10 October 2024

HALF YEAR RESULTS FOR THE 26 WEEKS ENDED 31 AUGUST 2024

Profit growth and strategic progress in H1

FY25 adjusted EBITDA outlook remains unchanged

Steve Johnson, Interim Executive Chair & Chief Executive, said:

"We have built on our return to profit in FY24 by delivering year-on-year progression in the first half of FY25. Our focus on maximising profitable sales and managing the cost base in a soft trading environment, has ensured we remain on track to achieve management's full year adjusted EBITDA expectations and we are encouraged by trading at the start of Q3.

"We have continued to deliver against our self-funded transformational priorities, including the successful launch of the new JD Williams website and our Product Information Management system to the remaining strategic brands, whilst our financial services transformation continues to progress well with the new platform now in testing. These developments will enhance the customer experience and will be supported by strengthened marketing activity to help position the business for sustainable profitable growth."

Highlights

Further strategic progress

·    Successful launch of new mobile-first website for JD Williams, completing the transitioning of our three strategic brands to the new platform, a key transformational priority

·    Product Information Management ('PIM') system, fundamental to our marketing strategy, now launched on all three strategic brands

·    Financial Services ('FS') transformation continues to progress well, with the testing of the new platform's minimum viable product having commenced

Financial

Gross margin and cost discipline driving H1 EBITDA and PBT progression

·    Improved Group revenue trajectory, down 6.7% against prior year, with product revenue of (-7.9%) and FS revenue of (-4.6%) both also showing improved trend in H1

·    Continued focus on profitable sales in a market which remained soft³ and was characterised by  unseasonal weather, drove adjusted group gross profit margin up 1.6ppts to 49.2%, with progression seen across both product and FS margin

·    Adjusted operating costs reduced by £6.2m following planned management initiatives and despite c. £1m additional marketing spend, as rebalancing of spend into marketing to support future growth commenced

·    Adjusted EBITDA up 7.4% to £18.8m and adjusted EBITDA margin up 0.9ppts to 6.8%, with gross profit margin progress more than offsetting the impact of operational deleverage from reduced sales

·    Adjusted profit before tax of £3.6m, up from £0.1m in H1 24, reflecting progress in adjusted EBITDA and lower net interest costs

·    Statutory profit before tax of £0.2m, up from a loss of £2.8m² in H1 24

Cash generative after self-funded investment, with no unsecured borrowings

·    Net cash generation of c. £1m after investment of £14.4m in progressing the strategic transformation

·    Strong balance sheet with significant cash and cash equivalents, and total accessible liquidity of £150.2m. RCF and overdraft remain undrawn with limits of £75m and £12.5m respectively

·    £66.0m cash and cash equivalents; securitisation borrowings of £277.6m are well covered by £480.2m of gross customer receivables

·    Adjusted net debt of £211.6m reflects the securitisation borrowings and net cash

Current trading encouraging and FY25 outlook unchanged

·    FY25 adjusted EBITDA expected to be in line with management expectations

·    Trading during the first five weeks of Q3 has been encouraging, with product revenue trajectory improving to -2% against prior year

·    Expected continued improvement in product revenue trajectory in H2 supported by delivery of our strategic initiatives and increased investment in marketing

·    Continued management focus on margin rate and operating cost efficiencies

·    Strategic investment will continue to be self-funded through carefully managed cash flows

·    Board has continued confidence that the progress made against the Group's strategic transformation plans and its differentiated brands leave it well positioned to deliver future sustainable growth

Webcast for analysts and investors:

A webcast presentation of these results will take place at 9.00am on 10 October 2024 followed by a Q&A conference call for analysts and investors.  Please contact Hawthorn on +44 (0)7719 078 196 or email [email protected] for details.

