A TRANSFORMING
DIGITAL RETAILER
N BROWN GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2020
N Brown Group plc Annual Report and Accounts 2020
1
STRATEGIC REPORT
AT A GLANCE
CHAIR'S STATEMENT
CHIEF EXECUTIVE'S STATEMENT
A STRATEGY FOR GROWTH
STRATEGY
MARKETPLACE
BUSINESS MODEL
KEY PERFORMANCE INDICATORS
UNIQUE BRANDS, DIGITAL GROWTH
BRAND ACTIVITY
FINANCIAL PERFORMANCE
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE
RISK MANAGEMENT
SECTION 172 STATEMENT
2
GOVERNANCE REPORT
CHAIR’S INTRODUCTION
LEADERSHIP AND PURPOSE
GROUP BOARD DIRECTORS
EXECUTIVE BOARD DIRECTORS
BOARD ENGAGEMENT WITH
THE WORKFORCE
DIVISION OF RESPONSIBILITY
GOVERNANCE STRUCTURE
2
4
5
8
18
20
22
24
28
32
40
46
49
50
52
56
58
COMPOSITION, SUCCESSION AND EVALUATION
BOARD COMPOSITION
NOMINATION AND GOVERNANCE
COMMITTEE REPORT
60
63
AUDIT, RISK AND INTERNAL CONTROL
AUDIT AND RISK COMMITTEE REPORT
FINANCIAL SERVICES BOARD
COMMITTEE REPORT
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (“ESG”) COMMITTEE REPORT
REMUNERATION
REMUNERATION COMMITTEE REPORT
OTHER DISCLOSURES
3
FINANCIAL STATEMENTS
For the detailed contents of the
Financial statements go to p96.
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED STATEMENTS
NOTES TO THE GROUP ACCOUNTS
COMPANY STATEMENTS
NOTES TO THE COMPANY ACCOUNTS
SHAREHOLDER INFORMATION
64
71
72
73
91
97
106
110
154
156
165
A STRATEGY
FOR GROWTH
p8
LEADERSHIP
AND PURPOSE
p50
UNIQUE BRANDS,
DIGITAL GROWTH
p24
DIVISION OF
RESPONSIBILITY
p58
ADAPTING TO
CONSUMER TRENDS
In a challenging marketplace, we believe that
our strategy is the right one to ensure long-term
growth. We believe a relentless focus on our
customers and a renewed energy to improve
our products across our compelling but distinct
portfolio of brands will make a big difference.
Restructuring takes time, but we’ve been
working hard all year, making sure the
shape of the business will deliver long-term
sustainable value for shareholders.
HIGHLIGHTS
REVENUE
ADJUSTED PRE-TAX PROFIT2
£858.2m
2019: £914.4m -6.1%
£59.5m
2019: £83.6m -28.8%
ADJUSTED EBITDA1
£106.7m
2019: £128.0m -16.6%
STATUTORY PROFIT
BEFORE TAX
£35.7m
2019: £-57.5m n/m
1 Adjusted EBITDA is defined as operating profit, excluding exceptionals, with depreciation and amortisation added
back. The Directors believe adjusted EBITDA represents the most appropriate measure of the Group’s underlying
trading performance.
2 Defined as excluding exceptionals and fair value movement on financial instruments. The Directors believe that
adjusted pre-tax profit represents the most appropriate measure of the Group’s underlying pre-tax profit as it removes
items that do not form part of the recurring activities of the Group.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report Governance report Financial statements AT A GLANCE
OUR VISION
OUR MISSION
Championing inclusion, we’ll become the
most loved and trusted fashion retailer.
We’re obsessed with our customers and have
been for generations. We delight them with
products, service and finance to fit their lives.
OUR PURPOSE
We exist to make our customers
look and feel amazing.
WE ARE A TOP 10 UK CLOTHING AND FOOTWEAR DIGITAL
RETAILER WITH A FOCUSED BRAND PROPOSITION
WOMENSWEAR
JD WILLIAMS
An online boutique experience
showcasing fashion and home product
for 45-65 year old women.
SIMPLY BE
An online fashion and beauty brand
for plus size women, targeting plus size
women aged 25-45.
AMBROSE WILSON
A womenswear fashion led brand
supported by home, available on
and offline that truly values the
mature customer.
Digital revenue growth
Digital revenue growth
Digital revenue growth
+2.0%
+8.2%
+10.5%
2
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk OUR COMMITMENT TO
OUR PEOPLE AND OUR PLANET
Our strategy is designed to embrace
the ESG pillars of Our People and Our
Planet. It aims to fully align our ethical
policies with our commercial activities,
achieving tangible results and benefits
for all our stakeholders.
REVENUE BREAKDOWN1
A WOMENSWEAR
1 JD WILLIAMS
2 SIMPLY BE
3 AMBROSE WILSON
B MENSWEAR
4 JACAMO
C PRODUCT BRANDS
D FINANCIAL SERVICES
£326.5m
£153.1m
£128.0m
£45.4m
£66.9m
£66.9m
£170.2m
£290.5m
D
C
A
2
1
3
4
B
MENSWEAR
PRODUCT BRANDS
FINANCIAL SERVICES
JACAMO
An online fashion and grooming brand
for plus size men, targeting plus size
men aged 25-50.
Our product brands complement
our Womenswear and Menswear
brands by focusing on distinct
customer niches which are not served
by JD Williams, Simply Be, Ambrose
Wilson and Jacamo.
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 flexibility,
we allow customers to either pay us
immediately or utilise a credit account
for their purchases, spreading the cost
of their purchase over time.
Digital revenue growth
Revenue decrease (exc Stores and US)
Revenue decrease
+5.5%
-5.7%
SEE MORE ABOUT
OUR BRANDS
p24
-2.7%
Gross customer loan book
£656.9m
-3.7%
1 Excludes US revenue. Digital revenue is revenue
from all online channels. Offline revenue is revenue
from telephone or mail channels, FY19 offline
revenue also includes revenue from Stores.
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CHAIR’S STATEMENT
REVIEW OF THE YEAR
The retail environment remained highly
promotional during the year and our
focus was on continuing to build our
digital business across our core brands.
In line with the strategy of scaling back
unprofitable marketing and recruitment,
whilst managing the decline of our
offline brands, Group revenue declined
6.1% to £858.2m. We were pleased,
however, with our focus on growing
digital revenue. Womenswear and
Menswear digital revenue both grew
5.5% and 85% of our Product revenue is
now digital.
In response to wide-sweeping
regulatory changes across the retail
credit financial services sector, the
Group has continued to develop our
credit business to ensure we offer an
attractive and flexible payment option
to customers, whilst ensuring we are
set up for the future. We have made
a number of significant changes to
the way we manage the debtor book
and as a result our Financial Services
revenue declined 2.7% in the year.
Our continued focus on a more
sustainable cost base continued with
operating costs down 9.9% in the year,
as we found more efficient ways of
running the business. Adjusted profit
before tax was £59.5m, a 28.8% decline
compared to the prior year; this was
driven by lower Product and Financial
Services gross profit and higher interest
costs. However, we were pleased to
report a material increase in statutory
profit before tax, driven by significantly
reduced exceptional items in the year.
Building blocks for future success have
been put in place with important changes
to the ways of working and key hires to
the executive team during the year.
DIVIDEND
The Board declared an interim dividend
of 2.83 pence per share in respect
of the first half of the financial year.
Following the outbreak of Covid-19 and
the subsequent impact on the business
and the wider economy, the Board
announced in March that it would not
be recommending a final dividend for
this financial year. Following the year
end, the Group secured amendments
to its financing facilities which included
accessing the Government’s Coronavirus
Large Business Interruption Loan
Scheme (“CLBILS”). For as long as the
£50m CLBILS facilities remain in place,
the Group will be restricted from paying
cash dividends. The Board does not
anticipate declaring cash dividends in
respect of the 2021 financial year.
BOARD CHANGES
This year has seen further changes to
the Board. We were pleased to welcome
Vicky Mitchell as a new Non-Executive
Director. Vicky brings over 20 years of
consumer finance experience to the
Board and was formerly Chief Operating
Officer of Capital One (Europe) plc,
previously holding the positions of Chief
Risk Officer and Chief Legal Counsel.
Vicky is currently a Non-Executive
Director and Chair of the Risk Committee
of Lookers plc and is also a Non-
Executive Director of West Bromwich
Building Society where she sits on both
the Risk and Audit Committees.
During the year, Craig Lovelace resigned
as Chief Financial Officer. I would like to
thank Craig for his contribution over the
last five years. We wish him every success
for the future. We were delighted to
appoint Rachel Izzard as our new Chief
Financial Officer. Rachel joins us from
Aer Lingus where she was the Chief
Financial Officer since 2015.
LOOKING FORWARD
The Board undertook a thorough
review of the strategy during the year
and the details are contained within
the Chief Executive’s statement.
Since we undertook the review the
trading environment has changed with
the outbreak of Covid-19 but we are
confident that the refreshed strategy
is right for our business over the long
term. We have renegotiated our debt
financing arrangements to ensure that
we have the necessary flexibility to trade
in these challenging times. The past few
months in particular with Covid-19 have
been challenging for all stakeholders
in the business. I would like to say a
huge thank you to all our stakeholders,
especially our brilliant colleagues for
their hard work and commitment over
these uncertain times.
I would like to thank all
our colleagues for their
commitment and hard
work, especially in their
recent response to the
challenges posed by
Covid-19. I am proud of
the way in which our team
has reacted, ensuring the
safety of our colleagues
whilst maintaining their
commitment to serving
our customers.
Matt Davies
Chair
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nbrown.co.uk CHIEF EXECUTIVE’S STATEMENT
A YEAR OF TRANSITION
The business has
responded strongly to the
challenges posed by the
Covid-19 outbreak and
I thank every single one of
our colleagues who have
worked so hard to keep
us operational, with safety
and our customers in the
front of their minds.
Steve Johnson
Chief Executive Officer
The Company took a number of
immediate and proactive measures
to reduce costs and strengthen
liquidity, including:
RESPONDING TO THE COVID-19 PANDEMIC
Our absolute priority has been
to protect the wellbeing of our
colleagues, both across our
distribution centres and at Head
Office, whilst maintaining continuity
of service for our customers shopping
our brands. We are immensely grateful
for the effectiveness and dedication
which our colleagues and supplier
partners have shown in adapting to a
more flexible way of working during
this difficult period and their continued
unstinting commitment to supporting
our loyal customer base.
A significant reduction in
marketing expenditure;
Cessation and deferral of all
non-essential capital expenditure;
The furloughing of 30% of
colleagues across the business;
Recruitment and salary freezes;
For information on how Covid-19
has impacted our risk management
practices see p42. Further narrative on
our social response to the pandemic is
set out on p35.
Voluntary pay reductions from
April to June for plc Board,
Management Board and senior
leadership team; and
Agreement with HMRC to defer
certain tax and duty payments
associated with our normal operating
activities as well as certain legacy tax
payments which were expected to be
paid in H1 FY21.
REVIEW OF THE YEAR
This year was a period of restructuring
for the business as we made the
required changes to our business model
and ways of working to strengthen our
position as a leading digital retailer.
Whilst our financial performance was
impacted by ongoing challenges from
a promotional retail market, combined
with industry-wide regulatory changes
in financial services, we made good
operational progress and the necessary
building blocks for success are being put
in place.
Group revenue declined 6.1% to
£858.2m, with a 7.8% decline in Product
revenue, as we continued the managed
decline of our legacy offline business.
There was also a 2.7% decline in
Financial Services revenue, as a result of
proactive measures undertaken on the
implementation of credit limit increases
and affordability assessments.
Over the next few pages we review
our progress during the financial year,
before outlining our new strategy
going forward.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report
CHIEF EXECUTIVE’S STATEMENT CONTINUED
OUR PROGRESS DURING THIS FINANCIAL YEAR
BRAND DEVELOPMENT
AND UK FOCUS
We closed down our International
division and exited marketing directly
to the US, removing an unprofitable
part of our business. This has enabled
us to redeploy key skills to support the
UK business. We now have a clear and
single-minded focus on the UK.
We delivered digital growth of 5.5%
on our three Womenswear brands
(Simply Be 8.2%, JD Williams 2.0%, and
Ambrose Wilson 10.5%). Menswear
(Jacamo) has delivered 5.5% digital
growth. Significantly, we are now an 85%
digital business which represents a six
percentage point increase from the 79%
delivered in the previous financial year,
as we continue to actively manage the
decline of our offline business.
We have invested more in our
Womenswear and Menswear brands
in the last 12 months, launching new
campaigns for JD Williams, Simply
Be and Jacamo and bringing in new
specialist fashion agency partners,
raising production quality. We have
focused our investment on established
channels such as TV and Press, and
newer brand building channels such as
outdoor media. During the year we also
relaunched our social media strategy
and are now using social for storytelling
to gain a deeper engagement with
followers. This will continue to be a focus
in this financial year. Recent examples
include the launch of Simply Be’s New
Icon model search, which was executed
purely through social media.
PRODUCT AND FIT
We have placed the customer at
the heart of decision-making across
the business and have focused on
understanding our customers’ views
on our product. In particular, we have
taken learnings from digital product
reviews and through weekly "blind
testing" sessions of our products vs.
competitors. The strongest feedback we
receive about our products is from our
customers and we have now ensured
that listening to our customers is more
deeply embedded in our culture.
We are working with Bloomreach
which uses machine learning and
Artificial Intelligence to offer advanced
merchandising tools that optimise and
personalise each customer’s digital
experience. This includes the capability
to serve every customer a personalised
product list based on their preferences.
Bloomreach launched on Jacamo in
April 2020 and further roll out is planned
across our core brands in H1 FY21.
Our size and fit recommendations
service, powered by the US innovator,
True Fit, is now live across JD Williams,
Simply Be, Ambrose Wilson and Jacamo.
The service aims to improve confidence
when purchasing and reduce the
number of times customers buy multiple
sizes to find their perfect fit, reducing
returns rates.
We have made good progress in
improving our branded portfolio to
complement our own label ranges
offering our customers an improved
proposition. In September we launched
Sea-Salt, Joules and Hobbs as new
brands for JD Williams, and in October,
we launched Tommy Hilfiger and
Calvin Klein as new brands for Jacamo.
Both Ralph Lauren and Hugo Boss have
also agreed to work with Jacamo and
launched this summer.
DRIVING IMPROVEMENTS
THROUGH DIGITAL,
DATA AND INNOVATION
Our IT squads are driving continuous
improvements to our apps.
These improvements will deliver a better
customer experience, higher conversion
rates and are a step towards our
technology vision.
We have continued to drive further
innovation through our market-leading
body scanning technology and 3D design
and product development to deliver
continued fit improvements. We now
have a much better understanding of our
customers’ shape, having scanned over
1,000 to date. This has fundamentally
changed our approach to fit, moving it
forward as a competitive differentiator.
We also selected our first clothing ranges
using virtual technology which enabled
us to design and select hundreds of
styles in less than two weeks. This will
drive sustainable cost efficiencies as it
will significantly reduce our development
time and negate the need for
sample production.
We also launched our automated
returns facility at our warehouse in Shaw.
This investment delivers benefits to
the customer through faster refunds,
better stock availability and improved
presentation of items returned to stock.
It has also delivered operational benefits,
by removing 66% of receiving and
sortation activity.
6
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk In the last financial year our use of data
has continued to improve customer
insight in the business. We have moved
to customer lifetime value (“CLTV”)
investment models in our digital
marketing strategy to drive a more
sustainable financial outcome. We have
also adopted a data led approach
to media spend, which has helped
accelerate the business to be 85% digital.
Within Financial Services, data
decisioning tools are also helping us
to serve a broader range of customers.
We are the first lender to adopt Aire’s
enhanced affordability assessment at
scale across our brands to improve credit
decisioning and ultimately improve
the customer experience for our credit
customers. We continue to develop
our own in-house capability and have
established a Data Science team led by
the newly appointed Director of Data
Science to continue to drive this critical
area in the digital world.
STRENGTHENING
OUR TEAM
We have also improved the expertise
around the business to support the
refreshed strategy by making significant
new hires across our Executive Board
and senior leadership team. We have
introduced our new Vision, Mission
and Purpose into the business, whilst
also refreshing our company Values.
We launched these to our colleagues
in the autumn to give them a clearer
indication of the direction the business
is heading in, and how we behave.
The process has been developed
bottom up, not top down, and is an
important step in creating an engaged
and dynamic culture. We measure
colleague engagement through our
VIBE survey which achieved an overall
score of 72% for FY20 (vs 68% FY19).
We are encouraged by the improvement
in score, particularly given large amounts
of internal change and external factors
such as the challenging retail market.
FINANCIAL SERVICES
During the year, in response to wide-
sweeping regulatory intervention
across the financial services sector,
the Group continued to make a
number of significant changes to the
way it manages Financial Services.
Revenue declined 2.7% in the year
due to lower balances and associated
interest income and due also to a fall in
administration fees as fewer customers
entered into arrears. As a result of lower
Product revenue, the gross debtor book
declined 3.7% to £656.9m.
Over the last 18 months there has been
a significant amount of industry-wide
regulatory change. We are committed to
improving outcomes for customers and
have made several changes to policies
and procedures over the past few years
to do this and ensure full compliance
with regulation. We are facing two
particular headwinds in Unsolicited
Credit Limit Increases (“UCLI”) and
Persistent Debt.
UCLI was introduced in two phases
with first phase starting in March 2019.
Changes were made to our credit limit
increase process whereby customers
were given 30 days before any proposed
increase in a credit limit was applied and
were provided the option to ‘opt-out’.
Further rule changes came into effect
as part of phase two in December 2019.
Customers were given more control
over credit limit increases by giving
them the option to ‘opt-in’ vs. ‘opt-out’
when signing up for credit and providing
options to change their preference
throughout the customer lifecycle.
On phase two we also introduced
hard policy rules around arrears and
persistent debt. These changes have
reduced the number of credit limit
increases that are offered to customers.
Persistent debt is defined as where,
over a period of 18 months, a consumer
pays more in interest, fees and charges
than they have repaid of the principal.
From June 2019, we communicated
with our customers identified to make
them aware of the implications of
continuing to make low repayments
and sign-post our customers to not-
for-profit-debt-advice. From March
2020 we sent a further reminder to
customers at 27 months whose payment
profile indicates that they would still
be in persistent debt by December
2020. Finally, we are required to take
intervention starting in December 2020
by proposing ways to help customers
repay their balance more quickly and
within the defined reasonable period
(3-4 years), for example by increasing
their minimum repayment level or
transferring their balance to a fixed sum
fixed term loan.
We expect that the steady improvement
in the quality of our debtor book
and the changes that we have made
in response to the new regulatory
environment will have further medium-
term consequences for the performance
of our Financial Services business.
Improved credit quality has reduced the
IFRS 9 bad debt provision; our IFRS 9
bad debt provision ratio declined to
10.9% as at the end of the financial year.
This compares with a 17.9% provision
when IFRS 9 was first introduced at the
start of FY19. In addition, changes to
our policies and procedures, will have
a significant influence on the size and
shape of our debtor book. The Group
continues to assess its strategies to
mitigate the impact of these changes,
including the phased introduction of
new financial products and further
reductions in its operating cost base.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report Governance report Financial statements N Brown Group plc Annual Report and Accounts 2020
CHIEF EXECUTIVE’S STATEMENT CONTINUED
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk LOOKING FORWARD –
RETURNING N BROWN TO SUSTAINABLE GROWTH
Over the last two financial years the Group has
undertaken a significant restructuring programme which
has created the right platform for sustainable growth.
Digital penetration has significantly
increased, international markets have
been exited and the store estate has
been closed. As we enter the new
financial year, N Brown is now a top 10
UK clothing and footwear digital retailer,
supporting underserved mature and size
inclusive markets. Digital capabilities have
been enhanced, the executive and senior
leadership team has been refreshed,
with a clearer strategic focus and the
cost base is now more appropriate for a
digital retailer, with further cost saving
opportunities identified.
During the financial year we undertook a
detailed review of our strategy focused
on returning N Brown to sustainable
growth and built a plan based on
driving profitability through the Retail
business, whilst defending the Financial
Services business. The recent outbreak
of Covid-19 has fundamentally altered
the broader retail landscape and this
disruption will likely continue for the
foreseeable future. We have successfully
restructured our operating model and
believe that our refreshed strategy is the
right one to deliver sustainable long-term
growth, completing our transformation
from a traditional to a digital retailer.
An important element of restructuring
our operations has been to identify key
factors contributing to poor historical
performance, and to address them within
our strategic plan, with significant action
already undertaken.
We have already started putting in
place the building blocks for the
refreshed strategy.
We will now begin an “accelerate”
phase driven by five growth pillars
which have been developed to reflect
the focus of the business and the
external environment:
DISTINCT BRANDS TO ATTRACT BROADER
RANGE OF CUSTOMERS
IMPROVED PRODUCT TO DRIVE
CUSTOMER FREQUENCY
NEW HOME OFFERING FOR CUSTOMERS
TO SHOP MORE ACROSS CATEGORIES
ENHANCED DIGITAL EXPERIENCE TO INCREASE
CUSTOMER CONVERSION
FLEXIBLE CREDIT TO HELP CUSTOMERS SHOP
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2
3
4
5
PEOPLE AND
CULTURE
OUR ENABLERS
DATA
SUSTAINABLE
COST BASE
nbrown.co.uk
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N Brown Group plc Annual Report and Accounts 2020
CHIEF EXECUTIVE’S STATEMENT CONTINUED
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DISTINCT BRANDS TO
ATTRACT BROADER RANGE
OF CUSTOMERS
We undertook a thorough review of
the markets in which we operate, which
highlighted that we are serving a specific
set of customers well but that we need
to extend our reach to a broader set of
customers to drive growth. Doing this
requires a portfolio of brands with
clearer, more focused propositions.
Therefore, from this financial year
we will simplify our portfolio to four
apparel brands, supplemented with
one standalone home brand. Our clear
brand proposition will standout against
the market and each other. The brand
architecture and target customer
segments are as follows:
Simply Be – an online fashion and
beauty brand for plus size women,
targeting plus size women aged 25-45.
Jacamo – an online fashion and
grooming brand for plus size men,
targeting plus size men aged 25-50.
JD Williams – an online boutique
experience showcasing fashion and
home product for 45-65 year old women.
Ambrose Wilson – a womenswear
fashion led brand supported by home,
available on and offline that truly values
the mature customer.
Home Essentials – a standalone one
stop home brand focused on modern
homeware and enabled by a credit
offering. The target customer will be
families with children at home.
Our other brands will either be folded
into our main brands or closed down.
As we execute our plan, we will be
focused on protecting our loyal and
valuable customers to ensure that they
continue to receive the product they
want and the customer service they
have come to expect. This refined brand
strategy ensures that our brands have a
clear proposition, appealing to distinct
customers segments in order to return
N Brown to growth.
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N Brown Group plc Annual Report and Accounts 2020
CHIEF EXECUTIVE’S STATEMENT CONTINUED
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 2
IMPROVED PRODUCT
TO DRIVE CUSTOMER
FREQUENCY
These initiatives will help to drive
increased order frequency and
customer loyalty.
Finally, we will continue to focus on
ethical and sustainable sourcing,
ensuring a consistent and consolidated
supply base. Our proactive approach
has resulted in a 50% supplier reduction
in the last 18 months and we will increase
the mix of UK and European sourcing
to increase flexibility and speed to
market. We also have a clearly defined
roadmap to deliver enhanced level of
sustainability. By evolving our sourcing
model, we will be able to respond with
increasing flexibility to shifting customer
demands, while reducing our lead times.
Refining and improving our product
offering is key to driving our new brand
propositions, encouraging customer
loyalty and frequency. We will focus on
three key areas.
We will improve our product
“handwriting” through clearly defined
designs for each brand, investing in
fabric, quality and consistency of fit.
Our focus will be on delivering trends
for customers at the right time in the
right way. This will result in a better
product, which is more relevant to
customers, thereby driving loyalty.
Secondly, we will renew our “good /
better / best” product architecture.
This will be done through increasing
the importance in our ‘own designed’
ranges in Womenswear, Menswear
and Home, better curation of
branded products and a well-defined
and responsive pricing strategy.
3
NEW HOME OFFERING
FOR CUSTOMERS TO SHOP
MORE ACROSS CATEGORIES
Previously our Home proposition
extended across our apparel brands
with no consistent, curated offer.
The separation of our Home offering
from our apparel brand sites represents
a significant market opportunity for
the Group, enabling cross sell into our
existing apparel-focused customer base
and attracting new customers.
Our new Home Essentials trading
website launched on April 1st and is
a standalone home brand targeting
young families who are balancing their
budgets. The brand focuses on soft
furnishings, helping customers “dress
their home,” while still providing access
to larger items and white goods.
The Home Essentials launch was
timely, coming just one week after
commencement of the “UK lockdown”.
The launch had an immediate impact
on the Group’s Home sales and the
strength of demand has subsequently
been sustained, demonstrating the
exciting opportunity that this presents
for the Group.
13
nbrown.co.ukStrategic report Governance report Financial statements N Brown Group plc Annual Report and Accounts 2020
CHIEF EXECUTIVE’S STATEMENT CONTINUED
4
ENHANCED DIGITAL
EXPERIENCE TO INCREASE
CUSTOMER CONVERSION
For the next two financial years we will
focus on progressing N Brown with a
“digital first” mentality. Our investment
will be focused on new front-end
websites, providing significant benefit to
the customer experience, and improving
site speed to drive performance of
organic search. In addition, we will invest
in a new Financial Services platform to
support new credit products.
We will invest to support our strategic
priorities, improving our digital
capabilities and ultimately improving the
customer experience. Through FY20,
we substantially changed how we
delivered technology projects, moving
away from largescale, waterfall delivery
to a more agile methodology focused
on driving frequent, incremental value
gains. Working under this methodology
has already delivered a new Home
Essentials trading website, Android and
iOS apps for JD Williams, Simply Be,
Jacamo, Ambrose Wilson and Home
Essentials and Artificial Intelligence
enabled search.
5
FLEXIBLE CREDIT TO
HELP CUSTOMERS SHOP
Our credit proposition is a key
differentiator. It enables us to provide
convenient financial services to
customers, while using data to provide
personalised and targeted offers to our
customers. Our credit customers are
also loyal to N Brown and have improved
purchasing power, helping to drive
demand for our products.
We will be resolutely focused on
continuing to provide convenient
financial services to our core customers,
delivering ongoing improvements to
customer outcomes and, at the same
time, continuing to improve the quality
of the debtor book. As the refined brand
propositions attract a broader and more
affluent section of the market, we will
develop new financial products that are
familiar to these customers and drive
higher volumes of full price incremental
retail sales. The new Financial Services
platform will support the delivery of
these new credit options.
We will also enhance our use of data
sources and analytical tools and
techniques to improve our lending
proposition. Our partnership with Aire
Labs is already driving incremental
improvement and we see further
opportunities in this area.
Finally, flexible credit is a key enabler of
the new Home proposition which will
allow us to compete within the market
by ensuring the relevancy and appeal of
our Home products.
14
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N Brown Group plc Annual Report and Accounts 2020
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N Brown Group plc Annual Report and Accounts 2020
CHIEF EXECUTIVE’S STATEMENT CONTINUED
16
16
nbrown.co.uk
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk These five growth pillars will be supported
by our key enablers:
PEOPLE AND CULTURE
Underpinning our refreshed strategy
are our people. It is fundamental that
we create the right culture within the
business to allow colleagues to thrive
and deliver a great experience for our
customers. Within the last 12 months
we have hired a new CFO, Chief Brand
Officer, CEO of Financial Services,
CEO of Retail and Director of Strategy
Transformation. In addition to this,
almost a third of our senior leadership
team has joined the business within
the last 18 months, bringing in further
relevant capabilities to support the
business. We have also re-aligned
our organisation design to support
the needs of a digital retailer. Multi-
functional trading squads are now in
place, focusing on each brand and
driving performance.
We began a cost reduction programme
in FY20, with a 13.8% reduction in
marketing spend achieved by removing
unprofitable expenditure through
attribution modelling and a focus
on driving more efficient marketing
channels. This will be accelerated in
FY21 with more data-led initiatives
to further reduce spend and improve
efficiency. We also expect admin and
payroll to be lower, in line with continued
Head Office efficiencies and creating
the right, sustainable cost base for a
digital retailer.
There is further scope to focus on
operating efficiencies in light of recent,
unprecedented events. In addition
to our focus on reducing operating
expenditure, we also have a strong
emphasis on working capital efficiency
to drive future cash generation.
DATA
The use of data within the business is
key to powering our refreshed strategy
and we are prioritising building on the
foundations that have been put in place
in the last year.
SUMMARY
We have undertaken significant steps
in restructuring our business over the
last two financial years and taken swift
and decisive action in the current,
unprecedented trading environment.
We will continue to increase our use of
data across the business to get to know
our customer better and drive continued
efficiencies in revenue, marketing and
product ranging. We have enhanced our
use of data by implementing Bloomreach
to increase data driven search across our
sites. We have also improved Financial
Services decisioning and customer
outcomes through partnering with the
fintech company Aire Labs.
The Group has developed a clear and
compelling strategy to unlock significant
addressable market potential in the
future, based on five deliverable pillars
and underpinned by our three enablers.
We are excited about the opportunity
for N Brown to return to growth, building
on the strong platform that we have
created through our restructuring, with a
priority to deliver long-term, sustainable
shareholder returns.
SUSTAINABLE COST BASE
Key to enabling our refreshed strategy
is an appropriate cost base which will
help build retail profitability. As part of
our review of strategy we undertook a
thorough benchmarking analysis of our
cost base. This activity identified two
cost areas which were higher than peers:
marketing expenditure and admin
and payroll.
Steve Johnson
Chief Executive Officer
17
nbrown.co.ukStrategic report Governance report Financial statements MARKETPLACE
THE IMPACT OF COVID-19
The retail market has significantly changed from the
start of 2020 due to the impact of Covid-19.
The clothing and footwear sector has
been the hardest hit with consumers
avoiding non-essential spend and
the demand for new clothing has
been impacted by social restrictions.
The BRC reported that the online
clothing and footwear market fell
10% from mid March 2020. However,
the online clothing and footwear market
returned to growth towards the end
of May 20201.
Consumer confidence has been heavily
weakened by Covid-19 to -34 , down
from -10 at the same time point last year.
Despite official Government guidance
that the Brexit transition period will not
be extended, the negotiations with the
EU over a trade deal may also affect
consumer confidence further.
DIGITAL SALES GROWTH4
WOMENSWEAR
+5.5%
MENSWEAR
+5.5%
This refined brand strategy ensures that
our brands have a clear proposition, in a
specialist niche, to ensure their unique
appeal in the market as we attract new
customer segments which are currently
underserved in the online market.
To supplement our four apparel
brands, we launched a standalone
home brand at the beginning of FY21:
Home Essentials. A mixed outlook is
predicted for the furniture, electricals,
DIY and gardening sectors in 2020,
with consumers reluctant to spend on
big ticket items due to low consumer
confidence. In contrast to this,
consumers turn to home and technology
improvements as they spend more time
at home due to the restrictions imposed
by Covid-19.
OUR BRANDS AND THE MARKET
In the challenging current market, our
apparel brands serve underserved
customer groups and represent clear
segmentations of the online market.
From FY21 we will simplify our offer to
four apparel brands and one standalone
home brand:
Simply Be – an online fashion and
beauty brand for plus size women,
targeting plus size women aged 25-45.
Jacamo – an online fashion and
grooming brand for plus size men,
targeting plus size men aged 25-50.
JD Williams – an online boutique
experience showcasing fashion and
home product for 45-65 year old women.
Ambrose Wilson – a womenswear
fashion led brand supported by home,
available on and offline that truly values
the mature customer.
Home Essentials – a standalone one
stop home brand focused on modern
homeware and enabled by a credit
offering. The target customer will be
families with children at home.
Whilst online spend for the clothing
and footwear sector has been revised
to decline 5.2% vs 2019, the online
spend within the homewares sector is
predicted to rise 6.2% vs 2019 according
to GlobalData2,3.
SEE MORE ABOUT
OUR BRANDS
p24
1 BRC.
2 GlobalData UK: UK Retail Forecasts – COVID-19 Impact, 23 March 2020.
3 GlobalData UK: Economic & Retail Forecasts, Q4 2019.
4 FY20 vs FY19.
18
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk SUSTAINABILITY AND ETHICAL SOURCING
The topic of sustainability is in the global spotlight more than ever
before and as such is becoming increasingly important for
customers when it comes to influencing their shopping choices.
Through the launch of sustainable
clothing ranges and our commitment to
changing all our Jacamo and Simple Be
branded despatch bags to Green PE
by the end of FY22, our customers can
make conscious shopping decisions
when choosing to shop with us.
We focus on working closely with
suppliers to build partnerships that
promote responsible sourcing and build
clear strategies that ensure all workers
are respected, treated fairly and work in
safe conditions. We undertake robust
checks for all new suppliers by using the
Ethical Trade Initiative base code and we
collaborate with several organisations
such as the Ethical Trade Initiative, UN
Global Compact and ACT Living Wage
projects (Action Collaboration and
Transformation) to ensure we maintain key
relationships with third parties to ensure
that informed decisions and actions can
be implemented where required.
The key focus of our sourcing strategy
is to rebalance the sourcing mix to
ensure that we can serve our customers
through flexibility and deliver key
products and trends at the right time.
China remains our key territory for
homewares, however our sourcing from
China decreased this year as we explore
new territories to support an improved
service level. Our sourcing strategy
has not only improved our availability
by allowing us to replenish best-selling
stock within weeks but has also driven
a reduction in our stock cover for the
second year in a row.
SEE MORE ABOUT
OUR APPROACH TO
SUSTAINABILITY
p32
0%
CONSUMER CREDIT
The competition that the retail credit market faces
from other lending products means we are continuing
to look at ways to improve our offering and innovate
within this space.
In the financial year we launched a pay
no interest offer, up to six months,
alongside competitive headline rates
and a discount for opening a credit
account across Simply Be, Jacamo
and JD Williams. We recognise that
innovation is key to our success and
one way in which we are innovating in
the financial services space is to partner
with leading fintech company Aire.
Through the use of data and analytics,
this has provided additional insights to
augment existing credit bureau data
and models when assessing
affordability and improve credit
decisioning, leading to better
outcomes for customers.
Six-month introductory interest
rate offer compared to last year
SEE MORE ABOUT
OUR FINANCIAL
SERVICES
p7
FY20 SOURCING BREAKDOWN
China
UK
India
Bangladesh
Pakistan
Sri Lanka
Turkey
Vietnam
RoW
% sourcing
34%
22%
12%
10%
5%
4%
5%
2%
6%
OUTLOOK
The recent outbreak of Covid-19 has
fundamentally altered the broader
landscape and this disruption will
likely continue for the foreseeable
future. We believe that our strategy
is the right one to ensure long-term
growth, but we will need to retain
operational agility to reflect a fast-
changing environment.
19
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report Governance report Financial statements BUSINESS MODEL
CREATING SUSTAINABLE VALUE
INPUTS
OUR RESOURCES
What makes us different?
Colleagues
Brands
Without our colleagues
and their relentless energy,
enthusiasm and passion we
couldn’t do what we do.
They are our single most
important asset.
We operate a trusted family
of retail brands selling
Womenswear, Menswear,
Footwear, and Home
and Gift.
Product
Reputation
Delivering product that
truly resonates with our
customers in perfect
fitting styles.
We believe we should be
a major force for good
in fashion. It’s a huge
responsibility, and a
purpose way beyond profit.
UNDERSERVED
MARKET FOCUS
DISTINCT BRAND PORTFOLIO
Finance
Our customers can either pay us immediately or make
purchases on credit, thereby spreading the cost and allowing
them to budget and manage seasonal spending cash
outflow peaks.
GREAT PRODUCT
DIGITAL CAPABILITIES
CONVENIENCE OF FINANCIAL
SERVICES OFFER
OUR RELATIONSHIPS
Customers
Suppliers
We are proud to make great
products which people
love. We exist to make
our customers look and
feel amazing.
We work collaboratively
with our suppliers across
the world to ensure that we
can serve our customers by
delivering key products and
trends at the right time.
Regulators
Communities
We work effectively with
all our regulators to ensure
that our customers receive
good outcomes.
We support the local
communities in which we
operate and encourage
our colleagues to play a
positive role within their
local community.
Further information on
our relationships on p46
OUR VALUES UNDERPIN
EVERYTHING WE DO
TOGETHER FOR
THE CUSTOMER
DRIVEN BY
CURIOSITY
20
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk WHAT WE DO
THE VALUE WE CREATE
We exist to make our customers look
and feel amazing, and create a platform
for sustainable growth.
SOURCE,
DESIGN AND
CREATE PRODUCTS
DATA
FEEDBACK
MARKET AND
SELL OWN AND
THIRD PARTY
BRANDS
DELIVERY
AND
RETURNS
FINANCIAL
£39.7m
Reinvested for
long-term growth1
£51.4m
Cash generated2
NON-FINANCIAL
72%
Colleague satisfaction3
£110,334
Charity and community
investment3
ABILITY TO OFFER FINANCE
WE OFFER OUR CUSTOMERS FLEXIBILITY
AND CONVENIENCE
1 Capital expenditure, i.e. purchases of
intangible assets and property, plant
and equipment.
2 Net cash inflow from operating
activities FY20.
3 FY20.
EMPOWERED
BY TRUST
MOTIVATED
BY PACE
21
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report Governance report Financial statements KEY PERFORMANCE INDICATORS
IN FY20 WE ASSESSED SUCCESS
AGAINST FIVE MEASURES
DIGITAL SALES %
EBITDA £m
NET PROMOTER
SCORE (NPS)
+6ppt
+5ppt
-16.6%
Flat
2019
2019
2020
2020
79.0
80.0
2019
85.0
85.0
2020
128.0
106.7
2019
2020
61
61
TARGET
Grow digital sales which
will develop our sustainable
business model.
DEFINITION
The percentage of sales which
are digital.
PERFORMANCE
Digital penetration increased from
79% of revenue in FY19 to 85% in
FY20. This was driven by a digital
sales increase of 5.5% for both
Womenswear and for Menswear.
This is in-line with our strategy of
transforming into a digital retailer.
TARGET
Increase EBITDA to deliver
sustainable profitability.
DEFINITION
EBITDA is defined as operating
profit, excluding exceptionals, with
depreciation and amortisation added
back. EBITDA is the key profit metric
which the business is focused on.
PERFORMANCE
EBITDA declined by 16.6% to £106.7m
in the year. This was due to lower
gross profit as a result of a highly
promotional retail environment and
industry-wide regulatory changes
which impacted our financial
services business.
TARGET
Increase Net Promoter Score to
delight more customers which
produces sustainable loyalty.
DEFINITION
NPS provides a score ranging
from -100 to 100 that measures
the willingness of customers to
recommend a company’s products
or services to others. Research has
shown that positive responses to the
NPS question are a good indicator
of a customer’s loyalty and likelihood
to order again. NPS is calculated by
asking the customer “On a scale of
0 – 10, how likely is it that you would
recommend *brand* to a friend
or colleague?”
PERFORMANCE
The FY20 score of 61 is comparable
to the wider retail average which
stands at 62.
22
NPS is collected using a digital tool called
Medallia. However prior to FY20, we collected
feedback via our contact centre. This new method
of reporting NPS is now aligned to our strategy to
become a digital retailer and best represents our
customer base.
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk FINANCIAL SERVICES (FS)
ARREARS RATE %
EMPLOYEE
ENGAGEMENT %
-40bps
+390bps
2019
2020
8.9
8.5
2019
2020
68.0
71.9
TARGET
Reduce FS arrears. As a
responsible lender we want to
continue to ensure our customers
have a more sustainable shopping
experience with us.
DEFINITION
Arrears are defined as customer
debts with two or more
missed payments.
PERFORMANCE
We continued to improve the quality
of the debtor book during the year
and this is reflected in lower arrears
compared to the prior year.
TARGET
Increase colleague engagement
score, VIBE. Engaged colleagues
will deliver better results for
our customer.
DEFINITION
Through VIBE, our colleague
engagement survey, we listen to
colleagues and use their feedback
to improve the way we do things
and to help our colleagues bring
their best selves to work.
PERFORMANCE
In FY20, we achieved an engagement
score of 71.9% which was in line with
our target of 70-72.5%. We believe
this increase in engagement
was a result of the launch of our
new Company Employee Value
Proposition (EVP) which was launched
Company-wide in October 2019,
introducing a new Vision, Mission,
Purpose, Values and Behaviours.
Over 1,000 colleagues volunteered
to be involved in the design of
the new EVP to create something
meaningful and authentic that all
colleagues can relate to and own.
SEE MORE ABOUT
OUR PEOPLE
p34
23
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report Governance report Financial statements BRAND ACTIVITY
WOMENSWEAR
JD WILLIAMS
An online boutique experience showcasing fashion
and home product for 45-65 year old women.
Our JD Williams customers expect the
clothes they choose to fit perfectly and
give them the confidence to live the life
they want. JD Williams know that great
fitting clothes make our customers feel
unstoppable which is why we constantly
strive to bring customers perfectly fitting
and confidence-inspiring styles. The use
of digital 2D pattern blocks ensure that we
have complete control of our fit, delivering
accuracy and consistency, and true to size
product, so our customers can be sure
that our clothes always deliver a great fit.
The FIT Foundation was launched this
year to bring together all the product
knowledge, innovation benefits and
features of our fit range in one place
for our customers. It also supports
the launch of True Fit which offers our
customers personalised fit and style
recommendations, which further improves
the customer experience.
Last year JD Williams commissioned
a study carried out by YouGov which
questioned over 2,000 people on their
reaction to being given a compliment.
One in five women find it hard to accept
any praise especially from a man.
Almost two thirds of women worry about
how they appear to other people and
struggle with their own looks, body size
and shape. By comparison men don’t have
the same anxieties with one in seven men
believing they are attractive compared
with one in 30 women. The AW19 JD
Williams brand campaign encouraged
women to start accepting compliments
when offered. JD Williams believes that
as a brand they can help women feel
confident in what they wear, and this may
in turn help women feel more comfortable
about accepting compliments
when offered.
Valerie Morris-Campbell, the 67-year-old
model and former dancer, collaborated
with JD Williams to showcase a selection
of swimwear and summer holiday
essentials for the SS19 campaign.
JD Williams is committed to using age
appropriate models in its campaigns
and this collaboration with Valerie further
champions age inclusivity in the fashion
and advertising industries.
24
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk SIMPLY BE
An online fashion and beauty brand for plus size
women, targeting plus size women aged 25-45.
To support the campaign further, The
New Icons Model Search was launched
in December to celebrate the female
form in all shapes and sizes. From over
3,000 entries via social media, 17 finalists
were selected for the casting day, where
The New Icons Model Search winner was
chosen by our judges and features in
Simply Be’s upcoming campaigns.
On a mission to continue to democratise
fashion, this year Simply Be surveyed over
2,000 women and discovered two thirds of
them can’t relate to current supermodels.
Despite the fact over half of the female
population are a size 16 or above, our
social media feeds are failing to faithfully
represent this reality and 81% of women
think brands are making token gestures or
just “ticking a box” when they do feature
bigger bodies.
The message was clear that the
conventions of the fashion industry
needed to be challenged and in October
Simply Be’s The New Icons campaign
launched across TV, digital, out of home
adverts, print, and social to do just that.
A teaser campaign initially raised a call
to arms with a “We need new icons”
takeover featured across national and
social media, supported by a PR launch
which saw projections plus an army of
real-life mannequins, ranging from sizes
12-24, each holding a newspaper bearing
the same headline outside London’s
Freemasons’ Hall. The campaign featured
curvy women in a new light with arresting
imagery which put curves centre stage
including special build billboards and a
memorable film paying homage to a new
breed of not just super, but role models.
nbrown.co.uk
25
N Brown Group plc Annual Report and Accounts 2020Strategic report Governance report Financial statements BRAND ACTIVITY CONTINUED
AMBROSE WILSON
A womenswear fashion led brand supported by
home, available on and offline, that truly values
the mature customer.
The AW19 “Made for You” campaign
has given us an opportunity to produce
new and more relevant content such as
behind the scenes and videos to give a
compelling reason for customers to go
online, as well as helping us to build a
social media strategy.
Christmas saw the launch of the first ever
Ambrose Wilson Christmas campaign,
“Made for Moments Like These”.
Centring around the key moments at
Christmas, our DRTV advert showcased
a selection of beautiful outfits designed
to make our customer look and feel
amazing. This campaign was supported
by a strong content plan for digital,
email, social and paper.
2019 saw the Ambrose Wilson Facebook
page organically grow from a few
hundred to over 16,000 followers
as we see this customer increasingly
engaging online.
2626
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk MENSWEAR
JACAMO
An online fashion and grooming brand for plus
size men, targeting plus size men aged 25-50.
The Jacamo Winter 2019 campaign
championed values that make “the
true measure of a man”. In a complete
directional change for the brand, the
campaign looks beyond size and the
superficial preconceptions that come
with it, and instead focuses on all the
emotional traits that make up the
modern Jacamo man. The campaign
was part of a full brand refresh across all
channels from the presentation of the
proposition itself (online), through to TV,
digital and out of home advertising.
To support the emotive side of the
new campaign, Jacamo took over a
pub for the day – creating The Jacamo
Arm-In-Arms. Based on insights from
Jacamo’s own research, a “safe space”
was created for men to get together and
discuss how they feel. A star-studded
line up took part in panel discussions
throughout the day and the event was
live streamed across social media.
As part of our new social media strategy,
we have concentrated on product story-
telling, and delivering inspiration to
engage our men, and to show them how
we are helping to level the playing field
with our leading selection of brands and
fashion. Results have been encouraging
so far with web sessions through
Instagram +62.9% YOY.
27
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report Governance report Financial statements FINANCIAL PERFORMANCE
REVIEW OF THE YEAR
I would like to thank
and recognise our great
colleagues across all parts
of the business for their
continued commitment,
energy and focus
throughout the year.
Craig Lovelace
Chief Financial Officer
28
REVENUE
Group revenue declined 6.1% to
£858.2m, driven by a 7.8% decline in
Product revenue and a 2.7% decline in
Financial Services revenue.
Product revenue declined as a result of
the continued managed decline of the
legacy offline business, the shift in focus
away from US and the impact of the
closure of our store portfolio in the prior
years. Excluding Stores and US, Product
revenue was down 5.7%.
The Group’s transformation to a leading
digital retailer continues, with digital
sales now accounting for 85% of Product
revenue, an increase of six percentage
points over the last 12 months. In the
year digital revenue grew by 0.2%
compared to FY19 and was ahead
by 5.5% for our Womenswear and
Menswear brands combined.
Womenswear revenue was down 1.3%
in the year as we continued to reduce
unprofitable marketing and offline
recruitment. However, in line with our
strategy Womenswear digital revenue
increased 5.5% in the year. JD Williams
revenue was down 4.0% but digital
revenue grew 2.0% compared to
the previous period. Simply Be grew
revenue by 6.6% during the period
excluding stores and reported an 8.2%
growth in digital revenue compared
to the prior period. Ambrose Wilson
revenue was down 11.5% but our focus
has been on growing its digital revenue
which increased 10.5% in the period –
the highest digital growth rate of any
of our brands. Menswear, which is the
Jacamo brand, increased revenue by
4.5% and delivered digital revenue
growth of 5.5% in the year.
Product brands revenue declined 16.0%
in the period with digital revenue down
7.5%. Strength in revenue growth at
Oxendales was more than offset by the
managed decline of House of Bath,
Premier Man and High and Mighty.
As outlined in the Chief Executive
Officer’s strategic update, some Product
brands will either be folded into our
main brands or closed down.
FINANCIAL SERVICES
REVENUE
Financial Services revenue decreased
2.7% to £290.5m. Revenue was lower
in the year as a result of lower Product
revenue and proactive measures on the
implementation of credit limit increases
and affordability assessments. In the
year credit account interest was down
1.5% reflecting management initiatives
such as risk-based pricing. This decrease
was accompanied by a 13.4% reduction
in other Financial Services revenue as a
result of lower admin fees.
GROSS MARGIN
The Group’s gross margin was 51.3%,
down 310bps compared to FY19. This was
as a result of a 380bps reduction in the
Financial Services gross margin to 55.4%,
and a 290bps decline in the Product
gross margin rate to 49.2%.
REVENUE ANALYSIS
£m
Revenue
JD Williams
Simply Be
Ambrose Wilson
Womenswear
Menswear1
Product brands2
Product revenue excluding US and Stores
US revenue
Stores
Total Product revenue
Financial Services revenue
Group revenue
FY20
FY19
Change
153.1
128.0
45.4
326.5
66.9
170.2
563.6
4.1
–
567.7
290.5
858.2
159.5
120.1
51.3
330.9
64.0
202.6
597.5
11.4
6.9
615.8
298.6
914.4
(4.0)%
+6.6%
(11.5)%
(1.3)%
+4.5%
(16.0)%
(5.7)%
(64.0)%
(100.0)%
(7.8)%
(2.7)%
(6.1)%
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Product gross margin declined as a
result of the highly promotional market,
product mix reflecting an increase in
Home sales, strategic decisions taken
to exit the US and the impact of an
increased year-end stock provision
reflecting discontinued brands and lower
apparel sales.
Financial Services gross margin
decreased due to a lower rate of
recovery from external debt markets,
this was partially offset by system and
other cost savings relating to the legacy
US proposition.
