18 May 2022

 

FULL YEAR RESULTS FOR THE 52 WEEKS ENDED 26 FEBRUARY 2022

 

Progressing our strategic transformation

 

£m	52 weeks to 26 February 2022 (FY22)	52 weeks to 27 February 2021 (FY21)1	% Change
Group revenue	715.7	728.8	(1.8)%
Product revenue	465.6	468.4	(0.6)%
Financial services revenue	250.1	260.4	(4.0)%
Adjusted EBITDA2	95.0	84.9	11.9%
Adjusted EBITDA margin	13.3%	11.6%	1.7ppts
Adjusted profit before tax2	43.1	29.4	46.6%
Statutory profit before tax	19.2	9.2	108.7%
Unsecured net cash2,3	43.1	80.8	(46.7)%
Adjusted net debt2	(259.4)	(301.1)	13.9%

¹ FY21 restated to reflect the impact of accounting policy change in relation to Software as a Service including minor reductions against the reported level of each of Adjusted and Statutory PBT (£0.7m) and to Adjusted EBITDA (£1.6m) (refer to note 19).

² A full reconciliation of statutory to adjusted measures is included in the FY22 Financial Review.

³ FY22 excludes accessible amounts voluntarily undrawn against the securitisation facility of £60.1m.

 

Highlights

·  Delivered growth in strategic brands product revenue driven by increase in total active customers

o  Group revenue reduced 1.8% reflecting a 0.6% reduction in product revenue and a 4.0% reduction in Financial Services revenue

o  Excluding the impact from closing Figleaves in early FY22, product revenue grew by c.4%, with growth in strategic brands more than offsetting the managed decline in other heritage brands

o  Strategic brands product revenue grew 9.9%, reflecting the benefits of strategic change and strong clothing & footwear performance

o  Year end active customers increased for the first time in four years, supported by the improved product offer and focused marketing

·  Financial Services

o  Financial Services revenue reduced by 4% reflecting the smaller debtor book at the start of the financial year

o  Financial Services gross margin was 61.8% in FY22, 15.9ppts higher than FY21, and c.10ppts higher than normalised levels.  This was a result of unprecedented conditions within the consumer credit market, with government support during the first part of the Covid-19 pandemic resulting in high repayment rates and low arrears rates and consequently a net reduction in the IFRS 9 bad debt provision compared to the position last year

·  Profit growth and strong balance sheet

o  Adjusted EBITDA up 11.9% to £95.0m, with the increase in Financial Services margin more than offsetting costs annualising against the initial Covid-19 related reductions, and investment in brand building

o  Operating costs as percentage of Group revenue of 36.0%, lower than equivalent pre-pandemic level (FY20: 39.8%) as efficiencies and cost flexibility retained

o  Strong balance sheet with unsecured net cash of £43.1m. Additional £60.1m accessible cash voluntarily undrawn on the securitisation funding facility at the year end

o  Accounting provision made of £28m in relation to the dispute with Allianz

·  Dividend update

o  The Board will consider the introduction of a dividend payment in FY23

·  Accelerating strategic investments in brand, product and digital whilst meeting sustainability targets

o  Increased marketing investment to further develop our strategic brand propositions and awareness; first year of Amanda Holden and Davina McCall as brand ambassadors for JD Williams

o  New in-house studio significantly enhances ability to showcase product through customised content created at an efficient unit cost including film quality photography

o  Solid progress towards roll out of a new front-end platform for our websites, scheduled for FY23 for Simply Be. This will provide a mobile-first experience, removing friction through journey and checkout

o  Increasing proportion of sustainably sourced own brand product, achieved FY22 target of 30%; post year end launch of JD Williams' in-house designed own brand range, Anise

·  Evolving our strategic transformation

o  Digital Chief Operating Officer appointed to Executive management team

o  Evolved strategy to deliver growth through a simpler and more focused business:

§ Strategic brands reduced to Simply Be, JD Williams and Jacamo, driving growth

§ Other brands consolidated within a "heritage brands" portfolio focused on protecting value, with no further closures planned in near future

o  Further integration of flexible credit offer into our customer journey  

o  Elevation of data as a core pillar of the strategy

Steve Johnson, Chief Executive, said:

"I am pleased with our continued progress in transforming N Brown into a more focused digital business, with a distinct and improving offer across our strategic brands. Our strategic brands returned to growth in the year with growing customer numbers. As we move forward, we are evolving our priorities to concentrate our growth focus on Simply Be, JD Williams and Jacamo, where we see the strongest market potential. We're executing on our investment plans to unlock these opportunities including through new websites which will be rolled out progressively over the coming months.

"In what has been another volatile period in the consumer environment, I would like to thank all of my colleagues for their continued commitment to serving customers, and their role in delivering a strong performance in the year. The work we have done means we are significantly better placed than we were before the pandemic and, although cautious in the short-term due to inflationary impacts and consumer behaviour, we remain confident that over the medium-term our strategy will support the delivery of 7% product revenue growth with a 13% EBITDA margin."

 

Webcast for analysts and investors:

A webcast presentation of these results will take place at 9am on 18 May 2022 followed by a Q&A conference call for analysts and investors.  Please contact [email protected] for details. 

 

 

For further information:

 

N Brown Group
David Fletcher, Head of Investor Relations	+44 (0)7876 111242
MHP Communications
Simon Hockridge / Charles Hirst	+44 (0) 20 3128 8789 [email protected]
Shore Capital - Nomad and Broker
Stephane Auton / Daniel Bush / John More	+44 (0) 20 7408 4090

 

 

About N Brown Group:

N Brown is a top 10 UK clothing & footwear digital retailer, with a home proposition. Our retail brands include JD Williams, Simply Be and Jacamo, 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 1,800 people across the UK. 

 

PERFORMANCE REVIEW

Continuing our Strategic Transformation

We have continued to see a challenging backdrop including the impacts of the Covid-19 pandemic and more recent geopolitical events and the economic, logistical, and personal shocks that these create. Despite this, over the past two years we've been able to create a solid foundation that has enabled our colleagues to execute against our strategy, including further development of our product proposition and refinement of our marketing focus. Furthermore, our colleagues continue to represent the values of our organisation by putting our customers first. We, in turn, continue to put our colleagues at the heart of what we do, underlining this through our commitment to ensure all colleagues are paid at least, the national living wage. We recognise that consumer sentiment is not back to pre-Covid levels, particularly given increases in the cost of living, but our business has performed resiliently as we've adapted our trading approach to be flexible in the face of changing customer expectations.

We are really pleased with the significant progress we have made over the last couple of years in building our new trading website, which is currently in test mode, and which will be launched for Simply Be within FY23. This is our first mobile adaptable website, which will bring benefits to both customers and colleagues.  Following the Simply Be launch, other brands will roll out once we are satisfied the experience is as we intended.

We have also undertaken a significant amount of exploration in relation to our Financial Services platform in order to understand how to deliver a better and more modern experience for our customers. Whilst it remains in the early stages of development, we are pleased with our progress and will update on developments as we move forward.  

We have delivered pleasing growth in product revenue from our strategic brands, which have increased 10%, and adjusted EBITDA is in line with guidance at £95.0m. The total number of active customers has grown year-on-year, closing 4% up at 2.9m (FY21: 2.8m) and which reflects a return to growth for the first time in four years albeit slightly behind our internal bonus targets. Supported by clear brand identities and effective marketing activity, Simply Be and Jacamo closed the year with the biggest active customer files in their histories. We saw Financial Services gross margin at higher than normalised levels due to unprecedented conditions within the consumer credit market driving high repayment and low arrears rates. Our robust balance sheet and continued cash generation positions us well for the future. This provides us with a foundation to execute our strategy, and the Board remains confident in achieving the Group's medium-term objective of delivering sustainable profitable growth.               