For further information:

About N Brown Group:

N Brown is a top 10 UK clothing and footwear digital retail platform, with a home proposition, headquartered in Manchester and employs around 1,700 people nationwide.  Through our strategic retail brands including JD Williams, Simply Be and Jacamo, we exist to make our customers look and feel amazing, and take great pride in passionately championing inclusion and serving the under-served. Our customer-first shopping experience, supported by our innovative financial services proposition, is designed to deliver choice, affordability, and value to our customers, and allows us to be truly inclusive and accessible. 

¹ A full reconciliation of statutory to adjusted measures is included in the Financial Review.

² Loss before tax for the 26 weeks to 2 September 2023 restated from £(4.1)m to £(2.8)m - see Note 18.

³ For the 26 weeks ended 31 August 2024, the online pureplay market according to IMRG declined by 6%.

PERFORMANCE REVIEW

We have continued to make good progress on delivering against our strategic objectives in H1 25 following a return to profit in FY24. The transformation of the business gained pace last year and we have now delivered further enhancements for our customers with the launch of the new JD Williams website and the roll out of our Product Information Management ('PIM') System to the remaining strategic brands. Our new Financial Services platform, minimum viable product ('MVP'), entered testing.

Our assumption entering the year was that macro-economic conditions would remain challenging but that conditions would improve. We are gradually seeing conditions improve through key macro-economic indicators but we have not yet seen a material change in consumer spending habits in our markets. However, despite the market conditions and unseasonal weather in the period, the H1 revenue performance reflects an improvement over FY24's trajectory.

A focus on profitable trade and planned management cost actions have driven progress in profitability in H1, with our full year outlook remaining unchanged. During H1, we commenced the strategic rebalancing of the cost base with greater investment in marketing, and further brand-building activity having commenced in Q3 as we target a continued improvement in product revenue trajectory in H2. We are encouraged by performance at the start of Q3. After increasing the level of capital expenditure deployed during H1, reflective of a business now making change faster, the Group has remained cash generative and maintained a strong balance sheet.

Strategic update

We have continued to focus investment on the following five transformational priorities:

-      New websites for all strategic brands - roll out our new mobile-first website experience and continuously iterate site launches with new features.

-      A technology platform to support our Financial Services proposition - the platform will enhance the ways in which customers can choose to pay for the products and will be supported by the launch of a new FS brand.

-      Data culture - further empower our colleagues to engage with data to identify and leverage analytical opportunities.

-      A Product Information Management ('PIM') system - providing a single place to collect, manage and enrich product data, to provide a better experience for customers and a more efficient process for colleagues.

-      A fully embedded agile operating model - evolving our organisational design so that all relevant colleagues will have moved to an agile way of working.

The significant further progress which has been made against these transformational priorities is included within the following update against our five strategic pillars. Within this, we have completed the roll out of new websites and PIM to all strategic brands. Our five pillars are underpinned by two key enablers: our people and talent, and a sustainable and efficient operating model.

1.    Build a Differentiated Brand Portfolio

Strategic objective: Build two multi brand and category platforms, one for women (JD Williams) and one for men (Jacamo), as well as one inclusive fashion brand for young women (Simply Be).

Our differentiated brand portfolio has progressed through evolving our creative and marketing platforms, as we continue to concentrate on our target brand positioning.

JD Williams: announced that it was once again to be the headline sponsor for ITV's popular relationship show, My Mum, Your Dad. Gok Wan was introduced as the new brand ambassador, a collaboration which is further connecting with, and inspiring, our customers. This partnership aligns perfectly with JD Williams' commitment to celebrating midlife and will continue to engage with its core audience through this platform.

Simply Be: as previously outlined in our focus areas for the year, H1 has been spent refining the Simply Be proposition. At the start of H2, we saw the launch of Simply Be's latest campaign 'Find That Feeling'. The campaign showcases a diverse cast of women, highlighting how fashion can evoke powerful feelings. It is showing up on a variety of places where Simply Be target customers spend their time, including mobile streaming services and terrestrial TV.