OPERATING COSTS
BEFORE EXCEPTIONALS
We made strong progress in the
year on operating expenses before
exceptionals which decreased by
9.9%. In line with the Group’s strategy
of scaling back offline marketing and
recruitment and improving marketing
efficiency, marketing costs were
down 13.8% year on year to £136.0m.
We also made strategic investment in
building our brands in the period and
expanding our social media presence.
Admin and payroll costs decreased by
6.9% to £119.1m, driven predominantly
by continued Head Office efficiencies.
Warehouse and fulfilment costs
decreased by 7.0% to £78.1m, primarily
driven by lower volumes.
ADJUSTED EBITDA
AND OPERATING
PROFIT BEFORE
EXCEPTIONAL ITEMS
Adjusted EBITDA decreased by 16.6%
to £106.7m and adjusted EBITDA
margin decreased by 160bps to 12.4%
(FY19: 14.0%). Overall, operating profit
before exceptional items was £76.6m,
down 21.8% year on year, with operating
margin before exceptionals decreasing
by 180bps to 8.9%. Statutory operating
profit (i.e. after exceptional items) was
£41.8m an increase of £95.8m compared
to the prior year.
DEPRECIATION AND
AMORTISATION
Depreciation and amortisation was flat
on the prior year at £30.1m.
DIGITAL AND OFFLINE REVENUE ANALYSIS
JD Williams
% of JD Williams revenue
Simply Be
% of Simply Be revenue
Ambrose Wilson
% of Ambrose Wilson revenue
Womenswear
% of Womenswear revenue
Menswear1
% of Menswear revenue
Product brands2
% of product brands2 revenue
Product revenue excluding US
and Stores
% of Product revenue excluding
US and Stores
US revenue
% of US revenue
Stores
% of Stores revenue
Total Product revenue
% of Total Product revenue
FY20
123.5
81%
125.1
98%
27.3
60%
275.9
84%
65.1
97%
140.1
79%
Digital revenue
FY19
Change
121.1
+2.0%
76%
+5ppts
115.6
+8.2%
96%
+2ppts
+10.5%
24.7
48% +12ppts
+5.5%
261.4
+5ppts
79%
+5.5%
61.7
+1ppt
96%
(7.5)%
151.4
+5ppts
74%
FY20
29.6
19%
2.9
2%
18.1
40%
50.6
16%
1.8
3%
30.1
21%
Offline revenue
FY19
38.4
24%
4.5
4%
26.6
52%
69.5
21%
2.3
4%
51.2
26%
Change
(22.9)%
(5)ppts
(35.6)%
(2)ppts
(32.0)%
(12)ppts
(27.2)%
(5)ppts
(21.7)%
(1)ppt
(41.2)%
(5)ppts
481.1
474.5
+1.4%
82.5
123.0
(32.9)%
85%
3.7
91%
–
–
484.8
85%
79%
9.1
+6ppts
(59.3)%
80% +11ppts
–
–
+0.2%
+6ppts
–
–
483.6
79%
15%
0.4
9%
–
–
82.9
15%
21%
2.3
20%
(6)ppts
(82.6)%
(11)ppts
6.9 (1000)ppts
(100%)
(37.3)%
(6)ppts
100%
132.2
21%
OPERATING PERFORMANCE
£m
Product gross profit
Product gross margin %
Financial Services gross profit
Financial Services gross margin %
Group gross profit
Group gross profit margin
Warehouse and fulfilment costs
Marketing and production costs
Admin and payroll costs
Total operating costs
Adjusted EBITDA3
Adjusted EBITDA3 margin %
Depreciation and amortisation
Operating profit before exceptionals
Operating profit before exceptionals margin %
Operating profit
Operating profit margin %
Net Finance costs
Adjusted profit before tax4
Exceptional items
Fair value adjustments to financial instruments
Statutory profit/(loss) before tax
Adjusted basic earnings per share (p per share)2
Statutory basic earnings per share (p per share)
Dividend (p per share)
FY20
279.2
49.2%
160.7
55.3%
439.9
51.3%
(78.1)
(136.0)
(119.1)
(333.2)
106.7
12.4%
(30.1)
76.6
8.9%
48.1
5.6%
(17.1)
59.5
(28.5)
4.7
35.7
16.37p
9.63p
2.83p
FY19
320.8
52.1%
176.9
59.2%
497.7
54.4%
(84.0)
(157.8)
(127.9)
(369.7)
128.0
14.0%
(30.1)
97.9
10.7%
(47.7)
(5.2)%
(14.3)
83.6
(145.6)
4.5
(57.5)
21.38p
(20.50p)
7.10p
Change
(13.0)%
(290)bps
(9.2)%
(390)bps
(11.6)%
(310)bps
(7.0)%
(13.8)%
(6.9)%
(9.9)%
(16.6)%
(160)bps
–
(21.8)%
(180)bps
n/m
+1080bps
+19.6%
(28.8)%
(80.4)%
+4.4%
n/m
(23.4)%
n/m
(60.1)%
1 Menswear is the Jacamo brand.
2 Product brands are Fashion World, Premier Man, House of Bath, Marisota, Oxendales, High and Mighty
and Figleaves.
3 Adjusted EBITDA is defined as operating profit, excluding exceptionals, with depreciation and
amortisation added back. The Directors believe that adjusted EBITDA represents the most appropriate
measure of the Group’s underlying trading performance.
4 Defined as excluding exceptionals and fair value adjustments on financial instruments. The directors believe
that adjusted profit before tax/EPS represents the most appropriate measure of the Group’s underlying profit
before tax as it removes items that do not form part of the recurring operational activities of the Group.
29
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report Governance report Financial statements FINANCIAL PERFORMANCE CONTINUED
NET FINANCE COSTS
Net finance costs were £17.1m, up
19.6% compared to last year primarily
driven by an increase in net debt due to
exceptional items.
EXCEPTIONAL ITEMS
As previously announced, we, in line
with the wider industry, saw a significant
increase in customer redress information
requests and complaints in the final
days leading up to, and including,
the 29 August 2019 PPI deadline.
The deadline has now passed and as a
result of the August spike in information
requests and complaints, an additional
provision for customer redress of £25m
was made during the first half of the
year. The final amount of customer
redress including that relating to
estimated Official Receiver complaints
was less than envisaged as at 31 August
2019 and therefore in the second half
of the year a £2.1m credit for customer
redress was recorded, resulting in a
£22.9m charge for the full year.
During the period, the Board has
undertaken a thorough review of strategy.
Fundamental to delivering this strategic
transformation is a material level of
cost reduction and increased focus and
refinement of the Group’s key five brands.
As part of this initiative, the Group has
incurred costs that are substantial in
scope and impact, and incremental to
the Group’s normal operational and
management activities and have therefore
been recognised within exceptional
costs. Total costs of £3.8m incurred relate
to £1.7m of redundancy costs, £1.8m of
consultancy costs incurred in relation to
the brand refinement and £0.3m being
the write off of stock relating to brands
that will no longer continue to trade.
Further details of exceptional Items are
contained in note 6.
ADJUSTED PROFIT BEFORE
TAX AND STATUTORY
PROFIT BEFORE TAX
Adjusted profit before tax was £59.5m,
down 28.8% year on year as a result
of lower gross profit and increased
EXCEPTIONAL ITEMS
£m
Customer redress
Store closure (credit)/costs
Legal costs
Impairment of tangible, intangible assets and brands
Strategy review costs
VAT partial exemption (credit)/cost
Other tax matters including associated legal and professional fees
GMP equalisation adjustment
Total exceptional items
FY20
22.9
(0.3)
1.0
1.8
3.8
(3.1)
2.4
–
28.5
FY19
45.0
22.0
–
20.0
–
49.4
8.9
0.3
145.6
Allianz claim and counterclaim
The Group is currently involved in a claim and counterclaim with Allianz Insurance plc regarding the sale
of historical insurance products. The claim and counterclaim are extremely complex, are at an early stage
of proceedings and both parties will need to gather detailed and factual expert evidence in relation to
multiple elements of the claim and counterclaim. The Group has concluded that these issues mean it is not
possible to reliably estimate the amount of any potential settlement and has, therefore, not made provision
for this claim at this time and instead a contingent liability has been disclosed. Further details are contained
in note 26.
FINANCIAL SERVICES
£m
Gross customer loan balances
IFRS 9 bad debt provision
IFRS 9 provision ratio
Net Customer Loan Balances
30
29 February 2020
656.9
(71.7)
10.9%
585.2
2 March 2019
682.2
(97.1)
14.2%
585.1
Change
-3.7%
-26.2%
-330bps
+0.1%
net finance costs. Due to lower
exceptional costs and an improvement
in unrealised FX, statutory profit before
tax was £35.7m, representing a £93.2m
improvement on last year.
TAXATION
The effective underlying rate of
corporation tax (the tax rate excluding
exceptional items) is 21.5% (FY19: 26.9%)
and the year-on-year difference is largely
due to smaller prior year adjustments
being made in FY20. The overall tax
charge after exceptional items is £8.3m
(FY19: £0.8m).
EARNINGS PER SHARE
Adjusted earnings per share was 16.37p
(FY19 : 21.38p). Statutory earnings per
share was 9.63p (FY19: ((20.50)p).
DIVIDEND
The Board declared an interim dividend
of 2.83 pence per share in respect
of the first half of the financial year.
Following the outbreak of Covid-19
and the subsequent impact on the
business and the wider economy, the
Board announced on 23 March 2020
that it would not be recommending
a final dividend for this financial year.
Following the year end, the Group
secured amendments to its financing
facilities which included accessing
the Government’s Coronavirus Large
Business Interruption Loan Scheme
(“CLBILS”). For as long as any amount
of the £50 million CLBILS facilities is
drawn, the Group will be restricted from
paying dividends. The Board does not
anticipate declaring cash dividends in
respect of the 2021 financial year.
FINANCIAL SERVICES
Compared to the same period last
year the expected credit loss provision
rate decreased by 330bps due to an
underlying improvement in the quality of
the loan book and the disposal of some
high-risk payment debt which was sold
at a better rate than the impaired book
value. As a result of sustained significant
reductions in observed default rates
since 2017 in particular, the probability
of default parameter in the expected
credit loss (“ECL”) model has been
appropriately updated during the year
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk to reflect observed rates over a two-year
period, rather than historic rates observed
prior to 2017 which were increasingly not
reflective of current book composition and
performance. This methodology change
to appropriately reflect the sustained and
observed improvements in default rates
resulted in a reduction in the IFRS 9 bad
debt provision.
BALANCE SHEET
AND CASH FLOW
Although the global spread of Covid-19
began before 29 February 2020, the
WHO declaration of a global pandemic
and escalation of the virus within the
UK took place in on 11 March 2020 and
were not therefore predictable as at the
balance sheet date. For this reason, the
significant effects of Covid-19 are non-
adjusting events as at the balance sheet
date. Management have considered the
potential impact of Covid-19 on the post
balance sheet event period, specifically
in regard to the recoverability of its
tangible, intangible assets and inventory,
the impairment of the trade receivables
and fair value of the Group’s pension
surplus. This is further highlighted in
a detailed post-balance sheet events
disclosure note 31.
Capital expenditure was £39.7m
(FY19: £36.3m). Inventory levels at the
period end were down 15.5%, to £94.9m
(Restated FY19: £112.3m).
Gross trade receivables decreased by
3.7% to £656.9m (FY19: £682.2m) driven
by a combination of reduced Financial
Services income and Product sales
and sales of customer receivables on
payment arrangements to a regulated
third-party purchaser.
Net cash generated from operations
(excluding taxation) was £47.6m
compared to a £35.0m outflow last
year, principally driven by a reduction
in exceptional cash outflows from
£84.6m in FY19 to £40.5m in FY20
and improvements in working capital.
After funding capital expenditure, finance
costs, taxation and dividends, net debt
increased from £467.9m to £497.2m.
The £585.2m net customer loan book
significantly exceeds this net debt figure.
The Group’s balance sheet is
underpinned by its customer loan book,
which at 29 February 2020 was £656.9m
on a gross basis and £585.2m on a net
basis, calculated under IFRS 9.
Core debt, which is defined as the
amount drawn on the Group’s Revolving
Credit Facility (“RCF”) less cash was
£77.5m, which means the Group’s
leverage is 0.7x on an unsecured net
debt/EBITDA basis for the last 12 months
EBITDA. For FY20 the Group had
financing facilities in place, comprising:
An up to £500 million securitisation
facility, maturing in December 2021,
secured by a charge over eligible
customer receivables without recourse
to the Group’s other assets, drawings on
which are linked to prevailing levels of
eligible receivables;
A RCF, maturing in September 2021, of
£125 million; and
An overdraft facility of £27.5 million.
On 18 May 2020, the Group agreed new
financing arrangements:
A new up to £50 million 3-year Term
Loan facility, provided by our lenders
under the Government’s Coronavirus
Large Business Interruption Loan
Scheme (“CLBILS”);
Amendment of certain terms and
covenants of the securitisation facility,
to mitigate a significant amount of
the impact that Covid-19 may have in
2020 on the facility. This is to address
variations in collection rates and
customer behaviour, and to enable the
Group to continue to offer its customers
enhanced flexibility. The amendments
to the facility are in place until late
December 2020 and are intended to fully
cover the impact of the current period of
the FCA’s Covid-19 forbearance; and
The widening of certain covenants at
the August 2020 half-year test date
in its existing unsecured £125 million
RCF and the introduction of quarterly
covenant tests.
The Group’s defined benefit pension
scheme has a surplus of £26.3m
(FY19: £23.9m surplus). The small
increase in the surplus is as a result of
general market changes in asset returns
during the financial year.
FX SENSITIVITY
As at the end of FY20 we had hedged
88% of our net purchases for FY21 at
a blended rate of $/£1.32. At a rate of
$/£1.28, which was the spot rate at year
end, and before any mitigating actions
or changes in annual requirements,
this would result in a c.£2.8m gain in
FY21 PBT.
As at the end of FY20 we had hedged
39% of our anticipated net purchases
for FY22 at a blended rate of $/£1.32.
At a rate of $/£1.28 which was the
spot rate at year end, and before
any mitigating actions or changes
in annual requirements, this would
result in a c.£1.0m gain in FY22 PBT.
Every five cents move from this rate in
our unhedged position would result in a
PBT sensitivity of c.£2.3m.
FY21 GUIDANCE
Since the initial significant impact
of Covid-19 on Product revenue,
trends have continued to improve
over the course of this financial year.
Financial Services revenue has been
impacted by the effects of Covid-19
on our markets. Product gross margin
pressure is expected to continue due
to mix and the highly promotional retail
market. Financial Services gross margin
will decline as a result of previously
guided regulatory pressures and an
increase in bad debt provisioning due
to the impact of Covid-19. The Group is
confident of offsetting at least 75% of
the Group gross margin decline through
operational cost savings with bad debt
provision movements being the primary
driver negatively affecting EBITDA.
We expect our cost mitigations
and significant reductions to capex
(expected to be c.£20m) and exceptional
costs (expected to be less than £10m) to
drive improved cash generation in FY21
leading to net debt to be in the range of
£380m to £400m at the year end.
31
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report Governance report Financial statements ENVIRONMENTAL, SOCIAL AND GOVERNANCE
TAKING CARE
OF OUR WORLD
As we entered FY21, the Covid-19
outbreak saw N Brown fundamentally
change parts of its business operations.
Our key priority has been to guarantee
the safety of our colleagues whilst
ensuring that the Company could
continue to serve customers and
support partners along our supply
chain in line with government guidance.
Details of the actions taken to date can
be found on p35 and we will report more
fully on the Covid-19 impact in next
year’s report.
As part of N Brown’s ongoing
commitment to sustainability, I am
pleased to announce the rebranding
of our Corporate Social Responsibility
(“CSR”) charter to a new Environmental,
Social and Governance (“ESG”) initiative.
While CSR has always represented
the Company’s efforts to foster
positive change across all aspects of
sustainability, the move to ESG will allow
the Company to better demonstrate
how it:
Considers climate change
in its corporate strategy;
Treats colleagues and its
wider stakeholder base;
Builds trust and champions
innovation; and
Manages its supply chain.
We continue to believe
we can be a major force
for good as well as a
major force for fashion.
Michael Ross
Chair of the ESG Committee
HIGHLIGHTS
OUR
PEOPLE
>£60,000
Raised by colleagues
for Maggie’s
>£53,000
Donated to Prostate
Cancer UK through
Jacamo
OUR
PLANET
50%
100%
Product bags made
from 50% recycled
material
100% zero carbon and
renewable electricity
across all our sites
>£32,000
Donated to Breast
Cancer Now through
Simply Be
>1,000
Hours volunteered by
colleagues through
our Make A Difference
volunteering initiative
-13%
Logistics GHG
emissions down
13% year on year
100%
FSC swing tickets
for all JD Williams,
Simply Be and
Jacamo products
32
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk SUSTAINABILITY
IN ACTION
As part of the rebranding to ESG, the Company
will focus its efforts under two key pillars:
SUSTAINABILITY EXPOSITION
A Sustainability Exposition was held
this year to engage with colleagues on
the topic of sustainability and to pose
the question “What does sustainability
mean to you?”. Colleagues were invited
to meet with a number of suppliers who
are helping us to deliver sustainable
changes within the business, from our
packaging to our product labels, and
we showcased up-cycling techniques
and ways to Make A Difference in
the community.
The Exposition ended with a discussion
forum which gave colleagues the
opportunity to share with members
of the ESG Working Group what
sustainability means to them and what
areas they would like to see the business
focus on. This in turn has fed into the
new ESG initiatives as we recognise
the value of our colleagues’ opinions
in shaping the strategy for this all-
important topic.
A MAJOR STEP IN
OUR MENSWEAR
SUSTAINABILITY JOURNEY
In April 2020, Jacamo launched its
new sustainable denim range – a major
step in our Menswear sustainability
journey. All our Jacamo jeans are
now made using sustainably sourced
fabrics. Our new suppliers use
hydroless technology, organic cotton
and recycled yarn, which, along with
other techniques, allows us to grade
the reduced impact on the environment
through an Environmental Impact
Measuring (“EIM”) score.
A standard pair of jeans usually scores
approximately 33 EIM, whereas our
new Jacamo jeans score between
11 – 22 EIM depending on the style.
In addition, all labelling within the jeans
is made from recycled materials and
our use of digital fit technology has
reduced the number of physical samples
produced as part of the design process,
further enhancing the sustainability of
this range.
OUR
PEOPLE
OUR
PLANET
We want everyone who
works with us, wherever
they are, to be treated
with fairness, dignity
and respect.
We want customers to
enjoy our products with
confidence, trusting that
we do the right thing for
the planet and its people.
SEE MORE
p34
SEE MORE
p36
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nbrown.co.uk
33
N Brown Group plc Annual Report and Accounts 2020We’re determined to find smarter and more sustainable ways of working. That means partnering with suppliers who share our standards, and working together to source, produce and transport ever more sustainable and responsible products.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
OUR PEOPLE
N Brown considers its people to encompass
all colleagues, customers and stakeholders
connected across our business and throughout
our supply chain.
We continue to develop engaging
policies and practices that enable
colleagues to bring their best selves
to work. N Brown promotes and
encourages flexible working practices
that allow colleagues to expand and
develop their skills in a diverse and
inspirational environment.
We expect everyone in our supply
chain to be treated with dignity and
respect, and to be provided with fair
opportunity and reward.
We continue to be a member of the
2018 Transition ACCORD (formerly
the Bangladesh ACCORD) which
works with retailers to improve
conditions for thousands of workers
across Bangladesh. N Brown
remains committed to this cause
and will continue to support efforts
in Bangladesh.
We are members of Action,
Collaboration, Transformation (“ACT”),
which is a ground-breaking agreement
between global brands, retailers
and trade unions to transform the
garment and textile industry. One key
aim of the agreement is to achieve
living wages for workers through
industry-wide collective bargaining
linked to purchasing practices. We are
collaborating with other key brands
and, in coordination with IndustriALL,
are supporting five key territories
across the globe. We will continue to
work closely with suppliers to promote
responsible sourcing and ensure that
all workers are treated with fairness,
respect and are safe at work.
Building on our Ethical Principles for
Trustworthy AI, first launched in 2019,
we will continue to adapt our learning
and behaviours as we use data to
better serve our customers, finding new
ways to delight them with products and
services to fit their lives.
Championing inclusivity, we continue to
focus on the needs of the underserved
customer groups.
As a financial services provider, we
take our obligations as a responsible
lender seriously and do everything
in our power to help customers with
their money management, ensuring
affordability and transparency in
respect of our terms and conditions
of service.
Our colleagues in the UK continue
to support the N Brown Corporate
Charity, Maggie’s, a national cancer
support charity which has local centres
in Manchester and near our distribution
centre in Oldham. We are pleased
to confirm that our partnership has
been extended for an additional year.
To date, the fantastic support for
Maggie’s has been purely colleague
driven. In 2020 we will continue to look
for new and innovative ways to support
the charity given the challenges faced
following the Covid-19 outbreak.
Work with our nominated Brand
Charities, Breast Cancer Now for
Simply Be and Prostate Cancer UK for
Jacamo, continued throughout FY20.
Following the launch of our refined
brand strategy in FY21, the Company
will reassess its Brand Charities to
ensure they align to causes close to our
customers’ hearts.
34
Our new
people brand
GIVING OUR COLLEAGUES
A CLEAR INDICATION
OF WHERE THE BUSINESS
IS HEADING
In 2019, with the support of our colleague
representative forum, the Culture Club,
we developed and launched our new
Vision, Mission and Purpose and refreshed
Values. The process was developed
bottom up by colleagues across the entire
business with over 1000 colleagues taking
part in workshops to voice their opinions
and help shape our new people brand.
Our new Vision, Mission and Purpose align
to our refreshed strategy and gives our
colleagues a clearer indication of where
the business is heading. Our Values are
at the heart of our business and their
launch in October was an important next
step in supporting our engaged and
dynamic culture.
>1,000
Colleagues took part in workshops
to voice their opinions and help
shape our new people brand
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Our social response
to Covid-19
Our absolute priority has been
protecting the health, safety and
wellbeing of our colleagues during the
crisis whilst still supporting our wider
business operations. The following
are some of the key actions taken and
procedures established.
SOCIAL DISTANCING
AND HYGIENE
In order to continue operations safely
we have made a number of changes to
ensure that we strictly follow the Public
Health England guidelines on social
distancing. At our distribution centres,
we reorganised the layout within
buildings to maintain social distancing,
introduced one-way routes, increased
points of access and exit, staggered
the entry and exit time of colleagues
and introduced clear floor markings.
We have also expanded our cleaning
regime and introduced additional hand
washing stations for colleagues.
Whilst a significant number of our
Head Office colleagues continue to
work remotely, we are following strict
social distancing guidelines and have
introduced enhanced hygiene and
cleaning protocols at all sites. We are
confident that our colleagues working
across our sites can do so safely.
COMMUNICATION
The business has communicated
daily with colleagues to ensure that
they remain informed and connected
during the pandemic. Our daily comms
to colleagues have also focused on
mental health and wellbeing, offering
support to individuals where needed.
Colleagues have also attended
our “Goals! Always Believe in your
Soul” sessions designed to support
leaders and team members alike in
setting clear, purposeful objectives
against their changing roles and
responsibilities as the business adapts
its ways of working.
BUSINESS SUSTAINABILITY
Our plc Board, Management Board
and senior leadership team took a
voluntary salary reduction of 20% for
the months of April, May and June.
The Company has taken advantage
of the Covid Job Retention Scheme
(“CJRS”) and colleagues on the
scheme will remain furloughed unless
there is a business-critical reason for
them to return.
To ensure that we have the optimum
capability in key areas, several cohorts
of colleagues have been trained and
redeployed to our critical Financial
Services (“FS”) and Customer Services
(“CS”) operations. In addition, existing
CS and FS colleagues have been
cross skilled, enabling them to work
flexibly and support the other area’s
operations as required. To ensure
that all colleagues are “fit” to work
in their redeployed capacity and to
demonstrate necessary controls to
the FCA, we have introduced a robust
Quality Assurance process.
We have also increased learning
and development opportunities.
As remote working is new to many
of our colleagues, we have designed
and digitally delivered workshops
to enable our teams to thrive whilst
working from home. Leaders from
various divisions have attended a
“Mind the Gap” workshop, developing
the skills required to lead teams
remotely whilst building engagement
and cohesion. Colleagues have
attended “(Remote) Working 9-5”
where they have learned practical
tips to develop the habits needed to
remain focused and productive when
working remotely.
GLOBAL COLLEAGUES
We have also implemented UK
Covid-19 guidance protocols and
support to our sourcing office in
Dhaka; all colleagues are working
from home and have daily briefings
with the UK sourcing team. The Dhaka
team provide key local updates to the
business on the Covid-19 situation
across Bangladesh.
LOCAL COMMUNITY
SUPPORT
Since the beginning of the Covid-19
outbreak we have been seeking ways to
support our local communities affected
by the crisis and those who are working
tirelessly on the frontline. We have
made donations of clothing and
household items to frontline NHS staff
in Manchester and we have donated
face masks and face shields to a local
care home near to our distribution
centre in Oldham. We have also made
donations of clothing items to a charity
supporting vulnerable people and
children within the local community.
SUPPLIERS
Throughout the pandemic we have
worked collaboratively with all of
our suppliers. We continue to pay
our product suppliers to contractual
terms but have cancelled some orders
due for spring summer 20 given
the uncertain demand backdrop.
Future orders for autumn winter 20
have been rephased and, in some
cases, suppliers are reworking pre-
ordered fabrics for more appropriate
seasonal lines. In recent weeks we
have started to work with suppliers
on spring summer 21 orders. We have
continued to pay all other suppliers
and partners to terms.
35
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report Governance report Financial statements ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
OUR PLANET
N Brown is part of a rapidly changing retail
world which is under increased scrutiny and
demand from customers, and our wider
stakeholder base, to ensure that our products
are sourced, produced and transported as
sustainably as possible.
We continue to focus on reducing our
Greenhouse Gas (“GHG”) emissions
from both direct and indirect sources.
LED lighting projects have been
implemented at our distribution
centres and Head Office with
additional projects planned for FY21.
Following the quantification of GHG
emissions arising from third party
logistics, we have been focusing on
reducing the amount of unplanned
air freight through improved supply
chain planning. Compared to last year,
logistics GHG emissions have fallen
by 13%. We continue to source 100%
zero carbon and renewable electricity
and have committed to this supply
until 2024.
Over the past year, there has been
a concerted effort to improve
sustainability across our plastic product
and despatch bags.
Product bags are now made from
50% recycled content, which is well
above the statutory minimum of
30%. Product bag sizes have been
streamlined so that they are smaller
and require less plastic. Fewer bag
sizes also enables more efficient
packing. Despatch sacks are made
from 65% recycled content.
We continue to promote the philosophy
that a transparent supply chain will
allow for a more sustainable one.
Factory audits and gradings are carried
out by our supply chain partner, Verisio,
who deliver comprehensive supplier
audits including information on wages,
working hours, general sustainability
and ethical practices. The longer-term
goal is to provide our buyers with a
supplier scorecard which gives them
full visibility on supplier performance,
including a sustainability metric.
We have partnered with the Forest
Stewardship Council (“FSC”) to
ensure that timber-based packaging
is as sustainable as possible. All swing
tickets for Jacamo, Simply Be and
JD Williams are sustainable, and
proudly display the FSC approved
logo. The transition from paper to
digital has seen the volume of paper
used in marketing and catalogues
diminish significantly. We continue
to source paper from certified and
sustainable sources.
We continue to report to the Carbon
Disclosure Project on the Climate
Change and Forests modules. In 2019
we attained a score of B for the Climate
Change module and a C in the Forests
module. The CDP have introduced a
new supplier engagement rating which
evaluates the work we do with our
supply chain on climate change; for this
we received an A-.
CDP NEW SUPPLIER ENGAGEMENT RATING
N Brown score
Sector average
Climate Change
Supplier Engagement
Forests
Leadership
A
A-
Management
Awareness
Disclosure
B
B-
C
C-
D
D-
100%
We continue to source
100% zero carbon and
renewable electricity
and have committed
to this supply until 2024
1 The Group are supplied with 100% renewable wind energy matched to Renewable Energy Guarantees of Origin (REGOs) enabling zero emissions reporting.
36
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk SUSTAINABILITY ROADMAP
YEAR 1: FOCUS ON PLASTICS
We want N Brown to be known for using sustainable packaging across
our fashion brands and ultimately, we want to be one of the first major
digital retailers to go fully sustainable on packaging.
In line with our refined brand strategy, we aim to change all Simply Be
and Jacamo branded despatch bags over to Green Polyethylene (Green
PE) by the end of FY22.
Four-year
sustainability plan
Looking ahead, N Brown has created
a new four-year sustainability plan that
aligns with the values of the business.
We know that we are stronger together,
so we continue to work collaboratively
with our suppliers and partners to
ensure that, united, we achieve this
plan and enable the changes required
to “do the right thing”.
SUSTAINABILITY
IMPACT ASSESSMENT
FY21
Q1
Rebrand to ESG
New sustainable
men’s denim
ranges launched
N BROWN
IMPACT
AREAS
O
P
E
R
A
T
I
O
N
S
D U C T S
P R O
LAND
AIR
SEA
Q2
Q3
Q4
Implement supplier
scorecards to
allow buyers full
performance viability
on sustainability
Complete green LED
lighting project –
80% energy saving
Introduce
sustainable brand
product labels
Commence input
attribution by raw
materials to enable
full traceability of raw
materials
Trial Green PE
despatch bags
on Simply Be and
Jacamo
Review progress
against existing 35%
target and set new
targets for GHG
emissions reduction
and climate change
FY22
Q3-4
Q1-2
All denim ranges
to have sustainable
properties
Roll out Green PE
across all Simply
Be and Jacamo
despatch bags
Review recycling
options for
customers
Launch recycled
swimwear range
Plan roadmap for
CO2 reduction in
supply base
FY23
Q1-2
50% of own-brand
product ranges
sustainably sourced
Implement recycling
options for customers
Q3-4
All plastics used
across products
and packaging to
be recyclable
LAND
Sustainable
cotton
Sustainable
timber
(viscose, paper
and board)
SEA
Man-made
fibres
(recycled
packaging)
Plastic
packaging
AIR
Direct carbon
emissions
Indirect carbon
emissions
FY24
Q3-4
Q1-2
Review and assess
next stage of
sustainability
roadmap
60% of own-brand
product ranges
sustainably sourced
Introduce
sustainability
auditors to ensure
that closed loop is
validated
t
r
o
p
e
r
e
c
n
a
n
r
e
v
o
G
37
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report Financial statements
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
OUR PLANET CONTINUED
ENVIRONMENT
Group-wide responsibility for
sustainability sits with the CEO of
Retail, who reports to the Group Chief
Executive Officer, and sits on both the
N Brown Executive Board and CSR
Committee. For the majority of FY20,
oversight sat with Ralph Tucker, former
Chief Product and Trading Officer
but for FY21, Sarah Welsh will have
oversight as CEO of Retail.
FY20 was an important year for
N Brown in terms of sustainability and
establishing strong foundations in
order to build a roadmap for the years
ahead. We continue to concentrate
on Greenhouse Gas (“GHG”) emission
reductions across our direct operations
and supply chain, improving overall
transparency and increasing the
sustainability of packaging across our
fashion brands. One key development
was a business-wide review of our key
environmental impacts and how we
can embed sustainability at the heart
of our operations and products.
EMISSIONS PROFILE
Under GHG reporting guidelines,
scope 1 and 2 emissions are the
key mandatory reporting areas.
These illustrate the environmental
impact of the Group for activities
over which we have direct control;
i.e. 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. During FY20
we expanded our scope 3 reporting
to include our supply chain emissions
which we will report on from FY21
onward, along with the below figures.
The table and chart overleaf illustrate
the Group’s GHG emissions across all
our reporting areas for FY20; the FY19
results are included for comparison.
Our GHG emissions inventory is
calculated for the Group under the
operational control approach, in
accordance with the GHG Protocol and
GHG emissions factors published by
BEIS. The inventory is independently
calculated by our partner carbon
consultants, Envantage Ltd.
38
RELATIVE GHG EMISSIONS (SCOPE 1
AND 2) AGAINST ITEMS DESPATCHED
FY18
FY19 (Previous year)
FY20 (Current year)
TOTAL GHG TCO2E
Scope 1
Source
Natural gas
Diesel
HFCs
Gas oil
Company vehicles
Scope 2
Electricity (location-based)
Electricity (market-based)
Total scope 1 and 2
Scope 3
Water
Employee commuting
Business travel (air, road
and rail)
Waste
Fuel and energy related
activities
Logistics (upstream)
Logistics (downstream)
Total scope 1, 2 and 3
Outside scopes – Biogenic element – Diesel
EMISSIONS PROFILE FY20 (TCO2E)
219
185
168
FY20
FY19
Change
Current year
1,673.0
Previous year
1,607.6
287.7
173.1
54.0
28.2
3,788.2
54.1
5,995.1
23.3
1,139.4
1,995.4
105.3
1,188.6
16,628.7
4,555.0
31,590.8
9.4
370.1
134.4
77.6
35.6
4,834.5
220.1
7,059.5
27.9
996.2
1,582.9
146.0
1,447.1
18,480.8
5,985.5
35,726.0
8.8
%
4%
-25%
29%
-30%
-21%
-22%
-75%
-15%
-17%
14%
24%
-28%
-18%
-10%
-12%
-12%
7%
Logistics (upstream)
52.6%
Employee commuting
3.6%
Logistics (downstream) 14.4%
Diesel
Electricity
12.0%
HFC
Business travel
6.2%
Waste
Gas
5.3%
Gas oil
Fuel and energy
related activities
3.8%
Company vehicles
Water
0.9%
0.5%
0.3%
0.2%
0.1%
0.1%
-9%
Decrease in scope 1 and 2
emissions per items shipped
compared to last year
-15%
Decrease in scope 1 and 2
emissions per items shipped
1 Items shipped figures used for intensity ratio covers all active entities during the reporting year.
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk TOTAL GHG TCO2E
Direct emissions (scope 1 and 2) have
fallen by 15% compared to FY19.
This reduction is mainly attributed to
a decrease in electricity consumption
as a result of store closures and
improvements in energy efficiency
across the Group estate, including LED
lighting and streamlining our warehouse
and distribution operations.
Total emissions including scope 3
have fallen by 12% compared to FY19.
The work the Group has undertaken
to improve supply chain management
has helped reduce the emissions
associated with upstream logistics.
Our third-party distribution partners
continue to improve the efficiency of
their operations to decrease the carbon
impact of each customer order.
Total scope 1 and 2 and total scope 1, 2
and 3 emissions have been calculated
using the location-based methodology
for scope 2 reporting.
RELATIVE PERFORMANCE
USING INTENSITY RATIOS
As a growing organisation, evaluation of
scope 1 and 2 emissions performance
using an intensity ratio allows a more
meaningful comparison to be made
between inventory periods.
Our relative GHG emissions (scope
1 and 2) against items despatched
have decreased year on year since
we started reporting in 2015. We are
pleased to report a significant reduction
of 9% compared to our previous
reporting year.
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
statement. Scope 1 and 2 emissions have
been calculated using the operational
control approach in accordance with the
GHG Protocol Corporate Accounting
and Reporting Standard. The quantified
emissions are for the reporting period
of FY20.
GHG emissions factors published by
the UK Government and International
Energy Agency for 2018 and 2019 have
been used to calculate GHG emissions.
NOTED CHANGE IN EMISSIONS
FOR FY19
Data accuracy: Some data for the FY19
inventory has been updated based on
actual data or more accurate data for
some sources.
Update in BEIS emissions factors:
Emissions from the previous published
report for the period FY19 have been
recalculated with the newly published
factors for 2019, affecting the months of
January and February 2019 (2019 factors
were not available at original time of
publish). This has resulted in a slight
change in emissions compared to those
originally reported.
DATA RECORDS
Natural gas and electricity: Emissions
are primarily calculated based on actual
metered consumption from invoices,
meter readings or half hourly consumption
data. 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 from previous periods of
consumption where quarterly bills have
not yet been published.
Gas oil: Fuel is used in stand-by
generators and onsite transport such
as forklifts. 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
fuel card invoices.
Company cars/vans: 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. Some small vans are used to
transport items between logistics sites;
the emissions are calculated based on
the annual mileage data for the vans.
HFC: Refrigeration emissions have been
calculated from the F-Gas register or
services records where the volume of
refrigerant gas lost to the atmosphere
during the reporting period is known.
Where service records were not
available, emissions have been estimated
using the screening methodology and an
assumed average leakage rate.
Waste: Most of the Group’s waste
(Head Office and logistics sites) is
managed by Viridor. Viridor provide a
breakdown of weight of waste disposed
of by N Brown split by waste type and
disposal method. For the remaining
sites which are not managed by Viridor,
waste audits are completed over a week
as a sample and figures are annualised.
Employee commuting: Employee
commuting habits are captured
using an annual online staff survey.
The results are taken as a sample of all
employees and the results are uplifted
by the total number of employees to
approximate total emissions.
Supply chain logistics: Internal data
and data provided by third-party
service providers has been used to
calculate the supply chain emissions
associated with the movement of
goods from the factory door through
to deliveries to our customers.
High level estimates have been used
where primary or secondary data
was unavailable. UK Government
emission factors and supplier specific
emission factors, where available, have
been utilised.
39
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukStrategic report Governance report Financial statements RISK MANAGEMENT
PROTECTING THE INTEGRITY
OF OUR BUSINESS STRATEGY
ENTERPRISE RISK MANAGEMENT FRAMEWORK
The design of N Brown’s Enterprise
Risk Management ("ERM") framework is
based on leading practices and includes
the key principles outlined by industry
and regulatory standards. The ERM
framework enables the Company
to maintain robust governance and
oversight around risk management
efforts across the business and
establishes a standardised approach
to managing risks.
RISK
STRATEGY AND
GOVERNANCE
RISK APPETITE
Proposed
themes
Statement,
threshold and KPIs
Monitoring
RISK MANAGEMENT PROCESS
Identify
and Assess
Respond
and Manage
Monitor
and Report
Strategic, Finance,
Operational, Compliance,
External
Monthly reporting
functional management
Quarterly assessment
and reporting
SKILLS AND
CAPABILITIES
RESOURCES
RISK
CULTURE
POLICIES, STANDARDS AND PROCEDURES
COVERING DEFINED RISK AREAS AND APPETITE
RISK ASSESSMENT
The Board of Directors has established
a continuous process for identifying,
evaluating and managing risk as part of
its overall responsibility for maintaining
internal control and risk management
frameworks. This process is intended to
provide reasonable assurance regarding
compliance with laws and regulations as
well as commercial and operational risks.
The Group recognises that no system of
controls can provide absolute assurance
against material misstatement, loss or
failure to meet its business objectives.
Specific review and identification
of existing and emerging risks were
facilitated by three Board level risk
assessment cycles completed during the
year. The Chief Executive, Chief Financial
Officer and Group Head of Internal
Audit, together with the operational
Directors, ranked existing key Group
risks, identified emerging risks and
appraised the structure of internal
controls. The outputs were reported to
the Audit and Risk Committee and used
by Internal Audit to refine and develop
the annual Internal Audit Plan.
INTEGRATED ASSURANCE
The Group's Compliance, Data
Governance and Information Security
teams continue to play key roles in the
ongoing monitoring and mitigation of
both regulatory and business risk across
the Group. Outputs from monitoring
activities are periodically reported to
the Executive Board. Additionally, the
Internal Audit team report on operational
process and the progress of agreed
actions against the risks identified.
The output is reported to the Executive
Board and Audit and Risk Committee.
Additionally, the Group continues to
enhance its first- and second-line risk
assurance and reporting through the
key governance committees in Financial
Services and to the Executive Board and
Audit and Risk Committee.
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 action
plans 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 prioritisation of the Group’s annual
Internal Audit plan.
UK EXIT FROM THE
EUROPEAN UNION
(“BREXIT”), COVID-19
AND OTHER KEY AREAS
OF FOCUS
The overarching and continuing nature
of Brexit and Covid-19 impacts across a
number of Tier One risks. Further details
can be found on p41 and 42.
40
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk RISK MANAGEMENT TEAM
• Owns the Risk Management Framework
• Approves risk appetite
N BROWN GROUP PLC BOARD
AUDIT AND RISK COMMITTEE
Risk management oversight across
Retail and Financial Services
Supports the Board in establishing
risk appetite
•
•
EXECUTIVE BOARD
•
Reports to the plc Board
FINANCIAL SERVICES COMMITTEES
•
Oversee the Financial Services risk management and report to the Financial Services Board
Committee and Executive Board
BOARD AND
COMMITTEES'
DIVISION OF
RESPONSIBILITIES
p58
AUDIT AND RISK
COMMITTEE
REPORT
p64
RISK MANAGEMENT TEAM
Facilitates the implementation and supports
reporting to the Executive Board
Facilitates effective implementation and
oversight of the ERM framework
•
•
FUNCTIONS: RETAIL AND
FINANCIAL SERVICES
• Executes the Risk Management Framework
• Conduct & Customer
•
Information Security
• Business Resilience
• Financial
12 TIER ONE RISKS
• Data Governance
• Change Management
• Credit
• Compliance & Regulatory
• People
• Technology
• Strategic
• Supplier & Outsourcing
SEE MORE ABOUT
OUR RISKS
p42
As part of the continuous improvement in
risk identification and management, the
Group expanded its risk profile and has
defined 12 Tier One risks against which
the risk management cycle is reported.
These are shown in the heat map
opposite and are detailed on p43 to 45.
BREXIT
Brexit remains one of the most
significant economic events for the UK
and at the time of this report, its effects
remain subject to significant levels of
uncertainty as to outcome. The full
range of potential economic, regulatory
and business environment impacts are
therefore unknown.
Brexit has several potential impacts in
the areas of economic and regulatory
environment, import of goods due
to currency exchange volatility and
increased import duties, availability and
cost of labour, and potentially other
unknown impacts. Labour restrictions in
the UK could affect our ability to recruit in
our logistics operations and other related
areas at historical or budgeted rates.
FY20 RISK HEATMAP
d
o
o
h
i
l
e
k
i
L
8
10
11
3
1
2
4
7
6
5
12
9
01 Credit
02 Change Management
03 Technology
04 Business Resilience
05 Strategic
06 Data Governance
Impact
07 Compliance & Regulatory
08 People
09 Financial
10 Conduct & Customer
11 Information Security
12 Supplier & Outsourcing
41
N Brown Group plc Annual Report and Accounts 2020Strategic report Governance report Financial statementsnbrown.co.uk RISK MANAGEMENT CONTINUED
PRINCIPAL RISKS AND UNCERTAINTIES
PROTECTING THE INTEGRITY
OF OUR BUSINESS
STRATEGY CONTINUED
IDENTIFYING, EVALUATING
AND MANAGING RISKS
FACING THE GROUP
In addition, continued uncertainty around the impact of
Brexit and the possibility of reduced consumer confidence,
could give rise to the risk of increased bad debts – and
related IFRS 9 sensitivity – from potential deterioration in
discretionary spending capacity.
RISK MITIGANTS
We have had a consistent Brexit planning strategy and
governance structure during the year which will continue to
be monitored and operated during the official transitional
period. Our planning included the assessment of Brexit risks,
impact assessments and mitigation in relation to trade and
tariffs, implications for our Irish business, logistics disruption,
labour shortages and hedging arrangements.
Our business is an Authorised Economic Operator –
ensuring preferential treatment on the importation of goods
and facilitating efficient clearance at the ports.
Our business imports the significant majority of its stock into
ports which are outside those presently assessed as being of
greater risk of being more heavily impacted.
There are a limited number of products purchased by our UK
businesses directly from the EU. Those products could also
be sourced elsewhere, de-listed or in a worst-case scenario
the cost price may increase for certain limited items because
of tariff imposition.
We have taken all realistically available steps to ensure we
continue to be able to trade in Ireland after transition.
Throughout the year we have continued to keep in close
contact with suppliers, ensuring that all critical suppliers
have appropriate Brexit contingency plans in place to
maintain a continuity of supply.
Short-term exchange rate volatility is mitigated by our
currency hedging policy which ensures an appropriate
degree of coverage for future buying seasons.
Continued refinement of, and improvement in, the risk
profile of the Groups debtor book to seek to mitigate the
risk of undue IFRS 9 volatility specifically relating to Brexit.
KEY ACTIONS IN FY20
The Board have continued to monitor Brexit impacts and
mitigations with management throughout the year via
detailed reporting and discussion on the businesses Brexit
Steering Committee actions and outputs. On the basis
of these regular Board updates, the Board took comfort
that management have a comprehensive and appropriate
set of mitigations in place to ensure the least disruption
is incurred by the business from Brexit in the primary risk
areas identified.
In relation to the above risk mitigations and the business
planning for a potentially significant impact from Brexit, we
do not consider the impacts of the risk to have materially
changed in the period under review.
42
IMPACT OF COVID-19 ON RISK MANAGEMENT
The impact of the continuing Covid-19 pandemic and the resultant
government lockdown and guidance on social distancing has
increased the risk profile of the Group across multiple Tier One risk
categories since the FY20 year end.
While many areas of risk have been impacted, the areas of
Business Resilience, Information Security, Data Governance,
Compliance and Regulatory, Credit and People have shown the
greatest increase in risk since the onset of the pandemic and
business mitigation actions have focused primarily on these areas.
The primary high-level priorities for the Group in response to the
pandemic have been to safeguard employees and customers
wellbeing while ensuring continuity of service across the
business functions.
As a result, the key mitigating actions the Group has taken during
the pandemic have been focused on transitioning to widespread
remote working whilst maintaining the necessary control frameworks
required to provide a good level of service to customers both in the
Financial Services and Retail sections of the business.
Activities for maintaining regulatory controls over FCA and GDPR
related processes have been the highest priority for action, and
ongoing monitoring and reporting over regulatory KPIs in the
areas of Arrears, Affordability and Vulnerability, Cyber Security and
PII have continued.
The impact to trade as a result of changes in customer behaviour
arising from the pandemic has increased trading risk, with
particular focus on working capital and treasury. This has been
partially mitigated by using the Covid Job Retention Scheme and
close partnership with the Group’s banks and suppliers to ensure
continuing headroom over borrowing facilities is maintained at a
suitable level.
Notwithstanding, we cannot predict the impact
that Covid-19 might have on the business.
Management have considered severe but
plausible downsides. However, these do not
include the most severe of possibilities.
N BROWN HAS FIVE
KEY STRATEGIC OBJECTIVES:
1 DISTINCT BRANDS TO ATTRACT BROADER
RANGE OF CUSTOMERS
2 IMPROVED PRODUCT TO DRIVE
CUSTOMER FREQUENCY
3 NEW HOME OFFERING FOR CUSTOMERS
TO SHOP MORE ACROSS CATEGORIES
4 ENHANCED DIGITAL EXPERIENCE TO
INCREASE CUSTOMER CONVERSION
5 FLEXIBLE CREDIT TO HELP CUSTOMERS SHOP
UNDERPINNED BY:
6 DATA
7 PEOPLE AND CULTURE
8 SUSTAINABLE COST BASE
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Conduct & Customer
The ability of the Group to respond to customer
expectations for fair treatment, quality products and good
service. Potential impacts include: Loss of market share,
regulatory fines and impact of key financial measures.
Information Security
The protection and management of Group and customer
data and the response to cyber threats. Potential impacts
include: Loss of customer data, business interruption,
potential fines or reputational damage.
Link to strategic priority
1, 3, 4, 5, 6, 7
Key mitigations
Financial Services
policy suite.
Financial Services
Governance Committees.
Customer insight modelling.
Compliance
monitoring processes.
Link to strategic priority
3, 4, 5, 6, 7
In year activity
Key mitigations
In year activity
Updated Risk Management
Framework and reporting
process.
Rolled out new brand and
trading strategy.
Updated first line risk
mapping for Financial
Controls, Financial Services
and IT.
Continuous Cyber
Security monitoring.
Network vulnerability
scanning.
Operating system software
security processes.
Anti DDoS processes.
Information Security and Data
Governance Committee.
Cyber Security CIS
Top 20 framework.
Vulnerability and
Patch Management
improvements.
Business Continuity –
IT resiliency
improvement plan.
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The ability of the Group to respond to external disrupting
events or risks. Potential impacts include: Disruption to
trade and customer service, impact to revenue, margin
or reputation.
Financial
The robustness of the Group's financial controls and
the capability for managing liquidity and market risks.
Potential impacts include: Increased costs, fall in liquidity
headroom and impact on margin.
Link to strategic priority
1, 2, 3, 4, 5, 6, 7, 8
Link to strategic priority
1, 4, 5, 6, 7, 8
Key mitigations
In year activity
Key mitigations
In year activity
Crisis Management plan.
Business Continuity plans
for each business area.
Offsite daily data backup.
Ongoing migration to cloud
based systems.
Outsource provider for IT
legacy systems.
Remote working capability
across the Group.
Debt securitisation
agreement with HSBC.
People management systems
moved to cloud.
Upgraded data warehousing.
Hedging of FX purchases.
Return on investment
measures for key areas of
discretionary spending.
Detailed cash and margin
forecasting processes.
Bank securitisation reporting.
Project to move financial
reporting systems to cloud
on track for FY21 delivery.
Payroll management systems
moved to cloud.
Securitisation reporting
controls review and upgrade
project initiated.
Updated first line risk mapping
for Financial Controls.
Stricter CAPEX approval
process.
Financial reporting systems
moving to cloud.
