It's been a turbulent few months for retailer N Brown (BWNG), so it was no surprise to see the share price rally on the back of better-than-expected first-half numbers. Pre-tax profits, excluding exceptionals and movements in currency derivatives, were £31.6m. That was ahead of consensus forecasts of £30.5m, although still marked a decline on the same period in the previous financial year (£35m).
We'd urge investors to look to the company's margins, which are still slipping. Product gross margins fell 190 basis points to 55.9 per cent due to higher levels of promotional activity, while the financial services gross margin fell 130 basis points. Chief executive Angela Spindler says margins should recover slightly in the second half, although the group is still guiding for a fall in the product gross margin of between 50bp and 150bp for the full year.
That's not the only piece of bad news on the horizon. Adverse foreign exchange rates are expected to come within the £3m hit that the company previously guided, but that's still a headache. N Brown was also forced to book a £9m exceptional charge (higher than the £5m-£8m previously estimated) relating to customer redress in its financial services business.
Peel Hunt expects pre-tax profits of £81.2m for the year ending February 2017, giving EPS of 23p (from £88.3m and 23.9p in FY2016).
| N BROWN (BWNG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 208.7p | MARKET VALUE: | £591m | |
| TOUCH: | 208.5-208.9p | 12-MONTH HIGH: | 400p | LOW: 160p |
| DIVIDEND YIELD: | 6.8% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 163p* | NET DEBT: | 62% | |
| Half-year to 27 Aug | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 425 | 23.8 | 6.8 | 5.67 |
| 2016 | 429 | 21.1 | 6.0 | 5.67 |
| % change | +1 | -11 | -12 | - |
Ex-div: 15 Dec Payment: 13 Jan *Includes intangible assets of £131m, or 46p a share | ||||
