N BROWN GROUP PLC HALF YEAR RESULTS 9 OCTOBER 2014 1 HALF YEAR - - PowerPoint PPT Presentation

N BROWN GROUP PLC HALF YEAR RESULTS

9 OCTOBER 2014

1

N Brown Group plc

HALF YEAR RESULTS

2

AGENDA

• INTRODUCTION
• BUSINESS UPDATE
• Performance highlights
• Delivering our change programme
• Q&A
• SUMMARY
• 2014/15 HALF YEAR RESULTS

N BROWN GROUP PLC DEAN MOORE

GROUP FINANCE DIRECTOR

3

FINANCIAL RESULTS OVERVIEW

N Brown Group plc 4

• Financial strategy to drive value for all stakeholders
• Entered period of change / transition
• Financial model will alter over time
• First Half review
• Guidance

26 weeks to 30 August 2014

KEY FINANCIAL MOVEMENTS

N Brown Group plc

2014 £m 2013 £m vs.LY % Turnover 407.3 409.6

• 0.6%

Operating Profit 45.2 48.4

• 6.6%

Trading Profit 41.6 45.0

• 7.6%

Pre-tax Profit 42.7 44.1

• 3.2%

Adjusted Earnings per Share 11.56p 12.55p

• 7.9%

Dividends per Share 5.67p 5.67p

• Cash Inflow from Operations

80.3 36.5 +120% Borrowings 205.2 197.9 +3.7% Receivables 565.1 548.0 +3.1%

5

26 weeks to 30 August 2014

N Brown Group plc

2014 £m 2013 £m vs.LY % Sale of goods 290.2 291.3

• 0.4%

Services 117.1 118.3

• 1.0%

Reported Group Turnover 407.3 409.6

• 0.6%

6

GROUP REVENUE

26 weeks to 30 August 2014

N Brown Group plc 7

MAJOR REVENUE MOVEMENTS

£407.3 Stores Roll -out Customer Base Growth Specialist Growth Rephase Marketing Spend to 2H Credit rule change Improved arrears - lower F.I. International

£1.7 £17.1 £4.4 £13.9 £8.0 £2.0 £1.3

£409.3 £400 £410 £420 £430 £440 2013 2014

£m

26 weeks to 30 August 2014

N Brown Group plc

GROUP TRADING ACCOUNT

2014 £m 2013 £m vs.LY % Group Revenue 407.3 409.6

• 0.6%

Gross Profit 215.6 215.1 +0.2% Gross Margin % 52.9% 52.5% +40bps Distribution Costs (36.6) (34.2) +7.0% Sales and Administration (133.8) (132.5) +1.0% Operating Profit 45.2 48.4

• 6.6%

Operating Margin 11.1% 11.8%

8

26 weeks to 30 August 2014

N Brown Group plc 9

MAJOR OPERATING PROFIT MOVEMENTS

£45.2 £13.6 £0.6 £0.6 £5.9 £5.0 £2.5 £2.4 £2.0 £0.2

£48.4

£40 £43 £46 £49 £52 £55 £58 £61 £64 £m Net Customer Base Stores Specialist Marketing Rephase Cust Sales Incentive Credit Rule Change Dist Costs Efficiency Improved Arrears Lower F.I. International Losses

2013 2014

GROUP PROFIT & LOSS ACCOUNT

N Brown Group plc

2014 £m 2013 £m vs.LY % Group Operating Profit 45.2 48.4

• 6.6%

Finance Costs (net) (3.6) (3.4) +5.9% Group Trading Profit 41.6 45.0

• 7.6%

Unrealised FX movement 1.1 (0.9)

• Profit Before Tax

42.7 44.1

• 3.2%

Taxation (9.3) (9.7)

• 4.1%

Profit After Tax 33.4 34.4

• 2.9%

10

26 weeks to 30 August 2014

PRE-TAX MARGIN

N Brown Group plc

• Gross Margin

Product Bad Debt / Financial Income Yield

• 50bps

+90bps

• Operating Costs
• 110bps
• Finance Costs

Higher Borrowings

• 10bps
• Pre-tax margin

(10.2%)