Jacamo: the brand's partnership with LADbible has continued to captivate the target consumer and received a nomination for the upcoming Retail Gazette awards for the 'Marketing Game-Changer'. The campaign continues to focus on connecting with our customers through their unique interests and shopping habits.

In late September Jacamo launched the 'Men's Style. Sorted' campaign to showcase this year's Autumn / Winter collection. The campaign, aimed at redefining men's fashion for the season is being displayed across multiple platforms including billboards, YouTube, Sky Sports and various social media platforms.

The heritage portfolio continued to focus on stabilising its customer file. Progress has been made in H1 in both the moderation in decline in heritage revenue, as described in the Financial Review, and also in the moderation in total active customer decline, described within the non-financial KPIs.

2.    Elevate the fashion and fintech proposition

Strategic objective: Elevate the fashion assortment, integrate the credit offer into the journey and create a credit brand.

Within women's brands, we continue to evolve our portfolio for JD Williams, expanding our offerings with brands which resonate most with our customers and phasing out those that do not. Notably, Adidas and Under Armour have shown particularly strong progress in H1. Looking ahead to H2, we are excited to launch Sweaty Betty on JD Williams at the end of October, further enhancing our successful sportswear branded offerings.

We continued to build the fashion credentials of Simply Be's proposition. Own brand mix has grown, with a particularly high mix within women's fashion, at 74%. The own brand performance and credibility is reflected through several third parties, both in the UK and globally, expressing interest in stocking and selling our brands and we are currently exploring these commercial opportunities.

We have seen a strong performance from men's brands, particularly on Jacamo. We have also strengthened our partnerships with premium tech brands such as Apple and Samsung, enabling us to offer their products at launch, aligned with market standards.

Work on the new FS platform has progressed with good momentum during H1. The first round of testing with a small group of colleagues has commenced and we have an internal rollout roadmap in place for the wider population. We remain on track to commence the external MVP rollout in FY26, providing a modern, market-standard credit proposition.

3.    Transform the customer experience

Strategic objective: Transform the customer experience, pre and post purchase, and drive conversion at checkout through a personalised experience.

Progress in transforming the customer experience has built on the momentum gained in FY24. The launch of our new mobile-first website for JD Williams marked a significant milestone in our transformation, being the last of our strategic brands to launch. JD Williams was the most complex site to transition to the new platform, given it has the widest product categories. However, with the experience and learnings gained from the Simply Be and Jacamo releases, we were able to deliver the fastest roll out to date - in 14 days compared to over 100 days for Simply Be. The efficient delivery of the new site is testament to the level of collaboration which our agile ways of working have unlocked. Google Lighthouse scores, an open-source measure for site performance and user experience, have more than tripled compared to the previous website. 

Following on from FY24's successful launch of our PIM system on our first strategic brand, Simply Be, progress has continued with PIM having been sequentially launched on Jacamo and JD Williams during H1. This marks the completion of delivery across all of our strategic brands. The Retail Systems Awards recognised this key milestone in one of our transformational priorities, by awarding PIM the 'Technology Project of the Year' award in June this year.

We have enhanced the ability to measure and report investments into our mobile apps. This has significantly improved our understanding of friction points. As an example, by testing the app delivery subscription during checkout, we successfully removed friction from the customer experience, by providing customers with more choice with delivery options. Additionally, extending the duration over which app customers remain logged in, from 30 days to 365 days, has not only reduced friction at checkout but also improved our ability to target customers more effectively throughout their journeys.

4.    Win with our Target Customer

Strategic objective: Grow our customer base through our existing core customer, high value lapsed customers and a new, younger generation.

We continued to increase the focus on the specificity of our target customer. We have identified a series of virtues, unique to each brand, which align with our most valuable customers.  We have ensured our marketing channels align with these virtues, which will allow each brand to be more targeted and personalised in communication, which we believe is ever important in a challenging consumer market.