Looking Back on FY22

Distinct Brands to Attract Broader Ranges of Customers

In June 2020 we set out to simplify our brand portfolio through focused propositions with clear target customers.  Having done substantial work in FY21 to simplify the portfolio with the closure of House of Bath, High and Mighty and the integration of Figleaves into Simply Be, the emphasis this year has been on propositional development and awareness building on strategic brands. 

Overall, we've made good progress; we now have more than 2 million followers on social media, and across the strategic brands the customer file grew by 6% over the course of the year. We've also invested in our creative infrastructure with a new LED studio environment which produces film quality photography and enables shooting of video to showcase our product to best advantage.

In JD Williams we focused on increasing visibility and relevance with our target customer, through brand ambassador partnerships with Davina McCall and Amanda Holden. 

Simply Be's core message is around inclusivity and fit, and our marketing campaigns have showcased this through elevating the importance of product, such as lingerie and denim, where fit is key. Influencers have become an increasingly important part of Simply Be's brand building strategy, and alongside this we were pleased to be a part of Instagram's UK pilot of "Instagram checkout" where customers can purchase directly via Instagram.

On Jacamo, campaign work has been focused on size as a positive, working with influencers like Big Zuu to build the brand's credentials in the market. Home Essentials formed a brand ambassador partnership with Frankie Bridge and Nicki Bamford-Bowes alongside a series of other influencers.

Improved Product to Drive Customer Frequency

We continue to optimise our range breadth across clothing, footwear and beauty, reducing SKUs by 7% to 25k, creating a clearer customer proposition and buying efficiency. As part of our focus on inclusivity, we have extended our core size ranges and now offer 13 sizes across womenswear and 10 sizes across menswear.

To continue to strengthen our product handwriting, we have invested substantially in our design capabilities, and the proportion of unique product designed in house is now 53% from 40% across men's and women's clothing. 

We have continued to add aspirational 3rd party brands to extend the "best" element of the range including Nobody's Child and Hope & Ivy on Simply Be, which are uniquely available in our sizing. Selected Femme and Finery have both launched on JD Williams. Through the year, we've also built on our existing strong partnerships with Joe Browns and Monsoon in womenswear and Ralph Lauren and Hugo Boss in menswear.  The success of these initiatives has given us the confidence to continue to develop both Jacamo and JD Williams as multi-brand platforms.

From a sourcing perspective, we have continued to rationalise the number of suppliers we work with from 979 to 805 (an 18% reduction) across the year resulting in improved relationships and efficiency.  

New Home Offering for Customers to Shop more across Categories

Our existing Home offering enabled us to capitalise on the Homeware boom through the pandemic, with our brands able to pivot towards this category by maximising customer demand. JD Williams, as a multi-category platform, represented the largest share of Home sales for the Group at 39%.

The Home category continues to evolve with the acceleration of own design product which is unique to us. We continue to design, develop, and procure furnishings in key categories across Home and Tech, with 70% of our Home and Furniture offer being own design. The success of the approach is reflected in an 18% year-on-year reduction in returns.

Within the technology category we've secured more premium brands such as LG and Samsung and grown our existing offer in areas that resonate with the customer at key times. Premium brands present our customer with an opportunity to shop more aspirational products, with flexibility around payment options in conjunction with a credit account.

Enhanced Digital Experience to Increase Customer Conversion

We've made significant progress on the continued development and deployment of our new front-end platform for the trading websites, ensuring that the technology is established for release in FY23. Simply Be is the first trading website to be migrated onto the new web platform, with beta testing currently taking place. 

In addition to development of the platform, our User Experience team have focused on delivering incremental improvements across the customer journey, developing efficiencies across digital product pages to enable a smooth checkout experience for customers.

Our commitment to digital transformation supported the development of Robotic Process Automation ("RPA"), which focused primarily on Merchandising, replacing repeated manual tasks with automated processes to improve speed, accuracy, and efficiency.

 Flexible Credit to Help Customers Shop

Financial Services is an integral part of our customer proposition, and we remain committed to providing great products for our customers and ensuring that we support them in appropriate ways.

Over the course of the year, we completed a detailed design phase for our new Financial Services platform, which will commence build in 2022. We will continue to enhance our existing proposition where possible including a six-month 0% interest campaign for new customers.

We continue to support customers categorised as being in persistent debt, by providing a solution to ensure balance paydown in a reasonable period and prevent any future reoccurrences. This is an integral part of ensuring our customers are protected.

From a regulatory perspective, we've successfully implemented Stronger Customer Authentication ("SCA") as part of the PSD2 regulation, ahead of the deadline, minimising any impact on our customers. Having rolled out the Senior Managers and Certification Regime ("SMCR") from the FCA in 2020, we have now embedded this within the organisation. In addition, we have worked closely with the CBI in the Republic of Ireland, setting up an appropriate Board structure and investing in our technology for improved ID checking and verification.

Sustainable Cost Base

Investment in brand marketing in the year has been the main contributor to an increase in the adjusted operating costs to Group revenue ratio, with the level of 36.0% remaining lower than pre-pandemic. This reflects efficiencies and cost flexibility. 

We were able to mitigate the logistical impacts of global shipping and distribution issues through our supply chain by appropriately managing our stock levels in advance, specifically around peak trading. This enabled us to meet customer demand versus competitors and to continue to provide the right products.

The current broader inflationary environment is creating two key themes. The first is a commercial impact directly related to the increased cost of doing business. The second is a customer impact reflecting the increased cost of living and the broader uncertainty leading to lower consumer confidence. We have worked through a series of actions and considerations in order to navigate the uncertainty and opportunities resulting from the current macro-economic environment.

People and Culture

Our colleagues continue to navigate through the impacts of a post-pandemic world with resilience and determination, always looking to put our customers at the forefront of everything we do. Colleagues are our biggest asset, providing flexibility and commitment, and showing that we can adapt our ways of working and keep delivering for our customers.

Data

We have continued to develop data products and tools that create actionable insight to support our business functions. We have supported commercial opportunities, developing an internal tool, PriceTagger, which optimally promotes product using pricing elasticity curves. We also use data insight to support our FS business to assess customer credit risk profiles and offer the appropriate solution for them.

The Group has continued to invest in its people and infrastructure with new key hires across our data function to build out a new data platform and deliver rapid insight to action analytics.

Strategic Update

Evolving our Strategic Roadmap

Over recent years we've undertaken a significant programme of transformation to become a lean, digital organisation.  Throughout this, our vision of "becoming the UK's most loved and trusted inclusive retailer" has been central, and it continues to be relevant to our business today.

In Autumn 2021, supported by external consultants, we conducted a review to assess our strategy and define the most expedient way forwards for growth.  Much of the strategy set out in June 2020 remains constant, and to accelerate value creation we have further refined our priorities based on the following principles:

·    Focus on growth through three strategic brands (JD Williams, Simply Be and Jacamo), which will allow us to boost simplicity and rigour of execution and deliver strong customer propositions and efficiency in our marketing. 

·    Home will remain an important category for N Brown, but our focus will shift to growing this through the multi category platform of JD Williams alongside a standalone Home brand. This enables us to improve efficiency in our marketing spend, and maximise the cross shopping experiences of our customers.

·    Establish the remaining brands as a "heritage" portfolio, focused on stabilisation and value protection rather than growth, with no further brand migrations planned at present.  This includes Home Essentials and Ambrose Wilson.

·    Full integration of our flexible credit offer into the core of the customer value proposition.

·    Elevation of data as an asset at the core of the strategy, driving daily decision making and activating our unique data pool.

