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Brown (N.) Group PLC (BWNG)

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Wednesday 10 May, 2000

Brown (N.) Group PLC

Final Results - Year Ended 26 February 2000

Brown (N.) Group PLC
10 May 2000


                       Preliminary Results Announcement
                         Year Ended 26th February 2000


N Brown Group plc, the Manchester based direct catalogue home shopping group,
today announces its preliminary results for the year to 26th February 2000.

The year under review has seen another strong performance by the group's home
shopping, logistics and financial services businesses, and the development and
launch of Zendor.com, an end-to-end e-fulfilment venture.


Highlights of the results from continuing operations include:

*   Profit before tax:                                            

         -    £51.4 million (including £3.8m exceptional          
              profit on sale of shares in Zendor.com) 
              (1999: £43.2 + million)                             +18.8%
    
         -    £47.6 million (excluding exceptional item)          +10.0%
              (1999: £43.2 million)
    
*   Operating profit £51.2 million (1999: £46.7 million)           +9.5%
                                                                  
*   Turnover £354.7 million (1999: £324.3 million)                 +9.4%
                                                                  
*   Earnings per share:                                           

         -    25.69p (including £3.8m exceptional profit 
              on sale of shares in Zendor .com) (1999: 20.67p)    +24.3%
         
         -    23.06p (excluding exceptional item) (1999:+ 20.67p) +11.6%      
                                  
*   Final dividend per share 6.40p (1999: 5.80p)                  
    Giving a total dividend per share for the year of 9.10p 
    (1999: 8.20p)                                                 +11.0%

*   Zendor.com has reached agreement to provide services to four clients,     
    whose current aggregrate turnover in the retail market is over £800m

*   One for one bonus issue of shares                             

1999 figures quoted excluding discontinued operations


Commenting on the results, Sir David Alliance CBE, Chairman, said:

'It has been another highly competitive year for retailing and the home
shopping market in particular.  I am pleased to be able to report excellent
results for the group.  These have been achieved through our strategy of
extending product ranges, launching new catalogues to specific target markets
and offering products at competitive prices across all sales channels,
including telemarketing and the internet.

'Turnover from the current Spring/Summer catalogues is 6% ahead of last year
for the first 10 weeks of the new financial year.  We feel confident about the
increasing strengths of our complementary home shopping, e-fulfilment and
financial services businesses, which will continue to receive additional
investment in order to facilitate further growth.'



For further information please contact:

Sir David Alliance, Chairman, N Brown Group plc  On the day:     020 7457 2345
Jim Martin, Chief Executive                      Thereafter:     0161 236 8256
Tim Kowalski, Finance Director

Gerald Gradwell / Luisa Winnett, Gavin Anderson & Company        020 7457 2345


CHAIRMAN'S STATEMENT
--------------------

In another highly competitive year for retailing and the home shopping market
in particular, I am pleased to be able to report an excellent result for the
group.  From continuing operations, adjusted profit before tax is up by 10.0%
to a record £47.6m on turnover which has risen 9.4% to £354.7m, and adjusted
earnings per share are 11.6% ahead at 23.06p.

A recommended final dividend of 6.4p increases the total dividend for the year
by 11.0% to 9.1p.  The board has also recommended a one-for-one bonus issue,
which will improve the marketability of our shares.  A circular providing
relevant information will be sent to shareholders together with the annual
report and accounts.

Our overall sales growth compares favourably with the home shopping sector and
the retail market as a whole, and we are particularly pleased with the 11%
rise in sales of ladieswear.  The launch of the new 'Simply Be' catalogue
during the year has helped to produce a 15% increase in turnover to younger
customers, and sales to the mid-life group, representing 71% of total group
turnover, are up by 8%.  This growth is mainly due to our strategy of
extending product ranges, launching new catalogues to specific target markets,
offering products at competitive prices and increasing the use of
telemarketing.

Recent developments in the internet and the growth of e-commerce are among the
most significant events in industry for many years.  We are well positioned to
benefit from these developments and will use them to extend our reach to a far
greater number of customers, improve customer service and reduce costs, as
well as extending their use to a number of business-to-business applications
in areas such as supply chain management.

