Final Results
Brown (N.) Group PLC
12 May 2004
12th May 2004
N Brown Group plc
PRELIMINARY RESULTS ANNOUNCEMENT
YEAR ENDED 28 FEBRUARY 2004
N Brown Group plc, the Manchester based direct home shopping, financial services
and fulfilment company, today announces its preliminary results for the 52 weeks
to 28 February 2004.
Highlights:
•Catalogue ranges expanded and marketing re-focused to drive growth in
sales and market share
•Turnover up 2.9% to £470.5m (2003: £457.3m)
•Profit before tax, goodwill amortisation and operating exceptional items
£49.1m (2003: £54.8m)
•Profit before tax £31.0m after impairment charges of £17.5m relating to
write-down of fixed assets and goodwill in Teleview and Eunite, and £0.6m
goodwill amortisation
•Total dividend per share for the year maintained at 5.84p
Sir David Alliance CBE, Chairman, said:
'The Group has outperformed the home shopping sector in what continues to be an
extremely competitive retail environment. We are refocusing our product ranges,
tightening credit limit policies, streamlining costs and improving sourcing to
drive growth in sales and earnings.'
Alan White, Chief Executive, added:
'We are in the process of transforming N Brown to become a more focused,
multi-channel home shopping retailer. In particular, we are excited by the
prospect of the launch of the television shopping channel and the opportunities
within online retailing. Our emphasis on the core product ranges is beginning to
reap rewards, and we are pleased with the progress made in revitalising the
catalogues. Catalogue presentation is improving, and marketing is being focused
on the niche areas where we believe our strengths lie.'
For further information please contact:
N Brown Group plc
Alan White, Chief Executive On the day: 0207 554 1400
Dean Moore, Finance Director Thereafter: 0161 238 2202
Gavin Anderson & Company
Liz Morley / Charlotte Stone / Louisa Hollins Tel: 020 7554 1400
Website : www.nbrown.co.uk
CHAIRMAN'S STATEMENT
Introduction
The year ended 28 February 2004 was one of transition, change and adjustment as
the group concentrated on improving its competitive position in its core
business while cutting out some lower profitability activities. New channels to
market, notably the internet, telemarketing and a new joint-venture television
shopping channel, will, we believe, result in new orders while improvements in
the fashionability of our product ranges and presentation have already made our
catalogues much more appealing.
These, and many other measures put in place by an active management team which
has reviewed every aspect of our business over the year, will enable us to
respond successfully to the ever increasing competitive pressure and the changes
which are occurring in the way customers shop today.
Our overall aim is to be the leading direct marketing company for destination
shopping, developing specific product niches for the 35+ age group. In the past
year we have made good progress towards achieving this and we are continuing to
implement the strategy this year with energy and commitment.
Group turnover for the year ended 28 February 2004 was up 2.9% at £470.5m,
although profit before tax, operating exceptional items and amortisation of
goodwill was down 10.5% at £49.1m, as highlighted in the group profit and loss
account. The financial strength of the business, with net assets of £246.6m and
interest cover of 9.0 times pre operating exceptional items and amortisation of
goodwill, enables the final dividend to be maintained at 5.84p per share.
Home Shopping
Turnover from home shopping was up by 3.0% at £452.9m, with operating profit
before amortisation of goodwill and operating exceptional items down 10.9% at
£51.0m. The key issues behind the results were the detrimental impact of the
postal strike in Autumn 2003 and a reduction of 1.6% in the rate of gross margin
due to an increased proportion of sales from discounted activities and higher
charges for bad debts.
Our key initiative has been to increase the level of fashionability of our
product ranges in order to improve customer response rates. Customer choice has
been extended, presentation improved within the catalogues and overlap of
product ranges between the different catalogue brands tightened. The result has
been a gradual strengthening of core product ranges and a slowly increasing
share of overall sales from the more profitable main catalogues.
Credit is an important element of our customer proposition and the average
interest bearing balance has increased significantly in recent years. We started
to see some signs of increasing arrears early in the second half and we have
taken corrective action by tightening up the credit limit policy across the
board to avoid customers becoming over-indebted. This will impact on sales
growth but should bring down the ratio of bad debts to sales next year. During
the year we have increased bad debt provisions by £4m which accounts for half
the reduction in the rate of gross margin.