• 80bps

11

NET ASSET SUMMARY

N Brown Group plc

2014 £m 2013 £m vs.LY % Non Current Assets 162.1 137.4 +18.0% Inventories 91.3 89.3 +2.2% Receivables/Prepayments 591.1 571.8 +3.4% Creditors/Accruals (138.8) (141.3)

• 1.8%

Retirement Benefit Deficit (5.2) (3.2) +62.5% Net Borrowings (205.2) (197.9) +3.7% 495.3 456.1 +8.6% Gearing 41% 43%

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At 30 August 2014

RECEIVABLES AND PROVISIONING

N Brown Group plc

2014 £m 2013 £m vs LY % Gross Trade Receivables 609.5 603.9 +0.9% Opening Bad Debt Provision 50.2 55.7 Bad Debt Charge 35.0 35.9

• 2.5%

Debtors Written Off (40.8) (35.7) +14.3% Closing Bad Debt Provision 44.4 55.9

• 20.6%

Provision Ratio 7.3% 9.3%

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At 30 August 2014

OPERATING CASHFLOW

N Brown Group plc

2014 £m 2013 £m Operating Profit 45.2 48.4 Depreciation & Amortisation/Share Option Charge 11.3 11.5 Increase in Stock (1.3) (2.8) Decrease/(Increase) in Receivables 7.5 (23.1) Increase in Payables 17.5 4.7 80.2 38.7 Pension Obligation 0.1 (2.2) Cash Generated from Operations 80.3 36.5

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26 weeks to 30 August 2014

GROUP CASHFLOW

N Brown Group plc

2014 £m 2013 £m Cash Generated from Operations 80.3 36.5 Taxation Paid (13.0) (10.4) Dividends Paid (24.0) (23.0) Investing Activities (30.8) (8.5) ESOT Share Issue - net(Purchases)/Proceeds 0.5 (0.4) Finance Costs (net) (4.5) (3.4) Net Cash Inflow/(Outflow) 8.5 (9.2) Opening Borrowings (213.7) (188.7) Closing Borrowings (205.2) (197.9)

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26 weeks to 30 August 2014

GROUP BORROWINGS

N Brown Group plc

Facility £m Drawndown £m Securitisation Debt 250 220 Bilateral Loans 120 30 Overdraft 9

• Gross Borrowings

379 250 Cash in Hand (45) Net Borrowings 205

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At 30 August 2014

GUIDANCE

N Brown Group plc 17

• Period of change / transition

continues

• September trading – immediate

impact

• Delayed impact
• Financial income
• Markdown
• Contingent costs
• Robust balance sheet
• Positive cashflow

N Brown Group plc

HALF YEAR RESULTS

18

AGENDA

• INTRODUCTION
• BUSINESS UPDATE
• Performance highlights
• Delivering our change programme
• Q&A
• SUMMARY
• 2014/15 HALF YEAR RESULTS

N Brown Group plc

HIGHLIGHTS

• Performance

19

• Trading profits of £41.6m
• Active customers up 3.7%
• 24% reduction in direct mail activity
• 58% online penetration (+2%)
• Customer service : No.3 in UK ICS rankings
• Significant improvement in quality of receivables

JACAMO

N Brown Group plc

HIGHLIGHTS

• Performance by brand

20

JD WILLIAMS SIMPLY BE SUPPORT BRANDS SPECIALIST Participation %

33 16 9 31 11

Growth %

• 3

+1 +7

• 3

+7

JACAMO

N Brown Group plc

HIGHLIGHTS

• Performance by brand excl. Home & Gift

21

JD WILLIAMS SIMPLY BE SUPPORT BRANDS SPECIALIST Participation %

26 13 7 26 10

Growth % Excl H/E

• 2

+4 +14

• 2

+10

CORE HOME

18

• 8

N Brown Group plc

HIGHLIGHTS

• Product categories

22

£m % of Total % Change Ladieswear 171 42

• 3

Footwear 47 11

• 1

Menswear 55 14 +5 Specialist 45 11 +13 Home & Gift 89 22

• 5

407 100

• 1

N Brown Group plc

HIGHLIGHTS

• Ladieswear

23

New customers up 26% for Autumn Winter Fast Fashion up 23% on LY in sizes exclusive to us Maxi dresses up 40% YOY Joe Browns up 41% on LY in sizes exclusive to us

