Post Close Period Trading Statement

31st March 2015

Findel plc

Post-close period trading statement

Findel plc, a market leader in the UK home shopping and education supplies markets, today issues a trading statement after entering the close period for the year ending 27th March 2015. Full-year results are expected to be announced in June 2015.

Group Performance

The Group has seen a year of significant progress, with overall Group sales (excluding Kleeneze, whose sale was completed on 24 March 2015) for the full year 2.7% ahead of the prior year and profit before tax substantially ahead driven by a further strong performance from Express Gifts and a significant reduction in losses from Kitbag.

Divisional Performance

The Group's largest business, Express Gifts, has seen strong growth in its operating profits* in the last 12 months.  Total sales are 4.8% ahead of the prior year, with product sales ahead by 6.6% and up by 7.9% in the final quarter. Gross margin has declined slightly largely due to changes in product mix. The quality of the credit receivables portfolio has continued to improve principally as a result of the investment in the behavioural scoring system and improved collections management. This has resulted in lower financial services revenue but this has been more than offset by the resulting significant reduction in the bad debt charge. The overall growth has come principally from increased spend from existing customers, although we have also increased the active customer base by 2.2% as at the end of December 2014. 

Findel Education has had a tough year with sales in the second half being particularly challenging. Full year sales were down around 6.5% against the prior year and sales in the final quarter down by 9.2%. The profit impact of these reductions has been partly mitigated through operational cost savings and efficiencies to produce an operating profit* slightly below the prior year. Market conditions continue to present challenges for this division, with recent analysis from the Institute of Fiscal Studies indicating that both major political parties would implement real-term reductions in spending levels per pupil in the next parliament. The management team is being strengthened and marketing improvements are being implemented ahead of the new catalogue launch later this month. Whilst the Board retains confidence in the long term future of this business, market conditions mean that achieving the Board's aspirations for the business will likely take longer and be harder than previously anticipated.

Kitbag has seen a strong recovery in its performance, driven by a record Christmas trading period and tighter control over product margins and stock levels. Sales for the year are up 10.5% and although, as expected, the division will continue to report an operating loss for FY15 this is substantially reduced from the prior year. The strategic review is continuing and further updates will be provided as appropriate.

The sale of Kleeneze to CVSL Inc. for consideration of £3.4m completed on 24 March. Its results will be reported as a discontinued operation, but saw a year-on-year sales decline of 21% and an operating loss. 

Financial Position

The Group's net bank debt† at 27th March was approximately £87m, some £10m below last year in line with the Group's strategy to reduce its indebtedness. 

Summary 

Profit before tax* for the year is expected to be substantially ahead of the prior year but slightly below the range of market expectations** largely as a result of the particularly weak final quarter in Education. The Group is expected to have achieved the target operating profit margin* of 7% for the year.

Looking forward to FY16, the challenges ahead for Findel Education are likely to result in a flat profit performance at best for the division. The impact of the strengthening dollar on import prices is likely to provide a headwind to Express Gifts, although its operating profit* for FY16 is still anticipated to grow at a similar rate to this year. Overall, we look forward to another year of strong progress.

Enquiries

Findel plcDavid Sugden / Tim Kowalski0161 303 3465

Tulchan Communications LLPStephen Malthouse / Will Smith020 7353 4200

 * before exceptional items

** The range of expectations for pre-tax profit* for the year to 27 March 2015 (based on four analysts) is £27.1m to £28.5m (pre-tax profit, pre-exceptional items) as at 30th March 2015. This compares to an equivalent result for the year to 28 March 2014 of £22.0m.

† total net debt excluding borrowings under the securitisation facility

Notes to Editors

The Findel Group contains market leading businesses in the UK home shopping and education supplies markets. It is primarily a retailer and distributor, handling and supplying specialist products manufactured by third parties.

The Group's activities are focused in three main operating segments, together with a small overseas sourcing operation:

· Express Gifts - one of the largest direct mail order businesses in the UK;

· Findel Education - the largest listed independent supplier of resources and equipment (excluding information technology and publishing) to schools in the UK; and

· Kitbag - a leading retailer of sports merchandise.