N Brown Group plc

Good morning, everybody, and welcome to NBROW's interim results for the six months ending August 2021. I'm joined by Rachel Lizard, our chief finance officer. Let's turn to the agenda for today. First, I'll give you a quick update on our highlights so far this year. Then I will hand over to Rachel, who will take you through the group's financial results. I will then return to talk in a little more detail about our KPIs and our strategic progress. After that, we'll open up the Q&A. I'm pleased with the progress that we have made in the first half of the financial year. While the consumer environment has been volatile, there has been continued momentum throughout our business. Customers have responded well to our improved product ranges, and we saw that reflected in the 15% strategic product revenue growth we delivered in the first six months of the year. We've seen signs of the success of our strategy in total order growth, which rose 6% year over year. And the number of active customers grew in the second quarter compared to the first quarter. We delivered an increase in EBITDA in the period, while profitability was boosted in the first half by the strength of the financial services margin It allowed us to more than offset the increased investment that we made in areas like marketing, as well as a normalization in other costs compared to last year at the onset of the pandemic. Rachel will touch more on the outlook, but I'm pleased to say that with our focus on profitability, we are reiterating our guidance for EBITDA for the full year. We've also been making good progress with our sustainability strategy something which has been deeply embedded in the DNA of N. Brown for many years. More on this later. Finally, and I think this is a point that sometimes gets missed, we have an incredibly strong balance sheet. Adjusted net debt of $268 million is nearly twice covered by our net customer loan book. I'll now hand over to Rachel to talk you through the financial results for the six months.

