A BREATH OF FRESH AIR
ANNUAL REPORT &
ACCOUNTS 2018/2019
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A BREATH OF FRESH AIR
ANNUAL REPORT &
ACCOUNTS 2018/2019
2
CONTENTS 3
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain information contained in this document, including any information as to the Group’s strategy, plans or future financial or operating
performance, constitutes ‘‘forward-looking statements’’. These forward-looking statements may be identified by the use of forward-looking
terminology, including the terms ‘‘believes’’, ‘‘estimates’’, ‘‘anticipates’’, ‘‘projects’’, ‘‘expects’’, ‘‘intends’’, ‘‘aims’’, ‘‘plans’’, ‘‘predicts’’, ‘‘may’’, ‘‘will’’,
‘‘seeks’’, ‘‘could’’, ‘‘targets’’, ‘‘assumes’’, ‘‘positioned’’ or ‘‘should’’ or, in each case, their negative or other variations or comparable terminology,
or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this document and include statements regarding the intentions, beliefs or current
expectations of the Directors concerning, among other things, the Group’s results of operations, financial condition, prospects, growth, strategies and
the industries in which the Group operates.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or
may not occur in the future or are beyond the Group’s control. Forward-looking statements are not guarantees of future performance. Even if the
Group’s actual results of operations, financial condition and the development of the industries in which the Group operates are consistent with the
forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent
periods. Accordingly, undue reliance should not be placed on these statements.
The forward-looking statements contained in this document speak only as of the date of this document. The Group and its Directors expressly disclaim
any obligation or undertaking to update or revise publicly any forward-looking statements, whether as a result of new information, future events or
otherwise, unless required to do so by applicable law, the AIM Rules for Companies or the Disclosure and Transparency Rules.
Note: The financial information contained in this document, including the financial information presented in a number of tables in this document, has
been rounded to the nearest whole number or the nearest decimal place. Therefore, the actual arithmetic total of the numbers in a column or row in a
certain table may not conform exactly to the total figures given for that column or row. In addition, certain percentages presented in the tables in this
document reflect calculations based upon the underlying information prior to rounding, and accordingly, may not conform exactly to the percentages
that would be derived if the relevant calculations were based upon the rounded numbers.
CONTENTS
HIGHLIGHTS
CHAPTER 1 - STRATEGIC REPORT
Chairman’s Statement
Chief Executive’s Strategic Report
Financial Review
Principal Risks and Uncertainties
Social Responsibility
CHAPTER 2 - CORPORATE GOVERNANCE
Board of Directors
Governance Framework
Audit Committee Report
Nomination Committee Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
CHAPTER 3 - CONSOLIDATED FINANCIAL STATEMENTS
Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Company Information
5
11
12 - 21
22 - 25
26 - 29
30 - 35
38
39 - 41
43
44
45 - 59
60 - 61
63
67 - 71
72
72
73
74
75
76 - 99
101
102
103 - 105
107
Company Secretary:
Registered Office:
Nominated Adviser:
Broker:
Corporate PR:
Legal Advisors:
Auditor:
Registrars:
Jonathan William Dargie
Joules Building, The Point, Rockingham Road, Market Harborough, Leicestershire, LE16 7QU
Peel Hunt LLP, Moor House, 120 London Wall, London, EC2Y 5ET
Liberum Capital Limited, Ropemaker Place, Level 12, 25 Ropemaker Street, London, EC2Y 9LY
Hudson Sandler, 25 Charterhouse Square, London, EC1M 6AE
Eversheds LLP, 115 Colmore Row, Birmingham, B3 3AL
Deloitte LLP, 1 Woodborough Road, Nottingham, NG1 3FG
Equiniti Limited, Aspect House, Spencer Road, Lancing, BN99 6DA
Joules Group plc - Registered in England and Wales number: 10164829. Website - www.joulesgroup.com
4
HIGHLIGHTS 5
HIGHLIGHTS
• Group revenue increased by 17.2% to £218.0 million - up 16.8% in constant currency1
• Comparable revenue growth2 of approximately 13% - excluding impact of transition
of wholesale accounts to retail concession model in the Period
• International revenue increased by 43.5% (40.1% constant currency) - now
represents 16.1% of Group revenue
• Underlying profit before tax (‘PBT’)3 increased by 19.4% to £15.5 million
• Statutory profit before tax increased by 14.9% to £12.9 million
• Group gross margin declined 90 bps to 54.8%, in line with expectations
• Underlying pro forma basic EPS4 increased by 19.4% to 14.1 pence, with statutory basic
EPS up by 17.3% to 11.6 pence
• Active customers5 increased by 8% to 1.5 million
• Net cash of £5.8 million, an improvement of £5.8 million on the prior year
• Final dividend of 1.35 pence per share proposed; FY19 total 2.1 pence per share
(FY18: 2.0 pence per share)
1 Constant currency comparatives apply a consistent exchange rate to the translation of financial results of overseas
subsidiaries.
2 Comparable revenue growth is a non-GAAP measure, to facilitate meaningful comparison across periods, given
the conversion of two large UK wholesale accounts to the Retail concession model during the Period. The growth is
based on the prior period being restated as if the retail concession model had been operated consistently across both
periods. Note, the restatement is unaudited and approximate.
3 Underlying PBT is a non-GAAP measure that, to facilitate meaningful comparison across periods, excludes the expense
of share-based compensation plans. A reconciliation to statutory PBT is shown below and further information is
provided in the Financial Review.
4 Underlying pro forma basic earnings per share (‘EPS’) excludes expense of share-based compensation plans and
reflects a consistent tax rate across periods. Further information is provided in the Financial Review.
5 Customer registered on our database who has transacted in the last 12 months.
Reconciliation to statutory profit before tax:
£MILLION
Underlying profit before tax
Share-based compensation
Statutory profit before tax
FY19
15.5
(2.6)
12.9
FY18
13.0
(1.8)
11.2
6 OUR BRAND VALUES
OUR BRAND VALUES
OUR BRAND VALUES 7
OUR BRAND VALUES
CONTEMPORARY COUNTRY LOVING
We celebrate our rural roots by designing clothing, accessories and
homeware for today’s family lifestyle.
INSPIRED BY NATURE
We take inspiration from all of the flora and fauna that can be found in the
countryside and along the coasts of Britain.
RESPECT THE ENVIRONMENT
As a brand that was established in the countryside, we see it as our
responsibility to look after the world around us.
CONNECT WITH LIFE’S HAPPY FEELINGS
Life is busy. We want to slow down, stop and take pleasure in the simple things
that make us happy.
CLOTHES TO ENABLE YOUR LIFESTYLE
We blend style with practicality to create collections that are built to last.
COLOUR AND PRINT
Our Print Team are experts in colour. All of our prints are hand-drawn or hand-
painted in-house, and the unique way we use colour and print makes us stand
out from the crowd.
CAPTURING THE SEASONS
Spring, summer, autumn and winter. In Britain we’re lucky to have four very
different seasons. We always look to them for inspiration.
FUN
Our upbeat and positive outlook on life can be seen in everything we do –
from the way we use colour and print to our tone of voice and packaging.
ATTENTION TO DETAIL
Our designs capture not only the eye but the imagination. Hidden details are
set to surprise and delight people of all ages.
QUALITY
It can be seen in the way we work and felt in what we create.
C H A P T E R
1
S T R AT E G I C R E P O RT
let’s take a walk
AT THE START
The Joules story began in 1989, when Tom Joule started selling clothing
on a stand at a country show in Leicestershire. Tom would constantly brave
the elements in pursuit of delivering traditional clothing with a twist.
The early days, facing driving rain and howling winds, have made us experts
in outwitting the weather and made sure an adventurous spirit
is woven throughout everything we create.
10
CHAIRMAN’S STATEMENT 11
CHAIRMAN’S STATEMENT
JOULES GROUP PLC
INTRODUCTION
It gives me great pleasure to provide my first Chairman’s Statement since
joining the Group at the beginning of August 2018. I have thoroughly enjoyed
working with the Joules team over the last 12 months and I share the Board’s
excitement about the significant future growth opportunities for the Joules
brand.
The FY19 financial period has been another year of strong growth and
strategic progress for Joules. The Group has continued to expand the brand
across distribution channels and product categories, with particularly good
progress made in our international markets and digital sales.
STRATEGIC PROGRESS
Since the Group’s admission to AIM in May 2016, the retail sector, particularly
in the UK, has been incredibly dynamic. The continued growth of online
shopping, in combination with a prolonged period of consumer uncertainty,
has driven significant challenges and changes across the sector. Against this
backdrop, the Group has delivered impressive growth and demonstrated
outstanding progress against its ambitious strategy by becoming an
increasingly international lifestyle brand operating seamlessly across sales
channels with a significantly larger customer base. The Group’s achievements,
despite the challenges in the retail sector over recent years, speak volumes
about the strength of our much-loved brand, the flexibility and adaptability of
our business model, and the talent, skill and passion of our people.
The Group has a consistent strategy for the continued growth of the Joules
brand which is expanded upon in the Chief Executive’s review of this Annual
Report. This strategy is built on four key pillars: increasing customer value;
expanding brand sales in the UK market through appropriate channels;
developing the brand in targeted international markets; and expanding the
product range into new areas that are appropriate for Joules. I am pleased to
report that the Group has made further progress in each of these areas during
the Period.
FINANCIAL RESULTS & DIVIDEND
Group revenue for the 52 weeks to 26 May 2019 increased by 17.2% to
£218.0 million (FY18: £185.9m) reflecting growth across all product categories
with a strong performance in the core Womenswear category and positive
further development of our Accessories and Footwear categories.
The Group continued to expand in its target international markets, primarily
the US and Germany, with sales from outside the UK growing by 43.5% to
represent 16.1% of Group revenue (FY18: 13.1%).
The Strategic Report and Financial Review that follow provide a more in-depth
analysis of the trading performance and financial results of the Group.
BOARD CHANGES
In April 2019, Colin Porter informed the Board of his intention to retire following
eight years in the business, the past five of which have been as Chief Executive
Officer. Colin has been an outstanding leader at Joules since joining the
business in 2010. During his tenure, Joules has achieved significant growth both
in the UK and internationally and developed into a true lifestyle brand with
appeal across channels and product categories.
At the same time, the Board was delighted to announce the appointment of
Nick Jones as the Group's next Chief Executive Officer. Nick will be joining
the Group from Asda where he has been a member of the Executive Board.
The Board was extremely impressed with Nick’s extensive retail, brand and
strategy credentials which, in combination with his clear alignment to the Joules
values, made him the outstanding candidate for the role. Nick will be joining
the Board on 2 September 2019 and, following a handover period to ensure a
smooth transition, Colin will then step down.
OUR TEAM
When I joined the Joules team, I was immediately struck by the skill, energy,
creativity and passion of our people across the Group. Joules’ teams around
the world remain key to the Group’s ability to grow and prosper in this dynamic
retail environment. I would like to take this opportunity to thank all colleagues
across the world for their fantastic efforts throughout the year.
OUTLOOK
We are pleased with the Group’s performance to date in the early stages of
our new financial year, with trading in line with our expectations. A major
focus for the Group in the year ahead will be on continuing to expand the
brand in our targeted international markets, through our wholesale and digital
sales channels. In addition, we have an exciting pipeline of new products,
partnerships and initiatives to expand the brand into new categories.
The Joules brand is highly distinctive and offers a unique product proposition
that is truly aligned to our customers’ lifestyles. The development of our
entire brand proposition – from our products and marketing to the customer
experience across channels – will remain critical to ensuring that Joules
continues to exceed the expectations of our growing and loyal customer base
however they choose to engage with our brand.
The Group continued to benefit from its flexible and integrated ‘Total Retail’
model as well as a steadfast focus on delivering a seamless and enjoyable
experience to customers, irrespective of how, when and where they choose
to shop the Joules brand. E-commerce again performed particularly well,
growing by 58% to represent approximately half of the Group's retail revenue.
Underlying profit before tax increased by 19.4% to £15.5m, and basic
underlying EPS was 14.1 pence per share (FY18: 11.8 pence). Statutory profit
before tax increased by 14.9% and Statutory EPS was 11.6 pence per share
(FY18: 9.9 pence).
The challenges facing the wider UK retail sector are well documented and
we anticipate that they will persist, as macroeconomic uncertainty, due in
part to the ongoing possible exit of the UK from the EU, continues to weigh
on consumer confidence, resulting in a highly promotional and competitive
environment. Our contingency plans for the eventuality of a ‘hard Brexit’ are
in place and have progressed over the year. Joules remains well positioned
to continue to deliver against its strategic growth objectives, with a distinctive
brand loved by our customers, great products, our flexible and integrated
‘Total Retail’ model accessing multiple routes to market, all supported by a well
invested infrastructure and outstanding team.
The Board has proposed a final dividend of 1.35 pence per share which, if
approved at the shareholder's AGM, will take the dividend for the full year to
2.1 pence per share (FY18: 2.0 pence).
IAN FILBY
Chairman
12 CHIEF EXECUTIVE’S STRATEGIC REPORT
CHIEF EXECUTIVE’S STRATEGIC REPORT 13
CHIEF EXECUTIVE’S STRATEGIC REPORT
BUSINESS MODEL
CHIEF EXECUTIVE’S STRATEGIC REPORT
STRATEGY
INTRODUCTON
I am pleased to report that during FY19 Joules has continued to make very good progress against its strategic objectives. The Group has delivered growth across
channels and product categories, both in the UK and internationally. This performance, achieved against a backdrop of particularly challenging external trading
conditions in the UK market, reflects the appeal of the Joules brand, the strength and flexibility of our ‘Total Retail’ model, and the success of our continued
international expansion.
OUR GROWTH STRATEGY
We have a consistent strategy for the long-term development of Joules as a premium lifestyle brand, both in the UK and internationally. This strategy is built on the
following four pillars, underpinned by our distinctive brand, unique products and unwavering customer focus and is delivered by our exceptional team of people,
supported by well-invested systems and infrastructure.
OUR BUSINESS MODEL - A TRULY MULTI-CHANNEL
BRAND
Joules has been developed as a truly multi-channel business, with our carefully
nurtured brand at the heart of everything we do. We distribute our products to
customers seamlessly across multiple channels, enabling customers to engage
with and shop the brand wherever, whenever and however they choose.
At the core of our multi-channel model is our ‘Total Retail’ platform, which
provides a fully Joules-branded customer experience across our fast-growing
e-commerce platform; our portfolio of stores and concessions; country shows
and events; and, more recently, a range of selected online marketplaces.
In addition, and to further support our goal of ensuring the brand is present
wherever our customers spend their time, we have a large network of
wholesale customers in the UK and internationally. The Joules brand is also
increasingly available through the online, store and wholesale channels of our
brand licence partners. This flexible and integrated approach balances the
Group’s exposure to any single route to market, with e-commerce sales now
representing approximately 50% of retail sales.
As the retail market continues to evolve, the lines between physical and digital
commerce are becoming increasingly blurred. The Joules e-commerce and
in-store propositions are converging and the development of these channels
as part of an integrated, consistent and customer focused proposition is central
to our growth strategy and continues to be reflected in our infrastructure
investments. In what is set to remain a highly dynamic, competitive and
increasingly digital-led retail environment, we believe the flexibility of our ‘Total
Retail’ approach will remain critical to Joules’ future growth and success.
THE JOULES BRAND
The Joules story began in 1989, when Tom Joule started selling clothing on
a stand at a country show in Leicestershire. Today, it is a truly multi-channel
lifestyle brand with products available online, through our own retail stores,
at country shows and events, and through wholesale partners both in the UK
and internationally. In 2019, Joules is celebrating its 30th birthday, marking
three decades of Joules delivering fun, quality clothing for families and friends
to make lasting memories together. The brand is enjoying some exciting
celebrations throughout the year, built around special moments shared with our
customers since the Joules story began.
Our in-house creative team takes inspiration from nature and the changing
British seasons to design clothing and accessories that enable our customers’
lifestyles, come rain or shine. We stand out with our unique use of colour and
print, with all our distinctive designs hand drawn by our in-house team. This
approach, along with a relentless attention to detail and drive to surprise and
delight customers with unexpected details, has been central to the brand’s
success and remains at the heart of everything Joules creates. The essence
of the Joules brand is all about connecting with life’s happy feelings and
embracing quality time by doing the things we love with the people who
matter. This approach and these values continue to enable Joules to develop
into new product categories through its own collections and selected licensing
partnerships.
Nurturing and expanding a strong brand that has real connection with
customers remains critical in a challenging, competitive and dynamic retail
sector. We continue to invest in our marketing and brand, with a particular
focus on our digital channels, to continue to strengthen awareness of what
Joules stands for and ensure consistency of brand experience across all
customer touch points.
We were delighted that the brand’s continued success was recognised at the
2018 Drapers Awards, where the business won the Fashion Retail Business of
the Year (between £101m-£500m turnover) for a second time. The business
also won two further accolades at the Brand & Lifestyle Licensing Awards,
where Joules took home the Best Licensed Fashion or Talent Brand award, and
our Joules gifting range was recognised by winning the Best Licensed Gifting
Product Award. For a second year running, Joules also received a Mark
of Excellence within The Best Fashion Retailer category at the Retail Week
Awards.
3. INTERNATIONAL EXPANSION
The Joules brand and products have demonstrated their appeal in our primary
international markets, the US and Germany. We have entered, and continue
to develop, these markets via a wholesale model supported by e-commerce,
leveraging investments made in our central creative and design functions,
supply chain and infrastructure with support from local teams, sales agents and
product showrooms.
Our international wholesale model provides us with multiple routes to attract
and engage with potential and existing customers, through online retailers,
independent stockists, department stores and subscription models, supported
by our capability to manage the newer marketplace and ‘drop ship’ models.
We continue to evaluate new markets to expand the brand through the most
appropriate channels.
4. PRODUCT EXTENSION
The strength of the Joules brand and our understanding of, and connection
with, our customers mean that Joules-branded products can extend into new
areas to meet many of their lifestyle needs. Joules has successfully extended
the product offer within existing categories and into new product categories.
We are focused on continuing to expand carefully into new product categories
that are appropriate for the development of the Joules brand both organically
and by working with carefully selected licence partners, with particular focus
on home and gifting categories and products that are complementary to our
clothing ranges.
Product extension through licensing also drives brand awareness and new
customer growth by presenting our brand where our current and potential
customers like to spend their time, leveraging the attractive distribution provided
by our selected licence partners.
1. INCREASING CUSTOMER VALUE
Increasing customer value means two things for Joules: firstly, growing our
active customer base and, secondly, increasing those customers’ frequency
of interaction and spend with the brand. Our goal is to increase awareness
of the Joules brand amongst potential customers and for customers who are
aware of our brand to allocate more of their clothing, footwear, accessories,
home and gifting spend to our unique Joules-branded products. We do this
by providing fantastic quality products and enjoyable experiences across all
distribution channels, as well as relevant, authentic and targeted customer
communications.
2. DRIVE TOTAL UK BRAND SALES
We aim to grow sales of Joules products in the UK by increasing availability
and accessibility across existing and emerging distribution channels. Our
goal is to make it easy for our customers to discover, be inspired by, purchase,
receive and, if necessary, exchange or return, our products. We achieve this
by being available to our customers however they wish to engage with our
brand, including being located where our customers choose to spend their
time. Our priorities are:
‘TOTAL RETAIL’
Our Joules branded retail proposition spans e-commerce, stores, country
shows and events and online marketplaces. Our ‘Total Retail’ proposition
is delivered through both owned and third-party platforms including
concessions and marketplaces.
E-commerce - is a fast-growing and evolving channel for Joules. We
expect to continue to increase the mix of e-commerce sales as a
proportion of our total retail sales through ongoing enhancements to the
customer journey, proposition and engagement, delivered through our
e-commerce platform and enhanced Customer Data Platform.
Stores - Joules operates a portfolio of stores across the UK that enables
our customers to shop and interact with the brand. As well as being
important sales channels, our increasingly digitally enabled stores offer
valuable touch points to showcase the brand to both existing and potential
customers. We believe this integrated 'Total Retail' approach is critical in
the evolving and competitive UK retail market.
Country shows and events - Joules has a strong brand presence at a
wide range of country shows and events across the UK. The channel
continues to be an important part of the Joules heritage and provides real
customer connectivity.
Marketplaces & concessions - we continue to leverage our wholesale
capabilities and relationships to support emerging new retail channels
such as online marketplaces and ‘fulfilled by’ models that offer new routes
to reach our target customer base in the UK and internationally, as well as
supporting the more traditional concession model.
WHOLESALE
We continue to broaden the reach of the Joules brand through selected
wholesale partners that are closely aligned with our brand values and
product categories - including specialist independents, department stores,
destination lifestyle retailers, subscription services and online retailers.
Wholesale is an important capability that facilitates our international
growth strategy.
14 CHIEF EXECUTIVE’S STRATEGIC REPORT
CHIEF EXECUTIVE’S STRATEGIC REPORT 15
CHIEF EXECUTIVE’S STRATEGIC REPORT
STRATEGIC PRIORITIES AND DEVELOPMENTS IN FY19
CHIEF EXECUTIVE’S STRATEGIC REPORT
STRATEGIC PRIORITIES AND DEVELOPMENTS IN FY19
INCREASING CUSTOMER VALUE
• Launched new Customer Data Platform at the end of the Period, which will enable targeted relevant communication to improve customer engagement and
retention
• Investment into digital and social media capabilities
• 1.5 million active customers at the end of the year with c.700,000 new customers acquired during the year
• Increased frequency of purchase and higher average customer spend
• Increasing proportion of multi-channel customers and customers buying multiple categories
• Over 530,000 Facebook followers and over 240,000 Instagram followers with high levels of daily engagement
• 30th Birthday campaigns, centred on customer generated content, have delivered strong response and engagement
Key challenges in executing the strategy (see next section): 3 5 6
DRIVE TOTAL UK BRAND SALES - ‘TOTAL RETAIL’
• Continued investment in the e-commerce platform and customer proposition
• E-commerce now approximately 50% of retail sales
• John Lewis womenswear and Next Label successfully converted from wholesale to retail concession model
• Six net new store openings in desirable locations
• Approximately 20% of store transactions now directly support a digital sale (e.g. click & collect, order in store)
• Increased mix of online and lifestyle wholesale partners
Key challenges in executing the strategy (see next section): 1 2 3 5 6
INTERNATIONAL EXPANSION
• International now represents 16.1% of total Group revenue (FY18: 13.1%)
• Further expansion in US and Germany through wholesale and e-commerce
• US wholesale growth with existing partners such as Dillard’s, Neiman Marcus and Bloomingdales and addition of online and subscription partners such as
Stitch Fix
• Germany wholesale continues to grow through independent accounts and online partners
• International e-commerce platform (rest-of-world) enhanced with localised payment and fulfilment options driving improved conversion
• Middle East franchise agreement - first store in Dubai (Autumn 2019)
Key challenges in executing the strategy (see next section): 2 4 5 6
PRODUCT EXTENSION
• Licensing revenue up 147% to £1.8m
• Joules toiletries and gifting range successfully further developed and extended in the Period
• Continued strong performance of the Joules sofa range - new and extended ranges
• New categories launched, including dog pet products, gifting and men’s formalwear
Key challenges in executing the strategy (see next section): 1 5 6
KEY CHALLENGES
The Board’s assessment of the main challenges in the successful continued delivery of our strategic priorities is summarised below. A comprehensive summary of
the key risks facing the Group is provided in the Principal Risks & Uncertainties section of this Annual Report.
1 UK macroeconomic uncertainty, due in part to the ongoing potential exit of the UK from the EU, may adversely impact consumer confidence and spending on
discretionary items thereby impacting the Group’s ability to drive increased brand sales in the UK.
We manage macroeconomic challenges by delivering distinctive and high-quality products that represent outstanding value for money and evolving our
distribution channels to continue to reach new and retain existing customers.
2 Structural changes are impacting the retail and clothing sector, resulting in a very competitive and promotional environment and an increasing shift away from
physical retail.
We navigate the structural changes and competitive environment through our product focus (described above) and our flexible ‘Total Retail’ model that
allows Joules to adjust to changing shopping behaviours and enables customers to engage with the brand however they choose to shop.
3 Emergence of new competitors and moves by existing competitors who may seek to replicate our success by targeting our segment of the market or imitating
our model.
We closely monitor the competitive landscape; our primary focus is on maintaining our close and engaging connection with our customers and
continuing to evolve the Joules offering with new, distinctive products and collections.
4 International markets each have their own distinctive dynamics, competitive and regulatory landscapes and consumer preferences. Global trading and
product flow are increasingly volatile with uncertainty on tariff structures, import restrictions and currency volatility.
The flexibility of the Joules model enables the Group to develop new markets with a low risk, low investment approach. We seek to manage global
trading risks by closely monitoring for potential changes and planning our pricing, sourcing and logistics strategy appropriately. Foreign currency
transaction risks are hedged in line with the Group’s policy.
5 Extending the Joules brand into new areas and with new partners presents a potential risk of brand dilution or reputational damage.
We only take the brand into new areas, and work with new partners, that are appropriate and additive for Joules and our customers. We select partners
who share our values, vision and integrity to ensure that all products meet the quality and design standards associated with and expected of our brand.
6 Increased understanding and awareness of the direct and indirect environmental impacts of the fashion industry are driving a significant shift in consumer
expectations for increased transparency and commitments to sustainable supply chains from the brands with which they engage.
The Joules brand is rooted in the British countryside and our ‘Responsibly Joules’ approach is central to how we work across our business.
Our commitment, focus and achievements are set out in the Responsibly Joules section of this Annual Report and on www.joulesgroup.com.
16 CHIEF EXECUTIVE’S STRATEGIC REPORT
CHIEF EXECUTIVE’S STRATEGIC REPORT 17
CHIEF EXECUTIVE’S STRATEGIC REPORT
KEY PERFORMANCE INDICATORS
CHIEF EXECUTIVE’S STRATEGIC REPORT
KEY PERFORMANCE INDICATORS
KEY PERFORMANCE INDICATORS (KPIs)
The Group’s KPIs have been selected based on their link to the successful delivery of our strategy. They are monitored by the Board on a regular basis.
FINANCIAL KPIs:
STRATEGIC KPIs:
FY19 KPIs
Online % of Retail
FY15
FY16
FY17
FY18
FY19
30.6%
32.1%
34.8%
38.4%
Number of stores1
FY15
FY16
FY17
FY18
49.5%
FY19
86
92
Our financial KPIs are:
• Revenue by channel - delivering balanced growth across our core sales channels
• Group gross margin - maintaining overall product level profitability whilst developing the different channels to market
• Underlying EBITDA margin – how effective we are at leveraging our cost base and infrastructure
• Return on Invested Capital (‘ROIC’) – how we are managing working capital and growth capital investments
Revenue by channel3 £m
FY154
£25.8m
£52.4m
£31.6m
Group gross margin
FY154
53.3%
105
FY16
£30.1m
£58.2m
£37.2m
FY16
53.5%
119
125
FY17
£38.9m
£68.3m
£44.7m
FY17
55.4%
FY18
£49.8m
£75.0m
£55.5m
FY18
55.7%
FY19
£78.7m
£75.9m
£57.1m
FY19
54.8%
Total selling space (‘000 Sq. ft.)
International as % of total revenue
FY15
FY16
FY17
FY18
FY19
96
107
132
159
FY15
FY16
FY17
FY18
9.1%
10.1%
11.5%
13.1%
175
FY19
16.1%
Active customer numbers (‘000)2
FY16
FY17
FY18
FY19
889
1,037
1,352
1,456
1 Excludes concessions and franchise stores; 34 concessions operated at May 2019 (5 at May 2018 and in all previous years) and 3 franchises.
2 Customer registered on our database who has transacted in the last 12 months.
0
30
60
90
120
150
180
210
52.0 52.5 53.0 53.5 54.0 54.5 55.0 55.5 56.0
E-COMMERCE
STORES
WHOLESALE
Underlying EBITDA5 margin
Return on Invested Capital - ROIC6
FY154
9.0%
FY16
10.3%
FY17
10.8%
FY18
11.3%
FY19
10.8%
FY154
21.6%
FY16
29.8%
FY17
39.4%
FY18
34.1%
FY19
30.5%
8.0
8.5 9.0
9.5 10.0 10.5 11.0
5
10
15
20
25
30
35
40
3 Revenue by channel excludes Shows (Retail) and Licensing (Other). FY19 is impacted by the transition of two large wholesale accounts to the retail concession model.
4 FY15 was a 53-week period.
5 Underlying EBITDA is a non-GAAP measure and excludes the expense of share-based compensation plans which is non-comparable across periods, to facilitate more meaningful
comparison. Further information is provided in the Financial Review.
6 Return on Invested Capital (‘ROIC’) is calculated as underlying operating profit after tax divided by average invested capital, with invested capital equal to fixed assets plus net working
capital.
18
CHIEF EXECUTIVE' S STRATEGIC REPORT 19
CHIEF EXECUTIVE'S STRATEGIC REPORT
BUSINESS REVIEW
INTRODUCTION
During the year we successfully transitioned our wholesale accounts with John Lewis womenswear and Next Label to the retail concession model that provides
us with greater control over brand execution, product assortment and trading flexibility. For comparative purposes, the summary below provides the approximate
segment revenue growth as if the retail concession model was in place in the prior period.
Revenue
Retail
Wholesale
Other (Licensing)
Group
52 WEEKS ENDED 26 MAY 2019
£million
Reported growth %
Approx. comparative growth¹ %
159.1
57.1
1.8
218.0
22.7%
2.8%
147.3%
17.2%
10%
22%
N/a
13%
1 Comparative growth percentages show the approximate growth for Retail and Wholesale on the basis of the prior period being restated to reflect the impact of the retail concession
model. Note, the prior period restatement is unaudited and approximate.
RETAIL: SUCCESSFUL ‘TOTAL RETAIL’ MODEL
Our ‘Total Retail’ model enables Joules to meet evolving customer expectations
and behaviours. Our model provides customers with a seamless online/in-
store experience including services such as click & collect and order in store
fulfilment options, easy in-store returns and exchanges for e-commerce orders
and consistent cross-channel communications and promotions. We have seen
an increasing number of in-store transactions directly supporting our customers’
digital sales journey, helped by our store colleagues and systems that fully
enable a seamless cross channel experience for customers.
