ACCELERATING OUR
TRANSFORMATION
N BROWN GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
HIGHLIGHTS
AT A GLANCE
CHAIR'S STATEMENT
CHIEF EXECUTIVE'S STATEMENT
STRATEGIC UPDATE
KEY PERFORMANCE INDICATORS
MARKETPLACE
BUSINESS MODEL
FINANCIAL PERFORMANCE
RISK MANAGEMENT
PRINCIPAL RISKS AND UNCERTAINTIES
SECTION 172 STATEMENT
BOARD ENGAGEMENT WITH
THE WORKFORCE
SUSTAIN
GOVERNANCE REPORT
INTRODUCTION FROM THE CHAIR
LEADERSHIP AND PURPOSE
GROUP BOARD DIRECTORS
EXECUTIVE BOARD DIRECTORS
DIVISION OF RESPONSIBILITY
GOVERNANCE STRUCTURE
1
2
4
5
7
20
22
24
26
32
35
39
40
42
55
56
58
62
COMPOSITION, SUCCESSION AND EVALUATION
BOARD COMPOSITION
NOMINATIONS AND GOVERNANCE
COMMITTEE REPORT
64
67
AUDIT, RISK AND INTERNAL CONTROL
AUDIT AND RISK COMMITTEE REPORT
FINANCIAL SERVICES BOARD
COMMITTEE REPORT
REMUNERATION
REMUNERATION COMMITTEE REPORT
ADDITIONAL DISCLOSURES
VIABILITY STATEMENT
FINANCIAL STATEMENTS
For the detailed contents of the
statements go to p98.
INDEPENDENT AUDITOR’S REPORT
GROUP ACCOUNTS
NOTES TO THE GROUP ACCOUNTS
GOING CONCERN
COMPANY ACCOUNTS
NOTES TO THE COMPANY ACCOUNTS
SHAREHOLDER INFORMATION
68
75
76
95
96
99
108
112
120
152
154
162
N Brown Group plc Annual Report and Accounts 2021 ACCELERATING OUR
TRANSFORMATION
We have continued to transform N Brown from a catalogue
retailer to a digital retailer. We see an opportunity to further
improve our customer proposition and to capitalise on current
industry drivers, not least the increasing trend towards online retail.
Our £100m capital raise gives us the firepower to invest further
in our digital capabilities and accelerate our growth strategy.
It has also significantly strengthened the Group’s balance
sheet to provide us with ongoing flexibility and a strong
platform from which to deliver returns for shareholders.
HIGHLIGHTS
REVENUE5
ADJUSTED
EBITDA1
ADJUSTED OPERATING
COSTS TO GROUP
REVENUE RATIO2
£728.8m £86.5m
2020 (restated): £837.5m -13.0%
2020: £106.7m -18.9%
32.5%
2020: 39.8%
ADJUSTED
PROFIT BEFORE TAX3
STATUTORY PROFIT
BEFORE TAX
ADJUSTED NET
DEBT4
£30.1m
2020: £59.5m -49.4%
£9.9m
2020: £35.7m -72.3%
£(301.1)m
2020: (£497.2)m -£39.3%
1 Adjusted EBITDA is calculated as operating profit, excluding exceptional items, with depreciation and amortisation added back. The Directors believe adjusted EBITDA
represents the most appropriate measure of the Group’s underlying trading performance as it removes items that do not form part of the recurring activities of the Group.
2 Adjusted operating costs to revenue ratio is calculated as operating costs less depreciation, amortisation and exceptional items as a percentage of Group
revenue. The Directors believe this is the most appropriate measure to demonstrate the efficiency of the Group’s operating cost base.
3 Adjusted profit before tax is calculated as profit before tax, excluding exceptional items and fair value movement on financial instruments. The Directors believe
that adjusted profit before tax represents the most appropriate measure of the Group’s underlying profit before tax profit as it removes items that do not form
part of the recurring activities of the Group.
4 Adjusted net debt is calculated as total liabilities from financing activities less cash, excluding lease liabilities. The Directors believe this is the most appropriate
measure of the Group’s net debt in relation to its unsecured borrowings and is used to calculate the Group’s leverage ratio, a key debt covenant measure.
A reconciliation is included in note 19.
5 The revenue has been restated in FY20 as outlined in note 32 on page 151.
A reconciliation of statutory measures to adjusted measures is included on page 31. A full glossary of Alternative Performance Measures and their definitions
is included on page 161.
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N Brown Group plc Annual Report and Accounts 2021nbrown.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 HOME PROPOSITION, SERVING CUSTOMERS
ACROSS FIVE STRATEGIC BRANDS
OUR FIVE STRATEGIC BRANDS
JD WILLIAMS
An online boutique shopping experience
showcasing own brand and third-party
brand fashion and home product for
45 - 65 year old women.
SIMPLY BE
A size-inclusive online brand showcasing
own brand and third-party brand fashion
and beauty for women aged 25 - 45.
AMBROSE WILSON
An online womenswear brand for the
more mature customer, supported by
home, showcasing own brand and third-
party brands targeting women aged 65+.
2
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk SUSTAIN
This year we rebranded our Environmental,
Social and Governance (“ESG”) strategy to SUSTAIN.
Fully embracing the values of our business,
SUSTAIN encompasses Our People and
Our Planet pillars.
REVENUE BREAKDOWN
Strategic brands
Other brands
FY21
FY20
(restated)¹
£341.2m
£372.7m
£127.2m
£174.3m
SEE MORE ON
p42
Total Product revenue
£468.4m
£547.0 m
Financial Services revenue
£260.4m
£290.5m
Group revenue
£728.8m
£837.5m
¹ FY20 restated see note 32 on page 151
JACAMO
A size-inclusive online fashion and
grooming brand for men, showcasing own
brand and third-party brands targeting
men aged 25 - 50.
HOME ESSENTIALS
A one-stop home brand offering own
brand and third-party brand modern
homeware helping customers to “dress
their homes”. The target customer is
mums aged 25 - 45 with children at home.
OTHER BRANDS
Our other brands complement our five
strategic brands by focusing on distinct
customer niches which are not served by
JD Williams, Simply Be, Ambrose Wilson,
Jacamo and Home Essentials.
FOLDED INTO
STRATEGIC BRANDS
FINANCIAL SERVICES
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,
customers either pay us immediately or
utilise a credit account for their purchases,
spreading the cost of their purchase over
time. We are regulated by the Financial
Conduct Authority (“FCA”) in the UK
and the Central Bank of Ireland (“CBI”)
in Ireland and we support our customers
throughout the credit journey with us.
Gross customer loan book
£605.8m
-7.8%
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements CHAIR’S STATEMENT
“I would like to thank the
whole team at N Brown for
the way they responded to
the challenges presented
by Covid-19. The Board’s
number one priority has
been to keep colleagues
safe whilst maintaining their
commitment to servicing
our customers throughout
the year.”
Ron McMillan
Chair
On 31 March 2021 Matt Davies, who was
appointed as Chair in May 2018, resigned
from the Board to spend more time on
his other business interests. On behalf of
the Board, I would like to thank Matt for
his contribution over the past three years
and for guiding the business through a
successful refinancing and transfer to the
Alternative Investment Market (“AIM”).
On 31 March 2021, I stepped down as the
Senior Independent Director and Audit
Committee Chair and succeeded Matt
as Chair of the Group.
REVIEW OF THE YEAR
Our performance in the year was
impacted by the onset of Covid-19 in
the first few weeks of the financial year.
I am very proud of the way in which the
business reacted, ensuring the safety of
our colleagues whilst maintaining our
commitment to servicing our customers.
Despite the challenging environment, we
produced a resilient performance for the
year, with product revenues recovering
4
each quarter, following a sudden and
sharp drop at the onset of the crisis.
This was matched by tight cost control as
we demonstrated our flexible cost base,
accelerated our digital transformation and
took swift actions to enhance liquidity.
Group revenue for the year declined
13.0% to £728.8m with Product revenue
down 14.4% and Financial Services (“FS”)
revenue down 10.4%. Our focus on building
an appropriate cost base for a digital
retailer resulted in a material improvement
in our operating cost efficiency with
our adjusted operating cost to Group
Revenue ratio improving from 39.8% in
the previous financial year to 32.5% this
year. This enabled the business to deliver
adjusted EBITDA of £86.5m which was
above the top end of our guidance.
Details of the strategic transformation
undertaken in the year are laid out in the
Chief Executive’s Statement and I am
pleased with the initial progress we have
made to deliver sustainable profitable
growth. We remain committed to our
medium-term targets of delivering 7%
product revenue growth and a 14%
adjusted EBITDA margin.
CAPITAL RAISE
During the financial year the Group saw
a compelling opportunity to de-risk
and accelerate its refreshed strategy; by
eliminating unsecured net debt and bringing
forward strategic investment. In December
2020 this culminated in the Group
successfully raising £100m through a pre-
emptive equity raise, admission to AIM and
the agreement of new and extended bank
facilities. These provide the Group with a
significantly strengthened balance sheet and
the right platform to accelerate its strategy.
BOARD CHANGES
During the financial year Craig Lovelace
left the business and we were delighted to
welcome Rachel Izzard as our new Chief
Financial Officer. Rachel joined us from
Aer Lingus where she had been Chief
Financial Officer since 2015.
Following completion of the £100m equity
raise in December 2020 we were pleased
to welcome Joshua Alliance to the
Board as a new Non-Executive Director.
Joshua was formerly Head of Business
Innovation for J.D. Williams & Company
Limited and is a Non-Executive Director
of a number of digitally based private
companies in the UK and Israel.
On my appointment as Chair, Gill Barr
became the Senior Independent Director
and on an interim basis, Vicky Mitchell has
assumed the Audit Committee Chair role.
A recruitment process is underway for an
additional independent Non-Executive
Director who will become the permanent
Audit Committee Chair.
On 31 March 2021, Lesley Jones stepped
down from the Board after nearly seven
years following her appointment as the
Chair of Sainsbury’s Bank. On behalf of the
Board I would like to thank Lesley for her
wise counsel and contribution to the Group.
SUSTAIN
SUSTAIN is our overarching Environmental,
Social and Governance strategy. As part
of our focus on plastics, in Year One of our
sustainability plan, we have successfully
conducted a trial of Green Polyethylene
(“Green PE”) despatch bags. This is an
important step as we progress our goal of
100% Green PE despatch bags by the end
of 2021. We are also proud to have signed
up to the British Retail Consortium (“BRC”)
Climate Action Roadmap to help the retail
industry, including supply chains, to hit zero
carbon emissions by 2040.
DIVIDEND
Following the outbreak of Covid-19
and the subsequent impact on the
business and the wider economy, the
Board suspended dividend payments.
The Directors recognise that dividends are
an important part of the Company’s returns
to shareholders and the Board will consider
the resumption of dividend payments at
the end of FY22.
COLLEAGUES
In a particularly challenging year I would like
to thank all our colleagues for their immense
hard work, dedication and effort and I look
forward to working with all colleagues to
deliver our strategy of returning N Brown
to sustainable, profitable growth.
LOOKING AHEAD
Our key objective is to deliver profitable
growth on a sustainable basis and our retail
brands are focused on delivering fashion for
our individual brands. We have also launched
a new Home Essentials brand and, in FS, we
will be making significant enhancements to
our FS platform.
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk CHIEF EXECUTIVE’S STATEMENT
PERFORMANCE REVIEW
“It has been an extraordinary
12 months, with our financial
year beginning just weeks
before the onset of the
Covid-19 pandemic in the
UK. This presented unique
challenges and difficulties
for everyone across the
country, and at N Brown it
has been no different. I am
immensely proud of all our
colleagues for their resilience
and commitment in serving
our customers throughout
the year.”
Steve Johnson
Chief Executive Officer
ACCELERATING STRATEGIC
TRANSFORMATION FROM
A STRENGTHENED BASE
Against that backdrop, I am immensely
proud of how our colleagues have looked
out for and supported one another. I am
also grateful for the effectiveness and
dedication which our colleagues and
supplier partners have shown in adapting
to a more flexible way of working during
the pandemic and for their continued
unstinting commitment to supporting our
loyal customer base. Despite the tough
trading environment, we have achieved
a lot during the year, transforming the
shape of our business so that it is leaner,
more digitally enabled, and even more
focused on our five strategic brands.
We have also produced a resilient financial
performance, with product revenues
recovering each quarter, following a
sudden and sharp drop at the onset of the
crisis. We have delivered adjusted EBITDA
above the top end of our guidance, a
tight control of costs throughout, and a
stable performance in our FS division.
Our Executive and Senior Leadership
teams have been refreshed and
strengthened in the year leaving us well
placed to continue our transformation.
We have also significantly strengthened
the capital structure of the Group,
having completed a £100m fundraise
to both strengthen our balance sheet,
by eliminating our unsecured debt, and
give us the firepower to accelerate our
sustainable growth strategy. I am pleased
with the strategic progress we have made
to deliver sustainable profitable growth
in the future and we remain committed
to our medium-term targets of delivering
7% product revenue growth per annum
and a 14% adjusted EBITDA margin.
OUR RESPONSE
TO COVID-19
Our absolute priority has been and
remains to protect the health, safety and
wellbeing of our colleagues, both across
our Distribution Centres and at Head
Office, whilst maintaining continuity of
service for our customers shopping our
brands. Since the outbreak of Covid-19
in early 2020 we have managed to keep
a continuous supply of goods to our
customers, whilst at all times keeping
colleagues safe in our Distribution Centres
and Head Office and operating in line with
Government guidelines.
We made several changes to ensure
continuing safe operations and to follow
the Public Health England guidelines on
social distancing and the subsequent
guidelines for workplaces. Across our sites
these changes included re-organising
the floorplan layouts to ensure social
distancing, introducing one-way walkways,
increasing points of access and exit,
staggering the entry and exit times of
colleagues and laying out clear floor
markings. We also installed thermal
imaging cameras, significantly expanded
our cleaning regime and introduced
additional hand washing stations for all
colleagues. To support our colleagues
we established ‘well-being ambassadors’
who are mental health first aiders, and we
provided packs which included masks,
hand sanitiser and cutlery as well as
providing lateral flow tests. As restrictions
ease, we continue to support and work
collaboratively with all our colleagues to
find a hybrid approach to onsite and home
working for our Head Office colleagues.
At the start of the pandemic we used the
Government’s Job Retention Scheme,
totalling £3.8m, which allowed us to work
through the challenges that Covid-19
initially presented for our business and
preserve a significant number of jobs for
our colleagues.
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N Brown Group plc Annual Report and Accounts 2020
STRATEGIC UPDATE
In June 2020 we announced our refreshed strategy to return N Brown to sustainable
growth by developing a stronger brand and product proposition for our customers,
driving profitability through the Retail business and continuing to offer attractive and
flexible credit solutions. We have made significant progress in transforming the Group
in the year and we are now in the “accelerate” phase of our strategy driven by our
five growth pillars and underpinned by our three enablers below. An update on the
transformation achieved in the year is provided on the following pages.
1
DISTINCT BRANDS TO ATTRACT BROADER
RANGES 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
FLEXIBLE CREDIT TO HELP CUSTOMERS SHOP
5
OUR ENABLERS
PEOPLE AND
CULTURE
DATA
SUSTAINABLE
COST BASE
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1 DISTINCT BRANDS TO
ATTRACT BROADER RANGES
OF CUSTOMERS
WHAT WE HAVE
ACHIEVED IN FY21
As set out in June 2020, our review of the
markets in which we operate highlighted
that we needed to extend our reach to
a broader set of customers through a
portfolio of brands with clearer, more
focused propositions. We have therefore
continued to simplify our portfolio, towards
having four apparel brands and one
standalone home brand as follows:
Simply Be – a size-inclusive online brand
showcasing own brand and third-party
brand fashion and beauty for women aged
25 - 45.
Jacamo – a size-inclusive online fashion and
grooming brand for men, showcasing own
brand and third-party brands targeting
men aged 25 - 50.
JD Williams – an online boutique shopping
experience showcasing own brand and
third-party brand fashion and home
product for 45 - 65 year old women.
Ambrose Wilson – an online womenswear
brand for the more mature customer,
supported by home, showcasing own
brand and third party brands targeting
women aged 65+.
Home Essentials – a one-stop home brand
offering own brand and third-party brand
modern homeware helping customers to
“dress their homes”. The target customer
is mums aged 25 - 45 with children at home.
This year we have progressed our
simplification journey, reducing the total
number of brands by 25% to nine in total.
We discontinued the High & Mighty
and House of Bath brands, successfully
migrating customers to Jacamo and
Ambrose Wilson respectively. We also
closed the Figleaves website and now offer
Figleaves on Simply Be.
We have refreshed the creative style
across our apparel brands to support our
brands’ clearer, more focused propositions
and to build stronger brand identities.
For example, our AW20 Simply Be ‘Fit
for an Icon’ campaign which challenged
convention about how curvy women are
portrayed whilst demonstrating our fashion
and fit credentials, is the beginning of a
brand ethos which will provide direction for
seasons to come.
We have accelerated the use of social
media throughout FY21 and have seen
encouraging results. During the period,
revenue generated via social media was up
27% across the Group, with a total of 1.9m
followers across Facebook and Instagram,
of which 14% were acquired in the year.
WHAT WE WILL
FOCUS ON IN FY22
With significant work done on improving
the brand and customer proposition,
we are now focused on acquiring new
customers in our core target segments,
particularly those where N Brown is under-
represented today. The successful equity
raise, completed in December 2020, will
enable us to accelerate our plans. We will
undertake a range of activities, including
expanding the presence of the core retail
brands through increased investment in
brand-building activity and through more
specific, targeted activity through digital
and social channels.
We will now communicate what makes
our brands special and unique to our
customers. We will focus on ensuring that
our brands are visible in the most relevant
way to our target customer, and in a way
and at times that they are most receptive to
receiving that message through channels
including above the line (“ATL”) marketing
and social media. For example, this will
mean a significant focus on social media
for Simply Be and Jacamo, and a focus on
broadcast campaigns for our JD Williams
and Home Essentials brands.
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IMPROVED PRODUCT
TO DRIVE CUSTOMER
FREQUENCY
WHAT WE HAVE
ACHIEVED IN FY21
Refining and improving our product
offering is central to driving our new brand
propositions, encouraging customer loyalty
and frequency. We have made good
progress on three key areas.
First, we started the process of improving
our product ‘handwriting’ through clearly
defined designs for each brand, investing in
fabric, quality and consistency of fit. With our
passion to define our unique and more
differentiated customer proposition by brand
we recruited a new Group Design Director
and created dedicated teams, aligned to
each strategic brand. These changes to our
design process mean that our prints are now
completely unique to us and our palettes
and product are designed with a specific
customer in mind. In the year we increased
the proportion of own designed womenswear
ranges from 53% to 57%. Our new teams
were able to swiftly pivot our product offer to
meet the customer demand for Leisurewear
and Nightwear whilst protecting our ‘famous
for’ categories such as lingerie and denim.
Secondly, we have redefined our good/
better/best price architecture with the
purpose of creating product which
represents great quality and value as well as
introducing new brands which stretch the
range within the ‘best’ category. We have
rationalised our ranges to ensure there is less
duplication and a clearer more considered
offer. These investments are being well
received by our customers. We have also
made significant progress with launching
new third-party brands on our websites, with
Hugo Boss and Ralph Lauren both launched
on Jacamo in the year.
Finally, we have continued with our
commitment to embed sustainability
throughout the organisation, our product
ranges and all our processes. In March 2020
we introduced our sustainably sourced
Jacamo men’s denim range which uses a
mixture of organic cotton, cotton sourced
through Better Cotton Initiative (“BCI”)
and Repreve polyester meaning the
entire men’s denim range has sustainable
attributes. 85% of our women’s denim
offer is now sustainably sourced and our
aim is to increase this further throughout
FY22. We have also further consolidated
our supplier base, with an 18% year on year
reduction in the total number of suppliers.
Throughout the pandemic we were able
to respond with increasing flexibility to
shifting customer demands and delivered
on average a one week improvement in
lead times on product changes throughout
the year.
WHAT WE WILL
FOCUS ON IN FY22
We will accelerate our initiatives around
improving our product handwriting,
transforming our pricing architecture and
driving our sustainability agenda.
We will continue to drive improvement in
our product handwriting to deliver exciting
product which resonates with our customers.
We are accelerating our investment in our
design team with a particular focus on ‘print’
and the “famous for” categories such as
lingerie, denim and footwear.
Our range rationalisation is ongoing as
we continue to improve the quality of the
product and ranges which we offer our
customers. On the Simply Be website we
launched exciting new third-party brands
Finery and Nobody’s Child in March and
April 2021 respectively with exclusivity
through sizing. We plan to add French
Connection, Sonder and Khost to JD
Williams later this year alongside increasing
the range size for existing third-party brands
such as Hobbs, Joules and Monsoon.
We are entering the second year of our
sustainability roadmap with the focus being
on ensuring all denim ranges will have
sustainable properties, completing the roll
out of Green Polyethene bags across Jacamo
and Simply Be and reviewing recycling
options for our customers. We will also focus
on a roadmap for delivering a continued CO2
reduction in our supplier base.
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3 NEW HOME OFFERING
FOR CUSTOMERS TO SHOP
MORE ACROSS CATEGORIES
WHAT WE WILL
FOCUS ON IN FY22
Home Essentials is a brand whose focus is
around in-house design which ensures the
complete offer is individual and bespoke
to this customer cohort. Our customers
come to Home Essentials to find furniture
alongside chairs, tables, soft furnishings,
lighting, small appliances and storage.
We will continue to invest in key product
categories such as furniture and bedding
to accelerate Home Essentials’ second
year as a standalone website.
New customer acquisition is key
to the success of Home Essentials.
We have exciting plans around
broadcast campaigns as well as
continued social media activity to drive
customer recruitment.
WHAT WE HAVE
ACHIEVED IN FY21
On 1 April 2020 we launched our Home
Essentials brand as a standalone trading
site for customers who enjoy dressing their
home with a close eye on affordability.
We have curated a home furnishings offer
alongside electrical and gifting categories;
much of which is designed by and unique
to the Group. The timing of our Home
Essentials launch coincided with an
increase in consumer demand for Home
and Garden, triggered by the pandemic,
which had an immediate impact on the
Group’s Home sales and has subsequently
been sustained. We were quick to pivot
our offering to address new customer
demand trends, for example by expanding
our electrical and home office proposition
which saw increased demand, particularly
during the first national lockdown.
In addition we launched Facebook and
Instagram pages for Home Essentials
in April, which have gained over
82,000 followers. This encouraging
start has demonstrated the significant
opportunities available to us to inspire
and serve even more potential customers
through these channels and will support
our customer acquisition strategy for
the brand.
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ENHANCED DIGITAL
EXPERIENCE TO INCREASE
CUSTOMER CONVERSION
WHAT WE HAVE
ACHIEVED IN FY21
We have implemented Bloomreach
technology across our strategic brands
in order to optimise and personalise
each customer’s digital experience.
Bloomreach uses machine learning
and artificial intelligence (“AI”) to
offer advanced merchandising tools
and includes the ability to serve
every customer with a personalised
product list based on their preferences.
Bloomreach has driven a 19% increase
in ‘click through rates’ from search to
the relevant product page and a 55%
reduction in ‘zero results’ across our
strategic brands’ websites.
Our agile approach to digital
transformation enabled us to launch the
standalone Home Essentials website
on 1 April 2020 as well as migrate
customers from High & Mighty and
House of Bath to Jacamo and Ambrose
Wilson respectively. We have also started
developing new Application Programming
Interfaces for social media integration
to enable more automated re-targeting
of customers. Once embedded, this will
increase efficiency and is expected to
benefit conversion.
WHAT WE WILL
FOCUS ON IN FY22
The existing N Brown websites are built on
a legacy technology stack, which has been
developed over many years. Following the
equity raise in December 2020, the Group
is accelerating its investment in new front-
end websites with the aim of improving
the customer experience through a
cleaner website resulting in better
conversion rates and search optimisation
benefits. It is an important step on N
Brown’s technology roadmap as we move
away from the legacy web technology
stack, improve stability and accelerate the
pace of future change.
An additional benefit to this is an
improvement to site speed which is key
to enhancing search engine optimisation
(“SEO”). This will include a new sales
journey, supported by a fresh customer
experience in line with brand principles
and improved search, navigation,
product listing, details pages, bag and
checkout functions.
Finally, we are focused on improving
our digital self-service capabilities
and refreshing our contact centre and
telephony offering for our customers.
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FLEXIBLE CREDIT TO HELP
CUSTOMERS SHOP
WHAT WE HAVE
ACHIEVED IN FY21
Our focus at the start of the pandemic was on
protecting our customers and our business
by ensuring continuity of service whilst
minimising any risk exposure. Throughout the
year our credit proposition remained a key
point of difference for our customers by
providing access to products they both need
and desire. With the structural shift in the year
towards higher value Home and Electricals,
being able to spread the cost of purchases
either through necessity or convenience,
helped to drive the recovery in product sales
throughout the year. This has been further
helped by the launch of seasonal offers for
our credit customers through 0% interest and
credit back campaigns.
Providing credit to make shopping
affordable is at the heart of N Brown’s
business model and remains at the core of
the strategy moving forwards. N Brown’s
current credit platform is built on a
mainframe system which is robust but lacks
flexibility to make changes to enhance the
customer proposition. Customer behaviours
have evolved and are generally shifting
towards a range of more flexible payment
products, which the Group’s current system
cannot currently service. To deliver more
modern products, the Group needs to
develop a new FS platform that has the
flexibility to offer these products and the
equity raise completed in December 2020
will enable investment in this.
A new Financial Services platform
development project is underway to
better understand the delivery options for
the new FS platform and the scale of the
business and technology change. We have
also conducted a comprehensive customer
research programme to understand the
needs of our customers, both now and
in the future, the products that appeal to
them and the customer experience they
expect from a digital retailer.
At the start of the pandemic we moved
swiftly to offer our customers payment
deferrals, ahead of FCA guidance, and
have provided this support throughout the
pandemic. We also proactively changed
16
lending criteria to prevent any harm to our
customers during these unprecedented
times, therefore ensuring good customer
outcomes. At the beginning of FY21 we
were facing into a challenge with regards
to customers identified as in Persistent
Debt. This was one of the key focus areas
for the year and a dedicated Persistent Debt
Programme was set up to find the right
solution. We ended FY21 with a solution in
place that delivers good outcomes for our
customers whilst mitigating the commercial
impact resulting from having to suspend
or close customers’ credit facilities. This
solution is now live and will be monitored
closely throughout this year.
Good progress has been made in FY21 to
enhance the use of different data sources
and analytical tools and techniques to drive
improvements in our lending proposition.
We continue to work with Aire using their
proprietary AI models to enhance our
creditworthiness process and have also
successfully launched a new lending model
using the DataRobot tool which has further
enhanced our capability. Multiple tests are
also underway on refining our credit limit
increase programme and we have also started
a Credit Limit Optimisation initiative working
with Experian. All these areas are helping to
drive incremental improvements to our credit
proposition and the FS team continue to
explore further opportunities in this area.
WHAT WE WILL
FOCUS ON IN FY22
Our strategic focus for the medium-term will
be on the delivery of the new FS platform
and the launch of new credit products that
will broaden the appeal of our proposition.
Whilst overall performance in FS remains
strong with low arrears and strong payment
behaviour from customers, we remain
cautious on the impact of the lockdown
being eased and the end of the furlough
scheme in September. We continue to
embed regulatory changes such as the
Senior Managers & Certification Regime
(“SM&CR”) and remain focused on providing
inclusive financial services to our customers
to enable them to shop our compelling
products across our brands.
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk N Brown Group plc Annual Report and Accounts 2021
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17
Strategic report Governance report Financial statements N Brown Group plc Annual Report and Accounts 2021
N Brown Group plc Annual Report and Accounts 2020
CHIEF EXECUTIVE’S STATEMENT
CONTINUED
18
18
nbrown.co.uk
nbrown.co.uk
These five growth pillars will be supported
by our key enablers:
SUSTAINABLE COST BASE
The final enabler of our strategy is
developing a sustainable and appropriate
cost base to help build retail profitability.
We took swift and decisive action to
respond to the pandemic and were able
to reduce our adjusted operating costs
by 28.9% in the year. We had previously
identified a range of sustainable
efficiencies in our marketing costs and
were able to accelerate these in response
to the trading environment. Our marketing
costs fell 55.7% in FY21, far in excess of the
13.0% decline in Group revenue.
We also took the difficult decision to
conduct a redundancy programme
in order to ensure the Group had an
appropriate and sustainable cost base for
a digital retailer. This process resulted in
c.245 colleagues leaving the business, who
we were regrettably unable to redeploy in
other areas.
Targeted initiatives across the entire
cost base resulted in adjusted operating
costs as a percentage of Group revenue
significantly improving from 39.8% in FY20
to 32.5% in FY21.
PEOPLE AND CULTURE
Our colleagues are our biggest asset and
they continue to show commitment like
no other in their flexibility and adaptability
in response to the change in ways of
working due to the pandemic. We have
remained fully operational throughout this
difficult period and we are grateful to our
colleagues for the part they have played
in this.
Within the year we welcomed Rachel
Izzard, CFO, and Sarah Welsh, Retail
CEO, to the Group as we continued to
refresh our Executive team. We have also
strengthened our Product team through
a series of senior hires and appointments
with a new Group Buying Director, Group
Design Director and a newly created role
of Group Sourcing, Sustainability, Quality
and Fit Director.
DATA
We continue to increase our use of data
across the business to understand our
customers better and drive continued
efficiencies in revenue, marketing
and product ranging. Our use of AI to
develop a model to predict customer
lifetime value now informs our marketing
decisions and has been crucial in
reducing unprofitable marketing
expenditure and making our cost base
more efficient and sustainable.
We have completed discovery projects
to determine the optimal pricing
strategies for our brands and we are
in the process of building models
which will determine how to maximise
revenue, margin or other strategic key
performance indicators (“KPIs”) through
promotional pricing.
The Group has continued to invest in its
people and infrastructure with new key
hires such as Data Scientists, Architects
and Product Managers to build out
modern, cloud-based data structures
increasing our ability to deliver rapid
insight-to-action analytics.
19
nbrown.co.ukStrategic report Governance report Financial statements SUMMARY AND OUTLOOK
FY21 was a year of significant strategic
progress and the business is in a much
stronger position than it was at the start of
the pandemic. We are heartened by the
strategic progress we have made, however
we remain cautious on the external
environment given the uncertainty around
the relaxing of the government restrictions
and the end of the furlough scheme.
We are confident that our strategy is the
right one and we have demonstrated
throughout the year that we have a flexible
and agile business model which is able to
react swiftly to the external environment
and deliver for our customers. We remain
committed to our medium-term targets
of 7% product revenue growth per annum
and a 14% adjusted EBITDA margin.
Achieving these will deliver sustainable
returns for shareholders.
Steve Johnson
Chief Executive Officer
CHIEF EXECUTIVE’S STATEMENT
CONTINUED
KEY PERFORMANCE
INDICATORS (“KPIS”)
As a digital retailer, accelerating our
strategy, and moving out of a period
impacted by Covid-19, we are in a position
to start reporting various digital customer
metrics, which provide operational
measures of how our strategy is progressing.
The initial disclosure below reflects the
impact of Covid-19 on the business in
FY21 and we are now focused on driving
improvements across these measures.
FY22 GUIDANCE
Since the start of FY22 we have returned
to Product revenue growth and for the
full year we currently expect Product
revenue growth of between 3% and 7%.
Financial Services revenue is expected
to be lower compared to FY21 as a result
of a smaller debtor book at the start of
FY22. Overall we currently expect Group
revenue growth to be +1% to +4% for
FY22 and for adjusted EBITDA to be in the
range of £93m to £100m.
We expect capex of £30m - £35m,
depreciation and amortisation of c.£40m
reflecting the acceleration of our strategy
and net interest costs of c.£16m. In FY22
the Group will use its adjusted EBITDA to
fund investment in capital expenditure
and working capital for growth. At the
end of FY22 this would leave the Group
with a strong unsecured net cash position
and at that point the Board will consider
the resumption of dividend payments.
FY22 year-end adjusted net debt is
expected to be in the range of £280m to
£300m.
Total website sessions remained relatively
high in the year despite a 55.7% reduction
in marketing expenditure supported by
our ability to pivot into the products the
customer was looking for such as home
office and garden. As expected and in-line
with other retailers, conversion was lower
in FY21 due to more customers browsing
during the pandemic.
The reduction in orders in FY21 was
reflective of customer demand and within
this there was a significant pivot from
Clothing and Footwear to Home and Gift.
Average order value (“AOV”) was broadly
similar to the prior year reflecting the strong
Home and Gift performance in the year
offsetting the price sensitivity in clothing
and footwear. The increase in average item
value (“AIV”) was driven by the mix effect of
Home and Gift as this category typically has
higher average prices. This mix effect also
resulted in a small decrease in ‘items per
order’ as Home and Gift items typically have
a higher price point. Total active customers
declined in the year, primarily driven by the
reduction in ‘other brands’ customers.
FS arrears fell due to an increase in the
quality of the loan book and an increasing
propensity for our credit customers to
pay down their balances in the year.