The postal strike during October 2003 severely disrupted mailing patterns,
particularly in the South East region, at a crucial point in the season. Whilst
most of our deliveries are made by our own couriers, catalogue mailings and
statements are handled by Royal Mail. The result was a significant loss of
business, which we partially recovered in the pre-Christmas period by
introducing a number of promotional discounts and free gifts, but these had a
detrimental impact on both gross margin and marketing costs.
We have continued to be successful in increasing sales per customer, with a 4%
uplift for established customers, including further success from pro-active
order building and telemarketing activity. Our challenge is to increase the
number of active customers on the database. Recruitment was more effective than
the previous year resulting in a 5% increase in new customers. The established
base however has seen a 2% decline.
We expect the expanded product ranges to drive higher response rates but we are
also undertaking a range of promotional activities to stimulate response from
non-orderers, including new catalogue formats and focused telemarketing and
email campaigns.
The outlook for home shopping in its widest context is strong but there will
continue to be a gradual shift from catalogues to digital media such as the
internet and television shopping channels. Our e-commerce sales have been
tremendously successful and have almost doubled to £28m during the year. We are
now looking to exploit the ability of more of our customers to place their
orders online as this results in higher order values, reduced operating costs
and increased loyalty.
To participate in the growth of television shopping we have formed a joint
venture with Northern & Shell Network Limited (which owns the Express group of
newspapers) to create the Express Shopping Channel which will offer a wide range
of merchandise. This venture, which will broadcast on digital television from
Autumn 2004, will have initial start up losses but is planned to be profitable
before the end of its second year.
As part of the strategic review of the group's activities we have concluded that
the Teleview television rental business cannot produce an acceptable return on
the capital invested, as the combination of lower retail prices and the wider
availability of credit has made rental increasingly uncompetitive. We are
presently seeking the optimum exit route, but this decision has given rise to an
exceptional charge of £9.0m in this year's results.
Financial Services
First Financial provides financial services, primarily to our home shopping
customer database. Operating profit was £2.4m, down from £2.7m the previous
year. This was due to a reduction in second half income arising from changes
implemented in the home shopping business which affected warranty income and the
level of unsecured loans made. We still believe that there is strong growth
potential in financial services, and we are reviewing opportunities to launch a
credit card and expand into secured lending.
Board Appointments
I am delighted to welcome two new directors to the board. Dean Moore joined as
our new group finance director in December 2003, and John McGuire has recently
taken up the role of non-executive director and chairman of the audit committee.
John has extensive knowledge of the banking and financial services sector, and
succeeds Robert Youngjohns who gave us excellent service over 4 years before he
was promoted to a post in the United States.
Outlook
We have made a number of improvements to the business in the last year but the
retail environment is more competitive than ever. Sales for the first 10 weeks
of the new financial year are level with the same period last year. We are
continuing to make progress in the areas where we have clearly focused product
offers. Sales of clothing and footwear are up by 2% but the reduced credit
exposure is resulting in home and leisure sales being down by 5%.
We aim to develop the group by broadening our channels to market, and
identifying product ranges and customer groups where we can establish a
competitive edge, and where the demographic trends are most favourable.
The Autumn 2004 catalogues have a revised format and contain product range
extensions which I believe will deliver further progress. We are excited by the
prospect of the launch of the television shopping channel and the opportunities
within online retailing. We continue to significantly outperform the home
shopping sector, and I would like to thank our dedicated workforce for their
contribution during another testing year for the group.
Sir David Alliance, CBE
12 May 2004
CHIEF EXECUTIVE'S REVIEW
Introduction
We are pleased to have further increased our market share of the home shopping
sector. However, there are a number of challenges we have to overcome to
re-establish a firm growth path for the business. In particular over the past
year the catalogue home shopping business has continued to be under pressure due
to the structural changes taking place in customers' shopping habits, especially
from the increasing penetration of the supermarkets and value retailers and the
wider availability of credit. Our progress in meeting these challenges was not
helped in the autumn by the postal strike which disrupted mailings in our peak
trading period.
We have an excellent customer database and a number of focused selling
propositions but we also need to expand our channels to market, further develop
our product ranges and improve our marketing to customers. During the year we
have taken a number of initiatives to drive these changes.