During the year we opened six net new stores to close the year with 125 stores
across the UK and ROI (FY18: 119 stores). We converted our John Lewis
womenswear account to the retail concession model in the first half of the year.
We now operate 34 concessions (FY18: 5). Our stores continue to play an
important role in our ‘Total Retail’ model, driving awareness of and showcasing
the Joules brand, providing great service to support the way a customer
chooses to shop our brand – be it online or in-store, as well as being important
sales channels in their own right.
Retail revenue, which includes e-commerce, stores and shows, increased
by 22.7% during the year to £159.1 million (FY18: £129.7m) on a reported
basis. On a comparative basis, excluding the retail concession transition, Retail
revenue increased by approximately 10%. This underlying growth was driven
by e-commerce.
The average payback on new stores, opened for more than one year,
continues to be well within our appraisal threshold of 24 months, with 95%
of our stores delivering a positive profit contribution based on store sales
alone, and all stores delivering a greater contribution when the value of digital
transactions and customer acquisition is taken into account.
E-commerce revenue increased by 58.1% to now represent 49.5% of total
retail revenue (FY18: 38.4%). Growth benefitted from the transition of John
Lewis womenswear and Next Label to the retail concession model. Underlying
growth from our owned e-commerce sites in the UK and internationally was
very strong in the Period reflecting the impact of our customer acquisition and
retention activity, improvements in our e-commerce platform as well as the
sector wide shift from physical retail to digital. During the Period we continued
to invest to enhance the online and ‘Total Retail’ experience for our customers
including new payment options, improved search functionality, product
merchandising, logistics and cloud hosting. We also improved the platform for
our international customers, outside of the core US and German markets, with
the introduction of local payment and fulfilment options. These enhancements,
combined with ongoing developments to targeted and personalised customer
communications and marketing, have helped us to drive increased website
traffic and improve conversion rates. Mobile continues to be the most
important e-commerce channel for our customers, with traffic from a mobile
device (including tablets) representing over three quarters of total traffic.
We evaluate the shape, locations and size of our stores and concessions
portfolios as part of our ‘Total Retail’ model given the increasing customer shift
towards e-commerce. Going forward, we will continue to carefully appraise
new openings in attractive locations that are appropriate for our brand and
product range, as well as selected relocations of existing stores to new sites.
We continue to actively manage our store portfolio, taking opportunities to
relocate and renegotiate terms; we also have a short and decreasing store
lease length, now at an average of c3.5 years to lease break, enabling
flexibility in our portfolio.
20 CHIEF EXECUTIVE' S STRATEGIC REPORT
CHIEF EXECUTIVE' S STRATEGIC REPORT 21
CHIEF EXECUTIVE'S STRATEGIC REPORT
BUSINESS REVIEW
CHIEF EXECUTIVE'S STRATEGIC REPORT
BUSINESS REVIEW
DEVELOPMENT AS A LIFESTYLE BRAND
Joules continues to expand as a lifestyle brand by driving growth in its core
categories and expanding into new product areas. During the Period, Joules
delivered sales growth across all product categories with a particularly
good performance in the core Womenswear category with strong customer
demand for Joules dresses, tops, outerwear and knitwear. The Accessories
category achieved impressive growth and Joules Footwear continued to
be well received by our customers with our famous wellington boot ranges
remaining popular, whilst our extended footwear range continued to perform
well with positive customer reactions to our expanded casual shoes and boots
collections.
We extend our product offer into core categories where the brand is relevant
to our customer base. In the year we saw developments within women’s
knitwear, leather bags and casual footwear, as well as extension within
already popular ranges. We carefully manage the overall size of our global
product catalogue, ensuring an appropriate level of new and continuity
products, as well as diligently removing options each season.
We also develop the brand through entering new product categories that are
relevant to our customers’ lifestyles by partnering, typically on a licence basis,
with carefully selected businesses that align to Joules’ values. We take a very
disciplined approach to establishing partnerships that we then develop over
several years whilst managing a pipeline of attractive new categories and
partners. Our focus is on home and gifting categories and products which
complement our clothing ranges.
Our existing partnerships performed well during the year. The Joules sofa
range, launched in partnership with DFS during the prior year, has performed
very well and is now available in 60 DFS stores across the UK and online. The
range has developed with new sofa styles, chairs and the successful addition of
a Joules bed. Our toiletries and gifting range developed with Boots performed
well amongst both Boots and Joules customers, with continued expansion of
both the range and offering.
During the year we expanded into new categories including distinctive Joules
DAB radios, Joules watches, stationery and gifting and, just before the end of
the year, an enhanced range of dog pet products that will be available online,
in Joules stores and across a wide range of pet retailers in the UK.
Since the year end, we launched a men’s formalwear range in partnership
with Next, with a collection comprising suits, jackets, shirts, ties, pocket squares
and shoes. Each item in the collection features Joules distinctive designs
and attention to detail with classic British tweeds and tailoring, reflecting the
heritage of the Joules brand being rooted in the British countryside.
WHOLESALE: GROWTH DRIVEN BY FURTHER
INTERNATIONAL EXPANSION
Underlying wholesale growth, adjusting for the transition of John Lewis
womenswear and Next Label to the retail concession model, was
approximately 22%. On a reported basis, including the impact of this
transition, wholesale revenue increased 2.8% to £57.1m (FY18: £55.5m).
UK wholesale performed to our expectations, with the addition of several new
accounts that have further evolved the mix of our UK wholesale business away
from traditional department stores towards online multi-brand and lifestyle
destination retailers, subscription models and stockists located where our
customers choose to spend their time.
Our primary international markets of the US and Germany saw strong growth,
reflecting the strength and growing appeal of the Joules brand.
INTERNATIONAL
International revenue increased by 43.5% to £35.1 million (FY18: £24.4m),
now representing 16.1% of Group revenue (FY18: 13.1%). This growth is
testament to our focused strategy to establish and grow the Joules brand
in selected international markets, primarily the US and Germany, through
wholesale partnerships and e-commerce channels.
Continued wholesale growth with an increasing number of international
partners was supported by strong e-commerce performance in the Period
reflecting effective, increasingly localised digital marketing activities as well
as growing awareness of the Joules brand.
In the US, we doubled the size of our trade showroom in New York due to
the increased interest in the Joules brand and product ranges and further
strengthened the local team. Our proven expansion strategy of both
deepening category penetration and developing new categories with
existing partners as well as extending our brand presence with new wholesale
partners continued to be effective during the year. We benefitted from the
first full year of trading with Dillard’s following the launch of womenswear in
the prior Spring/Summer season, piloted a ‘drop ship’ model with Nordstrom
– allowing us to broaden the online range of Joules products listed - and
continued to add new accounts including Stitch Fix, the fast-growing clothing
subscription service. Our wholesale partnerships are evolving, reflecting
changes in consumer shopping behaviours.
In Germany, we continued to perform well in the independent stockist channel,
serviced through our highly valued network of local sales agents.
In the year, we focussed on developing partnerships with online retailers and
marketplaces, including integrating with Zalando’s Partner Programme, initially
launching with a limited range on their platform.
Whilst the Group will remain firmly focused on developing the Joules brand
and achieving our potential in the significant US and German markets, the
brand’s international success has given the Group additional confidence to
explore measured expansion into new international markets.
During the year, we established a franchise agreement for Joules stores in the
Middle East region, with the first franchise store due to open in Dubai in the
Autumn. We believe that the Joules brand will resonate well in the Middle East
market and have teamed up with an experienced partner with extensive local
market expertise to explore the potential opportunity.
CUSTOMER COMMUNITY AND CONNECTIVITY
Joules has a loyal, growing and engaged customer base. Active customers
(those on our database who have transacted in the last 12 months) increased
to 1.5 million, up 8% on last year, with this increase being driven by both new
customers to the brand and retention of existing customers.
New customers discover and engage with the Joules brand through our digital
and social media marketing activity which typically drives a customer’s first
purchase through our website. Our stores also play an important role, being in
great locations for attracting ‘new to brand’ customers. The average marketing
cost of customer acquisition was maintained at the same level as the prior year.
Customer retention is first and foremost the result of providing customers with
distinctive, high quality products and a great experience, however they choose
to engage with the brand. This is supported by effective targeted marketing
campaigns.
At the end of the Period we went live with a new Customer Data Platform that
provides our teams with enhanced customer insight capability that in time will
allow even more targeted, relevant and personalised communication with
our customers.
Our current and future customers are increasingly using social media platforms
as their reference for inspiration, to engage with brands and to initiate a
purchase. The Joules brand, with its unique colours and prints, surprising details
on products and sense of fun, is well positioned for social media channels.
During the year we increased our investment in this area, across our in-house
team and our photography and digital media content creation capability. This
investment, which we anticipate will increase in the coming years, has already
delivered promising results with brand followers increasing across the main
social media platforms and, importantly, strong growth in engagement with
our content.
At the end of the year we have over 530,000 Facebook and over 240,000
Instagram followers, with these communities demonstrating high levels of
monthly engagement.
Partnerships with brands that have similar values to Joules and that resonate
with our customers are an important part of our marketing activity. During the
year we partnered with the Woodland Trust for the 'Let’s Explore' initiative,
the aim of which was to raise awareness of the importance of creating and
protecting the great British woodland. With the Woodland Trust we created a
children’s activity booklet which contained fun facts, a checklist and fun recipes
for little woodland explorers to keep busy during half term.
We also partnered with Holiday Cottages, leveraging our growing range of
lifestyle products to furnish twenty staycation properties across the UK with
Joules distinctive homeware products – this initiative highlights the strength and
scope of Joules as a lifestyle brand.
To celebrate our 30th birthday we’ve partnered with Lunar Caravans to
bring our customers an incredible opportunity to win a Joules Campervan,
worth over £50,000. With a high-profile launch of the competition in Joules’
heartland, Badminton Horse Trials, we have seen one of the fastest rate of
entries ever – further demonstrating our understanding of the Joules customer
and the broad appeal of our brand.
As Joules entered its 30th year, the business has celebrated each month with
social media and in-store campaigns that engage both loyal customers and
potential new customers. Whether it is sharing photos of themselves in some
of Joules’ earliest products that have stood the test of time or taking part in our
#JoulesMakingMemories year-long user-generated content campaign, the
response from our highly engaged customers has been fantastic, with over
12,000 image submissions to date. The birthday festivities are set to continue
throughout the year, as we celebrate Joules’ heritage and bright future and
highlight our continuous commitment to getting families outdoors to enjoy the
great British countryside.
INVESTING IN LONG TERM GROWTH
To support the Group’s long-term growth plans, we continue to invest in our
e-commerce proposition, stores, infrastructure, systems and people.
During the year we migrated our e-commerce platform to a cloud hosted
platform to increase site performance and reduce downtime. We also
upgraded our payment service provider solution and implemented several
enhancements to the customer proposition that make our websites easier for
browsing, searching and transacting. We continued to invest selectively in
our logistics and supply chain function in support of our growing e-commerce
business and to meet customer expectations.
FY19 was the first full year of operating our new group-wide ERP system,
Microsoft Dynamics AX, which was implemented to streamline and simplify
business processes and facilitate the international growth of the business across
multiple sales channels. We have seen the early benefits from the migration to
the new system and expect these to increase in future years.
As part of our ‘Total Retail’ model we started the development of a new
integrated point-of-sale platform, that we expect to be deployed to stores
during FY20. This new platform enables seamless integration between the
online and in-store experience as well as providing many operational benefits
for our store-based colleagues.
We migrated to a new Customer Data Platform just prior to the year end,
providing our teams with an increased level of customer insight and ability to
plan more targeted, relevant and personalised communications in the future.
In January 2019, we commenced the development of our new head office in
Market Harborough following the acquisition of the freehold site in FY18. We
anticipate moving in during Summer 2020 and are excited at the opportunities
that will flourish for our head office teams from a more flexible, modern
working environment that better reflects our brand and our values.
PEOPLE
The skill, passion and creativity of the Joules team remain critical to the brand’s
continued growth and success. I would like to take this opportunity to thank all
my colleagues around the world for their dedication and hard work during the
year.
We remain committed to investing in the skills and development of our people
across the business, with the aim of making our customers’ experiences with
Joules the very best they can be.
This is my final report to shareholders in my role as Chief Executive Officer of
Joules, prior to my retirement. Since joining Joules in 2010 the company has
grown significantly, and the brand has gone from strength to strength. Above
all else, this progress reflects the talent and commitment of the entire team
across the business. It has been, and continues to be, a tremendous pleasure
to work as part of a Joules team that is so passionate about serving our
amazing community of customers.
In Nick Jones, the Board has found an outstanding candidate to lead Joules
through the next exciting stages of its growth and development. I am looking
forward to working closely with Nick to ensure a smooth transition.
Joules has come a long way in the past 30 years since Tom started selling
clothing in the fields of Great Britain to develop into an outstanding
international lifestyle brand. Whilst the Joules journey so far has been
exceptional, I am extremely confident that the best is still to come.
COLIN PORTER
Chief Executive Officer
22 FINANCIAL REVIEW
FINANCIAL REVIEW
JOULES GROUP PLC
PROFIT BEFORE TAX – UNDERLYING AND STATUTORY
Underlying profit before tax (‘PBT’) increased by 19.4% to £15.5 million (FY18: £13.0m). Statutory profit before tax increased by 14.9% to £12.9 million (FY18:
£11.2m).
UNDERLYING AND STATUTORY RESULTS
Certain items have been excluded from the underlying results reported in the front section of this Annual Report. In the Period and prior period these solely relate to
the cost of share-based compensation. These adjustments are intended to provide the reader with a more meaningful year-on-year comparison.
Executive and employee share-based compensation plans were established at the time of the IPO, in May 2016. In accordance with IFRS 2, the non-cash
expense related to awards under the share plans is accounted for within administrative expenses over the Period until the shares are exercised, typically assumed
as three years. Awards under these plans were made in FY17, FY18 and FY19. As the share plan award cycle matures over the first three years, the related
expense is anticipated to increase each year. The associated income statement expense of £2.6 million in the Period (FY18: £1.8m) is treated as “non-underlying”
as it is non-comparable across periods whilst the share plan award cycle is in its initial three years, prior to reaching maturity. Therefore, from FY20 share-based
payments will no longer be treated as ‘non-underlying’.
Further detail on the share plans is contained within the Directors’ Remuneration Report and the Consolidated Financial Statements. A reconciliation between
underlying and statutory (IFRS) results is provided below:
£MILLION
Revenue
Gross profit
Admin expenses
Operating profit
Net Finance costs
Profit before tax
Operating profit
Depreciation & amortisation
EBITDA
52 WEEKS ENDED 26 MAY 2019
52 WEEKS ENDED 27 MAY 2018
Underlying
Share-based
compensation
Statutory
Underlying
Share-based
compensation
Statutory
218.0
119.4
(106.3)
13.1
(0.3)
12.9
(2.6)
(2.6)
(2.6)
218.0
119.4
(103.7)
15.7
(0.3)
15.5
15.7
7.8
23.5
185.9
103.5
(90.2)
13.3
(0.3)
13.0
13.3
7.8
21.1
185.9
103.5
(92.0)
11.5
(0.3)
11.2
(1.8)
(1.8)
(1.8)
FINANCIAL REVIEW
JOULES GROUP PLC
FINANCIAL REVIEW 23
REVENUE
Group revenue increased by 17.2% to £218.0 million from £185.9 million in
FY18 (up 16.8% on a constant currency basis).
Retail and Wholesale revenue figures in the Period were impacted by the
transition of two large UK wholesale accounts to the retail concession model
- a move that provides Joules greater future trading flexibility. For comparable
purposes the approximate revenue growth excluding the impact of this
transition is disclosed in the table below:
52 WEEKS ENDED 26 MAY 2019
Revenue
£million
Retail
Wholesale
Other (Licensing)
Group
159.1
57.1
1.8
218.0
Reported
growth %
Approx.
comparative
growth1 %
22.7%
2.8%
147.3%
17.2%
10%
22%
N/a
13%
1 Comparative growth percentages show the approximate growth for Retail and
Wholesale on the basis of the prior period being restated to reflect the impact of the retail
concession model. Note, the prior period restatement is unaudited and approximate.
RETAIL
Retail revenue increased by 22.7% to £159.1 million, which represents growth
of approximately 10% when adjusted for the transition of two large wholesale
accounts to the retail concession model in the Period. Revenue growth
benefitted from the Group’s flexible and integrated ‘Total Retail’ model as well
as our steadfast focus on delivering a seamless and enjoyable experience to
customers, irrespective of how, when and where they choose to shop the Joules
brand.
E-commerce
E-commerce performed particularly well this year and now represents
49.5% of all retail sales (FY18: 38.4%), benefitting from the transition to a
retail concession model in the Period. The strong performance of our owned
e-commerce channels was attributable to a 15% increase in traffic. In addition,
ongoing investment in both the customer experience and infrastructure of our
digital platforms continues to make them easier to shop and drive improved
conversion trends. This growth was complemented by good performance on
our concession partner retailer websites.
Stores
During the year we opened seven new stores and closed one store. At the
end of the Period, the Group operated 125 owned stores, in addition to 34
concessions and three franchises. Our stores are in desirable locations with
a reason to visit, they operate on relatively short lease terms and continue to
play an important role in the expansion of the Joules brand in the UK. As part
of our flexible and integrated ‘Total Retail’ model our stores portfolio plays
an increasingly important role in a customer’s digital purchase journey, with
increased utilisation of our click & collect, order in store and in-store return
services, with digital transactions now representing approximately 20% of store
transactions.
WHOLESALE
Wholesale revenue increased by 2.8% to £57.1 million, which represents
growth of approximately 22% when adjusted for the transition of two large
wholesale accounts to the retail concession model in the Period. This strong
growth reflects continued momentum in the Group’s target international
markets, the US and Germany, as well as growth in the UK. Within Wholesale,
international now represents approximately half of all sales, reflecting the
continued expansion of the Joules brand overseas.
LICENSING
Revenue from licensing activity increased by 147% to £1.8 million. This
increase is the result of improved performance within existing licensing
partnerships, as we increased distribution and grew the product range, and the
launch of new brand licence partnerships in new product categories including
Joules watches and Joules DAB radios.
INTERNATIONAL REVENUE
Total international revenue increased by 43.5% and now represents 16.1% of
total Group revenue (FY18: 13.1%). This very strong performance demonstrates
the appeal of the Joules brand in our target international markets. International
wholesale grew by 42.3% in constant currency, with growth in existing
accounts and the addition of several new accounts. International e-commerce
in the US and Germany continued to perform very well, with strong and
encouraging growth albeit from a relatively low base.
52 WEEKS ENDED
26 MAY 2019
27 MAY 2018
INCREASE
SHARE OF GROUP
REVENUE FY19
SHARE OF GROUP
REVENUE FY18
UK
International
TOTAL
£182.9m
£35.1m
£218.0m
£161.5
£24.4
£185.9
13.3%
43.5%
17.2%
83.9%
16.1%
86.9%
13.1%
100.0%
100.0%
24 FINANCIAL REVIEW
FINANCIAL REVIEW
JOULES GROUP PLC
GROSS MARGIN
Gross margin at 54.8% was 90 basis points ('bps') lower than the prior year.
Retail gross margin of 60.6% was 190 bps lower than the prior year, impacted
by the increasing mix of e-commerce sales, which have a lower gross margin
than store sales, as well as the transition of two large wholesale accounts to
the retail concession model. We also saw an increased level of customer
participation in our core annual promotional events.
Wholesale gross margin of 37.1% was 210 bps lower than the prior year, as a
result of higher sales growth in the US wholesale channel, which has relatively
lower gross margins. However, the US wholesale channel margin has
significantly improved year on year.
ADMINISTRATIVE EXPENSES - UNDERLYING
Underlying administrative expenses increased by 14.9% to £103.7 million from
£90.2 million and now represent 47.6% of revenue (FY18: 48.5%).
Excluding the impact of the retail concession transition and the resulting
increase in sales commissions, administration expenses grew by less than 8%,
well below comparable revenue growth at 13%, reflecting leverage from
previous investments in central capabilities and infrastructure.
Sales costs increased by 174.4% in the year to £13.3 million, with the increase
being mainly due to the first year of commission payments for transitioned retail
concessions.
Marketing costs increased by 7.7% in the year to £9.5 million. During the
year we increased marketing investment to support the growth of our US
wholesale business. We also increased investment in customer retention,
brand partnerships, social media and digital marketing in the UK and our
target international markets, the results of which are reflected in the strong
e-commerce channel performance.
Store costs grew by 3.8% in the year to £31.6 million. This reflects the increase
in National Living Wage, pension contributions and the impact of the new store
openings in the current and prior periods.
Distribution costs increased by 21.2% in the year to £8.4 million, driven by
growth in the US wholesale and e-commerce channels.
Head office costs increased by 5.1% in the year to £33.1 million. We
continue to invest in support of the areas of strategic growth including creative,
design, IT, digital and e-commerce. During the year we saw the benefit from
historic investments in head office functions and teams.
Depreciation and amortisation remained at £7.8 million (FY18: £7.8m), with
increases following the go-live of our new ERP platform in the prior period
offset by older stores being fully depreciated and lower levels of capital
expenditure compared to the prior period, most notably from fewer store
openings. The new head office development started in the Period is expected
to complete and begin depreciating in approximately 18 months.
The total rental expense, including service charges, for the Period was £14.8
million (FY18: £13.4m), with the increase due to US wholesale growth and
associated supply chain costs and the impact of new stores opened in the
Period and prior period. Business rates expense increased from £4.8 million to
£4.9 million in the year, reflecting the annualisation of rates increases and new
store openings.
NET FINANCE COSTS
Net finance costs of £0.3 million (FY18: £0.3m) related to interest and facility
charges on the Group’s revolving credit facility with Barclays Bank Plc.
TAXATION
The tax charge for the Period was £2.7 million (FY18: £2.6m). The effective tax
rate for the Period was 21.0% (FY18: 22.9%).
The effective tax rate was higher than the applicable UK corporation tax rate
of 19% for the Period, due to the impact of non-deductible expenses including
certain professional fees and expenses incurred in the fit-out and refurbishment
of new and relocated stores, offset by the benefit of deferred tax relating to
share-based payments. We anticipate that our effective tax rate will remain
broadly consistent in FY20.
EARNINGS PER SHARE
Statutory basic earnings per share for the Period were 11.6 pence per share
(FY18: 9.9 pence per share). Statutory diluted earnings per share for the
Period were 11.3 pence per share (FY18: 9.7 pence per share).
On an underlying, pro forma basis, the FY19 basic earnings per share were
14.1 pence (FY18: 11.8 pence).
To facilitate meaningful comparison of earnings per share, earnings are
adjusted for the non-underlying items detailed above and to reflect a consistent
tax rate across the Periods.
UNDERLYING PRO FORMA EPS
PBT – Underlying £m
Tax rate
Tax – underlying £m
Earnings – Underlying £m
Shares (million)
Underlying Basic EPS - Pence
Shares – diluted (million)
Underlying diluted EPS - Pence
FY19
15.5
20%
(3.1)
12.4
87.8
14.1
89.1
13.9
FY18
13.0
20%
(2.6)
10.4
87.8
11.8
89.1
11.6
DIVIDEND
The Board is recommending a final dividend of 1.35 pence per share in
respect of FY19 (FY18: 1.30 pence per share). This brings the total dividend
for FY19 to 2.1 pence per share (FY18: 2.0 pence per share). Following
approval by shareholders at the AGM on 25 September 2019, the dividend is
expected to be paid on 14 November 2019 to shareholders on the register at
25 October 2019.
FINANCIAL REVIEW
JOULES GROUP PLC
FINANCIAL REVIEW 25
CASH FLOW AND CAPITAL EXPENDITURE
Free cash flow, excluding expenditure on our new head office development,
was £8.7 million in the Period (FY18: £0.1 million). This improvement reflects
higher EBITDA, lower working capital outflow and a lower level of core
capital expenditure, primarily due to fewer store openings, as well as the
expenditure on the now live company-wide Microsoft Dynamics AX ERP
implementation in the prior period.
Core capital expenditure was £10.5 million (FY18: £12.5 million). Major
areas of capital expenditure included investment in our ‘Total Retail’ platform,
being enhancements to online and in-store customer experience capabilities,
and new stores. The development of our new head office incurred spend of
£1.0 million in the Period (FY18: £4.7 million, being largely the acquisition of
the site). Having obtained planning permission in November 2018, work has
now commenced, and we anticipate further expenditure of around £14 million
on the development over the next 18 months.
£MILLION
EBITDA
Net working capital cash flow
Operating cash flow
Interest - net
Tax paid
Capital expenditure – core
Free cash flow (core capex)
Capital expenditure – new Head Office
Cash flow before financing
FY19
23.5
(1.2)
22.3
(0.3)
(2.9)
(10.5)
8.7
(1.0)
7.6
FY18
21.1
(5.9)
15.1
(0.3)
(2.2)
(12.5)
0.1
(4.7)
(4.6)
Net cash
5.8
0.0
INVENTORY
Inventory at year end, including inbound goods-in-transit and the right of return
asset in line with IFRS15, was £35.9 million (FY18: £33.2m). The increase in
inventory reflects the growth of the business in the US and the impact of the
transition of two large wholesale accounts to the retail concessions model.
NET CASH AND BORROWINGS
Net cash at the end of the Period was £5.8 million (FY18: £0.0m).
Gross cash was £16.0 million at the end of the Period (FY18: £8.6m) and
Group borrowings were £10.2 million (FY18: £8.5m).
The Group has a £25 million revolving credit facility (‘RCF’) provided by
Barclays Bank Plc to fund seasonal working capital requirements. This facility
has been extended in the Period to mature in July 2022.
The development of the new head office is being funded, in part, through a
new £9.5 million term loan facility (‘Term Loan’), arranged with Barclays Bank
Plc during the Period. This new term loan incorporates the previous £3.5 million
term loan that was used to part fund the acquisition of the head office site. The
Term Loan will be drawn down over the next 18 months and is repayable by
December 2023.
At the year end the total Group borrowings comprised of the RCF £6.2 million
(FY18: £5.0m); the Term Loan £4.0 million (FY18: £3.2m), and legacy asset
finance loans £0.1 million (FY18: £0.3m).
IFRS 16 - LEASES
A new lease accounting standard, IFRS16, will be applicable to the Group’s
financial statements for the period ending 31 May 2020 (‘FY20’). The Group
intends to adopt the modified retrospective approach, which will result in the
restatement of the prior year (‘FY19’) comparatives.
The adoption of IFRS16 results in a change of accounting policy that impacts
the Statement of Financial Position, reclassifies certain Income Statement items
and changes the timing of profit recognition across periods as follows:
• Statement of Financial Position: Operating leases capitalised, at a
relevant discount rate, to create a ‘right of use asset’ and a corresponding
‘lease liability’
• Income Statement: Administrative expenses reduce as rent costs are
removed. Depreciation increases to reflect the straight-line amortisation
of the ‘right of use asset’ over the life of the lease. Finance costs increase
with an interest charge on the ‘lease liability’ - this finance cost reduces
over the life of the lease as the ‘lease liability’ balance decreases
• Profit before tax (‘PBT’): Will reduce at the start of a lease and increase at
the end of the lease due to the straight-line depreciation of the ‘right of use
asset’ and reducing interest charge on the ‘lease liability’
• Cash / cash flow: No impact
For illustrative purposes, the impact of IFRS16 on the Group’s FY19 Statement of
Financial Position and Income Statement has been assessed and its adoption
would result in an increase in ‘right of use asset’ by £59.9 million with an equal
‘lease liability’ and nil impact on net assets. A reduction in PBT of £0.6 million
results from the net impact of removing rent expense £12.7 million (reducing
administrative expenses), offset by increasing the depreciation charge by £11.8
million and the interest expense by £1.5 million.
26 PRINCIPLE RISKS AND UNCERTAINTIES
PRINCIPLE RISKS AND UNCERTAINTIES 27
PRINCIPLE RISKS AND UNCERTAINTIES
JOULES GROUP PLC
PRINCIPLE RISKS AND UNCERTAINTIES
JOULES GROUP PLC
Set out below are the principal risks and uncertainties that the Directors consider could impact the business. The Board regularly reviews the potential risks facing
the Group and the controls in place to mitigate any potential adverse impacts. The Board also recognises that the nature and scope of risks can change and that
there may be other risks to which the Group is exposed and so the list is not intended to be exhaustive.
The Corporate Governance Report includes an overview of our approach to risk management and internal control systems and processes.
EXTERNAL RISKS
External risks reflect those risks where we are unable to influence the likelihood of the risk arising and therefore focus is on minimising the impact should the risk
arise.
RISK AND IMPACT
MITIGATING FACTORS
Economy
The majority of the Group’s revenue is generated from sales in the UK to UK
customers. A deterioration in the UK economy may adversely impact consumer
confidence and spending on discretionary items. A reduction in consumer
expenditure could materially and adversely affect the Group’s financial
condition, operations and business prospects.
Brexit has increased the likelihood and potential impact of this risk.
As a premium lifestyle brand with a strong e-commerce channel, a
geographically disperse retail store portfolio and long-standing wholesale
customer accounts, the Directors consider that the UK business would be less
affected by a reduction in consumer expenditure than many other clothing
retailers.
In addition, the property portfolio has short lease terms, providing relative
flexibility to close or relocate stores should this become necessary.
Competitor actions
New competitors or existing clothing retailers or lifestyle brands may target
our segment of the market. Existing competitors may increase their level of
discounting or promotions and/or expand their presence in new channels.
These actions could adversely impact our sales and profits.
Foreign Exchange
The Group purchases the majority of its product inventory from overseas and is
therefore exposed to foreign currency risk, primarily the US Dollar.
Without mitigation, input costs may fluctuate in the short term, creating
uncertainty as to profits and cash flows.
Brexit has increased volatility in this area that may be sustained or worsen
going forward.
Regulatory and Political
New regulations or compliance requirements may be introduced from time
to time. These may have a material impact on the cost base or operational
complexity of the business. Non-compliance with the regulation could result in
financial penalties.