Our relentless focus on improving the
experience for our customers resulted in
Net Promoter Score (“NPS”) increasing by
2ppts in the year to 63.
20
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk N Brown Group plc Annual Report and Accounts 2021
TOTAL WEBSITE
SESSIONS
TOTAL ACTIVE
CUSTOMERS
TOTAL ORDERS
232m
FY21
FY20
2.8m
10.0m
232m
243m
FY21
FY20
2.8m
FY21
10.0m
3.3m
FY20
12.2m
DEFINITION
Total number of sessions across
N Brown apps, mobile and
desktop websites.
DEFINITION
Customers who placed an accepted
order in the 12-month period.
DEFINITION
Total orders placed in the
12 month period. Includes online
and offline orders.
CONVERSION
AVERAGE ORDER
VALUE (“AOV”)
AVERAGE ITEM
VALUE (“AIV”)
3.8%
FY21
FY20
£69.0
£25.0
3.8%
FY21
4.1%
FY20
£69.0
FY21
£70.2
FY20
£25.0
£24.3
DEFINITION
% of app / web sessions that result
in an accepted order.
DEFINITION
Average order value based
on accepted demand1.
DEFINITION
Average item value based
on accepted demand1.
ITEMS PER ORDER
FINANCIAL SERVICES
(“FS”) ARREARS
NET PROMOTER SCORE
(“NPS”)
2.8
FY21
FY20
DEFINITION
Average number of items per
accepted order.
7.9%
2.8
2.9
FY21
FY20
7.9%
9.2%
DEFINITION
FY20 and FY21 arrears are stated
including both customer debts with
two or more missed payments, or
customer debts on a payment hold
(including Covid-19 payment deferrals).
1 Accepted Demand is the value of orders from customers (including VAT) that we accept, i.e. after our credit
assessment processes. Excludes Figleaves for FY20 and FY21 due to different internal reporting systems.
63
FY21
FY20
63
61
DEFINITION
Customers asked to rate likelihood to
“recommend the brand to a friend or
colleague” on a 0-10 scale (10 most
likely). NPS is (% of 9-10) minus (% of 0-6)
NPS is recorded on JD Williams, Simply
Be, Ambrose Wilson, Jacamo, Home
Essentials and Fashion World.
nbrown.co.uk
21
Strategic report Governance report Financial statements MARKETPLACE
ADAPTING TO
MARKET TRENDS
The retail market has
significantly changed since
the start of 2020 due to
the impact of Covid-19.
The significant social and economic
challenges posed by Covid-19 have
accelerated the shift to online retail with
growth of online retail sales by 43.8% in Q4
20201. Whilst Covid-19 vaccine programmes
continue to bring hope for sustained easing
of restrictions throughout 2021, a degree
of uncertainty remains, and it is expected
that consumers will continue to shop more
online. Some customers will be reluctant to
return to in-store shopping and many have
become accustomed to shopping online
during the pandemic.
This year has seen an increased focus on
home products as people have spent
more time than ever at home. The launch
of our Home Essentials brand and our
ability to pivot to meet changing consumer
demand have been important for N Brown
in navigating the fast-changing retail
environment this year.
The clothing and footwear sector has
been the hardest hit retail sector in the
UK amid the pandemic2 as consumers
prioritised essential items due to economic
uncertainty and the restrictions imposed
on social events, occasions and holidays
reducing the need for new clothing.
Our focus is on responding promptly to
changing trends and customer demand,
and for example this year, we successfully
pivoted to newly resilient categories
such as Leisurewear and Nightwear.
We will continue to monitor changes in
consumer demand across categories
where our brands have a very strong,
differentiated offering.
1 BRC State of Trade Q4 2020, January 2021.
2 GlobalData UK Clothing & Footwear Market 2015 – 25e,
2 October 2020.
22
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk CONSUMER CREDIT
Our credit proposition is a key differentiator, enabling
us to provide convenient financial services to customers,
while using data to provide them with personalised and
targeted offers. Our credit customers are also loyal to
N Brown, helping to drive demand for our products.
As the refined brand propositions attract
a broader and more affluent section of
the market, we have begun the process
of developing new financial products that
are familiar to these customers and drive
higher volumes of full price incremental
retail sales. Supporting the delivery of
these new credit options will be our new
FS platform and we have made good
progress in a discovery phase to help
understand the different delivery options.
We are also enhancing our use of data
sources, analytical tools and techniques
to improve our lending proposition.
Aire Labs is an AI tool which supports
better credit decisions and customer
outcomes. This is helping drive
incremental improvement and we see
further opportunities in this area.
In response to the pandemic and to
ensure our customers are fully supported,
we implemented and adapted processes
at pace, to meet our customers’ needs.
The Group fully embraced the revised
FCA guidance on the impact of Covid-19
and expanded our contact channels,
rolled out additional forbearance in the
form of the temporary payment deferral,
and enhanced our monitoring and
reporting of vulnerable customers.
MARKETPLACE
OUTLOOK
Our success as a business is determined
by the demand for our products, which
stems from consumer confidence, and
our ability to benefit and service that
demand by cultivating brands that
resonate, products that stand out, and
a leading digital customer experience.
The latest GfK Consumer Confidence
Index3 shows a further increase in the
Overall Index Score for March which
increased by a sturdy seven points to
-16, marking an improvement each
month in 2021 so far. Whilst consumer
confidence is expected to continue
to rise, economic uncertainty and
overall lower consumer confidence are
expected to remain throughout 2021
as a result of the pandemic.
The anticipated sustained easing of
restrictions over the coming months
and a return to some level of normality
will mean that consumers look to spend
on categories which have been less
popular in 2020, such as formalwear.
Our ability to pivot our business model
into product categories to meet
consumer demand is key to supporting
our overall strategy to ensure
sustainable long-term growth.
3 GfK Consumer Confidence Index, 19 March 2021.
23
N Brown Group plc Annual Report and Accounts 2021nbrown.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.
We operate five strategic
retail brands and a portfolio
of other brands selling
Clothing and Footwear, and
Home and Gift.
UNDERSERVED
MARKET FOCUS
Product
Reputation
Delivering product which
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.
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 appropriately.
GREAT PRODUCT
OUR RELATIONSHIPS
Customers
Suppliers
We are proud to make
great products which our
customers 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.
Shareholders
We work to deliver long-term sustainable value for
our shareholders.
Further information on
our relationships is on p39
DIGITAL CAPABILITIES
CONVENIENCE OF FINANCIAL
SERVICES OFFER
OUR VALUES UNDERPIN
EVERYTHING WE DO
TOGETHER FOR
THE CUSTOMER
DRIVEN BY
CURIOSITY
24
N Brown Group plc Annual Report and Accounts 2021nbrown.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
FINANCIAL
£20.0m
Reinvested for
long-term growth1
£64.9m
Cash generated2
DATA
FEEDBACK
MARKET AND
SELL OWN AND
THIRD-PARTY
BRANDS
NON-FINANCIAL
71%
Colleague satisfaction3
DELIVERY
AND
RETURNS
ABILITY TO OFFER FINANCE
WE OFFER OUR CUSTOMERS FLEXIBILITY
AND CONVENIENCE
EMPOWERED
BY TRUST
MOTIVATED
BY PACE
£84,054
Charity and community investment4
1 Capital expenditure, i.e. purchases of intangible
assets and property, plant and equipment.
2 Net cash generated from the Group’s
operating activities. The Directors believe that
net cash generated is the most appropriate
measure of the Group’s cash generation from
underlying performance.
3 Overall colleague engagement score measured
through the Group’s VIBE survey in FY21.
4 Charitable donations made by the Group in FY21.
25
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements FINANCIAL PERFORMANCE
REVIEW OF THE YEAR
“I would like to thank all
our stakeholders for the
support which they have
given the Group in such
an unprecedented year.
The Group was able to
demonstrate its flexible
business model to deliver
a resilient adjusted EBITDA
performance in year above
the top end of guidance.
We also significantly
strengthened the capital
structure of the Group,
completing a £100m
equity raise which leaves us
well positioned to deliver
sustainable growth.”
Rachel Izzard
Chief Financial Officer
26
With the financial year beginning on
1 March 2020, and the first UK lockdown
announced on 23 March 2020, this
has been an unprecedented period
for N Brown with an initial immediate
and material impact on product sales.
By reacting quickly and flexibly, and
building on strategic changes already
underway, we were successful in
mitigating a large proportion of the
impact and remain profitable at all levels.
As a result of this resilient financial
performance and support from all
stakeholders including our shareholders,
the Group has eliminated unsecured
debt and extended its financing
facilities. We entered the pandemic
with the RCF fully drawn at £125m and
have finished the year with an undrawn
RCF and a significantly improved
leverage position.
Product revenue improved every quarter
following the sudden decline at the
onset of the pandemic, and in Q4 our
strategic brands delivered Product
revenue growth. We have demonstrated
the flexibility of our cost base with
material improvement in the adjusted
operating costs to Group revenue ratio
in the year enabling us to offset more
than 80% of the reduction in gross profit
and remain profitable.
We supported our Financial Services
credit customers through the period and
repayment rates stayed in line or ahead
of previous years with an improved
arrears position. IFRS 9 requires the
inclusion of future expected credit
losses which consider the forecast
impacts of the pandemic. This has
resulted in our IFRS 9 provision ratio
increasing to 14.1% from 10.9% in FY20.
As a result of the equity raise, tight cost
and working capital control, temporary
reductions in capital expenditure and
suspension of the dividend, combined
with a smaller debtor book, the Group
reduced adjusted net debt by £196.1m
in the year.
N Brown is now well placed to deliver
its strategic goals of medium-term
Product revenue growth of 7% per
annum and an adjusted EBITDA margin
of 14%.
REVENUE
£m
Revenue
Strategic brands2
Other brands3
Total Product revenue
Financial Services revenue
Group revenue
FY21
341.2
127.2
468.4
260.4
728.8
FY20
(Restated)1
372.7
174.3
547.0
290.5
837.5
Change
(8.5)%
(27.0)%
(14.4)%
(10.4)%
(13.0)%
1 FY20 restated see note 32 on page 151.
2 JD Williams, Simply Be, Ambrose Wilson, Jacamo and Home Essentials.
3 Other brands are Fashion World, Marisota, Oxendales and Premier Man. High & Mighty, House of Bath
and Figleaves were folded into Strategic brands in FY21.
Group revenue declined 13.0% to £728.8m, as a result of a 14.4% decline in Product
revenue and a 10.4% decline in Financial Services revenue.
£m
Product revenue
Strategic brands1
Other brands2
Financial Services revenue
Q1 FY21
Q2 FY21
Q3 FY21
Q4 FY21
(25.7)%
(19.6)%
(38.3)%
(8.3)%
(15.0)%
(9.8)%
(26.2)%
(15.8)%
(9.6)%
(2.5)%
(26.0)%
(8.3)%
(4.3)%
1.3%
(18.5)%
(8.0)%
Q1 FY21 is the 13 weeks to 30 May 2020, Q2 FY21 is the 13 weeks to 29 August 2020, Q3 FY21 is the
18 weeks to 2 January 2021, Q4 FY21 is the 8 weeks to 27 February 2021. All percentage changes reflect
FY21 revenue against the comparable period in FY20 restated. Product revenue has been adjusted to
reflect the actual returns performance in the year.
1 Strategic brands are JD Williams, Simply Be, Ambrose Wilson, Jacamo and Home Essentials.
2 Other brands are Fashion World, Marisota, Oxendales and Premier Man. High & Mighty, House of Bath
and Figleaves were folded into Strategic brands in FY21.
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk Following the sudden and significant
decline at the onset of the pandemic,
Product revenue made a steady recovery
throughout the period predominantly
driven by the performance of the
strategic brands which ended the year
in growth. The Group was able to pivot
its offer to meet customer demand
of Home and Gift products, boosted
by the launch of Home Essentials as a
standalone website on 1 April 2020 and
as a result, the percentage of Home and
Gift product revenue increased from 29%
in FY20 to 41% in FY21.
Customer returns rates were lower
in the year, (8.8)ppts vs FY20, due to
a combination of mix into the lower
returning Home and Gift products
(4.4)ppts as well as an underlying
improvement through the pandemic
period (4.4)ppts.
During the year we have changed our
treatment of where we record the VAT
bad debt relief received from HMRC as
a consequence of writing off customer
receivables. The VAT relief was previously
represented in Product revenue. We now
believe a more appropriate treatment,
is to credit the VAT relief as a reduction
to cost of sales. This credit is reflected
within the Product gross margin as
the relief would not be available to a
standalone Financial Services business.
Both the prior year and current year have
been amended to this approach which is
covered in note 32.
In Financial Services the customer
receivables gross debtor balance reduced
during the year 7.8% at the year end, and
(6.4)% on average through the year due to
a combination of lower Product revenue
sales, and higher levels of customer
repayment rates, partially offset by lower
write offs. As a consequence, Financial
Services revenue declined 10.4%.
Throughout the year our Financial
Services teams have been focused on
treating customers fairly and where
appropriate they were supported with
Covid-19 forbearance periods. When a
customer was on a Covid-19 payment
deferral, the Group did not apply interest
to their credit balances. The larger
decline in Financial Services revenue
in Q2 FY21 was due to c.3% of account
balances being on a Covid-19 payment
deferral. By the end of FY21 fewer than
1% of account balances remained on a
Covid-19 payment deferral.
ADJUSTED GROSS PROFIT1
£m
Product gross profit
Product gross margin %
Financial services gross profit
Financial services gross margin %
Adjusted Group gross profit1
Adjusted Group gross profit margin2
FY21
204.1
43.6%
119.4
45.8%
323.5
44.4%
FY20
(Restated)3
279.1
51.0%
160.8
55.4%
439.9
52.5%
Change
(27.1)%
(7.4)ppts
(25.7)%
(9.6)ppts
(26.4)%
(8.1)ppts
1 Adjusted gross profit is gross profit excluding exceptional items. The Directors believe adjusted gross
profit represents the most appropriate measure of the Group’s underlying trading performance.
2 Adjusted gross profit margin is calculated as adjusted gross profit as a percentage of Group Revenue.
The Directors believe adjusted gross profit margin represents the most appropriate measure of the
Group’s underlying trading performance.
3 FY20 restated see note 32 on page 151.
The Group’s overall adjusted gross margin was 44.4%, compared to 52.5% in FY20
(as restated).
Product gross margin declined 7.4ppts to 43.6% primarily as a result of the strategic
decision to pivot the customer offer towards Home and Gift to respond to customer
demand. Whilst Home and Gift has a lower gross margin, it also has a much lower
returns rate. Product gross margin also declined as a consequence of discounting to
clear down older stock, a continued highly promotional market and increased freight
rates from the second half of the financial year.
The Financial Services gross margin declined 9.6ppts to 45.8% due to the movement
in the impairment provision for future expected credit losses. In the first half of the
financial year and in accordance with IFRS 9, the Group increased the impairment
provision by £17m to reflect future expected credit losses as a result of the impact of
Covid-19 and payment deferrals. At the end of FY21 the impact has been reassessed
at £15.4m. The Financial Services gross margin in the prior year also benefitted from
IFRS 9 provision reassessments.
ADJUSTED OPERATING COSTS1
£m
Warehouse and fulfilment costs
Marketing and production costs
Admin and payroll costs
Adjusted operating costs1
Adjusted operating costs1 as a % of Group
Revenue
FY21
(64.8)
(60.3)
(111.9)
(237.0)
FY20
(78.1)
(136.0)
(119.1)
(333.2)
Change
17.0%
55.7%
6.0%
28.9%
32.5%
39.8%
(7.3)ppts
1 Adjusted operating costs are defined as operating costs less depreciation, amortisation and exceptional
items. The Directors believe this is the most appropriate measure of the Group’s operating cost base as
it removes items that do not form part of the recurring activities of the Group.
At the start of the pandemic, we took swift and decisive action on the operating
cost base, highlighting the agility of the business model. This included tight control
of marketing expenditure, management pay cuts, furlough support, and working
with suppliers to unlock volume variability. As a result of these initiatives, adjusted
operating costs decreased by 28.9% compared to the prior year, significantly more
than the 13.0% decline in Group revenue. Statutory operating costs decreased
by 26.4% compared to the prior year. These cost savings mitigated 83% of the
Gross Margin decline, in-line with our guidance of offsetting more than 80% of the
absolute Gross Margin decline.
27
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements FINANCIAL PERFORMANCE
CONTINUED
Marketing costs were down 55.7%
year on year to £60.3m driven by
the strategic focus on sustainable
profitable marketing activity and from
the immediate and sharp removal of
non-revenue generating spend in H1 in
response to Covid-19;
Warehouse and fulfilment costs were
17.0% lower year on year, better than
the 14.4% reduction in Product revenue.
Costs decreased as a result of lower
returns and continued efficiencies; and
Admin and payroll costs decreased
by 6.0%, driven predominantly by
an immediate essential spend only
response to Covid-19 in the first half
of the financial year, lower headcount,
minimal discretionary spend and travel,
and continued Head Office efficiencies.
Across Warehouse and Fulfilment and
Admin and Payroll, the Group benefitted
from c.£3.8m of furlough support from
the Government in H1 which allowed
us to work through the challenges that
Covid-19 initially presented for our
business and preserve a significant
number of jobs for our colleagues.
Overall, adjusted operating costs
as a percentage of Group revenue
significantly improved from 39.8%
in FY20 to 32.5% in FY21 through a
combination of strategic change and
Covid-19 response.
ADJUSTED EBITDA AND
STATUTORY OPERATING
PROFIT
We were able to offset more than 80%
of the reduction in gross profit and
the IFRS 9 provision increase through
control of costs and therefore adjusted
EBITDA decreased by £20.2m to £86.5m.
Statutory operating profit was £35.1m
a decrease of £13.0m compared to the
prior year.
28
DEPRECIATION AND AMORTISATION
The successful equity raise and refinancing in December 2020 has enabled the
Group to push ahead with strategic investment in technology advancements.
Following the equity raise and refinancing, the Group has therefore performed a
detailed review of the useful economic lives (“UEL”) of its legacy assets in light of
general advancements in technology and the Group’s revised strategy. This resulted
in shortening the useful economic lives of certain assets and an increase in the
amortisation charge of £6.6m. More detail is included in note 12 on page 132.
As previously guided, Depreciation and Amortisation increased in the year as
the Group accelerated the pace of its strategic change. FY21 Depreciation and
Amortisation was £39.8m, compared to £30.1m in the prior year.
NET FINANCE COSTS
Net finance costs were £16.6m, a decrease of 2.9% compared to last year as a result
of lower levels of debt following the equity raise, management actions to maintain
liquidity and a smaller debtor book.
EXCEPTIONAL ITEMS
Exceptional items are items of income and expenditure which are one-off in nature
and material to the current financial year or represent true ups to items presented as
exceptional in prior periods. These were significantly lower than the prior year as the
Group has now reached conclusion over the majority of legacy issues, with legacy
tax structures resolved and the FCA customer redress deadline behind us. The only
significant legacy issue still outstanding is the Allianz contingent liability, more detail
is provided on the following page.
In line with the Board’s strategic review and multi-year transformation of the
business, a material level of cost reduction programs have been completed as
well as an increased focus and refinement of the Group’s five strategic brands.
During FY21, total redundancy costs of £5.2m have been incurred across the
Group including Figleaves, in order to align the Group’s people costs to deliver
an organisational design that supports the revised strategy. A further £2.7m
has been incurred on the restructure and the transfer of the Figleaves business
under the Simply Be brand. including stock write down of £1.1m and onerous
contract provisions of £0.8m. The one-off costs related to the transformation are
substantially complete.
In accordance with the requirements of IAS 36 management have assessed the
carrying value of the intangible assets held in respect of the International (£1.2m)
and Figleaves business (£0.8m), following the Group’s strategic decision during the
year to focus on the UK as a market and the five strategic brands, and have written
the value of these assets down in full.
Further details are included in note 6 on page 126.
£m
Strategic change
Impairment of tangible and intangible assets and brands
Legal costs
Customer redress
Tax matters
Gain from early settlement of derivative contracts
Items charged to profit before tax
FY21
7.9
1.7
1.1
(0.1)
1.0
(1.4)
10.2
FY20
3.5
1.8
1.0
22.9
(0.7)
–
28.5
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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
and preceedings remain at an early
stage, with each party only recently
having completed a lengthy disclosure
exercise. We continue to gather detailed
and factual expert and witness 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 financial outflow
and has, therefore, not made provision
for this claim at this time and instead a
contingent liability has been disclosed.
Further details can be found in note 26
on p144.
EARNINGS PER SHARE
Adjusted earnings per share were 7.89p (FY20: 16.37p). Statutory earnings per share
were 2.63p (FY20: 9.63p). Both measures include the impact of the reduction in
earnings as well as the 61.1% increase in the share capital following the equity raise
in December 2020. Further details can be found in note 11 on p130.
FINANCIAL SERVICES CUSTOMER RECEIVABLES AND
IMPAIRMENT
In FY21, the gross debtor book reduced by 7.8% to £605.8m due to lower product
sales and an increase in customer repayment rates partially offset by lower write
off rates.
Customer arrears rates improved in the year (1.3ppts to 7.9%) with the government
pandemic support in place. The pricing for the previously bi-annual debt sales
improved underpinned by the decision to move to a single larger debt sale at the
end of the year.
IFRS 9 requires the inclusion of future expected credit losses which consider the
forecast impacts of the pandemic. This has resulted in our overall IFRS 9 provision
ratio increasing to 14.1% from 10.9% in FY20, with the Covid-19 impact model overlay
assessed at £15.4m at the year end.
Customer loan balances have reduced in the period, and the IFRS 9 provision rates
increased as shown in the following table:
ADJUSTED PROFIT BEFORE
TAX AND STATUTORY
PROFIT BEFORE TAX
Adjusted profit before tax was £30.1m,
down 49.4% year on year as a result of
lower gross profit, the increase in the
IFRS 9 provision and the accelerated
depreciation and amortisation.
£m
Gross customer loan balances
IFRS 9 provision
Normal account provisions
Payment arrangement provisions
Covid-19 impacts
IFRS 9 provision ratio
Net Customer Loan Balances
FY21
605.8
(85.2)
(60.9)
(8.8)
(15.4)
14.1%
520.2
FY20
656.9
(71.7)
(66.3)
(5.4)
10.9%
585.2
Change
(7.8)%
(18.8)%
+0.4ppts
(0.6)ppts
(2.5)ppts
(3.2)ppts
(11.0)%
Statutory profit before tax was £9.9m
(FY20: £35.7m) which reflects a £13.3m
reduction in fair value adjustments to
financial instruments and is inclusive
of the £15.4m Covid-19 impact on the
IFRS 9 provision made in the year.
TAXATION
The taxation charge for the period is
based on the underlying estimated
effective tax rate for the full year of
19.0%. Further details are contained
in note 9 on p129.
The profit and loss net impairment charge for FY21 was £139.1m, £11.5m higher
than last year due to the increase in IFRS 9 provision offset by lower write-offs as
shown below.
£m
FY20 net impairment charge
Under IFRS 9, we have provided an extra £15.4m for expected future credit losses
as a result of the economic impacts of Covid-19
A reduction in the amount of debt sold due to improved arrears performance
A smaller debtor book due to lower product sales
Improved book quality year-on-year
FY21 net impairment charge
127.6
15.4
4.6
(5.5)
(3.0)
139.1
29
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements FINANCIAL PERFORMANCE
CONTINUED
FUNDING AND EQUITY RAISE
In November 2020 the Group
announced a £100m equity raise to
eliminate unsecured debt and accelerate
strategic investment, concurrent with
new and extended banking facilities.
Following shareholder approval and
the subsequent move to the Alternative
Investment Market (”AIM”) the Group
fully repaid the RCF, and repaid and
cancelled the £50m Coronavirus Large
Business Interruption Loan Scheme
(“CLBILS”) facility put in place in
May 2020.
As a result, the Group now has the
following arrangements in place with
its lenders:
An up to £500 million securitisation
facility committed until December
2023, drawings on which are linked to
prevailing levels of eligible receivables;
An RCF of £100 million committed until
December 2023; and
An overdraft facility of £12.5 million
which is subject to an annual review
every July.
At the end of FY21 the Group had total
available liquidity of £184.8m.
In May 2020, in response to the
pandemic, the Group put in place an
up to £50 million three-year Term Loan
facility, under the Government’s CLBILS,
amended certain terms and covenants
of the securitisation facility and widened
certain covenants on the unsecured
RCF facility. These were replaced with
the facilities outlined above following
the December 2020 equity raise
and refinancing.
INVENTORY
Net inventory levels at the year end were
down 18.1%, to £77.7m (FY20: £94.9m)
following the Group’s focus on reducing
the level of inventory held in respect
of old seasons, as well as a reduction
in stock purchases reflecting the
reduction in customer demand for
certain products.
30
CASH FLOW
The Group initially reduced capital expenditure to preserve liquidity at the start of
the pandemic. Following the equity raise in December 2020, capital expenditure
levels started to increase as the Group began to accelerate its strategic plans and in
the year capital expenditure was £20.0m (FY20: £39.7m).
Total net cash generated in the year was £158.4m compared to £0.2m in the same
period last year. Excluding the £93.5m equity raise net proceeds, net cash generated
from operations was £64.9m (FY20: £20.3m). This increase was a result of the successful
reduction in inventory levels, a release of working capital from the FS customer
loanbook with customer repayments net of funds returned on the associated
securitisation debt facility, the suspension of dividends and a reduction in the level of
exceptional cash drain.
£m
Adjusted EBITDA
Inventory working capital
Other working capital and operating cashflows
Cashflow adjusted for working capital
Exceptional Items
Capital Investment
Non-operating tax and treasury
Interest
Non-operational cash outflows
Net repayment / (increase) in loan book
Net (decrease) / increase in securitisation debt balance
Net cash from the customer loan book
Net cash generated from operations
Dividends
Equity raise
Net cash generated from operations
FY21
86.5
17.0
2.5
106.0
(16.4)
(20.0)
(12.4)
(19.0)
(67.8)
64.5
(37.8)
26.7
64.9
–
93.5
158.4
FY20
106.7
16.6
(35.6)
87.7
(39.6)
(39.7)
0.3
(17.8)
(96.8)
(0.1)
29.5
29.4
20.3
(20.1)
–
0.2
ADJUSTED NET DEBT
As a result of the Group’s successful equity raise, on-going focus on cash
generation, tight cost control, reduction in capital expenditure and suspension of
the dividend, together with a smaller debtor book, the Group significantly reduced
adjusted net debt in the year.
Unsecured net debt, which is defined as the amount drawn on the Group’s unsecured
borrowing facilities less cash balances was eliminated in the period and the Group
closed the year with net cash of £80.8m (FY20: unsecured net debt (£77.5)m).
Adjusted net debt decreased by 39.4% in the year, to £301.1m (FY20: £497.2m). This is
the net of £80.8m of cash and £381.9m of debt drawn against the securitisation
funding facility which is backed by the eligible customer receivables. The £520.6m
net customer loan book significantly exceeds this net debt figure.
DIVIDEND AND CAPITAL ALLOCATION
As announced on 23 March 2020 due to the impact of Covid-19 the Board
suspended dividend payments for the foreseeable future. The Directors recognise
that dividends are an important part of the Company’s returns to shareholders and
the Board will consider the resumption of dividend payments at the end of FY22.
PENSION SCHEME
The Group’s defined benefit pension scheme has a surplus was £25.5m and remained
broadly similar to the prior year (FY20: £26.3m).
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk FINANCIAL KPIS
The Group’s non-financial KPIs are contained in the Chief Executive Officer’s statement. The Group also uses a number of
financial KPIs to manage the business. These are laid out below and the Group will continue to report these going forwards.
£m
Product revenue
Adjusted EBITDA1
Adjusted EBITDA margin
Adjusted operating costs2 to Group revenue
Unsecured net cash/(unsecured net debt)3
Adjusted EPS4
FY21
£468.4m
£86.5m
11.9%
32.5%
£80.8m
7.89p
FY20
£547.0m
£106.7m
12.7%
39.8%
£(77.5)m
16.37p
Change
(14.4)%
(18.9)%
(0.8)ppts
(7.3)ppts
n/m
(51.8%)
1 Adjusted EBITDA is calculated a operating profit, excluding exceptional items, with depreciation and amortisation added back. The Directors believe adjusted EBITDA
represents the most appropriate measure of the Group’s underlying trading performance as it removes items that do not form part of the recurring activities of the Group.
2 Adjusted operating costs to revenue ratio is calculated as operating costs less depreciation, amortisation and exceptional items as a percentage of Group
revenue. The Directors believe this is the most appropriate measure to demonstrate the efficiency of the Group’s operating cost base.
3 Unsecured net debt excludes debt securitised against receivables (customer loan book) of £381.9m and lease liabilities of £4.9m. The directors believe this is the most
appropriate measure of the Group’s net debt in relation to its unsecured borrowings and is used to calculate the Group’s leverage ratio, a key debt covenant measure.
4 Adjusted earnings per share based on earnings before exceptional items and fair value adjustments, which are those items that do not form part of the recurring
operational activities of the Group. The Directors believe that this is the most appropriate measure of the Group’s earnings per share as it removes items that do
not form part of the recurring activities of the Group.
RECONCILIATION OF STATUTORY FINANCIAL RESULTS TO ADJUSTED RESULTS
The Directors believe that the adjusted measures provide useful information for shareholders to evaluate the Group’s underlying
trading performance. These measures are used by management for budgeting, planning and monthly reporting purposes and
are the basis for executive and colleague incentive schemes.
The adjusted figures are presented before the impact of exceptional items. Exceptional items are items of income and
expenditure which are one-off in nature and material to the current financial year or represent true ups to items presented as
exceptional in prior periods. These are detailed in note 6.
Adjusted EBITDA represents the most appropriate measure of the Group’s underlying trading performance. Adjusted EBITDA
is defined as operating profit, excluding exceptionals, with depreciation and amortisation added back.
Adjusted profit before tax represents the most appropriate measure of the Group’s underlying profit before tax as it removes
the exceptional items and the fair value adjustments to financial instruments.
A full glossary of Alternative Performance Measures and their definitions is included on page 161.
£m
Group revenue
Gross profit
Group gross profit margin
Operating profit
Operating profit margin
Depreciation and amortisation
EBITDA
EBITDA margin
Net finance (costs)
Profit before tax and fair value adjustments to
financial instruments
Fair value adjustments to financial instruments
Profit before tax
Taxation
Profit for the year
Basic earnings per share (p)
Diluted earnings per share (p)
FY21
Exceptional
items
1.1
11.6
11.6
(1.4)
10.2
1.7
8.5
Notes
3
4
4
4
Statutory
728.8
322.4
44.2%
35.1
4.8%
39.8
8
(16.6)
18.5
(8.6)
9.9
(1.6)
8.3
2.63
2.63
18
9
11
11
Adjusted
728.8
323.5
44.4%
46.7
6.4%
39.8
86.5
11.9%
(16.6)
30.1
(10.0)
20.1
(3.3)
16.8
7.89
7.88
Statutory
837.5
439.6
52.5%
48.1
5.7%
30.1
(17.1)
31.0
4.7
35.7
(8.3)
27.4
9.63
9.62
FY20 (Restated)1
Exceptional
items
0.3
28.5
28.5
28.5
(5.5)
23.0
1 The revenue and gross profit have been restated in FY20 as outlined in note 32 on page 151.
Adjusted
837.5
439.9
52.5%
76.6
9.1%
30.1
106.7
12.7%
(17.1)
59.51
4.7
64.2
(13.8)
50.4
16.37
16.35
31
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements RISK MANAGEMENT
PROTECTING THE INTEGRITY
OF OUR BUSINESS STRATEGY
ENTERPRISE RISK MANAGEMENT FRAMEWORK
The Group has continued to enhance
and embed risk management practices
in support of the N Brown Enterprise
Risk Management Framework (“RMF”).
The RMF enables the Group to maintain
robust governance and oversight around
risk management activities across the
business to underpin a standardised
approach to managing risks.
RISK
STRATEGY AND
GOVERNANCE
RISK APPETITE
Statements
Metrics
Reporting
RISK MANAGEMENT PROCESS
Identify
and Assess
Manage
Monitor
and Report
Principal Risks, Internal
& External threats and
5x5 Matrix
Treat, Transfer,
Accept and Avoid
Key Control testing, Functional
Management Reporting and
Operating Board Reporting
SKILLS AND
CAPABILITIES
RESOURCES
RISK
CULTURE
POLICIES, STANDARDS AND PROCEDURES
RISK IDENTIFICATION
AND ASSESSMENT
As part of the deployment of the RMF
the Group has, over the last 12 months,
transitioned to a more consolidated
and standardised set of 14 Principal Risk
Categories. Legacy risks have been mapped
and indexed directly to one of these 14
Principal Risk Categories.
In order to identify the Group’s areas of
Principal Risk and determine risk appetite,
legacy risks and the current and horizon
risk profile have been mapped against
the Group’s strategic priorities and
transformation plan. Risk statements,
appetite metrics and key risk indicators have
been developed for each area of risk.
Principal risks with the potential to impact on
performance and the delivery of the strategic
roadmap in year or through the planning
cycle are listed on p33.
