(Alliance News) - UK clothing & footwear retailer N Brown Group PLC on Thursday announced plans to raise around GBP100 million in capital and move its shares to London's AIM market, amid a half-year profit drop.
Shares in N Brown were down 6.6% at 55.10 pence in London in afternoon trading.
The Manchester-based digital-only retailer's pretax profit dropped by a quarter to GBP14.1 million from GBP18.8 million in the six months ended August 31, a period hit by Covid-19 lockdowns.
This came as revenue fell 18% to GBP356.7 million from GBP296.3 million, including a 21% drop in product revenue to GBP224.5 million and 12% drop in financial services revenue to GBP132.2 million.
Product revenue suffered under the "sudden and significant impact of Covid-19 at the start of the period", while financial services revenue was hurt by "regulatory changes and lower product revenue leading to a smaller debtor book".
In terms of outlook, N Brown expects financial 2021 capital expenditure to be around GBP20 million, with exceptional costs of less than GBP10 million, which it predicts will "drive improved cash generation" in financial 2021. Net debt is forecast at between GBP380 million and GBP400 million at financial year end.
Chief Executive Steve Johnson said: "Having restructured the business and transitioned to more than 90% of revenues from digital, we now see a clear opportunity to capitalise on various industry drivers, not least the increasing trend towards online retail, and further improve our customer proposition. Today's separately announced proposed capital raise will give us the firepower to invest further in our digital capabilities and accelerate our growth strategy, whilst significantly strengthening the group's balance sheet to provide us with ongoing flexibility and a strong platform from which to deliver attractive returns for all of our shareholders.
"Whilst we are mindful of an uncertain UK retail environment, we are confident we can continue to build on the unique strength of the group's brands. We remain focused on creating a sustainable business delivering profitable growth over the long term."
As England enters its second national lockdown, N Brown said it will bolster its coffers through an equity raise of approximately GBP100 million, fully supported by substantial shareholder David Alliance.
This will be completed through a conditional placing to Alliance and his son, Joshua Alliance, subject to a clawback under an open offer of around GBP100 million to shareholders, priced at 57p per share and on the basis of 11 open offer shares for every 18 existing shares.
N Brown has an agreement with its lenders, subject to the capital raise's completion, which would extend the maturity on its existing secured and unsecured facilities on revised terms with proposed cancellation of its Coronavirus Large Business Interruption Loan Scheme facilities, giving it better flexibility for investing capital and returning capital to shareholders.
The company also plans to delist from the London Main Market and move to the junior AIM market in London.
N Brown said AIM is a more "appropriate environment" and better suited for a company of its size.
Johnson said: "The proposed capital raise will give us the firepower to invest further in our digital capabilities and accelerate our growth strategy, whilst significantly strengthening the group's balance sheet to provide us with ongoing flexibility and a strong platform from which to deliver returns for all of our shareholders."
By Anna Farley; annafarley@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
Brown Group (BWNG)