Home Shopping
Turnover from our core home shopping activities was up by 3.0% for the year at
£452.9m. Operating profit before goodwill amortisation and operating exceptional
items reduced to £51.0m, although this still represents a margin of 11.3%. The
principal reason for this fall is a lower rate of gross profit resulting from a
reduced proportion of sales at full margin and a higher rate of bad debt. We
have already taken steps, which are outlined in more detail later, which will
reverse these trends.
Customers
The numbers of new customers recruited during the year improved by 5% due to a
more promotional style of merchandise advertisements in newspapers and magazines
and a significant increase in activity from brochures inserted within these
publications. Sales per established customer rose by a healthy 4% but the
overall number of these customers fell by 2%. The expansion of the number of
catalogue pages and improvements to their presentation and promotion, as well as
making our clothing and footwear ranges more appealing, are all designed to
reverse the declining customer base trend.
Sales from our younger titles rose by 3% to £101m. The best performance came
from Simply Be, which is targeted at the confident woman in the 35-45 age
bracket with larger sizes in fashionable styles, where sales increased by 35% to
£24m.
The mid-life titles, targeted at the 45 plus market, still represent 64% of
total home shopping sales and increased revenues by 1% to £290m. Within this
category the core J D Williams titles were flat year on year but Premier Man and
our subsidiary company in Ireland had sales increases of over 10% on the back of
strong recruitment performances.
House of Stirling, our door-to-door selling operation, continued its
geographical expansion into the Midlands, resulting in a 30% increase in sales
to £33m. We are investing in collections support for the field force to increase
the proportion of debt collected each week thereby reducing the level of
arrears, which has risen during the year.
Products
Our policy during the year has been to focus on the development of those ranges
where we believe we have a strong selling proposition. We are delighted with
increases in the second half of almost 5% for ladieswear, 18% for footwear and
8% for menswear, the latter after almost two years of declining sales.
These sales increases reflect the changes made to the composition of the
catalogues in both Autumn Winter 2003 and Spring Summer 2004, where we have
added a number of new pages but more importantly have expanded the choice of
styles and price architecture.
Part of the increase in styles has come from in-season purchasing which allows
new lines to be interspersed with existing products in our monthly leaflet
programme. This allows us to compete more effectively with the high street
retailers, whose ranges change frequently, and we are now seeing evidence that
the new lines are outperforming those which were already in the main catalogues.
Whilst the Far East will remain our core sourcing region we are increasing the
proportion of merchandise purchased from Eastern Europe and Turkey where we can
buy reasonably small quantities on short lead times, affording us more
opportunity to introduce ranges in-season as appropriate.
Home and leisure sales were up by 3% for the year, but growth slowed in the
second half as we tightened the overall credit limit policy and eliminated
interest free credit options for higher priced furniture and electrical items in
the Home Essentials brochure, which proved to have an unacceptably high rate of
bad debt. We will continue to sell these items but on interest-bearing terms; we
still see opportunities to expand the ranges of product in the home and leisure
segment and will be trialling ranges of occasional furniture and ornaments as
well as craft and hobby products in our Autumn 2004 catalogues.
Channels to Market
The mix of demand played a significant role in influencing the rate of gross
margin achieved for the year as a whole. Sales from full margin activities, such
as catalogues and major leaflets, were down by 2% whereas sales from markdown
and promotional offers rose by 12%, reflecting the importance of incentives and
discounts for today's value conscious customers. This is also being seen in
catalogue sales where multi-item offers are performing strongly.
We are also moving to increase the frequency of catalogue distribution, whilst
eliminating a number of smaller leaflets, which we believe will give a better
return on our marketing investment. In addition we are changing our marketing
promotions to drive customers back to their catalogues with gifts and discounts,
rather than increasing the number of leaflets.
Home shopping sales are increasingly being generated by positive action rather
than passive order taking. During the year we increased the level of incremental
sales generated by order building over the telephone by 25%. Similarly, the
outbound telemarketing team increased sales by 5%, primarily from customers who
had not placed an order up to that point.
E-commerce is playing an ever-increasing role in the business. Sales via the
websites for our catalogue brands increased by 87% to £28m during the year. The
first £1m demand week was achieved at the end of November and the upward
momentum is being maintained. The greatest penetration of internet sales is on
our youngest brand, Simply Be, where over 30% of sales are on-line.