One of these virtues, shared by both Simply Be and JD Williams, is being a member of one of the loyalty schemes. The loyalty programme across the Group has shown significant growth in H1. The number of engaged accounts increased by 45% during this period, which has increased our reach and highlighted our ability to attract high-value customers.

The strategic rebalancing of spend into marketing and production has commenced in H1 with spend increasing by c. £1m (c. 3)% over prior year. As described within the non-financial KPIs, there has been an improvement in the retention of existing customers, performing better than either half within FY24. In addition to improving retention, management is focused on increasing new customers recruited and this is supported by marketing activities which have commenced in H2.

5.    Establish Data as an Asset to Win

Strategic objective: Establish data as an asset to drive top line and margin improvements.

Data continued to underpin our strategy and provide the foundations for decision making. At the beginning of July, we successfully transitioned from Google Analytics 3 to Google Analytics 4 (GA4), a move which significantly enhances our data analytics capabilities. This transition was a critical piece of work to continue to establish data as an asset to win via our data culture strategy, resulting in a notable increase in colleagues accessing our data estate and a reduction in interactions with our legacy data estate.

The completion of GA4 was also pivotal for our shift from third-party cookies to first-party data collection, ensuring compliance before the upcoming UK privacy law changes. Additionally, it serves as a gateway to the future transition to a cloud-native Analytics Platform, which consolidates data, accelerates analytics, facilitates self-service use cases, and mitigates compliance risks.

Key Enablers

Good progress continues to be made with the shift to our new agile ways of working model in our head office, with the anticipated efficiency and operational improvements coming through. We expect 80% of the retail business function to be fully embedded in these ways of working by the end of Q3.

In recent years, the business has transformed to become digital and data-focused, embraced hybrid working, and adopted an equality, diversity, inclusion and belonging strategy, all while aiming for agile ways of working across the organisation. To support our evolving culture and growth ambitions, we collaborated with external consultants over the summer to define the necessary cultural shifts, involving over 70 colleagues and leadership to identify strengths and areas for improvement.

Key Performance Indications ('KPIs')¹

As a digital retailer committed to accelerating our strategy, we continue to report various digital customer metrics, which provide operational measures of how our strategy is progressing. The following disclosure reflects our performance in the half.

^{1 KPIs are defined on page 19.}

^{2 Sessions and conversion for H1 24 restated for consistency with definitions within H1 25 reporting including to reflect the transition to Google Analytics 4 (GA4).}

^{3 Total orders includes online and offline orders.}

Although total orders decreased by 8.1% in the period, this represents a significant improvement against the prior year trajectory driven by a better trend in website sessions, benefitting from additional marketing spend. The lower conversion than prior year includes the impact from a continued soft market and higher sessions mix within paid traffic, which has a naturally lower conversion rate. The positive trend seen in Average Item Value ('AIV') over recent periods has continued, albeit at a more moderate level.

The lower active customers includes an improved performance in H1 25. Of the c. 250k (10.5%) reduction in active customers against a year ago, c. 60k of this occurred in H1 25, with the balance reflecting H2 24's movement. This is driven by better retention of existing customers than seen in either half of FY24. Marketing activities which have commenced in H2 support management's intention to increase new customers recruited, in order to drive the total active customer figure and product revenue.

The Financial Services arrears rate is lower than prior year, reflecting a lower level of insolvent account balances held. Excluding insolvent accounts, the arrears rate is 8.9% (H1 24: 8.4%). The business continues to support and retain customers through times of financial hardship, with the increase in rate including the impact from a higher mix of payment arrangements held at the end of the half, due to a later timing of debt sales relative to prior year.

Our NPS remains strong. The slight reduction against prior year includes a greater mix of new customers, which inherently score lower than the mature customer base. Additionally, although maintaining the level of customer promises met, the average time taken to meet a standard order has slightly increased. Improvements have been seen in areas including sentiment towards the product proposition, with enhanced product descriptions enabled by our PIM system being a contributing factor.