These iterations make N Brown a simpler, more focused business able to allocate colleagues, investment and marketing spend in the most effective manner. The result of this is an evolution in the focus on our strategic pillars:

·          Build a differentiated brand portfolio - Build two multi brand and category platforms, one for women (JD Williams) and one for men (Jacamo), as well as one inclusive fashion brand (Simply Be)

·          Elevate the fashion and fintech proposition - Elevate the fashion assortment, integrate the credit offer into the journey and create a credit brand

·          Transform the customer experience - Transform the customer experience, pre and post purchase, and drive conversion at checkout through a personalised experience

·          Win with our target customer - Grow our customer base through our existing core customer, high value lapsed customers and a new, younger generation

·          Establish data as an asset to win - Establish data as an asset to drive top line and margin improvements

1.    Build a Differentiated Brand Portfolio

Continuing the momentum built in FY22, our focus is on building awareness and driving growth across the strategic brands of Simply Be, Jacamo and JD Williams.

Simply Be is an inclusive fashion brand for young women, focused primarily on own label design and expertise in fit. We launched a new creative approach with our Spring/Summer campaign, where we are asking women to reject bad fit, joining us in a "fit revolution". We will explicitly shift our focus to include all sizes - welcoming all women to Simply Be through the campaign. We launched with a new media strategy which moved away from traditional TV advertising, focusing on the digital channels where our customer spends her time (digital, social, influencer), as well as high impact channels like out-of-home advertising.

JD Williams is a fashion and lifestyle platform for grown women.  As a platform it is multi category (selling clothing and homeware) and includes own label and third-party brands. The Irish brand Oxendales will also transition to being the offer of JD Williams for the Irish market. JD Williams will continue to work with Davina McCall and Amanda Holden as brand ambassadors in FY23, showing how we have a relevant offer for every occasion for our customer, 'a collection for every moment'.

Jacamo is an inclusive fashion platform for all men.  Our marketing strategy is evolving to showcase the styles, brands and sizes relevant 'for every man', this will be showcased through the year. Our spring/summer campaign launched in May with a focus on key clothing categories, showing how we have the right offer for all men. By using 'archetypes' of different men and their style, we showcased the breadth of our offer to convey relevant sizes, brands and styles. This went live across digital video, out-of-home, and social channels in mid-May. For Autumn we are developing a new long-term creative approach, and looking at media and third-party partnerships to land this with significant impact.

2.    Elevate the Fashion and Fintech Proposition

Through FY23 we will continue to strengthen our overall offer by reducing our range depth across clothing footwear and beauty by 7% to create clarity, and keeping our emphasis on quality and fit.

We will continue to grow the mix of own designed product to build our handwriting and uniqueness and next year will focus on utilising our 3D Design software across the ranges. This creates efficiencies in sampling costs and quicker decision-making, as well as building out our fit expertise.

On own designed clothing, we have launched Anise as a relaxed, casual collection which features premium sustainable fabrics.  We are relaunching Dannimac which is an historic label we own, modernised for the contemporary consumer, and Snowdonia, a true outdoors brand.  Within the JD Williams home offer, we are launching a series of homeware labels with Julipa, Osborne and Gray and Anise, complementing the clothing ranges.

New third-party brands for JD Williams include Whistles, Mango, Sosandar, with Joe Browns, Monsoon, Phase 8 and Finery all building on last year's successes.

On Simply Be, we continue to build on the strengths of existing partnerships by broadening the offer available with brands such as Nobody's Child, Hope & Ivy and Joe Browns which are all available exclusively to us in our sizing. We will also use collaborations to develop unique designs in key categories, such as "Flourish" which is a partnership with local florists' for occasionwear.

Within Jacamo we will continue to build momentum in our premium labels including Hugo Boss and Ralph Lauren and will build on the success of men's formalwear by introducing a product collaboration with William Hunt, a Savile Row Tailor, which is a key category for 2022.  

We will continue to rationalise the supply base and increase the proportion of clothing & footwear suppliers that are closer to home whilst reducing the supply base in China. 

Bringing closer connection between our retail and credit journeys is a key focus for the year ahead. This means enhancements to our current proposition with offers such as 0% finance and improved eligibility search, but also evolution to our digital shopping journeys which will help the customer understand the total offer available to them across both retail and credit product.  We will also start to talk about our credit offering more prominently in both above and below the line marketing.

3.    Transform the Customer Experience

We are making significant investments in upgrading our technology estate in order to transform our customer experience and give us the flexibility for future innovation.

Our new front-end platform, which delivers a new trading website has been in development and we anticipate a customer launch later this year on Simply Be, to be followed by our other brands.  The website is designed as a mobile first experience, reflecting the increasing amount of shopping done via mobile devices. The experience is designed based on reachability and enables easy navigation and frictionless checkout, creating the rich experience you get on a mobile app but through the ease of shopping on the web.

Given the centrality of fit to our proposition, we are implementing a new Product Information Management system ("PIM").  This will give customers better information and insight on our products such as more detail about sizing and fabric. This will create a consistent customer experience and lower returns rate by distributing accurate and complete content across all channels as well as creating efficiency through the removal of manual, repetitive processes.

We are commencing work on the build of a new Financial Services technology platform that will enable further propositional innovation and allow us to develop into a fintech organisation. This will provide flexibility, better service, and a wider range of products to benefit our customers for the future.

4.    Win with our Target Customer

One of our key focuses for the next financial year is to grow our customer base, with a particular emphasis on better engagement with existing customers and bringing back former customers who have lapsed. Through the integration of credit through the customer journey, improved product story telling in our trading stories and accelerated use of first-party data we'll create a more compelling relationship with our customers.

This approach will drive better engagement, increase re-trade rates within our customer file and most importantly, improve the loyalty of our customers to our strategic brands. To facilitate this, we are developing our approach to CRM. The intent is to create an ecosystem of relevant, personalised communications on a customer-by-customer journey, that is delivered at the right time for the customer. This year will be focused on developing the people, process and data requirements and foundations in place to start delivering more personalised, relevant content to the customer.

Being clearer on who our target customer is allows us to refine our proposition tailored to their needs. It also allows us to be more effective with our marketing strategy. This will give us a sharper view of our target customer, designing our creative and media approaches around them. The content we create will reflect this, with a storytelling approach and a choice of models that resonates with each audience, underpinning our drive for greater inclusivity and delivering more engaging content formats.

5.    Establish Data as an Asset to Win

Data was already an enabler to our strategy, and we have elevated it to be a core part as we move forward. We want to use our data to help better decision making in the business to enable teams to be empowered and move at pace.

Last year, we saw huge success with the build of our internal tool PriceTagger, which helps us optimally promote product using pricing elasticity curves. Alongside developing our core data platform we will focus on driving margin improvement through the following areas: dynamic pricing and promotions to adjust pricing within season, markdown optimisation which defines optimal timing and size of end-of-season markdowns, customer centric buying which is making in-season buying adjustments based on early detection of sales performance and online traffic movements, and in-session personalisation to help show the right customers to the right products based on their personal profile.

Key Performance Indications (KPIs)¹

As a digital retailer committed to accelerating our strategy and navigating a post-pandemic environment, we continue to report various digital customer metrics, which provide operational measures of how our strategy is progressing. The disclosure below reflects our performance in FY22.

 

	FY22	FY21	Change
Total website sessions	244m	232m	5.2%
Conversion	3.8%	3.8%	-
Total Orders2	10.2m	10.0m	2.0%
AOV	£71.1	£69.0	3.0%
Items per order	2.8	2.8	-
AIV	£25.2	£25.0	0.8%
Total active customers	2.9m	2.8m	3.6%
FS arrears	8.4%	7.9%	50bps
NPS	60	63	(3)

^{1 KPIs are defined on page 23}

^{2 Total orders includes online and offline orders}

Total website sessions during the period increased by 5% due to expanded marketing spend across our strategic brands, particularly in brand advertising to drive awareness. Conversion was flat against FY21 at 3.8%, with the 10.2m orders in FY22 reflecting customer demand and included a significant pivot back to Clothing and Footwear, as the UK was able to socialise again.