An increasing number of companies are entering the home shopping market and,
while some are using conventional catalogues, there is a small but growing use
of the internet, interactive television and several types of intelligent hand-
held device in these businesses.  Some companies, however, do not have the
logistics or administrative systems to be able to deliver products direct to
customers' homes or handle the inevitable high level of returned goods.

Our home shopping business, by comparison, has over many years developed
automated warehouses, a nationwide distribution system and considerable
marketing skills.  We also have well established call centres and experienced
telemarketing teams, essential for the success of an e-commerce business.  To
capitalise on these core strengths and the changes in technology, in October
we announced the launch of Zendor.com, a new subsidiary established to offer a
comprehensive range of fulfilment services to new and existing companies in
the sector.  This has been extremely well received and has attracted
considerable interest since its launch.  To date Zendor.com has reached
agreement with four retail clients to develop multi-channel distance shopping
propositions. These clients currently have an aggregrate retail turnover of
over £800m.  Given the past investments in our logistics infrastructure,
Zendor.com will move into profit later this year after trading has commenced.

A total e-fulfilment business requires the availability of sophisticated
credit facilities.  Knowledge of the wider characteristics of consumers in
product and socio-demographic sectors other than those in which our home
shopping business operates is needed to complete the proposition.  Therefore,
in February this year a subsidiary of GE, one of the largest companies in the
world, became a 25% partner in Zendor.com and agreed to provide credit card
facilities for clients of Zendor.com.  In addition, as well as supporting
Zendor.com's marketing to prospective clients, this strategic partnership will
also provide us with access to GE's credit management and other systems, a key
factor in our strategy of continuing to reduce costs in a deflationary
environment.

The progress of First Financial, our financial services division, is
encouraging and we believe there is good potential for further growth beyond
this year's profit of £1.3m, particularly by increasing the volume of
unsecured loans to customers on our core home shopping database.

The Turnbull report on internal control was published during the year and we
have already enhanced our internal control systems.  We welcome this
initiative as we believe it will add shareholder value by promoting risk
management as an integral part of the organisation.

Turnover from the current Spring/Summer catalogues is 6% ahead of last year
for the first 10 weeks of the new financial year.  We feel confident about the
increasing strengths of our complementary home shopping, Zendor.com and First
Financial businesses, which will continue to receive additional investment in
order to facilitate further growth.

On behalf of the board I would like to thank all our management and staff who
have contributed so much to our results.  They have exercised both flexibility
and innovation to increase market share and worked hard to reduce costs which
is crucial in a deflationary climate.


Sir David Alliance CBE
10 May 2000


CHIEF EXECUTIVE'S REVIEW
------------------------

The priority this year has been to expand our business by taking initiatives
which are aimed at increasing customer spending, as well as recruiting and
retaining more customers to build up the database for the future.  We have had
some success in both of these areas, which has contributed to increases from
continuing operations of 9.4% in group turnover to £354.7m and 10.0% in
adjusted group profit before tax to £47.6m.


THE CHANGING MARKET PLACE

The rate of change in retail has accelerated over the year and in some
respects we have seen more change over this short period than has taken place
in the past decade.  A major contributor to change has been the behaviour of
consumers who are better informed about the price of products and services as
a result of increased media coverage of this subject and the emerging use of
the internet which makes comparisons much easier.  There has also been a
growth in the influence of value retailers who offer competitive prices for
commodity products.

The group's activities are now focused on home shopping, logistics, e-
fulfilment, financial services and an emerging interest in information.  All
of these areas leverage off core skills which have contributed business growth
over many years.


HOME SHOPPING - SALES AND GROSS MARGINS HAVE IMPROVED

Turnover rose by 9.4% to £355m and operating profit increased by 9.5% to £51m.

The number of established customers who were on the database before March 1999
and ordered this year reached 2 million, an increase of 5% against the
equivalent population last year.  Their average spending was up by 3% as a
result of more publications, wider ranges and more frequent contact.  The
remaining 1% of the overall growth in turnover arose from the increased number
of customers recruited during the year.

