Financial Results
During the first half, total Group revenue reduced by 0.6% to £407.3m, largely reflecting lower sales in JD Williams. Like-for-like sales, excluding newly opened stores, were 0.5% lower. Profit before taxation was £42.7m (2013, £44.1m), 3.2% lower than last year.
Overall gross margin improved by 40 basis points due to an improved bad debt and financial income yield performance which has resulted from the success of our tightened credit policies, which we began to implement last year. Product gross margin declined by 50 basis points during the first half.
Despite good overall cost control, particularly in payroll and in marketing as we moved more of our spending from paper-based to digital activities, operating profit reduced by 6.6% to £45.2m, after absorbing £1.7m of losses in the United States (US) and £0.5m of losses from the Simply Be stores (2013, £1.0m). Distribution costs rose as a result of the strong growth in the volume of smaller parcels dispatched. We have identified some £2.0m of cost savings within sales and administration costs, linked to the organisational and marketing changes we have already begun to make, which we expect will come through during the second half.
Net finance costs were £3.6m (2013, £3.4m), due to higher levels of average borrowings. The effective rate of corporation tax was slightly lower than last year at 21.7% (2013, 22.0%), adjusted earnings per share reduced by 7.9% to 11.56p (2013, 12.55p). The interim dividend is held at 5.67p (2013, 5.67p).
Net assets grew by 8.6% to £495.3m (2013, £456.1m). Net cash generated from operating activities increased from £26.1m to £67.3m due principally to an improved working capital performance. Capital expenditure was higher at £30.8m (2013, £8.5m) as a result of the investment in our business transformation programme and after funding dividends and finance costs, net debt increased by £7.3m to £205.2m (2013, £197.9m). Gearing fell from 43% to 41%.