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N Brown Group plc Annual Report and Accounts 2020Strategic report nbrown.co.uk
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
IDENTIFYING, EVALUATING AND MANAGING
RISKS FACING THE GROUP CONTINUED
Change Management
The capacity of the Group to deliver its desired technological
and Cultural Change programme. Potential consequences
include: Loss of competitive position, underachievement
against growth targets, inefficient returns on investment and
constrained ability to respond to market forces.
Link to strategic priority
1, 2, 3, 4, 5, 6, 7, 8
Data Governance
The capability of the Group to protect the integrity,
accuracy and security of its data. Potential impacts
include: Regulatory breaches and fines, reputational
damage and loss of market share.
Link to strategic priority
1, 3, 4, 5, 6, 7
Key mitigations
In year activity
Key mitigations
In year activity
Continuous, agile IT
change processes.
Integrated trade and tech
delivery squads.
Information Security and Data
Governance Committee.
People management
systems moved to cloud.
Integrated approach to
tech and business change.
Improved change return on
investment modelling.
Cultural Change initiative.
Data driven decision making.
Stricter CAPEX
approval process.
Data monitoring processes.
Data usage and security
policies.
Data cleansing policy.
Mainframe Z-Cloud
migration.
Access Control update
and review project.
PCI Compliance
upgrade project.
Compliance & Regulatory
The impact and response of the Group to existing and
new legal and regulatory requirements. Potential impacts
include: Increased costs, erosion of margins and potential
fines or reputational damage.
Link to strategic priority
1, 2, 3, 4, 5, 6, 7, 8
Key mitigations
In year activity
Financial Services
Governance Committees.
Information Security and Data
Governance Committee.
Second line activity teams:
Compliance, Data
Governance, Information
Security.
Updated Risk Management
Framework and reporting
process.
Action plan and Reasonable
Steps from Senior Managers
& Certification Regime.
Updated first line risk
mapping for Financial
Controls, Financial Services
and IT.
Credit
The capability and management of the Group's
Customer portfolio and debtor book, including
arrears rates and potential bad or persistent debts.
Potential impacts include: Impact on profit, regulatory
fines and increased borrowing costs.
Link to strategic priority
1, 2, 3, 4, 5, 6, 7, 8
Key mitigations
Financial Services
policy suite.
Financial Services
Governance Committees.
Customer forecasting.
Compliance monitoring
processes.
IFRS 9 modelling.
Bank securitisation
reporting.
In year activity
Updated Risk Management
Framework and
reporting process.
Securitisation reporting
controls review and upgrade
project initiated.
Updated first line risk
mapping for Financial
Controls, Financial
Services and IT.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Technology
The stability and sustainability of the Group's current
mix of new and legacy IT systems and infrastructure.
Potential impacts include: dependence on legacy
IT systems, increased service costs and reduced
customer satisfaction.
People
The ability of the Group to manage its cultural and people
risks, including performance management, personal
development and recruitment and talent management.
Potential impacts include: Loss of key personnel, increased
costs and key skills gaps.
Link to strategic priority
1, 2, 3, 4, 5, 6, 8
Link to strategic priority
4, 5, 6, 7
Key mitigations
In year activity
Key mitigations
In year activity
Continuous, agile IT
change processes.
People management systems
moved to cloud.
Bi-annual employee
satisfaction survey.
Ongoing system
performance monitoring.
Integrated trade and
tech delivery squads.
Migration of legacy IT
systems and data to cloud
service providers.
Updated change
prioritisation process.
IT and business
strategy alignment.
People policies suite.
Performance
management system.
Online talent development
and learning hub.
Integrated tech and business
change programme.
People management system
upgrade to cloud.
Project to reduce IR35
impact on operational skills.
Rolled out new Group
values and behaviours.
Strategic
The delivery and pace of change in the business strategy and
the completion of action plans to achieve profitable growth.
Potential impacts include: Impact on margin, regulatory fines
and loss of market share arising from customer confidence
risks and Brexit.
Link to strategic priority
1, 2, 3, 4, 5, 6, 7, 8
Supplier & Outsourcing
The management and monitoring of supplier
performance and the operations of key outsource
partners. Potential impacts include: Increase costs and
impact on profitability.
Link to strategic priority
2, 3, 5, 7
Key mitigations
In year activity
Key mitigations
In year activity
Continuous, agile IT
change processes.
Rolled out new brand and
trading strategy.
Integrated approach to
tech and business change.
Cultural Change initiative.
Data driven
decision-making.
Financial Services
Governance Committees.
Updated Risk Management
Framework and reporting
process.
People management systems
moved to cloud.
Procurement Policy.
Delegated authority matrix.
In house monitoring of
outsource performance.
Third-party contract SLAs.
Improved change return
on investment modelling.
Complete review of
supplier contracts base.
Updated procure
to pay cycle.
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N Brown Group plc Annual Report and Accounts 2020Strategic report nbrown.co.uk
SECTION 172 STATEMENT
ENGAGEMENT WITH STAKEHOLDERS
Section 172(1) of the Companies Act 2006
states that the Directors of a company must
act in the way they consider, in good faith,
would most likely promote the success
of the Company for the benefit of its
members as a whole and in doing so have
regard, in addition to other matters, to:
The likely long-term consequences
of decisions
The interests of the
Company's employees
The need to foster the Company's
business relationships with
suppliers, customers and others
The impact of the Company's
operations on the community
and the environment
The desirability of the Company
maintaining a reputation for high
standards of business conduct
The need to act fairly as between
the Company's owners
The Board is mindful that our success
relies on our ability to engage
meaningfully with stakeholders, taking
their views into account when making
decisions on behalf of the Company.
By understanding our stakeholders,
we can ensure that an appropriately
diverse range of needs and concerns
are considered in both the day-to-day
running of the business as well as in its
longer-term strategy.
Methods and level of engagement vary
according to the stakeholder group being
addressed and involve the Group Board,
Executive Board, senior leadership team
and colleagues as required. The Company
engages both proactively and reactively
with stakeholders.
Throughout the year, the Board engaged
with stakeholders on a number of
principal matters across a variety of
forums and is proud to report on these
activities in its first Section 172 Statement.
DECISION-MAKING
BY THE BOARD
The responsibilities of the Board are
clearly documented in the Company’s
Articles and Schedule of Matters
reserved for Board approval; these can
be found at www.nbrown.co.uk.
All matters that require the Board
to reach a decision are presented at
Board meetings. Supporting papers
on these matters are provided to
Directors ahead of the meeting and set
out the background, the reasons for
the proposal and the associated costs,
benefits and risks. The papers also
highlight any potential impacts and risks
to relevant stakeholder groups and how
they are to be managed.
The Directors take all factors into
account before making informed
decisions. The fair treatment of relevant
stakeholders is always considered,
although the Board acknowledge that
not every outcome will always benefit
each stakeholder group.
Decision-making by the Board balances
the need to generate sufficient
profit in order sustain the business
commercially against the needs of our
various stakeholders and, ultimately,
the long-term sustainable success of
the Company.
We are committed to maintaining the
highest standard of business conduct;
each and every decision of the Board
is made on the basis of best ethical
practice. We want all stakeholders to be
comfortable in the knowledge that our
business decisions are made with the
intention of doing the right thing for the
planet and its people.
Further information on the Board's key activities
during FY20 can be found on p55.
SHAREHOLDERS
AND INVESTORS
Investors play a major and vital role in
the success of the Company; they are
the providers of capital without whom
the Company could not grow or invest
for future development.
We engage with our shareholders
and investors via:
The Company’s Annual
General Meeting
Meetings with shareholders
and proxy advisors
Presentations to the City
Publication of Stock Exchange
announcements, press releases,
quarterly trading results and
annual reports
During FY20, the Chair, CEO and
CFO, along with other Company
representatives, have held meetings
with major institutional stakeholders
to discuss a variety of matters
including corporate strategy,
business performance and share
price movements.
In 2019, the Chair of the Remuneration
Committee consulted with the
Company’s Top 20 shareholders on
the new remuneration policy that was
ultimately approved at the 2019 Annual
General Meeting.
COLLEAGUES
Without our colleagues and their
relentless energy, enthusiasm
and passion we couldn’t do what
we do. They are our single most
important asset.
The Company engages with colleagues
across a variety of platforms including:
The Annual Colleague Conference
Colleague Forum – The Culture Club
Ask Me Anything sessions with
the CEO
Quarterly colleague
engagement surveys
Weekly Division Huddles
Weekly Company-wide newsletter
from the CEO and other Directors
The Company-wide intranet and
weekly Company-wide newsletter
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 2019 was also the year that Richard
Moross stepped into the position of
Dedicated Director for Colleague
Engagement; he regularly feeds back
to the Board on key aspects of the
Company’s culture and performance.
Our Colleague Forum played a
crucial role in the development of the
Company’s new Vision, Mission, Purpose
and Values, alongside the 1000+
colleagues who took part in workshops
and feedback questionnaires.
Further information on Colleague Engagement can
be found on p56.
Feedback through our colleague
engagement surveys has led to the
introduction of new career development
pathways including training and
upskilling. This included the launch
of our Data Fellowship Programme,
a key pillar in the Company's digital
growth strategy.
Colleague input has helped shaped
our new Environmental, Social and
Governance programme and has
influenced sustainability practices
across our business operations.
CUSTOMERS
The Company is obsessed with its
customers and has been for generations.
It delights them with products, services
and finance to fit their lives.
We regularly engage, both proactively
and reactively, with our customers via:
Dedicated Board-Customer
Immersion sessions
Product testing
Market research groups
Net Promoter Scoring and
customer service reports
Engagement across social media
and Customer Service channels
As part of strategy discussions in January
2020, the Board met with customer
focus groups to discuss our brands
and product offerings. These sessions
helped shape the Company’s revised
brand strategy, including the launch of
our new Home Essentials platform.
Other customer engagement across the
year focused on aspects of the business
such as product pricing, brand website
and mobile app design and functionality,
delivery propositions, customer service
and overall business sustainability
including the sourcing, production and
transportation of our products. All of
the Company’s interactions with our
customers have contributed to overall
improvements in our business strategy.
SUPPLIERS
Suppliers are the key links in the
sourcing, development and delivery of
products to our customers. They support
the Company across every aspect of
its operations and are crucial to the
successful delivery of our business model.
In 2019 the Company revised its Supplier
Charter and Procurement Policy, both of
which give extended support to suppliers
in their engagement with the business
including the negotiation of agreeable
contractual terms and mutually beneficial
working relationships within and across
the supply chain.
We continue to promote transparency across
our supply chain, believing this will allow
for a more sustainable one. Our auditing
and grading of factories are now delivered
through an external partner, Verisio.
The Company helps deliver comprehensive
supplier audits including detailed and
up-to-date information on wages,
working hours and general sustainable
and ethical practices.
COMMUNITY AND
THE ENVIRONMENT
The Company has always endeavoured
to foster positive change across all
aspects of our community, both local and
global, and we continue to support and
encourage sustainable practices across
our business operations.
With the support of our colleagues and
following discussions between Executive
Directors and the Chair of Maggie’s, our
partnership with local centres (Maggie’s
Manchester and Maggie’s Oldham) has
been extended for a further year.
We continue to work with leading
local educational facilities, including
Manchester Metropolitan University,
establishing, maintaining and
developing our relationships. We also
reach out to our communities with our
"Make a Difference" day volunteering
programme, as well as continuing to
support a range of brand charities.
TRADE AND
INDUSTRY BODIES
Constructive engagement with trade
and industry bodies is a primary channel
via which the Company can support
the sustainable, ethical and responsible
growth of the retail industry.
We engage directly with and are part
of a number of bodies including:
Action Collaboration and
Transformation – Living Wage
Ethical Trading Initiative
2018 Transition ACCORD
Engagement with these bodies ensures
that we can contribute to maintaining
and improving industry standards and
best practice.
Oversight of our engagement with
trade and industries Bodies sits with the
ESG Committee which receives regular
reports on the activities of each group.
Insight gained from these reports has
contributed to the new ESG initiatives
of the Company.
For more information on our new ESG
initiatives see p32 to 39.
THE IMPACT OF
COVID-19 ON
STAKEHOLDER
ENGAGEMENT
The Covid-19 outbreak has had a
profound impact on how N Brown
operates and engages with its
stakeholders. Colleague safety has
been our number one priority, along
with supporting our customers and
supply chain partners.
Further information on the actions taken is
detailed on p35.
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N Brown Group plc Annual Report and Accounts 2020Strategic report Governance report Financial statementsnbrown.co.uk N Brown Group plc Annual Report and Accounts 2020
SETTING A HIGH STANDARD
OF GOVERNANCE
CHAIR’S INTRODUCTION
LEADERSHIP AND PURPOSE
GROUP BOARD DIRECTORS
EXECUTIVE BOARD DIRECTORS
BOARD ENGAGEMENT WITH THE WORKFORCE
DIVISION OF RESPONSIBILITY
GOVERNANCE STRUCTURE
COMPOSITION, SUCCESSION AND EVALUATION
BOARD COMPOSITION
NOMINATION AND GOVERNANCE COMMITTEE REPORT
AUDIT, RISK AND INTERNAL CONTROL
AUDIT AND RISK COMMITTEE REPORT
FINANCIAL SERVICES BOARD COMMITTEE REPORT
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
(“ESG”) COMMITTEE REPORT
REMUNERATION
REMUNERATION COMMITTEE REPORT
OTHER DISCLOSURES
49
50
52
56
58
60
63
64
71
72
73
91
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N Brown Group plc Annual Report and Accounts 2020
INTRODUCTION FROM
THE CHAIR
The Board has continued
to maintain the highest
standards of corporate
governance as it led
the Company through
the challenges of the
last 12 months. By
promoting integrity
and openness, valuing
diversity and ensuring
effective engagement
with stakeholders, we
will continue to develop
and improve on our
effectiveness.
Matt Davies
Independent Non-Executive Chair
This marks the first year in which we report
under the 2018 UK Corporate Governance
Code (the “Code”), and the Board has
welcomed the positive changes and
challenges it has brought about.
As required by the Code, this report
describes our activities and key
achievements during the year, giving
shareholders and stakeholders the
necessary information to evaluate how
the Code’s Principles, as summarised
to the right, have been applied.
Our Section 172 Statement on p46
outlines how the Board has engaged with
stakeholders and taken their interests into
account when making decisions on behalf
of the Company.
A key focus in 2019 was strengthening
the profile of the Board to further align
our skillset with the corporate strategy.
Essential appointments were made to
both the Group and Executive Boards,
as detailed in the Nomination and
Governance Committee Report on p63.
In line with strategy, a Financial Services
Board Committee was established
to support the Company’s Financial
Services business.
I would like to take this opportunity to
thank my fellow Directors for their support
during the year, and to welcome our
newest Board members. I will be available
to answer any questions you may have on
this report or any of the Board’s activities
at the AGM on 10 September 2020.
Matt Davies
Independent Non-Executive Chair
THE CODE
LEADERSHIP AND PURPOSE
The role of our Board is to promote
the long-term sustainable success of
the Company. This includes leading by
example, acting with integrity at all times
and ensuring effective engagement with
stakeholders. More information can be
found on p50 to 57.
DIVISION OF RESPONSIBILITY
Our Board has the correct balance of
Executive and Non-Executive Directors
in order to lead the Company effectively,
with the responsibilities between
the leadership of the Board and the
executive leadership of the Company
clearly defined. More information can
be found on p58 to 59.
COMPOSITION, SUCCESSION
AND EVALUATION
Our Board maintains an appropriate
combination of skills, experience
and knowledge to ensure effective
governance over the Company.
This includes an effective evaluation
and succession plan. More information
can be found on p60 to 63.
AUDIT, RISK AND CONTROL
Our Board defines the Company’s
strategy, taking account of the need to
avoid unnecessary or unacceptable risks.
On behalf of the Board, the Audit and
Risk Committee has established formal
and transparent processes to oversee
the independence and effectiveness
of internal and external audit functions.
More information can be found on
p64 to 72.
REMUNERATION
Our remuneration policy aims to
incentivise strong performance by
supporting strategy and long-term
sustainable success whilst avoiding
excess. We are also mindful of wider
colleague remuneration across the
business. More information can be
found on p73 to 95.
nbrown.co.uk
49
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GROUP BOARD DIRECTORS
Relevant skills, qualifications
and experience
Matt was appointed as Chair on 1 May 2018
after joining the Board in February 2018 as
Independent Non-Executive Director and
Chair Elect. He was previously the CEO
of Tesco UK and ROI. Prior to Tesco, Matt
was CEO of Halfords from 2012 to 2015
and Finance Director (2001-2004) and CEO
(2004-2012) of Pets at Home.
Key strengths
• Retail
• Strategy
• Management
External appointments
Matt is Chair of the boards of Hobbycraft
Trading Limited, Travel Counsellors Group
Limited and Mission Mars Limited.
Relevant skills, qualifications
and experience
Lord Alliance was appointed a Director and
Chair of the Company in 1968. He stood
down as Chair on 1 September 2012. Co-
founder and former Chairman of Coats
Viyella PLC, Lord Alliance holds numerous
honorary doctorates.
Key strengths
• Retail
• Strategy
• Management
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.
Relevant skills, qualifications
and experience
Lesley has nearly 40 years of experience
in financial services, having spent 30
years at Citigroup where she had global
responsibility for the corporate credit
portfolio and six years as Chief Credit
Officer at RBS from 2008 to 2014.
Key strengths
• Finance
• Governance
• Risk Management
External appointments
Lesley is a Non-Executive Director and
Chair of the Board Risk Committee of
ReAssure Group plc. She serves as a
Non-Executive Director and Board Risk
Committee Chair of Close Brothers Group
plc and is also a Non-Executive Director of
Moody’s Investor Services Limited.
MATT DAVIES
INDEPENDENT NON-
EXECUTIVE CHAIR
Appointed to the Board:
February 2018
Meetings attended 10/10
LORD ALLIANCE OF
MANCHESTER CBE
NON-EXECUTIVE
DIRECTOR
Appointed to the Board:
1968
Meetings attended 10/10
LESLEY JONES
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to the Board:
October 2014
Meetings attended 10/10
50
STEVE JOHNSON
CHIEF EXECUTIVE
OFFICER
Appointed to the Board:
September 2018
Meetings attended 10/10
Relevant skills, qualifications
and experience
Steve was appointed CEO of N Brown in
February 2019, having been appointed
Interim CEO in September 2018. Steve joined
the Group as Financial Services Director in
February 2016 and was appointed CEO of
the Financial Services Operating Board in
November 2017. Steve joined N Brown from
Shop Direct Group Limited where he was
Financial Services Marketing and Product
Director for four years and prior to that held
senior roles at Sainsbury’s and Halifax.
Key strengths
• Retail
• Financial Services
• Strategy
• Change Management
External appointments
None
Relevant skills, qualifications
and experience
Appointed in April 2013, Ron is Senior
Independent Director and Chair of the Audit
and Risk Committee. Previously, he was the
Deputy Chair of PricewaterhouseCoopers
in the Middle East and Northern Regional
Chairman of the UK firm.
RON MCMILLAN
SENIOR INDEPENDENT
NON-EXECUTIVE
DIRECTOR
Appointed to the Board:
April 2013
Meetings attended 10/10
GILL BARR
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to the Board:
January 2018
Meetings attended 10/10
Key strengths
• Finance
• Financial Reporting
• Governance
• Risk Management
External appointments
Ron is the Senior Independent Director
and Chair of the Audit Committee of B&M
European Value Retail SA and SCS plc. He is
also a Non-Executive Director and Chair of
the Audit Committee of Homeserve plc.
Relevant skills, qualifications
and experience
Appointed in January 2018, Gill was
previously a Non-Executive Director
of Morgan Sindall Plc. Formerly she
was Group Marketing Director of The
Co-operative Group, Marketing Director
of John Lewis and spent seven years
at Kingfisher plc in a variety of senior
strategy, marketing and business
development roles.
Key strengths
• Marketing
• Business Development
• Remuneration
External appointments
Gill is a Non-Executive Director of
McCarthy & Stone Plc. She is a Non-
Executive Director of PayPoint plc and
Wincanton plc, and is also the Chair of the
Customer Challenge Group for Severn
Trent Water plc.
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Relevant skills, qualifications
and experience
Craig was appointed CFO in May 2015.
Craig was Group CFO for General
Healthcare Group Ltd from 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.
Craig announced his departure from
N Brown in January 2020 and will leave the
business later this year. He will be replaced
as CFO by Rachel Izzard.
Key strengths
• Financial Reporting and Strategy
• Corporate Finance
• Business Planning and Restructuring
• Tax and Treasury
• Governance and Compliance
• Investor Relations
External appointments
None.
Relevant skills, qualifications
and experience
Michael is the co-founder and Chief Scientist
of Dynamic Action which is a leader in big
data analytics and AI for retail. He was
previously the co-founder and CEO of
figleaves.com and started his career at
McKinsey Consulting in the early days of
the internet.
Key strengths
• Digital Retail
• Data Analytics
• Artificial Intelligence
External appointments
Michael is a Non-Executive Director
of Sainsburys Bank. He also sits on the
commercial development board at the
Turing Institute.
RICHARD MOROSS
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to the Board:
October 2016
Meetings attended 10/10
VICKY MITCHELL
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to the Board:
January 2020
Meetings attended 1/1
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.
Key strengths
• Digital Retail
• Technology
• Change Management
• Entrepreneurship
External appointments
Richard is an Executive Director of Moo Print
Ltd and Modern Organisation Limited.
Relevant skills, qualifications
and experience
Appointed in January 2020, Vicky brings over
20 years of consumer finance experience to
the Board. Formerly Chief Operating Officer
of Capital One (Europe) plc, she was one of
the original executives of Capital One in the
UK, previously holding the positions of Chief
Risk Officer and Chief Legal Counsel.
Key strengths
• Financial Services
• Governance
• Risk Management
External appointments
Vicky is currently a Non-Executive Director
and Chair of the Risk Committee of Lookers
plc. She is also a Non-Executive Director of
West Bromwich Building Society where she
sits on both the Risk and Audit Committees,
as well as representing the Non-Executive
Directors on the IT and Transformation
Change Committee.
CRAIG LOVELACE
CHIEF FINANCIAL
OFFICER
Appointed to the Board:
May 2015
Meetings attended 10/10
MICHAEL ROSS
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to the Board:
January 2018
Meetings attended 10/10
Relevant skills, qualifications
and experience
Theresa 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. Theresa acts
as Secretary to all Board Committees and
the Executive Board.
Key strengths
• Retail and Financial Services Compliance
• Retail and Financial Legal Knowledge
• Company Secretarial Practice
External appointments
Theresa is a Governor of Crossley
Heath Grammar School.
BOARD COMMITTEE MEMBERSHIP
Committee key
Chair
A Audit
E ESG
R Remuneration
N Nomination
and Governance
F Financial Services*
Member
Matt Davies
Steve Johnson
Craig Lovelace
Richard Moross
Gill Barr
Michael Ross
Ron McMillan
Lesley Jones
Vicky Mitchell
Theresa Casey
(Secretary)
THERESA CASEY
GENERAL COUNSEL
AND COMPANY
SECRETARY
Appointed to the Board:
March 2015
Meetings attended 10/10
A
E
R N F
* Lesley Jones acted as Chair of the Financial Services Board Committee
during FY20; Vicky Mitchell will step into the role for FY21.
51
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EXECUTIVE BOARD DIRECTORS
CRAIG LOVELACE
CHIEF FINANCIAL
OFFICER
Appointed to the Board:
May 2015
Meetings attended 10/10
Relevant skills, qualifications
and experience
Craig was appointed CFO in May 2015.
Craig was Group CFO for General
Healthcare Group Ltd from 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.
Craig announced his departure from N
Brown in January 2020 and will leave the
business later this summer. He will be
replaced as CFO by Rachel Izzard.
Key strengths
• Financial Reporting and Strategy
• Corporate Finance
• Business Planning and Restructuring
• Tax and Treasury
• Governance and Compliance
• Investor Relations
External appointments
None.
Relevant skills, qualifications
and experience
Dan was appointed CEO of Financial
Services in January 2020 following 11
years at Ikano Bank where he held several
leadership roles including UK Country
Manager and, latterly, Group Chief
Commercial Officer. Dan has extensive
financial services experience across
multiple sectors having worked at Zurich
Insurance, Fairpoint plc and Capital One.
Key strengths
• Financial Services
• Leadership
• Customer Proposition Development
External appointments
None.
DAN JOY
CEO OF FINANCIAL
SERVICES
Appointed to the Board:
January 2020
Meetings attended 1/1
Relevant skills, qualifications
and experience
Steve was appointed CEO of N Brown in
February 2019, having been appointed
Interim CEO in September 2018.
Steve joined the Group as Financial
Services Director in February 2016 and was
appointed CEO of the Financial Services
Operating Board in November 2017.
Steve joined N Brown from Shop Direct
Group Limited where he was Financial
Services Marketing and Product Director
for four years and prior to that held senior
roles at Sainsbury’s and Halifax.
Key strengths
• Retail
• Financial Services
• Strategy
• Change Management
External appointments
None.
Relevant skills, qualifications
and experience
Kenyatte was appointed Chief Brand
Officer in June 2019, with responsibility
for Customer Insight, Marketing Strategy,
Proposition Design, Creative and
Customer Communication. Before joining
N Brown, Kenyatte spent time at both
Shop Direct and Missguided as Group
Marketing and Creative Director and
Chief Customer Officer respectively.
Before moving to the UK, he spent 16
years at Procter & Gamble in various
general management roles across the
Americas and EMEA.
Key strengths
• Customer Experience
• Digital Marketing and CRM
• Marketing and Media Strategy
• Customer Insight and Analytics
• Creative Production
External appointments
None.
STEVE JOHNSON
CHIEF EXECUTIVE
OFFICER
Appointed to the Board:
September 2018
Meetings attended 10/10
KENYATTE NELSON
CHIEF BRAND
OFFICER
Appointed to the Board:
June 2019
Meetings attended 6/6
52
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Relevant skills, qualifications
and experience
Alyson joined N Brown in April 2018 with
over 20 years’ experience in recruitment,
internal communications, talent
development and building employee
engaged cultures. Alyson has worked
on the boards of dynamic, fast paced
retail businesses including Missguided,
Sofology and Selfridges.
Relevant skills, qualifications
and experience
Adam joined N Brown in April 2018 as Chief
Information Officer following ten years in a
position leading the technology capability
at AO World PLC. Prior to this, Adam held
senior technology roles building successful
teams within Skipton Building Society
and EDS.
ALYSON FADIL
CHIEF PEOPLE
OFFICER
Appointed to the Board:
April 2018
Meetings attended 10/10
Key strengths
• Retail
• Culture
• Organisational Design
• Employee Engagement
External appointments
None.
ADAM WARNE
CHIEF INFORMATION
OFFICER
Appointed to the Board:
April 2018
Meetings attended 10/10
Key strengths
• Retail
• Technology Modernisation
• Data Strategy
• Agile Transformation
External appointments
None.
SARAH WELSH
CEO OF RETAIL
Appointed to the Board:
March 2020
Meetings attended 0/0
FY21 APPOINTMENTS
RACHEL IZZARD
CFO DESIGNATE
Appointed to the Board:
April 2020
Meetings attended 0/0
THERESA CASEY
GENERAL COUNSEL
AND COMPANY
SECRETARY
Appointed to the Board:
March 2015
Meetings attended 10/10
Relevant skills, qualifications
and experience
Rachel was appointed to the Executive
Board in April 2020 and will become
Group CFO upon Craig Lovelace’s formal
departure. Rachel joins from Aer Lingus
where she has been Chief Financial Officer
since 2015. Rachel started her career at
Mobil Oil and British Airways, moving on to
a range of senior financial roles. With the
forming of International Airlines Group
(“IAG”) she became CFO of IAG Cargo,
joining together the cargo businesses of
BA and Iberia. In 2015 Rachel moved to
become CFO of Aer Lingus, successfully
integrating Aer Lingus into IAG.
Key strengths
• Finance
• Technology
• International Business
• Airline Industry
External appointments
None.
Relevant skills, qualifications
and experience
Theresa 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. Theresa acts as Secretary to all Board
Committees and the Executive Board.
Key strengths
• Retail and Financial Services Compliance
• Retail and Financial Legal Knowledge
• Company Secretarial Practice
External appointments
Governor of Crossley
Heath Grammar School.
Relevant skills, qualifications
and experience
Sarah was appointed CEO of Retail in
March 2020. With over 25 years of retail and
brand experience within the UK high street,
Sarah started her career on the shop floor.
With her great passion for product, she
quickly developed her skills in buying and
has held senior buying roles at both River
Island and Miss Selfridge before joining
Oasis. Having spent 18 years at Oasis she
has been fundamental in shaping the
unique customer and product proposition,
most recently as Managing Director.
Key strengths
• Retail
• Design and Product Development
• Sourcing
• Trading
• Customer Engagement
External appointments
None.
DIRECTORS WHO SERVED
DURING THE YEAR:
Ralph Tucker, Chief Product
and Trading Officer
(March 2015 – January 2020).
Mark Murphy, Interim CEO
of Financial Services
(June 2019 – January 2020).
53
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukFinancial statementsStrategic report Governance report LEADERSHIP AND PURPOSE CONTINUED
BOARD LEADERSHIP
The Board comprises ten Directors, of
whom eight are Non-Executives including
the Chair. Of the eight Non-Executive
Directors, Lord Alliance of Manchester
is not considered by the Board to be
independent. The Board met ten times
during the year, the attendance of which
is set out in the table below. A number
of Non-Executive Director only meetings
were held this year to allow the Non-
Executives to discuss matters without the
Executive Directors present.
BOARD COMPOSITION
10
Ten Directors on the Board
8
Eight Directors of the Board,
including the Chair, are
Non-Executive Directors
Full biographical details of all
Directors appear on p50 to 53.
The role of the Board is to promote
the long-term sustainable success
of the Company, generating value
for shareholders while meeting the
appropriate interests of relevant
stakeholders. The Board establishes the
Company’s purpose, values and strategy,
and satisfies itself that these and its culture
are aligned. Board Directors act with
integrity, lead by example and promote
the desired culture of the business.
The Board ensures that the necessary
resources are in place for the Company
to meet its objectives and measure
performance against them. The Board has
established a framework of prudent and
effective controls, which enable risk to be
assessed and managed.
Further details on risk management
and control can be found on p40 to 45.
The Board ensures effective engagement
with all key stakeholders of the business,
a core principle of which is providing
effective channels through which
colleagues can raise any matters of
concern. Information on N Brown’s
engagement with colleagues during the
year is detailed on p56 and our Section
172 Statement outlining wider stakeholder
engagement across the year is on p46.
Further details on the role and responsibilities
of the Board, along with key individual
responsibilities can be found on p58 to 59.
BOARD AND COMMITTEE ATTENDANCE
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. The Board has, where necessary,
delegated operational matters to
sub-Committees, and to its Executive
Directors and senior officers.
Further information on the responsibilities
of each Committee is set out on p59.
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. Committee meeting
attendance is detailed in the table below.
After each Committee meeting the Chair
of that Committee makes a formal report
to the Board of Directors detailing the
business carried out by the Committee
and setting out any recommendations.
Total meetings
Matt Davies
Lord Alliance of Manchester CBE
Ron McMillan
Lesley Jones
Richard Moross
Gill Barr
Michael Ross
Vicky Mitchell
Steve Johnson
Craig Lovelace
54
Board
Committee
Remuneration
Committee
Audit and Risk
Committee
Environmental,
Social and
Governance
Committee
Nomination and
Governance
Committee
Financial
Services Board
Committee
10
10/10
10/10
10/10
10/10
10/10
10/10
10/10
1/1
10/10
10/10
3
3/3
3/3
3/3
–
3/3
–
–
3/3
–
4
4/4
4/4
4/4
–
4/4
–
–
–
2
2/2
–
–
–
–
2/2
–
–
–
1
1/1
1/1
1/1
1/1
1/1
1/1
–
1/1
1/1
1
1/1
1/1
1/1
1/1
–
0/0
0/0
–
1/1
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk KEY ACTIVITIES
The following summarises some of the Board’s key activities over the past year:
Business performance and strategy
Regulatory compliance
Review of the Company’s performance
against its strategic priorities and KPIs
Establishment of a new Financial
Services Board Committee
A two-day interactive strategy meeting
in January 2020, including input from
third-party advisors to obtain better
visibility of the retail market landscape
Approval of a refreshed brand strategy
and customer proposition, including
the launch of N Brown’s new Home
Essentials brand
Financial performance
Reviewing the Company’s overall
financial and operational performance
Approval of the FY19 Annual Report
and Accounts and Preliminary Results
announcement as well as the FY20
Interim Results and announcement
Assessment of capital allocations
including dividends and capital
expenditure in respect of the
Company’s growth strategy
Approval of the Group’s FY20 budget
and future financing needs
Risk and opportunity
Assessment and approval of the
Company’s Tier One risk register, risk
appetite and governance framework
Discussions on emerging risks and
the Board’s responsibilities to the
Company and its stakeholders
Oversight of the implementation
of and compliance with the Senior
Managers & Certification Regime
Implementation of the FCA’s High
Cost Credit rules
Incorporation of new processes and
amending practices as mandated
under the 2018 UK Corporate
Governance Code
Stakeholder matters
Approval of the new Environmental,
Social and Governance agenda
and Sustainability Roadmap
Review of product and branding
strategy to enhance the quality of
design, sourcing, pricing and trading
Culture and governance
Approval of N Brown’s new Employer
Value Proposition including its Vision,
Mission, Purpose and Values
Review of the colleague engagement
survey results
Recruitment of key Board positions:
Appointed in FY20: Independent Non-
Executive Director, CEO of Financial
Services and Chief Brand Officer
Appointed in early FY21: CFO
Designate and CEO of Retail
The Board also took part in
a number of training sessions
on the regulatory agenda
and specialist matter topics.
See p62 for
further information.
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 Board
Directors and the Executive Board.
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.
55
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BOARD ENGAGEMENT WITH THE WORKFORCE
COLLEAGUE CONFERENCE
In May 2019, N Brown held its Colleague
Conference at our distribution centre in Shaw.
Over 2,000 colleagues took part in
sessions spanning two days. Executive
Board members and senior leaders took
to the stage to present the Company’s
business plan to colleagues.
It was a chance to recognise the
transformation of the business, the
progress to date and our evolution into
a digital retailer. Colleagues came away
with a clear sense of the role they would
play in bringing to life the Company’s
new strategy.
Plans for the 2020 conference will be
revised in light of the Covid-19 outbreak,
but will look to showcase the Company’s
priorities for the year ahead, including
a drive throughout the business for
more sustainable plastics usage in
line with the Year 1 priority of our new
Sustainability Roadmap.
READ MORE ABOUT
OUR SUSTAINABILITY
ROADMAP
p37
CULTURE CLUB
The role of the Company’s Culture Club is to give
colleagues a platform to voice their thoughts and
influence decisions in relation to the business and
how it operates.
Chaired by the Director of Colleague
Experience, colleagues representing
each department meet on a monthly
basis to discuss topical matters.
In 2019 this included the workplace
charter and how we communicate
Company and employee benefits.
The Forum also played a key role
in supporting the development of
the N Brown’s new Mission, Vision,
Purpose and Values which launched in
October 2019.
MISSION, VISION,
PURPOSE AND
VALUES
p2
MESSAGE FROM
RICHARD MOROSS
This marks my first
year reporting as the
Designated Director for
Colleague Engagement
and I am proud of
what the Company,
with the support of our
colleagues, has achieved
in the last 12 months.
I have spent my time looking at the data
from our engagement surveys, liaising
with the Culture Club and getting to
know the People agenda, roadmap and
milestones for the year ahead.
With the launch of our new Values and
Behaviours, we have unlocked a culture
where opportunities are seized upon and
ideas spring into life. The key to N Brown’s
culture is trust, curiosity and togetherness.
Communication and engagement
continue to be extremely high on our
agenda. Without our people and their
relentless enthusiasm and passion we
couldn’t do what we do and we hope to
continue this good work in FY21.
Colleague safety following the Covid-19
outbreak was the Board’s key priority.
Further details on the measures
implemented to protect and support
colleagues are set out on p35.
Richard Moross
Designated Director for
Colleague Engagement
56
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk ASK ME ANYTHING –
WITH STEVE JOHNSON
Over the course of the
year, Steve Johnson has
held regular, open sessions
with colleagues across the
business.
The agenda is driven solely by the
attendees which gives colleagues who
wouldn’t normally have the opportunity, as
part of their day-to-day roles in the business,
to speak directly with the CEO and ask for
his take on the matters that are important
to them.
Attendees are encouraged to share their
experience with colleagues across the
business. Several of the other Executive
Directors have also initiated their own open
and informal sessions, increasing their
engagement with colleagues from other
divisions of the Company.
t
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F
i
COLLEAGUE SATISFACTION SURVEYS
N Brown offers multiple
channels through which
colleagues can share their
thoughts, feedback and
ideas with the Board and
senior management.
The principal tool for this is the bi-annual
VIBE survey. The questionnaire, sent
to all colleagues across the business,
asks them about a wide range of
topics including key factors that affect
their engagement with N Brown and
understanding of its strategy.
We ask specifically whether colleagues
feel they receive recognition for their
achievements and how motivated,
committed and inspired they feel
about the Company’s strategy.
Other questions allow colleagues
an opportunity to give feedback on
the quality of communication and
support from their managers and
senior leaders. We also ask for their
opinions on N Brown’s pay and benefits,
training opportunities, Company
culture, working environment and
ESG practices.
Feedback from all VIBE surveys is
assessed in detail, reported to the
Board and incorporated into strategies
to improve N Brown’s standing as
an employer.
57
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report
N Brown Group plc Annual Report and Accounts 2020
DIVISION OF RESPONSIBILITY
GOVERNANCE STRUCTURE
MITTEE
D
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E X E C UTIVE BOARD
F I N A N CIAL SERVICES
B O A R D COMMITTEE (FSB)
GROUP BOARD
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MITTEE
M
EXECUTIVE BO A R D
EXECUTIVE BOARD
The Executive Board is
accountable for the day-to-day
operations and running of the
Company, monitoring progress
against and delivering on its
strategy while ensuring that
the policies and procedures, as
decided by the Group Board,
are implemented and enforced
across the business.
THE BOARD
CHAIR
CHIEF EXECUTIVE OFFICER
Responsible for the overall leadership and
governance of the Board and for overseeing
its performance.
Has delegated authority from the Board and
is responsible for the conduct of the whole
of the business of the Company.
Responsible for promoting a culture of openness
and debate by facilitating the effective
contribution of all Board members.
Responsible for ensuring the Company’s strategy
is formulated clearly and is well understood both
internally and externally.
Responsible for fostering good relationships
between Executive and Non-Executive Directors.
Maintains a productive relationship with the CEO,
providing a source of counsel and challenge on
how the business is operated.
Delivers the Company’s strategy in accordance
with its objectives and regulatory requirements.
Develops and has oversight of the Company’s
corporate culture in the day-to-day management
of the business.
Communicates the strategic objectives of
the Company and its core values.
Leads the Executive Board, assigns
responsibilities to senior management and
oversees the establishment of effective risk
management and control systems.
ROLES AND
RESPONSIBILITIES
GROUP BOARD
The Group Board is collectively
responsible for the overall leadership
of the Company and for setting its
values and standards. It approves the
Company’s strategic aims and objectives,
is responsible for all major policy decisions
and oversees their delivery while ensuring
maintenance of a sound system of
internal control and risk management.
The Board is ultimately responsible for
determining the operational and strategic
risks it is willing to take in achieving the
Company’s objectives. The Board’s duty
is to promote the success of the Company
for the benefit of its members as a whole;
it reviews performance in the light of the
Company’s business plans and budgets
and ensures that any necessary corrective
action is taken. The formal list of matters
reserved for the Board can be found at
www.nbrown.co.uk.
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. The key responsibilities of each
Committee are outlined in the graphic
overleaf. The formal written terms of
reference of each Committee can be
found at www.nbrown.co.uk.
KEY ROLES
Resilient and open working relationships
between Directors are vital to the effective
and successful running of the Board and
the wider Group, with the Non-Executive
Directors providing constructive challenge
and alternative views to the Board.
The roles of Chair, Senior Independent
Director, Chief Executive Officer, Chief
Financial Officer and Company Secretary
are particularly crucial to this endeavour; a
summary of their roles and responsibilities,
as agreed and set out in writing, can be
found overleaf:
58
nbrown.co.uk
N Brown Group plc Annual Report and Accounts 2020
BOARD COMMITTEES
FINANCIAL SERVICES
BOARD COMMITTEE (FSB)
REMUNERATION
COMMITTEE
AUDIT AND RISK
COMMITTEE
Oversight of the Financial Services
business of the Group;
Setting the values and
standards of the Financial
Services operations;
Oversight and development of
culture and approval of long-term
objectives and strategy in relation
to the Financial Services business;
Ensuring that the Financial
Services business delivers good
customer outcomes; and
Establishing the risk appetite of
the Financial Services business.
Find out more on p71.
FINANCIAL SERVICES
OPERATING COMMITTEE
The Financial Services
Operating Committee is
responsible for the day-to-
day oversight and running of
N Brown’s Financial Services
Business, and reports to
the Executive Board and
Financial Services Board
Committee.
Setting and reviewing the
remuneration policy and
determining the total individual
remuneration package for all
Executive Directors, the Chair of
the Board and other designated
senior executives taking into
account the policies, practices,
pay and employment conditions
of the Group;
Reviewing Group policies and
practices and working with
management and the Board to
ensure alignment of policies and
practices across the Group as well
as the culture of the business;
Approving the design of, and
determining targets for, any
performance-related pay
schemes operated by the
Group and approving the total
annual payments made under
such schemes;
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 Group; and
Ensuring that the Group engages
as appropriate with its principal
shareholders about remuneration.
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 and
the Financial Services
Board Committee with the
development and execution of
a risk management strategy, risk
policies and exposures and a risk
register; and
Keeping under review the
adequacy and effectiveness of the
Group’s internal financial controls
and internal control and risk
management systems.
ENVIRONMENTAL,
SOCIAL AND
GOVERNANCE
COMMITTEE
Reviewing and making
recommendations to the Board
concerning matters of policy on
all areas of Environmental Social
Governance (“ESG”);
Reviewing and reporting on
how the Company sources,
manufactures and transports
products; and
Overseeing the Company’s
engagement and support
of stakeholders across its
supply chain.
NOMINATION
AND GOVERNANCE
COMMITTEE
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 the role;
Succession planning, taking into
account the skills and expertise
needed on the Board for
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 appropriate
changes; and
Reviewing the leadership
needs of the Group to
ensure the continued ability
of the organisation to
compete effectively within
the marketplace.
Find out more on p73.
Find out more on p64.
Find out more on p72.
Find out more on p63.
SENIOR INDEPENDENT DIRECTOR
CHIEF FINANCIAL OFFICER
COMPANY SECRETARY
Leads the assessment of the performance
of the Chair by meeting with the Non-Executive
Directors at least once a year to appraise the
Chair’s performance and on such other occasions
as are deemed appropriate.
Acts as a sounding board for the Chair, and
acts as an intermediary for other Directors
when necessary.
Works with the Chair and other Directors and/or
shareholders to resolve significant issues should
they arise.
Chairs the Nomination and Governance
Committee when considering the succession to
the role of Chair.
Supports the CEO in providing strategic
direction in relation to the overall finance
strategy for the Company.
Controls all day-to-day activities pertaining
to finance and business operating systems.
Responsible for the preparation of the
Annual Report and Accounts in line with
Generally Accepted Accounting Principles
(“GAAP”), International Financial Reporting
Standards (“IFRS”), and all relevant legislative and
regulatory requirements.
Responsibility for assessing the ongoing
appropriateness of accounting and financial
reporting policies for the Company, and where
relevant escalating matters for the attention of the
Board and Audit and Risk Committee, including
matters relating to provisions and impairments.
Responsible for monitoring and regularly
assessing the adequacy and effectiveness
of Finance processes and controls.
Ensures that the Boards and Committees operate
in line with good corporate governance.
Advises the Board on all matters relating to
the Listing Rules and applicable legal and
regulatory requirements, while working closely
with senior management to anticipate, plan
and address strategic, legal, governance and
compliance matters concerning the Company.
Manages the internal and external legal and
compliance resources, with primary responsibility
for the selection, retention, management and
evaluation of outside legal counsel.
Maintains all necessary minutes and actions all
necessary returns and statutory filings on behalf of
the Company.
nbrown.co.uk
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THE BOARD
COMPOSITION, SUCCESSION AND EVALUATION
BOARD COMPOSITION
NON-EXECUTIVE DIRECTOR TENURE
Appointed 2013
2014 2015 2016
2017 2018 2019 2020
Lord Alliance of
Manchester CBE
Ron McMillan
Lesley Jones
Richard Moross
Gill Barr
Michael Ross
Matt Davies
Vicky Mitchell
1968
1 April 2013
1 October 2014
6 October 2016
16 January 2018
16 January 2018
19 February 2018
20 January 2020
TENURE
Years
7+
2
4-6 2
0-3 4
GENDER BALANCE AT FINANCIAL YEAR END
ALL COLLEAGUES
5
0
%
3
50 %
9 4 3
1 0 5 2
1 0 0 9
2
3
13 0 0
15 2 3
145 5
PLC BOARD
SENIOR
LEADERSHIP
TEAM
2020
2019
2018
1
8
2
7
3
1
7 7
7
2018
2019
2020
June ‘20
FEMALE
MALE
3
1
1
EXECUTIVE
BOARD
3
1
14
1
1
50 %
7
4
5
5
3
5
0
%
DIVERSITY
The Board recognises the importance
of diversity of gender, social and ethnic
backgrounds, cognitive and personal
strengths at all levels of the Company
as well as on the Board. N Brown is
committed to equal opportunities and
increasing diversity across our operations.
The Board continues to consider how
diversity can be enhanced through both
the Group and Executive Boards, within
the senior leadership team and across the
60
wider Group whilst still ensuring the most
appropriate candidates are appointed.
Strengthening our executive pipeline
remains a priority for us and, as our
business evolves, we will continue to open
up new opportunities for women and
ethnic minorities, working with head-
hunters and agencies that can provide true
diversification in their candidate bases.
For more information on our recent Board
appointments see p63.
As of June 2020, we have 33%
representation at Board level and 38% on
the Executive Board. This means we have
met the 33% target for 2020 set by the
Davies Report.
Our “Women Like Us” network continues
to provide role models and mentors for
talented women in N Brown. Sessions and
workshops help them develop the skills
and knowledge needed to achieve their full
potential. The initiative remains a priority in
our mission to develop female talent.
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk COMPOSITION
The Board understands the need for Non-Executive Directors to be and remain
independent of management in order to be able to exercise proper oversight and to
effectively challenge the Executive Directors. The Non-Executive Directors who served
during the financial year ended 29 February 2020 were:
BOARD COMPOSITION
Matt Davies (Chair)
Lord Alliance of Manchester CBE
Ron McMillan (Senior
Independent Director)
Lesley Jones
Richard Moross
Gill Barr
Michael Ross
Vicky Mitchell
Throughout the year, at least half of the
Board, excluding the Chair, comprised
independent Non-Executive Directors.
The Chair was considered independent at
the time of his appointment.
The composition of the Board and
Committees is regularly reviewed and
refreshed. A key change which took place
during the year was the appointment of
Vicky Mitchell as Non-Executive Director
and her appointment to the Audit and
Risk Committee and Financial Services
Board Committee. Where appropriate,
the Committees will invite non-members
to attend meetings.
BOARD SKILLS AND EXPERIENCE
Executive Directors
Non-Executive Directors
Independent Non-Executive
Directors
2
1
7
Retail and
digital retail
Strategy
and change
management
Corporate
finance
Financial
services
Governance
Risk
management
Technology,
data analytics
and AI
Remuneration Marketing
Matt Davies
Lord Alliance of
Manchester CBE
Ron McMillan
Lesley Jones
Richard Moross
Gill Barr
Michael Ross
Vicky Mitchell
Steve Johnson
Craig Lovelace
BOARD APPOINTMENTS
All appointments to the Board follow a
formal, rigorous and transparent process
to ensure we appoint the best possible
candidate. Due regard is given to the
needs of the Board in respect of skills,
experience, independence and diversity.
Further detail on the appointment of Vicky Mitchell
is provided in the Nomination and Governance
Committee report on p63.
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 Chair
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 current external appointments can
be found in the Directors’ biographies set out
on p50 to 53.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukFinancial statementsStrategic report Governance report COMPOSITION, SUCCESSION AND EVALUATION CONTINUED
BOARD COMPOSITION CONTINUED
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 with key colleagues 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 the
Executive Board and operational teams
and undertake site visits to ensure that
they have the most up-to-date knowledge
and understanding of the Company and
its activities. This also allows colleagues
from across the Company 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 Chair has regular contact
with each Director and is able to address
their training and development needs.
BOARD EVALUATION
During January and February 2020, the
Board took part in an internal Board and
Committee evaluation which assessed:
Board Leadership and
Company Purpose
Division of Responsibilities
Composition and Succession
Audit, Risk and Internal Control
Performance of the Board
and Committees
The Board is satisfied with the outcome
of the evaluation and believes the
performance of the Chair, Committee
Chairs and Directors, and their
commitment to their respective roles,
continues to be fully effective.
The Board and its Committees continue
to provide appropriate oversight of the
Company and challenge to the Executive
team. Overall, the Board remains effective,
positive and cohesive, and has the
requisite skills, experience, challenge
and judgement appropriate for the
requirements of the business.
