10th May 2005 07:00
Brown (N.) Group PLC10 May 2005 10 May 2005 N Brown Group plc PRELIMINARY RESULTS ANNOUNCEMENT YEAR ENDED 26 FEBRUARY 2005 N Brown Group plc, the Manchester based direct home shopping company, todayannounces its preliminary results for the 52 weeks to 26 February 2005. Highlights: •Significant improvement in performance of the core Home Shopping business with operating profit up 13.6% to £59.2m •Group turnover £460.3m (2004: £470.5m) •Group profit before tax and exceptionals £44.1m (2004: £49.1m) •Exceptional provisions of £25.5m in respect of restructuring of House of Stirling and Financial Services businesses •Net cash inflow before financing of £19.3m and reduced gearing of 52% (2004: 60%) •Total dividend per share for the year maintained at 5.84p •Group current trading shows underlying sales growth of 2% Alan White, Chief Executive, said: "We are pleased with the successful home shopping performance this year. N Brownis working to build on this positive performance and also deliver a program ofsignificant change to restructure and re-focus our business model. We areconcentrating on the areas where we see the strongest future growthopportunities, from our more profitable home shopping brands and channels tomarket. "Over the course of this year, we have put in place many profit improvementinitiatives across the Group, and we are delighted to see early signs of thebenefit of these programmes." Lord Alliance CBE, Chairman, added: "The Group has made significant progress in the profit recovery of the core homeshopping business during a year in which the management team has worked hard toexploit additional channels to market for our specialist larger size productranges. "Our performance in the new financial year has started positively as customersare reacting well to improvements in product ranges and new catalogueofferings." -Ends- For further information please contact: N Brown Group plc On the day: 0207 554 1400Alan White, Chief Executive Thereafter: 0161 236 2000Dean Moore, Finance Director Website : www.nbrown.co.uk Gavin Anderson & CompanyCharlotte Stone / Fergus Wylie Tel: 020 7554 1400 CHAIRMAN'S STATEMENT Group The Group results for the year ended 26th February 2005 show significantprogress has been made in the profit recovery of the core home shoppingbusiness, reflecting the major focus on margins and new growth areas over thepast two years. In the continuing tough trading conditions, which have affectedthe whole retailing industry, this division, which accounts for over 90% oftotal revenues, increased operating profits by 13.6% on turnover up 0.9%. A program to rationalise and restructure our other businesses will be completedby the autumn. Impairment costs of £25.5m have been provided to effect thesechanges with positive benefits for group profitability going forward. Overall group turnover is down by 2.2% at £460.3m but operating profit beforeoperating exceptional items is up from £54.2m to £54.4m. Pre-tax profit is£18.6m (2004, £31.0m) after accounting for higher interest charges, jointventure losses and impairment provisions. The borrowings have reduced to £126.2m during the year with a net cash inflowbefore financing of £19.3m generated by a significant reduction in both theworking capital and capital expenditure requirements. This results in gearing of 52% (2004, 60%) on net assets of £243.3m and interestcover before operating exceptional items of 6.5 times. The Board is recommendingmaintaining the dividend at 5.84p, covered 1.9 times before operatingexceptional items. Home Shopping Core home shopping results, excluding House of Stirling and Teleview which arecovered separately below, show a significant operating profit improvement, up13.6% at £59.2m (2004 £52.2m) on turnover up 0.9% to £416.5m. This reflects theconcerted management action which has resulted in a 1.3% gross margin rateimprovement and a cost reduction programme which has reduced selling andadministration costs by over £4m. Our home shopping strategy is to focus on specific customer and product niches,with particular specialism in larger sizes and/or the over forty-five customer.Whilst turnover growth has been modest we have shown considerable success incertain key product categories. Overall sales of ladieswear were level with lastyear despite strong deflation in the market place, and within this sales ofcorsetry and lingerie were up by 9%. Footwear was our strongest performing rangewith sales up 13%. The total turnover for home and leisure products was, as expected, slightly downat £116m. The tighter credit controls, introduced to improve profitability, hadthe predicted impact on slowing sales of the higher value furniture andelectrical lines. This was offset by the launch of a new Christmas Giftscatalogue which