29 July 2016

Findel plc (the "Group")

AGM Statement

"AN ENCOURAGING START TO THE YEAR"

At the Annual General Meeting to be held at 11.00am today David Sugden, Chairman, will make the following remarks on trading for the 17 week period from 26 March 2016 to 22 July 2016. 

Current trading performance

The Group has made an encouraging start to the year, with overall sales up 5.3% on the prior year. 

Within this, the group's largest business, Express Gifts, has seen a very strong early response to its new marketing campaigns and is making good progress against its net new customer target of 100k for the full year with product sales growth of 14.5% for the year to date.  Product sales growth is expected to moderate as recruitment investment into peak season moves closer to prior year levels.  Much of the recent campaign, which includes TV advertising, is based around deeply-discounted introductory offers such that the gross margin rate is lower and marketing costs are higher than in the equivalent weeks of FY16.  Financial services revenue growth remains strong as a result of product sales growth and the roll-out of risk-based pricing, although the higher number of new customers is likely to lead to a slight increase to the overall bad debt charge for the year.

Findel Education has continued to see difficult market conditions with increased pressure on the proportion of budgets being allocated to educational resources within schools in recent weeks.  After adjusting for timing differences on the Sainsbury's Active Kids scheme, year-to-date sales are c.8% less than the equivalent period of last year, however the business is close to halting the market share decline.  The warehouse and systems integration projects remain on track to be completed in calendar 2016 and to deliver the planned benefits for FY18.  In view of market conditions, the target of maintaining sales at prior year levels is unlikely to be achieved and the operating profit for FY17 for this business is therefore expected to be lower than previously anticipated.

Vote to leave the European Union

The Group's hedging strategies mean that around 70% of planned US$ purchases for the next 12 months and around 80% in the current financial year have been covered at an average rate of c.£1=$1.44.  The Group is therefore well positioned to mitigate any currency effects of Brexit in the current financial year. The effect on consumer confidence is being closely monitored but at present does not appear to be affecting sales.

Update on discussions with Sports Direct International (SDI)

On 1 July 2016 the Board of Findel announced that it was in early stage discussions regarding a possible commercial supply agreement with SDI and a proposal that Mike Ashley be appointed Chairman of Findel to replace David Sugden, who had previously indicated his intention to step down from the Board at the conclusion of today's AGM.

The Board remains of the view that there is merit in a commercial supply agreement with SDI, but SDI are unwilling to take this forward until the role of Mike Ashley on the Findel board is clarified. Discussions on both topics are ongoing.

Update on leadership

The Board has decided not to appoint Mike Ashley as Chairman and will now move as quickly as possible to appoint an independent Executive Chairman.  As a result of the delays to this appointment, David Sugden will continue as Executive Chairman beyond his planned departure date until such time as a replacement has been appointed.

Outlook

Whilst it is still early in the year, and with the peak selling season for Express Gifts still to come, the strong product sales and improved financial services income in that business are expected to compensate for weaker margins and the difficult conditions facing the education supplies market.  As a result, the Board continues to anticipate an overall Group performance in line with expectations for the full year.

Enquiries 

Findel plc             

David Sugden / Tim Kowalski    
0161 303 3465 

Tulchan Communications LLP 

Stephen Malthouse / Will Smith              
020 7353 4200

Notes to Editors

The Findel Group contains market leading businesses in the UK home shopping and education supplies markets.  It is primarily a retailer and distributor, handling and supplying specialist products manufactured by third parties.

The Group's activities are focused in two main operating segments, together with a small overseas sourcing operation:

·     Express Gifts - one of the largest direct mail order businesses in the UK; and

·     Findel Education - the largest listed independent supplier of resources and equipment (excluding information technology and publishing) to schools in the UK.