The full results of the evaluation were
assessed with the Chair who, with the
support of the secretariat, will develop a
training strategy for FY21 to address areas
of development and improvement as
identified by the Directors.
The FY21 Board and Committee
evaluation will be conducted externally;
the results will be shared in next year’s
Annual Report.
BOARD TRAINING
AND DEVELOPMENT
In addition to the specialist training
sessions that take place during the year,
as outlined below, the Company Secretary
provides an ongoing programme of
briefings for Directors covering legal and
regulatory changes and developments
relevant to the Group’s activities and
Directors’ areas of responsibility.
During the year under review, the Board
took part in several training sessions on
the regulatory agenda and specialist
matter topics:
UK CORPORATE
GOVERNANCE CODE 2018
Directors’ Duties: Section 172 and
Stakeholder Considerations
Key changes of the 2018 Corporate
Governance Code:
Part One – Key issues raised in the
new Code
Part Two – Implementation of the
new Code
SENIOR MANAGERS AND
CERTIFICATION REGIME
SM&CR Readiness
Risk Governance
SM&CR Group sessions
Individual training sessions on NED
Senior Management Functions
DEEP DIVES
Technology Roadmap
Employer Value Proposition
Customer Lifetime Value Proposition
Brand Strategy: Market Segmentation
and Data Driven Insights
Further training sessions are planned
for FY21 which will cover a range of
relevant topics.
62
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk NOMINATION AND GOVERNANCE
COMMITTEE REPORT
MEMBER
Matt Davies (Chair)
Ron McMillan
Lesley Jones
Richard Moross
Gill Barr
Michael Ross
Vick Mitchell
February 2018 – Present
April 2013 – Present
October 2014 – Present
October 2016 – Present
January 2018 – Present
January 2018 – Present
January 2020 – Present
Meetings attended
1/1
1/1
1/1
1/1
1/1
1/1
0/0
RESPONSIBILITIES
2020 PRIORITIES
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 the role;
Succession planning, taking into
account the skills and expertise
needed on the Board for
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 appropriate
changes; and
Reviewing the leadership
needs of the Group to
ensure the continued ability
of the organisation to
compete effectively within
the marketplace.
Reviewing the talent pipeline and
its effectiveness in developing
diverse candidates;
Overseeing succession planning
for the Executive and Non-
Executive Directors to ensure it
aligns to the Group’s long-term
strategy; and
Reviewing the composition of
the Board and its committees,
engaging with external
shareholders where appropriate.
The Committee’s Terms of
Reference can be found at
www.nbrown.co.uk
DEAR SHAREHOLDER
I am pleased to present the Nomination and Governance
Committee report for FY20.
The main focus of the Committee over the course of the
year was an assessment of the composition and skill matrix
of the Board, Executive Board and senior management.
Recognising the challenges of the business strategy and the
establishment of the Financial Services Board Committee,
it was determined that new appointments to the Board and
Executive Board were required.
The Committee oversaw the search for and appointment
of the following Non-Executive Director and Executive
Board Directors:
Vicky Mitchell, Non-Executive Director (appointed
January 2020)
Kenyatte Nelson, Chief Brand Officer (appointed June 2019)
Dan Joy, CEO of Financial Services (appointed January 2020)
In addition to the above appointments that were made during
FY20, the Committee also oversaw the recruitment of Rachel
Izzard, who will become Group CFO upon Craig Lovelace’s
formal departure. Sarah Welsh also joined the Company as
CEO of Retail in March 2020.
Warren Partners, Sam Allen Associates and HW Global Talent
Partner were appointed by the Committee to support the
searches. They ran a comprehensive external candidate search
and selection processes that produced diverse shortlists of
excellent candidates. Following a thorough and competitive
process, the Committee recommended the appointments
of all three Directors which were supported unanimously by
the Board.
Looking ahead to FY21, the Committee will continue with its
core duties including making recommendations to the Board
in respect of Director appointments as it deems necessary.
The Committee will also review and maintain an effective
succession plan for the Board, Executive Board and senior
management. Appointments and succession plans will be based
on merit and assessed on objective criteria, taking into account
the skills and experience required to perform the role, with due
regard to diversity of gender, social and ethnic backgrounds and
cognitive and personal strengths. Where appropriate, external
search consultants will be engaged.
During the year the Committee also undertook an internal
evaluation of the Board and its committees. It will monitor the
action plan to reflect the outcomes of that review. In FY21 the
Committee will oversee an external evaluation of the Board
and its committees and I look forward to reporting on the
findings in the next Annual Report.
I am available to speak with shareholders at any time and shall
be available at the Annual General Meeting on 10 September
2020 to answer any questions you may have on this report.
Matt Davies
Chair of the Nomination and Governance Committee
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukFinancial statementsStrategic report Governance report N Brown Group plc Annual Report and Accounts 2020
AUDIT, RISK AND INTERNAL CONTROL
AUDIT AND RISK COMMITTEE REPORT
MEMBER
Ron McMillan (Chair)
Lesley Jones
Michael Ross
Vicky Mitchell
April 2013 – Present
October 2014 – Present
July 2018 – Present
January 2020 – Present
Meetings attended
4/4
4/4
4/4
0/0
RESPONSIBILITIES
2021 PRIORITIES
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 and
the Financial Services
Board Committee with the
development and execution of
a risk management strategy, risk
policies and exposures and a risk
register; and
Keeping under review the
adequacy and effectiveness of
the Group’s internal financial
controls and internal control and
risk management systems.
Monitoring the impact Covid-19
is having on the Group’s
business, internal control
procedures and governance;
Ensuring that the Group’s
risk management procedures
are responsive to the impact
Covid-19 is having on resources
and ways of working;
Ensuring that the Group’s
Internal Audit and Risk functions
are fully resourced;
In conjunction with the Financial
Services Board Committee,
ensuring that the Group
complies with the requirements
of the Senior Managers
Certification Regime – the FCA’s
enhanced accounting regime
for firms.
The Committee’s Terms of
Reference can be found at
www.nbrown.co.uk
DEAR SHAREHOLDER
Dear shareholder
I am pleased to present the Audit and Risk Committee’s
report for the year. During the year, the Audit and Risk
Committee has continued to carry out a key role within the
Group’s governance framework, supporting the Board and
Financial Services Board Committee in risk management,
internal control and financial reporting. The Committee
also 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 auditors an
independent view of the key disclosure issues and risks.
Whilst risk management is a Board responsibility, the
Committee works closely with the Board, the Financial Services
Board Committee and Group management to ensure that all
significant risks are considered on an ongoing basis and that all
communications with shareholders are properly considered.
In relation to risks and controls, the Committee ensures that these
have been identified and that appropriate responsibilities and
accountabilities have been set. The Committee also reviews reports
from the Group’s compliance function and assesses the means
by which the Group seeks to comply with regulatory obligations.
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 p94 of this Annual Report.
The Committee considered whether the 2020 Annual Report is
fair, balanced and understandable and whether it provides the
necessary information to shareholders to assess the Group’s
performance, business model and strategy. The Committee
considered management’s assessment of items included in
the financial statements and the prominence given to them.
The Committee, and subsequently the Board, were satisfied
that, taken as a whole, the 2020 Annual Report and Accounts
are fair, balanced and understandable.
Further information on the Committee’s responsibilities and the
manner in which they have been discharged is set out in this report.
I am available to speak with shareholders at any time and shall
be available at the Annual General Meeting on 10 September
2020 to answer any questions you may have on this report.
I would like to thank my colleagues on the Committee for their
help and support during the year.
Ron McMillan
Chair of the Audit and Risk Committee
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N Brown Group plc Annual Report and Accounts 2020
COMMITTEE COMPOSITION
The Committee comprises four members, each of whom is an
independent Non-Executive Director. Two members constitutes
a quorum. The Committee requires the inclusion of at least one
financially qualified member with recent and relevant financial
experience. The Committee Chair and new Committee member,
Vicky Mitchell, fulfil 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 p50 to 53, the Committee members have significant experience
of working in or with companies in the retail, financial services and
consumer goods sectors. This ensures compliance with the UK
Corporate Governance Code.
The members of the Committee during the year were:
Ron McMillan (Chair)
Lesley Jones
Michael Ross
Vicky Mitchell (appointed January 2020,
Chair of the Financial Services Board from FY21)
Details of Committee meetings and attendances are set out
on p64 and 70. The timing of Committee meetings is set to
accommodate the dates of releases of financial information and
the approval of the scope of and reviews of outputs from work
programmes executed by the internal and external auditors.
In addition to scheduled meetings, the Chair of the Committee
met with the CFO, the Head of Internal Audit and the external
auditors during the year.
Although not members of the Committee, the Chair of the Board,
CEO, CFO and representatives from the internal and external
auditors attend all meetings. The Secretary of the Committee is
the Group’s General Council and so also attends all meetings.
FINANCIAL SERVICES BOARD
As more fully explained in p71, the newly established Financial
Services Board Committee (“FSB”) is responsible to the N
Brown Board for oversight of the Financial Services business of
J.D. Williams & Company Limited, a wholly owned subsidiary
of N Brown Group plc. While ultimate oversight of Group
risk remains with the Committee, the FSB is responsible for
the development and oversight of the culture, the long-term
objectives and the strategy of the Group’s Financial Services
business. It establishes risk appetite and approves plans to
achieve the strategic objectives.
In relation to internal controls and risk management, the FSB
approves annual plans and performance targets and maintains
oversight of regulatory compliance. The FSB makes whatever
recommendations it deems appropriate on any area within
its remit and escalates to the Group Board such matters as it
deems appropriate.
COMMITTEE ACTIVITIES IN FY20
The table on p70 details the core activities of the Committee
in FY20. Key matters considered during the year include
the following:
IMPACT OF COVID-19
The Committee reviewed the disclosures in note 31 on p150
on post balance sheet events to the financial statements
which set out an estimated range of impacts on the Group’s
balance sheet resulting from the Covid-19 lockdown and the
associated assumptions used to support those estimates.
It also reviewed the reasonableness of the assumptions made
in relation to trade receivables bad debt impairment, software
intangibles impairment and inventories impairment.
The Committee has noted increased timelines for completion
of the Internal Audit Plan and the Risk Management
Framework Enhancements. In particular resource constraints
and redeployment of second and third line assurance
resources was deemed necessary to assist in the management
and maintenance of key governance processes and monitoring
activities in the face of Covid-19 crisis management response.
The Committee is satisfied that there continues to be
reasonable assurance over key risk areas despite the
challenges to timelines and resources.
IMPAIRMENT
The Group has a number of intangible assets which are
assessed for impairment. The Committee has reviewed
management’s judgement that the Group’s assets do not
need to be impaired. In reviewing this judgement, the
Committee considered the appropriateness of the key inputs
in the value in use calculations prepared by management
including the cash flows based on the Group’s three-year plan
as at 29 February 2020, the assumed long-term growth rate of
subsequent cash flows and the risk adjusted discount rate.
REGULATION AND COMPLIANCE
The Group operates in a regulated marketplace and is
challenged by regulatory requirements. This creates risk
for the business as non-compliance can lead to customer
detriment, reputational damage, financial penalties and
potential loss of licence to operate.
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AUDIT, RISK AND INTERNAL CONTROL CONTINUED
AUDIT AND RISK COMMITTEE REPORT CONTINUED
INVENTORY PROVISIONING
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, after reviewing
the provisioning methodology and assumptions that takes into
account historical experience, likely future selling values and
the availability of disposal channels, believe the provision to
be appropriate.
ALLIANZ CLAIM AND
OUR COUNTERCLAIM
The Committee noted that the claim lodged against the
Group by Allianz Insurance plc and the counterclaim that
the Group has also made. It concurred with management’s
judgement that because of the complexity of the claims and
the early stage of proceedings, it is not possible to reliably
estimate the amount of any potential settlement and therefore
no provision for the claim has been made.
RISK AND INTERNAL CONTROLS
Oversight of the Group’s risk management process is provided
by the Director of Risk, the Head of Internal Audit, the Head
of Compliance, the Financial Services Board Committee, the
Audit and Risk Committee and, ultimately, the Group Board.
The Director of Risk, the Heads of Compliance and Internal
Audit are invited to attend all Audit and Risk Committee
meetings. The Board has overall responsibility for ensuring
that the Group maintains a sound system of internal control
and risk management. 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.
Leading up to the introduction of the Senior Managers
and Certification Regime (“SM&CR”), the FCA’s enhanced
accountability regime for firms, in December 2019, the
Group embarked on the process of further up-weighting
its risk management capability across the Group through
the implementation of an enhanced Risk Management
Framework. A number of activities are underway or have been
completed, including:
Rationalisation and consolidation of key risk policies.
Optimisation of corporate and risk governance arrangements.
Improving risk decision-making, risk reporting, and the way
material risks across the Group are identified, assessed
and managed.
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 have been substantial in recent years
and have required 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
considers the provisions recorded to be appropriate.
CAPITALISATION OF SOFTWARE
DEVELOPMENT COSTS
The Group’s software development and implementation
programme is ongoing, albeit at a slower pace and the
Committee has continued 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.
ALLOWANCE FOR EXPECTED
CREDIT LOSSES
The Group’s methodology to determine provisions for
expected credit losses in its credit ledgers is both complex
and judgemental. A significant part of 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 made to better reflect changing economic or
commercial circumstances.
The Committee reviewed the enhancements to the IFRS
9 model that were implemented during the year, in particular
the application of new probability of default parameters to
reflect more up-to-date historical experience, a refinement
of the significant increase in credit risk methodology as well
as the revised economic assumptions and weightings used to
incorporate forward-looking information into the expected
credit loss estimation.
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 tax advisors (Deloitte)
and legal counsel. During the year the Committee has been
kept appraised of the significant progress made in addressing
legacy tax matters 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, including the estimates and judgements in
relation to legacy items.
66
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk The Group has always maintained a Risk Management
Process reporting into the Audit and Risk Committee. SM&CR
has provided an opportunity for further up-weighting and
formalisation. Further information on the Group’s Enterprise
Risk Management Framework is detailed on p40.
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 policy.
The Committee reviews annually the overall risk strategy and
risk policy, including risk appetite, exposure, measures and
limits, and material amendments to the risk appetite and
related policies.
The Group is proactive in ensuring that corporate and
operational risks are identified and managed. A corporate risk
register is maintained which details:
The key risks to the Group and the impact they may have
Actions to mitigate
Inherent and residual risk assessments to highlight the
implications of occurrence
Ownership
Target dates for actions to mitigate
A description of the Tier One risks is set out on p42 to 45.
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.
REVIEWING THE HALF YEAR
RESULTS AND ANNUAL REPORT
The Committee considered in particular the following:
The accounting principles, 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 review by the external auditors;
Compliance with statutory tax obligations and the Group’s
tax policy;
Whether the information set out in the Annual Report was fair,
balanced and understandable; and
Whether the use of “alternative performance measures”
was appropriate.
INTERNAL AUDIT
The Head of Internal Audit, and for the latter part of FY20 the
Interim Head of Internal Audit, had a direct reporting line to the
Committee and attended 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 Internal Audit has carried out reviews covering:
The Committee continues to believe that appropriate controls
are in place throughout the Group and 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.
Cyber Security
Accounts Payable
Business Continuity Planning
IT Vulnerability
Customer Ordering
GOING CONCERN AND VIABILITY
The Committee reviewed the appropriateness of adopting the
going concern basis of accounting in preparing the full year
financial statements and assessed whether the business was
viable in accordance with the Code. The assessment included
a review of the principal risks facing the Group, their financial
impact, how they are managed, the availability of finance,
including the new CLBILS funding secured in May 2020, and
the appropriate period for assessment. The Group’s viability
statement is on p94.
Contractor Management and IRS35
HR Systems Upgrade Projects
IT Strategic Alignment
VAT Partial Exemption
IT Third-Party Management
Financial Crime
Financial Services Governance
Persistent Debt Readiness
Capital Project Return on Investment Controls
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AUDIT AND RISK COMMITTEE REPORT CONTINUED
Internal Audit also provided ongoing assurance and support in
the following areas:
Bank Security
Information Security
Data Governance
SM&CR Compliance
Stock Audit
Regular reporting in these areas as well as the output from
dedicated reviews were presented to the Executive Board and
Committee for review.
During the year, the Internal Audit Charter was updated in line
with the Institute of Internal Auditors Code of Practice and
the Committee reaffirmed its commitment for Group Internal
Audit function to follow a best practice approach to deliver
independent assurance over key Group risks.
There were no restrictions placed on the scope of work to be
carried out by the Internal Audit function or its ability to report
to the Committee.
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.
PERFORMANCE OF
THE AUDIT AND RISK COMMITTEE
The Audit and Risk Committee’s performance was assessed
as part of the Board’s evaluation carried out over January-
February 2020, as detailed on p62. The Board considers that
the processes undertaken by the Committee are appropriately
robust, effective and in compliance with the guidelines issued
by the FRC. 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 have been determined to
be material in the context of the financial statements.
EXTERNAL AUDITORS
KPMG LLP were appointed as external auditors on 14 July
2015. The partner who has been responsible for the audit since
KPMG LLP were appointed is Stuart Burdass, a partner in the
Manchester office. The total fees paid to KPMG for the year
ended 29 February 2020 were £0.8m, of which £0.03m was
in respect of non-audit services. Further details are set out
in note 5 to the financial statements on p126.
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 auditor). 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.
68
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 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 effect for the Group in the financial
year ending 27 February 2021. The auditors also operate under
the FCA’s Revised Ethical Standard 2019.
The Committee reviews the performance of KPMG LLP
annually based on their understanding of key areas of
judgement and the extent of challenge, the quality of
reporting and the efficiency and conduct of the audit.
Feedback is sought from management, the Group’s Finance
and Internal Audit functions and the General Counsel.
The N Brown 2019 audit was not chosen for review by the FRC.
However, the Committee reviewed KPMG’s transparency report
for the year ended 30 September 2019, which was published in
December 2019. The report summarises the results of the audit
quality reviews of KPMG conducted by the FRC and sets out the
steps KPMG is taking to ensure audit quality with reference to
the audit quality framework issued by the FRC. In addition, the
Committee Chair has regular dialogue with the external auditors.
The Committee reviewed the reports prepared by KPMG
LLP on key audit findings and the control environment,
as well as the recommendations made by KPMG LLP to
improve processes and controls together with management’s
responses to those recommendations.
The overall conclusion of the process was that KPMG LLP’s
work continues to be thorough and professional and it
is, therefore, the Committee’s recommendation that the
reappointment of KPMG LLP be put to shareholders at the
Annual General Meeting on 10 September 2020. Given that
this is only the fifth year of KPMG LLP’s tenure as auditors,
the Board has no present plans to consider an audit
tender process.
WHISTLEBLOWING AND ANTI-BRIBERY
AND ANTI-CORRUPTION POLICIES
The Group remains committed to conducting its business with
honesty and integrity and expects all colleagues to maintain
equally high standards, encouraging open communication
from all those who work within the business or across its
supply chain. In line with its whistleblowing policy, the Group
is partnered with an independent, external whistleblowing
reporting service which provides 24-hour international
telephone lines, web portal and email reporting facilities.
All concerns can be raised anonymously and are escalated to
the Company Secretary who investigates them with due care
and attention, reporting accordingly to the Committee.
The Group is committed to ensuring that we offer good
quality, transparently and fairly sourced products and services
to our customers and operate with integrity and in an honest
and ethical manner at all times. Comprehensive Anti-Bribery
and Anti-Corruption and Gifts and Hospitality policies are in
place and are applicable to all colleagues across the business,
along with a dedicated central Register of Gifts and Hospitality
which all colleagues are required to use. Compliance to the
policy is monitored by the Internal Audit function which
reports any findings of note to the Committee.
FAIR, BALANCED AND UNDERSTANDABLE
At the request of the Group Board and as required by the
UK Corporate Governance Code, the Committee assessed
whether the content of the FY20 Annual Report and Accounts,
preliminary results announcement and presentation,
taken as a whole, were fair, balanced and understandable.
Consideration was also given to as to whether key messages,
disclosures and information were included in a consistent
manner throughout the report.
The Committee considered the prominence given to certain
items included in the financial statements and the language
used to describe performance. The Committee advised the
Group Board that it was satisfied that, taken as a whole, the
2020 Annual Report was fair, balanced and understandable,
and that it provided shareholders and other stakeholders with
the necessary information to allow them to determine the
Company’s performance, business model, risks and strategy.
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AUDIT AND RISK COMMITTEE REPORT CONTINUED
ACTIVITIES OF THE AUDIT AND RISK COMMITTEE
Meetings of the Committee are scheduled to coincide with key dates in the financial calendar and reporting cycle.
Recurring agenda items of the meeting included matters relating to the review and approval of the Internal Audit
Plan, risk mapping and appetite, financial reporting and legacy tax matters. Additional matters covered at each of
the meetings during FY20 were as follows:
APRIL 2019*
OCTOBER 2019
Approval of the full year results for FY19, including reviews
of the Group’s viability statement
Review of the Group’s half-year external audit
and financial reporting paper
Assessment of the Group’s FY19 preliminary
results announcement
Liquidity and Going Concern assessment at FY19
Review of the Group’s half-year statement
Review of the HY Internal Audit and Risk
Management reports
Review of the full year external audit report
Liquidity and Going Concern assessment at HY FY20
Review of the full year Internal Audit report and approval
of FY20 Internal Audit plan
Corporate Criminal Offence to prevent tax
evasion (SI 739)
Performance reviews of:
Internal Auditor
External Auditor
Audit and Risk Committee
Ratification of non-audit external service provider fees
Review of the Group’s Risk Management Report,
Risk Appetite and Three Lines of Defence model
Review and approval of the Group’s Risk
Management Roadmap
Assessment of the Group’s IFRS9 – Accounts Receivable
Impairment model
Regulatory provisions – product insurance and PPI
customer redress
Review of the draft FY19 Annual Report
Review of Internal Audit work at half year end
JANUARY 2020
Review and approval of the external auditors’ plan
for assessment of the FY20 full year results, including
their terms of reference and fees
Review of progress against the Risk Management Plan
Review of the FY21 Internal Audit Plan
Review of the Company’s Q3 Trading Statement
* Two meetings were held in April 2019.
In addition, some audit reports were reviewed at the Audit Committee in
May 2020. The impact of Covid-19 on the completion of the Internal Audit
Plan meant that review of some reports was delayed. The remainder of the
Internal Audit reports for the FY20 audit plan are scheduled to be reviewed
at the October 2020 Audit Committee.
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FINANCIAL SERVICES BOARD
COMMITTEE REPORT
MEMBER
Lesley Jones (Resigned as
Chair – January 2020)
Vicky Mitchell (Chair)
Matt Davies
Ron McMillan
Michael Ross
Steve Johnson
Craig Lovelace
Meetings attended
November 2019 – Present
January 2020 – Present
November 2019– Present
November 2019 – Present
March 2020 – Present
November 2019 – Present
November 2019 – Present
1/1
0/0
1/1
1/1
0/0
1/1
1/1
RESPONSIBILITIES
FY21 PRIORITIES
Oversight of the Financial
Services business of the Group;
Setting the values and
standards of the Financial
Services operations;
Oversight and development of
culture and approval of long-
term objectives and strategy
in relation to the Financial
Services business;
Ensuring that the Financial
Services business delivers good
customer outcomes; and
Overseeing the strategic
contributions of the FS
business to the Group’s
commercial development;
Ensuring compliance with
and delivery against the
requirements of the evolving
regulatory agenda;
Supporting credit customers
following the Covid-19 outbreak
in respect of the FCA’s payment
deferral regulations;
Embedding SM&CR;
Establishing the risk appetite of
the Financial Services business.
Delivering against the Persistent
Debt regulation; and
The Committee’s Terms of
Reference can be found at
www.nbrown.co.uk
Development of a revitalised FS
customer proposition, including
delivery of a new FS IT platform.
DEAR SHAREHOLDER
It is my pleasure to report on the first few months of activity
of the Financial Services Board Committee.
Building on the valuable work undertaken by the Financial
Services executive team at the Financial Services Operating
Committee, a decision was taken in 2019 to establish a
Financial Services Board Committee. In addition to providing
support to and oversight of the Financial Services (“FS”)
business of the Group, the Committee is responsible
for the development and oversight of the culture, long-
term objectives and strategy of the Group’s FS business.
While ultimate oversight of Group risk remains with the
Audit and Risk Committee, the Committee will establish risk
appetite and approve risk management plans in relation to FS.
The Committee will also maintain oversight of internal control
and governance frameworks across FS.
In 2019 the Committee began a detailed review of the FS
operations including FS strategy, performance against
KPIs, operational design, resources and risk appetite and
governance framework. Compliance obligations were
also assessed, with a focus on the implementation of the
Unsolicited Credit Limit Increase (“UCLI”), Persistent Debt,
Vulnerable Customers, Senior Managers & Certification
Regime (“SM&CR”), PPI redress and FCA engagement.
The Committee’s focus for FY21 will be on overseeing the
strategic contributions of the FS business to the Group’s
commercial development. The Committee will also oversee
compliance with the regulatory agenda, ensuring the FS
business is focused on the needs of our customers and on
delivering good customer outcomes. Key projects will include:
Embedding SM&CR;
Delivering against the Persistent Debt regulation; and
Development of a revitalised FS customer proposition,
including a new FS IT platform.
The Group’s FS operations and strategic plans for FY21
will also take into account the impact of Covid-19, the
requirements of the FCA’s payment deferral regulations
and the resulting changes to FS practices. N Brown remains
committed to supporting its credit customers through these
challenging times.
I would also like to welcome Vicky Mitchell to the Committee;
Vicky will step into the role of Chair for FY21.
I am available to speak with shareholders at any time and shall
be available at the Annual General Meeting on 10 September
2020 to answer any questions you may have on this report.
Lesley Jones
Chair of the Financial Services Board Committee
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE
(“ESG”) COMMITTEE REPORT
MEMBER
Michael Ross (Chair)
Matt Davies
Steve Johnson
Alyson Fadil
Ralph Tucker (resigned)
Sarah Welsh
Meetings attended
January 2018 – Present
February 2018 – Present
September 2018 – Present
April 2018 – Present
April 2018 – January 2020
March 2020 – Present
2/2
2/2
2/2
2/2
2/2
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RESPONSIBILITIES
FY21 PRIORITIES
Reviewing and making
recommendations to the
Board concerning matters
of Group policy on all areas
of Environmental, Social and
Governance (“ESG”);
Reviewing and reporting on how
we look after our environment,
source our products and work
with the community and our
employees; and
Updating shareholders and
stakeholders as necessary on the
work of the Committee.
The Committee’s Terms of
Reference can be found at
www.nbrown.co.uk
Ensuring that colleagues and
other key stakeholders are
supported during the Covid-19
pandemic and beyond;
Fulfilling the year one plastics
focus of the Company’s Land,
Sea and Air targets by instigating
a trial of green polyethylene
despatch bags on Simply Be and
Jacamo ranges;
Introducing sustainable brand
product labels;
Implementing supplier
scorecards to allow buyers
full performance viability
on sustainability;
Completing the green LED
lighting project across key sites;
and
Reviewing progress against
the existing 35% target and set
new targets for GHG emissions
reduction and climate change.
DEAR SHAREHOLDER
The Committee has overseen significant progress in a number
of new and exciting initiatives during the year, including its re-
branding to the Environmental Social Governance Committee.
In FY20 the Committee approved the renewal of the Group’s
Modern Slavery Statement in addition to reviewing its
participation in such significant international stakeholder forms
as the United Nations Ethical Trading Initiative and the ACT
living wage project in the textile and garment supply chain.
FY20 was also the first year of N Brown’s Ethical Principles for
Trustworthy AI. Since they were introduced, the Committee has
overseen ongoing work to embed the principles within business
operations via the development of effective AI policies.
Details on some of N Brown’s sustainable activities in FY20 can
be found in the ESG report on p32 to 39.
In FY20 the Committee will continue to support and oversee the
work of N Brown as it focuses its sustainability activities under
two new pillars: “Our People and Our Planet”.
“Our People” will expand on the good work already being
done to support colleagues within the Company as well as all
customers and stakeholders connected to N Brown across our
supply chain.
Under “Our Planet” we have developed a challenging four-
year sustainability roadmap. The projects identified will help
N Brown move closer to targets under its new Land, Sea and
Air initiatives.
Further information on N Brown’s new ESG initiatives and
sustainability roadmap can be found on p37.
I am available to speak with shareholders at any time and shall
be available at the Annual General Meeting on 10 September
2020 to answer any questions you may have on this report.
I look forward to reporting on our progress in relation to the
priorities outlined above in the next Annual Report.
Michael Ross
Chair of the ESG Committee
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk REMUNERATION
REMUNERATION COMMITTEE REPORT
MEMBER
Gill Barr (Chair)
Ron McMillan
Richard Moross
Matt Davies
January 2018 – Present
April 2013 – Present
January 2017 – Present
May 2018 – Present
Meeting attended
3/3
3/3
3/3
3/3
RESPONSIBILITIES
FY21 PRIORITIES
Setting and reviewing the
remuneration policy and
determining the total individual
remuneration package for all
Executive Directors, the Chair of
the Board and other designated
senior executives taking into
account the policies, practices,
pay and employment conditions
of the Group.
Reviewing Group policies and
practices and working with
management and the Board to
ensure alignment of policies
and practices across the
Group as well as the culture of
the business.
Approving the design of, and
determining targets for, any
performance-related pay
schemes operated by the
Group and approving the total
annual payments made under
such schemes.
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 Group.
Ensuring that the Group
engages as appropriate with
its principal shareholders
about remuneration.
Mindful of the difficulties in
setting measures and targets in
the current crisis, the Committee
will consider the optimal way
to further our policy objectives
and specifically provide the
mechanisms for both incentives
and retention.
We will be flexible in our
approach to ensure we can take
advantage of opportunities for
the benefit of our shareholders
and wider stakeholders.
The Committee will continually
review remuneration decisions
to ensure there is a strong
alignment between outcomes
for executives and those of other
stakeholders including investors
and colleagues.
We will ensure that all employee
pay and incentive arrangements
strongly support the delivery
of the cash flow performance
of the business and the
customer experience.
The Committee’s Terms of
Reference can be found at
www.nbrown.co.uk
DEAR SHAREHOLDER
I am pleased to present the Directors’ Remuneration Report
for FY20 on behalf of the Board. The report has been written in
the midst of the unprecedented market conditions as a result
of the global Covid-19 pandemic which has posed challenges
for determining executive remuneration.
I was very pleased that our new policy was approved by
shareholders at the 2019 AGM with 99.6% shareholder
approval and we have reviewed the policy again to ensure that
it remains appropriate for FY21 in the current environment.
We are satisfied that it remains appropriate although, within
the policy, we are proposing some changes to the operation of
our annual bonus and LTIP.
OUR RESPONSE TO COVID-19
Our focus has been on the health and wellbeing of our
colleagues as well as the prudent management of the
business. We gave a trading update on 19 May which provided
details of our new financing arrangements. A thorough review
of our operation led to various actions to maximise operating
efficiency and preserve liquidity and we have taken advantage
of government support and furloughed 30% of our employees.
Our plc Board, Management Board and senior leadership
team have all taken voluntary reductions to salary and fees of
20% for at least three months. No annual bonus will be paid
for FY20 and there will be no salary increase for the Executive
Directors and most of the workforce for FY21.
The final determination of the FY21 annual bonus and
LTIP opportunity, measures and target ranges has been
deferred until the Committee considers that the business
has better forward visibility. Full details of the LTIP awards
will be announced to the market at the time that the awards
are made.
The year end will require a series of carefully balanced
decisions. Whilst there should be an appropriate bonus and
LTIP opportunity, careful consideration will be given to all
relevant factors in determining incentive outcomes including
underlying performance, the experience of stakeholders
and the level of government support. We will be particularly
thoughtful on the extent to which discretion will need to be
applied to any formula driven payments.
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REMUNERATION CONTINUED
REMUNERATION COMMITTEE REPORT CONTINUED
CHANGES IN LEADERSHIP
During the year, the Committee has overseen further change
in the leadership of our business. Craig Lovelace, our Chief
Financial Officer, will be leaving us but we are delighted
to welcome our new Chief Financial Officer, Rachel Izzard.
In addition, there have been several important changes to
the team at Executive Board level and those remuneration
arrangements have also been determined by the
Remuneration Committee.
APPOINTMENT OF OUR NEW CFO
We announced, on 29 January 2020, the appointment of our
new Chief Financial Officer, Rachel Izzard. Rachel joined N
Brown on 6 April 2020 as CFO Designate.
Rachel’s fixed pay is lower than that of our outgoing CFO
and variable pay opportunity the same. Her base salary is
£350,000 and her pension contribution is 8% of salary, in line
with the rate paid to the majority of the workforce (compared
to £363,697 and 10% for Craig Lovelace). The normal annual
bonus maximum and the normal LTIP award level are both
125% of salary.
Rachel will be granted LTIP awards to compensate her for
awards forfeited at her previous employer. The awards will
be made on a strictly like-for-like basis and full details are
contained within this report.
CFO ARRANGEMENTS ON
CESSATION OF EMPLOYMENT
As announced on 29 January 2020, Craig Lovelace resigned as
CFO and is subject to a 12-month notice period. A departure
date has not yet been agreed as this needs to take into
account the time required to ensure an orderly handover
to our CFO Designate in the context of the current market
environment and restrictions on movement of people. Craig’s
remuneration on cessation of employment will be in line with
our shareholder approved remuneration policy. Full details will
be set out on the Company’s website following his departure
and in next year’s Annual Report on Remuneration.
REMUNERATION OUTCOMES FOR FY20
The CEO’s salary was unchanged for FY20 due to his recent
appointment at £425,000. The CFO received a 2% increase, in
line with the average workforce increase, to £363,697 effective
from 1 June 2019.
The FY20 annual bonus was determined 50% by Group EBITDA,
30% by corporate objectives and 20% by online sales growth.
Although some progress was made against our important
corporate objectives, EBITDA and online sales growth were both
below the threshold for payment. Taking into account business
performance, as well as the wider current economic and societal
environment, the Committee and the CEO agreed that no
bonus would be paid to him. Indeed, no bonus has been paid
to any employee in the Company ensuring alignment of reward
throughout the business. The CFO, having resigned in January
of this year, is not eligible for a bonus.
Further details of performance against the targets, and the
formulaic bonus outcome, are included in the Annual Report
on Remuneration.
The EPS, Cash flow and Revenue performance conditions
attached to the LTIP awards granted in June 2017, which were
measured by reference to performance to 29 February 2020,
have not been achieved, so the awards lapse in full.
In conclusion the Committee is satisfied the policy has
operated as intended, that no change is required to
the policy and that the discretion exercised is in all the
circumstances appropriate.
HOW THE POLICY WILL
BE APPLIED IN FY21
The CEO’s salary will remain unchanged and our CFO
Designate’s salary, set on appointment, will not be reviewed
again until FY22. We will review the temporary salary reductions
after three months and they may revert to normal at that point, or
later in the year.
We are also simplifying the bonus with a focus on two key
priorities for the business. It is the Committee’s current
thinking that the bonus will be based 75% on cash/net
drawn unsecured debt reduction and 25% on Customer
Net Promoter Score (NPS). However, the situation remains
volatile and the Committee acknowledges that in the current
environment, circumstances may arise where management
will need to change their focus during the year in order to
make the right decisions for the business and shareholders.
In these circumstances the Committee will consider whether
the measures and targets for the bonus should be adjusted or
discretion applied in determining the annual bonus outcome.
In all cases the determination of bonus outcomes will be made
with great care.
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N Brown Group plc Annual Report and Accounts 2020
There will be full retrospective disclosure of performance
targets and the exercise of any discretion in next year’s
Remuneration Report.
Exceptionally for 2020, the Committee’s current thinking,
given the market and economic volatility and lack of
visibility to longer-term performance, is that the LTIP
awards will be based 50% on relative TSR and 50% on
Free Cash Flow and will not include an earnings per
share measure.
The grant of LTIP awards will be delayed, we anticipate,
until the second half of the financial year when we
should have better visibility of our long-term financial
performance. The measures and weightings will be
reviewed again and award levels and targets set at that
time will be included in the RNS announcement as well
as in next year’s Remuneration Report.
I very much hope that you will support the shareholder
resolution on the Annual Report on Remuneration at our
forthcoming Annual General Meeting on 10 September
2020. In the meantime, should you have any questions,
I am contactable via the Company Secretary.
Gill Barr
Chair of the Remuneration Committee
DIRECTORS’
REMUNERATION POLICY
This report sets out the information required by Schedule 5
and 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 UK Corporate Governance Code.
The full Directors’ Remuneration Policy is shown on the
following pages. It was approved by shareholders at the 2019
AGM and is effective for three years from that date.
The Company’s policy ensures that the remuneration package
is linked to the Company’s annual and long-term strategy
and that it is capable of attracting, motivating and retaining
Executive Directors. The policy aims to provide Executive
Directors with competitive remuneration packages which
are prudently constructed, reward achievement of long-term
growth, profitability and sustainability of the business 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 the shareholders’ interests and the longer-term
growth, performance and sustainability of the business
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
Linked to performance measured over annual and three-year
performance periods
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REMUNERATION COMMITTEE REPORT CONTINUED
SUMMARY OF COMPONENTS OF EXECUTIVE DIRECTORS’ REMUNERATION
Purpose and link to strategy
Operation
Maximum
Performance assessment
SALARY
Reflects the performance
of the Company and the
individual, their skills
and experience, and the
responsibilities of the role.
Provides an appropriate
level of basic fixed income.
Reviewed annually, taking account
of Group performance and
individual performance as well as
changes to the market value of the
Company.
Set with reference to the levels of
base salary for similar positions
with comparable 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.
None, although overall individual
and Company performance is a
factor considered when setting and
reviewing salaries.
Salary increases will normally be in
line with increases awarded to other
employees of the Group.
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.
ANNUAL BONUS
Drives and rewards annual
delivery of financial,
corporate and individual
strategic goals.
The annual bonus is based on the
Group’s performance as set and
assessed by the Committee on an
annual basis.
Chief Executive: up to 150% of base
salary p.a.
Other Executive Directors: up to
125% of base salary p.a.
Bonuses will be paid 60% in cash
and 40% in shares, which must
be held for a further three years
(including in normal circumstances
post cessation).
The payment of any earned bonus
remains ultimately at the discretion
of the Committee.
Annual performance
targets are aligned to the
annual and longer-term
financial and strategic KPIs
of the Company and aimed
at increasing shareholder
value, whilst being prudent
and safeguarding the future
of the Company.
The holding period
provides alignment with
shareholders and the
longer-term performance of
the Company.
A significant majority of the annual
bonus will normally be determined
by reference to performance
against financial measures.
Additionally, corporate and
individual strategic performance
objectives may be set. Individual
and corporate strategic objectives
will be measurable and based on
the Group’s longer-term strategic
plan.
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.
The Committee has the discretion
to adjust bonus payment (including
reducing to zero) if it considers
that the formulaic outcome is
not reflective, for instance, of the
underlying performance of the
Company or investor experience or
wider Group employee reward.
Recovery of payments may
occur in the event of a material
misstatement of the Group’s
financial results, error in calculation
of performance or payment,
individual misconduct, reputational
damage, failure of risk management
and Company failure.
76
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Purpose and link to strategy
Operation
Maximum
Performance assessment
LONG-TERM INCENTIVE PLAN “LTIP”
Provides incentives to
reward sustained long-term
performance and success
through the achievement
of challenging long-term
performance targets,
thereby aligning the
interests of shareholders
and Executives.
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 which will, except in
exceptional circumstances, be paid
in shares.
Shares acquired from LTIP awards
must be held for a total period of
five years from the date of grant.
This comprises the three-year
performance period and a further
two years (including in normal
circumstances post cessation)
before they can be disposed of
(subject to sales to meet taxes
payable).
ALL-EMPLOYEE SHARE SCHEME (“SAYE”)
Normal maximum of 150% of salary.
Exceptional circumstances
maximum of 200% of salary.
The Committee may select
performance measures and
weightings for awards from year
to year that support the Group’s
business strategy.
A sliding scale of targets is set by
the Committee prior to each grant
with 25% of an award vesting for
threshold performance.
The Committee has the discretion
to adjust awards (including
reducing to zero) if it considers that
the formulaic vesting outcome is
not reflective of, for instance, the
underlying performance of the
Company or investor experience.
Recovery of payments may
occur in the event of a material
misstatement of the Group’s
financial results, error in calculation
of performance or payment,
individual misconduct, reputational
damage, failure of risk management
and Company failure.
Provides all employees,
including Executives, with
a mechanism to acquire
shares in the Group and to
together participate in the
success of the Group.
PENSION
Provides retirement
benefits.
OTHER BENEFITS
The Group operates an HM
Revenue & Customs approved
savings related share option
scheme for Group employees.
The plan is subject to statutory
individual limits as amended from
time to time or such lower limits as
set by the Group.
These are broad based all-
employee plans and are not subject
to performance targets.
The Company operates a defined
contribution plan and may also pay
a cash supplement in lieu.
8% of salary except for the outgoing
CFO whose retirement benefit is
10% of salary.
N/A
Provides a competitive
package of benefits that
assists with recruitment and
retention and supports the
wellbeing of the Executive
to enable them to carry out
their role effectively.
Main benefits currently include but
are not limited to 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.
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.
Any reasonable business-related
expenses (including tax (grossed
up) thereon) can be reimbursed if
determined to be a taxable benefit.
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REMUNERATION COMMITTEE REPORT CONTINUED
ALIGNMENT OF DIRECTORS’ PAY WITH
BROADER WORKFORCE PAY POLICIES
The remuneration policy for the Executive Directors is aligned
with the policy for employees across the Group as a whole.
Nearly all of our employees are eligible for a bonus which,
as with the Executive Directors, is fully aligned with Group
financial and corporate objectives. The corporate objectives
are tailored to the role of the individual, so they have clear line
of sight between their individual contribution, the results of
the business and their reward.
Longer-term share-based incentives are provided to our
Executive Directors and more senior managers through the
same long-term incentive plan with vesting determined by the
same Group targets. There are differences in quantum and
whether participation is offered.
All employees are able to share in the longer-term
performance of the business through our SAYE scheme.
With the exception of the outgoing CFO whose retirement
allowance is 10% of salary, the majority of our employees
including our CEO and new CFO receive the same 8% of salary
retirement allowance.
The Committee has taken into consideration the pay and
employment conditions of all employees when determining
the policy. The Committee did not consult with employees
specifically regarding the Directors’ Remuneration Policy
but does consult regarding Group-wide reward and
remuneration policies and practices at the Group’s employee
forum. The Annual Report on Remuneration sets out what
engagement has taken place this year with stakeholders
generally in relation to remuneration and to explain the
alignment of the Directors’ Remuneration Policy with the
wider business.
As part of the Committee’s broader remit under the UK
Corporate Governance Code, the Committee reviews and
provides input and challenge in respect of the Group’s wider
remuneration policies with the objective of ensuring an
appropriate cascade of policy for Executive Directors to the
rest of the workforce.
REMUNERATION COMMITTEE DISCRETION
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 has certain operational discretions as
set out in the plan rules. These include:
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.
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 or
LTIP performance conditions and/or targets being deemed no
longer appropriate (e.g. a material acquisition or divestment),
the Committee may 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 discretion 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.
AMENDMENTS TO POLICY
The Committee may amend this shareholder approved
policy to take account of changes to legislation, taxation and
other supplemental and administrative matters without the
necessity to seek shareholder approval for those changes.
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 under a previously
approved Directors’ Remuneration Policy. 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.
78
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk SELECTION OF PERFORMANCE METRICS
AND TARGETS
Variable pay and remuneration is linked to both corporate
and individual performance with measures clearly aligned to
business strategy and KPIs of the business. The Committee
reviews the measures to be used for the annual bonus and LTIP
each year to ensure they remain appropriate before awards
are granted.
Targets for the Executive Directors’ annual bonuses are set by
the Committee at the beginning of each financial year and for
LTIP awards prior to awards being made. In setting stretching
targets the Committee takes into consideration current and
prospective market conditions, the economic outlook, market
expectations, the business plans and long-term strategy of the
Company. 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.
The Committee also considers the Group’s performance and
forward planning on Environmental, Social and Governance
(“ESG”) matters when selecting performance measures and
setting targets. This ensures that the incentive arrangements
for senior managers take account of ESG matters so as to
mitigate any inadvertent irresponsible behaviour including the
taking of undue risks with the business.
SHAREHOLDING REQUIREMENT
Executive Directors are required to build and retain a
minimum shareholding in the Company of 200% of salary
through the retention of shares acquired from annual bonuses
and the vesting of LTIP awards. Post cessation of employment,
the requirement is to hold shares equal in value to 100% of
salary for two years post cessation.
POLICY ON EXTERNAL APPOINTMENTS
Subject to Board approval, Executive Directors may accept
one external non-executive director position and retain the
fees payable for such appointments.
HOW SHAREHOLDERS’ VIEWS ARE TAKEN
INTO ACCOUNT WHEN DETERMINING
DIRECTORS’ PAY
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 and operation of that
policy from year to year.
In developing the remuneration policy the Committee
consulted with its largest shareholders and representative
bodies such as the Investment Association, ISS and
Glass Lewis.
EXECUTIVE DIRECTORS’ SERVICE
AGREEMENT AND POLICY ON
TERMINATION OF EMPLOYMENT
Executive Directors have contracts with an indefinite term
providing for a maximum of 12 months’ notice.
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 for any
contractual payments.
The Committee will ensure that there are no payments for
failure. No Executive Director contracts provide for liquidated
damages. There are no special provisions contained in the
Executive Directors’ contracts that provide for longer periods
of notice or additional remuneration 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.
The Company may negotiate settlement terms including to
deal with a potential legal claim that the Committee considers
to be in the best interests of the Company and to enter into a
settlement agreement to affect 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 is 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.
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REMUNERATION COMMITTEE REPORT CONTINUED
Deferred bonus share awards will normally lapse on cessation
of employment, unless the Executive Director is deemed to
be a “good leaver” by the Committee in which case they will
vest in full at the usual time or exceptionally on the date of
cessation. Awards will vest early in full on a change of control
subject to the plan rules. Annual bonus shares subject to a
holding period must normally be retained for the remainder of
the holding period post-employment.
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 is for awards to continue until the end of the original
performance period and to vest to the extent targets are met,
with a pro-rata reduction 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 dis-apply pro-rating in exceptional
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.
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.
Name
Steve Johnson
Date of contract
26 February 2019
Rachel Izzard
6 April 2020
Craig Lovelace
6 January 2015
Potential
termination payment
12 months’ salary
and benefits
12 months’ salary
and benefits
12 months’ salary
and benefits
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, current remuneration package and securing the
best candidate for the role. Where it is appropriate to offer a
lower salary initially, a series of above inflation increases to the
desired salary positioning and may be given over subsequent
years subject to individual and Company performance.
Benefits and pension will be provided in accordance with the
approved policy. Assistance with relocation may be provided
where appropriate. Tax equalisation and an expatriate
allowance may also be considered, as may payment of the
Executive’s legal fees in connection with the appointment.
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 a normal annual
share award in the first year of employment in addition
to any awards made with respect to prior employment
being forfeited.
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 taking into
account and replicating as far as possible the form (cash or
shares), delivery mechanism, performance measures, timing
and expected value (i.e. likelihood of meeting any existing
performance criteria) of the remuneration being forfeited
and such other specific matters as the Committee considers
relevant. Existing arrangements may be bought out on terms
that, in the Committee’s judgement, are no more favourable
than the remuneration being forfeited. 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. Other benefits or remuneration may
also need to be “bought out” and the Committee will use its
judgement as to the most appropriate way to structure this.
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.
The chart overleaf sets out three scenarios for Executive
Directors’ remuneration for FY21.
80
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk POTENTIAL REMUNERATION SCENARIOS FOR EXECUTIVE DIRECTORS FY21
(£’000)
2,500
2,000
1,500
1,000
500
0
1,754
2,073
36%
36%
28%
1,117
29%
29%
42%
479
100%
1,270
1,489
34%
34%
32%
833
26%
26%
48%
395
100%
417
417
417
100%
100%
100%
Below target
Target
Maximum
Below target
Target
Maximum
Below target
Target
Maximum
Chief Executive Officer
CFO Designate
Chief Financial Officer
Fixed Pay
Annual Bonus
LTIP
LTIP with 50% share price growth
Assumptions
Fixed pay = salary on first day of financial year, benefits and pension
Target = Fixed pay plus target annual bonus and target LTIP, both at 50% of the maximum
Maximum = Fixed pay plus maximum annual bonus and full vesting of LTIP, including an additional scenario showing the value
total remuneration assuming a 50% increase to the share price
Note: Annual bonus and LTIP award levels for FY21 have not yet been determined and the scenario charts are based on the
normal bonus opportunity and LTIP award level.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Strategic report Financial statements REMUNERATION CONTINUED
REMUNERATION COMMITTEE REPORT CONTINUED
POLICY FOR NON-EXECUTIVE DIRECTORS’ FEES
Purpose and link to strategy
Operation
NON-EXECUTIVE DIRECTORS’ AND CHAIR’S FEES
Maximum
Performance
assessment
To attract and retain high-
calibre Non-Executives
and ensure they are
appropriately paid for
their skills and experience,
responsibilities and time
commitment of their role.
The Non-Executive Directors’ remuneration is determined by the Board within the
limits set by the Articles of Association.
N/A
N/A
The Chair is paid a single fee for all his responsibilities.
