N Brown Group plc Annual Report 2017

FY2017 Annual Report · N Brown Group plc

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The power of

N Brown Group plc
Annual Report & Accounts 2017

An expert in fashion that fits and
flatters, N Brown is one of the UK’s
leading online retailers. Our key retail
brands are JD Williams, Simply Be
and Jacamo.

We are all about democratising fashion and are size inclusive,
focusing on the needs of underserved customer groups – size
20+ and age 50+. We offer an extensive range of products,
predominantly clothing, footwear and homewares, and our
Financial Services proposition allows customers to spread the
cost of shopping with us.

We are headquartered in Manchester where we design,
source and create our product offer and we employ over
2,700 people across the UK.

HIGHLIGHTS

REVENUE – CONTINUING OPERATIONS (£M)

52 week figure 20171

Statutory 53 week figure 2017

887.7 900.7

(2016: £866.2m)

ADJUSTED2 PRE-TAX PROFIT
– CONTINUING OPERATIONS (£M)

52 week figure 20171

Statutory 53 week figure 2017

80.6 82.6

(2016: £88.3m)

STATUTORY PROFIT BEFORE TAX (£M)

52 week figure 20171

Statutory 53 week figure 2017

55.6 57.6

(2016: £72.2m)

ADJUSTED2 EARNINGS PER SHARE
– CONTINUING OPERATIONS (P)

52 week figure 20171

Statutory 53 week figure 2017

22.18 22.74

(2016: 24.02P)

DIVIDENDS PER SHARE (P)

NET ASSETS (£M)

Statutory 53 week figure
2017

14.23

(2016: 14.23P)

478.2

(2016: £476.0m)

1 As previously guided, this year we are reporting on the 53 weeks to 4 March
2017, with an extra week added to ensure that the year-end date stays close
to the end of February. In order to provide a meaningful comparison with last
year’s 52 week period, all P&L financial movements are reported on a 52 week
basis, excluding the 53rd week, unless otherwise stated. Where applicable,
the 53rd week’s known result has been used as the basis for the adjustment to
provide the 52 week results, although a degree of judgement has been applied
in deriving certain operating costs in respect of the final week. A detailed
comparison of the 53 weeks and 52 weeks results are set out on page 44. All
second half P&L financial movements relate to the 26 week period, excluding
the 27th week, unless otherwise stated. All balance sheet figures are reported
as at the year-end date and cash flow figures are for the 53 week period.

2 Defined as excluding exceptionals and unrealised FX movement and therefore

represents the underlying trading performance.

STRATEGIC REPORT

IFC Highlights
2 Our Trading Agility:

Insight
Presence
Flexibility

10 At a Glance
12 Chairman’s Statement
14 Market Review
16 Business Model
18 Chief Executive’s Review
20 Our Strategy

22 Strategy in Action
26 Key Performance Indicators
30 Risk Management
32 Principal Risks and
Uncertainties

36 Performance Review
42 Chief Financial
Officer’s Review

46 Corporate Social
Responsibility

GOVERNANCE

56 Governance Overview
58 Board of Directors
60 Directors’ Report
64 Corporate Governance

Statement

67 Audit Committee Report
70 Nomination and Governance

Committee Report
71 CSR Committee Report
72 Directors’ Remuneration

Report

FINANCIAL STATEMENTS

86 Independent Auditor’s

Report

90 Consolidated Income

93 Consolidated Statement
of Changes in Equity
94 Notes to the Group

Statement

Accounts

90 Consolidated Statement
of Comprehensive Income
91 Consolidated Balance Sheet
92 Consolidated Cash Flow

Statement

92 Reconciliation of Operating
Profit to Net Cash from
Operating Activities

120 Company Balance Sheet
121 Company Statement

of Changes in Equity

122 Notes to the

Company Accounts
127 Shareholder Information

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Our
new-found
trading

is key to thriving in
the see now, buy
now, wear now,
fashion culture.
Read pages 2– 9

N Brown Group plc Annual Report & Accounts 2017Strategic reportOUR TRADING AGILITY

Deeper...

We have made huge changes
to our business over the past
few years, bringing in new
talent and developing our
skills and capabilities. We have
also significantly changed
our processes, particularly in
buying, merchandising and
marketing. Looking forward,
we are on track to complete
the final stages of our systems
programme by Summer 2018,
which will enable even
faster growth.

Our trading agility, made
possible by the transformative
changes we have made, is
yielding results and is key to
thriving in a world changing
faster than ever before.

Angela Spindler
Chief Executive Officer

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N Brown Group plc Annual Report & Accounts 2017Greater...

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N Brown Group plc Annual Report & Accounts 2017Strategic reportOUR TRADING AGILITY
CONTINUED

Growing customer
lifetime value through
deeper insight
and cutting-edge
data analytics.

Deeper

N Brown Group plc Annual Report & Accounts 2017Using data to deliver
the right products at
the right price.

JD Williams ‘The Cut’ collection
– a great success
In Autumn Winter we introduced
‘The Cut’, a collection of our best
value, current season clothes, to further
reinforce our value for money credentials.
Sales of these lines significantly
exceeded expectations, up 72% versus
comparable lines in the previous year.

We extended the collection further for
Spring Summer, and adopted a similarly
assertive entry price strategy across our
other brands.

More detail p23

Merchandising tools now live
A key release from our systems
programme are our new merchandising
tools which went live in October, ahead
of schedule. These new tools give us the
ability to forecast at the individual item
level, improving our availability and
reducing markdown.

Our best ever cyber fortnight
Building on a successful cyber fortnight
last year, this year saw us beat records
again, with our biggest fortnight ever in
both revenue and profit. We planned
months in advance to ensure that we
could offer customers fantastic deals
whilst earning an improved margin
ourselves.

More detail p25

The results

The transformational changes we have made
in the past few years are driving results; this is most
apparent in the performance of our Power Brands.

– Simply Be revenue up 9.9%
– JD Williams brand revenue up 12%

All revenue figures on this page are on a 52 week basis as explained
on page 44.

9.9%

Power Brand active customer
file (excluding Fifty Plus)

6.3%

Power Brand revenue

N Brown Group plc Annual Report & Accounts 2017Strategic reportOUR TRADING AGILITY
CONTINUED

Reaching more
people through
multiple channels,
brand partnerships
and innovative
marketing activity.

Greater

N Brown Group plc Annual Report & Accounts 2017Gaining new
customers and
strengthening brand
engagement with
existing customers.

Expanding our product ranges
We have significantly grown the number
of third party brands we stock on our
websites, typically stocking their ranges
exclusively in larger sizes. This allows
brands access to a new, growing
customer base at relatively low risk, and
gives our customers an even greater
choice of products. Since the start of
the year we have added over 100 third
party brands across our categories.

Selling our ranges through
other retailers
We are also partnering with other
retailers, selling capsule collections of
our ranges through their sites or stores.
This allows us to further improve
our brand awareness and gain new
customers. To date we’re selling
ranges through ASOS and Tesco,
with more retailers in the pipeline.

Championing body diversity
in the fashion industry
We are a truly size and age agnostic
fashion retailer; whatever a customer’s
size or age, we aim to make them
feel amazing in what they wear.
This attitude differs significantly to
the fashion industry as a whole. We’ve
held a number of protests and other
events to call for greater body and
age diversity in the industry.

More detail p38

The results

We continue to gain market share and grow online sales.

4.2%

Ladieswear market share

Please see pages 26 to 29 for KPI definitions.

69%

Online penetration

N Brown Group plc Annual Report & Accounts 2017Strategic reportOUR TRADING AGILITY
CONTINUED

The ability to change
our product offering
and marketing materials
quickly, to enable us
to better compete
in an ever-changing
market place.

N Brown Group plc Annual Report & Accounts 2017Trading agility
delivering results.

Lead times
We reduced average lead times by over
20% year on year. Our fastest lead time
for repeat purchases is now seven days,
compared to seven weeks just two
years ago.

More detail p22

More flexible ways to pay
Ahead of our new Financial Services
system going live, which will enable us
to offer variable APR dependent on
each individual customer’s risk profile,
we trialled a lower APR for qualifying
new customers. The initial results of
this trial are encouraging.

More detail p41

Further delivery improvements
We extended our cut-off for next day
delivery by an hour to 10pm. We also
launched Jacamo Unlimited, offering
customers 12 months unlimited next
day delivery for a one-off £9.95. Initial
response to this delivery subscription
offer has been encouraging, and we
aim to expand it to other brands in
due course.

Marketing flexibility
We are working hard to ensure our
marketing spend is as flexible and
efficient as possible, so that we can
maximise revenue wherever possible.
We can now change email campaign
content and adjust our online spend
within minutes.

The results

Our flexibility continues to improve substantially, enabling us
to offer our customers an even better proposition.

20%

Reduction in average lead times

412m

Personalised emails sent

N Brown Group plc Annual Report & Accounts 2017Strategic reportAT A GLANCE

What we do

We are structured in a matrix approach,
buying by product category and
marketing by brand. This allows us to
run a portfolio of brands effectively
and efficiently. All of our brands sell
a wide range of clothing and
homewares products.

markets, however they are more niche
and we therefore aim to grow share of
existing customer spend. Our Traditional
Segment is in a slowly declining market;
our objective here is to grow market share
and hold this segment broadly flat over
the medium term.

Our three Power Brands are our growth
engines; here we aim to gain new
customers and grow market share. Our
Secondary Brands are also in growing

Our Financial Services business operates
across all brands, with the younger brands
typically having a higher penetration of
sales sold through credit.

POWER BRAND

An online department store, offering
style for 50-plus customers and their
families, with ranges for women, men,
home and kids. We create unique
silhouettes, rather than scaling
patterns; we use real bodies, rather
than static mannequins; and we design
to fit – a unique, age appropriate
point of view for our consumer.

Simply Be has empowered women
for over a decade, bringing fashion to
all, regardless of size. We understand
shape and create fashionable
collections that fit. The brand is
gaining significant momentum both
at home and in the USA.

A modern, challenger brand with a
strong digital offer, Jacamo is inspired
by everyday men’s tastes. Collections
are available in a market-leading range
of sizes, from Small to 5XL.

REVENUE GROWTH (%)

4.7%

9.9%

4.0%

REVENUE PERFORMANCE (M)

£158.3m

£114.2m

£65.3m

GROUP REVENUE BREAKDOWN (M)
GROUP REVENUE BREAKDOWN (%)

18%

13%

More detail p38

More detail p39

All revenue figures on this page are on a 52 week basis. For reconciliation to statutory 53 week figures please see page 44.

N Brown Group plc Annual Report & Accounts 2017SECONDARY BRANDS

TRADITIONAL SEGMENT

FINANCIAL SERVICES

Secondary Brands focus on distinct
customer niches which are not served
by our Power Brands. These brands
have significant customer loyalty, good
growth prospects and are increasingly
online. We view our Power Brands as
having the greatest growth potential
medium term, however, and therefore
our focus here is predominantly on our
existing customers.

The titles in this segment are focused
on serving our loyal, traditional and
typically more mature customers.
These customers tend to prefer
paper-based marketing, such as
catalogues and direct-mail offers.
This is an attractive and accessible
market, underserved by other retailers,
and whilst not a future growth driver
we generate a good financial return.

An important part of our overall
proposition, strengthening customer
loyalty and enabling our retail business
to thrive. In order to offer our
customers excellent convenience and
choice, we allow customers to either
pay us immediately or utilise a credit
account for their purchases, spreading
the cost of their purchases over time.

REVENUE GROWTH (%)

1.6%

1.3%

0.4%

REVENUE PERFORMANCE (M)

£155.2m

£134.2m

£260.5m

GROUP REVENUE BREAKDOWN (M)
GROUP REVENUE BREAKDOWN (%)

18%

15%

29%

More detail p40

More detail p41

All revenue figures on this page are on a 52 week basis. For reconciliation to statutory 53 week figures please see page 44.

N Brown Group plc Annual Report & Accounts 2017Strategic reportCHAIRMAN’S STATEMENT

A year of
encouraging
progress

“The transformative
changes we have
made over the past
few years have
started to deliver
results, as we benefit
from our new-found
trading agility.”

Andrew Higginson
Chairman

This year saw the first benefits come
through from the material changes to
people, processes and systems we have
made to the business. After a challenging
first half, the Board is pleased with the
trading momentum seen in the second
half, with the Group outperforming
the wider market over the key peak
trading period.

I continue to be impressed by the sheer
quantum of change that has occurred
in the business over the past few years.
Whilst the process of transformation
has not been without its challenges,
the business is now in a much stronger
position, with a far more sustainable
model for the future.

In September we gained our full FCA
authorisation. This was an important
milestone for the Group and marked
the successful end to a lengthy and
thorough process.

This coming year will be another
important one for the Group. We remain
on track to complete the final stages of
our systems programme by Summer 2018
although, as has been the case throughout
the programme, our first priority is risk
minimisation, not speed of delivery at
any cost.

N Brown Group plc Annual Report & Accounts 2017£887.7m

Revenue (52 week basis)

£88.3m

Adjusted operating profit
(52 week basis)

Progress made in 2017

Corporate Governance

Overall online penetration of 69%,
up 4ppts, with 77% of new customers
now coming to us online.

Active customer accounts +0.7% to
4.30m; within this, Power Brands active
customer accounts 2.17m, up 1.2%.

Received our highest ever customer
satisfaction score and are now ranked
number two across the UK retail sector.

Ladieswear revenue up 4.2% over the
year, and 10.4% in the second half.

Gained our full FCA authorisation in
September 2016. The authorisation
was granted unconditionally.

We continue to innovate and improve our
ways of working to ensure we continually
put the customer at the centre of
everything we do. We have a strong
business, with a loyal customer base and
good growth prospects.

Dividend
Whilst continuing to invest in the business
to secure our future growth, we also
continue to recognise the importance
of cash returns to our shareholders.
We intend to pay a final dividend of 8.56p
this year, taking the total dividend to
14.23p – unchanged from last year.

Board composition
In October I was pleased to welcome
Richard Moross to the Board as a
Non-Executive Director. Richard is the
founder and CEO of Moo.com and brings
significant expertise in digital retailing
and technology.

Following her appointment to the board of
Newell Brands Inc in the USA, Fiona Laird
has indicated her intention to step down
from the Board as soon as a suitable
replacement has been found. External
consultants have been engaged and an
announcement will be made in due course.

Revenue figures are on a 52 week basis as explained on
page 44. Please see pages 26 to 29 for KPI definitions.

The Board is committed to developing and applying high standards of corporate
governance both in the management of its business and in its accountability to
stakeholders as a whole.

Angela Spindler
Chief Executive

Andrew Higginson
Non-Executive Chairman

Craig Lovelace
Chief Financial Officer

Ivan Fallon
Non-Executive Director

Ron McMillan
Non-Executive Director

Fiona Laird
Non-Executive Director

Richard Moross
Non-Executive Director

Lesley Jones
Non-Executive Director

Lord Alliance of Manchester CBE
Non-Executive Director

Theresa Casey
Company Secretary

BOARD DIVERSITY

BOARD COMPOSITION

Male

Female

Non-Executive Directors

Executive Directors

After 23 years’ service, Ivan Fallon has
indicated his intention to retire and he will
therefore not be seeking re-election to the
Board at this year’s AGM. The Board and I
would like to thank Ivan for his outstanding
contribution over many years and to wish
him well for the future.

Outlook
The past year has seen unprecedented
changes in the macro-economic landscape
which remains challenging for retail. This
manifests itself in our cost prices through
inflation, particularly in fuel, our product
costs as a result of exchange rate changes,
and the disposable income of our
customers. Against this backdrop we
remain vigilant over our core costs and
efficiencies.

Consumers globally continue to move
their spending online, and our online
capabilities and lack of a large store
estate mean that we are at an advantage
here. We must not become complacent,
however, but instead we must continually
innovate and improve our capabilities
and customer offering.

I would like to express my thanks to
all stakeholders in the business, and in
particular our brilliant colleagues, for
all their passion, commitment and hard
work throughout the year.

Andrew Higginson
Chairman

N Brown Group plc Annual Report & Accounts 2017Strategic reportMARKET REVIEW

Maintaining the pace
in a challenging market

Global trends
With an uncertain global economic
backdrop, the retail market not only
faces the same uncertainties but also
the knock-on effect of rising input costs
and fragile consumer confidence.
Coupled with an increasingly competitive
retail market, the ability to act with agility
and continue to innovate will be key to
our success.

UK demographic
The UK has an ageing population, with
ONS figures showing a significant rise of
the 65+ population, by 21%, over the past
ten years. With people also becoming
larger, as evidenced by rising obesity
levels, our size and age inclusive approach
are important differentiators which benefit
from these population trends.

Financial services – consumer credit
We see UK consumers continuing to
participate in higher levels of unsecured
credit, a supportive backdrop given our
many years of experience in this sector.
We continue to monitor consumers’
demand for payment innovations and
ensure that we incorporate FinTech
developments when suitable.

Macro-
economic
trends

The global economic
backdrop is uncertain, with
recent volatility, particularly
in the percentage drop
in sterling following the
EU referendum.

Retail
trends

Consumers are
increasingly shifting spend
away from retail purchases
and towards leisure
activities.

Online
trends

Shopping globally is
increasingly online; the
BRC estimates that over
20% of all non-food retail
spending now takes
place online.

N Brown Group plc Annual Report & Accounts 2017SOURCING BREAKDOWN

China
UK
India
Pakistan
Bangladesh
Sri Lanka
Turkey
ROW

Strategy

More detail p20

Key performance indicators

More detail p26

Trends

How we are responding

Opportunities for growth

The uncertainty following the referendum
has led to consumer confidence at lower
levels than in the past few years. We
expect shoppers to continue to remain
cautious this year.

– We hedge our dollar purchases

exposure, allowing us to delay the
impact of a weaker sterling rate,
and giving us more certainty over
input costs.

The depreciation of sterling since the EU
referendum means that FX rates represent
a significant input cost headwind. Inflation
is also expected to increase this year,
putting further pressure on our costs.

– We aim to mitigate input costs and

inflation as much as possible, working
closely with our suppliers and moving
supply nearer to the UK in some cases.

We are planning to absorb or mitigate
input cost increases, as opposed to
passing these on to our customers,
as we believe that this stance will allow
us to gain further market share and
underpin future sustainable profitable
growth. Our international business
provides a small natural hedge which
we aim to grow in the future.

Trends

How we are responding

Opportunities for growth

Over the last 12 months there has been a
shift in spending patterns away from the
clothing and footwear sector and into the
hospitality and entertainment sectors.
Against this backdrop we work hard to
grow loyalty and offer our customers a
great choice of products. Within the retail
sector itself, health and beauty tops the
sector as the fastest growing according
to the BRC.

– Widening share of basket by continually
improving both our homewares and
our health and beauty offering.
– Continuing to invest in great value

products.

– Continuing to invest in our financial

services offering, to allow customers
to spread the cost of their purchases
over time.

Our customer loyalty rates continue
to be strong, and we work hard to
ensure our customers have a great
shopping experience with us. Our new
Financial Services system will allow
us to offer customers a greater range
of products, which should help us to
increase share of spending and
generate incremental income.

Trends

How we are responding

Opportunities for growth

Online penetration is predicted to grow
from 15.7% in 2017 to 18.4% in 2022, with
the clothing and footwear sector set to
grow from 25.6% of online retail share in
2017 to 29.4% in 2022 according to the
latest figures from GlobalData. We are in a
strong position to benefit from this trend
given our online exposure and our lack of
a significant store estate.

– Continuing to innovate and win

share online.

– Our new web platform will further
improve our online trading agility.

– Continuous improvements to customer

experience, for example through
personalisation and app development.

As an online retailer, we will continue to
make improvements to win more share
online and to further improve the
customer experience.

N Brown Group plc Annual Report & Accounts 2017Strategic reportBUSINESS MODEL

Creating
customer value

Inputs

Core activities

1 Brand portfolio

We operate a trusted family of retail brands,
focused on fashion that fits. Our primary growth
drivers are our Power Brands – JD Williams,
Simply Be and Jacamo. We sell ladieswear,
menswear, footwear, homewares and gifting
across all our brands.

Retail products

Without great products
we have nothing.
Our fit specialism,
at great value for
money, is our USP.

In-house
design
team

Logistics

Quality
and fit

Marketing

Sourcing
and
merchandise

Financial Services

Our Financial Services
offer enables customers
to spread the cost
of their purchase
over time.

Modernising
our offer

Cash
customers

Credit
customer
base

– 3 Power Brands
– Secondary Brands
– Traditional Segment

2 Engaged customer base

Strengthening customer loyalty and gaining
new customers is crucial for sustainable growth.
We put the customer at the centre of every
decision we make.

3 N Brown people

Without our people and their relentless enthusiasm
and passion we couldn’t do what we do. They are
our most important asset.

4 Systems and infrastructure

Our warehouse extension, now fully on stream,
further improved our logistics capabilities and
delivery proposition. Our systems investment
project, called ‘Fit 4 the Future’, is still ongoing,
with several important releases going live in the
year. Going forward, ongoing development and
investment in our systems and infrastructure will
remain crucial in a constantly changing sector.

N Brown Group plc Annual Report & Accounts 2017GUSTO shapes our culture. GUSTO celebrates positive attitudes
and behaviours. GUSTO is how we do things around here.

Glow with pride
We’re proud to make great products that people
love. Our clothes generate a feel-good factor
– for our customers and for us.

Understanding is everything
Everything starts and ends with understanding
and respecting the customer. They are our passion,
their shopping habits and preferences our
priority. They’re why we exist, and why we succeed.

Saving makes sense
Waste is the enemy. We value simplicity
and the saving of resources and time.

Togetherness is crucial
Teamwork triumphs in the end. There are
few tasks and even fewer problems that can’t
be tackled successfully though togetherness,
shared goals and collective effort.

Opportunity exists everywhere
There are always things to improve,
chances to be seized and ideas to be
unleashed. We take the opportunities
to build a better business, and to
build a better you.

Responsibility

Outputs

We believe we should be a major
force for good as well as a major
force in fashion. It’s a huge
responsibility, and a purpose
way beyond profit.

All People
Dignity and respect
through people

One Planet
Ways of working

Every
Product
Responsible

1 Value back to
shareholders

Our shareholders are very

important to us, and we value
the support and input they give
us. We are focused on a
progressive dividend policy.

2 Value back into

business to drive
future growth

We invest into our business
to ensure that we can drive
profitable, sustainable growth
in the years ahead.

3 Customer
satisfaction

We’re proud to make great
products that people love.

Our clothes generate a feel-good

factor for our customers.

Strategy

More detail p20

Performance review

More detail p36

N Brown Group plc Annual Report & Accounts 2017Strategic report

CHIEF EXECUTIVE’S REVIEW

Online
trading
agility

“We have transformed
from a mail order
business to an
innovative, agile,
online fashion retailer,
supported by a
modern Financial
Services business.
We are focused on
driving the business
forward, both in the
UK and internationally,
and I am confident in
our future growth
prospects.”

Angela Spindler
Chief Executive

Introduction
I am pleased with the progress made
this year, as we continue to build on our
position as an agile, online fashion retailer.
Ladieswear was a particular highlight,
delivering the best performance for
almost a decade as we gained significant
market share. This was the result of
changes made to design, buying,
merchandising and sourcing over the
past few years.

We continue to place customers at the
heart of everything we do. During the
year we further improved our delivery
proposition, maintained our assertive
price positioning and continued focus on
customer loyalty. I am pleased to report
that our work paid off, with our customer
satisfaction score increasing further to
86.4%, the second highest customer
satisfaction score in the UK retail sector.

We have a clear focus on our three fashion
Power Brands – JD Williams, Simply Be
and Jacamo – and revenue here increased
by 6.3%, a good performance. We also

N Brown Group plc Annual Report & Accounts 2017+10%

Online revenue
(52 week basis)

+4.2%

Ladieswear revenue
(52 week basis)

Strategy

More detail p20

Key performance indicators

More detail p26

Future opportunities

International
We launched our new USA site in
September. Through a series of
post-launch releases we have now
delivered the enhanced experience
scoped for our customers, which gives
us the foundations for our future
international expansion. We recently
announced the appointment of our
first International Director, who will
help us make the most of our significant
growth opportunity, both in the
USA and in other geographies.

Brand partnerships
We are increasingly partnering with
other retailers in two ways. Firstly, we
added over 100 new third party brands
on our sites during the year, further
broadening our customer offering.
We have also started to sell capsule
collections on other retailers’ sites.
These offer a complementary way
of driving sales and awareness of
our brands in a cost-effective manner.
We will continue to look at other
opportunities like this going forward.

successfully turned around the
performance of our Traditional segment
during the year, with revenue down in
the first half but growing in the second.

Our online metrics remain strong, with
new customers coming to us online
exceeding 75% for the first time.
71% of our traffic now comes from a
mobile device. Within this, smartphone
sessions – the device of choice for UK
consumers today – increased by 49%
to account for 46% of all traffic.

Our performance in FY17 overall was in line
with expectations. Spring Summer 2016
started poorly across the sector, but we
improved performance as we progressed
through the first half. The second half was
stronger, with a good Autumn Winter
season and two record-breaking weeks
for the business over Cyber fortnight. This
trend is visible in our profit performance,
with Adjusted PBT down 19.8% in the first
half and flat in the second.

Fit 4 the Future on track

– First UK site with our new Financial Services system,

High & Mighty, planned for launch in May 2017

– Programme completion on track for Summer 2018

– Continued focus on risk minimisation

We are pleased with the progress we
have made on our systems programme.
To date, we have successfully introduced
a new finance system, our new
Merchandise system, Cybersource and
PowerCurve, both important parts of
our Credit release, our Simply Be Euro
foundation site and, most recently,
our new USA website.

The next release, which represents a
major milestone in the programme, will
be the High & Mighty website, which
remains on track to replatform to Hybris
in May. This release will also include the
first go-live of our new Financial Services
system. This sees a significant amount of
core technical functionality delivered.

In line with the agile approach to running
IT projects, we have then made an
adaptation to the rollout plan compared
to that previously communicated.
Following the High & Mighty go-live we
have now decided that Fashion World

will be migrated onto the new systems
after peak trading 2017. Crucially, the
pace of our development will be
unchanged, and new releases will be
added to the High & Mighty and USA
sites on a monthly basis.

The benefits of this approach are that:

• It significantly reduces the commercial
risks, as new technology developments
going forward will all be tested in a live
environment, including through peak
trading, before the major brands
are migrated

• It minimises the time we will be

operating at scale in two different
technology worlds

We plan to migrate all brands onto the
new platform by the end of Summer
2018, as previously guided. The overall
programme costs and benefits, and
the timing of those benefits, are
all unchanged.

Outlook
The fashion sector remains as competitive
as ever. Added to this, the depreciation of
sterling and the recent increase in inflation
both represent significant input cost
headwinds to our business. Against this
backdrop, our significantly increased
trading agility and in-season flexibility puts
us in a much better position to be able to
quickly react to changing market
conditions, ensuring our product offer
remains competitive.

Our size and age agnostic attitude, our
dedication to continuous improvement
in the customer experience and our
relentless focus on helping our customers
look and feel amazing through our trusted
family of fashion brands all put us in a
strong position. We look to the future
with confidence.

KPIs and revenue figures are on 52 week basis unless
otherwise stated.

Angela Spindler
Chief Executive

N Brown Group plc Annual Report & Accounts 2017Strategic reportOUR STRATEGY

Our four
drivers

Product
Fantastic quality and fit fashion,
home ranges, and relevant
financial services

Price
Great prices and flexible
ways to pay

p22

p23

Relevance
Great product is the lifeblood of our business – it is the absolute core
of what we do.

Relevance
Value and convenient ways to pay are both as important to customers
as they have ever been.

Progress 2016
We strive to continuously improve our product offering, both in terms
of our retail and Financial Services products. We are particularly
pleased with our Ladieswear performance, the best for almost a
decade. This result was made possible by the changes we have made
to buying, merchandising, sourcing and design over the past few years.

Priorities 2017
Menswear delivered a solid performance, however we see scope for
further growth in this category. In Financial Services, we will continue
our trial of lower interest rates for new customers, ahead of the new
Financial Services system going live as part of Fit 4 the Future.

Progress 2016
We adopted an assertive opening price point strategy, offering
customers great value, stylish products from the very start of the
season. This was best seen through our ‘The Cut’ capsule collection
in JD Williams, which significantly outperformed expectations.

Priorities 2017
Our new merchandising tools will allow us to further optimise our
markdowns and promotions. In Financial Services, our new systems
will give customers more flexible, personalised payment options.

Associated risks
• Failure to change
• Competition
• Regulatory environment

KPIs
4.2%
Ladieswear market share, size 16+

1.5%

Menswear market share, chest size 44”+
26.8%
Group returns rate (rolling 12 months)

Associated risks
• Failure to change
• Competition

KPIs
86.4%
Customer satisfaction rating, UK CSI

129k

New credit recruits (Rollers, last six months)

N Brown Group plc Annual Report & Accounts 2017Our vision
To be the universally loved
experts in fashion that fits.

Our mission
We’ll do this by helping our customers
look and feel amazing through our
trusted family of fashion brands.

People
Obsessed with customers,
enriched with data and
powered by technology

Place
Whatever you want,
wherever you are, whenever
you want it, we make it easy

p24

p25

Relevance
Without our people and their relentless enthusiasm and passion
we couldn’t do what we do. They are our most important asset.

Relevance
Customers shop how and when they want, and it is our job to exceed
their expectations.

Progress 2016
We continued to develop our internal talent and hire great new
people to our business. We launched our online training hub and
talent mapping tools. Our colleague satisfaction rating reached a
record high.

Priorities 2017
We will launch our new intranet, which will further enable us to
engage with colleagues throughout the business. We will continue
to focus on developing our talent and rewarding achievement.

Progress 2016
We moved to 10pm cut-off for next day delivery and over our busiest
cyber fortnight ever our average delivery time was an entire day
quicker than last year. Online, mobile continued to take share of
traffic, now exceeding 70%. We also launched our new USA website,
a key milestone.

Priorities 2017
We will launch our new web platform in the UK on our High & Mighty
site. We will continue to improve our delivery offering, including
the recent launch of our first delivery subscription offering,
Jacamo Unlimited.

Associated risks
•
People
• Competition

KPIs
86.4%
Customer satisfaction rating, UK CSI

Associated risks
• Failure to change
• Competition
• People
• Cyber security

KPIs
69%
Online penetration

5.6%

Conversion rate
4.3m
Active customer accounts

KPIs on these pages are on a 52 week basis unless otherwise stated.

N Brown Group plc Annual Report & Accounts 2017Strategic reportSTRATEGY IN ACTION

Transformation
driving success in 2017

Product

Better by design

We have fundamentally changed
our design, buying, sourcing and
merchandising processes over the
past three years and we are pleased to
report that these changes are delivering
results. Having previously relied solely
on third party design agencies, we now
have a 22-person in-house team,
covering all product categories to
ensure that our ranges are on-trend
and flatter our customers, whatever
their size or age. We have also
introduced an in-house print team that
creates signature prints for each season.

We have rationalised and consolidated
our supply base, working closer with
fewer suppliers. We have also increased
sourcing closer to home to give us
greater flexibility. These changes in our
supply chain, together with process
changes throughout the department,
have enabled us to reduce lead times
significantly. Our fastest lead time for a
new product has improved from ten
weeks two years ago to three weeks
today. For repeat purchases, our fastest
lead time is now seven days compared
to seven weeks just two years ago.
We have also reduced our average
lead times by over 20% year on year.

We are now working on rolling out
innovative digital fit techniques using
3D avatars. This will allow us to design,
develop and fit our product samples on
each individual size, tailoring the fit to
take account of body shapes and sizes.
These cutting-edge techniques will
represent a further improvement to our
already industry leading fit capabilities,
as well as enabling us to deliver our
products faster than ever before, both
important drivers of customer loyalty.

N Brown Group plc Annual Report & Accounts 2017Price

Assertive
price points
and great
promotions

We typically benchmark our prices to the
mid-market, aiming to offer a better quality
product at a lower price than our mid-market
competitors. In Autumn Winter we adopted
a more assertive price strategy, further investing
in prices to offer customers exceptional value.
This was led by ‘The Cut’ collection in
JD Williams, a collection of our best priced,
current season clothes. Sales of these lines
significantly exceeded our already ambitious
expectations, with the range up 72% compared
to similar lines in the prior period. A similar
pricing strategy was adopted across our entire
brand portfolio.

By ensuring that our initial price points were
compelling, we reduced the proportion of lines
sold on discount significantly. When we did
offer promotions they represented exceptional
value to our customers, with our cyber fortnight
promotions and flash sales good examples
of these.

We continued to increase our use of data
analytics to make pricing and promotional
decisions, for example we have implemented
price elasticity algorithmic modelling for our
end of season sales and will be rolling this
out further in the coming year. Our new
merchandising system went live in the Autumn,
giving us the ability to plan our ranges across our
brand portfolio in a quick and consistent way.

N Brown Group plc Annual Report & Accounts 2017Strategic reportSTRATEGY IN ACTION CONTINUED

People

Digital talent

We continue to invest heavily in digital
talent across the organisation, both in
terms of attracting the best talent and
developing our people. Working at
N Brown is fast paced and exciting,
with no day the same as another.
As well as capabilities, we hire for
attitude and passion.

Our digital centre of excellence
continues to ensure that we stay ahead
of the competition, covering areas such
as personalisation, conversion rate
optimisation, page load speeds and
data analytics. Digital talent doesn’t just
cover marketing and IT, we also continue
to innovate in areas such as quality
control, product fit and specification
and our HR processes and colleague
engagement platforms.

During the year we partnered with seven
digital start-ups through our innovation
incubator JD Works. Over a ten week
period these start-ups worked alongside
us in our offices, helping us to accelerate
our adoption of new ideas and
technologies. These technologies
included artificial intelligence, big data
analytics, digitalised personal shopping
and 3D virtual fitting.

N Brown Group plc Annual Report & Accounts 2017Key performance indicators

More detail p26

Risk management

More detail p30

Place

A record breaking
cyber fortnight

We had our best ever cyber fortnight,
with record breaking revenue and profits.
This was made possible by our recent
warehouse extension, which doubled our
through-put capacity – that is, our ability
to get products through the warehouse
and out for delivery to customers.

Our websites dealt with the highest level
of traffic we’ve ever experienced, with
sessions up 20% against the prior year,
itself a record. Smartphone sessions were
up 49% and accounted for 46% of traffic
during the period. We sent 19 million
animated emails, 22% more than the year
before, and these drove a 48% increase in
email demand.

N Brown Group plc Annual Report & Accounts 2017Strategic reportKEY PERFORMANCE INDICATORS

Measuring progress
against our strategy

Customers

ACTIVE CUSTOMER
ACCOUNTS (m)

POWER BRAND ACTIVE
CUSTOMER ACCOUNTS (m)

GROWTH OF OUR MOST
LOYAL CUSTOMERS (%)

CUSTOMER SATISFACTION
RATING (%)

+0.7%

+1.2%

+400bps

+180bps

2016

2017

4.27m

4.30m

2016

2017

2.14m

2.17m

-0.4%

2016

2017

3.6%

2016

2017

84.6%

86.4%

Relevance to strategy

Definition
The number of customer
accounts which made a retail
purchase in the last 12 months.
The figures now include our USA
customers. They continue to
exclude Figleaves which has an
independent management team.