We have actively targeted the younger sector of the market in the age range
30-45 years and turnover from our catalogues in this sector increased by 15%
to £67m.  The more established younger catalogues of Fashion World and Classic
Combination were complemented by Simply Be, launched during the year and
offering an affordable range of ladieswear in larger sizes.  We were also
pleased with the mid-life catalogues where turnover reached a record £250m, up
8% on last year. Catalogues in this group are targeted at women in their
forties to early sixties and principally comprise J D Williams, Oxendales,
Ambrose Wilson and Fifty Plus, all providing merchandise in a wide range of
fittings and sizes.  Catalogues for older customers (aged 60 years or over)
achieved a turnover of £24m, up by 4%.  Sales from House of Stirling, our
field-based direct sales operation, fell slightly to £10m during a year of
consolidation in which new systems were introduced to create a solid platform
for the future expansion of this business.

Strong growth in younger fashion, lingerie and nightwear helped ladieswear
turnover reach £201m, a very satisfying increase of 11% over last year.
Footwear sales rose by 6% to £34m, which is ahead of the market rate of
growth.  Menswear, which nationally has been the worst affected retail
category, fell by 3% to £33m.  Household and electrical product sales
increased by 9% to £83m, a category which is so important to our strategy of
adding incremental customer spending.

Gross margins were up by 1% to 56% due to a favourable mix of sales and a
reduction in mark downs.  Intake margins were very similar to last year with
any reductions in cost prices being passed on to customers.  These results
have been helped by the continued development of stock forecasting systems
which have enabled us to control stocks effectively in a volatile market.

Customers regard the availability of credit as an essential part of our offer.
The choice of interest-bearing and interest-free credit terms has been widened
and there is now available a rental option for television and other consumer
electronic goods through Teleview Direct.  At the end of the year there were
1.4m debtors owing an average of £128 each, with aggregate debtors of £185m,
up by 12%.

We have created a range of new internet sites, which in the near future will
be progressively offered to all customers wishing to buy from one of our
brands.  These sites are fully integrated into our order processing systems
and include information on stock availability and transactions on each
customer's personal credit account.  This is a most important channel of
selling to existing customers as well as creating opportunities for us to
widen the reach of our offer.


OUR COMPETITIVE ADVANTAGE

The fiercely competitive retail climate is being addressed in a number of
ways.  The pricing of products is constantly reviewed to provide value for
money after reflecting the benefit of extra services, such as free delivery to
the home and the free collection of returns.  Almost half of our sales are
from smaller brochures sent to customers every month, which mostly feature
merchandise available in the larger bi-annual catalogues but presented closer
to the natural selling time in the season.  There is also the opportunity to
adjust prices quickly if they are found to be out of step with other
retailers.

Our catalogues have unique selling propositions relating to size, fittings or
products which are difficult for customers to find elsewhere.  Customers have
the choice of buying from one of many sales channels, including catalogues,
newspaper and television advertisements, internet, telephone contact or at the
doorstep.


LOGISTICS

We have several routes to market as well as operating through many different
catalogue brands.  Our logistics operation by contrast is a single unified
system.

Logistics consists mainly of call centres, warehousing and distribution, all
fully integrated by bespoke computing systems.  Around 75% of sales are
handled by telephone, through fully networked call centres in the North West
and the North East of England.  We have an expanding telemarketing function
which has created a wide range of sales programmes directed at carefully
selected customers from the database, using predictive telephone dialling
equipment to improve efficiency.

The main distribution centre is located in Shaw, near Oldham, and is used for
picking and collating two or three items ordered by each customer from a
seasonal range of around 40,000 stock options, as well as receiving and
refurbishing large volumes of returned products.  Storage facilities were
increased last year when an automated, high bay carton store became
operational.  Additional investments are being made which include enhancements
to the main sorting system to handle extra volumes, as well as equipping a new
section of the high bay to give capacity next year for a further 3 million
items of stock.  A 60,000 square feet, single storey warehouse, suitable for
larger products, was recently acquired in nearby Rochdale.  These investments
will support core home shopping business growth as well as the expected
volumes from Zendor.com's clients.

The people who run this part of our business are vital to its success and over
the last year we have invested in extra management, including the appointment
of Andy Lee as Director - Logistics.  Andy was previously Managing Director of
Logistics at Unipart and has wide experience over the past fourteen years
handling logistics on behalf of a variety of third party clients.


