Brown Group Regulatory News (BWNG)

9 May 2006 07:01

Brown (N.) Group PLC09 May 2006 9 May 2006 N Brown Group plc PRELIMINARY RESULTS ANNOUNCEMENT YEAR ENDED 25 FEBRUARY 2006 N Brown Group plc, the Manchester based direct home shopping company, todayannounces its preliminary results for the 52 weeks to 25 February 2006. Highlights: •Group turnover from continuing operations up by 8.2% to £484.8m (2005: £447.9m) including strong performance from core home shopping with turnover up 10.4% to £459.6m •Reported results show group profit before tax up 177.4% to £51.8m. (up 25.9% to £51.8m excluding last years operating exceptional item*) •Earnings per share up 146.5% from continuing operations (up 19.9% excluding last years operating exceptional item*) •Net debt reduced by £33.3m to £92.9m •Final dividend per share increased by 8.5% to 4.45p •Current trading for Group shows sales growth of 7.1% for the first 10 weeks to 6 May 2006, including home shopping sales up by 8.8% * Full year results 2005 included exceptional provisions of £22.5m in respect ofthe asset impairment in House of Stirling, the door-to-door selling division Alan White, Chief Executive, said: "I am pleased to announce a strong set of results against the background of a challenging retail market. It is encouraging that our focus on our core home shopping business over the past year has resulted in an excellent performance across all areas of the Group. Improved product ranges and catalogue presentation, together with an increasingly significant proportion of online sales demonstrates our ability to compete successfully in multi-channel retailing." Lord Alliance CBE, Chairman, added: "These results confirm the significant progress the Group has made over the past year. Our strategy of focusing on our home shopping business, servicing the specialised clothing and footwear needs of our target customer groups, whilst rationalising our other operations, has resulted in an excellent result.Despite a weak outlook for consumer spending we are confident that we can make further progress this year." -Ends- For further information please contact: N Brown Group plcAlan White, Chief Executive On the day: 0207 554 1400Dean Moore, Finance Director Thereafter: 0161 238 2202Website : www.nbrown.co.uk Gavin Anderson & CompanyFergus Wylie / Charlotte Stone / Amelia Ward Tel: 020 7554 1400 CHAIRMAN'S STATEMENT GROUP The group results for the 52 weeks ended 25th February 2006 confirm the progresswe have made throughout the past year in further developing the core homeshopping business and rationalising our other activities. Group turnover from continuing operations is up by 8.2% to £484.8m. The reportedresults show operating profit up by 125.1%, group profit before tax up by 177.4%and basic earnings per share up by 146.5%. Excluding last years operatingexceptional item of £22.5m relating to the asset impairment in the door-to-doorselling division, group operating profit is up by 19.5% to £60.0m, group pre-taxprofit has risen by 25.9% to £51.8m, and adjusted basic earnings per share is up19.9%. Net debt has fallen by £33.3m to £92.9m, resulting in a reduction in gearingfrom 55% to 38% on net assets of £246.0m (2005, £230.1m). As a result netinterest payable on borrowings has reduced from £8.1m to £6.9m, covered 8.7times. These results enable the directors to propose an 8.5% increase in thefinal dividend to 4.45p, making a total for the year of 6.27p (up 7.4%) which iscovered 2.0 times. HOME SHOPPING Turnover in the core home shopping business rose by 10.4% to £459.6m, andoperating profit was up 11.0% at £62.4m. The most encouraging aspect of theperformance is that sales have grown in all of our key customer and productniches. Our younger titles, specialising in stylish clothing for the larger woman in the30-45 age range, continued to grow at the fastest rate, delivering sales of£117m which was up by 15% on last year. The midlife catalogues, targeted at the45-65 year old customer, increased sales by 9% to £319m. The midlife categoryincludes a full years sales contribution of £19m (2005, £5m) from House of Bathwhich was acquired in November 2004 and the planned integration with the group'slogistics was completed in September 2005. The older titles for the 65+ agegroup also continued to make progress with an 8% increase in turnover. Following improvements to product ranges and designs, the most encouragingaspect of the year is the reinvigoration of our ladieswear sales which were up9% to £245m. Menswear provides 7% of total turnover and produced an 8% increaseon the