The Board of Directors maintain a continuous
process for identifying, evaluating
and managing risk as part of its overall
responsibility for maintaining internal
controls and RMF. This process is intended
to provide reasonable assurance regarding
compliance with laws and regulations as well
as commercial and operational risks.
Review and identification of existing and
emerging risks is facilitated by Board-level
risk assessment cycles completed during
the year, as informed by risk assessments at
business unit level. Outputs are reported to
the Audit and Risk Committee. During FY21,
facilitation of the process moved from
Internal Audit to Group Risk.
In setting strategy, the Board considers
Environmental, Social and Governance
(“ESG”) factors, drivers and impacts on the
health and sustainability of the business.
Furthermore, in general terms the strategy
is designed to deliver long-term sustainable
business management. The RMF has
been established to provide an overview
of strategic risk and as such incorporates
assessments of risks that have the potential
to create ESG exposures; these are reported
through the governance framework and
managed accordingly.
The Principal Risks are shown in the heat
map on p33 and are detailed on p35 to 38.
The residual risk profile of the majority of
these remains unchanged or has improved
over the period. Where the risk profile has
deteriorated this is generally a result of
continued uncertainty in the risk outlook
or uncontrollable external or market.
Control enhancements are identified as the
Risk Management Framework is rolled out
across each principal risk category.
The Group recognises that no system of
controls can provide absolute assurance
against material misstatement, loss or failure
to meet its business objectives.
32
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk RISK MANAGEMENT TEAM
• Owns the Risk Management Framework
• Approves risk appetite
N BROWN GROUP PLC BOARD
AUDIT AND RISK COMMITTEE AND FINANCIAL SERVICES BOARD COMMITTEE
• Board sub-committees responsible for risk oversight
•
Support the Board in establishing risk appetite
EXECUTIVE BOARD
RETAIL OPERATING COMMITTEE AND
FINANCIAL SERVICES OPERATING COMMITTEE
• Responsible for managing risk
RISK MANAGEMENT TEAM
Provides 2nd line assurance and reports to the
Audit and Risk Committee and Financial Services
Board Committee
Facilitates the implementation of and supports
reporting to the Executive Board
Facilitates effective implementation and oversight
of the RMF
•
•
•
FUNCTIONS: RETAIL AND
FINANCIAL SERVICES
• Executes the Risk Management Framework
BOARD AND
COMMITTEES'
DIVISION OF
RESPONSIBILITIES
p62
AUDIT AND RISK
COMMITTEE
REPORT
p68
1 Conduct and Customer
2
Information Security
3 Financial Crime
4 Business Resilience
5 Financial
14 PRINCIPAL RISKS
6 Change
7 Data
8
9 Credit
10 Process
Legal and Regulatory Compliance
11 Technology
12 People
13 Strategic
14 Supplier and Outsourcing
SEE MORE ABOUT
OUR PRINCIPAL RISKS
p35
FY21 RISK HEATMAP
1 Conduct and Customer
2
Information Security
3 Financial Crime
4 Business Resilience
5 Financial
6 Change
7 Data
8 Legal and Regulatory Compliance
t
c
a
p
m
I
9 Credit
10 Process
11 Technology
12 People
13 Strategic
3
6
11
13
5
4
8
14
2
7
10
12
1
9
14 Supplier and Outsourcing
Likelihood
33
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements Resilience, continuity, and disaster recovery
capability has been successfully exercised
and significantly real-world stress-tested
through Covid-19 incident management.
Notwithstanding, it is difficult to predict
the impact that Covid-19 might have on the
business. Related medium- and longer-
term macro-economic and social impacts
are difficult to determine and whilst
management has considered extreme but
plausible downsides, these do not include
the most severe of possibilities.
The Board has continued to monitor
Brexit impacts and mitigations with
management throughout the year via
the Group’s Brexit Steering Committee’s
actions and outputs. Management
executed a comprehensive and
appropriate set of action plans to mitigate
impacts in each of the areas of risk
identified – most significantly in relation
to supply chain continuity and tariff
arrangements. While some uncertainty
exists around the application of the Trade
and Co-Operation Agreement between
the UK and EU to retail and financial
services sectors, the outlook for the
impact of Brexit-related risk is considered
to be relatively benign and to have
significantly reduced.
RISK MANAGEMENT CONTINUED
PROTECTING THE INTEGRITY OF
OUR BUSINESS STRATEGY CONTINUED
Individual functional leadership teams and
colleagues are expected to operate within
the risk appetite boundaries approved by
the Board and to escalate any exceptions.
Formalisation of risk appetite allows
the Board and Executive Management
team to:
Better formulate and communicate a clear
Board-level direction on acceptable levels
of risk.
Implement a mechanism to monitor risk
areas needing senior management and
Board attention (through key Board-
level metrics) and associated actions
to address.
Provide guidance for the management
teams to make appropriate risk-informed
decisions within tolerances set by
the Board.
Provide a sound basis for Board assertions
around consideration of risk appetite.
COVID-19, UK EXIT FROM
THE EUROPEAN UNION
(“BREXIT”) AND OTHER
KEY AREAS OF FOCUS
Covid-19 and its related impacts has
dominated the Group’s in-year activity and
near-term risk horizon. Stress testing and
scenario planning has been maintained in
relation to a range of extreme but plausible
scenarios which include the impact on
demand for retail goods resulting from
a downturn in consumer confidence,
the ability of our credit customers to
maintain contractual payments, and loss of
operational continuity arising from further
lockdown restrictions or global disruption
to the supply chain. Management maintains
reasonable assurance over the Group’s
outlook across the range of scenarios
modelled but acknowledges that, while
likely to improve throughout the year, the
risk of continued business interruption
is likely to remain the new normal for
the foreseeable future in the context of
Covid-19. The business has continued to
perform well in the context of restrictions
and impacts related to the pandemic.
INTEGRATED ASSURANCE
The Group has continued to invest in risk
management capability and capacity
across the three lines of defence:
1st Line: Owns the risks to deliver a
well-managed and compliant business
and undertakes testing of key controls as
part of the formal Risk and Control Self-
Assessment process.
2nd Line: Designs the frameworks,
controls and policy structure to
manage risks, supports implementation
and operations and performs
reviews over compliance with key
regulatory requirements.
3rd Line: Provides independent assurance
of the internal control environment within
the Group. Conducts reviews of the key
controls within operational processes and
the risk management framework. Looks to
confirm that effective governance is in
place to manage the Group’s risks.
Outputs from assurance activities
are reported through the Group’s
governance structure.
RISK APPETITE
Risk appetite defines the level of risk
that the Group is prepared to accept in
pursuit of strategic objectives and aims
to determine guardrails within which the
Board expects management to operate.
Risk appetite formalisation is an iterative
process and needs be refreshed at least
annually to reflect changes in the Group’s
internal and external environment.
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. Appetite levels and
statements are contained within the
Group’s Principal Risk Policy set along with
the requirements for the management of
each of the principal risks.
The Board is responsible for approving
proposed risk appetite in line with its
expectations on risk taking.
Executive Management determines the
Group’s risk appetite statements and
tolerance levels for key risk appetite
themes across the Group.
34
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk PRINCIPAL RISKS AND UNCERTAINTIES
IDENTIFYING, EVALUATING AND MANAGING
RISKS FACING THE GROUP
N BROWN HAS FIVE
KEY STRATEGIC OBJECTIVES:
1 DISTINCT BRANDS TO ATTRACT BROADER
RANGES 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
Conduct and Customer
The risk that the Group’s processes, behaviours, products
or interactions will result in unfair outcomes for customer or
undermine market integrity.
The Group ensures that it is able to respond to customer
expectations for fair treatment throughout the customer lifecycle
that it has quality products and good service through customer
insight modelling and has aligned Financial Services policies and
effective compliance monitoring processes.
5 FLEXIBLE CREDIT TO HELP CUSTOMERS SHOP
Planned enhancements include:
UNDERPINNED BY:
6 DATA
7 PEOPLE AND CULTURE
8 SUSTAINABLE COST BASE
Each one of the areas of Principal Risk described is indexed to
one or more of the Group’s strategic priorities to ensure that
appropriate enabling risk management activity is undertaken.
Embedding of Customer Outcome focused
Quality Assurance Framework.
Enhanced Conduct Risk Dashboard reporting
through FS Governance.
Embedding of new Level 2 Conduct
and Customer Policy Suite.
Roll out new Conduct Risk Training module.
Embed enhanced Vulnerable Customer regulatory guidance.
Link to strategic priority
1, 3, 4, 5, 6, 7
Information Security
The risk of malicious or accidental disclosure, loss, amendment
or corruption of data. The risk a successful cyber attack gains or
prevents access to systems or resources.
We protect Group and customer data and respond to cyber
threats through continuous cyber security monitoring, network
vulnerability scanning and operating system software security
and anti-denial of service processes.
Planned enhancements include:
Enhanced Identity and Access Management.
Embedding of Patching and Vulnerability Policy.
Improved governance framework and monitoring system over
access to data.
Automated scanning of all assets against baseline security
standards.
Link to strategic priority
3, 4, 5, 6, 7
35
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements PRINCIPLE RISKS AND UNCERTANTIES
CONTINUED
IDENTIFYING, EVALUATING AND MANAGING
RISKS FACING THE GROUP CONTINUED
Financial Crime
The risk that financial crime is attempted or perpetrated against
or by the Group or that the Group fails to meet legal and
regulatory obligations in relation to financial crime.
Financial
The risk that the Group has insufficient liquidity, appropriate
access to funds or that there are negative movements in the
market or we cannot meet our obligations as they fall due.
The Group ensures that it protects itself and its customers from
the effects of financial crime. It does this through the effective
identification and management of financial crime risk, including
consideration of money laundering, terrorist financing, sanctions
violations, bribery and corruption, customer behaviour, external
fraud and internal fraud.
The Group ensures the robustness of its financial controls and
the capability for managing liquidity and market risks through
return on investment measures for key areas of discretionary
spending, detailed cash and margin forecasting processes, a
debt securitisation agreement and hedging of FX purchases.
Planned enhancements include:
Planned enhancements include:
Embedding of enhanced Financial Crime Policy Suite.
Further role-based Financial Crime training to be delivered.
Improved Financial Crime Management Information, reporting
and governance.
Embedding of L2 Liquidity and Funding and Financial Reporting
policies.
Enhanced MI and Reporting to the Financial Risk Management
Committee.
Enhanced stress and scenario testing.
Link to strategic priority
1, 3, 4, 5, 6, 7
Link to strategic priority
1, 4, 5, 6, 7, 8
Business Resilience
The risk of a lack of resilience in the delivery of critical services
and processes as a result of significant business disruption.
Change
The risk that we fail to execute change effectively and do not
deliver on strategic objectives.
The Group ensures it is able to respond to significant disrupting
events through having an effective risk management framework,
appropriate crisis management and scenario planning
underpinned by business continuity plans for each business area.
We provide capacity for the Group to deliver its desired change
programme by taking an integrated approach to technological
and business change, adopting continuous, agile IT change
processes, and ensuring data-driven decision-making.
Planned enhancements include:
Planned enhancements include:
Implementation of Operational Resilience Framework.
Embedding of Business Continuity Management System.
Upweighted Crisis Management Plans and capability.
Link to strategic priority
1, 2, 3, 4, 5, 6, 7, 8
36
Embedding of agile methodology through training and
awareness programme.
Embedding of new forecasting processes.
Improved RACI supporting change delivery.
Increased investment in Product Managers and Lead Delivery
Managers to build consistency and capability.
Link to strategic priority
1, 2, 3, 4, 5, 6, 7, 8
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk Data
The risk of failing to appropriately manage, maintain and ensure
appropriate usage of data including customer, colleague and the
group’s proprietary data.
The Group has a strong data governance programme across
all business areas and support functions to help ensure data;
is protected and maintains its integrity and confidentiality; is
available in the right structure, to the right people / systems,
at the right time; is of the highest quality required to support
business activity; is retained for no longer than is necessary; is
processed in accordance with regulatory requirements, and;
models are appropriately governed including mitigation of bias.
Credit
The risk that our customers fail to meet their obligations
when due.
We serve the underserved with inclusive credit whilst ensuring
capability and management of the Group’s customer portfolio
and debtor book, including arrears rates and potential bad or
persistent debts through lending and arrears management policies,
customer forecasting, credit loss (IFRS 9) modelling and compliance
monitoring processes.
Planned enhancements include:
Planned enhancements include:
Embedding of enhanced Data Risk Policy Suite.
Embedding of Credit Risk Dashboard.
Expand the Data responsibility assignment model implemented
in Financial Services and Finance to the rest of the Group.
Enhanced forbearance reporting.
New Data Protection Training rolled out to all colleagues.
Deployment of technology solutions to underpin data
classification and protection.
Link to strategic priority
1, 3, 4, 5, 6, 7
Link to strategic priority
1, 2, 3, 4, 5, 6, 7, 8
Legal and Regulatory Compliance
The risk of receiving legal or regulatory sanctions, fines, or
restriction on trade as a result of misinterpreting or failing to
comply with regulatory or legislative requirements. The risk that
our contracts are not enforceable.
The Group ensures there is an appropriate response to existing
and new legal and regulatory requirements, maintains relevant
licences and authorisations and conducts an open relationship
with regulatory bodies. The Group conducts appropriate
processes to facilitate the protection of both contractual and
copyright infringements.
Process
The risk of failure arising from the design, documentation and
operation of our processes.
We ensure material operational processes are identified,
controlled, compliant with regulation where appropriate and
underpinned by documented standard operating procedures.
Planned enhancements include:
Planned enhancements include:
Embed Compliance Policy and Methodology.
Operational Resilience Framework implemention.
Additional investment in Compliance Organisation Design.
Embedding of Quality Assurance Framework within Financial
Services.
Risk and Control Self-Assessment Key Control testing
requirements implemented over core processes.
Link to strategic priority
1, 2, 3, 4, 5, 6, 7, 8
Link to strategic priority
1, 2, 3, 4, 5, 6, 7, 8
37
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements PRINCIPLE RISKS AND UNCERTANTIES
CONTINUED
IDENTIFYING, EVALUATING AND MANAGING
RISKS FACING THE GROUP CONTINUED
Technology
The risk of the stability of the Group’s current mix of new and
legacy IT systems and infrastructure and the failure arising from
the design, documentation and operation of our processes.
Strategic
The risk that incorrect planning assumptions or management
information result in incorrect decisions or that management fail
to make decisions in light of changes in the external environment.
We seek to ensure the stability and sustainability of the Group’s IT
systems through continuous, agile IT change processes, ongoing
system performance monitoring and modernisation of legacy
IT systems.
The Group has a well-established and rigorous process for setting
strategy which involves assessing its internal position and priorities
and reviewing this in light of competitor and market context to form
a view on strategic direction. The strategy is reassessed annually and
governed through the Executive Board and N Brown Group Board.
The strategy forms the basis of the Company roadmap and three-
year financial plan to enable strategy measurement.
Planned enhancements include:
Planned enhancements include:
Enhanced Disaster Recovery / Resilience capability.
Enhance horizon risk assessment process.
Embedding of Technology Risk Policy suite.
Delivery of Technology Roadmap to reduce reliance on legacy
technology.
Update change management methodology from IT Infrastructure
Library 3 to 4.
Enhanced risk governance to oversee principal risk framework roll
out and gap remediation.
Link to strategic priority
1, 2, 3, 4, 5, 6, 8
Link to strategic priority
1, 2, 3, 4, 5, 6, 7, 8
People
The risk that we fail to recruit, develop and retain colleagues,
maintain a safe working environment, maintain an appropriate
organisational design or comply with employment-based legislation.
The Group ensures a safe and secure work environment.
We manage our cultural and people risks through performance
management, personal development, recruitment and talent
management of our colleagues through our people policies,
performance management system, My People Portal and the
intranet communication hub.
Supplier and Outsourcing
The risk that we fail to appropriately select and manage Goods
For Resale (“GFR”) and Goods Not For Resale (“GNFR”) suppliers,
including outsourced arrangement, specifically that the supplier
/ outsourcer ceases to operate / suffers a major disruption or
undertakes any activity that would impact on the reputation and
corporate social responsibility obligations of the supplier or N Brown.
The Group effectively selects and manages GFR and GNFR
suppliers and outsourcers, appropriately building strong and
trusted relationships, ensuring strong supplier governance
processes are followed.
Planned enhancements include:
Planned enhancements include:
Embedding of People Risk policy suite.
Embedding a supplier management framework.
Improved processes for managing key person dependencies.
Digitisation and roll out of new supplier onboarding process.
Enhanced Organisation structures, forums and decision making.
Increased supplier charter coverage of own branded suppliers.
Consolidation and Optimisation of the Group’s Data functions
and capability.
Enhanced MI, reporting and governance.
Embedding of a hybrid Ways of Working model.
Link to strategic priority
4, 5, 6, 7
38
Link to strategic priority
2, 3, 5, 7
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk SECTION 172 STATEMENT
ENGAGEMENT WITH
STAKEHOLDERS
DECISION-MAKING
BY THE BOARD
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 to 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.
WHISTLEBLOWING
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 Board.
PROVIDERS OF CAPITAL
Shareholders, Investors and Debt
Providers 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 providers of
capital via:
The Company’s Annual General Meeting
Meetings with shareholders
and proxy advisors
Presentations to analysts and investors
Publication of Stock Exchange
announcements, press releases,
quarterly trading results and Annual
Reports and Accounts.
COLLEAGUES
Without our colleagues and their
relentless energy, enthusiasm and passion
we couldn’t do what we do. They are our
most important asset.
While the Company’s communication with
colleagues has had to fundamentally shift
during the Covid-19 pandemic, regular
engagement has taken place across a
variety of platforms including:
Colleague Forum – The Culture Club
Colleague Voice: twice-yearly
engagement surveys and monthly
pulse surveys
Executive Director Sessions – coffee
with colleagues
Weekly Company-wide newsletters
from the CEO and other Directors
Colleague conversations – performance
and feedback sessions
Team huddles and meetings
Daily emails from Internal Comms
Colleague recognition and rewards
The Company-wide intranet
Further information about our engagement with
colleagues can be found on p40.
CUSTOMERS
The Company is obsessed with its
customers and has been for generations.
It delights them with products, services
and finance options to fit their lives.
We regularly engage, both proactively
and reactively, with our customers via:
Product testing
Market research groups
Net Promoter Scoring and Customer
Services reports
Engagement across social media
and Customer Service channels
SUPPLIERS AND PARTNERS
Suppliers and Partners are the key
links in the sourcing, development and
delivery of products and services to our
customers. They support the Company
across every aspect of its operations and
are crucial to the successful delivery of
our business model.
The Company has continued to support
its suppliers and wider supply chain
throughout the Covid-19 pandemic.
Following the Company’s admission
to AIM in December 2020 we now
have a Nominated Adviser whose
role is to advise and guide us on our
responsibilities under the AIM rules.
Further information about our engagement with
suppliers can be found on p45.
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.
Further information about our engagement with
charities and our work on Environmental, Social
Governance can be found on p42 to 53.
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. For example this year we signed up
to the BRC Climate Action Roadmap.
We engage directly with and are part of a
number of bodies including:
UN Global Compact
Action Collaboration and
Transformation – Living Wage
Ethical Trading Initiative
2018 Transition ACCORD/
RSC Bangladesh
The Transparency Pledge
Further information about our engagement with
shareholders can be found on p78.
Further information about our engagement with
trade and industry bodies can be found on p44.
39
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements BOARD ENGAGEMENT WITH THE WORKFORCE
COLLEAGUE VOICE SURVEYS
Along with our twice-
yearly engagement survey,
we also conduct monthly
pulse surveys, providing
regular insight into
colleague sentiment.
These are extremely positive results
considering the challenges of the year
and, particularly pleasing, were teams
such as Financial Services and Logistics,
which showed increases of 5% and 11%
respectively. These teams were key
to keeping the business operational
throughout FY21.
This year, the pulse insights have proven
extremely helpful in navigating necessary
changes to working practices throughout
the pandemic, enabling the business
to respond quickly and effectively
to any issues, questions or ideas
from colleagues.
Our full Colleague Voice survey,
conducted in February, saw results
improving across all key metrics year on
year. Our overall colleague engagement
score increased from 68% to 71% and
our Employee Net Promoter Score
moved from -10 to +7, moving us from
a moderate score to a positive score.
HOW ARE YOU
FEELING?
I’m fine
39.18%
I have my good
and bad days
51.55%
I’m getting
extra support
3.09%
I feel quite
anxious
11.34%
CULTURE CLUB
The role of the Company’s Culture Club is to enable
effective two-way dialogue and to give colleagues a
platform and channel to voice their thoughts and influence
decisions in relation to the business and how it operates.
piloted walking meetings across our
teams and has launched three sub-
groups to focus on Wellbeing, Diversity
and Inclusion and Ways of Working.
The Culture Club provides a vital channel
for feedback and dialogue around key
issues and champions the work around
colleague engagement. Chaired by the
Director of Colleague Experience, and
sponsored by myself, a representative
group of colleagues from across each
area of the business meet on a monthly
basis to discuss topical matters.
The Culture Club has gained further
momentum in FY21, working with
leaders from across the business to
share feedback and influence change.
Alongside garnering insight from across
the organisation, the Culture Club has
MESSAGE FROM
RICHARD MOROSS
“My second year,
reporting as the
Designated Director for
Colleague Engagement,
has been an insightful
one and I continue to
be proud of what the
Company, and our
colleagues, have achieved
throughout the year.”
Our engagement surveys continue
to provide us with rich and important
insight and I am delighted to see the
significant year on year improvements
to our engagement score and Net
Promotor Score. Along with my work
with the Culture Club, I have continued
to spend time understanding the People
agenda, roadmap and milestones for the
year ahead.
As we emerge from the various
stages of lockdown, now more than
ever, colleague communication and
engagement continue to be at the
centre of our strategy. Without the
enthusiasm, energy and passion of our
colleagues, we couldn’t do what we do
and we hope to continue this good work
going forward.
Richard Moross
Designated Director for
Colleague Engagement
40
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk COLLEAGUE
CONVERSATIONS
Courageous conversations
and feedback are key to
colleague engagement.
As we continue to develop our learning and
move towards a performance and feedback
culture, the statistics around check-ins and
feedback show some real improvements on
which we can build. A total of 14,218 check-
ins have been recorded over 2020 rising from
3,609 in the previous year. We have seen
4,738 pieces of feedback vs 3,931 last year.
Encouragingly, requested feedback has
increased from 28% to 51% which really
plays into our feedback culture. Much of this
feedback has been positive with only 13%
constructive or growth feedback and a focus
this year will be on increasing constructive or
growth feedback.
COLLEAGUE RECOGNITION
AND AWARDS
EXECUTIVE BOARD SESSIONS –
COFFEE WITH COLLEAGUES
Colleague recognition is a key focus
area and remains an engagement driver
for the business.
In December 2020, we hosted the first N Brown Awards at our
N Brown Big Night In. Nominations and Awards were linked to
the Values, along with the Alliance Award, which recognised the
colleague who’s pulled out all the stops to put the customer at the
heart of everything they do.
As we continue to recognise our colleagues with digital Shout Outs
and our Wheel of Values, we further developed our channels with
our new #ShoutOut noticeboard, giving colleagues opportunities
to celebrate each other. The combination of these channels gives
us c.200 celebrations each month.
The focus for 2021 is on the introduction of a new Comms
Platform which will enable clear communication channels
and two-way storytelling and feedback along with additional
colleague benefits.
Sessions have been hosted by members of
the Executive team with a cross-functional
selection of colleagues to support and
amplify the work around voice, purpose
and community.
As we continue to develop our learning and dovetailing into the
drivers of colleague engagement, these sessions work alongside
the in-department get togethers.
Held once a month and hosted each month by a different
member of the Executive team, attendees are encouraged
to share their experience, thoughts, ideas and suggestions.
This provides another channel to gather effective feedback
and enable two-way dialogue, along with giving colleagues an
opportunity for direct contact with members of the Executive
team from areas other than their own.
41
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements N Brown Group plc Annual Report and Accounts 2021
SUSTAIN – FOR TODAY,
FOR TOMORROW, FOREVER
42
nbrown.co.uk
nbrown.co.uk
MESSAGE FROM
MICHAEL ROSS
Michael Ross
Chair of the
ESG Committee
“The Committee’s primary focus in FY21 has been on
the impact of the Covid-19 pandemic. Fundamental to
our approach has been the support of our colleagues,
partners and suppliers during this challenging time. We
have adapted to a hybrid system of working and will
continue to invest in building the right physical and virtual
systems to support our colleagues.”
In FY21, N Brown rebranded its
Environmental, Social and Governance
strategy to SUSTAIN which aims to fully align
our ethical policies with our commercial
activities across our key sustainability pillars,
Our People and Our Planet.
Despite the challenges of the year, we are
pleased to report significant progress on
the Year One targets of our sustainability
roadmap, all of which were successfully
achieved within FY21. Information on the
activities in year can be found on p48.
We are proud to announce that we have
signed up to the British Retail Consortium
(“BRC”) Climate Action Roadmap,
committing to an ambitious plan to achieve
net zero emissions by 2040. Our current
sustainability roadmap will be combined with
the BRC’s; further information on our work
to-date can be found on p47.
Another key activity in year has been the
expansion of our ‘Ethical Principles of
Responsible AI’, originally announced in
2019, to a draft framework for assessing
‘Responsible Machine Learning’ (“ML”).
The goal of the framework is ensure that
our approach to building models does
not contain hidden biases. It also includes
a commitment to consider the impact
of these models on the people who use
them. Work is ongoing to finalise the
framework following lessons learned from
practical application and to embed it
alongside the original principles.
I am available to speak with shareholders
at any time via the Company Secretary and
shall be available at the Annual General
Meeting on 6 July 2021 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.
THIS YEAR WE REBRANDED OUR
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
(“ESG”) STRATEGY TO SUSTAIN.
SUSTAIN aims to align our ethical policies with our
commercial activities, achieving tangible results and
benefits for our stakeholders. Fully embracing the values
of our business, SUSTAIN is our overarching strategy across
our sustainability pillars – Our People and Our Planet.
43
nbrown.co.ukStrategic report Governance report Financial statements SUSTAIN – FOR TODAY, FOR TOMORROW, FOREVER
CONTINUED
OUR PEOPLE
Our People includes all colleagues, customers
and stakeholders across our business and
throughout our supply chain.
of meetings, but working groups have
continued to engage and collaborate
via video conferences. In November
2020 N Brown signed up to the BRC
Climate Action Roadmap. The Company
also became members of the Higg
Brand and Retail Module in January
2021 and will begin reporting on 2020’s
achievements this year.
HUMAN RIGHTS
This year has seen N Brown publish a
number of reports, including our fourth
Modern Slavery statement in December
2020 and our sixth Communication on
Progress (“COP”) report for the UNGC in
January 2021.
Collaboration and transparency has been
a key theme across many retail brands
and Non-Government Organisations
alike. In 2020 we published our Tier 1
factory list on our corporate website,
became a member of the ASOS Modern
Slavery working group, completed
questionnaires for The Business of Human
Rights organisation, and signed the
Transparency Pledge.
Human rights issues remain a priority
across the retail sector and the global
apparel industry continues to grapple with
varied challenges in an uncertain backdrop.
This has seen a growing call for all brands
to form a united front, combine resources
and work together to end such offences.
It has highlighted the need to increase
the strength of supply chain transparency
so that products can be traced back
to their source clearly and efficiently.
N Brown acknowledges the importance
of a transparent supply base and the
assurance this will give our customers in the
knowledge that our products continue to
be ethically sourced.
COLLEAGUES
As local lockdowns and government
restrictions start to ease, we have reviewed
the UK Covid-19 guidance protocols in place
and adapted our policies to allow colleagues
to return to work within a hybrid operational
model. Regular briefings continue
between the UK sourcing team and global
teams, where colleagues provide key
updates on the business and the Covid-19
situation globally.
MEMBERSHIPS
Last year’s pandemic gave many
organisations the opportunity to pause
for reflection, to learn and to adapt,
allowing for a change in approach.
This has been no different for N Brown.
We expect everyone in our supply chain
to be treated with dignity and respect,
and to be provided with fair opportunity
and reward.
In 2020 we saw the transition from the
2018 Transition ACCORD to the Ready-
Made Garments (“RMG”) Sustainability
Council (“RSC”), a new initiative to carry
forward the significant accomplishments
made on workplace safety in Bangladesh
by the ACCORD. The RSC will take
over these activities from the ACCORD
on 1 June 2021. N Brown remains
committed to workplace safety and will
continue to support the RSC’s 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, and campaigns
for the provision of fair wages for
workers in support of UN Goal 10 on
reducing inequality. We also continue
to be active members of the other
organisations such as Ethical Trade
Initiative (“ETI”), United Nations Global
Compact (“UNGC”) and All-Party
Parliamentary Corporate Responsibility
Group (“APCRG”). Over the last year the
pandemic has restricted the frequency
44
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk For FY21 our voluntary turnover rate was
11.4%, and our share of temporary colleagues
stood at 3.1%. Colleagues have access to a
variety of training opportunities, including
our online training portal Always Learning,
and throughout FY21 a total of 4,847 training
hours were recorded on Always Learning,
which is the equivalent to an average of
3.5 hours per colleague.
CHARITIES AND OUR
COMMUNITY
Since the beginning of the Covid-19
outbreak, charities, our local communities
and those who are working tirelessly on the
frontline have needed our support more
than ever before. Our colleagues continue to
support our local corporate charity centres
Maggie’s Manchester and Maggie’s Oldham,
and are driving towards our goal of raising
£100,000 for the cancer support charity.
Through the donation of net sales proceeds
from a range of products sold across our
brands, we have donated over £20,000
to NHS Charities Together. We have also
made donations of clothing and household
items to frontline NHS staff in Manchester
and donated face masks and face shields to
a local care home near to our distribution
centre in Oldham. Donations of clothing have
also been made to a local charity supporting
vulnerable people and children within the
local community. During the year, the Group
made charitable donations of £84,054
(2020: £118,238).
SUPPLIERS
We continue to believe that a transparent
supply chain will allow for a more sustainable
one. Audits and gradings of those factories
that produce our own brand products are
managed on our behalf by our supply chain
partner, Verisio, who deliver comprehensive
supplier audits including information on
wages, working hours, general sustainability,
and ethical practices. This allows us to
better manage our supply chain and align
our strategy, whilst giving us a greater
understanding of our sourcing and supply
base requirements. We have concentrated
our efforts to working closely with our
suppliers to promote responsible sourcing
and ensure that all workers are treated with
fairness, respect and are safe at work.
TRANSPARENCY AND
COLLABORATION
IN OUR SUPPLY BASE
Having a transparent supply base
remains key to N Brown’s SUSTAIN
strategy, and this has never been more
important than during the Covid-19
pandemic. Over the last 12 months
we have continued to collaborate with
our global supply chain to ensure that
our products are ethically sourced.
Transparency within our supply chain is
paramount and having our Tier 1 supply
base mapped and audited has given
us the ability to identify countries and
factories at greater risk and to work
with them to ensure that wages and
benefits are paid on time and in full.
In July 2020, with the support of Verisio,
we carried out unannounced audit visits
to all of our UK partners to ensure that
their operations were Covid-19-safe and
compliant against N Brown’s code of
conduct, which parallels the ETI base
code. All visits took place outside of
lockdown periods and followed full
Covid-19 safety guidance.
Throughout the Covid-19 pandemic we
have paid all suppliers on time and in
line with agreed payment terms and did
not extend any of our agreed payment
terms. We have been open and honest
with suppliers and made every effort to
remain in close contact with them during
the year. At the onset of the pandemic in
March 2020, we reviewed the business’
commitment to its future purchase order
file which allowed us to re-evaluate
product. In most instances, we were
able to rephase or rework product by
engaging closely with our suppliers.
Collaborating with our key supply chains
in Bangladesh, India, and China and
ensuring that all workers remain safe and
are treated with dignity and respect is
always high on our agenda. By taking
the time to build trusted relationships
with our suppliers, we have been able
to support each other through the
challenges of the Covid-19 pandemic;
we will continue to develop these
relationships as we move into the next
phase of the pandemic.
ESG DISCLOSURE SCORE
As part of SUSTAIN, N Brown will now
use the ESG Disclosure Score outlined by
the London Stock Exchange to provide
stakeholders with a comprehensive
assessment of our ESG progress.
The ESG Disclosure Score is intended
as a tool for companies to consider
good practice in disclosure of key
quantitative ESG metrics. The London
Stock Exchange comment that the “ESG
disclosure score is calculated based upon
the level of disclosure against the metrics
considered by FTSE Russell to be the
most material to investors for different
industries. This is drawn from existing
ESG standards including: the Global
Reporting Initiative (“GRI”); Sustainability
Accounting Standards Board (“SASB”);
and the Carbon Disclosure Project and
based upon expertise built over 18 years
of commercial activity in ESG data and
indexes, working with investors and other
market participants.”
Based on N Brown being in the
“Consumer Goods, Customer Services
& Healthcare” sector, the ESG Disclosure
Score assesses the following criteria and
more information can be found on the
following pages:
Carbon emissions – p50
Energy use – p52
Social and Community investment – p45
Employee turnover rates – p45
Share of temporary employees – p45
Employee training hours – p45
Independent Directors – p56
Female Directors – p64
In addition, N Brown also considers
the following to be central to its
ESG strategy: human rights, supply
chain, sustainable clothing and waste
and recycling.