resulted in a greater contribution from toys, gifts anddecorations. Sales grew in all three of our customer age groups. Within the younger titles(30-45 age group) Fashion World remains the dominant catalogue but the fastestgrowing brand is still Simply Be, where sales grew by 18%. The main mid-life group of catalogues targeted at the 45-65 age group rose by 1%to £293m including sales from the House of Bath database we acquired in November2004. Once this business is fully integrated we will use it as a platform toincrease sales from the ABC1 socio-demographic groups, where the market isgrowing strongly. Sales to the older customers (65 plus) rose by 2% to £22m with good performancesfrom Heather Valley and Special Collection. Our emphasis on customer recruitment has been to improve the quality rather thanthe quantity of our database. We discontinued the Value Catalogue and HomeEssentials on grounds of low profitability, which contributed to a 3% decline incustomer numbers. The higher quality customer base, together with improvedtargeting and catalogue content, resulted in the average sales per customerrising by 4%. Our channels to market continue to evolve. Internet penetration has increased to11% of total sales, reflecting growth of over 60% to £44m. We plan to increasethis further by both promoting this channel to our existing customers andbuilding new on-line brands. For example, Viva La Diva.com has been launched andis aimed at a new audience, offering a range of high street and designerfootwear brands in addition to our own range of wide fitting footwear. In late autumn we launched the Express Shopping Channel on the main digitaltelevision channels in partnership with Northern and Shell. Our share of losseswas £1.9m as planned, including set up costs. The gross margin has improved by 1.3% to 56.6% through a combination of reducedbad debts, following the tightening of credit limits, and a deliberate move toreduce the level of discounting. As we outlined at the interim results, we have embarked on a focussed costreduction campaign, including using on-line auction techniques to improvepurchase prices and, where necessary, restructuring business processes. This hasyielded savings of £4m in the current year. House of Stirling The recovery plan implemented for House of Stirling, our door-to-door sellingoperation, has delivered the expected reduction in losses in the second half.The underlying results for the year show sales of £24m, down 27.5%, andpre-exceptional operating losses of £6.3m (2004, £2.0m). We have undertaken a fundamental review of the business and are taking radicalaction to stem the losses, resulting in an impairment charge of £22.5m. This isshown separately as an operational exceptional item. Teleview The disposal process for our television rental operation has been protracted. Weare in negotiations with interested parties and hope to conclude a deal shortly.The operating result was break-even compared with a £1.2m pre-exceptionaloperating profit last year. Financial Services We have been making personal loans to our customers since 2001. After a thoroughreview of the prospects for this business we have decided to offer theseproducts only as an intermediary, for which we receive guaranteed commission. The existing loan portfolio of £19m will be collected out by our own debtcollection team but we anticipate a shortfall of £3m, including costs, which hasbeen taken as an operating exceptional item. The pre-exceptional operatingprofit in the division was £1.2m (2004, £2.4m). Fulfilment Services An operating profit before operating exceptional items of £0.3m has beenachieved against £0.8m last year. The interactive services activity was closeddown in July 2004 and the focus is now clearly on more profitable fulfilmentcontracts, helping retailers to establish their on-line and catalogue channels. We are working on a solid pipeline of opportunities, and fulfilment contractshave now been signed with Woolworths and more recently JJB Sports. The rapidgrowth of multi-channel retailing continues to provide exciting opportunitiesfor Zendor. Board Jim Martin, currently non-executive Deputy Chairman and distinguished formerChief Executive, has indicated his intention to retire from the board at ourAnnual General Meeting in July. Jim has served 31 years with the company, duringwhich it has grown from a market capitalisation of only £4m, much of it due tohis outstanding retailing skills, as well as sheer hard work. We thank Jim forhis enormous contribution to the company over many years and wish him well. Prospects & Outlook Despite the reported weakening of general customer demand in recent months, wehave seen some encouraging signs in current trading. Sales in our core homeshopping business for the 10 weeks since