The main stimulus to on-line ordering is still printed catalogues but we are now
seeking to exploit the opportunities which e-commerce provides. We hold over
500,000 e-mail addresses which allows us to contact these customers at very low
costs with special offers, and increasingly we see the opportunity to test new
products and ideas cost-effectively on-line before investing in printed
material. Consequently our strategy is to collect more of our customers' e-mail
details as a powerful direct marketing tool.
Our websites to date have largely been a service for our existing customers.
During the year we have been adding website addresses to our recruitment
advertisements and we will increase the level of on-line recruitment,
concentrating on our focused selling propositions of size and fittings in
clothing and footwear.
Catalogue shopping has been suffering recently from its relative lack of
flexibility in range and pricing compared with the 'fast fashion' prevalent on
the high street. E-commerce is another way in which we can quickly react to
customers' needs 24 hours a day, 7 days a week. In addition customers who order
on-line have higher average order values, greater loyalty and lower costs to
service.
Another channel which has similar dynamic characteristics is television shopping
which has now grown into a £500m marketplace, and is forecast to grow quickly in
the next few years. To participate in this sector we have entered into a 50:50
joint venture with Northern & Shell Network Limited (which own the Express group
of newspapers) to set up the Express Shopping Channel. We believe there is an
excellent match of our respective skill sets. Northern & Shell have the studio
facilities and programme-making expertise, plus the media vehicles to drive
customers to our channel, whilst we will be responsible for the product offer
and customer service from point of order to delivery. Inevitably there will be
modest start up losses as we establish the infrastructure for the channel but we
expect to be in profit by the end of the second year.
Financial Income
The availability of flexible credit for our customers has been one of the
mainstays of our home shopping proposition. During 2003 we recognised that, due
to the greater availability of credit in the near and sub prime markets from the
major credit card companies, we were seeing the proportion of our sales on
credit starting to diminish slightly.
We are increasing our marketing efforts to promote the availability and benefits
of our credit proposition but recognise that the long term trend favours credit
cards, an area where we have ambitions of our own.
We continually monitor the profitability of each part of our business, whether
it be customers, products or offers utilising the vast array of data in our
computer files. We identified a rising arrears position in the autumn and have
taken decisive action to tackle the situation. Firstly, we have selectively
reduced customers' credit limits where we perceived we were running an above
average risk. Secondly, we recognised that although the long-term interest free
offer on the higher value home and electrical products in our Home Essentials
brochure was stimulating strong levels of demand, it was also generating arrears
levels above our expectations. Consequently we have significantly changed the
product and credit offer from Spring 2004.
Service and Costs
The quality of service expected by our customers rises each year. I am delighted
that during the year we have delivered improved standards of performance in
order and enquiry handling and in the speed of delivery of parcels to customers.
This is reflected in our internal customer satisfaction surveys which show a
pleasing upward trend. The number of couriers we employ has risen to 1,200,
handling 65% of total parcel deliveries. This has mitigated the impact of the
20% rate increases imposed by third party carriers, which caused distribution
costs to rise by 5.2%.
Total overhead costs for the group rose by only 3.2% but with continuing
deflation in our core product ranges it is essential we exert stringent cost
control. We will be focusing on improvements to the supply chain and seeking to
reduce costs in our customer contact centres in the coming year.
Teleview
Teleview has been building a rental fleet since 1996 comprising televisions,
video recorders and other consumer electronic goods with a net book value of
£16m. Whilst it is a low cost operator with one centralised call centre and a
small number of regional depots we have concluded that, due to the continuing
trend for customers to buy rather than rent as selling prices continue to fall
in real terms each year, we will be unable to deliver an acceptable rate of
return on capital. Consequently we are looking to dispose of the business, and
in the current year we have incurred an impairment charge of £9.0m to reflect
the likely realisable value of our investment.
Fulfilment
Zendor, which provides home shopping solutions for multi-channel retailers, has
increased its operating profit before goodwill amortisation and operating
exceptional items to £0.8m, from £0.3m last year, although turnover has fallen
slightly to £8.9m as a result of realigning the client portfolio to focus on
higher margin contracts. The level of third party interactive revenue no longer
supports the remaining unamortised goodwill of £7.6m, which has been written off
as an exceptional charge this year, together with £0.9m of redundant assets.
There continues to be a high level of interest in Zendor's fulfilment services
as more retailers move online. We continue to discuss opportunities to partner
with logistics and software companies to allow Zendor to take advantage of the
buoyant market.