Average order value ("AOV") improved by 3.0% and we achieved a 0.8% increase in average item value ("AIV"). These were each driven by a mix back towards higher priced dresses and outer clothing from more casual clothing sold during the onset of the Covid-19 pandemic with items per order remaining in line with prior year.

Total active customers increased in the year driven by acquisition in our strategic brands, representing a return to growth in full year active customers for the first time in four years, albeit behind the internal target included within bonus metrics. This included some attrition through a cohort of customers who bought one off home products during lockdown periods not returning to shop.

FS arrears showed a small increase following some normalisation in payment rates as a result of an unusually high propensity of credit customers paying down balances in FY21. However, arrears rates have yet to return to FY20 levels.

NPS stepped back from FY21 performance, behind the internal target included within bonus metrics.  This was driven by supply chain disruption, and in particular a lack of delivery drivers during peak trading due to Covid-19.

FY23 Outlook

Our expectation for FY23 Adjusted EBITDA remains unchanged from our year end trading statement issued on 3 March 2022. This reflected Adjusted EBITDA at a level similar to that reported in FY21 before growing again as the Group's strategy is executed.

We are confident in continued revenue growth from strategic brands and see the managed decline in revenues from heritage brands moderating as we no longer cycle against the drag from the Figleaves website closure. The trading environment has become more challenging since the start of FY23, with inflation impacting consumer confidence and resulting in a slightly softer level of volumes and revenue growth than previously anticipated. As a result of our continued focus on product margin, its improved trajectory in the second half of FY22 and volume variable cost savings, we expect this to be mitigated.

We expect product mix to further normalise, with clothing driving demand and a continued shift back into categories such as dresses and formalwear. The previously reported softer conditions in the online home market have continued into FY23 and we do not anticipate these abating in the short-term.

We remain confident in the resilience of our business model and in our strategic direction. We expect to drive product margin improvements through the Group's pricing response to cost inflation, the movement of the product mix back into clothing, and continued initiatives including data usage to optimise pricing strategies.

Financial Services revenue is expected to decline albeit at a lower rate than in prior years, and Financial Services gross margin to normalise to a low to mid 50s per cent range.

We anticipate a net increase in the adjusted operating costs to Group revenue ratio in FY23 as a result of inflationary pressures. This is inclusive of continuing our strategic investments in areas such as brand marketing. Operating costs will also increase due to a higher level of project spend included within operating expenses. Management actions are planned across all areas to mitigate the effect of these pressures.

The business is well positioned to continue delivering strategic change through FY23 and beyond. At the end of FY23, we expect the Group to maintain a strong unsecured net cash position and for net debt to be broadly in line with FY22's closing position.

The Board remains confident that over the medium term our strategy will support the delivery of 7% product revenue growth with a 13% EBITDA margin.

Summary

FY22 was a year of continued progress. The business is in a much stronger position relative to the start of the pandemic as a result of the hard work of the team over the last two years. We made strategic progress during the year, including strengthening and refining the product offering and marketing approach and have achieved a return to growth in customer numbers.

We remain a double-digit EBITDA margin rate business, with a strong balance sheet and are cash generative.  Our improved retail proposition and our credit offer sets us up well to support customers as they look to spread the cost of their purchases and manage their monthly budgets.  We will continue to invest in our strategy and remain confident of achieving our medium-term objectives, however, we remain cautious in the short-term given the inflationary pressures businesses and customers are experiencing as we do not see these pressures abating this year. 

Environment, Social and Governance

In FY22, we have continued to build momentum in our Environmental, Social and Governance strategy. Our sustainability plan, SUSTAIN, continues to fully align our ethical policies with our commercial activities and our commitment to Our People and Our Planet.

A key pillar of SUSTAIN is our commitment to responsibly source own-brand product, and we have hit our exit run rate target for FY22 of 30% own brand designed Clothing and Home textile ranges with sustainable attributes (from 0% in 2019). We are targeting growing this to 50% in FY23 and 100% by FY30.

We have successfully achieved the 2030 target of the British Retail Consortium Climate Action Roadmap for the second year running with all electricity purchased from renewable sources.

Our Greenhouse Gas Emissions per item shipped are 49% lower compared to the base line and which finished ahead of the 42% reduction targeted for the year.

 

 

FY22 FINANCIAL REVIEW

 

Financial KPIs

Our non-financial KPIs are contained in the Chief Executive Officer's statement. We also use a number of financial KPIs to manage the business. These are shown below and will continue to be reported going forwards.

 

	FY22	FY212	Change
Product revenue	£465.6m	£468.4m	(0.6)%
Adjusted EBITDA1,2	£95.0m	£84.9m	11.9%
Adjusted EBITDA margin1,2	13.3%	11.6%	1.7ppts
Adjusted operating costs to Group revenue1,2	36.0%	32.7%	(3.3)ppts
Unsecured net cash1,3	£43.1m	£80.8m	(46.7)%
Adjusted EPS1	7.69p	7.76p	(0.9)%
Statutory profit before tax	£19.2m	£9.2m	108.7%

¹A full glossary of Alternative Performance Measures and their definitions is included on page 26..

²Refer to change in accounting policy prior year adjustment note 19

³During FY22 we agreed with our banks that the securitisation facility does not need to be fully drawn and that surplus cash can be used to repay drawings from time to time. FY22 excludes accessible amounts voluntarily undrawn against the securitisation facility of £60.1m.

 

 

Reconciliation of Statutory financial results to adjusted results

The Annual Report and Accounts includes alternative performance measures ("APMs"), which are not defined or specified under the requirements of IFRS. These APMs are consistent with how we measure performance internally and are also used in assessing performance under our incentive plans. Therefore, the Directors believe that these APMs provide stakeholders with additional, useful information on the Group's performance.

The adjusted figures are presented before the impact of exceptional items. Exceptional items are items of income and expenditure which are one-off in nature and are material to the current financial year or represent true ups to items presented as exceptional in prior periods. These are detailed in note 6.

A full glossary of Alternative Performance Measures and their definitions is included on page 26.

 

 

 

 

Reconciliation of Income Statement Measures
		FY22	FY22	FY22		FY21	FY21	FY21
		Statutory	Exceptional Items	Adjusted		Statutory	Exceptional Items	Adjusted
						Restated 1		Restated 1
Product Revenue		465.6		465.6		468.4		468.4
Financial services Revenue		250.1		250.1		260.4		260.4
Group Revenue		715.7		715.7		728.8		728.8
Product Cost of sales		(267.3)		(267.3)		(265.4)	1.1	(264.3)
Financial services Cost of sales		(95.5)		(95.5)		(141.0)		(141.0)
Group Cost of sales		(362.8)		(362.8)		(406.4)	1.1	(405.3)
Gross profit		352.9		352.9		322.4	1.1	323.5
Gross profit margin - Group		49.3%		49.3%		44.4%		44.4%
Gross profit margin - Product		42.6%		42.6%		43.3%		43.6%
Gross profit margin - Financial Services		61.8%		61.8%		45.9%		45.9%
Warehouse & fulfilment		(67.9)		(67.9)		(64.8)		(64.8)
Marketing & production		(73.1)		(73.1)		(60.3)		(60.3)
Other admin & payroll		(145.6)	28.7	(116.9)		(124.0)	10.5	(113.5)
Operating Costs		(286.6)	28.7	(257.9)		(249.1)	10.5	(238.6)
Adjusted operating costs to group revenue ratio				36.0%				32.7%
Adjusted EBITDA				95.0				84.9
Adjusted EBITDA margin				13.3%				11.6%
Depreciation & amortisation		(38.1)		(38.1)		(38.9)		(38.9)
Operating Profit		28.2	28.7	56.9		34.4	11.6	46.0
Finance costs		(13.8)		(13.8)		(16.6)		(16.6)
Profit before taxation and fair value adjustment to financial instruments		14.4	28.7	43.1		17.8	11.6	29.4
Fair value adjustments to financial instruments		4.8		4.8		(8.6)	(1.4)	(10.0)
Profit before taxation		19.2	28.7	47.9		9.2	10.2	19.4
Taxation		(3.0)	(5.7)	(8.7)		(1.3)	(1.7)	(3.0)
Profit for the year		16.2	23.0	39.2		7.9	8.5	16.4
Earnings per share		3.53p		7.69p		2.50p		7.76p

¹ FY21 restated to reflect the impact of accounting policy change in relation to Software as a Service including minor reductions against the reported level of each of Adjusted and Statutory PBT (£0.7m) and to Adjusted EBITDA (£1.6m) (refer to note 19).