the year end are running 5% ahead oflast year, 3% of which is contributed by House of Bath customers. However in thelight of recent announcements in the sector we remain cautious in our outlookfor both sales and gross margin. The restructuring program for our non-core activities will be completed by theautumn, resulting in a significant improvement in the rate of return on capitalemployed. Overall we are delighted that the many profit improvement initiatives we haveput in place in the core business are starting to deliver positive results.Sales in many of our key product categories are advancing and we have improvedboth the gross margin and the cost base, with a further limited net benefit tocome in the current year. The fact that this has been achieved in a very competitive retail market,confirms our confidence in the program we are now pursuing. Whilst there is moreprogress to be made, the hard work of management and staff is starting to berewarded. Lord David Alliance, CBE10 May 2005 CHIEF EXECUTIVE'S REVIEW Introduction We are pleased to report that in the year ended 26th February 2005 we have madegood progress in implementing our specialist multi-channel home shoppingstrategy, whilst at the same time rationalising our other activities. We willcontinue to pursue these two routes which we believe will enable us to succeedin a highly competitive and deflationary retail environment. Home Shopping Turnover from our core home shopping activities was up by 0.9% at £416.5m.Operating profit increased by 13.6% to £59.2m, giving an operating margin of14.2%. The key reasons for the improvement in operating profits are a reduction in baddebts, a direct result of the introduction of a more tightly controlled creditpolicy since 2003, and also reduced selling and administration costs resultingfrom a group-wide campaign to improve business processes and reduce costs. Channels to Market Customers have never had so many ways to spend their money. We have responded tothis competitive environment by expanding our channels to market and by targetedpromotional activity. The core route to our customer remains the mailing of catalogues. The frequencyof mailings has been increasing, with our best customers receiving a majorcatalogue or brochure almost every month. This frequent contact helps to keepthe offer fresh, the customers loyal and increases our share of their overallspending. These additional mailings also allow the introduction of new, andseasonal products, and we can offer selective price reductions and promotionaloffers to stimulate demand. Varying catalogue formats has proved successful in achieving enhanced responserates. The sales from leaflets accompanying customers' statements have beendeclining and we have been deliberately switching our marketing investment intothe direct mailing of mid-season catalogues (such as New Now, Summer Value andClassic Detail), where the sales rose by 5% to £91m. In addition to direct mail we continue to expand telemarketing activity at ourcall centres. In the last year £37m of revenue (up 3%) was generated through upselling techniques used on inbound orders and from outbound calls to selectedcustomers promoting our special offers. Our on-line activity continues to grow rapidly. Initially the internet wasmerely an alternative ordering mechanism to the telephone and post. This is nolonger the case. We are now well into the development phase where our websitescarry a much wider range of offers and products than any of our catalogues.These offers may be targeted at specific events, such as Mothers Day, or includeadditional products, such as flowers and vitamins. This channel to markettherefore remains a key area for future development and growth. The major internet launch last year was Viva La Diva.com which is targeted atwomen who love shoes. In addition to our own range of wide fitting footwear anumber of high street brands (such as Schuh, Carvela and Hobbs) and fashion shoedesigners (including Emma Hope and Lulu Guinness) are helping us to provide themost comprehensive on-line footwear selection in the UK. The availability of delivery to customers direct from the supplier is vital tothese on-line ventures if they are to deliver an acceptable return. The abilityto launch new concepts for a low level of investment, and the reduced cost ofcommunication with customers, makes the internet an increasing focus of ourdevelopment activities. Retail shops are a small part of our multi-channel mix at present. We have hadfor some time a chain of nineteen stores in the North East of England to selloff end of range stock. House of Bath has a shop at its headquarters in Bathwhich attracts customers who want to buy the goods on sale in the catalogues inperson rather than by home delivery. We are testing this