Member Info for Paulof2

Ssssh Ian don’t want anyone getting in trouble haha.

Thanks though z cars, confirms my suspicion, a couple of months back I actually said air freight is a real possibility so it’s definitely a very good sign.

Not too worried about that. If a delay stops a bad debt then it’s worth doing we’ve already seen that their cash balances are increasing even during weak trade so I don’t think cash will be an issue.

They’ve also over the past few years increased the bad debt provision but more importantly substantially increased the quality of the loan book, where before they make take on riskier customers it’s been much more refined to higher quality.

Combine that with furlough and many still being paid I don’t see this being an issue as of yet. After all the financial services aspect of the business performed incredibly well during the last recession, while you are viewing it as a potential negative I see it as a positive to have constant streams of income into the business as people repay their loans.

I doubt it, probably lifted up slightly by boohoo results like Asos has been today

No problem Ian, with the financial years getting muddled due to the delay in reporting it’s an easy mistake to make!

When did they say 70-72m would not be met?

There was not many weeks of trading left when they revised it down to those levels and that was after peak so one would expect most of the profits had already been obtained. In the first covid announcement they also said that the start of the financial year the first couple of weeks was in line with expectations so therefore I wouldn’t expect the end of last financial year to be materially different from 70-72m.

They do spend a lot yeah but it’s not really the same target market, people buy from boohoo because it’s cheap fast fashion that’s what’s driving the sales growth. Also the biggest brand is jd williams which is targeted for more elderly customers therefore it’s not as easy as paying some influencers to post on social media in your outfits like they do on boohoo.

So while I agree the marketing is too high it’s on the whole a different target market so not exactly right to compare them in my opinion. Perhaps comparing the marketing spend on simply be which is closest to the same target market albeit not identical would be a more meaningful comparison. You would also always be willing to spend more on marketing FS products due to the higher profits from those.

Finally, n brown themselves recognise this is spend is too high and were looking to reduce anyway (think the figure was 7.5% reduction this financial year although would need to go back and check ) which is a big reduction in a single year so a step in the right direction.

I don’t understand how cash is a concern though. Between the first covid update and the second they managed to pay off their overdraft and reduce debt and stay at pretty much the same cash position. So they’re definitely cash generative at the moment, and that was when sales were at their absolute worst.

March - securitisation facility & RCF £539.7m. Overdraft drawn 9m and 46.3m cash

May - securitisation & RCF £512m. Overdraft paid off and cash of 45.3m.

Although in May it doesn’t specify the rcf / securitisation split its possible that they reduced the rcf by almost 28m, paid off overdraft of 9m and only saw a cash reduction of 1m. That’s a big amount of cash potentially up to 36m difference in 2 months.

Their main cash outflow is marketing which was substantially reduced, through furlough and most of their summer stock being already purchased I wouldn’t imagine they are spending much cash at all.

Although they’ve given some customers payment deferrals remember that any payments from their existing loan book are essentially pure cash at this stage with the goods being purchased and sold a long time ago.

Agreed I couldn’t believe it either it was a true gift. I think it was because of a combination of things, firstly they came out arguably too early and said that sales were down 40% at the start but that was understandable, that was even before measures such as furlough were announced and demand has clearly somewhat recovered since then.

The most important point I believe is that people see the high debt (which isn’t the same as standard debt as I have explained on other posts) and think right well that means the business can’t survive if sales are down and therefore the business will collapse. On other threads I had people saying that this would be going into administration which I actually found hilarious given it’s current liabilities are peanuts. The only possibly explanation of it going to 10p is that people thought it would collapse.

It’s just poor research on most people’s part but that’s fine for me and others that are willing to do a bit of research and make a lot of money.

Hi Cam, I think it is three fold really.

Firstly I think part of it is that there will be many people who looked at last years results and dismiss it due to making a loss even though all due to exceptional. I think when it comes out with profits of 70-72m there will be a psychological impact where people suddenly think wait a minute how can this 100m market cap company be generating 70m profit? So in that regard I think it will increase the visibility of n brown and put it on a lot of traders radars. Further to this though a big review of the strategy of the business and brands was also planned to be revealed in these results for next year so that could be an added benefit although we know little about the outcome of the review yet but one would imagine it would lead to more profit or they wouldn’t be mentioning it.

Secondly as others have mentioned it is the trading update that will reveal a lot. Personally I’d like to see them quantify some of the figures more e.g we’ve reduced marketing by 35m say. They have the scope off the back of this to really go into more detail on current trading, is the recovery accelerating, are they reupping marketing. Is cash still increasing..

Then third I’d expect some big director buys following this. N brown in the past has been good at recognising that they really show confidence in the business so I’d be incredibly surprised if we don’t see a flurry of them following the results. They’ve been in a closed dealing period for a long time now and I’d imagine a lot of directors and probably the alliance brothers are chomping at the bit to stock up at these ridiculous prices.

