TIDMBWNG
RNS Number : 2702N
Brown (N.) Group PLC
19 May 2020
19 May 2020
Trading and financing update
N Brown plc (the "Group") today provides an update on trading
and amendments to its debt financing arrangements. In summary:
-- Trading improved from the levels experienced in early March
but continues to be affected by the Covid-19 pandemic; and
-- New financing arrangements secured with its long-standing
supportive lenders. These provide the Group with significantly
increased and amended facilities providing sufficient liquidity,
working capital headroom and covenant flexibility to be able to
manage effectively in a challenging trading environment.
Trading
Trading has improved from the sudden and significant decline
experienced in March with product sales down 25% in the last 6
weeks. The Board regards this performance as creditable in the
circumstances and is hugely grateful for the commitment and
flexibility shown by colleagues throughout the business. In the
last 6 weeks, we have seen significant growth in our Home &
Gift categories, up 74%, but continued weakness in apparel sales,
down 48%. Within apparel, offline sales declined significantly more
than digital sales.
Home & Gift sales have been supported by the launch, on
1(st) April, of our standalone Home brand, Home Essentials, and we
look forward to providing more detail on this in our strategic
brand review at the full year results in June.
Our financial services business continues to provide consistent
streams of revenue and cash inflows. Through focused operational
activity and the migration of more credit customers to automated
payment methods, financial services cash collections have performed
well and are broadly in line with the prior year. Following FCA
guidance, on 14(th) April we offered customers in financial
difficulty as a result of Covid-19 the option to defer payments for
3 months. Consequently, we expect cash collections to trend lower
over the coming months. However, as a result of the flexibility
provided by our new debt financing arrangements, our ability to
draw on our securitisation facility will be stabilised despite a
lower cash collection rate environment than previously.
The Group has taken decisive action to maximise operating
efficiency and preserve liquidity and has successfully achieved the
following:
-- Continued operation of our distribution centres, though at
lower levels of capacity than normal;
-- An 80% reduction in marketing expenditure;
-- A significant reduction in capital expenditure;
-- The furloughing of 30% of colleagues across the business;
-- Recruitment and salary freezes;
-- Voluntary pay reductions from April to June for PLC Board,
Management Board and senior leadership team; and
-- Agreement with HMRC to defer certain tax and duty payments
associated with our normal operating activities as well as certain
legacy tax payments which were expected to be paid in H1 FY21.
Financing arrangements and liquidity update
The Group has financing facilities in place, comprising:
-- An up to GBP500 million securitisation facility, secured by a
charge over eligible customer receivables without recourse to the
Group's other assets, drawings on which are linked to prevailing
levels of eligible receivables;
-- A Revolving Credit Facility ("RCF") of GBP125 million; and
-- An overdraft facility of GBP27.5 million.
As at 18(th) May 2020, drawings under the securitisation
facility and RCF stood at GBP512.0 million. As at the same date
cash balances stood at GBP45.3 million and the overdraft facility
was undrawn.
Today, the Group is pleased to announce new financing
arrangements with its long-standing, supportive lenders:
-- A new up to GBP50 million 3-year Term Loan facility, provided
by our lenders under the Government's Coronavirus Large Business
Interruption Loan Scheme ("CLBILS");
-- Amendment of certain terms and covenants of the
securitisation facility, to mitigate a significant amount of the
impact that Covid-19 may have in 2020 on the facility. This is to
address variations in collection rates and customer behaviour, and
to enable the Group to continue to offer its customers enhanced
flexibility. The amendments to the facility are in place until late
December 2020 and are intended to fully cover the impact of the
current period of the FCA's Covid-19 forbearance; and
-- The widening of certain covenants at the August 2020
half-year test date in its existing unsecured GBP125 million RCF
and the introduction of quarterly covenant tests.
The RCF and the securitisation facility are committed until
September 2021 and December 2021 respectively. The Group expects to
renegotiate these facilities well in advance of these dates.
The Group has modelled various scenarios, including a "severe
but plausible" scenario assuming:
-- Product sales down 50% year on year in April, May and June;
-- Product sales down 45% in July and August and 25% to 30% down
for the remainder of the 2021 financial year; and
-- Collections 15% to 20% lower than we are currently
experiencing, throughout the remainder of the 2021 financial
year.
