Griffin House
40 Lever Street
Manchester, M60 6ES
www.nbrown.co.uk
N Brown Group plc
Annual Report & Accounts 2013
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Shareholder Information
Financial Timetable
2012
2013
16 October
7 December
4 January
2 March
24 April
30 May
28 June
2 July
26 July
Announcement of interim results
Closing of register for interim dividend
Payment of interim dividend
Financial year-end
Preliminary announcement of annual results
Publication of 2013 annual report and accounts
Closing of register for final dividend
Annual general meeting
Payment of final dividend
Registered Office
Griffin House
40 Lever Street
Manchester
M60 6ES
Registered No. 814103
Telephone 0161 236 8256
Registrars
Capital IRG plc
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone 0871 664 0300
(Calls cost 10 pence per minute plus network extras)
Auditors
Deloitte LLP
P O Box 500
2 Hardman Street
Manchester
M60 2AT
Bankers
HSBC Bank plc
The Royal Bank of Scotland plc
Solicitors
Pinsent Masons LLP
Eversheds LLP
Addleshaw Goddard LLP
Corporate Brokers
Credit Suisse Securities (Europe) Ltd
Jefferies Hoare Govett
Shareholder benefits
Subject to certain conditions, shareholders are entitled to a 20% privilege discount off the selling price of consumer merchandise in
any of the group catalogues. Shareholders interested in these facilities should write for further information to the Company Secretary,
N Brown Group plc, Griffin House, 40 Lever Street, Manchester, M60 6ES stating the number of shares held and the catalogue or
product of interest.
Capital gains tax
For the purpose of capital gains tax, the value of the company’s ordinary shares of 10p each was 6.40625p per share on 31 March 1982
and 1.328125p on 6 April 1965.
For more information and latest news on the group, visit www.nbrown.co.uk.
2013
24%
more sales from
new customers
3.0m
people shopping with us
£6m
extra invested in tomorrow
3
GROWING CUSTOMER GROUPS
N Brown Group plc Annual Report & Accounts 2013
THE
NUMBERS
SAY IT ALL
Contents
02 Financial Highlights
03 Five Year History
04 Our Success Stories
08 Chairman’s Statement
10 Chief Executive’s Review
14 Financial Review
16 Directors and Officers
18 Directors’ Report
28 Corporate Governance Report
33 Remuneration Report
43
Independent Auditor’s Report
– Group Accounts
44 Consolidated Income Statement
44 Consolidated Statement of
Comprehensive Income
45 Consolidated Balance Sheet
46 Consolidated Cash
Flow Statement
46 Reconciliation of Operating
Profit to Net Cash from
Operating Activities
47 Consolidated Statement of
Changes in Equity
48 Notes to the Group Accounts
72
Independent Auditor’s Report
– Company Accounts
73 Company Balance Sheet
74 Notes to the Company Accounts
IBC Shareholder Information
2013 has been the year we can start to see the rewards of all
our hard work with the fastest revenue growth since 2009.
This is the welcome result of all our investments in our
brands, our online services and technologies, high street
stores and international expansion.
Behind the scenes, we’ve been busy testing, refining and
developing our initiatives, and as sales continue to rise, we’re
seeing positive results across the business. But there’ll be no
resting on our laurels – we’ll be redoubling our efforts in all areas,
and putting every effort into delighting our customers.
Our online channels now account for 55% of our overall
business, with 26% (and counting) of website traffic arriving
via mobile devices. Good news too from America, where
annual sales have risen by 75%. High street stores for
Simply Be and Jacamo are looking promising.
Finally, we have changes in our management team.
Lord Alliance, after 49 years as the Chairman and major
shareholder of the business, has stepped down, and our
new Chairman is Andrew Higginson, former Executive
Director of Tesco. Our Chief Executive, Alan White, will also
retire later this year. In his place will stand Angela Spindler,
currently the Chief Executive of The Original Factory Shop.
We warmly welcome both Andrew and Angela aboard and
wish them every success going forward.
N Brown Group plc Annual Report & Accounts 2013
01
FINANCIAL
HIGHLIGHTS
Financial Highlights
2013 (52 weeks)
2012 (52 weeks)
2012 (53 weeks)
Revenue
Operating profit
Adjusted profit before taxation*
Profit before taxation
Adjusted earnings per share**
Earnings per share
Dividends per share
Net assets
£784.7m
£102.2m
£95.1m
£96.4m
28.15p
28.51p
13.68p
£740.3m
£99.1m
£92.7m
£94.0m
28.16p
28.52p
13.03p
£753.2m
£102.0m
£95.6m
£96.9m
28.91p
29.28p
13.03p
£446.0m
£402.3m
£402.3m
Net asset value per share
Gearing
157.4p
42%
141.9p
48%
141.9p
48%
* Excluding fair value adjustments to financial instruments.
** See note 11 on page 56.
02
N Brown Group plc Annual Report & Accounts 2013
YEAR
HISTORY
Revenue –
Continuing operations (£m)
Operating profit –
Continuing operations (£m)
Pre-tax profit* –
Continuing operations (£m)
690.0
662.5
740.3
718.8
784.7
95.5
97.6
102.6
99.1
102.2
98.2
93.1
95.1
92.7
82.7
09
10
11
12
13
09
10
11
12
13
09
10
11
12
13
Adjusted earnings per share**
– Continuing operations (p)
Dividends per share (p)
Net assets (£m)
28.16
28.15
27.02
13.68
13.03
12.41
24.77
21.96
10.79
9.19
319.0
283.0
446.0
402.3
360.4
09
10
11
12
13
09
10
11
12
13
09
10
11
12
13
* Excluding fair value adjustments to financial instruments.
** See note 11 on page 56.
*** 2012 figures based on 52 week numbers.
N Brown Group plc Annual Report & Accounts 2013
03
OUR SUCCESS STORIES
Agility has become a key business skill in
this new age of retail progress. But as the
figures show, being flexible and receptive
to change hasn’t meant getting smaller.
On the contrary. We’ve seen good growth
in sales, with plenty more exciting
developments across the business.
NEW STORES
We’re going places
on the high street
We’ve opened five new Simply Be
stores and introduced the Jacamo
brand to five of the seven stores now
open. The dual fascia format has
shown encouraging results so far,
attracting new customers both to the
stores and online. We are reviewing
the business model in preparation for
further expansion.
A bigger US reach
Things stateside are just getting better,
with 75% annual sales growth in the
US. Simply Be is going from strength
to strength. We’ve launched Marisota
online, and we’ll also be launching
Jacamo for direct mail.
These are exciting times for our
brands overseas, and we’ve got
every reasonable expectation of
their ongoing success.
75%
US GROWTH
04
N Brown Group plc Annual Report & Accounts 2013
THE
PERFECT
FIT
We’re looking good. In fact, we’ve
never looked better. Our uniquely
innovative approach to fit-oriented
fashion continues to pay off.
This is how sales are taking shape.
£100m
Menswear sales up 8%
£87m
Footwear sales up 5%
£362m
Ladieswear sales up 1%
N Brown Group plc Annual Report & Accounts 2013
05
Coleen Nolan is on-board
with Marisota and doing
great things. Claire
Richards from the
band, Steps,
is our brand
ambassador
for Fashion
World.
OUR SUCCESS STORIES
Real star quality
Freddie, Dannii, Claire and Coleen. Inspiring
people, fresh ideas, cutting-edge design.
Superb collections from our celebrity
designers continue to keep us relevant
and aspirational. Freddie Flintoff is
continuing his good work for
Jacamo’s Flintoff range. Dannii
Minogue’s ‘Project D’ fashion line
in larger sizes has been launched
exclusively in Simply Be.
4
S
E
I
T
I
R
B
E
L
E
C
G
N
I
R
I
P
S
N
I
It’s a lifestyle thing
Customers are loving our new ranges
of gifts and homeware. ‘The Brilliant Gift
Shop’ is really living up to its name, and
winning over more and more customers
with everything from jewellery and toys
to crafts and technology.
OF BRAND
NEW LINES
06
N Brown Group plc Annual Report & Accounts 2013
5 5
%
ONLINE
SALES
We’ve never been
better connected
Our websites now account for 55%
of our overall business.
The mobile-optimisation of our
sites is also bringing in results, and
26% of website visits are from mobile
devices – a figure which will increase
as more customers take advantage
of the speed, ease and convenience
of shopping ‘on the move’.
%2 6
MOBILE
SITE
TRAFFIC
New faces at the top
Progress brings positive change, and
as our business adapts, so does our
leadership team. Lord Alliance remains
on our board of directors, but has
stepped down as Chairman to make
way for Andrew Higginson, former
Executive Director of Tesco. Andrew
is a strong commercial strategist, and
his experience in modern-day retailing
is sure to serve us extremely well.
Our Chief Executive, Alan White,
will also leave us later this year. Alan
has led the business since 2002, and
his legacy is a thriving and progressive
business which is one of the leading
online retailers.
In his place will stand Angela Spindler,
the Chief Executive of The Original
Factory Shop, who has had a blue
chip retail career with Debenhams,
Asda, Coca Cola and Mars.
Our people and our success are
intertwined, and every achievement
past, present and future is a direct
result of our leadership strengths
and retail strategy. We warmly
welcome Andrew and Angela onto
our leadership team, and we wish
Alan all the very best for the future.
NEW LEADERS
N Brown Group plc Annual Report & Accounts 2013
07
CHAIRMAN'S STATEMENT
We are pleased to report that the group made good trading
progress throughout last year and that this has continued
into the new financial year. This is despite the continuing
difficulties in the economy as a whole and for consumers
and retailers in particular.
We have achieved these positive results by maintaining a clear focus on improving
the product, presentation, value and service to our customers. In addition
we have invested heavily in our online systems, new customer recruitment,
international expansion and concept stores which have the potential to be
significant growth drivers in the medium term, although they reduce profits in
the short term. The early signs from these activities look promising.
Financial Results
£m
Revenue
Operating profit
Adjusted profit
before taxation
Adjusted earnings
per share (p)
52 wks 53 wks
2013
2012
%
52 wks
2012
%
784.7
102.2
753.2
102.0
+4.2
+0.2
740.3
99.1
+6.0
+3.1
95.1
95.6
-0.5
92.7
+2.6
28.15
28.91
-2.6
28.16
-
Total group revenue increased by
6.0% to £784.7m versus the 52 week
comparative and by 5.5% on a like-
for-like basis, excluding the non-
comparable periods for newly opened
stores. Having seen a reduction in the
rate of gross margin in the first half of
1.6%, an equivalent increase in the
second half resulted in an unchanged
rate for the year of 53.0%.
Operating profit was up by 3.1% to
£102.2m, after accounting for losses
of £6.8m from the expanded customer
recruitment programme, international
trading and the Simply Be/Jacamo
stores. Excluding these items core UK
home shopping profit rose by 7.9% to
£109.0m, despite the tough economic
environment for consumers.
Profit before taxation was £96.4m
(2012, £96.9m) but was up 2.6% to
£95.1m after excluding the impact of
the 53rd week last year and the fair
value adjustments to financial
instruments.
Adjusted earnings per share were
28.15p, almost identical to last year
despite a slightly higher tax charge
of 17.6% (2012, 16.4%). The board is
proposing a final dividend of 8.23 pence
per share, up 6.3% on last year, giving a
total dividend for the year of 13.68 pence
up by 5.0%, and covered 2.1 times.
Net borrowings at 2 March 2013
reduced to £188.7m (2012, £192.5m)
despite the continuing higher level of
capital expenditure of £25.0m, primarily
for online and stores development.
Net finance costs increased from
£6.4m to £7.1m, covered 14 times by
operating profit. Gearing has fallen
from 48% to 42% on net assets which
have risen by 10.9% to £446.0m.
Trading Highlights
The results for the year show the
benefit of a portfolio of brands and
the breadth of our product range
which has enabled us to allocate our
marketing investment to those areas
giving the best return. Consequently
we have seen the fastest growth,
15%, from our younger brands, such
as Simply Be, Jacamo and Fashion
World, as it has been easier both to
recruit new customers, predominantly
online, and get higher sales from the
existing customers. Conversely the
brands targeted at the over 50’s,
such as JD Williams, Fifty Plus,
Marisota and Julipa have exhibited
slower growth, 1%, as these customers
have continued to be cautious with
their spending. However this group
did increase revenue by 3% in the
second half compared to flat sales in
the first half.
08
N Brown Group plc Annual Report & Accounts 2013
The continued investment to make our
websites match best practice has been
rewarded with an increase of 15% in
online revenue to £424m, which now
represents 55% of home shopping
revenue. The increase also reflects the
cultural changes we are making in the
business to have everyone thinking
from a multi-channel perspective.
Revenue grew in all our major product
categories. Ladieswear recovered from
a first half decline to grow by 4% in the
second half, and by 1% for the year as
a whole. Footwear and menswear grew
by 5% and 8% respectively, capitalising
on our size and fit expertise. However
the fastest growth came from the home
and gift category where sales grew
by 15% and now account for 30% of
group revenue. The more aggressive
pricing policy on key value indicator
lines in home and gift drove sufficient
incremental volume to cover the lower
rate of gross margin and, coupled
with extensions to the product ranges,
especially online exclusives, resulted in
an encouraging performance.
Our international expansion is focused
on building a presence in the USA,
where revenue rose by 75% to £8.4m.
We continue to believe there is a major
strategic opportunity for the group to
win a share of the $35 billion plus size
ladieswear market in the USA, and
we are building the marketing and
operational capability to achieve this.
We traded from seven Simply Be
stores in the UK, three of which had a
Jacamo menswear section, and these
dual fascia stores have been the most
successful. We are now evaluating the
potential for rolling out this format in
other major UK cities, recognising that
they help to build brand awareness
and online penetration in addition to
the revenue transacted in the store.
We started the new financial year with a
stronger customer base than a year ago
as a result of the increased investment
in customer recruitment. We intend to
maintain this higher level of recruitment
activity and continue to drive the
proportion of our revenue transacted
online through positive trading actions,
whilst at the same time reducing the
volume of catalogue mailings through
our contact optimisation programme.
The trading teams are being reorganised
to give greater focus on the key brands
and the product development required
to deliver growth in market share. In
addition we are looking to give our
customers more choice by offering
more options for payment, delivery
and ways to contact us.
Dedicated websites for Marisota and
Jacamo are being launched in the USA
to complement Simply Be to deliver a
more segmented offer and maintain
high growth momentum, and Figleaves
is also looking to boost sales there.
We will identify possible new sites for
UK store expansion in the autumn
once we have fully evaluated the
potential of this channel and developed
the essential features for a roll-out.
There are also major projects
underway to assess the requirements
of our information technology systems
and processes and the operational
capacity to ensure we can manage our
anticipated growth in the medium term.
Although we expect market conditions
to remain challenging, based on the
stronger customer file and the planned
activities to drive further growth, the
board remains confident in the outlook
for the business. I would like to thank
all stakeholders in the business for their
contribution, and especially all of the
staff for their hard work and dedication
throughout the year.
Current Trading and Outlook
Sales for the 7 weeks to 20 April
2013 are up by 6.3% on last year and
by 6.1% on a like-for-like basis. The
cold weather in this period has had a
significant negative impact on the sales
of summer clothing but we have seen
good performances from menswear
and home and gift which have more
than offset this issue.
Board Composition
My appointment to the board in July
2012 and accession to chairman in
September 2012 was the start of
a significant transformation of the
board which will be completed during
2013. I succeeded Lord Alliance of
Manchester CBE when he stepped
down to the role of non-executive
director after over 40 years as
chairman of the group. I have very
much appreciated his wise counsel
over the last few months.
Angela Spindler, currently the chief
executive of The Original Factory Shop,
will join N Brown Group as chief executive
on 1 July 2013. She has had extensive
retail and consumer experience at Coca
Cola, Pedigree Petfoods, Asda and
Debenhams. Angela will take over from
our current chief executive, Alan White,
who will retire to a plural career after
11 successful years as chief executive
and after an appropriate handover period
to effect a smooth transition.
Nigel Alliance OBE retired in December
2012 having been a director of the
board since 1969 and Lord Stone of
Blackheath stepped down after 10 years
service on the board. We thank them
both for an outstanding contribution.
We have now announced three new
non-executive directors who will
enhance the diversity of the board as
well as ensure we comply with best
practice in corporate governance. Ron
McMillan was deputy chairman of
PricewaterhouseCoopers in the Middle
East and will become chair of audit later
this year and also our senior independent
director. Fiona Laird, the senior vice
president of human resources at
Unilever PLC, will chair the remuneration
committee. Simon Patterson, managing
director at Silver Lake, will chair the
nominations committee and brings
extensive knowledge of the global
technology industry including digital
media and e-commerce.
There has been significant change at the
Board in the last few months. I wish to
record my thanks and congratulations
to the departing directors, particularly
Alan White as CEO, who have delivered
strong growth and returns for investors
over the years. As the business
continues its migration online, they
have left strong foundations and I am
confident that the new board has the
right blend of skills and experience to
build on those foundations and deliver
growth in the future.
Andrew Higginson
N Brown Group plc Annual Report & Accounts 2013
09
CHIEf ExECUTIvE’S REvIEw
The group has made good progress this year with
the fastest rate of revenue growth since 2009.
This has been achieved by investing in high levels
of new customer recruitment, improving our product
and promotional offers, especially online, and making
progress with our key strategic initiatives.
The 53rd week last year delivered revenue of £12.9m
and operating profit of £2.9m. The commentary below
is all based on a comparison of 2012/13 with the
52 week version of 2011/12.
Revenue
Revenue growth has been delivered
in our core home shopping business
supplemented by increased
contributions from our international
and stores operations. For the 52
weeks ended 2 March 2013 group
revenue was £784.7m, up by 6.0%
in total and by 5.5% on a like-for-
like basis. The growth in revenue
accelerated as we progressed
throughout the year, culminating in
a strong second half which was up
by 7.1% on a like-for-like basis.
Customer Groups
The key objective of our marketing
activity this year was to restore growth
to the customer file, and this has been
successfully achieved. Sales from new
customers increased by 24% during
the year benefitting from an extra £6m
of marketing investment in media costs
compared with the previous year.
The additional investment has been
spent with the online search engines
on “pay per click” recruits, which is
now our single largest channel of
recruitment, and for television airtime
for direct response advertisements.
Inevitably these methods of
recruitment bring in younger than
average customers.
In addition to the increased sales from
new customers we also saw a 1%
increase in orders from our established
database and a 2% increase in the
amount spent by each customer. We
entered the new financial year with an
active database of 6.4m customers,
who are predominantly female with an
average age of 57.
The number of those customers who
had placed an order in the last year
was up by 6%, a key indicator of
future growth.
Target Age
Revenue £m
% Change
30-50
Over 50
Total
305
480
785
15
1
6
Under 50 Customer Group
The brands in this customer segment
continue to be the main contributors
to the group’s overall revenue growth.
Simply Be is the largest brand in
this segment with sales in excess of
£122m and growth of 14% across all
channels and geographies. It has the
most fashion-conscious customers
and our expertise is in recognising
the latest trends and designing
our clothing range to look good on
customers whether they are size
14 or size 32. On average Simply Be’s
customers are visiting the website
every few days looking for new lines.
Jacamo is targeted at the brand-
conscious thirty-something male
who wants the convenience of online
shopping and branded clothing in
their size, and identifies with the fun-
loving image of the brand, exemplified
by Freddie Flintoff as our brand
ambassador. This continues to be
our fastest growing brand with sales
up by 36%.
Fashion World’s customers, who
are primarily from lower socio-
demographic groups, have had a
tough time in the last few years but a
10
N Brown Group plc Annual Report & Accounts 2013
Group revenue
up 6.0% to
Adjusted earnings
per share
£784.7m
28.15p
Total dividend
up 5.0% to
13.68p
revamp of the product range, a more
contemporary feel to the catalogue
and website and the use of celebrities
such as Claire Sweeney and Claire
Richards to promote the brand, have
resulted in revenue growth of over 4%.
Figleaves, the leading online lingerie
brand, has seen strong growth in
profitability, managing its cost base
extremely well on revenues which
were slightly up.
50 Plus Customer Group
The 50 plus customer group has had
a difficult time during the recession
but there were signs of improvement
in the second half, when revenue grew
by 3%, resulting in a positive sales
outcome for the year as a whole.
The strongest growth in this segment
came from House of Bath, which
sells an eclectic range of items for the
home and garden, where revenue
grew by 34%, built on very successful
recruitment campaigns. There was
also strong growth from Marisota
which targets customers in their early
50’s with a catalogue and website
offering fitting solutions for clothing
and footwear. The menswear brands,
High & Mighty and Premier Man, saw
modest growth. Our largest brand,
JD Williams and its associated titles,
which supply a wide range of products
to customers who are typically retired,
saw revenue fall by 5%, partly due to
reductions in the recruitment budget in
previous seasons. Julipa, focussed on
our most traditional customers,
had flat sales year on year.
Product Groups
Category
Ladieswear
Footwear
Menswear
Home & Gift
Total
Revenue % of
Total
£m
%
Change
362
87
100
236
785
46
11
13
30
100
1
5
8
15
6
In light of the lacklustre economy
and the adverse weather conditions
throughout most of last year it is
pleasing that we have managed
to grow revenue in all four product
categories.
Ladieswear revenue grew by 1%.
The global supply chain has settled
down after the turbulent conditions in
2011 and this has helped us to have
better balanced stock levels, resulting
in higher full margin sales but fewer
discounted sales. The impact of a
very wet summer followed by a cold
start to 2013 depressed sales but in
between we had strong sales from
our autumn ranges. We exploited our
online capabilities to create fashion
stories and capsule ranges to reflect
the latest trends. In contrast the sales
of occasionwear and higher priced
garments were disappointing.
Footwear sales were up by 5% with
the strongest growth from Viva La
Diva, our online footwear portal, and
men’s footwear. The weather patterns
resulted in strong boot sales but weak
sandal sales.
Menswear continued its strong growth
as it has done for each of the last 5
years, and broke through the £100m
barrier for the first time.
The use of Freddie Flintoff as a
celebrity ambassador for Jacamo,
including strong sales from his own
range, contributed to the growth of
younger menswear.
Home and gift sales had an excellent
year with growth of 15%. Our strategy
across all product groups was to
sharpen our price points on easily
comparable lines and this had the
greatest effect on the home and gift
revenue. In addition we have been
using our supplier integration portal
to significantly increase the number of
lines available online with the product
being despatched directly from the
supplier. The aggregate impact of
these changes was to drive much
higher volumes at a lower rate of
gross margin with a net benefit in
terms of cash contribution. Within this
category there were some excellent
performances from electrical, furniture,
homewares, toys and gifts.
Multi-channel
Online sales have increased as a
proportion of our home shopping
revenues by five percentage points
or more for each of the last 8 years.
Last year the proportion rose from
50% to 55% with online revenue
rising by 15% to £424m, maintaining
our position in the top division of
internet retailers. The growth of
online purchasing is partly down to
global acceptance of digital media by
consumers and we aim to accelerate
this trend with our customers as it
delivers increased revenue and lower
operating costs. To this end we now
N Brown Group plc Annual Report & Accounts 2013
11
CHIEf ExECUTIvE’S REvIEw
Menswear sales
up 8% to
£100m
Ladieswear sales
up 1% to
£362m
Share of
online sales pass
55%
recruit most customers through online
campaigns, sponsoring approximately
five million key words and phrases
through online search engines coupled
with sophisticated optimisation
techniques. We also link our direct
response television campaigns and
our newspaper advertisements into
our websites. We continue to expand
the number of internet exclusive
product lines and last year had 84,000
stock options which were never
featured in a catalogue generating
an incremental £42m of revenue.
Last year saw an explosion in mobile
access to the internet through the
burgeoning sales of smartphones and
tablet computers. We quickly adapted
all our websites to be “mobile friendly”
and by the year end 26% of all online
sessions were being accessed from
mobile devices, which accounted for
23% of the value of sales transacted.
There is much evidence that the
older consumer is adapting to tablet
computers at a fast rate which will help
to accelerate the switch from paper to
digital media in the coming years.
The ideal scenario for the customer
is to be able to switch seamlessly
between channels without noticing
any variation in the branding or service
offer. As an example we saw the
number of inbound calls to our contact
centre decline by 9% but by offering
the same affinity products to our
telephone orderers as we do to our
online customers we increased
our add-on sales by £15m.
To be truly multi-channel requires a
store portfolio and we are testing this
concept for our younger brands in
targeted locations. During the year
we opened a further five Simply Be
stores and in addition we utilised
some of the space in three of the
stores for the Jacamo menswear
range, which has done exceptionally
well. Total revenue from the Simply
Be/Jacamo stores was £4.6m with
start-up losses of £2.2m. We are
in the process of evaluating the
incrementality of these sales, the
positive halo effect on online sales
and the projected return on capital
achievable. Assuming this evaluation
is positive we will look to open a
limited number of stores in high
footfall locations.
Our High & Mighty stores had revenue
of over £9m, up by 5% despite tough
trading conditions in many of the
locations where they are trading.
However more promotional activity
resulted in a loss of £0.7m compared
with our aspiration to reach breakeven.
International
Simply Be and Figleaves allow
international orders to be placed
on their websites from many parts
of the world, but our overseas
marketing is focussed on USA, Ireland
and Germany. International sales
amounted to £30.2m with losses of
£1.9m (2012, £1.5m). Simply Be’s sales
in the USA grew by 75% to £8.4m with
an acceleration in the second half. We
are still testing a variety of marketing
and recruitment techniques, and have
found that the Marisota product range,
which is slightly less fashionable than
Simply Be, yields better results from
direct mail recruitment. Consequently
we will launch a dedicated Marisota
website in April 2013 as well as one for
Jacamo menswear.
Our marketing expenditure in Germany
has been significantly reduced and
focussed wholly online. Whilst this has
reduced revenue by 38% to £2.2m
it has reduced losses and gives an
expectation of breakeven next year.
Oxendales is our primary brand in
Ireland, where we have traded for
many years. The continuing economic
woes have seen a decline in both sales
and profits since the recession hit, and
last year revenues fell a further 15% to
£14.2m and operating profit was down
49% to £1.7m.