Obviously only my own opinions but surely it can’t make the price go any lower can it haha!

Agreed if you look at the target market for jd williams (I can’t remember what the actual figure is) but the average age was really quite high. I don’t think there’s ever been a more influential event that will drive online shopping more. Particularly for these more elderly customers I bet many will have purchased online for the first time during lockdown and once their fears and apprehension of doing it are alleviated it should be very beneficial for n brown.

N brown have been tailoring the website and brand proposition for this shift of particularly more elderly customers to online shopping for years now so if they don’t benefit then something is wrong!

I believe so. The main issue in the past was that although revenue was growing it was coming at a cost and that was throwing a lot of marketing at it, doing things like direct mail where you may get a customer but they’ll only order once at a big discount and never again. They’ve since moved to a much more digital offering, cemented their core offering and are now looking for more organic growth which is the right approach in my eyes.

I think one of the biggest point though is they’ve also been horribly hampered by one off events related to legacy operating recently and these have really knocked down the share price. E.g they took a big hit because of legacy ppi claims, a big loss on partial exemption vat dispute which all legal advice and accountants thought they would win, and then on top of that took some big exceptionals to close stores. These have really reduced the profits but they’re all over and done with now. I believe it should all be settled as of these next financial results for the last FY.

These are all very much legacy issues that simply won’t happen again, therefore I don’t see any reason why it shouldn’t continue to rebound. It is still a very profitable business and when they’re not having to pay out 25-40m in ppi that can really help the business whether it be paying down debt, investing in further growth or even increasing the already very substantial dividends.

Very positive day given the market

It’s a difficult balance n brown as of the last trading announcement went down the route of reducing marketing in order to increase cash generation and profit, however obviously that somewhat subdues growth so will be interesting to see if they have maintained that approach.

Either way whether it is revenue growth or profit growth through reduced marketing either is fine with me.

Also worth noting if giving a payment holiday prevents a bad debt then it’s worth doing, doesn’t make too much difference if they receive the cash now or in a few months as we know they are already cash generative. So while it is good for pr it’s also the right decision financially

I can see 60p before results 85 after.

Some good signs from the similarweb data from May now showing that visits Marginally up again on jd williams which shows that The home sales are still holding out late May. Then what’s even more promising is simply be that is mainly clothing visits up 15% in May compared to April.

Both the above websites are now getting similar website visits to December 2019 which is peak trading period so very promising. A lot of this rebound appears to be driven by organic hits also which is once again very promising.

Jacamo visits seem to finally be recovering with May up 26% on April although still somewhat below pre covid but Jacamo is the least efficient marketing whereby a lot needs to be spent for sales, so it would make sense that a dramatic reduction in marketing would substantially reduce these visits so good to see this bouncing back.

Ambrose Wilson and home essentials both continuing to see good visitor growth between 5-10% on April.
Oxendales also bounced back 12% to peak trading levels.

It looks like the worst is very much behind us, the only one that still seems to be struggling is premier man which makes up a very small portion of revenue anyway. If these results and visitors are being achieved and marketing is still at the very low levels this bodes very well in my opinion.

Yes n brown may have more ‘debt’ than others but it also has a much bigger receivable than others too.

You can’t consider one without the other in a credit business, that’s the equivalent of assessing a business based solely on its costs and ignoring the revenue!

Spot on Ian B.

Also worth mentioning that the debt is only secured on the corresponding loan book so they are incredibly heavily linked. I.e if n brown did decide to default the corresponding amount of the loan book would be transferred over, with no claim to any other assets. This isn’t really standard debt and shouldn’t be treated as such.

This has always been the case with n brown and it makes sense, if you build a credit business where you don’t receive cash straight away and spread over a period you’re going to need some sort of debt to satisfy working capital requirements.

Thats why n browns debt is so much larger than others because of the credit element of the business, it’s very serviceable and as I say secured on the loan receivables only so not an issue. (Also it’s ridiculously cheap at the moment due to the incredibly low interest rates)

I’d imagine in the next trading update we’ll see n brown has reduced its net debt substantially, either by massively increasing its cash balance or then deciding to pay down some of the rcf which is essentially the only real debt the business has, the debt secured against their receivables won’t even cross their minds as it’s not an issue and would be the last thing you would consider paying off. However even so you could possibly make the argument that you wouldn’t even pay that off given how cheap it is and how much cheaper than any other debt would be.

No problem KSH, thanks for sharing here for me

If anyone is interested, i've done a really rough calculation on the impact of covid, rolling through the trading update through their figures and i've posted on UK ADVFN if anyone is interested.. Unfortunately cant post here as it is way more than the character limit.

I'll just say it is incredibly promising and shows how ridiculous these current prices are..