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements SUSTAIN – FOR TODAY, FOR TOMORROW, FOREVER
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.
The climate emergency is recognised
as one of the greatest threats to our
planet. Globally, the five-year period
between 2015 and 2019 was the warmest
of any equivalent period on record;
temperatures increased by 0.2°C on
average, compared to the previous
five-year period. Since the pre-industrial
period, average global temperatures
have increased by 1.1°C.
The Paris Climate Agreement has
established a scientific consensus that
to avoid the worst impacts of climate
change, greenhouse gas emissions need
to reach net zero by the mid-century
to limit the global temperature rise to
1.5°C.
FY21 IN REVIEW
FY21 has been a challenging year as a
result of the global Covid-19 pandemic.
We had to adapt quickly to safeguard
our colleagues and wider stakeholder
base and ensure business continuity
alongside progressing our sustainability
roadmap and achieving our ESG targets
for FY21.
As we begin to emerge from the
pandemic, our renewed purpose is
to build on the good progress we
have made during FY21 in order to
deliver on the commitments in our
sustainability roadmap.
Further information on our sustainability
roadmap can be found on p48.
SUSTAINABLE CLOTHING
LED LIGHTING
Sustainable clothing is an important
part of our sustainable roadmap and
a key focus for FY22.
Works have been completed in the
upgrade to LED lighting within one of
the warehouses at our main distribution
centre in Shaw.
N Brown recognises that we need to
minimise the effect our products have
on the environment and have continued
to increase our efforts to move towards
more sustainable products.
An example of this is the transition
to using recycled polyester in our
outerwear products in the Spring/
Summer 2020 collections. Across our
womenswear and menswear denim
categories, we have opted to use
sustainably sourced cotton and trims
in the upcoming ranges. We continue
to focus on moving towards factories
which use hydroless denim washing
techniques. This is part of ongoing
efforts across our supply base as we
work closely with suppliers in order
to encourage new technologies and
ways of working. Our motivation to
improve the sustainability of our clothing
demonstrates our proactive and
precautionary approach towards future
environmental challenges. This form
of responsible consumption will
improve the sustainability of cities and
communities around the world.
The energy savings delivered by the
project have exceeded our original
business case, resulting in an 80%
reduction in the lighting electricity used
and a 20% reduction in the site’s overall
energy consumption. Following this
success, we are currently evaluating
three further lighting projects for
implementation over FY22.
FLEET VEHICLES
As our business model has changed,
we continue to monitor the utilisation of
our fleet vehicles.
We have looked to reduce the number
of vehicles over the year and the size
of our fleet has shrunk in line with
operational business requirements.
The commercial vehicles that support
facilities and logistics are due to be
replaced soon and we are working
to lease the most environmentally
efficient vehicles, with the lowest carbon
emissions, to meet our business needs.
46
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk EMPLOYEE COMMUTING
Our focus this year has been on
protecting the health, safety and
wellbeing of our colleagues during the
Covid-19 pandemic.
A significant number of colleagues have
worked from home during the year
and commuting habits have therefore
changed significantly. To understand the
impact this has had on our emissions,
our commuter survey has been
expanded to capture emissions arising
from home working. As some of our
colleagues will continue to work using
a home and office hybrid model, we
will continue to monitor the impact that
home working has on our greenhouse
gas (“GHG”) emissions.
WASTE AND RECYCLING
During FY21, the
facilities team launched
two major projects.
The first waste and recycling project
was at our Head Office in Manchester
to ‘reset’ the building post-lockdown
and to provide a safe Covid-19-secure
working environment for all colleagues.
The team cleared and sorted all
redundant materials, clothing samples
and furniture, which generated 113
tonnes of waste being removed from the
building and the donation of over 750
bags of clothing to charity.
The second project was at our main
distribution centre in Shaw where
we removed machinery and assets
no longer needed by the business.
All machinery was stripped down so that
spare parts could be reused; in total 170
tonnes of waste was generated.
All of the waste generated by the
projects was either reused or recycled
with none going to landfill. During FY21
we have maintained zero waste to landfill
from our main operational sites through
our ongoing partnership with Viridor.
CARBON DISCLOSURE PROJECT
We continue to report to the Carbon
Disclosure Project (“CDP”) on both the
Climate Change and Forests modules.
In FY21, we achieved an improved
score of A- for the Climate Change
response and a C in the Forests
module. We also achieved an A- on
the supplier engagement rating for the
work we do to engage with our supply
chain on climate change.
We will continue to work towards
improvements across the Climate
Change and Forests modules as we
align our sustainability roadmap to
the BRC commitments. We intend
to expand our disclosure to the CDP
to include a response to the Water
Security module to cover the FY22
reporting period.
BRITISH RETAIL CONSORTIUM
CLIMATE ACTION ROADMAP
We are proud to announce that in
November 2020, N Brown signed up
to the BRC Climate Action Roadmap,
committing to an ambitious plan to
achieve net zero emissions by 2040.
We want every customer to be able to
make purchases safe in the knowledge
that they are not adversely contributing
to climate change. We have a fantastic
opportunity to make a real global
difference by combining our own
sustainability roadmap with that of
the BRC and sharing knowledge and
learning with other retailers in order to
work collaboratively towards net zero.
The BRC Climate Action Roadmap has
three key targets:
Net zero direct emissions
from operations including
from fleet vehicles, heating
fuels and refrigeration
by 2035
Net zero emissions from
purchased electricity
by 2030
Ambition for net zero
emissions embodied in
product supply chain, both
upstream (from suppliers)
and downstream
(from customers by 2040)
We are delighted to report that we
have met the first major target of the
Roadmap, having net zero emissions
from purchased electricity, nine years
ahead of schedule. For our sites across
the UK, we have sourced 100% REGO
backed wind power since 2016.
We have obtained renewable energy
certificates (GoO’s, REGO’s & I-RECs)
for our non-UK and UK landlord sites.
At our main distribution centre, we
have a solar PV array, which helps to
meet some of our energy demand.
Underpinning the main targets of the
BRC Climate Action Roadmap are five
pathways (“PW1-5”). These pathways
guide organisations towards net zero
by setting out a series of milestones to
track their progress:
1 Placing GHG data at the core of
business decisions
2 Operating efficent sites powered
by renewable energy
3 Moving to low carbon logistics
4 Sourcing sustainably
5 Helping our employees and
customers live a low carbon lifestyle
The first series of milestones set out
the early actions that can be taken to
establish the necessary foundations
that will help us deliver our net
zero ambition.
Over the coming months, we will
plot our journey to net zero in more
detail; setting clear and achievable
targets and objectives that support
our overall SUSTAIN strategy, align
with the UN global goals and empower
colleagues to help us reach our
sustainability goals.
47
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements SUSTAIN – FOR TODAY, FOR TOMORROW, FOREVER
CONTINUED
OUR PLANET CONTINUED
OUR SUSTAINABILITY ROADMAP
Year in focus – we are one year into our four-year
sustainability strategy and below is a summary
of progress against our Year One goals.
FY21
Q1
WE SET OUT TO
Rebrand to SUSTAIN.
OUR PROGRESS
We have completed our
rebrand to SUSTAIN.
Q2
Q3
Q4
WE SET OUT TO
Implement supplier
scorecards to allow buyers
full performance viability
on sustainability.
OUR PROGRESS
Supplier score cards have
been implemented and are
being rolled our across our
product teams.
WE SET OUT TO
Introduce sustainable brand
product labels.
WE SET OUT TO
Trial Green PE despatch bags
on Simply Be and Jacamo.
OUR PROGRESS
We have sucessfully rolled
out our sustainable product
labels. All swing tickets for
Jacamo, Simply Be and JD
Williams are sustainable,
and display the Forestry
Stewardship Council-
approved logo.
OUR PROGRESS
Following sucessful trials,
90% of our despatch bags
were replaced with Green PE
from March 2021. Our target
is to replace 100% by
December 2021, giving an
estimated carbon saving of
112 tCO2e.
Achieved
Achieved
Achieved
Achieved
WE SET OUT TO
Launch new sustainable
men’s denim ranges.
WE SET OUT TO
Complete a green LED
lighting project to achieve
energy saving.
WE SET OUT TO
Commence input attribution
by raw materials to enable
full traceability.
OUR PROGRESS
The project has been
sucessfully implemented
over FY21. Following this,
we are evaulating additional
LED lighting projects
to further reduce our
energy consumption.
OUR PROGRESS
The product teams
have started to attribute
sustainable products into
the system and this is being
tracked. Targets have been
set for FY22 to increase the
mix of own brand products
with sustainable properties.
OUR PROGRESS
In April 2020, Jacamo
launched its new sustainable
denim range. All of our
Jacamo denim products
are made using sustainably
sourced fabrics. Our supplier
uses hydroless technology,
organic cotton and recycled
yarns along with other
techniques to reduce
environmental impact of
our denim.
WE SET OUT TO
Review progress against
the existing 35% target and
set new targets for GHG
emissions reduction and
climate change.
OUR PROGRESS
Ongoing – we are
committed to net zero
carbon by 2040 and are a
proud supporter of the BRC
Climate Action Roadmap.
We are in the process of
setting interim emissions
reduction targets which will
align to our overarching net
zero ambition.
Achieved
Achieved
Achieved
Ongoing
48
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk YEAR ONE IN THE SPOTLIGHT
– GREEN POLYETHYLENE
(“GREEN PE”) DESPATCH BAGS
We believe online fashion should be
sustainable, and a key element of that
is reducing the use of plastic across the
delivery process.
This year we changed our delivery
packaging to Green PE despatch bags to
improve sustainability and reduce our GHG
emissions. Green PE is a bio-based plastic,
manufactured from polymer derived from
sugarcane and therefore produced from an
entirely renewable resource. These despatch
bags are recyclable and reduce our emissions
by an estimated 112 tonnes of carbon
per annum.
Following a successful trial of Green PE
despatch bags over autumn 2020, the bags
were launched on 1 March 2021, replacing
90% of packaging. We will extend to 100%
Green PE by the end of 2021.
In future, we want to be known for using
sustainable packaging across our brands
which ties into the BRC Climate Action
Roadmap which we are proud to be
committed to.
LOOKING FORWARD
FY22
Q1
Q2
Q3
Q4
Own-brand
product
launches across
womenswear
knit and linen
ranges
Initiate LED
lighting project
phase 2 (PW2)
Plan roadmap
for CO2
reduction across
the supply base
(PW1)
Introduce Better
Cotton Initiative
targets across
own-brand
product (PW4)
Review recycling
options for
customers (PW5)
Map out new
GHG targets
aligned to the
BRC Roadmap
targets for 2023
(PW1)
Complete roll
out of Green
PE across all
despatch bags
(PW5)
All own brand
denim ranges to
have sustainable
properties
Q3-4
FY23
Q1-2
All plastics used
across products
and packaging
to be recyclable
(PW4)
50% of own
brand product
ranges to be
sustainably
sourced
Implement
recycling
options for
customers
(PW5)
FY24
Q1-2
Q3-4
60% of own
brand product
ranges sustainably
sourced
Introduce
sustainability
auditors to ensure
the closed loop
can be validated
All own brand
cotton products
to be 100% Better
Cotton Initiative
approved
Review and assess
the next stage of
the sustainability
roadmap
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements
SUSTAIN – FOR TODAY, FOR TOMORROW, FOREVER
CONTINUED
OUR PLANET CONTINUED
FY21 SOURCING BREAKDOWN
EMISSIONS PROFILE FY21 (TCO2E)
China
UK
Bangladesh
RoW
India
Turkey
Pakistan
Other short lead
Morocco
% sourcing
43.5%
19.3%
10.7%
7.2%
6.7%
4.9%
4.4%
2.2%
1.2%
Logistics (upstream)
Logistics (downstream)
49.4%
21.1%
Electricity (location based)
11.6%
Natural gas
Fuel and energy-
related activities
Home working
Employee commuting
Diesel
Business travel
Waste
Gas oil
Company vehicles
Water
HFCs
6.2%
3.8%
3.2%
2.8%
0.7%
0.6%
0.3%
0.2%
0%
0%
0%
FY21 SOURCING
BREAKDOWN
Our sourcing mix has given the business
flexibility and supported trade throughout
the pandemic.
The summer element of the year was
cut short due to the trading conditions,
leading to a higher mix of autumnal
products such as outerwear and knitwear
that are heavily sourced in China.
The strength within the homeware
product category, which has a higher
element of China sourcing, has also
impacted the mix of products being
sourced closer to home.
Our sourcing strategy is to increase our
closer to home sources which brings the
advantage of reducing lead times to allow
us to give our customers the product they
want quicker.
FY21 EMISSIONS PROFILE
The Companies Act 2006 (Strategic
Report and Directors’ Report) Regulation
2018 requires the Group to disclose GHG
emissions and underlying energy use
for all direct emissions sources (Scope 1
and 2). Our energy and GHG emissions
have been independently calculated
in accordance with the GHG Protocol
using the operational control approach.
Emission factors published by the UK
Government and the International Energy
Agency have been used.
In addition to the mandatory direct
emission sources, we continue to quantify
a range of indirect emission sources
(Scope 3) relating to the operation of our
core business including logistics, business
travel, employee commuting, waste and
water. Due to an increase in homeworking
as a result of Covid-19, we have included
emissions from homeworking for the
first time.
50
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk Our business travel emissions have fallen
by 93% as a result of restrictions put in
place through Covid-19. Whilst business
travel will remain an important part of
our operations, we will embrace the new
ways of working and continue to use
technology to keep our business travel
emissions down.
Overall, our total emissions including
Scope 3 have fallen by 20% (6,357.9 tCO2e)
compared to FY20.
TOTAL GHG TCO2E
Direct emissions (Scope 1 and 2) have
fallen by 21% (1,253.6 tCO2e) compared
to FY20. We have completed the roll out
of a large scale LED lighting project at
our main distribution centre and have
continued to rationalise our operational
estate and vehicle fleets to reduce
our emissions. Covid-19 has also had
an impact on our emissions profile as
colleagues began working from home
which reduced emissions from our offices.
We have quantified the emissions
associated with home working which
are reported separately to employee
commuting. We will continue to quantify
homeworking emissions in future as we
transition towards a hybrid home and
office working model for colleagues.
There has been a fall in customer demand
over the year and a reduction in the
number of items shipped to customers.
The amount of stock brought into the
business has also decreased as a result
of reduced demand and improved
supply chain management practices
to more effectively manage our stock
levels. We have reduced the amount of
product brought in via airfreight by over
40% and the amount of sea freight by 8%.
Overall upstream emissions have fallen by
25% (4,162.4 tCO2e).
We have expanded the scope of our
downstream calculations in Scope 3 to
include deliveries of bulky items direct
from suppliers and a greater number
of the parcels we ship internationally.
When we factor in the new emission
sources that were not calculated in FY20,
emissions have increased by 17% (762.6
tCO2e). However, on a comparative basis
to FY20, the downstream emissions
sources that were reported have
actually decreased by 20% (925 tCO2e).
This is a result of a reduced number of
deliveries in FY21 and an increase in the
operational efficiency across the year
from our distribution partners who focus
on decreasing the carbon impact of each
customer order.
Total GHG tCO2e
FY21
FY20
tCO2e
change from
previous year
% change from
previous year
Scope
Scope 1
Scope 2
Scope 3
Source
Natural gas
Diesel
HFCs
Gas oil
Company vehicles
Electricity (location based)
Electricity (market based)
Total Scope 1 and 21
Water
Employee commuting
Home working
Business travel
Waste
Fuel and energy-related activities
Logistics (upstream)
Logistics (downstream)
Total Scope 1, 2 and 31
Outside Scopes – Biogenic element – Diesel
1,579.6
172.3
9.5
42.4
12.1
2,925.8
0.0
4,741.5
11.02
714.1
813.9
141.5
81.2
945.8
12,466.3
5,317.5
25,232.9
8.0
1,673.0
278.7
173.1
54.0
28.2
3,788.2
54.1
5,995.1
23.30
1,139.4
0.0
1,955.4
105.3
1,188.6
16,628.7
4,555.0
31,590.8
9.4
-93.4
-106.5
-163.6
-11.6
-16.1
-862.5
-54.1
-1,253.6
-12.3
-425.3
813.9
-1,813.9
-24.1
-242.8
-4,162.4
762.6
-6,357.9
-1.4
1 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.
-6%
-38%
-95%
-22%
-57%
-23%
-100%
-21%
-53%
-37%
–
-93%
-23%
-20%
-25%
17%
-20%
-15%
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements SUSTAIN – FOR TODAY, FOR TOMORROW, FOREVER
CONTINUED
OUR PLANET CONTINUED
UNDERLYING ENERGY USE
The table below shows the proportion of energy use that occurs
within the UK and non-UK countries alongside the total carbon
emissions. In FY21, 99.2% of the Group’s energy consumption
and 99.0% of carbon emissions arose from UK operations.
FY21 Energy Use
FY21 Carbon Emissions
Area
UK
Non-UK
Total
kWh
21,848,505
169,435
22,017,940
%
99.2%
0.8%
–
tCO2e
4,694
47
4,741.5
%
99.0%
1.0%
–
Our sourcing of renewable electricity has grown from 0% in FY16
to 100% in FY21.
SOURCING OF RENEWABLE ELECTRICITY
FY16
FY17
FY18
FY19
FY20
FY21
ABSOLUTE PERFORMANCE
ABSOLUTE GHG EMISSIONS (SCOPE 1 and 2) TCO2e
FY17
FY18
FY19
FY20
FY21
Our absolute emissions have more than halved (52.0%, 5,128
tCO2e) when reviewing our performance over the last five years.
We have delivered an average year on year reduction of 17%
since FY17. While absolute emissions have fallen between FY20
and FY21, some of this will have been due to the decrease in the
number of items shipped in the year. As the Company looks to
return to growth in FY22, emissions may increase accordingly.
A full narrative of the absolute emissions performance will be
given in the 2022 Annual Report.
RELATIVE PERFORMANCE
RELATIVE GHG EMISSIONS (SCOPE 1 and 2)
FY17
FY18
FY19
FY20
FY21
Our direct emissions intensity per item shipped has increased
by 16.6% compared to last year. This is due to a decrease in the
number of items shipped as customer demand dropped as a
result of the pandemic. However, our absolute emissions have
fallen by 1,254 tCO2e over the same period.
52
9,8708,8787,0605,9954,742246219185168196100%98%96%95%35%0%N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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
1 March 2020 to 27 February 2021.
GHG emissions factors published by
the UK Government and International
Energy Agency for 2020 have been used
to calculate GHG emissions. For activities
outside the UK, emissions factors provided
by the International Energy Agency
(“IEA”) have been used to calculate
GHG emissions.
NOTED CHANGE IN EMISSIONS
FOR 2019 – 2020
There have been no changes to the figures
reported in the previous reporting period.
DATA RECORDS
Natural gas and electricity: Emissions
are primarily calculated based on actual
or estimated 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.
HFCs: 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. There are a few
closed stores which are included within
the scope of reporting due to them still
being leased to N Brown. As the stores
were closed for the duration of the
reporting period, it has been assumed
that there has been no wastage at
the stores.
Employee commuting: Employee
commuting habits are captured using an
annual online colleague 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.
Home working: Due to Covid-19
restrictions there has been an increase
in colleagues working from home during
the reporting period. The emissions
associated with home working (e.g.
as a result of lighting, heating and IT
equipment) has been captured using an
online colleague survey.
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.
Business travel (air, rail): There are two
types of air travel carried out by N Brown:
traditional business travel and travel for
photoshoots. The business air travel
is recorded by Clarity who provide a
breakdown, by journey, including distance
travelled, type of journey (long-haul,
domestic etc.) and journey class (e.g.
business or economy). There were no
photoshoot journeys by air during the
latest reporting period due to Covid-19
restrictions. Rail figures are provided by
Clarity who provide a breakdown, by
journey, including distance travelled and
journey type (underground / national rail).
Business travel (private cars): Data
is calculated for the Group using data
logged in our internal Concur system
which records distance travelled, and
vehicle information for each business
travel expense claimed.
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukStrategic report Governance report Financial statements N Brown Group plc Annual Report and Accounts 2021
SETTING A HIGH
STANDARD OF
GOVERNANCE
CHAIR’S INTRODUCTION
LEADERSHIP AND PURPOSE
GROUP BOARD DIRECTORS
EXECUTIVE BOARD DIRECTORS
DIVISION OF RESPONSIBILITY
GOVERNANCE STRUCTURE
COMPOSITION, SUCCESSION AND EVALUATION
BOARD COMPOSITION
55
56
58
62
64
NOMINATIONS AND GOVERNANCE COMMITTEE REPORT 67
AUDIT, RISK AND INTERNAL CONTROL
AUDIT AND RISK COMMITTEE REPORT
FINANCIAL SERVICES BOARD COMMITTEE REPORT
REMUNERATION
REMUNERATION COMMITTEE REPORT
ADDITIONAL DISCLOSURES
VIABILITY STATEMENT
68
75
76
95
96
54
nbrown.co.uk
INTRODUCTION FROM
THE CHAIR
“The Board recognises
that good corporate
governance underpins
business performance.
We are committed to
maintaining the highest
standards of corporate
governance following the
Company’s move to AIM.
By promoting integrity
and openness, valuing
diversity and ensuring
effective engagement
with stakeholders, we
will continue to develop
and improve on our
effectiveness.”
Ron McMillan
Independent Non-Executive Chair
The focus of the Board this year has
been on ensuring continued colleague
support and welfare as we navigate
the ongoing challenges posed by
the Covid-19 pandemic as well as
counselling management through a
number of significant strategic and
operational challenges.
The Board successfully led the Company
through a £100m equity raise and re-
listing on the Alternative Investment
Market (“AIM”) in December 2020.
We believe that the successful completion
of these projects puts the Company in a
stronger position from which it can deliver
sustainable growth.
This is further supported by a number of
key appointments made during the year,
including the appointment of our new
CFO, Rachel Izzard and our first Retail
CEO, Sarah Welsh. I was appointed as
Chair following the departure of Matt
Davies. Full details of all changes are set
out in the Nominations and Governance
Committee Report on p67.
We maintain active engagement with our
stakeholders. Our Section 172 Statement
on p39 outlines how the Board has
engaged with stakeholders throughout
the year and taken their interests into
account when making decisions on behalf
of the Company.
I would like to take this opportunity to
thank my fellow Directors for their support
during this challenging year. 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 6 July 2021.
THE CODE
Following the move to AIM, the
Company will continue to comply with
the UK Corporate Governance Code
(‘the Code”) on a voluntary basis.
The Board is responsible for ensuring
that the Company has appropriate
frameworks in place to ensure compliance.
Explanations about how we have applied
the main principles of the Code can be
found opposite.
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 p56 to 61.
DIVISION OF RESPONSIBILITY
The Board has the appropriate 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 p62 to 63.
COMPOSITION, SUCCESSION
AND EVALUATION
The 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 p64 to 67.
AUDIT, RISK AND
INTERNAL CONTROL
The Board determines the Company’s
strategy, taking account of the need
to avoid or manage 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 p68 to 75.
REMUNERATION
The 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 p76 to 94.
55
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report LEADERSHIP AND PURPOSE
GROUP BOARD DIRECTORS
First appointed to the Board in April 2013,
Ron served as Senior Independent Director
until his appointment to Board Chair in March
2021. Prior to joining the Board, he was the
Deputy Chair of PricewaterhouseCoopers
in the Middle East and Northern Regional
Chairman of the UK firm.
Key strengths
• Retail
• Corporate Finance
• Governance
• Risk management
• Remuneration
External appointments
Ron is the Senior Independent Director
and Chair of the Audit Committee of B&M
European Value Retail SA and SCS Group plc.
He is also a Non-Executive Director and Chair
of the Audit Committee of Homeserve plc.
Rachel was appointed as CFO in June 2020
after joining the Company in April 2020. Prior
to this she was CFO at Aer Lingus, leading
the Finance and Technology functions,
successfully driving a step change in
performance, and integrating the company
into the IAG group. Over her career Rachel
has held a range of CFO, technology,
and senior finance roles in the Airline and
Logistics sectors, based in locations in Asia,
the US and Europe.
Key strengths
• Strategy and change management
• Retail and digital retail
• Corporate finance
• Governance
• Risk management
• Technology, data analytics and AI
External appointments
None.
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 and digital retail
• Strategy and change management
• Corporate finance
• Financial Services
• Governance
• Marketing
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.
RON MCMILLAN
INDEPENDENT
NON-EXECUTIVE
CHAIR
Appointed to the Board:
April 2013
Appointed Chair of the Board:
March 2021
Meetings attended 16/16
RACHEL IZZARD
CHIEF FINANCIAL
OFFICER
Appointed to the Board:
June 2020
Meetings attended 5/5
LORD ALLIANCE OF
MANCHESTER CBE
NON-EXECUTIVE
DIRECTOR
Appointed to the Board:
November 1968
Meetings attended 14/16*
* Lord Alliance was unable to attend two Board meetings in FY21 due to
illness. He was represented at these meetings by Joshua Alliance.
56
STEVE JOHNSON
CHIEF EXECUTIVE
OFFICER
Appointed to the Board:
September 2018
Meetings attended 16/16
GILL BARR
SENIOR
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to the Board:
January 2018
Appointed Senior Independent
Director: March 2021
Meetings attended 16/16
Steve was appointed CEO of N Brown in
February 2019, having been appointed
Interim CEO in September 2018.
Having originally joined the Group as
Financial Services Director in February 2016,
he 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
• Strategy, transformation and
change management
• Retail and digital retail
• Financial Services
• Governance
• Risk management
• Technology, data analytics and AI
• Marketing
• Change management
External appointments
None.
Gill joined the Board in January 2018
and was appointed Senior Independent
Director in March 2021. She was previously
a Non-Executive Director of Morgan Sindall
Plc, Group Marketing Director of The Co-
operative Group and Marketing Director of
John Lewis. Gill also spent seven years at
Kingfisher plc in a variety of senior strategy,
marketing and business development roles.
Key strengths
• Retail and digital retail
• Strategy and change management
• Financial Services
• Governance
• Remuneration
• Marketing
External appointments
Gill is a Non-Executive Director of PayPoint
plc and Wincanton plc. She is also the Chair
of the Customer Challenge Group for Severn
Trent Water plc.
Richard joined the Board in October 2016
and was appointed Designated Director for
Colleague Engagement in 2019. As the CEO
and founder of MOO.com, Richard brings
significant expertise in digital retailing and
technology. Before founding MOO, Richard
worked for the design company Imagination.
Other past companies include sorted.com
and the BBC.
RICHARD MOROSS
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to the Board:
October 2016
Meetings attended 16/16
Key strengths
• Retail and digital retail
• Strategy and change management
• Technology and data analytics
• Remuneration
• Marketing
External appointments
Richard is an Executive Director of
Moo Print Ltd.
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk Appointed to the Board in January 2018,
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
• Retail and digital retail
• Strategy and change management
• Financial Services
• Risk management
• Technology, data analytics and AI
• Marketing
External appointments
Michael is a Non-Executive Director of
Sainsbury’s Bank. He also sits on the
commercial development board at the
Turing Institute.
Joshua joined the Board in December 2020.
After graduating from Manchester University
in 2011 and, following experience working in
other developing hi-tech businesses, Joshua
joined the Company in 2014. He was formerly
Head of Business Innovation for J.D. Williams
& Company Limited.
Key strengths
• Retail and digital retail
• Strategy and change management
• Technology, data analytics and AI
External appointments
Joshua is a Non-Executive Director of a
number of digitally based private companies
in the UK and Israel.
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
• Strategy and change management
• Financial Services
• Governance
• Risk management
• Remuneration
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.
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.
VICKY MITCHELL
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to the Board:
January 2020
Meetings attended 16/16
THERESA CASEY
GENERAL COUNSEL
AND COMPANY
SECRETARY
Appointed to the Board:
March 2015
Meetings attended 16/16
MICHAEL ROSS
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to the Board:
January 2018
Meetings attended 16/16
JOSHUA ALLIANCE
NON-EXECUTIVE
DIRECTOR
Appointed to the Board:
December 2020
Meetings attended 1/1
DIRECTORS WHO SERVED DURING THE YEAR
MATT DAVIES
INDEPENDENT NON-EXECUTIVE CHAIR
Resigned from the Board: March 2021.
LESLEY JONES
INDEPENDENT NON-EXECUTIVE DIRECTOR
Resigned from the Board: March 2021.
CRAIG LOVELACE
CHIEF FINANCIAL OFFICER
Resigned from the Board: June 2020.
Meetings attended: 16/16
Meetings attended: 16/16
Meetings attended: 11/11
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.
Lesley joined the Board in October 2014 with 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.
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 and
Electronic Arts Inc and PwC.
57
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report LEADERSHIP AND PURPOSE CONTINUED
EXECUTIVE BOARD DIRECTORS
STEVE JOHNSON
CHIEF EXECUTIVE
OFFICER
Appointed to the Board:
September 2018
Meetings attended 10/10
Steve was appointed CEO of N Brown in
February 2019, having been appointed
Interim CEO in September 2018.
Having originally joined the Group as
Financial Services Director in February 2016,
he 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
• Strategy, transformation and
change management
• Retail and digital retail
• Financial Services
• Governance
• Risk management
• Technology, data analytics and AI
• Marketing
External appointments
None.
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.
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.
RACHEL IZZARD
CHIEF FINANCIAL
OFFICER
Appointed to the Board:
April 2020
Meetings attended 9/9
Rachel was appointed as CFO in June 2020
after joining the Company in April 2020. Prior
to this she was CFO at Aer Lingus, leading
the Finance and Technology functions,
successfully driving a step change in
performance, and integrating the company
into the IAG group. Over her career Rachel
has held a range of CFO, technology,
and senior finance roles in the Airline and
Logistics sectors, based in locations in Asia,
the US and Europe.
Key strengths
• Strategy and change management
• Retail and digital retail
• Corporate finance
• Governance
• Risk management
• Technology, data analytics and AI
External appointments
None.
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.
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.
58
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk KENYATTE NELSON
CHIEF BRAND
OFFICER
Appointed to the Board:
June 2019
Meetings attended 10/10
SARAH WELSH
CEO OF RETAIL
Appointed to the Board:
March 2020
Meetings attended 9/9
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
Kenyatte is a Non-Executive Director of the
British Retail Consortium.
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.
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 10/10
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.
THERESA CASEY
GENERAL COUNSEL
AND COMPANY
SECRETARY
Appointed to the Board:
March 2015
Meetings attended 9/10*
DIRECTORS WHO SERVED DURING THE YEAR:
CRAIG LOVELACE
CHIEF FINANCIAL OFFICER
Resigned from the Board: June 2020.
Meetings attended: 3/3
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 and Electronic Arts Inc and PcW.
* Theresa Casey was unable to attend one Executive Board meeting
in FY21 due to a prior commitment.
59
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report LEADERSHIP AND PURPOSE CONTINUED
BOARD LEADERSHIP
The Board comprises nine Directors, of
whom seven are Non-Executive Directors
including the Chair. Of the seven Non-
Executive Directors, Lord Alliance of
Manchester and Joshua Alliance are
not considered by the Board to be
independent. The Board met 16 times
during the year, the attendance of which
is set out in the table below. In addition,
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
9
Nine Directors on the Board
7
Seven Directors of the Board,
including the Chair, are
Non-Executive Directors
Full biographical details of all
Directors appear on p56.
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.
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. The powers of the
Directors are described in the Board
Terms of Reference and the Division of
Responsibility section on p62. The Terms
of Reference for the Board and its
Committees are available on the Group’s
website www.nbrown.co.uk.
Further details on risk management
and control can be found on p32 to 38.
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 p40 and our Section
172 Statement outlining wider stakeholder
engagement across the year and
whistleblowing procedures is on p39.
BOARD COMMITTEE MEMBERSHIP
A
R N F
Member
Ron McMillan
Gill Barr
Richard Moross
Michael Ross
Vicky Mitchell
Steve Johnson
Rachel Izzard
Theresa Casey (Secretary)
Committee key
Further details on the role and responsibilities
of the Board, along with key individual
responsibilities can be found on p62.
Chair
N Nominations and Governance
A Audit and Risk F Financial Services Board
R Remuneration
BOARD AND COMMITTEE ATTENDANCE
Total meetings
Ron McMillan
Lord Alliance1
Gill Barr
Richard Moross
Michael Ross2
Vicky Mitchell
Joshua Alliance
Steve Johnson
Rachel Izzard
Matt Davies
Lesley Jones
Craig Lovelace
Remuneration
Committee
5
5/5
–
5/5
5/5
–
–
–
–
–
5/5
Audit and Risk
Committee
4
4/4
–
–
–
3/4
4/4
–
–
–
4/4
Nominations and
Governance
Committee
2
2/2
–
2/2
2/2
2/2
2/2
–
–
2/2
2/2
Financial
Services Board
Committee
4
4/4
–
–
–
2/2
4/4
–
4/4
2/2
4/4
–
–
4/4
–
2/2
–
4/4
2/2
Board
16
16/16
14/16
16/16
16/16
16/16
16/16
1/1
16/16
5/5
16/16
16/16
11/11
1 Lord Alliance was unable to attend two Board meetings in FY21 due to illness. He was represented at these meetings by Joshua Alliance.