previous year. The highest growth category remained footwear, where theoffer of multiple width fittings for shoes and boots continues to attract bothnew and existing customers. Sales from the home and electrical categories didwell in the second half and increased by 11% for the year as a whole. The grossmargin on sales in core home shopping was the same as the previous year. The conduit between the customers and the product ranges is the promotionalchannels that we use. Catalogues are the dominant source of sales generation andincreases in pagination have helped sales increase by 9%. However the higherfrequency of contact with our customer base through mid-season mailings in avariety of formats has been the biggest contributor to sales growth. Inaggregate the sales from these mailings resulted in a 34% increase to £122m, nowrepresenting 27% of total sales. The other channel to our customers which has delivered significant growth is theinternet. On-line sales accounted for 16% of total sales, increasing by 70% to£74m. More customers are naturally choosing to key their order in on-line ratherthan telephone the call centre, which results in higher average order values aswell as lower operating costs. Additionally we run regular email promotionalcampaigns to drive incremental sales and we also implemented an advanced searchfacility on our various websites which helps customers find specific productsmore easily. Customer recruitment campaigns performed strongly throughout the year resultingin a 19% increase in sales from new customers. Increased response rates from ourmailings resulted in a 1% rise in the number of established customers whoordered, whilst their average spend increased by a further 4%. These encouragingstatistics mean we start the new financial year with a stronger database ofactive customers. OTHER CONTINUING ACTIVITIES House of Stirling, our door-to-door selling arm, has been radically overhauledduring the year. The result is a significant reduction in the operating lossesbefore operating exceptional items of £22.5m from £6.3m to £2.3m on turnoverwhich was down by 32.9% to £16.1m. Further cost saving measures are in hand toimprove the results in 2006/7. Zendor, which provides home shopping services for third party retailers,increased its revenues by 22.4% to £9.1m. Zendor now has its own dedicatedwarehouse facilities which will enable further contracts to be obtained, but theextra costs resulted in a small operating loss of £0.1m. DISCONTINUED ACTIVITIES During the year we disposed of businesses which in the year to February 2006incurred operating losses and losses on disposal totalling £1.1m. Teleview, a direct television rental business, was sold in May 2005 for £6.2m,incurring a loss on disposal of £1.2m. The debtor book of the financial servicesdivision was sold for £16.2m, slightly above our expectations allowing £1.1m ofthe £3m impairment provision taken last year to be released. JOINT VENTURE During the year we also closed our joint venture television shopping channel, asits growth prospects were below our original expectations, and our share oflosses was £1.9m. CURRENT TRADING The results for last year clearly demonstrate that the strategy we adopted in2003 to focus on those home shopping activities where we have a strong sellingproposition has worked. We have concentrated on servicing the needs of thelarger or older customer segments and exited from a number of peripheralbusinesses. Despite a generally weak consumer retail environment, our ongoing strategy ofproviding our target customer groups with fashionable yet comfortable clothingand footwear is continuing to deliver good sales growth in the ten weeks to 6thMay 2006. Since the financial year-end core home shopping sales are up by 8.8%with further increases in all major customer and product groups. Group sales intotal are up by 7.1%. The Spring Summer catalogues have performed well complemented by strong demandfrom the mid-season mailing program. On-line sales are maintaining their upwardmomentum and accounted for 20% of sales for the same ten week period since thefinancial year-end. OUTLOOK One of the key drivers of growth for the rest of the year, when comparativeswill get progressively tougher, will be the size of our active customer base.New customer recruitment campaigns have produced good results so far and it isvery encouraging that we now have many different routes to acquire new and longterm customers, with online recruitment via the search engines having greatpotential. Future catalogues and brochures will have a steady