N Brown swings to interim profit but revenue dips
Specialist womenswear retailer N Brown said on Thursday that it swung to an interim profit thanks to lower exceptional costs, but revenue dipped.
In the half year to 31 August, the company swung to a statutory pre-tax profit of £18.8m from a loss of £27.1m the year before, while adjusted pre-tax profit rose 3.9% to £31.8m as total exceptional costs fell to £25m from £65.4m.
However, revenue slipped 5.4% during the period to £432.9m as product revenue from its retail business fell 9.3% to £282.3m and financial services revenue rose 2.9% to £150.6m.
The fall in product revenue was attributed to the continued managed decline of the legacy offline business, a shift in focus away from the USA and the closure of its store portfolio in the previous year. Excluding stores and the USA, product revenue was 6.2% lower.
Womenswear revenue fell 3.4% during the half as the company continued to scale back unprofitable marketing and offline recruitment. However, in line with its digital growth strategy, womenswear digital revenue was up 4.6%.
JD Williams revenue declined 3.7%, while Simply Be saw revenue grow 2%. Revenue in the menswear division, which is the Jacamo brand, rose 5.5%.
Net debt increased 14.5% to £481.6m and the interim dividend was held steady at 2.83p a share.
Chief executive Steve Johnson said: "We announced our new strategy in May to return N Brown to sustainable profit growth and we have made good progress over the first half of the year.
"In particular, we have delivered on our strategy of growing digital revenue across Simply Be, JD Williams, Jacamo and Ambrose Wilson. This has been achieved by taking a more targeted approach to marketing and customer recruitment. The retail environment remains heavily promotional, but we are concentrating on continuing to improve our customer proposition and ensuring we operate as efficiently as possible, which has led to an increase of 4% in adjusted EBITDA for the period."
N Brown backed its expectations for the full year.
At 0935 BST, the shares were up 7.9% at 107.90p.
Russ Mould, investment director at AJ Bell, said: "Half-year results now show profit going in the right direction, triggering a large rally in the share price.
"Cynics may argue that revenue is still falling, net debt is rising and the dividend is not growing. However, there is a sense that Johnson has quickly stabilised the business and put it on a stronger footing to fight back.
"N Brown has advantage over many other UK retailers in that it is catering for a specific niche so there isn’t excess competition. It targets people aged over 50 and requiring size 20+. If it can offer good products and a pleasing shopping experience then there is a good chance that its customers will stay loyal.
"There are still plenty of challenges to overcome, including a reduction in relatively large levels of bad debt. A fairly chunky part of its profit comes from financial services and so it needs to reduce the risks associated with this source of earnings."