Performance
Our active customer file
increased by 0.7% to 4.30m
during FY17. Our customer
metrics improved through the
year, with active customers down
in the first half and then up mid
single-digits in the second half,
supported by strong new
customer recruitment.

Definition
The number of Power Brand
(JD Williams, Simply Be and
Jacamo) customer accounts
which made a retail purchase in
the last 12 months. The figures
now include our USA customers.

Performance
Again we saw an improving trend
through the year. The key driver
of this trend was the migration
of the Fifty Plus title into the
JD Williams brand (these
customers are included within the
JD Williams customer file); the
customer file of the Fifty Plus title
declined, as planned, during the
migration process. If we exclude
Fifty Plus customers, Power Brand
active customers were up 9.9%.

Definition
We define our most loyal
customers as those who have
purchased from us in each of
the last four clothing seasons.

Definition
Our latest overall customer
satisfaction score, as measured
independently by the UK
Customer Services Institute.

Performance
We are pleased to report that
our most loyal customers
increased by 3.6% year on year,
a significant improvement from
the 0.4% decline reported last
year. The primary driver of the
performance was the turnaround
in our Traditional Segment.

Performance
We were proud to receive a
rating of 86.4% in the latest
survey. We have also moved up
one place in the UK retail sector,
and now have the second-
highest rating overall, behind
only Amazon. Our score
continues to be over 4ppts
higher than the retail sector
average.

Outlook
We will continue to attract new
customers to our business
through our product offering,
marketing campaigns and
customer service proposition.

Outlook
The migration of Fifty Plus will
be completed by the start of the
second half FY18, and this title
should therefore cease to be a
drag on customer metrics.

Outlook
Further strengthening customer
loyalty is a key business focus.
We do this by continuously
improving our product offering,
service and delivery proposition.

Risk
• Failure to change
• Competition
• People

Risk
• Failure to change
• Competition

Outlook
Customer satisfaction is driven
by a wide range of factors, such
as product quality and value, the
delivery service and dealing with
complaints. We talk to our
customers every day to ensure
we are doing the best job we
possibly can.

Risk
• Failure to change
• Competition
• People
• Regulatory environment

N Brown Group plc Annual Report & Accounts 2017

Key to Strategic Drivers

Product

Price

People

Place

Product

LADIESWEAR MARKET SHARE
SIZE 16+ (%)

MENSWEAR MARKET SHARE
CHEST 44”+ (%)

GROUP RETURNS RATE
(ROLLING 12 MONTHS) (%)

+80bps

Flat

2016

2017

3.4%

4.2%

2016

2017

-70bps

1.5%

2016

2017

27.4%

26.8%

Relevance to strategy

Definition
Our market share in UK
Ladieswear, in size 16 and higher.
Market share is calculated using
internal and Kantar data, and
these figures relate to the 24
weeks ending 17 February 2017.

Definition
Our market share in UK
Menswear, in chest size 44” and
higher. Market share is calculated
using internal and Kantar data,
and these figures relate to the 24
weeks ending 17 February 2017.

Definition
The amount, measured in value,
of products which are returned
to us by customers, over the last
12 months.

Performance
Against an ongoing competitive
market holding our share flat
was a solid result, although our
objective is to grow share over
the medium term.

Performance
Ladieswear had its best
performance for almost a
decade, and this resulted in a very
encouraging increase in market
share. We saw market share gains
across every customer age range.
The performance is due to
significant changes we have
made to our design, buying
and merchandising people
and processes over the past
few years.

Outlook
We expect the market backdrop
to remain competitive. We will
focus on further growing market
share through continued
improvements to our products,
everyday great value and efficient
promotions.

Performance
We saw another good
performance in our returns rate,
with the primary driver being
the continued improvements in
our product offering, including
fit, quality and value for money.
The ongoing increase in the
proportion of cash customers
also benefited the rate, as these
customers naturally have a
lower returns rate than credit
account customers.

Outlook
Ladieswear has the highest
returns rate by category, and
the strong performance in the
second half and as we ended
the year is an ongoing headwind.
Product improvements and new
cash customers should continue
to help this KPI.

Risk
• Failure to change
• Competition
• People

Risk
• Failure to change
• Competition

KPIs on these pages are on a 52 week basis unless otherwise stated.

N Brown Group plc Annual Report & Accounts 2017Strategic report

KEY PERFORMANCE INDICATORS CONTINUED

Online

ONLINE
PENETRATION (%)

+4ppts

ONLINE PENETRATION
OF NEW CUSTOMERS (%)

CONVERSION
RATE (%)

TRAFFIC FROM MOBILE
DEVICES (%)

+5ppts

-20bps

+5ppts

2016

2017

65%

69%

2016

2017

72%

77%

2016

2017

5.8%

5.6%

2016

2017

66%

71%

Relevance to strategy

Definition
The percentage of sales,
excluding stores and
International, which comes
to us online. Our second
largest channel is through
our contact centre.

Performance
Online penetration is now
almost 70%, with online revenue
up 10% year on year. Some
customers are unlikely to ever
migrate online; we estimate that
these account for roughly half
of the non-online proportion.
Whilst we are online-first in our
approach, we are happy to serve
customers in whichever way they
would like to shop with us.

Definition
The percentage of sales from
new customers, excluding stores
and International, which comes
to us online.

Definition
The percentage of website
sessions which result in an order
being placed.

Definition
The percentage of our total
online traffic which comes
from either a smartphone or
a tablet device.

Performance
This metric passed 75% for
the first time, a key milestone.
By brand, JD Williams saw the
most significant increase,
from 65% to 80%.

Performance
At 5.6% our conversion rate
remains significantly above the
industry average. The decline
was entirely due to the increasing
share of mobile sessions, which
naturally have a lower conversion
rate than PCs. The conversion
rate for smartphones and tablets
each increased, by 8% and 3%
respectively.

Performance
Mobile devices include both
smartphones and tablets; of
these, smartphones are the
device of choice, with web
sessions here increasing by 49%
to account for 46% of all traffic.
This trend was even stronger for
JD Williams, where smartphone
sessions more than doubled
compared to last year.

Outlook
We continue to invest in both
our online platform and in hiring
and developing digital talent.
The online penetration of new
customers is an important
leading indicator for overall
future penetration.

Outlook
We continue to target our
new customer recruitment
campaigns to focus primarily
on online shoppers, and
therefore we would expect
this metric to continue to
increase looking forwards.

Outlook
The continued increase in share
from mobiles represents a drag
to the overall conversion rate.
We are focused on increasing
the conversion rate of each
device type.

Outlook
We adopt a ‘mobile first’ approach
to all of our digital improvements,
and expect the trend of customers
shopping more and more on their
smartphones to continue. The
launch of our first app during the
year, together with further
improvements to our mobile
optimisation, should result in
further progress in this metric
this year.

Risk
• Failure to change
• Competition
• People
• Cyber security

Risk
• Competition
• People
• Cyber security

Risk
• Failure to change
• Competition
• People
• Cyber security

N Brown Group plc Annual Report & Accounts 2017

Key to Strategic Drivers

Product

Price

People

Place

Financial Services

ARREARS RATE
(>28 DAYS) (%)

PROVISION
RATE (%)

NEW CREDIT RECRUITS
(ROLLERS)

-100bps

-480bps

2016

2017

10.9%

9.9%

2016

2017

15.6%

10.8%

-5%

2016

2017

136,000

129,000

Relevance to strategy

Definition
Arrears over 28 days are defined
as customer debts with two or
more missed payments.

Definition
Closing bad debt provision
as a percentage of gross trade
receivables.

Definition
The number of new customers
opening a credit account and
rolling a balance in the last six
months.

Performance
We saw a very strong
performance in arrears rate,
down 100bps year on year. This
was driven by the improvement
in the quality of our customer
loan book, together with our
ongoing efforts to proactively
help customers manage their
accounts.

Outlook
New customer recruitment
typically results in an increase in
arrears rate. Offsetting this, we
expect the loan book quality to
continue to be strong and we
therefore expect a broadly flat
rate over the coming year.

Performance
Our provision rate improved
significantly during the year.
This was a result of two factors.
Firstly, we benefitted from the sale
of a small quantum of high risk
payment arrangement debt, which
we were able to sell for a slightly
better rate than book value; given
the risk profile of this debt the sale
had a disproportionate impact on
the provision rate. Secondly, the
change reflects the continued
improvement in the quality of
the debt book.

Outlook
New customer recruitment
typically results in an increase in
the provisions rate. Offsetting
this, we expect the loan book
quality to continue to be strong
and we therefore expect a
broadly flat rate over the
coming year.

Performance
Although over the long term
we aim to increase new credit
rollers, the key enabler of this
will be our new Financial Services
products which are not yet fully
live. During the year we
nevertheless saw an improving
trend, from -19% in the first half
to -5% in the second half. For
the year as a whole we added
249,000 new credit rollers.

Outlook
We started trialling lower interest
rates for new customers in the
run-up to peak. Whilst it is still
too early to assess the full
impacts of this trial, this is the
first stage of our efforts to
expand our Financial Services
offering to enable us to grow
our credit customer numbers.

Risk
• Failure to change
• Competition
• People
• Regulatory environment

KPIs on these pages are on a 52 week basis unless otherwise stated.

N Brown Group plc Annual Report & Accounts 2017Strategic report

RISK MANAGEMENT

Protecting the integrity of
our business strategy

activities to mitigate these risks.
The committee was provided with and
discussed the outputs from this process
which were used by internal audit as a key
driver in developing 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.

Internal audit maintain the Group’s Three
Lines of Defence model which documents
the internal and external sources of
assurance provided across the business.
The adequacy of coverage over corporate
risks at operational, oversight and
assurance lines of defence is reviewed
bi-annually and the output from this
process is reported to the Audit
Committee and used to drive the content
of the annual internal audit plan.

Appropriate responsibilities and
accountabilities have been set to ensure
that there is ownership of the actions
required to mitigate risk across
the business.

The Group compliance function monitors
policy and regulatory requirements and
plays a key role in the mitigation of key
risks across the business. The function
continues to develop and is well
established in providing assurance over
areas of significant regulatory risk such
as Financial Services and Data Protection.

Risk committee
Operational management is asked to
present on a cyclical basis on the progress
of agreed actions against the major risks
identified by the process. The output is
shared with the Audit Committee and
the full Board.

Risk management
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 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.

In order to ensure key business
developments and emerging risks are
appropriately factored into the risk
management process, the Group’s internal
auditors facilitated two board level risk
sessions in the year. The Chief Executive
and Chief Financial Officer and head of
internal audit, along with the operational
directors identified, ranked and reviewed
the key risks facing the business and
appraised the structure of internal controls
and identified current and proposed

Principal risk rating matrix

N
A
T
R
E
C
T
S
O
M
L
A

D
O
O
H
I
L
E
K
I
L

E
R
A
R

LOW

IMPACT

HIGH

Top principal risks

Key strategic priorities affected

Change in year

N/A

1. Failure to change

2. Taxation

3. Regulation

4. Competition

5. Cyber security

6. People

7. Business interruption

N/A

N Brown Group plc Annual Report & Accounts 2017

A continuous process for identifying risks

The directors have
overall responsibility
for ensuring that
the Group maintains
a sound system
of internal control.

BOARD OF
DIRECTORS

Audit Committee
Receives and reviews reports from senior
management to consider whether significant
financial, compliance and operational risks
are being identified, evaluated, managed
and controlled and whether any significant
weaknesses exist which need to be addressed.
The Audit Committee report is set out in
pages 67 to 69.

Risk Committee
Focuses on reviewing management’s
activities to continually monitor and manage
the risks identified. The output from the
Risk Committee is shared with the Audit
Committee and the full Board.

Board committees

RETAIL

OPERATIONS

The principal risks which the Group
has identified, together with actions to
mitigate those risks are set out overleaf.

Risk appetite
The Group’s framework for managing its
consideration of risk appetite forms part
of the annual Risk Management Cycle and
is used to drive and inform any actions
undertaken in response to the principal
risks identified by the Board. Within this
framework, the Group’s appetite for risk is
defined with reference to the expectations
of the Board for both commercial
opportunity and internal control and is
used to inform the Group’s annual internal
audit plan.

The Board believes that appropriate
internal financial, operational and
compliance controls are in place
throughout the Group, the most significant
of which have been specifically referred to
in this report. The Group has a well-defined
organisational structure, with clear lines of
responsibility and explicit authority
delegated to divisional boards and
executive management. The Group also
has a comprehensive financial reporting
system with good communication of plans,
budgets and monthly results to relevant
levels of management and the Board.

The Group has complied, and continues to
comply, with the provisions of the Code on
internal controls. There is an on-going
process in place for identifying, evaluating
and managing the significant risks facing
the Group that has been in place
throughout the year and to the date of this
report. The process has been reviewed by
the Committee and the Board and accords
with guidance appended to the Code.

N Brown Group plc Annual Report & Accounts 2017Strategic reportPRINCIPAL RISKS AND UNCERTAINTIES

Identify, evaluate and manage
risks facing the Group

KEY RISK
Failure
to change

STRATEGIC DRIVERS

CHANGE FROM
LAST YEAR

ASSOCIATED KPIS

1 2 3 4 5 6 7

8 9 12 13 14

DESCRIPTION
The business does not recognise the need for change, is unsuccessful in
delivering the best course of action or fails to execute chosen strategy.

POTENTIAL IMPACT
ON BUSINESS
The capacity of the Group to achieve
desired change is necessary to remain
competitive and maintain market position.
The potential consequences of not
achieving change goals include: Loss of
competitive position, underachievement
against growth targets, inefficient returns
on investment and constrained ability
to respond to market forces.

WHAT WE HAVE DONE
IN 2016/17
• Delivered the USA element of
the F4F business development
programme.

• Achieved a record Customer
Satisfaction Index rating, now
ranked second in the UK.
• Ladieswear market share

+80bps.

• Record breaking performance

over cyber fortnight.

MITIGATION
• Capitalise on agile trading
capabilities to respond to
in-season weather and
macro-economic dynamics.

• Customer Insights team

ensures up to date information
on customer trends and
expectations.

• Development of strategic online
retail partnerships and alliances
to accelerate growth in the UK
and internationally.

• Continued focus on removal of
any barriers to loyalty through
the development of the
customer service experience.

• Fit 4 the Future business

transformation programme
to enable new technological
capabilities and competitiveness
and drive on-line growth.

KEY RISK
Competition

STRATEGIC DRIVERS

CHANGE FROM
LAST YEAR

ASSOCIATED KPIS

1 2 3 4 5 6 7

8 9 10 11 12 13 14

DESCRIPTION
Failure to compete effectively through product and service propositions.

POTENTIAL IMPACT
ON BUSINESS
Competing effectively across the key
areas of Product, Financial Services and
Customer Services remains a key driver
of customer recruitment and retention.
Potential consequences of competition
include: loss of market share, erosion
of margins and a fall in customer
satisfaction scores.

Given the uncertain macro-economic
backdrop, which particularly impacts on
business through input cost price inflation
as referenced on page 14 in the market
review, remaining competitive is even
more important in order to deliver
business growth.

MITIGATION
• New warehouse has increased
next-day delivery availability.
• Customer Insight team use the
Customer Services Index to
drive continuous improvement
programme.

• Benchmarking against
competitor activity.

• New suite of financial services

products with our new
credit platform.

• Fit 4 the Future programme

delivering new digital platform.

• Capitalise on agile trading
capabilities to respond to
in-season weather and
macro-economic dynamics.
• Hedging of foreign exchange
rate exposure to provide
certainty over input costs.

WHAT WE HAVE DONE
IN 2016/17
• Continued to broaden our

product offering, particularly
through the use of third party
brands.

• Successfully implemented

our new merchandising tools,
which enhanced our use of
data analytics enabling us
to price more efficiently
and effectively.

N Brown Group plc Annual Report & Accounts 2017

Key to KPIs
1 Active customer accounts
2 Power Brand active customer accounts

8 Online penetration

9 Online penetration of new customers

3 Growth of our most loyal customers

10 Conversion rate

4 Customer satisfaction rating

11 Traffic from mobile devices

5 Ladieswear market share size 16+

12 Arrears rate (>28 days)

6 Menswear market share chest 44”+

13 Provision rate

7 Group returns rate

14 New credit recruits (rollers)

Key to Strategic Drivers

Product

Price

People

Place

KEY RISK
Regulatory
environment
STRATEGIC DRIVERS

CHANGE FROM
LAST YEAR

ASSOCIATED KPIS

4 12 13 14

DESCRIPTION
Failure to ensure the Group complies with existing and
emerging UK and overseas legislation and regulation.

POTENTIAL IMPACT
ON BUSINESS
Recent and upcoming changes in
regulation are a key consideration for the
Group. Potential impacts arising from
changes in regulation are: increased
costs, erosion of margins and potential
fines or reputational damage if response
plans are not achieved.

WHAT WE HAVE DONE
IN 2016/17
• Received full, unconditional

authorisation from the
FCA to conduct consumer
credit activities.

• Significantly increased internal
compliance resource during
the year and established a
Customer Conduct committee.

MITIGATION
• Group employs specialists in
relevant fields to provide
expertise on regulatory matters.

• In-house Regulatory
Compliance function.

• Dedicated approval committee

reviewing and ratifying
proposed changes with a
regulatory impact.

• In-house Customer Service
team specialising in the
treatment of vulnerable
customers.

• Pro-active engagement with
the FCA and other regulatory
bodies.

• Continued, active membership
of the British Retail Consortium.

KEY RISK
People

STRATEGIC DRIVERS

CHANGE FROM
LAST YEAR

ASSOCIATED KPIS

1 2 4 5 6 8 9

10 11 12 13 14

DESCRIPTION
Over-reliance on key personnel and inability to recruit and retain required skill sets.

POTENTIAL IMPACT
ON BUSINESS
Recruitment and retention of high calibre
employees is a key driver of business
growth. Potential impacts arising from
the management of employees include
the loss of business knowledge,
increased costs and inefficient return
on investment.

MITIGATION
• Annual talent identification

and reward review.

• Talent review highlights people

risks and drives mitigating
actions.

• Twice yearly employee
engagement surveys.
• Benchmarking of reward
packages and terms
and conditions.

WHAT WE HAVE DONE
IN 2016/17
• Undertaken a twice yearly

colleague engagement survey.
The most recent score was
our highest ever.

• Continued to improve our
recruitment techniques to
attract new talent to the
business, including increased
use of social platforms.

N Brown Group plc Annual Report & Accounts 2017Strategic report

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

KEY RISK
Taxation

STRATEGIC DRIVERS
N/A

CHANGE FROM
LAST YEAR

ASSOCIATED KPIS
N/A

DESCRIPTION
Uncertainty over the outcome of legal cases with HMRC covering
VAT and historic approach to Corporation Tax.

POTENTIAL IMPACT
ON BUSINESS
Current test cases for Corporate Tax
and VAT partial exemption are ongoing.
Potential impacts from unfavourable
outcomes include increased VAT and
Corporate tax charges and decreased
future cash flows.

MITIGATION
• Proactive engagement

with HMRC.

• The Group employs Leading

Tax Counsel and other
providers of external expertise.

• Partial but not full provision
against litigation outcomes.

WHAT WE HAVE DONE
IN 2016/17
• Continued work on the tax
case with leading advisors.

KEY RISK
Cyber security

DESCRIPTION
Malicious activity leading to significant loss of data or disruption to trading and
potentially impacting income, profitability, customers and Group reputation.

STRATEGIC DRIVERS

CHANGE FROM
LAST YEAR

ASSOCIATED KPIS

8 9 10 11

POTENTIAL IMPACT
ON BUSINESS
Increased online presence and reliance
on digital systems raises the importance
of cyber security to the Group.
Forthcoming GDPR regulations increase
the Group’s focus in this area. Potential
impacts on the business include:

• Loss of customer data.
• Business interruption.
• Potential fines or reputational damage

if regulatory response plans are
delayed or not adequate.

MITIGATION
• A Security Operation Centre

monitors, manages and
responds to cyber security
attacks 24/7.

• Fit 4 the Future programme is
delivering new technology and
methods of protection against
cyber-attacks.

• Group cyber security team

design and implement security
controls.

WHAT WE HAVE DONE
IN 2016/17
• Continual review of customer
data encryption and ongoing
investment to ensure future
resilience.

• Implemented additional

technology to prevent denial
of service attacks and filter
out web based attacks.

N Brown Group plc Annual Report & Accounts 2017Key to KPIs
1 Active customer accounts
2 Power Brand active customer accounts

8 Online penetration

9 Online penetration of new customers

3 Growth of our most loyal customers

10 Conversion rate

4 Customer satisfaction rating

11 Traffic from mobile devices

5 Ladieswear market share size 16+

12 Arrears rate (>28 days)

6 Menswear market share chest 44”+

13 Provision rate

7 Group returns rate

14 New credit recruits (rollers)

Key to Strategic Drivers

Product

Price

People

Place

KEY RISK
Business
interruption

STRATEGIC DRIVERS
N/A

CHANGE FROM
LAST YEAR

ASSOCIATED KPIS

DESCRIPTION
A significant event impacts the ability of the business to continue trading.

POTENTIAL IMPACT
ON BUSINESS
Business interruption events are an
ever present possibility for the Group.
Potential impacts are broad ranging
and include:

• Short term disruption to trade

and customer service.

• Impact on revenue, margin

or reputation.

MITIGATION
• The business continuity plan
provides a framework to
manage business interruptions.

• Third party service provider
Business Continuity plans.
• Crisis management plans

provide recovery objectives
for key business areas.
• Our systems programme

includes further migration to
cloud based systems which
increases resilience.

WHAT WE HAVE DONE
IN 2016/17
• Crisis management and

recovery plans are reviewed
and updated bi-annually.
• A full day simulation exercise

took place with the Operating
Board. The crisis management
plan was updated with
feedback from the exercise.

• Crisis management was

instigated to successfully
resolve a flood at our main
warehouse in November 2016.

N Brown Group plc Annual Report & Accounts 2017Strategic reportPERFORMANCE REVIEW

Performance

N Brown Group plc Annual Report & Accounts 2017Our performance in detail:
“There were standout
results from JD Williams
and Simply Be, with all
key brands showing an
encouraging performance
during the year.”

JD Williams
4.7%

Product revenue increase
(52 week basis)

Simply Be
9.9%

Product revenue increase
(52 week basis)

Jacamo
4.0%

Product revenue increase
(52 week basis)

N Brown Group plc Annual Report & Accounts 2017Strategic reportPERFORMANCE REVIEW CONTINUED

JD Williams

Overall, JD Williams’ product
revenue was up 4.7%. Within
this, the JD Williams brand
was up 12%, and Fifty Plus,
which is being migrated into
JD Williams, was down 9%,
as planned.

JD Williams brand reported double-digit
sales growth in both the first and
second half

JD Williams online revenue was up 19%
year on year

Smartphone sessions on JD Williams more
than doubled year on year

‘The Cut’ range significantly outperformed
expectations

Fifty Plus migration well on track

4.7%

Product revenue increase to £158.3m

We are pleased with the performance of
the JD Williams brand during the year, as
our style proposition and age-agnostic
attitude continue to resonate with
customers, both existing and new.

We had particular success in the second
half with our ‘The Cut’ range, a collection
of our best priced, current season clothes,
which further reinforced our value for
money credentials. Sales of these lines
significantly exceeded expectations, with
sales up 72% versus comparable lines the
previous year. Best-selling lines within the
range included a £15 swing dress and a
£18 tunic.

We continue to campaign against the
lack of age diversity in the fashion industry.
In September we launched ‘The New
F Word’, a short film featuring nine
inspirational women, all of whom have
proved that 50 is an age to be celebrated.
In February we staged a protest at London
Fashion Week, together with five models
all over the age of 45. Our campaign
received significant press coverage and
customer engagement.

We are in the process of migrating the
Fifty Plus title into JD Williams; this is the
final title to go through this process. In the
first half, revenue from Fifty Plus was down
18% year on year, as we reduced marketing
spend ahead of its migration. We then
commenced the migration in Autumn
Winter, resulting in revenue up 1% in the
second half, in line with our expectations.
The migration will be completed by the
start of the second half of this coming
financial year.

N Brown Group plc Annual Report & Accounts 2017Simply Be

Simply Be continues to
perform very strongly,
winning new customers
and strengthening loyalty
with existing customers.

9.9%

Product revenue increase to £114.2m

Simply Be active customers up 20%
year on year

Simply Be Unique, our fast fashion sub-range,
continues to outperform significantly

Launched first Simply Be shopping app
in October

Campaigns resonating strongly and driving
significant customer engagement

Simply Be had another strong year and we
remain excited about its long term growth
prospects, both in the UK and abroad.

Our fast fashion sub-range Simply Be
Unique continues to outperform
significantly, with demand up 67% in the
second half, led by going out tops and
our new under £30 party dress offer.
Denim was a key category outperformer
throughout the year, with jeans up 14%
in the second half, led by our Shape and
Sculpt jean collection.

In October we launched our first
Simply Be shopping app. Performance to
date has been encouraging, with good
customer feedback and conversion rates.
We will continually improve our app
offering in the year ahead.

In March 2017 we launched our new SS17
campaign, We Are Curves, starring Iskra
Lawrence, Denise Bidot and Marquita
Pring. The campaign celebrates body
shapes of all sizes and aims to show how
true confidence comes from the perfect
fit. The campaign received our highest-
ever level of social engagement and
the advert soundtrack was top of the
Shazam charts.

Jacamo

A modern menswear brand
inspired by everyday men’s
tastes, Jacamo continues to
gain traction with customers.

4.0%

Product revenue increase to £65.3m

Jacamo active customers grew double-digit
year on year

Successful relaunch of own-brand Snowdonia

Jacamo Real Man Runway, a search to find
an everyday guy to star in our next campaign

Launch of Jacamo Unlimited, a next day
delivery subscription offer

Jacamo product revenue was up 4.0%
to £65.3m, with revenue performance
strengthening through the year. Active
customers grew double-digit year on year,
although spend per customer was lower
due to the subdued market backdrop,
particularly in the first half.

We saw strong product category
performances in denim, following the
launch of our new denim range, and
sportswear, driven both by third party
brands and the successful relaunch of
our own-brand Snowdonia.

During the second half we launched our
Real Man Runway, our search to find an
everyday guy to star in our next campaign,
whilst also helping to champion male
diversity in the fashion industry. We
received almost 500 entrants and our
shortlist of 20 men as judged by a panel
including brand ambassador Freddie
Flintoff. The winner, Andy Caine from
Leeds, will be the face of our AW17
campaign.

In late February 2017 we launched Jacamo
Unlimited, offering customers unlimited
next day delivery for a year for £9.95.
Whilst early days, customer take up so far
has been encouraging.

Revenue figures on these pages are for the 52 weeks ended
25 February 2017 vs 52 weeks ended 27 February 2016.
See page 44.

N Brown Group plc Annual Report & Accounts 2017Strategic report
PERFORMANCE REVIEW CONTINUED

Secondary Brands

Secondary Brands focus
on distinct customer niches
which are not served by our
Power Brands. The largest
brand here is Fashion World,
which was also the strongest
performer during the year.

1.6%

Product revenue increase to £155.2m

Good performance in Fashion World,
driven by increasing spend per customer

Launch of new Demandware web platform
for Figleaves in September

Appointment of new Figleaves CEO
in February 2017, with significant retail
and online experience

Within our four Secondary Brands,
Fashion World was the strongest
performer, up mid single-digits year on
year. This was driven by increased spend
per customer, an encouraging trend.

Marisota, which is now predominantly
used as a product brand focusing on fit
solutions, saw a solid performance.

Figleaves revenue was slightly down year
on year. This was in line with expectations,
as we slowed marketing spend during
the launch of the new Demandware web
platform at the start of Autumn Winter
2016. In February we were pleased to
announce the appointment of Miriam
Lahage as Figleaves CEO. Miriam brings
with her significant retail and online
experience. The new management team
will leverage the benefits of the new
Demandware platform and we expect
this to improve the performance of
Figleaves going forwards.

High and Mighty revenue was down year
on year as we continued to transition the
brand from a predominantly stores to an
online model with 11 fewer stores
compared to two years ago.

Traditional Segment

The actions we took
successfully turned around
the performance of our
Traditional Segment
during the year.

1.3%

Product revenue decrease to £134.2m

Launch of new bespoke publications
for customers

Reinvested back into key product categories,
such as jersey, knitwear and nightwear

Improved cross-working across traditional
titles, driving efficiencies and maximising
profitability

Our Traditional Segment recorded
revenue of £134.2m, down 1.3% year
on year. This overall result masks a
significantly improving trend as we
progressed through the year, with revenue
down 4.2% in the first half but up 1.6%
in the second half, as the actions we took
to address performance worked well.

These actions included a revamp of our
marketing materials and the launch of new
bespoke publications such as our ‘Classic
Detail’ catalogue. We also improved the
product range, in particular reinvesting
back into our jersey, knitwear and
nightwear offerings. By title, Julipa was
a particular strength.

Looking forward, our strategy in
Traditional remains unchanged, that is, to
hold overall revenues broadly flat through
gaining share in this declining market.

We believe that we have a competitive
advantage due to our scale, customer
loyalty and experience in serving these
customers. Whilst it is not, therefore, a
significant growth driver for our business,
it remains very relevant to our overall
portfolio and we continue to generate a
good financial return from this segment.

N Brown Group plc Annual Report & Accounts 2017International

Financial Services

We drove a good
performance in Financial
Services, driven by a
significant improvement in
the quality of the customer
loan book.

0.4%

Revenue increase to £260.5m

Within the revenue performance, interest
payments were up and non-interest lines
down, due to the continued improvement
in the quality of the loan book

Strong performance in both credit arrears
and provision rate

Received full FCA authorisation in
September, a significant milestone

Launched a trial offering qualifying new
customers a lower APR on our three Power
Brands, with early results encouraging

USA
USA revenue was £15.5m, up 8.5% year
on year (down 4.2% in constant currency
terms). The operating loss was £1.3m,
compared to £1.0m in FY16. As expected,
performance in the second half was
impacted by the launch of the new USA
website. Through a series of post-launch
releases we have now delivered the
enhanced experience scoped for our
customers, which gives us the foundations
for our future international expansion.

The majority of our USA revenues are
generated by the Simply Be brand,
which continues to resonate very well
with customers. Performance of the
JD Williams brand, which we launched
in the USA in March 2016, has so far
been encouraging.

Ireland
Ireland delivered revenues of £15.9m,
up 18.8% year on year, or 3.8% in constant
currency terms. The operating profit was
£3.3m, a significant improvement on the
£0.8m delivered last year. This performance
was driven by the improvements to our
product offering.

Stores

The performance of our store estate
continues to be impacted by weak
industry footfall. As a consequence, we
are not planning to open any new stores
in the future. As with any store estate,
performance by store varies. We continue
to take actions to address underperforming
stores and improve the overall profitability
of the estate. For FY18, some significant
rate increases for some of our stores
represents a further cost headwind.

Overall, revenue from our store estate was
£23.1m (FY16: £27.3m). As at the end of
FY17 we had 23 stores open, split 15 dual
Simply Be and Jacamo stores (FY16: 14),
and eight High & Mighty stores (FY16: nine).
The operating loss of our store estate was
£2.0m (FY16: £0.8m loss).

Revenue figures on these pages are for the 52 weeks ended
25 February 2017 vs 52 weeks ended 27 February 2016.
See page 44.

Financial Services revenue was up 0.4%
during the year. Within this, interest
payments were up mid single-digit
whilst non-interest lines were down low
double-digit. The improvement in the
quality of the loan book was reflected
in the gross margin performance, which
was up 110bps year on year to 55.7%.

We saw a strong performance in
credit arrears and the provision rate, as
discussed in the KPI section on page 29.

We continue to focus on growing two
key customer bases – those who use
their account (internally termed our
‘rollers’) and cash customers, who pay
immediately on a credit or debit card.
Cash customers generate attractive
returns, and are important in terms of
driving our growth, broadening our
appeal and enabling us to gain
economies of scale.

Looking forward, our intention over the
long term is to increase the number of
new credit rollers. The key enabler of this
will be our new Financial Services system,
which will be fully live across all brands by
Summer 2018.

Ahead of our new credit systems going
live, we have been running a trial offering
qualifying new customers a lower APR on
our three Power Brands, in order to test
take-up rates and customer behaviour. To
date, the trial has delivered encouraging
results, with an increase in the proportion
of new customers electing to open an
account as opposed to paying in cash.
The payment behaviour of these
customers has also so far been in line
with our expectations, however we need
to allow more time to pass before we
can fully judge the success of the trial.

Financial figures included on this page are for
52 weeks ended 25 February 2017 vs 52 weeks ended
27 February 2016. See page 44.

N Brown Group plc Annual Report & Accounts 2017Strategic reportCHIEF FINANCIAL OFFICER’S REVIEW

A good trading
performance,
driven by
Ladieswear and
our Power Brands

On a statutory
53 week basis Group
revenue was £900.7m,
with Product revenue
of £635.9m and
Financial Services
revenue of £264.8m.
On a 52 week basis
Group revenue was
+2.5% to £887.7m,
with Product revenue
+3.4% to £627.2m
and Financial Services
revenue +0.4% to
£260.5m.

53 week year
As previously guided, this year we are
reporting on the 53 weeks to 4th March
2017, with an extra week added to ensure
that the year-end date stays close to the
end of February. In order to provide a
meaningful comparison with last year’s
52 week period, all P&L financial
movements included in this review are
reported on a 52 week basis, excluding
the 53rd week, unless otherwise stated.

Where applicable, the 53rd week’s known
result has been used as the basis for the
adjustment to provide the 52 week results,
although a degree of judgement has been
applied in deriving certain operating costs
in respect of the final week. Group
revenue for the 53rd week was £13m
whilst Group adjusted and statutory PBT
was £2m, in line with expectations. A
detailed comparison of the 53 weeks and
52 weeks results are shown in the table on
page 44. All second half P&L financial
movements relate to the 26 week period,
excluding the 27th week, unless otherwise
stated. All balance sheet figures are
reported as at the year-end date and cash
flow figures are for the 53 week period.

N Brown Group plc Annual Report & Accounts 2017£337.8m

Power Brand product revenue

£627.2m

Product revenue

£260.5m

Financial Services revenue

£887.7m

Group revenue

Revenue by brand

Product revenue, £m
JD Williams

Simply Be

Jacamo

Power Brands

Secondary Brands

Traditional Segment

Product total

Financial Services

Revenue by category

Product revenue, £m
Ladieswear

Menswear

Footwear & Accessories

Home & Gift

Product total

52 weeks to
25 Feb 17
158.3

52 weeks to
27 Feb 16
151.2

114.2

65.3

337.8

155.2

134.2

627.2

260.5

103.9

62.8

317.9

152.7

136.0

606.6

259.6

52 weeks to
25 Feb 17
256.5

52 weeks to
27 Feb 16
246.1

85.8

69.0

215.9

627.2

82.0

68.5

210.0

606.6

Change
+4.7%

+9.9%

+4.0%

+6.3%

+1.6%

-1.3%

+3.4%

+0.4%

Change
+4.2%

+4.6%

+0.7%

+2.8%

+3.4%

Product revenue by brand and category on a 53 week basis is shown in note 4 on page 101.

Revenue performance
On a statutory 53 week basis Group
revenue was £900.7m, with Product
revenue of £635.9m and Financial Services
revenue of £264.8m. On a 52 week basis
Group revenue was +2.5% to £887.7m,
with Product revenue +3.4% to £627.2m
and Financial Services revenue +0.4%
to £260.5m.