Financial Services
First Financial sells financial products, such as personal loans, warranties and
insurances, mainly to our existing customer base. Turnover for the year
increased by 8.3% to £8.7m but there was a significant slowdown in the second
half. This was planned due to our more cautious approach in loan underwriting as
we felt many customers were already near the limit of their ability to repay.
This was manifested by an increase in arrears both from home shopping debtors
and the personal loans portfolio. In addition we saw a significant reduction in
the sale of warranties as the credit changes in the core business reduced sales
of warrantable products by 10%.
Despite this slowdown we still see financial services as a key area for
development. The market is growing most strongly in credit cards and secured
lending and we continue to pursue opportunities in these areas to augment our
existing range of products.
Management Team
We have seen a number of positive changes to the home shopping board this year.
Dean Moore has joined as Group Finance Director, John Hinchcliffe as Marketing
Director and Keith Risk as Logistics Director. They all have extensive knowledge
of the retail sector and have settled in very quickly, and I believe they will
enable us to continue outperforming our competitors.
Head Office Move
During the year we have migrated the business, excluding our call centre and
warehouse activities, from its long-established base at Dale Street to a modern
freehold office environment at nearby Griffin House at a net cost of £18m. This
major project, which included moving our computer centre, has been achieved
without disruption to the business and creates an excellent platform for future
development.
Summary
The year under review has been one of transition for the group as we revise our
business model to reflect the changing buying habits of our customers. We have
eliminated some low profitability activities and are re-focusing on those
product ranges where our comprehensive size and fittings offer targeted
primarily at the middle-aged woman, give us a competitive advantage. We also see
opportunities to service more affluent customers with targeted offers as home
delivery becomes more widely accepted following the rise of on-line shopping.
Printed catalogues and leaflets will remain at the core of our home shopping
business, albeit in varied formats and increased frequency, but a growing
proportion of our orders will now be generated through e-commerce, telemarketing
and our newly formed television shopping channel, where we can respond to events
more quickly. This multi-channel approach, allied with our established database
segmentation skills, will enable us to compete more effectively in the future.
Finally I would like to congratulate our Chairman, Sir David Alliance CBE, on
his appointment as a life peer, a fitting tribute for a long and successful
business career which I am sure will prove invaluable experience in the House of
Lords.
Alan White
12 May 2004
GROUP PROFIT AND LOSS ACCOUNT
for the 52 weeks ended 28 February 2004
Note Before Goodwill Unaudited Audited
goodwill amortisation Total Total
amortisation & operating 52 weeks to 52 weeks to
& operating exceptional 28-Feb-04 1-Mar-03
exceptional items £m £m
items (note 4)
£m £m
--------- --------- --------- --------
Turnover 1 470.5 - 470.5 457.3
========= ========= ========= ========
------------------------ ---- --------- --------- --------- --------
Operating
profit before goodwill amortisation 2 54.2 (7.8) 46.4 60.2
Goodwill amortisation - (10.3) (10.3) (0.7)
------------------------ ---- --------- --------- --------- --------
Operating profit 3 54.2 (18.1) 36.1 59.5
Profit on sale of tangible fixed assets 1.0 - 1.0 -
--------- --------- --------- --------
Profit on ordinary activities before finance
charges 55.2 (18.1) 37.1 59.5
Net interest payable and similar charges (6.1) - (6.1) (5.4)
--------- --------- --------- --------
Profit on ordinary activities before
taxation 49.1 (18.1) 31.0 54.1
Taxation on profit on ordinary
activities (13.8) 1.2 (12.6) (15.4)
--------- --------- --------- --------
Profit on ordinary
activities after taxation 35.3 (16.9) 18.4 38.7
Equity minority interests - (0.5) (0.5) (0.2)
--------- --------- --------- --------
Profit for the financial year 35.3 (17.4) 17.9 38.5
Dividends 6 (17.1) - (17.1) (17.1)