concept further with atrial store in Harrogate for our Shoe Tailor brand, offering a selection fromour footwear range and a personalised measuring service, augmented with a muchwider range available for home delivery. Customer Groups We operate a portfolio of catalogues targeted at defined customer groups. Thecommon link is the product range which is targeted at either the larger customerand/or those aged over forty-five. The customers are classified into three agegroups. The younger customers aged 30-45 are predominantly serviced by theFashion World and Simply Be catalogues. Total sales were £102m, up 1% on lastyear. The midlife customer group, incorporating principally the J D Williams, AmbroseWilson, Oxendales, Premier Man and Fifty Plus brands, increased sales by 1% to£293m, accounting for 70% of the home shopping total. The new addition to this group was House of Bath, a business we acquired out ofadministration in November 2004 for a total cost of £1.5m. This acquisition hasgiven us access to a database of over one million customers in the more affluentABC1 socio-demographic groups, currently the fastest growing sector of the homeshopping market. The key task is to integrate House of Bath's operations into NBrown's facilities, which will be completed later this summer. This willfacilitate mailings to and from other parts of the customer database, allowparcels to be distributed through our courier network and enable the provisionof a suitable credit offer. The launch in January 2005 of a 200 page catalogue to our best performingcustomers in our 65+ aged group has helped to reverse the recent downward trendin sales from this customer group. There were good performances from bothHeather Valley and Special Collection in particular. Sales in total rose by 2%to £22m. Product Ranges Our product ranges are tailored to the needs of our chosen groups. In order todeliver authority in our larger sizes and fittings proposition we have over50,000 different product options each season. The best performances have comefrom our most specialist product areas. Ladieswear sales of £224m represents 54% of our total sales, the same as theprevious year. Basic casual clothing was impacted by deflation in prices, drivenby the discount sector, but we saw strong demand for occasionwear, outerwear andstyles for the more mature lady. Corsetry and lingerie, where we offer acomprehensive range of fittings and styles, saw a 9% sales increase. Menswearsales of £31m were level with the previous year with the sales concentrated atthe lower price points. This pattern has been reflected in our 2005 menswearranges where we have a higher proportion of value for money lines. Footwear is a core range where we sell in excess of one million pairs ofwide-fitting shoes each year. Additional sales from a range of footwear inyounger styles for the Fashion World and Simply Be customers, together with anexpanded range for the midlife customer, helped aggregate footwear sales to riseby 13% to £46m. Home and leisure sales were 1% lower at £116m. However the launch of the newChristmas Gifts catalogues in the autumn gave new impetus to sales of toys,gifts and decorations. Similarly, the bulk of sales from the House of Bathcatalogues are largely for home and leisure lines, generally in the 'hard tofind' category. The plan for our product ranges in the 2005 catalogues is to increase furtherour market share in our core product areas. We will be reducing the number ofstock lines but the product options will increase as we selectively introducemore smaller sizes and variable garment lengths. Other Activities House of Stirling, our weekly collected credit operation incurred losses of£4.2m in the first half, and we instigated a recovery plan which has beenimplemented throughout the second half. This has resulted in a significantimprovement in the rate of cash collection, although sales have remained subdueddue to the more conservative underwriting criteria. The results for the yearshow turnover of £24.0m, down 27.5%, and pre-exceptional operating losses of£6.3m against £2.0m last year. A fundamental review of the business hasconcluded that we need to rationalise the business, which is unique in beingproduct-based rather than loan-based, if we are to eliminate losses in thefuture. We have taken an impairment charge of £22.5m to facilitate thisrestructuring. Zendor, which provides home shopping solutions for multi-channel retailers, hasseen a number of changes during the year. Eunite, the interactive servicesdivision, was closed as planned in July 2004 and the focus concentrated onsecuring fulfilment contracts from the top 200 UK retailers, many of whom areplanning to expand their catalogue and on-line activities. Zendor was successfullast year in winning contracts