ZENDOR.COM

A new venture was announced last October to provide end-to-end fulfilment
services for companies entering the distance shopping market using either
traditional catalogues or the internet.  Zendor.com is a marketing services
company and will mainly use home shopping logistics capabilities.

The provision of credit facilities for clients is an essential part of a
complete fulfilment service.  The strategic partnership between Zendor.com and
GE, the world's foremost provider of credit, creates a one stop fulfilment
service which GE is now promoting to its UK retail clients.  Shares in
Zendor.com are 75% held by N Brown and 25% by a subsidiary of GE, to reflect
the relative contribution of the two groups to this new venture.  In addition,
a marketing alliance was created with AHL Services, a large US based logistics
company, who will promote Zendor.com to those of their US retail clients
wishing to enter the European market.

Zendor.com has a dedicated team engaged in marketing, account management,
customer relations and finance, under the leadership of its Managing Director,
Keith Basnett.


CONTINUED FOCUS ON EFFICIENCY AND COST CONTROL

In this harsh deflationary climate, it is necessary to be particularly
innovative with measures to reduce costs and improve efficiency.  Initiatives
we are taking include a continuous review to simplify business processes and
the partnership with GE is helping us to identify new opportunities, including
volume aggregation, which will reduce costs.  There are also downstream gains
from the improved efficiency and benefits of scale in the logistics operation
from organic growth and extra volumes from clients of Zendor.com.


FINANCIAL SERVICES

The financial services division, First Financial, was formed in 1998 and has
grown organically to an operating profit last year of £1.3m (1999: £0.7m).  It
is currently a commission-based intermediary which takes no risks on any
business it undertakes with core home shopping customers.  It partners with
respected companies in the insurance and retail banking sectors using their
expertise and administrative systems.

Last year First Financial created a new tailor-made financial services
database, populated with almost 3 million names and details of dates of birth
and insurance renewal dates.  Information from lifestyle surveys and
telemarketing campaigns has also been added to improve our effectiveness when
promoting sales of financial products.


INFORMATION

We have a large database with around five year's transactional data on several
million customers, together with a growing volume of behavioural and
demographic information.  This has been used to create scoring systems which
have improved the focus of our marketing campaigns.  There are a number of
other information-related opportunities which will give extra strength to our
home shopping business as well as creating a new profit centre, and we have
made a number of small but strategic investments in this area.  At this stage
it is difficult to predict the scale of this, but details will emerge
progressively over the medium term.


PROSPECTS

We have an outstanding team of people who are committed to our strategic
direction of further developing the core home shopping business as well as the
emerging activities in logistics, fulfilment and financial services.  I would
like to thank them for their contribution in a changing retail climate which
has required them to be innovative and flexible.

I believe we have robust strategies in place and look forward to the future
with confidence.


Jim Martin
10 May 2000




GROUP PROFIT AND LOSS ACCOUNT for the 52 weeks ended 26th February 2000
                                                                              
              Note  Continuing Discon-   Total   Continuing  Discon-     Total
                    Operations  tinued           Operations  tinued
                                   Ops                          Ops      
                          2000    2000   2000         1999    1999       1999
                         £'000   £'000  £'000        £'000   £'000      £'000
                     
Turnover      1        354,733       -  354,733    324,302   3,538    327,840
                        ------   -----  -------    -------   ------   ------- 
% increase                9.4%                                                
                                                                             
Operating 
profit        2         51,208       -   51,208     46,745    (598)    46,147 
% increase                9.5%                                                
                                                                             
Loss on disposal of                                                           
discontinued    
operations                   -       -        -          - (14,702)   (14,702)
Profit on partial sale                                                        
of subsidiary                                                                 
undertaking              3,802       -    3,802         -        -          -
Share of loss of                                                              
associated            
undertakings              (132)      -     (132)      (72)        -       (72)
Income from                                                                  
listed investments          53       -       53        37         -        37
Interest payable        (3,564)      -   (3,564)   (3,488)       38    (3,450)
                        -------  -----  -------   -------    ------    -------
Profit on ordinary                                                            
activities before                                                             
taxation                51,367       -   51,367    43,222   (15,262)   27,960 
% increase               18.8%                                                
                                                                             