Thank you, Steve. Let me start with giving you a financial summary of the group's performance in the year. Overall group revenue was broadly flat, which is a result of three main drivers. From strategic brands, product revenue growth, it's now above pre-pandemic levels. The managed decline of the non-strategic brands and the lower interest income on the smaller financial services loan book. Now, the highlight within that is the 14.9% growth in product revenue from strategic brands, which I'll cover later in a little bit more depth. Growth profit margin has improved by seven percentage points, supported by a high financial services margin in the period. This more than offset the OPEX cost-to-sales ratio normalising post-pandemic, with the 36% achieved in the period still well below the pre-pandemic level of 41%. Combining that gross margin step-up with the OPEX cost normalising has led to an adjusted EBITDA of 53 million, 5 million favourable to the prior year. In the second half of last year, we reassessed the IT and tangible assets useful lives in light of both the pace of change in the tech environment and our revised strategy and subsequently accelerated the non-cash amortization. The result is that the depreciation for the first half is 5 million higher than last year. So combining the 5 million additional EBITDA with a 5 million accelerated amortization and finally a 1.6 million reduction in interest costs, that gives us the adjusted profit for tax position of 24.2 million, up 1.6 million, or 7.1%. Net debt is 143 million favourable to the half-year position last year, and 33 million favourable to year-end. We had repaid all unsecured borrowings by the end of last fiscal year, and in this half-year, we have flexed down on the securitisation facility by 57 million, below the maximum draw level, to optimise our strong cash position and drive those lower interest costs. Finally, following the equity raise last year, there are circa 61% more shares in issue, which netted the improvement in profitability, generated the reduction in adjusted EPS to 4.41 pence. Moving on and looking at the revenue performance in more detail, there are the three distinct drivers. Strong strategic brand product revenue growth, now above pre-pandemic levels. The managed decline of the non-strategic brands and the lower interest income on the smaller financial services loan book. Our strategic brands, J.D. Williams, Simply Bee, Giacomo, Ambrose Wilson, and Home Essentials, posted 14.9% product revenue growth. Within this, we have already seen strong demand in clothing and footwear, and we anticipate the market for these categories to continue to strengthen as the restrictions from COVID subside and customers return to more normal patterns of life. We are confident that investments we have made in brand and product will result in continued growth from our strategic brands. Simply Be and Giacomo were the first of our brands to benefit from the refresh of brand profiles and product ranges. These brands both delivered growth rates in the high teens in the first half, and both now have their highest ever active customer bases, having returned to their growth trajectory after the dip caused by COVID last year. The brand refresh for J.D. Williams followed on from Simply Be and Giacomo. The new campaign featuring Davina McCall and Amanda Holden launched in July, and we anticipate that this will further accelerate the growth that JD Williams delivered in the first half. In line with a third pillar of our strategic plan to provide a new home offering for customers to shop more across categories, product revenue for home essentials, which was launched back in FY21, more than tripled, albeit from that low base last year. Product revenue from other brands had been that managed decline and dropped by 28.2%. Roughly half of this is from fig leaves, where we took the strategic decision to close it at the end of last year. Other brands now represent less than 20% of the group's product revenue. The impact of ceasing to trade House of Bath and High and Mighty as B2C brands has now annualized, and the impact from fig leaves will annualize from the end of this fiscal year. The author part of the product revenue story in the period is customer returns. They've increased by 3.8 percentage points year on year as mix moves back into fashion and customer behavior normalizes. However, versus two years ago, they are still down 5.9 percentage points, with approximately three-quarters of that V2Y driven by mix, and one-quarter of it reflecting improvements in our product ranges, which is great to see. That covers the product revenue side. Let's move on to the financial services side. FS Revenue was down in line with the smaller opening better book due to lower product sales last year and continuing solid customer repayments. As we previously said, FS revenue follows product revenue, and you can see that lag, and you can see it in the visuals on the slide, showing a clear revenue trajectory mirroring the retail with a six- to nine-month lag. The group's adjusted growth margin was 51.3% compared to 44.3% in the first half of FY21. Product growth margin declined by 2.8 percentage points. The main causes of this have been, number one, freight rate increases. They kicked in towards the end of FY21 and they've intensified in the first half of this financial year across the whole market and that's driven circa 1.9 percentage points degradation in our own product growth margin. We anticipate freight rates to remain high throughout this financial year and that's covered in the guidance we give later. Number two, mix effect. We've seen a partial mix shift back towards clothing and footwear and that segment have a higher margin rate so it's improved the average margin rate by circa 1.3 percentage points. That has been largely offset, though, by an increased level in discounting in comparison to the previous year, particularly for clothing and footwear, driven by the highly promotional market, and that was particularly prevalent at the start of the period when the high street reopened. And third, finally, as a result of the lower levels of write-offs in financial services, we have claimed back a lower amount of the associated BAT bad debt relief. This gets credited to the product growth margin, as we can only reclaim it due to the benefit of being a combined retail and credit provider. This impact reduced product growth margin by circa one percentage point. That leads me on to the financial services growth margin, which steps ahead by 24.2 percentage points year on year. Now within the absolute margin in the period, the bad debt provision rates remain similar year on year. The swing in margin rate then versus half one FY21 reflects the initial increase last year in the provision rates, and then a lower than normal level of write-off this year, as customers have