influx of newmerchandise and improved presentation to stimulate our established customers toplace further orders. Longer term the demographic trends will continue to movein our favour with the number of customers aged 45 or over expected to rise by15% in the next decade. The retail environment has been challenging in the last year and the outlook forconsumer spending remains weak. We have demonstrated that we can deliver stronggrowth despite these tough trading conditions and with the tireless efforts ofthe management and staff the Board is confident in the Group's ability to drivefurther progress this year. Lord Alliance, CBE9 May 2006 CHIEF EXECUTIVES REVIEW We have made good progress during the year ended 25th February 2006 driving ourmulti-channel home shopping strategy forward whilst continuing to rationalisethe under performing businesses in the group. The strength of these results isderived from improvements in almost all areas of the business, thereby giving usa strong platform for future growth. Group sales from continuing activities were up by 8.2% to £484.8m. Operatingprofit from continuing activities was up by 20.3% to £58.1m excluding last yearsoperating exceptional costs of £22.5m. HOME SHOPPING Home shopping sales rose by 10.4% to £459.6m, with underlying sales excludingHouse of Bath up by 7.1% to £440.7m. This underlying sales growth accelerated asthe year progressed from a 4.9% increase in the first half to a 9.3% increase inthe second half. This reflected the building of momentum as we capitalised on anumber of successful tests in 2004 and rolled them out fully in 2005. The salesgrowth was an amalgam of improvements in our product ranges, catalogues,marketing and customer service. PRODUCT GROUPS Our strategy is to focus on niche customers and products. We have madesignificant progress during the year in selecting merchandise which suits themore modern outlook of the larger and/or older customer. The biggestbreakthrough has been in ladieswear where after three years of static sales wehave seen an increase of 9% to £245m. This was vital to the business as a wholeas ladieswear accounts for over half our total sales. The most notable increaseswithin ladieswear were in our younger fashion, casuals and occasion wear ranges.The success reflected the skill of the buying team in designing fashionableclothes to suit the fuller figure whilst purchasing at competitive prices inorder to deliver the value the customer demands in the continuing deflationaryretail clothing sector. The range of sizes we offer has continued to expand with more styles availableup to size 34 and even size 38 in some cases. Over half our sales are from size20 or above, confirming the strength of our proposition. This also applies toour corsetry ranges which specialise in large back and cup sizes, up to size54J. Over 90% of our customers are female but we also have a thriving menswearbusiness which saw sales increase by 8% to £34m. Our younger in-house menswearbrand Southbay saw strong sales growth to complement the older establishedPremier Man brand. Footwear, all of which is available in multiple widthfittings, has maintained its strong recent sales trends with a 16% increase to£53m. The introduction of younger styles has significantly increased thefootwear sales to our Fashion World and Simply Be customers. We have alsodemonstrated our understanding of customers special footwear requirements bydeveloping a range of boots which are available in different calf widths. Thisadds further stock options to our already extensive range but re-emphasises ourexpertise in fittings. Home and leisure sales represent 28% of home shopping turnover and saw an 11%increase to £128m. There was a full year contribution from House of Bath, andgood performances from the extended Christmas ranges, bedding and householdtextiles although other categories declined in a generally weak market. The nature of our business requires a high number of product options because ofour extensive range of size and fittings. To ensure the customer, whatever theirsize, has the widest possible choice of merchandise we increased our productoptions by 8% over the previous year. We have sought to capitalise on thisextensive range by incentivising customers to purchase from a product range theyhad not previously bought from, and this has resulted in a meaningful increasein the number of multi-range shoppers. In addition to generating more orders from customers we have been successful infulfilling a higher percentage of those orders. Our stock service level