2 Michael Ross was unable to attend one Audit and Risk Committee meeting in FY21 due to a prior commitment.
60
N Brown Group plc Annual Report and Accounts 2021nbrown.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 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 p63.
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 on p60.
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.
BOARD ADMINISTRATION
Board papers include detailed
management reports from the Chief
Executive Officer and the Chief Financial
Officer, management accounts, broker
analysis, 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.
KEY ACTIVITIES
The following summarises some of the Board’s key activities over the past year:
Business performance and strategy
Regulatory compliance
Continued oversight of compliance
with the Senior Managers &
Certification Regime.
Review of the Company’s Persistent
Debt strategy and roll out of Persistent
Debt interventions to Financial
Services customers.
Receipt of whistleblowing reports.
Stakeholder matters
Review of the Company’s approach
to wider supply chain support
and interaction during the
Covid-19 pandemic.
Communication with shareholders
around the Company’s equity raise and
move to the Alternative Investment
Market in 2020.
Review of product and branding
strategy to enhance the quality of
design, sourcing, pricing and trading.
Culture and governance
Prioritisation of colleague health,
safety and welfare during the
Covid-19 pandemic.
Review of the colleague engagement
survey results.
Recruitment of key Board positions.
Oversight of the Company’s strategic
move from the Main Market on
the London Stock Exchange to the
Alternative Investment Market.
Oversight of the Company’s operations
and trading strategy during the
Covid-19 pandemic.
Review of the Company’s performance
against its strategic priorities and KPIs.
Deep Dive assessments of key strategic
initiatives including: People strategy,
Product strategy, Financial Services
platform and IT roadmap.
Financial performance
Oversight of the Company’s £100m
equity raise.
Review and approval of the Company’s
banking arrangements and
facilities renewal.
Assessment of the Company’s overall
financial and operational performance
including close monitoring of liquidity.
Approval of the FY20 Annual Report
and Accounts and Preliminary Results
announcement as well as the FY21
Interim Results and announcement.
Assessment of capital allocations and
capital expenditure in respect of the
Company’s growth strategy.
Approval of the Group’s FY21 budget
and future financing needs.
Risk and opportunity
Review and approval of the Company’s
risk management framework,
risk register, risk appetite and
governance framework.
The Board also took part in
a number of training sessions
on the regulatory agenda
and specialist matter topics.
Discussions on emerging risks and the
Board’s responsibilities to the Company
and its stakeholders, especially in
relation to its move to the Alternative
Investment Market.
See p66 for
further information.
61
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report DIVISION OF RESPONSIBILITY
GOVERNANCE STRUCTURE
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.
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E X E C UTIVE BOARD
F I N A N CIAL SERVICES
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GROUP BOARD
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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.
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 opposite:
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.
62
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk
BOARD COMMITTEES
FINANCIAL SERVICES BOARD
COMMITTEE
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 p75.
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.
NOMINATIONS 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 p76.
Find out more on p68.
Find out more on p67.
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 Nominations 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 AIM 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.
63
THE BOARD
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report COMPOSITION, SUCCESSION AND EVALUATION
BOARD COMPOSITION
NON-EXECUTIVE DIRECTOR TENURE
Appointed 2014 2015 2016
2017 2018 2019 2020 2021
Lord Alliance of
Manchester CBE
25 November 1968
Ron McMillan
1 April 2013
Richard Moross
6 October 2016
Gill Barr
16 January 2018
Michael Ross
16 January 2018
Vicky Mitchell
20 January 2020
Joshua Alliance
23 December 2020
TENURE
Years
7+
2
4-6 1
0-3 4
7 6 8
9 4 3
1 0 5 2
3
3
2
10 7 5
13 0 0
152 3
FY21
FY20
FY19
1
6
1
8
2
7
1
4
11
8
4
5
4
7 7
6
FY19
FY20
FY21
1
1
3
3
DIVERSITY AND INCLUSION
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 wider Group whilst still
ensuring the most appropriate candidates
are appointed.
64
Balanced gender representation across the
business remains a key priority going into
FY22. As of June 2021, there is a 33% female
representation at Board level and 43% at
Executive Board level.
persons. We continue the employment
wherever possible of anyone who becomes
disabled during their employment, providing
assistance and modifications to their
environment where possible.
N Brown is committed to creating an
inclusive working environment which
enables everyone to work to the best of
their skills and abilities. As a Company, we
pride ourselves on providing opportunities
for learning and career development
which do not operate at the detriment of
disabled colleagues. Our application and
interview process are regularly reviewed
to ensure that full consideration is given to
applications for employment from disabled
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 headhunters
and agencies that can provide true
diversification in their candidate bases.
For more information on our recent Board
appointments see p65.
50%50%50%50%FEMALEMALEGENDER BALANCE AT FINANCIAL YEAR ENDALL COLLEAGUESSENIORLEADERSHIPTEAM PLC BOARDEXECUTIVEBOARDN Brown Group plc Annual Report and Accounts 2021nbrown.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 27 February 2021 were:
Ron McMillan (Chair, effective
31 March 2021)
Lord Alliance of Manchester CBE
Gill Barr (Senior Independent Director,
effective 31 March 2021)
Richard Moross
Michael Ross
Vicky Mitchell
Joshua Alliance
Lesley Jones (Resigned effective
31 March 2021)
Matt Davies (Outgoing Chair, resigned
effective 31 March 2021)
The composition of the Board and
Committees is regularly reviewed and
refreshed. In June 2020, Craig Lovelace
resigned as CFO and Rachel Izzard was
appointed in his place. Joshua Alliance was
appointed as a Non-Executive Director
in December 2020. These were the only
changes to Board composition within the
FY21 year, but as announced on 25 February
2021, Matt Davies stepped down as Chair
effective 31 March 2021 and was replaced
by Ron McMillan, previously Senior
Independent Non-Executive Director.
Gill Barr was appointed Senior Independent
Director effective 31 March 2021.
As announced on 24 March 2021, Lesley
Jones also resigned on 31 March 2021.
Vicky Mitchell stepped into the role of Acting
Chair of the Audit and Risk Committee
effective 31 March 2021. An external search
for a new Audit and Risk Committee Chair
is underway. Following his appointment
as Board Chair, Ron McMillan became
Chair of the Nominations and Governance
Committee on 31 March 2021.
Throughout the year, at least half of the
Board, excluding the Outgoing Chair,
comprised independent Non-Executive
Directors. The New Chair was considered
independent at the time of his appointment.
BOARD SKILLS AND EXPERIENCE
BOARD COMPOSITION
Executive Directors
Non-Executive Directors
Independent Non-Executive Directors
2
2
5
Retail and
digital retail
Strategy
and change
management
Corporate
finance
Financial
Services
Governance
Risk
management
Technology,
data analytics
and AI
Remuneration Marketing
Ron McMillan
Lord Alliance of
Manchester CBE
Gill Barr
Richard Moross
Michael Ross
Vicky Mitchell
Joshua Alliance
Steve Johnson
Rachel Izzard
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 appointments made during
the year are provided in the Nominations and
Governance Committee report on p67.
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. 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.
65
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report COMPOSITION, SUCCESSION AND EVALUATION CONTINUED
BOARD COMPOSITION CONTINUED
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 New Chair and are satisfied he has
sufficient time to devote to his role.
External appointments of other significant
commitments of the Directors require the
prior approval of the Chair. 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.
At the 2021 Annual General Meeting, all
of the Directors will retire and will offer
themselves for re-election with the exception
of Joshua Alliance who will be seeking
ratification of his appointment to the Board.
All Non-Executive Directors serve on letters
of appointment stipulating three-year
terms. All appointments are terminable,
without compensation, on 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 current external appointments can
be found in the Directors’ biographies set out
on p56.
BOARD DEVELOPMENT
AND TRAINING
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, mainly focusing around the
Company’s obligations upon its move to the
Alternative Investment Market (“AIM”).
The Board underwent extensive training,
facilitated by external providers, on
the following:
Equity Raise best practice and procedural
requirements under the Companies
Act 2006 and the Financial Services and
Markets Act 2000
66
AIM Rules and Regulations
Directors’ Duties and Responsibilities
under the Companies Act 2006
In addition, all Directors with a designated
Senior Manager Function received a
combination of written and face-to-
face training in relation to their specific
duties under the Senior Managers &
Certification Regime.
Board meeting agendas across the year
included deep dive discussions on the
following topics:
Refinancing of the Company and the
move to AIM
People strategy
Product strategy
Financial Services platform
Risk Management Framework
IT roadmap (including new website
front-end development)
Directors also underwent external training
and personal development relevant to
their roles.
The Company Secretary is responsible for the
induction of new Directors. New Directors
are provided with a comprehensive pack of
information (including Terms of Reference,
information regarding the business and
guidance on their roles and duties as
Directors) and meetings 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. Site visits have not
been possible for the majority of FY21
due to the Company’s Covid-19 Policy
and associated site access restrictions.
Site visits will recommence in FY22 when the
situation allows.
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
In early 2021, the Board took part in an
external Board and Committee evaluation,
facilitated by Sam Allen Associates.
A comprehensive questionnaire was
developed and completed by all Directors.
Key focus topics were as follows:
Business strategy and risk
Communication and remote working
Wider stakeholders
Shareholders’ value
Knowledge and skills
Board processes
In addition, performance reviews of all Board
Committees and individual Directors were
completed, including the Chair.
The results of the evaluation were assessed
by the full Board. Key areas of focus and
development over the next 12 months were
identified, including:
Strategic discussions and decision-making
by the Board
Risk appetite review and approval
Interaction of the FS and Retail arms
of the business
Board size, skill gap analysis and
succession planning
Best practice for remote
board engagement
Overall, 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.
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk NOMINATIONS AND GOVERNANCE
COMMITTEE REPORT
Meetings attended
MEMBER
Ron McMillan
April 2013 – Present
(Chair from 31 March 2021)
Gill Barr
January 2018 – Present
Richard Moross
October 2016 – Present
Michael Ross
Vicky Mitchell
Matt Davies
Lesley Jones
January 2018 – Present
January 2020 – Present
November 2019 – March 2021
October 2014 – March 2021
2/2
2/2
2/2
2/2
2/2
2/2
2/2
RESPONSIBILITIES
FY22 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.
Reviewing the leadership
needs of the Group to
ensure the continued ability
of the organisation to
compete effectively within
the marketplace.
Recruiting a new Independent
Non-Executive Director
and Chair of the Audit and
Risk Committee.
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.
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 Nominations and Governance
Committee report for FY21. This is my first report as Chair of the
Committee having stepped into the position in March 2021.
FY21 has seen a number of changes for the Company. The onset
of the Covid pandemic significantly impacted our business
operations and trading strategy; this was reflected in the changes
made to the Board and Committee structure across the year.
The Company appointed Russell Reynolds Associates and Sam
Allen Associates to support searches for new Board candidates.
Rachel Izzard joined the Company as Chief Financial Officer in
June 2020, replacing Craig Lovelace. In addition, Sarah Welsh was
appointed as CEO of Retail in March 2020. All appointments were
unanimously approved by the Board.
Following the Company’s admission to the Alternative Investment
Market and successful equity raise in late 2020, the Committee
was pleased to recommend the appointment of Joshua Alliance
to the Board as Non-Executive Director. Joshua joined the Board
in December 2020.
I stepped down as Chair of the Audit and Risk Committee and
Senior Independent Director following my appointment as Chair
of the Board in March 2021. The primary focus of the Committee
over the next few months is to oversee the external process
currently underway to appoint a new permanent Chair of the
Audit and Risk Committee. In the meantime, Vicky Mitchell has
kindly stepped into the role as Acting Chair. Gill Barr became
Senior Independent Director effective from March 2021. Gill is
one of the longest serving members of the Board and brings a
wealth of experience to the role.
In early 2021, the Board and its Committees underwent an
externally facilitated Board evaluation, carried out by Sam Allen
Associates. The results of the evaluation were discussed with the
whole Board and an action plan is now in development for FY22
which will focus on succession planning and talent development.
Further information on the external evaluation can be found
on p66.
The Company is proud of its commitment to and focus on
diversity. Details of our approach to appointments to and of the
composition of our Board is set out on p64.
I would like to thank my fellow Board members for their support
during this recent transition. I am available to speak with
shareholders at any time and shall be available at the Annual
General Meeting on 6 July 2021 to answer any questions you may
have on this report.
Ron McMillan
Chair of the Nominations and Governance Committee
67
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report AUDIT, RISK AND INTERNAL CONTROL
AUDIT AND RISK COMMITTEE REPORT
MEMBER
Vicky Mitchell
Michael Ross*
Ron McMillan
Lesley Jones
January 2020 – Present (Acting
Chair from 31 March 2021)
January 2018 – Present
April 2013 – March 2021
October 2014 – March 2021
Meetings
attended
4/4
3/4
4/4
4/4
* Michael Ross was unable to attend one of the Committee meetings due to
a prior commitment.
RESPONSIBILITIES
FY22 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.
Keeping under review the
adequacy and effectiveness of
the Group’s internal financial
controls and internal control and
risk management systems.
Appointing a new Audit and Risk
Committee Chair.
Continuing to monitor the
impact Covid-19 is having on the
Group’s business, internal control
procedures and governance.
Ensuring that the Group’s
risk management procedures
continue to be responsive to the
impact Covid-19 is having on
resources and ways of working.
Ensuring that the Group’s
Internal Audit and Risk functions
continue to be 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
regime for regulated firms.
The Committee’s Terms of
Reference can be found at
www.nbrown.co.uk
DEAR SHAREHOLDER
On 31 March 2021, Ron McMillan stepped down as Audit and
Risk Committee Chair, following his appointment as Chair of the
Board. I am presenting this report as the Acting Chair of the Audit
and Risk Committee; the Group has commenced a facilitated
search to find a new Committee Chair. 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 to the integrity of published financial information and the
effectiveness of audit.
The Committee maintains 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 an independent view of the key
disclosure issues and risks from the Group’s external auditor.
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 oversaw the internal control
assessment and working capital review for the equity raise that
completed in December 2020. The Committee also 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 p96 of this Annual Report.
The Committee considered whether the 2021 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 2021 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 6 July 2021 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.
Vicky Mitchell
Acting Chair of the Audit
and Risk Committee
68
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk COMMITTEE COMPOSITION
The Committee currently comprises two 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 Acting Committee Chair, Vicky Mitchell
fulfils that requirement. All members are expected to have an
understanding of financial reporting, the Group’s internal control
environment, relevant corporate legislation, the roles and function
of internal and external audit and the regulatory framework of
the business. As reflected in the biographical details on p56 the
Committee members have significant experience of working in
or with companies in the retail, financial services and consumer
goods sectors.
The members of the Committee who served during the year were:
Vicky Mitchell (Acting Committee Chair from 31 March 2021)
Michael Ross
Ron McMillan (Resigned 31 March 2021)
Lesley Jones (Resigned 31 March 2021)
Details of Committee meetings and attendances are set out on
p68. 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 Group’s internal
and external auditors attend all meetings. The Secretary
of the Committee is the Group’s General Counsel and
Company Secretary.
FINANCIAL SERVICES BOARD
As more fully explained on p75, the Financial Services Board
Committee (“FSB”) is responsible to the N Brown Board for
oversight of the Financial Services business. While ultimate
oversight of Group risk remains with the Group Board, 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.
In relation to internal controls and risk management within
Financial Services, 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 FY21
The table on p74 details the core activities of the Committee
during the year. Key matters considered included the following:
IMPACT OF COVID-19
Although the global spread of Covid-19 began in February
2020, the World Health Organization’s declaration of a global
pandemic took place in March 2020 and was not predictable as
at the 2020 balance sheet date. The impact of the pandemic has,
therefore, been accounted for in the current year.
The Committee has reviewed the disclosures made by
management in relation to the pandemic and the measures
taken by management to support the business throughout.
The Committee has also reviewed the associated assumptions
used to support forward estimates. In particular, it has reviewed
the reasonableness of the assumptions made in relation to
trade receivables bad debt impairment, software intangibles
impairment and inventories impairment.
Given the ongoing challenges posed by Covid, the Committee
has noted and approved extended timelines for completion of
the Internal Audit Plan and the Risk Management Framework
Enhancements. In addition and in line with the joint statement
issued by the FCA and FRC in January 2021, encouraging boards
to use the measures granted to allow listed companies an
additional two months to publish their audited annual financial
reports, the Committee has approved an extended timeline for
completion of the year end accounts.
The Committee remains satisfied that there continues to be
reasonable assurance over key risk areas despite the challenges
to timelines and resources.
IMPAIRMENT OF NON-FINANCIAL ASSETS
The Group assesses its assets for impairment on an annual basis.
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 February 2021, the assumed long-term
growth rate of subsequent cash flows and the risk-adjusted
discount rate.
REGULATION AND COMPLIANCE
While no longer considered a source of estimation uncertainty,
the Group operates in a regulated marketplace. 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.
The Group is regulated in the UK by the FCA under a licence
granted on 21 September 2016 and by the Central Bank of Ireland
for its Oxendales business. 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.
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AUDIT AND RISK COMMITTEE REPORT CONTINUED
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.
The Committee concurs with management’s reassessment of the
useful economic lives of its legacy assets in light of the Group’s
strategy and in the wider technology arena.
IMPAIRMENT OF CUSTOMER RECEIVABLES
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 again reviewed the IFRS 9 model and the
refinements that had been made to it in the year.
DEFINED BENEFIT PENSION PLANS
The Committee has continued to review the various assumptions
that underpin the actuarial valuation and recognise that
these may differ from actual developments in the future.
The Committee concurs with management’s assessment that
the assumptions are appropriate for the expert to use in their
actuarial valuation for the Group’s defined benefit pension plan.
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 and 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
& 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 being progressed:
70
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 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 of this process. Further information on the Group’s
Enterprise Risk Management Framework is detailed on p32.
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 Level One risks is set out on p35 to 38.
The Board has carried out a robust assessment of the principal
risks facing the Group, including those which threaten its
business model, future performance, insolvency or liquidity.
The Committee has focused on addressing some identified
control weaknesses, continuously improving the Group’s internal
control framework. 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 Financial Reporting Council (“FRC”) guidance
on risk management, internal control and related financial
business reporting.
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, and the
appropriate period for assessment.
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk REVIEWING THE FY21 HALF YEAR RESULTS,
FULL YEAR RESULTS AND ANNUAL REPORT
The Committee considered in particular the following:
There were no restrictions placed on the scope of work to
be carried out by the GIA function or its ability to report to
the Committee.
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
Following the resignation of the previous Head of Internal
Audit in FY20, a new Head of Internal Audit was appointed, and
resources were strengthened.
The Head of Internal Audit has a direct reporting line to the
Committee and attended all Committee meetings. During the
year Group Internal Audit (“GIA”) undertook a risk-based
programme of work which was discussed with, and approved
by, both Executive Management and the Committee.
During the year GIA has carried out reviews covering the
following areas:
Affordability
Persistent Debt
Conduct Risk Framework
Debt Securitisation
Information Security and Data Protection
IT Risk Management
IT Change Management
SM&CR Readiness
HR Systems Post-Implementation
The outcomes of GIA’s work were reported regularly during the
year to the Committee, the Executive Board and the Financial
Services Board.
The reviews culminated in a series of recommendations against
which management agreed a number of remedial actions.
Progress against these actions is formally monitored and their
status reported to the Committee.
On joining the Group, the new Head of Internal Audit undertook
a self-assessment against prevailing professional standards.
This assessment resulted in an action plan which was approved,
and is monitored, by the Committee.
Notwithstanding the self-assessment action plan, the
Committee has evaluated the performance of GIA 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 external evaluation carried out in early 2021,
as detailed on p66. 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 responsible for the audit is Anthony Sykes, a
partner in the London office. Anthony is in his first year as the
engagement partner. The total fees paid to KPMG for the year
ended 27 February 2021 were £1.6m, of which £0.5m 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, unless
the nature of the work means the auditors are best placed to
provide services. The allocation of work is 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 advisory work relating to the Company’s
Equity Raise in 2020. The Committee is satisfied that, in relation
to these services, KPMG LLP has taken actions to ensure that any
potential conflicts of interest are properly managed.
The Committee remains mindful of the attitude investors
have towards the auditors performing non-audit services.
The Committee will continue to ensure that fees for non-audit
services do not exceed 70% of aggregate audit fees, as measured
over a three-year period.
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.
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AUDIT AND RISK COMMITTEE REPORT CONTINUED
AUDIT QUALITY ASSESSMENT
The Committee assessed the quality of KPMG’s audit in a
number of ways:
1) The Committee met with the senior members of the KPMG
audit team on three occasions during the year and discussed
the planning, execution and reporting of audit work and
findings. All senior members of the KPMG team contributed
to these meetings.
2) In conjunction with the CFO and senior members of the
finance team, the Committee discussed and assessed
KPMG’s approach to the execution of and reporting
of their audit and related findings.
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
6 July 2021. Given that this is only the sixth year of KPMG LLP’s
tenure as auditors, the Board has no present plans to consider an
audit tender process.
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. The Group is committed to ensuring that it offers good
quality, transparently and fairly sourced products and services to
its customers and operates 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.
The N Brown 2020 audit was not chosen for review by the
FRC. However, the Committee reviewed KPMG’s transparency
report 2020 and noted the firm’s commitment to quality and risk
management. The Committee also discussed with KPMG the
results of the FRC Audit Quality Inspection of the UK firm, which
were published in July 2020.
The Committee noted that KPMG had taken steps to address
the key findings of the 2019 FRC report by continuing with and
extending the initiatives within its three-year Audit Quality
Transformation Plan. Whilst there has been considerable focus on
audit quality, the FRC concluded that there remain some areas
where improvements need to be made.
On an annual basis, the Audit Quality Review (“AQR”) team of
the FRC carry out reviews of the audits of listed companies.
In the year to July 2020, across the seven largest accounting
firms, 33% of audits reviewed were considered to need more
than limited improvement. The individual results of firms were
similar. The main areas of concern to the AQR continue to be
impairments of goodwill and intangibles, revenue and contracts
and provisions, including loan loss provisions.
KPMG are taking steps to improve the results of the 2020 AQRs
undertaken and the Committee will monitor progress it is making.
The Committee considered in detail KPMG’s audit planning
documentation and satisfied itself that the audit work to be
carried out by KPMG covered all significant aspects of the
Annual Report and Accounts. There were no areas which the
Committee asked KPMG to look at specifically. KPMG’s report
to the Committee at the conclusion of the audit confirmed
that the audit had been carried out as set out in the planning
documentation and the Committee considered the findings of
KPMG as reflected in their audit opinion and their year end report
to the Board. KPMG’s audit opinion sets out the key matters that,
in their professional judgement, were of most significance in their
audit. These are consistent with the key matters considered and
agreed with the Committee when the audit was planned. KPMG’s
opinion describes how these matters were addressed in the audit
and the scope and nature of their work reflects the thoroughness
of their approach and the degree of scepticism applied.
AUDITOR INDEPENDENCE
The Committee sought and was provided with assurance from
the Audit Engagement partners that they and all members of
KPMG’s staff engaged on the audit had confirmed that they and
their dependants were independent and that KPMG as a firm
was independent.
72
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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 FY21 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
2021 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.
CRITICAL JUDGEMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
The significant judgements made by management in applying
the Group’s accounting policies and key sources of estimation
uncertainty are set out in note 2 on p121.
These relate to the impact of Covid-19, impairment of customer
receivables, software and development costs and the useful
economic life assessment, the impairment of non-financial
assets, the defined benefit pension plan and the Allianz claim
and counterclaim.
The Committee discussed with the auditors how these matters
impacted the financial statements and reviewed the sensitivities
which were considered by management to be appropriate.
IMPAIRMENT OF CUSTOMER RECEIVABLES
This involves a number of areas of judgement, the estimating
of forward-looking modelling parameters, developing a range
of future economic scenarios, estimating expected lives and
assessing increases in credit risk. The Committee has reviewed
the disclosures made by management in relation to these
estimation components and related sensitivities and considers
them to be appropriate.
SOFTWARE AND DEVELOPMENT COSTS
Included within intangible assets are significant software and
development costs in respect of the Group’s technological
development programme. The Committee has discussed
with management whether the related projects will be
completed successfully and whether the carrying value is
supported by sufficient revenue and profitability going forward.
The Committee has also considered management’s exercise
performed in the year in reviewing the useful economic lives of
its legacy intangible assets in light of general advancements in
technology and the Group’s strategy.
IMPAIRMENT OF NON-FINANCIAL ASSETS
At the balance sheet date and following a significant drop
in the Group’s share price, the market capitalisation of the
Group was lower than the Group’s net assets. As this is an
indicator of impairment, management are required to test
for impairment based on value-in-use calculations reflecting
expected cash flows, long-term growth rates and a pre-tax
discount rate. The Committee has discussed these with
management and reviewed the relevant disclosures in the
Annual Report. The Committee has discussed the sensitivities
of key assumptions including Product Revenue, EBITDA growth,
capital expenditure and the discount rate with management and
reviewed the relevant disclosures in the Annual Report.
DEFINED BENEFIT PENSION PLAN
The cost of the Group’s defined benefit pension plan and present
value of the pension obligations are determined using actuarial
valuations. The Committee has reviewed the disclosures in the
Annual Report in relation to the pension plans and ensured
that these are consistent with the advice received from the
Group’s actuaries.
ALLIANZ CLAIM AND COUNTERCLAIM
The Committee noted the claim lodged against the Group by
Allianz Insurance plc and the counterclaim that the Group has
made. The legal position in relation to this claim and counterclaim
has not made any meaningful progress within the period.
Therefore, the Committee again concurred with management’s
judgement that, because of the complexity of the claims and the
early stage of proceedings, it is not currently possible to reliably
estimate the amount of any potential outcome and, therefore, no
provision for the claim has been made.
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report AUDIT, RISK AND INTERNAL CONTROL CONTINUED
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 tax matters. Additional matters covered at each of the meetings during FY21 were as follows:
MAY 2020
NOVEMBER 2020
Review of the full year Internal Audit Report, approval of FY21
Internal Audit Plan and the Internal Audit Charter
Review of the Group’s half-year report from the external
auditors and the financial reporting paper
Review and approval of the Group’s Risk Management
Framework and internal control update – including the
securitisation audit
Review and assessment of the Group’s Compliance activities
Approval of the Group’s taxation strategy and Tax Policy
Performance reviews of:
Internal Auditor
External Auditor
Audit and Risk Committee
Review of the Group’s half-year statement
Review of the HY Internal Audit and Risk Management reports
Liquidity and Going Concern assessment at HY FY21
Review of Internal Audit work at half year end
Approval of select level one risk policies
Review and approval of the Group’s financial position and
prospects procedures, working capital and going concern
position ahead of the Equity Raise, move to AIM and refinancing
of the Group’s banking facilities
JUNE 2020
JANUARY 2021
Approval of the full year results for FY20, including reviews of
the Group’s Viability Statement
Review and approval of the external auditors’ plan for
assessment of the FY21 full year results
Liquidity and Going Concern assessment at FY20 Review of the
full year external audit report
Review and assessment of the Group’s Compliance and
Risk activities
Assessment of the Group’s impairment of customer receivables
Approval of select level one risk policies
Assessment of the Group’s FY20 preliminary results
announcement and investor presentation
Review of the draft FY20 Annual Report
Ratification of non-audit external service provider fees
Review of progress against the FY21 Internal Audit Plan
Review of the Company’s Q3 Trading Statement
74
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk
FINANCIAL SERVICES BOARD
COMMITTEE REPORT
MEMBER
Vicky Mitchell (Chair)
Ron McMillan
Steve Johnson
Rachel Izzard
Matt Davies
Lesley Jones
Meetings attended
January 2020 – Present
November 2019 – Present
November 2019 – Present
June 2020 – Present
November 2019 – March 2021
November 2019 – March 2021
4/4
4/4
4/4
2/2
4/4
4/4
2/2
Craig Lovelace
November 2019 – June 2020
RESPONSIBILITIES
FY22 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.
Establishing the risk appetite of
the Financial Services business.
The Committee’s Terms of
Reference can be found at
www.nbrown.co.uk
Continuing to support credit
customers in respect of the
Financial Conduct Authority’s
(“FCA”) payment deferral
regulations following the
Covid-19 outbreak.
Overseeing the strategic
contributions of the Financial
Services business to the Group’s
commercial development.
Ensuring compliance with
and delivery against the
requirements of the evolving
regulatory agenda.
Continuing to ensure the Senior
Managers & Certification Regime
(“SM&CR”) is embedded across
the Group.
Delivering against the Persistent
Debt regulation.
Supporting the development of
a revitalised Financial Services
customer proposition, including
delivery of a new Financial
Services IT platform.
DEAR SHAREHOLDER
This is my first full year reporting as Chair of the Financial
Services Board Committee (the “Committee”) having taken
over the position from Lesley Jones in January 2020.
In addition to providing general support to and oversight of the
Financial Services (“FS”) business of the Group, the Committee
remains 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 establishes risk
appetite and approves risk management plans in relation to FS.
The Committee also maintains oversight of internal control and
governance frameworks across FS.
Throughout FY21, the Committee has prioritised the support of
credit customers affected by the Covid-19 outbreak. In response
to the pandemic and the FCA’s evolving guidance, the Company
undertook a series of strategic, operational and regulatory
changes to ensure that customers continued to receive good
outcomes and additional support as required by the regulator.
Covid-19 forbearance was offered and applied to customers
who were temporarily impacted by Covid-19, in line with the
firm’s processes and the regulator’s expectations. Agents had
good, empathetic conversations with customers, and reached
appropriate solutions. The Committee will oversee further
monitoring activity planned for 2021 to assess the provision of
tailored support for customers post-deferral. The Company has
maintained regular, open dialogue with the FCA on its operational
response to the Covid-19 pandemic and payment deferral activity.
In 2020, the Committee approved a new governance approach
for FS, including a revised reporting framework and policy
approval process. Particular attention was paid to the Group’s
risk management and tactical approach to the Covid-19
pandemic. In addition, the Committee considered the Group’s
Payment Card Industry risk mitigation and approach to
credit risk. The Committee also maintained oversight of the
Company’s application of the new Persistent Debt rules.
Work remains ongoing in respect of the development of a
revitalised FS customer proposition, including delivery of a new
FS IT platform. The Committee continues to oversee progress
and advises the business on its key strategic developments.
Looking ahead to FY22, the Committee will focus on supporting
customers as they emerge from the Covid-19 pandemic; N
Brown remains committed to helping its credit customers
through these challenging times. The Committee will continue
to oversee compliance with the regulatory agenda, ensuring the
FS business is focused on the needs of our customers and on
delivering good customer outcomes.
I am available to speak with shareholders at any time and shall
be available at the Annual General Meeting on 6 July 2021 to
answer any questions you may have on this report.
Vicky Mitchell
Chair of the Financial Services
Board Committee
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report REMUNERATION
REMUNERATION COMMITTEE REPORT
DEAR SHAREHOLDER
I am pleased to present the Directors’ Remuneration Report for
FY21 on behalf of the Board.
Our focus in 2020 has been on ensuring the safety and wellbeing
of our workforce and managing the business through the
Covid-19 pandemic. In addition, we have led a comprehensive
restructuring and refinancing of the business which has included
a relisting of our shares on AIM.
The governance regime for companies listed on AIM is different
to the Premium Segment of the Main Market and in many
respects is less stringent. However, the Board is committed to
maintaining the highest level of governance, including continuing
to report against the UK Corporate Governance Code.
Furthermore, in terms of the Directors’ remuneration reporting,
we will continue to report to the same standards as a Premium
Listed company.
Against a backdrop of the significant changes to the business in
the past year, we have thought particularly carefully about the
impact of the pandemic and performance of the business and
the remuneration of the senior management team. The result
is an approach that it considers to be fair and reasonable
for all stakeholders, taking into account the very significant
achievements of the management team in repositioning the
business for future growth.
BOARD CHANGES
We were delighted to welcome Rachel Izzard as our new CFO
on 29 June 2020. Rachel joined us on a salary of £350,000,
pension at 8% of salary, aligned to the workforce rate and normal
incentive opportunities aligned to the policy. Further details
are set out below and in the Annual Report on Remuneration.
The buyout arrangements for incentives which lapsed on her
leaving her former employer were set out fully in last year’s
Remuneration Report.
Craig Lovelace resigned and stood down as CFO on 28 June
2020. His remuneration for FY21 is disclosed in this Annual Report
on Remuneration and comprised salary, benefits and pension to
28 June 2020 with no annual bonus payment and all outstanding
incentive awards lapsing. He received no compensation for loss
of office.
Matt Davies stepped down from the Board on 31 March 2021
and has been succeeded by Ron McMillan. The Chair fee is
unchanged on appointment at £255,000.