with Daisy and Tom, Woolworths and, mostrecently, JJB Sports and there is a good pipeline of prospects. Sales were£7.4m, down 16.9% with a pre-exceptional operating profit of £0.3m (2004,£0.8m). Financial income is a core part of N Brown's activities. The major activity isthe provision of flexible credit accounts for our home shopping customers, andthis has continued successfully throughout the period. In addition we offerwarranty and insurance products and personal loans to our customers. Turnoverfor the year from these activities was down 22.9% at £6.7m, as we tightened theunderwriting criteria, producing an operating profit of £1.2m (2004, £2.4m). The insurance products are provided by financial services companies with N BrownGroup acting as a broker, but the personal loans have been transacted as aprincipal. These loans have not delivered an acceptable return on capitalemployed and we have decided to collect out the existing portfolio. We haverecognised a £3m impairment on the £19m loan portfolio as a consequence of thisexit. Going forward we will instead offer personal loans to our customers fromthird party providers for which we will receive a guaranteed commission. Balance Sheet and Cashflow The group's borrowings have been reduced to £126.2m as a result of a net cashinflow before financing of £19.3m against an outflow of £30.5m last year. Themain changes relate to a lower level of working capital requirements and capitalexpenditure of only £9.4m. Net assets at the year-end are £243.3m (2004,£244.3m) with gearing reduced to 52%. The underlying financial strength of thebusiness has significantly improved during the last year. Outlook Future growth for the business will come from expanding our customer base,developing the channels to our customers and refining the product range. Once we have integrated House of Bath onto our logistics platform we seeopportunities for expanding sales to the more affluent customer. We will also beconcentrating on reactivating lapsed customers and on-line search engines willbe an increasing source of new customer recruitment. Our internet websites will be further developed. Vivaladiva.com will besupported with a public relations campaign and Petfoodnstuff.com has recentlybeen launched to satisfy the millions of pet-loving consumers. We see furtheropportunities for specialist websites. There is additional scope to improve the efficiency of the business and weintend to build on the great response we had from the whole management team lastyear in rising to the challenge to reduce costs and change our businessprocesses. Summary The clear focus on niche customers and products is starting to produce positiveresults, and is helping us to succeed in a highly competitive and deflationaryretail environment. The business is developing a number of marketing channels tocustomers and improving the targeting of products and catalogues to customers.Current trading is 5% up on last year in the core home shopping business, and 2%up on a like-for-like basis excluding House of Bath for the 10 weeks since theyear end. We are pleased with the progress we have made in the last year and remainconfident that our strategy will provide a solid platform for the future. Alan White10 May 2005 GROUP PROFIT AND LOSSACCOUNT for the 52 weeks ended26 February 2005 Continuing Continuing activities Goodwill activities before goodwill Amortisation before Operating Unaudited amortisation & operating Audited operating exceptional Total & operating exceptional Total exceptional items 52 weeks to exceptional items 52 weeks to items (note 4) 26-Feb-05 items (note 4) 28-Feb-04 Note £m £m £m £m £m £m --------------------------------------------------------------------------------------------Turnover 1 460.3 - 460.3 470.5 - 470.5 ============================================================================================------------------------------------------------------------------------------------------------------------------------Operating profit before goodwill amortisation 2 54.4 (25.5) 28.9 54.2 (7.8) 46.4 Goodwill amortisation - - - - (10.3) (10.3) ------------------------------------------------------------------------------------------------------------------------Operating profit 3 54.4 (25.5) 28.9 54.2 (18.1) 36.1 Share of joint venture (1.9) - (1.9) - - -operating loss Profit/(loss) on sale of (0.3) - (0.3) 1.0 - 1.0tangible fixed assets -------------------------------------------------------------------------------------------- Profit on ordinary 52.2 (25.5) 26.7 55.2 (18.1) 37.1activities before finance charges Net interest payable (8.1) - (8.1) (6.1) - (6.1)and similar charges -------------------------------------------------------------------------------------------- Profit on ordinary 44.1 (25.5) 18.6 