Recent and on-going US/China trade negotiations with the threat of
additional US tariffs on China manufactured products, as well as the continuing
uncertainty surrounding Brexit, have increased the risk and uncertainty in this
area.
Joules differentiates from competitors through its strong brand and products
that are known for their quality, details, colour and prints. Our large customer
database allows the Group to communicate effectively with customers,
developing customer engagement and loyalty.
The Group’s Treasury Policy sets out the parameters and procedures relating to
foreign currency hedging. We currently seek to hedge a material proportion of
forecasted US Dollar requirement 12-24 months ahead using forward contracts.
The Group’s US wholesale business generates US Dollar cash flows which
provide a degree of natural hedging.
The Group has processes in place to monitor and report to the Board on new
regulations and compliance requirements that could have an impact on the
business. The impact of any new regulation is evaluated and reflected in the
Group’s financial forecasts and planning.
The Group is carefully monitoring the development of US/China trade
negotiations and plans for alternative sourcing strategies are being reviewed to
mitigate against increases in US tariffs on China manufactured products.
RISK AND IMPACT
MITIGATING FACTORS
Brexit
The on-going potential exit of the UK from the EU adds complexity and
uncertainty across many areas of the Group’s operations that could impact on
our ability to get products to customers in a timely manner and on product profit
margins.
A so-called “no deal” Brexit, whereby there is no free trade agreement
between the UK and the EU, is likely to exacerbate potential impacts on the
Group.
The continuing lack of clarity on the nature and timing of the post-Brexit
arrangements make it challenging to plan mitigation strategies effectively. A
Brexit ‘task force’ has been established to monitor and evaluate the potential
impacts of different scenarios and to implement mitigations. Contingency
planning by the task force has been focussed on preparing for a “no deal”
Brexit with input from external advisors as appropriate.
Specific risk areas that could be impacted by Brexit are as follows:
• Political uncertainty: The level of economic and consumer uncertainty has
increased due to the lack of clarity around the UK’s exit from the EU.
Mitigating steps taken:
• Political uncertainty: A detailed review of the business has highlighted
areas that would most likely be impacted by Brexit.
• Changes in customs duty and VAT regimes: It is likely that goods being
imported to and exported from the EU will be subject to a different duty
and VAT regime, which may result in increased costs to the Group.
Additional paperwork and administration are likely to be required in order
to move product in to and out of both the UK and the EU.
• Supply chain delays: Additional customs procedures may result in delays
to both inbound and outbound movements of goods, particularly if the UK
withdraws from the EU with no free trade agreement. This could adversely
affect our supply chain and our ability to supply our wholesale customer
base.
• Changes in customs duty and VAT regimes: An assessment of the Group’s
operations has been undertaken to identify additional costs.
An EU based distribution arrangement has been established to mitigate
potential adverse duty impacts and service wholesale customers.
Paperwork (e.g. commercial invoices) has been automated to improve
efficiency where possible.
• Supply chain delays: In the short term, we are seeking to expedite delivery
of products into the EU ahead of the UK’s withdrawal. In addition to the
EU based distribution arrangement above, the business has achieved
Authorised Economic Operator status and is well progressed with plans
to implement Customs bonded status for the Group’s main UK distribution
centre which would further mitigate adverse duty impacts and supply chain
delays.
• Employment of EU nationals: EU nationals living in the UK may no longer
have automatic rights to remain working in the UK. This could restrict the
Group’s ability to retain and recruit appropriate talent.
• Employment of EU nationals: All EU nationals working for the Group have
been consulted on the implications of Brexit and support with applying for
settled status has been provided.
• Foreign exchange fluctuations: The Group’s exposure to fluctuations in
foreign exchange rates, in particular the strength of Sterling relative to the
US Dollar, is increased as a result of the impact of Brexit.
• Foreign exchange fluctuations: As noted above the Group seeks to hedge
a material proportion of forecasted US Dollar requirement 12-24 months
ahead using forward contracts.
• Regulation and compliance: The regulatory regime applicable to the
manufacture and sale of products may increase in complexity if the UK
adopts a different framework from the current EU based legislation.
• Contractual and procurement arrangements: Commercial terms and
contractual arrangements may be adversely impacted by Brexit.
• Regulation and compliance: On-going legal advice is being taken in this
area to ensure continued compliance with relevant UK and EU regulations.
• Contractual and procurement arrangements: A detailed review of all
relevant key contracts and service agreements has been undertaken to
ensure the Group’s commercial exposure is mitigated. Where appropriate
new contracts are incorporating Brexit clauses.
28
PRINCIPLE RISKS AND UNCERTAINTIES 29
PRINCIPLE RISKS AND UNCERTAINTIES
JOULES GROUP PLC
INTERNAL RISKS
Internal risks reflect those where we can influence the likelihood of the risk arising and the impact should the risk arise.
RISK AND IMPACT
MITIGATING FACTORS
Brand and reputation
The strength of our brand and its reputation are very important to the success of
the Group.
Failure to protect and manage this could reduce the confidence and trust
that customers place in the business, which could have a detrimental impact
on sales, profits and business prospects. Our brand may be undermined or
damaged by our actions or those of our partners or through infringement of our
intellectual property ('IP').
Brand and reputation are monitored closely by senior management and the
Board. The Group’s public relations are actively managed and customer
feedback, both direct and indirect, is carefully monitored.
We carefully consider each new trade customer with whom we do business
and monitor on an ongoing basis.
We actively monitor for potential IP infringements and have a process to
determine the appropriate course of action to protect our brand and IP
vigorously.
Product sourcing
The Group’s products are predominantly manufactured overseas. Failure
to carry out sufficient due diligence and to act in the event of any negative
findings, especially in relation to ethical or quality related issues, could
adversely impact our brand and reputation.
Design
As with all clothing and lifestyle brands there is a risk that our offer will not
satisfy the needs of our customers or that we fail to correctly identify trends that
are important to our customer base. These outcomes may result in lower sales,
excess inventories and/or higher markdowns.
Key management
Our business performance is linked to the performance of our people and
to the leadership of key individuals. The loss of a key individual whether at
management level or within a specialist skill set could have a detrimental effect
on our operations and, in some cases, the creative vision for the brand.
The Group has a policy and process for the selection of new suppliers. This
includes a review of compliance with laws and regulations and that suppliers
meet generally accepted standards of good practice. In addition, suppliers
are required to sign up to the Joules code of conduct.
The Group operates a programme of ethical audits across the product supply
base supported by a third-party agency.
Joules has a long established in-house creative and design team who have a
high level of awareness and understanding of our target customer segment. A
large proportion of our product range is anchored in classic products that are
evolved season to season.
Early feedback from our trade customers can allow us to further refine our
product range ahead of significant purchase commitments.
The Group’s remuneration policy, which includes a long-term incentive
scheme and performance-related pay, is designed to attract and retain key
management. The Group operates learning and development programmes to
increase the opportunities for internal succession.
The Board’s approach to the recruitment of Nick Jones as Chief Executive
Officer and transition in the run up to Colin Porter’s retirement illustrates the
procedures the Board has in place for ensuring continuity of key personnel.
IT security and systems availability
Non-availability of the Group’s IT systems, including the e-commerce websites,
for a prolonged period could result in business disruption, loss of sales and
reputational damage.
Malicious attacks, data breaches or viruses could lead to business interruption
and reputational damage.
A business continuity plan exists to minimise the impact of a loss of key systems
and to recover the use of the system and associated data.
A regular assessment of vulnerability to malicious attacks is performed and any
weaknesses rectified. All Group employees are made aware of the Group’s IT
security policies and we deploy a suite of tools (email filtering, antivirus etc.) to
protect against such events.
Supply chain
The disruption to any material element of the Group’s supply chain, in particular
the UK central distribution centre, could impact sales and impact on our ability
to supply our consumers, stores and wholesale customers.
The business continuity plan includes an established procedure in the event
of the loss of the UK distribution centre. In addition, the Group maintains
insurance cover at an appropriate level to protect against the impact of such an
interruption.
30 SOCIAL RESPONSIBILIT Y
SOCIAL RESPONSIBILIT Y 31
SOCIAL RESPONSIBILITY
RESPONSIBLY JOULES
OUR STRATEGY
Joules was born in the great British Countryside, so supporting the communities within it, and protecting the beauty that surrounds them, is a fundamental
part of our DNA.
Our Responsibly Joules Charter sets out our approach to corporate social responsibility, reflecting how we want our business to operate: fairly, responsibly and
sustainably. Our dedicated Responsibly Joules team is focused on embedding the principles of our Responsibly Joules Charter into everything we do and working
towards some ambitious goals for driving positive change. We are committed to being open, honest and transparent on environmental and sustainability matters,
recognising that it is a very broad and complex area and that often there are not straightforward or easy solutions. We also recognise that despite our focus,
progress and continued efforts we still have a long way to go. You can view our Responsibly Joules Charter in full at www.joules.com/responsibly-joules
We plan, manage and report our Responsibly Joules progress under four pillars:
RESPONSIBLY JOULES
SOURCING WITH
INTEGRITY
RESPECTING OUR
ENVIRONMENT
CHARITABLY
JOULES
OUR JOULES
FAMILY
Partnering with our
suppliers to create distinctive
products made with care,
consideration and respect
Respecting the environment
from the shire to shore
Inspiring and generating
positive change
Creating and nurturing a
vibrant and supportive team
which our direct and indirect
employees are proud to
belong to
“DOING THE RIGHT THING”
“GIVING SOMETHING BACK”
INSPIRED BY NATURE … DESIGNED TO LAST
“With growth comes responsibility.
As Joules has grown, so has our brand’s love for the countryside.
We look to its farmland, rivers, woods and meadows
for inspiration - and we also recognise that the countryside
is where our customers love to spend their time.
We’ve always taken pride in looking after the world around us, but with
our business growth we need to place even more focus on doing the right
thing for the future. Our teams are working hard behind the scenes to ensure
that we’re making the shift to more sustainable materials and solutions
throughout our business.” - Tom Joule, Founder.
As one of the major polluting industries in the world, we are acutely aware of
the impact the fashion industry has on the environment we so treasure; fashion
is responsible for more than 300,000 tonnes of landfill each year*, with
so-called ‘fast fashion’ a core contributor. We are proud to focus on quality
and timeless styles that are designed to last and be handed down for years to
come. Extending the life of our clothing items helps us all to reduce the end-to-
end environmental impact of the fashion industry.
More information on our Responsibly Joules strategy can be found online at
www.joules.com/responsibly-joules.
*British landfills. Environmental Audit Committee Report, Feb 2019
The nature around us is a constant source of inspiration for our in-house artists
who create our timeless ranges. From botanical beauty to a quintessential
cottage, our talented team of designers find beauty and inspiration in the
humblest of sources, which are then translated into our iconic prints here
at Joules.
Of course we look at the world of fashion, but you are much more likely to find
our designers in the great outdoors, armed with a camera and sketchbooks
gathering inspiration and a true understanding of our customers and their
lifestyles. It is this approach and understanding that makes Joules unique and
ensures we are creating collections to be loved for many seasons to come.
GOVERNANCE
Our Responsibly Joules strategy is driven by our Steering Group, comprising:
• Our dedicated Responsibly Joules team;
• Directors and stakeholders from across the business; and
• Chaired by our Chief Financial Officer.
The Steering Group reports directly into the Operating Board and Board
of Directors. This clear structure ensures that working ethically and acting
responsibly is at the heart of everything we do.
32 SOCIAL RESPONSIBILIT Y
SOCIAL RESPONSIBILITY
RESPONSIBLY JOULES
HIGHLIGHTS OVER THE LAST YEAR
This year, we have made some exciting progress on our Responsibly Joules
journey.
• We have taken significant steps to reduce our use of plastics and increase
the sustainability of our packaging materials
• We have formalised our ethical and sustainable sourcing credentials by
becoming members of:
• The Better Cotton Initiative
• Leather Working Group
• Ethical Trade Initiative
• We have established an ambitious target to achieve 100% sustainable
cotton by 2022
• We have invested to expand our in-house team who ensure sustainability
and environmental impacts are considered in everything we do
• We raised over £125,000 for our Charitably Joules charities, including
over £40,000 in our second ‘Charity Week’ event.
SOURCING WITH INTEGRITY
We place great importance on our approach to sourcing materials ethically.
We work with suppliers who live and breathe our own values in relation
to working practices and environmental behaviours, and who contribute
positively to the community and wider world around them. All our suppliers
must understand and adhere to our supplier policies and be likeminded in their
approach to driving continuous improvements.
Achievements this year include:
• We have formalised our memberships of several leading industry bodies
to be a part of driving collaborative change in industry;
• The Better Cotton Initiative
• Leather Working Group
• Ethical Trade Initiative
• We have achieved 90% of the leather we use in our bags and shoes
coming from Leather Working Group approved tanneries
• 100% of our Tier 1 suppliers - including all of those making our end
products - were audited by an independent compliance third party in
the year, using the SMETA (Sedex Members Ethical Trade Audit) or BSCI
(Business Social Compliance Initiative) format. This ensures suppliers meet
our standards in relation to work and labour practices, health and safety,
quality and responsible practices
• We ran a supplier training programme in the year to support suppliers
in improving their performance. This included workshops with the Ethical
Trade Initiative and Better Cotton Initiative.
Focus areas for the year ahead:
• We will continue to set ourselves ambitious targets for raw material usage,
working closely with suppliers and partners to deliver against our 100%
sustainable cotton targets and increase our use of more sustainable and
innovative materials
• We will further strengthen our partnership with industry bodies, becoming
an active member and collaborating with others in the industry to drive
positive change.
SUSTAINABLE MATERIALS
This year has seen some exciting progress in our journey to working with more
sustainable materials. Look out for our Organic Cotton babywear collection
launching in November 2019 and our men’s and boys’ swim shorts made from
recycled plastic bottles, launching in March 2020. Whilst we are thrilled to
have worked on these and be delivering them to market soon, we recognise
that there is still plenty more we can be doing. From our in-house design team
to our buyers, we are constantly challenging our teams to investigate new
innovative materials and sources and look forward to bringing our customers
more exciting and sustainable ‘by-design’ products in the coming seasons.
BETTER COTTON INITIATIVE
Joules are proud members of ‘The Better Cotton Initiative’ ('BCI'), which exists
to make global cotton production better for the people who produce it, better
for the environment it grows in, and better for the sector’s future.
BCI trains farmers to use water efficiently, care for the health of the soil and
natural habitats, reduce the use of harmful chemicals and respect the rights and
well-being of workers.
Our ambition at Joules is to be using 100% Sustainable Cotton by 2022, which
means sourcing cotton through either certified organic routes, or cotton grown
in accordance with the BCI’s standards.
COMPLIANCE / SUPPLIER AUDITS
All of our manufacturing suppliers follow strict procedures to ensure that
they are compliant with, and meet or exceed, our standards. Our ‘Code of
Conduct’ supplier manual sets out the procedures with which all our suppliers
must comply. These include standards in relation to work and labour practices;
environmental performance; raw materials; restricted substances; and animal
welfare practices.
Joules also engages an independent compliance organisation to audit
our suppliers annually using the SMETA audit process. New suppliers are
thoroughly assessed and evaluated as part of our onboarding process.
During the year every one of our Tier 1 suppliers – those who produce product
directly for Joules – were independently audited using the SMETA or BSCI
audit process, to ensure they comply with our Ethical and Social standards,
which cover the following key areas:
1. Prison / forced labour
2. Freedom of Association
3. Health and Safety
4. Child labour
5. Wages and benefits
6. Working hours
7. Discrimination
8. Regular employment
9. Disciplinary practices
10. Environment
New suppliers are thoroughly assessed and evaluated as part of an
onboarding process, and all of our suppliers are actively engaged in
supporting our Responsibly Joules journey.
SOCIAL RESPONSIBILIT Y 33
Focus areas for the year ahead:
• Making further improvements to our product packaging and labelling and
reviewing our end-to-end processes
• Ensuring sustainability is front of mind throughout the development of our
new head office
• Continuing to engage and inspire our colleagues to drive forward our
recycling programmes
• Enhancing our environmental and sustainability reporting to track progress
and identify focus areas for improvement.
PACKAGING
This year, we have placed a particular focus on reviewing and refining our
packaging. This is a particularly challenging area as packaging must serve
many purposes, in particular protecting our customers’ purchases as they travel
from manufacturer to warehouse, store and eventually our customers’ homes.
Finding packaging options that adequately protect, in addition to being
environmentally responsible, is a challenging but important priority for us.
We were delighted to introduce our new, environmentally friendly, Green
PE ‘Hello Sugar’ mailbags for dispatching our customers' online purchases.
Created from 100% sustainable sugar cane, these bags are fully recyclable,
carbon negative and made in the UK. By using this Green PE material, Joules
is supporting ‘closed-loop’ recycling systems as well as reducing our reliance
on oil-derived plastics.
SOCIAL RESPONSIBILITY
RESPONSIBLY JOULES
JOULES SUPPLIER CONFERENCE
In October 2018 we held our third annual supplier conference in Shanghai.
76 attendees representing over 50 different suppliers from China, India
and the UK took part in the conference, which had the objectives of sharing
business updates, reiterating the importance of sustainability across the supply
chain and strengthening our working relationships.
The agenda and presentations for the day centred around four key themes:
• The importance of Responsibly Joules
• Collaborative working
• Joules’ business strategy and development initiatives
• Supply chain excellence.
RESPECTING OUR ENVIRONMENT
With our roots firmly planted in the British countryside, ‘Respecting our
Environment’ is core to our brand. From the way we run our head office,
distribution centre and stores, to the way we source our products, managing
and minimising our environmental impacts is important to us. We recognise
that there is always more that can be done; we are proud of our achievements
so far and are continuously striving to do more.
Achievements this year include:
• We have removed all plastic carrier bags from our stores and in their
place have introduced a fully recyclable, FSC certified paper twist bag.
This now provides our customers with a three-tier choice of carrier bag:
• Recycle me – our paper twist bag
• Re-use me – our re-usable high-quality gift bags, also made from
FSC certified paper
• Keep me – our brand new ‘bag for life’ in partnership with the
Woodland Trust
• All online customer orders are now dispatched to them in our innovative
and environmentally friendly Green PE mailbags, made from 100%
sustainable sugarcane crop
• All our product care labels are now made from recycled polyester; we
are committed to extending this to all woven labels
• We have launched several new initiatives across our head office in
the year, including the installation of a Green Wall to showcase our
Responsibly Joules journey and successes, and to foster continuous
inspiration among our colleagues
• Our store colleagues and customers enjoyed and supported six beach
cleans this year, collecting 6,300 pieces of rubbish.
We passionately believe that small things can add up to make a big
difference. With this mindset, and the can-do attitude of our teams across the
business, during the year we:
• Switched to re-usable glass milk bottles at our head office, saving
thousands of plastic milk bottles
• Modified our printer set-up and printing process for Joules colleagues,
halving our paper usage across the head office
• Introduced a new, local recycling partner for our head office, providing
a greater level of visibility and transparency of our waste recycling –
allowing waste reduction initiatives to be developed
• Placed a greater emphasis on Responsibly Joules through internal
communications, with a commitment to regular focused updates to the
business to inspire and engage employees.
34 SOCIAL RESPONSIBILIT Y
SOCIAL RESPONSIBILITY
RESPONSIBLY JOULES
BEACH CLEAN
From shire to shore, we constantly take inspiration from beautiful Britain, so
ensuring the great British coastline is there for everyone to enjoy for years to
come is naturally important to us. For the eleventh year running, we joined
forces with Coast Magazine and the Marine Conservation Society to support
their annual Coast Beach Clean and, leading by example, organising some
of our own. In May 2019, more than 200 Joules customers, employees and
Coast Magazine readers came together to tackle six beach cleans across the
country, clearing a staggering 6,300 pieces of litter weighing over 44 KG.
“It was great to see Joules staff, volunteers and customers all coming
together, empowering people, informing them to make that change and
again improving their environments.’ - Matt Barnes from the Marine
Conservation Society.
CHARITABLY JOULES
Our Charitably Joules strategy aims to support charities which play crucial
roles in the lives of children, young adults, families and communities across
the country.
Throughout this year, we have proudly continued to support our four
Charitably Joules charities: The Prince’s Trust, Hospice UK, Farms for City
Children and Nuzzlets.
The Prince's Trust supports young people across the country,
who are unemployed or struggling at school to transform their
lives. We help to fund their Enterprise programme in Leicester
and Kettering which enables 18 - 30 year olds to re-focus
their lives through exploring the opportunity of setting up their
own business, thereby creating a long-term sustainable future for themselves.
Hospice UK is the national voice of hospice care in
the UK. Their philosophy is that everyone matters all the
way through their life and they want to make sure that
everyone with a life-limiting or terminal condition gets the very best care. We
help them support hospices all around the country to deliver the very best
service possible for local communities.
Farms for City Children is a charity that offers
city children the opportunity to experience life
on a working farm in the heart of the countryside.
Through its amazing work, it supports children’s
learning, raises self-esteem and enriches young lives,
providing a safe and welcoming setting where children and their teachers get
involved for a whole week in the working life of a real farm with real farmers.
Nuzzlets is a fantastic grassroots charity that not only offers a
loving home for unwanted animals, but also provides free access
for young people with disabilities, special needs and life-
threatening illnesses to visit the centre for animal assisted therapy
and education.
In addition to this, we were incredibly proud to launch a new charitable
partnership with the Woodland Trust. Through the sales of a new ‘Bag for Life’
we will be contributing to the creation and conservation of woodlands across
the UK, so they can be enjoyed by families and friends for years to come.
Achievements this year include;
• We raised a total of over £125,000 for our Charitably Joules charities,
with £40,000 of this being raised in one week through our ‘Charity Week’
• We were awarded the Prince’s Trust ‘People Power’ Award, recognising
our employees’ engagement and enthusiasm in fundraising for the charity
• We were awarded the Leicestershire Cares ‘Outstanding Contribution to
Community Development’ award for our volunteering work
• 81 teams across Joules took part in The Prince’s Trust Future Steps
challenge, walking over 130 million steps throughout February and raising
over £12,000 – more than any other retail business taking part.
CHARITY WEEK
September saw us hold our second annual Charity Week event, with
employees and customers raising money for our four Charitably Joules
charities. From a 750-mile virtual bike ride to climbing the Three Peaks and
of course the Joules favourite – a fancy dress competition – we raised an
amazing £40,000 in just one week.
“We love our partnership with Joules – from working together to support
young people to start their own businesses, to seeing and hearing the
fantastic fundraising efforts of colleagues across Joules, it’s always a delight
to come together and help more young people to live, learn and earn.
At The Prince’s Trust, we want to give young people a stake in their own
futures, and transform the lives of young people who are unemployed and
struggling at school, and we know that everyone at Joules feels the same.
Thank you so much for all your support, fundraising, and the unique passion
and enthusiasm you bring to everything you do - we’re so excited to see
what great ideas happen next!” - Cath Taylor, Partnerships Manager,
The Prince’s Trust.
WOODLAND TRUST ‘JUCO’ BAGS
We were thrilled to launch our first ‘bags for life’ this year, in partnership
with the Woodland Trust. The ‘juco’ bags, which are a mixture of cotton
and jute, have a life of between three to four years, replacing the need for
approximately 600 plastic bags over this time. £1 from every bag sold goes
to the Woodland Trust to support their conservation work.
“We are delighted to work in partnership with Joules. As a brand that
was born in the countryside, it’s a perfect fit. Working together, we are
not only reducing plastic bag use, but celebrating the importance of trees
and woods and the fantastic benefits they offer.” - Pip Borrill, Head of
Partnerships, Woodland Trust.
SOCIAL RESPONSIBILIT Y 35
SOCIAL RESPONSIBILITY
RESPONSIBLY JOULES
OUR JOULES FAMILY
Our Joules family continues to grow and, with it, so does our focus on
recruiting, retaining and developing the best possible people, as well as
maintaining and enhancing the working environment and culture which we are
so proud of at Joules.
We continue to develop our employee offering, expanding existing areas as
well as launching several new programmes. During the year we:
• Introduced a new benefits platform ‘My Joules’ to support financial,
physical and mental wellbeing and facilitate peer to peer recognition
• Partnered with Salary Finance to provide our employees with access to a
range of savings and responsible borrowing financial products
• Created further opportunities for flexible working with increased options
around job sharing, flexible hours and part-time roles
• Continued to offer a holiday purchase scheme to contribute towards
creating a family friendly culture and positive work-life balance
• Conducted a colleague engagement survey with Best Companies to
understand how our colleagues feel about working for Joules
• Maintained above National Living Wage pay rates across the business,
regardless of age
• Enhanced our colleague discount offer to all employees
• Introduced a new benchmarking and job grading system to ensure that we
pay market competitive rates of pay
• Said “thank you” to our colleagues with a wide range of financial
and non-financial rewards throughout the year including cream teas
for everyone, Christmas gift vouchers and Easter treats amongst other
surprises throughout the year
• Started our second retail apprenticeships programme and offered the
opportunity for apprenticeships across our head office and distribution
centre
• Rolled out ‘My catchups’ – which supports employees and their managers
to have brilliant conversations about performance and development
• Continued the Management Development and Leadership Development
programmes for the third year
• Offered the third Save as You Earn ('SAYE') share scheme to all
employees with strong uptake of over a third of eligible employees.
Volunteering is encouraged across all our employees as it plays an important
role in supporting our charity partners and local communities and is valuable
experience for the individual or teams that volunteer. We continued to work
with Leicestershire Cares on a range of local volunteering initiatives during
the year.
Employee engagement and communications are achieved through regular
‘Directors’ briefings’ to all head office and distribution centre employees,
a weekly newsletter and the Group intranet. We hold a store manager
conference twice per year and issue a weekly newsletter for all store-based
employees. These communications aim to keep employees up to date on
Group initiatives and performance. We encourage employee feedback
through formal and informal channels. During the year we launched our
“Yammer” internal social media platform to support communication and
information sharing across the Group.
We are an equal opportunities employer and give full and fair consideration
to employment applications regardless of race, gender or disability, instead
regarding an applicant’s aptitudes and abilities. We also strive to provide
ongoing training, career development and promotion opportunities for
all employees. In the unfortunate event that an employee should become
disabled, we are committed to continuing their employment and arranging
appropriate training. We proudly support the Retail Trust who provide a great
support network for colleagues across the industry.
We continue to operate a confidential, third party administered, whistle-
blowing helpline and all colleagues are encouraged to voice any concerns
or challenges that they may face either inside or outside of their working
environment.
Here at Joules we have a family of highly valued colleagues. We are
committed to ensuring that all our team members, regardless of gender,
receive the same support and opportunities to progress, develop and enjoy
a rewarding career with us. We recently published our gender pay gap
information, reporting on the difference between our male and female mean
and median salaries across the whole organisation, for the second year. We
are pleased to update that the median pay gap has reduced to 11%, down
from 15% in the prior year. The fact that a gender pay gap exists at Joules is,
we believe, due to the structure of our business rather than any inequality in
how we pay men and women for doing the same role. We are proud that
54% of our Operating Board, 68% of our Senior Management Team and 71%
of our upper quartile employees are female.
C H A P T E R
2
leaps and bounds
C O R P O R AT E G OV E R N A N C E
BEHIND THE DESIGN
When designing a garment, we constantly think about our customers -
where will the item be worn, when and with what? After shapes and colours,
we will consider what functional features and details will
add practicality whilst not compromising the style.
38 BOARD OF DIRECTORS
BOARD OF DIRECTORS
JOULES GROUP PLC
IAN FILBY
Non-Executive Chairman
Ian joined Joules in 2018 following
almost eight years as Chief Executive
Officer at DFS Furniture plc. He is
also the Chairman of Sofology,
a member of the British Retail
Consortium Board and Chairman of
the British Retail Consortium Policy
Board, Trustee of Pennies charity
and Director of IFF Life and Business
Solutions Ltd. Ian has more than 37 years retail experience, largely at Alliance
Boots, where his most recent roles were Retail Brand Development Director
and Trading Director. He has also held the roles of Interim Chief Executive
Officer of Nectar and Non-Executive Chairman of Shoe Zone plc.
TOM JOULE
Founder & Chief Brand Officer
Tom founded Joules in 1989 selling
practical, high quality garments at
shows and events around the UK.
Tom’s entrepreneurial spirit, and
flair in giving products personality
to match those of Joules customers’
colourful and uplifting outlook, has
been central to the brand’s continued
success and expansion. Now a
global lifestyle brand, in his current role, Tom is focused on connecting with the
Joules customer and category product direction. Since 2010, Tom has featured
regularly in Drapers 100 Most Influential people in Fashion Retail. In 2015 he
was a finalist in the Fashion Entrepreneur of the Year category at the Great
British Entrepreneur Awards.
COLIN PORTER
Chief Executive Officer
Colin joined Joules in 2010 from
Crombie, where he was Joint
Managing Director. Prior to this
Colin spent over 10 years at House
of Fraser, becoming Commercial
Director on the main board. Colin
has also held a number of senior
positions within the retail sector
including at Etam, Laura Ashley
MARC DENCH
Chief Financial Officer
Marc joined Joules in 2015 from
Walgreens Boots Alliance, where
he was Chief Financial Officer of
its International Retail & Global
Consumer Brands division. Marc
has previously held a number of
senior financial and corporate
development positions at Alliance
Boots, Homeserve, Experian and
and Arcadia. Colin was also appointed Chairman of Moss Bros in May 2019.
Freeserve plc. Whilst at Freeserve, he was involved in the successful IPO
process and the subsequent merger with Wanadoo. Marc is a chartered
accountant and has an MBA from Sauder Business School. Marc is also a
Trustee of the Drinkaware Trust.
DAVID STEAD
Senior Independent Non-Executive
Director
David joined the Board in April
2016. David is currently on the board
of Card Factory plc and Majestic
Wine plc as an Independent Non-
Executive Director. He has many
years’ experience as a director of
companies in the UK retail sector.
David was the CFO of Dunelm
Group plc for 12 years from 2003 to 2015. Prior to this, David served as
Finance Director for Boots The Chemists and Boots Healthcare International
between 1991 and 2003. David is a chartered accountant, having spent the
early part of his career with KPMG.
JILL LITTLE
Independent Non-Executive
Director
Jill joined the Board in April 2016.