MEMBER
Gill Barr (Chair)
January 2018 – Present
Ron McMillan
April 2013 – Present
Richard Moross
January 2017 – Present
Matt Davies
May 2018 – March 2021
Meeting attended
6/6
6/6
6/6
6/6
RESPONSIBILITIES
FY22 PRIORITIES
Reviewing the Directors’
Remuneration Policy to ensure that
it continues to be aligned to and
support the business strategy as we
enter the third and final year of our
current policy.
Continuing to ensure our approach
to pay provides fair and appropriate
reward, balancing the interests
of all stakeholders with the need
to provide remuneration that is
aligned to shareholders’ interests
and drives the achievement of our
business strategy.
Monitoring the ongoing impact
of the Covid-19 pandemic on
the business and ensuring that
remuneration continues to be
appropriate in this context.
Considering the introduction of
a broader mix of performance
measures into the annual bonus
recognising our greater focus on
ESG matters as a business.
As we return to more normal
working arrangements and the
opportunity for increased colleague
engagement, ensuring that the
overall Group pay policies and
practices support the likely more
flexible world of work and slightly
different business culture.
The Committee’s Terms of
Reference can be found at
www.nbrown.co.uk
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 and in accordance with the
UK Corporate Governance Code
(the “Code”).
Establishing remuneration
schemes that promote long-
term shareholding by Executive
Directors and align with long-term
shareholder interests.
Designing remuneration policies
and practices which support the
Group’s long-term strategy and
promote sustainable success and
are aligned to the Group’s purpose
and values. Remuneration policies
and practices will take into account
all relevant factors, legal and
regulatory requirements and
provisions and recommendations of
the Code and associated guidance.
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.
Reviewing workforce remuneration
and related policies and overseeing
any major changes in employee
benefits structures throughout
the Group.
Ensuring that the Group engages
as appropriate with its principal
shareholders about remuneration.
76
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk Each year the Committee considers carefully whether the
formulaic outcome of the bonus is appropriate in light of broader
factors and this year there are additional factors relating to the
Covid-19 pandemic and the re-financing of the business, to be
factored into our assessment. These are discussed in turn below.
We have considered the appropriateness of bonus payments in
a year where the Company has received Government assistance
under the Coronavirus Job Retention Scheme (“CJRS”) amounting
to £3.8m to support the furlough of some of our workforce.
This support protected over 500 jobs that would otherwise
have been at risk of redundancy and has not had a beneficial
impact on the profit element of the performance condition as,
importantly, the EBITDA target range took this into account.
These colleagues have now returned to work and are a critical part
of our growth story. The limited draw-down we made under the
CLBILS loan scheme has since been repaid and the colleagues
we have regretfully lost though redundancies were as part of our
restructuring, not as a direct consequence of the pandemic.
We believe in appropriate and fair reward. All eligible colleagues
will receive an annual bonus for FY21 based on the same metrics
as the Executive Directors, acknowledging their exceptional
contribution during the year. Whilst senior staff had their bonus
opportunity reduced by 50%, the reduction was limited to 25%
for more junior employees, to ensure that senior executives
shouldered more of the burden. We strongly believe that paying
a bonus to all of our colleagues, with the scale back weighted
to the benefit of less senior employees is appropriate for the
performance delivered over the year.
We have also considered the appropriateness of bonus payments
by reference to the experience of our shareholders in a year
where the dividend has been cancelled and we have raised
capital as part of our refinancing. This has been recognised
through the scale back of bonus opportunity and the reduction
of the 2020 Long Term Incentive Plan (“LTIP”) awards (and
moreover the 2018 LTIP award measured over the three years to
FY21 will not vest). The bonus will be paid 60% in cash and 40%
in shares with a three-year holding period and, along with the
shares already held, ensures the Executive Directors continue to
be aligned to long-term performance and shareholders’ interests.
In relation to the dividend we believe that this value has been
retained in the share price and retaining cash has enabled us to
accelerate our investment and growth plans. The capital raise was
not an emergency fundraise caused by the impact of Covid-19
on the business, but part of the strategic recapitalising and
restructuring of the business that has, with other management
actions, ensured we are now well positioned financially, also
making us better able to accelerate our growth plans.
REMUNERATION OUTCOMES FOR FY21
There were no increases to base salaries, our CEO remained
on his FY20 salary and our new CFO’s base salary was set
on appointment.
ANNUAL BONUS
The market turmoil at the start of the financial year was
unprecedented as the UK entered its first national lockdown.
Recognising the immediate imperative to conserve cash, as
part of wider cost saving measures the Directors immediately
voluntarily waived 20% of their base pay and this reduction lasted
for the three months of the full lockdown*.
The market uncertainty made it very difficult for the Committee
to set the annual bonus performance targets and so the
Committee determined that the target setting should be delayed
until the half year. In light of the delay, the shorter performance
period and the recognition that total potential remuneration
should reduce in FY21, the maximum annual bonus opportunity
was scaled back by half, to 75% and 62.5% of salary for the CEO
and CFO, respectively. The Committee selected performance
metrics that would drive and reward short-term performance
and achievement of our strategy while building towards longer-
term sustainable growth. Taking into account the impact of
the Covid-19 pandemic on the business, our immediate short-
term priorities to preserve our cash position while maintaining
underlying profitability and to take advantage of the opportunity
to grow our customer base, the bonus was based 75% on EBITDA
targets and 25% on Net Promoter Score (“NPS”).
As the year progressed the Executive Directors, supported by
the senior management team and wider Group employees made
great strides in every area of the business to deliver against our
business strategy, including the repositioning of the business for
the post-Covid-19 operating environment, successful refinancing
and listing on AIM. As the Chair has set out on p4 the result of
their efforts is a much more robust business, with a strong cash
position, a good level of underlying profitability and customer
satisfaction and we are well positioned now to drive the business
forwards. As a result of the performance delivered the targets
for the annual bonus have been met at close to maximum. The
Committee is clear that the performance achieved has been key
in laying the foundations for longer-term sustainable growth as
we look to now accelerate our business growth.
Notwithstanding the considerable achievements of the
management team, the bonus available for the year has been
reduced to 50% of the usual maximum. The outcome by
reference to the stretching performance targets resulted in a
bonus level equivalent to 44% of the normal bonus maximum
and 88% of the scaled back maximum. This provides a bonus of
66% of salary (£280,500) for the CEO and 55% of salary £128,761
for the CFO, noting the CFO’s bonus is pro-rated from the
date of her appointment. 40% of this amount is deliverable in
deferred shares.
* The outgoing CFO did not take part in the voluntary waiver of base pay
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REMUNERATION COMMITTEE REPORT CONTINUED
HOW THE POLICY WILL BE APPLIED
IN FY22
The salaries of our CEO and CFO will be £431,375 and
£355,250 respectively.
Annual bonus maximum opportunity will revert to normal levels
at 150% of salary for the CEO and 125% of salary for the CFO.
Our focus for the year ahead is profitability and customer growth
with 65% of the annual bonus based on EBITDA, 15% on Active
Customer Accounts and 10% Customer NPS. The remaining
10% of the bonus will be based on our ESG agenda which is an
important part of our strategy.
Subject to a review of the prevailing share price at the time
awards are granted, LTIP award levels will also revert to normal
levels, for our CEO 150% of salary and our CFO 125% of salary.
We will retain the relative TSR performance measure for
50% of the award with the other 50% based on earnings per
share growth reflecting our focus on the future profitability
of the business. The targets are set out in the Annual Report
on Remuneration.
POLICY REVIEW
Our 2022 AGM will be the third anniversary of shareholder
approval of our current Directors’ remuneration policy. During the
course of 2021 the Committee will carry out a thorough review of
the policy and will bring a new policy to shareholders for approval
at our 2022 AGM.
SHAREHOLDER ENGAGEMENT
I have engaged in recent months with several of our larger
shareholders in respect of the application of policy in light
of Covid-19 and look forward to further engagement with
shareholders as we review our policy during the year.
We set stretching EBITDA and NPS targets at the half year
with the EBITDA targets at the top of the market range, and
performance over the second half of the year was excellent.
We believe that the annual bonus was an important motivational
factor in the delivery of such strong performance and helped
deliver the best possible outcome for shareholders. It is vital that
employees are confident in the integrity of the annual bonus plan
and that if challenging performance conditions are set, and then
achieved, the resultant bonus should be payable other than in
genuinely exceptional circumstances.
As a result of our restructuring and reflecting our much stronger
financial position, the Committee has noted that N Brown’s
share price at c.70p is higher than it was a year ago before the
pandemic impacted trading, showing a robust resilience to the
crisis and confidence in management’s actions and the future
prospects of the business.
No bonuses were paid for FY20 and incentive payment levels
have been low for a number of years. As noted above, the
2018 LTIP will not vest and it is very unlikely that there will be
vesting of the 2019 LTIP. This is understandable given historic
business performance and the Committee will continue to
ensure strong alignment between pay and performance and
restraint in pay at all times. However, incentivising and rewarding
proven performance of the new Executive Directors and their
management team (most of whom are also new to the business)
is vital. The Board believes that it has the right business strategy
and right people to deliver that strategy and that incentives
must be aligned to drive and reward outcomes that benefit
our shareholders.
In conclusion, the Executive Directors and employees must be
commended for delivering a financial performance well ahead of
expectations whilst repositioning the business in a very difficult
year to lay the foundations to accelerate future growth. On this
basis, and having consulted with shareholders, the Committee has
determined that payment of the reduced bonus, partly in deferred
shares, is appropriate to recognise and reward this performance.
LONG-TERM INCENTIVE
The earnings per share (“EPS”), free cash flow and revenue
threshold targets for the 2018 LTIP awards, which were measured
over the performance period ending in FY21, have not been met
and these awards have lapsed.
The grant of LTIP awards and target setting in FY21 was also
delayed in light of the pandemic. As explained in my Annual
Statement last year the Committee agreed, given the business
and economic volatility and difficulty in forecasting and setting
long-term earnings per share targets, exceptionally that the
2020 LTIP awards should not include an earnings per share
performance measure but instead be determined as to 50%
on relative total shareholder return (“TSR”) and the other 50%
Net Cash Generation. The Committee determined a scale back
of the LTIP of 15% taking into account the overall approach to
incentives for FY21 including the scale back of the annual bonus.
The Committee has, under the policy, the discretion to scale back
the vesting outcome if it has concerns that the level of vesting
and overall quantum is not appropriate.
78
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk CLOSING REMARKS
The Committee is satisfied that with the appropriate exercise of
discretion to reduce the maximum annual bonus opportunity
for the year and scale back LTIP award levels, there is a fair and
appropriate level of reward for the Executive Directors for FY21,
taking into account wider stakeholder considerations but also the
resilience and performance of the Executive Directors in such a
challenging year. The Committee is further comfortable that the
policy operated as intended, with the appropriate exercise of
discretion and that no change is required to the policy.
I very much hope that you will support the shareholder resolution
on the Annual Report on Remuneration at our forthcoming
Annual General Meeting on 6 July 2021. 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. Despite the move from
the Premium Segment of the London Stock Exchange to an
AIM Listing, we will continue to operate the policy on the terms
approved by shareholders.
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 payments (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.
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N Brown Group plc Annual Report and Accounts 2021nbrown.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 2 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.
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.
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. The Company operates a defined
8% of salary.
N/A
OTHER BENEFITS
Provides a competitive
package of benefits that
assists with recruitment and
retention and supports the
well-being of the Executives
to enable them to carry out
their role effectively.
contribution plan and may also pay a
cash supplement in lieu.
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.
Any reasonable business-related
expenses (including tax (grossed
up) thereon) can be reimbursed if
determined to be a taxable benefit.
Car and fuel allowance up to £20,000
per annum.
N/A
Other benefits will be in line with the
market. The value of each benefit is
based on the cost to the Company
and is not predetermined.
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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.
The majority of our employees including our CEO and
CFO receive the same 8% of salary retirement allowance.
The exception to this was the outgoing CFO whose retirement
allowance was 10% of salary.
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.
82
N Brown Group plc Annual Report and Accounts 2021nbrown.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
Potential
termination payment
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 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 FY22.
84
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk POTENTIAL REMUNERATION SCENARIOS FOR EXECUTIVE DIRECTORS FY22
(£’000)
2,500
2,000
1,500
1,000
500
0
1,780
2,104
36%
36%
28%
1,133
29%
29%
42%
486
100%
857
26%
26%
48%
413
100%
1,301
1,523
34%
34%
32%
Below target
Target
Maximum
Below target
Target
Maximum
Chief Executive Officer
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.
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.
85
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report REMUNERATION CONTINUED
ANNUAL REPORT ON REMUNERATION
NON-EXECUTIVE DIRECTORS’ LETTERS OF APPOINTMENT
Non-Executive Directors are retained on letters of appointment. All 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. All Non-
Executive Directors signed new letters of appointment, effective upon the Company’s re-listing on the Alternative Investment
Market in December 2020; this did not impact the progression of their current three-year rolling terms. Brief details of Non-
Executive Directors’ letters of appointment are summarised below:
Name
Ron McMillan
Lord Alliance of Manchester CBE
Gill Barr
Richard Moross
Michael Ross
Vicky Mitchell
Joshua Alliance
Date of original letter
of appointment
1 March 2013
16 May 2007
6 December 2017
13 September 2016
8 December 2019
24 January 2020
5 November 2020
Date of current letter
of appointment
9 March 2021
20 October 2020
26 October 2020
29 October 2020
27 October 2020
28 October 2020
5 November 2020
Date current
term commenced
31 March 2021
10 April 2019
16 January 2021
6 October 2019
16 January 2021
28 January 2020
23 December 2020
Notice period
6 months
6 months
6 months
3 months
3 months
3 months
6 months
The Annual Report on Remuneration will be put to an advisory shareholder vote at the 2021 Annual General Meeting. The information
on p86 to 89 has been audited.
DIRECTORS’ REMUNERATION PAYABLE FOR FY21 (AUDITED)
Salaries
and fees
£000’s
Taxable
benefits1
£000’s
Year7
Pension2
£000’s
Executive Directors
Steve Johnson
Rachel Izzard3
Craig Lovelace4
Non-Executive (fees)
Matt Davies
Lord Alliance of
Manchester CBE5
Ron McMillan
Lesley Jones
Richard Moross
Gill Barr
Michael Ross
Vicky Mitchell
Joshua Alliance6
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
404
425
234
–
119
361
242
255
0
0
73
73
68
67
58
58
63
64
58
60
74
5
7
–
20
20
29
–
5
17
0
0
0
0
0
6
0
3
0
9
1
5
0
3
0
0
0
–
32
34
19
–
12
36
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Bonus
(cash and
deferred
shares)
£000’s
281
0
129
–
0
0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
LTIP
£000’s
Total fixed
pay
£000’s
Total
variable
pay
£000’s
Total
£000’s
0
0
–
–
0
0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
456
479
282
–
136
414
242
255
0
0
73
79
68
70
58
67
64
69
58
63
74
5
7
–
281
–
129
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
737
479
411
–
136
414
242
255
0
0
73
79
68
70
58
67
64
69
58
63
74
5
7
–
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 Rachel Izzard’s remuneration is for her role as Executive Director only and not for the period prior to being appointed a Director. She was appointed to the
Board on 29 June 2020 after joining the Company as CFO Designate on 6 April 2020. Her taxable benefits include a relocation fee.
4 Craig Lovelace stepped down from the Board on 28 June 2020.
5 Lord Alliance has waived his Non-Executive Director’s fee of £51,000 in FY20 and FY21.
6 Joshua Alliance was appointed to the Board on 23 December 2020.
7 The Board of Directors took a voluntary 20% pay reduction in April, May and June 2020. The outgoing CFO did not take part in the voluntary waiver of base pay.
86
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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 FY21. 60% of the bonus is paid in cash and
40% is paid in shares with a three-year holding period. The annual bonus is also subject to clawback until the end of the holding period.
The normal maximum annual bonus opportunity for the Executive Directors was scaled back by 50% at the time the targets were set.
As set out in the Annual Statement of the Committee Chair, the Committee has carefully considered the formulaic bonus outcome which has
already been subject to a 50% scaleback and determined, for the reasons set out and having consulted with shareholders, that no further
adjustment to the outcome should be made.
Measure
EBITDA
Customer NPS
Steve Johnson
Rachel Izzard1
Weighting
(% of max
bonus activity)
75%
25%
Threshold
(0% payout)
£79.7m
62
Target
(25% of max
payout)
£81.3m
62.75
Target
(50% of max
payout)
£82.8m
63.5
Target
(75% of max
payout)
£84.4m
64.25
Max
(100% payout)
£85.9m
65
Actual
performance
£86.5
63.6
Payout %
of max
overall bonus
75%
13%
Maximum bonus
opportunity %
salary
75%
62.5%
Salary for
bonus
calculation
£425,000
£234,111
Bonus payable
(as % max)
88%
88%
Bonus payable
£280,500
£128,761
1 Rachel Izzard’s bonus is pro-rated for her role as Executive Director only and not for the period prior to being appointed a Director. She was appointed to the
Board on 29 June 2020 after joining the Company as CFO Designate on 6 April 2020.
LTIP AWARDS WITH PERFORMANCE PERIOD ENDING IN FY21 (AUDITED)
The LTIP awards granted on 22 August 2018 are subject to EPS, Free Cash Flow and Revenue performance targets measured
over the performance period ending 27 February 2021. Performance against targets is set out below:
Performance period
3 yrs ending FY21
3 yrs ending FY21
3 yrs ending FY21
Threshold target
(25% of that part
of the award vests)1
At least 3% CAGR
At least £350m
At least 3% CAGR
Stretch target
(100% of that part
of the award vests)
At least 8% CAGR
At least £420m
At least 5% CAGR
EPS growth 50%
FCF 30%
Revenue 20%
Total vesting
Actual performance
-27%
£283m
-8%
Vesting
0% out of 50%
0% out of 30%
0% out of 20%
0%
1 Straight-line vesting between threshold to maximum performance.
Set out below are the details of the LTIP awards held by Executive Directors and the vesting resulting from the performance
detailed above.
Executive
Steve Johnson1
% Salary
100%
Face value
at grant
£176,715
Share price at
grant (rounded)
pence
140
Number of
shares awarded
126,225
Percentage of
award vesting
0%
Number of
shares vesting
Nil
Value of
shares vesting
£0
1 Steve Johnson’s 2018 LTIP award was granted prior to him being appointed as CEO.
87
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ANNUAL REPORT ON REMUNERATION CONTINUED
VESTING OF CFO BUYOUT AWARD
The CFO was granted two 2020 LTIP Buyout awards to compensate for LTIP awards forfeited on leaving her previous employer,
Aer Lingus. These awards are granted over N Brown shares and subject to the original Aer Lingus performance targets.
The performance period for one of the awards ended on 31 December 2020. As a result of the pandemic, all three measures
(relative TSR, EPS, and Return on Invested Capital (“RoIC”) fell short of the threshold level at which payments begin, resulting in
zero vesting overall. Set out below is the award outcome.
Aer Lingus performance
conditions
TSR performance compared
to the TSR performance
of the MSCI European
Transportation (large and
mid-cap) index (one-third)
Adjusted earnings per share
(EPS) (one-third)
Return on Invested Capital
(RoIC) (one-third)
Threshold
IAG’s TSR performance equal to
the index (25% of award vests)
Actual
performance
IAG underperformed the
index by 20.7 per cent p.a.
Number of
N Brown
shares
awarded
170,998
Percentage
of award
vesting
0%
Number of
shares
vesting
0
Value of
shares
vesting
£0
2020 EPS of 130 €cents
(10% of award vests)
2020 RoIC of 13 per cent
(10% of award vests)
(122.6) €cents
(22.4) per cent
0%
0%
0
0
£0
£0
LTIP AWARDS GRANTED IN FY21 (AUDITED)
The table below provides details of the long-term incentive awards granted to Executive Directors during the year. Awards were
scaled back by 15% from normal award levels for the CEO from 150% of salary to 127.5% and, for the CFO from 125% of salary to
106.25% of salary. The scale back takes into account the overall approach to incentives for FY21 including the scale back of the
annual bonus and our newly appointed CFO. The Committee has, under the policy, discretion to scale back the vesting outcome
if it has concerns that the level of vesting and overall quantum are not appropriate.
Executive
Steve Johnson
Date of grant
06/11/2020
Performance
condition
50% TSR
% of salary
award level
127.5%
Face value
of award
£541,875
Number
of shares
979,882
Share price at
grant pence
Performance
period
55.3 Three years to end of
financial year FY23
Rachel Izzard
06/11/2020
50% Net Cash
Generation
As above
106.25%
£371,875
672,468
55.3
As above
Metric
TSR
Relative TSR compared to
the FTSE SmallCap excluding
Investment Trusts
Net Cash Generation2
Delivered over FY21,
FY22 and FY23
Weighting
50%
Threshold target (25% vesting)
Median ranking
Maximum target
(100% vesting)1
Upper quartile ranking
50%
£121.4m
£191.4m or more
Rationale for measure
To incentivise the achievement of
above average stock market returns for
shareholders.
To incentivise management’s focus on
strong business performance and careful
cash management, thus reducing the
business’ net unsecured debt.
1 Straight-line vesting between threshold and maximum performance.
2 For a definition of Net Cash Generation see glossary on p161.
88
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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.
Executive
Steve Johnson1
Rachel Izzard3
Craig Lovelace4
29 Feb 2020
65,645
17,316
126,225
35,410
601,983
–
–
–
–
133,915
12,586
29,355
238,771
48,836
429,292
Awarded
during
the year
–
–
–
–
–
979,882
672,468
170,998
482,674
–
–
–
–
–
–
Lapsed
during
the year
65,645
17,316
–
–
–
–
–
170,998
–
133,915
12,586
29,355
238,771
48,836
429,292
Vested and
exercised
during the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Date granted2
27 Feb 2021
August 2017
–
August 2018
–
August 2018
126,225
June 2019
35,410
601,983
September 2019
979,882 November 2020
672,468 November 2020
– November 2020
482,674 November 2020
August 2017
July 2017
June 2018
August 2018
June 2019
September 2019
–
–
–
–
–
–
Type of award
LTIP
DABS
LTIP
DSBP
LTIP
LTIP
LTIP
LTIP buyout award
LTIP buyout award
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 2018 have not been met and these awards have lapsed.
3 Awards were made to Rachel Izzard to compensate for awards forfeited upon leaving her former employer, Aer Lingus, part of the IAG Group. The Awards were
made under the terms of the LTIP Long-Term Incentive Plan and will have the same vesting dates and the same performance conditioned as the awards forfeited.
More detail on the lapse of the first award is set out in the section on p88 entitled ‘Vesting of CFO Buyout Award’.
4 All of Craig Lovelace’s outstanding awards lapsed upon cessation of employment in accordance with the terms of his employment.
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 annual bonus share awards until this threshold is achieved.
The beneficial interests of Directors who served during the year, together with those of their families are as follows:
Owned shares
Other interests in shares
Steve Johnson
Rachel Izzard3
Craig Lovelace4
Matt Davies
Lord Alliance of
Manchester CBE
Ron McMillan
Lesley Jones
Richard Moross
Gill Barr
Michael Ross
Vicky Mitchell
Joshua Alliance
29 February
20201
60,240
–
46,672
31,130
96,643,694
27 February
20211
97,160
57,377
–
50,154
184,196,762
50,000
–
–
8,506
–
–
–
80,555
–
–
13,704
–
–
21,213,800
Value of
shares
(as a %
of salary)2
15.7%
11.2%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Outstanding
awards subject
to performance
conditions
1,708,090
1,155,142
0
–
–
Guideline
met?
No
No
No
N/A
N/A
Unvested
awards not
subject to
performance
conditions
35,410
–
–
–
–
Vested
unexercised
awards
–
–
–
–
–
N/A
N/A
N/A
N/A
N/A
N/A
N/A
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total as at
27 February
2021
1,840,660
1,212,519
0
50,154
184,196,762
80,555
0
0
13,704
0
0
21,213,800
1 The figures for the Executive Directors include the number of beneficially owned shares obtained via direct purchase, acquisitions under the Company’s open
offer as executed on 23 December 2020 and deferred bonus shares.
2 The value of shareholding as a % of salary is calculated using the market closing price of 68.5p on 26 February 2021.
3 Rachel Izzard joined the Board on 29 June 2020.
4 Craig Lovelace stepped down from the Board on 28 June 2020 and the table states his position at that time and not 27 February 2021.
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 27 February 2021 and 19 May 2021.
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ANNUAL REPORT ON REMUNERATION CONTINUED
DIRECTORS’ SHAREHOLDINGS
The graph shows the Company’s ten-year performance, measured by TSR, compared to the performance of the FTSE Small Cap,
FTSE 250 and AIM 100 indices, also measured by TSR. The Company has been a member of these indices during the ten-year period
and they are therefore considered appropriate as comparator groups for this purpose.
TOTAL SHAREHOLDER RETURN PERFORMANCE: N BROWN VS FTSE 250,
FTSE SMALLCAP & AIM 100
(rebased to 100)
350
300
250
200
150
100
50
0
N Brown Group plc
FTSE 250 Index
FTSE SmallCap Index
FTSE AIM 100
Feb 11
Feb 12
Feb 13
Feb 14
Feb 15
Feb 16
Feb 17
Feb 18
Feb 19
Feb 20
Feb 21
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
2,734
38.7%
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%
FY17
1,373
42.1%
0%
FY18
1,208
66.7%
0%
FY19
555
34.4%
0%
FY19
266
38.5%
0%
FY202
479
0%
0%
FY21
737
88%
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 was 6.5% of maximum although no annual bonus was actually paid.
90
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk CEO PAY RATIO
The employee data for the CEO pay ratio has been compiled using Option A as it represents the most statistically accurate
method for identifying UK employee remuneration. The FY21 pay data has been taken for all individuals on a full-time equivalent
basis using fixed pay data as at 27 February 2021. 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
2021
2020
2021
2020
Method
A
A
25th percentile
pay ratio
36:1
27:1
Median
pay ratio
29:1
22:1
75th percentile
pay ratio
18:1
14:1
CEO
25th Percentile
50th Percentile
75th Percentile
Salary
£404,404
£424,934
Total
Remuneration
£737,326
£478,968
Salary
£19,000
£17,418
Total
Remuneration
£20,327
£17,944
Salary
£20,360
£20,883
Total
Remuneration
£25,333
£22,537
Salary
£36,269
£30,739
Total
Remuneration
£40,212
£35,417
The increase in the pay ratio year on year is due to the payment of the Annual Bonus for FY21, no bonus was paid for FY20. This has
increased the total remuneration for all colleagues, but to a significantly higher degree for the CEO. We have seen an increase in
salaries and total remuneration across the percentiles, this is due to two factors:
1 The proposed payment of the bonus; and
2 The shape of the organisation has changed considerably over the past 12 months with a reduction of 16% in the headcount,
this included the redundancy of c.160 of our lowest paid colleagues at Logistics, these factors have caused a shift in the
positioning of the percentiles.
PERCENTAGE CHANGE IN THE DIRECTORS’ REMUNERATION
The table below shows the percentage change in the Executive Directors and Non-Executive Directors’ salaries, benefits
(excluding pension) and annual bonus between FY19 and FY20 and between FY20 and FY21, compared to that of the average for
all employees of the Group.
% Change from FY20 to FY21
% Change from FY19 to FY20
Steve Johnson4
Rachel Izzard5
Matt Davies6
Ron McMillan
Gill Barr
Vicky Mitchell7
Michael Ross
Richard Moross
Lesley Jones
Lord David Alliance
of Manchester
Joshua Alliance8
Average of other employees9
Salary3
-4.9%
–
-5.1%
0%
-1.6%
–
-3.3%
0%
1.5%
0%
–
8.1%
Benefits2
0%
–
0%
0%
-80%
–
-100%
-97.8%
-100%
0%
–
33.8%
Annual bonus
100%
–
–
–
–
–
–
–
–
–
–
100%
Salary1
2%
–
–
15.9%
10.3%
–
9%
16%
-5.6%
0%
–
4.7%
Benefits
0%
–
–
100%
25%
–
50%
200%
0%
0%
–
0%
Annual bonus
-100%
–
–
–
–
–
–
–
–
–
–
-100%
1 Non-Executive Director fees were increased effective 1 June 2019 in line with the 2% salary increase implemented across the Company. Fees for Committee Chairs and
the Senior Independent Director were increased to take account of the increased responsibilities and time commitment of the roles.
2 Non-Executive Director benefits include travel and accommodation expenses. Executive and other employee expenses include private medical cover and car allowance.
3 In FY21, all members of the Board took a voluntary salary reduction of 20% across April, May and June 2020.
4 Steve Johnson did not receive a bonus in FY20.
5 Rachel Izzard joined the Company in June 2020; therefore no full year of remuneration has been paid to her across any of the financial years under review.
6 Matt Davies did not receive a full year of remuneration as Chair in FY19 having being appointed in May 2018, his full year as Chair was FY20.
7 Vicky Mitchell was appointed to the Board in January 2020; therefore FY21 is the only full year of remuneration paid to her across any of the financial years under review.
8 Joshua Alliance was appointed to the Board in December 2020; therefore no full year of remuneration has been paid to him across any of the financial years under review.
9 No bonus was paid to colleagues in FY20.
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report REMUNERATION CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED
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.
SHAREHOLDER VOTING ON THE DIRECTORS’
REMUNERATION REPORT AT THE 2020
ANNUAL GENERAL MEETING AND POLICY
AT THE 2019 ANNUAL GENERAL MEETING
Voting outcome for the 2019 Remuneration Policy vote:
Colleague costs (£m)
Dividends (£m)
2021
£72.5m
£0m
2020
% Change
£67.3m
£20.1m
5.6%
-100%
% of votes cast
Number of votes cast
For
99.60
177,995,722
Against
0.40
706,951
OTHER DIRECTORSHIPS
The current CEO and CFO do not serve as Non-Executive
Directors for any company.
PAYMENTS TO PAST DIRECTORS AND
PAYMENTS FOR LOSS OF OFFICE
Craig Lovelace resigned and stood down as CFO on 28 June
2020. Craig’s remuneration for FY21 is disclosed in this
Remuneration Report. For the period he was employed by the
Company in FY21, Craig Lovelace received his salary, benefits and
pension in accordance with the terms of his employment. He was
not eligible for an annual bonus for FY21 and did not receive an
LTIP award. All of Craig Lovelace’s outstanding LTIP and DSPB
awards lapsed upon cessation of employment.
Matt Davies stepped down as Chair on 31 March 2021 and
received no fees beyond this date or any payments in lieu
of notice.
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 2020 Remuneration Report vote:
% of votes cast
Number of votes cast
For
99.94
171,973,863
Against
0.06
109,805
Notes: 11,429 votes were withheld in 2020. 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 – 31 March 2021
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 takes 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 six times during the year, see p76 for details of attendance.
92
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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 FY21 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 and that the policy has
operated as intended.
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 £87,401 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 p40). 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.
The Committee Chair engaged with several of our larger
shareholders in respect of the application of policy in light of
Covid-19.
The Committee has also considered investor and proxy agency
voting policy guidelines and market practice developments
carefully in light of the pandemic to ensure the operation of
the policy reflects current investor thinking. Support for the
remuneration policy at the 2019 AGM was 99.60% and for
the Remuneration Report in 2020 99.94% and there were no
material concerns for the Committee to consider from the AGM
voting outcomes.
93
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report REMUNERATION CONTINUED
APPLICATION OF THE REMUNERATION POLICY FOR FY22
The application of the remuneration policy for FY22 is set
out below.
BASE SALARY
Effective 1 June 2021, the CEO and CFO’s salaries increased
by 1.5% in line with the salary increase awarded to the rest of
the workforce.
Name
Steve Johnson
Rachel Izzard
Salary at 1 June
2020
£425,000
Salary at 1 June
2021
£431,375
£350,000
£355,250
PENSION
Our CEO and CFO both receive cash supplements of 8% of
salary, in lieu of pension contributions and these are aligned to
the majority of the workforce.
ANNUAL BONUS PLAN
For FY22 the annual bonus maximum opportunity will revert to
normal levels at 150% of salary for the CEO and 125% of salary for
the CFO. 60% of the bonus will be paid in cash and 40% of the
bonus will be paid in shares with a three-year holding period.
Our focus for the year ahead is a return to profitability and
customer growth with an element based on Environmental,
Social and Governance factors which is an important element of
our business strategy.
The performance measures and weightings are set out below.
Objective
Adjusted EBITDA1
Active Customer Accounts
Customer NPS
ESG Metric
Weighting
65%
15%
10%
10%
1 For a definition of Adjusted EBITDA see the glossary on p161
The Committee considers that the targets for the annual bonus
are commercially sensitive and are not therefore disclosed in
this report. The targets and performance against them will be
disclosed retrospectively in the FY22 Remuneration Report.
LONG-TERM INCENTIVE AWARDS
Following the 15% scale back of the 2020 awards the LTIP award
levels for 2021 will revert to the normal policy level of 150% of
salary for our CEO and 125% for our CFO. The Committee is
satisfied that this award level is appropriate, taking into account
the recent appointment of the CFO and share price performance
over the last 12 months.
For the 2021 awards we have retained the TSR performance
measure for 50% of the award and reintroduced earnings per
share for the other 50% with targets as set out below. The LTIP
awards are not made until August each year and targets may
need to be reviewed if there is a significant change in business
outlook and performance in the interim.