Under these scenarios the new financing arrangements provide the
Group with a strong basis from which to continue to service its
customers and to manage appropriately the challenges faced by the
Group. For as long as the GBP50 million CLBILS facilities remain in
place, the Group will be restricted from paying cash dividends. The
Board does not anticipate declaring cash dividends in respect of
the 2021 financial year.
Operational actions to protect our business and stakeholders
Our priority through the crisis has been to protect the health,
safety and wellbeing of our colleagues and customers. Since the
outbreak of Covid-19 we have managed to keep a continuous supply of
goods to our customers, whilst at all times keeping colleagues safe
in our distribution centres, operating at all times in line with
Government guidelines.
In March and April, we made several changes to ensure continuing
safe operations and to follow the Public Health England guidelines
on social distancing. At our distribution centres, we re-organised
the floorplan layouts to ensure social distancing, introduced
one-way walkways, increased points of access and exit, staggered
the entry and exit times of colleagues and laid out clear floor
markings. We also significantly expanded our cleaning regime and
introduced additional hand washing stations for all colleagues. We
are in regular dialogue with USDAW, our trade union, with which we
are working to maintain satisfactory health and safety conditions
for our colleagues. Following publication of the guidelines for
workplaces on 11(th) May 2020, we will be incorporating recommended
practices and publishing our risk assessment.
Throughout the pandemic we have worked collaboratively with all
of our suppliers. We continue to pay our product suppliers to
contractual terms but have cancelled some orders due for SS20 given
the uncertain demand backdrop. Future orders for AW20 have been
rephased and, in some cases suppliers are reworking pre-ordered
fabrics for more appropriate seasonal lines. In recent weeks we
have started to work with suppliers on SS21 orders. We have
continued to pay all other suppliers and partners to terms.
Supporting our community
Since the beginning of the Covid-19 outbreak we have supported
both our local communities affected by the crisis and those who are
working tirelessly on the frontline. We have made donations of
clothing and household items to frontline NHS staff in Manchester
and donated face masks and face shields to a local care home near
to our distribution centre in Oldham. Donations of clothing have
also been made to a local charity supporting vulnerable people and
children within the local community.
Preliminary results for the year ended 29(th) February 2020
The Group's audit is being conducted on an entirely remote basis
and N Brown currently expects to release its results for the year
ended 29(th) February 2020 in mid to end June 2020. A further
announcement will be made in due course.
FY21 guidance
Given the uncertainty generated by the continually-evolving
Covid-19 pandemic, the Board does not believe it is appropriate at
this stage to provide any guidance for the financial year ending
27(th) February 2021.
Steve Johnson, CEO, said:
"In what remains a very uncertain environment, we have been
balancing our number one priority of looking after our colleagues,
with a commitment to continue serving our loyal customers, whilst
ensuring the business has the resilience to navigate the various
challenges we are facing.
"Our colleagues and suppliers have shown fantastic dedication
and demonstrated real agility amidst difficult conditions, and I am
extremely grateful for their hard work.
"We are pleased to have secured support from both our banking
partners and the Government's loan scheme, which help to strengthen
our financial position and gives us the flexibility and certainty
to manage through this challenging period. In addition, the
immediate and substantive actions we took at the very outset of
this crisis have supported our working capital positively in this
period.
"We have a unique portfolio of brands and products which appeal
to a range of customer groups who can also benefit from our
flexible payment options. As we further develop and improve our
offer, we remain confident in the long-term prospects for the
business as we emerge from these challenging times."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
For further information:
N Brown Group
Will MacLaren, Director of Investor
Relations and Corporate Communications 07557 014 657
MHP Communications
Andrew Jaques / Simon Hockridge 07709 496 125 / 07824
/ James Midmer 142 725
NBrown@mhpc.com
About N Brown Group:
N Brown is a top 10 UK clothing & footwear digital retailer.
We are size inclusive, focusing on the needs of underserved
customer groups - size 20+ and age 50+. We offer an extensive range
of products, predominantly clothing, footwear and homewares, and
our financial services proposition allows customers to spread the
cost of shopping with us. We are headquartered in Manchester where
we design, source and create our product offer and we employ over
2,200 people across the UK.
ENDS
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