Jill is currently the Non-Executive
Director of Shaftesbury plc and
previously chaired their remuneration
committee. Jill has spent the majority
of her career in the retail industry,
firstly at Simpsons of Piccadilly and
then at the John Lewis Partnership
(1975 to 2012). Jill became Merchandise Director on the board of John Lewis,
moving roles to become the Strategy and International Director where she was
responsible for developing the long-term strategy and international expansion
of John Lewis. Thereafter Jill became Business Development Director of the
John Lewis Partnership. Jill is also Chairman of the National Trust Commercial
Advisory Group and a Non-Executive Director of Loungers Plc. Jill continues to
sit on the board of Nobia AB, as a non-executive Director.
GOVERNANCE FRAMEWORK
JOULES GROUP PLC
CHAIRMAN’S INTRODUCTION
I have pleasure in introducing the Joules Group plc Corporate Governance
Statement, our fourth since our admittance to trading on AIM on 26 May
2016. The Board is committed to supporting high standards of corporate
governance and during the Period the Board took the decision to adopt the
QCA Corporate Governance Code (the ‘Code’). In this section of the Annual
Report we set out our governance framework and describe the work we have
done to ensure good corporate governance throughout Joules Group plc and
its subsidiaries (‘the Group’).
The Board is committed to a strong ethical corporate culture and ensuring the
culture within the business is consistent with Joules’ strategic objectives and
business model. The board achieves this by:
• Encouraging equal opportunities for all employees, as outlined in the
Responsibly Joules section of this report
• Investment in training and development
• Regular communication with employees e.g. weekly internal
communications emails, regular updates from the Board and an annual
conference for store managers and the wider business
• Appropriate induction for new employees
• Ongoing investment in a new head office, which will provide a vibrant
and creative environment consistent with the Group’s values.
The Board monitors and assesses the culture in the business through an
externally-managed employee engagement survey that was introduced
during the Period. The results of this survey are reviewed by the Board and
senior management to identify areas of focus – either to maintain and improve
on strengths or to develop actions and initiatives to address any areas of
concern. Employee engagement has, for the first time, been incorporated in
the proposed 2019 LTIP grants.
IAN FILBY
Non-Executive Chairman
BOARD SIZE AND COMPOSITION
For the financial year ended 26 May 2019, the Board has continued to
comprise of six Directors: a Non-Executive Chairman, two further Non-
Executive Directors and three Executive Directors.
ROLE OF THE BOARD
The Board is collectively responsible for the long term success of the Group. It
provides entrepreneurial leadership, sets Group strategy, upholds the Group’s
culture and values, reviews management performance and ensures that the
Group’s obligations to shareholders are understood and met.
CORPORATE GOVERNANCE 39
HOW THE BOARD OPERATES
The Executive Directors are responsible for business operations and for
ensuring that the necessary financial and human resources are in place to carry
out the Group’s strategic aims. The Non-Executive Directors’ role is to provide
an independent view of the Group’s business and to constructively challenge
management and help develop proposals on strategy. The Board as a whole
reviews all strategic issues and key strategic decisions on a regular basis.
Control over the performance of the Group is maintained through evaluation
of financial information; the monitoring of performance against key budgetary
targets; and by monitoring the return on strategic investments.
The Chairman takes responsibility for ensuring that the Directors receive
accurate, timely and clear information.
Directors are aware of their right to have any concerns recorded in the Board
minutes.
The Board is satisfied that all Directors are able to allocate sufficient time to the
company to discharge their responsibilities effectively.
MATTERS RESERVED FOR THE BOARD
Certain matters are reserved for approval by the Board, these include:
• Strategy and business plans – including annual budget
• Acquisitions and disposals of businesses (including minority interests)
• Changes in share capital and dividends
• Board membership and Committees and delegation of authority
• Remuneration and employment benefits (for the Executive Directors)
• Corporate statutory reporting
• Appointment of auditors
• New debt facilities
• Major capital and revenue commitments
• Corporate governance, policy approval, internal control and risk
management
• Certain litigation matters in line with the Joules litigation reporting policy
• Corporate social responsibilities.
BOARD MEETINGS
The Board has met eleven times in the reporting period. For all Board meetings
an agenda is established and a Board pack is circulated at least 48 hours
ahead of the meeting. As a minimum, the items covered include:
• Financial performance review
• Management accounts and KPIs
• Update on governance, finance, legal & risk matters
• Updates on significant business initiatives
• Proposals on any major items of capital expenditure
• Health and Safety
• Compliance with banking covenants and cash flow forecast.
The Board receives reports from the Executive Directors to enable it to be
informed of and supervise the matters within its remit. The Board considers at
least annually the Group’s strategic plan and, on a regular rolling basis, the
Board receives presentations from management on key areas of the Group’s
operations.
40 CORPORATE GOVERNANCE
GOVERNANCE FRAMEWORK
JOULES GROUP PLC
The following table shows Directors’ attendance at scheduled Board and Committee meetings in the period under review -
Neil McCausland*
Ian Filby*
Tom Joule
Colin Porter
Marc Dench
David Stead
Jill Little
BOARD
AUDIT
REMUNERATION
NOMINATION
2/11
10/11
10/11
11/11
11/11
11/11
11/11
1/3
2/3
-
-
-
3/3
3/3
1/3
2/3
-
-
-
3/3
3/3
-
4/4
-
-
-
4/4
4/4
* Neil McCausland resigned as Non-Executive Chairman on 31 July 2018. Ian Filby was appointed as Non-Executive Chairman commencing on 1 August 2018.
BOARD DECISIONS AND ACTIVITY DURING THE YEAR
The Board has a schedule of regular business, financial and operational
matters, and each Board Committee has compiled a schedule of work, to
ensure that all areas for which the Board has responsibility are addressed and
reviewed during the course of the year. The Chairman, aided by the Company
Secretary, is responsible for ensuring that the Directors receive accurate and
timely information to enable the Board to discharge its duties. The Company
Secretary compiles the Board and Committee papers which are circulated to
Directors at least 48 hours prior to meetings. The Company Secretary also
ensures that any feedback or suggestions for improvement on Board papers is
fed back to management. The Company Secretary provides minutes of each
meeting and every Director is aware of the right to have any concerns minuted.
SEPARATION OF DUTIES
There is a clear division of responsibilities between the Chairman and Chief
Executive Officer. Ian Filby, the Chairman, leads the Board and is responsible
for its effectiveness and governance. He sets the Board agenda and ensures
that sufficient time is allocated to important matters, in particular, strategic
issues. Colin Porter, the Chief Executive Officer is responsible for the day-to-
day management of Joules’ operations and for recommending strategy to the
Board. Colin is then responsible for implementing that strategy supported by
the wider management team.
The Non-Executive Directors have responsibility for determining the
remuneration of Executive Directors and have a prime role in appointing and,
where necessary, removing Executive Directors, and in succession planning.
BOARD COMMITTEES
The Board has delegated specific responsibilities to the Audit, Remuneration
and Nomination Committees. Each Committee has written terms of reference
setting out its duties, authority and reporting responsibilities, with copies
available on the Company’s website (www.joulesgroup.com) or on request
from the Company Secretary. The terms of reference of each Committee
were put in place at the time of the Company’s admission to AIM on 26 May
2016 and they are kept under review to ensure they remain appropriate and
reflect any changes in legislation, regulation or best-practice. Each Committee
comprises Non-Executive Directors of the Company. The Company Secretary
is the secretary of the Audit and Nomination Committees and the Group Legal
Counsel is secretary for the Remuneration Committee.
BOARD EFFECTIVENESS
The skills and experience of the Board are set out in their biographical
details on page 38. The experience and knowledge of each of the Directors
gives them the ability to constructively challenge strategy and to scrutinise
performance.
INDUCTION OF NEW DIRECTORS
Ian Filby joined the Board as Chairman on 1 August 2018. There were no other
new Directors appointed during the year and there were no other resignations.
On joining the Board, new directors undergo an induction programme
which is tailored to the existing knowledge and experience of the Director
concerned, including store and office visits; meetings with key employees;
and presentations from management on topics such as strategy, finance and
risk. The Chairman is responsible for this process, supported by the Company
Secretary.
TIME COMMITMENTS
The Board is satisfied that the Chairman and each of the Non-Executive
and Executive Directors continue to be able to devote sufficient time to the
Company’s business. There has been no change in the Chairman’s other time
commitments since his appointment.
CORPORATE GOVERNANCE 41
GOVERNANCE FRAMEWORK
JOULES GROUP PLC
EVALUATION
The Board conducted a thorough and formal Board review during the financial
year. This was led by the Chairman and consisted of interviews; the completion
of a questionnaire; and in-depth discussions between the Executive and Non-
Executive Directors.
No major changes to the function and focus of the Board arose from this
evaluation, however, the findings were used by the Board, and the Nomination
Committee, when considering short and long-term succession planning.
The Chairman will continue to meet regularly with the Non-Executive Directors
without the Executive Directors being present and the Senior Independent
Non-Executive Director will also meet with his fellow Non-Executive Director,
at least annually, and also on such other occasions as deemed appropriate, to
appraise the Chairman’s performance.
DEVELOPMENT
The Company Secretary ensures that all Directors are kept abreast of changes
in relevant legislation and regulations, with the assistance of the Group’s
advisers where appropriate. Executive Directors are subject to the Group’s
performance development review process through which their performance
against objectives is reviewed and their personal and professional
development needs considered.
EXTERNAL APPOINTMENTS
In the appropriate circumstances, the Board may authorise Executive Directors
to take non-executive positions in other companies and organisations
provided the time commitment does not conflict with the Director’s duties to the
Company. The appointment to such positions is subject to Board approval.
CONFLICTS OF INTEREST
At each meeting the Board considers Directors’ conflicts of interest. The
Company’s Articles of Association (‘Articles’) provide for the Board to authorise
any actual or potential conflicts of interest.
INDEPENDENT PROFESSIONAL ADVICE
Directors have access to independent professional advice at the Company’s
expense. In addition, they have access to the advice and services of the
Company Secretary who is responsible for advice on corporate governance
matters to the Board.
DIRECTORS AND OFFICERS LIABILITY INSURANCE
The Company has purchased directors’ and officers’ liability insurance during
the year as allowed by the Company’s Articles.
ELECTION OF DIRECTORS
In accordance with the Code, all Directors will offer themselves for election at
each Annual General Meeting (‘AGM’).
RISK MANAGEMENT AND INTERNAL CONTROLS
The Board has ultimate responsibility for the Group’s system of internal control
and for reviewing its effectiveness. However, any such system of internal
control can provide only reasonable, but not absolute, assurance against
material misstatement or loss. The Board considers that the internal controls in
place are appropriate for the size, complexity and risk profile of the Group.
The principal elements of the Group’s internal control system include:
• Day-to-day management of the activities of the Group by the Executive
Directors
• Preparation of a detailed annual budget including an integrated profit and
loss, balance sheet and cash flow. The budget is approved by the Board
• Monthly reporting of performance against the budget is prepared and
reviewed by the Board
• A schedule of delegated authority is maintained which defines levels of
approval authority over such items as capital expenditure, commercial
contracts, litigation and treasury matters
• Maintenance of a risk register which is reviewed at least annually by the
Board.
The Group continues to review its system of internal control to ensure
compliance with best practice, whilst also having regard to its size and the
resources available.
BOARD DIVERSITY
The Board does not have a formal Board diversity policy but plans to continue
to review the need for such a policy annually, taking into account the size of
the Board and skills required.
RELATIONS WITH SHAREHOLDERS
The Group maintains communication with institutional shareholders through
individual meetings with Executive Directors, particularly following publication
of the Group’s interim and full year preliminary results. All shareholders
are encouraged to attend the AGM at which the Group’s activities will be
considered and questions answered. General information about the Group is
also available on the Group’s website:
www.joulesgroup.com. This includes an overview of activities of the Group
and details of all recent Group announcements. The Non-Executive Directors
are available to discuss any matters stakeholders might wish to raise, and the
Chairman and Non-Executive Directors will attend meetings with investors
and analysts as required. Investor relations activity and a review of the share
register are standing items on the Board’s agenda and the Chairman ensures
ongoing, effective communication with shareholders.
The Senior Independent Non-Executive Director is available to shareholders if
they have concerns which contact through the normal channels of Chairman,
Chief Executive or other Executive Directors fails to resolve or for which such
contact is inappropriate.
ANNUAL GENERAL MEETING
The Company’s AGM will take place on 25 September 2019. The Annual
Report and Accounts and Notice of the AGM will be sent to shareholders at
least 20 working days prior to this date.
42
AUDIT COMMIT TEE REPORT 43
AUDIT COMMITTEE REPORT
JOULES GROUP PLC
On behalf of the Board, I am pleased to present the Audit Committee report for the 52 weeks ended 26 May 2019.
The Audit Committee has responsibility for, amongst other things, the monitoring
of the financial integrity of the financial statements of the Group and the
involvement of the Group’s external auditors in the external audit process,
together with providing oversight and advice to the Board in relation to current
and potential future risk exposures of the Group, reviewing and approving
various formal reporting requirements and promoting a risk awareness culture
within the Group. The Audit Committee also provides advice to the Board as to
whether the Annual Report and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information necessary for stakeholders to
assess the Company’s position and performance, business model and strategy.
MEMBERS OF THE AUDIT COMMITTEE
The Committee consists of three Non-Executive Directors: David Stead (Chair),
Ian Filby and Jill Little. The external Auditor (Deloitte LLP), the Chief Executive
Officer, Founder & Chief Brand Officer and Chief Financial Officer also attend
Committee meetings by invitation. The Committee has met three times since 24
July 2018 being the date the Group’s last Annual Report was approved.
The Board is satisfied that I, as Chairman of the Committee, have recent and
relevant financial experience. I am a chartered accountant and I have served
as Finance Director in a number of companies including Dunelm Group plc. I
report formally to the Board, as appropriate, on issues discussed by the Audit
Committee and I present the Committee’s recommendations.
The Committee also takes time to meet with the external auditors without any
Executive Directors or senior management present.
DUTIES
The duties of the Audit Committee are set out in its Terms of Reference, which
are available on the Company website (www.joulesgroup.com) and are also
available on request from the Company Secretary.
The Committee meets a minimum of twice per year.
The main items of business considered by the Audit Committee during the year
have included:
• Review of the consolidated financial statements and Annual Report
• Consideration of the external audit report and management representation
letter
• Going concern review
• Review of the risk management and internal control systems, and of the
Company’s risk register
• Review of the need for an internal audit function
• Review of Taxation matters of the Group
• Establishment of an Employee Benefit Trust
• Review of whistleblowing reports
• Review of the implications of forthcoming updates or changes to
accounting standards.
ROLE OF THE EXTERNAL AUDITOR
The Audit Committee monitors the Company’s relationship with the external
auditor, Deloitte LLP, to ensure that external auditor independence and
objectivity are maintained. As part of its review the Committee monitors the
provision of non-audit services by the external auditor. The breakdown of fees
between audit and non-audit services is provided in note 5 of the Group’s
financial statements. The non-audit fees related to Remuneration Committee
advice and other advisory services. The Committee also assesses the external
auditor’s performance. Having reviewed the external auditor’s independence
and performance, the Audit Committee recommends that Deloitte LLP be re-
appointed as the Company’s external auditor at the next AGM.
AUDIT PROCESS
The external auditor prepares an audit plan that sets out the scope of the audit,
key areas of audit focus, audit materiality and the audit timetable for audit
work. This plan is reviewed and agreed in advance by the Audit Committee.
Following the completion of its work, the external auditor presents its findings to
the Audit Committee for discussion.
INTERNAL AUDIT
At present the Group does not have an internal audit function. In view of
the size and nature of the Group’s business, the Committee believes that
management is able to derive assurance as to the adequacy and effectiveness
of internal controls and risk management procedures without a formal internal
audit function. This will be kept under review as the business evolves.
RISK MANAGEMENT AND INTERNAL CONTROLS
The Group has a framework of risk management and internal control systems,
policies and procedures. The Audit Committee is responsible for reviewing the
risk management and internal control framework and ensuring that it operates
effectively. The Committee has reviewed the framework and is satisfied that the
internal control systems in place are currently operating effectively.
WHISTLEBLOWING
The Group has a whistleblowing policy in place which sets out the formal
process by which an employee of the Group may, in confidence, raise
concerns about possible improprieties in financial reporting or other matters.
Whistleblowing is a standing item on the Committee’s agenda, and updates
will be provided at each meeting. During the Period, there were no incidents
for consideration.
GOING CONCERN
The Directors have prepared a detailed financial forecast with a supporting
business plan covering the medium-term future. The forecast indicates that
the Group will remain in compliance with covenants throughout the forecast
period. As such, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. For this reason, they continue to adopt the
going concern basis in preparing financial statements.
DAVID STEAD
Audit Committee Chairman
44 NOMINATION COMMIT TEE REPORT
DIRECTORS’ REMUNERATION REPORT 45
NOMINATION COMMITTEE REPORT
JOULES GROUP PLC
DIRECTORS’ REMUNERATION REPORT
STATEMENT FROM THE CHAIR OF THE REMUNERATION COMMITTEE
On behalf of the Board I am pleased to present the Nomination Committee Report for the 52 weeks ended 26 May 2019 (FY19).
Dear Shareholders
MEMBERS OF THE NOMINATION COMMITTEE
The Nomination Committee consists of three Non-Executive Directors; Ian Filby
(Chair), David Stead and Jill Little. Executive Directors attend by invitation.
In addition to this recruitment activity, during the year the Committee has
continued to focus its work on the following:
• The structure and composition of the Board and its Committees. The
DUTIES
In carrying out its duties, the Nomination Committee is primarily responsible for:
• Identifying and nominating candidates to fill Board vacancies
• Evaluating the structure and composition of the Board with regard
to the balance of skills, knowledge and experience and making
recommendations accordingly
• Drafting the job descriptions of all Board members
• Reviewing the time requirements of Non-Executive Directors
• Giving full consideration to succession planning
• Reviewing the leadership of the Group.
The Committee is scheduled to meet once a year but it will meet more
frequently if required.
The Committee reports to the Board on how it has discharged its
responsibilities. The Committee’s written Terms of Reference are available on
the Group’s website (www.joulesgroup.com).
ACTIVITY DURING THE YEAR
The Committee has met formally four times during the year, the additional
meetings being convened to support the successful recruitment of a
replacement Chief Executive Officer for the Group. The search was led by Ian
Filby, the Group’s Chairman, supported by the other members of the committee
together with the Group’s HR Director, and involved an extensive selection
process. An appropriate external recruitment agency was engaged to assist
with the process and a pool of suitably qualified and experienced candidates
was prepared as an initial step. A multi stage assessment and interview
process was then undertaken with input from all Directors as appropriate to
ensure that the correct candidate was identified. The outcome of the process
was the announcement on 8 May 2019 that Nick Jones will become the
Group’s next Chief Executive Officer from September 2019.
Committee discussed the skills, experience and diversity of the current
Board and committee members taking into account the current and future
needs of the Group, its culture and strategic objectives. The Committee
believes that the Board has the necessary balance of skills, knowledge
and experience for its current needs. The Committee believes that the
Directors are able to devote sufficient time to the Group, taking into
account their other Directorships
• The structure of the Operating Board. The Committee reviewed the
current management structure of the Group and options for the future.
In particular, the membership and work of the Operating Board, which
consists of senior management of the Group and meets monthly to review
performance and progress against strategic objectives and is responsible
for the implementation of the Group’s strategy
• Succession planning. The Committee discussed long term succession
planning and emergency cover, and the need to identify and develop
talent both within the Group and from the wider market. In its discussions
the Committee recognised the importance of looking at a diverse range of
candidates when considering future appointments.
TERMS OF REFERENCE
The committee will keep its terms of reference under review with the main
objective of ensuring that an appropriate management framework and
governance structure is in place.
IAN FILBY
Nomination Committee Chairman
On behalf of the Board I am pleased to present the Directors’ Remuneration
Report for the 52 weeks ended 26 May 2019 (FY19). Although not subject to
the reporting regulations of fully listed companies in the UK, the Remuneration
Committee has taken account of these regulations in the preparation of the
FY19 Directors’ Remuneration Report as a matter of best practice. Therefore,
this report is presented as:
• A Directors’ Remuneration Policy Report – setting out the parameters within
which the remuneration arrangements for Directors operate; and
• An Annual Report on Remuneration – setting out the remuneration earned
by Directors in respect of FY19 and how we intend to apply the policy for
FY20.
This Directors’ Remuneration Report will be put to an advisory shareholder vote
at the forthcoming annual general meeting on 25 September 2019.
OUR APPROACH TO REMUNERATION – KEY PRINCIPLES
Our policy on executive remuneration is designed to:
• include a competitive mix of base salary and short and long-term
incentives, with an appropriate proportion of the package determined by
stretching targets linked to the Group’s performance;
• promote the long-term success of the Group, in line with our strategy and
focus on profitability and growth; and
• provide appropriate alignment between the interests of shareholders and
executives, which is further enhanced through shareholding guidelines and
the deferral of a proportion of the annual bonus as shares.
FY19 PERFORMANCE AND ANNUAL BONUS OUTCOME
As detailed in the Strategic Report and Financial Review, Joules has delivered
strong results and made continued progress against its stated strategic
priorities. Good growth was delivered across distribution channels and
geographic markets, reflecting the growing appeal of the Joules brand and the
quality and design of our products, both in the UK and internationally. Based
on FY19 underlying profit before tax (‘PBT’) of £15.47 million the Executive
Directors will receive 55.6% of their maximum annual bonus opportunity. Half
the bonus earned being paid in cash and half as a share award deferred over
three years. Further details are set out herein.
The Company’s first long-term incentive awards were granted under the LTIP
in July 2016 (‘LTIP 2016’) and vested by reference to performance assessed
over the period of three financial years ended on 26 May 2019. The awards
vested at 98.8% of the maximum, reflecting exceptional performance over the
three year performance period with earnings per share (‘EPS’) growth of 104%
from FY16 to FY19, a compound annual growth rate of 26.7%. The awards
were earned over a three year period, but in line with the reporting regulation
for fully listed companies we have included the full value in the single figure of
remuneration table herein.
EXECUTIVE DIRECTOR SALARIES AND NON-EXECUTIVE
DIRECTOR FEES
Executive Directors’ base salaries were reviewed in April 2019, in line with the
salary review timetable for other head office employees. The base salaries for
Tom Joule, Colin Porter and Marc Dench were all increased by 2.0% in line
with the standard base salary increase across the Group.
Tom Joule’s base salary increased from £335,000 to £341,700, Colin
Porter’s from £345,000 to £351,900, and Marc Dench’s from £265,000 to
£270,300.
REMUNERATION FOR THE YEAR COMMENCING
27 MAY 2019
A summary of the proposed application of our remuneration policy for FY20 is
set out below:
• It is intended that Executive Directors’ base salaries will be reviewed
annually in April, at the same time as the pay review for the wider head
office workforce
• The maximum annual bonus opportunity for FY20 will be 100% of salary
for Tom Joule and Marc Dench. The annual bonus is subject to the
achievement of stretching underlying PBT performance targets
• The fourth awards under the LTIP (‘LTIP 2019’) will be granted following the
announcement of the FY19 full year results. The maximum LTIP opportunity
is 100% of salary for Tom Joule and 125% of salary for Marc Dench. These
awards are subject to stretching targets with 60% of the award linked to
an EPS target and 40% of the award linked to the strategic targets: US
revenue growth (15% of award); UK digital sales growth (15% of award);
and the Joules employee engagement score (10% of award). Reflecting
best practice, the vesting of the awards will also be subject to a further
underpin, that the vesting reflects the underlying financial performance of
the Group over the performance period.
The bonus and LTIP arrangements for Colin Porter and Nick Jones are
described below.
BOARD CHANGES
As announced on 1 April 2019, Colin Porter intends to retire before the end
of the FY20 financial year. It is currently anticipated that Colin will leave the
business on 31 October 2019. Colin has made a truly outstanding contribution
to the Group since joining in 2010 and during his tenure, the Group has
achieved fantastic growth in the UK and internationally. The remuneration
arrangements in respect of Colin’s departure, which are in line with the
Company’s Directors’ Remuneration Policy, are summarised below:
• FY20 bonus: Recognising that Colin will remain with the business for five
months of FY20, he will be eligible to earn a bonus in respect of FY20,
subject to the satisfaction of the same PBT targets which apply to the other
executive directors. Any bonus earned will be paid in cash and reduced
pro-rata to reflect his period of service and paid at the same time as for
other directors
• LTIP 2019: Colin will not receive an LTIP award in 2019
46
DIRECTORS’ REMUNERATION REPORT 47
DIRECTORS’ REMUNERATION REPORT
STATEMENT FROM THE CHAIR OF THE REMUNERATION COMMITTEE
• Existing LTIP awards: Colin was in service for the whole of the
• We will grant Nick an award over Joules’ shares with a value of
performance period for his 2016 LTIP award, which will vest at 98.8% of
the maximum as with other 2016 LTIP awards. Colin’s 2017 LTIP award
and 2018 LTIP award will continue, and vest subject to the satisfaction of
the performance conditions assessed at the ordinary time. To the extent
either award vests, a reduction will be made to reflect the proportion of
the performance period for which Colin was in service
• Existing deferred bonus awards: Colin will retain his existing deferred
share awards. In recognition of the fact that Colin was in service for the
whole of the applicable bonus years, and that the deferred awards are
not subject to further performance conditions, no reduction to the awards
will be made as a result of Colin leaving before the end of the deferral
period, which will vest in accordance with the originally anticipated
timelines.
£170,599 as part compensation for share awards which would have
vested if he had remained with his former employer. The shares will be
granted on or before 31 March 2020 and the award will be subject to a
three-year holding period.
Each of these awards will be subject to clawback if Nick leaves Joules (or
notice is served) within the period of three years starting with the date on which
he joins, with the proportion that may be clawed back reducing from 100% to
0% over that three-year period.
The Committee will continue to monitor our remuneration policy to ensure it
remains aligned to the business strategy and the delivery of shareholder value.
As announced on 8 May 2019, Nick Jones will succeed Colin Porter as Chief
Executive Officer during 2019. The remuneration arrangements for Nick are in
line with the Group’s Directors’ Remuneration Policy. Nick’s base salary will be
set at £420,000, the level required to secure him in role taking into account his
previous employment, and his salary will be kept under review to take account
of his development in role. Nick will be entitled to an annual bonus and LTIP
opportunity for FY20 of 150% of base salary. The annual bonus opportunity will
be pro-rated for the period of time served during the year and the Company
intends to grant the LTIP award as soon as reasonably practicable after Nick
joins. Nick will be entitled to pension contributions of 3% of salary, in line with
the contributions provided to the wider workforce.
In determining remuneration packages and arrangements the Remuneration
Committee adopts the principles set out in the QCA Corporate Governance
Code and evolving best practice. Notwithstanding this, and whilst the UK
Corporate Governance Code (the “UK Code”) does not apply to the Group,
the Remuneration Committee recognises the changes to the UK Code and
during FY20 will reflect on how these changes may be applied to the Group’s
approach to remuneration.
We remain committed to a responsible approach to executive pay as I trust
that this Remuneration Report demonstrates and hope that we can rely on your
continued support at our AGM.
We have agreed to compensate Nick for some (but not all) of the awards he
forfeited as a result of his resignation from his former employer, as follows:
• Nick will receive a cash payment in December 2019 of £120,559 in
respect of part of a cash bonus which would have been payable to him,
in the same timeframe, if he had remained with his former employer
JILL LITTLE
Remuneration Committee Chairman
48 DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION REPORT 49
DIRECTORS’ REMUNERATION REPORT
EXECUTIVE DIRECTORS’ REMUNERATION - AT A GLANCE
DIRECTORS’ REMUNERATION REPORT
EXECUTIVE DIRECTORS’ REMUNERATION - AT A GLANCE
We take a rigorous and disciplined approach to ensure that the remuneration package for Executive Directors rewards the delivery of both short and long-term
financial and strategic business goals, that are consistent with creation of shareholder value. The table below provides a summary of the key elements of the policy
and its application for FY19 and FY20.
ILLUSTRATION OF POTENTIAL REMUNERATION OPPORTUNITIES FOR THE EXECUTIVE DIRECTORS
The charts below show the potential remuneration opportunities for the Executive Directors during FY20.
BASE SALARY
Base salary and benefits are set at a level that is competitive with reference to the market and companies of a similar size and level
of complexity.
PENSION
Pension contribution rate of 5% for Executive Directors other than Nick Jones, who is entitled to contributions of 3%.
The company contribution rate for the all-employee defined contribution pension scheme is 3%.
ANNUAL BONUS
Maximum opportunity of 100% of salary for Executive Directors other than Nick Jones, whose annual bonus opportunity will be
150% of salary.
Underlying profit before tax (PBT) target selected to best represent alignment with shareholders.
Underlying PBT targets for the FY19 award were: Threshold (25% pay-out) £14.54m; Target (50% pay- out); £15.30m; Maximum
(100% pay-out) £16.83m. The maximum payout target represented a year-on-year underlying PBT growth rate of 29.5%.
ANNUAL BONUS
DEFERRAL
Executive Directors will receive 55.6% of their maximum annual bonus opportunity for 2019, based on FY19 underlying PBT of
£15.47m.
Half of the annual bonus award is paid in the form of shares, deferred over three years. Deferral provides alignment with
shareholder value creation objectives.
LTIP
SHAREHOLDER
ALIGNMENT
AND RISK
MODIFICATIONS
OR CHANGES TO
REMUNERATION
OR POLICY
The LTIP is designed to encourage sustainable development of the Group and creation of significant shareholder value.
The maximum LTIP opportunity is 100% of salary for Tom Joule, 125% of salary for Marc Dench and 150% of salary for Nick Jones
vesting over a three-year period.
FY20 LTIP targets are: 1) FY22 EPS (60% weighting), and 2) FY22 Strategic targets (40% weighting): US revenue growth; UK
digital sales growth; Employee engagement score.