94
Metric
TSR
Weighting
50%
Relative TSR to
the FTSE SmallCap
excl Investment
Trusts
Threshold
target 25%
vests1
Median
ranking
Maximum
target
100% vests
Upper
quartile
ranking or
above
Adjusted EPS
50%
4% CAGR
Growth from
FY21 to FY24
12%
CAGR or
above
Rationale for
measure
To incentivise
the
achievement
of above
average
stock market
returns for
shareholders.
To incentivise
management
to generate
sustainable
profitable
growth, in
line with the
strategy.
1 Straight-line vesting in between threshold and maximum.
FEES FOR THE CHAIR AND
NON-EXECUTIVE DIRECTORS
Details of the Non-Executive Directors’ fees are set out below.
From 1 June 2021 the fees increased by 1.5% in line with the
salary increase awarded to the rest of the workforce with the
exception of the Chair.
Chair of the Board fee
Other Independent Non-Executive Directors’
base Board fee
Non-Executive Director base Board fee
(Lord Alliance)
Non-Executive Director base Board fee (Joshua
Alliance)
Additional Non-Executive Director fees:
Senior Independent Director’s fee
Chair of Audit and Risk Committee
Chair of Remuneration Committee
Chair of Financial Services Board Committee
Designated Director for Colleague Engagement
Fees at
1 June 2020
255,000
51,000
Fees at
1 June 2021
255,000
51,765
51,000
51,765
–
40,600
10,000
15,000
15,000
24,000
10,000
10,150
15,225
15,225
24,360
10,150
APPROVAL OF THE DIRECTORS’
REMUNERATION REPORT
The Directors’ Remuneration report was approved by the Board
on 19 May 2021.
Signed on behalf of the Board on 19 May 2021.
Gill Barr
Chair of the Remuneration Committee
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk ADDITIONAL DISCLOSURES
The Directors have pleasure in presenting their Annual Report
and audited Accounts for the year ended 27 February 2021.
The Directors’ Report comprises p54 to 97, 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 elsewhere in the Annual Report and
Accounts, namely:
Disclosure
Financial and Risk Management
Future Business Developments
Disclosure of the Group’s greenhouse gas emissions in FY21
Page
32
20
50
Additional 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 97 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.
SHARE CAPITAL
Details of the Group’s issued share capital are shown in note
39 on p160. 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.
On 5 November 2020, the Company announced its proposal
to delist from the Main Market of the London Stock Exchange
and re-list on the Alternative Investment Market. The move was
approved by shareholders at a General Meeting on 23 November
2020 and effective from 23 December 2020, the Company’s
ordinary shares (as listed on the Official List) are now traded on
the Alternative Investment Market.
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.
On 5 November 2020, the Company announced a placing and
open offer to raise £100m by way of issuing 174,666,053 new
ordinary shares at 57p per share. The placing and open offer were
approved by shareholders at a General Meeting on 23 November
2020 and on 23 December 2020, 174,666,053 new ordinary shares
were issued bringing the Company’s total issued share capital to
460,483,231 ordinary shares.
At the 2020 Annual General Meeting, the Directors were given
the power to issue new shares up to a nominal amount of
£10,530,106. This power will expire on the earlier of the conclusion
of the 2021 Annual General Meeting or 6 July 2021. Accordingly,
a resolution will be proposed by Directors at the 2021 Annual
General Meeting to renew the Company’s authority to issue
new shares up to a further nominal amount of £16,965,171 in
connection with an offer by way of a rights issue.
An approval will be sought at the 2021 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 2021 Annual
General Meeting. The Directors have no current plans to issue
shares other than in connection with employee share options.
MAJOR SHAREHOLDERS
In addition to the Directors’ shareholdings shown in the
Remuneration Report on p76 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 10 May 2021:
Shareholder
Schroder Investment Mgt
Nigel Alliance and Joshua Senior
Hargreaves Lansdown Asset Mgt
Holding share
capital
% of issue
58,835,160
47,274,432
17,396,562
12.35
10.27
3.78
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.
95
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report ADDITIONAL DISCLOSURES CONTINUED
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.
CHANGE OF CONTROL
There are a number of agreements that take effect, alter or
terminate upon a change of control of the Company such as
commercial contracts, bank loan agreements, property lease
arrangements and employee share plans. None of these are
considered to be significant in terms of their likely impact on the
business of the Group as a whole. Executive Directors’ service
contracts are terminable by the Group on giving 12 months’
notice. There are no agreements between the Group and its
Directors or employees that provide for additional compensation
for loss of office or employment that occurs because of a
takeover bid. No relevant events were reported in the year.
SIGNIFICANT CONTRACTS
The Group has a number of contractual arrangements with
suppliers (both of goods and services) and occupies leasehold
premises for the purpose of conducting its business. Whilst these
arrangements are important to the business of the Group,
individually none of them are essential to the business of the
Group and do not require disclosure under section 417(5) (c) of
the Companies Act.
2021 ANNUAL GENERAL MEETING
The Annual General Meeting will be held at 12:30 on 6 July 2021.
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.
96
GOING CONCERN
As explained fully in note 2 on p120, the Directors have adopted the
going concern basis in preparing the financial statements.
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 2 March 2024, being the first three years of
the five-year strategic planning period.
The change in strategy implemented during the course of FY20
to strengthen our position as a leading digital retailer put us in
a strong position to respond to the challenges posed by the
Covid-19 outbreak.
During FY20, the Group undertook a strategic review to return
N Brown to sustainable growth and built a plan based on driving
profitability through the Retail business. Whilst the pandemic has
altered the structural dynamics of the retail sector, the Directors
believe that the refreshed strategy remains the right one to
ensure long-term sustainable growth because:
Online retailing is expected to continue to take market share,
accelerated by the impact of Covid-19 on customer behaviour;
N Brown’s target markets continue to be underserved, offering
significant opportunity for growth through a streamlined and
more focused brand portfolio; and
The Group’s new, refreshed customer-centric strategy will attract
a broader range of customers to the Group’s brands and flexible
credit offering.
At the onset of the pandemic the primary business objective was
on cash generation and reducing non-securitised debt. The Group
took swift and decisive action in March 2020 and this, combined
with delivery of strategic initiatives, enabled the Group to make
material cost savings and stabilise the business in the first half of the
financial year. In the second half of the financial year, the Group saw
a compelling opportunity to de-risk the business and accelerate its
refreshed strategy through successfully completing a capital raise
of £100m and securing new financing arrangements with its long-
standing, supportive lenders through to December 2023. The Group
finished FY21 with no unsecured debt, positive trajectory in product
revenue, a stable financial services business and a strong Balance
Sheet that facilitates accelerating its refreshed strategy. The strategic
progress made in FY21 is set out in more detail on p8 to 21.
Taking into account the continued 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 FY22 base and downside planning
scenarios as described in note 2 to the Group accounts on p120, 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.
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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 2 March 2024 assumes that all financing
facilities 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.
RESPONSIBILITY STATEMENT
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.
The Group financial statements are prepared in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006. The Directors have
elected to prepare the parent Company financial statements in
accordance with UK accounting standards, including Financial
Reporting Standard 101 Reduced Disclosure Framework
(“FRS 101”).
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 international accounting standards
in conformity with the requirements of the Companies Act 2006;
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.
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.
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.
The Strategic Report on p1 to 53 and the Directors’ Report on
p54 to 97 are hereby approved by the Board and signed on
behalf of the Board.
Theresa Casey LL.B (Hons) (Solicitor)
Company Secretary
19 May 2021
97
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukFinancial statementsStrategic report Governance report N Brown Group plc Annual Report and Accounts 2021
FINANCIAL
STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF N BROWN GROUP PLC
GROUP ACCOUNTS
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 ACCOUNTS
COMPANY BALANCE SHEET
COMPANY STATEMENT
OF CHANGES IN EQUITY
NOTES TO THE COMPANY ACCOUNTS
SHAREHOLDER INFORMATION
99
108
108
109
110
111
112
152
153
154
162
98
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 27 February
2021 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.
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 have fulfilled our
ethical responsibilities under, and are independent of the Group
in accordance with, UK ethical requirements including the FRC
Ethical Standard as applied to listed entities. We believe that the
audit evidence we have obtained is a sufficient and appropriate
basis for our opinion.
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
27 February 2021 and of the Group’s profit for the period
then ended;
Overview
Materiality:
Group financial
statements as a whole
£2.4m (2020: £2.8m)
4.4% (2020: 4.4%) of group profit before tax
normalised to exclude exceptional items and
by averaging over the last three years due to
fluctuations in the business cycle
Coverage
91% (2020: 90%) of group profit before tax
the Group financial statements have been properly prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
Key audit matters
Recurring risks:
vs 2020
the parent Company financial statements have been properly
prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework; and
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Impairment of customer receivables
Allianz legal claim - contingent liability
Capitalised software and development costs as intangible
assets.
Impairment of the carrying value of non-current assets
in the core group cash generating unit (“CGU”) and the
carrying amount of the parent company’s investment in
subsidiaries
99
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF N BROWN GROUP PLC
CONTINUED
2 KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT
Key audit matters are those matters that, in our professional judgement, 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. These matters were addressed in the context of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the
key audit matters, in decreasing order of audit significance, were as follows:
Impairment
of customer
receivables
£85.2m (2020: 71.7m)
Refer to p73 (Audit
and Risk Committee
Report), p115 to 117
(accounting policy)
and p121 and 134
(financial disclosures)
The risk
Subjective estimate:
The calculation of the impairment losses
provision is based on an expected credit
loss (“ECL”) model which includes a number
of judgements and subjective estimates,
including the determination of Significant
Increases in Credit Risk (“SICR”), Lifetime and
12-month Probability of Default (“PD”) and
Post-model adjustments (“PMA”).
There is a risk that the impairment losses
provision on trade receivables is materially
misstated as a result of inappropriate
judgements or estimates made by
management, as explained above. The risk is
heightened in the current year as a result of
the ongoing uncertainty due to the impact of
COVID-19 on the determination of the ECL.
We determined that the impairment losses
provision 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 response
Our procedures included:
Benchmarking assumptions: We critically assessed the appropriateness
of the judgements and estimates made by management in determining
the key assumptions used for the expected credit losses calculations. This
involved evaluating the key assumptions in the impairment calculation
using our cumulative entity and industry knowledge to assess against
factors such as historical experience and industry benchmarking where
appropriate.
Our sector experience: We assessed completeness of the PMAs and
critically assessed the assumptions underpinning the most significant
PMAs applied due to model weakness identified. We specifically tested
those PMA’s in relation to impact of COVID-19 through assessing a range
of plausible scenarios. We also tested management’s calculations of
the PMAs in addition to testing a sample of the underlying data used
in determining the PMAs through agreeing the sample to relevant
internal and third party reports. Together with our credit risk modelling
specialists, we critically assessed the methodology for determining PD
and SICR. We challenged the PD criteria against actual default rates and
staging allocation of receivables using SICR thresholds. With the support
of economic specialists, in response to identified model weakness, we
performed an assessment of the appropriateness of the macroeconomic
variables (“MEV”) and scenarios included within the ECL.
Sensitivity analysis: We performed sensitivity analysis over SICR and PDs
to assess how the model would perform under alternative assumptions
and the resulting impact on the ECL. We also applied stress scenarios of
the MEV to assess the resulting impact on the ECL.
Assess transparency: We assessed the adequacy and appropriateness
of the Group’s disclosures about the degree of estimation and sensitivity
analysis involved in arriving at the impairment of customer receivables.
100
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk Allianz Insurance
plc (“Allianz”) legal
claim – Contingent
liability
Refer to p73 (Audit
and Risk Committee
Report), p118
(accounting policy)
and p144 (financial
disclosures)
The risk
Dispute outcome:
In the normal course of business for the Group, potential
exposures may arise from disputes relating to regulatory
matters. Whether there is a liability and the quantum of any
such liability, is inherently uncertain and judgemental.
In January 2020, in the prior year, a legal claim was received
from Allianz in respect of all payments of redress Allianz
has made to the Group’s customers. The claim is extremely
complex and is at an early stage of proceedings.
There has been significant disruption in the year due to
COVID-19 which has delayed the progress of the claim.
No provision is recognised as it has been determined
that it is not possible to calculate a best estimate of the
potential liability as legal proceedings remain at an early
stage. As a result, a contingent liability is disclosed.
The amounts involved are potentially significant, and the
application of accounting standards to determine whether
a provision could or should be recognised, and whether
a reliable estimate can be made, requires the exercise of
significant judgement.
Our response
Our procedures included:
Inspecting correspondence: Together with our own legal
specialists, we inspected correspondence with the Group’s
external counsel and held discussions with the Group’s
in-house legal counsel.
Legal expertise: With the assistance of our own legal
specialists, we assessed the facts, complexities and
uncertainties of the claim, to evaluate whether a reliable
estimate of the amount of any potential liability can be
determined.
Assessment of experts: We assessed the competence,
capabilities and objectivity of the external legal expert
engaged by the Group.
Enquiry of external legal experts: With the help of our
own legal specialists, we held direct discussions with
management’s legal experts in respect of the legal claim,
including challenging the current status and complexities of
the claim.
Assessing transparency: We assessed the adequacy of
the Group’s related disclosures in respect of the contingent
liability and the judgements taken by management.
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CONTINUED
The risk
Accounting treatment:
The Group continues to incur significant software and
development project costs in respect of its ongoing
transformation from a catalogue company to a fully
online retailer. This is a significant system infrastructure
programme which has been ongoing for several years.
The Group capitalises both internal and external costs.
These costs are capitalised to the extent that future
economic benefits are expected to be generated by
the project and they meet the appropriate capitalisation
recognition criteria for software and development costs.
This requires significant judgement as to whether the
internal costs incurred meet the recognition criteria.
Subjective estimate:
Further to the above judgement, the Group continues
to undergo fast-paced change as part of its ongoing
transformation process, and continues to capitalise
significant amounts of new software and development
expenditure. The Group’s ability to implement its strategic
investment in technological advancements following
the completion of the equity raise and refinancing in
December 2020, has resulted in an increased risk this year
around the appropriateness of the Useful Economic Lives
(“UELs”) of the existing intangible assets and whether
any assets previously capitalised may be superseded by
newly capitalised intangible assets such that these older
assets could be subject to obsolescence, or a shortened
expected UEL due to revised timelines for new technology
projects. The financial statements (note 12) disclose the
sensitivity estimated by the Group.
The level of risk for capitalised software and development
costs has increased in the year as the length of time taken
to complete the digital transformation extends.
Forecast-based assessment:
The carrying value of non-current assets in the Group
CGU and the carrying amount of the parent company’s
investments in subsidiaries are significant and there are
indicators of impairment due to the Group’s market
capitalisation being lower than the carrying value of net
assets of the Group and the parent Company, continuing
pressure on the Group’s share price, and the impact of
COVID-19 on the Group’s trading performance.
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.
We determined that the value in use of the Group CGU has
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.
Our response
Our procedures included:
Tests of detail: We agreed a sample of internally capitalised
labour costs to timesheets and other relevant project
information. We interviewed selected employees who
were assigned to projects to corroborate the nature of
the work performed and time capitalised and to evaluate
the appropriateness of classification as capitalised costs,
by reference to the recognition criteria of the applicable
accounting standards.
Our experience: We assessed the Group’s criteria for the
capitalisation of intangible assets in the year with reference to
the recognition criteria for software and development costs.
Critical assessment of useful economic lives: We critically
assessed management’s exercise to revise the UEL of the
existing intangible assets portfolio. For selected intangible
assets, we challenged the future plans and the viability and
economic use of these assets. We assessed management’s
estimation of the useful economic lives of selected intangible
assets with reference to the Group’s latest IT strategy.
Enquiry of experts employed by the entity: We held
direct discussions with the Group’s IT technical personnel
to challenge the nature and use of the selected intangible
assets, and the basis for the UEL assigned, with reference to
the Group’s IT strategy.
Assessment of experts: We assessed the competence and
capabilities of the Group’s IT technical lead who was involved
in management’s exercise to reassess the UELs.
Assessing transparency: We assessed the adequacy of
the Group’s disclosures about the judgements taken in
the capitalisation of software and development costs as
intangible assets and the estimation of the Group’s useful
economic lives for existing intangible assets with reference to
their continued use in the Group.
Our procedures included:
Benchmarking assumptions: We challenged, with the
support of our own valuation specialists, the key assumptions
used in the value in use calculations of the Group CGU by
comparing them to externally derived data in relation to key
inputs such as projected growth rates in years one to three
and discount rates.
Historical comparisons: We compared previous financial
periods’ cash flow 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 and reduced
projected growth rates in years one to, to assess how sensitive
the value in use calculation is to a reasonably possible change
in key assumptions.
Comparing valuations: We compared the total of the value in
use calculation to the Group’s market capitalisation to assess
the reasonableness of those cash flows and critically assessed
the rationale for the difference from that comparison.
Assessing transparency: We assessed whether the Group’s
and parent Company’s disclosures about the sensitivity of
the outcome of the impairment assessment to changes in
key assumptions reflects the risks inherent in the valuation
of the Group.
Software and
development costs
as intangible assets
£133.0m (2020:
151.4m)
Refer to p73
(Audit and Risk
Committee Report),
p114 (accounting
policy) and p131-132
(financial disclosures)
Impairment of
the carrying value
of non-current
assets in the Group
cash generating
unit (“CGU”)
and the carrying
amount of the
parent company’s
investment in
subsidiaries
Refer to p73 (Audit
and Risk Committee
Report), p114
(accounting policy)
and p132 (financial
disclosures)
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk For each of the key audit matters reported above, we performed
the tests above rather than seeking to rely on any of the Group’s
controls because the nature of the balance is such that we would
expect to obtain audit evidence primarily through the detailed
procedures described.
We continue to perform procedures over the carrying value of
inventories. However, following management’s strategic focus
on reducing the inventory balance and the improvement in the
profile of ageing of inventory, we have not assessed this as one of
the most significant risks in our current year audit and, therefore,
it is not separately identified in our report this year.
Furthermore, we continue to perform procedures over the going
concern assumption. However, following the Group’s completion
of the equity raise in December 2020, we have not assessed this
as one of the most significant risks in our current year audit and
therefore, it is not separately identified in our report this year.
In the prior year we reported a key audit matter in respect of
the impact of uncertainties due to the UK exiting the European
Union. Following the trade agreement between the UK and the
EU, and the end of the EU-exit implementation period, the nature
of these uncertainties has changed. We continue to perform
procedures over material assumptions in forward looking
assessments such as going concern and impairment tests
however we no longer consider the effect of the UK’s departure
from the EU to be a separate key audit matter.
3 OUR APPLICATION OF MATERIALITY
AND AN OVERVIEW OF THE SCOPE
OF OUR AUDIT
Materiality for the Group financial statements as a whole was
set at £2.4m (2020: £2.8m), determined with reference to a
benchmark of Group profit before tax, normalised to exclude
exceptional items as disclosed in note 6, and by averaging over
the last three years due to fluctuations in the business cycle, of
which it represents 4.4% (2020: 4.4%).
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed
to a lower threshold, performance materiality, so as to reduce
to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a
material amount across the financial statements as a whole.
Performance materiality for the Group and parent Company was
set at 50% (2020: 65%) of materiality for the financial statements
as a whole, which equates to £1.2m (2020: £1.8m) for the Group
and £0.9m (2020: £1.6m) for the parent Company. We applied
this percentage in our determination of performance materiality
based upon the level of identified misstatements and control
deficiencies during the prior period.
Materiality for the parent Company financial statements as a
whole was set at £1.8m (2020: £2.1m), determined with reference
to a benchmark of Company total assets, of which it represents
0.5% (2020: 0.5%).
We agreed to report to the Audit Committee any corrected
or uncorrected identified misstatements exceeding £120,000
(2020: £140,000), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Of the Group’s 32 (2020: 33) reporting components, we
subjected 4 (2020: 4) to full scope audits for Group purposes.
The components within the scope of our work accounted for the
percentages illustrated opposite.
For the residual components, we performed analysis at an
aggregated Group level to re-examine our assessment that there
were no significant risks of material misstatement within these.
The work on the 4 components, including the audit of the parent
Company, was performed by the Group team.
The component materialities ranged from £0.42m to £2.04m
(FY20: £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.
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CONTINUED
4 GOING CONCERN
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group
or the Company or to cease their operations, and as they have
concluded that the Group’s and the Company’s financial position
means that this is realistic. They have also concluded that there
are no material uncertainties that could have cast significant
doubt over their ability to continue as a going concern for at least
a year from the date of approval of the financial statements (“the
going concern period”).
We used our knowledge of the Group, its industry, and the
general economic environment to identify the inherent risks to
its business model and analysed how those risks might affect
the Group’s and Company’s financial resources or ability to
continue operations over the going concern period. The risks that
we considered most likely to adversely affect the Group’s and
Company’s available financial resources and/or metrics relevant
to debt covenants over this period is consumer confidence.
We also considered less predictable but realistic second order
impacts, such as the impact of COVID-19 and the erosion of
supplier confidence, which could result in a rapid reduction of
available financial resources.
We considered whether these risks could plausibly affect the
liquidity or covenant compliance in the going concern period by
comparing severe, but plausible downside scenarios that could
arise from these risks individually and collectively against the level
of available financial resources and covenants indicated by the
Group’s financial forecasts.
We considered whether the going concern disclosure in note 2
to the financial statements gives a full and accurate description
of the Directors’ assessment of going concern. We assessed the
completeness of the going concern disclosure.
Our conclusions based on this work:
we consider that the Directors’ use of the going concern basis
of accounting in the preparation of the financial statements
is appropriate;
we have not identified, and concur with the Directors’
assessment that there is not, a material uncertainty related
to events or conditions that, individually or collectively, may
cast significant doubt on the Group’s or Company’s ability to
continue as a going concern for the going concern period; and
we have nothing material to add or draw attention to
in relation to the Directors’ statement in note 2 to the
financial statements on the use of the going concern basis
of accounting with no material uncertainties that may cast
significant doubt over the Group and Company’s use of that
basis for the going concern period, and we found the going
concern disclosure in note 2 to be acceptable.
GROUP PROFIT BEFORE
TAX NORMALISED TO
EXCLUDE EXCEPTIONAL
ITEMS AND AVERAGED
OVER THE LAST 3
YEARS £54.4M
(2020: £64.2m)
GROUP MATERIALITY
£2.40M
(2020: £2.80M)
£2.40m
Whole financial statements
materiality (2020: £2.80m)
£2.04m
Range of materiality
at 4 components
(£0.42m–£2.04m)
£0.12m
Misstatements reported
to the audit committee
(2020: £0.14m)
Normalised PBT
Group materiality
GROUP REVENUE
GROUP PROFIT AND
LOSSES BEFORE TAX
3
1
9
97%
(2020: 96%)
96
97
91%
(2020: 90%)
100
91
GROUP TOTAL ASSETS
3
4
97%
(2020: 96%)
90
97
Full scope for Group audit purposes 2021
Audit of specific account balances for Group purposes 2020
Full scope for Group audit purposes 2020
Residual components
104
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time
they were made, the above conclusions are not a guarantee that
the Group or the Company will continue in operation.
5 FRAUD AND BREACHES OF LAWS AND
REGULATIONS – ABILITY TO DETECT
IDENTIFYING AND RESPONDING TO RISKS OF
MATERIAL MISSTATEMENT DUE TO FRAUD
To identify risks of material misstatement due to fraud
(“fraud risks”) we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or provide
an opportunity to commit fraud. Our risk assessment
procedures included:
Enquiring of Directors, the Audit Committee, internal audit
and inspection of policy documentation as to the Group’s
high-level policies and procedures to prevent and detect
fraud, including the internal audit function, and the Group’s
channel for “whistleblowing”, as well as whether they have
knowledge of any actual, suspected or alleged fraud.
Reading Board, Audit & Risk Committee, Operational, Risk
and compliance committee, Financial services operations
committee, and Remuneration committee minutes.
Considering remuneration incentive schemes and
performance targets for management and Directors, including
the EPS target for management remuneration.
Using analytical procedures to identify any usual or
unexpected relationships.
We communicated identified fraud risks throughout the
audit team and remained alert to any indications of fraud
throughout the audit.
As required by auditing standards, and taking into account
possible pressures to meet profit targets and our overall
knowledge of the control environment, we perform procedures
to address the risk of management override of controls and the
risk of fraudulent revenue recognition, in particular the risk that
Group management may be in a position to make inappropriate
accounting entries, through journals throughout the period
in respect of, product revenue (excluding postage & packing
revenue) and credit account interest financial statement captions.
We also identified a fraud risk related to inappropriate
impairment on customer receivables and inappropriate
capitalisation of capitalised internal software and development
costs in response to pressures to meet profit targets, covenants,
management compensation arrangements, historic internal
control deficiencies identified and decline in the environment in
which the entity operates.
Further detail in respect of the above is set out in the key audit
matter disclosures in section 2 of this report.
We also performed procedures including:
Identifying journal entries and other adjustments to test for all
full scope components based on risk criteria and comparing the
identified entries to supporting documentation. These included
those posted to unusual accounts.
Assessing significant management judgements in relation to
capitalised internal software and development costs for bias; and
Assessing significant accounting estimates for bias.
IDENTIFYING AND RESPONDING TO RISKS
OF MATERIAL MISSTATEMENT DUE TO NON-
COMPLIANCE WITH LAWS AND REGULATIONS
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 together with
our legal specialists, and discussed with the Directors and other
management the policies and procedures regarding compliance
with laws and regulations.
As the Group is regulated, our assessment of risks involved
gaining an understanding of the control environment
including the entity’s procedures for complying with
regulatory requirements.
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, pension legislation, and
the regulations relevant to the Job Retention Scheme, 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 or the loss of the Group’s licence to operate.
We identified the following areas as those most likely to have
such an effect: health and safety, anti-bribery and employment
law. 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. Therefore, if a
breach of operational regulations is not disclosed to us or evident
from relevant correspondence, an audit will not detect that
breach. Further detail in respect of the Allianz legal claim is set
out in the key audit matter disclosures in section 2 of this report.
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CONTINUED
CONTEXT OF THE ABILITY OF THE AUDIT TO DETECT
FRAUD OR BREACHES OF LAW OR REGULATION
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 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 fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect non-
compliance with all laws and regulations.
6 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 addition to our audit of the financial statements, the Directors
have engaged us to audit the information in the Directors’
Remuneration Report that is described as having been audited,
which the Directors have decided to prepare as if the Company
were required to comply with the requirements of Schedule 8 to
The Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 (SI 2008 No. 410) made under the
Companies Act 2006.
In our opinion the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006, as if those requirements applied to
the Company.
DISCLOSURES OF EMERGING AND PRINCIPAL RISKS
AND LONGER-TERM VIABILITY
We are required to perform procedures to identify whether there
is a material inconsistency between the Directors’ disclosures
in respect of emerging and principal risks and the viability
statement, and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
the directors’ confirmation within the Viability Statement on
pages 96-97 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 how
emerging risks are identified, 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.
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 judgements 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 perform procedures to identify whether there
is a material inconsistency between the Directors’ corporate
governance disclosures and the financial statements and our
audit knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements and
our audit knowledge:
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;
106
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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 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 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.
9 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 and the terms of our engagement by the Company.
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 the further matters we are
required to state to them in accordance with the terms agreed
with the Company, 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.
Anthony Sykes (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
19 May 2021
the section of the annual report describing the work of the
Audit Committee, including the significant issues that the audit
committee considered in relation to the financial statements, and
how these issues were addressed; and
the section of the Annual Report that describes the review of
the effectiveness of the Group’s risk management and internal
control systems.
In addition to our audit of the financial statements, the
Directors have engaged us to review their Corporate
Governance Statement as if the Company were required to
comply with the Listing Rules and the Disclosure Guidance
and Transparency Rules of the Financial Conduct Authority in
relation to those matters. Under the terms of our engagement
we are required to review the part of the Corporate
Governance Statement relating to the Company’s compliance
with the provisions of the UK Corporate Governance Code
specified for our review. We have nothing to report in
this respect.
7 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:
adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law
are not made; or
we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
8 RESPECTIVE RESPONSIBILITIES
DIRECTORS’ RESPONSIBILITIES
As explained more fully in their statement set out on page 97,
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.
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report GROUP ACCOUNTS
CONSOLIDATED INCOME STATEMENT
52 weeks ended 27 February 2021
52 weeks ended 29 February 2020
Note
Before
exceptional
items
£m
Exceptional
items
(note 6)
£m
Total
£m
Before
exceptional
items
£m
Exceptional
items
(note 6)
£m
(Restated)*
Total
£m
Revenue
Credit account interest
Group 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
* Refer to prior year adjustment note 32
Earnings per share from continuing operations
Basic
Diluted
3
4
4
4
5
8
18
9
11
11
489.3
239.5
728.8
(266.2)
(144.1)
5.0
(139.1)
323.5
46.7
(16.6)
30.1
(10.0)
20.1
(3.3)
16.8
–
–
–
(1.1)
–
–
–
(1.1)
(11.6)
–
(11.6)
1.4
(10.2)
1.7
(8.5)
489.3
239.5
728.8
(267.3)
(144.1)
5.0
(139.1)
322.4
35.1
(16.6)
18.5
(8.6)
9.9
(1.6)
8.3
2.63
2.63
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Profit for the period
Items that will not be reclassified subsequently to profit or loss
Actuarial (loss)/gains on defined benefit pension schemes
Tax relating to items not reclassified
Net other comprehensive (loss)/income that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Net other comprehensive (loss)/income that may be reclassified to profit or loss
Other comprehensive (loss)/income for the period
Total comprehensive income for the period attributable to equity holders of the parent
574.2
263.3
837.5
(270.0)
(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)
574.2
263.3
837.5
(270.3)
(133.9)
6.3
(127.6)
439.6
48.1
(17.1)
31.0
4.7
35.7
(8.3)
27.4
9.63
9.62
Note
52 weeks
ended
27 February
2021
£m
52 weeks
ended
29 February
2020
£m
29
9
8.3
(1.9)
0.7
(1.2)
(2.6)
(2.6)
(3.8)
4.5
27.4
0.8
(0.3)
0.5
0.2
0.2
0.7
28.1
108
N Brown Group plc Annual Report and Accounts 2021nbrown.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 overdrafts
Provisions
Trade and other payables
Lease liability
Derivative financial instruments
Current tax liability
Net current assets
Non-current liabilities
Bank loans
Lease liability
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
Note
As at
27 February
2021
£m
As at
29 February
2020
£m
(Restated)*
12
13
27
29
18
20
15
16
18
25
25
22
21
27
18
17
27
18
20
23
24
133.0
60.9
3.6
25.5
–
12.7
235.7
77.7
549.0
0.4
94.9
722.0
957.7
(14.1)
(4.7)
(110.6)
(1.8)
(6.2)
(4.5)
(141.9)
580.1
(381.9)
(3.1)
(1.3)
(13.2)
(399.5)
(541.4)
416.3
50.9
85.0
(0.3)
0.4
280.3
416.3
151.4
62.6
5.6
26.3
1.3
13.2
260.4
94.9
614.4
4.0
161.7
875.0
1,135.4
(114.2)
(11.1)
(110.5)
(2.2)
(1.3)
(13.8)
(253.1)
621.9
(544.6)
(4.7)
(0.9)
(14.6)
(564.8)
(817.9)
317.5
31.4
11.0
(0.3)
3.0
272.4
317.5
* Both Cash and cash equivalents and Bank overdrafts have been restated in 2020 to gross up the effect of bank accounts in overdraft and cash separately
(see note 25).
The financial statements of N Brown Group plc (Registered Number 814103) were approved by the Board of Directors and
authorised for issue on 19 May 2021.
