TIDMBWNG
RNS Number : 1193H
Brown (N.) Group PLC
23 March 2020
Trading update
In light of current market conditions and the rapidly changing
developments regarding Covid-19, N Brown plc (the "Group" or the
"Company") provides the following update.
Our absolute priority has been to ensure the wellbeing of our
colleagues, both in Head Office and across our distribution
centres, whilst continuing to deliver the service and functionality
for our customers to continue shopping our brands. Our colleagues
and our supplier partners have been excellent in adapting to a more
flexible way of working during this difficult period and remain as
committed as ever to supporting our loyal customer base.
Demand
At this stage, there is no way of predicting the impact the
virus will have on our sales, nor how long the pandemic will last
and what effect it will have on customer behaviour. Trading for the
first two weeks of the new financial year was in line with
expectations. However, during the last week we have seen a very
significant and sudden reduction in customer demand with daily
product sales down in excess of 40% compared to expectations.
Whilst it is impossible to give accurate guidance, we are
anticipating a material reduction in demand through FY21 .
As a result, the Company has taken a number of immediate and
proactive measures to reduce costs and preserve liquidity,
including:
-- A significant reduction in marketing expenditure with
immediate effect and for the foreseeable future if market
conditions do not improve;
-- Stopping and deferring all non-essential capital expenditure.
This will have little or no impact on the short-term performance of
the business;
-- Working collaboratively with HMRC to secure the deferral of
all tax and national insurance payments;
-- Stopping stock purchases immediately, thereby aligning stock
levels for SS20 with reduced customer demand. Going forward, we
will be re-evaluating our stock intake plans; and
-- Freezing all recruitment and reviewing organisational structures.
Our objective in relation to all of these actions is to preserve
liquidity in the business and allow us to manage the business
effectively and prudently through this highly uncertain period. In
addition, the Group is exploring all options in relation to the
Government and Bank of England support packages for business.
Liquidity
The Group has financing facilities in place totalling GBP652.5m,
comprising:
-- A securitisation facility secured by a charge over certain
eligible customer receivables which is without recourse to any of
the Group's other assets, and which is committed to December 2021.
The facility is GBP500m but the amount that can be drawn under the
facility is lower than this and depends on the level of eligible
customer receivables at any one point in time;
-- A Revolving Credit Facility ("RCF") of GBP125m which is committed to September 2021; and
-- An overdraft of GBP27.5m.
As at 20 March 2020 the Group was drawn on the securitisation
facility, to the maximum extent possible, being GBP414.7m and fully
drawn down on the RCF of GBP125.0m. It had also drawn down GBP9.0m
on the overdraft and held cash balances of GBP46.3m.
Whilst the Group is currently in compliance with its existing
banking covenants, the downside scenario modelling we have
conducted for Covid-19, involving a significant and sustained
reduction in customer demand , indicates the need for amendments to
existing banking covenants, changes in the way our securitisation
facility operates and potentially additional facilities. The Group
is progressing proactive, collaborative discussions with its
long-standing, supportive lenders and is exploring options in
relation to maximising the value of its significant unlevered
debtor book. In addition, the Group is also exploring options in
relation to its unencumbered freehold properties with an original
cost of GBP58.3m.
Dividend
As a result of the initial impact of Covid-19 the Board will not
be recommending a final dividend for the financial year ended 29
February 2020 and will suspend dividend payments for the
foreseeable future.
FY20 guidance
The Bank of England in its 'Statement on IFRS 9 and Covid-19' on
20 March recognised that there is currently a very high level of
uncertainty around how Covid-19 will impact the economy. It is,
therefore, extremely difficult to quantify the expected impact as
reliable and detailed forecasts cannot yet be made.
The Group is currently reviewing the potential impact of
Covid-19 on its FY20 IFRS9 bad debt provision in light of
significantly worse future macro-economic scenarios which impact
the provision model.
Whilst the Board cannot be certain of the impact of Covid-19 on
the Groups FY20 IFRS 9 Bad debt provision, the Board expects the
Group's adjusted profit before tax to be lower than the previously
guided range of GBP70m to GBP72m.
The Board had expected to release its Full Year Results for the
year ended 29 February 2020 on 29 April 2020. However, due to
working restrictions affecting both the Company and the Auditors,
there is likely to be a delay to the publication of the results. A
further announcement will be made in due course.
FY21 guidance
Given the current acute uncertainty, the Board does not believe
it appropriate to provide financial guidance for the financial year
ending 27 February 2021. Whilst Covid-19 will have a very
significant impact on the Group's business, the Board remains
confident in N Brown's proposition and the markets it serves.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
For further information:
N Brown Group
Will MacLaren, Director of Investor
Relations and Corporate Communications 07557 014 657
MHP Communications
Andrew Jaques / Simon Hockridge 07709 496 125 / 07824 142 725
/ Ollie Hoare NBrown@mhpc.com
About N Brown Group:
N Brown is a top 10 UK clothing & footwear digital retailer.
We are size inclusive, focusing on the needs of underserved
customer groups - size 20+ and age 50+. We offer an extensive range
of products, predominantly clothing, footwear and homewares, 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
2,400 people across the UK.
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contact rns@lseg.com or visit www.rns.com.
END
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