• EPS target: Threshold 18.0p to Maximum 22.0p. Achievement of the Maximum would represent an annualised EPS growth
rate of 17.0% from FY19 (assuming constant fully diluted shares)
• Strategic targets:
• US revenue (15% of award weighting): Threshold at 30% compound annual growth rate from FY19 to FY22 (‘CAGR’) to
Maximum at 43% CAGR;
• UK digital sales (15% of award weighting): Threshold at 12% CAGR to Maximum at 20% CAGR; and
• Employee engagement (10% of award weighting): Threshold at a mid-1 star level (Best companies BCI score of 678) to
Maximum at mid-2 star level (BCI score 717)
• Pay-out levels: below Threshold no pay-out; at Threshold 25% pay-out; at Maximum 100% pay-out, with straight line vesting in
between
• The vesting of the awards will also be subject to a further underpin, that the vesting reflects the underlying financial
performance of the Group over the performance period
A shareholding requirement of 200% of salary.
Malus and claw-back provisions.
No other changes to the policy as set-out in the FY17 Annual Report have been made or are proposed to be made in the
forthcoming FY20 period.
£
Tom Joule
£
Colin Porter*
£
Marc Dench
1,200,000
1,000,000
800,000
600,000
400,000
200,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
Minimum Target Maximum
Minimum Target Maximum
Minimum Target Maximum
FIXED PAY
BONUS
LTIP
* As disclosed above, Colin Porter will not be granted an LTIP award in 2019 due to his retirement as Chief Executive Officer. For the illustration, Colin’s fixed pay and bonus is shown for
a full year.
Assumptions:
• Fixed pay includes salary, benefits and pension contributions
• Salaries are based on the Executive Directors’ salaries as at 1 April 2019
• Benefits are as paid for the year ended 26 May 2019
• Bonus opportunity is based on nil payout for minimum scenario, 50% payout for on target and 100% for maximum
• LTIP opportunity is based on nil payout for minimum scenario, 25% for threshold performance and 100% for maximum
• The Target LTIP figure in the tables above is for achieving 50% of the maximum
• The charts do not show the impact of any share price fluctuation on the level of remuneration opportunity.
50 DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION POLICY REPORT 51
DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION POLICY REPORT
DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION POLICY REPORT
The following section sets out our Directors’ Remuneration Policy (the ‘Policy’).
The aim of the Policy is to align the interests of Executive Directors with the Group’s strategic vision and the long-term creation of shareholder value. The Policy is
intended to remunerate Executive Directors competitively and appropriately for effective delivery and allows them to share in this success and the value delivered
to shareholders.
EXECUTIVE DIRECTORS’ REMUNERATION POLICY
The table below sets out the elements of Executive Directors’ compensation and how each element operates, as well as the maximum opportunity of each element
and any applicable performance measures.
FIXED REMUNERATION
ELEMENT, PURPOSE
AND STRATEGIC LINK
OPERATION
MAXIMUM OPPORTUNITY
BASIC SALARY
To provide a competitive base salary
for the market in which the Group
operates to attract and retain Executive
Directors of a suitable calibre.
Usually reviewed annually taking account of:
• Group performance
• Role, experience and individual performance
• Competitive salary levels and market forces
• Pay and conditions elsewhere in the Group
BENEFITS
To provide market competitive benefits
as part of the total remuneration
package.
RETIREMENT BENEFITS
To provide an appropriate level of
retirement benefit (or cash allowance
equivalent).
Executive Directors currently receive private medical
insurance, company car or allowance, staff discounts
and the right to participate in the Save As You Earn
(SAYE) scheme. Other benefits may be provided
based on individual circumstances. For example,
relocation or travel expenses.
Executive Directors are eligible to participate in
the Group defined contribution pension plan. In
appropriate circumstances (e.g. if contributions
exceed the annual or lifetime pension allowance
in the UK), Executive Directors may be permitted
to take the benefit as additional salary instead of
contributions.
Increases will normally be in line with the range of salary
increases awarded (in percentage terms) to other Group
employees. Increases above this level may be awarded to
take account of individual circumstances, such as:
• Promotion
• Change in scope or increase in responsibilities
• An individual’s development or performance in role
• Alignment with the market over time
• A change in the size or complexity of the business
Whilst the Committee has not set a maximum level of benefits
that Executive Directors may receive, the value of benefits is
set at a level which the Committee considers appropriate,
considering market practice and individual circumstances.
The contribution level for FY20 is set at 5% of salary (there is an
overall limit of up to 10% of salary) for Executive Directors other
than Nick Jones, who will receive 3% of salary.
OPERATION
MAXIMUM OPPORTUNITY
AND PERFORMANCE METRICS
VARIABLE REMUNERATION
ELEMENT, PURPOSE
AND STRATEGIC LINK
ANNUAL BONUS
Rewards performance against targets
which support the strategic direction of
the Group.
Awards are based on performance (typically
measured over one year) against targets determined
by the Committee at the start of the period.
Deferral provides a retention element
through share ownership and direct
alignment to shareholders’ interests.
Pay-out levels are determined by the Committee after
the year end. The Committee has discretion to amend
pay-outs should any formulaic output not reflect their
assessment of performance.
LONG-TERM INCENTIVE (‘LTIP’)
To create alignment between the
interests of Executive Directors and
shareholders through the delivery of
performance-based awards in Group
shares.
A proportion (normally 50%) of any bonus is paid
in cash with the balance paid in the form of shares
(subject to a de-minimis amount of £10,000) usually
deferred for three years. Awards may include
dividend equivalents earned between the grant and
vesting date.
Awards can be made over conditional shares or nil
cost options (or cash equivalent). Vesting is subject to
the achievement of specified performance conditions
normally over three years.
Awards may include dividend equivalents earned
between grant and vesting date.
Awards may be structured as Qualifying LTIP awards
comprising of an HMRC tax-qualifying option and
an LTIP award, with the vesting of the LTIP award
scaled back to take account of any gain made on the
exercise of the tax-qualifying option.
Overall maximum is up to 150% of base salary under the
Policy. However, the maximum FY20 bonus opportunity for
Executive Directors other than Nick Jones is capped at 100%
of salary. Nick Jones’ annual bonus opportunity will be 150%
of salary.
Performance measure:
Targets are set annually and aligned with key financial,
strategic and/or individual targets with the weightings between
these measures determined by the Committee each year
considering the Group’s priorities at the time.
The FY20 bonus is based on a PBT target.
Overall maximum is up to 150% of base salary under the
Policy. However, the maximum LTIP 2019 award for Tom Joule
will be 100% of salary, for Marc Dench it will be 125% of
salary and Nick Jones will be entitled to an LTIP opportunity of
150% of salary.
Where an award is structured as a Qualifying LTIP, the shares
subject to the tax-qualifying option element are excluded for
the purposes of this limit, reflecting the scale back.
Performance measure:
Set to reflect longer term strategy and business performance.
Performance measures and their weighting are reviewed
annually to maintain appropriateness and relevance.
For threshold levels of performance 25% of the award will vest
rising to 100% for maximum performance. Below threshold the
award will not vest.
The LTIP 2019 awards are subject to stretching targets with 60%
of award based on EPS and 40% based on strategic targets,
with an additional underpin applying to the whole award.
52 DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION REPORT 53
DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION POLICY REPORT
DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION POLICY REPORT
INFORMATION SUPPORTING THE POLICY TABLE
EXPLANATION OF PERFORMANCE MEASURES CHOSEN
Performance measures are selected for the annual bonus and long-term
incentive to reflect the Group’s strategy. Stretching performance targets are set
each year by the Committee, considering several different factors.
APPLICATION OF MALUS AND CLAWBACK
For up to three years following the payment of an annual bonus award (and
two years after the vesting of an LTIP award), the Committee may require the
repayment of all or some of the award if there is corporate failure, a material
error or misstatement of the financial results, gross misconduct or if information
comes to light which, had it been known, would have affected a decision as to
the extent to which an award would have vested.
For FY20, the annual bonus is based on PBT. Stretch targets for the maximum
awards under the bonus are set against outperformance of internal company
forecasts. The performance measure for the LTIP 2019 grant is underlying
diluted Earnings Per Share (EPS) (60% of award weighting) and strategic
targets, being: US revenue growth (15% of award weighting); UK digital sales
growth (15% of award weighting); and the Joules employee engagement
score (10% of award weighting). The Committee considers EPS to be the key
measure of sustainable business performance and international revenue growth
to be a key strategic priority. The vesting of the awards will also be subject to a
further underpin, that the vesting reflects the underlying financial performance
of the Group over the performance period.
The Committee retains the discretion to adjust or set different performance
measures or targets where it considers it appropriate to do so (for example,
to reflect a change in strategy, a material acquisition and/or a divestment
of a Group business or change in prevailing market conditions and to assess
performance on a fair and consistent basis from year to year). Awards
and options may be adjusted in the event of a variation of share capital in
accordance with the rules of the LTIP.
The Committee also has the right to reduce, cancel or impose further restrictions
on unvested LTIP and deferred bonus shares in similar circumstances (including
material failure of risk management).
SHAREHOLDING GUIDELINES
To promote further alignment to shareholders’ interests and share ownership,
each Executive Director is required to build and maintain a shareholding equal
to two times the value of their annual base salary. Until this guideline is met
Executive Directors will be required to retain half of any shares which vest
under the deferred bonus or LTIP (after sales to cover tax).
LEGACY REMUNERATION
The Committee has the right to settle remuneration arrangements that were
put in place prior to this Policy being created and in respect of remuneration
awarded to individuals prior to becoming an Executive Director (and which
was not awarded in anticipation of becoming an Executive Director).
NON-EXECUTIVE DIRECTORS’ REMUNERATION POLICY
The remuneration Policy for the Chairman and Non-Executive Directors is to pay fees necessary to attract the individual of the calibre required, taking into
consideration the size and complexity of the business and the time commitment of the role, without paying more than is necessary. Details are set out in the
table below:
APPROACH TO RECRUITMENT REMUNERATION
The Policy aims to facilitate the appointment of individuals of sufficient calibre
to lead the business and execute the strategy effectively for the benefit of
shareholders. When appointing a new Executive Director the Committee seeks
to ensure that arrangements are in the best interests of the Group and not to
pay more than is appropriate. The Committee will take into consideration
relevant factors, which may include the calibre of the individual, their existing
remuneration package, and their specific circumstance, including the
jurisdiction from which they are recruited.
The Committee will typically seek to align the remuneration package with the
Group’s Remuneration Policy. The Committee may make payments or awards
to recognise or ‘buy-out’ remuneration packages forfeited on leaving a
previous employer. The Committee’s intention is that such awards would be
made on a ‘like-for-like’ basis as those forfeited.
The remuneration package for a newly appointed Chairman or Non-Executive
Director will normally be in line with the structure set out in the Non-Executive
Directors’ Remuneration Policy.
PAYMENTS FOR LOSS OF OFFICE
Payments for loss of office will be in line with the provisions of the Executive
Directors’ service contracts and the rules of the share plans (as set out in the
IPO Admission document). Where a buy-out award is made then the leaver
provisions would be determined at the time of the award.
In appropriate circumstances, payments may also be made in respect of
accrued holiday, outplacement, legal fees and under the terms of the SAYE
plan. The Committee reserves the right to make additional payments where
such payments are made in good faith in discharge of an existing legal
obligation (or by way of damages for breach of such an obligation) or by
way of settlement or compromise of any claim arising in connection with the
termination of the Director’s office or employment.
Where the Committee retains discretion, it will be used to provide flexibility in
certain situations, considering the circumstances of the Director’s departure and
performance. There is no entitlement to any compensation in the event of Non-
Executive Directors’ contracts not being renewed or the agreement terminating
earlier.
SERVICE CONTRACTS
Each of the Executive Directors has a service contract with the Group. The
notice period of Executive Directors’ service will not exceed 12 months. All
Non-Executive Directors have initial fixed term agreements with the Group for
no more than three years. Details of the Directors’ service contracts are set out
below:
CONSULTATION WITH SHAREHOLDERS
The Committee will consider shareholder feedback received on remuneration
matters including issues raised at the AGM as well as any additional comments
received during any other meeting with shareholders. The Committee will seek
to engage directly with major shareholders and their representative bodies
should any material changes be made to the Policy.
APPROACH TO SETTING FEES
• The fees of the Non-Executive Directors are agreed by the Chairman and CEO and the fees for the Chairman are
Marc Dench
20 May 2016
determined by the Board as a whole
• Fees are set taking into account the level of responsibility, relevant experience and specialist knowledge of each
Non-Executive Director and fees at companies of a similar size and complexity
BASIS OF FEES
• Non-Executive Directors are paid a basic fee for membership of the Board with additional fees being paid for
Ian Filby
Jill Little
1 August 2018
20 May 2016
David Stead
20 May 2016
chairmanship of Board Committees
• Additional fees may also be paid for other Board responsibilities or roles
• Fees are normally paid in cash
OTHER
• Non-Executive Directors may be eligible to receive benefits such as travel, the use of secretarial support and other
expenses relevant to the performance of their roles
• Neither the Chairman nor any of the Non-Executive Directors are eligible to participate in any of the Group’s
incentive arrangements
COMMENCEMENT
NOTICE PERIOD
NAME
Tom Joule
20 May 2016
Colin Porter
20 May 2016
12 months
12 months
6 months
3 months
1 month
1 month
54 DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION REPORT 55
DIRECTORS’ REMUNERATION REPORT
ANNUAL REPORT ON REMUNERATION
DIRECTORS’ REMUNERATION REPORT
ANNUAL REPORT ON REMUNERATION
SINGLE TOTAL FIGURE OF REMUNERATION
The information provided in this table of the Directors’ Remuneration Report is audited.
The tables below detail the total remuneration earned by each Director in respect of FY19 and FY18.
FY19
EXECUTIVE DIRECTORS
Tom Joule
Colin Porter
Marc Dench
NON-EXECUTIVE DIRECTORS
Ian Filby*
Neil McCausland*
Jill Little
David Stead
TOTAL
SALARIES/FEES
£000
TAXABLE
BENEFITS
£000
PENSION
£000
ANNUAL BONUS
(INCLUDING
DEFERRED BONUS)
£000
338.3
348.0
267.7
100.0
13.3
50.0
55.0
22.9
22.2
16.4
-
-
-
-
15.8
17.4
13.4
-
-
-
-
188.1
193.8
148.9
-
-
-
-
LTIP
£000
507.2
522.4
499.7
-
-
-
-
TOTAL
REMUNERATION
£000
1,072.3
1,103.8
946.1
100.0
13.3
50.0
55.0
1,172.3
61.5
46.6
530.8
1,529.3
3,340.5
* Neil McCausland resigned as Non-Executive Chairman on 31 July 2018. Ian Filby was appointed as Non-Executive Chairman commencing on 1 August 2018.
FY18
EXECUTIVE DIRECTORS
Tom Joule
Colin Porter
Marc Dench
NON-EXECUTIVE DIRECTORS
Neil McCausland
Jill Little
David Stead
TOTAL
SALARIES/FEES
£000
TAXABLE
BENEFITS
£000
PENSION
£000
ANNUAL BONUS
(INCLUDING
DEFERRED BONUS)
£000
TOTAL
REMUNERATION
£000
335.0
345.0
257.5
85.0
50.0
55.0
21.1
22.6
14.7
-
-
-
16.8
17.3
16.2
-
-
-
333.4
343.2
384.3
-
-
-
706.2
728.1
672.7
85.0
50.0
55.0
1,127.5
58.4
50.2
1,060.9
2,297.0
EXPLANATORY NOTES TO THE SINGLE TOTAL FIGURE OF REMUNERATION TABLE
BASE SALARIES
From FY20 the base salaries for the Executive Directors will normally be
reviewed with effect from April. Prior to FY20, base salaries were reviewed in
December.
EXECUTIVE
DIRECTOR
Tom Joule
Colin Porter
Marc Dench
BASE SALARY AT
1 APRIL 2019
BASE SALARY AT
1 DECEMBER 2017
£341,700
£351,900
£270,300
£335,000
£345,000
£265,000
The base salary for Tom Joule, Colin Porter and Marc Dench were all
increased by 2.0%, in line with the standard base salary increase for
employees across the Group. Tom Joule’s base salary increased from
£335,000 to £341,700, Colin Porter’s from £345,000 to £351,900, and
Marc Dench’s from £265,000 to £270,300. To reflect the change in base
salary review date, and in accordance with the approach applied to all
eligible employees, a one-off payment was made to each Executive Director
to compensate for the equivalent base salary increase for the four month
period, December 2018 to March 2019.
TAXABLE BENEFITS
The taxable benefits for the Executive Directors included a company car or car
allowance, private fuel, clothing allowance and private medical insurance.
ANNUAL BONUS
For FY19 the maximum annual bonus opportunity for the Executive Directors
was 100% of subject to the achievement of stretching underlying PBT
performance targets.
The structure and targets for the FY19 annual bonus, that were established at
the start of the year, are set out in the following table. Below the Threshold
level no annual bonus is payable, between each level the annual bonus award
percentage increases on a linear basis.
LEVEL
THRESHOLD
TARGET
MAXIMUM
% of maximum award
25%
50%
100%
Underlying PBT
£14.54 million
15.30 million
£16.83 million
Based on FY19 underlying PBT of £15.47 million the Executive Directors will
receive 55.6% of their maximum annual bonus opportunity. The values of each
Executive Director’s annual bonus paid in cash and paid in deferred into shares
(for three years) were as follows:
CASH PAYMENT
DEFERRED
INTO SHARES
TOTAL ANNUAL
BONUS SHOWN
IN SINGLE
FIGURE TABLE
FOR FY19
Tom Joule*
£94,061
£94,061
£188,122
Colin Porter
£96,869
£96,869
£193,738
Marc Dench
£74,407
£74,407
£148,813
* Because Tom Joule’s existing shareholding in the business is greater than 30%, the
deferred share award to be granted to Tom Joule will be conditional on approval of a
separate resolution at the AGM in relation to Rule 9 of the Takeover Code.
For FY20 the annual bonus opportunity will be up to a maximum of 100%
of salary for Tom Joule, Colin Porter and Marc Dench and up to 150% of
salary for Nick Jones (with Colin Porter’s and Nick Jones’ bonus pro-rated to
reflect their respective periods of service). The annual bonus is subject to the
achievement of stretching PBT performance targets, with payment made half in
cash and half deferred into shares (vesting after a further three years).
The Committee considers PBT to be the key short term financial measure.
The actual FY20 annual bonus targets are not disclosed due to commercial
confidentiality reasons but the PBT target will be disclosed when we report the
performance out-turn in the FY20 Directors’ Remuneration Report.
LONG-TERM INCENTIVES
Long-term incentives vesting in respect of performance in FY19:
Each Executive Director was granted an award under the Joules 2016 Long
Term Incentive Plan on 6 July 2016. Each award was subject to a performance
condition based on the Company’s earnings per share (EPS) in the financial
year ended 26 May 2019, being the final financial year of a three-year
performance period in accordance with the following table.
EARNINGS PER
SHARE FOR FY19
PERCENTAGE
OF THE AWARD
THAT WILL VEST
PERFORMANCE
OUTCOME
(EPS FOR FY19)
VESTING
OUTCOME
11.5 pence
25%
Greater than 11.5
pence but less than
14.0 pence
Determined on a
straight line basis
between
25% and 100%
14.0 pence or
greater
100%
13.96 pence
98.8%
In the single figure table above, the value of the LTIP is calculated by
multiplying the number of shares in respect of which each award vested (being
192,429, 198,174 and 189,557 for Tom Joule, Colin Porter and Marc Dench,
respectively) by £2.635 (being the three month volume weighted average
share price up to 18 July 2019), less the exercise price of £0.01 per share.
56 DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION REPORT 57
DIRECTORS’ REMUNERATION REPORT
ANNUAL REPORT ON REMUNERATION
DIRECTORS’ REMUNERATION REPORT
ANNUAL REPORT ON REMUNERATION
The awards granted to Colin Porter and Marc Dench were granted in the form
of tax qualifying LTIP awards and consisted of an LTIP award over 200,581
and 191,860 shares, respectively, and a separate tax advantaged option
granted under the Joules Executive Share Option Plan over 17,441 shares
with an exercise price of £1.72 per share. Each tax advantaged option was
subject to the same performance condition as applied to the LTIP award. On
the exercise of the LTIP award and tax advantaged option, the extent to which
the LTIP award is capable of exercise shall be reduced to take account of the
gain made on the exercise of the tax advantaged option, to ensure that the
pre-tax value delivered to the participant is not increased by the grant of the
tax advantaged option. Taking into account this reduction, the tax advantaged
option is ignored for the purposes of determining the single figure table values.
Vesting of the awards will be based upon the amount of the adjusted diluted
EPS and the performance against certain strategic targets delivered in the final
Financial Year of the three-year performance period (FY22).
• EPS target (60% of award weighting): Below the threshold vesting target
of 18.0 pence, none of the award will vest. 25% of the award will vest if
underlying diluted EPS is 18.0 pence, with 100% vesting at 22.0 pence
and vesting determined on a straight-line basis between these figures
• Strategic targets (40% of the award weighting): US revenue growth; UK
digital sales growth; and the Joules employee engagement score. The
performance levels required to achieve the threshold vesting target and
the maximum vesting target are shown in the table below. Vesting is
determined on a straight-line basis between threshold and maximum.
LONG-TERM INCENTIVE AWARDS GRANTED DURING FY19
In FY19, the Committee granted LTIP awards as set out in the table below. The
share price used to calculate the awards was £3.415, being the closing share
price on the day immediately preceding the awards.
TARGET
ELEMENTS
EPS
LTIP 2018
DATE OF GRANT % OF SALARY
NUMBER OF
SHARES
Strategic targets:
% OF
AWARD
THRESHOLD
25% vesting
of award
MAXIMUM
100% vesting
of award
60%
18.0 pence
22.0 pence
Tom Joule
26 July 2018
Colin Porter
26 July 2018
Marc Dench
26 July 2018
100%
100%
100%
98,097
101,025
77,599
Vesting of the awards will be based upon achievement against two targets.
80% of the awards will be subject to underlying diluted Earnings Per Share
(EPS) delivered in the final year of the performance period (FY21) and 20%
subject to international revenue delivered in the final year of the performance
period FY21. Vesting is determined on a straight-line basis between the target
ranges. The target ranges are summarised below.
TARGET
ELEMENTS
EPS
International revenue
% OF
AWARD
80%
20%
THRESHOLD
25% vesting
of award
MAXIMUM
100% vesting
of award
16. 5 pence
21.5 pence
£46.0 million
£66.0 million
US revenue
15%
UK digital sales
15%
Employee
engagement
10%
30% compound
annual growth
rate vs FY19
43% compound
annual growth
rate vs FY19
12% compound
annual growth
rate vs FY19
20% compound
annual growth
rate vs FY19
Mid-1 Star level
(Best Companies
BCI score of 678)
or equivalent
Mid-2 Star level
(Best Companies
BCI score of 717)
or equivalent
The vesting of the awards will also be subject to a further underpin, that the
vesting reflects the underlying financial performance of the Group over the
performance period.
EPS is the most suitable performance measure for the Group supporting a focus
on profitability and growth and has therefore been chosen as the primary LTIP
metric.
LONG-TERM INCENTIVE AWARDS FY20
For FY20, the Committee intends to grant LTIP awards as set out in the table
below.
The strategic targets have been selected by the Remuneration Committee to
reflect certain elements of the Group’s strategic growth priorities, including
international growth and driving the UK ‘Total Retail’ model, that the Committee
believes will deliver shareholder value creation over the long term.
LTIP 2019
Tom Joule*
Colin Porter**
Marc Dench
Nick Jones***
% OF SALARY
100%
n/a
125%
150%
* Because Tom Joule’s existing shareholding in the business is greater than 30%, the LTIP to
be granted to Tom Joule will be conditional on approval of a separate resolution at the
AGM in relation to Rule 9 of the Takeover Code.
** As disclosed above, Colin Porter will not be granted an LTIP award in 2019 due to his
retirement as Chief Executive Officer.
*** As disclosed above, the Company has agreed to compensate Nick Jones for some
of the awards he forfeited as a result of leaving his previous employer.
NON-EXECUTIVE DIRECTOR FEES
Details of Non-executive Directors’ fees for FY20 are set out below:
• Chairman’s fee: £120,000
• Non-executive director fee: £45,000
• Additional fee for chair of a Board Committee: £5,000
• Additional fee for Senior Independent Non-Executive Director role: £5,000
With effect from 1 July 2019 the Chairman’s PA will be employed by the Company on a one day a week basis to provide executive assistant and secretarial
support related to the Chairman’s duties for the Company.
PAYMENTS MADE TO FORMER DIRECTORS DURING THE YEAR
No payments were made in the year to any former Director of the Group.
PAYMENTS FOR LOSS OF OFFICE MADE DURING THE YEAR
No payments for loss of office were made in the year to any Director of the Group.
STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS
The interests of the Directors and their immediate families in the Group’s ordinary shares as at 26 May 2019 were as follows.
BENEFICIALLY
OWNED AT
27 MAY 2018
NO. OF SHARES
BENEFICIALLY
OWNED AT
26 MAY 2019
NO. OF SHARES
SHAREHOLDING
GUIDELINES MET
UNVESTED
OUTSTANDING
SHARE AWARDS
AS AT
26 MAY 2019*
VESTED,
UNEXERCISED SHARE
AWARDS AS AT
26 MAY 2019
EXECUTIVE DIRECTORS
Tom Joule
Colin Porter
Marc Dench
NON-EXECUTIVE DIRECTORS
Ian Filby
Jill Little
David Stead
28,147,210
1,519,822
53,263
-
25,625
31,250
*Includes: ESOS, LTIP, Deferred share awards and SAYE
28,147,210
1,519,822
138,016
-
25,625
31,250
Yes
Yes
No
n/a
n/a
n/a
534,782
550,756
677,944
nil
nil
nil
The interests of the Directors and their immediate families in the Group’s ordinary shares did not change between 26 May 2019 and the date these accounts were
signed on 22 July 2019.
58 DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION REPORT 59
DIRECTORS’ REMUNERATION REPORT
ANNUAL REPORT ON REMUNERATION
DIRECTORS’ REMUNERATION REPORT
ANNUAL REPORT ON REMUNERATION
OUTSTANDING DIRECTORS’ SHARE AWARDS
Each Executive Director holds awards under the Company’s LTIP, Deferred Bonus Plan (‘DBP’), SAYE Scheme and Executive Share Option Scheme (‘ESOS’)
as follows.
SHAREHOLDER APPROVAL OF THE DIRECTORS’ REMUNERATION REPORT
At the 2018 AGM, the votes in respect of the FY18 Directors’ Remuneration Report were as follows.
FY18 DIRECTORS’ REMUNERATION REPORT
DIRECTOR
SHARE
PLAN
DATE OF
GRANT
SHARE
PRICE
AT GRANT
EXERCISE
PRICE
NUMBER
OF SHARES
/OPTIONS
AWARDED
PERFORMANCE PERIOD
VESTING DATE
Tom Joule
LTIP 2018
26 July 2018
£3.415
£0.01
98,097
Three years to end of FY21
DBP FY18
26 July 2018
£3.415
£0.01
48,803
-
Following announcement
of the Group’s FY20 results
Following announcement
of the Group’s FY20 results
LTIP 2017
17 August 2017
£3.14
DBP FY17
17 August 2017
£3.14
LTIP 20162
18 October 2017
£2.88
£0.01
£0.01
£0.01
106,858
Three years to end of FY20
24 July 2020
51,455
-
24 July 2020
194,767
Three years to end of FY19
6 July 2019
For
Against
Withheld
NUMBER
69,992,764
1,335,275
0
%
98.13
1.87
N/A
REMUNERATION COMMITTEE
The members of the Committee are Jill Little (Chair), Ian Filby and David Stead. The Group’s General Counsel attends the meeting as secretary to the Committee.
The Committee meets at least once a year and has responsibility for:
• Maintaining the remuneration policy;
• Reviewing and determining the remuneration packages of the Executive Directors;
• Monitoring the level and structure of the remuneration of Senior Management; and
• Production of the annual report on Directors’ remuneration.
Colin Porter
LTIP 2018
26 July 2018
£3.415
£0.01
101,025
Three years to end of FY21
DBP FY18
26 July 2018
£3.415
£0.01
50,260
-
Following announcement
of the Group’s FY20 result
Following announcement
of the Group’s FY20 result
The Chief Executive Officer and Chief Financial Officer occasionally attend meetings and provide information and support as requested. Neither Executive
Director is present when his remuneration package is considered.
The duties of the Remuneration Committee are set out in its Terms of Reference, which are available on the Group’s website (www.joulesgroup.com) and are also
available on request from the Company Secretary.
LTIP 2017
17 August 2017
£3.14
DBP FY17
17 August 2017
£3.14
£0.01
£0.01
110,048
Three years to end of FY20
24 July 2020
52,990
-
24 July 2020
LTIP 20161,2
6 July 2016
£1.72
£0.01
200,581
Three years to end of FY19
6 July 2019
Marc Dench
LTIP 2018
26 July 2018
£3.415
£0.01
77,599
Three years to end of FY21
DBP FY18
26 July 2018
£3.415
£0.01
75,063
-
Following announcement
of the Group’s FY20 result
Following announcement
of the Group’s FY20 result
LTIP 2017
17 August 2017
£3.14
DBP FY17
17 August 2017
£3.14
LTIP 20161,2
6 July 2016
£1.72
DBP FY16
14 July 2016
£1.66
£0.01
£0.01
£0.01
£0.01
119,617
Three years to end of FY20
24 July 2020
54,142
-
24 July 2020
191,860
Three years to end of FY19
6 July 2019
132,132
-
14 July 2019
1 Colin Porter and Marc Dench also received tax qualifying options of up to a maximum of £30,000, which were granted under the Tax Qualifying LTIP, and subject to the same
performance conditions as the LTIP award. The tax qualifying options have an exercise price of £1.72 per share (being the market value on the date of grant). The vesting of the LTIP
award will be scaled back to take account of any gain made under the tax qualifying option.