49.1 (18.1) 31.0activities beforetaxation Taxation on profit on (11.0) 7.7 (3.3) (13.8) 1.2 (12.6)ordinary activities -------------------------------------------------------------------------------------------- Profit on ordinary 33.1 (17.8) 15.3 35.3 (16.9) 18.4activities after taxation Equity minority - - - - (0.5) (0.5)interests ------------------------------------------------------------------------------------------- Profit for the financial 33.1 (17.8) 15.3 35.3 (17.4) 17.9year Dividends 6 (17.2) - (17.2) (17.1) - (17.1) -------------------------------------------------------------------------------------------Retained profit/(loss) 15.9 (17.8) (1.9) 18.2 (17.4) 0.8for the year =========================================================================================== Underlying earnings 7 11.25p 12.02pper share Goodwill amortisation (6.07)p (5.91)p& operating exceptional -------- --------items Basic earnings per 5.18p 6.11pshare -------- -------- Diluted earnings 7 5.17p 6.08pper share -------- -------- Dividends pershare 6 5.84p 5.84p -------- -------- GROUP BALANCE SHEETas at 26 February 2005 Unaudited Audited 2005 2004 £m £m (restated note 8) -------------------------------Fixed assetsIntangible assets 1.5 -Tangible assets 78.8 83.0Investments 0.1 - ------------------------------- 80.4 83.0 =============================== Current assetsStocks 44.8 46.4Debtors 332.6 354.1Cash at bank and in hand 44.5 26.8 421.9 427.3 ===============================CreditorsAmounts falling due within one year (84.2) (90.4) ------------------------------- Net current assets 337.7 336.9 -------------------------------Total assets less current liabilities 418.1 419.9 CreditorsAmounts falling due after more than one year (170.0) (170.6) Provisions for liabilities and charges (4.8) (5.0) -------------------------------Net assets 243.3 244.3 =============================== Capital and reservesCalled-up share capital 29.5 29.5Share premium account 9.2 9.1Own shares (1.5) (2.3)Profit and loss account 206.1 208.0 ------------------------------- Equity shareholders' funds 243.3 244.3 Equity minority interests - - ------------------------------- Capital employed 243.3 244.3 =============================== Gearing 52% 60% GROUP CASH FLOW STATEMENTfor the 52 weeks ended 26 February 2005 Unaudited Audited 2005 2005 2004 2004 Note £m £m £m £m --------------------------------------------- Net cash inflow from operating activities 5 66.5 29.4 Returns on investments and servicing offinanceInterest paid (8.3) (6.3)Interest element of finance lease payments (0.1) (0.1) ------- ------- Net cash outflow from returns oninvestmentsand servicing of finance (8.4) (6.4) TaxationCorporation tax paid (14.5) (12.8) Capital expenditure and financial investmentPurchase of tangible fixed assets (9.4) (25.4)Loans advanced to Joint Venture (2.0) -Sale of fixed asset investment - 0.8Sale of tangible fixed assets 4.9 0.6Decrease in own shares held in trust 0.8 0.7 ------- ------- Net cash outflow from capital expenditureand financial investment (5.7) (23.3) Acquisitions and disposalsPurchase of subsidiary undertakings - (0.3)Purchase of trade and assets (1.5) - ------- -------Net cash outflow from acquisitions anddisposals (1.5) (0.3) Equity dividends paid (17.1) (17.1) -------- ------- Cash inflow/(outflow) before financing 19.3 (30.5) FinancingIssue of ordinary share capital 0.1 0.4New loans - 34.0Loan repayments - (0.5)Capital element of finance leases (0.6) (0.5) ------- ------- Net cash (outflow)/inflow from financing (0.5) 33.4 -------- -------Increase in cash in the year 18.8 2.9 -------- ------- GROUP CASH FLOW STATEMENT, contd.for the 52 weeks ended 26 February 2005 Unaudited Audited 2005 2004 £m £m -------- -------Reconciliation of net cash flow to movement in net debtIncrease in cash in the year 18.8 2.9Cash inflow from increase in loans - (34.0)Repayment of loans - 0.5Repayment of capital element of finance leases 0.6 0.5 -------- ------- Movement in net debt in the year 19.4 (30.1) Net debt at 28 February 2004 (145.6) (115.5) -------- -------- Net debt at 26 February 2005 (126.2) (145.6) ======== ======= STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESfor the 52 weeks ended 26 February 2005 Unaudited Audited 2005 2004 £m £m ---------------------------------- Profit for the financial year 15.3 17.9 Exchange adjustments offset in reserves 0.2 (0.1) ----------------------------------Total recognised gains relating to the year 15.5 17.8 ================================== RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDSfor the 52 weeks ended 26 February 2005 Unaudited Audited 2005 2004 £m £m (restated note 8) Profit for the financial year 15.3 17.9 Dividends (17.2) (17.1) ------------------------------- (1.9) 0.8 Other recognised gains