The Non-Executives are paid a basic Board membership fee. The Chairs of
Committees, Senior Independent Director and Non-Executives with other specific
additional roles 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 or receive payments in lieu.
Any reasonable business-related expenses (including tax thereon (grossed up)
where an expense is treated as a taxable benefit) can be reimbursed and limited
benefits relating to travel, accommodation, secretarial support and hospitality
provided in relation to the performance of the Non-Executive Directors’ duties.
When setting and reviewing fee levels, account is taken of the experience and skills
required for and responsibilities of the role, fee levels in comparable companies,
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 Chair, Senior Independent Director 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 to six months’ notice. All appointments are subject
to successful re-election upon retirement at the Annual General Meeting. Fees are payable to the date of termination, but
termination carries no right to compensation other than that provided by general law. Brief details of Non-Executive Directors’
letters of appointment are summarised below:
Name
Lord Alliance of Manchester CBE
Matt Davies
Ron McMillan
Lesley Jones
Richard Moross
Gill Barr
Michael Ross
Vicky Mitchell
Date of contract/letter
of appointment
16 May 2007
19 February 2018
1 March 2013
30 September 2014
13 September 2016
6 December 2017
8 December 2019
24 January 2020
Date current
term commenced
10 April 2019
19 February 2018
1 April 2019
1 October 2017
6 October 2019
16 January 2018
16 January 2018
28 January 2020
Notice period
6 months
6 months
6 months
3 months
3 months
3 months
3 months
6 months
82
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk ANNUAL REPORT ON REMUNERATION
The Annual Report on Remuneration will be put to an advisory shareholder vote at the 2020 Annual General Meeting.
The information on p83 to 87 has been audited.
DIRECTORS’ REMUNERATION PAYABLE FOR 2019/20 (AUDITED)
Executive Directors
Steve Johnson3
Craig Lovelace
Non-Executive (fees)
Matt Davies4
Lord Alliance of Manchester CBE5
Ron McMillan
Lesley Jones
Richard Moross
Gill Barr
Michael Ross
Vicky Mitchell
Salaries
and fees
£000’s
Taxable
benefits1
£000’s
Bonus (cash
and deferred
shares)
£000’s
LTIP
£000’s
Pension2
£000’s
Total
£000’s
425
170
361
355
255
220
51
50
73
63
67
71
58
50
64
58
60
55
5
–
20
5
17
17
0
0
0
0
6
0
3
3
9
3
5
4
3
2
0
–
0
96
0
171
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
0
0
0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
34
13
36
35
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
479
284
414
578
255
220
51
50
79
63
70
74
67
53
69
62
63
57
5
–
Year
2019/20
2018/19
2019/20
2018/19
2019/20
2018/19
2019/20
2018/19
2019/20
2018/19
2019/20
2018/19
2019/20
2018/19
2019/20
2018/19
2019/20
2018/19
2019/20
2018/19
1 Taxable benefits comprise private medical cover and car allowance. For Non-Executive Directors taxable benefits comprise travel and accommodation.
2 Pension is paid as a cash supplement.
3 Steve Johnson’s remuneration for FY19 is for his role as Executive Director only from 12 September 2018 and not for the period prior to being appointed a Director.
4 Matt Davies’ remuneration for FY19 is for his role as Chair Elect to 30 April 2018 and as Chair from 1 May 2018.
5 Lord Alliance has waived his Non-Executive Director’s fee.
DETAILS OF VARIABLE PAY EARNED IN THE YEAR
ANNUAL BONUS (AUDITED)
The table below sets out performance against targets for the Executive Directors’ annual bonus for FY20. The formulaic
calculation of the annual bonus results in a bonus payment for Steve Johnson of £41,438 with 40% of this amount payable in
shares subject to a three-year holding period. The Remuneration Committee and the Chief Executive have agreed that taking
into account corporate performance, wider employee reward, investor return and the current external economic, societal and
business environment, a bonus for FY20 should not be paid. Craig Lovelace’s resignation from the business means that he is not
eligible to be considered for a bonus.
Measure/
OKR
EBITDA
Online sales growth
Corporate objectives
Total*
Steve Johnson1
Craig Lovelace
Weighting
(% of max
bonus activity)
50%
20%
30%
Threshold
(0% payout)
£128m
3%
Target (50% of
max payout)
£139.2
5.6%
Max (100%
payout)
£146.4m
15%+
Actual
performance
£106.7m
0.2%
See below
Payout %
of max
overall bonus
0%
0%
6.5%
Maximum bonus
opportunity %
salary
150%
125%
Salary for
bonus
calculation
£425,000
£363,697
Bonus payable
(as % max)
6.5%
0%
Bonus payable
before reduction
£
£41,438
£0
1 The bonus shown as payable for Steve Johnson is before reduction of the formula-driven outcome.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Strategic report Financial statements REMUNERATION CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED
CORPORATE OBJECTIVES
Corporate objectives which are weighted equally were set on a sliding scale range of 0% to 100%
Objective
Adjusted net debt
The reported level of net debt after
adjustment for exceptional items and
growth in debtors
VIBE Survey
(employee engagement)
Net Promoter Score
Financial Services Arrears
Total
Performance required for
threshold vesting (0%)
£432.5m
Performance required for
maximum vesting (100%)
£372.5m
Actual performance
£465.0m
Payout as % of maximum
for this element
0% out of 7.5%
70
59
<14.6%
75+
68+
10.6%
71.9
2.9% out of 7.5%
62
14.0%
2.5% out of 7.5%
1.1% out of 7.5%
6.5% out of 30%
LTIP AWARDS WITH PERFORMANCE PERIODS ENDING IN FY20 (AUDITED)
The awards granted on 9 August 2017 with EPS, Free Cash Flow and Revenue performance targets measured over the
performance period ending 29 February 2020 are set out below
Performance period
3 yrs ending FY20
3 yrs ending FY20
3 yrs ending FY20
Threshold target
(25% of that part
of the award vests)
At least RPI +2.5%
At least £370m
At least 5% CAGR
Stretch target
(100% of that part
of the award vests)
At least RPI +9%
At lease £450m
At least 9% CAGR
EPS growth 50%
FCF 30%
Revenue 20%
Total
Actual performance
-10.4%
£163.0m
-1.6%
Vesting
0% out of 50%
0% out of 30%
0% out of 20%
0%
Set out below are the details of the LTIP awards held by Executive Directors and the vesting resulting from the performance
details above.
Executive
Steve Johnson*
Craig Lovelace
% Salary
100%
125%
Face value
at grant
£215,000
£436,965
Share price at
grant (rounded)
pence
326.3
326.3
Number of
shares awarded
65,645
133,915
Percentage of
award vesting
0%
0%
Number of
shares vesting
Nil
Nil
Value of
shares vesting
£0
£0
* Steve Johnson’s 2017 LTIP award was granted prior to him being appointed as CEO.
84
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk LTIP AWARDS GRANTED FY20 (AUDITED)
The table below provides details of the long-term incentive awards granted to Executive Directors during the year. As set out
in our FY19 Remuneration Report, following the scale-back of the 2018 award levels for the CEO at that time and the CFO, the
2019 award levels reverted to our normal policy as set out below. The CEO received a grant at the normal policy level as he was
new to the role. Performance measures and weightings were reviewed as part of the wider policy review and consistent with our
disclosure last year are as set out below.
Executive
Steve Johnson
Craig Lovelace
03/09/2019
Date of grant % of condition
35% TSR
35% EPS
30% FCF
As above
03/09/2019
Salary
150%
Face value
£637,500
Number
of shares
601,983
Share
price at
grant
105.9
Performance period
Three years to end
of financial
year FY22
125%
£454,620
429,292
105.9
As above
Metric
TSR
Weighting
35%
Target range
25% of this element vests for N Brown achieving a ranking of median
Relative TSR compared to
the FTSE SmallCap excluding
Investment Trusts
EPS
Growth from the
FY19 EPS to FY22
FCF
35%
30%
Based on the aggregate of the
Free Cash Flow delivered over
FY20, FY21 and FY22
Maximum vesting for a ranking upper quartile or above
Straight line vesting in between
5% CAGR for threshold (25% of this element)
10% CAGR for 75% of this element vesting
15% CAGR for maximum vesting
Straight line vesting in between each target
£350m for threshold vesting (25% of this element) increasing in a
straight line to maximum vesting for £420m or more (not adjusted
for exceptional items but adjusted for debtor growth)
Rationale for measure
To incentivise management
directly to achieve superior
stock market returns
To reward long-term growth
in profitability attributable to
shareholders
To focus on efficient cash
management of the business
and to generate surplus cash
to return to shareholders
OUTSTANDING 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 for the CEO and CFO
Executive
Steve Johnson1
Craig Lovelace
2 March 2019
115,774
7,242
65,645
17,316
126,225
–
–
4,731
243,125
133,915
12,586
29,355
238,771
–
–
Awarded
during
the year
–
–
–
–
–
35,410
601,983
–
–
–
–
–
–
48,836
429,292
Lapsed
during
the year
115,774
7,242
–
–
–
–
–
–
243,125
–
–
–
–
–
–
Vested and
exercised
during the year
–
–
–
–
–
–
–
4,731
–
–
–
–
–
–
–
65,645
17,316
126,225
35,410
Date granted2
29 Feb 2020
–
August 2016
– September 2017
August 2017
August 2018
August 2018
June 2019
601,983 September 2019
June 2016
–
August 2016
–
August 2017
133,915
July 2017
12,586
June 2018
29,355
August 2018
238,771
48,836
June 2019
429,292 September 2019
Type of award
LTIP
DABS
LTIP
DABS
LTIP
DSBP
LTIP
DSBP
LTIP
LTIP
DSBP
DSBP
LTIP
DSBP
LTIP
1 Deferred annual bonus matching share awards (“DABS”) were granted to Steve Johnson prior to his appointment as CEO and are part of the below Board
incentive arrangements where part of the annual bonus is paid to employees in shares (and not as a deferred share award) and there is a share matching
element. Vesting is determined by an earnings per share performance target. Awards are no longer being made under the matching share award plan to any
N Brown employee. The earnings per share performance targets for the DABS award granted to Steve Johnson in August 2018 prior to his appointment as CEO
have not been met and this award has now lapsed.
2 The performance targets for the LTIP awards granted in August 2016 have not been met and these awards have now lapsed.
85
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Strategic report Financial statements REMUNERATION CONTINUED
ANNUAL REPORT ON REMUNERATION 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 to
200% of their base salary and must retain at least 75% of the net of tax value of vested LTIP and deferred bonus awards until this
threshold is achieved. 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:
Owned shares
Other interests in shares
2 March 20191
32,369
46,672
31,130
95,047,966
29 February
20201
60,240
46,672
31,130
96,643,694
Value of
shares2
(as a %
of salary)
8.2%
7.4%
N/A
N/A
Outstanding
awards subject
to performance
conditions
846,579
850,814
–
–
Guideline
met?
No
No
N/A
N/A
Unvested
awards not
subject to
performance
conditions
–
–
–
–
Vested
unexercised
awards
–
–
–
–
Total as at
29 February
2020
906,819
897,486
31,130
50,000
–
–
8,506
–
–
50,000
–
–
8,506
–
–
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50,000
0
0
8,506
0
0
Steve Johnson
Craig Lovelace
Matt Davies
Lord Alliance of
Manchester CBE3
Ron McMillan
Lesley Jones
Richard Moross
Gill Barr
Michael Ross
Vicky Mitchell
1 The figures for the Executive Directors include the number of beneficially owned shares obtained via direct purchase and deferred bonus shares.
2 The value of shareholding as a % of salary is calculated using the market closing price of 57.5p on 28 February 2020.
3 The Directors have become aware that previous Annual Reports of the Company incorrectly stated Lord Alliance’s interest in shares as 95,047,966. This was due
to shares being registered in the name of nominee companies and not being included in Lord Alliance’s holding, an error which has recently been corrected.
These shares represent a difference of 0.56% of the total issued share capital of the Company as at 29 February 2020.
The Directors’ share interests shown above include shares held by members of the Directors’ families, as required by the
Companies Act 2006. There are no changes to the Directors’ interests in shares between 29 February 2020 and 24 June 2020.
PERFORMANCE GRAPH
The graph shows the Company’s ten-year performance, measured by TSR, compared to the performance of the FTSE 250 index,
also measured by TSR. The Company has been a member of this index for most of the ten-year period and accordingly it is felt
to be the most appropriate comparator group for this purpose.
TOTAL SHAREHOLDER RETURN PERFORMANCE: N BROWN vs FTSE 250
(rebased to 100)
350
300
250
200
150
100
50
0
N Brown Group plc
FTSE 250 Index
Feb 10
Feb 11
Feb 12
Feb 13
Feb 14
Feb 15
Feb 16
Feb 17
Feb 18
Feb 19
Feb 20
86
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk ANALYSIS OF CHIEF EXECUTIVE’S PAY OVER TEN YEARS
Total remuneration (£’000)
Annual bonus (% of max)
Long-term share vesting
(% of max)
Alan White
Angela Spindler1
Steve Johnson
FY12
FY11
2,734
3,738
90.6% 38.7%
100%
100%
FY13
1,780
71.4%
100%
FY14
2,734
15.8%
85%
FY14
1,364
83.2%
N/A
FY15
728
0.0%
N/A
FY16
783
27.9%
0%
FY18
FY17
1,373
1,208
42.1% 66.7%
0%
0%
FY19
555
34.4%
0%
FY19
266
38.5%
0%
FY202
474
0%
0%
1 The one-off recruitment award granted to Angela Spindler in 2013 and which vested in FY16 and FY17 has been included in the figures for total remuneration,
but not counted as long-term share vesting.
2 The annual bonus formulaic outcome for FY20 is 6.5% of maximum although no annual bonus was actually paid.
CEO PAY RATIO
The employee data for the CEO pay ratio in FY20 has been compiled using Option A. The Company provided a CEO pay ratio
in last year’s Remuneration Report using Option B and gender pay gap data for FY19 to identify the individuals at each pay
quartile. Option A is the chosen methodology from FY20 onwards as it represents the most statistically accurate method for
identifying UK employee remuneration. The FY20 pay data has been taken for all individuals on a full-time equivalent basis
using fixed pay data as at 29 February 2020. A review has been carried out to ensure that the individuals at the quartiles are
representative by checking individuals both above and below the quartile points.
The reward policies and practices for our employees are aligned to those set for the Executive Directors, including the CEO,
and on this basis the Committee is satisfied that the median pay ratio is consistent with the pay, reward and progression policies
across all of the N Brown employees.
Year
2020
2020
Method
A
25th percentile
pay ratio
32:1
Median
pay ratio
25:1
75th percentile
pay ration
16:1
CEO
25th Percentile
50th Percentile
75th Percentile
Salary
£424,934.04
Total
Remuneration
£572,547.94
Salary
£17,418.27
Total
Remuneration
£17,943.69
Salary
£20,882.97
Total
Remuneration
£22,536.65
Salary
£30,738.87
Total
Remuneration
£35,417.40
PERCENTAGE CHANGE IN THE CHIEF
EXECUTIVE’S REMUNERATION
The table below shows the percentage change in the Chief
Executive’s salary, benefits (excluding pension) and annual
bonus over 12 months between FY19 and FY20, compared to
that of the average for all employees of the Group.
Chief Executive
Average of other employees
% Change from FY19 to FY20
Salary
2%
4.7%
Benefits Annual bonus
-100%
-100%
0%
0%
RELATIVE IMPORTANCE OF SPEND
ON PAY
The following table shows the Company’s actual spend on pay
(for all employees) relative to dividends. These figures relate to
amounts payable in respect of the relevant financial year.
Staff costs (£m)
Dividends (£m)
2020
£67.3m
£20.1m
2019
% Change
£68.6m
£32.2m
-1.9%
-37.6%
OTHER DIRECTORSHIPS
The current CEO and CFO to do not serve as Non-Executive
Directors for any other companies.
PAYMENTS TO PAST DIRECTORS AND
PAYMENTS FOR LOSS OF OFFICE
(AUDITED)
There are no payments except as disclosed below.
As announced on 29 January 2020, Craig Lovelace has
resigned as CFO and is subject to a 12-month notice period.
A departure date has not yet been agreed as Craig will work
with Steve Johnson, Group Chief Executive Officer, and the
Board to ensure an orderly handover to Rachel Izzard the CFO
Designate. Craig’s remuneration for FY20 is disclosed in this
Remuneration Report. Craig’s remuneration on leaving the N
Brown business will be provided on the Company’s website in
accordance with section 430 (2B) of the Companies Act 2006
immediately following his departure.
87
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Strategic report Financial statements REMUNERATION CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED
SHAREHOLDER VOTING ON THE DIRECTORS’
REMUNERATION REPORT AND POLICY AT
THE 2019 ANNUAL GENERAL MEETING
Voting outcome for the 2019 Remuneration Policy vote:
% of votes cast
Number of votes cast
For
99.60
177,995,722
Against
0.40
706,951
Notes: 26,023,384 votes were withheld in 2019. A vote withheld is not a vote
in law and is not counted in the votes for or against a resolution but would be
considered by the Committee in the event of a significant number of votes
being withheld.
Voting outcome for the 2019 Remuneration Report vote:
% of votes cast
Number of votes cast
For
99.66
204,028,327
Against
0.34
687,498
Notes: 10,233 votes were withheld in 2019. A vote withheld is not a vote in
law and is not counted in the votes for or against a resolution but would be
considered by the Committee in the event of a significant number of votes
being withheld.
MEMBERS OF THE
REMUNERATION COMMITTEE
Gill Barr (Chair)
Ron McMillan
Richard Moross
Matt Davies
16 January 2018 – Present
1 April 2013 – Present
3 January 2017 – Present
1 May 2018 – Present
The General Counsel and Company Secretary acts as
secretary to the Committee and the Chief Executive Officer,
Chief Financial Officer and Chief People Officer may also
attend meetings by invitation. However, no Director take any
part in discussion about their own remuneration.
The Committee has formal written terms of reference
which are available on the Company’s corporate website.
The Committee met three times during the year, see p73 for
details of attendance.
ADVISORS TO THE
REMUNERATION COMMITTEE
The Committee received advice during the year from Korn
Ferry who were appointed through a formal tender process
by the Committee in March 2018. Korn Ferry is a signatory
to the Remuneration Consultants’ Group Code of Conduct.
Fees amounting to £62,351 were paid to Korn Ferry during the
financial year for their services to the Committee.
The Committee reviews the performance and independence
of its advisors on an annual basis and is satisfied that the
advice received is objective and independent. The advisors’
terms of engagement are available on request from the
Company Secretary.
THE WORK OF THE
REMUNERATION COMMITTEE
ENGAGEMENT WITH STAKEHOLDERS
The Committee reviews workforce policies and practices
and invites members of the management team to attend
Committee meetings to provide input into the Committee’s
considerations. A key part of the Group People Officer’s
role, supported by the Designated Non-Executive Director
for Colleague Engagement, Richard Moross, and the CEO,
is to engage with the wider workforce and feedback on
remuneration is provided to the Committee and Board.
The Company engages with its workforce throughout the year
via the colleague forum, The Culture Club, (as set out in more
detail on p56). The forum acts as a platform through which
Directors can liaise with colleagues about broader pay policies
and practices and the alignment to the Executive Directors’
Remuneration Policy, as measured against the Group’s annual
performance, strategy and reward agenda.
Following last year’s investor consultation regarding the
Directors’ Remuneration Policy, the Committee has not carried
out any specific engagement with shareholders in relation to
remuneration during the year. The Committee has, however,
considered investor and proxy agency voting policy guidelines
and market practice developments to ensure the Company’s
operation of policy reflects current investor thinking.
Support for the remuneration policy and the Remuneration
Report at the 2019 AGM was above 99% and there were no
material concerns for the Committee to consider from the AGM
voting outcomes.
DETERMINING EXECUTIVE
DIRECTOR REMUNERATION
The Committee considers the appropriateness of the
Executive Directors’ remuneration not only in the context
of overall business performance and Environmental, Social
and Governance matters but also in the context of wider
workforce pay conditions. It does this by reviewing workforce
pay policies and practices as well as the ratio of CEO pay to
all-employee pay.
The Committee is comfortable, in reviewing the remuneration
for FY20 against corporate performance, employee reward,
investor return and the external economic, societal and
business environment that there has been an appropriate link
between reward and performance. In particular, the Committee
is comfortable that the decision taken in consultation and
agreement with the Chief Executive Officer to not pay an
annual bonus for FY20 was appropriate.
The annual bonus targets and performance against them will
be disclosed retrospectively in the FY21 Remuneration Report.
88
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk APPLICATION OF THE REMUNERATION POLICY FOR 2020/21
The application of the remuneration policy for FY21 is set
out below.
BASE SALARY
There will be no increase in salary for the CEO. The CFO’s
salary was set on her joining N Brown and will be reviewed for
the first time in 2021.
Name
Steve Johnson
Rachel Izzard
Salary as at
1 June 2020
£425,000
£350,000
Salary as at
1 June 2019
£425,000
–
PENSION
Our CEO and new CFO both receive cash supplements of 8%
of salary, in lieu of pension contributions and aligned to the
majority of the workforce.
ANNUAL BONUS PLAN
It is the Committee’s current thinking that the bonus will be
based 75% on Cash/net drawn unsecured debt reduction
and 25% on Customer NPS. The metrics, as well as the bonus
opportunity, will be finalised by the Committee when the
targets are set.
The Committee acknowledges that in the current
environment, circumstances may arise where management will
need to change their focus during the year in order to make
the right decisions for the business and shareholders. In these
circumstances the Committee will consider whether the
measures and targets for the annual bonus should be adjusted
or discretion applied in determining the annual bonus
outcome. In all cases the determination of bonus outcomes
will be made with great care.
LONG-TERM INCENTIVE AWARDS
The Committee has considered carefully the performance
measures and weightings for the 2020 LTIP awards.
Given current business and economic volatility and the
difficulty in forecasting and setting long-term earnings per
share performance targets, the Committee has agreed
exceptionally that the 2020 LTIP award should not include an
earnings per share performance measure. The Committee’s
current thinking is that the 2020 LTIP awards should be
determined 50% by Free Cash Flow targets and 50% by
relative TSR, but will review and confirm this at the time the
awards are made.
For the relative TSR element threshold vesting will occur for
median ranking and maximum vesting for upper quartile
ranking or above and straight-line vesting in between the two
target points.
The targets for the Free Cash Flow element and award
levels have not been finalised by the Committee and will
be disclosed by RNS at the time the awards are made.
The Committee, in determining award levels, will consider the
fall in share price since awards were made in 2019 as it relates
to Covid-19 and other business factors as well as the targets
being set and we anticipate that there will be a reduction from
the normal policy level.
REMUNERATION FOR CRAIG LOVELACE,
OUTGOING CFO FOR 2020/21
As set out earlier in this report, the outgoing CFO will
remain with the business for a period of time to ensure a
smooth handover to the incoming CFO. His departure date
is therefore not yet confirmed. While working for N Brown
during FY21, he will continue to receive his salary, benefits and
pension in line with those paid during FY20 but will not be
eligible for an annual bonus or LTIP award.
89
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Strategic report Financial statements REMUNERATION CONTINUED
APPLICATION OF THE REMUNERATION POLICY
FOR 2020/21 CONTINUED
BUYOUT AWARDS TO COMPENSATE THE CFO DESIGNATE FOR REMUNERATION
FORFEITED ON LEAVING HER FORMER EMPLOYER
The following LTIP awards will be made to Rachel Izzard to compensate for awards forfeited upon leaving her former employer,
Aer Lingus.
The LTIP awards will have the same vesting dates and the same performance conditions as the awards forfeited. The number of
N Brown shares subject to the awards has been determined by taking the value of the IAG shares forfeited on the date of joining
N Brown and the value of an N Brown share on the same date. The vested awards will be subject to a two-year post vesting
holding period. Awards will be forfeited on a cessation of employment before vesting other than as a good leaver.
To avoid any windfall gains arising as a result of the current N Brown share price, the formulaic vesting outcome is capped at a
maximum of twice the value of the N Brown shares subject to the buy-out awards on 6 April 2020 being the date of conversion
of the IAG shares forfeited to N Brown shares, with the Committee retaining the discretion to adjust the cap if it considers
it appropriate.
2018 Aer Lingus PSP award
Vesting date
08/03/2021
IAG shares forfeited
11,133
N Brown shares (based on
the share price of 14.74p
on 6 April 2020)
170,998
2019 Aer Lingus PSP award
04/03/2022
31,425
482,674
Performance conditions to
determine vesting
The same performance
conditions that determine
the vesting of the 2018 Aer
Lingus PSP award
The same performance
conditions that determine
the vesting of the 2019 Aer
Lingus PSP award
FEES FOR THE CHAIR AND NON-EXECUTIVE DIRECTORS
Details of the Non-Executive Directors’ fees are set out below. Other than the temporary 20% reduction, there has been no
change in fees between 2019 and 2020.
Fees at 1 June 2019
Fees at 1 June 2020
Chair of the Board fee
Other Non-Executive Directors’ base Board fee
Additional Non-Executive Director fees:
Senior Independent Non-Executive Director
Chair of Audit and Risk Committee
Chair of Remuneration Committee
Chair of ESG Committee
Chair of Financial Services Board Committee
Designated Director for Colleague
Engagement
255,000
51,000
10,000
15,000
15,000
10,000
20,000
10,000
255,000
51,000
10,000
15,000
15,000
10,000
20,000
10,000
APPROVAL OF THE DIRECTORS’ REMUNERATION REPORT
The Directors’ Remuneration report was approved by the Board on 24 June 2020
Signed on behalf of the Board on 24 June 2020
Gill Barr
Chair of the Remuneration Committee
90
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk OTHER DISCLOSURES
The Directors have pleasure in presenting their Annual Report
and audited financial statements for the year ended 29 February
2020. The Directors’ Report comprises p48 to 95, together with
the sections on the Annual Report incorporated by reference.
Some of the matters required to be included in the Directors’
Reports have been included in the Strategic Report on p1 to 47,
namely:
Disclosure
Financial and Risk Management
Future Business Developments
Statement of Directors’ Responsibilities
Disclosure of the Group’s greenhouse gas emissions in FY20
Viability Statement
Going Concern Statement
Page
40
8
95
38
94
93
Other information to be disclosed in the Directors’ Report is
given in this section.
This Directors’ Report together with the Strategic Report set
out on p1 to 95 form the Management Report for the purposes
of DTR 4.1.5R.
Both the Strategic Report and the Directors’ Report have been
prepared and presented in accordance English company law
and the liabilities of the Directors in connection with those
reports shall be subject to the limitations and restrictions
provided by such law.
UK CORPORATE GOVERNANCE CODE
As required by the UK Corporate Governance Code 2018 (the
“Code”), p20 to 21 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 p48
to 95 forms part of the Directors’ Report.
DIRECTORS
The biographies of the current Directors who served during
the year in review are shown on p50 to 53. With regard to the
appointment and replacement of Directors, the Company
is governed by its Articles of Association, the Code, the
Companies Act 2006 and related legislation. At the 2020
Annual General Meeting all of the Directors will retire and will
offer themselves for re-election with the exception of Vicky
Mitchell and Rachel Izzard who will be seeking ratification of
their appointments to the Board. All Non-Executive Directors
serve on letters of appointment stipulating three-year terms.
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.
Details of Directors’ interests (beneficial and non-beneficial)
in shares of the Group are given in the Remuneration Report
on p73 to 90. The powers of the Directors are described in the
Board terms of reference and the Division of Responsibility
section on p58 to 59. 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
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.
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. The Company’s
Articles of Association may only be amended by a special
resolution at a general meeting of shareholders.
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
29 February 2020 and through to the date of this report.
SHARE CAPITAL
Details of the Group’s issued share capital are shown in
note 23 on p143. 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 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.
During the period, 663,083 ordinary shares in the Company
were issued under the terms of the Company’s 2014 Long-
Term Incentive Plan at nominal value. Details of outstanding
employee share options and the operation of the relevant
schemes are shown in note 28 on p146. The Directors have
no current plans to issue shares other than in connection with
employee share options.
91
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Strategic report Financial statements OTHER DISCLOSURES CONTINUED
At the 2019 Annual General Meeting, the Directors were
given the power to issue new shares up to a nominal amount
of £10,505,659. This power will expire on the earlier of the
conclusion of the 2020 Annual General Meeting or 10 July
2020. Accordingly, a resolution will be proposed by Directors
at the 2020 Annual General Meeting to renew the Company’s
authority to issue new shares up to a further nominal amount
of £10,530,106 in connection with an offer by way of a
rights issue.
An approval will be sought at the 2020 general meeting for a
certain number of shares up to a maximum nominal value – to
be allotted pursuant to the authority granted to Directors set
out above without being covered by statutory pre-emption
rights regime. Further information regarding this will be
included in the Notice of the Meeting for the AGM.
As in previous years, authorisation for the Directors to buy
back the Company’s shares will not be sought at the 2019
Annual General Meeting.
RESULTS, DIVIDENDS AND RESERVES
The financial statements set out the Group’s results for the
year ended 29 February 2020 and are contained in p96 to
164. An interim dividend of 2.83p per share (2019: 2.83p)
was paid on the ordinary shares of the Group on 5 February
2020. The net cost of this dividend was £8.0m (2019: £8.0m).
No final dividend will be paid for the year ended 29 February
2020 (2019: 4.27p). Movements in reserves are shown in the
Statement of Changes in Equity on p109.
MAJOR SHAREHOLDERS
In addition to the Directors’ shareholdings shown in the
Remuneration Report on p86 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 15 June 2020:
Shareholder
Holding share
capital
% of issues
Nigel Alliance OBE
UBS Global Asset Mgt (London)
Hargreaves Lansdown Asset Mgt (Bristol)
31,489,256
25,208,735
15,301,028
11.02
8.82
5.35
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.
EMPLOYEE SHARE SCHEMES –
RIGHTS OF CONTROL
The trustees of the N Brown Group plc Employee Benefit
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.
92
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk AUTO-ENROLMENT AND
STAKEHOLDER PENSION
With effect from 1 November 2015, Zurich was appointed
as provider for all qualifying employees. As at 1 March 2020,
86% of all employees were members of a qualifying pension
scheme with 2,082 employees being enrolled as at the date of
this report. At the date of this report the opt out rate is 4%.
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.
COMPOSITION OF THE GROUP
During the year there were no corporate acquisitions
or disposals.
TAX STATUS
The Company is not a close company within the meaning of
the Corporation Tax Act 2010.
CHARITABLE AND POLITICAL DONATIONS
During the year, the Group made charitable donations of
£118,238 (2019: £116,377). No political donations have been
made (2019: nil). No contributions have been made to non-EU
political parties (2019: nil).
SUSTAINABILITY
The Group remains committed to ensuring the business
operates sustainably and remains mindful of the impact of
climate change. Further information on our ESG initiatives
and full disclosure of the Group’s energy consumption and
emissions can be found on p38 to p39.
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.
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
auditor is unaware, and each Director has taken all the steps
they ought to have taken as a Director to make themselves
aware of any relevant audit information and to establish that
the Company’s auditor is aware of that information.
INDEPENDENT AUDITOR
The Group’s independent auditor, KPMG LLP, have indicated
their willingness to continue in office and the Audit and Risk
Committee has recommended that KPMG LLP remain in
office. A resolution to reappoint the independent auditor will
be proposed at the AGM. The auditor’s fees for both audit
and non-audit work are given in the Audit and Risk Committee
report on p68.
2020 ANNUAL GENERAL MEETING
The Annual General Meeting will be held at 12:30 on
10 September 2020. 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 be available online and accessible to
all shareholders unless they have specifically requested
to receive hard copies.
GOING CONCERN
The Directors have adopted the going concern basis in the
financial statements and their opinion is explained in note 2
on p118.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Strategic report Financial statements OTHER DISCLOSURES CONTINUED
VIABILITY STATEMENT
As required by the UK Corporate Governance Code, the
Directors have assessed the prospects of the Group.
The period used for this assessment is a three-year period
(consistent with the prior year) i.e. to 4 March 2023, being the
first three years of the five-year strategic planning period.
Over the past year, the Group undertook a detailed strategic
review to develop its strategy to drive profitable, digital
growth. The key pillars to achieve this have been evolved to
reflect the focus of the business and the external environment.
The recent outbreak of Covid-19 has fundamentally altered the
broader landscape and this disruption will likely continue for
the foreseeable future. The Directors believe that the strategy
is the right one to ensure long-term growth but acknowledge
the need to retain operational agility to reflect a fast-changing
environment. For FY21, cash generation and reducing non-
securitised debt will be the primary business objective.
Thereafter, the business will begin a turnaround plan which
rebases our business and creates a platform for growth.
The strategy is set out in more detail on p8 to 17.
Taking into account the current challenges facing the retail
market following the Covid-19 outbreak, the Group’s current
position, its principal risks and uncertainties as described on
p40 to 45 and how these are managed, as well as its FY21 base
and downside planning scenarios as described in note 2 to
the Group accounts on p111, the Directors have assessed the
Group’s prospects and viability.
Although the base 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.
As announced to the market on 19 May 2020 and explained
in detail in note 2, the Group has secured new financing
arrangements with its long-standing, supportive lenders.
Under the base and downside scenarios the new financing
arrangements provide the Group with a strong basis
from which to continue to service its customers and to
manage appropriately the challenges faced by the Group.
The above considerations form the basis of the Board’s
reasonable expectations that the Group will be able to
continue in operation and meet its liabilities as they fall due.
The Directors will maintain oversight of and frequently assess
the performance of the Group against the strategy. This will
include regular reporting by the Group’s Operating Board
and the discussion of any pivots to strategies undertaken by
the Board in its normal course of business. These reviews will
consider both the market opportunity and any associated or
emerging risks to managing its working capital performance
and the level of financial resources available to the Group.
The 3-year plan to 4 March 2023 assumes that all borrowings
that mature in the review period will be renewed or replaced
with facilities of similar size on commercially acceptable terms.
This is considered to be a reasonable planning assumption
given actual and planned business performance, however
there is some uncertainty as to whether this can be achieved
given the uncertain future impacts resulting from Covid-19
including the risk that debt markets may not continue to
operate as currently.
As a result a material uncertainty exists that may cast
significant doubt on the Group and Company’s ability to
continue as a going concern arising from the risk that the
Group is unable to refinance its RCF and securitisation
borrowing facilities at commercially acceptable terms when
they mature in September and December 2021 respectively.
As noted in note 2, the Board emphasises that this uncertainty
arises solely due to the Covid-19 pandemic which is entirely
outside the Group’s influence or control.
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 International Financial
Reporting Standards as adopted by the European Union (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:
Select suitable accounting policies and then apply
them consistently;
Make judgements and estimates that are reasonable, relevant,
reliable and prudent;
For the Group financial statements, state whether they have
been prepared in accordance with IFRSs as adopted by
the EU;
For the parent Company financial statements, state whether
applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in
the parent Company financial statements;
Assess the Group and parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
Use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent or to cease
operations or have no realistic alternative but to do so.
94
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 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 are
responsible for such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error, and 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 complies 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.
The Strategic Report on p1 to 47 and the Directors’ Report on
p48 to 95 are hereby approved by the Board and signed on
behalf of the Board.
Theresa Casey LL.B (Hons) (Solicitor)
Company Secretary
24 June 2020
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
The financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole; and
The Strategic Report includes a fair review of the development
and performance of the business and the position of the issuer
and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
We consider the Annual Report, 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.
By order of the Board
Steve Johnson
Chief Executive Officer
24 June 2020
95
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Strategic report Financial statements N Brown Group plc Annual Report and Accounts 2020
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF N BROWN GROUP PLC
CONSOLIDATED STATEMENTS
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
CONSOLIDATED BALANCE SHEET
CONSOLIDATED CASH FLOW STATEMENT
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
NOTES TO THE GROUP ACCOUNTS
COMPANY STATEMENTS
COMPANY BALANCE SHEET
COMPANY STATEMENT
OF CHANGES IN EQUITY
NOTES TO THE COMPANY ACCOUNTS
SHAREHOLDER INFORMATION
97
106
106
107
108
109
110
154
155
156
165
96
nbrown.co.uk INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF N BROWN GROUP PLC
1 OUR OPINION IS UNMODIFIED
We have audited the financial statements of N Brown
Group plc (“the Company”) for the 52 week period ended
29 February 2020 which comprise the consolidated income
statement, consolidated statement of comprehensive income,
consolidated balance sheet, consolidated cash flow statement,
consolidated statement of changes in equity, the Company
balance sheet, the Company statement of changes in equity,
and the related notes, including the accounting policies in
notes 2 and 33.
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 29 February 2020 and of the Group’s profit for the year
then ended;
the Group financial statements have been properly prepared
in accordance with International Financial Reporting Standards
as adopted by the European Union (IFRSs as adopted by
the EU);
the parent Company financial statements have been properly
prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework; and
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities are described below. We believe
that the audit evidence we have obtained is a sufficient
and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the Audit and Risk Committee.
We were first appointed as auditor by the Directors on 14 July
2015. The period of total uninterrupted engagement is for the
five financial years ended 29 February 2020.
We have fulfilled our ethical responsibilities under, and we
remain independent of the Group in accordance with, UK
ethical requirements including the FRC Ethical Standard as
applied to listed public interest entities. No non-audit services
prohibited by that standard were provided.
Overview
Materiality:
Group financial
statements as a whole
£2.80m (2019: £3.24m)
4.4% (2019: 3.7%) of Group profit before tax
excluding exceptional items
Coverage
90% (2019: 100%) of Group profit before tax
Key audit matters
Recurring risks:
vs 2019
New
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.
Impairment of the carrying value of non-current assets
in the core Group cash generating unit (“CGU”) and
carrying amount of parent Company’s investments
in subsidiaries
Capitalised software and development costs
Impairment losses on trade receivables
Carrying value of inventories
Event-Driven:
The impact of uncertainties due to the UK exiting the
European Union on our audit
Allianz legal claim
New
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF N BROWN GROUP PLC
CONTINUED
2 MATERIAL UNCERTAINTY RELATING TO GOING CONCERN
Going concern
We draw attention to note
2 in the financial statements
which indicates that due
to the uncertain economic
outlook resulting from
Covid-19, the group may
not be able to successfully
refinance their facilities
at the end of their terms
and under certain severe
and plausible downside
scenarios, the Group would
need to take appropriate
mitigating actions to remain
compliant with its banking
covenants during the going
concern assessment period.
These events and conditions,
along with other matters
as explained in note 2,
constitute a material
uncertainty that may
cast significant doubt on
the Group’s and Parent
Company’s ability to
continue as a going concern.
Our opinion is not modified
in respect of this matter.
The risk
Disclosure quality
Our response
Our procedures included:
The financial statements explain how the
Board has formed a judgement that it is
appropriate to adopt the going concern
basis of preparation for the group and
Parent Company.
That judgement is based on an
evaluation of the inherent risks to the
Group’s and Company’s business
model and how those risks might
affect the Group’s and Company’s
financial resources or ability to continue
operations over a period of at least
a year from the date of approval of
the financial statements, in this case
the period is considered to be 31
December 2021.
The risk for our audit is whether or not
those risks are such that they amount
to a material uncertainty that may cast
significant doubt about the ability to
continue as a going concern. If so,
that fact is required to be disclosed
(as has been done) and, along with a
description of the circumstances, is a
key financial statement disclosure.
• Funding assessment: We obtained confirmation letters for
loans and cash balances as at 29 February 2020. We obtained
and inspected the new facilities agreements signed during the
year and post year end and assessed the forecasts in light of
new terms to identify any expected future covenant breaches or
liquidity shortfalls.
• Historical comparisons: We compared previous cash flow
forecasts against actual cash flows achieved in the year and in
previous years to assess historical reliability of the forecasting.
• Sensitivity analysis: In conjunction with our restructuring
specialists, we considered sensitivities over the level of available
financial resources indicated by the Group’s financial forecasts
taking account of severe but plausible downsides that could arise
from these risks individually and collectively. We challenged the
directors’ stress testing of a range of sensitivities to the Group’s
revenue and associated costs, cash collections and arrears levels
applied in the calculation of forecast covenants tests.
• Benchmarking assumptions: Using our own restructuring
specialists, we assessed the key assumptions underpinning the
forecasts by evaluating these against our sector knowledge and
external information.
• Evaluating directors’ intent: We evaluated the intent and
achievability of the actions the Directors consider they would
take to improve the position should the risks materialise against
our understanding of the business.
• Assessing transparency: We assessed the completeness and
accuracy of the matters covered in the going concern disclosure
with reference to the outcome of the procedures detailed above.
Our results:
• We found the going concern disclosures of the material
uncertainty to be acceptable.
We are required to report to you if the Directors’ going concern statement under the Listing Rules set out on p93 is materially inconsistent
with our audit knowledge. We have nothing to report in this respect.
98
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 3 KEY AUDIT MATTERS: INCLUDING OUR ASSESSMENT
OF RISKS OF MATERIAL MISSTATEMENT
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. Going concern is a significant key audit matter and is described in section 2
of our report. We summarise below the other key audit matters, in arriving at our audit opinion above, together with our key
audit procedures to address those matters and, as required for public interest entities, our results from those procedures.
These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the
purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental
to that opinion, and we do not provide a separate opinion on these matters.
We continue to perform procedures over taxation and regulatory provisions on our audit. However, following significant
developments of the discussions with HMRC on the related tax treatment disputes and following the passing of the PPI deadline
in August 2019, the estimation uncertainty with respect to the taxation and regulatory provisions held has reduced considerably.
Therefore, we have not assessed these as the most significant risks in our current year audit and they are not separately
identified in our audit report this year.
The impact of
uncertainties due to
the UK exiting the
European Union on
our audit
Refer to p40
(principal risks)
The risk
Unprecedented levels of uncertainty
All audits assess and challenge the
reasonableness of estimates, in particular
as described in impairment of the carrying
value of non-current assets in the core
Group cash generating unit (“CGU”) and
carrying amount of parent Company’s
investments in subsidiaries, impairment
losses on trade receivables, carrying value
of inventories and related disclosures
and the appropriateness of the going
concern basis of preparation of the
financial statements (see above). All of
these depend on assessments of the future
economic and the Group’s future prospects
and performance.
In addition, we are required to consider the
other information presented in the Annual
Report including the principal risk disclosure
and the viability statement and to consider
the Directors’ statement 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.
Brexit is one of the most significant
economic events for the UK and its effects
are subject to unprecedented levels of
uncertainty of consequences, with the full
range of possible effects unknown.
Our response
We developed a standardised firm-wide approach to the consideration
of the uncertainties arising from Brexit in planning and performing our
audits. Our procedures included:
• Our Brexit knowledge: We considered the Directors’ assessment of
Brexit-related sources of risk for the Group’s business and financial
resources compared with our own understanding of the risks. We
considered the Directors’ plans to take action to mitigate the risks.
• Sensitivity analysis: When addressing the impairment of the carrying
value of non-current assets in the core Group CGU and carrying
amount of parent Company’s investments in subsidiaries, impairment
losses on trade receivables and carrying value of inventories, and
other areas that depend on forecasts, we compared the directors’
analysis to our assessment of the full range of reasonably possible
scenarios resulting from Brexit uncertainty and, where forecast cash
flows are required to be discounted, considered adjustments to
discount rates for the level of remaining uncertainty.
• Assessing transparency: As well as assessing individual disclosures
as part of our procedures on the above key audit matters, we
considered all of the Brexit related disclosures together, including
those in the strategic report, comparing the overall picture against
our understanding of the risks.
Our results:
• As reported under the carrying value of non-current assets in the
core Group cash generating unit (“CGU”) and carrying amount of
parent Company’s investments in subsidiaries, impairment losses
on trade receivables, and carrying value of inventories, we found
the resulting estimates and related disclosures of the above key
audit matters and disclosures of the material uncertainty in relation
to going concern to be acceptable. However, no audit should be
expected to predict the unknowable factors or all possible future
implications for a company and this is particularly the case in relation
to Brexit.
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CONTINUED
Impairment of
the carrying value
of non-current
assets in the
core Group cash
generating unit
(“CGU”) and the
carrying amount of
parent company’s
investments
in subsidiaries
Refer to p65 (Audit
and Risk Committee
Report), p113
(accounting policy)
and p132 and
parent company
p163 (financial
disclosures).
Capitalisation
of software and
development costs
£151.4m;
(2019: £143.4m)
Refer to p66 (Audit
and Risk Committee
Report), p113
(accounting policy)
and p132 (financial
disclosures).
The risk
Forecast-based valuation
Our response
Our procedures included:
The carrying value of non-current assets in the core
Group CGU and the carrying amount of parent
company’s investments in subsidiaries, are significant
and there are indicators of impairment due to the
market capitalisation of the group continuing to be
lower than the carrying value of net assets of the Group
and of the parent company, continuing pressure on the
share price of the Group, under-performance in trading
versus market expectation.
The estimated recoverable amount of these balances
is subjective due to the inherent uncertainty involved
in forecasting and discounting future cash flows which
forms the basis of the Group’s value in use calculation
and assessment of the carrying amount of the parent
Company’s investments in subsidiaries.
The effect of these matters is that, as part of our risk
assessment, we determined that the value in use
of the core Group cash generating unit (‘CGU’) and
carrying amount of the parent company’s investments
in subsidiaries have a high degree of estimation
uncertainty, with a potential range of outcomes greater
than our materiality for the financial statements as a
whole, and possibly many times that amount.
The financial statements (note 12) disclose the sensitivity
estimated by the Group.
• Benchmarking assumptions: We challenged with
the support of our own valuation specialists, the key
assumptions used in the value in use calculations by
comparing them to externally derived data in relation to
key inputs such as projected economic growth, discount
rates and cost inflation.
• Historical comparisons: We compared previous financial
period’s forecasts against actual results to assess the
reliability of the current period’s forecasts.
• Sensitivity analysis: We performed breakeven analysis on
the key assumptions, including the discount rate, EBITDA
growth and long-term growth rates.
• Comparing valuations: We compared the sum of
the discounted cash flows to the group’s market
capitalisation to assess the reasonableness of those cash
flows and discount rate.
• Assessing transparency: We assessed whether the
Group and parent company’s disclosures about the
sensitivity of the outcome of the impairment assessment
to changes in key assumptions, reflected the risks
inherent in the valuation of the group.
Our results:
• We found the carrying values of the non-current assets
in the core Group CGU and the parent company’s
investments in subsidiaries to be acceptable.
Accounting treatment:
Our procedures included:
The Group has incurred significant software and
development project costs in the current year in respect
of 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 that the
development relates to technically feasible systems
and websites.
Judgements are thus involved in determining whether
the software and development costs can be capitalised.
The level of risk has increased in the year given the
increased pressure to improve results following the
group’s profit warning in January 2020 and share price
fall around the year end.
• Test of detail: We agreed a statistical sample of costs
capitalised to external invoices, internal timesheets
or other relevant documentation, to determine the
nature of the items and evaluate the appropriateness
of their classification as capitalised costs, by reference
to the recognition criteria of the applicable accounting
standards.
• Our experience: With assistance from our IT specialist,
we challenged the Group’s assessment of technical
feasibility of the projects based on our discussions with
key project leads and inspection of project plans, Board
meeting minutes and performance to date.
• Assessing transparency: We considered the adequacy
of the Group’s disclosures in respect of capitalisation of
software and development of intangible assets.
Our results:
• We found the capitalisation of software and
development costs to be acceptable (2019: acceptable).
100
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Impairment
losses on
trade receivables
£71.7m;
(2019: £97.1m)
Refer to p66 (Audit
and Risk Committee
Report), p115
(accounting policy)
and p134 (financial
disclosures).
The risk
Subjective estimate:
Our response
Our procedures included:
The calculation of the impairment provision on trade
receivables includes a number of subjective judgements
and estimates, such as the determination of significant
increases in credit risk (“SICR”), lifetime and 12 month
probability of default (“PD”), loss given default (“LGD”)
and the macro-economic variables (“MEVs”).
There is a risk that the impairment allowances for trade
receivables is misstated as a result of inappropriate
judgements or estimates made by management. This
risk is heightened in the current year given the pressure
to improve the group’s results following the group’s
profit warning in January 2020 and share price fall
around the year end.
The effect of these matters is that, as part of our risk
assessment, we determined that the impairment
allowances on trade receivables has a high degree
of estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for
the financial statements as a whole, and possibly many
times that amount. The financial statements (note 2)
disclose the sensitivity estimated by the Group.
• Our expertise: Together with our financial risk modelling
specialists, we critically assessed the methodology for
determining SICR and tested the staging allocation with
reference to the SICR thresholds. With the support of
economic specialists, we also performed an assessment
of the macro-economic variables included within the
provision. We performed sensitivity analysis over SICR
and MEVs to assess how the model would perform under
alternative assumptions and the resulting impact on the
provision.
• Test of detail: We critically assessed the key
assumptions in the impairment calculation against
historical experience where appropriate, such as PD
and LGD. We tested on a sample basis the accuracy
and completeness of underlying data used in the key
assumptions, inspecting a sample to relevant source data
We critically assessed the validity and appropriateness
of management manual overlays to the model, based
on our understanding of the customers under payment
arrangements and wider macro-economic scenarios.
• Analytical procedures: We analytically assessed IFRS
9 key model outputs against underlying customer
behaviour and our understanding of the Groups
refinements to assumptions to identify unexpected
trends and results.
• Benchmarking assumptions: We critically assessed key
assumptions: SICR, LGD and MEVs in the model against
recent performance, industry developments, forecasted
economic conditions, comparative firms in the wider
market and our understanding of the Group.