2 As detailed above LTIP 2016 will vest at 98.8% of the maximum potential award.
This report was approved by the Board on 22 July 2019 and signed on its behalf by:
JILL LITTLE
Remuneration Committee Chairman
60 DIRECTORS’ REPORT
DIRECTORS’ REPORT
JOULES GROUP PLC
The Directors present their Annual Report on the affairs of the Group, together with the financial statements and Auditors’ Report, for the 52 weeks ended 26 May
2019. The Governance Framework Section on pages 39 to 41 also forms part of this Directors’ Report.
ACQUISITION OF THE COMPANY’S OWN SHARES
At the AGM held on 27 September 2018, the Company was authorised in
accordance with section 701 of the Companies Act 2006 (the ‘Act’) to make
market purchases (within the meaning of section 693(4) of the Act) of up to
8,750,114 Ordinary Shares (being approximately 10 per cent of the Share
Capital) on such terms and in such manner as the Directors of the Company
may from time to time determine. This authority was not used during the year
or up to the date of this report. Shareholders will be asked to renew these
authorities at the AGM as detailed in the next AGM Notice. The Company
held no treasury shares during the year.
DIRECTORS’ INTERESTS
Details of the Directors’ beneficial interests are set out in the Remuneration
Report on pages 45 to 59.
DIRECTORS’ INDEMNITIES AND DIRECTORS AND
OFFICERS’ LIABILITY INSURANCE
The Company has purchased directors’ and officers’ liability insurance during
the year as allowed by the Company’s articles.
FINANCIAL RISK MANAGEMENT
Details of the Directors’ assessment of the principal risks and uncertainties which
could impact the business are outlined in the Principal Risks and Uncertainties
section of this Annual Report. The Board manages internal risk through the
on-going review of the Group’s risk register and the Board manages external
risk through the monitoring of the economic and regulatory environment and
market conditions.
GOING CONCERN
The Directors have prepared a detailed forecast with a supporting business
plan for the year ending 31 May 2020. The forecast indicates that the Group
will remain in compliance with covenants throughout the forecast period. As
such, the Directors have a reasonable expectation the Company and Group
will have adequate resources to continue in operational existence for the
foreseeable future. The forecasts have also been stress tested through scenario
analysis and the Directors remain confident in the validity of the going concern
assumption. As a result, they continue to prepare the financial statements on
the basis of going concern.
DIRECTORS
The Directors of the Company during the period under review were, and
subsequently to the date of this report, were:
Neil McCausland (resigned 31 July 2018)
Ian Filby (appointed 1 August 2018)
Tom Joule
Colin Porter
Marc Dench
David Stead
Jill Little
RESULTS AND DIVIDENDS
Results for the 52 weeks ended 26 May 2019 are set out in the Consolidated
Income Statement on page 72. The Directors are recommending a final
dividend of 1.35 pence per share which, if approved at the AGM, will result in
a full year dividend of 2.1 pence per share for FY19.
ARTICLES OF ASSOCIATION
A copy of the full articles of association are available on request from the
Company Secretary and are also available on the Group’s website
www.joulesgroup.com. Any amendments to the articles of association can be
made by a special resolution of the Shareholders.
SHARE CAPITAL AND SUBSTANTIAL SHAREHOLDERS
Details of the issued share capital, together with details of the movements
during the year, are shown in Note 18 to the Consolidated Financial
Statements. The Company has one class of ordinary share and each ordinary
share carries the right to one vote at general meetings of the Company.
At 26 May 2019 the Company had been notified of the following substantial
shareholders comprising 3% or more of the issued ordinary share capital of the
Company:
Tom Joule
Octopus Investments
Standard Life
Blackrock
Canaccord Genuity
Columbia Threadneedle Investments
Janus Henderson
NFU Mutual Investment
% of issued share capital
32.06%
9.66%
8.07%
7.15%
7.12%
3.28%
3.13%
3.11%
There have been no significant changes to substantial shareholders since the
year end.
DIRECTORS’ REPORT
JOULES GROUP PLC
DIRECTORS’ REPORT 61
VIABILITY STATEMENT
The Directors have also assessed the Group’s prospects and viability over the
three-year period to 29 May 2022. This three-year assessment period was
selected as it corresponds with the Board’s strategic planning horizon.
In making this assessment, the Directors have taken account of the Group’s
current financial position, annual budget for the year ending 31 May 2020,
three-year plan forecasts and sensitivity analysis and testing. The Board also
considered a number of other factors, including the Group business model
and strategy, risks and uncertainties and risk management and internal control
effectiveness. While the principal risks and uncertainties could impact future
performance, none of them is considered likely, individually or collectively,
to affect the viability of the business during the three-year assessment period.
The Group is operationally strong with a robust balance sheet and has a
track record of delivering profitable and sustainable growth. The Group
has borrowing facilities in place which cover the time period of this viability
statement.
Based on this assessment, the Directors have a reasonable expectation that the
Group will continue in operation and meet all its liabilities as they fall during
the period up to 29 May 2022.
POST BALANCE SHEET EVENTS
There have been no material post balance sheet events.
ANNUAL GENERAL MEETING
The Company’s AGM will be held on 25 September 2019.
FUTURE DEVELOPMENTS IN THE BUSINESS OF THE
COMPANY
The Strategic Report on pages 12 to 21 sets out the likely future developments
of the Company.
BRANCHES OUTSIDE THE UK
In addition to subsidiary companies in USA, China and Hong Kong, the Group
has branches in France and the Republic of Ireland.
POLITICAL DONATIONS
No political donations were made during the period under review.
EMPLOYEE INVOLVEMENT
The Directors recognise that communication with the Group’s employees is
essential and the Group places importance on the contributions and view of
its employees. Details of employee involvement are set out in the Responsibly
Joules section of this report on page 35.
DISABLED EMPLOYEES
Details of the Group’s policy in relation to disabled employees is set out in the
Responsibly Joules section of this report on page 35.
DISCLOSURE OF INFORMATION TO THE AUDITORS
In the case of each Director in office at the date the Directors’ Report is
approved, the following applies:
• The Director knows of no information, which would be relevant to the
auditors for the purpose of their audit report, of which the auditors are not
aware; and
• The Director has taken all steps that he/she ought to have taken as a
director to make him/herself aware of any such information and to
establish that the auditors are aware of it.
AUDITOR
The Auditor, Deloitte LLP, have indicated their willingness to continue in office
and a resolution seeking to re-appoint them will be proposed at the AGM.
CHANGE OF CONTROL
So far as the Directors are aware, there are no arrangements in place that
the operation of which at a later date may result in a change of control of the
Company.
JONATHAN DARGIE
Company Secretary
62
STATEMENT OF DIRECTORS’ RESPONSIBILITIES 63
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
JOULES GROUP PLC
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors are required to prepare
the group financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union and Article
4 of the IAS Regulation and have elected to prepare the parent company
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable
law), including FRS 101 “Reduced Disclosure Framework”. Under company
law the directors must not approve the accounts unless they are satisfied that
they give a true and fair view of the state of affairs of the company and of the
profit or loss of the company for that period.
In preparing the parent company financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
In preparing the group financial statements, International Accounting Standard
1 requires that directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity’s
financial position and financial performance; and
• make an assessment of the company’s ability to continue as a going
concern.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the company’s transactions and disclose
with reasonable accuracy at any time the financial position of the company
and enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets
of the company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company’s website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company and the
undertakings included in the consolidation taken as a whole;
• the strategic report includes a fair review of the development and
performance of the business and the position of the company and the
undertakings included in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties that they face; and
• the Annual Report and Financial Statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the company’s position and performance, business
model and strategy.
This responsibility statement was approved by the Board of Directors on 22 July
2019 and is signed on its behalf by:
MARC DENCH
Chief Financial Officer
22 July 2019
C H A P T E R
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As a family lifestyle brand with an authentic heritage, we’re proud
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on the beach and gathering together with family and friends.
66
AUDITOR’S REPORT 67
AUDITOR’S REPORT
JOULES GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JOULES GROUP PLC
In our opinion:
Summary of our audit approach
• the financial statements of Joules Group plc (the ‘parent company’)
and its subsidiaries (the ‘group’) give a true and fair view of the state
of the group’s and of the parent company’s affairs as at 26 May 2019
and of the group’s profit for the period then ended;
• the group financial statements have been properly prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union;
• the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including Financial Reporting Standard 101
“Reduced Disclosure Framework”; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Key audit matters
Materiality
Scoping
The key audit matter that we identified in the current
year is the accuracy and completeness of the returns
provision.
Within this report, any key audit matters which are the
same as the prior year are identified with
The materiality that we used for the group financial
statements was £633,400 (2018: £559,000) which
was determined on the basis of 5% of profit before tax
(2018: 5% of profit before tax).
Our full scope audit procedures covered the main UK
entity which accounted for 91% of the total revenue
for the group and 97% of the group’s profit. We have
undertaken specific procedures on certain balances in
the group’s overseas subsidiaries to address specific
risks to the group.
Significant changes
in our approach
There have been no significant changes in our audit
approach.
The completeness of the stock in transit is no longer
considered a key audit matter.
CONCLUSIONS RELATING TO GOING CONCERN
We are required by ISAs (UK) to report in respect of the following matters
where:
• the directors’ use of the going concern basis of accounting in preparation
of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified
material uncertainties that may cast significant doubt about the group’s or
the parent company’s ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when
the financial statements are authorised for issue.
We have nothing to report in respect of these matters.
We have audited the financial statements which comprise:
• the consolidated income statement;
• the consolidated statement of comprehensive income;
• the consolidated statement of financial position and parent company
statement of financial position;
• the consolidated and parent company statements of changes in equity;
• the consolidated cash flow statement; and
• the related notes 1 to 36.
The financial reporting framework that has been applied in the preparation
of the group financial statements is applicable law and IFRSs as adopted by
the European Union. The financial reporting framework that has been applied
in the preparation of the parent company financial statements is applicable
law and United Kingdom Accounting Standards, including FRS 101 “Reduced
Disclosure Framework” (United Kingdom Generally Accepted Accounting
Practice).
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the auditor’s responsibilities for the audit of
the financial statements section of our report.
We are independent of the group and the parent company in accordance
with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’)
Ethical Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
68 AUDITOR’S REPORT
AUDITOR’S REPORT
JOULES GROUP PLC
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and
include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
In the prior year the completeness of inventory and goods in transit was included as a key audit matter. This is not included as a key audit matter in the current year
as a result of no issues being noted in the prior year’s audit and due to enhanced controls being implemented to reduce the risk of transactions for goods in transit
being recorded inappropriately.
ACCURACY AND COMPLETENESS OF THE RETURNS PROVISION
Key audit matter
description
As described in note 1 to the financial statements, the group has different revenue streams that have separate characteristics.
Customers are entitled to return products after purchase for a defined period. The directors apply estimates in both the retail (stores
and e-commerce) and wholesale business streams in determining the level of provision that is required.
However, the returns from the e-commerce business are typically at a higher level than traditional store retailing which therefore
makes the judgements involved more significant in determining the level of provision, the total returns provision is £1,548,000 as
outlined in note 14, £1,102,000 of this relates to e-commerce sales.
As outlined in note 1 of the financial statements, the presentation of the returns provision has been restated to reflect the adoption
of IFRS 15. The provision is now shown at the gross sales value of expected returns with a corresponding right of return asset being
recognised within current assets for the related value of inventory.
The group uses an expected value method based on historical analysis of returns across the different revenue streams to model the
potential reversal to revenue. The nature of the provision is judgemental in nature. Further information is given to this in note 1 within
key sources of estimation.
Given the significant level of judgement involved, we have also identified this as a potential fraud risk area.
We have evaluated the design and implementation of controls over the returns provision.
We recalculated the provision for returns and tested the integrity of the data that has been used by management by agreeing through
to underlying supporting evidence.
In addition to testing details on a sample basis, we performed an analytical review of the returns provision based on gross levels of
sales as well as comparing with historical levels of accuracy and levels of returns.
How the scope of our
audit responded to the
key audit matter
AUDITOR’S REPORT
JOULES GROUP PLC
AUDITOR’S REPORT 69
OUR APPLICATION OF MATERIALITY
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
GROUP FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS
Materiality
£633,400 (2018: £559,000)
£627,000 (2018: £550,000)
Basis for determining
materiality
5% of statutory profit before tax (2018: 5% of statutory profit
before tax).
Rationale for the
benchmark applied
We have assessed that the use of profit before tax is the most
appropriate measure upon which to base materiality as this
continues to be a key driver of the business’s value, is a critical
component of the financial statements and a key metric that
management use to monitor the performance of the business and
communicate this to shareholders.
3% of net assets (2018:3% of net assets), but adjusted to be
limited to an appropriate percentage of group materiality in both
years.
We have assessed the use of the net asset balance to be
appropriate as the parent company acts as a holding company
for the group’s operations and as such, the value of its net assets
is the key financial metric.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £31,670 (2018: £27,950), as well as differences
below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified
when assessing the overall presentation of the financial statements.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The group consists of operations in the UK, US, Hong Kong and China. There are no significant sub-consolidations and the group structure is consistent with the
prior year with no acquisitions or disposals arising in the period. Our full scope audit procedures covered the main UK entity and the parent company. As the
overseas subsidiaries act as distribution channels for the UK entity these were not deemed significant components. The main UK trading entity, Joules Limited
contributes 91% of the group’s total revenue and generates 97% of the group’s profit and 92% of the group’s net assets before consolidation eliminations.
As a result of the growth in the US component, this component has been subject to specific audit procedures on certain balances in the current year. This is an
increase in scope from the prior year. The US component contributes 8% of the group’s total revenue and generates 7% of the group’s profit from profit-making
entities, before consolidation eliminations.
The range of component materialities used were between £253,400 and £627,000 of group materiality.
We have performed a retrospective review of returns received post year end to assess whether any contradictory evidence existed.
All the audit work was undertaken directly by the group engagement team and no component auditors were used.
We have assessed the impact and presentation of IFRS 15, which involved comparing to industry practice and assessing
performance obligations within contracts.
At the group level we also tested all consolidation adjustments and carried out analytical procedures to confirm our conclusion that there was no significant risk of
misstatement of the aggregated financial information of the remaining components not subject to audit or audit of specified balances.
Key observations
We are satisfied that the key assumptions applied in the returns provision are appropriate.
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial
statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in respect of these matters.
70
AUDITOR’S REPORT 71
AUDITOR’S REPORT
JOULES GROUP PLC
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement, the directors
are responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the directors are responsible for assessing
the group’s and the parent company’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no realistic
alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE
FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
REPORT ON OTHER LEGAL AND REGULATORY
REQUIREMENTS
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the
financial year for which the financial statements are prepared is consistent
with the financial statements; and
• the strategic report and the directors’ report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and of the
parent company and their environment obtained in the course of the audit,
we have not identified any material misstatements in the strategic report or the
directors’ report.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY
EXCEPTION
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
• we have not received all the information and explanations we require for
our audit; or
• adequate accounting records have not been kept by the parent company,
or returns adequate for our audit have not been received from branches
not visited by us; or
• the parent company financial statements are not in agreement with the
accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our
opinion certain disclosures of directors’ remuneration have not been made.
We have nothing to report in respect of these matters.
USE OF OUR REPORT
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we
have formed.
ANDREW HALLS FCA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Nottingham, United Kingdom
22 July 2019
72 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS 73
CONSOLIDATED INCOME STATEMENT
JOULES GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
JOULES GROUP PLC
REVENUE
Cost of sales
GROSS PROFIT
Administrative expenses
Share-based payments
Total administrative expenses
OPERATING PROFIT
Finance costs
PROFIT BEFORE TAX
Income tax expense
PROFIT FOR THE PERIOD
Basic earnings per share (pence)
Diluted earnings per share (pence)
52 WEEKS ENDED
26 MAY 2019
£’000
52 WEEKS ENDED
27 MAY 2018
£’000
NOTE
2
5
5
27
6
7
26
26
217,970
(98,583)
119,387
(103,665)
(2,616)
185,933
(82,403)
103,530
(90,226)
(1,766)
(106,281)
(91,992)
13,106
(251)
12,855
(2,701)
10,154
11.57
11.32
11,538
(348)
11,190
(2,564)
8,626
9.86
9.74
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
JOULES GROUP PLC
PROFIT FOR THE PERIOD
Items that will not be reclassified subsequently to profit or loss:
Net gain/(loss) arising on changes in fair value of hedging instruments entered into for cash flow hedges
Gains arising during the period on deferred tax on cash flow hedges
OTHER COMPREHENSIVE INCOME FOR THE PERIOD
Items that may be reclassified subsequently to profit or loss:
Exchange difference on translation of foreign operations
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
52 WEEKS ENDED
26 MAY 2019
£’000
52 WEEKS ENDED
27 MAY 2018
£’000
NOTE
10,154
8,626
20
20
3,378
(689)
2,689
20
157
13,000
(308)
31
(277)
422
8,771
NON-CURRENT ASSETS
Property, plant and equipment
Intangibles
Deferred tax
Derivative financial instruments
TOTAL NON-CURRENT ASSETS
CURRENT ASSETS
Inventories
Trade and other receivables
Right of return asset
Cash and cash equivalents
Derivative financial instruments
TOTAL CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Current corporation tax payable
Borrowings
Provisions
Right of return provision
Derivative financial instruments
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITIES
Share capital
Hedging reserve
Translation reserve
EBT reserve
Merger reserve
Retained earnings
Share premium
TOTAL EQUITY
NOTE
26 MAY 2019
£’000
27 MAY 2018
RESTATED
£’000
8
9
17
11
10
12
10
22
11
13
15
14
14
11
15
18
20
20
21
19
19
19
17,245
16,862
958
-
35,065
35,311
18,053
615
16,013
3,320
73,312
108,377
42,613
1,612
6,769
247
1,548
-
52,789
3,447
3,447
56,236
52,141
878
2,631
518
(322)
18,049
12,614
1,148
428
32,239
32,795
16,456
429
8,571
910
59,161
91,400
40,008
1,355
5,559
264
1,196
1,680
50,062
2,972
2,972
53,034
38,366
875
(277)
361
-
(125,807)
(125,807)
162,833
11,410
52,141
151,804
11,410
38,366
These financial statements of Joules Group plc (Company Registration Number 10164829) were approved by the Board of Directors and authorised for issue on
22 July 2019 and were signed on behalf of the Board of Directors by:
MARC DENCH
Chief Financial Officer
22 July 2019
74 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS 75
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
JOULES GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
JOULES GROUP PLC
MERGER
RESERVE
£’000
HEDGING
RESERVE
£’000
TRANSLATION
RESERVE
£’000
EBT RESERVE
£’000
SHARE
CAPITAL
£’000
SHARE
PREMIUM
£’000
EARNINGS
£’000
TOTAL
EQUITY
£’000
BALANCE AT 28 MAY 2017
(125,807)
(139)
875
11,410
142,956
29,234
Profit for the period
Other comprehensive income for
the period
TOTAL COMPREHENSIVE
INCOME FOR THE PERIOD
Basis adjustment to hedged
inventory
Shares Issued (note 18)
Dividends Issued (note 28)
Credit to equity for equity-settled
share-based payments excl. NI
(note 27)
Gains arising during the period
on deferred tax on share-based
payments
-
-
-
-
-
-
-
-
Profit for the period
Other comprehensive income for
the period
TOTAL COMPREHENSIVE
INCOME FOR THE PERIOD
Basis adjustment to hedged
inventory
EBT share purchases and
commitments
Shares Issued (note 18)
Dividends Issued (note 28)
Credit to equity for equity-settled
share-based payments excl. NI
(note 27)
Gains arising during the period
on deferred tax on share-based
payments
-
-
-
-
-
-
-
-
-
(277)
422
(61)
-
422
-
-
-
-
-
361
-
157
-
(277)
139
-
-
-
-
-
2,689
2,689
157
219
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(322)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
-
-
-
-
-
-
-
-
-
-
-
-
8,626
8,626
-
145
8,626
8,771
-
-
139
-
(1,663)
(1,663)
1,595
1,595
10,154
10,154
-
2,846
10,154
13,000
-
-
219
(322)
(3)
-
(1,800)
(1,800)
2,678
2,678
Cash generated from operations
PROFIT FOR THE PERIOD
Adjustments for:
Depreciation
Amortisation
Share-based payments
Finance expense
Tax expense
OPERATING CASH FLOWS BEFORE MOVEMENTS IN WORKING CAPITAL
Increase in inventory and right of return asset
Increase in receivables
Increase in payables and right of return provision
Interest paid
Tax paid
NET CASH FROM OPERATING ACTIVITIES
Cash flow from investing activities
Purchase of property, plant and equipment and intangible assets
NET CASH FROM INVESTING ACTIVITIES
Cash flow from financing activities
Purchase of shares in EBT
Repayment of borrowings
Proceeds from borrowings
Dividend paid
NET CASH FROM FINANCING ACTIVITIES
NET INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period
52 WEEKS ENDED
26 MAY 2019
£’000
52 WEEKS ENDED
27 MAY 2018
£’000
NOTE
10,154
8,626
8
9
27
5,126
2,672
2,616
251
2,701
23,520
(2,702)
(1,597)
3,125
22,346
(270)
(2,936)
19,140
6,360
1,453
1,766
348
2,564
21,117
(11,601)
(2,443)
8,105
15,178
(308)
(2,227)
12,643
8/9
(11,502)
(11,502)
(17,228)
(17,228)
23
23
28
23
(322)
(449)
2,134
-
(596)
8,500
(1,800)
(1,663)
(437)
7,201
8,571
241
6,241
1,656
6,964
(49)
8,571
BALANCE AT 27 MAY 2018
(125,807)
(277)
875
11,410
151,804
38,366
290
290
CASH GENERATED BY OPERATIONS
BALANCE AT 26 MAY 2019
(125,807)
2,631
518
(322)
878
11,410
162,833
52,141
-
-
Effect of foreign exchange rate changes
CASH AND CASH EQUIVALENTS AT END OF PERIOD
22
16,013
76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JOULES GROUP PLC
1. SIGNIFICANT ACCOUNTING POLICIES
STATEMENT OF COMPLIANCE
The financial information has been prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union. The
particular accounting policies adopted and applied are described below.
The Group financial statements comprise the financial information of the parent
undertaking and its subsidiary undertakings.
Joules Group plc is a public company limited by shares whose principal
activities are the design and sale of lifestyle clothing, related accessories and
a homeware range, through the multi-channel business structure including retail
stores, e-commerce, county shows and events and wholesale. The company’s
registered office is Joules Building, The Point, Rockingham Road, Market
Harborough, Leicestershire, LE16 7QU.
For the year ended 26 May 2019 (the ‘Period’) the following subsidiaries
of the Company were entitled to exemption from audit under s479A of the
Companies Act 2006 relating to subsidiary companies.
SUBSIDIARY NAME
Joules Investments Holdings Limited
COMPANIES HOUSE
REGISTRATION NUMBER
08752970
Joules Limited
Joules Developments Limited
Joules Property Limited
02934327
11250107
11250113
APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL
REPORTING STANDARDS (IFRSs)
Adoption of new and revised standards
With the exception of IFRS 9 and IFRS 15 which have been incorporated in
to these financial statements, there have been no new IFRSs adopted in the
current year which have materially impacted the Group’s financial statements.
IFRS 9 – FINANCIAL INSTRUMENTS
OVERVIEW
IFRS 9, which replaces IAS 39 “Financial instruments: recognition and
measurement” for annual periods beginning on or after 1 January 2018 covers
the accounting for financial instruments: classification and measurement,
impairment and hedge accounting. The Group applied IFRS 9 using the
modified retrospective method, except for the hedge accounting requirements
which were applied prospectively. The impact of the application of IFRS 9
was not material to the net assets or profit of the Group for the Period or prior
period. As a result, prior year balances have not been restated for IFRS 9.
There were no changes to the carrying amounts of assets and liabilities on
transition to IFRS 9.
IMPAIRMENT
The adoption of IFRS 9 in the period ended 26 May 2019 has changed the
Group’s accounting for impairment losses for financial assets by replacing
IAS 39’s incurred loss approach with a forward-looking Expected Credit
Loss (‘ECL’) approach. Further detail on the transition from IAS 39 can found
in note 12 “Trade and other receivables”. The new methodology adopted
by the Group has not had a material impact on the level of provision held for
impairment losses.
HEDGE ACCOUNTING
The Group has applied the IFRS 9 hedge accounting model prospectively for
the first time in the period ended 26 May 2019. IFRS 9 requires that hedge
accounting relationships are aligned with the risk management objectives and
strategy of the Group and applies a more qualitative and forward-looking
approach to assessing hedge effectiveness. At the date of initial application
of IFRS 9, all of the Group’s existing hedging relationships were eligible to
be treated as continuing hedge relationships. Consistent with prior periods,
the Group has continued to classify all hedging relationships as “derivatives
designated as hedging instruments”. The change in fair value of the entire
forward contract is accounted for in the Group’s cash flow hedge relationship
and, as such, the adoption of the hedge accounting requirements of IFRS 9 did
not have a significant impact on the Group’s financial statements.
IFRS 15 – REVENUE FROM CONTRACTS WITH CUSTOMERS
OVERVIEW
IFRS 15 supersedes IAS 11 “Construction contracts”, IAS 18 “Revenue” and
related interpretations and it applies to all revenue arising from contracts with
customers, unless those contracts are in the scope of other standards. The new
standard establishes a five-step model to account for revenue arising from
contracts with customers. Under IFRS 15, revenue is recognised at an amount
that reflects the consideration to which an entity expects to be entitled to in
exchange for transferring goods or services to a customer. The Group has
adopted IFRS 15 using the fully retrospective method of adoption, thereby
restating comparatives as summarised in the table below and did not apply
any optional practical expedients. There was no impact on profit after tax or
retained earnings.
VARIABLE CONSIDERATION
Product sales are accounted for on a net basis excluding taxes, expected
returns and wholesale volume discounts. Customers have a right of return
within a specified period and therefore it is deemed that product sales
include a variable element under IFRS 15. The Group uses the expected value
method to estimate the value of goods that will be returned as this method
best predicts the amounts of variable consideration to which the Group will
be entitled. Under the old standard, IAS 18, expected returns were estimated
using a similar approach and therefore no adjustment to the value of variable
consideration was required on transition to IFRS 15.
Under IFRS 15 a right of return is not a separate performance obligation and
the Group is required to recognise revenue net of estimated returns. There
is no change to the Group’s revenue recognition under IFRS 15, however
the returns provision was previously recorded on a net basis (the amount of
revenue relating to expected returns less the corresponding adjustment to cost
of sales) within current liabilities. As a result, on adoption of IFRS 15 the Group
was required to recognise a right of return asset on the balance sheet and
a corresponding right of return liability. Prior year comparatives have been
adjusted accordingly.
In summary, the adjustments to the Balance Sheet were as follows:
27 MAY 2018
AS PREVIOUSLY
REPORTED
£’000
ADJUSTMENTS
£’000
27 MAY 2018
RESTATED
£’000
Current assets
Right of return asset
-
429
429
Current liabilities
Provisions
(1,031)
Right of return liability
-
767
(1,196)
Net position
(1,031)
-
(264)
(1,196)
(1,031)
The adoption of IFRS 15 in the period ended 26 May 2019 resulted in the
recognition of a right of return asset of £615,000 (2018: £429,000) and a
right of return liability of £1,548,000 (2018: £1,196,000).
At the date of authorisation of these financial statements, the following
Standards and Interpretations which have not been applied in these financial
statements were in issue but not yet effective (and in some cases had not yet
been adopted by the EU):
IFRS 3 (amendments)
Business combinations
IFRS 11 (amendments)
Joint arrangements
IFRS 16
IFRS 17
Leases
Insurance contracts
IAS 1 (amendments)
Definition of materiality
IAS 12 (amendments)
Annual improvements
IAS 19 (amendments)
Plan Amendment, Curtailment or Settlement
IAS 23 (amendments)
Annual improvements
IAS 28 (amendments)
Long-term interests in associates and joint ventures
IFRS 16 LEASES
The Directors have considered the impact of the adoption of the Standards and
Interpretations listed above and have concluded that only IFRS 16 will have
a material impact on the reported assets, liabilities and income statement for
the Group. The standard will be applied for accounting periods starting after
1 January 2019, therefore the Group’s first financial year that is impacted will
be the year ending 31 May 2020. IFRS 16 requires operating leases to be
capitalised on the Statement of Financial Position. The Group has decided to
adopt the modified retrospective approach. The Directors have performed
a review of the effect of IFRS 16 on the Group and the impact is to create a
‘right of use asset’ of approximately £59.9 million at 26 May 2019, being
the present value of future lease obligations and with a corresponding ‘lease
liability’. Profit before tax in the year ended 26 May 2019 would have a
marginal reduction of approximately £0.6 million as the result of the imputed
finance charge on the ‘lease liability’ of £59.9 million, this impact reverses as
the average lease lengths mature. The cash flow impact is nil.
BASIS OF PREPARATION
The financial statements have been prepared on the historical cost basis,
except for certain financial assets and liabilities that are measured at fair value
at the end of each reporting period, as explained in the accounting policies
below.
For financial reporting purposes, fair value measurements are categorised
into Level 1, 2 or 3 based on the degree to which the inputs to the fair value
measurements are observable and the significance of the inputs to the fair
value measurement, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level
1, that are observable for the asset or liability, either directly or indirectly;
and
• Level 3 inputs are unobservable inputs for the asset or liability.
The preparation of financial statements in conformity with International
Financial Reporting Standards adopted by the European Union requires
the use of estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Although these estimates are based on
management’s best knowledge of current events and actions, actual results
ultimately may differ from those estimates.
The principal accounting policies adopted are set out below.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries. Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the
investee; and
• has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control listed above.
The Company considers all relevant facts and circumstances in assessing
whether or not the Company’s voting rights in an investee are sufficient to give it
power over the entity.
Consolidation of a subsidiary begins when the Company obtains control over
the subsidiary and ceases when the Company loses control of the subsidiary.
When necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with the Group’s
accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are eliminated in full on
consolidation.
78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 79
GOING CONCERN
The Directors have prepared a detailed forecast with a supporting business
plan for the foreseeable future. The forecast indicates that the Group will
remain in compliance with covenants throughout the forecast period. As
such, the Directors have a reasonable expectation the Company and Group
will have adequate resources to continue in operational existence for the
foreseeable future. As such, they continue to prepare the financial statements
on the basis of going concern.