been supported through the pandemic, and repayment rates have stayed solid, arrears rates have stayed low, and within that specific six-month period, we've seen low levels of write-off. We believe this low level of write-off is temporary compared to a more normal level, and in the absence of the atypical COVID performance, adjusting for the lower level of write-off referred to, the financial services margin would have been in a low 50% range. This slide on adjusted operating cost ratio demonstrates the success of our plan to restructure the cost base, holding the efficiency level below pre-COVID levels, with a higher level of volume variability to match our new digital retail model. And while you should expect some positive operating leverage in half two, the effect will be less than prior years, as more of our cost base flexes now with volume. Operating costs were particularly low this time last year in FY21 due to our management actions in response to the first COVID lockdown that included materially reducing marketing spend, stopping all but essential other spend and making use of the solo scheme. In comparison to last year, warehouse and fulfilment costs have increased 5.3%. That's slightly above the 3.3% increase in product revenue due to the slight increase in rate of returns. Marketing costs have stepped up by 29.3%. This aligns to the first pillar of our strategic plan, creating and investing in distinct brands. And finally, admin and payroll costs have increased by 20%, reflecting last year's cessation and deferment of non-essential spend, the normalization of payroll costs post-furlough, a level of insourcing of marketing activity to better control quality with that key area of the business, and a greater level of project spend now being expensed rather than capitalized. Cash generation in the period was healthy, enabling us to optimize the debt level for lower interest costs. Looking at this year on year, starting at the top, cash flow adjusted for working capital of 44.7 million is 24 million lower than the equivalent generated last year. The main variance within that is a 26.7 million swing in inventory working capital. During the first lockdown last year, we focused on selling through our existing inventory, utilizing the assets we'd already paid for. and then kept it very tight through the second half of the year, enabling us to start this year in a really clean stock position. So during the first half of this year, inventory working capital has conversely been built up with a net drain of 12.4 million, representing our confidence buying into the new product, as well as ensuring that we have the product in stock prior to the peak in the context of the supply chain challenges facing the whole market. Non-operational cash flows are 4.6 million lower than last year from a combination of reducing the exceptional cash flows related to previously provided charges, slightly lower capital investment and lower interest costs, plus a return to normal timing for tax payments. Now, we expect the rate of capital expenditures to increase in the second half of the year with a full year expectation of around 25 million. Customer loan book has reduced only slightly this year, whilst in the first half of last year, customers were paying down balances and write-offs were higher. And then across all these categories, we net generated 18.3 million, which added to the strong position from year end, gave us the opportunity to pay down debt further. Our securitized debt facility has a formula that calculates the maximum proportion of our customer loan book that we can draw down as borrowings. At the end of the year, the securitized facility was fully drawn and we were holding net cash of circa 81 million. Since then, we have taken the opportunity to reduce our draw approximately 57 million below the max level for the current size loan book, leaving net cash of 42 million and optimizing our finance costs. However, the full value of the securitized facility still remains available if required, supporting our accessible liquidity. Net debt of £268 million represents a reduction of £143 million compared with last half year end and a reduction of £33 million compared with year end. Unusually for Enbrown over the past few years, exceptional items were net zero in the first half of this year, which is a great place to be. An increase in the provision for legal costs relating to the dispute with Allianz £1 million was offset by resolution of several historical matters previously provided for through the exceptional charges line. Last year's cost of 4.5 million covered a range of items, including redundancy costs and the impairment of assets on the brands we were closing. The final point to note on this slide is that we continue to have a contingent liability with respect to the claim and counterclaim with Allianz. It is not possible to reliably estimate the amount of any potential financial outflow of this dispute, nor to be virtually certain of the successful outcome from our own counterclaim. Thus, In accordance with IAS 37, we have continued to report this as a contingent liability relating to Allianz's claims at total circa 66 million plus interest. Moving on, it leads me to looking ahead and guidance for our new financial year. The macroeconomic outlook remains uncertain. The impact of furlough ending remains to be seen on consumer confidence and behavior. I've already noted we're well placed with our inventory for the peak season, but the effects of COVID could still have some level of medium-term effect on our supply chain. And whilst markets remain promotional, given our improvements in product and branding, we will be progressively focused on profitable growth rather than chasing heavily promotion-led growth. As a result, we expect product revenue growth to be between 1% and 4% for the full year. The rate of decline in financial services revenue should improve in the second half, resulting in a full-year decline of circa 5%, Put that together, and we expect the overall group revenue to continue to be broadly flat. With a continued focus on profitability, though, our guidance range for EBITDA remains unchanged at 93 million to 100 million. We now expect capital expenditure to be circa 25 million, lower than the previously guided, but a step up on last year, and that reflects the increased strategic investment, net of some project spend now being expense rather than capitalized. Our expectation of depreciation and amortization remains unchanged at circa 40 million. And netting stress costs are now anticipated to be slightly lower at 15 million. Finally, FY22 year-end adjusted net debt is expected to be slightly better than previously guided in the range of 270 to 280 million with a strong unsecured net cash position. I'll now hand you back to Steve to talk you through progress on our strategy. Thank you.