Figleaves derives 22% of its total
revenue of £24.7m from overseas,
with the USA the main market, and
has ambitions to grow sales further
in this region.
Gross Margin and Credit
The rate of gross margin was level
with the previous year at 53.0%.
However this masks a 1.6% increase
in the rate of gross margin in the
second half to offset an equivalent
reduction in the first half. There have
been three key features which shaped
the gross margin. The “Amazing Value”
lines throughout the various product
categories successfully traded gross
margin rate for volume growth, but this
was more than offset by a significant
reduction in the level of product and
marketing discounts compared with
the high level in the second half of
2011/12 when we had excess levels
of stock to clear. The ratio of bad
12
N Brown Group plc Annual Report & Accounts 2013
Online sales
up 15% to
£424m
Footwear sales
up 5% to
£87m
Home & Gift
sales up 15% to
£236m
debts to sales rose by 0.4% to 8.1%
due to the high level of customer
recruitment. The underlying level
of arrears and write-offs was level
with the prior year and the increase
in the ratio is wholly due to this
customer mix.
The services revenue associated with
our credit accounts rose by 6.1% to
£226.9m, 29% of our total revenue.
Overheads
A 5% increase in average item values
helped contain the rise in distribution
costs to 3.9%. To build up the
customer database we invested an
extra £6m in recruitment campaigns,
offset by a £2.5m reduction in
catalogue costs through our contact
optimisation programme. In addition
we had invested further to support
our strategic initiatives to drive
international revenue and develop
the stores channel.
Customer Service
We are continually looking to improve
the customer service experience.
During the last twelve months we
have made more of the product range
available for next day delivery and
moved the cut-off time from 2pm to
6pm. We have improved the online
self-service “My Account” facility
and the automated service emails
are keeping the customers’ better
informed and generating revenue.
The end result has been a reduction
in the number of enquiries and claims
from our customers, keeping us in the
top quartile for service amongst our
peer group.
Current Trading and Outlook
We have made good progress with
our strategic plan in the last year but
there are still many opportunities to
develop in the new financial year.
The trading processes and organisation
have been revamped to recognise the
pre-eminence of the online channel
and also to strengthen the focus
on our key brands, both from
product development and marketing
perspectives. We will offer more choice
in payment options to attract those
customers who do not wish to open
a credit account. The transition from
paper contacts to online communication
will be managed carefully to drive sales
and reduce costs. The higher level of
customer recruitment investment will be
maintained. Strong revenue increases
are anticipated from our operations in
the United States, and from our Simply
Be/Jacamo stores, and we expect
lower levels of operating losses as these
operations develop.
Revenue in the first 7 weeks of the
new financial year is up by 6.3%
and by 6.1% on a like-for-like basis.
The strength of our customer base
is the most positive influence in
delivering this rate of growth which
has been achieved despite the cold
spell in March which has significantly
impacted the sales of ladies summer
clothing. However sales of footwear
and menswear have been positive and
home and gift has continued its strong
performance. This product mix has
impacted the achieved rate of gross
margin so far but we hope that we
will enjoy better weather than the wet
summer of 2012 to redress this issue.
Change of Chief Executive
This is my last Chief Executive’s report
before starting to hand over to Angela
Spindler from 1 July 2013. I have had a
hugely enjoyable career with N Brown
Group in two spells totalling 25 years,
the last 11 years as chief executive,
and I must especially thank David
Alliance and Jim Martin for both these
opportunities. It is almost impossible
to believe that the business I joined
with sales of £42m in 1985 could
deliver these results in 2013. The
talent, enthusiasm and dedication of
everyone in the group has delivered
this long-term transformation and
I sincerely thank everyone for their
contribution.
The business is in good shape
today with a strong management
team and I firmly believe that the
group has an excellent strategic
position with an exciting future
ahead of it. I offer Angela my full
support and best wishes to realise
this potential and I am sure the group
will continue to prosper under Andrew
Higginson’s and Angela’s guidance.
Alan White
N Brown Group plc Annual Report & Accounts 2013
13
fINANCIAl REvIEw
Net debt reduced
by £3.8m to
Net assets
up 10.9% to
Bank loans in
place until 2016
Gearing reduced to
£188.7m
£446.0m
42%
Group Trading Summary
Group sales increased by 4.2%
to £784.7m (2012, £753.2m) with
operating profit rising by 0.2% to
£102.2m (2012, £102.0m). Operating
margins have fallen by 50bps from
13.5% to 13.0% analysed as follows:
Net operating margin last year 13.5%
Impact of gross margin
– Product
Impact of gross margin
– Financial Income/Bad Debt
Increase in operating costs
+70bps
-70bps
-50bps
Net operating margin this year 13.0%
The rate of gross margin of 53.0%
remained flat against last year.
This was due to a combination of
higher product margins as a result
of lower promotional discounting
especially in the second half, offset
by an expected increase in the rate
of charge for bad debts and a slight
reduction in financial income yield.
Overhead costs increased as a
consequence of the store expansion
and the recruitment drive of new
customers. Group net finance charges
increased from £6.4m to £7.1m.
This was primarily due to a £0.4m
decrease in the expected return on
the group’s defined benefit pension
scheme assets. The financial costs
relating to group borrowings were
broadly flat year on year and were
covered 14 times by operating profit.
Therefore profit before taxation and
fair value adjustments to financial
instruments was slightly down by
0.5% to £95.1m (2012, £95.6m).
The movement in the fair value of
the group’s forward foreign currency
contracts contributed a gain of £1.3m
(2012, £1.3m). The fair value of these
forward contracts is based on external
factors which are beyond the control
of management. Profit before
taxation was down 0.5% to £96.4m
(2012, £96.9m).
Taxation
The effective rate of corporation
tax for the year was 17.6% (2012,
16.4%) and was below the statutory
rate, predominantly as a result of the
favourable settlement of certain prior year
initiatives. The tax charge for the year
was £17.0m (2012, £15.9m) which meant
that profit after taxation and attributable
to shareholders was down by 2.0% to
£79.4m (£81.0m). The effective tax rate
for the year ahead is expected to return
towards the UK statutory rate.
Balance Sheet And Cashflow
The balance sheet continues to grow
in strength. Net assets increased by
10.9% to £446.0m at the year end
(2012, £402.3m).
Capitalised expenditure for the year
was £25.0m (2012, £24.9m) which
included £5.0m on the Simply Be &
Jacamo concept stores. The majority
of the remaining expenditure relates
to our continuous investment in our
online systems.
The working capital requirements of the
group grew broadly in line with revenue
growth. Trade receivables at the year
end had increased by 5.2% to £527.8m
(2012, £501.8m), and stock levels by
4.7% to £86.5m (2012, £82.6m).
The bad debt provision increased to
£55.7m (2012, £49.3m) which equates
to 9.5% (2011, 8.9%) of gross debtors.
The deficit position of the group’s
defined benefit pension scheme has
increased to £3.3m compared to
£1.0m at the prior year end.
The movement predominately arises
from a net actuarial loss of £4.0m
together with service costs of £2.1m
and net finance costs of £0.2m offset
in part by contributions of £4.0m.
to £188.7m (2012 £192.5m). Gearing
levels once again improved from
48% last year to 42% at the year end.
Key Financial Performance
Indicators
The group employs a number of
key performance indicators (KPIs)
to monitor progress including:
• Like for like sales (see page 10).
• Internet sales (see page 11).
• The number of customer debtor
accounts and their average debtor
balance, which at the year end was
1,475,000 (2012, 1,449,000) and
£380 (2012, £354) respectively.
• Mix of sales by product and
customer groups (see page 10).
• Gross margin (see page 14).
• Operating margin (see page 14).
• Interest cover (see page 8).
• Earnings per share (see page 8).
Risk And Uncertainties
There are a number of risks and
uncertainties which could have an
impact on the group’s long-term
performance. These include:
• consideration of the general
economic climate and the impact
it has on the provision of credit to
our customers and their ability to
maintain payment terms;
• the potential threat from our
competitors;
• our relationship with key suppliers;
• the loss of key personnel;
• potential disruption to our key
information systems, warehousing or
call centre facilities, which may arise
from events beyond our control,
and which could have a detrimental
impact on sales and profit; and
Net cash generated from operating
activities increased from £56.5m to
£72.4m and after funding increased
capital expenditure, finance costs and
dividends, net debt reduced by £3.8m
• changes to the regulatory
environment in which the business
operates, primarily with regard to the
Financial Conduct Authority and the
Office of Fair Trading.
14
N Brown Group plc Annual Report & Accounts 2013
The directors routinely monitor all
these risks and uncertainties taking
appropriate action to mitigate where
necessary. Business continuity
procedures are in place, together
with a dedicated team assessing
regulatory developments and ensuring
that we treat our customers fairly.
Regular reviews are carried out with
all of our strategic partners. The board
are also committed to the investment
in systems and infrastructure to keep
pace with new technology.
Treasury
There has been no change during
the year to the group’s banking
facilities which were renewed last year
to support its ongoing trading and
development activities. The group
has committed borrowings of £370m
of which £250m (2012, £250m) was
utilised at the year end. The primary
facilities are a £250m securitisation
programme through an HSBC A-1/
P1 rated conduit that has a matching
standby facility. This facility is in place
until March 2016. Additionally, the
group has two revolving credit loan
facilities of £50m each with HSBC
Bank plc and the Royal Bank of
Scotland plc which also expire in
March 2016. All current facilities in
place at the year end are arranged at
floating interest rates at margins which
were negotiated at more favourable
rates at the time of renewal. Where
appropriate, exposure to interest
rate fluctuations on indebtedness is
managed by using derivatives such
as interest rate swaps. There were no
interest rate swaps used in the year.
Foreign exchange requirements for
the purchase of stocks denominated
in US dollars may be hedged for up to
three years ahead to fix the costs of
sterling. This hedging activity involves
the use of spot, forward and option
contracts. At the year end the group
had outstanding forward foreign
exchange contract commitments of
$35m (2012, $69m).
Accounting Standards And
Going Concern
Group accounting policies reflect
current professional standards and
related guidelines issued by the
International Accounting Standards
Board and are prepared in accordance
with International Financial Reporting
Standards as adopted for use in the
European Union.
In determining whether the group’s
accounts can be prepared on a going
concern basis the directors consider
the group's business activities together
with factors likely to affect its future
development, performance, and
financial position. These include cash
flows, liquidity position, borrowing
facilities and the principal risks and
uncertainties relating to its business
activities. These are set out within
this report and discussed further in
the Chairman’s Statement and the
Chief Executive’s Review.
The group has considered carefully
its cash flows and banking covenants
for the next twelve months from the
date of signing of the group’s audited
financial statements. These have been
appraised in the light of uncertainty
in the current economic climate.
Conservative assumptions for working
capital performance have been used
to determine the level of financial
resources available to the company
and to assess liquidity risk. The key
trading risk identified by the directors
for these assumptions is the impact
that a further deterioration in the
economic climate might have on
the performance of the group’s
sales and debtor book.
The group’s forecast and
projections, after sensitivity to take
account of all reasonably foreseeable
changes in trading performance,
show that the group will have
sufficient headroom within its current
loan facilities of £370m which are
committed until March 2016.
After making appropriate enquiries
the directors have a reasonable
expectation that the company and the
group have adequate resources to
continue in operational existence for
the foreseeable future. Accordingly, we
continue to adopt the going concern
basis in the preparation of the annual
report and accounts.
Shareholder Return
The share price of 238.8p at the
start of the year has risen to 397.0p
at the year end giving a market
capitalisation of £1,125.2m (2012,
£676.8m). In addition the group’s five
year performance measured by Total
Shareholder Return compared with
the FTSE Mid-250 index, of which the
group is a member, show that we have
outperformed the market in the last
twelve months. A final dividend
of 8.23p (2012, 7.74p) per share has
been recommended by the board
giving a total dividend for the year
of 13.68p (2012, 13.03p) per share
up by 5.0% and covered 2.1 times
(2012, 2.2 times).
Dean Moore
15
DIRECTORS AND OffICERS
11 PEOPlE 1 BOARD
Left to Right: Andrew Higginson, Alan White, Lord Alliance of Manchester CBE, John McGuire, Ivan Fallon, Philip Harland, Anna Ford, Dean Moore.
Not Pictured: Ron McMillan, Simon Patterson, Fiona Laird
Andrew Higginson (55)
Non-executive Chairman
Appointed a director on 3 July 2012 and
became Chairman on 1 September 2012.
Having started his career in consumer
products, with Unilever and Guinness,
Andrew spent 22 years as an Executive
Director of retail companies, first with Laura
Ashley Holdings, then The Burton Group,
and for fifteen years, on the Board of Tesco
plc. At Tesco, he was Group Finance and
Strategy Director for eleven years, then
CEO of Retailing Services for four years
where he was responsible for businesses
including Tesco.com and Tesco Bank. He
is a non-executive director of BSkyB plc.
Alan White (58)
Chief Executive
Qualified as a chartered accountant with
Arthur Andersen and was finance director
for Sharp Electronics, N Brown Group and
Littlewoods before returning as Chief Executive
in 2002. He is a non-executive director
of Topps Tiles plc, Direct Wines Ltd and
Deputy Chairman of CBI in the North West.
Dean Moore (55)
Group Finance Director
Appointed in November 2003. Previously
Group Finance Director at T&S Stores Plc
and Graham Group Plc. Also held various
roles with Lloyds Chemist Plc, Sketchley Plc,
Blue Circle Industries and Grant Thornton.
Lord Alliance of Manchester CBE (80)
Non-executive Director c
Appointed a director and Chairman in
1968. Stood down as Chairman on 1
September 2012. Formerly Chairman of
Coats Viyella Plc. He is also a director of
a number of private companies, and was
appointed a life peer in 2004.
Ivan Fallon (68)
Deputy Chairman
Non-executive Director a, b, c
Appointed a director in 1994 and Deputy
Chairman on 1 March 2009. He was
Chief Executive of Independent News &
Media (UK) until March 2010 and a leading
financial journalist. Chairman of
the remuneration committee.
John McGuire (64)
Non-executive Director a, b, c
Appointed a director in March 2004.
Formerly Chairman of Corporate Banking
for Royal Bank of Scotland Group in the
North of England and Midland regions.
Vice Chairman of Royal Bank of Scotland
Pension Fund Trustee Ltd. Currently
Director and Chairman of Risk Committee
Cambridge and Counties Bank Limited.
Member General Assembly of The
University of Manchester.
Until his retirement in March this
year, he spent his entire career with
PricewaterhouseCoopers. For the past
four years, he was Deputy Chairman of the
firm's practice in the Middle East and for the
previous nine years, he was the Northern
Regional Chairman of the UK firm.
Fiona Laird (52)
Non-executive Director a, b, c
Appointed a director on 1 April 2013.
Senior Vice President of Human
Resources at Unilever plc. She has
served in numerous human resources,
compensation & benefits, labour relations,
communications and change management
roles globally for Unilever since joining the
company in 1991.
Simon Patterson (40)
Non-executive Director a, b, c
Appointed a director on 1 April 2013.
Managing Director at Silver Lake, a leading
investment firm focused on the global
technology industry. He is currently a board
member of Intelsat, Multiplan and Gerson
Lehrman Group.
Anna Ford (69)
Non-executive Director a, b, c
Philip Harland (57)
Company Secretary
Appointed a director on 1 March 2009.
Anna retired from the BBC in 2006, after 32
years in News and Current Affairs. Previously
non-executive director of J Sainsbury Plc.
Honorary bencher of Middle Temple.
Ron McMillan (61)
Non-executive Director a, b, c
Appointed a director on 1 April 2013.
Joined the company in 2000. Previously
a commercial lawyer in private practice
in Manchester, then company secretary
and associate director of legal services at
GUS Home Shopping Ltd. Admitted as a
solicitor in 1981.
a Audit committee member
b Remuneration committee member
c Nomination committee member
16
N Brown Group plc Annual Report & Accounts 2013
fINANCIAl STATEMENTS
THE
NUM3ER5
18
28
33
43
44
44
45
46
46
47
48
72
73
74
IBC
Directors’ Report
Corporate Governance Report
Remuneration Report
Independent Auditor’s Report – Group Accounts
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Reconciliation of Operating Profit to Net Cash from Operating Activities
Consolidated Statement of Changes in Equity
Notes to the Group Accounts
Independent Auditor’s Report – Company Accounts
Company Balance Sheet
Notes to the Company Accounts
Shareholder Information
N Brown Group plc Annual Report & Accounts 2013
17
DIRECTORS’ REPORT
Directors’ Report
The directors present their annual report
and accounts for the 52 weeks ended
2 March 2013.
Activities and results
The principal activity of the group is
multi-channel retailing. The activities are
more fully explained and reviewed in
the Chief Executive’s Review on pages
10 to 13. Group profit before taxation
from continuing operations for the 52
weeks ended 2 March 2013 amounted to
£96.4m (2012, £96.9m). No geographical
segmentation is provided because, other
than small operations in the Republic of
Ireland, Germany and the United States, all
activities take place in the United Kingdom.
Business Review
The company is required by the
Companies Act 2006 (‘Companies Act’)
to set out in this report a fair review of the
business of the group during the 52 weeks
ended 2 March 2013 and the position
of the group at the end of that period to
enable shareholders to assess how the
directors have performed the duty under
Section 172 of the Companies Act (duty to
promote the success of the company).
The company is also required to set
out a description of the principal risks
and uncertainties facing the group.
The information fulfilling these
requirements can be found within
this report, the Chairman’s Statement,
the Chief Executive’s Review and the
Financial Review (pages 8 to 15), all of
which information is incorporated by
cross-reference into this report and is
deemed to form part of it.
The board continuously strives to identify
and review key business risks and
monitors a number of financial and non-
financial Key Performance Indicators.
The financial KPIs are detailed on page
14 and non-financial KPIs are discussed
further below. The board oversees the
development of processes to manage risks
appropriately. The executive directors and
operating board directors implement and
oversee risk management processes and
report to the board on them.
As required by the Code, pages 4 to 15
provide an explanation of the basis on
which the company generates value and
preserves it over the long-term and its
strategy for delivering its objectives.
Dividends and reserves
An interim dividend of 5.45p per share
(2012, 5.29p) was paid on the ordinary
shares of the company on 4 January 2013.
The net cost of this dividend was £15.3m
(2012, £14.7m).
The directors recommend a final dividend
of 8.23p per share (2012, 7.74p) for the 52
weeks ended 2 March 2013, the net cost
of which will be £22.9m (2012, £21.5m).
The dividend will be paid on 26 July 2013.
Movements in reserves are shown in the
Statement of Changes in Equity on page 47.
Acquisitions and disposals
In the year under review there were no
corporate acquisitions or disposals.
Share capital
Details of the company’s issued share
capital are shown in note 22 on page 65.
The company has one class of ordinary
shares which carry no fixed income.
Each share carries the right to one vote
at general meetings of the company. The
ordinary shares are listed on the Official
List and are traded on the London
Stock Exchange. There are no specific
restrictions on the size of a holding nor
on the transfer of shares which are both
governed by the general provisions of
the Articles of Association and prevailing
legislation (except as set out below
in the section entitled “Voting Rights
and Restrictions on Transfers”). No
person has any special rights over the
company’s share capital and all issued
shares are fully paid.
Details of outstanding employee share
options and the operation of the relevant
schemes are shown in note 27 on
page 67.
The directors have no current plans to
issue shares other than in connection with
employee share options.
Annual general meeting
The annual general meeting will be held on
Tuesday, 2 July 2013. The notice convening
the annual general meeting will be sent
to members by way of separate circular.
Explanatory notes on each resolution to be
proposed at the meeting will accompany
the circular.
Directors
The biographies of the current directors,
are shown on page 16. With regard to
the appointment and replacement of
directors, the company is governed by
its Articles of Association, the UK
Corporate Governance Code and the
Companies Act.
At the 2013 annual general meeting all of
the directors will retire and, being eligible,
will offer themselves for re-election.
The directors who served throughout the
year in review were as follows:
Andrew Higginson
Non-executive Chairman1
Lord Alliance of Manchester CBE
Non-executive Chairman2
Alan White
Chief Executive Officer
Dean Moore
Finance Director
Ivan Fallon
Senior Independent Non-executive Director
Anna Ford
Non-executive Director
John McGuire
Non-executive Director
Lord Stone of Blackheath
Non-executive Director3
Nigel Alliance OBE
Non-executive Director4
1 Appointed Chairman 1 September 2012
2 Retired as Chairman 1 September 2012
3 Resigned 2 January 2013
4 Resigned 2 January 2013
In addition Simon Patterson, Fiona
Laird and Ron McMillan, having been
appointed directors since the last annual
general meeting, will stand for election.
Biographical details for Simon, Fiona and
Ron can be found on page 16.
Details of directors’ interests (beneficial
and non-beneficial) in shares of the
company are given in the Remuneration
Report on page 42 and are deemed to
be incorporated into this report by
cross-reference.
The powers of directors are described
in the board terms of reference and the
Corporate Governance Report on page 28.
No director had any interest in any
disclosable contract or arrangements,
other than a contract of service, with the
company or any subsidiary company either
during or at the end of the year.
Directors’ and officers’ liabilities
The group maintains insurance for
directors and officers of the group,
indemnifying them against certain liabilities
incurred by them whilst acting on behalf
of the group. In accordance with section
236 of the Companies Act, qualifying third
party indemnity provisions are in place
18
N Brown Group plc Annual Report & Accounts 2013
Holding
31,489,256
18,884,510
15,355,580
8,513,327
% of issued
share capital
11.11
5.96
5.42
3.00
through him, to the board of directors.
Since 2007, the group has been actively
working alongside its environmental
partners, Envantage Limited and
Viridor Limited, to boost environmental
performance and increase group-
wide environmental awareness and
accountability. Ongoing investment
into energy, carbon, waste and water
minimisation initiatives has led to a
considerable reduction in our carbon
emissions and water footprint profiles.
DIRECTORS’ REPORT
for the directors in respect of liabilities
incurred as a result of their office, to the
extent permitted by law. Both the insurance
and indemnities applied throughout the
financial year ended 2 March 2013 and
through to the date of this report.
Major shareholders
In addition to the directors’ shareholdings
shown in the Remuneration Report on
page 42 and in accordance with Chapter
5 of the Disclosure and Transparency
Nigel Alliance OBE
INVESCO Asset Management Ltd
Threadneedle Asset Management Ltd
Artemis Investment Management LLP
Environmental, social and
governance issues
Governance and risk management
The board is committed to maintaining
high standards of corporate governance.
The company monitors and evaluates
risk on an on-going basis as part of its
commitment to sustainable business.
Further details are contained in the
Corporate Governance Report on pages
28 to 32.
Ethical standards
The board regards the maintenance of the
highest ethical standards in business as an
essential characteristic of the way in which
the group conducts all of its business.
A code of ethical conduct covering
commercial standards, bribery and
corruption, conflicts of interest, gifts and
hospitality has been adopted by the group.
All senior managers and employees of the
group are required to comply with both the
letter and the spirit of the code in all their
dealings for and on behalf of the group.
In dealings with each other, shareholders,
customers, suppliers, competitors,
regulatory authorities and the wider
community, all employees are required to:
• conduct dealings with honesty, integrity,
respect and fairness;
• comply with all relevant laws, regulations
and internal company policy;
• encourage and support a business
culture which promotes sound ethical
conduct at all levels within
the organisation;
• avoid any situation or action, which
could cause a conflict of interest or
damage to the group’s reputation; and
Rules, the following notifications had been
received from holders of notifiable interests
in the company’s issued share capital at
30 April 2013:
• foster an inclusive team-working
environment in which praise and
recognition play key roles.
Directors of all group companies are
required to disclose details of related party
transactions for review and authorisation
by the audit committee and by the board.
A gifts and hospitality register requires all
employees to record any gift or hospitality
offered by suppliers and other parties.
Monthly returns are required from all
directors and employees declaring any
offer with a value of £25 or more, and
stating whether any offer was accepted
or declined.
A “whistleblowing policy” and confidential
‘hotline’ provides employees with a secure
and private means of reporting any ethical
concerns that they may have regarding
the way the group or any employee is
behaving in day-to-day activities.
No ‘whistleblowing’ events were
reported in the year.
Environment
Overview
Our sustainability strategy and
environmental performance has become
an integral element of our core business
strategy. As a responsible multi-channel
retailer, we have formally committed to
reduction targets and continually strive to
exceed expectations of our customers,
staff and investors. Group-wide
sustainability responsibility has been
assigned to Ian Carr, director of logistics,
who sits on the operational board of
J D Williams & Company Limited and who
reports to the Chief Executive Officer and,
N Brown Group plc Annual Report & Accounts 2013
19
DIRECTORS’ REPORT
Achievements
Annual measurement and reporting of full
Green House Gasses (“GHG”) emission,
water and waste footprint profiles are
carried out. In this report we have focused
on key emissions and water figures
and achievements against our imposed
reduction targets.
As referred to above, we have committed
to an emissions reduction target which
includes group wide electricity, natural gas
and diesel associated GHG emissions. The
reduction target is founded on a base year
of performance during the financial year
2007/08. Calculated GHG emissions are
evaluated against annual turnover figures
expressed in tCO2e / £. We have also
committed to further waste and
water reduction targets across some
of the group which are evaluated on an
absolute basis.
The table below illustrates achieved
targets to date and on-going targets:
Scope
Units
GHG Emissions:
• Electricity
• Natural Gas
• Diesel
Waste1
Water2
Tonnes Co2 £million
turnover (relative)
Tonnes
(absolute)
1. Across sites where waste is controlled by the group.
2. Across sites with water meters
Target from
07-08 levels
Date to be
achieved
15%
30%
Zero to landfill
25%
2012
2017
2013
2017
Status
Achieved
On-going
On-going
On-going
Absolute energy and emissions
evaluation
The tables below illustrate group wide
electricity, natural gas and diesel
Energy consumption
consumptions and related GHG emissions
from 07/08 to 12/13. Figures are expressed
on an absolute basis.