Revenue by brand for the 52 weeks is
shown in the table above. A detailed
discussion of performance by brand is
contained within the performance review
on pages 38 to 41.

Revenue performance for the 52 weeks
by category is also shown in the table
above. We have changed our revenue by
category allocation, moving Accessories
revenue from Ladieswear into the
renamed Footwear & Accessories
category. This reflects our approach to
these categories, with Footwear and
Accessories managed by the same team.

We are pleased to report 4.2% growth
in Ladieswear revenue year on year. Our
performance strengthened significantly
as we went through the year. In the first
half revenue was down 1.1% year on year,
against a weak sector backdrop and
impacted by the decline in our Traditional
titles. In the second half we outperformed
the market and delivered revenue growth
of 10.4% year on year. Our Lingerie ranges,
included within Ladieswear, also recorded
a strong performance with revenue up
high double-digit. We saw particular
success with our new Figleaves Curve
range sold through both Simply Be and
JD Williams.

Menswear recorded consistent growth
throughout the year, and for FY17 revenue
was up 4.6% year on year. Footwear and
Accessories revenue growth of 0.7% again
masks a different performance by half,
with revenue in the first half down 3.6%
before recovering to +5.3% in the
second half.

Home and Gift revenue was up 2.8%.
Our strategy in Home remains unchanged
– we aim to recruit new customers to our
Fashion offering, but then see customers
also buying Homewares. Within
Homewares we focus on categories which
have higher gross margins and are more
competitively differentiated, such as
Furniture, Gifting, Home Textiles, Kitchen
and Home Décor, and Outdoor Living.
These categories overall grew by 6%, with
double-digit growth rates recorded in
Furniture and Outdoor Living as a result
of us further improving and expanding
our ranges.

Gross margin
Product cost of goods sold (COGS) were
£284.1m, compared to £265.9m in FY16.
Product gross margin was 54.7%, down
150bps year on year, in line with guidance.
This was primarily a result of increased
promotions against a challenging sector
backdrop in the first half, together with
headwinds from FX rates and our
inventory clearance exercise. These factors
were partially offset by a further increase
in our buying-in margin and a small
tailwind from mix.

N Brown Group plc Annual Report & Accounts 2017Strategic reportCHIEF FINANCIAL OFFICER’S REVIEW CONTINUED

Operating performance

£m

Product revenue

Financial Services revenue
Group revenue2
Product gross profit

Product gross margin

Financial Services gross profit

Financial Services gross margin
Group gross profit3
Group gross margin %
Warehouse and fulfilment4
Marketing and production4
Admin and payroll4
Adjusted1 EBITDA
Adjusted1 EBITDA margin
Depreciation and amortisation4
Adjusted1 operating profit
Adjusted1 operating margin
Net finance costs
Adjusted1 PBT
Exceptional items

Fair value adjustments
to financial instruments

Statutory PBT

53 weeks to
4 March 17

52 weeks to
25 Feb 17

52 weeks to
27 Feb 16

52 weeks on
52 weeks
change

635.9

264.8

900.7

347.7

54.7%

147.5

55.7%

495.2

55.0%

(81.3)

(165.4)

(130.6)

117.9

13.1%

(27.6)

90.3

10.0%

(7.7)

82.6

(25.2)

0.2

57.6

627.2

260.5

887.7

343.1

54.7%

145.2

55.7%

488.3

55.0%

(79.6)

(162.5)

(130.3)

115.9

13.1%

(27.6)

88.3

9.9%

(7.7)

80.6

(25.2)

0.2

55.6

606.6

259.6

866.2

340.9

56.2%

141.7

54.6%

482.6

55.7%

(76.7)

(161.7)

(122.6)

121.6

14.0%

(25.2)

96.4

11.1%

(8.1)

88.3

(17.2)

1.1

72.2

+3.4%

+0.4%

+2.5%

+0.6%

-150bps

+2.5%

+110bps

+1.2%

-70bps

+3.8%

+0.5%

+6.3%

-4.7%

-90bps

+9.5%

-8.4%

-120bps

-4.9%

-8.7%

–

-23.0%

1 Before exceptionals costs and unrealised FX movement.
2 52 week revenue has been calculated by excluding the actual revenue recorded for the 53rd week.
3 52 week cost of sales has been approximated by applying the full year gross margin percentage to 52 week revenue.
4 Approximation of variable and semi-variable costs has been made on a time apportionment basis. Certain fixed costs

such as audit fee and depreciation/amortisation are deemed to be incurred on an annual basis and as such are
consistent with those costs recorded for the 53 week period.

Our gross bad debt charge was
£110.9m (FY16: £110.3m). This bad debt
charge, together with a small number
of other Financial Services costs, resulted
in a Financial Services gross margin of
55.7%, up 110bps year on year. This
increase in gross margin is a result
of the improvement in the quality
of the customer loan book, together
with the sale of some high risk payment
arrangement debt at a slightly better
rate than book value.

Warehouse and fulfilment costs increased
by 3.8% to £79.6m, driven predominantly
by volumes, which were up 6% year on
year, together with further improvements
to our delivery offering, partially offset by
continued efficiencies.

Marketing costs were up 0.5% year on
year. Admin and payroll costs increased by
6.3% to £130.3m, as we invested in digital
talent, funded by the movement of some
marketing costs.

Adjusted1 EBITDA declined by 4.7% to
£115.9m. Depreciation and amortisation
increased by 9.5% to £27.6m, as a result of
the investments we are making into the
business. Overall, operating profit before
exceptional items was £88.3m.

Net finance costs
Net finance costs were £7.7m, down 4.9%
year on year, driven by lower funding costs
on our securitisation facility.

N Brown Group plc Annual Report & Accounts 2017FY18 guidance
We have provided the following
guidance for FY18; this is subject
to change.

Product gross margin -120bps to -20bps

Financial Services gross margin flat
to +100bps

Group operating costs +3.5% to +5.5%
(excluding depreciation and amortisation)

Depreciation and amortisation
£29m to £30m

Net interest £8m to £9m

Tax rate c.20%

Capex of c.£40m

Net debt £300m to £320m

Exceptional costs of c.£3m, as a result
of our ongoing tax disputes with HMRC

Craig Lovelace
Chief Financial Officer

Dividends
The Board recognises the importance
of the dividend to shareholders and
accordingly, is holding the final year
dividend flat on last year, at 8.56p,
taking the full year dividend to 14.23p
(FY16: 14.23p), as we continue to invest
in the business.

Balance sheet and cash flow
(53 weeks ending 4 March 2017 vs
52 weeks ended 27 February 2016)

Capital expenditure for the year was
£41.4m (FY16: £58.7m). The majority of this
investment was on our systems investment
programme.

Inventory levels at the period end were up
3.9% to £105.5m (FY16: £101.5m). Within
this overall level, we successfully disposed
of a small amount of aged stock, as
planned. The higher inventory level year
on year is driven by the impact of changes
in exchange rates; inventory units were
down 4.5% year on year.

Gross trade receivables declined by 4.0%
to £599.5m (FY16: £624.7m). The provision
declined from £97.6m to £64.7m, largely
driven by the sale of some high risk
payment arrangement debt at a slightly
better rate than book value, along with
ongoing progress in reducing overall
debtor risk. The majority of the balance of
debtors written off relate to this debt sale.
Outside of this, the risk profile of our
customer loan book continues to improve.

The Group’s defined benefit pension
scheme has a surplus of £8.3m
(FY16: £10.8m surplus).

Net cash generated from operations
(excluding taxation) was £87.1m compared
to £86.9m last year. After funding capital
expenditure, finance costs, taxation and
dividends, net debt was broadly flat at
£290.9m (FY16: £289.7m), in line with
our expectations. Gearing levels were
flat at 61%.

FX sensitivity
For FY18 we expect our annual purchases,
net of international revenues, to be
c.$125m, on which we have a hedging
strategy in place, together with c.£130m,
where we face indirect cost pressures due
to the depreciation of sterling.

Looking at our dollar exposure specifically,
for FY18, we have, to date, hedged 90%
of our net purchases at a blended rate of
$/£1.27. At a rate of $/£1.25, and before
any mitigating actions, this would result
in a c.£10m PBT headwind compared to
FY17. Every 5 cents move from this rate
in our unhedged position would result in
a PBT sensitivity of c.£0.4m. For FY19 we
have, to date, hedged 25% of our net
purchases at a blended rate of $/£1.27.
At a rate of $/£1.25, and before any
mitigating actions, this would result in a
c.£1m PBT headwind compared to FY18.
Every 5 cents move from this rate in our
unhedged position would result in a PBT
sensitivity of c.£3.2m.

Importantly, a number of mitigating
activities are underway, including supplier
negotiations, fabric and production
planning, markdown optimisation and our
ongoing work on supplier consolidation.

Exceptional items
Exceptional costs totalled £25.2m.
Within this, we incurred £22.9m related
to Financial Services customer redress,
£2.5m of external costs related to taxation
matters and a credit of £0.2m relating to
the closure of our clearance stores.

Taxation
The effective rate of Corporation Tax is
23.1% (FY16: 23.9%). The tax charge for
the 53 week period was £13.3m
(FY16: £17.3m) which meant that profit
from continuing operations for the
53 weeks to 4 March 2017 was £44.3m
(FY16: £54.9m).

Earnings per share
Earnings per share from continuing
operations for the 53 week period were
15.67p (FY16: 19.45p). Adjusted earnings
per share for the 53 week period from
continuing operations were 22.74p
(FY16: 24.02p).

N Brown Group plc Annual Report & Accounts 2017Strategic reportCORPORATE SOCIAL RESPONSIBILITY

Dear Shareholder
I am pleased to report on the
progress we have made since the
launch of our CSR Charter entitled
‘Taking care of our world’.

The Committee has recognised
the real synergy in embedding
the CSR strategy fully into our
commercial strategies. Through
this we are living the GUSTO
values that are so important to
the business.

We continue to believe we can be
a major force for good as well as
a major force for fashion.

Corporate Social Responsibility
We are now commencing our new
three year strategy.

Our strategy is designed to embrace
the three CSR pillars: ‘All People’,
‘One Planet’ and ‘Every Product’.

It aims to fully align our ethical
policies with our commercial activities,
achieving tangible results and benefits
for all our stakeholders.

To find out more:
www.nbrown.co.uk/sustainability

Fiona Laird
Chair of the CSR Committee

All People
Dignity and respect
We want everyone who works for
us, wherever they are, to be treated
with fairness, dignity and respect.
Because everything we achieve as a
business, we achieve
through people.

One Planet
Ways of working
We’re determined to understand
our effect on the world, and
find better, smarter and more
sustainable ways of working.
To learn and to teach, to recycle,
reuse and respect,
wherever we are on our
big beautiful planet.

Every Product
Responsible
That means partnering with suppliers
who share our standards, working
together to create ever more
responsible, sustainable
products that our customers
can enjoy with confidence
and with conscience.

Taking care
of our

N Brown Group plc Annual Report & Accounts 2017PROGRESS IN 2017

PRIORITIES IN 2018

New dedicated ethical
trading team.

To successfully launch our
improved People reward
and re-banding scheme.

New targets set for GHG
emissions, waste and water.

To train staff in energy
awareness.

Publication of our first Modern
Slavery Statement.

To further reduce risk in the
supply chain by continuing our
work on supplier transparency.

N Brown Group plc Annual Report & Accounts 2017Strategic reportCORPORATE SOCIAL RESPONSIBILITY CONTINUED

Three pillars,
one passion

All People

One Planet

Every Product

Where people are
concerned, so are we

Protecting the earth
begins with respecting it

Everything we achieve as a business
is achieved through caring for our
customers, our community and
our people.

Our Customer Charter sets out our
commitment to customers. We seek to
establish enduring relationships for the
mutual benefit of both customer and the
company. In particular we recognise the
importance of being a responsible lender.
We continually monitor the experience of
our customers in order to improve their
experience and offer tailored products
whilst being mindful of a customer’s
individual needs.

In 2016 we launched our Make a
Difference Day, allowing colleagues to
take a day out of work to volunteer within
a charity of their choice. See page 49 for
a case study.

We are very proud of our Manchester
heritage and of our investment in jobs in
the North West. This year we will be a
sponsor of the Manchester International
Festival 2017.

All businesses are required to pay the living
wage. We are delighted to report we have
applied the living wage to all colleagues
regardless of age. Internationally, we are
proud to be one of the founding members
of the ACT (Action, Collaboration &
Transformation Working Group) which
promotes fair, living wages for individuals
working in overseas factories making
products for retailers.

We want to ensure our colleagues feel
valued, motivated and informed, and are
equipped to succeed. We regularly seek
out the opinions of our people through
our annual #Vibe Survey to ensure we are
delivering on this important commitment.

We’re determined to understand our
effect on the world and find better,
smarter and more sustainable ways of
working. To learn and to teach, to recycle,
reuse and respect, wherever we are on
our big beautiful planet.

Over the last five years through the
hard work of our colleagues, greater
operational efficiencies and greater
investment, we have achieved a 28%1
reduction in greenhouse gas emissions
per million pound turnover and aim to
reduce this further.

Reducing packaging is one method we
have used to achieve this. Lighter, smaller
packages have meant a reduction in the
number of HGVs on the road.

To further reduce emissions we are
looking to extend the hours of operation
at our logistic sites so that less
transportation occurs during peak times.

We continue to be a ‘zero to landfill’
organisation.

Our progress does not stop here – new
targets have been set to 2023.

Management of our electricity usage
is a key objective and we now purchase
100% green electricity, supporting
renewable sources.

We voluntarily report to both the Carbon
Disclosure Project (CDP) and the Forestry
Disclosure Project (FDP) and are pleased
with our progress to date. In particular,
our FDP score is an A minus which puts
us in the ‘leadership’ category.

Further information on our emissions
profile can be found on page 51.

Our products should
make people feel as good
as they look

The Group has been working closely with
its suppliers over the last couple of years
to improve customer experience and to
promote responsible sourcing. This means
partnering with suppliers who share our
values and standards. By working
together, we hope to create more
responsible and sustainable products that
our customers can enjoy with confidence.

Ethical trading is extremely important to
N Brown Group, which is why a new team
has been assembled to strengthen and
drive through the core principles within
the supply chain. The new team comprises
a Head of Sourcing and Ethical Trading,
an Ethical Trading Manager, a Regional
Ethical Trading Manager based in Dhaka
and an Ethical Trading Administrator.

Our continued focus has been to work
closely with suppliers to promote
responsible sourcing and ensure that the
supply chain workers are treated with
fairness, respect, and are safe at work.

We are one of the founding members
of the Bangladesh Accord which in the
four years of its existence has identified
and improved conditions for thousands
of workers across Bangladesh. Our
commitment to safety in this is now further
supplemented by inspections conducted
by our own compliance manager in Dhaka.

We continue to improve supplier
engagement by visiting key suppliers
regularly.

1 Reduction of GHG per turnover compared to the base

year of 2007-8 for electricity, gas and diesel.

N Brown Group plc Annual Report & Accounts 2017Make a Difference Day:
Proud to work at N Brown

For our UK and European suppliers we
have set up a monthly ‘Close to Home’
Supplier day inviting suppliers into head
office to showcase what they do and
encouraging open dialogue.

For suppliers who are further afield we
have implemented a strict supplier
engagement ‘Gatekeeper’ process that
will encompass a balanced scorecard
review including factory compliance
standards in line with the ETI base code.

For all suppliers there is an on boarding
due diligence process and ongoing reviews
to ensure factory compliance standards.

Operating Board supports Age UK

Leading by example was our executive
team. Our CEO and five of the
Operating Board Directors volunteered
to work with Age UK. Age UK is the
country’s largest charity that helps older
people make the most of later life.

The Operating Board chose to spend
its MAD day at the Openshaw Resource
Centre in Manchester. Funding from
Age UK helps to support the Openshaw
Resource Centre, which offers a
stimulating and enjoyable day out for
older people who would otherwise
have to spend all day at home.

The Operating Board took part in a
number of activities with its patrons,
including decorating gingerbread men,
games and bingo!

The Centre performs a vital function in
enabling older people to avoid isolation,
and in promoting social and physical
wellbeing among the older population.

Over 70 colleagues have booked in
nearly 500 hours to ‘Go MAD’, with
hundreds more colleagues’ eagerly
discussing ways to volunteer and
‘Make a Difference’.

N Brown Group plc Annual Report & Accounts 2017Strategic reportCORPORATE SOCIAL RESPONSIBILITY CONTINUED

Environment

Overview
As a worldwide, multi-channel retailer, we
recognise that we have a responsibility to
minimise the impact that our operations
have on the environment. We have been
working towards environmental targets for
several years and our performance against
these targets has been formally assessed
this year. New targets have recently been
set reflecting our efforts to continually
improve our performance and the
expectations of our customers, staff
and investors.

Group-wide responsibility for sustainability
is assigned to Ian Carr, Director of
Logistics, who sits on the Operational
Board of JD Williams and Company
Limited and who reports to the Chief
Executive Officer and, through him,
to the Board of Directors.

For the past ten years, we have
been actively working alongside our
environmental partners, Envantage Ltd and
Viridor Limited to boost our environmental
performance and increase Group-wide
environmental awareness, accountability
and disclosure. We have strived to reduce
our carbon emissions profile, water
consumption and waste impact through
ongoing investment into energy efficiency,
efficient operations, waste management,
water minimisation initiatives and
investment into green energy.

Carbon Disclosure Project
The Carbon Disclosure Project (CDP) is a voluntary, investor-led programme, requesting
companies to respond to a range of carbon and energy management related questions,
as well as providing full carbon footprint disclosure. Companies are scored and results
are published annually. Since 2008, the Group has responded to the climate change
questionnaire and our performance is shown in the table below.

Year

2008

2009

2010

2011

2012

2013

2014

2015
2016

Disclosure
Score

93
N/A

CDP

Performance
Score

Not Scored

C
N/A

New
Scoring

N/A

N/A
B

FDP

Score

N/A

B
A-

N BROWN GROUP
CDP AND FDP SCORES 2016

2016 FDP Score

2016 CDP Score

A-

B-

C-

D-

Leadership
Management
Awareness
Disclosure

In the last reporting year, a new scoring
methodology was introduced which
combined the previously separate
disclosure and performance scores
to provide one alphabetical score only
(A to D-). In 2016, we achieved a score
of B which is above the industry and sector
average score (of C), placing us firmly in
the ‘Management’ category.

We also report on the forests module of
the CDP which encourages participants
to look at how they procure and use forest
commodities both directly and through
the supply chain. As a direct consumer
and onward retailer of forest products,
we have a responsibility to ensure that
our procurement is not at the expense
of the future world’s forests, but positively
supports responsible forest management.

Our first submission to the Forestry
Disclosure Project (FDP) was made in 2015
and a score of B was achieved. In 2016,
we improved on this achieving a
Leadership score of A- for the timber
module which was above the sector
average of B.

N Brown Group plc Annual Report & Accounts 2017
Emissions profile
Our Green House Gas (GHG) emissions
inventory is calculated for the global
Group1 under the operational control
approach, in accordance with the GHG
Protocol and GHG emissions factors
published by Department of Energy and
Climate Change (DECC). The inventory is
independently calculated by our partner
carbon consultants Envantage Ltd.

Under GHG reporting guidelines, scope 1
and 2 emissions are the key mandatory
areas to report, illustrating the
environmental impact of the Group for
activities which we have direct control
over; ie operation of our sites and vehicles.
As a responsible retailer, we have also
taken steps to quantify as many optional
scope 3 emission sources that relate to
our operations.

The table and chart below illustrate
our GHG emissions across all our
reporting areas, for the global Group
from 1 March 2016 to 28 February 2017
and the previous year.

Scope
Scope 1

Scope 2
Total scope 1 and 2
Scope 3

Source
Gas
Diesel
HFCs
Gas oil
Company and pool car
Electricity2

Water
Employee commuting
Business travel
(air, road and rail)
Waste
Well to tank (all)

Total
Outside scopes Biogenic element Diesel

Total GHG tCO2e
(tonnes of carbon
dioxide equivalent)

2015 – 2016
(Previous year)
1,475.7
533.4
51.5
74.4
73.6
8,411.0
10,619.6
29.5
1,713.9

2016 – 2017
(Current year)
1,656.6
393.0
146.4
102.7
63.0
7,737.1
10,098.9
31.7
1,621.4

1,604.8
253.3
1,691.5
15,912.6
17.2

1,827.4
233.5
1,612.3
15,425.2
9.1

%
change
+12%
-26%
+184%
+38%
-14%
-8%
-5%
+7%
-5%

+14%
-8%
-5%
-3%
-47%

1 Emissions figures detailed cover all active entities during the reporting year.
2 Emissions associated with electricity usage at the Bangladesh and Ireland office are reported in CO2 rather than CO2e.

This is because overseas emissions factors are only available on a CO2 basis.

N BROWN GROUP PLC EMISSIONS PROFILE 2016 – 2017
(tCO2e)

Electricity

Business travel (air, road and rail)

Gas

Employee commuting
Well to tank (all)

11.8%

10.7%

10.5%
10.5%

Diesel

2.5%

Waste

1.5%

HFCs

0.9%

Gas oil

0.7%

Company and pool car

0.4%

Water

0.2%

Scope 1

Scope 2

Scope 3

50.2%

N Brown Group plc Annual Report & Accounts 2017Strategic report

CORPORATE SOCIAL RESPONSIBILITY CONTINUED

Emissions change from previous year
We have reduced our Group GHG
emissions by 3% compared to the previous
reporting period. A breakdown of the
reduction in emissions by source is shown
in the chart to the right.

Relative performance using
intensity ratios
As a growing organisation, evaluation
of scope 1 and 2 emissions performance
using intensity ratios allows a more
meaningful comparison to be made
between inventory periods. The table to
the right shows the scope 1 and 2 GHG
emissions in relation to both Group
turnover (£million) and million items
dispatched3. GHG emissions relating to
Scope 1 and 2 sources have decreased
considerably in terms of our relative
performance against both turnover and
items dispatched, as shown in the table
and charts to the right.

Market based
electricity emissions
As well as making efforts to reduce
emissions by reducing energy
consumption, the Group are also
committed to reducing emissions
by purchasing energy from greener
technologies and sources.

In January 2015, the Greenhouse Gas
Protocol updated their Scope 2 reporting
guidelines on how organisations report
their emissions relating to purchased
electricity, heat and steam. Companies
shall now report two sets of Scope 2
emissions: one using a location based
method and another using a market based
method. This is termed ‘dual reporting’.

The location based method reflects the
average emissions intensity of grids on
which energy consumption occurs; the
same way that electricity emissions have
been reported historically. The market
based method reflects the emissions for
the energy that a company is purchasing,
as supplies under different contracts emit
different levels of greenhouse gases
depending on the energy source or
technology used. Our market based and
location based electricity emissions are
shown in the table to the right.

EMISSIONS CHANGE FROM PREVIOUS YEAR
(tCO2e)

s
C
F
H

l
i

o
s
a
G

r
a
c

o
o
p
d
n
a

y
n
a
p
m
o
C

y
t
i
c
i
r
t
c
e
E

r
e
t
a
W

g
n
i
t
u
m
m
o
c

e
e
y
o
p
m
E

)
l
i

a
r
d
n
a
d
a
o
r
r,
i
a
(

e
v
a
r
t
s
s
e
n
i
s
u
B

e
t
s
a
W

)
l
l

a
(
k
n
a
t
o
t

l
l

e
W

s
a
G

e
s
e
D

c
n
e
g
o
B
-
s
e
p
o
c
s
e
d
i
s
t
u
O

e
s
e
D

-
t
n
e
m
e
e

180.9

94.9

28.4

-10.6

2.2

-140.3

222.6 -19.9

-8.1

-79.2

-92.5

-673.9

400

200

-200

-400

-600

-800

Intensity ratios
Scope 1 & 2 GHG emissions tCO2e/
Group turnover (£million)
Scope 1 & 2 GHG emissions tCO2e/
million items dispatched

2015 – 2016
(Previous year)

2016 – 2017
(Current year)

% Change from
previous year

12.2

283.5

11.4

251.6

-6%

-11%

EMISSIONS AGAINST TURNOVER
PREVIOUS YEAR AND CURRENT YEAR
(tCO2e/£million turnover)

EMISSIONS AGAINST ITEMS SHIPPED
PREVIOUS YEAR AND CURRENT YEAR
(tCO2e/£million items)

12.2

11.4

284

252

2015 – 2016

2016 – 2017

(Previous year) (Current year)

2015 – 2016

2016 – 2017

(Previous year) (Current year)

Scope
Scope 2

Approach
Location based
Market based

Total GHG tCO2

Source
Electricity
Electricity

2015 – 2016
(Previous year)
8,411.0
6,934.5

2016 – 2017
(Current year)
7,737.1
4,703.5

%
change from
previous year
-8%
-32%

3 Financial figures and items shipped figures used for intensity ratios cover all active entities during the reporting year.

N Brown Group plc Annual Report & Accounts 2017

REGO backed green electricity
The Group have continued to purchase
green electricity for all our UK sites4, and
since November 2016 we have purchased
100% renewable electricity which is
backed with REGO (Renewable Energy
Guarantees of Origin) certificates. The
REGO certificates provide confidence
that we are purchasing energy which
was generated from renewable sources
as each megawatt-hour produced is
evidence with a REGO. In accordance
with the GHG Protocol, we are now able
to report our REGO backed electricity
as zero carbon. In addition to purchasing
green electricity we have been generating
our own green electricity via a solar PV
array at our distribution centres since 2016.

We have a small number of sites outside
the UK for which we are unable to
purchase green electricity. We also
operate several landlord managed sites
and are not responsible for the
procurement of electricity. Overall,
97% of the electricity for our directly
controlled sites is from zero carbon
and renewable sources5.

ELECTRICITY PROFILE FOR
DIRECTLY CONTROLLED SITES (%)

97%

REGO green electricity

Non-UK supplies

Self generated solar

Performance against 2017 targets
Since 2010 the Group has been working towards three environmental targets focusing
on waste, water and greenhouse gas emissions. The targets were set against a base year
of 2007 – 2008, with a goal of them being met by 2017. Our performance against these
targets has been reviewed and the results are outlined below.

Waste6

Achieve zero
waste to landfill6

Target:
zero waste
to landfill

Performance:
zero waste
to landfill

Most of our waste is generated from activities carried out at our
head office and distribution sites. We recognise that we have a
responsibility to manage our waste so that it has the least impact
on the environment as possible. A key part of this is ensuring our
waste does not end up in landfill.

We have achieved our target of zero waste to landfill for the
past two years by taking advantage of new, cleaner disposal
technologies such as energy from waste and mechanical
biological treatment.

YEARLY PERCENTAGE OF WASTE SENT TO LANDFILL (%)

20.3%

15.3%

4.8%

2.4%

2.0%

3.0%

7.0%

0.4%

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

0.0%
2015-2016
(Last year)

0.0%
2016-2017
(Current year)

2007-2008
(Base year)

Water7

Reduce water
consumption (m3)

Target:
25% reduction

Performance:
28% reduction

Despite experiencing a growth in operations, the Group has
achieved a 28% reduction in the volume of water consumed
at our main sites compared to the 2007 – 2008 base year, thus
exceeding our target.

Since this target was set, we have appointed water management
consultancy, Cadantis to work alongside us to improve the
management of our water consumption. We have also invested
in water saving controls.

WATER CONSUMPTION AGAINST TARGET (m3)

50,000

40,000

30,000

20,000

10,000

2007-2008
(Base year)

2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
(Last year)

2016-2017
(Current year)

Total (like for like)

Target

4 This excludes any UK sites where we do not have
control over the purchase of the electricity used.
5 This is based on a sample representative period

of February 2017.

6 This target relates to the waste managed by the Group’s main waste contract. This covers the head office, logistic sites, and some stores.
7 This target relates to the head office, logistics sites, Figleaves, and House of Bath.

N Brown Group plc Annual Report & Accounts 2017Strategic report

CORPORATE SOCIAL RESPONSIBILITY CONTINUED

Greenhouse gas emissions8

Reduce
GHG emissions
/ £ turnover

Most of the Group’s direct (scope 1 and 2) greenhouse gas
emissions are associated with electricity, natural gas and diesel
(used for internal haulage) across our facilities and vehicles.

Target:
30% reduction

Performance:
28% reduction

We almost achieved our relative emissions target and despite
significant business growth, there has still been a reduction.

Since our emissions target was set, we have had a shift in
business strategy, with an increased focus towards the volume
of items distributed from our warehouses. This change in
direction has been accounted for in our new targets, which
are detailed opposite.

RELATIVE GAS, DIESEL AND ELECTRICITY EMISSIONS – PERFORMANCE AGAINST TARGET
(GHG/£ million turnover)

2007-2008
(Base year)

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

2015-2016
(Last year)

2016-2017
(Current year)

Electricity

Gas

Diesel

Target

8 This target relates to the Group’s key scope 1 and scope 2 greenhouse gas emissions: electricity gas and diesel.

New targets for
2017 – 2023
We have recently committed to new,
Group-wide environmental targets. The
targets have been carefully considered and
account for our changing business strategy,
making them relevant and challenging.

Having met our water reduction target,
we consider that it is appropriate to shift
our focus to another area of our
operations: our haulage. Our haulage
fleet is a key aspect of our operations
that we have influence over in terms of
reducing our environmental impact and
we are keen to take on this challenge. As
well as creating a new haulage focused
target we have also expanded the scope
of our emissions targets for our buildings.

Greenhouse gas emissions Buildings
(offices and logistics sites)9

Target: Reduce GHG emissions
(tCO2e/items shipped)

Base year: 2012 – 2013

Target: 35% reduction

We aim to reduce our emissions from our
offices and logistics sites in relation to the
number of items we ship to our customers.

Separate targets have been set for our
offices/logistics sites and retail stores to
reflect the different energy drivers and
energy intensities of the buildings,
allowing for a more meaningful evaluation
of how efficiently we are performing
across our estate.

9 This target covers electricity, gas, hfc releases,

and bulk fuels.

N Brown Group plc Annual Report & Accounts 2017

Greenhouse gas emissions Buildings
(retail stores)10

Target: Reduce GHG emissions
(tCO2e/1,000 m2)

Base year: 2014 – 2015

Target 1: 20% reduction

(Simply Be and Jacamo)

Target 2: 15% reduction (High & Mighty)

The Group is committed to reducing
emissions and gaining a better
understanding of the way energy is
used across our portfolio of stores.

We have already taken a step towards
meeting this target by voluntarily
upgrading our non-automated electricity
meters to automatic, half-hourly meters.
The energy data will feed into a
monitoring platform allowing detailed
analysis to take place and for energy
wastages to be highlighted, targeted,
and eliminated.

Waste

Maintain zero waste to landfill

We are committed to maintain zero waste
to landfill for the sites managed under our
main waste contract. We are also keen
to expand the scope of this contract,
where possible, to cover more of our
smaller offices and stores.

Transport11

Target: increase km/litre fuel used

Base year: 2015 – 2016

Target: 14% improvement

Over the next five years we will track our
fuel usage against the distance that our
haulage fleet travels. Our vehicles will be
monitored within four categories (split by
vehicle type), allowing a detailed analysis
of how efficiently we are transporting
our goods.

10 This target covers electricity and hfc releases.
11 This target covers our haulage owned fleet only.

Mandatory GHG reporting notes
The data disclosed is in conformance with
the Companies Act 2006 (Strategic Report
and Directors’ Report Regulations). GHG
emissions disclosed under the required
reporting categories fall within the
Group’s consolidated financial statements.
Scope 1 and 2 emissions have been
calculated on a global scale where the
Group has operation control using the
GHG protocol. The quantified emissions
are for the reporting year 1 March 2016
to 28 February 2017.

• Gas oil: Fuel is used in stand by
generators and onsite transport
(forklifts etc). Data for onsite transport
is calculated using actual fuel usage
from invoices and internal records of
gas oil deliveries. Generator fuel usage
has been estimated using generator
fuel demand per hour and activation
information.

• Diesel: Data is calculated based

on actual fuel consumption taken
from invoices.

• Company car: Data is primarily

calculated for the Group using data
logged in our Concur system which
records distance travelled, and vehicle
information for each business travel
expense claimed. Any company cars
not logged on this system have been
taken from independent mileage
claim records.

• HFC: Refrigeration emissions have

been calculated from the F-Gas register
for applicable plant where provided.
Where this is not possible, leakages
have been estimated using DECC
leakage tables. Emissions for plant not
affected by this regulation (smaller
systems) have been calculated using
data provided by full service records.
Where service records were not
available for a very small number of
shops, refrigeration losses have been
estimated using DECC leakage tables.
For a very small number of shops and
the Bangladesh office, details of the
systems were not known and therefore
estimation of emissions has not
been possible.

GHG emissions factors published by
DECC for 2016 have been used to
calculate GHG emissions.

Noted change in emissions
for 2015 – 2016
• Data accuracy: Some data for the

2015-2016 inventory has been updated
based on actual data or more accurate
data for some sources.

• Update in DECC emissions factors:

Emissions from the previous published
report for the period 2015 – 2016 have
been recalculated with the newly
published factors for 2016, affecting
the months of January and February
2016 (2016 factors were not available at
time of publishing). This has resulted in
a slight change in emissions compared
to those originally reported.

• Improved waste quantification:

Data relating to waste at the retail sites
has been updated for 2015 – 2016 as
waste audits were carried out this year,
providing a more accurate indication
of the emissions arising from
waste disposal.

Data records
• Natural gas and electricity: Data is
primarily calculated based on actual
metered consumption from invoices or
meter readings. Where actual metered
data is not available, for example if
energy is billed as part of a landlord
service charge, energy consumption
has been estimated using floor areas
and published benchmarks. Some data
has been estimated where quarterly
bills have not yet been published.

N Brown Group plc Annual Report & Accounts 2017Strategic reportGOVERNANCE OVERVIEW

Setting a high standard
of governance

My role is to ensure the Board
operates effectively, is well managed,
complies with the requirements of
the Code and has the correct balance
of diversity, skills and experience to
execute the strategy set by the Board.

Andrew Higginson
Independent Non-Executive Chairman

Dear Shareholder

The Board is committed to meeting a
high standard of corporate governance
and to comply with the principles in the
UK Corporate Governance Code issued
by the UK Financial Reporting Council
in 2014 (the ‘Code’). This Corporate
Governance statement explains the
key features of the Group’s governance
structure and how it complies with
the Code.

Statement of Compliance
with the Code
The Group applied the provisions of
the Code and the UK Financial Conduct
Authority’s Disclosure Guidance and
Transparency Rules throughout the year.
The following paragraphs explain how
the main principles of the Code have
been applied. The Directors’
Remuneration Report contains further
details on pages 72 to 85. In addition,
disclosures required by the Disclosure
Guidance and Transparency Rules
(rule 7.2.6) regarding share capital
can be found on page 61.

EMPLOYEE DIVERSITY (%)

BOARD COMPOSITION

40%

60%

Male 1,069

Female 1,573

Non-Executive Directors

Executive Directors

SENIOR MANAGEMENT (%)

COMMITTEE MEETINGS DURING 2016/17

48%

52%

Male 24

Female 22

Employee data as at 6 March 2017.