Thank you, Rachel. I'll now talk about some of the strategic progress that we've been making in the last six months. I'm not going to spend long on this slide. Hopefully it's familiar to you all. As a quick reminder, our strategy to return end brands of sustainable growth is based on five pillars. We are focusing on developing stronger brands and product propositions for our customers, driving profitability through the retail business, and continuing to offer attractive and flexible credit solutions. The growth pillars are underpinned by our three enablers, people and culture, data, and a sustainable cost base appropriate for a digital retailer. We've made good progress on our strategic pillars, and there is real momentum across the business. I'd like to highlight a couple of points before going into more detail on products and brands. We said at the start of the year that with a greatly improved brand and customer proposition, we would increase investments in marketing activity. We have invested in our in-house design team and improved product, which has led to greater customer purchase frequency. Home Essentials is our newest brand and has been successful with strong growth in both revenue and customer. We continue to develop the proposition and recently added to high-profile brand ambassadors who will help customers build their dream room. Investing in our digital capabilities is a key part of our strategy. The current priority is the development of new front-end websites that will improve the customer experience whilst delivering benefits in terms of conversion rates and search engine optimization. In financial services, performance has been robust. Customer behavior has been stable, and we have not seen increased signs of distress. At the end of the half year, no customers were on a COVID-19 payment deferral. A medium-term strategic priority remains building a new, more flexible financial services platform, which will enable us to launch new credit products that will widen our appeal to consumers. At our full year results, we started providing a range of digital customer metrics to help track the progress of our business. Not all the metrics are where we want them to be, and there's plenty more progress we need to make. But as I look at these KPIs, I feel real signs of improvement. Today, I'd like to highlight four of the KPIs. First is the 11% year-over-year increase in website sessions. These are the results of the progress we have made improving the brand and customer proposition in our target segments, as well as the investment we have made in marketing. Second, orders rose by 6%. This is driven by growth in demand amongst our strategic brands. In particular, we saw robust demand for clothing and footwear as pandemic restrictions eased. Third is our total active customers. Year on year, the number of customers declined, driven by non-strategic brands' managed decline. Recently, however, we have seen positive trends with the number of customers on a rolling 12-month basis growing in the second quarter compared to the first quarter, with momentum in our underlying strategic brands. And finally, orders per customer rose 13% versus last year. This increased frequency of purchase shows how consumers are becoming more deeply engaged with our brands and our products. At the full year presentation in May, we said one of our focus areas, the FY22, would be brand. Now that we are at the halfway stage, I'd like to give you an update. We've been accelerating our use of social media, and we are seeing very positive results, both in terms of the 15% increase in revenue from social channels, but also in terms of the number of followers. Across Facebook, Instagram, and Twitter, our number of followers now stands at 2.1 million, of whom 13% were acquired in the last 12 months. And it's not just the number of followers. It's also the level of engagement with our brand, with customers increasingly commenting on, liking, and sharing our content. We took an important step in our branding activities by signing two high-profile celebrity partnerships. Amanda Holden and Davina McCall became brand ambassadors for J.D. Williams. Both women represent the brand's values and are aspirational for our J.D. Williams target audience. For Home Essentials, we signed Frankie Bridge and Nikki Dunn for those as brand ambassadors. In case you are not familiar with them, Frankie Bridge is a celebrity singer-songwriter And Nikki Bamford-Bowes is an interior designer who appeared on BBC's Interior Design Masters. Together, they have a huge online presence and a combined social following of over 1.4 million, which will help us reach our target audience of 25 to 40-year-olds with a family. In September, we commenced a campaign supported by above-the-line marketing to build awareness of the Home Essentials brand. In addition to our social media and brand marketing activities, we have invested in our in-house content production capabilities. This allows us to create high-quality content tailored to each brand style, whilst also enabling us to tailor the content to different media, such as social or video. Having talked about our activities and branding, I want to dive into products. We've been investing in our in-house design