Source
Natural Gas
Diesel (litres)
2007
- 2008
2008
- 2009
2009
- 2010
2010
- 2011
2011
- 2012
2012
- 2013
% Change
from 07/08
12,975,745
13,569,359
11,242,105
16,769,510
11,359,532
14,123,527
168,867
156,708
127,531
133,812
152,711
178,008
Total Electricity (kWh) 19,635,490
19,455,057
18,818,315
18,711,488
19,016,814
20,060,497
-8.8%
-5.4%
-2.2%
GHG emissions
Year
2007 - 2008
2008 - 2009
2009 - 2010
2010 - 2011
2011 - 2012
2012 - 2013
Gas
tCO2e
2,392
2,568
2,125
3,140
2,092
2,825
Electricity
tCO2e
Diesel
tCO2e
10,562
10,435
9,873
9,737
9,901
10,439
451
419
338
355
395
460
Total
tCO2e
13,405
13,422
12,336
13,232
12,388
13,724
Absolute % reduction
from 08/07
-
-0.1%
8.0%
1.3%
7.6%
-2.4%
As a continually growing company, with an
expanding property portfolio, an emissions
increase of only 2% is lower than would
have been achieved if the group had
not taken any action. There was a slight
increase in 2012/2013 on the previous year
due to an increased property portfolio
(Simply Be stores) and longer operating
hours across our logistic sites.
20
N Brown Group plc Annual Report & Accounts 2013
DIRECTORS’ REPORT
Relative emissions evaluation
The table below illustrates group wide
GHG emissions from 07/08 to 12/13
in comparison with group turnover.
Figures are expressed in terms of tCO2e
per £million. Emissions history is analysed
on a relative basis to take into account the
growth of the group. Since 07/08 the group
has reduced emissions per £million turnover
by an impressive 20% due to the continued
environmental improvement and investment
the group has undertaken since 07/08.
Year
2007 - 2008
2008 - 2009
2009 - 2010
2010 - 2011
2011 - 2012
2012 - 2013
Total
tCO2e
13,405
13,422
12,336
13,232
12,388
13,724
Turnover
(£ million)
tCO2e
£ million
% reduction
from 08/07
611
663
690
719
753
785
21.94
20.24
17.88
18.40
16.45
17.48
-
7.7%
18.5%
16.1%
25.0%
20.3%
Water
The table below illustrates the water
consumption profile across the group from
07/08 levels.
Source
2007
- 2008
2008
- 2009
2009
- 2010
2010
- 2011
2011
- 2012
2012
- 2013
% reduction
from 07/08
Water (m3)
44,045.6
51,422.2
34,758.0
30,993.3
29,338.0
31,737.0
28%
Waste
The group has committed to achieving
zero waste to landfill by the end of 2013
at its main operating sties. Working with
our consultant Viridor Limited we have
achieved a 99.98% recycling rate including
waste to energy.
Summary
The table below summarises the group’s
performance against our committed
reduction targets.
Scope
Units
Target reduction
from 07-08 levels
Date to be
achieved
Current performance
(2012-2013)
Status
GHG Emissions:
• Electricity
• Natural Gas
• Diesel
Waste3
Water4
Tonnes Co2 £million
turnover (relative)
30%
Tonnes (absolute)
Zero to landfill
Cubic metres
(absolute)
25%
3. Across sites where waste is controlled by the group.
4. Across sites with water meters
2017
2013
2017
20%
99.98%
28%
On track
On track
Exceeding
target
The continued investment and
development of our sustainability
strategy has allowed the group to achieve
impressive results since 07/08.
Future planned expenditure into resource
efficiency, effective management and
awareness campaigns, will allow the
group to continue to proposer as an
environmentally responsible retailer in
today’s low carbon society.
N Brown Group plc Annual Report & Accounts 2013
21
DIRECTORS’ REPORT
Employees
The Chief Executive has board level
responsibility for employment matters.
Employee involvement - Our success
has been substantially contributed to by
an engaged, enthusiastic, motivated and
well-trained workforce. Considerable
resources are devoted to employee
training, with a large dedicated training
team based in the contact centre with
around 40 people providing customer
service and systems training to ensure
our customers receive the highest
possible levels of service. This year we
have launched a new certified bespoke
leadership programme for all 50 Team
Leaders.
A management development team
based at head office provides learning
and development support for both the
head office teams and all subsidiary and
support divisions. The entire management
team undergoes a bespoke 360° process
every two years with the intention of
ensuring every employee understands the
impact they have on the teams around
them. The Customer Services Division
also runs an engagement survey every
two years to check engagement level
at a team level across the group.
A consultative forum operates within the
logistics division where employees from
all levels contribute and share ideas that
help shape the culture of the business.
This year the Logistics and Customer
Services divisions have also achieved
Investors in People accreditation at Silver
and Gold standard. Over 500 group
employees either hold shares in the
company or have options/awards to acquire
them through the group’s various share
option and long-term incentive schemes.
A large proportion of the group’s training
and development work is delivered by the
HR learning and development team, which
is supplemented by external training in
specialist technical and IT training areas
where necessary as well as individually
tailored training, there is also a suite of
self-training tools available and an online
database, “simply development” which
enables employees to access a wide
range of self-development activities,
tools and information.
In addition we offer placements within the
Buying and Merchandising function.
In 2012/2013, 13% of our recruitment
was achieved through our Employee
Referral Programme which is a
programme whereby existing
employees can recommend friends
and relatives to fill vacancies.
An employee profit share scheme has
been introduced to enable employees
to participate in the company’s success.
Bonus levels for the 2013/14 scheme
provide an enhanced bonus entitlement
for certain junior grades, providing
greater benefit differentials for employees
promoted to non-management grades. In
addition the company’s grading structure
has been enhanced by the introduction of
two new grades to allow enhanced career
progression and better alignment of pay
and benefits.
Consultation - Constructive relationships
with the trade unions that represent the
group’s employees (principally USDAW
and SATA) exist. Elements of the group
are covered by a collective bargaining
arrangement with USDAW. Union
membership is encouraged and regular
communication with the union is facilitated
through ‘partnership forums’ established
on the principle of shared commitment to
business success, employment security
and development with a particular
emphasis on quality of life, openness and
adding value.
Equal opportunities - The group supports
the principle of equal opportunities in
employment and is opposed to all forms
of discrimination, including those on the
grounds of colour, race, nationality, ethnic
or national origin, religion, gender, age,
sexual orientation, marital status
or disability.
Our selection processes for recruitment,
promotion, training and development are
non-discriminatory. We believe it is in
the best interests of employees and the
group to provide these opportunities to the
most suitable candidates, and to achieve
a balanced working population spread
across a diverse range of ethnic origins,
gender and age groups.
The company has developed close
relationships with local universities to retain
talent within the northwest. We now offer
graduate schemes in Buying, Quality & IT.
Applications for employment by
disabled persons are thoroughly and
sympathetically considered, with
the aptitude of the applicant being
regarded as foremost. In the event of
any employee becoming disabled during
their employment, every effort is made
to ensure that their employment with
the group continues and the group will
endeavour to assist the employee by
offering additional training, adapting the
job if appropriate or by offering a transfer
to another position. It is the policy of the
group that the training, career development
and promotion of disabled persons should,
as far as possible, be identical to that of
other employees.
Health and safety - The health, safety
and welfare at work of its employees,
contractors and visitors is paramount as
is ensuring compliance with all relevant
legislation. The group is also committed
to best practice initiatives.
As we increase the number of our retail
outlets, we have increased Health & Safety
resources to ensure that all areas of the
business meet the same exacting safety
standards that we demand throughout.
Cumulative group accident statistics show
that for the year in review, reportable
accidents under Reporting of Injuries,
Diseases and Dangerous Occurrences
Regulations 1995 (RIDDOR) have reduced.
The ratio of employee number to RIDDORs
has fallen from 0.04% to 0.03% from the
previous year in review.
In the year in review, the group ratio of
accidents per employee remain static at
0.6%. This reflects the work completed to
ensure that our new retail sites maintain
the tight safety standards expected within
the group to retain this figure.
The group’s Health & Safety and
Human Resources departments are
complimented by the Occupational Health
Department, whose focus is to look after
the well-being of the group’s employees.
The department provides advice, guidance
and support on people’s fitness to work,
on-site physiotherapy, chiropody and a
counselling service.
We endeavour to ensure that all products
and services sold by the group or used
in the workplace are safe and without
risk to employees and customers when
used properly.
22
N Brown Group plc Annual Report & Accounts 2013
DIRECTORS’ REPORT
Customers
A key factor of the group’s success is
the strength of relationships with our
customers and their levels of satisfaction
with our group products and services.
We aim to attract and retain customers
through a highly competitive product and
service offering, regularly monitoring retail
and home-shopping sector developments
to stay in touch with our marketplace.
Insights into our customers’ needs and
expectations are regularly updated
through customer satisfaction surveys
conducted both directly and through
third parties.
Our overall strategy is to adopt a
"multi-channel" approach to managing
customer contacts, with the key aim
of a joined-up and consistent customer
experience across channels.
Our multi-channel service platforms
cover web, telephone, mobile/tablet,
post, and will extend to our relatively
new UK store operations.
We continually develop our web sites for
richer product content, ease of use, and
improved performance. Optimisation for
mobile/tablet devices is a priority due
to the rapid growth of demand in this
channel. Web self-service capabilities
are delivered through a "my account"
facility for customer order and account
management information. Web-enabled
contact centre capabilities are being
deployed to support our web-trading
customers, including multimedia, web
chat, click-to-call and social media.
The group operates both in-house
and outsourced contact centres,
predominantly located in the UK. Our
international businesses are supported
through local contact centres in the
U.S.A., Germany and Eire. Enquiries
and complaints have been pro-actively
reduced over recent years as a proportion
of customer order transactions, reflecting
the introduction of more customer-
oriented policies, processes and product/
service standards. Telephone, email and
letter contacts received from customers
are analysed and remedial actions taken
to improve our levels of service.
proportion of customer telephone
payments and parcel collection requests.
We continue to invest in improved speed
of product deliveries to our customers
and to offer more delivery service options
such as next-day or nominated day of
delivery. E-mails inform customers about
their order and account status.
Service developments are planned
to further enhance our multi-channel
customer experience with new
capabilities to offer personalisation and
choice. Individual customer needs and
preferences will drive their relationship
with us across brands, products, services,
channels, offers, trading terms, and
communications.
Suppliers
Ethical trading policies and compliance
The group is aware of its impact on
communities all over the world, wherever
we manufacture the products that we
sell. As part of this we have a strict
Code of Conduct that we expect all our
suppliers to adhere too. This Code of
Conduct is based on the ETI (Ethical
Trading Initiative) Base Code. This is a
global Code of Conduct that is used
as a standard by retailers across the
world and especially within the UK.
This is in turn based on the standards
set out by the ILO (International Labour
Organisation), which is the United Nations
body that oversees international labour
standards. This Code of Conduct is
incorporated into our standard terms
and conditions for dealing with suppliers.
The Code of Conduct is available in
6 languages (Chinese, Thai, Urdu,
Vietnamese, Turkish and English) and we
encourage all suppliers to display this
Code of Conduct in their factories. Our
Code of Conduct is also being rolled
out across all transactional websites to
inform customers of our policy, as well as
being displayed in all stores. The Code of
Conduct includes the following principles:
1. Employment is freely chosen
2. Freedom of association and the right
to respect collective bargaining are
respected
3. Working conditions are safe and
hygienic
8. Regular employment is practiced
9. No harsh or inhumane treatment is
allowed
As an integral part of ensuring that
our suppliers comply with the Code of
Conduct and implement processes and
procedures to enable this, we regularly
audit and risk assess our suppliers.
This is done with a combination of
external audits carried out by external
parties and also some due diligence
checks from our internal ethical trading
team. The audits are always carried out
to either the SMETA (SEDEX Members
Ethical Trade Audit) or to SA8000 (Social
Accountability International) standards.
These standards are recognised across
the world by most retailers and NGO’s
(Non-Governmental Organisations).
We have joined SEDEX this year to assist
us in our ethical trading programme.
This is a database that holds audits and
risk assessments for factories. All our
suppliers are encouraged to join the
system as this enables them to share their
information with any members across
the world. This is a cost effective way
of sharing audit information with other
retailers, cuts down on audit duplication
and helps to increase transparency across
supply chains. We also upload our own
audits into the system for factories to be
able to share this information. In addition
to this we have developed our own “swift
audit” system. This is designed to be
used after a risk assessment has been
carried out and it is felt that a full audit
is not necessary. Currently we have 866
suppliers operating from approximately
2,260 factories, of which 87% are
currently compliant with our Code of
Conduct. Suppliers are requested on at
least a quarterly basis for accurate audit
information and to check the progress
on outstanding CAPS (Corrective Action
Plans). This information is also discussed
by the wider buying and merchandise team
when they travel to visit the suppliers. We
have also completed a trial of giving our
suppliers an “ethical score” on our supplier
scorecard. This helps to increase visibility
of ethical trading within buying and
merchandising and also encourages the
long term relationship with the suppliers.
This will be rolled out to the rest of the
buying teams later this year.
Our speed of answering calls and
responding to emails has been improved
and made more consistent. Automated
speech services handle a significant
4. Child labour shall not be used
5. Living wages are paid
6. Working hours are not excessive
7. No discrimination is practiced
N Brown Group plc Annual Report & Accounts 2013
23
DIRECTORS’ REPORT
The group is a member of the ETI.
This is a ground breaking alliance of
retailers and suppliers, trade unions and
non-governmental organisations. Members
include major companies, trade unions
such as the TUC and non-governmental
organisations such as Oxfam and Women
Working Worldwide. The idea is that by
working together we can influence change
for the better in all our worldwide supply
chains. Members also share policies and
best practice which has enabled us to
introduce our own policies on banning
sandblasting within our denim supply chain
and also joining the Kimberley Process
on Conflict Diamonds. Members are open
about shared supply chains and work
together to influence collective change.
Annually we compile a detailed report on
our supply chain at factory level on 6 key
management benchmarks:
1. Commitment to ethical trading
2. Integrating ethical trade into the
company culture and practices
3. Capacity building for suppliers
4. Identifying problems in our supply chain
5. Projects and work undertaken
6. Public transparency
We are currently in the process of
compiling the 2012/13 report. We
submitted our first annual report for
2010/2011. We had risk assessed 1,126
sites and audited 249 sites. This figure
has considerably improved for 2012/13
with us having risk assessed 2,010 sites
and audited 749 sites. We estimate that
our risk assessments and audits have
covered over 500,000 workers. The report
is graded by an independent consultancy
firm and also assessed by a non-
governmental organisation. Our results are
then benchmarked against other retailer
members and a final grade is given.
We were very pleased in our first year of
reporting to be graded from a Foundation
level, which is the entry level membership
to the Improver level, which is the
second level of membership. This further
demonstrates our commitment to ethical
trading and our swift progress has been
noted by the Ethical Trade Initiative.
Further information on the 2012/13 will be
released when available later in the year.
Following a recent factory fire in
Bangladesh ETI members have agreed
some concrete measures to improve fire
and electrical safety within our supply
chains. These include:
1. the setting up of a task force, of which
we are members, to co-ordinate a
joint approach to fire and electrical
safety which will include agreeing joint
standards which will apply to all factories
by involving experts in the area;
Future work
Much of our future work will encompass
the new UN Guidelines for Business and
Human Rights, also known as the “Ruggie
Principles”. These place responsibilities
on all businesses to have policies and
procedures in place which should include:
• policy commitment from the most
senior level to stipulate the human rights
expectations of the group and also other
related parties;
2. immediate review of all our factories
• human rights due diligence which
regarding all aspects of fire safety and
electrical safety; and
3. lobbying the government of Bangladesh
to improve the safety standards across
the garment sector and also improve the
policing of the relevant laws.
should cover all aspects of the groups’
operations either directly or indirectly;
and
• processes to be in place within the
business to ensure any remediation that
is required can be acted upon.
We have reviewed all our main agents’
factories in Bangladesh, which account
for 66% of our production in the country,
and have also developed an additional fire
and electrical safety check which will be
rolled out to the rest of our suppliers in
the country.
We are continually working to improve
working conditions in garment factories in
Bangladesh.
We have rolled out a Chain of Custody
system in order to comply with EU Timber
Regulations 2013. This will enable us to
trace back to source all the timber used
in our supply chain and suppliers have to
keep auditable and reportable records to
fit in with this system.
The UK government is currently working
on guidelines for businesses which we
will adopt and report on in the future.
We will also conduct relevant human rights
assessments within our supply chains.
We will continue to ensure that our suppliers
and the group companies have a positive
and open relationship regarding ethical
trading and we will undertake more project
work with suppliers as deemed appropriate.
As part of our continued commitment
to ethical trading and corporate social
responsibility ('CSR'), the board has
decided to establish a CSR Committee.
This committee will report to the board on
all matters relating to CSR, specifically:
Our ethical trading manager has travelled
to key markets this year both to audit
current suppliers and to also gain a greater
understanding of these markets. This
has been achieved by working closely
with UKTI (UK Trade and Investment),
Foreign and Commonwealth Office, ILO
(International Labour Organisation), IHRB
(International Human Rights Board) and the
ITUC (International Trade Union Congress).
The group has also joined the All
Parliamentary Group on International
Corporate responsibility.
We have also launched an “intranet”
site within the group to improve
communication and visibility of ethical
trading across the group.
• looking after our environment;
• ethically sourcing our products; and
• working with the wider community
and our employees.
The committee will be chaired by Anna
Ford and will comprise one other non-
executive director, the Finance Director,
the Company Secretary and the group
Ethical Trading Manager. The committee
will set SMART (Specific Measurable
Achievable Relevant Timed) targets in
CSR areas, and will report on progress
to these targets annually once established.
The committee will have a specific budget
and will pass recommendations to the
board. It is anticipated that the CSR
committee will be established in the
second half of 2013. Further information
can be obtained from
ethical.trading@nbrown.co.uk.
24
N Brown Group plc Annual Report & Accounts 2013
DIRECTORS’ REPORT
Paying our suppliers
The group’s policy for the payment
of suppliers is to ensure that terms of
payment are negotiated with suppliers
when agreeing the terms of each
transaction and to ensure that all suppliers
are made aware of and accept agreed
payment terms. The group continually
reviews payment procedures and liaises
with suppliers to eliminate difficulties and
to maintain good working relationships.
Agreed payment terms are then abided
by and payment is made in accordance
with those terms. Trade creditors of the
group at 2 March 2013 represented
38 days (2012, 40 days) of purchases.
Trade payables days is calculated by
dividing the trade payables by the
aggregate of trade purchases and non
inventory expenditure multiplied by 365.
Community relations
The group takes great pride in its links with
local communities and actively supports
the communities in which it operates.
It maintains close links with the Christie
Hospital in Manchester and the Retail Trust
and also regularly encourages employees
to participate in fundraising activities
for these, and other worthwhile causes.
The group matches the money raised
by employees to double the size of the
donation. The logistics division provide
Christmas presents and Easter Eggs for
children’s wards at local hospitals, sponsor
the local bonfire and firework display and
Christmas lights, make donations to local
schools and work closely with charities
close to home to help raise much needed
funds for good causes. £134,000 was
raised for good causes in this way in the
year in review.
The family, health and well-being
programme, now in its ninth year,
continues to provide support and real
assistance for all of our employees.
Charitable and political donations
During the year, the group made charitable
donations of £40,070 (2012, £71,011).
No political donations have been made
(2012, nil). No contributions have been
made to non-EU political parties (2012, nil).
Pension fund
The company has a defined benefit
scheme The N Brown Group Pension
Fund (“Pension Fund”). Its assets are
administered by a trustee company
(the “Trustee”) which is controlled by a
board of directors and which includes
an independent trustee and others who
represent the interests of pension fund
members (including pensioners) and the
company.
The Trustee has appointed Mercer Limited
to provide various services including
actuarial advice, investment advice,
administration services and fiduciary
management services.
The Pension Fund is required to undertake
an actuarial valuation every 3 years and
the Trustee has instructed the actuary
to undertake the valuation due as at
30 June 2012.
The company (and some of its associated
companies) are required to indemnify the
Trustee company and its officers in respect
of certain liabilities incurred by them in the
performance of their obligations relating
to the Pension Fund or in administration
of the Pension Fund. This amounts to a
“qualifying indemnity provision” (as defined
in section 236 of the Companies Act).
The Pension Fund was closed to new
entrants with effect from 31 January 2002.
New employees joining the group after
31 January 2002 and existing employees
who had not joined the Pension Fund
as at that date, are entitled to join a
stakeholder pension scheme providing
a defined contribution pension
arrangement, administered by Prudential
Stakeholder Pensions.
The company is currently working towards
the introduction of pension auto-enrolment
to ensure full compliance across the group.
‘The People Pension’ has been selected
as the auto-enrolment provider for weekly
paid employees, whilst Prudential will
auto-enrol monthly paid employees and
continue to run the Stakeholder Pension
for weekly employees already in the
scheme. The company has chosen to
defer its staging date from 1 July 2013 to 7
September 2013 for weekly employees and
1 October 2013 for monthly employees.
Financial risk management, objectives
and policies
The group is exposed to certain
financial risks, namely interest rate risk,
currency risk, liquidity risk and credit risk
Information regarding such financial risks is
detailed in note 19 on page 61. The group’s
risk management policies and procedures
are also discussed in the Financial Review
on page 15.
Change of control
There are a number of agreements that
take effect, alter or terminate upon a
change of control of the company such
as commercial contracts, bank loan
agreements, property lease arrangements
and employee share plans. None of these
are considered to be significant in terms
of their likely impact on the business of
the group as a whole. Executive Directors’
service contracts are terminable by the
company on giving 12 months’ notice.
There are no agreements between the
company and its directors or employees
that provide for additional compensation
for loss of office or employment that
occurs because of a takeover bid.
No events were reported in the year.
Essential contracts
The group has a number of contractual
arrangements with suppliers (both of
goods and services) and occupies
leasehold premises for the purpose of
conducting its business. Whilst these
arrangements are important to the
business of the group, individually none of
them are essential to the business of the
group and do not require disclosure under
section 417(5)(c) of the Companies Act.
Tax status
The company is not a close company
within the meaning of the Corporation
Tax Act 2010.
N Brown Group plc Annual Report & Accounts 2013
25
DIRECTORS’ REPORT
Auditor
A resolution to re-appoint Deloitte LLP as
auditor to the company and to authorise
the directors to fix remuneration will be
proposed at the annual general meeting
on 2 July 2013.
decision. In exercising their trustee powers
the trustees may take all of the following
matters into account:
In preparing the parent company financial
statements, the directors are required to:
• select suitable accounting policies and
• the long-term interests of beneficiaries;
• the interests of beneficiaries other than
then apply them consistently;
• make judgments and accounting
Voting rights and restrictions on
transfer of shares
None of the ordinary shares carry any
special rights with regard to control of
the company.
financial interests;
• the interests of beneficiaries in their
capacity as employees or former
employees or their dependents;
• the interests of persons (whether
or not identified) who may become
beneficiaries in the future; and
There are no restrictions on transfers of
shares other than:
• consideration of a local, moral, ethical,
environmental or social nature.
• certain restrictions which may from
time to time be imposed by laws or
regulations such as those relating to
insider dealing;
• pursuant to the company's code for
securities transactions whereby the
directors and designated employees
require approval to deal in the
company's shares; and
• where a person with an interest in the
company’s shares has been served with
a disclosure notice and has failed to
provide the company with information
concerning interests in those shares.
The directors are not aware of any
arrangements between shareholders that
may result in restrictions on the transfer of
securities or voting rights. The rights and
obligations attaching to the company's
ordinary shares are set out in the Articles
of Association.
Employee share schemes –
rights of control
The trustees of the N Brown Group plc
Employee Share Ownership Trust hold
shares on trust for the benefit of the
executive directors and employees of the
group, which are used in connection with
the company's various share incentive
plans. The trustees currently abstain from
voting but have the power to vote for or
against, or not at all, at their discretion
in respect of any shares in the company
held in the relevant trust. The trustees
may, upon the recommendation of the
company, accept or reject any offer
relating to the shares in any way it sees fit,
without incurring any liability and without
being required to give reasons for their
Going concern
The directors have adopted the going
concern basis in the financial statements
and their opinion is explained in the
Financial Review on page 15.
Liability
All the information supplied in the
Chairman’s Statement on pages 8 to 9,
the Chief Executive’s Review on pages 10
to 13, Financial Review on pages 14 to 15,
Remuneration Report on pages 33 to 42
and the Corporate Governance Report on
pages 28 to 32 form part of this Directors’
Report. Any liability for the information is
restricted to the extent prescribed in the
Companies Act.
Directors’ responsibilities statement
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 have elected to prepare the
parent company financial statements
in accordance with United Kingdom
Generally Accepted Accounting Standards
and applicable law. 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.
estimates that are reasonable and
prudent;
• state whether applicable IFRS’s as
adopted by the European Union 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.
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. 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
company’s website. Legislation in the
United Kingdom governing the preparation
and dissemination of financial statements
may differ from legislation in other
jurisdictions.
Each person who is a director at the date
of the approval of this report confirms that:
• so far as the director is aware, there is
no relevant audit information of which
the group’s auditors are unaware; and
• the director has taken all steps that he
ought to have taken as a director in
order to make himself or herself aware
of any relevant audit information and to
establish that the group’s auditors are
aware of that information.
26
N Brown Group plc Annual Report & Accounts 2013
DIRECTORS’ REPORT
This confirmation is given and should
be interpreted in accordance with the
provisions of section 418 of the
Companies Act.
Responsibility statement
We confirm that to the best of our
knowledge:
By order of the board
• the financial statements, prepared in
Philip F Harland LL.B (Hons) (Solicitor)
Secretary
17 May 2013
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;
and
• the management report, which is
incorporated into the directors' 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.