Environment, Social and Governance

We have continued to embed our Environmental, Social and Governance strategy into the business. Our sustainability plan, SUSTAIN, fully aligns our ethical policies with our commercial activities and our commitment to Our People and Our Planet. One of the key commitments for the business is responsibly sourcing own-brand product. We have reached 53% of own brand designed clothing and home textile ranges with sustainable properties (from 0% in 2019) as we target growing this to 100% by FY30 in line with our Textiles 2030 commitment.

FY25 Outlook

FY25 adjusted EBITDA is expected to be in line with management expectations.

Trading during the first five weeks of Q3 has been encouraging, with the product revenue trajectory  improving to -2% against prior year. We expect continued improvement in the product revenue trajectory in H2 supported by the successful execution of our strategic priorities, and the scaling of investment into marketing and production spend, funded by cost efficiencies.

The Board has continued confidence that the investment in the Group's strategic transformation plan, its differentiated brands and a new credit proposition in testing, leave it well positioned to deliver future sustainable growth.

FINANCIAL REVIEW

Financial KPIs

Our non-financial KPIs are contained in the Performance Review. We also use a number of financial KPIs to manage the business. These are shown below and will continue to be reported going forwards.

1 A full glossary of Alternative Performance Measures and their definitions is included on page 20.

2 Prior year loss before tax restated from £(4.1)m to £(2.8)m - see Note 18.

Reconciliation of statutory financial results to adjusted results

The reporting includes Alternative Performance Measures ('APMs'), which are not defined or specified under the requirements of IFRS. These APMs are consistent with how the Group measures performance internally and are also used in assessing performance under the Group's incentive plans. Therefore, the Directors believe that these APMs provide stakeholders with additional, useful information on the Group's performance.

The adjusted figures are presented before the impact of adjusting items. These are items of income and expenditure which are one-off in nature and material to the current financial year, or represent true ups to items presented as adjusting in prior periods. These are detailed in note 5.

A full glossary of APMs and their definitions is included on page 20.

Reconciliation of Income Statement Measures

^{1 The adjusting items in the 26 week period to 2 September 2023 have been restated. Refer to note 18 for further details of the restatement.}

Reconciliation of Cash and cash equivalents and bank overdrafts to Unsecured Net Cash and Adjusted Net Debt

Reconciliation of Net movement in Cash and cash equivalents and bank overdraft to Net Cash generation

Overview

Following the return to profit in FY24, we have built on this performance with progress in adjusted EBITDA, adjusted PBT and statutory PBT in H1 25. Our Adjusted EBITDA of £18.8m and Adjusted PBT of £3.6m leave us on track for management's full year expectations.

Although there has been some improvement in macro-economic indicators, the online pureplay market remained soft during the half and we have kept a strong focus on profitable trade. Product revenue reduced 7.9% with FS revenue down 4.6%, with the drag continuing to reflect the opening debtor book and the product revenue. Both product and FS revenue performances reflect an improvement in trajectory. Alongside this, the focus on profitable trade helped Group gross margin progress by 1.6ppts versus the prior year.

Planned management actions on the cost base drove adjusted operating costs £6.2m lower than H1 24 after commencing the rebalancing of spend into marketing. As a result of operational deleverage, the adjusted operating costs to revenue ratio increased by 0.8ppts over prior year.

Interest costs were £2.3m lower than prior year due to lower utilisation of the securitisation facility and greater interest income from cash held on deposit. The interest rate payable has benefitted from the interest rate hedge in place and we also remain well hedged on foreign exchange.

Net cash of £0.8m was generated after investing a further £14.4m in the transformation of the business. Following the proactive intake reductions and clearance of older stock in the prior year, stock has remained a key focus area and a lower and cleaner position has been maintained.