SALE OF GOODS AND REVENUE RECOGNITION
The Group’s contracts with customers for the sale of products generally include
one performance obligation being the delivery of the goods. The Group has
concluded that revenue from the sale of product should be recognised at the
point in time when control of the asset is transferred to the customer i.e. on the
delivery of the product.
This does not represent a change to the Group’s accounting policy and
therefore, the adoption of IFRS 15 does not have an impact on the timing of
revenue recognition.
Revenue is measured at the fair value of the consideration received or
expected to be receivable. Revenue is recorded excluding Value Added Tax
and is reduced for actual and estimated customer returns, discounts, rebates
and other similar allowances.
RETURNS PROVISION
Present obligations for the actual and estimated customer returns are
recognised and measured as provisions when it is probable that the Group will
be required to settle the obligation under sales contracts. Returns provisions
in existence at the balance sheet date are expected to be utilised within 12
months, the provision is recalculated at each balance sheet date taking into
account recent sales and anticipated levels of returns.
PROPERTY, PLANT AND EQUIPMENT
Land and buildings held for use in the production or supply of goods or for
administrative purposes, are stated in the Statement of Financial Position
at their fair value, being the deemed cost at the date of acquisition, less
any subsequent accumulated depreciation and subsequent accumulated
impairment losses. Assets in the course of construction for production, supply
or administrative purposes, are carried at cost, less any recognised impairment
loss. Depreciation of these assets commences when the assets are ready for
their intended use.
Depreciation is provided at the following annual rates in order to write off
each asset over its estimated useful life or, if held under a finance lease term,
whichever is the shorter.
Land and Buildings
- Buildings straight line over 25 years, Land
non-depreciating
Leasehold improvements - straight line over the lease period, typically
5-10 years
Fixtures and fittings
- straight line over 3-5 years
Motor vehicles
- straight line over 4 years
Useful lives are reviewed annually and carrying values adjusted in line with
third party valuations where appropriate.
INTANGIBLE ASSETS
TRADE AND OTHER INTANGIBLES
Trademarks and other intangibles are measured initially at purchase cost and
are amortised on a straight-line basis over their estimated useful life.
IT SYSTEMS
Software and IT represent computer systems and processes used by the Group
in order to generate future economic value through normal business operations.
The underlying assets are amortised over the period from which the Group
expects to benefit, which is typically between three to eight years. The new ERP
system is being depreciated over eight years.
INTANGIBLE ASSETS ACQUIRED SEPARATELY
Intangible assets with finite useful lives that are acquired separately are carried
at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is recognised on a straight-line basis over their estimated useful
lives. The estimated useful life and amortisation method are reviewed at the
end of each reporting period, with the effect of any changes in estimate being
accounted for on a prospective basis.
RESEARCH AND DEVELOPMENT EXPENDITURE
Expenditure on research activities is recognised as an expense in the period in
which it is incurred.
INTERNALLY-GENERATED INTANGIBLE ASSETS
An internally-generated intangible asset arising from development (or from the
development phase of an internal project) is recognised if, and only if, all of
the following have been demonstrated:
• the technical feasibility of completing the intangible asset so that it will be
available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
• the availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
• the ability to measure reliably the expenditure attributable to the intangible
asset during its development.
The amount initially recognised for internally-generated intangible assets is the
sum of the expenditure incurred from the date when the intangible asset first
meets the recognition criteria listed above. Where no internally-generated
intangible asset can be recognised, development expenditure is recognised in
profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are
reported at cost less accumulated amortisation and accumulated impairment
losses.
DERECOGNITION OF INTANGIBLE ASSETS
An intangible asset is derecognised on disposal, or when no future economic
benefits are expected from use or disposal.
Gains or losses arising from derecognition of an intangible asset, measured as
the difference between the net disposal proceeds and the carrying amount of
the asset are recognised in profit or loss when the asset is derecognised.
IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS
At each statement of financial position date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (cash-
generating unit) is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit or loss.
INVENTORIES
Inventory is carried in the financial statements at the lower of cost and net
realisable value. Cost includes product purchase price and associated inward
transportation costs. Net realisable value is based on estimated selling price
less further costs incurred to disposal.
TAXATION
Income tax expense represents the sum of the tax currently payable and
deferred tax.
CURRENT TAX
The tax currently payable is based on taxable profit for the year. Taxable profit
differs from net profit reported in the income statement because it excludes
items of income or expense that are taxable or deductible in other years and
items that are never taxable or deductible.
The Group’s current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
DEFERRED TAX
Deferred tax is recognised on temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised.
Deferred tax assets and liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries, following the relevant
accounting for utilising temporary differences.
Deferred tax liabilities and assets are measured at the tax rates that are
expected to apply in the period in which the liability is settled or the asset
realised, based on tax rates and tax laws enacted by the end of the reporting
period.
The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects,
at the end of the reporting period, to recover or settle the carrying amount of its
assets and liabilities.
CURRENT AND DEFERRED TAX FOR THE YEAR
Current and deferred tax are recognised in profit or loss, except when they
relate to items that are recognised in other comprehensive income or directly in
equity, in which case, the current and deferred tax are also recognised in other
comprehensive income or directly in equity respectively.
FOREIGN CURRENCIES
Transactions entered into by the Group entities in a currency other than the
currency of the primary economic environment in which they operate (their
“functional currency”) are recorded at the rates ruling when the transaction
occur. Foreign currency monetary assets and liabilities are translated at
the rates ruling at the reporting date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised
immediately in the Consolidated Statement of Comprehensive Income.
The assets and liabilities of overseas subsidiaries denominated in a foreign
currency, including fair value adjustments arising on consolidation, are
translated at foreign exchange rates ruling at the balance sheet date. The
revenues and expenses of overseas subsidiaries are translated into sterling
using average foreign exchange rates ruling at the date of transaction.
Foreign exchange differences arising on retranslation are recognised in the
retranslation reserve in equity.
HIRE PURCHASE AND LEASING COMMITMENTS (LEASING)
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
THE GROUP AS LESSEE
Assets held under finance leases are initially recognised as assets of the Group
at their fair value at the inception of the lease or, if lower, at the present value
of the minimum lease payments. The corresponding liability to the lessor is
included in the consolidated statement of financial position as a finance lease
obligation.
Lease payments are apportioned between finance expenses and reduction
of the lease obligation so as to achieve a constant rate of interest on the
remaining balance of the liability. Contingent rentals are recognised as
expenses in the periods in which they are incurred.
Operating lease payments are recognised as an expense on a straight-line
basis over the lease term. Certain rental expenses are determined on the basis
of revenue achieved in specific retail locations and accrued for on that basis.
PENSIONS
The Group operates a defined contribution pension scheme. Contributions
payable for the period are recognised as an expense when employees have
rendered service entitling them to the contributions.
PROVISIONS
Provisions are recognised when the Group has a present obligation (legal
or constructive) as a result of a past event, it is probable that the Group will
be required to settle the obligation and a reliable estimate can be made of
the amount of the obligation, net of any third-party recoveries that can be
measured reliably.
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the end of the reporting period,
taking into account the risks and uncertainties surrounding the obligation.
LEASE DILAPIDATION
The Group recognises present obligations arising from lease contracts where
it is required to restore leased properties to their pre-lease condition upon the
expiry of leases. Lease dilapidations provisions are expected to be utilised in
the next financial year.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised when a group entity
becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value.
Transaction costs that are directly attributable to the acquisition or issue of
financial assets and financial liabilities are added to or deducted from the fair
value of the financial assets or financial liabilities, as appropriate, on initial
recognition.
80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 81
FINANCIAL ASSETS
TRADE AND OTHER RECEIVABLES
Trade and other receivables originated by the Company are stated at
amortised cost as reduced by appropriate allowances for doubtful debts
using the Expected Credit Loss model, as detailed in note 12 “Trade and other
receivables”.
SHARE-BASED PAYMENTS
Equity-settled share-based payments to employees are measured at the
fair value of the equity instruments at the grant date. The fair value excludes
the effect of non-market-based vesting conditions. Details regarding the
determination of the fair value of equity-settled share-based transactions are
set out in note 27.
Trade and other receivables that have fixed or determinable payments that are
not quoted in an active market are classified as ‘Trade and other receivables’.
They are measured at amortised cost using the effective interest method, less
any impairment. Interest income is recognised by applying the effective interest
rate, except for short-term receivables when the recognition of interest would
be immaterial.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are measured at fair value, based on the relevant
exchange rates at the Statement of Financial Position and include overdrafts
where these are used on a day-to-day basis to manage cash.
OTHER FINANCIAL LIABILITIES
Other financial liabilities, including loans payable, are initially measured at
fair value, net of transaction costs. Other financial liabilities are subsequently
measured at amortised cost.
LOANS PAYABLE
Interest-bearing loans are initially recorded on the day that the loans are
advanced at the net proceeds received.
At subsequent reporting dates, interest-bearing borrowings are measured at
amortised cost. Finance charges, including premiums payable on settlement or
redemption and direct issue costs, are accounted for on the accrual basis in the
statement of comprehensive income using the effective interest rate method and
are added to the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
TRADE PAYABLES
Trade payables are stated at amortised cost.
DERIVATIVE FINANCIAL INSTRUMENTS AND CASH FLOW HEDGES
The Group holds derivative financial instruments to hedge its foreign currency
exposures. These derivatives, classified as cash flow hedges, are initially
recognised at fair value and then re-measured at fair value at the end of
each reporting date. Hedging relationships are documented at inception
and effectiveness is tested throughout their duration. Changes in the value of
cash flow hedges are recognised in other comprehensive income and any
ineffective portion is immediately recognised in the income statement.
If the firm commitment or forecast transaction that is the subject of a cash flow
hedge results in the recognition of a non-financial asset or liability, then at the
time the asset is recognised, the associated gains or losses on the derivative
that had been previously recognised in other comprehensive income are
included in the initial measurement of the asset or liability. For hedges that do
not result in the recognition of an asset or liability, amounts deferred in other
comprehensive income are recognised in the statement of comprehensive
income in the same period in which the hedged item affects net profit.
The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based
on the Group’s estimate of equity instruments that will eventually vest. At each
balance sheet date, the Group revises its estimate of the number of equity
instruments expected to vest as a result of the effect of non-market-based
vesting conditions. The impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to equity reserves.
SHARES HELD BY EBT
During the year Joules Group plc set up an Employee Benefit Trust (“EBT”) to
provide for the issue of shares to Group employees, principally under share
option schemes. Shares in the Company held by the EBT are included in the
Statement of Financial Position at cost, including any directly attributable
incremental costs, as a deduction from equity.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY
Drawing up the financial statements in accordance with IFRS requires
management to make the necessary estimates and assessments. Estimates are
based on past experience and other reasonable assessment criteria. There
remains a probability, however, that the estimates and assessments will bring
about an adjustment in the value of the assets and liabilities in the next financial
year.
In accordance with IAS 1 the Group is required to disclose critical accounting
judgements and key source of estimation uncertainty. The Directors have
assessed that there are no critical accounting judgements. In preparing the
financial statements the Directors have made estimates with regard to the
variable consideration element within product sales as a result of returns. The
Directors use their accumulated historical knowledge of returns to model the
level of provision required as outlined in note 14.
2. REVENUE
The revenue and profit before taxation are attributable to the one principal
activity of the Group.
Sale of goods
52 WEEKS ENDED
26 MAY 2019
£’000
52 WEEKS ENDED
27 MAY 2018
£’000
217,970
217,970
185,933
185,933
3. SEGMENT REPORTING
The Group has three reportable segments; Retail, Wholesale and Other. For each of the three segments, the Group’s chief operating decision maker (the ‘Board’)
reviews internal management reports on a monthly basis. Each segment can be summarised as follows:
• Retail: Retail includes sales and costs relevant to stores, e-commerce, shows and franchises
• Wholesale: Wholesale includes sales and costs relevant to the sale of products to other retail businesses or distributors for onward sale to their customer
• Other: Other includes income from licencing, central costs and items that are not distinguishable into the segments above
The accounting policies of the reportable segments are the same as described in note 1. Information regarding the results of each reportable segment is included
below. Segment results before non-recurring costs, being underlying earnings before interest, taxation, share-based payments, depreciation and amortisation, are
used to measure performance as management believes that such information is the most relevant in evaluating the performance of certain segments relative to other
entities that operate within these industries.
There are no discontinued operations in the period.
52 WEEKS ENDED 26 MAY 2019
REVENUE
Cost of sales
GROSS PROFIT
Administration expenses
SEGMENT RESULT
Reconciliation of segment result to profit before tax
SEGMENT RESULT
Depreciation and amortisation
Share-based payments (incl. NI)
Finance costs
PROFIT BEFORE TAX
52 WEEKS ENDED 27 MAY 2018
REVENUE
Cost of sales
GROSS PROFIT
Administration expenses
SEGMENT RESULT
Reconciliation of segment result to profit before tax
SEGMENT RESULT
Depreciation and amortisation
Share-based payments (incl. NI)
Finance costs
PROFIT BEFORE TAX
RETAIL
£’000
WHOLESALE
£’000
OTHER
£’000
TOTAL
£’000
159,088
57,088
1,794
217,970
(62,682)
(35,901)
-
(98,583)
96,406
21,187
1,794
119,387
(56,350)
(11,963)
(27,554)
(95,867)
40,056
9,224
(25,760)
23,520
40,056
9,224
(25,760)
23,520
(4,390)
(663)
(2,745)
(7,798)
(2,616)
(251)
12,855
129,680
55,528
725
185,933
(48,636)
(33,767)
-
(82,403)
81,044
21,761
725
103,530
(46,586)
(10,334)
(25,493)
(82,413)
34,458
11,427
(24,768)
21,117
34,458
11,427
(24,768)
21,117
(4,656)
(410)
(2,747)
(7,813)
(1,766)
(348)
11,190
82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 83
GEOGRAPHICAL INFORMATION
The Group’s revenue from external customers and non-current assets by geographical location are detailed below.
52 weeks ended 26 May 2019
Revenue
Non-current assets
52 weeks ended 27 May 2018
Revenue
Non-current assets
4. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
Staff costs during the period
Wages and salaries
Social security costs
Other pension costs
Equity-settled share-based payment charges (excl. NI)
The average number of employees (including executive directors) was:
Head office
Stores and Shows
Warehousing
DIRECTORS’ REMUNERATION
The tables below detail the total remuneration earned by each Executive Director:
UK
£’000
INTERNATIONAL
£’000
TOTAL
£’000
182,917
33,845
161,499
31,361
35,053
1,220
24,434
878
217,970
35,065
185,933
32,239
52 WEEKS ENDED
26 MAY 2019
£’000
52 WEEKS ENDED
27 MAY 2018
£’000
32,846
3,903
793
2,677
40,219
539
1,152
132
1,823
30,260
2,731
351
1,595
34,937
452
1,169
144
1,765
52 WEEKS ENDED
26 MAY 2019
Executive Directors
T S L Joule
C N Porter
M S Dench
Non-Executive Directors
I F Filby*
N W McCausland**
J C Little
D A Stead
TOTAL
SALARIES/
FEES
£’000
TAXABLE
BENEFITS
£’000
PENSION
£’000
ANNUAL
BONUS
(including
deferred bonus)
£’000
338.3
348.0
267.7
100.0
13.3
50.0
55.0
22.9
22.2
16.4
-
-
-
-
15.8
17.4
13.4
-
-
-
-
188.1
193.8
148.9
-
-
-
-
LTIP
£’000
507.2
522.4
499.7
-
-
-
-
TOTAL
REMUNERATION
£’000
1,072.3
1,103.8
946.1
100.00
13.3
50.0
55.0
1,172.3
61.5
46.6
530.8
1,529.3
3,340.5
52 WEEKS ENDED
27 MAY 2018
Executive Directors
T S L Joule
C N Porter
M S Dench
Non-Executive Directors
N W McCausland**
J C Little
D A Stead
TOTAL
*Appointed 1 August 2018
**Resigned 31 July 2018
SALARIES/FEES
£’000
TAXABLE BENEFITS
£’000
PENSION
£’000
ANNUAL BONUS
(INCLUDING
DEFERRED BONUS)
£’000
TOTAL
REMUNERATION
£’000
335.0
345.0
257.5
85.0
50.0
55.0
21.1
22.6
14.7
-
-
-
16.7
17.3
16.2
-
-
-
533.4
343.2
384.3
-
-
-
706.2
728.1
672.7
85.0
50.0
55.0
1,127.5
58.4
50.2
1,060.9
2,297.0
The number of Directors to whom retirement benefits have accrued during the Period was 3 (2018: 3).
5. PROFIT FOR THE YEAR
Profit before tax is stated after charging/(crediting):
Cost of inventories recognised as expense
Staff costs (see note 4)
Property rent and service charges
Transportation, carriage and packaging
Depreciation of property, plant and equipment
Amortisation of intangible assets
Net foreign exchange gains
Write down of inventory in the period
Other expenses
Amortisation of intangible assets is included within administrative expenses in the income statement.
52 WEEKS ENDED
26 MAY 2019
£’000
52 WEEKS ENDED
27 MAY 2018
£’000
85,948
40,219
13,998
10,517
5,126
2,672
43
57
46,284
204,864
69,794
34,937
13,534
10,110
6,360
1,453
(796)
150
38,853
174,395
84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 85
In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised in other comprehensive income.
Deferred taxation (note 17)
Gain/(loss) arising during the period on deferred tax on cash flow hedges
TOTAL INCOME TAX GAIN/(LOSS) RECOGNISED IN OTHER COMPREHENSIVE INCOME
(689)
(689)
31
31
52 WEEKS ENDED
26 MAY 2019
£’000
52 WEEKS ENDED
27 MAY 2018
£’000
b) Factors affecting the tax charge for the period
There are reconciling items between the expected tax charge and the actual, which are shown below:
52 WEEKS ENDED
26 MAY 2019
£’000
52 WEEKS ENDED
27 MAY 2018
£’000
PROFIT BEFORE TAXATION
UK corporation tax at the standard rate
Profit multiplied by the standard rate in the UK
Effects of:
Expenses not deductible for tax purposes and other permanent differences
Depreciation and amortisation on non-qualifying assets
Difference in overseas tax rate
Effect of adjustment in deferred tax rate
Adjustment in respect of prior period (current tax)
Share-based payments
R&D expenditure credits
Adjustment in respect of prior period (deferred tax)
TAX EXPENSE FOR THE PERIOD (NOTE 7A]
12,855
19.0%
2,442
170
281
45
59
(26)
(302)
(25)
56
2,701
11,190
19.0%
2,126
216
347
17
45
(39)
-
-
(148)
2,564
The Finance Act 2015 included provisions to reduce the rate of UK corporation tax to 19% with effect from 1 April 2017. The Finance Act 2016 included provisions
to further reduce the rate of UK corporation tax to 17% with effect from 1 April 2020. Deferred taxation is measured at tax rates that are expected to apply in
the periods in which temporary timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the
balance sheet date. Accordingly, the rate used to calculate deferred tax assets and liabilities is the effective rate at the date the deferred tax is expected to be
realised.
The UK corporation tax at the standard rate for the year is therefore 19.0% (2018: 19.0%).
AUDITORS’ REMUNERATION
The analysis of auditor's remuneration is as follows:
Audit of these financial statements
Audit of financial statements of subsidiaries of the Company
TOTAL AUDIT FEES
Other services pursuant to legislation:
Tax advice
Audit related assurance services
Remuneration and share plan advisory
Other Services
TOTAL NON-AUDIT FEES
6. FINANCE COSTS
Credit facility interest
Term loan interest
Finance lease interest
7. INCOME TAX
a) Analysis of charge in the period
Current tax
UK corporation tax based on the profit for the period
Adjustment in respect of prior periods
Overseas tax
TOTAL CURRENT TAX CHARGE
Deferred taxation (note 17)
Adjustment in respect of prior periods
Deferred tax on share-based payments
Pension contributions
Short lease premiums tax deductions
Movement in fixed asset timing differences
Movement on disallowable provision
TOTAL DEFERRED TAXATION CHARGE/(CREDIT)
TAX CHARGE FOR THE PERIOD (NOTE 7B)
52 WEEKS ENDED
26 MAY 2019
£’000
52 WEEKS ENDED
27 MAY 2018
£’000
10
106
116
7
4
16
-
27
8
90
98
13
4
22
7
46
52 WEEKS ENDED
26 MAY 2019
£’000
52 WEEKS ENDED
27 MAY 2018
£’000
210
23
18
251
254
56
38
348
52 WEEKS ENDED
26 MAY 2019
£’000
52 WEEKS ENDED
27 MAY 2018
£’000
3,029
(26)
197
3,200
56
(543)
(64)
(8)
78
(18)
(499)
2,701
3,090
(39)
17
3,068
(148)
(290)
-
-
(89)
23
(504)
2,564
86 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 87
8. PROPERTY, PLANT AND EQUIPMENT
9. INTANGIBLES
Cost
At 28 May 2017
Additions
Disposals
Transfers
At 27 May 2018
Additions
Disposals
Transfers
At 26 May 2019
Accumulated depreciation
At 28 May 2018
Charge for the period
Disposals
Transfers
At 27 May 2018
Charge for the period
Disposals
Transfers
At 26 May 2019
Net book value
At 28 May 2017
At 27 May 2018
At 26 May 2019
LAND &
BUILDINGS
£’000
LEASEHOLD
IMPROVEMENTS
£’000
FIXTURES AND
FITTINGS
£’000
MOTOR
VEHICLES
£’000
-
4,715
-
-
4,715
2,676
-
-
7,391
-
-
-
-
-
-
-
-
-
4,715
7,391
100
-
(100)
-
-
-
-
-
-
77
23
(100)
-
-
-
-
-
-
23
-
-
28,195
8,437
(7,233)
(1,318)
28,081
2,357
-
(988)
29,450
16,581
6,331
(7,233)
(929)
14,750
5,123
-
(277)
19,596
11,614
13,331
9,854
126
-
(33)
-
93
-
(34)
-
59
117
6
(33)
-
90
3
(34)
-
59
9
3
-
TOTAL
£’000
28,421
13,152
(7,366)
(1,318)
32,889
5,033
(34)
(988)
36,900
16,775
6,360
(7,366)
(929)
14,840
5,126
(34)
(277)
19,655
11,646
18,049
17,245
PROPERTY, PLANT AND EQUIPMENT
Disposal of motor vehicles during the period relates to a fully depreciated vehicle that is no longer in use.
Transfers in the current period relate to trademarks and other intangibles which were previously recorded within Plant, Property and Equipment being reclassified to
Trademarks and other intangibles.
Transfers in the prior period relate to capital expenditure with regard to the new ERP System which was previously recorded within Plant, Property and Equipment
being reclassified to Intangible Assets - IT Systems expenditure.
During the previous financial year the Directors conducted a detailed review of the Group’s fixed assets. As a result of this review £7,366,000 of Leasehold
improvements, Fixtures and fittings and Motor vehicles of nil book value items which were no longer in existence or in use as at the balance sheet date were
identified, these were recorded as a disposal in the period.
Land & buildings comprise of land, buildings and capitalised borrowing costs in relation to the ongoing development of the site intended for use as the Group’s
new head office.
Cost
At 28 May 2017
Additions
Disposals
Transfers
At 27 May 2018
Additions
Disposals
Transfers
At 26 May 2019
Accumulated amortisation
At 28 May 2017
Charge for the period
Disposals
Transfers
At 27 May 2018
Charge for the period
Disposals
Transfers
At 26 May 2019
Net book value
At 28 May 2017
At 27 May 2018
At 26 May 2019
TRADEMARKS
AND OTHER
INTANGIBLES
£’000
IT SYSTEMS
£’000
TOTAL
£’000
-
-
-
-
-
179
-
999
13,037
13,037
4,179
(1,111)
1,318
17,423
6,030
-
(11)
4,179
(1,111)
1,318
17,423
6,209
-
988
1,178
23,442
24,620
-
-
-
-
-
120
-
277
397
-
-
781
3,538
1,453
(1,111)
929
4,809
2,552
-
-
7,361
9,499
12,614
16,081
3,538
1,453
(1,111)
929
4,809
2,672
-
277
7,758
9,499
12,614
16,862
INTANGIBLE ASSETS
Transfers in the current period relate to trademarks and other intangibles which were previously recorded within Plant, Property and Equipment being reclassified to
Trademarks and other intangibles.
Transfers in the prior period relate to capital expenditure with regard to the new ERP System which was previously recorded within Plant, Property and Equipment
being reclassified to Intangible Assets - IT Systems expenditure.
During the previous financial year the Directors conducted a detailed review of the Group’s intangible fixed assets. As a result of this review £1,111,000 of nil book
value IT System items which were no longer in existence or in use as at the balance sheet date were identified, these were recorded as a disposal in the period.
88 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 89
10. INVENTORIES
Goods for resale
Goods in transit
26 MAY 2019
£’000
27 MAY 2018
£’000
26,403
8,908
35,311
22,441
10,354
32,795
The cost of inventories recognised as an expense during the year in respect of continuing operations in the 52 weeks ended 26 May 2019 was £85,948,000
(2018: £69,794,000).
During the period, the cost of inventories recognised as an expense includes £103,000 (2018: £138,000 ) of inventory previously provided for which was sold
and the provision was therefore released. The cost of inventories recognised as an expense includes £696,000 for the 52 weeks ended 26 May 2019 (2018:
£150,000) in respect of write-downs of inventory to net realisable value.
Product is purchased on a seasonal basis with the intention of selling that stock within 12 months of the purchase date. Any aged stock is appropriately provided for.
Right of return asset
26 MAY 2019
£’000
27 MAY 2018
£’000
615
615
429
429
The right of return asset represents the Group’s right to recover products from customers where customers exercise their right of return. The Group uses its
accumulated historical experience to estimate the number of returns using the expected value method.
11. DERIVATIVE FINANICAL INSTRUMENTS
FORWARD CONTRACTS AND OPTIONS
The Group enters into forward foreign exchange contracts and options to manage the risk associated with anticipated sale and purchase transactions which are
denominated in foreign currencies.
As at 26 May 2019, the Group had 72 (2018: 135) forward foreign exchange contracts outstanding. Derivative financial instruments are carried at fair value,
further detailed on note 24.
The following table details the USD foreign currency contracts outstanding as at the balance sheet date.
AVERAGE
EXCHANGE RATE
2018
2019
£/$
£/$
FOREIGN
CURRENCY
NOTIONAL
VALUE
FAIR
VALUE
2019
$’000
2018
$’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
OUTSTANDING CONTRACTS
Buy U.S. Dollars
Less than 3 months
3 to 6 months
6 months and above
1.3317
1.3820
41,000
74,050
30,793
53,581
1.4158
1.2733
7,000
25,150
4,945
19,752
545
1.4306
1.3049
19,375
29,050
13,532
22,263
(894)
(572)
1,124
1,617
1,158
1.3673
1.3416
67,375
128,250
49,270
95,596
3,320
(342)
The Company does not hold Euro to GBP forward options (2018: nil). The US Dollar spot rate at 26 May 2019 was $1.2691/ £1.
The fair value of cash flow hedges of the Group as at 26 May 2019 was an asset of £3,320,000 (2018: £1,338,000) and a liability of £nil (2018: £1,680,000)
resulting in a net asset of £3,320,000 (2018: net liability £342,000), further detailed in note 24.
The ineffective component of the cash flow hedge is insignificant and therefore the entire value of the continuing hedges at the year end is recognised within the
cash flow hedge reserve.
12. TRADE AND OTHER RECEIVABLES
Trade receivables – gross
Less: allowance for expected credit losses (calculated under IFRS 9)
Trade receivables – net
Other receivables
Prepayments
26 MAY 2019
£’000
27 MAY 2018
£’000
6,955
(325)
6,630
1,289
10,134
6,730
(592)
6,138
582
9,736
TOTAL TRADE AND OTHER RECEIVABLES
18,053
16,456
All of the Other receivables and Prepayment balances above are deemed to be current and do not include impaired assets. The maximum exposure to credit risk
at the reporting date is the carrying value of each class of asset.
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. Accordingly, the Directors
believe that there is no further credit provision risk required in excess of the allowance for doubtful debts.
During the year the Group adopted IFRS 9, which resulted in a change in the accounting for impairment losses, as noted in the significant accounting policies note.
The new standard replaced the incurred loss approach under IAS 39 “Financial instruments” with a forward-looking Expected Credit Loss (‘ECL’) approach.
The standard credit period on sales of goods is 30 days. Interest may be charged on outstanding trade receivables. The Group measures the loss allowance for
trade receivables at an amount equal to lifetime ECL. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past
default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtor, general economic
conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of trading conditions at the reporting
date. All trade receivable balances are assessed individually.
The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of
recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or when the trade receivables are over two years
past due, whichever occurs earlier. None of the trade receivables that have been written off is subject to enforcement activities.
The allowance provision for impairment calculated under IAS 39 “Financial instruments: Recognition and measurement” and IFRS 9 “Financial instruments” at 27
May 2018 are not materially different. Accordingly, there are no adjustments on transition.
The following table details the risk profile of trade receivables based on the Group’s provision matrix. As the Group’s historical credit loss experience does not show
significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished between the
Group’s different customer base:
26 MAY 2019
Expected credit loss
Gross carrying amount
Loss allowance
NET TRADE RECEIVABLES
NOT PAST DUE
£’000
0%
4,495
(8)
4,487
<30
£’000
2%
1,390
(32)
1,358
31-60
£’000
3%
632
(16)
616
>61
£’000
61%
438
(269)
169
TOTAL
£’000
5%
6,955
(325)
6,630
As at the date of the approval of these financial statements a total of £4,972,000 has been received in relation to the above trade receivables as follows:
£2,820,000 not past due, £1,398,000 <30 days past due, £536,000 31-60 days past due, £218,000 and >61 days past due.
27 MAY 2018
Expected credit loss
Gross carrying amount
Loss allowance
NET TRADE RECEIVABLES
NOT PAST DUE
£’000
0%
3,606
-
3,606
<30
£’000
2%
1,847
(34)
1,813
31-60
£’000
26%
600
(156)*
444
>61
£’000
59%
677
(402)
275
TOTAL
£’000
9%
6,730
(592)
6,138
* This balance includes a provision of £82,000 in relation to a specific trade debtor balance increasing the expected credit loss percentage from 12% to 26%, as stated in the table
above.