and losses (net) relating to the year 0.2 (0.1)Share option charge 0.6 0.2Issue of ordinary share capital 0.1 0.4 ------------------------------- Net (reduction in)/additions to shareholders' funds (1.0) 1.3 Equity shareholders' funds at 28 February 2004 244.3 243.0(originally £246.6m before deducting prior periodadjustment of £2.3m) -------------------------------Equity shareholders' funds at 26 February 2005 243.3 244.3 =============================== NOTES TO THE ACCOUNTSfor the 52 weeks ended 26 February 2005 Unaudited Audited 2005 20041. Analysis of turnover £m £m Home shopping 416.5 412.6Door to door selling 24.0 33.1TV Rental 5.7 7.2Financial services 6.7 8.7Fulfilment 7.4 8.9 --------------------------------- 460.3 470.5 ================================= Unaudited Audited2. Analysis of operating profit before goodwill 2005 2004amortisation and operating exceptional items £m £m Home shopping 59.2 51.8Door to door selling (6.3) (2.0)TV Rental - 1.2Financial services 1.2 2.4Fulfilment 0.3 0.8 --------------------------------- 54.4 54.2 ================================= Unaudited Audited 2005 20043. Analysis of operating profit £m £m Home shopping 59.2 52.2Door to door selling (28.8) (2.0)TV Rental - (8.4)Financial services (1.8) 2.4Fulfilment 0.3 (8.1) --------------------------------- 28.9 36.1 ================================= Unaudited Audited4. Analysis of goodwill amortisation and 2005 2004operating exceptional items £m £m Amortisation of goodwill - 0.6Impairment of carrying value of tangible fixed assets - 7.8Impairment of carrying value of financial services 3.0 -Impairment of carrying value of door to door sellingoperation 22.5 -Write-off of carrying value of goodwill - 9.7 --------------------------------- 25.5 18.1 ================================= Unaudited Audited5. Reconciliation of operating profit to 2005 2004operating cash flows £m £m Operating profit 28.9 36.1Decrease/(increase) in stocks 1.6 (4.7)Decrease/(increase) in debtors 17.6 (23.2)Increase/(decrease) in creditors 7.5 (9.6)Depreciation 10.9 12.6Amortisation of goodwill and other intangible fixedassets - 0.7Impairment of goodwill and tangible fixed assets - 17.5 --------------------------------- Net cash inflow from operating activities 66.5 29.4 --------------------------------- 6. An interim dividend of 1.74p per ordinary share was paid on 7 January 2005 toshareholders on the register at the close of business on 10 December 2004. Afinal dividend of 4.10p per ordinary share is proposed to be paid on 27 July2005 to shareholders on the register at the close of business on 1 July 2005. 7. The calculation of earnings per share is based on the profit for thefinancial year of £15.3m (2004, £18.4m) and the weighted average number ofshares in issue during the year of 294.0m (2004, 293.0m). To assist comparison,an underlying earnings per share has also been calculated to exclude the impactof goodwill amortisation and operating exceptional items and is based on aprofit for the financial year of £33.1m (2004, £35.3m). For diluted earnings pershare, the weighted average number of shares of 294.7m (2004, 294.1m) has beencalculated after adjusting for the potential dilution of outstanding shareoptions. 8. The financial information set out above does not constitute the group'sstatutory financial statements for the 52 weeks ended 26 February 2005 or the 52weeks ended 28 February 2004. The financial information for the 52 weeks ended28 February 2004 is derived from the statutory financial statements for thatyear which have been delivered to the Registrar of Companies. The auditors havereported on the financial statements for the 52 weeks ended 28 February 2004;their report was unqualified and did not contain any statement under Section 237(2) or (3) of the Companies Act 1985. The accounts for the 52 weeks to 28 February 2004 have been restated followingthe implementation of UITF Abstract 38 - Accounting for ESOP Trusts. The effectof this change is that shares held within Employee Share Option Schemes are nolonger classified in the balance sheet as a fixed asset investment but as adeduction from shareholders' funds. This change has no impact on the profit andloss account. All other accounting policies adopted are consistent with thoseset out in the Annual Report and Accounts for the 52 weeks ended 28 February2004. The auditors have not reported on financial statements for the 52 weeks ended 26February 2005, nor have any such financial statements been delivered to theRegistrar of Companies. This report was approved by the Board of Directors on 10 May 2005. It is expected that the full Annual Report and Accounts for the 52 weeks ended26 February 2005 will be posted to shareholders on 3 June 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Brown Group