hasimproved, despite sales being above our original expectations, benefiting from anumber of changes made in our supply chain. Similarly the extensive work done toimprove the fit of the garments was rewarded with a 1% reduction in the rate ofreturns. This reduction improved net sales growth, increased stock turnover andreduced the cost of refurbishing returned items. On average our unit sellingprices were 3% lower than the previous year due to a combination of the productmix and deflation. CUSTOMER GROUPS We have many different catalogue brands, each with a specific target niche,which for convenience we group into three age segments. The fastest growingsegment is for those customers aged 30 to 45 years old which has seen salesincrease by 15% to £117m. Simply Be, which offers fashion clothing, footwear andaccessories in sizes 14 to 34, continues to perform extremely well, and ourother key brand, Fashion World, has also contributed to the growth. The midlife category, for customers aged 45-65 years old, increased sales by 9%to £319m with particularly strong performances from Fifty Plus, Shapely Figures,Shoe Tailor and Oxendales in Ireland. This is our core segment producing 69% oftotal sales. It also includes House of Bath, an upmarket catalogue specialisingin hard to find products for the house and garden, which we acquired in November2004. Although it took a little longer than originally anticipated House ofBath's operations have now been successfully integrated into the group's callcentres, warehouse and reporting systems, which is resulting in both costefficiencies and cross-selling opportunities. The older and upmarket sector ofthe home shopping market has seen strong growth in recent years and, using Houseof Bath as a base, we will be looking to increase our penetration of thissegment in future years. The sales to customers aged over 65 grew by 8% to £24m with a doubling in thesize of the Special Collection catalogue being the main catalyst for thisgrowth. It is noticeable in all our customer groups that the product which isselling best has a younger feel to it than in previous years, supporting thecontention that all age groups are preferring a younger image than previousgenerations. CHANNELS TO MARKET We have had to progressively manage our channels to market to reflect the latesttrends in customer behaviour. The development of on-line shopping is afundamental change for the home shopping sector, bringing with it many costsavings and promotional opportunities, but also intensifying the competitivelandscape, as many more retailers are adopting a multi-channel strategy. During the year our on-line sales grew by 70% to £74m. The natural trend is forcustomers to switch from ordering by telephone to keying their orders directlyinto the internet as the technological barriers break down and broadbandconnectivity becomes more widely available. More of our recruitment budget isnow being spent on promoting our brands and key product features through theinternet search engines such as Google. We are typically high on the naturalwebpage listings but we also sponsor certain keywords which help drive trafficcost effectively to our sites. Additionally, once we have a customers emailaddress we send them regular promotions to generate incremental demand. Duringlast year we ran over 150 different email campaigns sending 33 million emails.The cost of these emails is small compared to the cost of direct marketing bypost and this allows us to target customers where it would not be profitable todo so by conventional means. We do not foresee the time when we will cease tosend customers catalogues as the look and feel of them is still extremelydifficult to replicate on a computer screen. However promotional offers andletters can be replicated by email offers, requiring minimal lead time, and thisis where the major cost opportunity lies. We now have some internet only brands which have required a low level ofinvestment to launch. VivaLaDiva markets an extensive range of boutique and highstreet footwear brands as well as our own ranges whilst the Craftingdirectwebsite carries a wide range of craft kits and ideas. These sites rely on thesuppliers to despatch the goods to our customers and there is more work to do tomake the supply chain effective and increase the gross margin to a profitablelevel. In addition we have launched a number of stock clearance websites whichare proving very popular and improve the yield on the disposal of fragmented endof range stocks. The proportion of sales placed online is now 16%, up from 4% only three