90 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 91
MOVEMENT IN EXPECTED CREDIT LOSSES
BALANCE AS AT 29 MAY 2017 UNDER IAS 39
Adjustments upon application of IFRS 9
BALANCE AS AT 27 MAY 2018 UNDER IFRS 9
Movement in loss allowance recognised in profit or loss during the year
Receivables written off during the year as uncollectable
Amounts recovered
BALANCE AT END OF PERIOD
2019
£’000
(592)
-
(592)
(227)
172
322
(325)
2018
£’000
(405)
-
(405)
(492)
71
234
(592)
15. BORROWINGS
SUMMARY OF BORROWING ARRANGEMENTS
The Credit facility is a £25 million Revolving Credit Facility in which amounts drawn down are generally repayable within three months. The facility matures in July
2022 following an amendment and extension that was completed in December 2018.
During the period the existing five-year term loan facility with Barclays Bank PLC was increased from £3.5 million to £9.5 million to part fund the development
of the Group’s new head office premises. The term loan facility is secured against the new head office land and buildings asset and £4.0 million of it was drawn
down as at the period end (2018: £3.2m).
The Finance leases are secured against the assets to which they relate. The present value of minimum lease payments is equal to the liability. Interest is paid at
varying rates above base rate.
The weighted average interest rates paid during the period were as follows:
The table above details the movement in the lifetime expected credit losses that have been recognised for trade and other receivables in accordance with the
simplified approach set out in IFRS 9.
13. TRADE AND OTHER PAYABLES
Trade payables
Other taxation and social security
Other payables
Accruals
26 MAY 2019
£’000
27 MAY 2018
£’000
23,130
3,188
1,568
14,727
42,613
20,267
1,926
1,980
15,835
40,008
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider that the fair value of trade and
other payables is not materially different from the carrying value.
Credit facility
Term loan
Finance leases
Credit facility
Term loan
Finance leases
52 WEEKS ENDED
26 MAY 2019
%
52 WEEKS ENDED
27 MAY 2018
%
2.3%
1.7%
9.0%
2.0%
1.8%
7.3%
26 MAY 2019
£’000
27 MAY 2018
£’000
6,157
3,975
84
5,000
3,237
294
10,216
8,531
14. PROVISIONS
DILAPIDATIONS
AS AT 27 MAY 2018
Additional provision during the period
Utilisation of provision
AS AT 26 MAY 2019
£’000
264
93
(110)
247
As detailed in the significant accounting policies note, as a result of the adoption of IFRS 15, the Group was required to restate its Statement of Financial Position
and recognise a right of return asset and a corresponding right of return liability. As a result, the returns provision is no longer included in the restated provisions
balance. There has been no impact on profit and net assets.
Right of return provision
26 MAY 2019
£’000
27 MAY 2018
£’000
1,548
1,548
1,196
1,196
The right of return provision relates to the customer’s right to return product following purchase. At the point of sale, a refund liability and a corresponding
adjustment to revenue is recognised for those products expected to be returned. The Group uses its accumulated historical experience to estimate the number of
returns using the expected value method.
92 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 93
BORROWINGS ARE REPAYABLE AS FOLLOWS:
Credit facility
Within one year
Term loan
Within one year
Between one and two years
Between two and five years
Finance leases
Within one year
Between one and two years
Between two and five years
Total borrowings
Within one year
Between one and two years
Between two and five years
26 MAY 2019
£’000
27 MAY 2018
£’000
6,157
5,000
16. FINANCIAL COMMITMENTS
OPERATING LEASE COMMITMENTS
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as
follows:
528
1,056
2,391
3,975
84
-
-
84
6,769
1,056
2,391
10,216
350
350
2,537
3,237
209
85
-
294
5,559
435
2,537
8,531
LAND AND BUILDINGS
Lease payments:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
OTHER
Lease payments:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
26 MAY 2019
£’000
27 MAY 2018
£’000
12,042
36,969
15,367
64,378
11,107
34,818
18,929
64,854
26 MAY 2019
£’000
27 MAY 2018
£’000
663
584
-
1,247
742
1,114
105
1,961
17. DEFERRED TAXATION
The following is the analysis of deferred tax assets/(liabilities) presented in the Consolidated Statement of Financial Position:
Difference between depreciation and capital allowances
Balance brought forward
Credit/(charge) to income statement
BALANCE AT END OF PERIOD
Other short-term timing differences
Balance brought forward
Credit to income statement
Credit due to cash flow hedges
BALANCE AT END OF PERIOD
TOTAL DEFERRED TAX ASSET AT END OF PERIOD
Movement
Balance brought forward
Credit /(charge) to income statement (note 7)
Credit to other comprehensive income (note 7)
BALANCE AT END OF PERIOD
26 MAY 2019
£’000
27 MAY 2018
£’000
616
(283)
333
532
782
(689)
625
958
1,148
499
(689)
958
260
356
616
351
150
31
532
1,148
613
504
31
1,148
There is no unprovided deferred tax in the current period for the Group (2018: £nil). The deferred tax asset recognised in the current period is expected to be
utilised against future taxable profits.
94 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 95
21. EBT RESERVE
During the year the Group set up an Employee Benefit Trust (‘EBT’) to partially settle obligations under the various employee share option schemes of the Group.
The EBT has an independent trustee resident in Jersey. During the year no share options have been settled with shares held by the EBT.
At 26 May 2019 the EBT held 118,300 (2018: nil) ordinary shares of 1p each in the Company purchased for a total consideration of £322,000 (2018: £nil).
Details of outstanding share options are shown in Note 27.
The consideration paid for the ordinary shares of 1p each in the Company held by the EBT at 26 May 2019 has been shown as an EBT reserve and presented
within equity for the Company and the Group. All other assets, liabilities, income and costs of the EBT have been incorporated into the accounts of the Company
and the Group.
The table below shows the movements in equity from EBT share purchases during the year:
Shares purchased by EBT in the year
Shares issued on employee option exercises
22. CASH AND CASH EQUIVALENTS
Cash and cash at bank
23. ANALYSIS OF NET CASH
Cash at bank and in hand
Credit facility
Term loan
Finance leases
2019
2018
SHARES
£’000
SHARES
£’000
118,300
-
322
-
-
-
-
-
26 MAY 2019
£’000
27 MAY 2018
£’000
16,013
8,571
AT 27 MAY 2018
£’000
NON-CASH
CHANGES
£000
CASH
CHANGES
£’000
AT 26 MAY 2019
£’000
8,571
(5,000)
(3,150)
(381)
(8,531)
241
-
-
-
-
7,201
(1,157)
(825)
297
16,013
(6,157)
(3,975)
(84)
(1,685)
(10,216)
40
241
5,516
5,797
18. CALLED UP SHARE CAPITAL
Allotted and issued
26 MAY 2019
£’000
27 MAY 2018
£’000
87,793,809 Ordinary shares of £0.01 each (2018: 87,503,058)
878
875
Authorised
116,667,736 Ordinary shares of £0.01 each (2018: 116,667,736)
1,167
1,167
During the period new ordinary shares were issued to employees that left the business from the following share schemes: SAYE: 13,569 shares (2018: 2,368),
ESOP: 271,532 shares (2018:nil) and LTIP: 5,650 shares (2018:nil).
All ordinary shares carry equal rights.
19. OTHER RESERVES
MERGER RESERVE
The Company was incorporated on 1 May 2016. The acquisition of Joules Investments Holdings Limited by Joules Group plc on 26 May 2016 has been
accounted for using reverse acquisition accounting principles. As a result, a merger reserve of £125,807,000 was created upon acquisition and AIM listing of the
Group on 26 May 2016.
RETAINED EARNINGS
The movement on retained earnings is as set out in the Consolidated Statement of Changes in Equity. Retained earnings represent cumulative profits or losses, net of
dividends and other adjustments.
SHARE PREMIUM
The share premium reserve contains the premium arising on the issue of equity shares, net of issue expenses incurred by the company. On 26 May 2016 in an initial
public offering Joules Group plc issued 7,175,851 ordinary £0.01 shares at a price of £1.60, resulting in share premium of £11,409,603.
£’000
11,410
11,410
Balance at 27 May 2018
Balance at 26 May 2019
20. HEDGING AND TRANSLATION RESERVE
GROUP
BALANCE AS AT 28 MAY 2017
Other comprehensive income for the period
Basis adjustment to hedged inventory
BALANCE AS AT 27 MAY 2018
Other comprehensive income for the period
Basis adjustment to hedged inventory
BALANCE AS AT 26 MAY 2019
HEDGING RESERVE
The reserve represents the cumulative gains and losses on hedging instruments in cash flow hedges. The cumulative deferred gain or loss on the hedging instrument
is recognised in profit or loss only when the hedge transaction impacts the profit or loss or is included as a basis adjustment to the non-financial hedged item,
consistent with the applicable accounting policy.
TRANSLATION RESERVE
Exchange differences relating to the translation of the net assets of the Group’s foreign operations which relate to subsidiaries only, from their functional currency
into the Group’s presentational currency being Sterling, are recognised directly to the translation reserve.
HEDGING
RESERVE
£’000
TRANSLATION
RESERVE
£’000
Total liabilities from financing activities
TOTAL NET CASH
(139)
(277)
139
(277)
2,689
219
2,631
(61)
422
-
361
157
-
518
96 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 97
24. FINANCIAL INSTRUMENTS
CATEGORIES OF FINANCIAL INSTRUMENTS
Carrying value of financial assets at amortised cost:
Cash and cash equivalents
Trade and other receivables
Cash flow hedges
TOTAL FINANCIAL ASSETS
Financial liabilities held at amortised cost:
Trade payables
Other payables
Borrowings
Cash flow hedges
TOTAL FINANCIAL LIABILITIES
AT 26 MAY 2019
£’000
AT 27 MAY 2018
£’000
NOTE
22
12
11
13
13
15
11
16,013
18,053
34,066
3,320
37,386
(23,130)
(19,483)
(10,216)
8,571
16,456
25,027
1,338
26,365
(20,267)
(19,741)
(8,531)
(52,829)
(48,539)
-
(52,829)
(1,680)
(50,219)
INTEREST RATE SENSITIVITY ANALYSIS
If interest rates on all borrowings had been 1% higher/lower and all other variables were held constant, the Group’s profit for the period ended 52 weeks to 26
May 2019 would decrease/increase by £95,000 (2018: £70,000). This has been calculated by applying the amended interest rate to the weighted average rate
of borrowings for the period to 26 May 2019 for borrowings at the period end, other than borrowings which are held at a fixed interest rate as those borrowings
are not sensitive to external variables, such as movement in interest rates.
FOREIGN CURRENCY SENSITIVITY ANALYSIS
The Group is mainly exposed to fluctuations in the US $, which is used for stock purchases. If the US $ exchange rate strengthened/weakened by 10 percent and
all other variables were held constant, the Group’s profit for the period ended 52 weeks to 26 May 2019 would increase/decrease by £919,000 and £482,000
respectively (2018: £194,000 and £27,000). This has been calculated by applying the amended currency rate to the US $ value of financial assets and financial
liabilities held at the period end, an amended rate has not been applied to US $ purchases in the period as they have been effectively hedged against currency
fluctuations via forward contracts.
EXPECTED CREDIT LOSS SENSITIVITY
Deterioration in the ability of customers to afford their payments will have an impact the Group’s Expected Credit Loss (‘ECL’).
A 2% movement upwards (or downwards) in the expected rate of cash collectable following default reduces (or increases) the allowance for ECL by £7,000.
In the eight weeks following the year end date, £4,972,000 of the £6,955,000 Joules Group plc’s customer and other trade receivables balance has been
settled.
LIQUIDITY AND INTEREST RISK TABLES
The following tables detail the Group’s remaining contractual maturity for its derivative and non-derivative financial liabilities with agreed repayment periods. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.
The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate
curves at the balance sheet date. The contractual maturity is based on the earliest date on which the Group may be required to pay.
WEIGHTED
AVERAGE
EFFECTIVE
INTEREST RATE
%
LESS THAN
1 MONTH
£’000
1-3
MONTHS
£’000
3 MONTHS TO
1 YEAR
£’000
1-5
YEARS
£’000
26 MAY 2019
Credit facility
Term loan
Finance leases
Trade payables
Accruals
NON-DERIVATIVE FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
27 MAY 2018
Credit facility
Term loan
Finance leases
Trade payables
Accruals
NON-DERIVATIVE FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
2.3
1.7
9.0
-
-
-
-
2.0
1.8
7.3
-
-
-
-
TOTAL
£’000
(6,231)
(4,205)
(86)
(23,130)
(14,727)
(12)
(269)
(14)
(17,891)
(7,364)
(25)
(10)
(29)
(5,098)
(5,891)
(6,194)
-
(837)
(43)
(141)
(1,472)
(3,089)
-
-
-
(25,550)
(11,053)
(8,687)
(3,089)
(48,379)
(2,949)
(14,218)
(32,103)
(11)
(92)
(22)
(10,010)
(8,004)
(21)
(10)
(44)
(5,159)
(6,403)
(5,032)
(308)
(160)
(5,099)
(1,428)
-
-
(3,072)
(87)
-
-
(49,270)
(5,064)
(3,482)
(313)
(20,268)
(15,835)
(18,139)
(11,637)
(12,027)
(3,159)
(44,962)
(4,919)
(23,148)
(50,829)
(16,699)
(95,595)
The Group has significant financial assets in inventory and trade debtors which are easily convertible to cash. In addition, the above table includes derivative
financial instruments where there would be cash inflows on maturity of the forward contract.
CARRYING VALUE OF FINANCIAL ASSETS
The Directors have assessed that, on the basis of the net assets of the owing companies, receivables are fully recoverable. A significant decrease in the net assets
and trade of the owing company or a decline in the financial position of customers would trigger an impairment review.
CREDIT RISK
In the opinion of the Directors, the only financial instrument that is subject to credit risk is the trade receivables. The Directors believe that the Expected Credit Loss as
disclosed in note 12 represents the Directors’ best estimate of the maximum exposure to credit risk at period-end.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are measured in accordance with the accounting policy set out in note 1. Foreign currency forward contracts and options are considered
Level 2. In the opinion of the Directors, the fair value of the financial assets and liabilities are equal to their book values.
LIQUIDITY RISK MANAGEMENT
The Directors believe that the receivables are not impaired and that the owing companies have sufficient net assets to repay the balances. Therefore the Directors
believe that liquidity risk is minimal.
CAPITAL RISK MANAGEMENT
The Directors maintain detailed cash forecasts which are frequently revised to actuals to ensure that the Group has sufficient liquid resources to meet its
requirements.
FOREIGN CURRENCY ASSETS AND LIABILITIES
Included within the Consolidated Statement of Financial Position are £16,483,000 (2018: £13,822,000) of assets and £5,070,000 (2018: £4,072,000) of
liabilities relating to the overseas subsidiaries which have been translated in the consolidation at the period-end rate. These balances are subject to movements
in exchange rates, as shown in the Statement of Changes in Equity. The Directors do not believe the risk is significant enough to warrant hedging against the
investments in overseas subsidiaries.
Also included within the above table are foreign denominated external trade payables and receivables of £12,508,000 (2018: £2,191,000) and £4,561,000
(2018: £4,129,000) respectively.
98 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 99
25. RELATED PARTY TRANSACTIONS
Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation.
The Directors control 29,861,923 shares (2018: 30,112,305 shares) in Joules Group plc, which represents 34.0% (2018: 34.4%) of the issued share capital.
The remuneration of the Directors of the Group is disclosed in note 4 and in the Directors’ Remuneration Report. In addition Directors participate in dividend
payments and share schemes, further details of which can be found in note 28 and 27 respectively.
26. EARNINGS PER SHARE
Basic and diluted earnings per share are calculated by dividing profit attributable to ordinary equity holders by the weighted average number of ordinary shares in
issue during the period.
For the calculation of diluted earnings per share, the weighted average number of shares in issue is further adjusted to assume conversion of all potentially dilutive
ordinary shares. The Company has one category of potentially dilutive ordinary shares, being management shares not yet vested.
Basic earnings per share (pence)
Diluted earnings per share (pence)
The calculation of basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purpose of basic and diluted earnings per share
Number of shares
52 WEEKS ENDED
26 MAY 2019
52 WEEKS ENDED
27 MAY 2018
11.57
11.32
£’000
10,154
9.86
9.74
£’000
8,626
Weighted number of ordinary shares for the purpose of basic earnings per share
87,745,789
87,503,058
Potentially dilutive share awards
1,901,152
1,014,761
Weighted number of ordinary shares for the purpose of diluted earnings per share
89,646,941
88,517,819
27. SHARE-BASED PAYMENTS
SUMMARY OF MOVEMENT IN AWARDS
NUMBER OF SHARES
DBP
ESOP
LTIP
SAYE
TOTAL
OUTSTANDING AT 27 MAY 2018
290,719
582,907
2,253,094
646,444
3,773,164
Granted during the year
Lapsed during the year
Exercised during the year
174,126
-
-
-
-
865,656
332,560
1,372,342
(105,287)
(70,266)
(175,553)
(479,108)
(5,650)
(14,494)
(499,252)
The inputs into the model were as follows:
Weighted average share price
Weighted average exercise price
No. of employees
Shares under option
Expected volatility
Expected life (Years)
Risk-free rate
Possibility of ceasing employment before vesting
Expectations of meeting performance criteria
Expected dividend yields
DBP
2.93
0.01
1
ESOP
2.51
1.68
10
LTIP
2.84
0.01
86
SAYE
2.93
2.06
249
464,845
103,799
3,007,813
894,244
28%
3
28%
3-10
0.08%
0.08%
0%
100%
1.9%
0%
100%
1.9%
28%
3
0.08%
0%-10%
75% -100%
1.9%
28%
3
0.08%
0%
100%
1.9%
The Group recognised a net expense of £2,677,000 during the year (2018: £1,595,000) relating to equity settled share-based payments. Including associated
employer’s National Insurance contributions which in the year was a credit of £61,000 (2018: £171,000 expense), the Group recognised a total expense of
£2,616,000 during the year (2018: £1,766,000).
DEFERRED BONUS PLAN (‘DBP’)
The DBP operates in conjunction with the Group’s annual bonus plan. The number of ordinary shares subject to a DBP award will be the number of shares that have
a market value equal to the value of the annual bonus deferred into a DBP award. DBP awards take the form of nil-cost options, vest on the third anniversary of the
date on which the relevant annual bonus was determined and are normally exercisable until the tenth anniversary of the grant date.
EXECUTIVE SHARE OPTION PLAN (‘ESOP’)
The Group operated a share option scheme during the period for certain employees under the Executive Share Option Plan (‘ESOP’). The different options
vest between two years and three years and have an exercise life between three and ten years from grant date. All option schemes are subject to continued
employment over the vesting period.
LONG TERM INCENTIVE PLAN (‘LTIP’)
The Board approved Long Term Incentive Plan 2016 (‘LTIP 2016’) allows the grant of options to executive directors and senior management of the Group in
the form of nil-cost options over ordinary shares in Joules Group plc. The options are exercisable three years after the date of grant subject to achieving certain
stretching targets. For the Executive directors and members of the operating board, the target is based on an EPS target in the final year of the relevant performance
period, being the financial years ending May 2019, May 2020 and May 2021 for grants made to date. For the financial years ending May 2020 and May
2021 20% of the target is based on achieving specified international revenue targets. For other senior management awards the target is based on the cumulative
PBT over the three years to May 2019, May 2020 and May 2021 for the grants made to date. The calculation includes an assumption that 10% of senior
managers on the scheme would cease employment before vesting.
SAVE AS YOU EARN SCHEME (‘SAYE’)
Under the terms of the SAYE scheme, the Board grants options to purchase ordinary shares in the Company to employees who enter into the HMRC-approved
SAYE scheme for a term of three years. Options are granted at up to 20% discount to the market price of the shares on the day proceeding the date of offer and
are exercisable for a period of six months after completion of the SAYE contract.
OUTSTANDING AT 26 MAY 2019
464,845
103,799
3,007,813
894,244
4,470,701
EXERCISABLE AT 26 MAY 2019
-
103,799
-
-
103,799
28. DIVIDENDS
All share options were valued using the Black-Scholes model. Expected volatility was determined by management, using comparator volatility as a basis. The
expected life of the options was determined based on management’s best estimate. The expected dividend yield was based on the anticipated dividend policy of
the Company over the expected life of the options. The risk-free rate of return input into the model was a zero coupon government bond with a life in line with the
expected life of the options.
The fair value of the total shares issued during the period, and measured as at issue date is £4,430,956.
Interim dividend paid in the financial year
Approved dividend paid after the financial year
Final dividend proposed, not accrued, payable subject to approval at AGM
TOTAL
26 MAY 2019
27 MAY 2018
PENCE PER
SHARE
0.75
1.35
2.1
£000
658
1,185
1,843
PENCE PER
SHARE
0.7
1.3
2.0
£000
612
1,141
1,753
The Directors are proposing a final dividend of 1.35 pence per share with a total value of £1,185,216 (2018: 1.30 pence per share with a total value of
£1,141,117). This dividend has not been accrued in the Consolidated Statement of Financial Position and will be put for approval at the AGM on
25 September 2019.
100
COMPANY STATEMENT OF FINANCIAL POSITION 101
COMPANY STATEMENT OF FINANCIAL POSITION
JOULES GROUP PLC
NON-CURRENT ASSETS
Investments
TOTAL NON-CURRENT ASSETS
CURRENT ASSETS
Other debtors
Cash at bank and in hand
TOTAL CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Other payables
NET CURRENT LIABILITIES
TOTAL ASSETS LESS CURRENT LIABILITIES
CAPITAL AND RESERVES
Called up share capital
Share premium
EBT reserve
Loss for the period
Profit and loss account
SHAREHOLDERS’ FUNDS
AT 26 MAY 2019
£’000
AT 27 MAY 2018
£’000
NOTE
30
139,980
139,980
139,980
139,980
31
32
33
34
21
41
41
20
-
20
140,021
140,000
5,821
5,780
3,147
3,127
134,200
136,853
878
11,410
(322)
(532)
122,766
134,200
875
11,410
-
(574)
125,142
136,853
The parent company loss for the period was £532,000 (2018: loss of £574,000).
These financial statements of Joules Group plc (Company Registration Number 10164829) were approved by the Board of Directors and authorised for issue on
22 July 2019 and were signed on behalf of the Board of Directors by:
MARC DENCH
Chief Financial Officer
22 July 2019
102 COMPANY STATEMENT OF CHANGES IN EQUIT Y
NOTES TO THE COMPANY FINANCIAL STATEMENTS 103
COMPANY STATEMENT OF CHANGES IN EQUITY
JOULES GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
JOULES GROUP PLC
Balance at 28 May 2017
Dividend paid
Loss for the year and total comprehensive income
Balance at 27 May 2018
Shares issued
EBT share purchases and commitments
Dividend paid
Loss for the year and total comprehensive income
SHARE
CAPITAL
£’000
SHARE
PREMIUM
£’000
RETAINED
EARNINGS
£’000
EBT
RESERVE
£’000
NOTE
28
21
28
875
11,410
126,805
-
-
-
-
(1,663)
(574)
875
11,410
124,568
3
-
-
-
-
-
-
-
(3)
-
(1,800)
(532)
-
-
-
-
-
(322)
-
-
TOTAL
EQUITY
£’000
139,090
(1,663)
(574)
136,853
-
(322)
(1,800)
(532)
Balance at 26 May 2019
878
11,410
122,233
(322)
134,200
29. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION
These separate financial statements of Joules Group plc were prepared in accordance with Financial Reporting Standard 101, Reduced Disclosure Framework
(FRS 101).
The Company’s financial statements are presented in GBP.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to:
• share based payments;
• financial instruments,
• capital management,
• presentation of comparative information in respect of certain assets,
• presentation of a cashflow statements;
• standards not year effective and;
• certain related parties transactions;
• business combinations;
As permitted by section 408 of the Companies Act 2006, the profit and loss account is not presented. The loss for the year amounted to £532,000, (2018: loss of
£574,000).
Director remuneration for the period was £218,300 (2018: £190,000) in relation to Non-Executive Directors, further detailed in note 4.
Auditor remuneration for the period was £10,000 (2018: £8,000), further detailed in note 5.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are the same as those set out in note
1 to the consolidated financial statements except as set out below.
INVESTMENTS
Fixed asset investments are stated at cost less provisions for diminution in value.
GOING CONCERN
Going concern for the Company has been considered along with the Group by the Directors. The consideration is set out in note 1 of the consolidated financial
statements.
SHARES HELD BY EBT
The Joules Group plc Employee Benefit Trust (‘EBT’) is set up to provide for the issue of shares to Group employees, principally under share option schemes. Shares
in the Company held by the EBT are included in the Statement of Financial Position at cost, including any directly attributable incremental costs, as a deduction from
equity.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
There were no critical accounting judgements that would have a significant effect on the amounts recognised in the parent company financial statements or key
sources of estimation uncertainty at the balance sheet date would have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next year.
104 NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS 105
30. INVESTMENTS
Cost and Net Book Value
At 27 May 2018
At 26 May 2019
£’000
139,980
139,980
On 26 May 2016 Joules Group plc acquired the entire share capital of Joules Investments Holdings Limited.
The Company’s subsidiaries, as at the period end are shown in the table below. All subsidiaries have been in existence for the whole of the reporting period.
32. OTHER PAYABLES
Trade payables
Payables due to subsidiary
Taxation and social security
Accruals
26 MAY 2019
£’000
27 MAY 2018
£’000
9
5,785
11
16
34
3,102
-
11
5,821
3,147
SUBSIDIARIES
As at the period-end the Group has the following subsidiaries, those marked with * being indirect holdings:
SUBSIDIARY NAME
NATURE OF
BUSINESS
PLACE OF
INCORPORATION
AND OPERATION
Joules Investments Holdings Limited Holding company
England and Wales
Joules Limited*
Retailer
England and Wales
Joules Hong Kong Limited*
Overseas trading
entity
Hong Kong
Joules Clothing Shanghai
Company Limited*
Overseas office
China
REGISTERED ADDRESS
Joules Buildings, The Point,
Rockingham Road, Market
Harborough
Joules Buildings, The Point,
Rockingham Road, Market
Harborough
18/F, United Centre, 95
Queensway, Admiralty, Hong
Kong
Room 1401-1404, No.432 West
Huaihai Road, Changning district,
Shanghai, China
100%
100%
100%
100%
Joules USA Inc.*
Overseas trading
entity
USA
103 Foulk Road, Suite 202,
Wilmington, DE19803, USA
100%
100%
Joules Developments Limited *
Non trading entity
England and Wales
Joules Property Limited *
Non trading entity
England and Wales
Joules Buildings, The Point,
Rockingham Road, Market
Harborough
Joules Buildings, The Point,
Rockingham Road, Market
Harborough
100%
100%
100%
100%
The payables due to subsidiary is in relation to administrative expenses and dividends paid by Joules Limited on behalf of Joules Group plc. The terms of the
intercompany payable is at nil interest, payable on demand.
PROPORTION
OF OWNERSHIP
INTEREST
PROPORTION OF
VOTING POWER
HELD
100%
100%
33. CALLED UP SHARE CAPITAL
100%
100%
Allotted and issued
26 MAY 2019
£’000
27 MAY 2018
£’000
87,793,809 Ordinary shares of £0.01 each (2018: 87,503,058)
878
875
Authorised
116,667,736 Ordinary shares of £0.01 each (2018: 116,667,736)
1,167
1,167
During the period new ordinary shares were issued to employees that left the business from the following share schemes: SAYE: 13,569 shares (2018: 2,368),
ESOP: 271,532 shares (2018:nil) and LTIP: 5,650 shares (2018:nil).
The company was incorporated on 1 May 2016. The acquisition of Joules Investments Holdings Limited by Joules Group plc on 26 May 2016 has been accounted
for using reverse acquisition accounting principles. As a result, a merger reserve of £125,807,000 was created upon acquisition and AIM listing of the Group on
26 May 2016.
All ordinary shares carry equal rights.
34. SHARE PREMIUM
The share premium reserve contains the premium arising on the issue of equity shares, net of issue expenses incurred by the company. On 26 May 2016 in an initial
public offering Joules Group plc issued 7,175,851 ordinary £0.01 shares at a price of £1.60, resulting in share premium of £11,409,603.
31. OTHER DEBTORS
Prepayments
26 MAY 2019
£’000
27 MAY 2018
£’000
41
41
20
20
Balance at 27 May 2018
Balance at 26 May 2019
35. DIVIDEND
Details of the Dividend paid is shown in note 28 of the consolidated financial statements.
£’000
11,410
11,410
36. RELATED PARTY TRANSACTIONS
The Company has taken advantage of the disclosure of related party transactions with wholly owned fellow group companies. Related party transactions with key
management personnel (including Directors) are shown in note 25 of the Consolidated Financial Statements.
106
COMPANY INFORMATION 107
COMPANY INFORMATION
JOULES GROUP PLC
JOULES GROUP PLC
Registered in England and Wales number: 10164829
COMPANY SECRETARY
Jonathan William Dargie
REGISTERED OFFICE
Joules Building, The Point,
Rockingham Road, Market Harborough,
Leicestershire, LE16 7QU
WEBSITE
www.joulesgroup.com
NOMINATED ADVISER & BROKER
Peel Hunt LLP, Moor House,
120 London Wall,
London, EC2Y 5ET
BROKER
Liberum Capital Limited
Ropemaker Place, Level 12,
25 Ropemaker Street,
London, EC2Y 9LY
CORPORATE PR
Hudson Sandler
25 Charterhouse Square,
London, EC1M 6AE
LEGAL ADVISORS TO THE COMPANY
Eversheds LLP,
115 Colmore Row,
Birmingham, B3 3AL
AUDITOR
Deloitte LLP,
1 Woodborough Road,
Nottingham, NG1 3FG
REGISTRARS
Equiniti Limited, Aspect House,
Spencer Road,
Lancing, BN99 6DA
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