N Brown Group plc

HIGHLIGHTS

• Footwear

24

Occasion Footwear up 16% 11 styles in Curvy Plus boots Sports footwear up 68% Occasion footwear up 16%

N Brown Group plc

HIGHLIGHTS

• Menswear

25

Fast Fashion sales up 51% Black Label

• wn brand

+105% vs.LY

N Brown Group plc

HIGHLIGHTS

• Home – Famous Five categories +5% YOY

26

HOME DECOR BEDDING HOMEWARES OUTDOOR LIVING GIFTS

N Brown Group plc

• Active customer file +3.7%
• New customers up 3.0% for H1
• 64% of first order demand placed online

HIGHLIGHTS

• Growth in customers

27

• New season recruits up 9% - JD Williams up 26%

N Brown Group plc 28

HIGHLIGHTS

• Channel Participation

10 20 30 40 50 60 70 80 90 100 2008/9 2013/14 Stores UK Phone UK Web

58% 36%

3%

64% 39%

H1 H1

N Brown Group plc 29

HIGHLIGHTS

• Online growth fuelled by mobile

68% 17.5% 14.5% 54% 27% 19%

• 46% of traffic from mobile (+14%)
• 37% of demand from mobile (+11%)
• Tablets lead the way
• Mobile optimisation to drive

conversion

N Brown Group plc 30

HIGHLIGHTS

• Service Improvements
• 7 day delivery service launched
• 8pm next day cut-off – moving to 9pm from January
• Click & Collect parcel shops now at 4,000 increasing to

5,500 before Christmas

• Enquiries to order ratio improved by 2%
• Ranked No. 3 UK ICS ratings

Tracked services now available for USA & Ireland

N Brown Group plc

HIGHLIGHTS

• Top 3 for customer satisfaction

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Source: Institute of Customer Service

45.0 50.0 55.0 60.0 65.0 70.0 75.0 80.0 85.0 90.0 95.0 100.0

WH Smith Sports Direct Currys/Dixons/PC World Ikea New Look Primark Matalan Homebase Debenhams B&Q Wilkinson eBay Lloyds Pharmacy Marks & Spencer Superdrug Argos Next Boots JD Williams John Lewis Amazon Retail - Non Food UKCSI Overall

MISSION & STRATEGY

N Brown Group plc 32

• Unique plus size

capabilities

• Population is ageing &

getting larger

• Consumer credit drives

loyalty

• A winning formula
• Modernisation essential to

deliver potential

N Brown Group plc

2014 CALENDAR

33

Launch of new International team for Simply Be USA New advertising for Power Brands plus Oxford Street opens Phase 1 of ‘Famous Five’ strategy for Home & Gift Introduced ‘Pay by Card’ Adjusting

• ur

marketing mix & phasing Kick off systems development HLD phase Re-launch JD Williams.

• Ladieswear

Improvements first Multichannel enhancements delivered pre- peak

PEAK TRADING PERIOD

New store

• pening

programme begins

N Brown Group plc

2014 CALENDAR

34

Launch of new International team for Simply Be USA New advertising for Power Brands plus Oxford Street opens Phase 1 of ‘Famous Five’ strategy for Home & Gift Introduced ‘Pay by Card’ Adjusting

• ur

marketing mix & phasing Kick off systems development HLD phase Re-launch JD Williams.

• Ladieswear

Improvements first Multichannel enhancements delivered pre- peak

PEAK TRADING PERIOD

New store

• pening

programme begins

N Brown Group plc

CHANGE PROGRAMME

• “Famous Five”

35

• Garden (+13%) & gifting (+29%)
• Offset by electrical (-26%) & H&B (-13%) YOY
• Total sales -8% vs. last year
• Lowest level of accounts in arrears since 2006
• Famous Five growth offset by managed decline in high risk

categories

N Brown Group plc

2014 CALENDAR

36

Launch of new International team for Simply Be USA New advertising for Power Brands plus Oxford Street opens Phase 1 of ‘Famous Five’ strategy for Home & Gift Introduced ‘Pay by Card’ Adjusting

• ur

marketing mix & phasing Kick off systems development HLD phase Re-launch JD Williams.