Audit committee

Remuneration committee

Nomination and Governance committee

CSR committee

N Brown Group plc Annual Report & Accounts 2017

Committees of the Board

Audit Committee

Ron McMillan
(Chair)

Lesley Jones

Richard Moross1

Remuneration
Committee

Fiona Laird
(Chair)

Ron McMillan

Richard Moross2

Nomination and
Governance Committee

Fiona Laird
(Chair)

Andrew Higginson

Lesley Jones

Ron McMillan

CSR Committee

Fiona Laird
(Chair)

Angela Spindler
(Chief Executive)

Theresa Casey
(General Counsel, Company
Secretary and Group Head of CSR)

Ralph Tucker3
(Product Director)

Ian Carr3
(Logistics Director)

Tanya McCartney3
(Head of Culture, Talent and Policy)

Activities
During the year the Committee
considered, amongst other things,
the Group’s approach to and
methodologies for provisioning
bad and doubtful debt and
inventory, the Group’s exposure
to corporate tax and VAT, the
capitalisation of software costs,
FCA compliance (including
regulatory provisioning), internal
controls and risk.

Activities
Key activities for the Committee
included support and oversight
of progress in relation to gender
pay gap reporting and the
introduction of the amended LTIP.
The Committee also reviewed the
remuneration packages of all
executive Directors and senior
executives and monitored the
approval of the remuneration
policy at the 2016 AGM.

Activities
Our activities this year have
included the appointment of
Richard Moross, a Board evaluation
exercise and a review of the
composition and membership
of the Committees in light of
the current composition, skills,
expertise and experience of
the Board.

Activities
We have agreed a new three year
strategy and have a new ethical
team in place to support this.
Theresa Casey has taken on the
role of Group Head of CSR and
we have set up a cross divisional
working group. Our CSR activities
have been further aligned with our
corporate activities to ensure we
are living our GUSTO values in
everything we do.

Outlook
The Committee will continue to
exercise oversight over published
financial information and the
effectiveness of audit.

It will also review the
implementation of Fit 4 the Future
and the introduction of new
Financial Services products.

Outlook
The Committee will build on the
work completed so far in relation
to gender pay gap reporting.
It will continue to monitor the
remuneration of Directors and
senior executives to ensure they
are appropriate.

Outlook
The chairship of the Committee
will move to Lesley Jones. In the
forthcoming year the Committee
will focus on Board development
and succession planning in order
to strengthen the Board further.

Together with our appointed
consultants we will seek to appoint
a suitably skilled and experienced
Non-Executive Director to
replace Fiona.

Outlook
Our focus for 2018 will be working
towards the challenges we have
set. We are also continuing to
increase transparency in our
supply chain, increasing our
environmental commitments and
preparing a revised Modern
Slavery Statement to be released
in October.

1 Appointed 6 October 2016.
2 Appointed 3 January 2017.
3 Appointed 13 April 2016.

N Brown Group plc Annual Report & Accounts 2017GovernanceBOARD OF DIRECTORS

Angela Spindler

Andrew Higginson

Craig Lovelace

Chief Executive

Independent
Non-Executive Chairman

Chief Financial Officer

Lord Alliance
of Manchester CBE

Non-Executive Director

Ivan Fallon

Non-Executive Director

Appointed to the Board
2013

Appointed to the Board
2012

Appointed to the Board
2015

Appointed to the Board
1968

Appointed to the Board
1994

Relevant skills,
qualifications and
experience
Angela was appointed Chief
Executive Officer in July 2013
and has over 30 years of
consumer facing business
experience and 20 years of
retail experience. This includes
roles at Coca Cola, Mars Inc,
Asda, Debenhams and the
Original Factory Shop.
Angela studied at
Manchester University.

Relevant skills,
qualifications and
experience
Andrew was appointed a
Director in July 2012 and
became Chairman in
September 2012. Andrew
spent over 20 years in
executive retail roles,
including positions with
Laura Ashley Holdings,
The Burton Group and Tesco.

Relevant skills,
qualifications and
experience
Appointed in May 2015.
Formerly Group Chief
Financial Officer for General
Healthcare Group Ltd since
2011 and prior to this, held
a number of senior UK and
international finance roles at
Regus Plc, Electronic Arts Inc
and PwC. Craig is a fellow of
the ICAEW.

Relevant skills,
qualifications and
experience
Appointed a Director
and Chairman in 1968.
Stood down as Chairman
on 1 September 2012.
Co-founder and former
Chairman of Coats Viyella Plc.
Lord Alliance holds numerous
honorary doctorates including
awards from Heriot-Watt
University and the University
of Manchester.

Relevant skills,
qualifications and
experience
Appointed a Director in 1994.
Ivan was Chief Executive of
Independent News & Media
(UK) until March 2010 and a
leading financial journalist.

Key strengths
Change management

Retail

Multi-channel retail

Key strengths
Retail

Strategy

Finance

Strategy development

Board governance

Management

Marketing

Business planning

Key strengths
Financial reporting

Financial strategy

Corporate finance

Restructuring

Tax and treasury

Business planning

Governance and compliance

Investor relations

Key strengths
Detailed knowledge
of N Brown

Retail

Key strengths
Financial journalism

Management

External appointments
Angela currently serves as a
Non-Executive Director of DIA,
which is listed on the Madrid
stock exchange.

Angela was a Non-Executive
Director of Manchester Airport
Group until 31 March 2016.

External appointments
Andrew is currently the
Chairman of WM Morrison
Supermarkets PLC and ITC
Luxury Travel. He is a
Non-Executive Director of
Woolworths Holdings
Limited (South Africa).

External appointments
None.

External appointments
Lord Alliance is also a director
of a number of private
companies, committees
and trustee bodies. He was
appointed a life peer in 2004.

Meetings attended
8/8

N Brown Group plc Annual Report & Accounts 2017Ron McMillan

Fiona Laird

Lesley Jones

Richard Moross

Theresa Casey

Independent Senior
Non-Executive Director

Independent
Non-Executive Director

Independent Non-
Executive Director

General Counsel and
Company Secretary

Appointed to the Board
2013

Appointed to the Board
2014

Appointed to the Board
2016

Appointed to the Board
2015

Relevant skills,
qualifications and
experience
Appointed a Director on
1 April 2013. Ron is Senior
Independent Director and
Chairman of the Audit
Committee.

Previously, he was the
Deputy Chairman of
PricewaterhouseCoopers
in the Middle East and
Northern Regional
Chairman of the UK firm.

Relevant skills,
qualifications and
experience
Appointed a Director
on 1 April 2013. Fiona is
Chief Human Resources
and Communications Officer
for Newell Brands based in
New Jersey, USA. Fiona
previously served at Unilever
as Senior Vice President of
global Human Resources
as well as in numerous
other compensation and
benefits, labour relations
change management,
communications and
legal roles.

Relevant skills,
qualifications and
experience
Retired from executive life in
January 2014 after 30 years
in relationship and risk
management at Citigroup
and latterly as Chief Credit
Officer for RBS Group Plc
from 2008 until January 2014.

Relevant skills,
qualifications and
experience
As the CEO and founder
of Moo.com Richard brings
significant expertise in digital
retailing and technology.
Before founding MOO,
Richard worked for the design
company Imagination. Other
past companies include
sorted.com and the BBC.

Richard was awarded an MBE
in 2015 for ‘Services to
Entrepreneurship’.

Relevant skills,
qualifications and
experience
Joined the Group in January
2015. Admitted as a solicitor
in 1997, Theresa has held a
number of legal and company
secretarial roles in the
financial services and retail
sectors, including the
Co-operative Bank, Shop
Direct and Brown Shipley
Private Bank.

Key strengths
Finance

Financial reporting

Governance

Risk management

Key strengths
Human resources

Key strengths
Finance

Executive remuneration

Governance

Leadership development

Risk management

Change management

Key strengths
Digital retail

Technology

Change management

Entrepreneurship

Key strengths
Retail and financial services
compliance

Retail and financial legal
knowledge

Company secretarial practice

External appointments
Ron is also Chairman of the
Audit Committee of B&M
Value Retail SA, 888 Holdings
Plc and SCS PLC.

External appointments
None

External appointments
Lesley was appointed as
Non-Executive Director and
Board Risk Committee Chair
at Close Brothers in
December 2013.

External appointments
Richard served on the Board
of Seedcamp and was a
Non-Executive Director of
Ladbrokes PLC between
2012 and 2016.

External appointments
None.

Meetings attended
8/8

Meetings attended
3/3

Meetings attended
8/8

Indicates member of the:

Audit Committee

Nomination and
Governance Committee

Remuneration
Committee

CSR Committee

Committee chair

N Brown Group plc Annual Report & Accounts 2017Governance

Details of outstanding employee share
options and the operation of the relevant
schemes are shown in note 29 on pages
116 to 117. The Directors have no current
plans to issue shares other than in
connection with employee share options.

2017 annual general meeting
The annual general meeting will be held
at 12:30pm on Tuesday, 18 July 2017.
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 pages 58 and 59. With
regard to the appointment and
replacement of Directors, the Company
is governed by its Articles of Association,
the Code and the Companies Act.

At the 2017 annual general meeting
all of the Directors will retire and will
offer themselves for re-election with
the exception of Ivan Fallon.

The Directors recommend a final dividend
of 8.56p per share (2016, 8.56p) for the
year ended 4 March 2017, the net cost of
which will be £24.2m (2016, £24.2m). The
dividend will be paid on 4 August 2017.

Movements in reserves are shown in
the Statement of Changes in Equity
on page 93.

Composition of the Group
During the year there were no corporate
acquisitions or disposals.

Share capital
Details of the Group’s issued share capital
are shown in note 24 on page 114.

The Group has one class of ordinary shares
which carry no fixed income. Each share
carries the right to one vote at general
meetings of the Group. 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 Company’s
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 Group’s share
capital and all issued shares are fully paid.

The Directors who served throughout the year in review were as follows:

Andrew Higginson

Non-Executive Chairman

Lord Alliance of Manchester CBE

Non-Executive Director

Angela Spindler

Craig Lovelace

Ivan Fallon

Fiona Laird

Chief Executive Officer

Chief Financial Officer

Non-Executive Director

Simon Patterson

Non-Executive Director (resigned 13 April 2016)

Ron McMillan

Lesley Jones

Non-Executive Director

Richard Moross

Non-Executive Director (appointed 6 October 2016)

DIRECTORS’ REPORT

Activities and results
The Directors have pleasure in presenting
their Annual Report and audited financial
statements for the year ended 4 March
2017. Some of the information required to
be part of the Directors’ Report can be
found elsewhere in this document as
detailed in the following paragraphs
and is incorporated into this report by
cross-reference.

Management Report
This Directors’ Report, together with the
Strategic Report set out on pages 1 to 55,
form the Management Report for the
purposes of DTR 4.1.5R.

Strategic Report
The Strategic Report sets out a review of
the business of the Group during the year
ended 4 March 2017 and the position of
the Group at the end of that period to
enable shareholders to assess how the
Directors have performed their duty
under section 172 of the Companies Act.
The review also describes the principal
risks and uncertainties facing the Group,
provides a fair review of the Group’s
business at the end of the financial
year and an indication of likely future
developments in the business.

Risk management
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. The Board also
identifies and reviews key business risks.
Further detail can be found on pages
30 to 35.

UK Corporate Governance Code
As required by the UK Corporate
Governance Code 2014 (the ‘Code’),
pages 16 to 17 provide an explanation of
the basis on which the Group generates
value and preserves it over the long term
(its business model) and its strategy for
delivering its objectives. The Corporate
Governance Statement on pages 64 to 66
forms part of this Director’s Report.

Results, dividends and reserves
The financial statements set out the
Group’s results for the year ended 4 March
2017 and are contained in pages 90 to 119.

An interim dividend of 5.67p per share
(2016, 5.67p) was paid on the ordinary
shares of the Group on 13 January 2017.
The net cost of this dividend was £16.0m
(2016, £16.0m).

N Brown Group plc Annual Report & Accounts 2017Richard Moross joined the Board in
October 2016 and shareholders are invited
to ratify his appointment at the 2017 AGM.

Details of Directors’ interests (beneficial
and non-beneficial) in shares of the Group
are given in the Remuneration Report
on page 84 and are deemed to be
incorporated into this report by
cross-reference.

The powers of the Directors are described
in the Board terms of reference and the
Corporate Governance Statement on
pages 64 to 66. The terms of reference
for the Board and its Committees are
available on the Group’s website
www.nbrown.co.uk

Other than a contract of service, no other
Director had any interest in any disclosable
contract or arrangements with the Group
or any subsidiary Company either during
or at the end of the year.

Directors’ and officers’ liabilities
The Company’s Articles of Association
provide that, in so far as the law permits,
every Director of the Group or associated
Company may be indemnified by the
Company against liability. In accordance
with section 236 of the Companies Act,
qualifying third party indemnity provisions
are in place for the Directors in respect of
liabilities incurred as a result of their office,
to the extent permitted by law. In addition,
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. Both the insurance
and indemnities applied throughout the
financial year ended 4 March 2017 and
through to the date of this report.

Disclosure of information to auditors
The directors who held office at the date
of approval of this directors report confirm
that, so far as they are each aware, there is
no relevant audit information of which the
Company’s auditor is unaware, and each
director has taken all the steps that he or
she ought to have taken as director to
make himself aware of any relevant audit
information and to establish that the
Company’s auditor is aware of that
information.

Major shareholders
In addition to the Directors’ shareholdings shown in the Remuneration Report on page
84 and in accordance with Chapter 5 of the Disclosure Guidance and Transparency
Rules, the following notifications had been received from holders of notifiable interests in
the Group’s issued share capital at 13 April 2017:

Shareholder

Nigel Alliance OBE

Invesco Perpetual Asset Management

UBS Global Asset Management

Governance
The Board is committed to maintaining
high standards of corporate governance.
Further details are contained in the
Corporate Governance Statement on
pages 64 to 66.

Corporate social responsibility
and greenhouse gas emissions
Details on corporate social responsibility
and greenhouse gas emissions are set out
on pages 46 to 55.

Charitable and political donations
During the year, the Group made
charitable donations of £95,902 (2016,
£13,315). No political donations have been
made (2016, nil). No contributions have
been made to non-EU political parties
(2016, nil).

Auto-enrolment and
Stakeholder pension
With effect from 1 November 2015,
Zurich was appointed as provider for all
qualifying employees. As at 31 May 2017
85.6% of all employees were members of
a qualifying pension scheme with 1,140
employees being auto-enrolled as at the
date of this report. At the date of this
report the opt out rate is 4.1%.

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 20 on page 110. The
Group’s risk management policies and
procedures and the table of principal risks
and mitigations can be found on pages
32 to 35.

Holding
share capital

31,489,256

28,760,449

16,778,791

% of issues

11.07

10.11

5.90

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
Group on giving 12 months’ notice. There
are no agreements between the Group
and its Directors or employees that
provide for additional compensation for
loss of office or employment that occurs
because of a takeover bid. No relevant
events were reported in the year.

Significant 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.

Independent auditor
The Group’s independent auditors,
KPMG LLP (‘KPMG’), have indicated their
willingness to continue in office and the
Audit Committee has recommended that
KPMG remain in office. A resolution to
re-appoint the independent auditors will
be proposed at the AGM.

The auditor’s fees for both audit and
non-audit work are given in the Audit
Committee report on page 69.

N Brown Group plc Annual Report & Accounts 2017GovernanceDIRECTORS’ REPORT CONTINUED

Voting rights and restrictions
on transfer of shares
None of the ordinary shares in the
Group carry any special rights with regard
to control of the Group. There are no
restrictions on transfers of shares
other than:

• 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.

Amendment of the Company’s
Articles of Association
The Company’s Articles of Association
may only be amended by a special
resolution at a general meeting of
shareholders. Where class rights are
varied, such amendments must be
approved by the members of each class
of shares separately. The Company
currently only has one class of share.

Powers of the Directors
The Directors are responsible for the
management of the business of the
Company and may exercise all powers
of the Company subject to applicable
legislation and regulation and the
Company’s Articles of Association.

At the 2016 annual general meeting, the
Directors were given the power to issue
new shares up to a nominal amount of
£10,442,189. This power will expire on
the earlier of the conclusion of the 2017
annual general meeting or 18 July 2017.
Accordingly, a resolution will be proposed
at the 2017 annual general meeting to
renew the Company’s authority to issue
new shares.

Directors were also given the power to
issue new issue shares up to a further
nominal amount of £10,442,189 in
connection with an offer by way of a rights
issue. This authority too will expire on the
earlier of the conclusion of the 2017 annual
general meeting or 18 July 2017, and a
resolution will be proposed at the 2017
annual general meeting to renew it.

Approval was also given at the 2016
annual general meeting for a certain
number of shares up to a maximum
nominal value of £1,566,328 – to be
allotted pursuant to the authority granted
to Directors set out above without being
covered by statutory pre-emption rights
regime. As with the previously mentioned
approvals, this authority too will expire on
the earlier of the conclusion of the 2017
annual general meeting or 18 July 2017,
and a resolution will be proposed at the
2017 annual general meeting to renew
this authority.

As in previous years, authorisation for the
Directors to buy back the Company’s
shares will not be sought at the 2017
annual general meeting.

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. The shares held by the trust are
used in connection with the Group’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 trust. The
trustees may, upon the recommendation
of the Company, accept or reject any offer
relating to the shares in any way they see
fit, without incurring any liability and
without being required to give reasons for
their decision. In exercising their trustee
powers the trustees may take all of the
following matters into account:

• the long-term interests of beneficiaries;
• the interests of beneficiaries other than

financial interests;

• the interests of beneficiaries in their
capacity as employees or former
employees or their dependants;

• the interests of persons (whether or not

identified) who may become
beneficiaries in the future; and

• considerations of a local, moral, ethical,

environmental or social nature.

Going concern
The Directors have adopted the going
concern basis in the financial statements
and their opinion is explained on pages
98 and 99.

Viability statement
In accordance with provision C.2.2 of the
Code, the Directors have assessed the
longer term viability of the Group and can
confirm that they have a reasonable
expectation that the Group will continue to
operate and meet its liabilities as they fall
due for the three year period from approval
of this Annual Report.

The Group uses a three year timescale to
forecast its strategic plan on a rolling basis,
as it is felt that a longer period would not
produce a reliable result given the current
pace of development both within the
Group and the wider retail sector in which it
operates. The Directors’ assessment has
been made with reference to the Group’s
current position and prospects, the Group’s
strategy, the Board’s risk appetite and the
Group’s principal risks and how these are
managed, as detailed in the Corporate
Governance Report.

The strategy and associated principal risks
underpin the Group’s three year plan and
scenario testing, which the Directors review
at least annually. The three year plan makes
certain assumptions about our core product
and financial services growth drivers,
margins and operating costs, together with
the Group’s cash flows, general liquidity and
other key financial ratios. Although the
strategic plan reflects the Directors’ best
estimate of the future prospects of the
business, they have also tested the potential
impact on the Group of a number of
scenarios over and above those included in
the plan, by quantifying their financial impact
and overlaying this on the detailed financial
forecasts in the plan. The plan has been
subjected to severe but plausible stress tests
using four primary downside scenarios
which have been derived as part of the
Board’s review of the Group’s principal risks
detailed in the Corporate Governance
Report. They represent ‘severe but
plausible’ circumstances that the Group
could experience. The stress tests apply a
range of sensitivities to our headline interest
rate, bad debt levels, Group revenue
sensitivities and current tax positions;
reflecting the principal risks of the business,
primarily through a reduction in the credit
activities of the Group, a negative potential
customer impact arising from increased
LIBOR rates, potential trading restrictions
dealing with the impact of a cyber attack
and negative outcomes from a number of
tax positions we are currently defending.

N Brown Group plc Annual Report & Accounts 2017The three year plan review is solidly
underpinned by the regular Board
briefings provided by the Group’s
Operating Board and the discussion of
any new strategies undertaken by the
Board in its normal course of business.
These reviews consider both the market
opportunity and the associated risks,
principally the ability to operationally
deliver any new initiatives, to manage
its working capital performance and the
level of financial resources available to
the Group. Implausible scenarios, such
as multiple circumstances occurring at
the same time are assumed to not occur.
The Directors do not consider it plausible
that any of the key risks would crystallise
together in a way that would create a
worst outcome over the three year
assessment period. In the unlikely event
of multiple risks occurring and having a
particularly severe effect on the Group,
all potential actions such as constraining
capital spending and reducing payments
to shareholders would be taken on a
timely basis. Thus, the Directors believe
it has the early warning mechanisms to
identify the need for such actions and the
ability to implement them on a timely
basis if necessary.

Statement of Directors’ responsibilities
in respect of the Annual Report and the
financial statements
The Directors are responsible for
preparing the Annual Report and the
Group and parent Company financial
statements in accordance with applicable
law and regulations.

Company law requires the Directors to
prepare Group and parent Company
financial statements for each financial year.
Under that law they are required to
prepare the Group financial statements in
accordance with IFRSs as adopted by the
EU and applicable law and have elected to
prepare the parent Company financial
statements in accordance with UK
Accounting Standards, including FRS 101
Reduced Disclosure Framework.

Under Company law the Directors must
not approve the financial statements
unless they are satisfied that they give a
true and fair view of the state of affairs of
the Group and parent Company and of
their profit or loss for that period.

In preparing each of the Group and
parent Company financial statements,
the Directors are required to:

Responsibility statement
We confirm that to the best of our
knowledge:

• select suitable accounting policies
and then apply them consistently;
• make judgements and estimates that

are reasonable and prudent;

• for the Group financial statements,

state whether they have been prepared
in accordance with IFRSs as adopted
by the EU;

• the financial statements, prepared in
accordance with the relevant financial
reporting framework, give a true and
fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken
as a whole; and

• for the parent Company financial

• the Strategic Report and Directors’

Report, taken together, include a fair
review of the development and
performance of the business and the
position of the Company and the
undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties that
they face; and

• the Annual Report, taken as a whole, is
fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Company’s
position and performance, business
model and strategy.

By order of the Board

Craig Lovelace
Chief Financial Officer
9 May 2017

statements, state whether applicable
UK Accounting Standards have been
followed, subject to any material
departures disclosed and explained
in the parent Company financial
statements; and

• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Group and the parent Company will
continue in business.

The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the parent
Company’s transactions and disclose with
reasonable accuracy at any time the
financial position of the parent Company
and enable them to ensure that its
financial statements comply with the
Companies Act 2006. They have general
responsibility for taking such steps as are
reasonably open to them to safeguard the
assets of the Group and to prevent and
detect fraud and other irregularities.

Under applicable law and regulations,
the Directors are also responsible for
preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report
and Corporate Governance Statement
that comply with that law and those
regulations.

The Directors are responsible for the
maintenance and integrity of the
corporate and financial information
included on the Company’s website.
Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.

By order of the Board

Theresa Casey LL.B (Hons) (Solicitor)
Company Secretary
9 May 2017

N Brown Group plc Annual Report & Accounts 2017Governance
CORPORATE GOVERNANCE STATEMENT

Introduction
This corporate governance statement
explains the key features of the Group’s
governance structure and how it complies
with the UK Corporate Governance Code
(the ‘Code’). This statement also includes
items required by the Listing Rules and the
Disclosure Guidance and Transparency
Rules (‘DTRs’). Except as specifically
highlighted within this statement the
Directors consider that the Group has
throughout the year complied with the
provisions of the Code.

Leadership
The Board comprises nine Directors of
whom seven are Non-Executive including
the Chairman. Of the seven Non-Executive
Directors, Lord Alliance of Manchester
and Ivan Fallon are not considered by
the Board to be independent.
Full biographical details of all Directors
appear on pages 58 and 59.

The members of the Board are named
below. The Board met eight times during
the year. Directors’ attendance at Board
meetings was as follows:

Andrew Higginson
Lord Alliance of Manchester CBE
Angela Spindler
Ivan Fallon
Fiona Laird
Simon Patterson (resigned April 2016)
Ron McMillan
Lesley Jones
Craig Lovelace
Richard Moross

Attendance
8/8
8/8
8/8
8/8
8/8
1/1
8/8
8/8
8/8
3/3

Committees
The Board delegates authority to a
number of Committees to deal with specific
aspects of management and to maintain
supervision over the internal control policies
and 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 Committee meeting, at which they are
ratified. The following Committees of the
Board have been established:

• an Audit Committee;
• a Remuneration Committee;
• a Nominations and Governance

Committee; and

• a Corporate Social Responsibility

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.

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, where necessary, delegated
operational matters to its Committees and
sub-Committees, and to its Executive and
Operational Directors and senior officers.
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
for 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.

The Board governs through clearly
mandated Committees, accompanied by
robust monitoring and reporting systems.

Responsibilities
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, Angela Spindler, who is
responsible for the Group’s operational
performance. Equally there is a clear
distinction between the Chair, the Senior
Independent Director and the Non-
Executive Directors. The table below
summarises the position:

Chair Leader of the Board.

Responsible for Board effectiveness
including agendas, Board
composition and Board meetings.

CEO Head of operational matters.
Leader of the executive team.

SID

Point of contact for shareholders
if required.

Co-ordinator of NED only
meetings.

NEDs Provide constructive challenge

and alternative views to the Board.

Evaluate the performance
of the Chair.

Board activities

Some of the key activities that the Board has covered over the past year are:

Strategy

Stakeholder issues

Development of a strategy tracker.

Oversight of the Fit 4 the Future
development.

In depth reviews of strategy in key areas
of the business such as logistics and retail.

Examining the results of a colleague
engagement survey and talent mapping.

Successfully recruiting Richard Moross
as Non-Executive Director.

Approving the Annual Report.

Operational

Governance

Re-evaluating the Company’s risk
management processes and risk
appetite to ensure they are still
appropriate.

Reviewing the governance structure
of the Company.

Assessing the effectiveness of
current governance arrangements
for outsourcing.

Reviewing a three year financial
plan of the business.

Assessing marketing return
on investment.

Focused updates on various areas
of the business, such as retail stores
and traditional brands.

Regulatory

Oversight of the successful FCA
application.

Review of the tax and pensions
provisions of the Company.

Assessment of the viability statement,
Group contingent liabilities, treasury
policy and regulatory provisions.

N Brown Group plc Annual Report & Accounts 2017The Chairman was considered independent
at the time of his appointment.

The Board understands the need for
Non-Executive Directors to be and 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 4 March 2017 were:

• Andrew Higginson (Chairman);

• Lord Alliance of Manchester;

• Ivan Fallon;

• Fiona Laird;

• Simon Patterson (resigned April 2016)

• Richard Moross

(appointed October 2016)

• Ron McMillan

(Senior Independent Director); and

• Lesley Jones

A number of Non-Executive Director
only meetings were held this year to
allow NEDs to discuss matters without
the Executive Directors present.

Day-to-day management of the Group’s
activities is delegated to the operational
board, known as the Operating Board, on
which Angela Spindler and Craig Lovelace
sit as Chief Executive Officer and Chief
Financial Officer respectively.

In November the members of the Board
met with the Operating Board 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.

Effectiveness
The Board considers that, throughout the
year, at least half of the Board, excluding
the Chairman, comprised independent
Non-Executive Directors and that the
composition of the Board had the
necessary balance of executive and
Non-Executive Directors to provide
the requisite skills, experience, challenge
and judgement appropriate for the
requirements of the business and full
Board effectiveness.

The composition of the Board sub
Committees is regularly reviewed and has
been refreshed part way through this year.
Where appropriate, the Committees will
invite others to attend.

The appointment of Richard Moross,
our most recent Board appointment,
further strengthens the digital skills
and knowledge of the Board, thereby
reflecting our digital first strategy.

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 in terms of relevant
skills, experience, ethnicity and gender.
The Board now comprises six male
Directors and three female Directors. The
Board continues 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.

We currently have 33% female diversity
at Board level and 30% on the Operating
Board. This means we are already in line
with the 33% target for 2020 set by the
Davies report, and significantly higher than
the current FTSE 250, who have achieved
representation at 20.4%. We believe that
gender representation makes good
business sense, given that women make
up over half of the UK population and
almost 60% of our total workforce.

Strengthening our executive pipeline
remains a priority for us and we continue
to open up new opportunities for women
in the business, working with head-hunters
and agencies that can provide true gender
diversification in their candidate bases.

To provide role models in the business and
break the glass ceiling we are members of
‘Women on Boards’. Our aim is to allow

development of Board Directors and to
allow Directors to take up Non-Executive
roles in other businesses where
opportunities arise.

At the date of this report the gender split
(male/female, senior management and
entire workforce) is as per the table and
diagram below:

Board appointments
All appointments to the Board follow a
formal, rigorous and transparent process
to ensure we are appointing the best
possible candidate. Due regard is given to
the needs of the Board in respect of skills,
experience, independence and diversity.
The appointment of Richard Moross was
facilitated by external consultants
MWM Consulting LLP.

Appointments to the Board are made
solely on merit based on the skills and
experience offered by the candidate and
required by the role. This ensures that all
appointees have the best mix of skills and
time to devote themselves effectively to
the business of the Board and to discharge
their duties to the best of their ability.

Prior to appointment to the Board all
Directors are informed of the expected
time commitment. At the time of writing
there are no concerns that any of the
current Directors will be unable to
commit sufficient time to the role.
We have evaluated the commitments
of the Chairman and are satisfied he has
sufficient time to devote to his role.

External appointments or other significant
commitments of the Directors require the
prior approval of the Board. Details of such
external appointments can be found in the
Directors’ biographies set out on pages
58 and 59.

Senior management
All employees

Male

Heads
24
1069

% Split
52%
40%

Female

Heads
22
1573

% Split
48%
60%

SENIOR MANAGEMENT (%)

EMPLOYEE DIVERSITY (%)

48%

52%

Male 24

Female 22

Employee data as at 6 March 2017.

40%

60%

Male 1,069

Female 1,573

N Brown Group plc Annual Report & Accounts 2017Governance
CORPORATE GOVERNANCE STATEMENT CONTINUED

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 are in place at every meeting
for individual Directors to report and
record any potential or actual conflicts
which arise. The register of reported
conflicts is reviewed by the Board at least
annually. The Board has complied with
these procedures during the year.

Board development
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. The Company Secretary is
also 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.
Inductions to the business for new
Directors are designed to expose them
to all areas of the Group’s operations
but with particular emphasis on each
Director’s area of expertise.

Non-Executive Directors meet with
operational teams and the Operating
Board and undertake site visits to ensure
that they have the most up-to-date
knowledge and understanding of the
Company and its activities and to enable
the broader population of the Group to
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 own fiduciary duties and
obligations and have full and direct access
to the Company Secretary, who is a
qualified solicitor and who attends
all Board and Committee meetings
as Secretary.

The Chairman regularly reviews and
agrees with each Director their training
and development needs.

Board administration
Board papers include detailed
management reports from the Chief
Executive and the Chief Financial Officer,
management accounts, broker analyses,
compliance and regulatory briefings and
bespoke reports. A comprehensive pack
of papers is electronically circulated to
each Director not less than seven days
prior to each Board meeting. Budgetary
performance and forecasts are reviewed
and revised at each meeting. Outside of
the meeting there is a regular flow of
information between the Directors
including the weekly dissemination of
management information statistics.

Board evaluation
The Board, having carried out a
performance evaluation, believes
the performance of the Chairman
and Directors, and their commitment
to their respective roles, continues to
be fully effective and the Board and
its Committees continue to provide
appropriate oversight and challenge.

In accordance with Main Principle B.6 of
the Code an internal effectiveness review
of the Board and its Committees was
undertaken during the second half of the
year by way of a tailored, high-level
questionnaire which was distributed for
the Directors to complete.

The responses to the evaluation of the
Board and its Committees were reviewed
with the Chairman and then considered by
the Board. The overall view was that the
Board remains effective, positive and
cohesive and there has been progress in
relation to the areas for improvement
identified in the 2016 evaluation exercise.
As with all evaluations an action plan has
been agreed by the Chairman as a result
of the evaluation and, based on this, the
Board has agreed a set of objectives for
2017/18.

Beyond the annual evaluation, the
performance of the Executive Directors is
continuously monitored throughout the
year by the Chairman and the senior
Non-Executive Director.

Election of Directors
Pursuant to the Code, all Directors are
required to retire and submit themselves
for re-election annually. Accordingly, each
of the Directors will retire at the
forthcoming annual general meeting and
offer themselves for reappointment at that
meeting with the exception of Ivan Fallon
who will not be seeking re-election.

All Non-Executive Directors serve on
letters of appointment stipulating 3 year
terms, apart from Ivan Fallon who remains
on a three month rolling arrangement.
All appointments are terminable, without
compensation, on between three and
six months’ notice by either party and
are subject to other early termination
provisions without compensation, for
example in the event a Director is not
re-elected at the annual general meeting.

Accountability
The Directors have carried out a robust
assessment of the principle risks facing the
Company including those which would
threaten its business model, future
performance, solvency or liquidity. The
Board monitors the Company’s risk
management and internal control systems
and at least annually carries out a review of
the effectiveness and reports on the
review in the Annual Report.

The Audit Committee report on page 67
and the risk report on pages 30 to 35 set
out the position of the Board on the risk to
the Company, internal controls and its’
prospects in relation to this.

Remuneration
The Directors’ Remuneration Report
setting out the remuneration policy and
its implementation this financial year is
on page 72 to 85.

No Director is involved in the approval
of his or her own remuneration.

Details of Directors’ contract terms are
shown in the Remuneration Report on
pages 77 and 79. In accordance with
the Code, the Company has made the
terms and conditions of appointment
of the Non-Executive Directors available
for inspection.

Relations with shareholders
The Board recognises the importance of
good two way communications between
the Company and shareholders.
Accordingly, the Board welcomes the
opportunity to discuss the contents of this
report with shareholders at the N Brown
Group AGM, details of which are to follow.

Other matters
The Audit Committee report and Strategic
Report include additional information
which forms part of the Corporate
Governance Statement.

N Brown Group plc Annual Report & Accounts 2017AUDIT COMMITTEE REPORT

Ron McMillan
Chairman of the
Audit Committee

The Audit Committee

Member
Ron McMillan (Chairman)
Lesley Jones
Fiona Laird (resigned 6 October 2016)
Richard Moross

No. of meetings
4/4
4/4
1/1
1/1

The Committee met four times during the year and attendance
was as follows:

Responsibilities

Reviewing the integrity of the financial statements,
price sensitive financial releases and significant financial
judgements and estimates relating thereto;

Monitoring the scope of work, quality, effectiveness
and independence of the external auditors and approving
their appointment and fees;

Monitoring and reviewing the independence and activities
of the internal audit function;

Assisting the Board with the development and execution
of a risk management strategy, risk policies and exposures
and a risk register;

Dear Shareholder,
The Audit Committee acknowledges and embraces its role of
protecting the interests of shareholders as regards the integrity
of published financial information and the effectiveness of audit.

In so doing, the Committee exercises oversight of the Group’s
financial policies and reporting, monitors the integrity of the
financial statements and reviews and considers significant
financial and accounting estimates and judgements. The
Committee satisfies itself that the disclosures in the financial
statements about these estimates and judgements are
appropriate and obtains from the external auditor an
independent view of the key disclosure issues and risks.

In relation to risks and controls, the Committee ensures that
these have been identified and that appropriate responsibilities
and accountabilities have been set.

A key responsibility of the Committee is to review the scope
of work undertaken by the internal and external auditors and
to consider their effectiveness.

During the year, the Committee again oversaw the process
used by the Board to assess the viability of the Group, the
stress testing of key trading assumptions and the preparation
of the viability statement which is set out on pages 62 to 63
in the Directors’ Report.