By order of the board
Alan White
Chief Executive
Dean Moore
Finance Director
17 May 2013
N Brown Group plc Annual Report & Accounts 2013
27
CORPORATE GOvERNANCE REPORT
Corporate Governance Statement
Andrew Higginson (Chairman of the Board)
audit committee in October 2013 when John
McGuire will relinquish his role but also remain
on the board.
director appointments reported above
were made.
Dear Shareholder,
The board is committed to meeting a high
standard of corporate governance and
compliance with the principles in the UK
Corporate Governance Code issued by
the UK Financial Reporting Council in 2010
(the “Code”).
Statement of compliance with the Code
For the year under review the board
considers that it and the company have
complied with the provisions of the
Code except for provision B6.1 and B6.2
as the board has decided that an informal
review of board effectiveness
was appropriate. All other provisions of
the Code have been complied with.
The following paragraphs explain how
the main principles of the Code have
been applied. The Remuneration Report
contains further details on pages 33 to 42.
In September 2012, the Financial Reporting
Council published a new edition of the UK
Corporate Governance Code, effective
from the company’s next financial year (the
‘New Code’). The changes largely relate to
Accountability, Part C of the Code, which
covers areas such as financial and business
reporting, audit committees and auditors.
The intention of the board is that the
company will fully comply with the changes
introduced in the New Code in 2013.
Board composition
A new non-executive chairman, Andrew
Higginson, was appointed a director on
3 July 2012 taking over as chairman from
Lord Alliance of Manchester, who remains
a non-executive director, on 1 September
2012. Lord Alliance of Manchester was not
involved in the selection process for the
appointment of Andrew Higginson as his
successor as Chairman.
During the year there were a number of
other significant appointments to the board
of directors. As they had both served for
terms beyond which the Code regarded their
independence to be impaired, Lord Stone
of Blackheath and Nigel Alliance stepped
down from the board on 2 January 2013. In
March 2013 three new non-executive directors
were appointed to the board effective 1 April
2013. Ron McMillan joined the company as
Senior independent non-executive director
in place of Ivan Fallon who will relinquish the
role of Senior independent non-executive
director later in 2013 but will remain on the
board. Ron McMillan will become chair of the
Simon Patterson will assume the chair
of the nomination committee with
immediate effect, taking over from
Lord Stone of Blackheath and finally,
Fiona Laird will become chairman of the
remuneration committee on 1 October
2013 when Ivan Fallon relinquishes that role
(but remains on the board as a director).
Alan White, Chief Executive Officer, indicated
at last year’s annual general meeting his
intention to retire from the company. After
a search for suitable candidates, Angela
Spindler was selected to become CEO and
will join the company on 1 July 2013 and will
be appointed a director after the 2013 annual
general meeting.
The board now comprises of ten members,
eight of whom are non-executive. There is
a clear division of responsibilities between
the Chairman, Andrew Higginson, who is
responsible for the effective operation of
the board and the Chief Executive, Alan
White, who is responsible for the group’s
operational performance.
The board is sensitive to the need for
non-executive directors to remain
independent of the management in order
to be able to exercise proper oversight
and effectively challenge the executive
directors. The non-executive directors
who served during the financial year
ended 2 March 2013 were:
• Andrew Higginson (Chairman);
• Lord Alliance of Manchester CBE;
• Ivan Fallon (deputy chairman and senior
independent non-executive director);
• John McGuire (chair of audit committee);
and
• Anna Ford.
• Lord Stone of Blackheath (resigned 2
January 2013)
• Nigel Alliance OBE (resigned 2 January 2013)
Of these Ivan Fallon and Lord Alliance of
Manchester CBE are no longer regarded
by the board as independent owing to
their length of service on the board and, in
the case of Lord Alliance, his position as
a major shareholder. All of the other non-
executives are considered by the board to
be independent.
In order to address any issues of
independence and to bring board
composition in line with Code
requirements, the three new non-executive
Ivan Fallon and John McGuire will
remain as members of the board for the
foreseeable future as the board considers
that both still have much to offer in terms
of their knowledge and experience which
will be of immense value to the new non-
executive directors.
In view of the foregoing, the board
considers that it now has a majority of
independent non-executive directors and
that the composition of the board has
the necessary balance of executive and
non-executive directors to provide the
requisite skills, experience and judgement
appropriate for the requirements of the
business and full board effectiveness.
Pursuant to recent amendments to the
Code, the company now requires all
directors retire and submit themselves for
re-election annually and, again this year,
each of the directors will again retire at
the forthcoming annual general meeting.
All directors, including those appointed
since the last annual general meeting,
being eligible, will offer themselves for
reappointment at that meeting.
With the exception of Ivan Fallon and
John McGuire who are on a three month
rolling arrangement, all non-executive
directors serve on letters of appointments
stipulating three year terms. All non-
executive appointments are terminable,
without compensation, on between
three and six months’ notice by either
party and are subject to other early
termination provisions, for example without
compensation in the event a director is not
re-elected upon retirement by rotation in
accordance with the articles of association,
or at the annual general meeting.
The board, having carried out a
performance evaluation, considers that
the performance of all directors and
their commitment to the role of director
continues to be effective.
Biographical detail of each director
is provided on page 16 of this annual
report to enable shareholders to make
an informed decision on the re-election
resolutions. All appointments to the board
are made on merit against objective criteria
and with the intention of ensuring that
all appointees have the requisite skills
and sufficient time to devote themselves
effectively to the business of the board
and to discharge their duties.
28
N Brown Group plc Annual Report & Accounts 2013
CORPORATE GOvERNANCE REPORT
Details of directors’ contract terms are
shown in the Remuneration Report on
page 37. In accordance with the Code,
the company has made the terms and
conditions of appointment of the non-
executive directors available for inspection.
Diversity
The board recognises the importance of
diversity, including gender, at all levels
of the company as well as on the board.
The company is committed to equal
opportunities and increasing diversity
across our operations. Since the last
report two further female members have
been appointed to the board. Fiona Laird
joined the board on 1 April 2013 as a non-
executive director and Angela Spindler
was appointed to succeed Alan White
as the company’s new Chief Executive
Officer with effect from 1 July 2013. Once
Angela takes up her post the board will
have female members equating to 30%
of its directors. The board considers
that significant progress has already
been made towards meeting the goals
of its diversity policy but will continue to
consider how diversity can be enhanced
through the board and the senior
management teams and across the group
generally, whilst ensuring that it appoints
only the most appropriate candidates to
the board.
Board operation and evaluation
An effective board of directors leads and
controls the group. The members of the
board are shown on page 16 of this report.
The board met eight times during the year.
Directors' attendance at board meetings
was as follows:
Attendance
Andrew Higginson†
Lord Alliance of Manchester CBE
Ivan Fallon
Alan White
Lord Stone of Blackheath*
Nigel Alliance OBE*
Dean Moore
John McGuire
Anna Ford
*(resigned 2 January 2013)
†(appointed 1 July 2012)
5
8
8
8
5
5
8
8
8
The board is responsible for all major
policy decisions and for determining the
operational and strategic risks it is willing to
take in achieving its objectives. The board
has delegated operational matters to those
of its committees and sub-committees,
the executive and operational directors
and senior officers, where necessary.
The board is collectively responsible
for providing effective leadership and
promoting the success of the group and
works to a formal list of matters reserved
for the board (a copy of which is available
on the company’s website, www.nbrown.
co.uk). Matters reserved to the board
include, amongst other things, decisions
on business strategy, the approval of
financial statements, the annual capital and
operating expenditure plans, investment,
treasury and dividend policies, governance
issues, major capital projects, overseeing
the group’s risk control procedures, board
membership and the composition of its
committees and the group’s ethical, social
and environmental policies.
In January of each year the members of
the board meet with the operational board
members over a two day period to review
the progress being made against, and the
future development of, the group’s long-
term rolling strategic plan.
Day-to-day management of the group
is delegated to the operational board of
JD Williams & Company Limited, known
as the Home Shopping board, on which
both Alan White and Dean Moore sit
as chief executive and finance director
respectively.
The board governs through clearly
mandated committees, accompanied by
robust monitoring and reporting systems.
Further detail is given below.
Board papers include detailed
management reports from the Chief
Executive and the Finance Director,
management accounts, broker analyses,
compliance and regulatory briefings and
bespoke reports. A comprehensive pack
of papers is circulated to each director not
less than seven days prior to each board
meeting. Non-executive directors are
encouraged to meet and talk to operational
teams and the Home Shopping board and
undertake regular site visits to ensure that
they have the most up-to-date knowledge
and understanding of the company and
its activities and also so that the broader
population of the group can derive benefit
from the skills and experience of the non-
executive directors.
All board members are permitted to obtain
independent professional advice in respect
of their fiduciary duties and obligations
and have full and direct access to the
Company Secretary, who is a qualified
solicitor and who sits on all board and
committee meetings as secretary.
The Company Secretary regularly
briefs the board on legal, regulatory
and compliance matters, shareholder
engagement issues and the statutory
duties and obligations of the directors.
In the last year (as in previous years)
the board has undertaken an informal
appraisal of its own performance and
effectiveness and also that of the
Chairman and the board’s committees.
The engagement of an external body
to manage the performance evaluation
process was considered but the board
concluded that, in view of the changes to
the board composition and the advent of
a new chief executive officer it was not
appropriate to employ the services of an
externally facilitated evaluator but that the
approach adopted in the previous year
remained sufficiently robust, appropriate
and cost effective for the company.
The evaluation process consisted of the
individual completion of a questionnaire
containing 26 detailed questions ranging
from the effectiveness of individual
members, the size and number of board
reports, relationships with management,
the mix of skill-sets, individual contribution
at board meetings to the effectiveness of
the Company Secretary. The questionnaire
was completed by all directors in relation
to the board and also any committee of
which they were a member. The process
is designed to establish whether each
director continues to meet the board’s
requirements in terms of effective
contribution, skills and devotion to the role.
The evaluation results were collated by
the Company Secretary for review by the
Chairman and then a joint review by the
board. The performance of the Chairman
was reviewed and appraised by the senior
non-executive director in consultation
with the other board members. The Chief
Executive’s performance was reviewed
and appraised by the Chairman and the
non-executive directors. The performance
of the Finance Director (the only other
executive director on the board) was
carried out in a similar manner to the
Chief Executive.
The evaluation concluded that the board
and committees continue to perform
well and are effective and that robust,
free and frank discussion and challenge
N Brown Group plc Annual Report & Accounts 2013
29
CORPORATE GOvERNANCE REPORT
to the operational directors and the
executive directors exists at all levels.
The survey also found that the board and
committees continue to be effectively
led by their respective Chairmen and
that information provided to the directors
was comprehensive and sufficient
for the director’s needs. It was also
concluded that each director is individually
contributing to the overall effectiveness
and success of the group. No material
issues were raised.
Beyond the formal annual evaluation,
the performance of the executive directors
is continuously monitored throughout the
year by the Chairman and the Deputy
Chairman.
The board acknowledges the provisions
of section B.6.2 of the Code require that
an externally facilitated evaluation be
carried out at least once in every 3 years
and an external evaluation of board
effectiveness will be carried out for the
financial year 2013/14.
The Chairman reviews and agrees
with each director their training and
development needs.
Directors’ conflicts of interest
The articles of association of the company
give the directors the power to consider
and, if appropriate, authorise conflict
situations where a director’s declared
interest may conflict or does conflict with
the interests of the company.
Procedures have been set in place by the
board to regularly report and record any
potential or actual conflicts which arise in
a register which is then reviewed by the
board at least annually.
No conflicts of interest were reported in
the year under review.
Committees of the Board
The board has delegated specific
authority to a number of committees
to deal with specific aspects of
management and to maintain supervision
over the internal control procedures
of the group. These committees meet
regularly and have formal written terms
of reference which are available for
inspection on the company’s website.
The minutes of the meetings of these
committees are circulated to all
committee members in advance of the
next following committee meeting, at
which they are ratified. The following
committees of the board have been
established:
• audit committee;
• remuneration committee;
• nomination committee; and
• finance committee
After each committee meeting the
chairman of that committee makes a
formal report to the board of directors
detailing the business carried out
by the committee and setting out its
recommendations.
Audit committee
The audit committee currently consists of
the chairman John McGuire, Ivan Fallon
and Anna Ford. Lord Stone of Blackheath
served on the committee up to and
including the date he retired from the
board on 2 January 2013. Ron McMillan
joined the audit committee on 1 April
2013 and will succeed John McGuire as
chairman with effect from October 2013.
Fiona Laird and Simon Patterson also
joined the committee with effect from 1
April 2013.
The chairman of the committee and a
sufficient number of other members of
the committee are regarded as having
recent and relevant financial experience.
By invitation, the audit committee meetings
are also attended by the Chief Executive,
the Finance Director, the group’s head
of internal audit and the group’s external
auditors.
The committee met twice in the year under
review. Committee attendance was as
follows:
Attendance
2
2
2
2
John McGuire
Lord Stone of Blackheath*
Ivan Fallon
Anna Ford
*(resigned 2 January 2013)
Fiona Laird, Ron McMillan and Simon
Patterson joined the audit committee with
effect from 1 April 2013.
The audit committee is charged with
overseeing the nature and scope of the
group’s audit process (both internal and
external) and their effectiveness. The
committee’s work in the year includes:
• reviewing and approving the annual
internal audit programme and resources;
• meeting with the internal and external
auditors both with and in the absence of
the executive directors;
• receiving and reviewing the annual
and interim financial statements and
reviewing the audit reports and audit-
related reports provided by the external
auditor;
• reviewing and assessing the group’s
system of internal risk control and
sources of assurance;
• receiving reports from the company
secretary on environmental, social or
governance issues; and
• making recommendations to the board
in respect of its findings in respect of all
of the above matters.
In addition to the above scheduled
meetings, the chairman of the committee
also regularly attends the group’s head
office to meet with the Finance Director
and, separately, the group’s head of
internal audit.
The audit committee also oversees the
management of the group’s whistleblowing
procedure which contains procedures for
the committee to receive, in confidence,
complaints on all operational matters.
The committee has established a
continuous process for identifying,
evaluating and managing the significant
risks the group faces. This monitoring is
principally based on reviewing reports
from senior management to consider
whether significant operational risks are
being identified, evaluated, managed and
controlled and whether any significant
weaknesses exist which need to be
addressed. Again this year, the committee
members have received, considered and
approved an updated risk evaluation from
the operational directors. Further details
are given later in the Risk Management
section of this report.
The board considers that the processes
of the audit committee continue to be
reasonably robust and effective and in
compliance with the guidance issued by
the Smith Committee. During the year
under review the board has not been
advised by the audit committee of, nor
identified itself, any failings or weaknesses
in internal control which it has determined
to be material.
The audit committee periodically reviews
the appointment of the external auditors
as well as their relationship with the group,
including monitoring the group’s use of
the auditors for non-audit services and the
balance of audit and non-audit fees paid
to the auditors. Non-audit services are
30
N Brown Group plc Annual Report & Accounts 2013
CORPORATE GOvERNANCE REPORT
generally subject to tender and decisions
on the allocation of work are made on the
basis of competence, cost effectiveness,
relevant legislation and knowledge of the
group’s business. Deloitte LLP has been
the group’s auditor for a number of years.
Having reviewed the independence and
effectiveness of the external auditor, the
committee has not considered it necessary
to require them to tender for the audit work.
Deloitte LLP has during the year also
provided some non-audit services to the
company in the form of corporate tax, VAT
and regulatory compliance advice. The
audit committee is aware that providing
audit and non-audit services could give
rise to a potential conflict of interest. To
address this concern, the company has
also appointed independent advisers to
provide advice on taxation, executive
remuneration, regulatory and pension
matters where appropriate. These advisers
do not provide the group with any other
services which could bring into question
their independence or provide any conflict
of interest (further details of other advisers
are set out in the Remuneration Report on
page 33).
During the year fees paid to Deloitte LLP
for audit and non-audit services were as
follows:-
Audit: £0.3m
Non-audit/tax: £0.9m
The audit committee has considered
the level of fees paid to Deloitte LLP to
enable it to consider and report to the
board any concerns it may have that
the auditor’s independence is being
compromised. The majority of non-audit
work was tax advisory services and it was
considered that Deloitte LLP was best
placed to provide such advice in view of its
knowledge of the group’s financial affairs.
The audit committee has concluded that
the committee has acted in accordance
with its terms of reference and has
addressed and reasonably ensured the
independence and objectivity of the
external auditors.
Ron McMillan will assume chair of the
audit committee on 1 October 2013.
There are no contractual obligations
restricting the group’s choice of external
auditor. The committee has recommended
that the existing auditors, Deloitte LLP be
reappointed. Deloitte LLP have signified
their willingness to continue in office and
ordinary resolutions appointing them as
auditors and authorising the directors to
set their remuneration will be proposed at
the 2013 annual general meeting.
Remuneration committee
The remuneration committee consists
entirely of non-executive directors.
The current chairman is Ivan Fallon.
The other members are John McGuire
and Anna Ford. By invitation the chairman
Andrew Higginson and the Chief Executive
Officer Alan White also attended committee
meetings during the year. Lord Stone of
Blackheath served on the committee up to
and including the date of his retirement on
2 January 2013. Fiona Laird has joined the
remuneration committee with effect from
1 April 2013 and will succeed Ivan Fallon
as the chairperson in October 2013. Ron
McMillan and Simon Paterson also joined
the committee with effect from 1 April 2013.
The remuneration committee met on three
occasions during the year. Member’s
attendance was as follows:
Attendance
make recommendations to the board for
appointments of directors including, when
appropriate, the Chairman of the board
and also directors of the operating board
and other senior executive staff of the
operating company. Where appropriate,
the Chief Executive and Company
Secretary attend meetings of
the nomination committee.
The committee had a busy year in
searching for, identifying and appointing
replacements for the Chairman, the Chief
Executive Officer and the appointment of
three new non-executive directors. In this
task the committee was assisted in its
executive search role by MWM Consulting
LLP. MWM Consulting LLP has no other
connection with the company.
Andrew Higginson was announced as the
new Chairman at the last AGM at which
time it was also announced that Alan White
would be retiring in the latter half of 2013.
Angela Spindler was chosen to replace
Alan White as the new chief executive
officer and Fiona Laird, Simon Patterson
and Ron McMillan were all appointed to
bring more independent oversight to the
board.
Ivan Fallon
Lord Stone of Blackheath*
John McGuire
Anna Ford
*(resigned 2 January 2013)
3
3
3
3
The nomination committee evaluates board
candidates on merit, against objective
criteria, taking into account the skills and
experience required to perform the duties
of the post with due regard to diversity
and gender. Where appropriate, external
search consultants are engaged.
The remuneration committee reviews,
formulates and determines the reward and
remuneration package of each executive
director and other senior members of the
company including the Home Shopping
board. It also considers how the company
is applying the principles of the Code in
respect of directors’ remuneration.
The Remuneration Report is included in
this Annual Report on pages 33 to 42.
The report will be put to an advisory vote
by the members at the company’s 2013
annual general meeting.
Nomination committee
The nomination committee was chaired
by Lord Stone of Blackheath throughout
the year up to the date of his resignation
in January 2013. Simon Patterson joined
the committee and took on the role of
chairman on 1 April 2013. The other
members are currently Lord Alliance
of Manchester CBE, Ivan Fallon, John
McGuire, Anna Ford, Ron McMillan
and Fiona Laird. The formal terms of
reference for this committee require it to
The nomination committee was active in
considering the Davies Report into Women
on Boards and its response to the issues
it raised. The appointments mentioned
above bring the female quotient on the
board to 30%.
The Company Secretary is responsible
for the induction of new directors. New
directors are provided with a comprehensive
pack of information (including terms
of reference, information regarding the
business and guidance on their roles and
duties as directors) and meetings/site visits
with key employee contacts are arranged
as appropriate. The Company Secretary
provides an on-going programme of
briefings for directors covering legal and
regulatory changes and developments
relevant to the group’s activities and
director’s areas of responsibility.
During the year the nomination committee
met on four occasions with full attendance
by the current members.
N Brown Group plc Annual Report & Accounts 2013
31
CORPORATE GOvERNANCE REPORT
Finance committee
So that actions may be taken promptly
a finance committee comprising the
chairman of the audit committee, the
Chief Executive and the Finance Director
(together with such other non-executive
directors as the board may appoint from
time to time) operates between scheduled
board meetings and is authorised to make
decisions, within limits defined by the
board, regarding certain finance, treasury
and tax or investment matters.
Corporate social responsibility
committee
As reported in the Directors' report it is
intended to establish a corporate social
responsibility committee in 2013.
Internal control
The directors have overall responsibility
for ensuring that the group maintains a
sound system of internal control.
There are inherent limitations in any
system of internal control and no
system can provide absolute assurance
and management against material
misstatement, loss or failure. Equally,
no system can guarantee elimination of
the risk of failure to meet the objectives
of the business. Against this background,
the board has established a continuous
process for identifying, evaluating and
managing the significant risks the group
faces in order to give it reasonable
assurances regarding its operations and
compliance with laws and regulations.
Risk management
In order to ensure key business
developments and emerging risks are
appropriately factored into the group’s
risk management process, internal audit
facilitated two board-level risk sessions
in the year. The Chief Executive Officer
of the group and the Finance Director
along with operational directors identified,
ranked and reviewed the key risks facing
the business and appraised the structure
of internal controls and identified current
and proposed activities to mitigate these
risks. The audit committee was provided
with the output from this process and
given the opportunity to conduct its own
assessment of risks across strategic,
financial and operational areas. The results
have been collated by internal audit and
used as a key driver in the annual internal
audit plan.
An enterprise wide mapping of activities
across business functions was also
undertaken by internal audit during the
year to assess the level of risk within each
activity. Output from this process has also
been reflected in the annual audit plan.
A risk committee has been established as
a sub-committee of the audit committee
on which the Chief Executive Officer, the
Finance Director (chair of risk committee),
the Company Secretary and head of
internal audit sit, to focus on reviewing
management's activities and to continually
monitor and manage the risks identified.
Operational management is asked to
present to the risk committee on a
cyclical basis on the progress of agreed
actions against the major risks identified
by the process. The output from the
risk committee is then shared with the
audit committee and the board. The risk
committee met on two occasions during
the year and received presentations from
operational management covering group
security, information security including
PCI compliance, risk management and PPI
regulatory compliance.
The board of directors (through and
with the benefit of the reports and
recommendations of the audit committee)
has reviewed the effectiveness of the
system of internal control for the year
under review. The board (through the audit
committee) discusses with the external
auditors and the internal audit department,
the results of audit work and any resulting
internal control issues, including the
implementation of action points arising
from previous audits.
The internal audit function is independent
of management and the head of the
function has direct access to the chairman
of the audit committee and the chief
executive of the group. Internal audit
plans are discussed and agreed annually
between the group head of internal audit
and the audit committee.
Appropriate internal financial controls
are in place throughout the group, some
of which have already been referred
to in this statement. Other examples
include the existence of a well-defined
group organisation structure, with
clear lines of responsibility and explicit
authority delegated to divisional boards
and executive management, and a
comprehensive financial reporting system
which communicates plans, budgets
and monthly results to relevant levels of
management, including the board.
The company has complied, and continues
to comply, with the provisions of the Code
on internal controls. There is an on-going
32
N Brown Group plc Annual Report & Accounts 2013
process in place for identifying, evaluating
and managing the significant risks
facing the group that has been in place
throughout the year under review and to
the date of approval of the accounts.
This process has been reviewed by the
audit committee and the board, and
accords with guidance appended to
the Code. The board has not identified
nor been advised of any failings or
weaknesses which it has determined to
be material.
Relations with investors
The company places considerable
importance on good communication with
all shareholders, be they institutional or
individual investors. Institutional investors,
fund managers and analysts are kept
informed of the company’s overall strategy
through regular meetings and investor
‘road-shows’ and site visits. All non-
executive directors are kept informed
of shareholders’ views through detailed
feedback on surveys and polls and
analyst and broker reports are tabled
at each board meeting. The senior non-
executive director is available to meet
with, and understand, the views of major
shareholders.
The company aims to ensure that all
shareholders have full and timely access
to the information it discloses in the
annual report, the yearly and half yearly
announcements and interim management
statements and that shareholders
have the opportunity to meet with the
executive management team (and certain
members of the operating division)
at the announcement of the group’s
results and also at the annual general
meeting. Non-executive and executive
directors also attend meetings with
shareholders on request. As well as
being provided with a copy of the annual
report and results announcements, the
group recently overhauled its website to
provide shareholders with up to date and
comprehensive material about the group
and its activities and also real-time market
information and prices. Shareholders also
have the opportunity to ask questions,
make observations or represent their views
to the board of directors by constructive
use of the annual general meeting.
REMUNERATION REPORT
Introduction
This report has been prepared in
accordance with the provisions of the
Companies Act 2006 and Schedule 8 to
the Large and Medium-sized Companies
and Groups (Accounts and Reports)
Regulations 2008. This report also meets
the relevant requirements of the listing
rules of the UK Listing Authority and
describes how the board has applied the
principles relating to directors’
remuneration set out in the UK Corporate
Governance Code 2010 (“the Code”).
This report will be put to an advisory vote
of the company’s shareholders at the
annual general meeting on Tuesday 2 July
2013. The auditors are required to report
on certain parts of this report and to state
whether, in their opinion, that part of the
report has been properly prepared in
accordance with the Companies Act 2006.
The report is therefore divided into
separate sections for audited and
unaudited information.
Unaudited information:
Remuneration committee
The board has a remuneration committee
(“the committee”) in accordance with the
recommendations of the Code.
During the financial year, the committee
comprised Ivan Fallon (chairman), John
McGuire and Anna Ford, all of whom are
non-executive directors. Lord Stone of
Blackheath also served on the committee
up to and including the date of his
retirement as a director on 2 January
2013. Lord Alliance of Manchester, Andrew
Higginson and Alan White also attended
the committee by invitation. Fiona Laird
joined the committee on 1 April 2013 and
will succeed Ivan Fallon as chairman of the
committee in October 2013.