Taxation on profit                                                           
on ordinary      
activities             (14,366)      -  (14,366)  (13,514)      350   (13,164)
                                               
Profit on ordinary                                                            
activities after                                                              
taxation                37,001       -   37,001    29,708   (14,912)   14,796
% increase               24.5%                                                
                                                                             
Equity minority                                                               
interests                  115       -      115         -         -        -
                         -----   -----   ------     -----    ------   ------  
Profit for the                                                                
financial year          37,116       -   37,116    29,708   (14,912)   14,796 
% increase               24.9%                                                

Dividends     4        (13,187)      -  (13,187)  (11,805)        -   (11,805)
                      --------   -----  -------   -------     -----   -------
Retained profit         23,929       -   23,929    17,903   (14,912)    2,991
                      ========   =====  =======   =======    ======   =======
% increase               33.7%                                                
                                                                             
Earnings per                                                                 
share         3         25.69p           25.69p    20.67p              10.29p
                        ======           ======    ======              ======
% increase               24.3%                                                

Diluted earnings                                                              
per share     3         25.44p           25.44p    20.53p              10.23p
                        ======           ======    ======              ======
% increase               23.9%                                                
 
Adjusted earnings                                                             
per share     3         23.06p           23.06p    20.67p              10.29p
                        ======           ======    ======              ======
% increase               11.6%                                           
      
Adjusted diluted                                                            
earnings per 
share         3         22.83p           22.83p    20.53p              10.23p 
                        ======           ======    ======              ======
% increase               11.2%                                                

Dividends per  
share         4          9.10p            9.10p     8.20p               8.20p 
                        ======           ======    ======              ======
% increase               11.0%                                                



GROUP BALANCE SHEET as at 26th February 2000

                                         2000                       1999
                                        £'000                      £'000
Fixed assets                                                            
Intangible assets                       2,885                        181
Tangible assets                        62,758                     54,575
Investments                             3,199                      4,401
                                     --------                   --------
                                       68,842                     59,157
                                       ======                     ======
                                                                        
Current assets                                                          
Stocks                                 35,467                     33,328
Debtors                               202,806                    186,849
Investments                                 -                        150
Cash at bank and in hand                5,083                      4,472
                                   ----------                 ----------
                                      243,356                    224,799
                                                                        
Creditors:                                                              
Amounts falling due                                                     
within one year                       (88,471)                   (96,318)
                                   ----------                 ----------
Net current assets                    154,885                    128,481
                                   ----------                 ----------
                                                                        
Total assets less                                                       
current liabilities                   223,727                    187,638
                                                                        
Creditors:                                                              
Amounts falling due                                                     
after more than one year              (47,941)                   (36,866)
                                                                       
Provisions for                                                          
liabilities and charges                (3,253)                    (2,270)
                                    ----------                 ----------

Net assets                            172,533                    148,502
                                    ==========                 ==========
                                                                        
Capital and reserves                                                          
Called up share capital                14,634                     14,609
Share premium account                  18,714                     17,699
Revaluation reserve                     1,511                      1,548
Profit and loss account               138,103                    114,646
                                   ----------                 ----------
                                                                        
Equity shareholders' funds            172,962                    148,502

Equity minority interests               (429)                          -
                                   ----------                 ----------
                                                                        
Capital employed                      172,533                    148,502
                                   ----------                 ----------
                                                                        
Gearing                                   26%                        29%



GROUP CASH FLOW STATEMENT for the 52 weeks ended 26th February 2000

                               2000            2000          1999      1999
                              £'000           £'000         £'000     £'000
Net cash inflow                                                          
from operating activities                    37,465                  43,271

Returns on investments and
servicing of finance
Interest paid                (3,219)                       (2,907)        
Interest element of                                                         
finance lease                 
rental payments                (246)                         (299)
Dividends received                                                            
from investments                 53                            37
                            -------                       -------
Net cash outflow                                                         
from returns on investments                                                   
and servicing of                                                          
finance                                      (3,412)                 (3,169)
                                                                         
Taxation                                                                 
Corporation tax paid                                                          
(including ACT)                             (14,080)                (11,800)