The Committee has also considered the narrative at the front end
of the Annual Report and believes that sufficient information has
been provided to give shareholders a fair, balanced and
understandable account of the Group’s business.

Further information on the Committee’s responsibilities and the
manner in which they have been discharged is set out below.

I shall be available at the annual general meeting in July to answer
any questions you may have on this report and would like to thank
my colleagues on the Committee for their help and support
during the year.

Keeping under review the adequacy and effectiveness
of the Group’s internal financial controls and internal control
and risk management systems; and

Ron McMillan
Chairman of the Audit Committee

Making recommendations to the Board in relation
to the appointment of the external auditor.

N Brown Group plc Annual Report & Accounts 2017GovernanceAUDIT COMMITTEE REPORT CONTINUED

Committee composition
The Committee comprises three members, each of whom is an
independent Non-Executive Director. Two members constitute a
quorum. The Committee requires the inclusion of one financially
qualified member with recent and relevant financial experience.
The Committee chair fulfils that requirement. All members are
expected to have an understanding of financial reporting, the
Group’s internal control environment, relevant corporate
legislation, the roles and function of internal and external audit
and the regulatory framework of the business. As reflected in the
biographical details on pages 58 to 59, the Committee members
have significant experience of working in or with companies in
the retail, financial services and consumer goods sectors.

The members of the Committee during the year were:

• Ron McMillan (Chair)
• Lesley Jones
• Fiona Laird (resigned 6 October 2016)
• Richard Moross (appointed 6 October 2016)

Details of Committee meetings and attendances are set out
on page 67 and the timing of Committee meetings is set to
accommodate the dates of releases of financial information
and the approval of scope of and reviews of outputs from work
programmes executed by the internal and external auditors. In
addition to scheduled meetings, the chairman of the Committee
met with the CFO, the head of internal audit and the external
auditors on a number of occasions during the year.

Although not members of the Committee, Angela Spindler
as CEO, Craig Lovelace as CFO, the General Counsel and
representatives from the internal and external auditors attend
all meetings and, in addition, the Chairman of the Board
regularly attends meetings.

Committee activities in 2016/17
In discharging its oversight of the matters referred to in the
introductory letter to this report and as set out below, the
Committee was assisted by management, the General Counsel
and the internal and external auditors.

The recurring work of the Committee comprised:

• Consideration of the Annual Report and financial statements

of the Group;

• Consideration of the interim results report and non-statutory

financial statements of the Group for the half year;
• Consideration of the significant areas of accounting

estimation or judgement;

• Consideration of the significant risks included

in the Annual Report;

• Approval of the external auditors’ terms of reference,

audit plan and fees; and

• Approval of the internal audit plan.

The key matters considered by the Committee during
the year include the following:

Regulatory environment
The Group is regulated by the FCA under a licence granted on
21 September 2016. Changes in laws and regulations impact
the Group’s business, sector and market and the Committee
continues to review the outputs of work carried out by the
Group’s compliance function in order to satisfy itself that action is
being taken to address the changes that are required to comply
with the regulations. Provisions made for customer redress
require significant levels of estimation and judgement. The
Committee has considered the assumptions applied in recording
such provisions, including the complaint volume, complaint

uphold rate and average redress rates and consider the
provisions recorded to be appropriate. A priority for 2017 was
the oversight of more flexible and personalised financial services
products. These remain under development and the Committee
will carry this priority into 2018.

Capitalisation of software development costs
The Group’s Fit 4 the Future programme is ongoing and the
Committee will continue to review the treatment of the significant
software and project costs in order to satisfy itself that the
Group’s approach to capitalisation of these costs remains
appropriate. In this regard, the Committee has been assisted
by both internal and external audit.

Marketing costs
An objective for the Committee in 2017 was the review of marketing
investment. This responsibility was assumed by the Board.

Bad and doubtful debts
The Group’s methodology to determine provisions for bad
and doubtful debts in its credit ledgers is both complex and
judgemental. A significant part of the external audit is focused in
this area and the Committee seeks assurance from the finance
function and the auditors that the approach to provisioning is
consistent year on year or, if not, that changes are being made to
better reflect changing economic or commercial circumstances.

Tax exposures
The Group continues to have a number of open tax items with the
tax authorities and the calculation of the Group’s potential liabilities
or assets in respect of these continues to involve a degree of
estimation and judgement. The Board sets and oversees the
Group’s tax strategy including tax risk. In undertaking this task the
Group uses its tax advisers (Deloitte) and legal counsel. During the
year the Group’s tax advisers have kept the Committee appraised
of existing and emerging risks, and the Committee and the Board
have considered the appropriateness of related tax provisions and
assets and their disclosure in the Group’s financial statements.

Inventory Valuation
Provision is made where the net realisable value of stock is
estimated to be lower than the cost. The Committee recognises
that there is an element of uncertainty in relation to the
estimation of net realisable value but considers that, taking into
account historical experience, likely future selling values and the
availability of disposal channels, the provision is appropriate.

Internal controls
The Board has 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 against material misstatements, 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 Committee has helped the Board develop and
maintain an approach to risk management which incorporates
risk appetite, the framework within which risk is managed and
the responsibilities and procedures pertaining to the application
of the policy.

The Group is proactive in ensuring that corporate and operational
risk are identified and managed. A corporate risk register is
maintained which details:

1. The risks and impact they may have
2. Actions to mitigate
3. Risk scores to highlight the implications of occurrence
4. Ownership
5. Target dates for actions to mitigate

N Brown Group plc Annual Report & Accounts 2017A description of the principal risks is set out on pages 30 to 35.
The Board has confirmed that it has carried out a robust
assessment of the principal risks facing the Group, including
those which threaten its business model, future performance,
insolvency or liquidity.

The Board considers that the processes undertaken by the
Committee are appropriately robust, effective and in compliance
with the guidelines issued by the Financial Reporting Council.
During the year, the Board has not been advised by the
Committee, nor has it identified itself, any failings, frauds or
weaknesses in internal control which it has determined to be
material in the context of the financial statements.

The Committee continues to believe that appropriate controls
are in place throughout the Group, that the Group has a
well-defined organisational structure with clear lines of
responsibility and a comprehensive financial reporting system.
The Committee also believes that the Company complies with
the FRC guidance on risk management, internal control and
related financial business reporting.

Going concern
The Committee considered the going concern position
of the Group and the viability statement set out on page 62.
In so doing, the Committee ensured that the assumptions
underpinning forecasts were stress tested and that the factors
which impact risks and uncertainties were properly considered.

Other activities
During the year, the Committee also received policy papers
on anti-money laundering, anti-bribery and corruption, fraud
and whistleblowing.

Reviewing the draft interim and Annual Reports
The Committee considered in particular the following:

• The accounting principals, policies and practices adopted
and the adequacy of related disclosures in the reports;

• The significant accounting issues, estimates and judgements

of management in relation to financial reporting;
• Whether any significant adjustments were required

as a result of the audit;

• Compliance with statutory tax obligations and the

Group’s tax policy;

• Whether the information set out in the Strategic Report

was balanced, comprehensive, clear and concise and covered
both positive and negative aspects of performance; and
• Whether the use of ‘alternative performance measures’

observed IFRS measures.

Internal audit
The head of internal audit has a direct reporting line to the
Committee and attends all Committee meetings. During the
year, internal audit undertook a programme of work which
was discussed with and agreed by both management and the
Committee and which was designed to address both risk
management and areas of potential financial loss. Internal audit
also has established procedures within the business to ensure
that new risks are identified, evaluated and managed and that
necessary changes are made to the risk register.

During the year, the Committee received reports from internal
audit on the following topics:

• Fit 4 the Future
• Outsourcing providers
• Stock audits
• Retail stores
• Employee expenses
• Business continuity plan
• PCI compliance

• FCA compliance
• Group imports
• Warehouse expansion

project

• Risk management
• Fraud review

In relation to each of the above, internal audit made
recommendations for improvements, the vast majority of
which have been or are being implemented by management.

The Committee has evaluated the performance of internal audit
and has concluded that it continues to provide helpful and
constructive challenge to management and demonstrates a
commercial and constructive view of the business.

External auditors
KPMG were appointed as external auditors on 14 July 2015.
The partner who has been responsible for the audit since
KPMG were appointed is Stuart Burdass, a partner in the
Manchester office. The total fees paid to KPMG for the year
ended 27 February 2017 were £430,000, of which £110,000
was in respect of non-audit services. Further details are set
out in note 6 to the financial statements.

The Board’s policy in relation to the auditors undertaking
non-audit services is that they are subject to tender processes
with the allocation of work being done on the basis of
competence, cost effectiveness, regulatory requirements,
potential conflicts of interest and knowledge of the Group’s
business. KPMG LLP has, during the year provided non-audit
services in the form of pensions advisory work (a project which
commenced before they were appointed as auditors).
The Committee is satisfied that, in relation to these services,
KPMG LLP has taken actions to ensure that any potential
conflicts of interest are properly managed.

The Committee remains mindful of the attitude investors have
towards the auditors performing non-audit services and the new
legislation which is operative for accounting periods beginning on
or after 17 June 2016. This new legislation introduces a permitted
non-audit services fee cap of 70% of the average audit fee over a
consecutive three year period. This cap will come into affect for
the Group in the financial year ending February 2021.

The Committee has reviewed the performance of KPMG,
a process which involved Committee members, the Chairman,
the CEO, the CFO and senior members of the finance function
and the General Counsel.

The overall conclusion of the process was that KPMG’s work was
thorough and professional and it was, therefore, the Committee’s
recommendation that the reappointment of KPMG be put to
shareholders at the annual general meeting on 18 July 2017.
Given that this was only the second year of KPMG’s tenure as
auditors, the Board has no present plans to consider an audit
tender process.

The Committee reviewed the reports prepared by KPMG on
key audit findings and the control environment, as well as the
recommendations made by KPMG to improve processes and
controls together with management’s responses to those
recommendations.

N Brown Group plc Annual Report & Accounts 2017GovernanceNOMINATION AND GOVERNANCE COMMITTEE REPORT

Fiona Laird
Chair of the
Nomination and
Governance Committee

The Nomination and Governance Committee

Member
Fiona Laird (Chair)
Andrew Higginson
Lesley Jones
Ron McMillan
Simon Patterson (resigned 13 April 2016)

No. of meetings
1/1
1/1
1/1
1/1
0/0

The Committee met on one occasion during the year and
attendance was as above.

Responsibilities

Identifying and nominating candidates to fill Board vacancies
having evaluated the balance of skills, knowledge and
experience already on the Board and identified the
capabilities required for a particular appointment;

Succession planning, taking into account the skills
and expertise needed on the Board in the future;

Reviewing the structure, size and composition (including
the skills, knowledge and experience) of the Board and
making recommendations to the Board with regard to
any changes; and

Reviewing the leadership needs of the Group to ensure the
continued ability of the organisation to compete effectively
in the marketplace.

Priorities for 2018

Linking the long term strategy to succession planning.

Utilising the Board evaluation to develop succession
planning and training for Board members.

Identifying and nominating a suitable candidate
to replace Fiona Laird.

Dear Shareholder,
The objectives of the Committee are to ensure the Board
comprises individuals possessing the requisite skills, knowledge
and experience and to review and make recommendations to the
Board to ensure that the Company’s arrangements are consistent
with best practice corporate governance standards.

The Nomination and Governance Committee was chaired by me
throughout the year since the resignation of Simon Patterson on
13 April 2016. The other members of the Committee are currently
Andrew Higginson, Lesley Jones and Ron McMillan.

The formal terms of reference for this Committee require it to
make recommendations to the Board for appointments of
Directors including, when appropriate, the Chair 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 are invited to attend meetings
of the Committee.

During the year the Committee met on one occasion with full
attendance by all members. Activities undertaken during the
year included a review of the Committee’s terms of reference,
the company’s succession planning, recruitment of a new
Non-Executive Director and a Board evaluation.

The 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.

This year we are delighted to have recruited Richard Moross in
the position of independent Non-Executive Director. Richard
brings with him specialist skills in digital retailing which I believe
will be invaluable to the Board.

MWM Consulting LLP (‘MWM’) were appointed by the
Committee as external agents to assist in the discharge of its
duties and assisted the Committee with a comprehensive
external candidate search and selection process to find a suitable
replacement independent Director with the appropriate mix
of skills and experience. MWM has no other connection with
the Company.

As has been mentioned earlier in the Annual Report I will be
resigning from the Committee and the Board as soon as a
suitable replacement has been found.

Ivan Fallon will also be leaving the Board in July as he will not be
seeking re-election at the 2017 AGM.

Consultants have been engaged to commence the process for
my replacement. As Ivan Fallon is not considered independent
no replacement for him will be sought.

The new Chair of the Nomination and Governance Committee,
Lesley Jones, will report on this in more detail in the next
Annual Report.

Fiona Laird
Chairman of the Nomination and Governance Committee

N Brown Group plc Annual Report & Accounts 2017CSR COMMITTEE REPORT

Fiona Laird
Chairman of the
CSR Committee

The CSR Committee

Member
Fiona Laird (Chair)
Angela Spindler (Chief Executive Officer)
Theresa Casey
(Company Secretary and Group head of CSR)
Andrew York (Ethical Trading Manager – resigned 1 April 2016)
Ralph Tucker (Product Director)
Ian Carr (Logistics Director)
Tanya McCartney (Head of Culture, Talent and Policy)

No. of meetings
2/2
2/2
2/2

1/1
1/1
1/1
1/1

The committee met twice during the year and attendance
was as above.

Responsibilities

Reviewing and making recommendations to the Board
concerning matters of Group policy on all areas of
Corporate Social Responsibility (‘CSR’);

Reviewing and reporting on how we look after
our environment, source our products and work
with the community and our employees; and

Updating shareholders or a wider audience as necessary
on the work of the Committee.

Priorities for 2018

Introducing and overseeing the effectiveness
of the new 3 year CSR strategy.

Overseeing the implementation of the
Gender Pay Gap reporting.

Monitoring the delivery of ethical trading.

Dear Shareholder,
The Committee has enjoyed another busy and productive year.

We successfully launched the Group’s CSR Charter in 2015 to
highlight our passion for fair fashion, entitled ‘Taking Care of
Our World’. The Charter is designed to align with and implement
our three CSR pillars of ‘All People, One Planet, Every Product’.
We are delighted to report that progress is in line with our
expectations. Further detail on this is available in the CSR report
on page 46.

The Committee’s oversight of the Group’s CSR activities has
encouraged further alignment of our ethical policies with our
commercial with tangible results and benefits.

As is expected of a CSR Committee we continue to be involved
in a wide range of issues touching every area of the business.
Over the year the Committee has discussed modern slavery,
charity engagement, anti-bribery and corruption, living wage
and set new environmental targets amongst many others.

Our Modern Slavery statement was published in October and we
intend to build on this year on year to further reduce the risk of
slavery in our supply chain. The revised version of the statement
will be released in October providing an update on the actions
and initiatives we have in place to combat the risk of slavery in our
supply chain.

This year we refreshed the membership of the Committee.
In April 2016, we welcomed Ian Carr, Ralph Tucker and Tanya
McCartney to report on Planet, Product and People respectively.
In addition, Theresa Casey has been appointed the Group Head
of CSR and oversees operational progress on CSR matters.

There will be further changes in the coming months and I wish the
Committee the best of luck with their endeavours.

Fiona Laird
Chairman of the CSR Committee

N Brown Group plc Annual Report & Accounts 2017GovernanceDear Shareholder,
I am pleased to present the Directors’ Remuneration Report
for 2016/17 on behalf of the Board and to summarise the
Remuneration Committee’s main activities during the year.

This report contains the following parts:

• This ‘Annual Statement’, which identifies the key messages
on remuneration for the year under review and explains the
business context in which the Committee’s major decisions
during the period were taken;

• An ‘Annual Report on Remuneration’, which provides

shareholders with details of the remuneration that was actually
delivered to the Company’s Directors during 2016/17. This final
part of the report will be subject to an advisory vote at the
forthcoming annual general meeting; and

• The ‘Directors’ Remuneration Policy’ which was approved by
shareholders at the 2016 AGM and is included in this reports
for ease of reference.

The Group has undergone significant transformation and is keen
to ensure that the incentive arrangements remain appropriate.
The changes proposed last year were approved by shareholders
at the 2016 AGM and have therefore been implemented during
this financial year.

The Board believes that maintaining the highest standards of
corporate governance is essential to protecting shareholder
value; the alignment of remuneration with the forward looking
business strategy is an integral part of this process. As such the
Board fully debated and approved any payments or awards made
to Directors to ensure that the incentive plans in place
appropriately reward the delivery of our transformation plan
whilst ensuring alignment with shareholders. We also consulted
with our top ten shareholders and investor bodies on the change
and took on board the feedback.

DIRECTORS’ REMUNERATION REPORT

Fiona Laird
Chair of the
Remuneration
Committee

The Committee twice during the year and attendance was
as follows:

The Remuneration Committee

Member
Fiona Laird (Chair)
Ron McMillan
Richard Moross

Responsibilities

No. of meetings
2/2
2/2
1/1

Setting and reviewing the remuneration policy and
determining the total individual remuneration package
for all Executive Directors, the Company’s Chairman and
other designated senior executives;

Recommending and monitoring the level and structure of
remuneration for senior management having regard to pay
and employment conditions across the Group;

Approving the design of, and determining targets for, any
performance-related pay schemes operated by the Company
and approving the total annual payments made under such
schemes (in accordance with provisions of the Code);

Reviewing the design of all share incentive plans for approval
by the Board and shareholders;

Overseeing any major changes in employee benefits
structures throughout the Company or Group; and

Ensuring that the Company maintains contact as required
with its principal shareholders about remuneration.

Priorities for 2018

The Committee will continue to foster a close relationship
with shareholders in developing the remuneration policy;

The Committee will continue to monitor the remuneration
of Directors and ensure it is appropriate; and

The Committee will oversee the implementation of new
requirements in relation to gender pay gap reporting.

N Brown Group plc Annual Report & Accounts 2017Directors’ Remuneration Policy

This report sets out the information required by Part 4 of the
Schedule 8 to The Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008, as amended.
The report also satisfies the relevant requirements of the Listing
Rules of the Financial Conduct Authority, and describes how the
Board has applied the principles and complied with the provisions
relating to Directors’ remuneration in the Code.

It summarises the Committee’s remuneration policy for the
Executive Directors which was approved by shareholders at
the 2016 AGM and is binding for three years. The full Directors’
Remuneration Policy, approved for three years from 2016 AGM,
is shown on the following pages for ease of reference. Please note
that the information shown has been updated to take account of the
fact that policy is now approved and enacted rather than proposed.

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, are appropriate in
quantum and capable of attracting, motivating and retaining
Executive Directors. The policy aims 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 remuneration
packages are:

• aligned with the Group’s strategic plan;

• aligned with shareholders’ 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 shares; and

• linked to performance measured over annual and three-year

performance periods.

Remuneration outcomes for 2016/17
Annual bonus is paid 60% in cash and 40% deferred as a
conditional award of shares that vest at the end of three years
after the grant. The principal performance metric for the normal
annual bonus was based on Group profit. The Committee
determined that 43% of this element of the annual bonus targets
had been met. The remainder of the normal annual bonus
was based on meeting corporate and personal objectives
and the Committee determined that 63.18% of salary was
payable to the CEO and 54.53% of salary was payable to the
Chief Financial Officer.

The Committee reviewed the EPS and TSR performance of the
Company in respect of the 2014 Long Term Incentive Plan (‘LTIP’)
award. The Company was ranked below median against its peers
at the end of the three year performance period and did not
meet the threshold EPS targets, as a result of which the
award lapsed.

Upon her appointment the CEO was granted two one-off share
awards as detailed in the 2013 Annual Report. Vesting of the first,
over shares worth £520,000 at the time of grant, was subject to
employment conditions over two years which were met in the
prior year.

Vesting of the second award over shares worth £1,040,000
at the time of grant, was subject to the achievement of strategic
objectives measured over a period of three years as detailed in
our 2015 Annual Report, which were met in the year.

The Committee reviewed the salaries of the Executive Directors
in April 2017 and determined that the CEO and the Chief
Financial Officer’s salaries should be increased by 2%, in line
with the average increase received by the general workforce,
with effect from 1 June 2017.

LTIP awards with a face value of 150% of salary in respect of
Angela Spindler and 125% of salary in respect of Craig Lovelace
were granted in July 2016. Vesting of these awards is subject to
growth in adjusted EPS in excess of RPI (50% weighting), free cash
flow (30%) and revenue (20%). In 2017 Angela Spindler and Craig
Lovelace will again receive awards with a face value of 150% and
125% of salary respectively. The award will be granted in July 2017
and will be subject to the performance conditions set out above.

I will be available to answer any questions at the annual general
meeting in July and very much hope that you will support the
Annual Report on Remuneration at our forthcoming meeting.

I would like to thank all of my colleagues on the Remuneration
Committee for all their hard work over the last year.

I am delighted with and proud of the progress the Committee
has made during the last four years and I will be handing over
the reigns to my successor in due course.

Fiona Laird
Chair of the Remuneration Committee

N Brown Group plc Annual Report & Accounts 2017GovernanceDIRECTORS’ REMUNERATION REPORT CONTINUED

Summary of components of Executive Directors’ remuneration
The table below summarises the Committee’s policy for the main components of remuneration.

ELEMENT

Salary

PURPOSE AND
LINK TO STRATEGY

Reflects the performance
of the individual, their skills
and experience, and the
responsibilities of the role.

Provides an appropriate level
of basic fixed income.

Annual bonus Drives and rewards annual

delivery of financial, corporate
and personal goals.

Annual performance targets
are aligned to the long-term
strategic KPIs of the Company
and aimed at increasing
shareholder value, whilst being
prudent and safeguarding the
future of the Company.

Deferral provides alignment
with shareholders and assists
with retention.

OPERATION

MAXIMUM

PERFORMANCE ASSESSMENT

Reviewed annually, taking
account of absolute Group
profitability and performance
against personal and corporate
objectives.

Set with reference to the levels
of base salary for similar
positions with comparable
status, responsibility and skills
in competitor organisations
of comparable size and
complexity, in particular those
in the home shopping and
retail market sectors.

When reviewing salary
increases the Committee takes
into account the impact of any
increase to base salaries on the
total remuneration package.

Any changes normally take
effect from 1 June.

Targets are reviewed annually
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.

Bonuses will be paid 60% in
cash, with 40% deferred as a
conditional award of shares.

Vesting of future deferred
shares is at the end of three
years from the award of the
bonus, subject to continued
employment (save in ‘good
leaver’ scenarios).

The payment of any earned
bonus remains ultimately at the
discretion of the Committee.

Executives may also be
entitled to receive dividends
equivalents on vested shares.

Salary increases will normally
be in line with increases
awarded to other employees
of the Group.

None, although overall
individual performance is
a factor considered when
setting and reviewing salaries.

More significant increases may
be awarded at the discretion
of the Committee, for example:
where there is a change in
responsibilities or scope of
the role; to reflect individual
development and performance
in the role (e.g. for recent hires);
or in exceptional circumstances.

Chief Executive:
up to 150% of base salary p.a.

Other Executive Directors:
up to 125% of base salary p.a.

A significant majority of the
annual bonus will normally be
determined by reference to
performance against stretching
Group profit measures.

Additional targets linked to
corporate performance and
individual targets will be applied.

Personal objectives will be
measurable and linked to goals
that are consistent with the
Group’s longer-term goals.

Performance below threshold
results in zero payment.

Payment rises from 0% to 100%
of the maximum opportunity for
levels of performance between
threshold and maximum, with
50% of the maximum normally
payable for on-target
performance.

Includes a ‘clawback’
mechanism in the event of
material misstatement of the
Group’s financial results or
individual misconduct.

N Brown Group plc Annual Report & Accounts 2017ELEMENT

Long-term
incentive
plan ‘LTIP’.

PURPOSE AND
LINK TO STRATEGY

Provides appropriate incentives
to reward sustained success
through the achievement of
challenging business targets,
thereby aligning the interests
of shareholders and Executives.

OPERATION

MAXIMUM

PERFORMANCE ASSESSMENT

Normal maximum of
150% of salary.

Exceptional circumstances
maximum of 200% of salary.

Annual grants of performance
shares which vest, subject to
the Group’s performance,
measured over three years.

Participation and all awards
are subject to the discretions
given to the Committee in the
plan rules.

Executives may also receive
dividend equivalents on
vested shares.

The Committee retains the
discretion to subject the LTIP
awards to a holding period of
up to two years post vesting.

The performance conditions
for awards granted from
2016/17 onwards will be split
between growth in adjusted
EPS in excess of RPI (50% of the
award), free cash flow (30% of
the award) and revenue (20% of
the award). The Committee will
have the discretion to change
the weightings of measures,
or use different measures for
subsequent awards so that
they are directly aligned with
the Group’s strategic objectives
for each performance period.

Targets are set by the
Remuneration Committee prior
to each grant and will be based
on a sliding scale. For each
measure, performance below
threshold results in zero
payment. Payment rises from
25% at threshold to 100% of
the maximum opportunity at
a maximum performance level.

Includes a ‘clawback’
mechanism in the event of a
material misstatement of the
Group’s financial results or
individual misconduct.

These are broad based plans
and are not subject to
performance targets.

All-employee
share schemes
(SAYE and SIP)

All employees, including
Executives, are able to acquire
shares by participating in the
Group’s all-employee share
plan at the discretion of
the Committee.

The plans are subject to
statutory individual limits as
amended from time-to-time
or such lower limits as set by
the Group.

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.
Participation in the SIP may
also be offered.

Pension

Provides retirement benefits
that reward sustained
contribution.

The Company operates a
defined contribution plan and
may also provide cash pension
contributions or cash
supplements in lieu.

Up to 15% of salary as a
Company contribution to a
defined contribution pension
scheme and/or as a cash
allowance.

N/A.

Other
benefits

Provides a competitive package
of benefits that assists with
recruitment and retention.

Car and fuel allowance up
to £20,000 per annum.

N/A.

Other benefits will be in line
with market. The value of each
benefit is based on the cost to
the Company and is not
predetermined.

Main benefits currently include
private medical insurance and
a car allowance. Executive
Directors are eligible for other
benefits which are introduced
for the wider workforce on
broadly similar terms.

Any reasonable business related
expenses (including tax thereon)
can be reimbursed if determined
to be a taxable benefit.

Notes:
1
2

A description of how the Company intends to implement the policy set out in this table for 2017/18 is set out in the Annual Report on Remuneration.
The remuneration policy for the Executive Directors and other senior Executives is designed with regard to the policy for employees across the Group as a whole. However, there are
some differences in the structure of the remuneration policy for senior Executives. In general, these differences arise from the development of remuneration arrangements that are market
competitive for the various categories of individuals. They also reflect the fact that, in the case of the Executive Directors and senior executives, a greater emphasis tends to be placed
on performance-related pay in the market.
All-employee share plans do not have performance conditions. Executive Directors are eligible to participate in the SAYE and SIP on the same terms as other employees.
Copies of the LTIP rules are available on request from the Company Secretary.
LTIP awards granted prior to 2014 and LTIP awards prior to 2017 are subject to performance conditions described in the Annual Report on Remuneration.
The Company also operates share ownership guidelines requiring Executive Directors to acquire and hold a specified level of shareholding. The current level of holding expected
under the guidelines is described in the Annual Report on Remuneration.
Awards may be structured as nil cost options, conditional awards of shares and may be delivered through a Joint Share Ownership Plan structure.

3
4
5
6

N Brown Group plc Annual Report & Accounts 2017GovernanceDIRECTORS’ REMUNERATION REPORT CONTINUED

Selection of performance metrics and targets
All incentives are subject to the individual review and scrutiny
of the Committee, particularly in the case of share incentives,
both at award and vesting to ensure that performance has been
correctly adjudicated and to safeguard against excessive overall
reward. Variable pay and remuneration is linked to both corporate
and individual performance and is benchmarked to attract and
retain the highest quality people.

The annual bonus is designed to thoroughly stretch the
performance of the Executive and is linked to absolute growth in
annual Group 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 and 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’ contained in the Company’s strategic
long-term plan. This ensures they are aligned to the strategic
objectives of the Company and designed to increase shareholder
value, whilst being prudent and safeguarding the long-term
future of the Company.

For 2017, the Committee has decided to maintain a condition
based on growth in adjusted EPS, free cash flow and revenue
measures for the LTIP. Adjusted EPS is considered appropriate as
it is easily understood, is a key measure of financial performance
and closely aligned to the Company’s objective of driving
profitable growth. The measure takes account of fair value
adjustments to financial instruments (net of tax) as well as other
non-recurring exceptional items such as unplanned investments
in IT infrastructure, acquisitions and/or disposals. As the targets
are set as a rate of growth in excess of RPI it also takes into
account inflation. The free cash flow measure is defined as cash
flow generated from operations excluding receivables and is seen
as a key measure for N Brown to monitor the flows of cash in and
out of the business as well as providing an assessment of
underlying profitability. Revenue is a critical KPI for the business
and management have clear line of sight over this measure and
given that earnings measures make up the majority of the plan,
there is an appropriate balance to encourage revenue growth
whilst maintaining margin. The Committee retains the discretion
to change the performance measures to reflect its strategy.

The Committee considers the Group’s performance on
environmental, social and governance (‘ESG’) issues when setting
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.

Shareholding guidelines
It is the Board’s policy that Executive Directors build and retain a
minimum shareholding in the Company. Under these guidelines
the Chief Executive and the Chief Financial Officer are
respectively required to hold Company shares equal in value
(at the time of acquisition) to 200% and 100% of their base salary,
respectively, and to have met this guideline within five years
of appointment.

Details of the current shareholdings of the Executive Directors are
provided later in this report.

How employees’ pay is taken into account
The remuneration policy for the Executive Directors is designed
with regard to the policy for employees across the Group as a
whole. The Company’s ability to meet growth expectations and
compete effectively is dependent on the skills, experience and
performance of all of our employees. As a result, our employment
policies, remuneration and benefit packages for employees are
regularly reviewed. Whilst there are some differences in the
structure of the remuneration policy, these reflect individuals’
differing responsibilities, with the principal difference being the
increased emphasis on performance related pay for the more
senior Executives within the organisation.

Although the Committee does not consult directly with
employees on Directors’ pay, the Committee does take into
consideration the pay and employment conditions of all
employees when setting the policy for Directors’ remuneration.
The Committee is also mindful of any changes to the pay and
benefit conditions for employees more generally when
considering the policy for Directors’ pay.

Committee discretions
The Committee operates the Group’s variable incentive plans
according to their respective rules and in accordance with HMRC
rules where relevant. To ensure the efficient administration of
these plans and to be consistent with market practice, the
Committee will retain certain operational discretions.
These include:

• selecting plan participants;
• determining the timing of grants of awards and/or payment;
• determining the quantum of awards and/or payments
(within the limits set out in the policy table above);

• determining the extent of vesting based on the assessment

of performance;

• making the appropriate adjustments required in certain

circumstances (e.g. change of control, rights issues, corporate
restructuring events, and special dividends);

• determining ‘good leaver’ status for incentive plan purposes

and applying the appropriate treatment; and

• undertaking the annual review of weighting of performance
measures, and setting targets for the annual bonus plan and
LTIP from year to year.

If an event occurs which results in the Annual Bonus Plan,
Deferred Share Bonus Plan or LTIP performance conditions and/
or targets being deemed no longer appropriate (e.g. a material
acquisition or divestment), the Committee will have the ability to
adjust appropriately the measures and/or targets and alter
weightings, provided that the revised conditions or targets are
not materially less difficult to satisfy.

Any use of the above discretions would, where relevant, be
explained in the Annual Report on Remuneration and may, as
appropriate, be the subject of consultation with the Company’s
major shareholders.

Legacy arrangements
In approving the remuneration policy, authority is given to the
Company to honour any commitments previously entered into
with the current or former Directors in accordance with the relevant
plan rules, where applicable. It is also part of this policy that the
Company will honour payments or awards crystallising after the
effective date of this policy but arising from commitments entered
into at a time when the relevant individual was not a Director of the
Company. Details of any payments to former Directors will be set
out in the Annual Report on Remuneration.

N Brown Group plc Annual Report & Accounts 2017How shareholders’ views are taken into account
The Committee considers shareholder feedback received
regarding the Directors’ Remuneration Report and guidance
from shareholder representative bodies more generally.
As appropriate, the Committee also seeks feedback from
shareholders on specific matters. These views are key
inputs when shaping remuneration policy.

In developing the changes proposed to the policy last year,
the Committee engaged with its major shareholders and
representative bodies and took their opinions into consideration.

Executive Directors’ service agreements
and termination policy
It is the Company’s policy that Executive Directors should have
contracts with an indefinite term providing for a maximum of
12 months’ notice.

Name

Date of contract

Angela Spindler

1 July 2013

Craig Lovelace

6 January 2015

Potential termination payment
12 months’ salary
and benefits
12 months’ salary
and benefits

Assumptions:
1
2

Fixed pay = salary to be paid in year, benefits and pension provision.
On target = fixed pay plus target annual bonus (50% of the maximum) of 75%
of salary for the Chief Executive and 62.5% of salary for the Chief Financial Officer
plus target LTIP awards of 37.5% of salary for the Chief Executive and 31.25% for
the Chief Financial Officer.
Maximum = fixed pay plus maximum annual bonus of 150% of salary for the Chief
Executive and 125% for the Chief Financial Officer plus maximum LTIP awards of 150%
of salary for the Chief Executive and 125% for the Chief Financial Officer.
Salary levels (on which other elements of the packages are calculated) are based on
those effective from 1 March 2016 (£543,660 for the Chief Executive and £342,720
for the Chief Financial Officer).
The value of taxable benefits is based on an estimated cost of £19,000 in respect
of the Chief Executive and £18,000 for the Chief Financial Officer and includes
a car allowance and health insurance.
Pension provision is 15% of salary for the Chief Executive and 10% for the
Chief Financial Officer.

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. Neither 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. Furthermore, there are no special provisions providing
for additional compensation on an Executive Director’s cessation
of employment with the Company. Where the Director may be
entitled to pursue a legal claim, the Company will be entitled to
negotiate settlement terms that the Committee considers to be
in the best interests of the Company and to enter into a
settlement agreement to effect the terms agreed under the
service contract and any additional statutory or other claims.
The Committee may pay reasonable outplacement and legal
fees where considered appropriate.

Other than in certain ‘good leaver’ circumstances (including,
but not limited to, redundancy, ill-health or retirement or on a
change of control), no bonus would be payable unless the
individual remains employed and is not under notice at the
payment date. Any bonuses paid to a ‘good leaver’ would be
based on an assessment of their individual and the Company’s
performance over the period, and normally pro-rated for the
proportion of the bonus year worked.

Deferred bonus share awards will also normally lapse on cessation
of employment, unless the Executive Director is deemed to be a
‘good leaver’ by the Committee. Awards will vest early on a
change of control subject to the plan rules.