--------- --------- --------- --------
Retained profit for the year 18.2 (17.4) 0.8 21.4
========= ========= ========= ========
Underlying earnings per share 7 12.02p 13.42p
Goodwill amortisation and exceptional
operating items (5.91)p (0.26)p
--------- --------
Basic earnings per share 6.11p 13.16p
========= ========
Diluted earnings per share 7 6.08p 13.10p
========= ========
Dividends per share 6 5.84p 5.84p
========= ========
GROUP BALANCE SHEET
as at 28 February 2004
Unaudited Audited
2004 2003
£m £m
-------------- -------------
Fixed assets
Intangible assets - 10.0
Tangible assets 83.0 77.6
Investments 2.3 3.9
-------------- -------------
85.3 91.5
-------------- -------------
Current assets
Stocks 46.4 41.7
Debtors 354.1 326.8
Cash at bank and in hand 26.8 24.0
-------------- -------------
427.3 392.5
-------------- -------------
Creditors
Amounts falling due within one year (90.4) (96.1)
-------------- -------------
Net current assets 336.9 296.4
-------------- -------------
Total assets less current liabilities 422.2 387.9
Creditors
Amounts falling due after more than one year (170.6) (137.1)
Provisions for liabilities and charges (5.0) (5.4)
-------------- -------------
Net assets 246.6 245.4
============== =============
Capital and reserves
Called-up share capital 29.5 29.5
Share premium account 9.1 8.7
Revaluation reserve - 1.7
Profit and loss account 208.0 206.1
-------------- -------------
Equity shareholders' funds 246.6 246.0
Equity minority interests - (0.6)
-------------- -------------
Capital employed 246.6 245.4
============== =============
Gearing 59% 47%
GROUP CASH FLOW STATEMENT
for the 52 weeks ended 28 February 2004
Unaudited Audited
2004 2004 2003 2003
Note £m £m £m £m
------- ---------- ------- -------
Net cash inflow from operating activities 5 29.4 30.8
Returns on investments and servicing of
finance
Interest paid (6.3) (5.4)
Interest element of finance lease payments (0.1) (0.1)
------- -------
Net cash outflow from returns on investments
and servicing of finance (6.4) (5.5)
Taxation
Corporation tax paid (12.8) (16.6)
Capital expenditure and financial investment
Purchase of tangible fixed assets (25.4) (15.3)
Purchase of intangible fixed assets - (0.1)
Sale of fixed asset investment 0.8 -
Sale of tangible fixed assets 0.6 0.1
Decrease in own shares held in trust 0.7 0.8
------- -------
Net cash outflow from capital expenditure and
financial investment (23.3) (14.5)
Acquisitions and disposals
Purchase of subsidiary undertakings (0.3) (0.1)
------- -------
Net cash outflow from acquisitions and
disposals (0.3) (0.1)
Equity dividends paid (17.1) (17.1)
---------- -------
Cash outflow before financing (30.5) (23.0)
Financing
Issue of ordinary share capital 0.4 0.3
New loans 34.0 136.0
Loan repayments (0.5) (98.2)
Capital element of finance leases (0.5) (0.5)
------- -------
Net cash inflow from financing 33.4 37.6
---------- -------
Increase in cash in the year 2.9 14.6
========== =======
GROUP CASH FLOW STATEMENT, contd.
for the 52 weeks ended 28 February 2004
Unaudited Audited
2004 2003
£m £m
Reconciliation of net cash flow to movement in net debt
Increase in cash in the year 2.9 14.6
Cash inflow from increase in loans (34.0) (136.0)
Repayment of loans 0.5 98.2
Repayment of capital element of finance leases 0.5 0.5
--------- ---------
Changes in net debt resulting from cash flows (30.1) (22.7)
New unsecured loan notes - (0.2)
--------- ---------
Movement in net debt in the year (30.1) (22.9)
Net debt at 1 March 2003 (115.5) (92.6)
--------- ---------
Net debt at 28 February 2004 (145.6) (115.5)
========= =========
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the 52 weeks ended 28 February 2004
Unaudited Audited
2004 2003
£m £m
----------- ----------
Profit for the financial year 17.9 38.5
Unrealised gain on trade investment - 0.1
Exchange adjustments offset in reserves (0.1) 0.2
----------- ----------
Total recognised gains relating to the year 17.8 38.8
=========== ==========
RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS
Unaudited Audited
2004 2003
£m £m
----------- ----------
Profit for the financial year 17.9 38.5
Dividends (17.1) (17.1)
----------- ----------
0.8 21.4
Other recognised gains and losses (net) relating to the
year (0.1) 0.3
Transfer in respect of employee share ownership trusts (0.5) 0.4
Issue of ordinary share capital 0.4 2.4
----------- ----------
