Fashion retailer N Brown (BWNG) swung back into profit in the six months to August 2019, despite an overall drop in sales. During the previous period, the group clocked up a statutory operating loss of £28.3m, largely due to £65m of exceptional costs associated with the closure of its store portfolio, asset impairments and the cost of PPI compensation. The first two issues were linked to management’s plan to move online, though PPI has persisted into the current period, with a previously flagged £25m relating to a spike in claims in the run-up to the August deadline.
Exceptionals aside, the underlying market got tougher in the period. Management said a “highly promotional” trading environment was to blame for a 190 basis point drop in product gross margins. This was partially offset by a 140 basis point improvement in the financial services margin, but at a group level N Brown was still 70 basis points worse off.
Financial services revenue – made from allowing purchases on credit – was up 2.9 per cent in the period. Once again the provision rate improved, this time by 460 basis points, and the proportion of customer accounts in arrears fell to 9 per cent, from 9.7 per cent previously.
House broker Shore Capital is forecasting adjusted pre-tax profits of £83.6m for the full year, giving EPS of 23.4p, compared with £83.6m and 21.4p in 2019.
| N BROWN (BWNG) | ||||
| ORD PRICE: | 107p | MARKET VALUE: | £305.2m | |
| TOUCH: | 107-107.8p | 12-MONTH HIGH: | 153p | LOW: 82p |
| DIVIDEND YIELD: | 6.6% | PE RATIO: | NA | |
| NET ASSET VALUE: | 109p* | NET DEBT**: | 152% | |
| Half-year to 31 Aug | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 458 | -27.1 | -9.14 | 2.83 |
| 2019 † | 433 | 18.8 | 4.95 | 2.83 |
| % change | -5 | - | - | - |
| Ex-div: | 02 Jan | |||
| Payment: | 05 Feb | |||
| *Includes intangible assets of £151m, or 53p a share **Does not include IFRS 16 lease liabilities of £9.5m †Revenue includes £136.6m in credit account interest. | ||||