POTENTIAL REMUNERATION SCENARIOS FOR EXECUTIVE DIRECTORS
(£’000)

2016/17

2017/18

2,231

36%

1,231

16%

32%

632

2,321

36%

1,172

34%

670
15%
30%

369

1,281

16%

33%

36%

657

1,276

34%

730
15%
30%

403

100%

52%

28%

100%

51%

28%

100%

55%

32%

100%

55%

32%

y
a
P
d
e
x
F

t
e
g
r
a
T

m
u
m
x
a
M

y
a
P
d
e
x
F

t
e
g
r
a
T

m
u
m
x
a
M

y
a
P
d
e
x
F

t
e
g
r
a
T

m
u
m
x
a
M

y
a
P
d
e
x
F

t
e
g
r
a
T

m
u
m
x
a
M

Angela Spindler

Craig Lovelace

Angela Spindler

Craig Lovelace

Total Fixed Pay

Annual Bonus

Long-term Share Grants

N Brown Group plc Annual Report & Accounts 2017Governance

DIRECTORS’ REMUNERATION REPORT CONTINUED

The variable pay opportunity will be in accordance with the
Company’s approved policy as detailed above. However,
different performance measures and targets may be set for the
first year in the case of the annual bonus and long-term incentives
taking into account the responsibilities of the individual, and the
point in the financial year at which they joined. A new employee
may be granted normal annual share awards in the first year of
employment in addition to any awards made with respect to
prior employment being forfeited. Such awards would normally
be made shortly following an appointment (assuming the
Company is not in a close period).

If it is necessary to buy-out incentive pay, which would be
forfeited by reason of leaving the previous employer, in order to
secure the appointment, this would be provided for taking into
account the form (cash or shares), timing and expected value
(i.e. likelihood of meeting any existing performance criteria) of the
remuneration being forfeited and such other specific matters as it
considers relevant. Existing arrangements may be bought out on
terms that are no more favourable than the Committee considers
is required to provide reasonable compensation to the incoming
Director for the awards they will be losing. Existing plans will be
used to the extent possible (subject to the exceptional limits
contained in the plan rules), however, the Committee retains
discretion to agree bespoke arrangements and, if required, to
make use of the flexibility provided by the Listing Rules to make
awards without prior shareholder approval when buying out
existing entitlements. The service contract for a new appointment
would be in accordance with the policy for the current
Executive Directors.

In the case of an internal hire, any outstanding variable pay
awarded in relation to the previous role will be allowed to pay out
according to its terms of grant.

Fees for a new Chairman or Non-Executive Director will be set in
line with the approved policy.

With regards to long-term incentive awards, the LTIP rules
provide that other than in certain ‘good leaver’ circumstances,
awards lapse on cessation of employment. Where an individual is
a ‘good leaver’, the Committee’s policy for future LTIP awards will
be to permit awards to remain outstanding until the end of the
original performance period, when a pro-rata reduction will be
made to take account of the proportion of the vesting period that
elapsed prior to termination of employment, although the
Committee has discretion to partly or completely disapply
pro-rating in certain circumstances. On a change of control
awards would vest, subject to the extent to which the
performance conditions have been achieved and, normally,
pro-rating for time. The Committee has discretion to determine
‘good leaver’ treatment. In doing so, it will take account of the
reason for their departure and the performance of the individual.

For awards granted under the LTIP, awards lapse if cessation
occurs during the financial year in which an award is granted.
Thereafter awards held by good leavers may vest subject to
performance without pro-rating. On a change of control existing
awards would not be pro-rated.

Apart from service contracts, no Executive Director has
any material interest in any contract with the Company or
its subsidiaries.

Copies of Executive Directors’ service contracts (and also
Non-Executive Directors’ letters of appointment) are available
for inspection at the Company’s registered office on application
to the Company Secretary.

Recruitment of Executive Directors
Base salary levels will be set in accordance with the Company’s
remuneration policy, taking account of the Executive’s skills,
experience and their current remuneration package. Where
it is appropriate to offer a lower salary initially, a series of above
inflation increases to the desired salary positioning may be
given over subsequent years subject to individual and
Company performance.

Benefits and pension will generally be provided in accordance
with the approved policy, with relocation expenses and/or an
expatriate allowance paid for if necessary. For an overseas
appointment, the benefit and pension arrangements may be
tailored to reflect local market practice (subject to the overall
maximum limits set out in the policy table). Assistance with
relocation may be provided where appropriate. Tax equalisation
may also be considered as may payment of the Executive’s legal
fees in connection with the appointment.

N Brown Group plc Annual Report & Accounts 2017MAXIMUM

PERFORMANCE
ASSESSMENT

N/A.

Policy for Non-Executive Directors

ELEMENT

PURPOSE AND
LINK TO STRATEGY

OPERATION

Non-Executive
Directors’ and
Chairman’s
fees

Takes account of recognised
practice and set at a level that is
sufficient to attract and retain
high-calibre Non-Executives.

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 Chairman is paid a single fee for all his responsibilities.

The Non-Executives are paid a basic fee. The Chairs of
Committee and Senior Independent Director receive
additional fees to reflect their extra responsibilities.

Non-Executive Directors may not participate in any of
the Company’s share incentive schemes or performance-
based plans and are not eligible to join the Company’s
pension scheme.

Any reasonable business related expenses (including
tax thereon) can be reimbursed if determined to be a
taxable benefit and limited benefits relating to travel,
accommodation, secretarial support and hospitality
provided in relation to the performance of their duties.

When reviewing fee levels, account is taken of market
movements in Non-Executive Director fees, Board
Committee responsibilities, ongoing time commitments,
the general economic environment and the level of
increases awarded to the wider workforce.

In exceptional circumstances, additional fees may be
paid where there is a substantial increase in the time
commitment required of Non-Executive Directors.

If there is a temporary yet material increase in the time
commitment required of Non-Executive Directors, the
Board may pay additional fees on a pro-rata basis to
recognise the additional workload.

Non-Executive Directors’ letters of appointment
Non-Executive Directors are retained on letters of appointment. Other than the Chairman and Lord Alliance, whose letters of
appointment provide for six months notice in the event of early termination, all Non-Executive appointments are on three-year rolling
terms terminable upon three months’ notice. 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.

Brief details of Non-Executive Directors’ contracts are summarised below:

Name
Lord Alliance of Manchester CBE
Ivan Fallon
Andrew Higginson
Fiona Laird
Simon Patterson (resigned 13 April 2016)
Ronald McMillan
Lesley Jones
Richard Moross

Date of contract/
letter of appointment
16 May 2007
1 October 1994
3 July 2012
1 March 2013
13 March 2013
1 March 2013
30 September 2014
13 September 2016

Date current term
commenced
10 April 2016
10 April 2016
3 July 2016
1 April 2016
N/A
1 April 2016
1 October 2014
6 October 2016

Notice period
6 months
3 months
6 months
3 months
3 months
3 months
3 months
3 months

N Brown Group plc Annual Report & Accounts 2017GovernanceDIRECTORS’ REMUNERATION REPORT CONTINUED

Annual Report on Remuneration

This part of the report has been prepared in accordance with Part 3 of the revised Schedule 8 set out in The Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008 (as amended), and 9.8.6R of the Listing Rules. The Annual Report on
Remuneration will be put to an advisory shareholder vote at the 2017 annual general meeting. The information on pages 82 to 84 has
been audited.

The Remuneration Committee and its advisers
Members of the Remuneration Committee

Name
Fiona Laird (Chair)
Ron McMillan
Richard Moross

From

1 April 2013
1 April 2013
3 January 2017

To date
To date
To date

General Counsel and Company Secretary, Theresa Casey, acts as secretary to the Committee and the Chief Executive,
Angela Spindler, the Chair, Andrew Higginson, and a senior member of the People team, may also attend meetings by invitation.
However, no Director played any part in discussion about his or her own remuneration.

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 twice during the year. See page 72 for details of attendance.

Advisers
The Committee received advice from New Bridge Street (part of Aon plc). New Bridge Street was formally appointed by
the Committee.

New Bridge Street is a signatory to the Remuneration Consultants’ Group Code of Conduct, which sets out guidelines to ensure that
its advice is independent and free from undue influence. The Group received no other services from New Bridge Street or any other
part of the Aon group of companies, during the year. The fees paid to New Bridge Street in 2016/17 were £25,964 (2015/16: £40,512).
The Committee reviews the performance and independence of its advisers on an annual basis and is satisfied that the advice received
is objective and independent.

The advisers’ terms of engagement are available on request from the Company Secretary.

Consideration of matters
The Remuneration Committee has considered a number of factors when determining the application of the Remuneration Policy
including the average pay increases for the general workforce, market conditions and achievement of objectives.

Payments to past Directors and payments for loss of office
There have been no payments to past Directors or payments for loss of office during the year.

N Brown Group plc Annual Report & Accounts 2017Application of the remuneration policy for 2017/18

Base salary
The Executive Directors’ salaries were reviewed in April 2017. The salary increases take effect from 1 June 2017 for the CEO and CFO
and are set out below. The salary increases are in line with the average received by the general workforce.

Name
Angela Spindler
Craig Lovelace

Salary as at
1 October 2016
£543,660
£342,720

Salary as at
1 June 2017
£554,533
£349,574

Increase
2%
2%

Fees for the Chairman and Non-Executive Directors
As detailed in the remuneration policy, the Group aims to set remuneration for Non-Executive Directors at a level which is sufficient
to attract and retain Non-Executive Directors of the right calibre. Details of the fees are set out below:

Chair’s fees
Other Non-Executive Directors’ base fee
Senior Independent Non-Executive Director
Chair of a Committee’s fees

Fees as at
1 March 2016
£250,000
£47,000
£5,000
£5,000 – £8,000

Fees as at
1 June 2017
£250,000
£50,000
£5,000
£5,000 – £8,000

Increase
0%
6.4%1
0%
0%

1 The Non-Executive Director salary has been reviewed this year and an increase of 6.4% has been made to reflect that no increases were made in the five years prior.

Annual bonus plan performance targets
The annual bonus plan for 2017/18 will be payable 60% in cash and 40% as an award of deferred shares. Deferred bonus shares
will vest, subject to continued service, three years after award.

For 2017/18, the performance measures and weightings will be as follows:

Measure
Group profitability
Corporate objectives
Individual objectives

As a percentage of maximum bonus opportunity

Angela Spindler
70%
20%
10%

Craig Lovelace
70%
20%
10%

The personal objectives of the Executive Directors for 2017/18 are as follows:

Angela Spindler
• Deliver the Fit 4 the Future project to plan
• Develop and begin to execute accelerated growth plan

Craig Lovelace
• Develop further the strong relationships of support

and trust with the CEO and Board members

for international business

• Secure and develop the financial services sector

• Ensure integrity of reporting internal and external numbers
• Continue to build upon improved city relationships

of the business

and transparency

• Enhance reporting to provide more insightful financial

information for commercial decision making

• Assess and address future skills capabilities in the

finance function

• Continue to progress the Group’s tax strategy

and issue resolution

Long term incentive targets
Awards granted to the Executive Directors under the LTIP in 2017/18 will be subject to three metrics, namely growth in adjusted EPS,
free cash flow and revenue. The performance targets are as follows:

Percentage of
each part of the award
that will vest
0%
25%
100%

Annual growth
in adjusted EPS
in excess of RPI
over 3 financial years
(50% of award)
Less than RPI + 2.5%
At least RPI +2.5%
At least RPI + 9.0%

Free cash flow (30% of award)
is defined as cash flow
generated from operations
excluding receivables.
Targets are cumulative over
3 financial years
Less than £370m
At least £370m
At least £450m

Annual growth
in total revenue
over 3 financial years
(20% of award)
Less than 5% CAGR
At least 5% CAGR
At least 10% CAGR

Below threshold
Threshold
Maximum

For performance that is between the threshold and maximum levels awards vest on a straight-line basis.

N Brown Group plc Annual Report & Accounts 2017GovernanceDIRECTORS’ REMUNERATION REPORT CONTINUED

Directors’ emoluments (Audited)

Executives (salaries)

Angela Spindler

Craig Lovelace

Non-Executives (fees)

Lord Alliance of Manchester CBE

Andrew Higginson

Ivan Fallon

Richard Moross – appointed 6 October 2016

Fiona Laird

Simon Patterson – resigned 13 April 2016

Ron McMillan

Lesley Jones

Salaries
and fees1
£000’s

Taxable
benefits2
£000’s

Year

2016/17
2015/16

544
533

342
258

47
47

250
250

55
55

19
–

55
55

5
55

60
60

47
47

19
18

18
14

–
–

Bonus
(cash and
deferred
shares)
£000’s

343
152

187
56

–
–

LTIP
£000’s

Pension
£000’s

Other3
£000’s

Total
£000’s

–
–

82
80

34
26

–
–

385
–

–
9

–
–

1,373
783

581
363

47
47

250
250

55
55

19
–

55
55

5
55

60
60

47
47

Notes:
1 Lord Alliance has waived his Non-Executive Director’s fee. Craig Lovelace was appointed on 11 May 2015 and as such the 2015/16 figures reflect remuneration earned for the partial period.
2 Taxable benefits comprise private medical cover and car allowance.
3 Craig Lovelace received £9,434 in respect of relocation expenses. Angela Spindler received £385,000 due to the vesting of share awards as detailed on page 73 of this report.

Total pension entitlements (Audited)
Angela Spindler receives a cash supplement of 15% of salary in lieu of pension contributions.

Craig Lovelace is a member of the contributory defined contribution pension scheme (‘scheme’). He receives contributions from the
Company up to 10% salary with an amount up to his personal allowance being paid by the Company into the scheme and the balance
being paid as cash in lieu of pension contribution. Contributions paid by the Company into the scheme during the year in respect of
Craig Lovelace amounted to £25,677 (2016: £16,800).

Details of variable pay earned in the year

Annual bonus (Audited)
The table below gives details of Executive Directors’ bonuses for 2016/17:

Director
Angela Spindler

Craig Lovelace

Weighting (as a
percentage of
maximum bonus
opportunity)
70%
20%

Performance
required
Threshold
(0% payout)
£81.5m

Maximum
(100% payout)
£99.5m

Actual
Performance
£82.6m
27.6%

Payout
% of salary
45.15%
8.28%

10%

70%
20%

10%

£81.5m

£99.5m

65%

9.75%

£82.6m
27.6%

37.63%
6.90%

80%

10%

Measure
Group profit
Corporate
objectives
Personal
objectives
Group profit
Corporate
objectives
Personal
objectives

Notes:
1 The precise targets set for the corporate objectives are considered to be commercially sensitive.
2 Payouts determined on a straight line between threshold and maximum.
3 The personal objectives on which these figures are based, were disclosed on page 74 of the Annual Report and Accounts for 2016.
4 The corporate objectives are commercially sensitive. They include five measures that focus on various aspects of the business and are assessed objectively against measurable results.

N Brown Group plc Annual Report & Accounts 2017Summary of awards granted in 2016/17 (Audited)
The table below provide details of the long-term incentive awards granted to Executive Directors during the year.

Executive

Angela
Spindler

Craig
Lovelace

Type of
award

% of
condition

Salary

Face
value

Number
of shares

Share
price at
grant

LTIP

50% EPS

150% £815,489

472,063

172.75p

30% Free
cash flow

20% Revenue

LTIP

50% EPS

125% £419,998

243,125

172.75p

30% Free
cash flow

20% Revenue

Performance
Period

3yrs to end of
financial year
2018/19

Threshold target

Stretch target

EPS: 25% vests if EPS
growth compounded
annually at least 2.5%
above RPI

EPS: 100% vests if EPS
growth compounded
annually at least 9%
above RPI

Free cash flow:
At least £370m

Free cash flow:
At least £450m

Revenue:
At least 5% CAGR

Revenue:
At least 10% CAGR

3yrs to end of
financial year
2018/19

EPS: 25% vests if EPS
growth compounded
annually at least 2.5%
more than RPI

EPS: 100% vests if EPS
growth compounded
annually at least 9%
above RPI

Free cash flow:
At least £370m

Free cash flow:
At least £450m

Revenue:
At least 5% CAGR

Revenue:
At least 10% CAGR

Note:
1 The awards are based on salaries at the date of grant.

Summary of awards (Audited)
The table below summarises each of the Executive Directors’ long-term share awards and the changes that have taken place
in the year.

Executive
Angela Spindler

Craig Lovelace

28 February
2016
220,338
151,834
185,198
238,087
–
–
119,117
–
–

Awarded
during the year
–
–
–
–
472,063
12,790
–
4,731
243,125

Lapsed
during the year
–
(151,834)
–
–
–
–
–
–
–

Vested
and exercised
during the year
(220,338)
–
–
–
–
–
–
–
–

4 March
2017
–
–
185,198
238,087
472,063
12,790
119,117
4,731
243,125

Date
granted
Aug 2013
Aug 2013
Aug 2014
Aug 2015
Aug 2016
June 2016
Aug 2015
June 2016
Aug 2016

Type of award
Recruitment
LTIP
LTIP
LTIP
LTIP
DSBP
LTIP
DSBP
LTIP

Summary of awards lapsed or vested in 2016/17 (Audited)
The table below provides details of the long-term incentive awards made to Executive Directors that lapsed to during the year.

Type of
award

% of
condition

Salary

Face
value

Number
of shares

Share
price at
grant

LTIP

50% EPS

125% £650,000 151,834

428.1p

Executive

Angela
Spindler

50% TSR

Recruitment Strategic

200% £1,040,000 220,338

472.0p

metrics

Performance
Period

Threshold
target

Stretch
target

Actual
performance Vesting

EPS: 3 years to
end of financial
year 2015/16

EPS: 50% vests
if EPS growth
compounded
annually greater
than 5%

EPS: 100% vests
if EPS growth
compounded
annually greater
than 10%

EPS: not
achieved

TSR: 3 years to
June 2016

3 years to
July 2016

TSR: 25% vests
TSR: 100%
at median
vests at upper
quartile
performance
Targets are commercially sensitive Targets
achieved

TSR: 15th
out of 20

100%

N Brown Group plc Annual Report & Accounts 2017GovernanceDIRECTORS’ REMUNERATION REPORT CONTINUED

Directors’ shareholdings (Audited)
It is the Board’s policy that Executive Directors build up and retain a minimum shareholding in the Company. Under these guidelines
the Chief Executive Officer and the Chief Financial Officer are expected to hold Company shares equal in value (at the time of
acquisition) to 200% and 100% of their base salary respectively and to have met this guideline within 5 years of appointment.

The beneficial interests of Directors who served during the year, together with those of their families, in the shares of the Company
are as follows:

Angela Spindler
Craig Lovelace
Lord Alliance of Manchester CBE
Andrew Higginson
Ivan Fallon
Ron McMillan
Fiona Laird
Simon Patterson
(resigned April 2016)
Lesley Jones
Richard Moross

28 February
2016
100,438
–
95,047,966
101,009
11,425
–
–

10,000
–
–

Owned shares (Number of shares)

Other interests in shares

Value of shares
counting
towards
guideline
holding
(as a 2016
% of salary)
41%
0%
N/A
N/A
N/A
N/A
N/A

4 March
2017
214,147
–
95,047,966
104,161
11,425
–
–

Outstanding
awards
subject to
performance
conditions
895,348
362,242
–
–
–
–
–

Outstanding
awards not
subject to
performance
condition
12,740
4,731
–
–
–
–
–

Guideline
met?
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Outstanding
share options
–
–
–
–
–
–
–

Total as at
4 March 2017
1,122,235
366,973
95,047,966
104,161
11,425
–
–

N/A
–
–

N/A
N/A
N/A

–
–
–

The Directors’ share interests shown above include shares held by members of the Director’s family, as required by the
Companies Act 2006.

There have been no changes to the Directors ‘ interests in shares between 4 March and 30 April 2017.

Performance graph and table
The graph shows the Company’s ten year performance, measured by TSR, compared with the performance of the FTSE 250 Index,
also measured by TSR. The Company was a member of this index throughout the 2016/17 financial year and accordingly it is felt to be
the most appropriate comparator group for this purpose.

Analysis of Chief Executive’s pay over 9 years

Total remuneration (£’000)
Annual bonus (% of maximum)
Long term share vesting (% of maximum)

2009/10
2,438
96.9%
100%

2010/11
3,738
90.6%
100%

2011/12
2,734
38.7%
100%

2012/13
1,780
71.4%
100%

2013/14
2,734
15.8%
85%

2013/14
1,364
83.2%
N/A

2014/15
728
0%
N/A

2015/16
783
27.9%
N/A

2016/17
1,373
42.1%
N/A

Alan White

Angela Spindler

TOTAL SHAREHOLDER RETURN PERFORMANCE: N BROWN VS FTSE 250
(rebased to 100)

300

250

200

150

100

Feb 07

Feb 08

Feb 09

Feb 10

Feb 11

Feb 12

Feb 13

Feb 14

Feb 15

Feb 16

Feb 17

N Brown Group plc

FTSE mid-250 Index

N Brown Group plc Annual Report & Accounts 2017
Percentage change in the Chief Executive’s remuneration
The table below shows the percentage change in the Chief Executive’s total remuneration (excluding the value of any long term share
awards and pension benefits receivable in the year) between the 2015/16 and 2016/17 financial years, compared to that of the average
for all employees of the Group.

Chief Executive
Average of other employees

% Change from 2015/16 to 2016/17

Salary
+2.0%
+2.0%

Benefits
5.6%
nil

Annual bonus
+126%
+173%

Relative importance of spend on pay
The following table shows the Company’s actual spend on pay (for all employees) relative to dividends.

Staff costs (£m)
Dividends (£m)

The figures relate to amounts payable in respect of the relevant financial year.

2017
69.3
40.2

2016
71.3
40.2

% Change
–2.8%
0%

Shareholder voting on the Directors’ Remuneration Report at the 2016 annual general meeting
Annual Report on Remuneration

For
Against
Total votes cast (excluding withheld votes)
Votes withheld1
Total votes cast (including withheld votes)

Total number of votes
186,409,339
1,121,425
187,530,764
13,294,675
200,825,439

% of votes cast
92.82%
0.56%
93.38%
6.62%
100%

1 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast ‘for’ and ‘against’ a resolution.

Shareholder voting on the Directors’ Remuneration Policy at the 2016 annual general meeting
Directors’ Remuneration Policy

For
Against
Total votes cast (excluding withheld votes)
Votes withheld1
Total votes cast (including withheld votes)

Total number of votes
181,154,278
17,796,528
198,950,806
1,897,309
200,848,115

% of votes cast
90.20
8.86
99.06
0.94
100%

Approval of the Directors’ Remuneration Report
The Directors’ Remuneration Report was approved by the Board on 9 May 2017.

Signed on behalf of the Board on 9 May 2017.

Fiona Laird
Chair of the Remuneration Committee

N Brown Group plc Annual Report & Accounts 2017Governance
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF N BROWN GROUP PLC ONLY

Opinions and conclusions arising from our audit:

1 Our opinion on the financial statements is unmodified
We have audited the financial statements of N Brown Group PLC for the 53 weeks ended 4 March 2017 set out on pages 90 to 126.
In our opinion:

• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs

as at 4 March 2017 and of the group’s profit for the 53 weeks then ended;

• the group financial statements have been properly prepared in accordance with International Financial Reporting Standards

as adopted by the European Union;

• the parent company financial statements have been properly prepared in accordance with UK Accounting Standards,

including FRS 101 Reduced Disclosure Framework; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006;

and, as regards the group financial statements, Article 4 of the IAS Regulation.

Overview

Materiality:
group financial statements
as a whole

£3.6m (2016: £3.8m)
(4.3% (2016: 4.3%) of normalised
group profit before tax)

Coverage

100% (2016: 100%) of group
profit before tax

vs 2016

Risks of material misstatement

Recurring risks

Allowance for doubtful debts

Tax provisions

Carrying value of software and development costs

Regulatory provisions

Carrying value of inventories

2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the risks of material misstatement, in decreasing order of audit
significance, that had the greatest effect on our audit were as follows (unchanged from 2016):

The Risk
The allowance for doubtful debts requires the Directors
to assess which accounts are considered impaired and
estimate the quantum of the associated impairment.
This assessment is particularly judgmental in the case
of customers in early arrears or under revised payment
terms. A proportion of the Group’s customers are
subject to revised payment terms, in particular where
interest has been temporarily waived, which makes the
impact of this judgment more significant for N Brown.

The Group has segmented the debtors book into
accounts that are interest bearing and those that are
not, which allows for a degree of granularity when
applying the other key judgements, which are the
probability of default and the timing and value of
cash flows.

To assess the probability of default, the Group
estimates a customer’s likelihood of entering default
based upon the experience of customers with
comparable characteristics such as arrears status
and payment history. These estimates are inherently
uncertain because they are reliant upon historical,
non-predictive data and are impacted by the Group’s
segmentation of customers with comparable
impairment characteristics.

The expected loss on default of receivables is based on
expected timing and value of cash flows which are
estimated using historical cash receipts and write-offs
incurred for customers with comparable arrears status
and payment history, interest and fees charged and
debt sale rates. These estimates are inherently
uncertain because of the long-term nature of the cash
receipts and the exposure of the portfolio to the credit
performance of many individual customers.

Due to the quantity of data involved in assessing all of
these elements of the provision, it is a complex model for
which the completeness and accuracy of data inputs and
the accuracy of calculations are, in themselves, risks.

Our response
Our audit procedures included:

We critically assessed the Group’s definition of ‘Objective
evidence of impairment’ of customer receivables against the
requirements of the relevant accounting standards, including
evidence of the Group’s experience of customers with
comparable characteristics.

We compared the assumptions made in respect of the
probabilities of default against our understanding of the
Group as well as our knowledge of market counterparts,
and consistency with the historical internal data available.

We assessed and challenged the assumptions made in respect
of timing and value of cash flows for all segments of the model
(including customers in arrears and subject to revised payment
terms) against historical internal data taking into account
information from peers and knowledge of the industry.

We obtained supporting evidence relating to the quantum
of debt sales in the year and critically assessed if the debt
sales supported management estimates for future cash
flows and recoveries.

We assessed the accuracy of the allowance for doubtful
debts model, with assistance from our IT specialists, by
reviewing the detail of the model, and compared the
methodology used to our interpretation of the requirements
of the relevant accounting standards. This included testing of
the completeness and accuracy of data through testing a
sample of customer data back to the source system.

We also considered the adequacy of the Group’s disclosures
in relation to the allowance for doubtful debts for compliance
with the relevant accounting policies.

Allowance
for doubtful
debts £64.7m
(2016: £97.6m)

Risk vs 2016

Refer to page 68
(Audit Committee
Report),
pages 97 and 99
(accounting policy),
pages 108 to 109
(financial
disclosures)

N Brown Group plc Annual Report & Accounts 2017Taxations
Provisions

Risk vs 2016

Refer to page 68
(Audit Committee
Report),
pages 96 and 99
(accounting policy),
page 104 (financial
disclosures)

The Risk
The outcome of a number of open VAT and corporation
taxation positions, some of which are proceeding
towards litigation, is uncertain and as such has required
the Directors to make significant judgements and
estimates in relation to the likely outcome of these
tax issues and exposures. There is a risk that the
judgements made by the Directors, and therefore the
amounts recorded in the financial statements will differ
from any final settlements agreed with HMRC. Given
the significant value and judgmental nature of this
provisioning, this is considered to be an area of
significant audit risk.

Carrying value
of software
and development
costs under
the course of
construction:
£83.4m
(2016: £51.2m)

Risk vs 2016

Refer to page 68
(Audit Committee
Report),
pages 95 and 99
(accounting policy),
page 106 (financial
disclosures).

The Group has incurred significant software and
development project costs in the year in respect of the
Fit 4 the Future project, a significant systems
infrastructure programme. The Group capitalises both
internal and external eligible costs to the extent that
future economic benefits are expected to be generated
by the project. This requires judgement as to whether
the costs incurred are directly attributable and
incremental, and that the development relates to
technically feasible systems and websites. Given the
significant value and judgemental nature of the
classification of software and development assets,
between operational and capital expenditure, this is
considered to be an area of significant audit risk.

Furthermore, assets under the course of construction
are not subject to amortisation and as such are required
to be tested for impairment annually. Assessing
recoverability of these assets is based on forecasting
and discounting future cash flows, which are themselves
inherently highly judgemental.

Our response
Our audit procedures included, with assistance from our
own tax specialists:

• Analysing and challenging the assumptions applied by

•

the Directors’ to determine tax provisions.
Inspecting correspondence with HMRC and evaluating the
Directors interpretation of this correspondence by forming
our own expectations of the provisions required in the
financial statements.

These assessments were based on our knowledge of the
business and experience of the industry in which it operates,
together with our knowledge and experience of the
application of the relevant legislation by authorities and courts.

Specifically in relation to VAT, we inspected legal counsel
opinion received by the Directors in relation to the Group’s
likelihood of success in each of the open VAT exposures and
critically assessing whether amounts recorded in the financial
statements were consistent with this legal opinion.

We also considered the adequacy of the Group’s disclosures
in relation to Taxation provisions for compliance with the
relevant accounting policies.

Our audit procedures included comparing a statistical
sample of costs capitalised to external invoices or internal
timesheets, determining the nature of the expenses to
assess whether costs are appropriately capitalised, by
reference to the recognition criteria of the applicable
accounting standards.

With assistance from our own IT specialists, we challenged
the group’s assessment of the technical feasibility of the
different project releases based on our discussions with key
project leads and reviews of detailed business cases and
project plans produced internally, outlining the proposed
features and expected completion dates.

We challenged the group’s assessment of impairment
indicators based on our understanding of project progress
and performance to date obtained from our other
audit procedures.

We critically assessed the key inputs into the Group’s cash flow
forecasts, used as a basis for determining the Value in Use of
the cash generating unit to which the asset was allocated,
specifically revenue growth, cost reduction, discount rate and
the timing and amount of capital expenditure. This assessment
was performed with reference to Board-approved forecasts
and knowledge gained from performing our other audit
procedures including consideration of the accuracy of previous
forecasts. We sensitised key inputs to the model to determine
the likely impact on the value in use calculation.

We critically evaluated the discount rates used to discount
the forecast cash flows by comparing the rates used to
market data, and we performed our own sensitivity analysis
of the impact on the impairment charge to changes in the
rate used.

We evaluated the adequacy of the related disclosures
in the Group financial statements.

N Brown Group plc Annual Report & Accounts 2017Financial statementsINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF N BROWN GROUP PLC ONLY CONTINUED

Regulatory
Provisions £19.9m
(2016: nil)

Risk vs 2016

Refer to page 68
(Audit Committee
Report),
pages 98 and 99
(accounting policy),
page 114 (financial
disclosures)

The Risk
The Group’s provision of credit services to customers
mean that it operates within a regulated environment
which requires the Group to comply with the
requirements of the Financial Conduct Authority (FCA)
and maintain FCA permissions.

The requirement for FCA permissions includes the fair
treatment of customers, protections for vulnerable
customers and appropriate and clear disclosure of
terms to customers. Where the group has identified
areas of non-compliance with these regulations,
provision is made for the expected cost of redressing
customers. Such provisioning requires significant
judgements to be made with respect to complaint
volumes, the level of average redress and expected
uphold rates. Given the significant value and
judgemental nature of this provisioning, this is
considered to be an area of significant audit risk.

Carrying value
of inventories:
£105.5m
(2016: £101.5m)

Risk vs 2016

Refer to page 68
(Audit Committee
Report),
pages 96 and 99
(accounting policy),
page 108 (financial
disclosures).

The Group has significant levels of inventory and a
number of judgements and estimates are involved in
valuing aged or slow moving inventories.

Furthermore, the seasonal nature of a retail business
and changes in customer preferences and spending
patterns, primarily driven by the wider fashion industry,
introduce uncertainty over the recoverability of
inventories.

Given the level of judgements and estimates involved
this is considered to be a key audit risk.

Our response
Our audit procedures include the following:

We have assessed the entity-wide governance processes for the
identification of regulatory issues and areas of non-compliance.

We have reviewed correspondence with the regulators and
assessed customer complaints for indications of significant or
non-identified areas of customer detriment that may require
provision in the financial statements.

We have assessed the areas of non-compliance and customer
complaints identified and documented by the Group. Using
our experience of the regulatory requirements and wider
industry, we critically assessed the key inputs into the group’s
calculation of regulatory provisions, specifically we:

• assessed the accuracy of the complaints register and the
classification of complaints, by comparing data recorded
to the supporting customer complaint.

• assessed the completeness of the complaints register and
claims volume by comparing to customer correspondence
and critically assessing claims volumes with respect to
historical data

• compared average claim redress and uphold rates inputs

to historical experience

• compared the forecast future claims profile to historical
data, considering the accuracy of previous forecasting
and market expectations.

We also considered the adequacy of the Group’s disclosures
in respect of the judgement and estimation made in respect
of regulatory provisioning.

Our audit procedures included comparing inventory levels,
by season, to sales data to test whether slow moving and
obsolete inventories had been appropriately identified. We
considered sales of inventories during the year, in particular
of inventory which has been held for greater than one year
and clearance categories, and compared these sales to the
Group’s forecast sales plan at the period end date.

We utilised data analytics to test the adequacy of inventory
provision by comparing the recent selling price of inventory
to the cost of the inventory as well as analysing the ageing of
inventory items. We also considered whether the Group’s
accounting policies had been consistently applied and the
adequacy of the Group’s disclosures in respect of the
judgement and estimation made in respect of inventory
provisioning.

3 Our application of materiality and an overview of the scope of our audit
Materiality for the group financial statements as a whole was set at £3.6m (2016: £3.8m), determined with reference to a benchmark
of group profit before tax, normalised to exclude this year’s exceptional items as disclosed in note 7, of £25.2m, of which it
represents 4.3% (2016: 4.3%).

We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.2m (2016: £0.2m),
in addition to other identified misstatements that warranted reporting on qualitative grounds.

All of the group’s reporting components were subjected to audits for group reporting purposes, The audits were conducted by
the Group audit team and covered 100% of Group revenue, Group profit before tax, and Group assets. Component materialities,
which ranged from £0.1m to £3.0m were applied by the Group team, having regard to the mix of size and risk profile of the Group
across the components (2016: audited as if it was a single aggregated set of financial information to group materiality of £3.8m).

4 Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
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 Strategic Report and the Directors’ Report for the financial year is consistent with the

financial statements.

N Brown Group plc Annual Report & Accounts 2017Based solely on the work required to be undertaken in the course of the audit of the financial statements and from reading
the Strategic report and the Directors’ report:

• we have not identified material misstatements in those reports; and
• in our opinion, those reports have been prepared in accordance with the Companies Act 2006.

5 We have nothing to report on the disclosures of principal risks
Based on the knowledge we acquired during our audit, we have nothing material to add or draw attention to in relation to:

• the Directors’ statement of Viability Statement on pages 62 to 63, concerning the principal risks, their management, and,

based on that, the Directors’ assessment and expectations of the group’s continuing in operation over the 3 years to 2020; or

• the disclosures in note 2 of the financial statements concerning the use of the going concern basis of accounting.

6 We have nothing to report in respect of the matters on which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have
identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial
statements, a material misstatement of fact, or that is otherwise misleading.

In particular, we are required to report to you if:

• we have identified material inconsistencies between the knowledge we acquired during our audit and the Directors’ statement
that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and
provides the information necessary for shareholders to assess the group’s position and performance, business model and
strategy; or

• the Audit Committee Report does not appropriately address matters communicated by us to the Audit Committee.

Under the Companies Act 2006 we are required 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

• 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.

Under the Listing Rules we are required to review:

• the Directors’ statements, set out on pages 62 to 63, in relation to going concern and longer-term viability; and
• the part of the Corporate Governance Statement on page 56 relating to the company’s compliance with the

eleven provisions of the 2014 UK Corporate Governance Code specified for our review.

We have nothing to report in respect of the above responsibilities.