yearsago. Going forward we can offer online customers a wider product range andpromote to them more frequently. In addition every online order bypasses thecall centre thereby reducing our overheads. The other continuing trend has been the switch of sales from the smallerleaflets sent with the monthly statement mailings to more substantial brochuressuch as NewNow, Summer and Winter Value, Classic Detail and Selections, wheresales rose by 34% over last year and which now account for 27% of all homeshopping sales. One of the core skills in the group is our ability to analysethe 5 million customers on our database and determine who is most appropriate tobe sent each catalogue or brochure based on the their previous purchasingbehaviour. The content and format of the mid-season mailings are continuallyrefreshed to stimulate the customers interest. Catalogues mailed up to five times a year remain the core offer for customers.Significant changes have been made to improve the presentation of the catalogueswhich has yielded an improvement in response rates. Overall sales fromcatalogues have increased by 9% over last year, and they now account for 56% oftotal sales. In recent years sales growth has been wholly driven by higher sales perestablished customer, as recruitment was becoming more expensive and our overalldatabase was slowly contracting. We have undertaken a rebalancing of therecruitment campaigns, reducing merchandise advertising in newspapers andmagazines but increasing the level of catalogue inserts in womens magazines andin weekend newspaper supplements, direct response TV advertising, direct mail,online activity and catalogue advertising. This rebalanced campaign has resultedin fewer customers being recruited but they are higher spenders and more likelyto purchase again in subsequent seasons. Telemarketing remains a fertile activity to deliver incremental sales. We targeta series of campaigns utilising the specific sales and service data we hold oneach customer which results in a high response rate to our calls. As theproportion of orders through the internet increases we are utilising theresulting spare capacity in the call centre to progressively enlarge thetelemarketing team. This has necessitated the purchase of a new automateddialler and we will be switching some personnel from answering inbound calls tomaking outbound calls. INFRASTRUCTURE We have initiated a number of major projects to cater for the next phase of ourbusiness growth. During the year we purchased a 21 acre site in Glossop for £9mincluding the cost of converting the existing buildings into usable warehousespace. This enabled the in-sourcing of House of Bath's fulfilment from a thirdparty operator, and also allowed us to exit from some rented warehousing. Afurther two warehouse buildings will be erected on the site for a cost of £8m bythe end of 2006. This will enable further reduction in our third party warehouserequirements and improve our efficiency. Anticipating that our online sales will continue their strong upward momentum weneed to improve the capacity and functionality of our websites. This involves amajor development project at a total cost of £5m, £2m of which was incurred inthe last financial year. FINANCIAL INCOME About half of our customers pay for their purchases on deferred terms creatingan interest-bearing debtor portfolio of £303m which comprises 1.5m customersowing an average of £200 each. The level of bad debts has remained the same aslast year with the adverse effect of more sales from the younger titles offsetby improved fraud detection. We implemented new behavioural scoring systems onschedule in December 2005 which will improve the decision making on the creditlimit to be provided to each customer. We will be carefully managing thetrade-off between higher sales and bad debts arising from these changes. We also work with third party financial services providers to offer creditorinsurance, loans, life and general insurances, warranty cover on our furnitureand electrical sales, and our own brand credit card, which is currently ontrial. However the increasing level of regulation over the selling of financialproducts does make them more difficult to market through remote channels. OPERATING MARGIN The operating margin we have achieved on our home shopping activities hasincreased from 13.5% to 13.7%. Gross margins are level with last year with thebenefit from the mix of product sales which have favoured the higher marginladieswear offset by higher VAT charges. The cost saving program that we focusedon last year has