• Assessing transparency: We assessed the adequacy of
the Group’s disclosures about the degree of estimation
involved in arriving at the impairment losses on trade
receivables.
Our results
• We found the impairment losses on trade receivables to
be acceptable (2019: acceptable).
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF N BROWN GROUP PLC
CONTINUED
Carrying value
of inventories
£94.9m; (2019:
restated £112.3m)
Refer to p66 (Audit
and Risk Committee
Report), p114
(accounting policy)
and p134 (financial
disclosures).
The risk
Subjective estimate:
Our response
Our procedures included:
The Group has significant levels of inventory
and a number of judgements and estimates are
made in estimating provisions for aged or slow-
moving inventories.
Furthermore, the seasonal nature of retail business
and changes in customer preferences and spending
patterns, primarily driven by the wider fashion
industry, introduces uncertainty over the recoverability
of inventories.
The level of risk has increased in the year given the
increased pressure to improve results following the
group’s profit warning in January 2020 and share price
fall around the year end.
The effect of these matters is that, as part of our risk
assessment, we determined that the carrying value of
inventories has a high degree of estimation uncertainty,
with a potential range of reasonable outcomes greater
than our materiality for the financial statements as
a whole.
• Test of detail: We compared aged inventory levels in
the current financial year against the prior financial year
to identify categories with significant slow moving or
obsolete inventories. We compared current and some of
the significant aged inventory levels to current financial
year sales data to check whether slow moving and
obsolete inventories have been appropriately identified.
We tested the adequacy of the inventory provision
by comparing the average selling price in the year of
inventory items to the cost of the inventory at year end.
Compared selling prices of inventory around the year
end to the cost of inventory for a statistical sample of
aged items. We compared the value of write offs and
scrapped items in the financial years to historic inventory
provisions.
• Our specialist expertise: With the assistance of our own
data analytics specialists, we derived our expectation
of the year end provision for the aged inventory based
on historical sales data and expected future sales routes
and compared this against the corresponding year end
provision held.
• Assessing transparency: We considered the adequacy of
the Group’s disclosures in respect of the judgement and
estimation made in respect of the inventory provisioning.
Our results:
• We found the carrying amount of inventories to be
acceptable (2019: acceptable).
Allianz legal claim
Dispute outcome:
Our procedures included:
Refer to p66 (Audit
and Risk Committee
Report), p118
(accounting policy)
and p145 (financial
disclosures).
In the normal course of business for the Group,
potential exposures may arise from disputes relating
to regulatory matters. Whether there is a liability is
inherently uncertain.
A legal claim from Allianz has been received during the
year and this has been disclosed as a contingent liability.
The amounts involved are potentially significant, and
the application of accounting standards to determine
whether a liability should be recognised requires the
exercise of significant judgement.
• Enquiry of lawyers: On the Allianz legal claim received
during the year, together with the help of our own
compliance specialists, we inspected correspondence
with Group’s external counsel and held discussions with
in-house legal counsel.
• Our compliance expertise: With the assistance of our
own compliance specialists, we assessed the facts,
complexities and uncertainties of the claim received to
evaluate whether a reliable estimate of the amount of any
potential settlement could be determined.
• Assessing transparency: We assessed whether the
Group’s related disclosures adequately disclose the
potential liability of the Group.
Our results
• We found the judgement made and the contingent
liability disclosures to be acceptable.
102
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 4 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 £2.80m (2019: £3.24m), determined with reference to a
benchmark of Group profit before tax, normalised to exclude
exceptional items, as disclosed in note 6 (of which it represents
4.4% (2019: 3.7%).
Materiality for the parent Company financial statements as
a whole was set at £2.10m (2019: £2.71m), determined with
reference to a benchmark of Company total assets, of which it
represents 0.5% (2019: 0.6%).
We agreed to report to the Audit and Risk Committee
any corrected or uncorrected identified misstatements
exceeding £140,000 (2019: £160,000), in addition to other
identified misstatements that warranted reporting on
qualitative grounds.
Of the Group’s 33 reporting components, we subjected four
to full scope audits for Group purposes, and one to specified
risk-focused audit procedures over cash. The latter was not
individually financially significant enough to require a full
scope audit for group purposes but did present specific
individual risks that needed to be addressed.
For the residual components, we performed analysis at an
aggregated group level and at a disaggregated entity level, to
re-examine our assessment that there were no significant risks
of material misstatement within these.
In prior year, the Group team performed the audit of the
Group as if it was a single aggregated set of financial
information including procedures on the exceptional items
excluded from group profit before tax excluding exceptional
items. The audit was performed using the Group materiality
level set out above.
The work on the 5 components, including the audit of the
parent company was performed by the group team.
The component materialities ranged from £0.49m to £2.49m
having regard to the mix of size and risk profile of the Group
across the components.
The Group team performed procedures on the items excluded
from normalised Group profit before tax.
GROUP PROFIT BEFORE
TAX NORMALISED TO
EXCLUDE EXCEPTIONAL
ITEMS £64.2M
(2019: £88.1m)
GROUP MATERIALITY
£2.8M
(2019: £3.24m)
£2.80m
Whole financial statements
materiality (2019: £3.24m)
£2.49m
Range of materiality
at 5 components
(£0.49m–£2.49m)
£0.14m
Misstatements reported
to the Audit and Risk
Committee (2019: £0.16m)
Normalised PBT
Group materiality
GROUP REVENUE
GROUP PROFIT AND
LOSSES BEFORE TAX
3
1
10
97%
(2019: 100%)
100
97
90%
(2019: 100%)
100
89
GROUP TOTAL ASSETS
4
6
96%
(2019: 100%)
100
90
Full scope for Group audit purposes 2020
Audit of specific account balances for Group purposes 2020
Full scope for Group audit purposes 2019
Residual components
103
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF N BROWN GROUP PLC
CONTINUED
Under the Listing Rules we are required to review the Viability
Statement. We have nothing to report in this respect.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgments that were reasonable at the
time they were made, the absence of anything to report on
these statements is not a guarantee as to the Group’s and
Company’s longer-term viability.
CORPORATE GOVERNANCE DISCLOSURES
We are required to report to you if:
we have identified material inconsistencies between the
knowledge we acquired during our financial statements 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 section of the Annual Report describing the work of
the Audit and Risk Committee does not appropriately
address matters communicated by us to the Audit and
Risk Committee.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the
provisions of the UK Corporate Governance Code specified by
the Listing Rules for our review.
We have nothing to report in these respects.
6 WE HAVE NOTHING TO REPORT ON
THE OTHER MATTERS ON WHICH WE ARE
REQUIRED TO REPORT BY EXCEPTION
Under the Companies Act 2006, we are required to report to
you if, in our opinion:
Aadequate 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.
We have nothing to report in these respects.
5 WE HAVE NOTHING TO REPORT ON
THE OTHER INFORMATION IN THE
ANNUAL REPORT
The Directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated
or inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
STRATEGIC REPORT AND DIRECTORS’ REPORT
Based solely on our work on the other information:
we have not identified material misstatements in the Strategic
Report and the Directors’ Report;
in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
DIRECTORS’ REMUNERATION REPORT
In our opinion the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006.
DISCLOSURES OF EMERGING AND PRINCIPAL
RISKS AND LONGER-TERM VIABILITY
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:
The Directors’ confirmation within the Viability Statement
p94 that they have carried out a robust assessment of the
emerging and principal risks facing the Group, including those
that would threaten its business model, future performance,
solvency and liquidity;
The Principal Risks disclosures describing these risks and
explaining how they are being managed and mitigated; and
The Directors’ explanation in the Viability Statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that period
to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
104
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 7 RESPECTIVE RESPONSIBILITIES
DIRECTORS’ RESPONSIBILITIES
As explained more fully in their statement set out on p95, the
directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and
fair view; such internal control as they determine is necessary
to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or
error; assessing the Group and parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern; and using the going concern basis
of accounting unless they either intend to liquidate the Group
or the parent Company or to cease operations, or have no
realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or other
irregularities (see below), or error, and to issue our opinion in
an auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from
fraud, other irregularities or error and are considered material
if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken
on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
IRREGULARITIES – ABILITY TO DETECT
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the
financial statements from our general commercial and
sector experience, through discussion with the Directors
and other management (as required by auditing standards)
and from inspection of the Group’s regulatory and legal
correspondence and discussed with the Directors and
other management the policies and procedures regarding
compliance with laws and regulations. We communicated
identified laws and regulations throughout our team and
remained alert to any indications of non-compliance
throughout the audit.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation (including related companies legislation),
distributable profits legislation, taxation legislation and FCA
legislation and we assessed the extent of compliance with
these laws and regulations as part of our procedures on the
related financial statement items.
Secondly, the Group is subject to many other laws and
regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in the
financial statements, for instance through the imposition of
fines or litigation. We identified the following areas as those
most likely to have such an effect: health and safety, anti-
bribery, employment law, regulatory capital and liquidity
and certain aspects of company legislation recognising
the financial and regulated nature of the Group’s activities.
Auditing standards limit the required audit procedures to
identify non-compliance with these laws and regulations
to enquiry of the Directors and other management and
inspection of regulatory and legal correspondence, if any.
Through these procedures, we became aware of actual or
suspected non-compliance and considered the effect as part
of our procedures on the related financial statement items.
The identified actual or suspected non-compliance was not
sufficiently significant to our audit to result in our response
being identified as a key audit matter.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we
have properly planned and performed our audit in accordance
with auditing standards. For example, the further removed
non-compliance with laws and regulations (irregularities) is
from the events and transactions reflected in the financial
statements, the less likely the inherently limited procedures
required by auditing standards would identify it. In addition, as
with any audit, there remained a higher risk of non-detection
of irregularities, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override
of internal controls. We are not responsible for preventing
non-compliance and cannot be expected to detect non-
compliance with all laws and regulations.
8 THE PURPOSE OF OUR AUDIT
WORK AND TO WHOM WE OWE
OUR RESPONSIBILITIES
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Company’s members those matters
we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than
the Company and the Company’s members, as a body, for our
audit work, for this report, or for the opinions we have formed.
Stuart Burdass (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square, Manchester M2 3AE
24 June 2020
105
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report GROUP ACCOUNTS
CONSOLIDATED INCOME STATEMENT
52 weeks ended 29 February 2020
52 weeks ended 2 March 2019
Revenue
Credit account interest
Total revenue (including credit interest)
Cost of sales
Impairment losses on customer receivables
Profit on sale of customer receivables
Net impairment charge
Gross profit
Operating profit/(loss)
Finance costs
Profit/(Loss) before taxation and fair value adjustments to
financial instruments
Fair value adjustments to financial instruments
Profit/(Loss) before taxation
Taxation
Profit/(Loss) for the period
Profit/(Loss) attributable to equity holders of the parent
Earnings/(Loss) per share from continuing operations
Basic
Diluted
4
4
4
4,5
8
18
9
11
11
Before
exceptional
items
£m
594.9
263.3
858.2
Exceptional
items
(note 6)
£m
–
–
–
Note
4
3,4
(290.7)
(133.9)
6.3
(127.6)
439.9
76.6
(17.1)
59.5
4.7
64.2
(13.8)
50.4
(0.3)
–
–
–
(0.3)
(28.5)
–
(28.5)
–
(28.5)
5.5
(23.0)
Before
exceptional
items
£m
647.2
267.2
914.4
Exceptional
items
(note 6)
£m
–
–
–
(308.4)
(119.0)
10.7
(108.3)
497.7
97.9
(14.3)
83.6
4.5
88.1
(23.7)
64.4
–
–
–
–
–
(145.6)
–
(145.6)
–
(145.6)
22.9
(122.7)
Total
£m
594.9
263.3
858.2
(291.0)
(133.9)
6.3
(127.6)
439.6
48.1
(17.1)
31.0
4.7
35.7
(8.3)
27.4
Total
£m
647.2
267.2
914.4
(308.4)
(119.0)
10.7
(108.3)
497.7
(47.7)
(14.3)
(62.0)
4.5
(57.5)
(0.8)
(58.3)
50.4
(23.0)
27.4
64.4
(122.7)
(58.3)
9.63
9.62
(20.50)
(20.50)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Profit/(Loss) for the period
Items that will not be reclassified subsequently to profit or loss
Actuarial gains on defined benefit pension schemes
Tax relating to items not reclassified
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Total comprehensive income/(expense) for the period attributable to equity holders of the parent
Note
29
9
52 weeks
ended
29 February
2020
£m
27.4
52 weeks
ended
2 March
2019
£m
(58.3)
0.8
(0.3)
0.5
0.2
28.1
3.9
(4.9)
(1.0)
0.7
(58.6)
106
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk CONSOLIDATED BALANCE SHEET
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Retirement benefit surplus
Derivative financial instruments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total assets
Current liabilities
Bank overdraft
Provisions
Trade and other payables
Lease liability
Derivative financial instruments
Current tax liability
Net current assets
Non-current liabilities
Bank loans
Lease liability
Provisions
Derivative financial instruments
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
* Refer to prior year adjustment note 32.
As at
29 February
2020
£m
Note
As at
2 March
2019
(restated*)
£m
As at
4 March
2018
(restated*)
£m
12
13
27
29
18
20
15
16
18
25
17
22
21
27
18
17
27
18
20
23
24
151.4
62.6
5.6
26.3
1.3
13.2
260.4
94.9
614.4
4.0
47.5
760.8
1,021.2
–
(11.1)
(110.5)
(2.2)
(1.3)
(13.8)
(138.9)
621.9
(544.6)
(4.7)
–
(0.9)
(14.6)
(564.8)
(703.7)
317.5
31.4
11.0
(0.3)
3.0
272.4
317.5
145.2
59.4
–
23.9
–
18.8
247.3
112.3
619.8
–
43.7
775.8
1,023.1
(11.4)
(24.8)
(152.2)
–
(1.5)
(7.1)
(197.0)
578.8
(500.2)
–
–
–
(14.5)
(514.7)
(711.7)
311.4
31.4
11.0
(0.3)
2.8
266.5
311.4
156.0
67.4
–
19.3
–
2.8
245.5
126.8
652.7
–
58.2
837.7
1,083.2
–
(43.8)
(147.9)
–
(6.0)
(3.3)
(201.0)
636.7
(405.0)
–
(5.4)
–
(12.2)
(422.6)
(623.6)
459.6
31.4
11.0
(0.2)
2.1
415.3
459.6
t
r
o
p
e
r
e
c
n
a
n
r
e
v
o
G
The financial statements of N Brown Group plc (Registered Number 814103) were approved by the Board of Directors and
authorised for issue on 24 June 2020.
They were signed on its behalf by:
Craig Lovelace
CFO and Executive Director
107
Governance report Financial statementsStrategic report N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk
GROUP ACCOUNTS CONTINUED
CONSOLIDATED CASH FLOW STATEMENT
Net cash inflow/(outflow) 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
Principal elements of lease payments
Purchase of shares by ESOT
Proceeds on issue of shares held by ESOT
Net cash inflow from financing activities
Net foreign exchange difference
Net increase/(decrease) in cash and cash equivalents and bank overdraft
Cash and cash equivalents and bank overdraft at beginning of period
Cash and cash equivalents and bank overdraft at end of period
RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW
FROM OPERATING ACTIVITIES
Profit/(Loss) for the period
Adjustments for:
Taxation charge
Fair value adjustments to financial instruments
Net foreign exchange difference
Finance costs
Depreciation of right-of-use assets
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Loss on disposal of intangible assets
Impairment of intangible assets
Impairment of property, plant and equipment
Amortisation of intangible assets
Share option (credit)/charge
Operating cash flows before movements in working capital
Decrease in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Decrease in provisions
Pension obligation adjustment
Cash generated/(utilised) by operations
Taxation received/(paid)
Net cash inflow/(outflow) from operating activities
* Refer to prior year adjustment note 32.
108
For the
52 weeks
ended
29 February
2020
£m
51.4
For the
52 weeks
ended
2 March
2019
£m
(37.1)
Note
(6.5)
(33.2)
(39.7)
(17.8)
(20.1)
44.4
(3.5)
(0.1)
–
2.9
0.6
15.2
32.3
47.5
(3.4)
(32.9)
(36.3)
(15.4)
(32.2)
95.2
–
(0.1)
–
47.5
–
(25.9)
58.2
32.3
25
For the
52 weeks
ended
29 February
2020
£m
27.4
8.3
(4.7)
(0.6)
17.1
1.3
4.2
–
–
1.8
–
24.7
(1.3)
78.2
16.6
5.5
(41.1)
(10.9)
(0.7)
47.6
3.8
51.4
For the
52 weeks
ended
2 March
2019
(Restated*)
£m
(58.3)
0.8
(4.5)
–
14.3
–
4.9
5.0
0.7
17.8
1.5
25.2
0.1
7.5
14.5
(32.8)
0.7
(24.4)
(0.5)
(35.0)
(2.1)
(37.1)
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk CHANGES IN LIABILITIES FROM FINANCING ACTIVITIES
Loans and borrowings
Balance brought forward
Changes from financing cash flows
Net proceeds from loans and borrowings
Leases recognised at transition of IFRS 16
New leases entered into in the period
Lease payments in the period
Increase in loans and borrowings due to interest
Increase in bank loans
Balance at 29 February 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Balance at 4 March 2018
Comprehensive income for the period
Loss for the period
Other items of comprehensive loss for the period
Total comprehensive gain/(loss) 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 2 March 2019
Changes in equity for the 52 weeks ended 29 February 2020
Balance at 2 March 2019
Adjustment on initial application of IFRS 16 (net of tax)
Balance at 3 March 2019
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 credit
Adjustment to equity for share payments
Tax on items recognised directly in equity
Total contributions by and distributions to owners
Balance at 29 February 2020
Share
capital
(note 23)
£m
31.4
Share
premium
£m
11.0
Own
shares
(note 24)
£m
(0.2)
–
–
–
–
–
–
–
–
31.4
31.4
–
31.4
–
–
–
–
–
–
–
–
–
31.4
–
–
–
–
–
–
–
–
11.0
11.0
–
11.0
–
–
–
–
–
–
–
–
–
11.0
–
–
–
–
(0.1)
–
–
(0.1)
(0.3)
(0.3)
–
(0.3)
–
–
–
–
–
–
–
–
–
(0.3)
Foreign
currency
translation
reserve
£m
2.1
–
0.7
0.7
–
–
–
–
–
2.8
2.8
–
2.8
–
0.2
0.2
–
–
–
–
–
–
3.0
52 weeks to
29 February
2020
£m
52 weeks to
2 March
2019
£m
500.2
405.0
43.2
9.5
0.9
(3.6)
1.3
51.3
551.5
Retained
earnings
£m
358.3
(58.3)
(1.0)
(59.3)
(32.2)
–
0.1
(0.4)
(32.5)
266.5
266.5
(0.5)
266.0
27.4
0.5
27.9
(20.1)
–
(1.3)
(0.1)
–
(21.5)
272.4
94.1
–
–
–
1.1
95.2
500.2
Total
£m
402.6
(58.3)
(0.3)
(58.6)
(32.2)
(0.1)
0.1
(0.4)
(32.6)
311.4
311.4
(0.5)
310.9
27.4
0.7
28.1
(20.1)
–
(1.3)
(0.1)
–
(21.5)
317.5
109
Governance report Financial statementsStrategic report N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 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 p165 at the end of the report. The nature of the
Group’s operations and its principal activities are set out
on p120.
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 52 weeks ended
29 February 2020 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 and these are presented on p154 to 164.
The Directors have concluded that due to the uncertain
economic outlook resulting from Covid-19 there is a
material uncertainty as to the ability of the Group to
successfully refinance its borrowing facilities at commercially
acceptable terms. This is explained further in note 2 (Going
Concern section).
The accounting policies have been applied consistently in the
current and prior period except where noted otherwise.
ADOPTION OF NEW AND REVISED STANDARDS
At the date of authorisation of these financial statements, the
following standards and interpretations were in issue but have
not been applied in these financial statements as they were
not yet mandatory:
IFRS 17 “Insurance Contracts”
“Classification of Liabilities as Current or Non-Current
(Amendments to IAS 1)”
“Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS
39 and IFRS 7)”
“Definition of Material (Amendments to IAS 1 and IAS 8)”
“Definition of a Business (Amendments to IFRS 3)”
Revised “Conceptual Framework” and “Amendments to
References to the Conceptual Framework in IFRS Standards”
“Covid-19-Related Rent Concessions amendment to IFRS 16”
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.
110
The following accounting standards and interpretations
became effective this financial year and have been applied
for the first time in these financial statements:
IFRS 16 “Leases”
“Annual Improvements to IFRS Standards 2015-2017 Cycle”
“Plan Amendment, Curtailment or Settlement
(Amendments to IAS 19)”
“Long-term Interests in Associates and Joint Ventures
(Amendments to IAS 28)”
“Prepayment Features with Negative Compensation
(Amendments to IFRS 9)”
IFRIC 23 “Uncertainty over Income Tax Treatments”
None of these new standards and interpretations have had any
material impact on the financial statements, other than IFRS 16
as explained below.
IFRS 16 LEASES
The Group has adopted IFRS 16 on 3 March 2019 using the
modified retrospective approach. The Group elected to use
the recognition exemptions for lease contracts that, at the
commencement date, have a lease term of 12 months or less
and do not contain a purchase option, and for lease contracts
for which the underlying asset is of low value. The Group
have also applied the practical expedients to apply a single
discount rate over all leases with similar characteristics.
Included in the contracts being transitioned to IFRS 16 are
the store portfolio which is in the process of being exited.
All right-of-use assets have been measured at an amount
equal to the lease liability adjusted for prepaid or accrued
lease payments. The Group has elected to offset the onerous
lease provision held in respect of the store portfolio and other
vacant properties against the right-of-use asset.
IFRS 16 impacts the presentation of the Group consolidated
financial statements introducing a single, on-balance sheet
lease accounting model for lessees. A lessee recognises a right-
of-use asset representing its right to use the underlying asset
and a corresponding lease liability representing its obligation
to make lease payments. Lease liabilities are measured at the
present value of the remaining lease payments, discounted
at the incremental borrowing rate of 2.8% approximated at
the transition date to the Group’s weighted cost of borrowing
reflecting the rate the Group would have to pay to borrow the
funds necessary to obtain assets of similar value to the right-of-
use assets, in a similar economic environment with similar terms,
security and conditions. Right-of-use assets are depreciated on
a straight-line basis over the shorter of estimated useful life and
the lease term.
The effect of IFRS 16 at adoption is as follows:
Impact on the Consolidated balance sheet as at 3 March 2019:
Right-of-use assets of £6.2m were recognised and presented
separately in the balance sheet.
Additional lease liabilities of £9.5m were recognised and
presented separately in the balance sheet.
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk MEASUREMENT OF LEASE LIABILITIES
The table below reconciles the operating lease commitments
disclosed in the prior year financial statements in accordance
with IAS 17 to the lease liability recognised in the opening
balance sheet for the current financial year.
Operating lease commitments disclosed
as at 2 March 2019
Discounted using the incremental borrowing rate
at the date of initial application
(Less): low value leases not recognised as a liability
Add: Other amounts recognised at transition
Lease liability recognised as at 3 March 2019
£m
8.1
7.3
(2.0)
4.2
9.5
The impact on retained earnings at 3 March 2019 was
a decrease of £0.5m, due to the recognition of the net
investment on subleases where the Group holds property
sublet at a lower rental than the head lease cost incurred by
the Group. £4.2m other amounts recognised at transition
consisted of other contracts identified as leases on transition
to IFRS 16.
Further information relating to the closing balance sheet
position and profit and loss impact on the current financial
year are included in note 27.
2 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 2020 means at 29 February 2020 or the
52 weeks then ended; reference to 2019 means at 2 March
2019 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.
SECURITISATION
Where the Group securitises its own financial assets, this is
achieved through the sale of these assets to a securitisation
trust (the “Trust”), which is financed through the issuance of
loan notes to a number of funders. The Trust used to hold the
securitised receivables and funds raised by the issued loan
notes is controlled by N Brown Group plc due to the Group
retaining the risks and rewards over the financial assets and
issued loan notes; as such it is consolidated under IFRS 10
Consolidated Financial Statements. The Group therefore
continues to recognise the receivables in full and the amounts
repayable under the securitised borrowing is presented as a
bank loan.
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.
Product revenue is recognised in accordance with IFRS 15, with
the sale of a product.
In the case of goods sold through our trading websites and
other routes, including goods delivered to the customers
directly from suppliers, revenue is recognised when goods
are delivered to the customer and therefore control is
transferred to the customer. In regards to goods directly
despatched to the customer from suppliers, the Group has
the ability to direct the use of, and obtain substantially all of
the benefits from the specified goods. More specifically, the
Group is responsible for providing the specified goods to the
customer, has inventory risk prior to these being transferred
to the customer and has significant influence over the pricing
of the goods, therefore it is acting as the principal in these
arrangements. Revenue from direct despatch sales is therefore
recognised gross.
Sales returns in the period are recognised as a deduction
to revenue based on expected levels of returns. 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
against trade receivables. Inventory expected to come back
as a result of returns is recorded as a reduction in cost of sales
with a corresponding entry to increase the closing stocks.
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2 ACCOUNTING POLICIES CONTINUED
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. Effective interest rate is
the rate that exactly discounts estimated future cash receipts
through the expected life of the financial assets to that asset’s
gross carrying amount, being its amortised cost excluding
expected credit losses. Interest income from stage 1 and
2 trade receivables is recognised by applying the effective
interest rate to the gross carrying amount of the asset; for
stage 3 trade receivables, the effective interest rate is applied
to the net carrying amount after deducting the allowance for
expected credit losses.
Revenue from non-interest related financial services income
primarily comprises administration fees arising from missed
payments by customers and is recognised when the
associated arrears management activity has been performed.
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:
Land and Buildings
Freehold buildings
Leasehold property and
improvements
Fixtures and Equipment
Computer equipment
Plant and machinery
Fixtures and fittings
2%
over the period of the lease
between 10% and 20%
between 5% and 20%
between 10% and 20%
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
Any borrowing costs directly attributable to the acquisition,
development or production of qualifying assets 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.
RIGHT-OF-USE ASSETS
The Group recognises right-of-use assets at the
commencement date of the lease (i.e., the date
the underlying asset is available for use).
112
Right-of-use assets are measured at the amount of the
initial measurement of the lease liability, plus any lease
payments made prior to commencement date, initial direct
costs, and estimated costs of restoring the underlying
asset to the condition required by the lease, less any lease
incentives received.
Unless the Group is reasonably certain to obtain ownership of
the leased asset at the end of the lease term, the recognised
right-of-use assets are depreciated on a straight-line basis
over the shorter of its estimated useful life and the lease term.
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 development 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.
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
At each balance sheet date, the Group reviews the carrying
value of its tangible and intangible assets (including right-
of-use 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 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.
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 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.
Impairment losses recognised in prior periods are assessed
at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed only
to the extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised. A reversal of an impairment loss is recognised in
the income statement immediately.
INVENTORIES
Inventories have been valued at the lower of cost and net
realisable value. Provision is made based on management’s
estimates of future disposal strategies. Cost comprises of
direct materials calculated on a first-in-first-out basis and those
overheads that have been incurred in bringing inventories to
their present location and condition based on the standard
costing method. Net realisable value means estimated
selling price less all costs to be incurred in marketing, selling
and distribution.
Stock in transit is recognised where control of the goods has
transferred to the Group, following acceptance of the asset
and the transfer of the risks and rewards associated with it.
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 statements of the individual
companies, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the
rates of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and liabilities
that are denominated in foreign currencies are retranslated at
the rates prevailing on the balance sheet date. Non-monetary
items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date
when the fair value was determined. Non-monetary items that
are measured in terms of historical cost in a foreign currency
are not retranslated.
Exchange differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are
included in profit or loss for the period. Exchange differences
arising on the retranslation of non-monetary items carried at
fair value are included in profit or loss for the period except
for differences arising on the retranslation of non-monetary
items in respect of which gains and losses are recognised
directly in equity. For such non-monetary items, any exchange
component of that gain or loss is also recognised directly
in equity.
In order to hedge its exposure to certain foreign exchange
risks, the Group may enter into forward contracts and options
(see below for details of the Group’s accounting policies in
respect of such derivative financial instruments).
For the purpose of presenting consolidated financial
statements, the assets and liabilities of the Group’s foreign
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.
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FINANCIAL INSTRUMENTS – CLASSIFICATION –
FINANCIAL ASSETS
IFRS 9 contains a classification and measurement approach
for financial assets that reflects the business model in which
assets are managed and their cash flow characteristics.
In assessing whether the contractual cash flows are solely
payments of principal and interest the Group considers the
contractual terms of the instrument. This includes assessing
whether the financial asset contains a contractual term that
could change the timing or amount of contractual cash flows
such that it would not meet this condition. In making this
assessment the Group considers:
IFRS 9 contains three principal classification categories for
financial assets: measured at amortised cost; fair value through
other comprehensive income (“FVOCI”); and fair value
through profit and loss (“FVTPL”). The Group has determined
that all of the trade and other receivables are classified as
amortised cost, as a financial asset is measured at amortised
cost if both the following conditions are met and it has not
been designated as at FVTPL:
all such assets are held within a business model whose objective
is to hold the asset to collect its contractual cash flows; and
the contractual terms of all such assets give rise to cash flows
on specified dates that represent payments of solely principal
and interest on the outstanding principal amount.
The Group makes an assessment of the objective of the
business model in which a financial asset is held at a portfolio
level because this best reflects the way the business is
managed and information is provided to management.
The information considered includes:
the stated policies and objectives for the portfolio and the
operation of those policies in practice. These include whether
management’s strategy focuses on earning contractual
interest income or realising cash flows from the sale of assets;
how the performance of the portfolio is evaluated and
reported to the Group’s management;
the risks that affect the performance of the business model
and how those risks are managed;
how managers of the business are compensated; and
the frequency, volume and timing of sales of financial assets
in prior periods, the reasons for such sales and expectations
about future sales activity.
For the purpose of this assessment “principal” is defined
as the fair value of the financial asset on initial recognition.
Interest is defined as the consideration for the time value of
money and for the credit risk associated with the principal
amount outstanding during a particular period of time and
for other basic lending risks and costs (e.g. liquidity risk and
administration costs), as well as a profit margin.
contingent events that would change the amount or timing of
cash flows; and
terms that may adjust the contractual coupon rate.
IFRS 9 contains two classification categories for financial
liabilities: measured at amortised cost or fair value through
profit and loss (“FVTPL”). All of the Group’s financial
liabilities other than derivative liabilities are measured at
amortised cost.
FINANCIAL INSTRUMENTS – RECOGNITION
AND MEASUREMENT
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.
All financial assets are recognised and derecognised on a
trade date where the purchase or sale of a financial asset
is under a contract whose terms require delivery of the
financial asset within the timeframe established by the market
concerned. The Group derecognises financial liabilities when,
and only when, the Group’s obligations are discharged,
cancelled or they expire.
Financial assets and financial liabilities are initially measured
at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial
liabilities are added to or deducted from the fair value of
the financial assets or financial liabilities as appropriate on
initial recognition.
Financial assets classified as amortised cost are subsequently
measured using the effective interest method, less any
impairment. Financial liabilities classified as amortised cost
are subsequently measured using the effective interest
method, with interest expense recognised on an effective
yield basis. The effective interest rate method is a method
of calculating amortised cost and of allocating interest
expense over the relevant period. The effective interest rate
is the rate that exactly discounts estimated future cash flows
through the expected life of the financial instrument, or, where
appropriate, a shorter period, to the net carrying amount on
initial recognition;
Financial instruments held at fair value through profit or loss
relate entirely to derivative contracts. As noted below, these
instruments are carried in the balance sheet at their fair
value with changes in the fair value recognised in the income
statement as they arise.
114
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk IMPAIRMENT – FINANCIAL SERVICES AND
CONTRACT ASSETS
The Group recognises an allowance for expected credit losses
(ECLs) for customer and other receivables. IFRS 9 requires an
impairment provision to be recognised on origination of a
customer advance, based on its ECL. Customer receivables
relate to trade receivables included in the Group
balance sheet.
Additional ECL provisions that are recognised in the income
statement are presented as “Impairment losses on customer
receivables”. Any change to ECL provisions required where
there is a difference between sale price and carrying value
at the point of derecognition due to a spot debt sale is
presented in the income statement as “Profit on sale of
customer receivables”.
As the Group has determined there is a significant financing
component, the ECL model introduces the concept of staging.
Stage 1 – assets which have not demonstrated any significant
increase in credit risk since origination
Stage 2 – assets which have demonstrated a significant
increase in credit risk since origination
Stage 3 – assets which are credit impaired (i.e. defaulted)
Under IFRS 9, loss allowances are measured on either
of the following bases:
12-month ECLs: these are ECLs that result from possible
default events within the 12 months after the reporting date;
and
Lifetime ECLs: these are ECLs that result from all possible
default events over the expected life of a financial instrument.
12-month ECLs are calculated for assets in Stage 1 and lifetime
ECLs are calculated for assets in Stages 2 and 3.
ECL is the product of the probability of default (PD), exposure
at default (EAD) and loss given default (LGD), discounted at
the current effective interest rate (EIR). In accordance with
IFRS 9, the current EIR is used as the discount rate because all
trade receivables have a variable interest rate.
The probability of default is an estimate of the likelihood of
default over 12 months (stage 1) or the expected lifetime of
the debt (stage 2). It is 100% for balances within stage 3 as
these have already defaulted. The calculation of PDs is based
on statistical models that utilise internal data, adjusted to take
into account estimates of future conditions.
The exposure at default is an estimate of the exposure at the
date of default and is capped so as not to exceed the balance
outstanding at the reporting date because receivables arising
from future sales are not incorporated into the ECL calculation
as explained below.
The loss given default is an estimate of the loss arising on
default, including an estimation of recoveries based on
the Group’s history of recovery rates from debt sales and
expectations of how these are expected to change in the
future. Recoveries exclude estimated future proceeds from
VAT Bad Debt Relief. Instead VAT Bad Debt relief is recognised
within the net VAT creditor in Other creditors at the point at
which the receivable balance meets the agreed criteria with
HMRC for VAT Bad Debt Relief to apply.
IFRS 9 ordinarily requires an entity to not only consider a
loan, but also the undrawn commitment when calculating
the ECL, where the exposure to credit risk cannot be limited
by the ability to cancel or demand repayment. However,
the guidance in IFRS 9 excludes from its scope a sales
commitment, being the rights and obligations from the
delivery of goods as a result of a contract with a customer
within the scope of IFRS 15. Thus, a sales commitment is not
considered to be a financial instrument, and therefore the
impairment requirements are not applied by the Group until
delivery has occurred and a receivable has been recognised,
at which point the 12-month ECL will be recognised in line with
the above.
SIGNIFICANT INCREASE IN CREDIT RISK
A financial asset will be considered to have experienced a
significant increase in credit risk (SICR) since initial recognition
where there has been a significant increase in the lifetime
probability of default of the asset. The assessment uses
behavioural risk scores (which comprise both internal data
around how customers have been using their accounts and
credit bureau data as to how customers have been managing
their credit obligations with other lenders) to compare the
estimated risk of default occurring at the reporting date with
that at initial recognition to identify the proportional change
in risk score. The SICR threshold is set at the point at which,
in recent historical observations, the proportional change in
risk score resulted in the PD after 12 months for such stage
1 customers being higher than the average PD for stage 2
customers that are one payment in arrears.
Where the proportional change in risk score since initial
recognition exceeds the threshold, the asset will be deemed
to have experienced a significant increase in credit risk.
The credit risk of a financial asset may improve such that
when this threshold is no longer exceeded, it is no longer
considered to have experienced SICR and would move back to
stage 1.
IFRS 9 requires a backstop to be applied whereby a receivable
that is over a certain number of days past due (presumed to
be no later than 30 days) is automatically considered to have
experienced SICR. The backstop applied by the Group is a
receivable that is 28 days or more past due. This period is used
as customers have a 28 day statementing cycle. Days past
due are determined by counting the number of days since the
earliest elapsed due date in respect of which the minimum
payment has not been received. Due dates are determined
without considering any grace period or forbearance that may
have been made available to the borrower.
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DEFINITION OF DEFAULT
At each reporting date, the Group assesses whether financial
assets carried at amortised cost are in default (stage 3).
Evidence that a financial asset is in default includes the
following observable data:
The account has been placed on a non-interest bearing
payment arrangement (as part of forbearance measures);
Notification of bereavement has been received; or
The receivable is 56 days or more days past due for new
customers and 84 days past due for established customers.
DEFINITION OF WRITE OFF
The Group consider that an asset should be written off when
it is more than 124 days past due for new customers and 152
days past due for established customers and all collection
activity has been exhausted. Write offs include where
receivables have been sold to third parties in accordance with
the Group’s recovery strategies.
INCORPORATION OF FORWARD-LOOKING DATA
The Group incorporates forward looking information into
its measurement of expected credit loss. Separate macro-
economic provisions are recognised to reflect the expected
impact of future economic events on a customer’s ability
to make repayments and the losses incurred given
default, in addition to the core impairment provisions
already recognised.
This is achieved through engagement of external expert
advisors to devise a central, downside and upside of potential
economic scenarios and modelling expected credit losses
for each scenario. Management uses the outputs from each
scenario to apply a weighting of 40% central, 30% upside and
30% downside, to estimate the likelihood of each scenario
occurring to derive a probability weighted estimate of
expected credit loss.
The macro-economic measures used are changes in
unemployment and real wage earnings and are disclosed in
more detail in note 19. A significant portion of the Group’s
customers are not currently in employment and therefore this
segment of customers do not have a significant correlation to
these or any other readily determinable economic indicators.
The future macro-economic scenario assumptions are
reviewed at each reporting date and updated accordingly.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and
demand deposits, less bank overdrafts where a right to offset
exists, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject
to an insignificant risk of changes in value.
FINANCIAL LIABILITIES AND EQUITY
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that
evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
BANK BORROWINGS
Interest-bearing bank loans and overdrafts are recorded at
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 to market risks of changes
in foreign currency exchange rates relating to the purchase
of overseas sourced products, and interest rates relating
to the Group’s floating rate debt. The Group uses foreign
exchange derivatives (forward contracts and options) and
interest rate derivatives (caps) 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 classified as financial assets or financial
liabilities at fair value through profit or loss (“FVTPL”) and
therefore stated at their fair value with changes in the fair
value recognised in the income statement as they arise.
Hedge accounting is not applied by the Group.
Foreign currency and interest rate derivative fair values
represent the estimated amount that the Group would receive
or pay to terminate the derivative at the balance sheet date
based on prevailing foreign currency and interest rates.
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. In the cases where the amount of the obligation
cannot be estimated reliably, no provision is made.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 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. 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, other
than rental costs offset against the right-of-use asset under
IFRS 16. An onerous contract is one where the unavoidable
costs of meeting the Group’s contractual obligations exceed
the expected economic benefits.
CONTINGENT LIABILITIES AND ASSETS
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.
Contingent assets are possible assets that arise from past
events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the entity.
Contingent assets are not recognised but information about
them is disclosed where an inflow of economic benefits
is probable.
LEASE LIABILITIES
The Group leases offices, warehouses, retail stores that have
now closed, equipment and vehicles.
Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants other
than the security interests in the leased assets that are held
by the lessor. Leased assets may not be used as security for
borrowing purposes.
Where the Group is a lessee, it recognises a right-of-use asset
and a corresponding lease liability, measured at the present
value of remaining cash flows on the lease. Lease liabilities
include the net present value of fixed payments less any lease
incentives receivable. There are no residual value guarantees
or purchase options present in any contracts entered by the
Group. The lease payments are discounted using the Group’s
incremental borrowing rate at transition or at the lease start
date for leases entered into after transition, calculated by
applying a weighting to all recent third-party financing.
Lease payments are allocated between principal and finance
cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on
the remaining balance of the liability for each period.
The lease liability is subsequently measured at the amortised
cost using the effective interest rate method. When the lease
liability is remeasured, a corresponding adjustment is made to
the carrying amount of the right-of-use asset, or is recorded
in the income statement if the carrying amount of the right-of-
use asset has been reduced to nil.
Extension and termination options are not currently included
in measurement of any of the leases across the Group, as all
options present in the contracts have been exercised in the
past. Any new leases or renegotiated leases which the Group
enters into in future containing an extension or termination
option will be considered when determining the lease length
with reference to management intention and historic action.
The Group applies the recognition exemption in IFRS 16 for
leases with a term not exceeding 12 months and low value
leases. For these leases the lease payments are recognised as
an expense on a straight-line basis over the lease term.
Policy applicable before 3 March 2019.
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.
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 using the Monte Carlo method 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.
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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. Curtailments gains
and losses are also accounted for as a past-service cost
within operating expenses. Net interest expense or income is
recognised within finance costs.
The retirement benefit asset recognised in the balance sheet
represents the fair value of scheme assets as reduced by the
present value of the defined benefit obligation. Any asset
resulting from this calculation is recognised in full as the Group
considers it has unconditional right to any surplus after all
members’ benefits have been settled.
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 or are probable to be agreed with suppliers before
they are recognised in the income statement; outstanding
balances are recorded in accrued income.
EXCEPTIONAL ITEMS
Exceptional items are those that do not form part of the
recurring operational activities of the Group and are so
material in nature and impact that the Directors believe
that they require separate disclosure on the face of the
consolidated income statement to avoid distortion of
underlying performance.
SUPPLIER FINANCING ARRANGEMENTS
The Group has a supplier financing scheme as part of its
normal course of business. This scheme is based around the
principle of reverse factoring whereby the banks purchase
from the suppliers approved trade debts owed by the
Group. Access to the supplier finance scheme is by mutual
agreement between the bank and supplier; the Group is
not party to this contract. The scheme has no cost to the
Group as the fees are paid by the supplier directly to the
banks. The banks have no special seniority of claim to the
Group upon liquidation and would be treated the same as
any other trade payable. As the scheme does not change
the characteristics of the trade payable, and the Group’s
obligation is not legally extinguished until the bank is
repaid, the Group continues to recognise these liabilities as
trade payables.
GOING CONCERN
Summary
For the reasons set out in detail below, the Directors believe
that it remains appropriate to prepare the financial statements
on a going concern basis.
As at 19 June 2020, the Group had total accessible liquidity
(“TAL”) of £148.4m, which was £73.4m higher than as at
29 February 2020, due to the additional £50m CLBILS facility
granted in May 2020 and additional cash generation measures
taken since the year end totalling £23.4m. Under our base case
scenario, the Group’s TAL will increase further by the end of
FY21 and would allow it to trade for the foreseeable future
thereafter. Even under severe downside scenarios outlined
below, with management taking appropriate mitigating
actions, the Group is expected to have sufficient liquidity in
place to allow it to trade, to meet its covenants, until at least
December 2021.
The Group’s £125m RCF and securitisation facilities are
committed to September 2021 and December 2021
respectively. The Group continues to expect to renegotiate
these facilities well in advance of these maturity dates.
Whilst the amount drawn under these facilities is expected
to be lower at these dates than the year end position or
current position, the Directors have concluded that due to
the uncertain economic outlook resulting from Covid-19
there is a material uncertainty as to the ability of the Group
to successfully refinance these facilities at commercially
acceptable terms.
In the event that this uncertainty crystallises, the Directors
believe that mitigating actions would be available given
that the Group is expected to continue to have significant
net assets and therefore in the event that refinancing at
commercially acceptable terms is not possible, asset sales
outside the normal course of business or alternative financing
options would be entered into.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk The lenders to the Group have been consistently supportive
to date. Whilst however no certainty can be provided that the
facilities will be renewed until refinancing negotiations have
been successfully completed, the maturity of the facilities in
September and December 2021 provide a substantial window
in which to undertake such refinancing activities proactively.
In the event of being unable to successfully renegotiate the
facilities, the Group would undertake a variety of mitigating
actions, but given the ongoing longer-term economic
uncertainty arising from Covid 19, it is not possible to be
certain as to their success.
The above material uncertainty may cast significant doubt
on the Group and Company’s ability to continue as a going
concern and therefore realise its assets and discharge its
liabilities in the normal course of business. The financial
statements do not include any adjustments that would result
from the basis of preparation being inappropriate.
Cash flow forecasts
In determining whether the Group’s accounts can be prepared
on a going concern basis, the Directors have 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 p40 to 45.
The Directors have taken into consideration that, since the
balance sheet date, restrictions on trading activity and the
movement of people applied by the UK Government to
contain the spread of Covid-19 have had a severe and sudden
effect on economic activity. Measures, both immediate
and planned, were taken across the Group to mitigate the
consequential and significant profit and cash flow impacts
arising from the loss of sales following the UK lockdown.
The Group has considered carefully its debt covenants and
performance metrics inherent in the securitisation and RCF
facilities which link to the available levels of draw and its
cash flows. These metrics reflect the foreseen restrictions
on trading as well as the mitigating factors applied by the
Group, for the next 18 months from the date of signing the
financial statements. These have been appraised in the light
of the current economic climate by applying a series of stress
tests. The stress tests apply a range of sensitivities to Group
revenue and associated costs, cash collections and arrears
levels; reflecting the principal risks arising from continued UK
social distancing measures and the uncertainty of the impact
of Covid-19 on the business.
New arrangements
On 19 May 2020, the Group announced that it had secured
new financing arrangements with its long-standing
supportive lenders.
These new arrangements comprise:
A new up to £50 million three-year Term Loan facility, provided
by our lenders under the government’s Coronavirus Large
Business Interruption Loan Scheme (“CLBILS”);
Amendment of certain terms and covenants of the
securitisation facility, to mitigate a significant amount of the
impact that Covid-19 may have in 2020 on the facility. This is to
address variations in collection rates and customer behaviour,
and to enable the Group to continue to offer its customers
enhanced flexibility. The amendments to the facility are in
place until late December 2020 and are intended to fully cover
the impact of the current three month period of the FCA’s
forbearance requirements for consumer credit customers
impacted by Covid-19; and
The widening of certain covenants at the August 2020 half-
year test date in its existing unsecured £125 million Revolving
Credit Facility (“RCF”) and the introduction of quarterly
covenant tests.
Resulting funding and liquidity position
As a result of these changes, the Group currently has the
following facilities in place:
An up to £500 million securitisation facility committed until
December 2021, drawings on which are linked to prevailing
levels of eligible receivables (fully drawn at £393.8m as at
19 June 2020);
An RCF of £125 million committed until September 2021
(of which £nil undrawn);
An overdraft facility of £27.5 million which is subject to an
annual review every July (none of which is drawn); and
A £50m CLBILS Term Loan facility committed until May 2023
(none of which is drawn).
The Group continues to expect to renegotiate these facilities
well in advance of the maturity dates shown.
As at 19 June 2020, cash balances stood at £70.9 million, which
in addition to the undrawn facilities of £77.5 million outlined
above, and after deducting cash not immediately accessible,
provides the Group with total accessible liquidity (“TAL”)
of £148.4m. This is £73.4m higher than the TAL available as
at 29 February 2020 of £75.0m due to the additional £50m
CLBILS facility and additional cash generation measures
taken to date of £23.4m. It is also considerably higher than the
average TAL available during FY20 of £49.2m.
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Actual trading performance
Trading has improved from the sudden and significant decline
experienced in March with Group revenue down 22% in the
first quarter of FY21.
Downside trading scenario
It is recognised that there is considerable uncertainty as to
the continued impacts of Covid-19 on our customer base and
we have therefore also constructed a recently updated severe
but plausible downside scenario which applies sensitivities
to Group revenue and associated costs, cash collections and
arrears levels. Specifically, in terms of FY21 revenue we have
sensitised the following reductions on FY20 levels as follows:
Retail product revenue – 25% down
FS revenue – 8% down
Management have confidence, based on successful Q1 FY21
responses to Covid-19, that a significant portion of the impact
to EBITDA would be mitigated by operating cost savings
across all areas of the cost base.
The Group would continue to have available liquidity in place
and meet all necessary debt covenants to allow it to continue to
trade under such a scenario after taking necessary management
actions that are within the Group’s control. If any further
downside scenarios were to arise, further management actions
are available to the Group:
Sale of customer receivables
CRITICAL JUDGEMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY
The significant judgements made by management in applying
the Group’s accounting policies and the key sources of
estimation uncertainty in these financial statements, which
together are deemed critical to the Group’s results and
financial position, are as follows:
IMPACT OF COVID-19
Critical judgement
Although the global spread of Covid-19 began before
29 February 2020, the World Health Organisation declaration
of a global pandemic did not take place until 11 March 2020.
As at 29 February 2020 management did not foresee and
could not reasonably have foreseen the escalation of the virus
within the UK that subsequently took place. For this reason,
the significant effects of Covid-19 that were not foreseen at
the balance sheet date are not adjusted within these financial
statements. Disclosure of the estimated financial impacts
relating to this post balance sheet event is provided in note 31.
TRADE RECEIVABLES
Critical Judgement and Estimation Uncertainty
The allowance for expected credit losses for trade receivables
involves several areas of judgement, including estimating
forward-looking modelled parameters (PD, LGD and EAD),
developing a range of unbiased future economic scenarios,
estimating expected lives and assessing significant increases
in credit risk, based on the Group’s experience of managing
credit risk.
Sale or sale and leaseback arrangement in relation to the
Group’s properties
Key judgements involved in the determination of expected
credit loss are:
Temporary reductions in inventory and CAPEX spend
Further discretionary cost reductions
Covenant compliance
As noted above, the Group’s long-standing supportive lenders
have adjusted some of their debt covenants.
Under its base and downside scenarios, after taking
appropriate management actions, the Group expects to
remain in compliance with these amended covenants and all
other debt covenants.