Scope and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set out on page 63, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an
audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. This
report is made solely to the company’s members as a body and is subject to important explanations and disclaimers regarding our
responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated into this report as
if set out in full and should be read to provide an understanding of the purpose of this report, the work we have undertaken and
the basis of our opinions.

Stuart Burdass (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square
Manchester
M2 3AE
9 May 2017

N Brown Group plc Annual Report & Accounts 2017Financial statementsCONSOLIDATED INCOME STATEMENT

Continuing operations

Revenue

Operating profit

Finance costs

Profit before taxation and fair value adjustments to
financial instruments

Fair value adjustments to financial instruments

Profit before taxation

Taxation

Profit for the year from continuing operations

Loss for the period from discontinued operations

Profit attributable to equity holders of the parent

Earnings per share from continuing operations

Basic

Diluted

Earnings per share from continuing
and discontinued operations

Basic

Diluted

Note

4,6

53 weeks ended 4 March 2017
Exceptional
items
(note 7)
£m

Before
exceptional
items
£m

Total
£m

52 weeks ended 27 February 2016
Exceptional
items
(note 7)
£m

Before
exceptional
items
£m

Total
£m

900.7

90.3

(7.7)

82.6

0.2

82.8

(18.3)

64.5

–

64.5

–

900.7

866.2

–

866.2

(25.2)

–

(25.2)

–

(25.2)

5.0

(20.2)

–

(20.2)

65.1

(7.7)

57.4

0.2

57.6

(13.3)

44.3

–

44.3

15.67p

15.66p

15.67p

15.66p

96.4

(8.1)

88.3

1.1

89.4

(20.7)

68.7

(0.6)

68.1

(17.2)

–

(17.2)

–

(17.2)

3.4

(13.8)

–

(13.8)

79.2

(8.1)

71.1

1.1

72.2

(17.3)

54.9

(0.6)

54.3

19.45p

19.43p

19.23p

19.22p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Profit for the period

Items that will not be reclassified subsequently to profit or loss

Actuarial (losses)/gains on defined benefit pension schemes

Tax relating to items not reclassified

Items that may be reclassified subsequently to profit or loss

Exchange gain on translation of foreign operations

Total comprehensive income for the period attributable to equity holders of the parent

Note

53 weeks
ended
4 March
2017
£m

52 weeks
ended 27
February
2016
£m

44.3

54.3

(3.1)

0.6

(2.5)

0.5

42.3

12.5

(2.5)

10.0

0.8

65.1

N Brown Group plc Annual Report & Accounts 2017CONSOLIDATED BALANCE SHEET

Non-current assets

Intangible assets

Property, plant and equipment

Retirement benefit surplus

Deferred tax assets

Current assets

Inventories

Trade and other receivables

Current tax asset

Derivative financial instruments

Cash and cash equivalents

Total assets

Current liabilities

Trade and other payables

Provisions

Current tax liability

Net current assets

Non-current liabilities

Bank loans

Provisions

Deferred tax liabilities

Total liabilities

Net assets

Equity attributable to equity holders of the parent

Share capital

Share premium account

Own shares

Foreign currency translation reserve

Retained earnings

Total equity

As at
4 March
2017
£m

As at 27
February
2016
£m

Note

141.9

73.5

8.3

2.4

124.9

76.7

10.8

3.9

226.1

216.3

105.5

575.4

–

2.5

64.1

747.5

973.6

(98.9)

(15.6)

(13.4)

(127.9)

619.6

101.5

553.4

5.3

2.2

45.3

707.7

924.0

(99.7)

–

(99.7)

608.0

(355.0)

(335.0)

(4.3)

(8.2)

(367.5)

(495.4)

478.2

31.3

11.0

(0.1)

2.3

433.7

478.2

–

(13.3)

(348.3)

(448.0)

476.0

31.3

11.0

(0.2)

1.8

432.1

476.0

The financial statements of N Brown Group plc (Registered Number 814103) were approved by the Board of Directors and
authorised for issue on 9 May 2017.

They were signed on its behalf by:

Craig Lovelace
CFO and Executive Director

N Brown Group plc Annual Report & Accounts 2017Financial statementsCONSOLIDATED CASH FLOW STATEMENT

Net cash from operating activities

Investing activities

Purchases of property, plant and equipment

Purchases of intangible assets

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

For the 53
weeks
ended
4 March
2017
£m

For the 52
weeks
ended
27 February
2016
£m

89.0

64.5

Note

(3.7)

(38.6)

(42.3)

(7.8)

(40.2)

20.0

–

0.1

(27.9)

18.8

45.3

64.1

(12.1)

(46.1)

(58.2)

(9.6)

(40.2)

48.0

(0.4)

0.8

(1.4)

4.9

40.4

45.3

RECONCILIATION OF OPERATING PROFIT TO NET CASH FROM OPERATING ACTIVITIES

For the 53
weeks
ended
4 March
2017
£m

For the 52
weeks
ended
27 February
2016
£m

65.1

–

6.9

–

20.7

0.5

93.2

(4.0)

(21.6)

(0.2)

19.9

(0.2)

87.1

1.9

89.0

79.2

(0.7)

6.0

0.7

19.2

2.2

106.6

(6.7)

0.9

(12.2)

–

(1.7)

86.9

(22.4)

64.5

Operating profit from continuing operations

Operating loss from discontinued operations

Adjustments for:

Depreciation of property, plant and equipment

Loss on disposal of property, plant and equipment

Amortisation of intangible assets

Share option charge

Operating cash flows before movements in working capital

Increase in inventories

(Increase)/decrease in trade and other receivables

Decrease in trade and other payables

Increase in provisions

Pension obligation adjustment

Cash generated by operations

Taxation received/(paid)

Net cash from operating activities

N Brown Group plc Annual Report & Accounts 2017CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share
capital
(note 24)
£m

Share
premium
£m

Own
shares
(note 25)
£m

Foreign
currency
translation
reserve
£m

Retained
earnings
£m

Total
£m

Changes in equity for the 52 weeks ended 27 February 2016

Balance as at 28 February 2015

31.3

11.0

(0.3)

1.0

407.0

450.0

Comprehensive income for the period

Profit for the period

Other items of comprehensive income for the period

Total comprehensive income for the period

Transactions with owners recorded directly in equity

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

Total contributions by and distributions to owners

–

Balance at 27 February 2016

31.3

11.0

–

(0.4)

0.5

–

0.1

(0.2)

–

0.8

–

1.8

54.3

10.0

64.3

(40.2)

–

0.3

2.2

(1.5)

(39.2)

432.1

54.3

10.8

65.1

(40.2)

(0.4)

0.5

0.3

2.2

(1.5)

(39.1)

476.0

Changes in equity for the 53 weeks ended 4 March 2017

Balance as at 27 February 2016

31.3

11.0

(0.2)

1.8

432.1

476.0

Comprehensive income for the period

Profit for the period

Other items of comprehensive income for the period

Total comprehensive income for the period

Transactions with owners recorded directly in equity

Equity dividends

Issue of own shares by ESOT

Share option charge

Tax on items recognised directly in equity

Total contributions by and distributions to owners

–

Balance at 4 March 2017

31.3

11.0

–

0.1

–

0.1

(0.1)

–

0.5

–

44.3

(2.5)

41.8

44.3

(2.0)

42.3

(40.2)

–

0.5

(0.5)

(40.2)

0.1

0.5

(0.5)

(40.1)

2.3

433.7

478.2

N Brown Group plc Annual Report & Accounts 2017Financial statements2 Accounting policies
Basis of accounting
The financial statements are prepared on the historical cost
basis except that derivative financial instruments are stated
at their fair value. The principal accounting policies adopted
are set out as follows.

Accounting period
Throughout the accounts, the directors report and financial
review, reference to 2017 means at 4 March 2017 or the
53 weeks then ended; reference to 2016 means at 27 February
2016 or the 52 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 coterminous
with the financial period of the parent company.

Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity. In assessing control, the Group takes into consideration
potential voting rights that are currently exercisable. The
acquisition date is the date on which control is transferred to
the acquirer. The financial statements of subsidiaries are
included in the consolidated financial statements from the
date that control commences until the date that control ceases.
Losses applicable to the non-controlling interests in a subsidiary
are allocated to the non-controlling interests even if doing so
causes the non-controlling interests to have a deficit balance.
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.

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 in the Shareholder Information
section on page 127 at the end of the report. The nature of the
Group’s operations and its principal activities are set out on
page 60 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 financial statements for the 53 weeks ended
4 March 2017 have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted
for use in the EU. The Company has elected to prepare its
parent company financial statements in accordance with
FRS 101, these are presented on pages 120 to 126.

The accounting policies have been applied consistently
in the current and prior periods.

Adoption of new and revised standards
No standards have been adopted that affect the reported
results or financial position.

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 9: Financial Instruments.
• IFRS 15: Revenue from Contracts with Customers.
• IFRS 16 Leases*
• Clarification and Measurement of Share Based

Payment Transactions – Amendments to IFRS 2*
• Recognition of Deferred Tax assets for unrealised

losses – Amendments to IAS 12*

• Clarifications to IFRS 15 Revenue from Contracts

with Customers*

The directors do not expect that the adoption of the standards
listed above 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. Management are still assessing the
impact on the financial statements of future periods.

• Management have made initial investigations but have not
yet assessed the impact of the introduction of IFRS 15 and
IFRS 16 on the financial statements of future periods.

Discontinued operations
Discontinued operations are those which management identify
separately and where notice has been given that they are to be
discontinued. As a result of notice being given regarding the
closure of Gray & Osbourn in 2015 as detailed in note 5, the prior
year income statement excludes the results of Gray & Osbourn
under continuing activities.

* Not yet endorsed by the EU

N Brown Group plc Annual Report & Accounts 2017Goodwill
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.

Property, plant and 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:

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.

Land and Buildings

Freehold buildings

On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on disposal.

Leasehold property and
improvements

Fixtures and Equipment

over the period of the lease

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.

Computer equipment

between 10% and 20%

Plant and machinery

between 5% and 20%

Fixtures and equipment

between 10% and 20%

Revenue recognition
Product revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for
goods and services provided in the normal course of business,
net of discounts and sales related taxes.

In the case of goods sold through our retail stores and trading
websites, revenue is recognised when goods are despatched and
the risks and rewards of ownership have transferred to the buyer.
Sales returns in the period are recognised as a deduction to
revenue as incurred. Provision is made for outstanding returns not
yet made at the period end. Accumulated experience (including
historical returns rates) is used to estimate and provide for such
returns. The provision is recorded as a reduction in revenue with
a corresponding entry to debtors (for credit sales) and accruals
(for cash sales).

Financial services revenue includes 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 asset’s net carrying amount.
Revenue from non-interest related financial income is recognised
when the services have been performed.

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 the
income statement.

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 a range of five to ten
years. Assets under construction are not amortised but instead
tested for impairment annually.

Expenditure on development activities is capitalised if the product
or process is technically and commercially feasible and the Group
intends to and has the technical ability and sufficient resources to
complete development, future economic benefits are probable
and if the Group can measure reliably the expenditure attributable
to the intangible asset during its development. Development
activities involve a plan or design for the production of new or
substantially improved products or processes. The expenditure
capitalised includes the cost of materials and direct labour. Other
development expenditure is recognised in the income statement
as an expense as incurred. Capitalised development expenditure
is stated at cost less accumulated amortisation and less
accumulated impairment losses.

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE GROUP ACCOUNTS CONTINUED

2 Accounting policies (continued)
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.

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. For goodwill and intangible assets that have
indefinite useful lives or that are not yet available for use, the
recoverable amount is estimated each year at the same time.

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 estimates 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.

Inventories
Inventories have been valued at the lower of cost and net
realisable value. Provision is made based on the age of the
inventory and management’s estimates of future disposal
strategies. 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 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, 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.

N Brown Group plc Annual Report & Accounts 2017Financial 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
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.

Trade and other payables
Trade and other payables are recognised initially at fair value,
are not interest bearing and are subsequently measured at
amortised cost.

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.

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
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. For further details see note 17.

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.

Leasing
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.

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE GROUP ACCOUNTS CONTINUED

2 Accounting policies (continued)
Provisions
The Group recognises a provision for a present obligation
resulting from a past event when it is more likely than not that
it will be required to transfer economic benefits to settle the
obligation and the amount of the obligation can be estimated
reliably. The Group has on-going discussions with HMRC in
respect of a number of Corporation tax positions. Provisions are
made in respect of these positions when management consider
it probable that the position will be settled via payment to HMRC
and it is possible to estimate reliably the amount of the obligation
which will be settled. In determining whether a future economic
outflow is probable the Group assesses all available information
including the opinion of legal counsel where appropriate.

Provision is made for customer remediation when the Group has
established that a present obligation exists in respect of financial
services products sold in the past. The provision requires a
significant level of estimation and judgement and the amounts
provided depend on a number of different assumptions.

Provision is made for restructuring costs, including the costs of
redundancy, when the Group has a constructive obligation to
restructure. An obligation exists when the Group has a detailed
formal plan for the restructuring and has raised a valid
expectation in those affected by starting to implement the plan
or by announcing its main features. If the Group has a contract
that is onerous, it recognises the present obligation under the
contract as a provision. An onerous contract is one where the
unavoidable costs of meeting the Group’s contractual
obligations exceed the expected economic benefits. When the
Group vacates a leasehold property, a provision is recognised
for the unavoidable future costs under the lease less any
expected economic benefits (such as rental income).

Contingent liabilities are possible obligations arising from past
events, whose existence will be confirmed only by uncertain
future events, or present obligations arising from past events
that are not recognised because either an outflow of economic
benefits is not probable or the amount of the obligation cannot
be reliably measured. Contingent liabilities are not recognised
but information about them is disclosed unless the possibility
of any outflow of economic benefits in settlement is remote.

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. This is recognised as an employee expense
with a corresponding increase in equity. Fair value is measured
by monte - carlo for options subject to a market based
performance condition and by use of a Black–Scholes model for
all others. For share-based payment awards with non-vesting
conditions, the grant date fair value of the share-based payment
is measured to reflect such conditions and there is no true-up
for differences between expected and actual outcomes.

Own shares held by ESOT
Transactions of the group-sponsored Employee Share Ownership
Trust (ESOT) are included in the Group financial statements. The
trust’s purchases and sales of shares in the Company are debited
and credited directly to equity.

Retirement benefit costs
Payments to defined contribution retirement benefit schemes
are charged as an expense as they fall due.

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
the end of each reporting period. Remeasurement comprising
actuarial gains and losses, the effect of the asset ceiling (if
applicable) and the return on scheme assets (excluding interest)
are recognised immediately in the balance sheet with a charge
or credit to the statement of comprehensive income in the
period in which they occur. Remeasurement recorded in the
statement of comprehensive income is not recycled. Past
service cost is recognised in profit or loss in the period of
scheme amendment. Net-interest is calculated by applying
a discount rate to the net defined benefit liability or asset.
Defined benefit costs are split into three categories:

• current service cost, past-service cost and gains and losses

on curtailments and settlements;
• net-interest expense or income; and
• remeasurement.

The Group presents the first two components of defined
benefit costs within operating expenses (see note 30) in its
consolidated income statement. Curtailments gains and losses
are accounted for as past-service cost. Net-interest expense
or income is recognised within finance costs (see note 9).

The retirement benefit asset/(obligation) recognised in the
balance sheet represents the present value of the defined
benefit asset/(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.

Supplier rebates
The Group enters into volume based rebate arrangements with
suppliers. Rebates are calculated annually based on agreements
in place, which stipulate an agreed percentage of purchase be
grated as a rebate. Rebates are agreed with suppliers before
they are recognised in the Income Statement, outstanding
balances are recorded in accrued income.

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 Risk Management Report on pages
30 to 31.

N Brown Group plc Annual Report & Accounts 2017The 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 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 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 £405m – which
are committed until August 2020 – and its £20m revolving
credit facility. After making appropriate enquiries, the
directors have a reasonable expectation that the Company
and the Group have adequate resources to continue in
operational existence. Accordingly, they continue to adopt
the going concern basis in the preparation of the Annual
Report and Accounts.

Exceptional items
Exceptional items are those that are considered to be one
off, non-recurring in nature and so material that the directors
believe that they require separate disclosure to avoid distortion
of underlying performance and should be separately presented
on the face of the income statement.

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 based on assumed collection rates which,
although based on the Group’s historical experience of
customer repayment patterns, remains inherently uncertain.
Changes in the assumptions applied (including period of
historical experience used to estimate customer repayment and
the occurrence and frequency of future debt sales), could have
a significant impact on the carrying value of trade receivables.

As a result this is continually assessed for relevance and
adjusted appropriately. Further information is given in note 17.

Taxation
The Group has on-going discussions with HMRC in respect of
a number of Corporation tax and VAT positions. The calculation
of the Group’s potential liabilities or assets in respect of these
involves a degree of estimation and judgement in respect of
items whose tax treatment cannot be finally determined until
resolution has been reached with HMRC or, as appropriate,
through legal processes. Issues can, and often do, take a
number of years to resolve.

In respect of VAT, the Group has provided a total of £5.4m
(2016: £5.4m) in respect of future payments which the Directors’
have a reasonable expectation of making in settlement of these
historical positions.

In addition and separate to the above positions, the Group
continues to be in discussion with HMRC in relation to the VAT
consequences of the allocation of marketing costs between our
retail and credit businesses. At this stage it is not possible to
determine how the matter will be resolved. However within our
year end VAT debtor is an asset of £36.0m (2016: £21.7m) which
has arisen as a result of cash payments made under protective
assessments raised by HMRC and the Group estimates that a
further £10m could be paid under this assessment in the
forthcoming year. Based on legal counsel’s opinion, we believe
that we will recover this amount in full from HMRC and we are
engaged in legal process to do so.

The inherent uncertainty regarding the outcome of these
positions means the eventual realisation could differ from the
accounting estimates and therefore impact the Group’s future
results and cash flows. Based on the amounts reflected in the
balance sheet as at 4 March 2017, the Directors estimate that the
unfavourable settlement of these cases could result in a charge
to the income statement of up to £43.3m (including the full write
off of the VAT debtor noted above) and a cash payment to
HMRC of up to £16.0m. The favourable settlement of these
cases would result in a repayment of tax of up to £54.1m and
an associated credit to the income statement of up to £29.0m.

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 disposal channels, and is
consequently a source of estimation uncertainty.

Regulatory
The regulatory environment in which the Group operates is
both complex and changing and the Group continues to review
and develop its compliance with the requirements of the FCA.
Provisions for customer remediation require significant levels
of estimation and judgement. The amounts of provisions
recognised depend on a number of different assumptions,
such as, the volume of inbound complaints, the uphold rate
of complaint volumes and the average redress amount paid.
A summary of the impact of a reasonable change in these
assumptions is set out in note 23.

Software development costs
Included within intangibles assets are significant software
and development project costs in respect of the Group’s
transformation project, Fit 4 the Future. Costs are capitalised
to the extent that future economic benefits are expected to
be generated by the project, which requires judgement to be
made as to whether the project will be completed successfully,
will be technically feasible and whether sufficient revenue and
profitability will be generated to recover the costs capitalised.
If these criteria are not subsequently met, the asset would
be subject to a future impairment charge which would impact
the Group’s results. This is consequently a source of
estimation uncertainty.

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE GROUP ACCOUNTS CONTINUED

3 Revenue

An analysis of the Group’s revenue is as follows:

Continuing operations

Sale of goods

Financial services

Revenue – continuing operations

Discontinued operations

Subsidiary catalogue business

Revenue

2017
£m

2016
£m

635.9

264.8

900.7

–

900.7

606.6

259.6

866.2

4.3

870.5

4 Business segment
The Group has one reportable segment in accordance with IFRS 8 – Operating Segments, which is the Home Shopping segment.
The Group’s Board receives monthly financial information at this level and uses this information to monitor the performance of the
Home Shopping segment, allocate resources and make operational decisions. Internal reporting focuses on the Group as a whole
and does not identify individual segments. To increase transparency, the Group has included an additional voluntary disclosure
analysing product revenue within the reportable segment, by brand categorisation and product type categorisation.

2017
£m

2016
£m

900.7

635.9

264.8

(405.5)

(288.2)

(117.3)

495.2

54.7%

55.7%

(81.3)

(165.4)

(27.6)

(130.6)

90.3

(25.2)

65.1

(7.7)

0.2

57.6

866.2

606.6

259.6

(383.6)

(265.7)

(117.9)

482.6

56.2%

54.6%

(76.7)

(161.7)

(25.2)

(122.6)

96.4

(17.2)

79.2

(8.1)

1.1

72.2

Continuing operations

Analysis of revenue – Home Shopping total

Product

Financial Services

Analysis of cost of sales – Home Shopping total

Product

Financial Services

Gross profit – total

Product gross margin

Financial Services gross margin

Warehouse and fulfilment costs

Marketing and production costs

Depreciation and amortisation costs

Other administration and payroll costs

Operating profit before exceptionals

Exceptional items (see note 7)

Segment result and operating profit – Home Shopping

Finance costs

Fair value adjustments to financial instruments

Profit before taxation

100

N Brown Group plc Annual Report & Accounts 2017Analysis of product revenue by brand

JD Williams

Simply Be

Jacamo

Power Brands

Traditional segment

Secondary brands

Total product revenue – Home Shopping

Analysis of product revenue by category

Ladieswear

Menswear

Footwear and accessories

Home and gift

Total product revenue – Home Shopping

2017
£m

2016
£m

160.5

115.8

66.2

342.5

136.1

157.3

635.9

260.0

87.0

70.0

218.9

635.9

151.2

103.9

62.8

317.9

136.0

152.7

606.6

246.1

82.0

68.5

210.0

606.6

We have reclassified accessories from ladieswear to footwear and accessories in 2017 and restated comparatives by £4.7m.

The Group has one significant geographical segment, which is the United Kingdom. Revenue derived from international markets
amounted to £35.8m (2016, £31.9m) and operating profits of £1.9m (2016, losses of £0.1m). Segment assets are located in the UK,
Ireland and the US.

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 reportable segment, being
Home Shopping. There are no impairments of goodwill, intangible assets or tangible assets in the current period (2016, £nil).

Other information

Capital additions

Capital disposals

Depreciation and amortisation

Balance sheet

Total segment assets

Total segment liabilities

Segment net assets

2017
£m

41.4

–

(27.6)

2016
£m

58.7

(2.4)

(25.2)

973.6

(495.4)

478.2

924.0

(448.0)

476.0

101

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE GROUP ACCOUNTS CONTINUED

5 Discontinued operations
Following a review of the business and its future profit potential, the Board decided in January 2015 to close the Gray & Osbourn
catalogue business. The results of the discontinued operation, which have been included in the consolidated income and cashflow
statement, were as follows:

Revenue

Expenses

Profit before tax

Attributable tax credit

Net loss attributable to discontinued operations

2017
£m

–

2016
£m

4.3

(5.0)

(0.7)

0.1

(0.6)

There was no contribution to the Group’s cash flows from the discontinued activity in the 53 weeks ended 4 March 2017 (2016,
considered insignificant).

6 Profit for the period

Profit for the period has been arrived at after charging:

Net foreign exchange losses

Depreciation of property, plant and equipment

Loss on disposal

Amortisation of intangible assets

Cost of inventories recognised as expense

Staff costs

Auditor’s remuneration for audit services

Doubtful debts recognised as an expense

Exceptional items (note 7)

Operating lease costs (note 28)

Amounts payable to KPMG LLP and their associates by the Group in respect of non-audit services were £0.1m (2016, 0.5m).

A more detailed analysis of auditor’s remuneration is provided below:

Audit of these Group financial statements

Amounts receivable by the Company’s auditor and its associates in respect of:

Audit of financial statements of subsidiaries of the Company

Audit-related assurance services

Tax advisory services

All other services

Total

2017
£m

0.1

0.2

–

0.1

0.4

Fees in relation to audit related assurance services totalled £36,000 (2016, £40,000).

Fees payable to the Company’s auditor for the audit of the Company’s annual accounts were £15,000 (2016, £15,000).

A description of the work of the Audit Committee is set out in the Corporate Governance Statement on page 64 and includes
an explanation of how auditor objectivity and independence is safeguarded when non audit services are provided by the auditor.

102

2017
£m

2016
£m

3.6

6.9

–

20.7

288.2

79.5

0.3

113.5

25.2

6.5

1.5

6.0

0.7

19.2

270.9

83.0

0.3

110.3

17.2

9.8

2016
£m

0.1

0.2

–

0.5

0.8

N Brown Group plc Annual Report & Accounts 20177 Exceptional items

Strategy costs
External costs related to taxation matters

Clearance store closure (credits)/costs

Financial services customer redress

2017
£m

–
2.5

(0.2)

22.9

25.2

2016
£m

7.6
1.6

8.0

–

17.2

An exceptional charge of £22.9m was recognised during the period (2016, £nil) reflecting the costs incurred or expected to be
incurred in respect of payments for historic financial services customer redress payments. Of the amount charged in the period
the Group has made customer redress payments totalling £3.0m (2016, £nil). See note 23.

External costs related to taxation matters are in respect of on-going legal and professional fees which have been incurred as
a result of the Group’s on-going disputes with HMRC regarding a number of historical tax positions. Of the amount charged
in the period the Group has made related cash payments of £1.9m (2016, £1.6m).

Following the closure of the Group’s retail clearance stores in 2016 an exceptional cost of £8.0m was recognised in respect of stock
write downs, onerous lease provisions and other related closure costs. Following the exit of the remaining store leases a credit of
£0.2m has been recognised to reflect the final exit cost being below that originally anticipated.

Strategy costs incurred in 2016 related to Group re-organisation costs and outsourcing of IT maintenance.

8 Staff costs

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 30)
Share options costs (see note 29)

Details of individual directors’ remuneration is disclosed in the Directors’ Remuneration Report on page 82.

9 Finance costs

Interest on bank overdrafts and loans

Net pension finance (credit)/charge (see note 30)

2017
Number

2016
Number

1,146
1,596

2,742

2017
£m

69.3
5.8
3.9
0.5

79.5

2017
£m

8.1

(0.4)

7.7

1,091
1,848

2,939

2016
£m

71.3
6.5
3.0
2.2

83.0

2016
£m

8.0

0.1

8.1

103

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE GROUP ACCOUNTS CONTINUED

10 Tax

Recognised in the income statement

Current tax

Charge for the period

Adjustments in respect of previous periods

Deferred tax

Origination and reversal of temporary timing differences

Reduction in rate

Adjustments in respect of previous periods

Tax expense (continuing)

Tax from discontinued operations

Total tax expense

2017
£m

12.7

4.1

16.8

(1.5)

(0.3)

(1.7)

(3.5)

13.3

–

13.3

2016
£m

13.6

(0.2)

13.4

0.6

(1.2)

4.5

3.9

17.3

(0.1)

17.2

UK corporation tax is calculated at 20.0% (2016, 20.08%) of the estimated assessable profit for the period. Taxation for other
jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013.
Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on
26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016.
This will reduce the future current tax charge accordingly. The Group’s deferred tax assets and liabilities as at 4 March 2017 have
been calculated based upon the rates which will apply when those balances are expected to unwind.

The charge for the period can be reconciled to the profit per the income statement as follows:

Profit before tax from continuing operations:

Tax at the UK corporation tax rate of 20.0% (2016, 20.08%)

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

2017
£m

57.6

11.5

(0.3)

0.3

(0.6)

2.4

13.3

2016
£m

72.2

14.5

(1.2)

0.4

(0.7)

4.3

17.3

In addition to the amount charged to the income statement, tax movements recognised directly through equity were as follows:

Tax recognised in other comprehensive income

Deferred tax – remeasurement of retirement benefit obligations

Tax (credit)/charge in the statement of comprehensive income

Tax recognised in equity

Current tax – share based payments

Deferred tax – share based payments

Tax charge in the statement of changes in equity

2017
£m

(0.6)

2017
£m

(0.1)

0.6

0.5

2016
£m

2.5

2016
£m

(0.2)

1.7

1.5

The Group has on-going discussions with HMRC in respect of a number of Corporation tax positions. The calculation of the
Group’s potential liabilities or assets in respect of these involves a degree of estimation and judgement in respect of items whose
tax treatment cannot be finally determined until resolution has been reached with HMRC or, as appropriate, through a legal
process. Issues can, and often do, take a number of years to resolve.

In respect of Corporation tax, as at 4 March 2017 the Group has provided a total of £3.6m (2016: £Nil) for potential tax future
charges based upon the Group’s best estimation and judgement and, where appropriate, legal counsels opinion. Adjustments in
respect of previous periods include current tax provisions made in respect of tax exposures (£2.4m) in addition to a reclassification
between current and deferred tax in respect of tax deductions on software development costs (£1.7m).

104

N Brown Group plc Annual Report & Accounts 201711 Dividends

Amounts recognised as distributions to equity holders in the period:

Final dividend for the 52 weeks ended 28 February 2016 of 8.56p (2015, 8.56p) per share

Interim dividend for the 53 weeks ended 4 March 2017 of 5.67p (2016, 5.67p) per share

Proposed final dividend for the 53 weeks ended 4 March 2017 of 8.56p (2016, 8.56p) per share

2017
£m

2016
£m

24.2

16.0

40.2

24.2

16.0

40.2

24.2

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.

12 Earnings per share
The calculation of earnings per ordinary share is based on earnings after tax and the weighted average number of ordinary shares
in issue during the period.

The adjusted earnings per share figures have also been calculated based on earnings before items that are one-off in nature,
material by size and are considered to be distortive of the true underlying performance of the business (see note 7) and certain
other fair value adjustments. These have been calculated to allow the shareholders to gain an understanding of the underlying
trading performance of the Group. For diluted earnings per share, the weighted average number of ordinary shares in issue is
adjusted to assume conversion of dilutive potential ordinary shares.

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

Weighted average number of ordinary shares for the purposes of diluted earnings per share

2017
£m

2016
£m

44.3

54.3

2017
Number

2016
Number

282,701

282,316

252

245

282,953

282,561

Earnings from continuing operations

Net profit attributable to equity holders of the parent

Adjustments to exclude loss for the period from discontinued operations

Earnings from continuing operations for the purpose of basic earnings per share

Fair value adjustment to financial instruments (net of tax)

Exceptional items (net of tax)

Adjusted earnings for the purposes of adjusted earnings per share

2017
£m

44.3

–

44.3

(0.2)

20.2

64.3

The denominators used are the same as those detailed above for basic and diluted earnings per share from continuing and
discontinued operations.

Adjusted earnings per share from continuing operations

Basic

Diluted

From discontinued operations

Basic

Diluted

2017
Pence

22.74

22.72

2017
Pence

–

2016
£m

54.3

0.6

54.9

(0.9)

13.8

67.8

2016
Pence

24.02

23.99

2016
Pence

(0.22)

(0.21)

105

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE GROUP ACCOUNTS CONTINUED

13 Intangible assets

Cost

At 28 February 2015

Additions

At 27 February 2016

Additions

At 4 March 2017

Accumulated amortisation and impairment

At 28 February 2015

Charge for the period

At 27 February 2016

Charge for the period

At 4 March 2017

Carrying amount

At 4 March 2017

At 27 February 2016

At 28 February 2015

Brands
£m

Software
£m

Customer
Database
£m

16.9

–

16.9

–

16.9

8.0

–

8.0

–

8.0

8.9

210.9

45.8

256.7

37.7

294.4

121.5

19.2

140.7

20.7

161.4

133.0

116.0

89.4

1.9

–

1.9

–

1.9

–

1.9

–

1.9

–

Total
£m

229.7

45.8

275.5

37.7

313.2

131.4

19.2

150.6

20.7

171.3

141.9

124.9

98.3

Assets in the course of construction included in intangible assets at the year end total £88.5m (2016, £55.3m), of which £83.4m
relates to the Fit 4 the Future project (2016, £51.2m). No amortisation is charged on these assets. All software additions relate
to internal usage. Borrowing costs of £1.3m (2016 £nil) have been capitalised in the period using the weighted average bank loan
interest rate applied to the capitalised spend on Fit 4 the Future project. In addition the Group has spend of £16.7m (2016 £16.5m)
that relates to Fit 4 the Future assets which are now in use and therefore being amortised.

As at 4 March 2017, the Group had entered into contractual commitments for the further development of intangible assets of
£3.0m (2016: £3.4m) of which £1m (2016: £0.9m) is due to be paid within one year.

Impairment testing of software intangible assets
The Group is currently undertaking a systems transformation project, Fit 4 the Future. Elements of the project are not yet available
for use and are not therefore being amortised. Where intangible assets are not being amortised management have tested for
impairment with the recoverable amount being determined from value in use calculations.

The value in use calculations use cash flows based on budgets prepared by management covering a three year period. These
budgets have regard to historic performance and knowledge of the current market, together with managements views on the
future achievable growth and impact of the Fit 4 the Future project. Cash flows beyond this three year period are extrapolated
using a long term growth rate to five years at which point a terminal value has been calculated based upon the long term growth
rate and the Group’s risk adjusted pre-tax discount rate.

Other than the detailed budgets, the key assumptions in the value in use calculations are the long-term growth rate and the risk
adjusted pre-tax discount rate. The long-term growth rate has been determined with reference to forecast GDP growth which
management believe is the most appropriate indicator of long-term growth rates that is available. The long-term growth rate used
is purely for the impairment testing of intangible assets and brands under IAS 36 ‘Impairment of Assets’ and does not reflect
long-term planning assumptions used by the Group for investment proposals or for any other assessments. The pre-tax discount
rate is based on the Group’s weighted average cost of capital, taking into account the cost of capital and borrowings, to which
specific market-related premium adjustments are made.

The value attributed to the key assumptions are as follows

• Long term growth rate : 1.9% (2016, 2.7%)
• Pre tax discount rate : 11.6% (2016, 8.0%)

The analysis performed indicates that no impairment is required. A sensitivity analysis has been performed on each of these key
assumptions with other variables held constant. Management have concluded that there are no reasonably possible changes in
these key assumptions that would cause the carrying value to exceed the value in use.

106

N Brown Group plc Annual Report & Accounts 2017Impairment testing of brand intangibles
The brand names arising from the acquisitions of 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
therefore subject to annual impairment tests with the recoverable amount being determined from the value in use calculations.

The value in use calculations use cash flows based on budgets prepared by management covering a three year period. These
budgets have regard to historic performance and knowledge of the current market, together with management’s views on the
future achievable growth. Cash flows beyond this three year period are extrapolated using a long term growth rate to 5 years at
which point a terminal value has been calculated based upon the long term growth rate and the Group’s risk adjusted pre tax
discount rate.

Other than the detailed budgets, the key assumptions in the value in use calculations are the long-term growth rate and the risk
adjusted pre-tax discount rate which management have assumed to be 1.9% (2016, 2.7%) and 12.5% (2016, 8.0%) respectively.

14 Property, plant and equipment

Cost

At 28 February 2015

Additions

Disposals

At 27 February 2016

Additions

Reclassification

At 4 March 2017

Accumulated depreciation and impairment

At 28 February 2015

Charge for the period

Eliminated on disposals

At 27 February 2016

Charge for the period

Reclassification

At 4 March 2017

Carrying amount

At 4 March 2017

At 27 February 2016

At 28 February 2015

Land and
Buildings
£m

Fixtures and
Equipment
£m

53.2

124.4

Total
£m

177.6

12.9

(2.4)

188.1

3.7

–

12.9

(2.4)

134.9

3.7

(5.9)

132.7

191.8

94.9

5.1

(1.7)

98.3

5.8

–

107.1

6.0

(1.7)

111.4

6.9

–

104.1

118.3

28.6

36.6

29.5

73.5

76.7

70.5

–

53.2

–

5.9

59.1

12.2

0.9

–

13.1

1.1

–

14.2

44.9

40.1

41.0

Assets in the course of construction included in property, plant and equipment at the year end date total £0.3m (2016, £13.4m),
and in land and buildings total £nil (2016, £7.0m). No depreciation has been charged on these assets.