limited the increase in marketing costs whilst the expansion ofthe home delivery courier network has resulted in lower distribution costs perparcel. These savings have helped offset significant increases in some of ouroverheads such as payroll and pension costs, utilities and informationtechnology expenditure. OTHER BUSINESSES House of Stirling, our door to door selling business, has operated throughoutthe second half with a revised business model which has significantly reducedoperating losses before exceptional items for the year from £6.3m to £2.3m. Theworst performing debt was sold off to a third party collector and the salesforce reduced by 140. We also eliminated some low margin activities which hadtraditionally boosted sales in December. The result has been a 32.9% reductionin sales to £16.1m but there has also been a corresponding significant reductionin bad debts, which coupled with overhead savings has led to the reduced losses.We need to make more progress in the new financial year, through both modestsales growth, bad debt reduction and further cost savings. Zendor has enjoyed significant growth of 43% in its core fulfilment revenueswithin an overall sales increase of 22.4% to £9.1m. Zendor's major clients allbenefited from the growing proportion of retail sales being transacted on-line.This has not translated into a growth in operating profit for Zendor in thefinancial year because we have acquired more warehouse capacity which was notfully utilised, but it does provide the capability to secure more fulfilmentcontracts from retailers. OUTLOOK The results we have achieved in the last year have resulted from our strategy tofocus on a multi-channel approach to home shopping concentrating on thosecustomers where we have a competitive advantage due to their age and/or size andthen ensuring we deliver the products which meet their needs. The demographicsof the UK population will provide an increased number of target customers asthere will be 15% more females over the ages of both 45 and 65 in the nextdecade. Our challenge is to provide these customers with exciting catalogues andwebsites which contain fashionable, yet comfortable merchandise. There is a new postage charging regime which will be beneficial from September2006. We will look to exploit this change by selective increases in the numberof pages in our mailings where we believe we can generate incremental sales. Theproportion of sales through the online channel will continue to grow organicallywith the increased penetration and reducing cost of broadband but we also planto expand the range of products and services available, such that the widestchoice will be available on line. CURRENT TRADING The 7.1% increase in group sales and more importantly, the 8.8% growth in homeshopping sales in the first 10 weeks of the year provides much encouragement forthe prospects for the current year. The sales growth is arising from more activecustomers, both new and established, as well as an increase in the averagespending of each customer. At this stage the price architecture is delivering anaverage selling price and a gross margin which are level with last year. The comparatives will become tougher as the year progresses but the trading inthe early part of the current financial year, the growth in our active customerbase and the strong financial position give us confidence that we can makefurther progress this year. Alan White9 May 2006 CONSOLIDATED INCOME STATEMENT 52 weeks to 52 weeks to Note 25-Feb-06 26-Feb-05 £m £m Revenue - continuing operations 1 484.8 447.9 ========== ========= Operating profitGroup operations 1 60.0 27.6 Share of joint venture operating loss (1.9) (1.9) ---------- --------- Operating profit - continuing operations 58.1 25.7 Investment income 2.8 2.9Finance costs (10.8) (10.2)Fair value adjustments to financial instruments 6 1.7 - ---------- --------- Profit before taxation 51.8 18.4 Taxation (14.8) (3.4) ---------- ---------Profit for the year from continuing operations 37.0 15.0 Loss for the period from discontinued operations 2 (0.9) (3.1) ---------- ---------Profit attributable to equity holders of the parent 36.1 11.9 ========== ========= Earnings per share from continuing operations 4Basic 12.57p 5.1pDiluted 12.52p 5.09p Earnings per share from continuing anddiscontinued operations 4Basic 12.26p 4.05pDiluted 12.22p 4.04p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 52 weeks to 52 weeks to 25-Feb-06 26-Feb-05 £m £m Exchange differences on translation of foreign operations (0.2) 0.2Actuarial losses on defined