 

Reconciliation of Cash and cash equivalents and bank overdrafts to Unsecured Net Cash and Adjusted Net Debt

 

£m	FY22	FY21
Cash and cash equivalents	43.1	94.9
Bank overdrafts	-	(14.1)
Unsecured debt	-	-
Unsecured Net Cash	43.1	80.8
Bank loans	(302.5)	(381.9)
Adjusted Net Debt	(259.4)	(301.1)

 

Reconciliation of Net movement in Cash and cash equivalents and bank overdrafts to Net Cash generation

 

£m	FY22	FY21
Net (decrease) / increase in cash and cash equivalents and bank overdraft	(37.7)	33.3
Voluntary flexible repayment of securitisation loan	60.1	-
Repayment of unsecured loans	-	125.0
Proceeds on issue of share capital	-	(99.6)
Transaction costs relating to the issue of share capital	-	6.1
Net Cash generation	22.4	64.9

 

Overview

We have benefitted from our flexible business model, responding to the continued market volatility and delivering a return to growth in strategic brands product revenue, adjusted EBITDA of £95.0m in line with narrowed guidance, and statutory profit before tax of £19.2m.

This was in the context of a year of low levels of consumer credit default, as our customers transitioned through the pandemic.

Our continued cash generation and robust balance sheet means we are well positioned to execute on our strategy.

 

Revenue

 

£m	FY22	FY21 (Re-presented)1	Change
Revenue
Strategic brands1,2	381.2	347.0	9.9%
Other brands1,3	84.4	121.4	(30.5)%
Total product revenue	465.6	468.4	(0.6)%
Financial services revenue	250.1	260.4	(4.0)%
Group revenue	715.7	728.8	(1.8)%

¹FY21 split between Strategic and Other brands has been re-presented to correctly allocate bad debt relief. There is no impact on Total product revenue or Group revenue.

²JD Williams, Simply Be, Ambrose Wilson, Jacamo and Home Essentials.

³Other brands are Fashion World, Marisota, Oxendales and Premier Man. High & Mighty, House of Bath and Figleaves were closed in FY21.

 

Group revenue declined 1.8% to £715.7m, as a result of a 0.6% decline in total Product revenue and a 4.0% decline in Financial Services revenue, each reflecting an improvement in trajectory over prior year.

Excluding the impact from the closure of Figleaves, underlying product revenue grew by 4% with the growth in strategic brands offset by the managed decline of other brands. Looking ahead, the Figleaves closure will no longer cause a drag on revenue.

The return to growth in strategic brands' product revenue, up 9.9% against last year, has been supported by our strategic changes including in the quality of our product proposition, our return to targeted marketing investment, and the flexibility of the business model. This has allowed us to cater for a resurgence in demand for Clothing and Footwear whilst we have seen a tempering in pandemic-driven demand for Home and Gift. Strong stock and range planning allowed customer needs to be met, including during peak trading, despite the ongoing supply chain challenges.

The Group's total active customers are now in year-on-year growth for the first time in four years, closing up 4% at 2.9m as more people discover the N Brown brands. This positions us well for the future whilst we remain cognisant of the inflationary driven headwinds on consumer spending.

Clothing and Footwear mix increased during the year from 59% of product revenue in FY21 to 66% in FY22. With the pivot back into Clothing and Footwear, customer returns rates increased by 4.5ppts against the prior year. Returns rates were 4.3ppts below pre-pandemic levels, inclusive of both mix and underlying like for like improvement. We expect to see further normalisation of returns in H1 FY23 due to product mix.

We have continued to see over 80% of product revenue coming from credit accounts. The customer gross receivables book opened the year 8% down on prior year following lower retail sales in FY21. It ended the year 4.7% down on prior year as new sales and low write off levels more than offset higher than normal repayment rates. This resulted in a 4% reduction in Financial Services revenue, an improving trajectory versus prior year.

 

Adjusted Gross profit¹

£m	FY22	FY21	Change
Product gross profit	198.3	204.1	(2.8)%
Product gross margin %	42.6%	43.6%	(1.0)ppts
Financial services gross profit	154.6	119.4	29.5%
Financial services gross margin %	61.8%	45.9%	15.9ppts
Adjusted Group gross profit1	352.9	323.5	9.1%
Adjusted Group gross profit margin	49.3%	44.4%	4.9ppts

¹ A reconciliation of statutory measures to adjusted measures is included on page 15. A full glossary of Alternative Performance Measures and their definitions is included on page 26.

 

The Group's adjusted gross profit margin was higher at 49.3%, compared to 44.4% in FY21.

Product gross margin declined 1.0ppts to 42.6% primarily as a result of inflationary pressures in freight rates and a high level of discounting due to the competitive and promotional environment.  The pressures on Product gross margin were partially offset by growth in the higher margin Clothing and Footwear category and price increases which were made to partially mitigate the impact of freight rates. We also entered into FX contracts to hedge against US Dollar spend as described in Note 7.

Financial Services gross margin was 61.8% in FY22, 15.9ppts higher than FY21, and c10ppts higher than normalised levels.  This was a result of unprecedented conditions within the consumer credit market, with government support during the first part of the Covid-19 pandemic resulting in high repayment rates, low arrears rates, and consequently a net reduction in the IFRS 9 bad debt provision compared to the position last year.

At the end of FY21, the forward macroeconomic indicators were suggesting an increase in the level of customer defaults compared to the decrease we have subsequently experienced.  Of the £15.4m additional IFRS 9 provision made at the end of FY21, £13.7m was released in the year.  During the year we have seen abnormally low write off levels, net of recoveries, £14.2m lower than prior year. At the end of FY22, in assessing future expected credit losses considering the macro inflationary risk on consumers, we have set aside an additional provision of £5.8m.  We expect Financial Services gross margin to normalise to a low to mid 50s percent range.

 

Adjusted operating costs¹

£m	FY22	FY212	Change
Warehouse & fulfilment costs	(67.9)	(64.8)	(4.8)%
Marketing & production costs	(73.1)	(60.3)	(21.2)%
Admin & payroll costs	(116.9)	(113.5)	(3.0)%
Adjusted operating costs1	(257.9)	(238.6)	(8.1)%
Adjusted operating costs as a % of Group Revenue	36.0%	32.7%	(3.3)ppts

¹ A reconciliation of statutory measures to adjusted measures is included on page 15. A full glossary of Alternative Performance Measures and their definitions is included on page 26.

²  Refer to change in accounting policy prior year adjustment note 19.

 

At the start of the pandemic in early FY21, we took rapid action to significantly reduce costs. Marketing expenditure was reduced through both efficiencies and a temporary reduction in brand marketing. Conversely, in FY22, we saw increases in the cost base as we invested in targeted marketing to support our strategic brands and reach a broader set of customers. As a result we have seen an increase in adjusted operating costs of 8.1% against the prior year. Statutory operating costs including exceptional items increased by 15.1%.