The committee members have no
personal financial interest (other than as
shareholders) in matters to be decided,
no potential conflicts of interest arising
from cross-directorships and no day-to-
day involvement in running the business
and are considered by the company to be
independent. The committee has formal
written terms of reference which are
available for shareholders to inspect and
on the corporate website. The committee
met four times during the year, with full
attendance on each occasion.
Recommendations and reports were
provided to the committee during the
year by Alan White, the Chief Executive
Officer and Andrew Higginson, the
Chairman of the board. No director played
any part in discussion about his or her
own remuneration. The committee also
received advice from external advisers
during the year which materially assisted
their consideration of remuneration matters
as follows:
• New Bridge Street provided
benchmarking services in setting
executive remuneration;
• remuneration benchmarking and other
remuneration data taken from various
publications of Deloitte LLP were also
used;
• Ernst & Young LLP and Pinsent Masons
LLP provided advice in respect of
certain executive remuneration matters
and in respect of the company's share
incentive plans and aspects of directors'
pension arrangements; and
• Mercer Human Resource Consulting
Limited provided advice in relation to the
Chief Executive's pension arrangements.
New Bridge Street, Ernst & Young LLP
and Mercer Human Resources Consulting
Limited were appointed by the committee
and provided no other services to the
company. Pinsent Masons LLP are
the group's general legal advisers and
were not specifically appointed by the
committee. These advisers have no other
connections with the group other than as
set out above.
The advisers' terms of engagement are
available on request from the Company
Secretary.
The board and the committee have reviewed
the group’s compliance with the Code on
remuneration-related matters. It is the opinion
of the board that the group complied with the
remuneration-related aspects of the Code
during the financial year ended 2 March 2013.
The company has, however, agreed a long-
term incentive arrangement in connection
with Angela Spindler's recruitment, without
shareholder approval, as permitted by the
Listing Rules and as described in more detail
on page 36.
In setting the remuneration policy for
2013 the committee considered the
structure and quantum of the basic pay
award for senior executives against
that available for all other grades of
staff and concluded that other than
in cases of additional responsibilities
being undertaken the same structure
be applied to the senior executives. The
committee also considered whether it was
appropriate to introduce a ‘claw-back’
into any of the group’s incentive schemes.
The committee considered in light of the
provisions of Schedule A to the Code
and has concluded that, in view of the
existing safeguards built into the review
mechanisms of the incentive schemes
(which ensure they only pay out on the
achievement of tangible deliverables
set into the performance conditions),
a claw-back is not required. However,
the committee has resolved to keep
the overall position on claw-back under
review. It was decided, after reviewing
the matter, that the previous structure of
the group’s annual bonus scheme split
between the achievement of a profit target
and the achievement of personal and
corporate objectives would be retained.
The committee also decided to leave the
long-term incentive share plan ("LTIP")
unchanged for 2013. A detailed review
of the LTIP scheme is scheduled to take
place during 2013, following which a
resolution for its renewal in updated form
will be proposed at the annual general
meeting in 2014.
Remuneration policy for executive
directors and senior executives
The committee’s policy is designed to
ensure that the main elements of the
remuneration package are linked to
the company’s annual and long-term
strategy and are appropriate in amount
and capable of attracting, motivating and
retaining executive directors. It is the aim
of the policy to reward executive directors
and senior executives by offering them
competitive remuneration packages, which
are prudently constructed, sufficiently
stretching and linked to long-term
profitability and which do not encourage
excessive risk taking.
In particular the committee strives to
ensure that its remuneration package is:
• aligned with the group’s strategic plan;
• aligned to shareholder’s interests;
• measured against stretching targets,
both in absolute and relative terms;
• competitive and sufficiently flexible to
support the recruitment needs of the
business;
• paid in a combination of cash and share
options; and
• calculated over an annual and three-year
performance period.
The normal remuneration package for
executive directors comprises basic
salary, an annual performance-related
bonus (including a deferred element with a
matching share award subject to a further
N Brown Group plc Annual Report & Accounts 2013
33
REMUNERATION REPORT
performance condition, in the case of
current directors), long-term share based
incentives, a pension, a company car
allowance and private medical insurance.
The committee strives to ensure that
the structure of executive remuneration,
including the balance between fixed and
variable pay, is linked to the achievement
of the long-term success of the group
compatible with the company's prudent
risk policies and systems.
All pay and incentives are subject to
the individual review and scrutiny of
the committee, particularly in the case
of share incentives both at the award
stage and at the vesting stage to ensure
that performance has been correctly
adjudicated and to safeguard against
excessive overall reward. Variable pay and
remuneration is normally linked to both
improvements in corporate and individual
performance and is benchmarked to
attract and retain the highest quality
people. The committee reviews the policy
on an annual basis and recommends
changes as and when appropriate,
guided in this process by external
consultants it appoints from time to time.
The remuneration policy will undergo a
comprehensive review ahead of the annual
general meeting in 2014.
The committee considers the group’s
performance on Environmental, Social and
Governance (‘ESG’) issues when settling
the remuneration of any executive director
and is of the opinion that the incentive
arrangements for senior managers do not
raise ESG risks by inadvertently motivating
irresponsible behaviour or the taking of
undue risks with the business.
The charts which follow demonstrate the
potential achievable balance between fixed
and variable performance based pay for
each executive director.
Basic salary
When determining the salary of the
executive directors the committee takes
into account the levels of base salary for
similar positions with comparable status,
responsibility and skills in competitor
organisations of broadly similar size and
complexity, in particular those existing
in the home shopping and retail market
sectors; the performance of the individual
executive director; the individual executive
director’s experience and responsibilities;
and the pay and conditions throughout
the group. Salaries and conditions are
reviewed on an annual basis and are
subject to absolute improvements in group
profitability and individual performance
against personal and corporate objectives
and peer-group benchmarking. Salary
reviews also take into account salary levels
within the workforce as a whole.
The current salaries of the executive
directors are shown in the table below:
Salaries
Alan White
Dean Moore
£534,250
£338,400
The above salaries represent a 2.5%
increase on the respective executive
director’s salary in June 2012, which
is broadly in line with the percentage
increase awarded to the workforce as
a whole during the same period.
Dean Moore also received an additional
12.5% pay rise on 1 March 2013 to reflect
additional responsibilities.
contained in the company’s strategic long-
term plan. They are therefore aligned to
the strategic objectives of the company
and aimed at increasing shareholder value,
whilst being prudent and safeguarding the
long-term future of the company.
The components of the normal annual
bonus scheme are made up as follows:-
Annual performance-related bonus
The executive directors and senior
executives participate in one of a number
of annual performance-related bonus
schemes at the invitation of the committee.
Each scheme is designed to thoroughly
stretch the performance of the executive
and is linked to absolute growth in annual
profit, the achievement of certain business
targets and of personal objectives.
These targets are reviewed and agreed
by the committee at the beginning of
each financial year to ensure that they
are appropriate to the current market
conditions, the long-term strategy of the
company and that they continue to remain
stretching and challenging. The targets are
linked to KPIs which are drawn from, and
relate to, the achievement of ‘milestones’
• group profitability (70%);
• corporate objectives (15%); and
• individual objectives (15%).
The maximum potential bonus payable to
current executive directors for 2012/13 and
2013/14 is 100% of basic salary. 75% of
any bonus earned is payable in cash and
(in the case of current directors) 25% is
deferred net of tax into company shares
for two years under the Deferred Annual
Bonus scheme and is eligible for a 1:1
match on the pre-tax value of the shares.
Awards of matching shares are made two
years from their date of award, subject to
terms of the employee's contract, provided
the executive remains in employment and
are subject to a financial performance
condition requiring that growth in the
34
N Brown Group plc Annual Report & Accounts 2013
Analysis of Performance vs Non Performance related elements of Remuneration PackageFixed Pay70%30%Alan WhiteDean MooreVariable Performance Related Pay70%30% REMUNERATION REPORT
company’s earnings per share must at
least equal the growth of the retail price
index over the deferral period.
scheme was 50.4% (of a maximum of
70%) for both the Chief Executive Officer
and the Finance Director.
The performance targets used for 2012/13
were based on a combination of a
profit target, improvements in customer
service and the achievement of personal
objectives. The performance targets for
current directors for 2013/14 have recently
been reviewed and, once again, will be
based upon a combination of a profit
target and the achievement of personal
and corporate objectives.
For 2012/13 the achievement of each
element the bonus was scored as follows
for both executive directors:
(b) Corporate objectives (15% of bonus)
The corporate objective for the year in
review was related to improvements
in online trading performance.
This was measured against twenty
leading service measures and
benchmarked against a range index
totaling 100 points. A score of 65.0%
was achieved and therefore the
payment due under this element of
the bonus scheme was 9.75 % (of a
maximum of 15%) for both executive
directors.
personal objectives were to oversee
implementation of the strategic plan,
improve customer choice of available
delivery and return options, increase
online and affinity sales, progress
business development activities and
update strategic options for the group.
Amongst Dean Moore’s personal
objectives were to manage the Simply
Be store start-up, deliver agreed targets
for the bad debt charge, review the
group’s cost base and recommend areas
of reduction. The achievement for the
individual performance objective elements
of the bonus scheme for the executive
directors was adjudged by the committee
and the group Chairman to be as follows:
(c) Individual performance objectives
• Alan White 11.25%
(a) Group profit (70% of bonus)
(15% of bonus)
The targeted adjusted profit before tax
range for bonus purposes was £92.9m
to £97.8m to reflect the impact of the
53rd week in the prior year, compared
with the prior year’s adjusted result of
£97.0m. Adjusted profit before tax for
2012/13 was £95.1m, therefore the bonus
payment due under this element of the
Several individual performance objectives
are established for each senior executive.
These are stretching objectives designed
to achieve exceptional improvements
against the prior year, or budgeted
results, or the delivery of a key strategic
project linked to corporate strategy. In
the year in review amongst Alan White’s
(of a maximum of 15%)
• Dean Moore 11.40%
(of a maximum of 15%)
Based on the results of the three elements
comprised in the annual bonus scheme, the
bonus payable for the year under review, 25%
of which is compulsorily converted into shares
and deferred for two years, is as follows:
Name
2012/13 Bonus & Deferred Shares Paid
2012/13 Matching Share Award (Contingent)
Total 2012/13 Bonus & Matching Share Award as a percentage of Salary
Share incentives
Subject to the review of the committee,
executive directors and senior executives
are considered for participation in one of
either the company’s long-term incentive
plan or its executive share option schemes.
The committee’s policy is that combined
awards (ie awards under both the plan
and the schemes) shall not be made
other than where individual contribution
to the performance of the group has been
exceptional or on recruitment. In addition,
it is the committee’s policy only to make
combined grants where full consideration
has been given to the following:
• the accounting impact and cost for
the company and the dilutive cost
for shareholders for a given share
commitment to an executive;
• different performance conditions that
might apply to awards and options; or
• the recruitment of a senior executive.
For the year under review no combined
awards were made.
Alan White Dean Moore
£381,455
£251,208
£95,364
£53,802
89.3%
89.4%
Existing schemes
Long-term incentive share plan (“LTIP”)
At the discretion and invitation of the
committee, executive directors and certain
senior executives are eligible to participate
in the group’s LTIP. The plan provides
appropriate incentives to reward sustained
success through the achievement of
challenging business targets, thereby
better aligning the interests of shareholders
and executives. It is the intention of the
committee to recommend that LTIP awards
are made again in 2013/14 and that the
LTIP be reviewed before being renewed at
the 2014 annual general meeting.
Long-term incentive share plan
Description
Maximum Annual Award (% of Salary)
150%
Nature of Right
Performance Period
Performance Requirements
A nil cost award over a fixed number of shares subject to the satisfaction of conditions
Three years
Total shareholder return ("TSR") subject to quartile ranking of company against
comparator group of companies calculated over a performance period over three years
Additional Features
None
Currently the committee adopts a policy of granting awards of up to 100% of salary to both executive directors.
N Brown Group plc Annual Report & Accounts 2013
35
REMUNERATION REPORT
Performance condition
The normal LTIP performance condition is
based upon TSR. TSR as a performance
condition is considered appropriate for the
following reasons:
• market research indicates that TSR is an
appropriate and common measure for
long-term incentive arrangements within
FTSE 250 companies;
• a TSR performance condition is in the
opinion of the committee closely aligned
with shareholder interests; and
• a TSR performance condition more
closely evaluates company performance
against a basket of comparator
companies in the same sector.
The committee determines whether the
TSR performance conditions for share
awards are satisfied by ranking the
company over a three-year performance
period measured from the date of grant
against a group of comparator companies
currently comprising: ASOS, Debenhams,
Dixons Retail, Dunelm, Findel, Flying
Brands, French Connection, Halfords,
HMV, Home Retail Group, J.D. Sports,
JJB Sports, Darty, Laura Ashley, Marks &
Spencer, Moss Bros Group, Mothercare,
Next, Provident Financial and Supergroup.
The committee determines from time
to time which companies are to be
added or removed from this comparator
group, including the treatment of any
company which ceases trading during
any performance period. For 2013, Sports
Direct and Carpetright will replace HMV
and JJB Sports in the comparator list.
Vesting of awards
For awards vesting in 2013 and beyond
100% of the award will vest if the company’s
TSR is ranked in the upper quartile.
Depending on rank, where the company’s
TSR is ranked between the median and
upper quartiles, between 25% and 85%
of the award will vest. The percentage award
vesting at median performance is 25% of
the maximum award.
The company’s TSR performance against
these targets is measured by reference to
publicly available data produced by the
company’s brokers, Credit Suisse, and by
Datastream. The results are then reviewed
and ratified by the committee before any
final award is made.
There are currently 3 LTIP awards extant.
Based on TSR performance as at 30
April 2013, the company is situated in the
relevant quartiles as follows:
2010/13 award – 2nd quartile
2011/14 award – 2nd quartile
2012/15 award – 1st quartile
Recruitment awards
The committee has agreed a recruitment
package for Angela Spindler, who is
expected to take up her appointment
as Chief Executive Officer on 1 July
2013. This includes special provisions
for financial year 2013/2014. For the
period from her joining until the end of
the 2013/2014 financial year, she will be
eligible to receive a time pro rated bonus
based on 125% of salary, subject to
the achievement of personal objectives
agreed with the Chairman on behalf of the
Remuneration committee. In subsequent
years it is anticipated that she will be
eligible for a cash bonus up to a maximum
of 125% of salary, with 40% of any bonus
outcome deferred into an award of shares
exercisable after a period of two years,
subject to employment conditions, but
without any additional matching awards.
On an exceptional basis, and only to the
extent necessary to compensate her for
awards made by her former employer
which are forfeited as a result of taking up
her appointment with the company, Angela
Spindler is eligible to receive two one-off,
share awards. The first award, over shares
to a value of up to 100% of salary, will be
subject to employment conditions over two
years. The second award, over shares to
a value of up to 200% of salary will also
be subject to the achievement of strategic
objectives measured over a period of
three years, which will be agreed by the
Chairman on behalf of the Remuneration
Committee. In addition, she is expected to
participate in the LTIP in accordance with
the policy agreed by the Remuneration
committee.
The performance conditions for her
LTIP awards for financial year 2013/14,
over shares to a value of up to 125% of
salary, will be 50% by reference to Total
Shareholder Return, as described above
and 50% by reference to stretching
conditions that will be set relating to
growth in earnings per share, requiring
substantial improvement in financial
performance in order to achieve maximum
vesting, in each case measured over a
period of 3 years. Earnings per share
is considered appropriate because it is
easily understood and is a key measure
of financial performance, closely aligned
to the company's objectives of driving
profitable growth.
Executive share option schemes
The company operates both Unapproved
and CSOP share option schemes,
permitting annual awards of up to 200%
of remuneration, although there is no plan
to make any CSOP or unapproved option
awards to executive directors in 2013/14,
and none of the executive directors
have any options outstanding under the
executive share option schemes.
All employee share schemes
The group operates an HM Revenue &
Customs approved savings related share
option scheme for the benefit of group
employees, provided that they have
completed at least six months’ service.
Eligible employees, including executive
directors and senior executives, may be
granted options over the company’s shares
at a discount of up to 20% to the prevailing
market price at the time of grant of the
option, which (subject to certain conditions)
can be exercised after either three or five
years. There is currently no intention to
invite eligible employees to participate in
the company’s share incentive plan (SIP).
Shareholding guidelines
The company has introduced formal share
ownership guidelines under which the
Chief Executive Officer and the Finance
Director are respectively required to hold
company shares equal in value (at the time
of acquisition) to 200% and 100% of their
base salary respectively. As at the year end
the respective holdings are as follows (as a
% of base salary).
Alan White 572%
Dean Moore 339%
Angela Spindler will be expected to attain
her shareholding requirement over a
5 year period.
Pension
Defined benefit scheme
Alan White is a member of the N Brown
Group Pension Fund (“the fund”), which
is an HM Revenue & Customs registered
defined benefit scheme. The group has also
made an unregistered promise of benefits in
addition to those of the fund such that the
overall group provides for him, at his normal
retirement age of 60, a pension accrual
rate of 1/40th of pensionable salary, which
is defined as base salary only, (to give a
maximum pension of 2/3 pensionable salary
at normal retirement age, including retained
benefits and benefits earned in the fund prior
to 1999). He is also provided with a lump
sum death benefit of four times pensionable
salary. The pension is calculated on a final
salary basis for service prior to 30 June 2005
and from then on a career average revalued
36
N Brown Group plc Annual Report & Accounts 2013
REMUNERATION REPORT
earnings basis. As Alan White remained in
service until August 2010, his previous period
of service with the group from 1985 to 1999
will be included in full in the calculation of his
current pension, subject to the above two-
thirds maximum.
No part of a director’s pensionable salary
includes remuneration other than basic pay.
All members of the fund currently pay
contributions (or sacrifice salary) at the
rate of 6% or 8% of pensionable salary.
The group bears the cost of providing the
lump sum death benefit and the balance
of contributions necessary to finance fund
benefits.
Defined contribution scheme
Dean Moore is a member of the defined
contribution scheme. Members of
this scheme pay contributions up to a
maximum rate of 6% of pensionable salary,
with the company matching the level of
employee contribution. The company
contributes 6% of Dean Moore’s annual
salary into the defined contribution
scheme.
Benefits in kind
Executive directors receive the following
additional benefits:
•
•
a car and fuel allowance; and
private medical insurance
The fund is now closed to new entrants.
Eligible employees who would otherwise
have been entitled to join the fund are now
able to join a new defined contribution
pension scheme.
Directors’ contracts
It is the company’s policy that executive
directors should have contracts with an
indefinite term providing for a maximum
of 12 months' notice.
The policy is that the company does not
make payments beyond its contractual
obligations on termination. In addition,
executive directors are expected to
mitigate their loss or, within existing
contractual constraints, accept phased
payments. The committee seeks to ensure
that there are no unjustified payments for
failure. None of the executive directors’
contracts provides for liquidated damages.
There are no special provisions contained
in any of the executive directors’ contracts
that provide for longer periods of notice
on a change of control of the company.
Further, there are no special provisions
providing for additional compensation
on an executive director’s cessation of
employment with the company.
Potential termination payments are
summarised below:
Name
Alan White
Dean Moore
Potential termination
payment
Potential payment
upon company takeover
Potential payment in
event of liquidation
12 month’s salary
12 month’s salary
Nil (unless terminated)
Nil (unless terminated)
Nil (unless terminated)
Nil (unless terminated)
Apart from service contracts, no executive director has any material interest in any contract with the company or its subsidiaries.
Non-executive directors are retained on
letters of appointment. All non-executive
appointments are on three year terms
terminable upon up to six months' notice,
save for Ivan Fallon and John McGuire who
are on three month rolling terms.
All appointments are subject to successful
re-election upon retirement at the annual
general meeting. Termination carries no
right to compensation other than that
provided by general law. This policy also
applies to non-executive directors.
Brief details of non-executive and
executive directors’ contracts are
summarised below:
Name
Lord Alliance of Manchester CBE
Alan White
Dean Moore
Ivan Fallon
John McGuire
Anna Ford
Andrew Higginson
Fiona Laird
Simon Patterson
Ron McMillan
Status
non executive
executive
executive
non executive
non executive
non executive
non executive
non executive
non executive
non executive
Date of contact/letter
of appointment
16 May 2007
10 August 2002
20 December 2004
10 April 2013
10 April 2013
10 April 2013
3 July 2012
1 March 2013
13 March 2013
1 March 2013
Notice
period
6 months
12 months
12 months
3 months
3 months
3 months
6 months
3 months
3 months
3 months
Additional directorships
Executive directors are encouraged
by the company to hold non-executive
directorships in listed businesses. Fees
for such directorships are retained by the
executive director. Alan White currently
holds a non-executive directorship with
Topps Tiles Plc for which he is paid a fee
of £41,000 per annum and with Direct
Wines Limited for which he is paid a fee of
£40,000. Alan White is permitted to retain
both of these fees.
Non-executive directors
All non-executive directors have
specific terms of engagement and their
remuneration is determined by the board
within the limits set by the Articles of
Association and based on independent
surveys of fees paid to non-executive
directors of similar companies.
The basic fee paid to each non-executive
director in the year was within the range
£17,000–£38,000 per annum. A further fee
of £5,000 was payable for additional work
performed in respect of the chairmanship
of the remuneration committee, £6,500 for
the chairmanship of the audit committee
and £3,000 for chairing the nomination
committee. The Deputy Chairman also
receives an additional fee of £7,000 in
recognition of the further duties which
that post entails. Non-executive directors
cannot participate in any of the company’s
N Brown Group plc Annual Report & Accounts 2013
37
REMUNERATION REPORT
share incentive schemes or performance-
based plans and are not eligible to join the
company’s pension scheme.
Following a review by New Bridge
Street in December 2012 the committee
recommended to the board that the non-
executive directors' fees be revised.
Acting on the recommendations of the
committee, the board (acting by those
directors not interested in the matter)
resolved to increase the basic non-
executive fee to £47,000 with a
supplement of between £5,000 and
£8,000 for chairing a committee and
£5,000 for acting as senior independent
non-executive director.
Performance graph
The graph shows the company’s five
year performance, measured by TSR,
compared with the performance of the
FTSE Mid-250 Index, also measured by
TSR. The company is a member of this
index and accordingly it is felt to be the
most appropriate comparator group for
this purpose.
Total Shareholder Return Performance: N Brown vs FTSE 250
N Brown Group plc
FTSE Mid-250 Index
250
200
150
100
50
)
0
0
1
o
t
d
e
s
a
b
e
r
(
n
r
u
t
e
R
l
a
t
o
T
0
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Financial Period
Source: Datastream
38
N Brown Group plc Annual Report & Accounts 2013
REMUNERATION REPORT
Audited Information:
Directors’ remuneration and interests
Emoluments
The individual elements of directors’ emoluments for the year are as follows:
Salaries
/fees
£’000
Taxable
benefits1
£’000
Performance-
related
bonuses2
£’000
Share award
related
gains
£’000
2013
total
£’000
Executive (salaries)
Alan White
Dean Moore
Non executive (fees)
Lord Alliance of Manchester CBE
Andrew Higginson
Nigel Alliance OBE
Ivan Fallon
Lord Stone of Blackheath
John McGuire
Anna Ford
542
324
17
150
15
50
32
45
38
1,213
1
1
–
–
–
–
–
–
–
2
2012
total
£’000
2,765
957
17
-
18
50
38
45
38
382
215
–
–
–
–
–
–
–
613
297
1,538
837
–
–
–
–
–
–
–
17
150
15
50
32
45
38
597
910
2,722
3,928
1. Taxable benefits comprise the provision of private medical cover.
2. Included in the performance-related bonus awards stated above are £95,363 for Alan White and £53,802 for Dean Moore which (after deduction of income tax)
are shortly due to be transferred to the deferred annual bonus scheme.
N Brown Group plc Annual Report & Accounts 2013
39
REMUNERATION REPORT
Pensions
Details of directors' accrued pension entitlements under the group's defined benefit schemes are as follows:
Change
in accrued
pension
during
year2
£’000
Value of
net change
in accrual
during
Accrued
pension at
2 Mar 13 1 year2,3,4
£’000
£’000
Transfer
value of
accrued
pension at
3 Mar 123
£’000
Change
in transfer
value during
year3,4,5
£’000
Transfer
value of
accrued
pension at
2 Mar 133
£’000
Accrued
pension at
3 Mar 12 1
£’000
Alan White
105
18
126
315
2,194
690
2,894
1. As Mr White has given his notice to retire, the above pension amounts have been calculated on the assumption he will retire early but based on service to the year end.
2. Change stated net of inflation.
3. Transfer values have been calculated in accordance with the Occupational Pension Schemes (Transfer Values) Regulations 1996.
4. Stated after deduction of the director's contribution.
5. The change in the transfer value includes the effects of fluctuations in the transfer value due to factors beyond the control of the company and directors, such
as gilt yield changes.
Voluntary contributions paid by the directors and resulting benefits are not shown.
Contributions paid by the company into the group's defined contribution scheme during the year in respect of Dean Moore amounted to
£17,937 (2012, £17,512).
Share options
Details of directors’ share options are as follows:
At 3 Mar
2012
Granted
in year
Lapsed Exercised
in year
in year
At 2 Mar
2013
Exercise
price
Market
price at Date from
which
date of
exercise exercisable Expiry date
Dean Moore
SAYE
8,413
8,413
–
–
-
-
–
–
8,413
8,413
186.0p
01/08/2014 31/01/2015
The market price of the company's shares at 2 March 2013 was 397.0p (2012, 238.8p) and the range during the year was 222.4p to 405.9p.
40
N Brown Group plc Annual Report & Accounts 2013
REMUNERATION REPORT
Deferred annual bonus share awards
Details of awards made to the directors under the group's deferred annual bonus scheme are as follows:
At 3 Mar
2012
Awarded
in year
Lapsed Exercised
in year
in year
At 2 Mar
2013
Market
price at
date of
award
Market
price at Date from
which
date of
exercise exercisable Expiry date
Alan White
Dean Moore
53,912
38,422
–
–
–
20,420
92,334
20,420
28,340
21,684
–
–
–
9,273
50,024
9,273
–
–
–
–
–
–
–
–
(53,912)
–
–
–
38,422
20,420
250.0p
288.0p
232.0p
261.4p 28/05/2012 27/11/2012
02/06/2013 01/12/2013
30/05/2014 29/11/2014
(53,912)
58,842
(28,340)
–
–
–
21,684
9,273
250.0p
288.0p
232.0p
241.3p 28/05/2012 27/11/2012
02/06/2013 01/12/2013
30/05/2014 29/11/2014
(28,340)
30,957
The total gains made by Alan White and Dean Moore on the exercise of the awards during the year were £140,934 and £68,323 respectively.