team and our own brand products have increased double digits compared to last year. The step forward that we have made in product is visible in our improved underlying returns rate. Year on year, the figures are clouded by the growth of homewares during the first lockdown and lower customer demand for apparel. But if we look at returns compared to the equivalent pre-pandemic period, we can see that returns have improved by nearly six percentage points. Rachel mentioned earlier, part of that is due to the shift towards home ways. Although with the growth of home essentials, we would hope to retain some of that benefit. The other part is due to a fundamental improvement in the product offering and quality. I've spoken before about our good, better, best price architecture. and creating product which represents great quality and value whilst introducing brands which stretch the range within the best category. We've made progress on replacing the good elements of third party ranges with more aspirational products. We've also launched new third party brands on our website with more plans for the remainder of this year. I'm now going to turn to our responsible sourcing strategy. This is a long-standing commitment and embedded in the way we do business. In addition to it being the right thing to do for us, responsible sourcing is increasingly important to our customers. Maintaining strong relationships across our supply base is essential for ensuring availability of products, which is particularly important at present, given the well-publicized supply chain disruption. Part of our ongoing partnership with the Apparel and Footwear Supply Chain Transparency Pledge Coalition, signed in December 2020, we have now published the second edition of our full tier one supplier list, encompassing nearly 500 own brand suppliers. Our partnership with Virizio continues to strengthen, ensuring that we have visibility over where our products are made and knowing that our workers are safe and treated with respect. Over the last six months, we've graded a total of 345 Tier 1 suppliers, both existing and new, while at the same time reducing our total supply base by 9% year over year. We are committed to UK manufacturing and have aligned with Fast Forward, a non-profit next-generation improvement programme which shares our vision of an ethical UK supply base. And lastly, we are proud to be working with an industry-leading UK manufacturer and social enterprise, Fashion Enter. Fashion Enter have been instrumental in producing elements of the product featured in our recent JD Williams campaign as brought to life by Amanda Holden and Davina McCool. We have now dived into brand and marketing as well as our improved product and our sourcing strategy. but how is this progress translating through into the numbers? We saw growth in total customer numbers in the second quarter versus the first quarter. Progress is masked by the managed decline of non-strategic brand customers, as well as the closure of brands such as House of Bath, which we closed last year and folded into Ambrose Wilson. We exclude both of these categories. Active customers make up 80% of the total customer base, and grew 6.5% in the second quarter of the year compared to three quarters ago. Our five strategic growth pillars are underpinned by three key enablers. Our people are key to the success of Ben Brown. We have remained fully operational following government guidelines to ensure that our sites are COVID-19 secure. We've moved to a hybrid working structure where this is possible, with the focus on ensuring productivity, collaboration, and employee well-being. Continue to invest in our data science and analytics capability. In the first half of this year, our focus areas was optimization of discounts and promotions, building models that allow us to pull the levers on revenue, margin, and other KPIs. The third pillar is the development of a sustainable and appropriate cost base. The key point here is that our unit costs remain substantially lower than pre-pandemic levels. We have baked in efficiency improvements and made our cost base less rigid and more variable with volume. At Enbrown, we are fully committed to embedding sustainability throughout the organization. Our product ranges and all our processes. To highlight a number of recent achievements and commitments, This responsible source product now makes up 20% of our own brand clothing and home textiles range. We are on track to achieve an exit room rate target of 30% by the end of this financial year. In July 2021, we signed up for the Better Cotton Initiative, the world's leading sustainability initiative for cotton. We are on track to source 50% of our own brand cotton through BCI 35 routes by the end of this year, increasing to 100% by the end of FY24. And finally, greenhouse gas emissions per item shipped are currently 42% lower than our baseline. Our target is to reduce them by 35% by the end of this year, and I'm happy to report that we are on track to hit that milestone. We remain confident of achieving our median term target, delivering product revenue growth of 7% per annum at an adjusted EBITDA margin of 14%. As regards our balance sheet, we intend to maintain a net cash position.