Marketing costs increased by 21.2% year on year to £73.1m reflecting a return to investing in this area, following the immediate and sharp reduction in marketing spend in FY21. The FY22 spend includes a £6m increase in above-the-line activity to drive brand awareness on strategic brands.  Our new in-house photographic studio, which drives improvements in how our brands are presented, has also driven cost efficiencies in the year. FY22 marketing costs were 46.3% below the pre Covid-19 pandemic level in FY20 of £136.0m.

Across warehouse and fulfilment, and admin and payroll, we have annualised against an FY21 credit of c.£3.8m in furlough support from the Government which allowed us to preserve a significant number of jobs for our colleagues and work through the challenges that Covid-19 presented for our business.

Warehouse and fulfilment costs were 4.8% higher year on year, due to 6% growth in items shipped to drive product revenue of -1% including through an increase in returns rates.

Admin and payroll costs increased by 3.0%, driven predominantly by annualising against the Covid-19 actions taken in the prior year. As accounting standards and delivery methods develop a proportionally higher levels of investment spend is being expensed rather than capitalised. We have continued to seek further cost efficiencies, including achieving savings within our contact centre approach and property estate during the year.

Overall, adjusted operating costs as a percentage of Group revenue increased from 32.7% in FY21 to 36.0% in FY22, but remains significantly below pre Covid-19 pandemic levels. We expect this ratio to increase in FY23 through inflationary increases in the cost base and maintaining strategic brand investment. We will action pricing increases in response to the higher cost environment.

 

Exceptional items

The Group is involved in a legal dispute with Allianz. More details of the Allianz claim and the JDW counterclaims and defence are set out in note 6. The eventual financial outcome of the dispute is highly uncertain for both parties. We believe that it remains in the best interest for the parties to settle the dispute and an accounting provision of £28m has been made to cover settlement, or award at trial, plus future legal costs.

The Group has now reached agreement with HMRC over a number of historical VAT and other tax matters, and the release of £1.2m in the period relates to opening provisions that are no longer required.

 

£m	FY22	FY21
Allianz litigation	29.8	1.1
Tax matters	(1.2)	1.0
Other	0.2	0.2
Items charged to profit before tax	28.7	10.2

 

Profit and earnings per share

Driven by the growth in gross profit, adjusted EBITDA increased by £10.1m to £95.0m and adjusted EBITDA margin increased by 1.7ppts to 13.3%.

Depreciation and amortisation was £38.1m, slightly below the £38.9m in the prior year. The prior year has been restated to reflect the non-cash impact of accounting policy changes in relation to Software as a Service (see Note 19).

Statutory operating profit decreased by £6.2m over prior year to £28.2m reflecting the increase in Adjusted EBITDA and the higher exceptional items.

Net finance costs were £13.8m, a decrease of £2.8m compared to last year primarily driven by the lower net debt and enabled by the newly introduced flexibility to voluntarily under-draw on the securitisation facility. The Group has also limited its exposure to interest rate movements through entering into interest rate hedging, as described in Note 7.

Adjusted profit before tax was £43.1m, up £13.7m year on year (FY21 restated: £29.4m) as a result of higher gross profit, and reduced depreciation and amortisation.

Statutory profit before tax was £19.2m, up £10.0m year on year (FY21 restated: £9.2m) which includes a £13.4m improvement in fair value adjustments to financial instruments. In FY21 sterling weakened through the year resulting in a mark to market loss on our US $ hedges of £10.0m, we also proactively settled certain derivatives that were no longer required due to the sharp decline in product purchases at the onset of the pandemic, realising an exceptional gain of £1.4m. In FY22, conversely, sterling strengthened resulting in a mark to market gain of £4.8m.

The taxation charge for the period is based on the underlying estimated effective tax rate for the full year of 16%. The effective taxation charge for the year is lower than the corporation tax rate of 19% as the Group expects to take advantage of the Super Deductions on qualifying fixed assets, the benefit of which is partially offset by the effects of an increase in deferred tax to 25%. Further tax analysis is contained in note 8.

Statutory earnings per share increased to 3.53p (FY21 restated: 2.50p). Adjusted earnings per share decreased to 7.69p (FY21 restated: 7.76p). This reduction is inclusive of the 46% increase in the weighted average number of shares following the equity raise in December 2020.  Further details can be found in note 9.

 

Financial services customer receivables and impairment

Gross customer trade receivables at year end reduced by 4.7% to £577.2m, with the level of contraction reducing through the year. This reflected a combination of current year credit sales and low levels of write offs, offset by higher than normal levels of customer repayments.

As covered in the gross margin commentary, we saw unprecedented conditions within the consumer credit market, resulting in low levels of arrears, particularly in H1, then a degree of normalisation through H2, with year end arrears increasing by 0.5ppts to 8.4% as the Government pandemic support was removed.

The IFRS9 bad debt provision to gross receivable balance ratio has reduced to 11.9% from 14.1% in FY21. The FY21 level was inclusive of £15.4m (2.5ppts) to cover future Covid-19 default risks. Of this, £1.6m was utilised and £13.7m was not required and released in the year. The FY22 provision ratio includes a £5.8m (1.0ppts) provision for the new macro risk of inflationary pressures. The FY22 ratio of 11.9% therefore remains above the pre Covid-19 level reported in FY20 (10.9%).

 

£m	FY22	FY21	Change
Gross customer loan balances	577.2	605.8	(4.7)%
IFRS 9 provision	(68.7)	(85.2)	(19.3)%
Normal account provisions	(58.1)	(60.9)	0.0ppts
Payment arrangement provisions	(4.8)	(8.8)	+0.6ppts
Inflationary / Covid-19 impacts	(5.8)	(15.4)	+1.5ppts
IFRS 9 provision / loan book ratio	11.9%	14.1%	+2.2ppts
Net customer loan balances	508.5	520.6	(2.4)%

 

 

The profit and loss net impairment charge for FY22 was £94.4m, £44.7m lower than last year due to the benefit from  annualising against the Covid-19 model overlay, the release of Covid-19 provisions not utilised or required in the year and lower write-offs in FY22, as shown below.

£m
FY21 net impairment charge	139.1
Under IFRS 9, in FY21 we provided an extra £15.4m for expected future credit losses as a result of the economic impacts of Covid-19	(15.4)
Release of FY21 provisions not required	(13.7)
Under IFRS 9, in FY22 we have provided an extra £5.8m for expected future credit losses driven by inflationary pressures	5.8
Lower write-offs net of recoveries than prior year	(14.2)
Lower customer receivables	(4.3)
Model refinements and other adjustments	(2.9)
FY22 net impairment charge	94.4

 

Funding and total accessible liquidity ("TAL")

During the year, we right-sized the securitisation facility to £400m to better reflect the size of the debtor book and reduce ongoing fees, and introduced flexibility in the levels of drawdown to deliver greater balance sheet efficiency and interest savings. We now have the following arrangements in place with our lenders:

·   A £400m securitisation facility (FY21: £500m) committed until December 2024, extended from December 2023 during the year, drawings on which are linked to prevailing levels of eligible receivables but with flexibility around the level which the Company chooses to draw;

·   A RCF of £100m committed until December 2023, which was fully undrawn at the year end; and

·   An overdraft facility of £12.5m which is subject to an annual review every July, which was fully undrawn at the year end.

At the end of FY22 the Group had TAL of £212.1m (FY21: £184.8m), comprising £43.1m of cash, net of restricted cash of £3.6m, £60.1m voluntarily undrawn against the securitisation facility, the fully undrawn RCF of £100m and overdraft facility of £12.5m.

