Interim Management Statement

4 August 2011  

Findel plc

AGM Trading Statement and Interim Management Statement

At the Annual General Meeting to be held at 2.00pm today David Sugden, Chairman, will read out the following Interim Management Statement which covers the 17 week period from 2 April 2011 to 3 August 2011.

Group Performance

The Group has made a satisfactory start to the year. Although the external environment remains challenging and with the normal peak trading periods still to come, we remain focussed on delivery of our three-year Full Potential plan initiatives and group sales are ahead of the prior year by1.1%, though with some pressure on margins, offset by cost savings.

Within our Home Shopping business Express Gifts has continued to see the benefit from its strategy to increase its value proposition to customers, which was launched during the second half of FY2011. This has resulted in a strong sales performance in the first 17 weeks, with both sales and customer numbers ahead of last year. Bad debt indicators also continue to show gradual improvement. The systems investments announced in the Full Potential Review are on track and within budget. Significant progress is being made on upgrading buying and merchandising effectiveness, and we have recently recruited a new head for our Far Eastern buying operation.

Within Kleeneze the difficult economic environment is creating a challenge with sales below the prior year in the first quarter. However, we have continued to see strong distributor growth from a number of recruitment initiatives including our 'Break Free' programme and, based on results to date, believe that we are being successful in recruiting effective/productive distributors. As per our plan, we have reinforced the management team with the recruitment of a new Sales Director.

Kitbag continues to experience strong year-on-year sales growth, reflecting the success of our partner clubs, although profitability is further depressed due to the simultaneous need for end of season and other obsolete stock clearance. As indicated at the time of our annual results, multi-channel contracts with both an established Premier League club, Sunderland AFC, and Leicester Tigers rugby club were recently finalised. We are delighted to have appointed Andy Anson as the new chief executive of Kitbag who will be responsible for leading the future profit growth of the business.

Outside Home Shopping, our Education Supplies business has seen some early success as it implements its turnaround plan, but still faces challenges. Overall sales for the division are therefore behind FY2011 as anticipated. The performance in the first 17 weeks shows that where we have been able to coincide new catalogue releases with our newly improved service levels, we are seeing signs of our business recovering, particularly in regions where we have geographic strength. However, those brands whose main catalogues were issued before the refinancing in March (and thus had significantly poorer service levels at that time) are taking longer to restore their customer reputation with a negative impact upon sales and margin. This is exacerbated by pressure on certain areas of school budgets, particularly in the nursery and primary sectors. 

Finally, our Healthcare business has seen steady growth versus prior year in revenue and gross profit in the first 17 weeks.

Funding

The Group has made further progress in strengthening its financial position, with funding headroom at the end of July ahead of plan. This has been achieved despite a normalisation of supplier credit through improved control over other aspects of working capital. Pleasingly, we are also now seeing a gradual reintroduction of trade credit insurance from the major providers after cover was effectively withdrawn during 2009.

Outlook

We have made an encouraging start on our turnaround, although it is early days. The group's normal peak trading periods are still to come and the external environment continues to provide a headwind. Nonetheless, we continue to see the opportunity for significantly improved performance over the medium-term, and are confident that we are taking the right steps to achieve that.

Enquiries

Findel plcRoger Siddle / Tim Kowalski0161 303 3465

Tulchan Communications LLPStephen Malthouse / Susanna Voyle / Lucy Legh020 7353 4200