At the end of FY22, the Board will consider the resumption of dividend payments.

Over the last six months, we've become even more confident that we are delivering on our strategic plan despite what has been a volatile consumer environment. We see real momentum in the business with consumers responding positively to our improved product offering and our brand proposition. We've delivered pleasing double-digit growth in strategic brands and we are heartened by the trajectory in customer numbers. We expect to deliver product revenue growth this year and adjusted EBITDA of between 93 and 100 billion. We are committed to our median term target of 7% product revenue growth per annum and a 14% adjusted EBITDA margin. Achieving these targets will deliver sustainable returns for shareholders. And now we'll turn to Q&A. So if you are not already dialed in for the conference call, please do so now and we will take questions in a moment. Thank you.

Our first question comes from John Stevenson from Peel Hunt. John, your line is now open.

That's a long pause.

Morning, everyone.

Can I start off just by getting a sort of sense of kind of normalisation? You know, if you could maybe talk a little bit about how customers are shopping at the moment, how they return to normal purchase, whether sort of clothing or otherwise is gone. And secondly, you might have talked about it in the presentation, but if you can talk a little bit about the sort of mix of closing versus home sales at the moment. And then finally, just I don't know if there's any thoughts in terms of when you're looking at deploying the marketing, what sort of efficiency you're gaining at the moment, how you think about in terms of sort of cost of acquisition.

Sure. Hi, John, how are you? I'll pick up in terms of normalisation you know since sort of shops opened etc it was a bit sort of spiky around that particular point in time as we go back into the first half and we saw a bit of volatility there but ultimately we also saw people shopping into our clothing and footwear which I mentioned in the presentation which is great and that really continues we haven't really seen a change in those patterns as we've headed into the early part of H2 trading. Our customers, literally, they were buying dresses, et cetera, at the start. They're now moving into outerwear. So we're quite pleased with how that's going. And clearly, we're revving up for the golden quarter. So it's almost like it is normal. We're seeing normal patterns. And hopefully, that gives you some comfort and confidence. In relation to the sort of questions around marketing and sort of return on investment, well, that's something we've been working on for quite some time. It's certainly been part of the strategy for the last couple of years, and we've built a lot of different sort of tools and techniques to enable us to do that. We're pretty clear that performance marketing is all sort of delivering profit, and we also have built sort of really intentional marketing campaigns where we see that most effective. So in relation to JD Williams Home Essentials, we've talked about brand ambassadors because that's how the customer responds. And in relation to SimplyVee, we've talked about the influencer campaigns that we've been running, which we've been getting good sort of coverage from. So we have got intentional processes and intentional um approaches based on you know where we're sort of um where we think it's right for the customer but historically the business was probably less um intentional per brand and i suppose that's the difference of where we are today john we're very clear that we have different sets of customers um and they react in different ways so we're doing things differently uh and i guess at this stage um as we've sort of said um our trading uh is pretty much in line with expectations so um we're feeling pretty good about that. There was a second part, I think I've picked up one and three, if you can just remind me what the second part was, John.

Yeah, just on the mix of clothing versus home at the moment, and actually just as a supplementary while I'm on, just obviously if things are normal from a trading point of view, are returns levels normal now as well?

