Pre-close period statement

29th March 2012  

Findel plc

Pre-close period statement

Findel plc, a market leader in the UK home shopping, education supplies and healthcare markets, today issues a trading statement prior to entering the close period for the year ending 30th March 2012. The full-year results are scheduled to be announced on 12th June 2012.

Trading in each of the Group's businesses during the final quarter of the year has remained in line with the trends described in our Interim Management Statement dated 18 January 2012. Group sales for the year are expected to be approximately 1.1% ahead of the prior year, with the rate of sales growth in the second half being approximately 2.4%. This reflects the continued strong trading performance of the Group's largest business, Express Gifts, offset primarily by declining sales in curricular brands within Education Supplies.

Express Gifts has continued to see increasing customer numbers in response to the more competitive pricing approach and improved offer first rolled out in the 2011 Spring/Summer season, with overall cash margins now compensating for our investment in gross margin. Sales since the half year have maintained strong growth of around 11% above the prior year and around 9% higher for the year as a whole, reflecting a particularly strong Christmas performance, which will produce strong credit receivables for the months to come. Customer payments have performed slightly ahead of our expectations in the important period after Christmas and, consequently, bad debt indicators continue to be very stable.

The annual sales decline in Kleeneze of more than 9% in the first half of the year has improved significantly during the second half of 2011/12 to a decline of only c.1%. Increased numbers of active ordering distributors and recent new sales initiatives have set the business on a trajectory to return to annual sales growth in the near future.

Kitbag will report an increase in revenue for the full year. However, sales in the second half have fallen by around 1% against the prior year and, as previously announced, it will report a significant operating loss for 2011/12. Over the last few months the new management team has refocused the business upon growth in cash margin and in dealing with legacy issues such as poor processes and unprofitable contracts. The programme to renegotiate a number of partner contracts is progressing well, new exclusive terms with Aston Villa F.C. have been agreed in recent weeks, and the pipeline of new potential contracts remains strong. We have also recently won contracts in golf to support the next two Ryder Cups and have renewed with The Open Championship. Discussions are in an advanced stage with two major American organisations in other sports to service their European online stores. Progress has also been made in enhancing processes and reducing costs and the business enters the new financial year in a much improved position.

The Education Supplies division is expected to report an annual sales decline for the full year of around 12%. Its commodity schools brands have recovered well from their decline in the first half of the year, and are now showing stronger second half sales growth versus prior year as a result of improved service levels, pricing and sales-force coverage. However, this progress has been more than offset by continued significant weakness in the curricular brands, whose sales have fallen further during the last few months. This is in part due to the ongoing pressures on school budgets, exacerbated by a delayed update to the national curriculum until 2014, which have reduced the sales opportunity in the first calendar quarter for these brands. It is also due to planned changes to the timing of our marketing activity, which is focussed upon the launch of an enhanced proposition and catalogue in April. 

The Healthcare division continues to perform well, benefitting from an increased level of outsourcing by the NHS, maintaining annual sales growth since the half-year of around 12%. A new mobility care contract has recently been secured, in addition to the new ICES contract for Berkshire previously announced. As previously indicated, however, overall margins for the year will be down reflecting the start-up costs of new contracts and a change in contract mix.

At the half year the Group had incurred exceptional costs of c.£5m, largely associated with the refinancing of the Group in March 2011. We expect that a figure of c.£8m will be incurred in the second half of the year, associated with further management changes, continued rationalisation of property and other restructuring including addressing legacy issues within Kitbag. 

Overall, the Board expects the Group's full-year profit before tax* to be within the range of current market expectations. The Group's bank debt is expected to end the year in line with the prior year, notwithstanding the investments made in working capital during the year to improve the supply chain, restructuring costs and capital expenditure.

Although some of our businesses need to improve their overall performance, the Board continues to be encouraged by the progress made by the Group in its Full Potential turnaround plan, particularly at our largest business, Express Gifts. As previously indicated, we expect the Group to report improved results for the second half of the year compared to 2010/11, which is expected to confirm the start of a trend leading to improved shareholder returns over the medium term.

* before terminated operations and exceptional items

Enquiries

Findel plcRoger Siddle / Tim Kowalski0161 303 3465

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