Long term incentives
Details of awards of shares made to the directors are as follows:
Alan White
Dean Moore
At 3 Mar
2012
Awarded
in year
Lapsed Exercised
in year
in year
At 2 Mar
2013
Market
price at
date of
award
Market
price at Date from
which
date of
exercise exercisable Expiry date
212,691
204,136
194,434
–
–
–
–
235,841
(31,904)
–
–
–
(180,787)
–
–
–
– 1
204,136 1
194,434 1
235,841 1
235.0p
247.0p
275.0p
241.0p
261.4p 28/05/2012 27/11/2012
05/07/2013 04/01/2014
08/07/2014 07/01/2015
28/06/2015 27/12/2015
611,261
235,841
(31,904)
(180,787)
634,411
111,663
114,928
109,467
–
–
–
–
132,777
(16,750)
–
–
–
(94,913)
–
–
–
– 1
114,928 1
109,4671
132,7771
235.0p
247.0p
275.0p
241.0p
241.3p 28/05/2012 27/11/2012
05/07/2013 04/01/2014
08/07/2014 07/01/2015
28/06/2015 27/12/2015
336,058
132,777
(16,750)
(94,913)
357,172
1. Exercise is subject to performance condition geared to Total Shareholder Return.
The total gains made by Alan White and Dean Moore on the exercise of the awards during the year were £472,534 and £229,051 respectively.
N Brown Group plc Annual Report & Accounts 2013
41
REMUNERATION REPORT
Interests
Directors’ interests in shares of the company as at the date of this report are as follows:
Lord Alliance of Manchester CBE
Lord Alliance of Manchester CBE (non beneficial)
Alan White
Dean Moore
Andrew Higginson
Ivan Fallon
John McGuire
Anna Ford
Ron McMillan
Fiona Laird
Simon Patterson
Approval
This report was approved by the board of directors on 17 May 2013 and signed on its behalf by:
Ivan Fallon
Chairman of the remuneration committee
2013
Ordinary
Shares of
2012
Ordinary
Shares of
111/19p each 111/19p each
75,316,182
19,731,784
770,474
289,219
82,507
10,000
9,047
–
–
–
–
75,316,182
19,731,784
760,316
224,572
-
10,000
9,047
–
–
–
–
42
N Brown Group plc Annual Report & Accounts 2013
• certain elements of the report to
shareholders by the Board on
directors’ remuneration.
Other matters
We have reported separately on the
parent company financial statements
of N Brown Group plc for the 52 weeks
ended 2 March 2013.
Damian Sanders ACA
(Senior Statutory Auditor) for and
on behalf of Deloitte LLP
Chartered Accountants and
Statutory Auditor
Manchester, UK
17 May 2013
INDEPENDENT AUDITOR’S REPORT – GROUP ACCOUNTS
Independent Auditor’s Report to the
members of N Brown Group plc.
We have audited the group financial
statements of N Brown Group plc for
the 52 weeks ended 2 March 2013 which
comprise the Consolidated Income
Statement, the Consolidated Statement
of Comprehensive Income, the
Consolidated Balance Sheet, the
Consolidated Cash Flow Statement,
the Consolidated Statement of Changes
in Equity, the Reconciliation of Operating
Profit to Net Cash Flow from Operating
Activities and the related notes 1 to 29.
The financial reporting framework that
has been applied in their preparation
is applicable law and International
Financial Reporting Standards (IFRSs)
as adopted by the European Union.
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.
Respective responsibilities of
directors and auditor
As explained more fully in the Directors’
Responsibilities Statement, the directors
are responsible for the preparation of the
group financial statements and for being
satisfied that they give a true and fair
view. Our responsibility is to audit and
express an opinion on the group financial
statements in accordance with applicable
law and International Standards on
Auditing (UK and Ireland). Those standards
require us to comply with the Auditing
Practices Board’s Ethical Standards
for Auditors.
appropriate to the group’s circumstances
and have been consistently applied and
adequately disclosed; the reasonableness
of significant accounting estimates
made by the directors; and the overall
presentation of the financial statements.
In addition, we read all the financial
and non-financial information in the
annual report to identify material
inconsistencies with the audited financial
statements. If we become aware of
any apparent material misstatements
or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion the group financial
statements:
• give a true and fair view of the state of
the group’s affairs as at 2 March 2013
and of its profit for the 52 weeks then
ended;
• have been properly prepared in
accordance with IFRSs as adopted
by the European Union; and
• have been prepared in accordance with
the requirements of the Companies Act
2006 and Article 4 of the IAS Regulation.
Opinion on other matter prescribed by
the Companies Act 2006
In our opinion the information given in
the Directors’ Report for the financial year
for which the group financial statements
are prepared is consistent with the group
financial statements.
Matters on which we are required
to report by exception
We have nothing to report in respect
of the following:
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
• certain disclosures of directors’
remuneration specified by law are not
made; or
• we have not received all the information
and explanations we require for our
audit.
Scope of the audit of the
financial statements
An audit involves obtaining evidence
about the amounts and disclosures
in the financial statements sufficient
to give reasonable assurance that the
financial statements are free from material
misstatement, whether caused by fraud
or error. This includes an assessment
of: whether the accounting policies are
Under the Listing Rules we are required
to review:
• the directors’ statement, contained
within the Directors’ Report, in relation
to going concern;
• the part of the Corporate Governance
Statement relating to the company’s
compliance with the nine provisions of
the UK Corporate Governance Code
specified for our review; and
N Brown Group plc Annual Report & Accounts 2013
43
CONSOlIDATED INCOME STATEMENT
For the 52 weeks ended 2 March 2013
Note
3
5
7
8
18
9
11
11
Note
28
9
Revenue
Operating profit
Investment income
Finance costs
Profit before taxation and fair value adjustments to financial instruments
Fair value adjustments to financial instruments
Profit before taxation
Taxation
Profit attributable to equity holders of the parent
Adjusted earnings per share
Basic
Diluted
Earnings per share
Basic
Diluted
CONSOlIDATED STATEMENT Of COMPREHENSIvE INCOME
For the 52 weeks ended 2 March 2013
Profit for the period
Items that will not be reclassified subsequently to profit or loss
Actuarial losses on defined benefit pension schemes
Tax relating to items not reclassified
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Total comprehensive income for the period attributable to equity holders of the parent
44
N Brown Group plc Annual Report & Accounts 2013
2013
£m
784.7
2012
£m
753.2
102.2
102.0
3.9
(11.0)
95.1
1.3
96.4
(17.0)
79.4
4.3
(10.7)
95.6
1.3
96.9
(15.9)
81.0
28.15p
28.09p
28.91p
28.88p
28.51p
28.45p
29.28p
29.24p
2013
£m
79.4
(4.0)
1.0
(3.0)
0.4
76.8
2012
£m
81.0
(6.2)
1.6
(4.6)
(0.2)
76.2
CONSOlIDATED BAlANCE SHEET
As at 2 March 2013
Non-current assets
Intangible assets
Property, plant & equipment
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Current tax liability
Net current assets
Non-current liabilities
Bank loans
Retirement benefit obligation
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Own shares
Foreign currency translation reserve
Retained earnings
Total equity
Note
12
13
20
15
16
18
24
21
18
17
28
20
22
23
2013
£m
69.6
66.4
3.4
139.4
86.5
548.7
1.2
61.3
697.7
837.1
(109.7)
-
(19.0)
(128.7)
569.0
(250.0)
(3.3)
(9.1)
(262.4)
(391.1)
446.0
31.3
11.0
(0.9)
2.3
402.3
446.0
2012
£m
62.8
67.2
1.9
131.9
82.6
522.0
-
57.5
662.1
794.0
(106.6)
(0.1)
(22.9)
(129.6)
532.5
(250.0)
(1.0)
(11.1)
(262.1)
(391.7)
402.3
31.3
11.0
(1.5)
1.9
359.6
402.3
The financial statements of N Brown Group plc (Registered Number 814103) were approved by the board of directors and authorised for
issue on 17 May 2013.
They were signed on its behalf by:
Alan White
Dean Moore
Directors
N Brown Group plc Annual Report & Accounts 2013
45
CONSOlIDATED CASH flOw STATEMENT
For the 52 weeks ended 2 March 2013
Net cash from operating activities
Investing activities
Purchases of property, plant and equipment
Purchases of intangible assets
Interest received
Net cash used in investing activities
Financing activities
Interest paid
Dividends paid
Increase in bank loans
Purchase of shares by ESOT
Proceeds on issue of shares held by ESOT
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Note
24
2013
£m
72.4
(7.1)
(17.9)
0.1
(24.9)
(6.9)
(36.8)
-
(0.5)
0.5
(43.7)
3.8
57.5
61.3
2012
£m
56.5
(5.7)
(19.2)
0.1
(24.8)
(7.9)
(35.0)
20.0
(1.0)
0.6
(23.3)
8.4
49.1
57.5
RECONCIlIATION Of OPERATING PROfIT TO NET CASH fROM
OPERATING ACTIvITIES
For the 52 weeks ended 2 March 2013
Operating profit
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share option charge
Operating cash flows before movements in working capital
Increase in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Pension obligation adjustment
Cash generated by operations
Taxation paid
Net cash from operating activities
46
N Brown Group plc Annual Report & Accounts 2013
2013
£m
2012
£m
102.2
102.0
7.9
11.1
2.1
7.6
8.6
2.2
123.3
120.4
(3.9)
(26.4)
3.1
(1.9)
94.2
(21.8)
72.4
(4.5)
(30.7)
(7.5)
(1.6)
76.1
(19.6)
56.5
CONSOlIDATED STATEMENT Of CHANGES IN EqUITy
Share
capital
£m
Note 22
Share
premium
£m
Own
shares
£m
Note 23
Foreign
currency
translation
reserve
£m
Retained
earnings
£m
Total
£m
Changes in equity for the 52 weeks
ended 2 March 2013
Balance as at 3 March 2012
31.3
11.0
(1.5)
Profit for the period
Other items of comprehensive income
for the period
Total comprehensive income
for the period
Equity dividends
Purchase of own shares by ESOT
Issue of own shares by ESOT
Adjustment to equity for share payments
Share option charge
Tax on items recognised directly in equity
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at 2 March 2013
31.3
11.0
Changes in equity for the 53 weeks
ended 3 March 2012
-
-
-
-
(0.5)
1.1
-
-
-
(0.9)
Balance as at 26 February 2011
31.0
11.0
(1.2)
Profit for the period
Other items of comprehensive income
for the period
Total comprehensive income
for the period
Equity dividends
Issue of ordinary share capital
Purchase of own shares by ESOT
Issue of own shares by ESOT
Adjustment to equity for share payments
Share option charge
Tax on items recognised directly in equity
-
-
-
-
0.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at 3 March 2012
31.3
11.0
-
-
-
-
-
(1.3)
1.0
-
-
-
(1.5)
1.9
-
0.4
0.4
-
-
-
-
-
-
359.6
79.4
402.3
79.4
(3.0)
(2.6)
76.4
76.8
(36.8)
-
-
(0.6)
2.1
1.6
(36.8)
(0.5)
1.1
(0.6)
2.1
1.6
2.3
402.3
446.0
317.5
360.4
2.1
-
(0.2)
81.0
(4.6)
(0.2)
76.4
-
-
-
-
-
-
-
(35.0)
-
-
-
(0.4)
2.2
(1.1)
81.0
(4.8)
76.2
(35.0)
0.3
(1.3)
1.0
(0.4)
2.2
(1.1)
1.9
359.6
402.3
N Brown Group plc Annual Report & Accounts 2013
47
NOTES TO THE GROUP ACCOUNTS
1 General information
N Brown Group plc is a company
incorporated in the United Kingdom under
the Companies Act 2006. The address of
the registered office is listed at the end
of the report. The nature of the group’s
operations and its principal activities are
set out on page 18 of the directors’ report.
These financial statements are presented
in pounds sterling because that is the
currency of the primary economic
environment in which the group operates.
Foreign operations are included in
accordance with the policies set out
in note 2.
The group's financial statements for
the 52 weeks ended 2 March 2013
have been prepared in accordance with
International Financial Reporting Standards
(IFRS) as adopted for use in the EU.
The accounting policies have been applied
consistently in the current and prior
periods, other than that as set out below.
Adoption of new and revised Standards
In the current year, the following new and
revised Standards and Interpretations
have been adopted and have affected
the amounts reported in these financial
statements.
Standards affecting the financial
statements
The following amendments were made as
part of Improvements to IFRSs (2010).
Amendment to IFRS 7 Financial Instruments:
Disclosures. The amendment clarifies the
required level of disclosure around credit
risk and collateral held and provides relief
from disclosure of renegotiated financial
assets. The impact of this amendment
has been to reduce the level of disclosure
provided on collateral that the entity holds
as security on financial assets that are past
due or impaired.
Standards not affecting the reported
results nor the financial position
The following new and revised Standards
and Interpretations have been adopted in
the current year. Their adoption has not
had any significant impact on the amounts
reported in these financial statements but,
with the exception of the amendment to
IFRS 1, may impact the accounting for
future transactions and arrangements.
Amendment to IFRS 1 - Limited Exemption
from Comparative IFRS 7 Disclosures
for First-time Adopters. The amendment
provides a limited exemption for first-time
adopters from providing comparative fair-
value hierarchy disclosures under IFRS 7.
IAS 24 (2009) - Related Party Disclosures.
The revised standard has a new,
clearer definition of a related party,
with inconsistencies under the previous
definition having been removed.
Amendment to IAS 32 - Classification of
Rights Issues. Under the amendment,
rights issues of instruments issued to
acquire a fixed number of an entity’s own
non-derivative equity instruments for a
fixed amount in any currency and which
otherwise meet the definition of equity are
classified as equity.
Amendments to IFRIC 14 - Prepayments
of a Minimum Funding Requirement.
The amendments now enable recognition
of an asset in the form of prepaid minimum
funding contributions.
Improvements to IFRSs 2010. Aside from
those items already identified above, the
amendments made to standards under
the 2010 improvements to IFRSs have had
no impact and will not have any impact on
the group.
Standards in issue not yet effective
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 1 (amended): Severe Hyperinflation
and Removal of Fixed Dates for First-
time Adopters
• IFRS 7 (amended): Disclosures –
Transfers of Financial Assets
• IFRS 9: Financial Instruments
• IFRS 10: Consolidated Financial
Statements
• IFRS 11: Joint Arrangements
• IFRS 12: Disclosure of Interests in
Other Entities
• IFRS 13: Fair Value Measurement
• IAS 1 (amended): Presentation of Items
of Other Comprehensive Income
• IAS 12 (amended): Deferred Tax:
Recovery of Underlying Assets
• IAS 19 (revised): Employee Benefits
• IAS 27 (revised): Separate Financial
Statements
• IAS 28 (revised): Investments in
Associates and Joint Ventures
• IFRIC 20: Stripping Costs in the
Production Phase of a Surface Mine
The directors do not expect that the
adoption of the standards listed above which
are not yet effective will have a material
impact on the financial statements of the
group in future periods, except as follows:
- IFRS 9 will impact both the measurement
and disclosures of Financial Instruments.
It is likely that the transition to an effective
loss provisioning basis will potentially
increase the overall provision for trade
receivables but the group has not yet
finalised the assessment of likely impact;
- IFRS 12 will impact the disclosure of
interests the group has in other entities;
- IFRS 13 will impact the measurement of
fair value for certain assets and liabilities
as well as the associated disclosures; and
- IAS 19 (revised) will impact the
measurement of the various
components representing movements
in the defined benefit pension obligation
and associated disclosures, but not the
group’s total obligation. It is likely that
following the replacement of expected
returns on plan assets with a net
finance cost in the income statement,
the profit for the period will be reduced
and accordingly other comprehensive
income increased.
Beyond the information above, it is not
practicable to provide a reasonable
estimate of the effect of these standards
until a detailed review has been completed.
2 Accounting policies
Adoption of International Financial
Reporting and Accounting Standards
(IFRS).
The group has adopted Standards and
Interpretations issued by the International
Accounting Standards Board (IASB) and
the International Financial Reporting
Interpretations Committee (IFRIC) of the
IASB that are relevant to its operations.
Individual standards and interpretations
have to be adopted by the European
Commission (EC) and the process leads
to a delay between the issue and adoption
of new standards and interpretations
and in some cases amendments by the
EC. Where the group has applied a new
standard or interpretation in advance of
EC adoption this will be noted below in
the relevant policy statement.
Basis of accounting
The financial statements have been
prepared in accordance with IFRS.
The financial statements have also
been prepared in accordance with
48
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE GROUP ACCOUNTS
IFRSs adopted by the European Union
and therefore comply with Article 4 of
the EU IAS Regulation.
The financial statements have been
prepared on the historical cost basis,
except for the revaluation of certain financial
instruments. The principal accounting
policies adopted are set out as follows.
Accounting period
Throughout the accounts, the directors
report and financial review, reference to
2013 means at 2 March 2013 or the
52 weeks then ended; reference to 2012
means at 3 March 2012 or the 53
weeks then ended unless otherwise stated.
Basis of consolidation
The consolidated financial statements
incorporate the financial statements
of the company and entities controlled
by the company (its subsidiaries) made
up to the Saturday that falls closest to
28 February each year. The Employee
Share Ownership Trust is also made up
to a date co-terminus with the financial
period of the parent company.
The results of subsidiaries acquired or
disposed of during the period are included
in the consolidated income statement
from the effective date of acquisition or
up to the effective date of disposal, as
appropriate. Control is achieved where
the company has the power to govern
the financial and operating policies of an
investee entity so as to obtain benefits
from its activities. Where necessary,
adjustments are made to the financial
statements of subsidiaries to bring the
accounting policies used into line with
those used by the group.
All intra-group transactions, balances,
income and expenses are eliminated on
consolidation.
Business combinations
The acquisition of subsidiaries is
accounted for using the purchase method.
The cost of the acquisition is measured
at the aggregate of the fair values, at the
date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments
issued by the group in exchange for
control of the acquiree. The acquiree’s
identifiable assets, liabilities and contingent
liabilities that meet the conditions for
recognition under IFRS 3 are recognised
at their fair value at the acquisition date.
Acquisition costs are expensed as incurred.
Goodwill
Goodwill arising on acquisition is
recognised as an asset on the date
control is acquired and initially measured
at cost, being the excess of the cost
of the business combination over the
group’s interest in the net fair value of
the identifiable assets, liabilities and
contingent liabilities recognised. If, after
reassessment, the group’s interest in the
net fair value of the acquiree’s identifiable
assets, liabilities and contingent liabilities
exceeds the cost of the business
combination, the excess is recognised
immediately in profit or loss.
Goodwill is not amortised, but is reviewed
for impairment at least annually. Any
impairment is recognised immediately
in the income statement and is not
subsequently reversed.
On disposal of a subsidiary, the attributable
amount of goodwill is included in the
determination of the profit or loss on disposal.
Purchased goodwill arising on acquisitions
before 1 March 1998 was charged against
reserves in the year of acquisition in
accordance with UK GAAP and has not been
reinstated and is not included in determining
any subsequent profit or loss on disposal.
Revenue recognition
Revenue is measured at the fair value of
the consideration received or receivable
and represents the total amount receivable
for goods and services provided in the
normal course of business net of returns,
VAT and sales related taxes.
Sales of goods are recognised when goods
are delivered and title has passed and it
is probable that the economic benefits
associated with the transaction will flow to
the entity. Sales of rendering of services
include interest, administrative charges
and arrangement fees. Interest income is
accrued on a time basis, by reference to
the principal outstanding and the applicable
effective interest rate which is the rate that
exactly discounts estimated future cash
receipts through the expected life of the
financial assets to that assets’ net carrying
amount. Such revenues are recognised only
when collectability is reasonably assured.
Revenue from non-interest related financial
income is recognised when the services
have been performed.
Property, plant & equipment
Property, plant and equipment is stated
at cost, less accumulated depreciation
and any provision for impairment in value.
Depreciation is charged so as to write
off the cost of assets to their estimated
residual values, based on current prices
at the balance sheet date, over their
remaining useful lives, using the straight-
line method. No depreciation is charged on
freehold land. In this respect the following
annual depreciation rates apply:
Freehold buildings
2%
Leasehold property over the period
and improvements
of the lease
Motor vehicles
20%
Computer equipment 20%
Plant and machinery
Fixtures and fittings
between
5% and 20%
between
10% and 20%
Assets held under finance leases are
depreciated over their expected useful
lives on the same basis as owned assets
or, where shorter, over the term of the
relevant lease.
The gain or loss arising on the disposal
or retirement of an asset is determined as
the difference between the sales proceeds
and the carrying amount of the asset and
is recognised in income.
Borrowing costs
Borrowing costs directly attributable to
the acquisition, construction or production
of qualifying assets, which are assets that
necessarily take a substantial period of
time to get ready for their intended use
or sale, are added to the cost of those
assets, until such time as the assets are
substantially ready for their intended use
or sale.
All other borrowing costs are recognised
in profit or loss in the period in which they
are incurred.
Intangible assets
Computer software development costs
that generate economic benefits beyond
one year are capitalised as intangible
assets and amortised on a straight-line
basis over five years.
Customer databases arising on
acquisitions assessed under the
requirements of IFRS 3 are amortised
over their useful economic lives, which
have been assessed as being five years.
Legally protected or otherwise separable
trade names acquired as part of a
business combination are capitalised at
fair value on acquisition. Brand names are
individually assessed and are assumed
to have an indefinite life and are not
amortised, but are subject to annual
impairment tests.
N Brown Group plc Annual Report & Accounts 2013
49
NOTES TO THE GROUP ACCOUNTS
Impairment of tangible and intangible
assets excluding goodwill
At each balance sheet date, the group
reviews the carrying value 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 the asset does not
generate cash flows that are independent
from other assets, 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 discount rate that
reflects current market assessments of the
time value of money and the risks specific
to the asset for which the estimate of
future cash flows have not been adjusted.
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 as an
expense immediately.
Where an impairment loss subsequently
reverses, the carrying amount of the asset
(cash-generating unit) is increased to the
revised estimate of its recoverable amount,
but so that the increased carrying amount
does not exceed the carrying amount
that would have been determined had
no impairment loss been recognised for
the asset (cash-generating unit) in prior
years. A reversal of an impairment loss is
recognised as income immediately.
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.
Rentals payable under operating leases
are charged to income on a straight-line
basis over the term of the relevant lease
even where payments are not made on
such a basis.
Assets held under finance leases are
included in tangible fixed assets at a value
equal to the original costs incurred by the
lessor less depreciation, and obligations to
the lessor are shown as part of creditors.
The interest element is charged to the
income statement over the period of the
lease to produce a constant rate of charge
on the balance of capital repayments
outstanding.
Inventories
Inventories have been valued at the
lower of cost and net realisable value.
Cost comprises direct materials and
those overheads that have been incurred
in bringing inventories to their present
location and condition based on the
standard costing method. Cost has been
calculated on a first-in-first-out basis.
Net realisable value means estimated
selling price less all costs to be incurred
in marketing, selling and distribution.
Taxation
The tax expense represents the sum of the
tax currently payable and deferred tax.
The tax currently payable is based on
taxable profit for the year. Taxable profit
differs from net profit as reported in the
income statement because it excludes
items of income or expense that are
taxable or deductible in other years and
it further excludes items that are never
taxable or deductible. The group’s liability
for current tax is calculated using tax rates
that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is the tax expected to be
payable or recoverable on 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, and
is accounted for using the balance sheet
liability method. 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.
Such assets and liabilities are not
recognised if the temporary difference
arises from goodwill or from the initial
recognition (other than in a business
combination) of other assets and liabilities
in a transaction that affects neither the tax
profit nor the accounting profit.
Deferred tax liabilities are recognised for
taxable temporary differences arising on
investments in subsidiaries and interests
in joint ventures, except where the group
is able to control the reversal of the
temporary difference and it is probable
that the temporary difference will not
reverse in the foreseeable future.
Deferred tax is calculated at the tax rates
that are expected to apply in the period
when the liability is settled or the asset
is realised. Deferred tax is charged or
credited in the income statement, except
when it relates to items charged or
credited directly to equity, in which case
the deferred tax is also dealt with in equity.
Foreign currencies
The individual financial statements of
each group company are presented in
the currency of the primary economic
environment in which it operates (its
functional currency). For the purpose of
the consolidated financial statements, the
results and financial position of each group
company are expressed in pounds sterling,
which is the functional currency of the
group, and the presentation currency for
the consolidated financial statements.
In preparing the financial statement of
the individual companies, transactions in
currencies other than the entity’s functional
currency (foreign currencies) are recorded
at the rates of exchange prevailing on
the dates of the transactions. At each
balance sheet date, monetary assets and
liabilities that are denominated in foreign
currencies are retranslated at the rates
prevailing on the balance sheet date. Non-
monetary items carried at fair value that
are denominated in foreign currencies are
translated at the rates prevailing at the date
when the fair value was determined.
Non-monetary items that are measured
in terms of historical cost in a foreign
currency are not retranslated.
Exchange differences arising on the
settlement of monetary items, and on
the retranslation of monetary items, are
included in profit or loss for the period.
Exchange differences arising on the
retranslation of non-monetary items
carried at fair value are included in profit
or loss for the period except for differences
arising on the retranslation of non-
monetary items in respect of which gains
and losses are recognised directly
in equity. For such non-monetary items,
any exchange component of that gain or
loss is also recognised directly in equity.
In order to hedge its exposure to certain
foreign exchange risks, the group may
enter into forward contracts and options
(see below for details of the group’s
accounting policies in respect of such
derivative financial instruments).