• Ladieswear

Improvements first Multichannel enhancements delivered pre- peak

PEAK TRADING PERIOD

New store

• pening

programme begins

N Brown Group plc 37

CHANGE PROGRAMME

• Recruiting cash customers

Typical level

• f “non-rollers”

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% SS13 SS14

New Ordering Accounts

Roller Credit Rejects Non Roller Cash

Cash Non Roller Roller 2nd order rate 23% 27% 65% AOV £45 £39 £55 Margin 46.5% 45.0% 44.5%

N Brown Group plc

2014 CALENDAR

38

Launch of new International team for Simply Be USA New advertising for Power Brands plus Oxford Street opens Phase 1 of ‘Famous Five’ strategy for Home & Gift Introduced ‘Pay by Card’ Adjusting

• ur

marketing mix & phasing Kick off systems development HLD phase Re-launch JD Williams.

• Ladieswear

Improvements first Multichannel enhancements delivered pre- peak

PEAK TRADING PERIOD

New store

• pening

programme begins

N Brown Group plc 39

CHANGE PROGRAMME

• Change in phasing

Q1 Q2 Q3 Q4

• Newness
• Fashionability
• Back Winners
• Availability
• Value for money

Mail order Investment Profile Consumer Spending Low Spend

• Jan Sale
• Early Easter

Mid Spend

• Build for

spring/summer

• June Peak

Mid Spend

• Holiday

Season

• A/W launch

High Spend

• Xmas build

through quarter 1 2 3 4

Jan SS Book July AW Book

(Illustrative)

N Brown Group plc 40

CHANGE PROGRAMME

• Adjusting our marketing mix
• Recruitment investment

increased to 42% of total

• Retention investment

below 40%

• Direct mail spend down

24% in the first half

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 14/15 13/14 12/13 11/12 Year Recrutiment Brand Retention

N Brown Group plc 41

CHANGE PROGRAMME

• Increasing customer recruitment
• Online recruitment

value maintained

• Pre-campaign brand

awareness for JD Williams at 4%

• TV for the season over

40% of recruitment spend

N Brown Group plc

2014 CALENDAR

42

Launch of new International team for Simply Be USA New advertising for Power Brands plus Oxford Street opens Phase 1 of ‘Famous Five’ strategy for Home & Gift Introduced ‘Pay by Card’ Adjusting

• ur

marketing mix & phasing Kick off systems development HLD phase Re-launch JD Williams.

• Ladieswear

Improvements first Multichannel enhancements delivered pre- peak

PEAK TRADING PERIOD

New store

• pening

programme begins

N Brown Group plc

CHANGE PROGRAMME

• Systems Infrastructure Development (2014/15)

43

N Brown Group plc

2014 CALENDAR

44

Launch of new International team for Simply Be USA New advertising for Power Brands plus Oxford Street opens Phase 1 of ‘Famous Five’ strategy for Home & Gift Introduced ‘Pay by Card’ Adjusting

• ur

marketing mix & phasing Kick off systems development HLD phase Re-launch JD Williams.

• Ladieswear

Improvements first Multichannel enhancements delivered pre- peak

PEAK TRADING PERIOD

New store

• pening

programme begins

N Brown Group plc 45

CHANGE PROGRAMME

• - USA

2014/15 First Half

• Product demand growth of 16%
• Dedicated international team
• Credit & loyalty offer exceeds expectations
• Won “Retailer of the Year” at Full Figured

Fashion Week 2014/15 Second Half

• Continued focus on service
• Marketing activity utilising loyalty

proposition

• Marketing refocused on proven activity

N Brown Group plc

2014 CALENDAR

46

Launch of new International team for Simply Be USA New advertising for Power Brands plus Oxford Street opens Phase 1 of ‘Famous Five’ strategy for Home & Gift Introduced ‘Pay by Card’ Adjusting

• ur

marketing mix & phasing Kick off systems development HLD phase Re-launch JD Williams.