Cash and cash equivalents amounted to £66.0m with Total Accessible Liquidity of £150.2m, which includes the fully undrawn RCF of £75.0m and overdraft of £12.5m, net of a low level of restricted cash. Our balance sheet remains strong after continuing to self-fund strategic progress made in the half, which included the launch of the new mobile-first website for JD Williams and rollout of our PIM system to remaining strategic brands.

Revenue

^{1 JD Williams, Simply Be, Jacamo.}

^{2 Ambrose Wilson, Home Essentials, Fashion World, Marisota, Oxendales and Premier Man.}

Group revenue declined 6.7% to £277.2m, which represent an improvement of around 3ppts against the FY24 trajectory. The Group revenue movement reflects a 7.9% decline in product revenue and a 4.6% decline in FS revenue.

Total product revenue also reflects an improvement in trajectory over FY24's performance, with a significant moderation in the level of decline in heritage brands, which are managed for contribution as opposed to growth.

Market conditions have remained challenging, with the online pureplay market declining by 6%¹, whilst unseasonal weather caused a weaker performance in seasonal fashion categories. A strong focus on driving profitable sales has been maintained and we have evolved our approach to discounts and promotions in the period, leading to the removal of some less profitable sales.

New websites and the PIM system are now in place for all strategic brands, which provides good foundations for H2. Alongside this, marketing activity is being upweighted including brand building activity which commenced in September with campaigns on Simply Be and Jacamo, and JD Williams' second year as headline sponsor of My Mum, Your Dad.

The reduced level of product revenue during the first half and prior year resulted in a smaller customer receivables loan book, down 9.2% at the end of the half.  FS revenue experienced a more moderate decrease, of 4.6%, driven by a higher yield resulting from APR increases applied since the comparative period. FS revenue performance is consistent with the guidance that FS revenue would decline at a slightly improved rate.

Our responsible and flexible credit offering remains an integral part of our customer proposition, particularly in the current macro-economic environment.

^{1 IMRG view of online pureplay market.}

Adjusted gross profit¹

¹ A reconciliation of statutory measures to adjusted measures is included on page 10. A full glossary of Alternative Performance Measures and their definitions is included on page 20.

Adjusted gross profit margin further progressed over prior year to 49.2%, reflecting continued growth in both retail margin and FS margin.

Product gross margin improved 0.3ppts to 47.4% driven by good retail disciplines including benefitting from a cleaner stock package. The improvement was despite headwinds from foreign exchange, and lower VAT bad debt relief due to lower write offs¹.

The FX contracts used to hedge US $ spend are described in Note 6 to the financial statements and we remain well hedged through the remainder of FY25 with nearly 90% of the US $ cash spend hedged.

FS gross margin rate improved by 3.8ppts to 52.2% resulting from the combined benefit of the higher yield and an improvement in bad debt, particularly seen in lower write offs following refinements to customer credit scorecards.

¹ Included in product gross margin as they are only recoverable as we are a combined retail and financial services business, and they would not be recoverable as a standalone credit business.

Adjusted operating costs¹

¹ A reconciliation of statutory measures to adjusted measures is included on page 10. A full glossary of Alternative Performance Measures and their definitions is included on page 20.

Total operating costs excluding adjusting items reduced by £6.2m to £117.7m driven by management initiatives, particularly within admin and payroll costs, and some volume driven reductions. Within this, the strategic rebalancing of spend into marketing and production costs has commenced.

Adjusted operating costs as a percentage of Group revenue increased 0.8ppts to 42.5% reflecting the negative operational gearing on fixed costs partially mitigated by the management cost initiatives.

Warehouse and fulfilment costs were £0.8m (2.9%) lower than the prior year, benefiting from the flexible cost base, with c. £2m of savings from lower core volumes. This was partially offset by a headwind of c. £1m inflationary price impacts on carrier and resource costs.