At 4 March 2017, the Group had not entered into any contractual commitments for the acquisition of property, plant and
equipment (2016, £nil).

Assets previously categorised as Fixtures and Equipment totalling £5.9m have been reclassified as Land and Buildings in 2017
following finalisation of the Alliance Building capital spend analysis.

15 Subsidiaries
A list of all investments in subsidiaries, including the name, country of incorporation, proportion of ownership interest is given
in note 34 to the Company’s separate financial statements.

107

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE GROUP ACCOUNTS CONTINUED

16 Inventories

Finished goods

Sundry stocks

2017
£m

103.8

1.7

105.5

2016
£m

100.4

1.1

101.5

A net charge of £1.1m (2016, £12.1m) has been made to the income statement in respect of written down inventories.

There was no inventory pledged as security for liabilities in the current or prior period.

Sundry stocks relate to spare parts for engineering repairs and packaging stocks.

17 Trade and other receivables

Amount receivable for the sale of goods and services

Allowance for doubtful debts

Net trade receivables

Other debtors and prepayments

Trade receivables are measured at amortised cost.

2017
£m

599.5

(64.7)

534.8

40.6

575.4

2016
£m

624.7

(97.6)

527.1

26.3

553.4

The average credit period given to customers for the sale of goods is 217 days (2016, 222 days). Interest is charged at 58.7%
(2016, 58.7%) on the outstanding balance. Provision for impairment of receivables is established when there is objective evidence
that the Group will be unable to collect all amounts due. For customers who find themselves in financial difficulties, the Group may
offer revised payment terms to support the customer, encouraging customer rehabilitation and thereby maximising long term
returns. These revised terms may also include suspension of interest for a period of time. The cash collection rates on these
accounts are therefore reduced and a provision is held for all receivables on renegotiated terms. Accounts not on renegotiated
terms are also assessed and all accounts that reach the trigger point of 56 days past due are considered for provision.

The Group considers 56 days past due to be objective evidence of impairment for all accounts, not on renegotiated terms.
All such accounts are subject to an individual impairment provision. All accounts that are not considered individually impaired are
included in a collective provision to reflect impairment triggers that are incurred but not reported ('IBNR'). The group uses historic
roll rates to measure the likelihood of receivables moving into a segment which is subject to individual impairment over a 6 month
emergence period. This is then used to assess the level of provision needed in relation to these incurred but not reported
('IBNR') events.

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. The credit quality of trade receivables that are neither past due nor impaired, with
regard to the historical default rate has remained stable.

2017
£m

Trade
receivables on
payment
arrangements

Trade
receivables

Total trade
receivables

Trade
receivables

2016
£m

Trade
receivables on
payment
arrangements

444.2

53.0

497.2

406.6

38.2

18.7

13.3

9.1

8.1

531.6

(30.8)

500.8

6.5

2.5

2.0

1.6

2.3

67.9

(33.9)

34.0

44.7

21.2

15.3

10.7

10.4

599.5

(64.7)

534.8

41.9

20.8

14.4

10.2

8.5

502.4

(32.4)

470.0

94.2

14.0

5.0

3.4

2.6

3.1

122.3

(65.2)

57.1

Total trade
receivables

500.8

55.9

25.8

17.8

12.8

11.6

624.7

(97.6)

527.1

Ageing of trade receivables

Current – not past due

0 – 28 days – past due

29 – 56 days – past due

57 – 84 days – past due

85 – 112 days – past due

Over 112 days – past due

Gross trade receivables

Allowance for doubtful debts

Net trade receivables

108

N Brown Group plc Annual Report & Accounts 2017The carrying amount of trade receivables whose terms have been renegotiated but would otherwise be past due totalled
£53.0m at 4 March 2017 (2016, £93.1m). Interest income recognised on trade receivables which have been impaired was
£40.6m (2016, £41.7m).

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

2017
£m

97.6

113.5

(146.4)

64.7

2016
£m

100.9

110.3

(113.6)

97.6

The amounts written off in the period of £146.4m include the sale of impaired assets with a net book value of £29m. This sale has also
been a material driver in the reduction in trade receivables on payments arrangements, from £122.3m to £67.9m as at 4 March 2017.

The concentration of credit risk is limited due to the customer base being large and unrelated and comprising 1.2 million
(2016, 1.3 million) customers. Accordingly, the directors believe that there is no further credit provision required in excess
of the allowance for doubtful debts.

‘Other debtors and prepayments’ includes a net VAT debtor, comprising the VAT liability which arises from day to day trading,
together with amounts in relation to matters which are in dispute with HMRC. The Group continues to be in discussion with HMRC
in relation to the VAT consequences of the allocation of marketing costs between our retail and credit businesses. At this stage it
is not possible to determine how the matter will be resolved. However, within our year end VAT debtor is an asset of £36.0m
(2016, £21.7m) which has arisen as a result of cash payments made under protective assessments raised by HMRC. Based on legal
counsel’s opinion, we believe that we will recover this amount in full from HMRC and we are engaged in a legal process to do so.

Other debtors and prepayments do not include impaired assets. The maximum exposure to credit risk at the reporting date is
the carrying value of each class of asset. The Group does not hold any collateral over these balances.

18 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

The principal features of the Group’s borrowings are as follows:

2017
£m

2016
£m

355.0

335.0

–

355.0

–

335.0

2017
%

2016
%

2.0

2.1

2.0

2.4

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. The Group has a revolving credit facility of £20m (2016, £20m) which is undrawn at period end.

ii. The Group has a bank loan of £270m (2016, £250m) 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 £280m for which finance costs are linked to US commercial paper rates which is committed until August 2020.

The Group also has unsecured bank loans of £85m (2016, £85m) drawn down under a medium term bank revolving credit
facility, of £125 million, which is committed until August 2020.

iii. All borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk. The Group may use

derivatives such as interest rate swaps where appropriate to manage this risk. None have been used in the current or prior year.
Based on weighted average interest rates and the value of bank loans at 4 March 2017 the estimated future interest cost per
annum until maturity would be £7.6m (2016, £7.9m).

109

N Brown Group plc Annual Report & Accounts 2017Financial statements
NOTES TO THE GROUP ACCOUNTS CONTINUED

18 Bank overdraft and loans (continued)
At 4 March 2017, the Group had available £50m (2016, £70m) of undrawn committed borrowing facilities in respect of which all
conditions precedent had been met, in addition to its undrawn overdraft facility of £20m (2016, £20m).

Note 20 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. The covenants inherent to these borrowing
arrangements are closely monitored on a regular basis.

There is no material difference between the fair value and book value of the Group’s borrowings.

19 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 recognised

2017
£m

94.2

2.5

2016
£m

21.5

2.2

Changes in the fair value of assets/liabilities recognised, being non-hedging currency derivatives, amounted to a credit of £0.2m
(2016, credit of £1.1m) to income in the period.

The fair value of foreign currency derivatives contracts is their 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 financial instruments that are measured subsequent to initial recognition at fair value are all grouped into Level 2 (2016, 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 period (2016, same).

20 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 18, cash and cash equivalents disclosed in note 26 and equity attributable
to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 24 to 25 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

2017
£m

355.0

64.1

290.9

478.2

61%

2016
£m

335.0

45.3

289.7

476.0

61%

Debt is defined as long and short-term borrowings, as detailed in note 18.

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.

110

N Brown Group plc Annual Report & Accounts 2017Financial 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.
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

2017
£m

32.6

47.4

14.2

94.2

2016
£m

17.5

4.0

–

21.5

Forward contracts outstanding at the period end are contracted at US dollar exchange rates ranging between 1.25 and 1.32.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting
date are as follows:

Euro

US dollar

Liabilities

Assets

2017
£m

4.1

15.5

2016
£m

5.7

13.7

2017
£m

14.0

–

2016
£m

7.1

–

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 directors’ 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

US Dollar
Currency Impact

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

2017
£m

(0.5)

1.6

2016
£m

2017
£m

0.2

0.6

1.3

(1.8)

2017
£m

64.1

2.5

534.8

601.4

2017
£m

–

419.2

2016
£m

0.5

(2.4)

2016
£m

45.3

2.2

527.1

574.6

2016
£m

–

403.7

111

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE GROUP ACCOUNTS CONTINUED

20 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 53 weeks
ended 4 March 2017 would have decreased by £1.8m (2016, £1.4m).

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 which together with assessment against credit policy determines the terms and credit limit offered. Customer debtor
balances are monitored on an ongoing basis and provision is made for estimated irrecoverable amounts as detailed in note 17.

While the group has a number of support options for customers in financial difficulty, the majority are subject to the revision
of payment terms.

The concentration of credit risk is limited due to the customer base being large and unrelated.

Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. 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 18 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.

The following are the contractual maturities of financial liabilities, including estimated interest payments:

2017
Carrying
Amount
£m

2017
Contractual
Cash flows
£m

2017
1 year
or less
£m

2017
1 to <2
years
£m

2017
2 to <5
years
£m

2017
5 years
and over
£m

(7.6)

(366.7)

(355.0)

(64.2)

(381.9)

(64.2)

(7.6)

(64.2)

2.5

–

(416.7)

(443.6)

(71.8)

–

2.5

(5.1)

2016
Carrying
Amount
£m

2016
Contractual
Cash flows
£m

2016
1 year
or less
£m

2016
1 to <2
years
£m

–

(366.7)

2016
2 to <5
years
£m

(335.0)

(68.7)

(371.3)

(68.7)

(7.9)

(68.7)

2.2

(401.5)

(437.8)

2.2

(74.4)

(7.9)

(355.5)

–

(7.9)

(355.5)

–

2016
5 years
and over
£m

–

2017

Non derivative financial liabilities

Secured bank loans

Trade payables

Derivative financial (liabilities)/assets

Forward exchange contracts

Inflow

2016

Non derivative financial liabilities

Secured bank loans

Trade payables

Derivative financial (liabilities)/assets

Forward exchange contracts

Inflow

112

N Brown Group plc Annual Report & Accounts 2017Fair value of financial instruments
The fair value of each category of the Group’s financial instruments are the same as their carrying value in the Group’s
balance sheet other than as noted below.

Trade Receivables
As discussed in note 17, where a customer finds themselves in financial difficulty, we may offer revised payment terms.
This maximises long term returns to the business, but may not maximise the present value of the receivables.

The Group believes that the fair value of interest bearing receivables whether on a payment plan or not, is the same as their
carrying value on the balance sheet, as interest rates are charged to reflect market rates.

For non interest bearing debt, fair value is estimated based on the recent sale prices of similar debt books.

The fair value of receivables is calculated to be £524.1m (2016: £553.4m). This is considered a IFRS 13 Level 3 valuation
(2016: same) as the valuation relies on unobservable inputs.

Derivative financial instruments are recorded at fair value (IFRS 13: Level 2) as discussed in note 19. A Level 2 valuation uses
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).

21 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.

At 28 February 2015

(Charge)/credit to income

Charge to equity

At 27 February 2016

(Charge)/credit to income

(Credit)/charge to equity

At 4 March 2017

Debtor
Impairment
provision
£m

Share
based
payments
£m

Accelerated
tax
depreciation
£m

Retirement
benefit
obligations
£m

4.0

(1.4)

–

2.6

(1.0)

–

1.6

2.4

0.4

(1.7)

1.1

0.1

(0.6)

0.6

(7.2)

(3.2)

–

(10.4)

4.0

–

(6.4)

0.6

–

(2.5)

(1.9)

–

0.6

(1.3)

Other
£m

(1.1)

0.3

–

(0.8)

0.5

–

(0.3)

Total
£m

(1.3)

(3.9)

(4.2)

(9.4)

3.6

–

(5.8)

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

2017
£m

2.4

(8.2)

(5.8)

2016
£m

3.9

(13.3)

(9.4)

At the balance sheet date, the Group has unused tax losses of £0.1m (2016, £0.1m) and capital losses of £3.2m (2016, £3.2m)
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.

113

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE GROUP ACCOUNTS CONTINUED

22 Trade and other payables

Trade payables

Other creditors

Accruals and deferred income

2017
£m

64.2

0.1

34.6

98.9

2016
£m

68.7

0.4

30.6

99.7

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
The average credit period taken for trade purchases is 26 days (2016, 25 days).

The Group has financial risk management policies in place to ensure that all payables are paid within agreed credit terms.

23 Provisions

Balance as at 27 February 2016

Provisions made during the period

Provisions used during the period

Provisions reversed during the period

Balance as at 4 March 2017

Non-current

Current

Balance as at 4 March 2017

Customer
redress
£m

–

22.9

(3.0)

–

19.9

4.3

15.6

19.9

Total
£m

–

22.9

(3.0)

–

19.9

4.3

15.6

19.9

The provisions for customer redress relates to the Group’s expected liabilities in respect of payments for historic financial services
customer redress. The provision made is firstly in respect of recompensing certain customers due to an error in our previous
calculation for redress and, secondly, our estimate of the likely future costs arising from complaints relating to financial services
products sold in the past.

As at 4 March 2017 the Group holds a provision of £19.9m of which £0.8m is in respect of administration expenses. There are still a
number of uncertainties as to the eventual customer redress costs, in particular the total number of claims and the cost per claim,
however the Directors believe that the amounts provided at the period end, based on historical and forecasted claim rates and
amounts, along with known legal and regulatory obligations, appropriately reflect the expected cost to the Group.

The principal sensitivities in the customer redress calculation are: customer claim volume, uphold rates (which reflects the number
of customer claims which result in redress) and average redress amount.

+/- 10% in customer claims volumes

+/- 5% in uphold rate

+/- 10% in average redress amount

24 Share capital

Allotted, called-up and fully paid

Ordinary shares of 111/19p each

At 4 March 2017 and 27 February 2016

2017

£m

+/– 0.7

+/– 0.5

+/– 0.7

2017
Number

2016
Number

2017
£m

2016
£m

283,429,454

31.3

The Company has one class of ordinary shares which carry no right to fixed income. The holders of ordinary shares are entitled
to receive dividends as declared and are entitled to one vote per share at meetings of the Company.

114

N Brown Group plc Annual Report & Accounts 201725 Own shares

Balance at 27 February 2016

Additions

Issue of own shares on exercise of share options

Balance at 4 March 2017

2017
£m

0.2

–

(0.1)

0.1

2016
£m

0.3

0.4

(0.5)

0.2

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 29).

At 4 March 2017 the employee trusts held 635,022 shares in the company (2016, 897,018).

26 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

2017
£m

61.2

7.4

(4.5)

64.1

2016
£m

44.9

1.8

(1.4)

45.3

27 Contingent liabilities
Parent company bank overdrafts which at 4 March 2017 amounted to £27.2m (2016, £13.0m) have been guaranteed by certain
subsidiary undertakings.

28 Operating lease arrangements

Minimum lease payments under operating leases recognised as an expense for the period

2017
£m

6.5

2016
£m

9.8

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable
operating leases, which are payable as follows:

Within one year

In the second to fifth years inclusive

After five years

2017
£m

7.5

14.3

2.2

24.0

2016
£m

7.8

15.9

2.6

26.3

Operating lease payments represent rentals payable by the Group for certain buildings, plant and equipment and motor vehicles.

The Group’s operating leases include stores, certain buildings, plant and equipment and vehicles. These have varying terms,
restrictions and renewal rights. The commercial terms of the Group’s operating leases vary, however they commonly include
either market rent review or an index linked rent review. The timing of when rent reviews take place differs for each lease.

115

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE GROUP ACCOUNTS CONTINUED

29 Equity settled share based payments
The Directors’ Remuneration Report on pages 72 to 85 contains details of management and sharesave options/awards
offered to employees of the Group.

Details of the share options/awards outstanding during the period are as follows:

Option scheme

2010 Savings related scheme

2010 Executive scheme

Unapproved executive scheme

Long-term incentive scheme awards

July 2013

August 2013

August 2014

June 2015

August 2016

Deferred annual bonus scheme awards

May 2014

May 2015

May 2016

Option price
in pence

Exercise
period

Number of
shares
2017

Number of
shares
2016

189 – 420

August 2016 – February 2022 1,049,859

1,139,126

nil – 459

211 – 459

May 2009 – August 2024

220,429

776,000

May 2009 – August 2024

90,107

719,077

–

July 2016 – December 2016

August 2016 – February 2017

–

August 2017 – July 2024

623,527

579,981

151,834

872,955

June 2018 – June 2025

895,427

1,098,723

August 2019 – August 2026 2,619,067

–

May 2016 – November 2016

May 2017 – November 2017

May 2018 – November 2018

–

1,562

41,335

32,559

1,562

–

Movements in share options are summarised as follows:

2017

2016

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
options

2,634,203

543,146

Weighted
average
exercise
price £

Number of
share
options

Weighted
average
exercise
price £

3.20

2.18

4,139,570

527,372

(1,531,647)

3.72 (1,398,491)

(285,307)

0.51

(634,248)

1,360,395

2.78 2,634,203

151,597

2.51

349,820

2.80

2.98

2.73

1.46

3.20

2.51

Options were exercised on a regular basis throughout the period and the weighted average share price during this period was
225 pence (2016, 331 pence). The options outstanding at 4 March 2017 had a weighted average remaining contractual life
of 3.5 years (2016, 4.4 years). The aggregate estimated fair values of options granted in the period is £309,128 (2016, £629,348).

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

2017

2016

Number of
share
awards

2,737,614

2,696,993

(1,253,689)

–

4,180,918

–

Weighted
average
exercise
price £

–

Number of
share
awards

2,618,071

1,100,285

(953,150)

(27,592)

2,737,614

–

Weighted
average
exercise
price £

–

The awards outstanding at 4 March 2017 had a weighted average remaining contractual life of 8.8 years (2016, 6.7 years).
The aggregate estimated fair values of options granted in the period is £4,369,877 (2016, £2,421,892).

116

N Brown Group plc Annual Report & Accounts 2017The 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 (%)

2017

189

2016

339

29.2 – 35.0 27.7 – 34.2

2.5 – 5.5

0.1

4.0

0.9

4.2

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 £0.5m and £2.2m related to equity-settled share based payment transactions in 2017
and 2016 respectively.

30 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 £3.9m (2016, £3.0m) represents contributions payable to the schemes by the Group at rates
specified in the rules of the plans. As at 4 March 2017, contributions of £0.1m (2016, £0.3m) 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. On
29 February 2016 the scheme was closed to future accrual. A past service credit in respect of this closure was recognised in 2016,
as the Company was both committed to the change, and had the right to apply the change by the balance sheet date. No other
post-retirement benefits are provided. The scheme is a funded scheme and operates under UK trust law and the trust is a separate
legal entity from the Group. The scheme is governed by a board of trustees. The trustees are required by law to act in the best
interests of scheme members and are responsible for setting certain policies (eg investment funding) together with the Group.
The scheme exposes the Group to actuarial risks such as longevity risk, interest rate risk and investment risk.

The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at
30 June 2015 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

Future pension increases

Inflation – Retail Price Index

Inflation – Consumer Price Index

Life expectancy at age 65 (years)

Pensioner aged 65

Non-pensioner aged 45

2017

2016

2.65%

2.3%

3.4%

2.4%

23.4

25.2

3.90%

2.15%

3.15%

2.15%

24.6

26.7

117

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE GROUP ACCOUNTS CONTINUED

30 Retirement benefit schemes (continued)
Amounts recognised in profit or loss in respect of these defined benefit schemes are as follows:

Current service cost

Past service credit

Net interest (credit)/cost

Profit recognised in the income statement

The actual return on scheme assets was £30.1m (2016, £3.7m).

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

Surplus in the scheme and asset recognised in the balance sheet

The amount included in the statement of comprehensive income.

Remeasurement (loss)/gain

Return on scheme assets

(Loss)/gain recognised in the statement of comprehensive income

The surplus reflects the economic benefit at the balance sheet date, that the Group would be entitled to,
through refund, in the event the scheme was wound up.

Movements in the present value of defined benefit obligations were as follows:

At 27 February 2016

Current service cost

Past service cost/(credit)

Interest cost

Remeasurement (gain)/loss

a. Effect of changes in financial assumptions

b. Effect of experience adjustments

Benefits paid

At 4 March 2017

Movements in the fair value of the scheme assets were as follows:

At 27 February 2016

Interest income

Return on scheme assets excluding interest income

Contributions from sponsoring companies

Benefits paid

At 4 March 2017

118

2017
£m

–

(0.4)

2017
£m

(135.2)

143.5

8.3

2017
£m

(28.7)

25.6

(3.1)

2017
£m

108.1

–

4.1

42.2

(13.5)

(5.7)

2016
£m

2.3

(2.4)

0.1

–

2016
£m

(108.1)

118.9

10.8

2016
£m

12.9

(0.4)

12.5

2016
£m

120.8

2.3

(2.4)

4.2

(10.1)

(2.8)

(3.9)

135.2

108.1

2017
£m

118.9

4.5

25.6

0.2

(5.7)

2016
£m

117.5

4.1

(0.4)

1.6

(3.9)

143.5

118.9

N Brown Group plc Annual Report & Accounts 2017The analysis of the scheme assets at the balance sheet date was as follows:

Equities

Fixed-interest government bonds

Index-linked government bonds

Corporate Bonds

Property

Growth fixed income

Alternatives

Cash and cash equivalents

2017

2016

£m

38.1

16.5

40.2

14.7

2.4

16.9

13.5

1.2

26.6

11.5

28.0

10.2

1.7

11.8

9.4

0.8

£m

33.8

14.8

29.1

14.6

2.2

13.2

10.9

0.3

28.4

12.4

24.5

12.3

1.9

11.1

9.2

0.2

143.5

100.0

118.9

100.0

All assets had a quoted market price (2016, all). Significant actuarial assumptions for the determination of the defined benefit
obligation are the discount rate, inflation and life expectancy.

• An increase of 0.25% in the discount rate used would decrease the defined benefit obligation by £7.4m (2016, £5.8m).
• An increase of 0.25% in the inflation assumption would increase the defined benefit obligation by £6.0m (2016, £4.4m).
• An increase of one year in the life expectancy assumption would increase the defined benefit obligation by £4.2m (2016, £2.2m)

The above sensitivities are applied to adjust the defined benefit obligation at the end of the reporting period. Whilst the analysis
does not take account of the full distribution of cash flows under the scheme, it does provide an approximation to the sensitivity
of the assumptions shown. No changes have been made to the method and assumptions used in this analysis from those used in
the previous period.

The scheme is funded by the Group and current employee members. Funding the scheme is based on a separate actuarial
valuation for funding purposes for which the assumptions may differ from the assumptions above. Funding requirements are
formally set out in the Statement of Funding Principles, Schedule of Contributions and Recovery Plan agreed between the trustees
and the Group.

Whilst no commitment has been made as at the balance sheet date, the Group expects to contribute £0.3m (2016, £0.2m)
to the defined benefit scheme in the next financial year.

The weighted average duration of the defined benefit obligation at 4 March 2017 is approximately 24 years (2016, 24 years).

The defined benefit obligation at 4 March 2017 can be approximately attributed to the scheme members as follows:

• Active members: 0% (2016, 0%)
• Deferred members: 70% (2016, 68%)
• Pensioner members; 30% (2016, 32%)

All benefits are vested at 4 March 2017 (unchanged from 27 February 2016).

31 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. Details of remuneration paid to the Group’s key management personnel are given on page 82
of the Directors’ Remuneration Report.

119

N Brown Group plc Annual Report & Accounts 2017Financial statementsCOMPANY BALANCE SHEET

Fixed assets

Investments

Current assets

Debtors

Cash and cash equivalents

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

Own shares

Profit and loss account

Shareholders’ funds

As at
4 March
2017
£m

As at 27
February
2016
£m

Note

366.5

366.0

73.2

–

73.2

(212.7)

(139.5)

227.0

(85.0)

142.0

31.3

11.0

(0.1)

99.8

58.8

0.1

58.9

(199.5)

(140.6)

225.4

(85.0)

140.4

31.3

11.0

(0.2)

98.3

142.0

140.4

The financial statements of N Brown Group plc (Registered Number 814103) were approved by the Board of Directors and
authorised for issue on 9 May 2017.

They were signed on its behalf by:

Craig Lovelace
CFO and Executive Director

120

N Brown Group plc Annual Report & Accounts 2017COMPANY STATEMENT OF CHANGES IN EQUITY

Changes in equity for the 52 weeks ended 27 February 2016

Balance at 28 February 2015

31.3

11.0

(0.3)

94.3

136.3

Share
capital
(note 38)
£m

Share
premium
£m

Own Shares
£m

Retained
earnings
£m

Total
£m

Comprehensive income for the period

Profit for the period

Other items of comprehensive income for the period

Total comprehensive income for the period

Transactions with owners recorded directly in equity

Equity dividends

Purchase of own shares by ESOT

Issue of own shares by ESOT

Adjustment to equity for share payments

Share based payment charge

Total contributions by and distributions to owners

–

Balance at 27 February 2016

31.3

11.0

–

(0.4)

0.5

–

0.1

(0.2)

41.7

–

41.7

(40.2)

–

0.3

2.2

(37.7)

98.3

41.7

–

41.7

(40.2)

(0.4)

0.5

0.3

2.2

(37.6)

140.4

Changes in equity for the 53 weeks ended 4 March 2017

Balance at 27 February 2016

31.3

11.0

(0.2)

98.3

140.4

Comprehensive income for the period

Profit for the period

Total comprehensive income for the period

Transactions with owners recorded directly in equity

Equity dividends

Issue of own shares by ESOT

Share based payment charge

Total contributions by and distributions to owners

–

0.1

–

0.1

Balance at 4 March 2017

31.3

11.0

(0.1)

41.2

(40.2)

–

0.5

(39.7)

99.8

0.1

0.5

(39.6)

142.0

121

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE COMPANY ACCOUNTS

32 Significant accounting policies
Basis of accounting
N Brown Group plc (’the Company’) is a company incorporated and domiciled in the UK. These financial statements present
information about the Company as an individual undertaking and not about its Group. These financial statements were prepared
in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’).

In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of
International Financial Reporting Standards as adopted by the EU (‘Adopted IFRSs’), but makes amendments where necessary
in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has
been taken.

The Company is the ultimate parent undertaking of the Group and also prepares consolidated financial statements. The
consolidated financial statements of N Brown Group plc are prepared in accordance with International Financial Reporting
Standards and are available to the public and may be obtained from its registered office address.

In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of
the following disclosures:

• Company cashflow statement and related notes
• Disclosures in respect of transactions with wholly owned subsidiaries
• Disclosures in respect of capital management
• The effects of new but not yet effective IFRSs
• Disclosures in respect of the compensation of key management personnel

As the consolidated financial statements of N Brown Group plc include equivalent disclosures the Company has also taken
exemptions under FRS 101 available in respect of the following disclosures:

• Certain disclosures required by IFRS 13 Fair Value Measurement
• Disclosures required by IFRS 7 Financial Instrument Disclosures

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.

Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except
to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised
directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than
in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse
in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of
the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred
tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary
difference can be utilised.

122

N Brown Group plc Annual Report & Accounts 2017Dividends
Dividends receivable are recognised when the Company’s right to receive payment is established. Dividends payable to the
Company’s shareholders are recognised as a liability and deducted from shareholders’ equity in the period in which the
shareholders’ right to receive payment is established.

Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form
an integral part of the Company’s cash management are included as a component of cash and cash equivalents on the basis there
is right to offset.

Own shares held by ESOT
Transactions of the Company-sponsored Employee Share Ownership Trust (ESOT) are treated as being those of the Company and
are therefore reflected in the Company financial statements. In particular, the trust’s purchases and sales of shares in the Company
are debited and credited directly to equity.

33 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 after tax for the financial period ended 4 March 2017 of £41.2m (2016, profit £41.7m) which
includes dividends received of £48.2m (2016, £49.0m).

The Non-Executive Directors’ remuneration was £538,000 (2016, £569,000) and eight Non-Executive Directors were remunerated
(2016, seven). The Executive Directors were remunerated by a subsidiary company in both years. Further details are provided on
page 82 of the Directors’ Remuneration Report.

The auditor’s remuneration for audit services to the company of £15,000 (2016, £15,000) was borne by subsidiary undertakings.

123

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE COMPANY ACCOUNTS CONTINUED

34 Fixed asset investment

Cost and net book value

The Company has investments in the following subsidiaries and joint ventures.

Company

Aldrex Ltd

Registered Office Address

Griffin House, 40 Lever Street, Manchester M60 6ES

Alexander Ross (Financial services) Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

Ambrose Wilson Ltd

Better Living Ltd

Classic Combination Ltd

Comfortably Yours Ltd

Crescent Direct Ltd

Cuss Contractors Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

Dale House (Mail Order) Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

Daly Harvey Morfitt Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

DHM (Management Services) Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

E Langfield & Co. Ltd

Eunite Limited

Griffin House, 40 Lever Street, Manchester M60 6ES

Figleaves Global Trading Limited

Griffin House, 40 Lever Street, Manchester M60 6ES

Financial Services (Edinburgh) Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

First Financial Ltd

Gray & Osbourn Ltd

Halwins Ltd

Hammond House Investments
International Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

Hammond House Investments Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

Hartingdon House Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

HB Wainwright (Financial Services) Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

Heather Valley (Woollens) Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

Hilton Mailing Ltd

Holland & Heely Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

House of Stirling (Direct Mail) Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

J.D. Williams & Co Ltd

J.D. Williams Group Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

J.D. Williams Merchandise Co Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

JDW Finance Ltd

JDW Malta Limited

Griffin House, 40 Lever Street, Manchester M60 6ES

JDW Pension Trustees Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

Langley House Ltd

Mature Wisdom Ltd

Melgold Ltd

NB Finance (Eire Reg)

Griffin House, 40 Lever Street, Manchester M60 6ES

29 Earlsfort Terrace, Dublin 2, Ireland

N Brown Pension Trustees Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

N Brown Funding Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

N Brown Group Quest Trustee Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

N Brown Holdings Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

N Brown No. 2 Ltd (Guernsey Reg)

St Martin’s House, Le Bordage, St Peter Port, Guernsey, GY1 4AU

N Brown Property One Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

N Brown Property Three Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

N Brown Property Two Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

124

2017
£m

2016
£m

366.5

366.0

Proportion held by
the Group (%)

100

N Brown Group plc Annual Report & Accounts 2017Company

Registered Office Address

NB Funding Guernsey Ltd (Guernsey Reg)

St Martin’s House, Le Bordage, St Peter Port, Guernsey, GY1 4AU

NB Guernsey UK

Griffin House, 40 Lever Street, Manchester M60 6ES

NB Holdings Guernsey Ltd (Guernsey Reg)

St Martin’s House, Le Bordage, St Peter Port, Guernsey, GY1 4AU

NB Insurance Guernsey Ltd (Guernsey Reg) St Martin’s House, Le Bordage, St Peter Port, Guernsey, GY1 4AU

NB Malta No1 Ltd
(Malta Reg)

NB Malta No2 Ltd
(Malta Reg)

The Hedge Business Centre, Level 3, Triq ir-Rampa ta’ San Giljan,
St Julians STJ 1062, Malta

Nochester Holdings (Eire Reg)

29 Earlsfort Terrace, Dublin 2, Ireland

Odhams Leisure Group Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

Oxendale & Company Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

Oxendale & Co. Ltd (Eire Reg)

Woodford Business Park, Santry, Dublin 17, Ireland

Reliable Collections Ltd

Sander & Kay Limited

Griffin House, 40 Lever Street, Manchester M60 6ES

Speciality Home Shopping (US) Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

Tagma Ltd

T-Bra Limited

Griffin House, 40 Lever Street, Manchester M60 6ES

The Bury Boot & Shoe Co (1953) Ltd

Griffin House, 40 Lever Street, Manchester M60 6ES

The Value Catalogue Limited

Griffin House, 40 Lever Street, Manchester M60 6ES

Vote It Ltd

Whitfords (Bury) Ltd

Whitfords (Cosytred) Ltd

Whitfords (Textiles) Ltd

Wingmark Ltd

35 Debtors

Amounts falling due within one year:

Amounts owed by Group undertakings

Prepayments and accrued income

36 Creditors

Amounts falling due within one year:

Bank overdrafts (note 37)

Amounts owed to Group undertakings

Accruals and deferred income

Proportion held by
the Group (%)

100

2016
£m

58.0

0.8

58.8

2017
£m

72.3

0.9

73.2

2017
£m

2016
£m

27.2

184.7

0.8

212.7

13.0

186.0

0.5

199.5

125

N Brown Group plc Annual Report & Accounts 2017Financial statementsNOTES TO THE COMPANY ACCOUNTS CONTINUED

37 Bank loans and overdrafts

Bank overdrafts

Bank loans

2017
£m

27.2

85.0

112.2

2016
£m

13.0

85.0

98.0

The Company has unsecured bank loans of £85.0m (2016, £85.0m) drawn down under a medium term bank revolving credit facility
committed until September 2020.

At 4 March 2017, the Company had available £40.0m (2016, £40.0m) of undrawn committed borrowing facilities in respect of
which all conditions precedent had been met, in addition to a £20m (2016, £20m) undrawn revolving credit facility.

The weighted average interest rates paid were as follows:

Bank overdrafts

Bank loans

38 Share capital

2017
%

2.0

1.9

Allotted, called-up and fully paid Ordinary shares of 111/19p each

2017
Number

2016
Number

2017
£m

2016
%

2.0

1.9

2016
£m

At 4 March 2017 and 27 February 2016

283,429,454 283,429,454

31.3

The Company has one class of ordinary share which carry no right to fixed income.

39 Guarantees
Parent company bank overdrafts which at 4 March 2017 amounted to £27.2m (2016, £13.0m) have been guaranteed by certain
subsidiary undertakings.

126

N Brown Group plc Annual Report & Accounts 2017SHAREHOLDER INFORMATION

Financial calendar

2017

2018

October

December

January

February

April

June

July

Announcement of interim results

Closing of register for interim dividend

Payment of interim dividend

Christmas Trading Statement

Financial year-end

Preliminary announcement of annual results

Publication of 2018 annual report and accounts

Closing of register for final dividend

Annual general meeting

August

Payment of final dividend

An updated version of the financial calendar is available at www.nbrown.co.uk

Registered office
Griffin House
40 Lever Street
Manchester
M60 6ES
Registered No. 814103
Telephone 0161 236 8256

Registrars
Capita Asset Services
PXS 1
34 Beckenham Road
Beckenham
Kent BR3 4ZF
Telephone 0871 664 0300
(Calls cost 10 pence per minute
plus network extras)

Auditor
KPMG LLP
1 St Peter’s Square
Manchester
M2 3AE

Bankers
HSBC Bank plc
The Royal Bank of Scotland plc

Solicitors
Pinsent Masons LLP
Eversheds LLP
Addleshaw Goddard LLP

Corporate brokers
Jefferies Hoare Govett
Shore Capital Stockbrokers Limited

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

127

N Brown Group plc Annual Report & Accounts 2017NOTES

128

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N Brown Group plc
Griffin House
40 Lever Street
Manchester M60 6ES
www.nbrown.co.uk