benefit pension schemes (4.9) (3.5)Tax on items recognised directly in equity 1.5 1.1 --------- ------------Net expense recognised directly in equity (3.6) (2.2) Profit for the year 36.1 11.9 Recognised income for the year attributable --------- -----------to equity holders of the parent 32.5 9.7 ========= ============ CONSOLIDATED BALANCE SHEET 25-Feb-06 26-Feb-05 £m £mNon-current assetsIntangible assets 22.0 19.7Property plant & equipment 61.0 53.6Other investments - 0.1Deferred tax assets 10.4 8.9 ----------- ----------- 93.4 82.3 ----------- -----------Current assetsInventories 52.5 44.7Trade and other receivables 326.0 310.2Other financial assets 0.7 -Cash and cash equivalents 51.1 44.5 ----------- ----------- 430.3 399.4 ----------- ----------- Non-current assets classified as held for sale - 23.1 ----------- -----------Total Assets 523.7 504.8 ----------- ----------- Current liabilitiesBank overdrafts (0.2) (0.1)Obligations under finance leases - (0.6)Trade and other payables (79.1) (65.6)Other financial liabilities - (1.0)Current tax liability (14.9) (5.6) ----------- ----------- (94.2) (72.9) ----------- -----------Net current assets 336.1 326.5 ----------- ----------- Non-current liabilitiesBank loans (143.8) (170.0)Retirement benefit obligation (34.4) (28.3)Deferred tax liabilities (5.3) (2.9) ----------- ----------- (183.5) (201.2) ----------- -----------Liabilities directly associated withnon-current assets classified as held for sale - (0.6) ----------- -----------Total liabilities (277.7) (274.7) ----------- ----------- ----------- -----------Net assets 246.0 230.1 =========== =========== EquityShare capital 29.5 29.5Share premium account 9.2 9.2Own shares (0.8) (1.5)Foreign currency translation reserve - 0.2Retained earnings 208.1 192.7 ----------- -----------Total equity 246.0 230.1 =========== =========== CONSOLIDATED CASH FLOW STATEMENT 52 weeks to 52 weeks to 25-Feb-06 26-Feb-05 £m £m Net cash inflow from operating activities 71.3 52.8 Cash flows from investing activitiesPurchases of property, plant and equipment (11.7) (5.8)Proceeds on disposal of property, plant and equipment 0.2 4.9Purchases of intangible fixed assets (8.1) (5.1)Loan advanced to joint venture - (2.0)Disposal of subsidiary 5.3 - --------- ------------Net cash flows from investing activities (14.3) (8.0) --------- ------------ Cash flows from financing activitiesInterest paid (7.9) (10.0)Interest received 1.4 1.6Dividends paid (17.4) (17.1)Repayment of bank loans (26.2) -Repayment of obligations under finance leases (0.6) (0.6)Proceeds on issue of share capital - 0.1Proceeds on issue of shares held by ESOT 0.2 -Increase/(decrease) in bank overdrafts 0.1 (1.1) --------- ------------Net cash flows from financing activities (50.4) (27.1) --------- ------------ Net increase in cash and cash equivalents 6.6 17.7Opening cash and cash equivalents 44.5 26.8 --------- ------------Closing cash and cash equivalents 51.1 44.5 ========= ============ RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 52 weeks to 52 weeks to 25-Feb-06 25-Feb-05 £m £mCash flows from operating activitiesOperating profit 60.0 27.6Operating profit/(loss) from discontinued operations 0.1 (2.5)Depreciation 4.2 5.6Loss on disposal of property, plant and equipment 0.2 0.3Amortisation of intangible fixed assets 5.8 5.3Share option charge 0.6 0.7 --------- ---------- Operating cashflows before changes in working capital 70.9 37.0 (Increase)/decrease in inventories (7.8) 1.6(Increase)/decrease in trade and other receivables (2.2) 21.3Increase in trade and other payables 13.4 7.7Pension obligation adjustment (0.2) (0.3) --------- ----------Cash generated from operations 74.1 67.3 Taxation paid (2.8) (14.5) --------- ----------Net cash inflow from operating activities 71.3 52.8 --------- ---------- NOTES TO THE PRELIMINARY ANNOUNCEMENT 1. Analysis of revenue and operating profit 52 weeks to 52 weeks to 25-Feb-06 26-Feb-05 £m £mAnalysis of revenueContinuingHome shopping 459.6 416.5Door to door selling 16.1 24.0Fulfilment 9.1 7.4 ---------- ---------- 484.8 447.9 ---------- ---------- Analysis of operating profitContinuingHome shopping 62.4 56.1Door to door selling (2.3) (28.8)Fulfilment (0.1) 0.3 ---------- ---------- 60.0 27.6 ---------- ---------- Analysis of operating profit before operating exceptional items ContinuingHome shopping 62.4 56.1Door to door selling (2.3) (6.3)Fulfilment (0.1) 0.3 ---------- ---------- 60.0 50.1 ---------- ---------- The prior year operating exceptional items comprised a £22.5m impairment chargeon the value of assets in the door to door selling division. 