The Group also notes the Joint Statement issued by the
Financial Reporting Council, the Financial Conduct Authority
and the Prudential Regulation Authority on Thursday 26 March
2020 which stated that they would expect lenders to consider
the need to treat potential breaches of covenants arising
directly from the Covid-19 pandemic differently compared to
uncertainties that arise because of borrower specific issues
and in doing so consider waiving the resultant covenant
breach. The Directors therefore believe it is reasonable to
believe that the Group will continue to have in place suitable
securitisation facility arrangements should there be any
further extension of the FCA’s forbearance requirements for
consumer credit customers impacted by Covid-19.
120
determining which receivables have suffered from a significant
increase in credit risk;
determining the period over which historical probabilities of
default are measured to apply current PD estimates; and
determining the value and frequency of future debt sales in
calculating the LGD.
Refinements have been made in the year to the judgement
over when a significant increase in credit risk (SICR) is deemed
to have occurred. The refinement has taken place during
the year following the first year of full IFRS 9 implementation
allowing further analysis over a larger historical data set and
model observations, which allowed management to better
identify receivables which have experienced SICR.
The significant increase in credit risk SICR threshold was
previously based on segmenting the book, where a significant
increase in credit risk was considered to have occurred if
a customer segment move resulted in a 250% increase in
lifetime PD.
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk The SICR threshold is now set at the point at which the
proportional change in the behavioural risk score results in
the PD after 12 months for such stage 1 customers being
higher than the average PD for stage 2 customers that are one
payment in arrears.
Sensitivities of Estimation Uncertainties
To indicate the level of estimation uncertainty, the impact on the
ECL of applying different model parameters are shown below:
a 20% increase in PDs would lead to a £5.9m increase in the ECL;
using an 18-month rather than two-year observation window
for the PD adjustment factor outlined above would lead to a
£1.3m reduction in the ECL; or
a 20% reduction in debt sale prices would lead to a £1.2m
increase in the ECL.
SOFTWARE DEVELOPMENT COSTS
Critical judgement
Included within intangible assets are significant software
and development project costs in respect of the Group’s
technological development programme. 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.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Critical judgment and estimation uncertainty
Impairment exists when the carrying value of an asset or
cash generating unit exceeds its recoverable amount, which
is the higher of its fair value less costs of disposal and its
value in use. The value in use calculation is based on a DCF
model. The cash flows are derived from the Group’s three-
year budget, taken into perpetuity, and do not include
restructuring activities that the Group is not yet committed
to or significant future investments that will enhance
the performance of the assets of the CGU being tested.
The recoverable amount is sensitive to the discount rate used
as well as the expected future cash inflows and the long-term
growth rate used in perpetuity. The key assumptions used
to determine the recoverable amount for the Group’s two
CGUs, including a sensitivity analysis, are disclosed and further
explained in note 12.
Where the proportional change in risk score for a customer
since initial recognition exceeds the threshold for the relevant
segment for that customer, the asset will be deemed to have
experienced a significant increase in credit risk.
The revised approach is considered to be a more appropriate
calculation methodology as it removes the risk in certain cases
of relatively small score internal behavioural score changes
resulting in SICR being applied.
The probability of default of the trade receivables book has
also been reassessed during the current year, as previous
PDs formed from historical development data did not fully
capture the improving credit quality of trade receivables. A PD
realignment has taken place by calculating an adjustment factor
to give weighting to more recent performance by comparison
of historical default data to the performance of more recent
vintages. The adjustment factor has then been applied across
the PD tables to PD parameters for each customer segment to
ensure the model is more reflective of current trends, and in turn
a better predictor of future performance.
In management’s judgement, the most appropriate
probability of default parameter in the ECL model is to reflect
observed rates over a two-year period. The two-year period
has been selected as this is considered to fully capture recent
improvements in PDs resulting from the introduction of
new collection models, new payment tools, more stringent
affordability rules that led to reduced acceptance rates for
new applicants and a reduction in the number of credit limit
increases. A shorter period may lead to a less reliable estimate
and increased volatility, whereas a longer period would be
less likely to provide an up-to-date view of PDs incorporating
the above. The sustained significant reductions in observed
default rates over recent years have been a key driver in the
reduction in ECL provision during the year.
Once collection strategies are no longer appropriate or
effective, management typically sell customer receivables to
third parties. Therefore the estimated sales price for these
balances is a key judgement. Due to forecasted and observed
market conditions during the year, the estimated future sales
prices used to arrive at LGD have been reduced from the
prior year end by between 20% and 40% dependent on the
type of debt being sold. A profit on debt sale arises when
the consideration receivable from the third party exceeds
the carrying value of the customer receivables net of their
expected credit losses at the point of the debt sale.
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2 ACCOUNTING POLICIES CONTINUED
VAT LIABILITIES
Critical judgement
The calculation of the Group’s VAT liability involves a degree
of estimation and judgement in respect of items whose tax
treatment cannot be finally determined until final resolution
has been reached with HMRC. The Group has provided a total
of £3.8m (2019: £6.6m) in respect of future payments which
the Directors have a reasonable expectation of making in
settlement of these historical positions.
The Group has been in long-running discussions with HMRC
with respect to the VAT treatment of certain marketing
and non-marketing costs and the allocation of those costs
between our retail and credit businesses. The case was heard
in a first tier VAT tribunal in May 2018 with a draft decision
being issued in November 2018 which was made public in
March 2019.
Since this date the Group has been in discussions with HMRC
to settle this matter and whilst substantial progress has
been made, with the Group providing detailed calculations
and supporting documentation to HMRC on 30 April 2020.
A final binding agreement has not yet been reached. As at
29 February 2020, the Group holds a creditor of £3.8m
(2019: £6.6m) in respect of this matter, being management’s
best estimate of the liability to settle.
The level of estimation uncertainty has decreased
considerably at FY20 as compared to FY19 as the Group had
previously only provided to HMRC actual data for two of
the years in question whereas now the Group has provided
information for all years, although assumptions have been
made for 2007/08 and 2008/09 as the underlying data cannot
be found.
INVENTORY
Critical judgement and estimation uncertainty
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.
The selling prices of inventory are estimated to determine the
net realisable value of inventory. Historical sales patterns and
post year end trading performance are used to determine
these. At 29 February 2020 the inventory provision amounted
to £7.7m (2019: £6.0m). The increase in the provision in the
current year reflects an expected increase in sales through
channels that achieve lower realisation rates as well as
provision against stock relating to brands that will no longer
trade through the Group’s main selling channels.
Sensitivity of estimation uncertainty
A 10% change in the volume of inventories sold via sub optimal
channels would impact the net realisable value by £2.0m.
ALLIANZ CLAIM AND COUNTERCLAIM
Critical judgement
The ongoing legal claim with Allianz Insurance plc has been
disclosed as a contingent liability in note 26. The Group does
not consider it appropriate to make any provision in respect
of this claim because there is no certainty as to whether any
loss will arise and in the event that it did, it is not possible to
reliably estimate the amount of any settlement. Similarly, no
asset has been recognised for our counterclaim as there is no
certainty as to whether the claim will be successful.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 3 REVENUE
An analysis of the Group’s revenue is as follows:
Sale of goods
Financial Services revenue
Revenue
2020
£m
567.7
290.5
858.2
2019
£m
615.8
298.6
914.4
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4 BUSINESS SEGMENT
The Group has identified two operating segments in accordance with IFRS 8 – Operating segments, Product Revenue and
Financial Services. The Board receives monthly financial information at this level and uses this information to monitor the
performance of the Group, allocate resources and make operational decisions. Internal reporting focuses and tracks revenue,
cost of sales and gross margin performance across these two segments separately, however it does not track operating costs or
any other income statement items.
Revenues and costs associated with the product segment relate to the sale of goods through various brands. The revenue and costs
associated with the Financial Services segment relate to the income from provision of credit terms for customer purchases, and the
costs to the business of providing such funding. To increase transparency, the Group has included additional voluntary disclosure
analysing product revenue within the relevant operating segment, by brand categorisation and product type categorisation.
The move to two reportable segments for the 52 weeks ended 29 February 2020 reflects the change in management structure
of the Group through this period.
Continuing operations
Analysis of revenue
Product – total revenue
Other financial services revenue
Credit account interest
Financial Services – total revenue
Revenue – total
Analysis of cost of sales
Product – total cost of sales
Impairment losses on customer receivables
Profit on sale of customer receivables
Other financial services cost of sales
Financial Services – total cost of sales
Cost of sales – total
Gross profit
Gross margin – Product
Gross margin – Financial Services
Warehouse and fulfilment
Marketing and production
Depreciation and amortisation
Other administration and payroll
Segment result and operating profit before exceptional items
Exceptional items (see note 6)
Segment result and operating profit/(loss)
Finance costs
Fair value adjustments to financial instruments
Profit/(loss) before taxation
124
2020
£m
2019
£m
567.7
615.8
27.2
263.3
290.5
31.4
267.2
298.6
858.2
914.4
(288.6)
(295.0)
(133.9)
6.3
(2.1)
(129.7)
(119.0)
10.7
(13.4)
(121.7)
(418.3)
(416.7)
439.9
49.2%
55.3%
(78.1)
(136.0)
(30.1)
(119.1)
76.6
497.7
52.1%
59.2%
(84.0)
(157.8)
(30.1)
(127.9)
97.9
(28.5)
(145.6)
48.1
(47.7)
(17.1)
4.7
(14.3)
4.5
35.7
(57.5)
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Analysis of Product revenue by brand
JD Williams
Simply Be
Ambrose Wilson
Womenswear
Menswear1
Product brands2
Product revenue excluding US and Stores
US revenue
Stores
Total Product revenue
Financial Services revenue
Group revenue
2020
£m
2019
£m
153.1
128.0
45.4
326.5
66.9
170.2
563.6
4.1
–
567.7
290.5
858.2
159.5
120.1
51.3
330.9
64.0
202.6
597.5
11.4
6.9
615.8
298.6
914.4
1 Menswear is the Jacamo brand.
2 Product brands are Fashion World, Premier Man, House of Bath, Marisota, Oxendales, High and Mighty and Figleaves.
The Group has one significant geographical segment, which is the United Kingdom. Revenue derived from Ireland and the US
amounted to £30.1m (2019: £37.1m). Operating results from international markets amounted to £3.3m profit (2019: £1.9m loss).
All segment assets are located in the UK, Ireland and the US.
For the purposes of monitoring segment performance, assets and liabilities are not measured separately for the two reportable
segments of the Group and therefore disclosed together below. Impairments of tangible and intangible assets in the current
period were £1.8m (2019: £19.3m). Tangible and intangible assets of £nil (2019: £5.7m) were written off following the closure of
stores in the prior year, see note 6.
Other information
Capital additions
Capital disposals
Balance sheet
Total segment assets
Total segment liabilities
Segment net assets
5 PROFIT FOR THE PERIOD
Profit for the period has been arrived at after charging/(crediting):
Net foreign exchange gains
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment (note 6)
Loss on disposal of intangible assets (note 6)
Amortisation of intangible assets
Cost of inventories recognised as expense
Staff costs (note 7)
Auditor’s remuneration for audit services
Net impairment charge (note 16)
Exceptional items (note 6)
Operating lease costs (note 27)
Depreciation of right-of-use assets (note 27)
Amounts payable to KPMG LLP and their associates by the Group in respect of non-audit services were £nil (2019: £0.1m).
2020
£m
39.2
–
2019
£m
36.3
(5.7)
1,021.2
(703.7)
317.5
1,023.1
(711.7)
311.4
2020
£m
(3.2)
4.2
–
–
24.7
288.6
78.3
0.8
127.6
28.5
0.9
1.3
2019
£m
(3.0)
4.9
5.0
0.7
25.2
295.1
79.9
0.6
108.3
145.6
2.3
–
125
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
5 PROFIT FOR THE PERIOD CONTINUED
A more detailed analysis of auditor’s remuneration is provided below:
Audit of these Group financial statements
Audit of financial statements of subsidiaries of the Company
Non-audit services
Total
2020
£m
0.2
0.6
–
0.8
2019
£m
0.1
0.4
0.1
0.6
Fees in relation to audit related assurance services totalled £30,000 (2019: £29,000).
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts were £20,000 (2019: £17,000).
A description of the work of the Audit and Risk Committee is set out in the Corporate Governance Statement on p55 and
includes an explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided by
the auditor.
6 EXCEPTIONAL ITEMS
Customer redress (note 22)
Store closure (credit)/costs
Legal costs
Impairment of tangible, intangible assets and brands
Strategy review costs
VAT partial exemption (credit)/cost
Other tax matters including associated legal and professional fees
GMP equalisation adjustment
Items charged to profit before tax
Taxation provision (see note 20, included within exceptional tax credit of £5.5m (2019: £22.9m))
2020
£m
22.9
(0.3)
1.0
1.8
3.8
(3.1)
2.4
–
28.5
–
2019
£m
45.0
22.0
–
20.0
–
49.4
8.9
0.3
145.6
3.0
CUSTOMER REDRESS
During the prior period, a charge of £16.5m was made to reflect the additional expense following the completion of the
customer redress programme in relation to flaws in certain insurance products which were provided by a third-party insurance
underwriter. In addition, a charge of £28.5m was recognised to reflect an updated estimate following an increase in the volume
of PPI claims and the latest assessment of the expected uphold rate and average redress per claim.
In the current period, in line with wider industry experience, the volume of PPI information requests and claims received in the
final days leading up to and including the 29 August 2019 deadline was significantly higher than expected and therefore an
additional charge of £25.0m was recognised at 31 August 2019.
The final amount of customer redress including that relating to estimated Official Receiver complaints was less than envisaged
as at 31 August 2019 and therefore in the second half of the year a £2.1m credit for customer redress was recorded, resulting in a
£22.9m charge for the full year. Included in this amount is £1.3m of withholding tax incurred in relation to interest applied on PPI
claims which has been reclassified to exceptional costs. Further information is provided in note 22.
CLOSURE COSTS
In line with our strategy of reshaping our retail offering, following a period of consultation with all staff involved in our store
estate, the decision was made to close all remaining retail outlets at the end of August 2018. This review resulted in an
exceptional cost of £22.0m in respect of onerous lease provisions, other related store closure costs and asset write offs of £5.7m
in the prior year. The onerous lease provision will run to the earlier of the break clause or lease expiry for all stores. The credit of
£0.3m in the current year relates to a release of amounts no longer required in relation to properties that have now been exited.
126
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk IMPAIRMENT OF TANGIBLE, INTANGIBLE ASSETS AND BRANDS
In accordance with the requirements of IAS 36 management have assessed the carrying value of the intangible and tangible
assets held in respect of the High & Mighty, Slimma, Diva and Dannimac brands, and following this review, as well as the refocus
to the Group’s key five brands following a full strategic review, the remaining value of the intangible asset held for these brands
(£1.8m) has been written down in full.
In the prior year, management assessed the carrying value of the intangible and tangible assets held in respect of Figleaves
and following this review wrote down the full value of the brand (£7.1m), tangible fixed assets (£1.5m) and deferred tax asset of
£3.0m in relation to future unutilised tax losses. Also in the prior year, the Group terminated an agreement with a third-party IT
Financial Services provider, Welcom Digital Limited (“WDL”). Following a detailed review of capitalised development spend held
in respect of this item a non-cash impairment charge of £11.4m was made.
STRATEGY REVIEW COSTS
During the period, the Board has undertaken a strategic review and has approved a multi-year transformation of the business.
Fundamental to delivering this strategic transformation is a material level of cost reduction and increased focus and refinement
of the Group’s key five brands. As part of this initiative, the Group has incurred costs that are substantial in scope and impact,
and incremental to the Group’s normal operational and management activities, and have therefore been recognised within
exceptional costs. Total costs of £3.8m incurred relate to £1.7m of redundancy costs, £1.8m of consultancy costs incurred in
relation to the brand refinement and £0.3m being the write off of stock relating to brands that will no longer continue to trade.
VAT PARTIAL EXEMPTION
In the prior year, a total exceptional charge of £49.4m was incurred in relation to the write off of the reassessment of the VAT
debtor previously held by the Group. The Group was in a long-running dispute with HMRC with respect to the VAT treatment of
certain marketing and non-marketing costs and the allocation of those costs between our retail and credit businesses. The case
was heard in a first tier VAT tribunal in May 2018 with a draft decision being issued in November 2018 which was made public in
March 2019. Following the final ruling, the asset was no longer considered recoverable and therefore fully written off.
Since this date the Group has been in discussions with HMRC to settle this matter and whilst substantial progress has been
made, a final binding agreement has not yet been reached. As at 29 February 2020, the Group holds a creditor of £3.8m (£6.6m
at 2 March 2019) in respect of this matter, being management’s best estimate of the liability to settle, including interest payable,
with the decrease since the prior year end being due to lower VAT disallowance identified as part of the detailed resolution
process now nearing completion.
This has resulted in a total credit to the income statement of £2.8m, of which £3.1m relating to the legacy years under discussion
has been taken as a credit against exceptional items and a £0.3m charge has been recognised in current year operating profit.
OTHER TAX MATTERS INCLUDING ASSOCIATED LEGAL AND PROFESSIONAL FEES
Of the total charge of £2.4m, £1.3m relates to further expenses in relation to legacy tax issues. The remaining £1.1m relate to
legal and professional fees incurred as a result of the Group’s ongoing disputes with HMRC regarding a number of historical
VAT matters and tax positions. Of the amount charged in the period, the Group has made related cash payments of £1.9m
(2019: £2.8m).
For further information see note 21.
GMP EQUALISATION
An exceptional pension cost arose in the prior year as a result of the High Court ruling in the case of Lloyds Bank in relation to
Guaranteed Minimum Pension (“GMP”) equalisation. An exceptional provision of £0.3m was made for the expected one-off
impact of GMP equalisation on the reported liabilities of the Company’s defined benefit pension scheme.
LEGAL COSTS
A £1.0m provision for future expected legal costs to defend the Allianz Insurance plc claim and continuing to proceed with the
counterclaim referred to in note 26 has been recognised in the year.
127
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
7 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 29)
Share option (credit)/costs (see note 28)
2020
Number
2019
Number
1,154
1,372
2,526
2020
£m
67.5
6.1
6.0
(1.3)
78.3
1,106
1,414
2,520
2019
£m
68.6
5.7
5.5
0.1
79.9
The aggregate amount of remuneration paid or receivable by Directors in respect of services in the year was £1.9m (2019: £2.0m).
The aggregate amount of contributions paid to a pension scheme in respect of Directors’ qualifying services was £0.1m
(2019: £0.1m). Retirement benefits are accruing in respect of qualifying services in defined contribution pension schemes for
two Directors (2019: three).
No amounts were paid to or receivable by Directors under long-term incentive schemes in respect of qualifying services in the
year (2019: £nil).
Details of individual Directors’ remuneration is disclosed in the Directors’ Remuneration Report on p73 to 90.
8 FINANCE COSTS
Interest on bank overdrafts, loans and lease liabilities
Net pension interest credit (see note 29)
2020
£m
17.8
(0.7)
17.1
2019
£m
14.8
(0.5)
14.3
128
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 9 TAX
Tax recognised in the income statement
Current tax
Charge/(credit) for the period
Adjustments in respect of previous periods
Deferred tax
Origination and reversal of temporary timing differences
Adjustments in respect of previous periods
Total tax expense
2020
£m
2019
£m
2.7
0.1
2.8
4.4
1.1
5.5
8.3
(2.0)
9.7
7.7
(6.8)
(0.1)
(6.9)
0.8
UK corporation tax is calculated at 19% (2019: 19%) 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 19% to 17% (effective from 1 April 2020) was substantively enacted on
6 September 2016, and the UK deferred tax asset/(liability) as at 29 February 2020 has been calculated based on this rate. In the
11 March 2020 Budget it was announced that the UK tax rate will remain at the current 19% and not reduce to 17% from 1 April
2020. This will have a consequential effect on the Group’s future tax charge. If this rate change had been substantively enacted
at the current balance sheet date the deferred tax liability would have decreased by £0.9m.
The charge for the period can be reconciled to the profit per the income statement as follows:
Profit/(loss) before tax
Tax at the UK corporation tax rate of 19% (2019: 19%)
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
2020
£m
35.7
6.7
0.4
0.2
(0.2)
1.2
8.3
2019
£m
(57.5)
(10.9)
0.1
2.2
(0.2)
9.6
0.8
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 charge in the statement of comprehensive income
Tax recognised in equity
Deferred tax – share-based payments
Tax charge in the statement of changes in equity
2020
£m
0.3
0.3
2020
£m
–
–
2019
£m
4.9
4.9
2019
£m
0.4
0.4
In respect of corporation tax, as at 29 February 2020 the Group has provided a total of £13.2m (2018: £13.9m) for potential tax
future charges based upon the Group’s best estimates and their discussions with HMRC. Adjustments in respect of previous
periods include the above mentioned increase in tax provision relating to items which are subject to ongoing discussions with
HMRC (2019: £9.1m).
129
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
10 DIVIDENDS
Amounts recognised as distributions to equity holders in the period:
Final dividend for the 52 weeks ended 2 March 2019 of 4.27p (2019: 8.56p) per share
Interim dividend for the 52 weeks ended 29 February 2020 of 2.83p (2019: 2.83p) per share
Proposed final dividend for the 52 weeks ended 29 February 2020 of nil (2019: 4.27p) per share
2020
£m
12.1
8.0
20.1
–
2019
£m
24.2
8.0
32.2
12.1
11 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 exceptional items, which are those
items that do not form part of the recurring operational activities of the Group and are so substantial in nature and impact
that the Directors believe that they require separate disclosure to avoid distortion of underlying performance 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 6)
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/(loss) 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
Earnings from continuing operations
Total net profit/(loss) attributable to equity holders of the parent 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
The denominators used are the same as those detailed above for basic and diluted earnings per share.
Adjusted earnings per share
Basic
Diluted
Earnings/(Loss) per share
Basic
Diluted
130
2020
£m
27.4
2019
£m
(58.3)
2020
Number
284,665
2019
Number
284,379
297
284,962
409
284,788
2020
£m
27.4
(3.8)
23.0
46.6
2020
Pence
16.37
16.35
2020
Pence
9.63
9.62
2019
£m
(58.3)
(3.6)
122.7
60.8
2019
Pence
21.38
21.35
2019
Pence
(20.50)
(20.50)
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 12 INTANGIBLE ASSETS
Cost
At 3 March 2018
Additions
Disposals
At 2 March 2019
Additions
Disposals
At 29 February 2020
Accumulated amortisation and impairment
At 3 March 2018
Charge for the period
Impairment
Disposals
At 2 March 2019
Charge for the period
Impairment
Disposals
At 29 February 2020
Carrying amount
At 29 February 2020
At 2 March 2019
At 3 March 2018
Brands
£m
Software
£m
Customer
Database
£m
16.9
–
–
16.9
–
–
16.9
8.0
–
7.1
–
15.1
–
1.8
–
16.9
–
1.8
8.9
330.9
32.9
(2.4)
361.4
32.7
(35.9)
358.2
183.8
25.2
10.7
(1.7)
218.0
24.7
–
(35.9)
206.8
151.4
143.4
147.1
1.9
–
–
1.9
–
–
1.9
1.9
–
–
–
1.9
–
–
–
1.9
–
–
–
Total
£m
349.7
32.9
(2.4)
380.2
32.7
(35.9)
377.0
193.7
25.2
17.8
(1.7)
235.0
24.7
1.8
(35.9)
225.6
151.4
145.2
156.0
Assets in the course of development included in intangible assets at the year end total £15.2m (2019: £35.4m). No amortisation is
charged on these assets. Borrowing costs of £nil (2019: £nil) have been capitalised in the period.
As at 29 February 2020, the Group had entered into contractual commitments for the further development of intangible assets
of £10.8m (2019: £4.7m) of which £5.4m (2019: £1.5m) is due to be paid within one year.
IMPAIRMENT TESTING OF INTANGIBLE ASSETS
The Group is undertaking a systems transformation project. Some elements of the project are not yet available for use and are
not therefore being amortised. Where intangible assets are not being amortised management is required to test for impairment.
At the balance sheet date, the market capitalisation of the Group was lower than the Group’s net assets, following a significant
drop in the Group’s share price. As this is an indicator for impairment, management is required to test for impairment over the
Group’s total assets, with the recoverable amount being determined from value in use calculations. The value in use assessment
has been performed over the Group’s total assets under two CGUs, being Figleaves and core Group excluding Figleaves.
The Group’s results, performance and viability is assessed for the Group as a whole, with the exception of Figleaves which
operates from a separate location and maintains a separate management structure.
The value in use calculations used cash flows based on budgets prepared by management covering a three-year period.
These budgets had regard to historic performance and knowledge of the current market, together with management’s views
on the future achievable growth and impact of technological developments. After the three-year cash flows, management have
extrapolated the cash flows into a fourth and fifth year using a growth rate of 4.1%. After the fifth year cash flows, a terminal value
was calculated based upon the long-term growth rate and the Group’s risk adjusted pre-tax discount rate.
The Group’s three-year cash flow projections were based upon the Group’s three-year plan as at 29 February 2020. This detailed
forecast addressed the challenges faced by the business during the current year, and assumed like-for-like sales and gross profit
margin growth from the third year of the plan onwards. In accordance with the Group’s accounting judgement explained in note
2 that the impact of Covid-19 is a non-adjusting post balance sheet event, these forecasts do not include the estimated impacts
of Covid-19 that are currently being projected in the latest Board approved five-year plan. The potential impact if such forecasts
are used is shown in note 31.
131
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12 INTANGIBLE ASSETS CONTINUED
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 was determined with reference to forecast GDP growth which
management believe is the most appropriate indicator of long-term growth rates that was available at 29 February 2020.
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 was based on the Group’s weighted average cost of capital as at 29 February
2020, taking into account the cost of capital and borrowings, to which specific market-related premium adjustments are made.
The key assumptions are as follows:
Expected future cash inflows;
Years 4 and 5 growth rate: 4.1% (2019: 1.5%)
Long-term growth rate: 1.3% (2019: 1.5%)
Pre-tax discount rate: 11.2% (2019: 10.7%)
Following the Board’s strategic review and refocus to the Group’s key five brands, an impairment of the full carrying value of the
remaining brands of High & Mighty, Slimma, Diva and Dannimac has been recorded (£1.8m), reflecting the values in use of these
assets and has been disclosed in note 6. These assets formed part of the Group’s core CGU excluding Figleaves.
The impairment review performed over the Group’s core CGU has indicated that no impairment is required over the remaining
assets of the Group.
The following sensitivities have been performed:
a) Stress to three-year cash flows by 5% which has indicated potential impairment in the order of £45m;
b) Decrease in long-term growth rate by 1% resulting in the recoverable amount of the group assets still exceeding their carrying
value by £41m;
c) Decrease in Years 4 and 5 growth rate by 1% resulting in the recoverable amount of the group assets still exceeding their
carrying value by £60m; and
d) Increasing discount rate by 1% which has indicated potential impairment in the order of £20m.
13 PROPERTY, PLANT AND EQUIPMENT
Cost
At 3 March 2018
Additions
Disposals
At 2 March 2019
Additions
Reclassifications
Disposals
At 29 February 2020
Accumulated depreciation and impairment
At 3 March 2018
Charge for the period
Impairment
Disposal
At 2 March 2019
Charge for the period
Disposal
At 29 February 2020
Carrying amount
At 29 February 2020
At 2 March 2019
At 3 March 2018
132
Land and
buildings
£m
Fixtures and
equipment
£m
59.1
–
–
59.1
–
–
–
59.1
15.4
1.2
–
–
16.6
1.2
–
17.8
41.3
42.5
43.7
130.9
3.4
(11.6)
122.7
6.5
0.9
(50.1)
80.0
107.2
3.7
1.5
(6.6)
105.8
3.0
(50.1)
58.7
21.3
16.9
23.7
Total
£m
190.0
3.4
(11.6)
181.8
6.5
0.9
(50.1)
139.1
122.6
4.9
1.5
(6.6)
122.4
4.2
(50.1)
76.5
62.6
59.4
67.4
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Assets in the course of development included in fixtures and equipment at 29 February 2020 total £8.7m (2019: £2.3m), and in
land and buildings total £nil (2018: £nil). No depreciation has been charged on these assets.
At 29 February 2020, the Group had not entered into any contractual commitments for the acquisition of property, plant and
equipment (2019: £nil).
Disposals relate to the retirement of assets no longer in service. All retired assets were fully depreciated and therefore no loss
arose as a result (2019: £5.0m).
The reclassification of £0.9m in the year relates to engineering stock reclassified from inventory in line with IAS 16.
14 SUBSIDIARIES
A list of all investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest,
is given in note 34 to the Company’s separate financial statements.
15 INVENTORIES
Finished goods
Sundry stocks
2020
£m
94.6
0.3
94.9
2019
£m
(Restated)
111.1
1.2
112.3
A net charge of £11.2m (2019: £12.6m) has been made to the income statement in respect of written down inventories. £0.3m of
this has been taken to exceptional costs being the write off of stock relating to brands that will no longer continue to trade.
The right of return asset in inventory amounted to £3.9m (2019: £3.9m).
There was no inventory pledged as security for liabilities in the current or prior period.
Sundry stocks relate to packaging stocks.
The comparative figures have been restated for the impact of stock in transit as disclosed in note 32.
16 TRADE AND OTHER RECEIVABLES
Amount receivable for the sale of goods and services
Allowance for expected credit losses
Net trade receivables
Other debtors and prepayments
2020
£m
656.9
(71.7)
585.2
29.2
614.4
2019
£m
(Restated)
682.2
(97.1)
585.1
34.7
619.8
The comparative figures for Other debtors and prepayments have been restated for the impact of stock in transit as disclosed in
note 32.
Trade receivables are measured at amortised cost.
The amount of expected repayments in relation to net trade receivables for the next 12 months is estimated to be £415.8m.
The weighted average APR across the trade receivables portfolio is 57.9% (2019: 59.2%). For customers who find themselves in
financial difficulties, the Group may offer revised payment terms (payment arrangements) to support customer rehabilitation.
These revised terms may also include suspension of interest for a period of time.
Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer’s credit
quality and bespoke credit limit. Credit limits and scores attributed to customers are reviewed every 28 days.
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16 TRADE AND OTHER RECEIVABLES CONTINUED
The following table provides information about the exposure to credit risk and ECLs for trade receivables as at 29 February 2020.
The carrying amount of trade receivables whose terms have been renegotiated but would otherwise be past due totalled
£8.7m at 29 February 2020 (2019: £19.9m). Interest income recognised on trade receivables which were impaired as at
29 February 2020 was £16.0m (2019: £16.2m).
The amounts written off in the period of £159.3m (2019: £137.9m) include the sale of impaired assets with a net book value of
£19.9m (2019: £14.7m).
There is no significant concentration of credit risk due to the large number of credit customers (1.0 million (2019: 1.1 million) with
individually small balances.
Ageing of trade receivables
Current – not past due
28 days – past due
56 days – past due
84 days – past due
112 days – past due
Over 112 days – past due
Gross trade receivables
Allowance for expected credit losses
Net trade receivables
Allowance for expected credit losses
Opening balance
Impairment
Utilised during the period
Closing balance
Impairment
Recoveries
Other items
Net Impairment charge
Trade
receivables
550.7
35.9
19.5
13.0
8.9
16.4
644.4
(66.3)
578.1
2020
£m
Trade
receivables
on payment
arrangements
8.7
1.5
0.7
0.6
0.4
Total trade
receivables
559.4
37.4
20.2
13.6
9.3
Trade
receivables
558.5
35.4
20.7
14.7
10.3
2019
£m
Trade
receivables
on payment
arrangements
19.9
3.3
1.3
0.9
0.6
Total trade
receivables
578.4
38.7
22.0
15.6
10.9
0.6
12.5
(5.4)
7.1
17.0
656.9
(71.7)
585.2
15.8
655.4
(83.5)
571.9
0.8
26.8
(13.6)
13.2
Stage 1
15.8
26.5
(29.2)
13.1
Stage 2
40.7
42.6
(62.5)
20.8
Stage 3
40.6
73.6
(76.4)
37.8
2020
Total
97.1
142.7
(168.1)
71.7
16.6
682.2
(97.1)
585.1
2019
Total
116.0
119.0
(137.9)
97.1
2020
£m
142.7
(17.0)
1.9
127.6
Further analysis of the constituents of the net impairment charge in the consolidated income statement and the movement in
the allowance for expected credit losses has been provided in this year’s financial statements.
134
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 17 BANK OVERDRAFT AND LOANS
Bank loans
Bank overdrafts
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
The bank overdrafts are repayable on demand.
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:
2020
£m
(544.6)
–
–
(544.6)
2019
£m
(500.2)
(11.4)
(11.4)
(500.2)
(544.6)
(500.2)
2020
%
2019
%
2.3
3.0
2.1
2.6
Bank overdrafts of £nil (2019: £11.4m) are repayable on demand, unsecured and bear interest at a margin over bank base rates.
The Group has an overdraft facility of £27.5m (2019: £27.5m).
The Group has a bank loan of £419.6m (2019: £390.2m) 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
£500m for which finance costs are linked to US commercial paper rates which is committed until December 2021, after being
extended during the year from the previous end date of September 2021.
The Group also has unsecured bank loans of £125m (2019: £110m) drawn down under a medium-term bank revolving credit
facility (RCF), of £125 million, which is committed until September 2021.
All borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk. The Group uses interest
rate cap derivatives to manage this risk. The notional amount of interest rate caps outstanding at the year end was £0.8m
(2019: £nil). Based on current weighted average interest rates and the value of bank loans at 29 February 2020 the estimated
future interest cost per annum until maturity is £16.2m (2019: £12.8m).
At 29 February 2020, the Group had an undrawn borrowing facility of £nil (2019: £15m) on the RCF facility in respect of which all
conditions precedent had been met. In addition there was an undrawn overdraft facility of £27.5m (2019: £27.0m).
Note 19 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.
The Group continues to have a supplier financing arrangement which is facilitated by HSBC. The maximum facility limit is £10.0m
and as at 29 February 2020 a total of £6.3m (2019: £6.5m) had been funded under the programme. There is no fixed expiry date
on this facility. As explained in note 2, these balances are not classified as bank debt and instead included within trade and
other payables.
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18 DERIVATIVE FINANCIAL INSTRUMENTS
At the balance sheet date, details of outstanding forward foreign exchange contracts that the Group has committed to are
as follows:
Notional amount – sterling contract value
Fair value of asset/(liability) recognised
2020
£m
305.9
3.1
2019
£m
271.4
(1.5)
The fair value of foreign currency derivatives contracts is their market value at the balance sheet date. Market values are
calculated with reference to the duration of the derivative instrument together with the observable market data such as spot and
forward interest rates, foreign exchange rates and market volatility at the balance sheet date.
Changes in the fair value of derivatives recognised, being currency derivatives where hedge accounting has not been applied,
amounted to a credit of £4.7m (2019: credit of £4.5m) to income in the period.
Financial instruments that are measured subsequent to initial recognition at fair value are all grouped into Level 2 (2019: Level 2).
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 (i.e. as prices) or indirectly (i.e. derived from prices).
There were no transfers between Level 1 and Level 2 during the current or prior period.
19 FINANCIAL INSTRUMENTS
CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising
the return to stakeholders through the optimisation of the debt and equity balance. The debt and equity structure of the Group
consists of debt, which includes the borrowings disclosed in note 17 and lease liabilities as recognised under IFRS 16, disclosed
in note 27, net of cash and cash equivalents disclosed in note 25 and equity attributable to equity holders of the parent,
comprising issued capital, reserves and retained earnings as disclosed in notes 23 to 24 and the consolidated statement of
changes in equity.
GEARING RATIO
The gearing ratio at the year end is as follows:
Debt
Lease liability
Cash and cash equivalents
Net debt
Equity
Gearing ratio
2020
£m
544.6
6.9
(47.5)
504.0
317.5
159%
2019
£m
511.6
–
(43.7)
467.9
311.4
150%
Debt is defined as long and short-term borrowings, as detailed in note 17.
Equity includes all capital and reserves of the Group attributable to equity holders of the parent.
EXTERNALLY IMPOSED CAPITAL REQUIREMENT
The Group is not subject to externally imposed capital requirements. However, its wholly owned subsidiary, J.D. Williams & Co
Ltd does have an FCA regulatory minimum capital requirement, which it comfortably exceeded throughout the year.
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.
136
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk FINANCIAL RISK MANAGEMENT OBJECTIVES
The financial risks facing the Group include foreign exchange 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, primarily relating to purchases of inventories
and revenue from its overseas operations. Hence, exposures to exchange rate fluctuations arise. Exchange rate exposures are
managed within approved policy parameters utilising foreign exchange derivative contracts.
It is the policy of the Group to enter into foreign exchange derivative 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 two years ahead.
At the balance sheet date, details of the notional value of outstanding US dollar foreign exchange derivative contracts that the
Group has committed to are as follows:
Less than 6 months
6 to 12 months
12 to 18 months
Greater than 18 months
2020
£m
142.6
99.2
41.2
22.9
305.9
2019
£m
125.4
63.1
50.0
32.9
271.4
Forward contracts outstanding at the period end are contracted at US dollar exchange rates ranging between 1.28 and 1.36.
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
2019
£m
4.1
19.7
2020
£m
5.1
20.6
2020
£m
17.3
35.8
Assets
2019
£m
25.9
20.0
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 table
below illustrates the sensitivity to the Group’s reported operating profit before the impact of fair value adjustments on derivative
instruments. The Group’s foreign exchange derivatives are not designated hedges and therefore movements in exchange rates
impact the income statement.
Income statement
Sterling strengthens by 10%
Sterling weakens by 10%
Euro
currency impact
2020
£m
(0.9)
1.1
2019
£m
(1.6)
2.9
US Dollar
currency impact
2020
£m
2019
£m
(3.0)
1.2
0.3
0.4
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19 FINANCIAL INSTRUMENTS CONTINUED
CATEGORIES OF FINANCIAL INSTRUMENTS
Financial assets
Derivatives – at fair value through profit and loss
Cash and bank balances – amortised cost
Trade receivables – amortised cost
Other receivables – amortised cost
Financial liabilities
Derivatives – at fair value through profit and loss
Bank loans and overdraft – amortised cost
Trade and other payables – amortised cost
2020
£m
5.3
47.5
585.2
6.3
644.3
2020
£m
2.2
544.6
73.0
619.8
2019
£m
–
43.7
585.1
6.2
635.0
2019
£m
1.5
511.6
95.0
608.1
INTEREST RATE RISK MANAGEMENT
The Group is exposed to interest rate risk, as entities in the Group borrow funds at floating interest rates but earns interest from
customers at interest rates which are fixed for at least 12 months. Where appropriate, exposure to interest rate fluctuations on
indebtedness is managed by using derivatives such as interest rate caps.
The Group has in place interest rate caps on some of its borrowings to hedge the risk of the Group’s financing costs increasing
should LIBOR increase above a certain level.
INTEREST RATE SENSITIVITY ANALYSIS
If interest rates had increased by 0.5% and all other variables were held constant, the Group’s profit before tax for the 52 weeks
ended 29 February 2020 would have decreased by £2.7m (2019: £2.5m).
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.
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 16.
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.
CREDIT QUALITY ANALYSIS
The following table sets out information about the overdue status of trade receivables in Stages 1, 2 and 3.
Ageing of trade receivables
Current – not past due
28 days – past due
56 days – past due
84 days – past due
112 days – past due
Over 112 days – past due
Gross trade receivables
Allowance for expected credit losses
Stage 1
516.2
–
–
–
–
–
516.2
(13.1)
Stage 2
29.5
35.3
17.5
–
–
–
82.3
(20.8)
Stage 3
13.7
2.0
2.6
13.7
9.3
17.1
58.4
(37.8)
2020
Total
559.4
37.3
20.1
13.7
9.3
17.1
656.9
(71.7)
2019
Total
578.4
38.7
22.0
15.6
10.9
16.6
682.2
(97.1)
As at 29 February 2020, current debtors are included in Stage 2 if the receivable had suffered from a significant increase in credit
risk. Debtors which were in default or on an agreed interest free or interest bearing payment arrangement were included in Stage 3.
138
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Ageing of trade receivables
Current – not past due
28 days – past due
56 days – past due
84 days – past due
112 days – past due
Over 112 days – past due
Gross trade receivables
Allowance for expected credit losses
Stage 1
494.2
–
–
–
–
–
494.2
(15.8)
Stage 2
69.6
36.7
19.8
1.9
–
–
128.0
(40.7)
Stage 3
14.6
2.0
2.2
13.7
10.9
16.6
60.0
(40.6)
2019
Total
578.4
38.7
22.0
15.6
10.9
16.6
682.2
(97.1)
As at 2 March 2019 current debtors are included in Stage 2 if the receivable had suffered from a significant increase in credit
risk or were on a interest bearing payment arrangement. Debtors which were in default or on an agreed interest free payment
arrangement were included in Stage 3.
INCORPORATION OF FORWARD-LOOKING INFORMATION
The economic scenarios used as at 29 February 2020 included the following key indicators for the UK for the calendar years 2020
to 2024:
Unemployment rate (%)
Base
Upside
Downside
Annual real wage growth (%) Base
Upside
Downside
2020
4.0
3.9
4.1
0.9
1.9
(0.1)
2021
3.9
3.8
4.1
1.4
2.4
0.6
2022
3.8
3.8
4.1
1.6
2.5
0.9
2023
3.8
3.8
4.2
1.7
2.6
1.2
2024
3.8
3.8
4.3
1.8
2.7
1.4
The scenarios above have been applied to all customers within the Group’s ECL model. However, a significant proportion
the Group’s customers are not currently in employment and therefore this segment of customers do not have a significant
correlation to these or any other readily determinable economic indicators.
Predicted relationships between the key indicators and default and loss rates on various portfolios of financial assets have been
developed based on historical data.
As required by IFRS 9, these economic scenarios reflect estimated future economic parameters forecasted as at 29 February
2020 and therefore do not reflect the significant changes to the future economic outlook resulting from the Covid-19 lockdown.
Note 31 identifies the economic scenario assumptions used to estimate the impact on the ECL that would have been recognised
had the Covid-19 impacts been adjusted at 29 February 2020.
Gross trade receivables
Balances as at 2 March 2019
Transfer Stage 1
Transfer Stage 2
Transfer Stage 3
Remeasurement of balances
New financial assets originated
Financial assets that have been derecognised
Write-offs
Balances as at 29 February 2020
Stage 1
Stage 2
Stage 3
Total
494.2
–
18.8
(26.4)
35.5
44.9
(25.2)
(25.6)
516.2
128.0
(18.8)
–
(8.5)
28.8
12.7
(20.4)
(39.5)
82.3
60.0
26.4
8.5
–
8.0
5.6
(17.2)
(32.9)
58.4
682.2
7.6
27.3
(34.9)
72.3
63.2
(62.8)
(98.0)
656.9
The amounts written off in the period include the sale of impaired assets with a net book value of £19.9m (2019: £14.7m). This sale
has also been a material driver in the reduction in trade receivables on payments arrangements, from £26.8m to £12.5m as at
29 February 2020.
139
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
19 FINANCIAL INSTRUMENTS CONTINUED
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 17 is a description of additional
undrawn facilities that the Group has at its disposal and details of the Group’s remaining contractual maturity for its non-
derivative financial liabilities.
The table below shows the maturity analysis of the undiscounted remaining contractual cash flows (including estimated interest
payments) of the Group’s financial liabilities, including cash flows in respect of derivatives:
2020
Secured bank loans
Trade payables
Lease liabilities
Other creditors
Accruals and deferred income
Derivatives: gross settled
Cash inflows
Cash outflows
2019
Non-derivative financial liabilities
Secured bank loans
Trade payables
Other creditors
Accruals and deferred income
Derivatives: gross settled
Cash inflows
Cash outflows
2020
1 to <2
years
£m
2020
2 to <5
years
£m
2020
5 years
and over
£m
2020
Carrying
amount
£m
2020
Contractual
cash flows
£m
(544.6)
(65.9)
(6.9)
(7.1)
(37.5)
(662.0)
(549.5)
(65.9)
(7.7)
(7.1)
(37.5)
(667.7)
2020
1 year
or less
£m
(16.4)
(65.9)
(2.3)
(7.1)
(37.5)
(129.2)
(533.1)
–
(1.9)
–
–
(537.1)
5.3
(2.2)
(658.9)
5.3
(2.2)
(664.6)
4.0
(1.3)
(126.5)
1.3
(0.9)
(537.5)
–
–
(2.1)
–
–
(2.1)
–
–
(2.1)
–
–
(1.4)
–
–
(1.4)
–
–
(1.4)
2019
Carrying
amount
£m
2019
Contractual
cash flows
£m
(500.2)
(81.0)
(14.0)
(57.2)
(652.4)
(510.6)
(81.0)
(14.0)
(57.2)
(662.8)
2.9
(4.5)
(654.0)
2.9
(4.5)
(664.4)
2019
1 year
or less
£m
(12.8)
(81.0)
(14.0)
(57.2)
(165.0)
2.1
(2.1)
(165.0)
2019
1 to <2
years
£m
2019
2 to <5
years
£m
2019
5 years
and over
£m
(12.8)
–
–
–
(12.8)
0.8
(2.4)
(14.4)
(485.0)
–
–
–
(485.0)
–
–
(485.0)
–
–
–
–
–
–
–
–
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of each category of the Group’s financial instruments are approximately the same as their carrying value in the
Group’s balance sheet.
140
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 20 DEFERRED TAX
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the
current and prior reporting periods.
At 3 March 2018
Adjustment on initial application of IFRS 9
Adjustment on initial application of IFRS 15
(Charge)/credit to income
Credit/(charge) to equity
As at 2 March 2019
Adjustment on initial application of IFRS 16
(Charge)/credit to income
Charge to equity
As at 29 February 2020
Debtor
impairment
provision
£m
0.8
–
–
(0.8)
–
–
–
–
–
–
Share-
based
payments
£m
0.8
–
–
(0.2)
(0.4)
0.2
–
(0.2)
–
–
Accelerated
tax
depreciation
£m
(8.9)
–
–
2.8
–
(6.1)
–
1.2
–
(4.9)
Retirement
benefit
obligations
£m
(3.3)
–
–
(0.1)
(5.0)
(8.4)
–
(0.5)
(0.3)
(9.2)
IFRS 9
transitional
adjustment
£m
Other
deferred tax
assets and
liabilities
£m
Tax
losses
£m
–
11.7
–
(1.3)
–
10.4
–
(1.2)
–
9.2
–
–
–
7.6
–
7.6
–
(4.0)
–
3.6
1.2
–
0.4
(1.0)
–
0.6
0.1
(0.8)
–
(0.1)
Total
£m
(9.4)
11.7
0.4
7.0
(5.4)
4.3
0.1
(5.5)
(0.3)
(1.4)
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
As at 29 February 2020
2020
£m
13.2
(14.6)
(1.4)
2019
£m
18.8
(14.5)
4.3
At the balance sheet date, the Group has unused tax losses of £17.5m (2019: £17.5m) and capital losses of £3.2m (2019: £3.2m)
available for offset against future profits. The Group has recognised a deferred tax asset of £3.3m in relation to trading losses
carried forward. As at 29 February 2020, it is management’s expectation that sufficient profits will arise in future periods to
support these losses and therefore will be utilised in full.
21 TRADE AND OTHER PAYABLES
Trade payables
Other payables
Accruals and deferred income
2020
£m
65.9
7.1
37.5
110.5
2019
£m
(Restated)
81.0
14.0
57.2
152.2
The comparative for Accruals and deferred income has been restated for the impact of stock on water as disclosed in note 32.
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 54 days (2019: 48 days).
The Group has financial risk management policies in place to ensure that all payables are paid within agreed credit terms.
“Other payables” include a net VAT creditor, comprising the VAT debtor which arises from day to day trading together with
amounts in relation to matters which are in discussion with HMRC. The Group was in a long-running dispute with HMRC with
respect to the VAT treatment of certain marketing and non-marketing costs and the allocation of those costs between our retail
and credit businesses. The case was heard in a first tier VAT Tribunal in May 2018 with a draft decision being issued in November
2018 which was made public in March 2019.
Since this date the Group has been in discussions with HMRC to settle this matter and whilst substantial progress has been
made, a final binding agreement has not yet been reached. As at 29 February 2020, the Group holds a creditor of £3.8m (£6.6m
at 2 March 2019) in respect of this matter, being management’s best estimate of the liability to settle, with the decrease since the
prior year end being due to the actualisation of the previously estimated cost disallowances.
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21 TRADE AND OTHER PAYABLES CONTINUED
The case had two key aspects, being attribution which is in respect of whether marketing costs can be directly attributed to
product revenue or financial services income and secondly apportionment which is surrounding the allocation of marketing
costs between the retail and financial services business. With respect to attribution, the judge agreed with HMRC, finding that
when the Group is marketing goods it is also in effect marketing financial services, even if there is no reference to this in its
marketing materials. The judge however ruled against HMRC’s standard method of apportionment of costs (which is based on
the proportion of total UK revenue which is generated from product sales).
Whilst discussions are ongoing with HMRC and a final outcome has not yet been achieved, following the final ruling
management have reviewed the provision held as at March 2019 and as a result of this reduced liability by £3.1m. The Group
has not yet been assessed by HMRC for the period June 2017 to February 2020. However, adjustments have been made to
the VAT returns throughout the period to estimate disallowances; which have resulted in an expense recognised in EBITDA
of £0.3m. This results in a total reduction to the provision of £2.8m and a VAT creditor at year end of £3.8m (2019: £6.6m). As a
final settlement has not yet been reached, inherent uncertainty regarding the outcome of this position remains which means
the eventual realisation could differ from the accounting estimate as at 29 February 2020. The tribunal stay is in place until
30 June 2020. If no agreement is reached by this date, there could be a second tribunal hearing on this issue, but this is not
management’s current expectation.