 

 

Net Cash Generation

£m	FY22	FY21 (Restated)1
Adjusted EBITDA	95.0	84.9
Inventory working capital movement	(9.6)	17.0
Other working capital and operating cash flows Customer loan book IFRS 9 provision movement	(5.3) (16.5)	2.5 13.5
Cash flow adjusted for working capital	63.6	117.9
Exceptional items	(9.8)	(16.4)
Capital investing activities	(19.8)	(18.4)
Non-operating tax & treasury	(7.2)	(12.4)
Interest paid	(13.8)	(19.0)
Non-operational cash outflows	(50.6)	(66.2)
Gross customer loan book repayment	28.6	51.0
Decrease in securitisation debt in line with customer loan book	(19.4)	(37.8)
Net cash inflow from the customer loan book	9.4	13.2
Net cash generation	22.4	64.9

¹FY21 restated to reflect the impact of accounting policy change in relation to Software as a Service including minor reductions against the reported level of each of Adjusted and Statutory PBT (£0.7m) and to Adjusted EBITDA (£1.6m) (refer to note 19).

Net cash decreased in the year by £37.7m compared to an increase of £158.4m in the prior year. Excluding voluntary repayment of the securitisation facility of £60.1m this year and the £93.5m equity raise net proceeds in the prior year, net cash generated from operations was £22.4m (FY21: £64.9m). This represents continued strong cash generation in the year, annualising against the onset of Covid-19, when cash was particularly tightly managed.

Capital expenditure of £19.8m (FY21: £18.4m) was consistent with last year's level and we expect strategic investment to step-up in FY23. 

Net inventory levels at the year end were up 12.4%, to £87.3m (FY21: £77.7m).  This reflects normalisation following the significant reduction which took place in the prior year as well as the significant increase in freight rates which increased the landed cost of our stock.  We have entered FY23 with what we consider to be an appropriate level of inventory, with the product mix focused on new season stock which has increased by approximately £17m, whilst last and previous season stock has reduced by approximately £9m.

 

Adjusted net debt

Following a significant reduction in net debt in the prior year, this was further reduced during the year through cash generation and the reduction in the debtor book.

Unsecured net cash / (debt), which is defined as the amount drawn on the Group's unsecured borrowing facilities less cash balances, closed the year with unsecured net cash of £43.1m (FY21: unsecured net cash £80.8m). The reduction over the prior year reflects the voluntary repayment of £60.1m on the securitisation funding facility to deliver greater balance sheet efficiency and interest savings.

Adjusted net debt decreased by £41.7m in the year, to £259.4m (FY21: £301.1m). This is the net amount of £43.1m of cash and £302.5m of debt drawn against the securitisation funding facility which is backed by eligible customer receivables. The £508.5m net customer loan book significantly exceeds this adjusted net debt figure.

Dividend and capital allocation

We have a clear set of investment plans and a number of competing demands on our cash resources. Nevertheless, the Directors recognise that dividends are an important part of shareholders' returns and the Board will consider the reintroduction of a dividend in FY23.

Pension scheme

The Group's defined benefit pension scheme had a surplus of £37.4m at year end, which ha increased over the prior year (FY21: £25.5m). This reflects an actuarial gain on the scheme liabilities due to an increase in both the discount rate, reflecting higher corporate bond yields, and an increase in future inflation assumptions. The assets have increased due to the continued payment of the employer contributions and improved investment returns.

Financial risk management and processes

We continue to make progress on our Financial Risk Management capability through our Finance Risk Management Committee.  During the year, we also improved our financial processes and controls. Due to the longstanding legacy systems and processes across the Group, we are targeting further improvements in documentation, clarity on specific key controls, and overall process level controls to reduce the reliance on detective management level controls. This feeds into the Audit and Risk Committee focus on improving controls. Examples of improvements already deployed include the introduction of an interest rate hedging policy which has significantly reduced our exposure to future interest rate changes, as well as practical enhancements to our supplier statement reconciliations.

With the updated IFRIC guidance issued on accounting for SAAS, we performed an in-depth review of our historic technology investment spend. This resulted in a prior year adjustment due to the change in accounting policy as disclosed in note 19. This change in accounting policy combined with our increasing use of agile technology development is likely to result in a greater proportion of our investment spend being charged to operating expenses versus historically what would have been capitalised as an intangible asset.

During the year we welcomed a letter from the Corporate Reporting Review team of the FRC in relation to the Group's FY21 Annual Report and Accounts, referenced in full in the Audit and Risk Committee report on p70. This provided helpful feedback. No substantial issues were identified and recommendations on improvements in disclosures have been incorporated in this Annual Report.

 

 

KPI DEFINITIONS

 

 

Measure	Definition
Total website sessions	Total number of sessions across N Brown apps, mobile and desktop websites in the 12 month period
Total active customers	Customers who placed an accepted order in the 12 month period to reporting date
Total orders	Total accepted orders placed in the 6 or 12 month period.  Includes online and offline orders.
AOV	Average order value based on accepted demand1
AIV	Average item value based on accepted demand
Items per order	Average number of items per accepted order
Orders per customer	Average number of orders placed per ordering customer
Conversion	% of app/web sessions that result in an accepted order
NPS	Customers asked to rate likelihood to "recommend the brand to a friend or colleague" on a 0-10 scale (10 most likely). NPS is (% of 9-10) minus (% of 0-6). NPS is recorded on JD Williams, Simply Be, Ambrose Wilson, Jacamo, Home Essentials and Fashion World.
FS Arrears	Arrears are stated including both customer debts with two or more missed payments, or customer debts on a payment hold.

¹Accepted demand is defined as the value of Orders from customers (including VAT) that we accept, i.e. after our credit assessment processes.  Excludes Figleaves for FY21 due to different internal reporting systems

 

 

 

APM GLOSSARY

The Preliminary Results statement includes alternative performance measures ("APMs"), which are not defined or specified under the requirements of IFRS. These APMs are consistent with how the Group measures performance internally and are also used in assessing performance under the Group's incentive plans. Therefore, the Directors believe that these APMs provide stakeholders with additional, useful information on the Group's performance.

 

 

Alternative Performance Measure	Definition
Adjusted gross profit	Gross profit excluding exceptional items.
Adjusted gross profit margin	Adjusted gross profit as a percentage of Group Revenue.
Adjusted EBITDA	Operating profit, excluding exceptional items, with depreciation and amortization back.
Adjusted EBITDA margin	Adjusted EBITDA as a percentage of Group Revenue.
Adjusted profit before tax	Profit before tax, excluding exceptional items and fair value movement on financial instruments.
Adjusted profit before tax margin	Profit before tax, excluding exceptional items and fair value movement on financial instruments expressed as a percentage of Group Revenue.
Net Cash generation	Net cash generated from the Group's underlying operating activities.
Adjusted Operating costs	Operating costs less depreciation, amortization and exceptional items.
Adjusted Operating costs to revenue ratio	Operating costs less depreciation, amortization and exceptional items as a percentage of Group revenue.
Adjusted Net debt	Total liabilities from financing activities less cash, excluding lease liabilities.
Net debt	Total liabilities from financing activities less cash.
Unsecured net cash / (debt)	Amount drawn on the Group's unsecured debt facilities less cash balances. This measure is used to calculate the Group's leverage ratio, a key debt covenant measure.
Total Accessible Liquidity	Total cash and cash equivalents, less restricted amounts, and available headroom on secured and unsecured debt facilities.
Adjusted Earnings per share	Adjusted earnings per share based on earnings before exceptional items and fair value adjustments, which are those items that do not form part of the recurring operational activities of the Group.

 

The reconciliation of the statutory measures to adjusted measures is include in the Financial Review report on page 15.