2. Discontinued operations 52 weeks to 52 weeks to 25-Feb-06 26-Feb-05 £m £mRevenueTV rental 0.8 5.7Financial services 0.9 6.7 --------- --------- 1.7 12.4 --------- --------- Operating profitTV rental (0.1) (0.7)Financial services 0.2 (1.8) --------- --------- 0.1 (2.5) Loss on disposal of TV rental business (1.2) -Finance costs (0.2) (2.0)Taxation 0.4 1.4 --------- ---------Loss from discontinued operations (0.9) (3.1) --------- --------- 3. Reconciliation of equity 52 weeks to 52 weeks to 25-Feb-06 26-Feb-05 £m £m Total recognised income for the year 32.5 9.7Equity dividends declared (17.4) (17.1)Issue of ordinary share capital - 0.1Issue of own shares via ESOT 0.2 -Share option charge 0.6 0.7Opening balance sheet adjustment for adoption of IAS 39 - (0.7) --------- --------- Total movement during the period 15.9 (7.3) Equity at the beginning of the year 230.1 237.4 --------- ---------Equity at the end of the year 246.0 230.1 ========= ========= 4. Earnings per share The calculation of earnings per share from continuing operations is based on theprofit for the year from continuing operations of £37.0m (2005, £15.0m) and theweighted average number of shares in issue during the year of 294.4m (2005,294.0m). The calculation of earnings per share from continuing and discontinuedoperations is based on the profit attributable to equity holders of the parentof £36.1m (2005, £11.9m) and the weighted average number of shares in issueduring the year of 294.4m (2005, 294.0m). To assist comparison, an adjusted basic earnings per share from continuingoperations of 10.48 pence has also been calculated to exclude the impact of theoperating exceptional item of £22.5m (7.65 pence per share) and the associatedtax credit of £6.7m (2.27 pence per share) in the prior year and is based on aprofit for the financial year of £37.0m (2005, £30.8m). For diluted earnings per share, the weighted average number of shares used inthe calculation of 295.5m (2005, 294.7m) is after adjusting for the potentialdilution of outstanding share options. 5. Dividends The final recommended dividend is proposed to be paid on 26 July 2006 toshareholders on the register at the close of business on 30 June 2006. 6. Basis of preparation The group's financial statements for the 52 weeks ended 25 February 2006 will beprepared in accordance with International Financial Reporting Standards (IFRS)as adopted for use in the EU. Previously, the group's financial statements wereprepared in accordance with United Kingdom Generally Accepted AccountingPrinciples (UK GAAP). Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with IFRS, this announcement does not itself containsufficient information to comply with IFRS. The company expects to publish fullfinancial statements that comply with IFRS in June 2006. Details of the changes in accounting policies arising from the adoption of IFRStogether with restated financial information for the 26 weeks ended 27 August2005 and the 52 weeks ended 26 February 2005 have previously been published andis available on the group's website www.nbrown.co.uk. In accordance with IFRS1 ' First Time Adoption of International FinancialReporting Standards', the group has elected not to restate comparativeinformation for the impact of IAS 32 and IAS 39 'Financial Instruments'. Theopening balance sheet at 26 February 2005 has been adjusted in accordance withthe requirements of these standards from that date. During the 52 weeks ended 25February 2006 income of £1.7m has been recognised in respect of fair valuemovements of the group's forward foreign currency contracts. 7. Non-statutory financial statements The financial information set out above does not constitute the group'sstatutory financial statements for the 52 weeks ended 25 February 2006 or the 52weeks ended 26 February 2005, but is derived from those financial statements.The financial statements for the 52 weeks ended 25 February 2005 were preparedunder UK GAAP and have been delivered to the Registrar of Companies. Theauditors have reported on the financial statements for the 52 weeks ended 26February 2005; their report was unqualified and did not contain any statementunder Section 237(2) or (3) of the Companies Act 1985. The auditors have notreported on financial statements for the 52 weeks ended 25 February 2006, norhave any such financial statements been delivered to the Registrar of Companies. This report was approved by the Board of Directors on 9 May 2006. This information is provided by RNS The company news service from the London Stock Exchange