22 PROVISIONS
Balance as at 2 March 2019
Provisions made during the period
Provisions reversed during the period
Provisions used during the period
Reclassification at IFRS 16 transition
Balance as at 29 February 2020
Non-current
Current
Balance as at 29 February 2020
Customer
redress
£m
17.4
22.9
–
(32.0)
-
8.3
Store
closure
£m
7.4
–
(0.3)
(3.1)
(2.9)
1.1
Restructuring
£m
–
1.7
–
–
–
1.7
–
8.3
8.3
–
1.1
1.1
–
1.7
1.7
Total
£m
24.8
24.6
(0.3)
(35.1)
(2.9)
11.1
–
11.1
11.1
STORE CLOSURES
At the end of H1 FY19 the decision was made to close all stores and these were subsequently closed in August 2018. The costs
were treated as an exceptional item and detailed separately in the income statement as per note 6. The provision was made in
respect of onerous lease obligations and other store related closure costs.
The majority of these costs have been settled during the current and prior years, and amounts relating to the rental cost have
been reclassified to offset against the right-of-use asset recognised at the transition date for IFRS 16, with the provision of £1.1m
outstanding as at 29 February 2020 relating primarily to dilapidations and other costs of any remaining stores which will run to
the earlier of the break clause or lease expiry for all stores. In the prior year provisions for onerous leases were recognised net of
an estimate of potential sub-letting income.
CUSTOMER REDRESS
The provision relates to the Group’s liabilities in respect of costs expected to be incurred in respect of payments for historic
financial services customer redress, which represents the best estimate of redress obligations, taking into account factors
including risk and uncertainty.
As at 29 February 2020 the Group holds a provision of £8.3m (2019: £17.4m) in respect of the anticipated costs of historic financial
services customer redress. These amounts include a provision of £nil (2019: £0.1m) in relation to administration expenses.
RESTRUCTURING
The provision relates to redundancy costs of £1.7m to be incurred by the Group. Prior to the reporting date, the Board approved
a formal plan for the restructuring and appropriate communications with those affected were carried out which has created a
constructive obligation.
142
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 23 SHARE CAPITAL
Allotted, called-up and fully paid
Ordinary shares of 111/19p each
At 29 February 2020 and 2 March 2019
2020
Number
2019
Number
2020
£m
2019
£m
285,817,178 285,153,619
31.4
31.4
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.
24 OWN SHARES
Balance at 2 March 2019
Issue of own shares
Balance at 29 February 2020
2020
£m
0.3
–
0.3
2019
£m
0.2
0.1
0.3
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-based payment benefit schemes (see note 28).
At 29 February 2020 the employee trusts held 1,573,598 shares in the Company (2019: 85,171).
25 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. Included in the amount below
is £0.6m (2019: £0.9m) of restricted cash which is held in respect of the Group’s customer redress programmes and £3.6m
(2019: £2.9m) in respect of our securitisation reserve account. In addition £4.2m was held at the balance sheet date in relation to
an amount to be repaid against the Group’s securitisation facility.
A breakdown of significant cash and cash equivalent balances by currency is as follows:
Sterling
Euro
US dollar
2020
£m
10.2
10.3
27.0
47.5
2019
£m
7.6
18.9
17.2
43.7
A significant amount of the Group’s cash is held in US dollars so as to act as a natural hedge of its US dollar purchase of
inventories requirements. After the balance sheet date, £4.5m of the Group’s euro balance was converted into sterling.
143
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26 CONTINGENT LIABILITIES
BANK OVERDRAFTS
Parent Company bank overdrafts and loans which at 29 February 2020 amounted to £48.0m (2019: £18.4m) and £125.0m
(2019: £110.0m) respectively have been guaranteed by certain subsidiary undertakings.
ALLIANZ CLAIM AND COUNTERCLAIM
Until 2014, JD Williams & Company Limited (“JDW”), a subsidiary of N Brown Group plc sold (amongst other insurance products)
payment protection insurance (“PPI”) to its customers when they bought JDW products. This insurance was underwritten by
Allianz Insurance plc (“Allianz”). JDW was an unregulated entity prior to 14 January 2005 in respect of the sale of PPI insurance.
The regulated entity prior to 14 January 2005 was Allianz.
In recent years, JDW and Allianz have paid out significant amounts of redress to customers in respect of certain insurance
products, including PPI. In July 2014 JDW and Allianz entered into an indemnity agreement in respect of certain PPI mis-selling
liabilities (Indemnity Agreement). In September 2018 JDW and Allianz entered into a Complaints Handling Agreement (CHA) to
regulate complaints handling and redress payments for both parties in respect of pre-2005 PPI claims.
In January 2020, a claim was issued against JDW by Allianz in respect of all payments of redress Allianz has made to JDW’s PPI
customers together with all associated costs. Allianz have made a claim in contribution as well as asserting a number of direct
claims against JDW in relation to:
the Indemnity Agreement;
alleged negligence as its agent; and
alleged breaches of the CHA.
On 5 March 2020 JDW issued its defence which refuted each element of the claim and also issued counterclaims in respect of
the losses JDW has suffered in respect of two separate insurance policies underwritten by Allianz. JDW has claimed that:
Allianz is liable to compensate JDW for such loss and damage by way of a contribution to JDW’s liability in relation to Product
Protection Insurance sales (a separate product to PPI);
Allianz has been unjustly enriched to the extent that its liability to the complainants was discharged and JDW seeks restitution of
all such sums; and
JDW seeks contribution from Allianz in respect of sums paid by JDW pursuant to the CHA as Allianz was also liable for the same
damages in relation to Payment Protection Insurance.
On 9 April 2020 JDW received a Reply and Defence to JDW’s counterclaim. This document confirmed that the amount of
Allianz’s claim was £28m plus interest.
All claims made by Allianz, and counterclaimed by JDW, remain subject to final determination by the court, both as to their
success and quantum. The claim and counterclaim are extremely complex, are at an early stage of proceedings and both parties
will need to gather detailed and factual expert evidence in relation to multiple elements of the claim and counterclaim.
Having taken legal advice on its own position, the Group has concluded that these issues mean it is not possible to reliably
estimate the amount of any potential settlement and has therefore not provided any amount for this claim at this time.
There is also considerable uncertainty as to the timing of any cash outflows/inflows from the claim/counterclaim given that
the legal process remains at an early stage and the potential disruption to court timings and process as a result of Covid-19.
Legal fees are expected to continue to be incurred during FY21 but it is possible that the cash flows resulting from the claim
and/or counterclaim may not arise until FY22.
144
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 27 LEASES
The Group leases various buildings, equipment and vehicles under non-cancellable operating leases of varying lengths.
In accordance with IFRS 16, from 3 March 2019 the Group has recognised right-of-use assets for these leases except for short
term and low value leases, further information on the amounts recognised in the balance sheet are included within this note, and
within note 1.
AMOUNTS RECOGNISED IN THE BALANCE SHEET
The Consolidated balance sheet as at 29 February 2020 shows the following amounts relating to leases. As IFRS 16 has not been
applied retrospectively the balances alongside represent the equivalent balances at the start of the accounting period after
restating for IFRS 16.
Right-of-use assets
3 March 2019
Additions
Depreciation
29 February 2020
Lease liabilities
Current
Non-current
AMOUNTS RECOGNISED IN THE INCOME STATEMENT
The consolidated income statement shows the following amount relating to leases:
Depreciation charge of right-of-use buildings
Depreciation charge of right-of-use equipment and vehicles
Interest expense (included in finance costs)
Expense relating to leases of low-value assets (included in operating expenses)
Expense relating to short-term leases (included in operating expenses)
The total cash outflow for leases during the year was £4.4m.
Land and
buildings
£m
4.7
–
(1.1)
3.6
Fixtures and
equipment
£m
1.5
0.7
(0.2)
2.0
2020
£m
2.2
4.7
6.9
2020
£m
1.1
0.2
0.1
0.8
0.1
Total
£m
6.2
0.7
(1.3)
5.6
2019
£m
3.5
6.0
9.5
2019
£m
–
–
–
–
–
In the prior year all leases were classified as operating leases under IAS 17. Because there were no leases classified as finance
leases, no lease liabilities or related assets were recognised in the prior year balance sheet.
The required disclosures under IAS 17 for these operating leases for the prior year are shown below:
Minimum lease payments under operating leases recognised as an expense for the period
2020
£m
–
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Within one year
In the second to fifth years inclusive
After five years
2020
£m
–
–
–
–
2019
£m
2.3
2019
£m
2.1
4.3
1.7
8.1
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
28 EQUITY-SETTLED SHARE-BASED PAYMENTS
The Directors’ Remuneration Report on p73 to 90 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 (LTIPs)
July 2013
August 2013
August 2014
June 2015
August 2016
August 2017
August 2018
June 2019
September 2019
Deferred annual bonus scheme awards (DABs)
May 2014
May 2015
May 2016
September 2017
August 2018
June 2019
Deferred share bonus plan (DSBP)
June 2019
Movements in share options are summarised as follows:
Option price
in pence
189 – 420
238 – 444
238 – 444
Exercise
period
Number
of shares
2020
Number
of shares
2019
May 2010 – February 2022
May 2010 – August 2024
May 2010 – August 2024
1,740,653 1,048,234
89,049
60,450
89,049
60,450
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
July 2016 – December 2016
August 2016 – February 2017
August 2017 – July 2024
June 2018 – June 2025
August 2019 – August 2026
August 2020 – August 2027
August 2021 – August 2028
September 2022 – August 2029
September 2022 – September 2029
May 2016 – November 2016
May 2017 – November 2017
May 2018 – November 2018
September 2019 – March 2020
September 2020 – March 2021
July 2021 – July 2021
–
–
–
–
–
770,817
1,586,211
285,409
3,230,819
–
–
–
–
175,401
163,766
–
–
–
–
2,437,024
1,273,015
2,677,133
–
–
–
–
–
85,269
245,219
–
July 2022 – July 2022
84,246
–
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
2020
Weighted
average
exercise
price
£
2.10
1.13
1.85
–
1.55
2.62
Number
of share
options
1,197,733
1,225,391
(532,972)
–
1,890,152
228,361
2019
Weighted
average
exercise
price
£
2.45
1.67
2.27
–
2.10
2.50
Number
of share
options
1,238,952
717,323
(758,542)
–
1,197,733
150,751
No options were exercised in the period and the weighted average share price during the period was 116 pence (2019: 147
pence). The options outstanding at 29 February 2020 had a weighted average remaining contractual life of 2.21 years (2019: 2.15
years). The aggregate estimated fair values of options granted in the period is £502,043 (2019: £243,244).
146
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Movements in management share awards (LTIPs and DABs) 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
2020
Weighted
average
exercise
price
£
–
–
–
–
–
–
Number
of share
awards
4,893,445
3,024,886
(1,200,671)
–
6,716,660
–
Number
of share
awards
6,717,660
4,457,764
(4,567,899)
(310,856)
6,296,669
–
2019
Weighted
average
exercise
price
£
–
–
–
–
–
–
The awards outstanding at 29 February 2020 had a weighted average remaining contractual life of 8.52 years (2019: 8.14 years).
The aggregate estimated fair values of options granted in the period is £3,579,266 (2019: £3,170,372).
The fair value of management and sharesave options/awards granted is calculated at the date of grant using a Black–Scholes
option pricing model. The inputs into the Black–Scholes model are as follows:
Weighted average share price at date of grant (pence)
Weighted average exercise price (pence)
Expected volatility (%)
Expected life (years)
Risk-free rate (%)
Dividend yield (%)
2020
112
24
46.5
2.5-4.3
1.0
0.6
2019
141
32
40.6
2.5-3.5
0.8
–
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 a total credit of £1.3m and an expense of £0.1m related to equity-settled share-based payment
transactions in 2020 and 2019 respectively.
147
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29 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 £6.0m (2019: £5.5m) represents contributions payable to the schemes by the Group at rates
specified in the rules of the plans. As at 20 February 2020, contributions of £0.1m (2019: £0.1m) 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 it was closed to new members from 31 January 2002.
On 29 February 2016 the scheme was closed to future accrual. 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 (e.g. 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 2018 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 – male
Pensioner aged 65 – female
Non-pensioner aged 45 – male
Non-pensioner aged 45 – female
Amounts recognised in profit or loss in respect of these defined benefit schemes are as follows:
Current service cost
Past service cost
Net interest credit
Administrative expenses paid from plan assets
Profit recognised in the income statement
2020
1.75%
2.00%
2.85%
2.05%
2019
2.80%
2.05%
3.40%
2.40%
22.0
23.4
23.8
25.7
2020
£m
–
–
(0.7)
0.1
(0.6)
22.2
23.6
24.0
25.9
2019
£m
–
0.3
(0.5)
–
(0.2)
The actual return on scheme assets was £23.8m (2019: £0.7m).
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
2020
£m
(130.9)
157.2
26.3
2019
£m
(112.0)
135.9
23.9
148
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk The amount included in the statement of comprehensive income is as follows:
Remeasurement (loss)/gain
Return on scheme assets
Gain recognised in the statement of comprehensive income
2020
£m
(19.3)
20.1
0.8
2019
£m
7.0
(3.1)
3.9
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. There are no restrictions on the recovery of the surplus.
Movements in the present value of defined benefit obligations were as follows:
At 3 March 2019
Current service cost
Past service cost
Interest cost
Remeasurement (gain)/loss
a. Effect of changes in financial assumptions
b. Effect of experience adjustments
c. Effect of changes in demographic assumptions
Benefits paid
At 29 February 2020
Movements in the fair value of the scheme assets were as follows:
At 3 March 2019
Interest income
Return on scheme assets excluding interest income
Contributions from sponsoring companies
Benefits paid
At 29 February 2020
2020
£m
112.0
–
–
3.0
19.1
–
0.2
(3.4)
130.9
2020
£m
135.9
3.7
20.1
0.9
(3.4)
157.2
2019
£m
120.7
–
0.3
3.2
(0.4)
(6.6)
–
(5.2)
112.0
2019
£m
140.0
3.7
(3.1)
0.5
(5.2)
135.9
The analysis of the scheme assets at the balance sheet date was as follows. All investments held by the scheme are unquoted:
Equities
Fixed-interest government bonds
Index-linked government bonds
Corporate bonds
Property
Growth fixed income
Alternatives
Cash and cash equivalents
£m
15.2
0.4
13.8
89.2
1.8
14.4
1.5
20.9
157.2
2020
%
9.7
0.3
8.8
56.6
1.1
9.2
1.0
13.3
100.0
£m
16.6
11.1
40.4
50.4
1.7
8.9
4.4
2.4
135.9
2019
%
12.2
8.2
29.7
37.1
1.3
6.5
3.2
1.8
100.0
All assets had an observable market price (2019: 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 £6.9m (2019: £5.3m).
An increase of 0.25% in the inflation assumption would increase the defined benefit obligation by £3.8m (2019: £4.5m).
An increase of one year in the life expectancy assumption would increase the defined benefit obligation by £4.6m (2019: £3.5m).
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.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
29 RETIREMENT BENEFIT SCHEMES CONTINUED
The Group has updated its approach to setting RPI and CPI inflation assumptions in light of the RPI reform proposals published
on the 4th September 2019 by the UK Chancellor and UK Statistics Authority.
The Group continued to set RPI inflation in line with the market break-even expectations less an inflation risk premium.
The inflation risk premium has been increased from 0.05% at 2 March 2019 to 0.25% at 29 February 2020, reflecting an allowance
for additional market distortions caused by the RPI reform proposals. For CPI, the Group reduced the assumed difference
between the RPI and CPI by 0.2% to an average of 0.8% per annum. The estimated impact of the change in the methodology is
approximately a £2.5m decrease in the defined benefit obligation.
The scheme is funded by the Group and current employee members. Funding levels for the scheme is based on a
separate actuarial valuation for funding purposes for which the assumptions may differ from the assumptions above.
Funding requirements and deficit contributions are formally set out in the Statement of Funding Principles, Schedule of
Contributions and Recovery Plan agreed between the trustees and the Group.
Although the scheme has an accounting surplus, the Group expects to contribute £1.0m (2019 actual contributions: £0.9m) to the
defined benefit scheme in the next financial year.
The weighted average duration of the defined benefit obligation at 29 February is approximately 20 years (2019: 20 years).
The defined benefit obligation at 29 February 2020 can be approximately attributed to the scheme members as follows:
Active members: 0% (2019: 0%)
Deferred members: 64% (2019: 64%)
Pensioner members: 36% (2019: 36%)
All benefits are vested at 29 February 2020 (unchanged from 3 March 2019).
30 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. Remuneration paid to key management personnel (who comprise the Group Directors and
members of the Executive Board) was £2.3m (2019: £3.4m). This was split as follows: employment benefits of £2.1m (2019: £2.6m),
other benefits of £0.2m (2019: £0.7m) and share-based payments of £nil (2019: £0.1m).
31 POST BALANCE SHEET EVENTS
This note sets out the subsequent events which are material to the Group up to the date of this report.
NEW FINANCING ARRANGEMENTS
On 18 May 2020, the Group secured new financing arrangements with its long-standing supportive lenders.
These new arrangements comprise:
A new three-year Term Loan facility up to £50 million, provided by our lenders under the government’s Coronavirus Large
Business Interruption Loan Scheme (“CLBILS”). This facility requires the Group to comply with various additional covenants
including the Group being unable to pay any cash dividends for as long as the facilities remain in place;
Amendment of certain terms and covenants of the securitisation facility, to mitigate a significant amount of the impact that
Covid-19 may have in 2020 on the facility. This is to address variations in collection rates and customer behaviour, and to
enable the Group to continue to offer its customers enhanced flexibility. The amendments to the facility are in place until late
December 2020 and are intended to fully cover the impact of the current period of the FCA’s forbearance requirements for
consumer credit customers impacted by Covid-19; and
The widening of certain covenants at the August 2020 half-year test date in its existing unsecured £125 million Revolving Credit
Facility (“RCF”) and the introduction of quarterly covenant tests.
150
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk IMPACT OF COVID-19
Although the global spread of Covid-19 began before 29 February 2020, the WHO declaration of a global pandemic and
escalation of the virus within the UK took place in March 2020 and was not predictable as at the balance sheet date. For this
reason the significant effects of Covid-19 are non-adjusting as at the balance sheet date. Management have considered the
potential impact on the 29 February 2020 balance sheet if Covid-19 had been treated as an adjusting event, specifically in
regards to the recoverability of its tangible, intangible assets and inventory, the impairment of the trade receivables and fair
value of the Group’s pension surplus.
ASSET IMPAIRMENT
The Group has considered the risk of impairment of its tangible and intangible assets after the balance sheet date, as a result of
the impact of Covid-19 on the business, by reperforming the impairment test, using the latest Board approved base trading five
year forecasts which includes the estimated impacts of Covid-19. Other key assumptions have also been reviewed and updated
where appropriate in light of current market conditions. The resulting value in use exceeds the carrying value of the group’s
tangible and intangible assets. The following sensitivities have been performed under the base scenario with no impairment
resulting for these:
Decrease in long-term growth rate by 1%;
Decrease in Years 4 and 5 growth rate by 1%;
Increasing discount rate by 1%.
It is recognised that the current trading outlook remains highly uncertain and hence management have also assessed for
impairment under the core Group downside trading forecasts. No impairment has resulted from this further sensitivity.
INVENTORY
Following the Covid-19 lockdown, management performed an assessment of the Group’s inventory holdings in light of the
reduced demand in certain product lines, and the Group’s five-year plan which includes the estimated impacts of Covid-19
(base case), and have taken appropriate steps to reduce the Group’s exposure in regard to the Spring/Summer 2020 season
by cancelling all orders no longer needed. Whilst Covid-19 is expected to have a significant impact on the business in FY21,
inventory held as at 29 February 2020 was £17.4m lower than the prior year and therefore management consider the maximum
exposure in regards to inventory impairment to be £6.4m, of which £2.0m relates to supplier reimbursement for cancellation
of orders.
IFRS 9 ALLOWANCE FOR EXPECTED CREDIT LOSSES
IFRS 9 requires an entity to measure expected credit losses that reflect reasonable and supportable information that was
available at the reporting date about past events, current conditions and forecasts of future conditions. As noted above, as at
the 29 February 2020 reporting date, management could not have reasonably foreseen the material change to actual economic
conditions that took place between the year end and the date of approving these financial statements and to forecast future
economic conditions that have now arisen due to the impact of the Covid-19 lockdown.
As a result, expected credit losses reported in the 29 February 2020 balance sheet have not been adjusted to include the
expected impact of Covid-19 and instead this will be reported in future financial statements of the Group. A potential range for
the increase to the 29 February 2020 expected credit loss provision and net impairment charge in the income statement if the
impact of the Covid-19 lockdown had been adjusted is £7.7m to £17.7m.
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31 POST BALANCE SHEET EVENTS CONTINUED
Given the significant amount of uncertainty as to the extent of the impact of Covid-19 on the debtor book and the business as
whole, the actual change to the expected credit loss provision recorded in future financial statements may differ to this.
The following matters have been taken into consideration in arriving at this estimate:
applying an updated economic scenario into the existing ECL model to reflect current economic forecasts incorporating the
impact of Covid-19 and support measures that have been implemented by the government to support the economy;
given that the extreme nature of the current and forecasted economic stress may not allow the economic inputs in the ECL
model to accurately capture future credit losses, a further adjustment to the model to increase expected probabilities of default
have been applied; and
reducing the amount of the expected future proceeds from debt sales (and therefore the modelled LGD) given the adverse
impact forecasted on future debt sale market conditions.
The updated economic scenario for calendar years 2020 to 2024 that have been applied is shown below:
Unemployment rate (%)
Base
Upside
Downside
Annual real wage growth (%)
Base
Upside
Downside
2020
2021
2022
2023
2024
9.7
9.3
10.3
(4.4)
(1.5)
(7.2)
7.5
7.1
8.2
5.3
6.3
4.5
5.8
5.4
6.6
1.6
2.5
0.9
4.9
4.4
5.8
1.4
2.3
0.9
4.4
3.9
5.3
1.5
2.4
1.1
Within the PD and LGD stresses outlined above, management have considered the impact on expected credit losses that may
arise from the FCA guidance issued on 9 April 2020 that consumer credit lenders, including the Group, should provide under
certain circumstances temporary financial relief for customers impacted by Covid-19. Where a customer is already experiencing
or reasonably expects to experience temporary payment difficulties as a result of circumstances relating to Covid-19, and wishes
to receive a payment deferral, the guidance requires the Group to grant the customer a payment deferral for three months
unless it is obviously not in the customer’s interests to do so. As at 18 June 2020, the Group had entered into payment holiday
arrangements with 9,932 customers with a value of £17.1m.
The bottom end of the potential range disclosed above applies in full the upside economic scenario outlined above, a 10% PD
increase and a 10% debt sale price reduction. The top end of the range applies in full the downside economic scenario outlined
above, a 30% PD increase and a 30% debt sale price reduction.
PENSION SURPLUS
Review of the key financial assumptions relating to the Group’s defined benefit pension scheme subsequent to the balance sheet
date indicates that fluctuations in obligations fall within the range of sensitivities described in note 29. Both decreases to the
discount rate and inflation post year end are expected to lead to a marginal increase in the liability. The fair value of plan assets
is expected to be volatile in the short term due to uncertain market conditions, with the overall impact on the balance sheet
expected to be a reduction in the pension scheme surplus since year end.
POST PERIOD-END TRADING
A summary of the Group’s trading since the period end and its use of the Coronavirus Job Retention Scheme and deferrals of
tax payments to HMRC is included within the note 2 section on Going Concern.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk 32 PRIOR YEAR ADJUSTMENT
During the period ended 29 February 2020, the Group identified that £12.5m of goods in transit as at 2 March 2019 were not
recorded as part of the inventory balance as at the prior period end when they should have been. These goods in transit
represented the group’s inventories as at 2 March 2019 as the group had obtained control of these assets, having accepted the
goods and gained the risks and rewards of ownership, as at that date, as per their agreed supplier terms.
Part of the goods in transit as at 2 March 2019 was already paid for as at that date and were incorrectly recorded as prepaid
balances of £1.1m and £3.8m within ‘Trade and other receivables’ and ‘Trade and other payables’ respectively instead of being
recorded as inventories. No liability was recorded for the unpaid goods in transit of £7.6m as at 2 March 2019.
As a result, inventory balance was understated by £12.5m, trade and other receivables were overstated by £1.2m and trade and
other payables were understated by £11.3m as at the prior period end.
These adjustments have no impact on the Group net assets or profit or loss in the prior year and preceding year, and therefore
no impact on basic or diluted earnings per share. In addition, within the cashflow statement the movement in inventories, trade
and other receivables and trade and other payables have been impacted, however there was no impact on net cash flows from
operating activities in either the prior or preceding years.
The prior period has accordingly been restated to correct for these, as shown below. The affected financial statement line items
for the prior period are as follows:
Balance sheet (extract)
Current assets
Inventories
Trade and other receivables
Current liabilities
Trade and other payables
Net assets
Total equity
2 March
2019
£m
Adjustment
£m
2 March
2019
(Restated)
£m
99.8
621.0
(140.9)
311.4
311.4
12.5
(1.2)
(11.3)
–
–
112.3
619.8
(152.2)
311.4
311.4
Similarly, a third balance sheet has been presented in accordance with IAS 1 to illustrate the impact on the opening balance
sheet for the prior financial year. The group identified that £16.2m of goods in transit as at 4 March 2018 were not recorded as
part of the inventory balance when they should have been. Part of the goods in transit as at 4 March 2018 was already paid for
as at that date and were incorrectly recorded as prepaid balances of £4.8m within ‘Trade and other payables’ instead of being
recorded as inventories. No liability was recorded for the unpaid goods in transit of £11.3m as at 4 March 2018.
The opening balance sheet of the prior period has accordingly been restated to correct for these, as shown below. The affected
financial statement line items are as follows:
Balance sheet (extract)
Current assets
Inventories
Trade and other receivables
Current liabilities
Trade and other payables
Net assets
Total equity
4 March
2018
£m
Adjustment
£m
4 March
2018
(Restated)
£m
110.6
652.7
(131.7)
459.6
459.6
16.2
–
(16.2)
–
–
126.8
652.7
(147.9)
459.6
459.6
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report COMPANY BALANCE SHEET
Fixed assets
Investments
Current assets
Debtors
Creditors
Amounts falling due within one year
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Bank loans
Net assets
Capital and reserves
Called-up share capital
Share premium account
Own shares
Profit and loss account
Shareholders’ funds
As at
29 February
2020
£m
As at
2 March
2019
£m
Note
35
36
37
38
39
366.0
367.3
115.2
86.6
(257.3)
(142.1)
223.9
(125.0)
98.9
31.4
11.0
(0.3)
56.8
98.9
(213.0)
(126.4)
240.9
(110.0)
130.9
31.4
11.0
(0.3)
88.8
130.9
The financial statements of N Brown Group plc (Registered Number 814103) were approved by the Board of Directors and
authorised for issue on 24 June 2020.
They were signed on its behalf by:
Craig Lovelace
CFO and Executive Director
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk COMPANY STATEMENT OF CHANGES IN EQUITY
Changes in equity for the 52 weeks ended 29 February 2020
Balance at 2 March 2019
Comprehensive income for the period
Loss for the period
Total comprehensive loss for the period
Transactions with owners recorded directly in equity
Equity dividends
Issue of own shares by ESOT
Share-based payment credit
Total contributions by and distributions to owners
Balance at 29 February 2020
Changes in equity for the 52 weeks ended 2 March 2019
Balance at 3 March 2018
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
Balance at 2 March 2019
Share
capital
(note 38)
£m
Share
premium
£m
Own shares
£m
Retained
earnings
£m
Total
£m
31.4
11.0
(0.3)
88.8
130.9
–
–
–
–
–
–
31.4
–
–
–
–
–
–
11.0
–
–
–
–
–
–
(0.3)
(10.6)
(10.6)
(20.1)
–
(1.3)
(21.4)
56.8
(10.6)
(10.6)
(20.1)
–
(1.3)
(21.4)
98.9
31.4
11.0
(0.2)
102.9
145.1
–
–
–
–
–
–
31.4
–
–
–
–
–
–
11.0
–
–
–
(0.1)
(0.1)
(0.3)
18.0
18.0
(32.2)
–
0.1
(32.1)
88.8
18.0
18.0
(32.2)
(0.1)
0.1
(32.2)
130.9
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33 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 the 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 cash flow 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
Disclosures required by IFRS 2 Share-based payment
GOING CONCERN
Summary
For the reasons set out in detail below, the Directors believe that it remains appropriate to prepare the financial statements on a
going concern basis.
As at 19 June 2020, the Group has total accessible liquidity (“TAL”) of £148.4m, which is £73.4m higher than as at 29 February
2020, due to the additional £50m CLBILS facility granted in May 2020 and additional cash generation measures taken since the
year end totalling £23.4m. Under our base case scenario, the Group’s TAL will increase further by the end of FY21 and would
allow it to trade for the foreseeable future thereafter. Even under severe downside scenarios outlined below, with management
taking appropriate mitigating actions the Group is expected to have sufficient liquidity in place to allow it to trade to meet its
covenants until at least December 2021.
The Group’s £125m RCF and securitisation facilities are committed to September 2021 and December 2021 respectively.
The Group continues to expect to renegotiate these facilities well in advance of these maturity dates. Whilst the amount drawn
under these facilities is expected to be lower at these dates than the year end position or current position, the directors have
concluded that due to the uncertain economic outlook resulting from Covid-19 there is a material uncertainty as to the ability of
the Group to successfully refinance these facilities at commercially acceptable terms.
In the event that this uncertainty crystallises, the Directors believe that mitigating actions would be available given that the
Group is expected to continue to have significant net assets and therefore in the event that refinancing at commercially
acceptable terms is not possible, asset sales outside the normal course of business or alternative financing options would be
entered into.
The lenders to the Group have been consistently supportive to date. Whilst no certainty can be provided that the facilities
will be renewed until refinancing negotiations have been successfully completed, the maturity of the facilities in September
and December 2021 provide a substantial window in which to undertake such refinancing activities proactively. In the event of
being unable to successfully renegotiate the facilities, the Group would undertake a variety of mitigating actions, but given the
ongoing longer-term economic uncertainty arising from Covid 19, it is not possible to be certain as to their success.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk The above material uncertainty may cast significant doubt on the Group and Company’s ability to continue as a going concern
and therefore realise its assets and discharge its liabilities in the normal course of business. The financial statements do not
include the adjustments that would result from the basis of preparation being inappropriate.
CASH FLOW FORECASTS
In determining whether the Group’s accounts can be prepared on a going concern basis, the Directors have 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 p40 to 45.
The Directors have taken into consideration that, since the balance sheet date, restrictions on trading activity and the movement
of people applied by the UK Government to contain the spread of Covid-19 have had a severe and sudden effect on economic
activity. Measures, both immediate and planned, were taken across the Group to mitigate the consequential and significant
profit and cash flow impacts arising from the loss of sales following the UK lockdown.
The Group has considered carefully its debt covenants and performance metrics inherent in the securitisation and RCF facilities
which link to the available levels of draw and its cash flows. These metrics reflect the foreseen restrictions on trading as well as
the mitigating factors applied by the Group, for the next 18 months from the date of signing the financial statements. These have
been appraised in the light of the current economic climate by applying a series of stress tests. The stress tests apply a range of
sensitivities to Group revenue and associated costs, cash collections and arrears levels; reflecting the principal risks arising from
continued UK social distancing measures and the uncertainty of the impact of Covid-19 on the business.
FINANCING ARRANGEMENTS
New arrangements
On 19 May 2020, the Group announced that it had secured new financing arrangements with its long-standing
supportive lenders.
These new arrangements comprise:
A new up to £50 million three-year Term Loan facility, provided by our lenders under the government’s Coronavirus Large
Business Interruption Loan Scheme (“CLBILS”);
Amendment of certain terms and covenants of the securitisation facility, to mitigate a significant amount of the impact that
Covid-19 may have in 2020 on the facility. This is to address variations in collection rates and customer behaviour, and to
enable the Group to continue to offer its customers enhanced flexibility. The amendments to the facility are in place until
late December 2020 and are intended to fully cover the impact of the current three-month period of the FCA’s forbearance
requirements for consumer credit customers impacted by Covid-19; and
The widening of certain covenants at the August 2020 half-year test date in its existing unsecured £125 million Revolving Credit
Facility (“RCF”) and the introduction of quarterly covenant tests.
RESULTING FUNDING AND LIQUIDITY POSITION
As a result of these changes, the Group currently has the following facilities in place:
An up to £500 million securitisation facility committed until December 2021, drawings on which are linked to prevailing levels of
eligible receivables (fully drawn at £393.8m as at 19 June 2020);
An RCF of £125 million committed until September 2021 (of which £nil undrawn);
An overdraft facility of £27.5 million which is subject to an annual review every July (none of which is drawn); and
A £50m CLBILS Term Loan facility committed until May 2023 (none of which is drawn).
The Group continues to expect to renegotiate these facilities well in advance of the maturity dates shown.
As at 19 June 2020, cash balances stood at £70.9 million, which in addition to the undrawn facilities of £77.5 million outlined
above, and after deducting cash not immediately accessible, provides the Group with total accessible liquidity (“TAL”) of
£148.4m. This is £73.4m higher than the TAL available as at 29 February 2020 of £75.0m due to the additional £50m CLBILS
facility and additional cash generation measures taken to date of £23.4m. It is also considerably higher than the average TAL
available during FY20 of £49.2m.
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33 SIGNIFICANT ACCOUNTING POLICIES CONTINUED
ACTUAL AND FUTURE TRADING PERFORMANCE
Actual trading performance
Trading has improved from the sudden and significant decline experienced in March with Group revenue down 22% in the first
quarter of FY21.
Downside trading scenario
It is recognised that there is considerable uncertainty as to the continued impacts of Covid-19 on our customer base and
we have therefore also constructed a recently updated severe but plausible downside scenario which applies sensitivities to
Group revenue and associated costs, cash collections and arrears levels. Specifically, in terms of revenue we have sensitised the
following reductions on FY20 levels as follows:
Retail product revenue – 25% down
FS revenue – 8% down
Management have confidence, based on successful Q1 FY21 responses to Covid-19, that a significant proportion of the impact
to EBITDA would be mitigated by operating cost savings across all areas of the cost base.
The Group would continue to have available liquidity in place and meet all necessary debt covenants to allow it to continue
to trade under such a scenario after taking necessary management actions that are within the Group’s control. If any further
downside scenarios were to arise, further management actions are available to the Group:
Sale of customer receivables
Sale or sale and leaseback arrangement in relation to the Group’s properties
Temporary reductions in inventory and CAPEX spend
Further discretionary cost reductions
COVENANT COMPLIANCE
As noted above, the Group’s long-standing supportive lenders have adjusted some of thier debt covenants.
Under its base and downside scenarios, the Group expects to remain in compliance with these amended covenants and all
other debt covenants.
The Company also notes the Joint Statement issued by the Financial Reporting Council, the Financial Conduct Authority and
the Prudential Regulation Authority on Thursday 26 March 2020 which stated that they would expect lenders to consider the
need to treat potential breaches of covenants arising directly from the Covid-19 pandemic differently compared to uncertainties
that arise because of borrower specific issues and in doing so consider waiving the resultant covenant breach. The Directors
therefore believe it is reasonable to believe that the Group will continue to have in place suitable securitisation facility
arrangements should there be any further extension of the FCA’s forbearance requirements for consumer credit customers
impacted by Covid-19.
INVESTMENTS
Fixed asset investments in subsidiaries are shown at cost less provision for impairment.
IMPAIRMENT
At each balance sheet date, the Company reviews the carrying value of its investments to determine whether there is any
indication that those investments have suffered an impairment loss. If any such indication exists, the recoverable amount of the
investment is estimated in order to determine the extent of the impairment loss (if any). 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.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk If the recoverable amount of an investment 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.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, if no impairment loss had been recognised. A reversal of an impairment loss
is recognised in the income statement immediately.
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.
DIVIDENDS
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 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.
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.
SHARE-BASED PAYMENTS
The Company issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are
measured as the Company 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 Company’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 the Monte Carlo method 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. Whilst the Company has no own employees of its own, it settles all share incentive schemes granted to employees
of its subsidiaries. As subsidiaries are not recharged for the share-based payment charge, the amount is debited to cost
of investment.
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33 SIGNIFICANT ACCOUNTING POLICIES CONTINUED
FINANCIAL ASSETS – CLASSIFICATION
IFRS 9 contains a classification and measurement approach for financial assets that reflects the business model in which assets
are managed and their cash flow characteristics.
IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost; fair value through other
comprehensive income (“FVOCI”); and fair value through profit and loss (“FVTPL”). A financial asset is measured at amortised
cost if both the following conditions are met and it has not been designated as at FVTPL:
All of the Company’s receivables are due from subsidiary companies, and are classified as amortised cost because:
all such assets are held within a business model whose objective is to hold the asset to collect its contractual cash flows; and
the contractual terms of all such assets give rise to cash flows on specified dates that represent payments of solely principal and
interest on the outstanding principal amount.
FINANCIAL INSTRUMENTS – RECOGNITION AND MEASUREMENT
Financial assets and financial liabilities are recognised on the Company’s balance sheet when the Company becomes a party to
the contractual provisions of the instrument.
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under
a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned.
The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or
they expire.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets
or financial liabilities as appropriate on initial recognition.
Financial assets classified as amortised cost are subsequently measured using the effective interest method, less any
impairment. Financial liabilities classified as amortised cost are subsequently measured using the effective interest method, with
interest expense recognised on an effective yield basis. The effective interest rate method is a method of calculating amortised
cost and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash flows through the expected life of the financial instrument, or, where appropriate, a shorter period, to the
net carrying amount on initial recognition.
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.
IMPAIRMENT OF FINANCIAL ASSETS
The Company recognises an allowance for expected credit losses (ECLs) on its receivables from subsidiaries.
Receivables from subsidiaries are determined to have a significant financing component, and therefore the ECL model applies
the concept of staging.
Stage 1 – assets which have not demonstrated any significant increase in credit risk since origination
Stage 2 – assets which have demonstrated a significant increase in credit risk since origination
Stage 3 – assets which are credit impaired (i.e. defaulted)
Under IFRS 9, loss allowances are measured on either of the following bases:
12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and
Lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.
12-month ECLs are calculated for assets in Stage 1 and lifetime ECLs are calculated for assets in Stages 2 and 3.
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N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk All receivables are considered to be repayable on demand, and therefore expected credit losses have been measured over
the expected period to transfer cash once demanded. Receivables are considered on an entity by entity basis to assess the
expected credit loss based on the assets of the counterparty and their ability to repay. In the case of these receivables the PD is
considered to either be close to nil which would result in an immaterial loss, or 100% for those entities without sufficient assets to
repay, and therefore be considered to be stage 3 credit impaired. The LGD has been determined based on the expected ability
to realise cash from the assets of the counterparty entity to calculate the expected credit loss.
CRITICAL JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The significant judgements made by management in applying the Company’s accounting policies and the key sources of
estimation uncertainty in these financial statements, which together are deemed critical to the Company’s results and financial
position, are as follows:
IMPACT OF COVID-19
Critical judgement
Although the global spread of Covid-19 began before the 29 February 2020, the World Health Organisation declaration of a
global pandemic did not take place until 11 March 2020. As at 29 February 2020 management did not foresee and could not
reasonably have foreseen the escalation of the virus within the UK, that subsequently took place. For this reason, the significant
effects of Covid19 that were not foreseen at the balance sheet date are not adjusted within these financial statements.
Disclosure of the estimated financial impacts relating to this post balance sheet event is provided below.
CARRYING VALUE OF INVESTMENTS
Critical judgement and estimate of uncertainty
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the
higher of its fair value less costs of disposal and its value in use. An impairment indicator exists at the year end as the market
capitalisation of the Company is exceeded by the value of its investments, and an impairment review was therefore carried out
at the year-end date.
Of the Company’s investments, £343.0m (2019 £343.0m) are held in a non-trading entity, whose own investments are supported
by loan receivables in issue with other Group companies. The critical judgement taken by management is that these loan notes
are wholly recoverable, and therefore support the investment value. The carrying value of the investment is sensitive to any
changes in the carrying value of the underlying loan notes, which would have a directly proportional impact to the carrying value
of investments held within the Company. The carrying value of the parent company investments is supportable through the
value in use of the group assets which exceeds their carrying value.
34 LOSS 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 loss after tax for the financial period ended 29 February 2020 of £10.6m (2019: profit £18.0m)
which includes dividends received of £nil (2019: £25.0m).
The Non-Executive Directors’ remuneration was £603,000 (2019: £628,000) and seven Non-Executive Directors were
remunerated (2019: seven). The Executive Directors were remunerated by a subsidiary company in both years; the total was
£1,259,000 (2019: £1,417,000). Further details are provided on p83 of the Directors’ Remuneration Report.
The auditor’s remuneration for audit services to the Company of £20,000 (2019: £17,000) was borne by subsidiary undertakings.
There are no non-audit fees for the Company excluding the half year review; details of Group fees for non-audit services are
included in note 5.
161
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE COMPANY ACCOUNTS CONTINUED
35 FIXED ASSET INVESTMENT
Opening cost and net book value
Movement in period
Closing cost and net book value
The Company has investments in the following subsidiaries and joint ventures.
Company
Aldrex Ltd
Alexander Ross (Financial Services) Ltd
Ambrose Wilson Ltd
Better Living Ltd
Classic Combination Ltd
Comfortably Yours Ltd
Crescent Direct Ltd
Cuss Contractors Ltd
Dale House (Mail Order) Ltd
Daly Harvey Morfitt Ltd
DHM (Management Services) Ltd
E Langfield & Co. Ltd
Eunite Limited
Figleaves Global Trading Limited
Financial Services (Edinburgh) Ltd
First Financial Ltd
Gray & Osbourn Ltd
Halwins Ltd
Hammond House Investments
International Ltd
Hammond House Investments Ltd
Hartingdon House Ltd
HB Wainwright (Financial Services) Ltd
Heather Valley (Woollens) Ltd
Hilton Mailing Ltd
Holland & Heeley Ltd
House of Stirling (Direct Mail) Ltd
J.D. Williams & Co Ltd
J.D. Williams Group Ltd
J.D. Williams Merchandise Co Ltd
JDW Finance Ltd
JDW Malta Limited
JDW Pension Trustees Ltd
Langley House Ltd
Mature Wisdom Ltd
Melgold Ltd
NB Finance (Eire Reg)
N Brown Pension Trustees Ltd
N Brown Funding Ltd
N Brown Holdings Ltd
N Brown No. 2 Ltd (Guernsey Reg)
N Brown Property One Ltd
N Brown Property Three Ltd
N Brown Property Two Ltd
NB Funding Guernsey Ltd (Guernsey Reg)
NB Holdings Guernsey Ltd (Guernsey Reg)
162
Registered Office Address
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
29 Earlsfort Terrace, Dublin 2, Ireland
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
St Martin’s House, Le Bordage, St Peter Port, Guernsey, GY1 4AU
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
St Martin’s House, Le Bordage, St Peter Port, Guernsey, GY1 4AU
St Martin’s House, Le Bordage, St Peter Port, Guernsey, GY1 4AU
2020
£m
367.3
(1.3)
366.0
2019
£m
367.2
0.1
367.3
Proportion held by the
Group (%)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk Company
Registered Office Address
Proportion held by the
Group (%)
St Martin’s House, Le Bordage, St Peter Port, Guernsey, GY1 4AU
The Hedge Business Centre, Level 3, Triq ir-Rampa ta’ San Giljan, St
Julians STJ 1062, Malta
The Hedge Business Centre, Level 3, Triq ir-Rampa ta’ San Giljan, St
Julians STJ 1062, Malta
29 Earlsfort Terrace, Dublin 2, Ireland
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Woodford Business Park, Santry, Dublin 17, Ireland
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
1209 Orange Street, Wilmington, Delaware 19801
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
NB Insurance Guernsey Ltd (Guernsey Reg)
NB Malta No1 Ltd
(Malta Reg)
NB Malta No2 Ltd
(Malta Reg)
Nochester Holdings (Eire Reg)
Odhams Leisure Group Ltd
Oxendale & Company Ltd
Oxendale & Co. Ltd (Eire Reg)
Reliable Collections Ltd
Sander & Kay Limited
Speciality Home Shopping (US) Ltd
Speciality Home Shopping
(US Marketing) LLC (incorporated
5 January 2018)
Tagma Ltd
T-Bra Limited
The Bury Boot & Shoe Co (1953) Ltd
The Value Catalogue Limited
Vote It Ltd
Whitfords (Bury) Ltd
Whitfords (Cosytred) Ltd
Whitfords (Textiles) Ltd
Wingmark Ltd
36 DEBTORS
Amounts falling due within one year:
Amounts owed by Group undertakings
Prepayments and accrued income
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
2020
£m
115.1
0.1
115.2
2019
£m
86.5
0.1
86.6
The amounts owed by Group undertakings, whilst there is no fixed term of expiry, are expected to be repaid within the next
12 months.
37 CREDITORS
Amounts falling due within one year:
Bank overdrafts (note 38)
Amounts owed to Group undertakings
2020
£m
2019
£m
48.0
209.3
257.3
18.4
194.6
213.0
163
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE COMPANY ACCOUNTS CONTINUED
38 BANK LOANS AND OVERDRAFTS
Bank overdrafts
Bank loans
2020
£m
48.0
125.0
173.0
2019
£m
18.4
110.0
128.4
The Company has unsecured bank loans of £125.0m (2019: £110.0m) drawn down under a medium-term bank revolving credit
facility committed until September 2020.
At 29 February 2020, the Company had available £nil (2019: £15.0m) of undrawn committed borrowing facilities in respect of
which all conditions precedent had been met, in addition to a £27.5m (2019: £16.1m) undrawn overdraft.
The weighted average interest rates paid were as follows:
Bank overdrafts
Bank loans
39 SHARE CAPITAL
2020
%
2.3
2.5
2019
%
2.1
2.4
Allotted, called-up and fully paid ordinary shares of 111/19p each
2020
Number
2019
Number
2020
£m
2019
£m
At 29 February 2020 and 2 March 2019
285,817,178 285,153,619
31.4
31.4
The Company has one class of ordinary share which carries no right to fixed income.
40 GUARANTEES
Parent Company bank overdrafts which at 29 February 2020 amounted to £48.0m (2019: £18.4m) have been guaranteed by
certain subsidiary undertakings.
41 POST BALANCE SHEET EVENTS
This note sets out the subsequent events which are material to the Company up to the date of this report.
NEW FINANCING ARRANGEMENTS
On 18 May 2020, the Company secured new financing arrangements with its long-standing supportive lenders.
These new arrangements comprise:
a new up to £50 million three-year Term Loan facility, provided by our lenders under the government’s Coronavirus Large
Business Interruption Loan Scheme (“CLBILS”). This facility requires the Group to comply with various additional covenants
including the Company being unable to pay any cash dividends for as long as the facilities remain in place; and
the widening of certain covenants at the August 2020 half-year test date in its existing unsecured £125 million Revolving Credit
Facility (“RCF”) and the introduction of quarterly covenant tests.
164
N Brown Group plc Annual Report and Accounts 2020nbrown.co.uk SHAREHOLDER INFORMATION
FINANCIAL CALENDAR
2019
2020
October
January
January
February
February
June
July
September
Announcement of interim results
Closing of register for interim dividend
Christmas trading statement
Payment of interim dividend
Financial year end
Preliminary announcement of annual results
Publication of 2020 Annual Report and Accounts
Annual General Meeting
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
BANKERS
HSBC Bank plc
The Royal Bank of Scotland plc
REGISTRARS
Link Asset Services PXS
134 Beckenham Road
Beckenham, Kent BR3 4ZF
Telephone 0871 664 0300
(Calls cost 10 pence per minute plus
network extras)
SOLICITORS
Pinsent Masons LLP
Eversheds LLP
Addleshaw Goddard LLP
AUDITOR
KPMG LLP 1 St Peter’s Square
Manchester M2 3AE
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
165
N Brown Group plc Annual Report and Accounts 2020nbrown.co.ukGovernance report Financial statementsStrategic report THANK YOU
We would like to thank everyone who
has helped to produce this report:
Aaron Yates
Adam Langfield
Adam McGough
Amy Linehan
Angela Gaskell
Chris Kevill
Chris McAteer
Colm O’Callaghan
Craig French
Daniel McIntyre
Duncan Farquhar
Elizabeth Barnham
Emma Pickett
Gemma Clarke
Isla Kirby
James Wheeler
Jo Clarke
Joe Barnfather
Jonathan Clough
Kate Samba
Ken Cheung
Ken Mellis
Laura Taljaard
Louise Robinson
Maria Yiannakou
Mark Curran
Melissa Sanigar
Mushtaq Laher
Nayan Patel
Paul Ray
Paul Rostron
Richard Adnett
Rik Evans
Sian Scriven
Tim Sykes
Tom Wright
Vanessa Lewis
Will MacLaren
166
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N BROWN GROUP PLC
N Brown Group plc
Griffin House
40 Lever Street
Manchester M60 6ES
www.nbrown.co.uk