Capital expenditure and
financing activities
Purchase of tangible                                                          
fixed assets                (14,174)                        (11,679)

Purchase of intangible                                                        
fixed assets                      -                            (181)
Sale of tangible                                                         
fixed assets                    175                             198
Decrease in own                                                          
shares held in trust            757                             405
                            -------                         -------
Net cash outflow from capital                                                 
expenditure and financing                                                     
activities                                  (13,242)                (11,257)
                                                             
Acquisitions and disposals
Purchase of subsidiary                                                     
undertakings                   (866)                              -
Cash at bank and in hand                                                
acquired with subsidiary                                                  
undertakings                     71                               -
Sale of subsidiary                                                            
undertaking                       -                           4,250
Bank overdraft disposed with                                                  
subsidiary undertaking            -                             385
Partial sale of                                                          
subsidiary undertaking        3,802                               -
Purchase of investment in                                                    
associated undertaking           (9)                           (515)
                            -------                         -------
Net cash inflow                                                          
from acquisitions and             
disposals                                     2,998                  4,120
                                                                         
Equity dividends paid                       (12,270)               (10,990)
                                          ----------             ---------    
              
Cash (outflow)/inflow                                                         
before management of                        
liquid resources and financing               (2,541)                10,175

Management of liquid resources
Purchase of current                                                           
investments                    (513)                           (250)
Sale of current                                                          
investments                   1,021                               -
                            -------                          ------
Net cash inflow/(outflow)                                                    
from management of liquid                
resources                                       508                   (250)
Financing                                                                
Issue of ordinary shares                        535                     87
Increase in/(repayment of)                                                    
bank loans                                    3,000                (13,000)
Capital element                                                          
of finance lease                               (858)                  (750)
rental payments                            --------                -------
                                                                     
Cash                                                                     
inflow/(outflow)                              2,677                (13,663)
from financing                             --------                -------    
                                                                     
Increase/(decrease) in cash in                 
the year                                        644                 (3,738)   
                                            =======                =======    
                         

NOTES TO THE ACCOUNTS

1.   Analysis of turnover

                                2000               1999                    %
                               £'000              £'000             Increase
                                                                         
Home shopping                354,733            324,302                  9.4
Property and financial                                                        
services -    
Discontinued operations            -              3,538                    -
                             --------           -------              -------
                             354,733            327,840                  8.2
                             =======            =======              =======

2.   Analysis of operating profit

                                2000               1999                    %
                               £'000              £'000             Increase
                                                                         
Home shopping                 51,957             47,345                  9.7
Property and                                                             
financial services -              
Discontinued operations            -               (598)                   -
Central                                                                  
administration costs            (749)              (600)                24.8
                             -------            -------               ------
                              51,208             46,147                 11.0
                             =======            =======               ======


3.   The calculation of earnings per share is based on the profit for the
financial year and the weighted average number of shares in issue during the
year of 144,462,000 (1999: 143,725,000).  For diluted earnings per share, the
weighted average number of shares of 145,916,000 (1999: 144,680,000) has been
calculated after adjusting for the potential dilution of outstanding share
options.
An adjusted earnings per share figure has also been calculated and is based on
the profit for the financial year excluding the effect of the exceptional
profit on the partial sale of the subsidiary undertaking Zendor.com Limited of
£3,802,000.  It has been calculated to help provide a clearer understanding of
the underlying profitability of the group.

4.   An interim dividend of 2.7p per ordinary share was paid on 21st December
1999 to shareholders on the register at the close of business on 19th November
1999.  A final dividend of 6.4p per ordinary share is proposed to be paid on
21st July 2000 to shareholders on the register at the close of business on
23rd June 2000.

5.   The summary of results for the two years ended 26th February 2000 does
not constitute full financial statements within the meaning of section 240 of
the Companies Act 1985.  Full group accounts for the 52 weeks ended 27th
February 1999 have been delivered to the Registrar of Companies in England and
Wales with an unqualified auditors' report.  Full group accounts for the 52
weeks ended 26th February 2000 will be delivered to the Registrar of
Companies.

6.     It is expected that the full report and accounts for the 52 weeks ended
26th February 2000 will be posted to shareholders on 31st May 2000.