• Ladieswear

Improvements first Multichannel enhancements delivered pre- peak

PEAK TRADING PERIOD

New store

• pening

programme begins

N Brown Group plc 47

CHANGE PROGRAMME

• All stores performance
• 14 stores by year end 2014
• 5% “Halo” effect in store catchments
• 17% store LFL sales growth
• Existing stores deliver £1m profit
• Customers recruited in stores 34% more

profitable than non-store

N Brown Group plc

2014 CALENDAR

48

Launch of new International team for Simply Be USA New advertising for Power Brands plus Oxford Street opens Phase 1 of ‘Famous Five’ strategy for Home & Gift Introduced ‘Pay by Card’ Adjusting

• ur

marketing mix & phasing Kick off systems development HLD phase Re-launch JD Williams.

• Ladieswear

Improvements first Multichannel enhancements delivered pre- peak

PEAK TRADING PERIOD

New store

• pening

programme begins

N Brown Group plc

CHANGE PROGRAMME

• Ladieswear improvements

49

• Improved product phasing
• Improved fabrics & finishing
• Improved value for money
• Improved styling & fit
• Improved product presentation

Best selling blouse…..ever!

• Improved brand awareness

N Brown Group plc

CHANGE PROGRAMME

• Ladieswear improvements

50

• Improved product phasing
• Improved fabrics & finishing
• Improved value for money

New Premium fabrics

• Improved styling & fit
• Improved product presentation
• Improved brand awareness

N Brown Group plc

CHANGE PROGRAMME

• Ladieswear improvements

51

• Improved product phasing
• Improved fabrics & finishing
• Improved value for money

Further improvements in manufacturing techniques

• Improved styling & fit
• Improved product presentation
• Improved brand awareness

N Brown Group plc

CHANGE PROGRAMME

• Contemporary presentation

52

• Improved product phasing
• Improved fabrics & finishing
• Improved value for money
• Improved styling & fit
• Improved product presentation
• Improved brand awareness

N Brown Group plc

CHANGE PROGRAMME

• Ladieswear improvements

53

Slippers from £15 in width fittings unique to us

Improved product presentation

From….

N Brown Group plc

CHANGE PROGRAMME

• Ladieswear improvements

54

Slippers from £15 in width fittings unique to us

Improved product presentation

To….

N Brown Group plc

CHANGE PROGRAMME

• Ladieswear improvements

55

Improved brand awareness

• Media Value: £3m

N Brown Group plc

2014 CALENDAR

56

Launch of new International team for Simply Be USA New advertising for Power Brands plus Oxford Street opens Phase 1 of ‘Famous Five’ strategy for Home & Gift Introduced ‘Pay by Card’ Adjusting

• ur

marketing mix & phasing Kick off systems development HLD phase Re-launch JD Williams.

• Ladieswear

Improvements first Multichannel enhancements delivered pre- peak

PEAK TRADING PERIOD

New store

• pening

programme begins

N Brown Group plc 57

N Brown Group plc 58

CHANGE PROGRAMME

• Brand Ambassadors
• 46.3m adults had at least 1 opportunity to view
• Highest ever traffic to site – 30x previous peak hour
• Christmas Ad airs in November

N Brown Group plc 59

CHANGE PROGRAMME

• Brand Ambassadors

N Brown Group plc 60

CHANGE PROGRAMME

• Brand Ambassadors

N Brown Group plc 61

CHANGE PROGRAMME

• Brand Ambassadors

N Brown Group plc

2014 CALENDAR

62

Launch of new International team for Simply Be USA New advertising for Power Brands plus Oxford Street opens Phase 1 of ‘Famous Five’ strategy for Home & Gift Introduced ‘Pay by Card’ Adjusting

• ur

marketing mix & phasing Kick off systems development HLD phase Re-launch JD Williams.