Marketing and production costs were £0.9m (2.8%) higher than prior year reflecting the strategic decision to start rebalancing the cost base into marketing spend. This is with the objective of growing customer numbers through strengthening the existing customer base and recruiting more credit customers.

Admin and payroll costs reduced by £6.3m or 9.9%, driven by planned management initiatives to optimise the cost base.

Statutory operating costs, including adjusting items reduced by 4.4%.

Depreciation and amortisation

Depreciation and amortisation of £10.0m was in line with the prior year (H1 24: £9.9m).

Finance costs

Net finance costs of £5.2m, were lower than the £7.5m in the prior year reflecting lower utilisation of the securitisation facility due to debtor balances, and greater levels of cash earning interest from overnight deposit. The Group has limited its exposure to interest rate movements through interest rate hedging which it continues to have in place.

Adjusting items

Adjusting items of £2.8m reflect a reduction against the £3.2m incurred in H1 24 (restated)¹.

During the current year, the Group continues the multi-year transformation of the business and the  ongoing review of the cost base. A restructuring programme of the Group's operational and head office headcount to reflect the lower sales orders, was initiated at the end of FY24 and continues through FY25,  with total redundancy costs of £1.0m incurred in the period. Also included are costs of transferring certain workstreams to an outsourced company and costs associated with an onerous lease.

Further details can be found in note 5.

During the prior year, the Board approved the rationalisation of the Group's warehousing facilities following a review of the overall warehouse portfolio capacity, utilisation and associated operational cost base, resulting in a £3.3m charge in H1 24 across provisioning and onerous lease impairment.

^{1 Adjusting items in the 26 week period to 2 September 2023 have been restated. Refer to note 18 for further details of the restatement..}

Profit and earnings per share

Adjusted EBITDA increased by £1.3m to £18.8m reflecting an improvement in Adjusted EBITDA margin of 0.9ppts, on a reduced level of Group revenue against prior year.

Statutory operating profit increased by £1.6m against the prior year (restated), to £6.0m, reflecting the increase in Adjusted EBITDA and £0.4m lower adjusting items.

Statutory profit before tax of £0.2m, up £3.0m year on year (H1 24: loss before tax (restated) of £2.8m), driven by the improvement in statutory operating profit, lower interest costs, partially offset by a fair value loss on financial instruments as a result of the movement in the US dollar driving foreign exchange mark to market losses.

The taxation charge for the year is based on the underlying estimated effective tax rate for the full year of 24.8%. Further tax analysis is contained in note 7.

Statutory earnings per share increased to a profit of 0.04p (H1 24 (restated): loss of (0.33)p). Adjusted earnings per share increased to 0.61p (H1 24: 0.15p).

Financial services customer receivables and impairment charge on customer receivables

Gross customer receivables at the end of H1 25 reduced by 9.2% against H1 24 to £480.2m, driven by the reduced level of product sales in the prior year and H1 of this year.

Arrears rates are lower than prior year, reflecting a reduction in the level of insolvent account balances held. Excluding insolvent accounts, the arrears rate was 8.9% (H1 24: 8.4%) with the increase in rate driven by a higher mix of payment arrangements held at the end of the half, through later timing of the debt sale relative to prior year.

Although there has been some more stability in macro-economic conditions, there continues to be pressure on customers from higher prices and higher interest rates, which is being carefully monitored as we continue to support our customers.

The expected credit loss ('ECL') provision ratio improved to 13.5% from 14.3% in prior year. This reflects an improvement in debtor book quality, as well as a lower level of insolvent accounts held. These benefits which reduce the required provision have been partially offset by the later timing of the debt sale against prior year. Provisions on the normal book are lower at 10.8% compared to 11.6% in H1 24, reflecting lower insolvency balances held.

The profit and loss net impairment charge on customer receivables for H1 25 was £49.6m, £6.5m lower than last year, driven by debtor book quality, as seen in lower write-offs and in provision movements. 