Well, the returns levels as we covered as part of the presentation are improved from pre-pandemic levels. We're seeing You know, we're seeing similar mixes in terms of clothing and footwear in homes, as we saw in H1 flow into H2 at this point in time. That might change as we head into the golden quarter, but as I sort of tried to sort of point to, it's pretty normal, John, to be honest. We're quite happy with it. There's no sort of differences that we're seeing at this particular point in time. The returns rate has sort of improved, I think, about sort of, you know, sort of, few points. And that's principally based on the mix that we're seeing. We're obviously selling more home now because of Home Essentials that we launched last year. But also the actual underlying product improvement has absolutely delivered a few points of improvement in relation to returns rate. So we're not seeing that change at all from the half one. So in a strange way, it's quite a sort of bland answer because everything is the same as H1, really. It's just continuing into H2.

Okay, Steve, that's great. That's very clear. Thank you. Thank you.

As a final reminder, please dial in to ask any questions and please press star followed by one on your telephone keypad. Our next question comes from Clive Black from Shaw Capital Market. Clive, please go ahead.

Good morning and thanks for the time and well done on executing the last six months. A question about working capital, please, and linked to that, how confident do you feel you are to trade into all the fragility and uncertainty of the final quarter of the year, please?

Yeah, hi, Clive. Thanks for the comment. I'll cover where we are from a sort of managing our supply chains, et cetera. Then I'll hand over to Rachel, I think, to sort of talk about working capital. I mean, in terms of our business, we're in decent shape. We have been investing in our stock as part of the capital raise. We started investing in our stock and product, which was covered in the presentation. So we actually have sort of got ourselves into a decent place. We have the large majority of our stock already in the warehouse, and what isn't in the warehouse is on the water. We should also keep in mind that we've simplified the business over the last couple of years. We have no stores. We are not shipping to the USA anymore. We've closed down other self-autonomous parts of the operation, like fig leaves. So actually, our supply chain is reasonably simple, albeit we're not immune to the challenges that the industry faces. We also operate out of Manchester. So our head office is in Manchester. Our distribution centers are outskirts of Manchester. It's a loyal workforce, which I'm very grateful for. I think they've done an amazing job. and they continue to do a fantastic job in keeping this business moving forward. So whilst I appreciate that there are issues in supply chains, which every company is not immune to, we feel we're in decent shape to head into the golden quarter. And with that, I'll hand over to Rachel, who will give you, I suppose, a more empirical answer in relation to working cap.

Thanks, Steve. And morning all. And thanks for the question, Clive. So yeah, you're right. In the period We had healthy cash generation and that was net of an investment into inventory working capital because we set ourselves up with a strong balance sheet at the end of last fiscal year to be able to step up our investment in marketing, which we've done, step up back into a strong product to come in with a clear stock position and then enable Sarah and the team with a decent open to buy to buy into the new product and buy into product revenue growth, which she's done, which sets us up well for the peak. We will continue to do that. So I would expect to continue to see a net drain on the inventory working capital side. But for me, that's a good indication of the product resonating and us setting ourselves up for growth into the future. So we've used the strong balance sheet to invest in the brand, invest in the inventory. The customer loan book has been sort of stabilizing and the rate of decline and contraction in it has stabilized through the half. compared to this time last year where it was reducing more considerably. As that turns into growth, that will be a net drain in terms of working capital investment into the loan book. But again, a good indicator in terms of a positive use of working capital. And we're well set with the unsecured cash position we've got and the reduction in debt draw that we did on the FS securitization facility. We've reduced the drawdown voluntarily by 57 million whilst we've got a strong cash position. And we can pull back down on that as needed within a very short timeframe as and when we need working capital for growth or as and when we get to any conclusion with the Allianz deal. So in a very good position from a balance sheet perspective and working capital, and it was pleasing to see how the period generated a healthy cash position and we could optimize the balance sheet and keep ourselves well set for the second half and into next year.

And then just a follow-up, if I may, I was probably wearing short the last time, and Brown didn't have exceptional items. And Allianz aside, do you expect any in the second half?