 

 

Consolidated income statement

for the 52 weeks ended 26 February 2022

 

		52 weeks to 26 February 2022			52 weeks to 27 February 2021 (Restated)1
		Before exceptional items	Exceptional items (Note 6)	Total	Before exceptional items	Exceptional items  (Note 6)	Total
	Notes	£m	£m	£m	£m	£m	£m
Revenue		487.0	-	487.0	489.3	-	489.3
Credit account interest		228.7	-	228.7	239.5	-	239.5
Group Revenue	5	715.7	-	715.7	728.8	-	728.8
Cost of sales	5	(268.4)	-	(268.4)	(266.2)	(1.1)	(267.3)
Impairment losses on customer receivables	12	(94.4)	-	(94.4)	(139.1)	-	(139.1)
Gross profit /(loss)	5	352.9	-	352.9	323.5	(1.1)	322.4
Operating profit /(loss)	5	56.9	(28.7)	28.2	46.0	(11.6)	34.4
Finance costs		(13.8)	-	(13.8)	(16.6)	-	(16.6)
Profit /(loss) before taxation and fair value adjustments to financial instruments		43.1	(28.7)	14.4	29.4	(11.6)	17.8
Fair value adjustments to financial instruments		4.8	-	4.8	(10.0)	1.4	(8.6)
Profit before taxation		47.9	(28.7)	19.2	19.4	(10.2)	9.2
Taxation	18	(8.7)	5.7	(3.0)	(3.0)	1.7	(1.3)
Profit /(loss) for the period		39.2	(23.0)	16.2	16.4	(8.5)	7.9
1Refer to change in accounting policy prior year adjustment note 19 and presentational adjustment in note 5
Earnings per share from continuing operations
Basic	11			3.53			2.50
Diluted	11			3.51			2.50

Consolidated statement of comprehensive income

for the 52 weeks ended 26 February 2022

 

	52 weeks to 26 February 2022	52 weeks to 27 February 2021 (Restated)1
	£m	£m
Profit for the period	16.2	7.9
Items that will not be reclassified subsequently to profit or loss
Actuarial gains/(loss) on defined benefit pension schemes	10.5	(1.9)
Tax relating to items not reclassified	(3.7)	0.7
Net other comprehensive income / (loss) that will not be reclassified to profit or loss	6.8	(1.2)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations	0.6	(2.6)
Fair value movements of cash flow hedges	7.2	-
Amounts reclassified from other comprehensive income to profit & loss	0.6	-
Tax relating to these items	(1.8)	-
Net other comprehensive income/ (loss) that may be reclassified to profit or loss	6.6	(2.6)
Other comprehensive income / (loss) for the period	13.4	(3.8)
Total comprehensive income for the period attributable to equity holders of the parent	29.6	4.1

¹Refer to change in accounting policy prior year adjustment note 19

 

 

Consolidated balance sheet

As at 26 February 2022

 

		As at 26 February 2022	As at 27 February 2021 (Restated)1	As at 29 February 2020 (Restated)1
	Note	£m	£m	£m
Non-current assets
Intangible assets	10	113.0	128.1	147.2
Property, plant and equipment	11	58.5	60.9	62.6
Right-of-use assets		1.1	3.6	5.6
Retirement benefit surplus		37.4	25.5	26.3
Derivative financial instruments		5.1	-	1.3
Deferred tax assets		11.5	13.6	13.8
		226.6	231.7	256.8
Current assets
Inventories		87.3	77.7	94.9
Trade and other receivables	12	533.1	549.0	614.4
Derivative financial instruments		1.7	0.4	4.0
Current tax asset		1.0	-	-
Cash and cash equivalents	14	43.1	94.9	161.7
		666.2	722.0	875.0
Total assets		892.8	953.7	1,131.8
Current liabilities
Bank overdrafts		-	(14.1)	(114.2)
Provisions		(30.9)	(4.7)	(11.1)
Trade and other payables	13	(94.7)	(110.6)	(110.5)
Lease liability		(0.9)	(1.8)	(2.2)
Derivative financial instruments		(0.4)	(6.2)	(1.3)
Current tax liability	8	-	(4.5)	(13.8)
		(126.9)	(141.9)	(253.1)
Net current assets		539.3	580.1	621.9
Non-current liabilities
Bank loans	15	(302.5)	(381.9)	(544.6)
Lease liability		(0.4)	(3.1)	(4.7)
Derivative financial instruments		-	(1.3)	(0.9)
Deferred tax liabilities		(20.7)	(13.2)	(14.6)
		(323.6)	(399.5)	(564.8)
Total liabilities		(450.5)	(541.4)	(817.9)
Net assets		442.3	412.3	313.9
Equity attributable to equity holders of the parent
Share capital	17	50.9	50.9	31.4
Share premium account		85.0	85.0	11.0
Own shares		(0.2)	(0.3)	(0.3)
Cash flow hedge reserve		5.5	-	-
Foreign currency translation reserve		1.0	0.4	3.0
Retained earnings		300.1	276.3	268.8
Total equity		442.3	412.3	313.9

¹Refer to change in accounting policy prior year adjustment note 19

 

Consolidated cash flow statement

For the 52 weeks ended 26 February 2022

 

		52 weeks to 26 February 2022	52 weeks to 27 February 2021 (Restated)1
		£m	£m
Net cash inflow from operating activities		78.7	142.2
Investing activities
Purchases of property, plant and equipment		(3.4)	(1.4)
Purchases of intangible assets		(16.4)	(17.0)
Net cash used in investing activities		(19.8)	(18.4)
Financing activities
Interest paid		(13.8)	(19.0)
Dividends paid		-	-
Decrease in bank loans		(79.3)	(162.8)
Principal elements of lease payments		(1.8)	(1.7)
Foreign exchange forward contracts		(1.3)	-
Proceeds on issue of share capital		-	99.6
Transaction costs relating to the issue of share capital		-	(6.1)
Net cash (outflow) from financing activities		(96.2)	(90.0)
Net foreign exchange difference		(0.4)	(0.5)
Net (decrease)/increase in cash and cash equivalents and bank overdraft		(37.7)	33.3
Cash and cash equivalents and bank overdraft at beginning of period		80.8	47.5
Cash and cash equivalents and bank overdraft at end of period		43.1	80.8

 

 

Reconciliation of operating profit to net cash from operating activities

 

		52 weeks to 26 February 2022	52 weeks to 27 February 2021 (Restated)1
		£m	£m
Profit for the period		16.2	7.9
Adjustments for:
Taxation charge		3.0	1.3
Fair value adjustments to financial instruments		(4.8)	10.0
Net foreign exchange gain		0.4	0.8
Finance costs		13.8	16.6
Depreciation of right-of-use assets		1.2	1.6
Depreciation of property, plant and equipment		4.4	3.3
Gain on disposal of right of use assets		(0.5)	-
Impairment of intangible assets		-	1.9
Amortisation of intangible assets		32.5	34.0
Share option charge		0.8	0.8
Operating cash flows before movements in working capital		67.0	78.2
(Increase)/Decrease in inventories		(9.6)	17.0
Decrease in trade and other receivables		15.9	64.4
(Increase)/Decrease in trade and other payables		(13.5)	0.7
Increase/(Decrease) in provisions		26.1	(6.2)
Pension obligation adjustment		(0.9)	(0.8)
Cash generated by operations		85.0	153.3
Taxation paid		(6.3)	(11.1)
Net cash inflow from operating activities		78.7	142.2
Changes in liabilities from financing activities		52 weeks to 26 February 2022	52 weeks to 27 February 2021
		£m	£m
Loans and borrowings
Balance at 27 February 2021		386.8	551.5
Changes from financing cash flows
Net repayment from loans and borrowings1		(79.2)	(161.7)
Lease payments in the period		(1.8)	(2.0)
Lease disposals in the period		(1.8)	-
Decrease in loans and borrowings due to change in interest rates		(0.2)	(1.0)
Decrease in loans and borrowings		(83.0)	(164.7)
Balance at 26 February 2022		303.8	386.8
1Repayments relating to the Group's Securitisation facility and are re-presented net of cash receipts in respect of the customer book collections. The Directors consider that the net representation more accurately reflects the way the Securitisation cashflows are managed.