The PPI payout of 2018 after having taken a heavy toll on the company’s performance in 2018 has also shown its aftereffects on the company's fortunes in 2019. Rising debt levels, increased debt servicing costs and a fall in revenues have resulted in the stock of the company losing nearly 39 per cent of its market capitalisation in trading on the London Stock Exchange in the past one year. Still moving towards the worst, the company in January 2020 drove down its adjusted profit before tax forecast for the year 2020 from a previously stated £78.0m to £84.1m range to £70m to £72m range, putting further downward pressure on its stock prices.
Among the many businesses that the company operated, it also sold PPIs, which later on became the focal point of one of the biggest financial scandals to have hit the United Kingdom. The payouts made by the company to aggrieved consumers far exceeded its organic streams of revenue, and the company had to raise significant debt to keep it operational thereafter. Still, there were thousands of applications pending with the company as the last date of compensation claims passed on 29 August 2019 for which the company had to make additional provisions in its books.
Ever since the payments were made in 2018, the company’s other businesses have not been performing well. In its half-yearly financial results for the period ended 31 August 2019, the company had reported group revenue of £432.9 million which was down by 5.4 per cent from the revenues of the six-month period ending on 1 September 2018 which for the period stood at £457.8 million. Again, in the 18-week results of the company for the period ended on 4 January 2020 the total revenues of the company still fell by 5 per cent compared to the corresponding 18-week period in 2019. The company though had also been adversely affected by the Brexit-led adverse economic environment during the year which had a telling effect on all sectors of the British economy. There has also been wide-ranging intervention across the financial sector during the year by regulatory agencies in the wake of the PPI controversy that had an impact on the financial services business of the Company.
The company has revised downwards its profit guidance for the year owing to the lower than expected benefit from the IFRS9 non-cash provision estimate. It can be reasonably expected that the year 2020 will not be any more challenging for the company than envisaged by the management on account of the improving trading environment in the country.
PPI controversy explained
The Payment Protection Insurance controversy is a major financial services scandal to have hit the United Kingdom in recent times. In this scam, over 12 million consumers have been mis-sold payment protection insurance (PPI) products. PPI was an insurance product sold by financial institutions in the United Kingdom to ensure repayment of the loan if the borrower dies or is faced with any other form of eventuality whereby, he is unable to service the debt. Several banks and large insurance companies had to pay massive compensations after an FCA investigation revealed that the practice was fraudulent and led to huge losses to the consumers. By January 2018 nearly £28.5 billion had been paid to consumers as compensation, with thousands of claim applications still pending. The Financial Conduct Authority (the FCA) which is the nodal agency in the country to ensure fair market practices in the financial services industry, found that the root cause of the scandal was complex financial products whose understanding was very limited with the general public, who were taken advantage of by the issuing companies.
N Brown Group Plc had also been selling PPIs and had to pay compensation of more than £100 million to thousands of affected consumers, which had put a serious dent in its revenue performance for the financial year 2018 and had also led to a massive increase in its debt levels. The stock of the company has been underperforming on the London Stock Exchange ever since the controversy hit the Company.
N Brown Group PLC Stock Trading Performance at The London Stock Exchange
Source – Thomson Reuters (one-year price chart)
On 27 February 2020 at the time of writing of this report the company’s shares on the London Stock Exchange were trading at GBX 62.95.
The shares of the company during the past 52 weeks of trading at the London Stock Exchange have registered a 52-week high of GBX 163.90 while also registering a 52-week low of GBX 58.65. The company had a market capitalisation of £183.50 million on the London Stock Exchange at the time of writing this report on 27 February 2020.
The stock’s traded volume at the above date and time stood at 1,794,662. Stock's average daily traded volume for 5 days was 327,263.60: 30 days- 584,157.80 and 90 days – 349,184.66. The beta of the stock of the company on the date was 1.3, which compared to the benchmark index reflected a higher level of volatility. The stock’s average daily trading volumes on the London Stock Exchange on an average for five days was lower by -43.98 per cent as compared to the 30 days’ average daily traded volume. In last one month, the shares have generated a negative return of -29.71 per cent and also a negative return of -60.47 per cent on-year to date basis.
About N Brown Group PLC
N Brown Group PLC (LON: BWNG) is a Manchester, United Kingdom-headquartered digital fashion retailer, which designs, sources and creates own-range and branded fashion and homewares and focuses on catering underserved customer groups, specifically size 20+ and age 50+ and operates a trusted family of retail brands, focused on fashion that fits. The company has an extensive range of products, predominantly homewares, footwear and clothing, and offers in-house ranges, such as Label J and Black Label, alongside international brands.
The shares of the company are identified and traded with the ticker name BWNG on the Premium main market segment of the London Stock Exchange, and the share is also part of the FTSE All-Share Index.