No, Allianz aside, we absolutely, we said this at the year end and in the equity raise last year, we believe material exceptional items are behind us. Now, obviously, we've done full disclosure and continuing disclosure on Allianz, but... We were also pleased to see, albeit I wasn't quite sure, pleased to see the net nil in the period. I think that's a good, healthy position for M Brown. Full disclosure on Allianz, it's still a contingent liability because it's a complex case, but we're fighting it robustly and we'll continue with that level of disclosure. But net nil, excluding Allianz, and we expect net nil on the go forward as well.

Well done.

Long may that continue. Thank you. Thanks, Clive.

Our next question comes from Darren Shirley from Shaw Capital.

Darren, your line is now open.

Yeah, morning folks. A couple from me, if you don't mind. I just wondered if you could give us a bit more colour on the sort of moving parts within the strategic brands. Was there any particular standout performers within there? Any underperformers? I mean, I'm not expecting numbers, but that sort of trajectory would be good. And in terms of the board review of the dividend at the year end, is there any particular criteria that needs to be met that we need to look out for for that decision to be a yes?

Well, I'll pick up the second question for Darren. We made a commitment to review it at the year end. uh that commitment has just been restated today the board hasn't discussed this um as a sort of policy at this particular point in time and but we did make a commitment to sort of consider it at the year end um i think it's very difficult to sort of um pick things that are dependent on that policy given we haven't had that conversation but look i mean we want to see this business get to growth right so and we need to invest to grow this business um We want to get through the sort of consumer uncertainty that exists at the market level. Clearly, you know, we want to move on from the Allianz case. There's a bunch of different things that we will think about. But at this stage, our commitment is the same. We said we would review it at the year end. And when we get to it, we will have that conversation as a board. In relation to the moving parts on the strategic brand, I mean, look, we sort of came out the back of last year. We raised the money. We launched our accelerate strategy and we've got going um and as ever in that you're going to have ups and downs you're going to have things that go well things that don't go well and it's a transformation it's um it's heading in the right direction we're really pleased with it and um you know we're really pleased with the sort of campaigns that we've got from an influencer perspective on simply be really pleased with the content that we've got um our brand ambassadors on jd williams um and home essentials uh we're genuinely really pleased with i mean everything is sort of pointing in the right direction at the moment, but it will all be down to consumer sentiment. I think at the year end, we'll perhaps be able to talk a little bit more about 12 months of progress. And in that, Darren, we may have some ups and downs that we want to talk about and some things to look forward to as we plan forward for the following year. But at this stage, we're just cracking on. We're genuinely in a good place.

Thanks for that, Stephen. One more, if you don't mind. Just in terms of your customer profile, obviously you're starting to build customers now across the strategic brands. Is there anything you can tell us about them in terms of demographics, age, and anything distinctive at all?

Yeah, well, we're trying to, as part of our brand segmentation, again, we came out with five strategic brand segmentations um we have uh simply be perhaps going to push a little bit younger um jd williams 45 to 65 um that sort of area and ambrose wilson post that we've got home essentials which is aimed at 25 to 45 year old families um and jacomo of course uh is our menswear brand which um again may push a little bit younger but um We're very clear on our proposition. Our proposition is all about inclusivity and whether that's a customer who some say are a little bit older or some say are a little bit less affluent or some say are a little bit larger. We don't see the world like that. We focus on those customers. We love those customers and we'll continue to build segmentations that are appropriate. Some of our brands might end up going a little bit younger. um but you know not significantly so um we're very very clear where um our heartland sits as a business and as i say we're we're we're positive about the progress that we're making okay i'll um i'll leave it to someone else now thanks thanks steve thanks darren we currently have no further questions so i'll now hand back over to the host for any closing remarks Well, thank you very much for joining the webcast and for the questions. I really appreciate it. M Brown has no or net nil on exceptional items. And my takeaway is obviously Clive's comment about his shorts, which I'll pick up with him offline. I'm really pleased with where the business is. I really thank our brilliant colleagues. They've done an amazing job and we need to push on from here. And thank you very much for your time.