• Ladieswear

Improvements first Multichannel enhancements delivered pre- peak

PEAK TRADING PERIOD

New store

• pening

programme begins

N Brown Group plc

CHANGE PROGRAMME

• Multichannel improvements

63

• Platform fast and stable
• Optimised for different devices
• Web chat roll-out
• Improvements to zoom
• Improvements to sequencing & cross-

selling

• Rolled out product recommendations
• Cash to credit online conversion

N Brown Group plc

CHANGE PROGRAMME

• Multichannel improvements

64

• Platform fast and stable
• Optimised for different devices
• Web chat roll-out
• Improvements to zoom
• Improvements to sequencing & cross-

selling

• Rolled out product recommendations
• Cash to credit online conversion

N Brown Group plc

CHANGE PROGRAMME

• Multichannel improvements

65

• Platform fast and stable
• Optimised for different devices
• Web chat roll-out
• Improvements to zoom
• Improvements to sequencing & cross-

selling

• Rolled out product recommendations
• Cash to credit online conversion

N Brown Group plc

CHANGE PROGRAMME

• Multichannel improvements

66

• Platform fast and stable
• Optimised for different devices
• Web chat roll-out
• Improvements to zoom
• Improvements to sequencing & cross-

selling

• Rolled out product recommendations
• Cash to credit online conversion

N Brown Group plc

CHANGE PROGRAMME

• Multichannel improvements

67

• Platform fast and stable
• Optimised for different devices
• Web chat roll-out
• Improvements to zoom
• Improvements to sequencing &

cross-selling

• Rolled out product recommendations
• Cash to credit online conversion

N Brown Group plc

CHANGE PROGRAMME

• Multichannel improvements

68

• Platform fast and stable
• Optimised for different devices
• Web chat roll-out
• Improvements to zoom
• Improvements to sequencing & cross-

selling

• Rolled out product recommendations
• Cash to credit online conversion

N Brown Group plc

CHANGE PROGRAMME

• Multichannel improvements

69

• Platform fast and

stable

• Optimised for

different devices

• Web chat roll-out
• Improvements to

zoom

• Improvements to

sequencing & cross- selling

• Rolled out product

recommendations

• Cash to credit online

conversion

N Brown Group plc 70

Build Loyalty Grow Profits! Be………. “Fit for the Future” Grow Company Value!

OUR AMBITION

• Route map to growth

Recruit more Customers Grow!

CAPACITY & CAPABILITY

N Brown Group plc 71

Build Loyalty Grow Profits! Be………. “Fit for the Future” Grow Company Value!

OUR AMBITION

• Route map to growth

Recruit more Customers Grow!

• Brand Awareness
• Multichannel
• Cash & Credit
• International

CAPACITY & CAPABILITY

N Brown Group plc 72

Build Loyalty Grow Profits!

• Value
• Newness
• Service
• Communication

Be………. “Fit for the Future” Grow Company Value!

OUR AMBITION

• Route map to growth

Recruit more Customers Grow!

• Brand Awareness
• Multichannel
• Cash & Credit
• International

CAPACITY & CAPABILITY

N Brown Group plc 73

Build Loyalty Grow Profits!

• Value
• Newness
• Service
• Communication

OUR AMBITION

• Route map to growth

Recruit more Customers Grow!

• Brand Awareness
• Multichannel
• Cash & Credit
• International

Be………. “Fit for the Future” Grow Company Value!

• Systems
• Supply Chain
• People

CAPACITY & CAPABILITY

N Brown Group plc

OUR TARGETS

• Seven KPIs

74

1. Increase customer satisfaction 2. Grow ladieswear share 3. Grow menswear share 4. Increase online penetration 5. Increase home & gift penetration 6. Grow international revenues 7. Increase operating margin

Progress so far

• No. 3 in UK
• No.1 online retailer for size 16+
• Market share increases to 3.5%
• 58% (up 2%)
• Quality of sales improved
• US demand up 16%
• Changes impacted profit in

short term

N Brown Group plc

SUMMARY

75

• Significant change already delivered to

ensure the business is “fit for the future”

• Difficult Autumn trade has affected outturn

projections

• New customers fuelling growth in customer

base which underpins confidence for accelerated growth next year

• Progress made on 6 of the 7 key

performance indicators

N Brown Group plc

THANK YOU,

ANY QUESTIONS?

76

No.1 online plus size retailer in the UK