For the purpose of presenting consolidated
financial statements, the assets
and liabilities of the group’s foreign
50
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE GROUP ACCOUNTS
operations are translated at exchange
rates prevailing on the balance sheet
date. Income and expense items are
translated at the average exchange rates
for the period, unless exchange rates
fluctuate significantly during that period,
in which case the exchange rates at the
date of transactions are used. Exchange
differences arising, if any, are classified
as equity and transferred to the group’s
translation reserve. Such translation
differences are recognised as income or
as expenses in the period in which the
operation is disposed of.
Financial instruments
Financial assets and financial liabilities are
recognised on the group’s balance sheet
when the group becomes a party to the
contractual provisions of the instrument.
Profits and losses on financial instruments
are recognised in the income statement as
they arise.
Trade receivables
Trade receivables are measured at
amortised cost using the effective interest
rate method. Appropriate allowances
for estimated irrecoverable amounts are
recognised in profit or loss when there
is objective evidence that the asset is
impaired based on specific customer
patterns of behaviour which may be
affected by external economic conditions.
The allowance recognised is measured
as the difference between the asset’s
carrying amount and the present value of
estimated future cash flows discounted
at the effective interest rate computed at
initial recognition.
Trade receivables are assessed for
impairment on a collective basis.
Objective evidence of impairment could
include the group's past experience of
collecting payments and observable changes
in national and local economic conditions
that could correlate with a default event.
Cash and cash equivalents
Cash and cash equivalents comprise cash
on hand and demand deposits, and other
short-term highly liquid investments that
are readily convertible to a known amount
of cash and are subject to an insignificant
risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments
are classified according to the substance
of the contractual arrangements entered
into. An equity instrument is any contract
that evidences a residual interest in the
assets of the group after deducting all of
its liabilities.
Bank borrowings
Interest-bearing bank loans and overdrafts
are recorded at the proceeds received,
net of direct issue costs. Finance charges,
including premiums payable on settlement
or redemption and direct issue costs,
are accounted for on an accrual basis in
the income statement using the effective
interest 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 not interest bearing
and are stated at their nominal value.
Equity instruments
Equity instruments issued by the company
are recorded at the proceeds received, net
of direct issue costs.
Derivative financial instruments
The group’s activities expose it primarily
to the financial risks of changes in foreign
currency exchange rates relating to the
purchase of overseas sourced products,
and interest rates relating to the group’s
debt. The group uses foreign exchange
forward contracts and interest rate swap
contracts where appropriate to hedge
these exposures. In accordance with
its treasury policy, the group does not
use derivative financial instruments for
speculative purposes.
The use of financial derivatives is governed
by the group’s policies approved by
the board of directors, which provide
written principles on the use of financial
derivatives.
Derivatives are stated at their fair
value. The fair value of foreign currency
derivatives contracts is their quoted market
value at the balance sheet date.
Market values are based on the duration
of the derivative instrument together with
the quoted market data including interest
rates, foreign exchange rates and market
volatility at the balance sheet date. The
fair value of interest rate contracts is the
estimated amount that the group would
receive or pay to terminate them at the
balance sheet date, taking into account
prevailing interest rates.
Changes in the fair value of currency
derivative financial instruments are
recognised in the income statement
as they arise.
Share-based payments
The group issues equity-settled share-
based payments to certain employees.
Equity-settled share-based payments are
measured at fair value at the date of grant.
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 shares that will
eventually vest. Fair value is measured
by use of a Black-Scholes model.
Retirement benefit costs
Payments to defined contribution
retirement benefit schemes are charged
as an expense as they fall due. Payments
made to state-managed retirement benefit
schemes are dealt with as payments to
defined contribution schemes where the
group’s obligations under the schemes
are equivalent to those arising in a defined
contribution retirement benefit scheme.
For defined benefit retirement benefit
schemes, the cost of providing benefits is
determined using the Projected Unit Credit
Method, with actuarial valuations being
carried out at each balance sheet date.
Actuarial gains and losses are recognised
in full in the period in which they occur.
They are recognised outside income
statement and presented in the statement
of comprehensive income.
Past service cost is recognised
immediately to the extent that the benefits
are already vested, and otherwise is
amortised on a straight-line basis over
the average period until the benefits
become vested.
The retirement benefit obligation
recognised in the balance sheet represents
the present value of the defined benefit
obligation, as reduced by the fair value
of scheme assets. Any asset resulting
from this calculation is restricted to the
past service cost plus the present value of
available refunds and reductions in future
contributions.
Critical judgements and key sources
of estimation uncertainty
The key assumptions concerning the
future and other sources of estimation
uncertainty at the year end date, that have
a significant risk of causing a material
adjustment to the carrying amounts
of assets and liabilities within the next
financial year, are discussed below.
Trade receivables
An appropriate allowance for estimated
irrecoverable trade receivables is derived
where there is an identified event which,
based on previous experience, is evidence
of a potential reduction in the recoverability
of future cash flows. This estimation is
N Brown Group plc Annual Report & Accounts 2013
51
NOTES TO THE GROUP ACCOUNTS
based on assumed collection rates which,
although based on the group’s historical
experience of customer repayment
patterns, remains inherently uncertain.
As a result this is continually assessed
for relevance and adjusted appropriately.
Further information is given in note 16.
Inventory
Provision is made for those items of
inventory where the net realisable value
is estimated to be lower than cost. Net
realisable value is based on both historical
experience and assumptions regarding
future selling values, and is consequently
a source of estimation uncertainty.
Pensions
The liability recognised in the balance
sheet in respect of the group’s defined
benefit pension obligations represents the
liabilities of the group’s pension scheme
after deduction of the fair value of the
related assets. The scheme’s liabilities
are derived by estimating the ultimate
cost of benefits payable by the scheme
and reflecting the discounted value of
the proportion accrued by the year end.
The rate used to discount the resulting
cash flows is equivalent to the market
yield at the balance sheet date on high
quality bonds with a similar duration to the
scheme’s liabilities. This rate is potentially
subject to significant variation and changes
to these rates could have a significant
impact on the net deficit.
Going concern
In determining whether the group’s
accounts can be prepared on a going
concern basis, the directors considered
the group’s business activities together
with factors likely to affect its future
development, performance and its financial
position including cash flows, liquidity
position and borrowing facilities and the
principal risks and uncertainties relating to
its business activities. These are set out
within the Financial Review and discussed
further in the Chairman’s Statement and
Chief Executive’s Review.
The group has considered carefully
its cash flows and banking covenants
for the next twelve months from the
date of signing the audited financial
statements. These have been appraised
in light of the uncertainty in the current
economic climate. As such, conservative
assumptions for working capital
performance have been used to determine
the level of financial resources available
to the company and to assess liquidity
risk. The key trading risk identified by
the directors for these assumptions is
the impact that a further deterioration in
the economic climate might have on the
performance of the group’s debtor book.
The group’s forecasts and projections,
after sensitivity to take account of all
reasonably foreseeable changes in trading
performance, show that the group will
have sufficient headroom within its current
loan facilities of £370m, which are
committed until 2016. After making
appropriate enquiries, the directors have
a reasonable expectation that the
company and the group have adequate
resources to continue in operational
existence for the foreseeable future.
Accordingly, they continue to adopt the
going concern basis in the preparation
of the annual report and accounts.
3 Revenue
An analysis of the group’s revenue is as follows:
Sale of goods
Rendering of services
Revenue
Investment income
Total revenue
2013
£m
2012
£m
557.8
226.9
784.7
3.9
788.6
534.8
218.4
753.2
4.3
757.5
52
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE GROUP ACCOUNTS
4 Business segments
Revenue
Home Shopping
Operating profit
Segment result & operating profit – Home Shopping
Fair value adjustments to financial instruments
Investment income
Finance costs
Profit before taxation
Taxation
Profit after tax
2013
£m
2012
£m
784.7
753.2
102.2
1.3
3.9
(11.0)
96.4
(17.0)
79.4
102.0
1.3
4.3
(10.7)
96.9
(15.9)
81.0
The group has one business segment and one significant geographical segment that operates in and derives revenue from
UK and Ireland. Revenue derived from international markets, which management now analyse as including Ireland, amounted to
£30.2m (2012, £30.7m) and incurred operating losses of £1.9m (2012, £1.5m). All segment assets are located in the UK and Ireland.
The analysis above is in respect of continuing operations.
For the purposes of monitoring segment performance, all assets and liabilities are allocated to the sole business segment,
being Home Shopping, with the exception of current and deferred tax assets and liabilities. There are no impairments of
goodwill, intangible assets or tangible assets in the current period (2012, £nil).
Other information
Capital additions
Depreciation and amortisation
Balance sheet
Total segment assets
Total segment liabilities
Segment net assets
Unallocated assets
Unallocated liabilities
Consolidated net assets
2013
£m
25.0
19.0
833.7
(363.0)
470.7
3.4
(28.1)
446.0
2012
£m
24.9
16.2
792.1
(357.7)
434.4
1.9
(34.0)
402.3
N Brown Group plc Annual Report & Accounts 2013
53
NOTES TO THE GROUP ACCOUNTS
5 Profit for the period
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Sales and administration costs
Operating profit
Profit for the period has been arrived at after (crediting)/charging:
Net foreign exchange gains
Depreciation of property, plant and equipment
Amortisation of intangible assets
Cost of inventories recognised as expense
Staff costs
Auditor’s remuneration for audit services (see below)
2013
£m
784.7
(368.6)
416.1
(66.3)
(247.6)
102.2
2013
£m
(3.6)
7.9
11.1
234.7
80.3
0.3
2012
£m
753.2
(354.2)
399.0
(64.8)
(232.2)
102.0
2012
£m
(2.9)
7.6
8.6
227.5
77.7
0.2
Amounts payable to Deloitte LLP and their associates by the company and its UK subsidiary undertakings in respect of non-audit
services were £0.9m (2012, £0.4m).
A more detailed analysis of auditor’s remuneration is provided below:
Audit fees:
The audit of the company’s subsidiaries pursuant to legislation
Other services:
Tax services
2013
£m
0.3
0.9
2012
£m
0.2
0.4
Fees payable for tax services relate to tax advisory services of £0.7m (2012, £0.3m) and compliance of £0.2m (2012, £0.1m).
Fees payable to the company’s auditor for the audit of the company’s annual accounts were £10,000 (2012, £10,000).
Within the fees for audit of the company's subsidiaries pursuant to legislation there are other assurance fees totalling £30,000 (2012, £25,000)
In addition to the amounts shown above, the auditors received fees of £5,000 (2012, £5,000) for the audit of the group pension scheme.
A description of the work of the audit committee is set out in the corporate governance statement and includes an explanation
of how auditor objectivity and independence is safeguarded when non audit services are provided by the auditor.
6 Staff costs
2013
2012
The average monthly number of employees (including executive directors) was:
Distribution
Sales and administration
Their aggregate remuneration comprised
Wages and salaries
Social security costs
Other pension costs (see note 28)
Share options costs (see note 27)
Details of individual director’s remuneration is disclosed in the remuneration report on page 39.
54
N Brown Group plc Annual Report & Accounts 2013
955
2,299
3,254
2013
£m
66.8
7.2
4.2
2.1
80.3
986
2,283
3,269
2012
£m
64.4
7.3
3.8
2.2
77.7
NOTES TO THE GROUP ACCOUNTS
7
Investment income
Interest on bank deposits
Expected return on pension assets (see note 28)
8 Finance costs
Interest on bank overdrafts and loans
Interest on pension scheme liabilities (see note 28)
9 Tax
Current tax – charge for the period
Current tax – adjustment in respect of previous periods
Deferred tax (see note 20)
Deferred tax – adjustment in respect of previous periods (see note 20)
UK Corporation tax is calculated at 24.17% (2012, 26.17%) of the estimated assessable profit for the period.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
The charge for the period can be reconciled to the profit per the income statement as follows:
Profit before tax:
Tax at the UK corporation tax rate of 24.17% (2012, 26.17%)
Effect of change in deferred tax rate
Tax effect of expenses that are not deductible in determining taxable profit
Effect of different tax rates of subsidiaries operating in other jurisdictions
Tax effect of adjustments in respect of previous periods
Tax expense for the period
2013
£m
0.1
3.8
3.9
2013
£m
7.0
4.0
11.0
2013
£m
23.9
(4.9)
(2.0)
-
17.0
2013
£m
96.4
23.3
(0.7)
0.5
(1.2)
(4.9)
17.0
2012
£m
0.1
4.2
4.3
2012
£m
6.8
3.9
10.7
2012
£m
25.5
(10.5)
(0.9)
1.8
15.9
2012
£m
96.9
25.4
(0.9)
0.5
(0.4)
(8.7)
15.9
In addition to the amount charged to the income statement, tax movements recognised directly through equity were as follows:
Deferred tax – retirement benefit obligations
Tax credit in the statement of comprehensive income
Current tax – share based payments
Deferred tax – share based payments
Tax charge/(credit) in the statement of changes in equity
2013
£m
(1.0)
(1.0)
2013
£m
(1.1)
(0.5)
(1.6)
2012
£m
(1.6)
(1.6)
2012
£m
(1.3)
2.4
1.1
On 21 March 2013 the government announced that it intends to further reduce the rate of corporation tax to 21.0% with effect
from 1 April 2014 and to 20.0% on 1 April 2015. The impact of this post-balance sheet event is not reflected in the tax
balances reported above.
N Brown Group plc Annual Report & Accounts 2013
55
NOTES TO THE GROUP ACCOUNTS
10 Dividends
Amounts recognised as distributions to equity holders in the period:
Final dividend for the 53 weeks ended 3 March 2012 of 7.74p (2011, 7.37p) per share
Interim dividend for the 52 weeks ended 2 March 2013 of 5.45p (2012, 5.29p) per share
Proposed final dividend for the 52 weeks ended 2 March 2013 of 8.23p (2012, 7.74p) per share
2013
£m
21.5
15.3
36.8
22.9
2012
£m
20.3
14.7
35.0
21.5
The proposed final dividend is subject to approval by shareholders at the annual general meeting and has not yet been included
as a liability in these financial statements.
11 Earnings per share
The calculations of the basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purposes of basic and diluted earnings per share being
net profit attributable to equity holders of the parent
Number of shares (’000s)
Weighted average number of ordinary shares for the purposes of basic earnings per share
Effect of dilutive potential ordinary shares:
Share options
2013
£m
2012
£m
79.4
81.0
2013
Number
2012
Number
278,536
276,681
529
367
Weighted average number of ordinary shares for the purposes of diluted earnings per share
279,065
277,048
Adjusted earnings
Net profit attributable to equity holders of the parent
Fair value adjustment to financial instruments (net of tax)
Adjusted earnings for the purposes of adjusted earnings per share
The denominators used are the same as those detailed above for basic and diluted earnings per share.
2013
£m
79.4
(1.0)
78.4
2012
£m
81.0
(1.0)
80.0
56
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE GROUP ACCOUNTS
12
Intangible assets
Cost
At 26 February 2011
Additions
At 3 March 2012
Additions
At 2 March 2013
Amortisation
At 26 February 2011
Charge for the period
At 3 March 2012
Charge for the period
At 2 March 2013
Carrying amount
At 2 March 2013
At 3 March 2012
At 26 February 2011
Brands
£m
Software
£m
Customer
Database
£m
16.8
0.1
16.9
-
16.9
-
-
-
-
-
16.9
16.9
16.8
109.0
19.1
128.1
17.9
146.0
73.6
8.6
82.2
11.1
93.3
52.7
45.9
35.4
1.9
-
1.9
-
1.9
1.9
-
1.9
-
1.9
-
-
-
Total
£m
127.7
19.2
146.9
17.9
164.8
75.5
8.6
84.1
11.1
95.2
69.6
62.8
52.2
Assets in the course of construction included in intangible assets at the year end total £12.4m (2012 £13.8m). No depreciation
is charged on these assets.
All software additions relate to internal development. The brand additions of £0.1m relate to the acquisition of Dannimac
and the Diva brand names.
Amortisation of intangible assets is split equally between cost of sales and administration costs and is disclosed in note 5.
The amortisation periods for intangible assets are:
Software
Customer Database
Years
5
5
The brand names arising from the acquisition of Gray & Osbourn Limited, High and Mighty, Slimma, Figleaves, Diva and Dannimac
are deemed to have indefinite lives as there are no foreseeable limits to the periods over which they are expected to generate cash
inflows and are subject to annual impairment tests.
The carrying value of the brand names have been determined from a value in use calculation. The key assumptions for this
calculation are those regarding the discount rates, growth rates and the forecast cash flows.
The group prepares cash flow forecasts based on the most recent three year financial budgets approved by management and
thereafter extrapolates cash flows in perpetuity (with 2.7% growth assumed) to reflect that there is no foreseeable limit to the
period over which cash flows are expected to be generated. The rate used to discount the forecast post tax cash flows is 5.7%
(2012, 5.7%). The directors consider that the value in use calculation has sufficient headroom above the carrying value of the
brand names. Should there be a materially adverse change in the key assumptions noted above this could result in an impairment.
N Brown Group plc Annual Report & Accounts 2013
57
NOTES TO THE GROUP ACCOUNTS
13 Property, plant and equipment
Cost
At 26 February 2011
Additions
At 3 March 2012
Additions
At 2 March 2013
Accumulated depreciation and impairment
At 26 February 2011
Charge for the period
At 3 March 2012
Charge for the period
At 2 March 2013
Carrying amount
At 2 March 2013
At 3 March 2012
At 26 February 2011
Land and Fixtures and
Buildings Equipment
£m
£m
46.2
-
46.2
-
46.2
8.5
1.0
9.5
0.9
10.4
35.7
36.7
37.7
99.5
5.7
105.2
7.1
112.3
68.1
6.6
74.7
7.0
81.7
30.7
30.5
31.4
Total
£m
145.7
5.7
151.4
7.1
158.5
76.6
7.6
84.2
7.9
92.1
66.4
67.2
69.1
Assets in the course of construction included in property, plant and equipment at the year end date total £2.1m (2012, £1.8m),
no depreciation has been charged on these assets.
At 2 March 2013, the group had not entered into any contractual commitments for the acquisition of property, plant and equipment
(2012, £nil).
14 Subsidiaries
A list of the significant investments in subsidiaries, including the name, country of incorporation, proportion of ownership interest
is given in note 3 to the company’s separate financial statements.
15
Inventories
Finished goods
Sundry stocks
2013
£m
85.2
1.3
86.5
2012
£m
78.7
3.9
82.6
58
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE GROUP ACCOUNTS
16 Trade and other receivables
Amount receivable for the sale of goods and services
Allowance for doubtful debts
Other debtors and prepayments
2013
£m
583.5
(55.7)
527.8
20.9
548.7
2012
£m
551.1
(49.3)
501.8
20.2
522.0
Trade receivables are measured at amortised cost.
The average credit period given to customers for the sale of goods is 246 days (2012, 243 days). Interest is charged at 39.9%
(2012, 39.9%) on the outstanding balance. Generally, receivables over 150 days past due are written off in full. Trade receivables
that reach the trigger point of 56 days past due are provided for based on estimated irrecoverable amounts, determined by
reference to past default experience. The carrying amount of trade receivables whose terms have been renegotiated but would
otherwise be past due totalled £68.8m at 2 March 2013 (2012, £66.5m).
Before accepting any new customer, the group uses an external credit scoring system to assess the potential customer’s
credit quality and defines credit limits by customer. Credit limits and scores attributed to customers are reviewed every
28 days. The credit quality of trade receivables that are neither past due nor impaired, with regard to the historical default
rate has remained stable.
Ageing of trade receivables
Current
0 – 28 days
29 – 56 days
57 – 84 days
85 – 112 days
Over 112 days
Total
Movement in the allowance for doubtful debts
Balance at the beginning of the period
Amounts charged net to the income statement
Net amounts written off
Balance at the end of the period
2013
£m
437.9
74.0
28.7
17.1
14.1
11.7
583.5
2013
£m
49.3
63.2
(56.8)
55.7
2012
£m
418.1
64.5
28.5
16.4
11.8
11.8
551.1
2012
£m
45.1
58.0
(53.8)
49.3
The concentration of credit risk is limited due to the customer base being large and unrelated and comprising 1.5 million
(2012, 1.5 million) customers. Accordingly, the directors believe that there is no further credit provision required in excess
of the allowance for doubtful debts.
The directors consider that the carrying amount of trade and other receivables approximates their fair value.
N Brown Group plc Annual Report & Accounts 2013
59
NOTES TO THE GROUP ACCOUNTS
17 Bank overdraft and loans
Bank loans
The borrowings are repayable as follows:
Within one year
In the second year
In the third to fifth year
Amounts due for settlement after 12 months
All borrowings are held in sterling
The weighted average interest rates paid were as follows:
Bank overdrafts
Bank loans
2013
£m
2012
£m
250.0
250.0
-
-
250.0
250.0
2013
%
2.0
0.7
–
–
250.0
250.0
2012
%
2.0
0.8
The principal features of the group’s borrowings are as follows:
(i) Bank overdrafts which are nil at the current and prior year ends are repayable on demand, unsecured and bear interest
at a margin over bank base rates.
(ii)
The group has a bank loan of £220m (2012, £220m) secured by a charge over certain ‘eligible’ trade debtors (current and
0-28 days past due) of the group and is without recourse to any of the group’s other assets. The facility has a current limit of
£250m for which finance costs are linked to US commercial paper rates which is committed until March 2016.
In addition the group has unsecured bank loans of £30m (2012, £30m) drawn down under a medium term bank revolving credit
facility, which was renegotiated in November 2011, of £100 million committed until March 2016.
(iii)
All borrowings are arranged at floating rates, thus exposing the group to cash flow interest rate risk. The group use derivatives
such as interest rate swaps where appropriate. Based on weighted average interest rates and the value of bank loans at
2 March 2013 the estimated future interest cost per annum until maturity would be £1.8m (2012, £2.1m).
Financial liabilities other than financial instruments include bank loans and overdrafts and trade and other payables. Other than
as disclosed above, all are due within one year. The maturity analysis of the group’s financial liability on an undiscounted basis,
assuming that the facilities are retained until the end of the committed period are as follows:
On demand or within one year
In the second year
In the third to fourth year
In the fifth year
2013
£m
1.8
1.8
251.8
-
255.4
2012
£m
2.1
2.1
2.1
252.1
258.4
At 2 March 2013, the group had available £120m (2012, £120m) of undrawn committed borrowing facilities in respect of which
all conditions precedent had been met.
The Financial Review on page 15 summarises the objectives and policies for holding or issuing financial instruments and
similar contracts, and the strategies for achieving those objectives that have been followed during the period.
There is no material difference between the fair value and book value of the group’s borrowings and other financial assets
and liabilities.
60
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE GROUP ACCOUNTS
18 Derivative financial instruments
At the balance sheet date, details of outstanding forward foreign exchange contracts that the group has committed to are as follows:
Notional amount – Sterling contract value
Fair value of asset/(liability) recognised
2013
£m
22.1
1.2
2012
£m
43.6
(0.1)
Changes in the fair value of assets/liabilities recognised, being non-hedging currency derivatives, amounted to a credit of £1.3m
(2012, credit of £1.3m) to income in the period.
The financial instruments that are measured subsequent to initial recognition at fair value are all grouped into Level 2 (2012, same).
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).
There were no transfers between Level 1 and Level 2 during the year (2012, same).
19 Financial instruments
Capital risk management
The group manages its capital to ensure that entities in the group will be able to continue as going concerns while maximising the
return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the group consists of debt,
which includes the borrowings disclosed in note 17, cash and cash equivalents disclosed in note 24 and equity attributable to
equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 22 to 23 and the
statement of changes in equity.
Gearing ratio
The gearing ratio at the year end is as follows:
Debt
Cash and cash equivalents
Net Debt
Equity
Gearing ratio
2013
£m
250.0
(61.3)
188.7
446.0
42%
2012
£m
250.0
(57.5)
192.5
402.3
48%
Debt is defined as long and short-term borrowings, as detailed in note 17.
Equity includes all capital and reserves of the group attributable to equity holders of the parent.
Externally imposed capital requirement
The group is not subject to externally imposed capital requirements.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and
equity instrument are disclosed in note 2.
Financial risk management objectives
The financial risks facing the group include currency risk, credit risk, liquidity risk and cash flow interest rate risk. The group seeks
to minimise the effects of certain of these risks by using derivative financial instruments to hedge these risk exposures as governed
by the group’s policies. The group does not enter into or trade financial instruments, including derivative financial instruments, for
speculative purposes.
Foreign currency risk management
The group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations
arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
It is the policy of the group to enter into forward foreign exchange contracts to cover specific foreign currency payments for the
purchase of overseas sourced products. Group policy allows for these exposures to be hedged for up to three years ahead.
N Brown Group plc Annual Report & Accounts 2013
61
NOTES TO THE GROUP ACCOUNTS
19 Financial instruments continued
At the balance sheet date, details of the notional value of outstanding US dollar forward foreign exchange contracts that the group
has committed to are as follows:
Less than 6 months
6 to 12 months
12 to 18 months
2013
£m
16.5
5.6
-
22.1
2012
£m
20.7
17.9
5.0
43.6
Forward contracts outstanding at the period end are contracted at US dollar exchange rates ranging between 1.56 and 1.60.
The carrying amounts of the group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date
are as follows:
£m
Euro
US dollar
Liabilities
Assets
2013
£m
2.0
1.9
2012
£m
2.0
4.6
2013
£m
10.1
2.0
2012
11.0
4.7
Foreign currency sensitivity analysis
The following table details the group’s hypothetical sensitivity to a 10% increase and decrease in sterling against the relevant
foreign currencies. The sensitivity rate of 10% represents the director’s assessment of a reasonably possible change. The sensitivity
analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for
a 10% change in foreign currency rates. A positive number below indicates an increase in profit before tax.