Funding and total accessible liquidity ('TAL')

The Group has the following arrangements in place:

·    A £400m securitisation facility (H1 24: £400m) committed until December 2026, drawings on which are linked to prevailing levels of eligible receivables but with flexibility around the level which the Group chooses to draw. The Group has previously chosen to proactively reduce the lender commitment from £400m to £340m to reflect the accessible funding level and reduce ongoing fees;

·    A RCF of £75m, and an overdraft facility of £12.5m, both fully undrawn at 31 August 2024 and committed to December 2026;

At 31 August 2024 Group TAL was £150.2m, comprising cash of £66.0m including restricted cash of £3.3m, the fully undrawn RCF of £75.0m and overdraft of £12.5m.

Net Cash Generation

The business generated cash of £0.8m in the half, closing with £66.0m unsecured net cash. The inflow was driven by positive EBITDA generation and net cash inflow from the customer loan book, partially offset by self-funded capital expenditure.

Net inventory levels at the end of the half were down 5.8%, against prior year at £77.8m (H1 24: £82.6m), remaining well controlled against the year end position (FY24: £73.9m) having focused on selling through older items last year.

Capital expenditure of £14.4m reflects a step-up on prior year (H1 24: £8.9m) and has continued to be self-funded as we invest in delivering the ongoing digital transformation of the business. We expect to undertake a similar level of capital investment in H2 as part of the continued transformation.

The lower interest paid is due to the lower utilisation of the securitisation facility, reflective of debtor balances, and greater levels of cash earning interest from overnight deposit

The net inflow from the customer loan book reflects the reduction in the customer loan book, partially offset by associated lower securitisation borrowings.

Adjusted net debt

Unsecured net cash / (debt), which is defined as the amount drawn on the Group's unsecured borrowing facilities less cash balances, closed the half in a positive position with unsecured net cash of £66.0m (H1 24: unsecured net cash of £49.1m).

Adjusted net debt reduced by £24.7m in the half against FY24 year end, to £211.6m (FY24: £236.3m; H1 24: £258.4m). This is the net amount of £66.0m of unsecured net cash and £277.6m of debt drawn against the securitisation funding facility which is backed by eligible customer receivables. The £415.3m net customer loan book significantly exceeds this adjusted net debt figure. The reduction in net debt in the half reflects the net cash generation described above and lower securitised borrowings.

Dividend and capital allocation

As previously announced in the Group's FY23 results and in light of the macro-economic environment, our clear set of investment plans and the number of competing demands on our cash resources, the Board decided not to re-introduce a dividend in FY23 or FY24. The Board continues to keep its dividend policy under review and will evaluate the re-introduction of a dividend when transformational priorities and business performance allows.

Pension scheme

The Group's defined benefit pension scheme had a surplus of £19.4m at the end of the half, which is broadly consistent with the prior year (H1 24: £20.0m).

KPI DEFINITIONS

¹Accepted demand is defined as the value of orders from customers (including VAT) that we accept, i.e. after our credit assessment processes.

APM GLOSSARY

The Preliminary Results statement includes alternative performance measures ('APMs'), which are not defined or specified under the requirements of IFRS. These APMs are consistent with how the Group measures performance internally and are also used in assessing performance under the Group's incentive plans. Therefore, the Directors believe that these APMs provide stakeholders with additional, useful information on the Group's performance.

The reconciliation of the statutory measures to adjusted measures is included in the Financial Review on page 9.

Unaudited condensed consolidated income statement

for the 26 weeks ended 31 August 2024

Unaudited condensed consolidated statement of comprehensive income

for the 26 weeks ended 31 August 2024

    ^{1. The  loss for the 26 week period to 2 September 2023 has been restated. Refer to note 18 for further details of the restatement.}

Condensed consolidated balance sheet

As at 31 August 2024

^{1.         The balance for the 26 week period to 2 September 2023 has been restated. Refer to note 18 for further details of the restatement.}