Net additions to shareholders' funds 0.6 24.5
Equity shareholders' funds at 1 March 2003 246.0 221.5
----------- ----------
Equity shareholders' funds at 28 February 2004 246.6 246.0
=========== ==========
NOTES TO THE ACCOUNTS
for the 52 weeks ended 28 February 2004
Unaudited Audited
2004 2003
1 Analysis of turnover £m £m
---------- ------------
Home shopping 452.9 439.7
Financial services 8.7 8.0
Fulfilment 8.9 9.6
---------- ------------
470.5 457.3
========== ============
Unaudited Audited
2 Analysis of operating profit before goodwill 2004 2003
amortisation and operating exceptional items £m £m
---------- ------------
Home shopping 51.0 57.2
Financial services 2.4 2.7
Fulfilment 0.8 0.3
---------- ------------
54.2 60.2
========== ============
Unaudited Audited
2004 2003
3 Analysis of operating profit £m £m
---------- ------------
Home shopping 41.8 56.9
Financial services 2.4 2.7
Fulfilment (8.1) (0.1)
---------- ------------
36.1 59.5
========== ============
Unaudited Audited
4 Analysis of goodwill amortisation and operating 2004 2003
exceptional items £m £m
---------- ------------
Amortisation of goodwill 0.6 0.7
Impairment of carrying value of tangible fixed 7.8 -
assets
Write-off of carrying value of goodwill 9.7 -
---------- ------------
18.1 0.7
========== ============
An impairment review of the carrying value of the group's tangible fixed assets has resulted
in an exceptional charge to reduce the carrying value by £7.8m. The annual impairment review
of the carrying value of the group's investment in Teleview Direct Ltd and Eunite Ltd
indicated that a write-off of goodwill of £2.1m and £7.6m respectively was required. The
impact of these exceptional items has reduced the current year tax charge by £1.2m.
5 Reconciliation of operating profit to operating Unaudited Audited
2004 2003
cash flows £m £m
----------- --------
Operating profit 36.1 59.5
Increase in stocks (4.7) (2.7)
Increase in debtors (23.2) (44.4)
(Decrease)/increase in creditors (9.6) 4.1
Depreciation (net of profit (loss) on disposals) 12.6 13.6
Amortisation of goodwill and other intangible fixed 0.7 0.7
assets
Impairment of goodwill and tangible fixed assets 17.5 -
----------- --------
Net cash inflow from operating activities 29.4 30.8
=========== ========
6. An interim dividend of 1.74p per ordinary share was paid on 6
January 2004 to shareholders on the register at the close of business on 28
November 2003. A final dividend of 4.10p per ordinary share is proposed to be
paid on 16 July 2004 to shareholders on the register at the close of business on
18 June 2004.
7. The calculation of earnings per share is based on the profit
for the financial year of £17.9m and the weighted average number of shares in
issue during the year of 293.0m (2003, 292.5m). To assist comparison, an
underlying earnings per share has also been calculated to exclude the impact of
goodwill amortisation and operating exceptional items and is based on a profit
for the financial year of £35.3m. For diluted earnings per share, the weighted
average number of shares of 294.1m (2003, 294.0m) has been calculated after
adjusting for the potential dilution of outstanding share options.
8. The financial information set out above does not constitute the
group's statutory financial statements for the 52 weeks ended 28 February 2004
or the 52 weeks ended 1 March 2003. The financial information for the 52 weeks
ended 1 March 2003 is derived from the statutory financial statements for that
year which have been delivered to the Registrar of Companies. The auditors have
reported on the financial statements for the 52 weeks ended 1 March 2003; their
report was unqualified and did not contain any statement under Section 237(2) or
(3) of the Companies Act 1985.
The financial information set out above has been prepared under the same
accounting policies as the 2003 financial statements.
The auditors have not reported on financial statements for the 52 weeks ended 28
February 2004, nor have any such financial statements been delivered to the
Registrar of Companies.
This report was approved by the Board of Directors on 12 May 2004.
It is expected that the full Annual Report and Accounts for the 52 weeks ended
28 February 2004 will be posted to shareholders on 28 May 2004.
This information is provided by RNS
The company news service from the London Stock Exchange
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