Euro
Currency
Impact
2013
£m
0.9
(0.7)
2012
£m
1.0
(0.8)
US Dollar
Currency
Impact
2013
£m
2012
£m
-
-
–
–
2013
£m
2012
£m
61.3
1.2
527.8
590.3
57.5
-
501.8
559.3
-
(250.0)
(250.0)
(0.1)
(250.0)
(250.1)
Income statement
Sterling strengthens by 10%
Sterling weakens by 10%
Categories of financial instruments
Financial assets
Cash and bank balances
Derivatives at fair value through profit and loss - held for trading
Loans and receivables
Financial liabilities
Derivatives at fair value through profit and loss - held for trading
Amortised cost
62
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE GROUP ACCOUNTS
19 Financial instruments continued
Interest rate risk management
The group is exposed to interest rate risk, as entities in the group borrow funds at floating interest rates. Where appropriate,
exposure to interest rate fluctuations on indebtedness is managed by using derivatives such as interest rate swaps.
Interest rate sensitivity analysis
If interest rates had increased by 0.5% and all other variables were held constant, the group’s profit before tax for the 52 weeks
ended 2 March 2013 would have decreased by £1.25m (2012, £1.25m).
This sensitivity analysis has been determined based on exposure to interest rates at the balance sheet date and assuming the net
debt outstanding at the year end date was outstanding for the whole year.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the group.
Investments of cash surpluses, borrowings and derivative financial instruments are made through banks which are approved by
the board.
All customers who wish to trade on credit terms are subject to credit verification procedures, supplied by independent rating
agencies. Customer debtor balances are monitored on an ongoing basis and provision is made for estimated irrecoverable
amounts. The concentration of credit risk is limited due to the customer base being large and unrelated, and did not exceed five
percent of gross monetary assets at any one time during the period.
Liquidity risk management
The group manages liquidity risk by maintaining adequate banking and borrowing facilities and by continuously monitoring
forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in note 17 is a
description of additional undrawn facilities that the group has at its disposal and details of the group’s remaining contractual
maturity for its non-derivative financial liabilities.
Fair value of financial instruments
Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted
interest rates matching maturities of the contracts.
The carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate
their fair values.
N Brown Group plc Annual Report & Accounts 2013
63
NOTES TO THE GROUP ACCOUNTS
20 Deferred tax
The following are the major deferred tax liabilities and assets recognised by the group and movements thereon during the current
and prior reporting periods.
Share Accelerated Retirement
benefit
based
payments depreciation obligations
£m
tax
£m
£m
At 26 February 2011
Credit/(charge) to income
(Charge)/credit to equity
At 3 March 2012
Credit/(charge) to income
Credit to equity
At 2 March 2013
3.3
0.6
(2.4)
1.5
0.4
0.5
2.4
(7.5)
(1.0)
-
(8.5)
1.4
-
(7.1)
(0.9)
(0.5)
1.6
0.2
(0.4)
1.0
0.8
Other
£m
Total
£m
(2.4)
-
-
(2.4)
0.6
-
(1.8)
(7.5)
(0.9)
(0.8)
(9.2)
2.0
1.5
(5.7)
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset)
for financial reporting purposes:
Deferred tax assets
Deferred tax liabilities
2013
£m
3.4
(9.1)
(5.7)
At the balance sheet date, the group has unused tax losses of £0.1m (2012, £0.1m) and capital losses of £4.4m (2012, £4.4m)
available for offset against future profits. No deferred tax asset has been recognised due to the unpredictability of future profit
streams within the relevant subsidiary.
21 Trade and other payables
Trade payables
Other taxes and social security
Other creditors
Accruals and deferred income
2013
£m
63.5
17.4
0.6
28.2
2012
£m
1.9
(11.1)
(9.2)
2012
£m
61.5
14.7
0.4
30.0
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit
period taken for trade purchases is 38 days (2012, 40 days).
For most suppliers no interest is charged on the trade payables. The group has financial risk management policies in place to
ensure that all payables are paid within agreed credit terms.
109.7
106.6
64
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE GROUP ACCOUNTS
22 Share capital
Authorised
Ordinary shares of 111/19p each
Allotted, called-up and fully paid
Ordinary shares of 111/19p each
At 3 March 2012
Ordinary shares issued
At 2 March 2013
2013
Number
2012
Number
2013
£m
2012
£m
352,857,142
352,857,142
39.0
39.0
283,429,454 280,429,454
3,000,000
-
283,429,454 283,429,454
31.3
-
31.3
31.0
0.3
31.3
Last year 3,000,000 ordinary shares were issued to the N Brown Group plc Employee Share Ownership Trust for £331,736.
The company has one class of ordinary shares which carry no right to fixed income.
23 Own shares
Balance at 3 March 2012
Additions
Issue of own shares on exercise of share options
Balance at 2 March 2013
2013
£m
1.5
0.5
(1.1)
0.9
2012
£m
1.2
1.3
(1.0)
1.5
The own shares reserve represents the cost of shares in N Brown Group plc held by the N Brown Group plc Employee Share
Ownership Trust to satisfy options under the group’s various share benefit schemes (see note 27).
At 2 March 2013 the employee trusts held 4,324,171 shares in the company (2012, 5,911,974).
N Brown Group plc Annual Report & Accounts 2013
65
NOTES TO THE GROUP ACCOUNTS
24 Cash and cash equivalents
Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at
bank and other short-term highly liquid investments with a maturity of three months or less.
A breakdown of significant cash and cash equivalent balances by currency is as follows:
Sterling
Euro
US Dollar
25 Contingent liabilities
2013
£m
58.3
1.7
1.3
61.3
2012
£m
50.2
2.7
4.6
57.5
Parent company borrowings which at 2 March 2013 amounted to £41.0m (2012, £21.5m) have been guaranteed by certain
subsidiary undertakings.
26 Operating lease arrangements
Minimum lease payments under operating leases recognised as an expense for the period
2013
£m
6.2
2012
£m
5.2
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:
Within one year
In the second to fifth years inclusive
After five years
2013
£m
0.8
17.3
6.2
24.3
2012
£m
0.9
20.5
7.5
28.9
Operating lease payments represent rentals payable by the group for certain buildings, plant and equipment and motor vehicles.
66
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE GROUP ACCOUNTS
27 Equity settled share based payments
The remuneration report on pages 33 to 42 contains details of management and sharesave options/awards offered to employees
of the group.
Details of the share options/awards outstanding during the year are as follows:
Option scheme
2000 Savings related scheme
2000 Executive scheme
Unapproved executive scheme
Option price
in pence
186 – 269
106 – 341
211 – 341
Long-term incentive scheme awards
May 2009
July 2010
July 2011
June 2012
Deferred annual bonus scheme awards
May 2010
June 2011
May 2012
–
–
–
–
–
–
–
Exercise
period
Number
of shares
2013
Number
of shares
2012
August 2012 – February 2018
June 2007 – May 2022
May 2009 – June 2022
1,651,533
1,885,983
1,289,129
1,639,816
1,797,485
1,104,730
May 2012 – November 2012
July 2013 – January 2014
July 2014 – January 2015
June 2015 – December 2015
-
1,022,829
1,037,011
1,431,687
1,166,576
1,180,129
1,158,928
-
May 2012 – November 2012
June 2013 – December 2013
May 2014 – November 2014
-
199,344
117,014
299,365
233,926
-
N Brown Group plc Annual Report & Accounts 2013
67
NOTES TO THE GROUP ACCOUNTS
27 Equity settled share based payments continued
Movements in share options are summarised as follows:
Number of
share options
2013
Weighted
average exercise
price
£
Number of
share options
2012
Weighted
average exercise
price
£
Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Exercised during the period
Outstanding at the end of the period
Exercisable at the end of the period
4,542,031
1,516,431
(353,785)
(878,032)
4,826,645
493,390
2.39
2.07
2.31
2.33
2.31
2.33
4,315,613
1,544,936
(521,491)
(797,027)
4,542,031
611,602
2.24
2.65
2.00
2.33
2.39
2.34
Options were exercised on a regular basis throughout the period and the weighted average share price during this period was
295 pence (2012, 264 pence). The options outstanding at 2 March 2013 had a weighted average remaining contractual life
of 6.1 years (2012, 6.0 years). The aggregate estimated fair values of options granted in the period is £881,000 (2012, £1,041,000).
Movements in management share awards are summarised as follows:
Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Exercised during the period
Outstanding at the end of the period
Exercisable at the end of the period
Number of
share awards
4,038,924
1,554,871
(433,784)
(1,352,126)
3,807,885
-
2013
Weighted
average exercise
price
£
Number of
share awards
2012
Weighted
average exercise
price
£
-
-
-
-
-
-
7,788,004
1,493,670
(3,427,987)
(1,814,763)
4,038,924
–
–
–
–
–
–
–
The awards outstanding at 2 March 2013 had a weighted average remaining contractual life of 1.9 years (2012, 1.7 years).
The fair value of management and sharesave options/awards granted is calculated at the date of grant using a Black-Scholes
option pricing model. The inputs into the Black-Scholes model are as follows:
Weighted average share price at date of grant (pence)
Weighted average exercise price (pence)
Expected volatility (%)
Expected life (years)
Risk-free rate (%)
Dividend yield (%)
2013
2012
239
102
32.6 - 39.4
2.5 - 5.5
0.4
5.4
278
135
37.9 - 41.0
2.5 – 5.5
1.5
4.4
Expected volatility was determined by calculating the historical volatility of the group’s share price over a period equivalent to the
expected life of the option. The expected life used in the model has been adjusted, based on management’s best estimate, for the
effects of non-transferability, exercise restrictions, and behavioural considerations.
The group recognised total expenses of £2.1m and £2.2m related to equity-settled share based payment transactions in 2013 and
2012 respectively.
68
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE GROUP ACCOUNTS
28 Retirement benefit schemes
Defined contribution schemes
The group operates defined contribution retirement benefit schemes for all qualifying employees.
The group is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits.
The only obligation of the group with respect to the retirement benefit scheme is to make the specified contributions.
The total cost charged to income of £2.1m (2012, £2.0m) represents contributions payable to the schemes by the group at rates
specified in the rules of the plans. As at 2 March 2013, contributions of £0.2m (2012, £0.2m) due in respect of the current reporting
period had not been paid over to the schemes.
Defined benefit scheme
The group operates a defined benefit scheme, the N Brown Group Pension Fund. Under the scheme, the employees are entitled
to retirement benefits based on final pensionable earnings and was closed to new members from 31 January 2002. No other
post-retirement benefits are provided. The scheme is a funded scheme.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 30
June 2009 by an independent qualified actuary. The present value of the defined benefit obligation, the related current service
cost and past service cost were measured using the projected unit credit method. The principal actuarial assumptions used in
determining the group’s net retirement benefit obligations at the balance sheet date were as follows:
Discount rate
Expected return on scheme assets
Expected rate of salary increase
Future pension increases
Inflation – Retail Price Index
Inflation – Consumer Price Index
Life expectancy at age 65 (years)
Pensioner aged 65
Non-pensioner aged 45
Amounts recognised in income in respect of these defined benefit schemes are as follows:
Current service cost
Interest cost
Expected return on scheme assets
2013
4.55%
4.5%
4.5%
2.15%
3.5%
2.5%
23.8
26.8
2013
£m
2.1
4.0
(3.8)
2.3
2012
4.8%
4.6%
4.4%
2.4%
3.4%
2.4%
23.8
26.8
2012
£m
1.8
3.9
(4.2)
1.5
Actuarial gains and losses have been reported in the statement of comprehensive income. The cumulative actuarial losses since
transition to IFRS were £4.1m (2012, actuarial losses of £0.1m).
The actual return on scheme assets was a gain of £6.3m (2012, gain of £8.4m).
The scheme is a closed scheme and therefore, under the projected unit method, the current service cost would be expected
to increase.
N Brown Group plc Annual Report & Accounts 2013
69
NOTES TO THE GROUP ACCOUNTS
28 Retirement benefit schemes continued
The amount included in the balance sheet arising from the group’s obligations in respect of its defined benefit retirement benefit
scheme is as follows:
Present value of defined benefit obligations
Fair value of scheme assets
Deficit in the scheme and liability recognised in the balance sheet
Movements in the present value of defined benefit obligations were as follows:
At 3 March 2012
Service cost
Interest cost
Actuarial losses
Benefits paid
At 2 March 2013
Movements in the fair value of the scheme assets were as follows:
At 3 March 2012
Expected return on scheme assets
Actuarial gains
Contributions from sponsoring companies
Benefits paid
At 2 March 2013
2013
£m
(94.3)
91.0
(3.3)
2013
£m
83.3
2.1
4.0
6.5
(1.6)
94.3
2013
£m
82.3
3.8
2.5
4.0
(1.6)
91.0
2012
£m
(83.3)
82.3
(1.0)
2012
£m
68.5
1.8
3.9
10.4
(1.3)
83.3
2012
£m
71.8
4.2
4.2
3.4
(1.3)
82.3
70
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE GROUP ACCOUNTS
28 Retirement benefit schemes continued
The analysis of the scheme assets and the expected rate of return at the balance sheet date was as follows:
Equities
Bonds
Cash
Property
Expected
Return
Fair value
of assets
2013
%
6.8
2.5
-
6.8
4.5
2012
%
6.8
2.6
0.5
-
4.6
2013
£m
41.7
47.5
-
1.8
91.0
2012
£m
39.5
41.2
1.6
-
82.3
Expected rates of return on the scheme assets are based on consistent assumptions with the previous period, adjusted to reflect
changes in market conditions since that date.
The history of experience adjustments is as follows:
Present value of defined benefit obligations
Fair value of scheme assets
(Deficit)/surplus in the scheme
Experience adjustments on scheme liabilities
Amount (£m)
Percentage of scheme liabilities (%)
Difference between expected and actual return
on scheme assets:
Amount (£m)
Percentage of scheme assets (%)
2013
£m
(94.3)
91.0
(3.3)
–
0%
2.5
3%
2012
£m
(83.3)
82.3
(1.0)
–
0%
4.2
5%
2011
£m
(68.5)
71.8
3.3
–
0%
3.4
5%
2010
£m
(66.0)
64.2
(1.8)
2.2
3%
10.6
16%
2009
£m
(50.8)
46.8
(4.0)
–
0%
(11.7)
(25%)
The group currently contributes 10% of scheme salaries per annum to the defined benefit scheme in respect of the future accrual
of benefits (plus "SMART" contributions in respect of members' contributions under salary sacrifice arrangements), and is expected
to contribute £2.5m to the defined benefit scheme by 31 March 2013, as agreed following the 2009 valuation. Contributions for the
next financial year will be determined once the 30 June 2012 valuation is finalised.
29 Related party transactions
Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are
not disclosed in this note. Transactions between the company and its subsidiaries are disclosed in the company’s separate financial
statements. Details of remuneration paid to the group’s key management personnel are given on page 39 of the remuneration report.
N Brown Group plc Annual Report & Accounts 2013
71
INDEPENDENT AUDITOR’S REPORT – COMPANy ACCOUNTS
• the parent company financial
statements and the part of the Directors’
Remuneration Report to be audited are
not in agreement with the accounting
records and returns; or
• certain disclosures of directors’
remuneration specified by law are not
made; or
• we have not received all the information
and explanations we require for our
audit.
Other matters
We have reported separately on the group
financial statements of N Brown Group plc
for the 52 weeks ended 2 March 2013.
Damian Sanders ACA
(Senior Statutory Auditor) for and
on behalf of Deloitte LLP
Chartered Accountants and
Statutory Auditor
Manchester, UK
17 May 2013
Independent Auditor’s Report to the
members of N Brown Group plc.
We have audited the parent company
financial statements of N Brown Group
plc for the 52 weeks ended 2 March 2013
which comprise the Parent Company
Balance Sheet and the related notes 1
to 10. The financial reporting framework
that has been applied in their preparation
is applicable law and United Kingdom
Accounting Standards (United Kingdom
Generally Accepted Accounting Practice).
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.
Respective responsibilities of
directors and auditor
As explained more fully in the Directors’
Responsibilities Statement, the directors
are responsible for the preparation of the
parent company financial statements and
for being satisfied that they give a true and
fair view. Our responsibility is to audit and
express an opinion on the parent company
financial statements in accordance with
applicable law and International
Standards on Auditing (UK and Ireland).
Those standards require us to comply
with the Auditing Practices Board’s
Ethical Standards for Auditors.
Scope of the audit of the
financial statements
An audit involves obtaining evidence
about the amounts and disclosures
in the financial statements sufficient
to give reasonable assurance that the
financial statements are free from material
misstatement, whether caused by fraud
or error. This includes an assessment
of: whether the accounting policies are
appropriate to the parent company’s
circumstances and have been consistently
applied and adequately disclosed; the
reasonableness of significant accounting
estimates made by the directors; and
the overall presentation of the financial
statements. In addition, we read all the
financial and non-financial information
in the annual report to identify material
inconsistencies with the audited financial
statements. If we become aware of
any apparent material misstatements
or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion the parent company
financial statements:
• give a true and fair view of the state of
the company’s affairs as at 2 March
2013 and of its profit for the 52 weeks
then ended;
• have been properly prepared in
accordance with United Kingdom
Generally Accepted Accounting
Practice; and
• have been prepared in accordance
with the requirements of the Companies
Act 2006.
Opinion on other matters prescribed
by the Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration
Report to be audited has been properly
prepared in accordance with the
Companies Act 2006; and
• the information given in the Directors’
Report for the financial year for which
the financial statements are prepared
is consistent with the parent company
financial statements.
Matters on which we are required to
report by exception
We have nothing to report in respect of the
following matters where the Companies
Act 2006 requires us to report to you if, in
our opinion:
• 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
72
N Brown Group plc Annual Report & Accounts 2013
COMPANy BAlANCE SHEET
As at 2 March 2013
Fixed assets
Investments
Current assets
Debtors
Creditors
Amounts falling due within one year
Net current liabilities
Total assets less current liabilities
Non current liabilities
Bank loans
Net assets
Capital and reserves
Called-up share capital
Share premium account
Profit and loss account
Equity shareholders’ funds
Note
3
4
5
6
7
8
8
2013
£m
344.9
344.9
21.6
21.6
(226.1)
(204.5)
140.4
(30.0)
110.4
31.3
11.0
68.1
110.4
2012
£m
267.9
267.9
100.1
100.1
(233.5)
(133.4)
134.5
(30.0)
104.5
31.3
11.0
62.2
104.5
The financial statements of N Brown Group plc (Registered Number 814103) were approved by the board of directors and authorised for
issue on 17 May 2013.
They were signed on its behalf by:
Alan White
Dean Moore
Directors
N Brown Group plc Annual Report & Accounts 2013
73
NOTES TO THE COMPANy ACCOUNTS
1 Significant accounting policies
Basis of accounting
The separate financial statements of the company are presented as required by the Companies Act 2006. They have been prepared
under the historical cost convention and in accordance with United Kingdom Accounting Standards and law.
The principal accounting policies are summarised below. They have all been applied consistently throughout the period and the
preceding period.
Investments
Fixed asset investments in subsidiaries are shown at cost less provision for impairment.
Bank borrowings
Interest bearing bank loans and overdrafts are recorded at the proceeds received. Finance charges are accounted for on an
accruals basis in the profit and loss account using the effective interest rate method.
Cash flow
The company has taken advantage of the exemption from producing a cash flow statement afforded by FRS 1 (Revised) because
the group accounts include a consolidated cash flow statement.
Taxation
Corporation tax payable is provided on taxable profits at the current rate.
2 Profit for the period
As permitted by section 408 of the Companies Act 2006 the company has elected not to present its own profit and loss account for
the period. N Brown Group plc reported a profit for the financial period ended 2 March 2013 of £42.7m (2012, profit £38.3m).
The non executive directors’ remuneration was £345,750 (2012, £206,000) and seven non executive directors were remunerated
(2012, six). The executive directors were remunerated by a subsidiary company in both years. Further details are provided on page
39 of the remuneration report.
The auditor’s remuneration for audit services to the company of £10,000 (2012, £10,000) was borne by subsidiary undertakings.
3 Fixed asset investment
Cost and net book value
At 3 March 2012
Additions
At 2 March 2013
£m
267.9
77.0
344.9
Additions in the year relate to a further capital injection in N B Finance via its holding company Nochester Holdings.
The company and group has investments in the following subsidiaries and joint ventures which principally affected the profits or net
assets of the group. All of the below companies are held indirectly. To avoid a statement of excessive length, details of investments
which are not significant have been omitted.
Company
Principal activity
J D Williams & Co. Limited
Oxendale & Co. Limited
J D W Finance Limited
N B Insurance Guernsey Limited
Gray & Osbourn Limited
Speciality Home Shopping (US) Limited
N B Finance
N B Malta No2 Limited
Direct home shopping retailer
Direct home shopping retailer
Financing and ancillary services
Insurance services
Direct home shopping retailer
Direct home shopping retailer
Financing and ancillary services
Financing and ancillary services
Country of Proportion
incorporation held by the
group (%)
and operation
England
Republic of Ireland
England
Guernsey
England
England
Republic of Ireland
Malta
100
100
100
100
100
100
100
100
74
N Brown Group plc Annual Report & Accounts 2013
NOTES TO THE COMPANy ACCOUNTS
4 Debtors
Amounts falling due within one year:
Amounts owed by group undertakings
Prepayments and accrued income
5 Creditors
Amounts falling due within one year:
Bank loans and overdrafts
Trade creditors
Amounts owed to group undertakings
Accruals and deferred income
6 Bank loans
Bank overdrafts
Bank loans
The borrowings are repayable as follows:
On demand within one year
In the second year
In the third to fifth year
Less: amounts due for settlement within 12 months (shown under current liabilities)
Amounts due for settlement after 12 months
2013
£m
21.1
0.5
21.6
2013
£m
41.0
0.3
184.5
0.3
226.1
2013
£m
41.0
30.0
71.0
41.0
-
30.0
71.0
(41.0)
30.0
2012
£m
99.6
0.5
100.1
2012
£m
21.5
0.4
211.3
0.3
233.5
2012
£m
21.5
30.0
51.5
21.5
–
30.0
51.5
(21.5)
30.0
The company has unsecured bank loans of £30m (2012, £30m) drawn down under a medium term bank revolving credit facility
committed until March 2016.
At 2 March 2013, the company had available £90m (2012, £90m) of undrawn committed borrowing facilities in respect of
which all conditions precedent had been met.
The weighted average interest rate paid were as follows:
Bank overdrafts
Bank loans
2013
%
2.0
1.8
2012
%
2.0
1.4
N Brown Group plc Annual Report & Accounts 2013
75
NOTES TO THE COMPANy ACCOUNTS
7 Share capital
Authorised
Ordinary shares of 111/19p each
Allotted, called-up and fully paid
Ordinary shares of 111/19p each
At 3 March 2012
Ordinary shares issued
At 2 March 2013
2013
Number
2012
Number
2013
£m
2012
£m
352,857,142
352,857,142
39.0
39.0
283,429,454 280,429,454
3,000,000
-
283,429,454 283,429,454
31.3
-
31.3
31.0
0.3
31.3
Last year 3,000,000 ordinary shares were issued to the N Brown Group Employee Share Ownership Trust for £331,736. Movements
in share capital during the year relate to the exercise of share options. The company has one class of ordinary share which carry no
right to fixed income.
8 Reconciliation of movements in shareholders’ funds and reserves
Balance at 26 February 2011
Dividends paid
Profit for the financial period
Increase in share capital
Balance at 2 March 2012
Dividends paid
Profit for the financial period
At 2 March 2013
9 Guarantees
Share
capital
£m
Share
premium
account
£m
Profit
and loss
account
£m
31.0
-
-
0.3
31.3
-
-
11.0
-
-
-
11.0
-
-
31.3
11.0
59.3
(35.4)
38.3
-
62.2
(36.8)
42.7
68.1
Total
£m
101.3
(35.4)
38.3
0.3
104.5
(36.8)
42.7
110.4
Parent company borrowings which at 2 March 2013 amounted to £41.0m (2012, £21.5m) have been guaranteed by certain subsidiary
undertakings.
10 Related party transactions
The company has taken advantage of the exemption under FRS8 not to disclose transactions and balances with other
group companies.
76
N Brown Group plc Annual Report & Accounts 2013
Shareholder Information
Financial Timetable
2012
2013
16 October
7 December
4 January
2 March
24 April
30 May
28 June
2 July
26 July
Announcement of interim results
Closing of register for interim dividend
Payment of interim dividend
Financial year-end
Preliminary announcement of annual results
Publication of 2013 annual report and accounts
Closing of register for final dividend
Annual general meeting
Payment of final dividend
Registered Office
Griffin House
40 Lever Street
Manchester
M60 6ES
Registered No. 814103
Telephone 0161 236 8256
Registrars
Capital IRG plc
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone 0871 664 0300
(Calls cost 10 pence per minute plus network extras)
Auditors
Deloitte LLP
P O Box 500
2 Hardman Street
Manchester
M60 2AT
Bankers
HSBC Bank plc
The Royal Bank of Scotland plc
Solicitors
Pinsent Masons LLP
Eversheds LLP
Addleshaw Goddard LLP
Corporate Brokers
Credit Suisse Securities (Europe) Ltd
Jefferies Hoare Govett
Shareholder benefits
Subject to certain conditions, shareholders are entitled to a 20% privilege discount off the selling price of consumer merchandise in
any of the group catalogues. Shareholders interested in these facilities should write for further information to the Company Secretary,
N Brown Group plc, Griffin House, 40 Lever Street, Manchester, M60 6ES stating the number of shares held and the catalogue or
product of interest.
Capital gains tax
For the purpose of capital gains tax, the value of the company’s ordinary shares of 10p each was 6.40625p per share on 31 March 1982
and 1.328125p on 6 April 1965.
For more information and latest news on the group, visit www.nbrown.co.uk.
2013
24%
more sales from
new customers
3.0m
people shopping with us
£6m
extra invested in tomorrow
3
GROWING CUSTOMER GROUPS
N Brown Group plc Annual Report & Accounts 2013
Griffin House
40 Lever Street
Manchester, M60 6ES
www.nbrown.co.uk
N Brown Group plc
Annual Report & Accounts 2013
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