They were signed on its behalf by:
Rachel Izzard
CFO and Executive Director
109
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report GROUP ACCOUNTS CONTINUED
CONSOLIDATED CASH FLOW STATEMENT
Net cash inflow 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
(Decrease)/Increase in bank loans
Principal elements of lease payments
Proceeds on issue of share capital
Transaction costs relating to the issue of share capital
Purchase of shares by ESOT
Net cash (outflow) / inflow from financing activities
Net foreign exchange difference
Net increase 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 for the period
Adjustments for:
Taxation charge
Fair value adjustments to financial instruments
Net foreign exchange gain / (loss)
Finance costs
Depreciation of right-of-use assets
Depreciation of property, plant and equipment
Impairment of intangible assets
Amortisation of intangible assets
Share option charge/ (credit)
Operating cash flows before movements in working capital
Decrease in inventories
Decrease in trade and other receivables
Decrease in trade and other payables
Decrease in provisions
Pension obligation adjustment
Cash generated by operations
Taxation (paid)/received
Net cash inflow from operating activities
110
Note
For the
52 weeks
ended
27 February
2021
£m
For the
52 weeks
ended
29 February
2020
£m
143.8
51.4
(1.4)
(18.6)
(20.0)
(19.0)
–
(162.8)
(1.7)
99.6
(6.1)
–
(90.0)
(0.5)
33.3
47.5
80.8
(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
25
For the
52 weeks
ended
27 February
2021
£m
For the
52 weeks
ended
29 February
2020
£m
8.3
1.6
10.0
0.8
16.6
1.6
3.3
1.9
34.9
0.8
79.8
17.0
64.4
0.7
(6.2)
(0.8)
154.9
(11.1)
143.8
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
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk CHANGES IN LIABILITIES FROM FINANCING ACTIVITIES
Loans and borrowings
Balance at 29 February 2020
Changes from financing cash flows
Net (repayment)/proceeds from loans and borrowings
Leases recognised on transition of IFRS 16
New leases entered into in the period
Lease payments in the period
(Decrease)/Increase in loans and borrowings due to changes in interest rates
(Decrease)/Increase in loans and borrowings
Balance at 27 February 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
52 weeks to
27 February
2021
£m
52 weeks to
29 February
2020
£m
551.5
500.2
(161.7)
–
–
(2.0)
(1.0)
(164.7)
386.8
43.2
9.5
0.9
(3.6)
1.3
51.3
551.5
Balance at 3 March 2019
Comprehensive income for the period
Profit for the period
Other items of comprehensive income for the period
Total comprehensive gain for the period
Transactions with owners recorded directly in equity
Equity dividends
Share option credit
Tax on items recognised directly in equity
Total contributions by and distributions to owners
Balance at 29 February 2020
Comprehensive income for the period
Profit for the period
Other items of comprehensive loss for the period
Total comprehensive income for the period
Transactions with owners recorded directly in equity
Issue of shares
Share option charge
Tax on items recognised directly in equity
Total contributions by and distributions to owners
Balance at 27 February 2021
Share
capital
(note 23)
£m
Share
premium
£m
Own
shares
(note 24)
£m
31.4
11.0
(0.3)
Foreign
currency
translation
reserve
£m
2.8
Retained
earnings
£m
Total
£m
266.0
310.9
–
–
–
–
–
–
–
31.4
–
–
–
19.5
–
–
19.5
50.9
–
–
–
–
–
–
–
11.0
–
–
–
74.0
–
–
74.0
85.0
–
–
–
–
–
–
–
(0.3)
–
–
–
–
–
–
–
(0.3)
–
0.2
0.2
–
–
–
–
3.0
–
(2.6)
(2.6)
–
–
–
–
0.4
27.4
0.5
27.9
(20.1)
(1.3)
(0.1)
(21.5)
272.4
8.3
(1.2)
7.1
–
0.8
–
0.8
280.3
27.4
0.7
28.1
(20.1)
(1.3)
(0.1)
(21.5)
317.5
8.3
(3.8)
4.5
93.5
0.8
–
94.3
416.3
111
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report 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 p162 at the end of the report. The nature of the
Group’s operations and its principal activities are set out
on p2.
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 following accounting standards and interpretations
became effective this financial year and have been applied for
the first time in these financial statements:
“Definition of Material (Amendments to IAS 1 and IAS 8)”
“Definition of a Business (Amendments to IFRS 3)”
“Interest Rate Benchmark Reform (Amendments to IFRS 9,
IAS 39 and IFRS 7)”
“Covid-19 Related Rent Concessions amendment to IFRS 16”
“Revised conceptual framework for Financial Reporting”
The Group financial statements for the 52 weeks ended
27 February 2021 have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. The Company has
elected to prepare its parent Company financial statements
in accordance with FRS 101 and these are presented on p152
to 161.
The Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, they have adopted
the going concern basis in the preparation of these financial
statements. This is explained further in note 2 (Going
Concern section).
The accounting policies have been applied consistently
in the current and prior period except for the accounting
for government grants for funds received under the UK
Government’s Coronavirus Job Retention Scheme which has
been paid to employees on furlough.
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)”
“References to the Conceptual Framework (Amendments
to IFRS 3)”
“Property, Plant and Equipment: Proceeds before intended
use (Amendments to IAS 16)”
Onerous contracts – Cost of fulfilling a contract (Amendments
to IAS 37)”
“Annual improvements to IFRS Standards 2018-2020”
“Sale or contribution of assets between an investor and its
associate or joint venture (Amendments to IFRS 10 and IAS 28)”
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.
None of these new standards and interpretations have had any
material impact on the financial statements.
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 2021 means at 27 February 2021 or the 52
weeks then ended; reference to 2020 means at 29 February
2020 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.
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.
112
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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 are presented as a bank loan.
REVENUE RECOGNITION
Product revenue consists of sales of goods as well as postage
and packaging receipts, and 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 for all goods, including the ones delivered
to the customers directly from suppliers and goods delivered
to partners, is recognised in accordance with IFRS 15,
when goods are delivered to the customer or partner and
therefore control is transferred. 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.
Postage and packaging subscription revenue is recognised
over the length of the subscription and deferred where this
relates to future periods.
Financial services revenue includes interest and administrative
charges. 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. Assets under construction are not depreciated but
instead tested for impairment annually.
In this respect the following annual depreciation rates apply:
Land and Buildings
Freehold buildings
Leasehold property and
improvements
Fixtures and Equipment
Plant and machinery
Fixtures and fittings
2%
over the period of the lease
between 2% and 20%
10%
The gain or loss arising on the disposal of an asset is
determined as the difference between the sales proceeds and
the carrying amount of the asset, or as the assets residual net
book value in the case of asset retirements, 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).
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.
113
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
2 ACCOUNTING POLICIES CONTINUED
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 period of up to six
years, or by exception over a longer period where it is expected
that economic benefits are attributable over a longer period.
The remaining useful life of assets is reviewed on an annual
basis, or where a change in the business or other circumstances
would trigger a revision. Assets under development are
not amortised but instead tested for impairment annually.
The amortisation expense on intangible assets is recognised in
the income statement within Depreciation and Amortisation.
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
directly attributable materials and direct labour. Research costs
and other development expenditure which does not meet the
criteria of an asset under IAS 38, is recognised in the income
statement as an expense as incurred.
Software as a service (“SAAS”) contract costs are expensed to
the Income Statement over the life of the contract. For SAAS
and cloud based technology, integration costs are capitalised
only when they represent enhancements to to Group’s
existing assets.
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 and are assumed to have an
indefinite useful life. Intangible assets with indefinite lives are
not amortised, but are subject to annual impairment tests.
The indefinite life assessment is also reviewed annually to
determine whether this continues to be supportable.
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. 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.
INVENTORIES
Inventories have been valued at the lower of cost and net
realisable value. Cost of inventories 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. Where materials are
purchased in a foreign currency, the cost of inventories also
includes the currency gains and losses incurred.
Provision is made based on management’s estimates of future
disposal strategies.
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 the transfer of the risks and
rewards associated with the goods.
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.
114
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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.
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.
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.
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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:
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 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.
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 material 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 PD, exposure at default (“EAD”) and
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 PD 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 EAD 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 LGD 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, generally being that a debt is over 180
days past due.
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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 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. Where a customer has entered into a Covid-19
payment deferral arrangement either with the Group or
another credit provider we have determined that this is an
indicator of a SICR. These customers are considered in the
stage 2 population during the Covid-19 payment deferral and
during an observation window of 3 months post returning to
normal payment terms.
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.
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 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.
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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 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
(legal or constructive) 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.
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.
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N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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.
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.
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.
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.
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The Group presents the first two components of defined
benefit costs within operating expenses. Curtailment 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 granted as a rebate. Rebates are agreed with
suppliers or are probable to be agreed with suppliers before
they are recognised in the income statement, with amounts
receivable recorded in accrued income on the balance sheet.
EXCEPTIONAL ITEMS
Exceptional items are items of income and expenditure
which are one off in nature and material to the current
financial year or represent true ups to items presented as
exceptional in prior periods. These are presented separately
in the Consolidated Income Statement, as the Directors
believe that this presentation helps 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,
with the principal purpose being to provide the supplier
with earlier access to liquidity. Access to the supplier finance
scheme is by mutual agreement between the bank and
supplier, where the supplier wishes to be paid faster than
standard Group payment terms, 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.
From the Group’s perspective, the invoice payment due date
remains unchanged and the payment terms of suppliers
participating in the supplier financing arrangement are similar
to those suppliers that are not participating. 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.
GOVERNMENT GRANTS
Grants from the government are recognised at their fair
value where there is a reasonable assurance that the grant
will be received and the Group will comply with all attached
conditions. Government grants relating to costs are
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recognised in profit and loss when they become receivable to
match them with the already incurred staff costs with which
they are intended to compensate.
GOING CONCERN
After reviewing the Group’s forecasts and risk assessments
and making other enquiries, the Directors have formed a
judgement at the time of approving the financial statements,
that there is a reasonable expectation that the Group and the
Company have adequate resources to continue in operational
existence for the 12 months following the date of signing this
Annual Report and Accounts. For this reason, the Directors
continue to adopt the going concern basis in preparing the
financial statements.
In arriving at their conclusion, the Directors considered
the following:
a) the Group’s cash flow forecasts and revenue projections
for the 12 months from the date of signing (the “Base Case”),
reflecting, amongst other things the following assumptions:
The business continues to be fully operational throughout
the remainder of the pandemic (as has been the case since
the outset);
Product gross margin pressure continues due to product mix,
a highly promotional retail market and industry-wide increase
in freight rates;
Financial Services revenue reduces as the size of the loan book
reduces as a function of the lower product sales;
FS gross margin declines due to an increase in bad debt and
write offs due to the impact of Covid-19; and
Operating cost efficiencies are maintained in that they
continue at a similar cost to revenue ratio as achieved in FY21.
b) the impact on trading performance of severe but plausible
downside scenarios (the “Downside Case”), including continued
Covid-19 restrictions, the removal of government support
schemes such as Stamp Duty Relief and the Coronavirus Job
Retention Scheme and adverse macro-economic conditions.
In particular, the downside scenario assumes that the lockdown
restrictions experienced in the second half of the year ended
February 2021 will apply throughout the year ending February
2022 resulting in an adverse impact on retail sales, a reduction
in customer receivable collection rates with a consequent
increase in bad debts and a reduction in the debt securitisation
advance rate. It has also been assumed that the current
unusually high freight rates will continue to apply with an
adverse effect on gross margins.
c) the committed facilities available to the Group and the
covenants thereon. Details of the Group’s committed facilities
are set out in note 17, the main components of which are:
A £500m securitisation facility committed until December
2023, drawings on which are linked to prevailing levels of
eligible receivables (£381.9m drawn to the maximum of eligible
customer receivables at the year end);
An RCF of £100m committed until December 2023, which is
fully undrawn; and
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk An overdraft facility of £12.5m which is subject to an
annual review every July (undrawn as at date of signing of
these accounts).
d) that there are no forecast breaches of any covenants in
either the Base Case or Downside Case. In the event that
trading deteriorated further than envisaged in the Downside
Case additional management actions could be implemented
which would include sale of customer receivables, working
capital deferrals, temporary reductions in inventory and
capital expenditure and further discretionary cost reductions.
e) the Group’s robust policy towards liquidity and cash flow
management. As at 30 April 2021, the Group had cash of
£84.3m, net restricted cash of £3.3m and undrawn facilities
of £112.5m, giving rise to total accessible liquidity (“TAL”) of
£193.5m (FY20: £75m) reflecting, amongst other things, the
benefit of the equity raise in December 2020 (£93.5m, net) and
positive cash generation in the current financial year offset
by a decision by the Board to reduce the RCF by £25m and to
hand back the £50m CLBILS Term Loan Facility.
f) the Group management’s ability to successfully manage
the principal risks and uncertainties outlined on p35 to 38
during periods of uncertain economic outlook and challenging
macro-economic conditions.
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:
IMPAIRMENT OF CUSTOMER 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.
Key judgements involved in the determination of expected
credit loss are:
Determining which receivables have suffered from a significant
increase in credit risk, including customers impacted by
Covid-19 who have taken out an internal or external Covid-19
payment deferral on their repayments; and
Determining the appropriate PD to apply to the receivables.
The SICR threshold is 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.
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.
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, this is considered to provide a
representative view of default in ordinary times. 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.
Management have taken the judgement in the current year to
use PD’s in line with the previous year end, due to the impact
of Covid-19 which management considered to be artificially
improving the PD and SICR experienced in the previous
12 months as a result of continuing government support
schemes, combined with the FCA instruction that Covid-19
payment deferrals should not affect customer credit files.
Further judgement has been required to determine how to treat
customers who have been impacted by a Covid-19 payment
deferral. Management have considered that for both customers
who have taken a Covid-19 payment deferral with N Brown or
with an external provider, this equates to a SICR event, and
therefore such customers would be considered to be in a stage 2
population. An observation window, defined as the period after
which a customer comes off a Covid-19 payment deferral of three
months has been applied before which customers will return to
the normal modelled stage 1 ECL if subsequent evidence does
not support that a SICR has occurred. During this period, and
for any customers on a live Covid-19 payment deferral, these
receivables have been provided for in line with the stage 2
population ECL.
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. The expected recovery through debt sales built into
the year end ECL reflects an average of prices achieved over the
previous 2 years.
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 or decrease in PDs would lead to a £3m
(2020: £5.9m) increase or decrease in the ECL;
Extending the observation window for Covid-19 payment
deferrals by one month would lead to a £2.2m increase or
£2.3m decrease to the ECL respectively; and
An increase or decrease to peak unemployment of 2% would
lead to a £3.8m increase or decrease to the ECL respectively.
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SOFTWARE AND DEVELOPMENT COSTS
Critical judgement
Included within intangible assets are significant software
and development project costs in respect of the Group’s
technological development programme. Included in the year
are agile asset development costs; costs spent on the Group’s
assets to integrate with and move to SAAS and Cloud based
technologies; development of the new website and initial
design and development of the Financial Services Platform.
Initial capitalisation of costs is based on management’s
judgement that technological and feasibility is confirmed,
the project will be successfully completed and that future
economic benefits are expected to be generated by the
project. 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 judgement 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 discounted
cash flow model. The cash flows are derived from the Group’s
three- year forecasts, taken into perpetuity, and are adjusted
for 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 non-
financial assets, including a sensitivity analysis, are disclosed
and further explained in note 12.
Estimation uncertainty
The estimated useful lives and residual values are based on
management’s best estimate of the period the asset will be
able to generate economic benefits for the Group and are
reviewed at the end of each reporting period, with the effect
of any changes in estimate accounted for on a prospective
basis from the date at which a change in life is determined to
be triggered.
Following the equity raise at the end of 2020, management
performed a detailed review of the useful economic lives of its’
legacy assets in light of general advancements in technology
and the Group’s revised strategy. More detail on the outcome
and impact of this review, and sensitivity of the estimation
uncertainty is disclosed in note 12.
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 it is not possible to reliably
estimate the amount of any possible financial outflow as at
the balance sheet date. No asset has been recognised for the
counterclaim as there is no certainty as to whether the claim
will be successful.
DEFINED BENEFIT PLAN
Key source of estimation uncertainty
The cost of the defined benefit pension plan and the present
value of the pension obligation are determined using actuarial
valuations. An actuarial valuation involves making various
assumptions that may differ from actual developments in
the future. These include the determination of the discount
rate, future salary increases, mortality rates and future
pension increases. Due to the complexities involved in
the valuation and its long-term nature, a defined benefit
obligation is highly sensitive to changes in these assumptions.
Sensitivities performed on key assumptions are discussed in
note 29. All assumptions are reviewed at each reporting date.
122
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 3 REVENUE
An analysis of the Group’s revenue is as follows:
Sale of goods
Postage and packaging
Product Revenue
Credit account interest
Other Financial Services income
Financial Services Revenue
Total Group Revenue
* Refer to prior year adjustment note 32
2021
£m
449.8
18.6
468.4
239.5
20.9
260.4
728.8
2020
(Restated)*
£m
518.6
28.4
547.0
263.3
27.2
290.5
837.5
123
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
4 BUSINESS SEGMENT
The Group has identified two operating segments in accordance with IFRS 8 – Operating segments, Product Revenue and Financial
Services (“FS”). 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 product cost of sales is
inclusive of VAT bad debt relief claimed of £18.0m (2020 £20.7m) as a consequence of customer debt write off, with the write off presented in
FS cost of sales. 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 strategic and other brand categorisation.
Analysis of revenue:
Sale of goods
Postage and packaging
Product – total revenue
Other Financial Services revenue
Credit account interest
Financial Services – total revenue
Group Revenue
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
Gross profit
Gross profit margin
Gross margin – Product
Gross margin – Financial Services
Warehouse and fulfilment
Marketing and production
Other administration and payroll
Adjusted operating costs before exceptional items
Adjusted EBITDA
Adjusted EBITDA margin
Depreciation and amortisation
Exceptional items charged to operating profit (see note 6)
Operating profit
Finance costs
Fair value adjustments to financial instruments including exceptional fair value gain (see note 6)
Profit before taxation
* Refer to prior year adjustment note 32.
124
2020
(Restated)*
£m
2021
£m
449.8
18.6
468.4
20.9
239.5
260.4
518.6
28.4
547.0
27.2
263.3
290.5
728.8
837.5
(264.3)
(267.9)
(144.1)
5.0
(1.9)
(141.0)
(133.9)
6.3
(2.1)
(129.7)
(405.3)
(397.6)
323.5
44.4%
43.6%
45.8%
(64.8)
(60.3)
(111.9)
(237.0)
86.5
11.9%
(39.8)
(11.6)
439.9
52.5%
51.0%
55.4%
(78.1)
(136.0)
(119.1)
(333.2)
106.7
12.7%
(30.1)
(28.5)
35.1
48.1
(16.6)
(8.6)
(17.1)
4.7
9.9
35.7
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk Analysis of Product revenue:
Strategic brands1
Other brands2
Total Product revenue
Financial Services revenue
Group Revenue
2020
(Restated)*
£m
2021
£m
341.2
127.2
468.4
260.4
728.8
372.7
174.3
547.0
290.5
837.5
* Refer to prior year adjustment note 32
1 Strategic brands include JD Williams, Simply Be, Ambrose Wilson, Jacamo and Home Essentials.
2 Other brands include Fashion World, Marisota and Premier Man,High & Mighty, House of Bath, and Figleaves which were folded into Strategic brands in FY21.
Management have aligned the product revenue analysis to strategic and other brands, following the Group’s strategic change and
focus of the business on the five key strategic brands. The prior year comparatives have been aligned accordingly.
The Group has one significant geographical segment, which is the United Kingdom. Revenue derived from Ireland and the USA
amounted to £27.6m (2020: £30.1m). Operating results from international markets amounted to £6.2m profit (2020: £3.3m profit).
All segment assets are located in the UK and Ireland. All non-current assets are located in the UK with the exception of £0.1m located
in Ireland.
For the purposes of monitoring segment performance, assets and liabilities are not measured separately for the two reportable
segments of the Group and therefore are disclosed together below. Impairments of tangible and intangible assets in the current
period were £2.0m (2020: £1.8m).
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
Impairment of property, plant and equipment
Impairment of intangible assets
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)
Lease costs (note 27)
Depreciation of right-of-use assets (note 27)
* Refer to prior year adjustment note 32
2021
£m
20.1
–
957.7
(541.4)
416.3
2020
(Restated)*
£m
39.2
–
1,135.4
(817.9)
317.5
2021
£m
(5.8)
3.7
0.1
1.9
34.5
264.3
78.0
1.1
139.1
10.2
1.2
1.6
2020
(Restated)*
£m
(3.2)
4.2
–
–
24.7
267.9
78.3
1.1
127.6
28.5
0.9
1.3
125
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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
2021
£m
0.2
0.9
0.5
1.6
2020
£m
0.2
0.9
–
1.1
Fees in relation to non-audit-related services include fees of £60,000 (2020: £30,000) relating to assurance services and £450,000,
of which £45,000 was required by regulation (2020: £nil) in relation to the equity raise completed by the Group during the year.
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts were £20,000 (2020: £20,000).
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
Strategic change
Impairment of tangible, intangible assets and brands
Legal costs
Customer redress (note 22)
Tax matters
Gain from early settlement of derivative contracts
Items charged to profit before tax
2021
£m
7.9
1.7
1.1
(0.1)
1.0
(1.4)
10.2
2020
£m
3.5
1.8
1.0
22.9
(0.7)
–
28.5
STRATEGIC CHANGE
In line with the Board’s strategic reviews and multi-year transformation of the business, a material level of cost reduction
programs have been completed as well as an increased focus and refinement of the Group’s five strategic brands.
During the current year, total redundancy costs of £5.2m have been incurred across the Group including Figleaves, in order to
align the Group’s people costs to deliver an organisational design that supports the revised strategy. A further £2.7m has been
incurred on the restructure and the transfer of the Figleaves business under the Simply Be brand, including stock write down of
£1.1m and onerous contract provisions of £0.8m.
The restructuring plans for both Figleaves and rest of the Group were announced to the affected employees prior to the end of
the year, which represents a constructive obligation for the Group at the year end. The costs incurred are substantial in scope
and impact, and incremental to the Group’s normal operational and management activities, and therefore recognised within
exceptional costs. All payments are expected to be made within FY22. The one-off costs related to the transformation are
substantially complete.
126
N Brown Group plc Annual Report and Accounts 2021nbrown.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 assets held
in respect of the international (£1.2m) and Figleaves (£0.8m)
businesses, following the Group’s strategic decision during
the year to focus on the UK as a market and the five strategic
brands, and have written the value of these assets down in full.
The impairment in the period is offset by a credit release
of £0.3m relating to the reversal of previously recognised
impairment on capitalised IT development.
In the prior year, management assessed the carrying value of
the intangible and tangible assets held in respect of the High
& Mighty, Slimma, Diva and Dannimac brands. Following this
review, as well as the refocus to the Group’s five strategic
brands, the remaining value of the intangible asset held for the
afore mentioned brands (£1.8m) was written down in full.
LEGAL COSTS
During the prior year, a £1.0m provision was recognised for
future expected legal costs to defend the Allianz Insurance
plc claim and continuing to proceed with the counterclaim
referred to in note 26. The trial date has now been set to
March 2022 and as a result of the timetable extension, the
expected total future legal costs have increased. An increase
in the provision of £1.1m has been recognised in the
current year.
CUSTOMER REDRESS
Redress activity, other than the Official Receiver complaints,
has been concluded in the current year resulting in a net
release to the provision of £0.1m. The provision held as at
27 February 2021 is £1.6m as disclosed in note 22. During the
prior period, a charge of £22.9m was made to reflect the
additional volume of PPI information requests and claims
received in the final days leading up to and including the
29 August 2019 deadline, including the amount relating to the
estimated Official Receiver complaints.
TAX MATTERS
During the year, the Group reached agreement with HMRC
to settle its long-running dispute with respect to the VAT
treatment of certain marketing and non-marketing costs and
the allocation of those costs between our Retail and Financial
Services businesses. Total and final payment in the year
amounted to £3.7m, compared to the opening provision held
of £3.8m thus resulting in a release in the period of £0.1m.
The Group has recognised an additional charge in the current
year of £1.1m in respect of further costs and interest expected
to be incurred in relation to further matters under discussion
with HMRC over a number of historical VAT and other
tax matters.
GAIN ON EARLY SETTLEMENT OF
DERIVATIVE CONTRACTS
A £1.4m credit was recognised in the period representing
the gain achieved on the early settlement of foreign currency
derivative contracts that were no longer required following
the decline in product purchases driven by the sudden and
significant impact of Covid-19 at the start of the period.
127
N Brown Group plc Annual Report and Accounts 2021nbrown.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 costs/(credit) (see note 28)
2021
Number
2020
Number
860
1,300
2,160
2021
£m
65.2
5.9
6.1
0.8
78.0
1,154
1,372
2,526
2020
£m
67.5
6.1
6.0
(1.3)
78.3
Wages and salaries of £67.3m are net of £3.8m of government grant received in respect of the furlough scheme. The Group took
advantage of the Government coronavirus job retention scheme and 596 colleagues were placed on furlough from March 2020
to November 2020.
The aggregate amount of remuneration paid or receivable by Directors in respect of services in the year was £1.9m (2020: £1.9m).
The aggregate amount of contributions paid to a pension scheme in respect of Directors’ qualifying services was £0.1m
(2020: £0.1m). Retirement benefits are accruing in respect of qualifying services in defined contribution pension schemes for
three Directors (2020: two).
No amounts were paid to or receivable by Directors under long-term incentive schemes in respect of qualifying services in the
year (2020: £nil).
Details of individual Directors’ remuneration is disclosed in the Directors’ Remuneration Report on p76 to 94.
8 FINANCE COSTS
Interest on bank overdrafts, loans and lease liabilities
Net pension interest credit (see note 29)
2021
£m
17.1
(0.5)
16.6
2020
£m
17.8
(0.7)
17.1
128
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 9 TAX
Tax recognised in the income statement
Current tax
Charge for the period
Adjustments in respect of previous periods
Deferred tax
Origination and reversal of temporary timing differences
Adjustments in respect of previous periods
Total tax expense
2021
£m
2020
£m
2.0
(0.2)
1.8
(0.4)
0.2
(0.2)
1.6
2.7
0.1
2.8
4.4
1.1
5.5
8.3
UK Corporation tax is calculated at 19% (2020: 19%) of the estimated assessable profit for the period. Taxation for other jurisdictions is
calculated at the rates prevailing in the respective jurisdictions.
The UK deferred tax asset/(liability) as at 27 February 2021 has been calculated based on the enacted rate as at the balance sheet date
of 19% with the exception of the retirement benefit scheme where deferred tax has been provided at the rate of 35%. In the 3 March
2021 Budget it was announced that the UK tax rate will remain at the current 19% and increase to 25% from 1 April 2023. 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 £1.3m.
The charge for the period can be reconciled to the profit per the income statement as follows:
Profit before tax
Tax at the UK Corporation tax rate of 19% (2020: 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
2021
£m
9.9
1.9
(0.6)
0.6
(0.3)
–
1.6
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
2021
£m
(0.7)
(0.7)
2020
£m
35.7
6.7
0.4
0.2
(0.2)
1.2
8.3
2020
£m
0.3
0.3
In respect of Corporation tax, as at 27 February 2021 the Group has provided a total of £2.8m (2020: £13.2m) for potential tax
future charges based upon the Group’s best estimate and their discussions with HMRC. The Group has now resolved these
historical open corporation tax positions with the majority of the 2020 provision being settled during the current year, and the
closing 2021 provision settled in March 2021.
129
N Brown Group plc Annual Report and Accounts 2021nbrown.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 29 February 2020 of nil (2020: 4.27p) per share
Interim dividend for the 52 weeks ended 27 February 2021 of nil (2020: 2.83p) per share
Proposed final dividend for the 52 weeks ended 27 February 2021 of nil (2020: nil) per share
2021
£m
–
–
–
–
2020
£m
12.1
8.0
20.1
–
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 and fair value
adjustments, 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 (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 for the purposes of basic and diluted earnings per share being net profit attributable to equity holders
of the Parent Company
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 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 per share
Basic
Diluted
2021
£m
8.3
2020
£m
27.4
2021
Number
315,633
2020
Number
284,665
194
315,827
297
284,962
2021
£m
8.3
8.1
8.5
24.9
2021
Pence
7.89
7.88
2021
Pence
2.63
2.63
2020
£m
27.4
(3.8)
23.0
46.6
2020
Pence
16.37
16.35
2020
Pence
9.63
9.62
In December 2020, the Group completed an equity raise for £93.5m net proceeds, which were used to eliminate unsecured debt and
accelerate the Group’s strategic investment. As part of the equity raise, a total number of 174,666,053 ordinary shares were issued,
which has subsequently led to an increase in the weighted average number of shares used in the calculation of both the basic and
diluted earnings per share, and therefore a reduction in both against the prior year.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date
of authorisation of these financial statements.
130
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 12 INTANGIBLE ASSETS
Cost
At 2 March 2019
Additions
Disposals
At 29 February 2020
Additions
Disposals
At 27 February 2021
Accumulated amortisation and impairment
At 2 March 2019
Charge for the period
Impairment
Disposals
At 29 February 2020
Charge for the period
Impairment
Transfer from tangible assets
Disposals
At 27 February 2021
Carrying amount
At 27 February 2021
At 29 February 2020
At 2 March 2019
Brands
£m
Software
£m
Customer
Database
£m
16.9
–
–
16.9
–
–
16.9
15.1
–
1.8
–
16.9
–
–
–
–
16.9
–
–
1.8
361.4
32.7
(35.9)
358.2
18.4
–
376.6
218.0
24.7
–
(35.9)
206.8
34.5
1.9
0.4
–
243.6
133.0
151.4
143.4
1.9
–
–
1.9
–
–
1.9
1.9
–
–
–
1.9
–
–
–
–
1.9
–
–
–
Total
£m
380.2
32.7
(35.9)
377.0
18.4
–
395.4
235.0
24.7
1.8
(35.9)
225.6
34.5
1.9
0.4
–
262.4
133.0
151.4
145.2
Assets in the course of development included in intangible assets at the year end total £9.8m (2020: £15.2m). No amortisation is
charged on these assets. Borrowing costs of £0.3m (2020: £nil) have been capitalised in the period.
As at 27 February 2021, the Group had entered into contractual commitments for the further development of intangible assets
of £6.2m (2020: £10.8m) of which £5.2m (2020: £5.4m) is due to be paid within one year.
Research costs of £0.4m were incurred in the year.
REVIEW OF ESTIMATED USEFUL ECONOMIC LIVES
The successful equity raise and refinancing in December 2020 has enabled the Group to push ahead with strategic investment
in technology advancements. Following this the Group has therefore performed a detailed review of the useful economic lives
(“UEL”) of its legacy assets in light of general advancements in technology and the Group’s revised strategy.
An assessment has been performed, on an asset line basis, to consider whether the remaining UEL continues to be the best
estimate in respect of the likely period of continued use of each asset, with reference to the Group’s strategy and technology
roadmap to estimate when a replacement or other change in circumstance would result in the obsolescence or retirement
of those assets. Assets with a total Net Book Value (‘NBV’) of £114.9m have been identified where a revision of their UEL was
required. A summary of impact of this assessment is as follows:
Additional amortisation charge of £6.6m has been incurred in the current financial year in respect of those assets where their
UEL has been shortened; and
Additional amortisation charge of £10m, £4.4m and £2.5m is expected over the next 3 financial periods respectively as a result of
the revision of UELs on these assets. This will be offset by a reduction in amortisation charge further into the future.
131
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12 INTANGIBLE ASSETS CONTINUED
SENSITIVITY OF ESTIMATION UNCERTAINTY
To indicate the level of sensitivity in relation to the judgement
applied in determining the revised useful economic lives, we
have assessed the impact of reducing or increasing the UELs of
the affected assets by 12 months. Where the increase results in a
longer life than the original UEL, no change has been applied:
A reduction in the revised UEL of the affected assets by a
further 12 months would increase the expected amortisation
charge for the following financial year by £4m;
An increase in the UEL of the affected assets of a further
12 months would decrease the expected amortisation
charge for the following financial year by £2.4m.
IMPAIRMENT TESTING OF INTANGIBLE ASSETS
The Group performed its impairment review in February 2021.
The Group considers the relationship between its market
capitalisation and its book value, among other factors, when
reviewing for indicators of impairment. At the balance sheet date,
the market capitalisation of the Group was lower than the Group’s
net assets. As this, together with the impact of Covid-19, represent
indicators 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. In addition,
included within intangibles assets are ongoing projects that
are not yet available for use and therefore not being amortised.
Where intangible assets are not being amortised management is
required to test for impairment.
The value in use assessment has been performed over the Group’s
total assets under one CGU, being the smallest group of assets
which generate independent cash inflows. This represents a
change from the prior year where two CGUs were in existence,
being Figleaves and Group excluding Figleaves. During the
current year, the decision was taken to restructure and transfer the
Figleaves business to be under the Simply Be brand, which forms
part of the Group CGU. The transfer of business has progressed
through the financial year, and Figleaves now wholly operates
under the Simply Be brand and trades from our Head Office
in Manchester with fulfilment out of the Distribution Centres in
Oldham and Hadfield. From the current year end the Group’s
results, performance and viability will be assessed for the Group as
a whole. In line with IAS 36, management therefore considered the
assessment on a single CGU basis as appropriate.
The value in use calculations use Board-approved forecasts covering
a three-year period as the basis for its cashflow projections, with
accounting adjustments taken to comply with specific requirements
of IAS 36. The board approved forecasts target medium term
product growth of 7% and an adjusted EBITDA margin of 14%.
These forecasts 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 first three-year cash flows from adjusted
forecasts, management have extrapolated the cash flows into
a fourth and fifth year using a growth rate assumption of 3.4%
taken from analysis of external views of the overall market growth
expected in future. 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.
132
The Group’s three-year cash flow projections were based upon the
Group’s Board-approved three-year plan as at 27 February 2021.
The key assumptions in the value in use calculations are
considered to be the determination of years 1-3 cashflows
incorporating expected product revenue growth not
attributed to future capital expenditure and expected EBITDA
margin growth, the risk-adjusted pre-tax discount rate, and
the level of capital expenditure cashflows considered to be
of a replacement nature. The key assumptions on revenue
and EBITDA growth reflect historic experience, the expected
recovery in demand post Covid-19 and the anticipated
benefits of product, marketing and other initiatives.
The years 4-5 growth rate and long-term growth rate were
determined with reference to retail market publications and
IMF forecast GDP growth respectively which management
believe are reasonable indicators of expected market growth
rates available at 27 February 2021, however the value in use
is relatively insensitive to these assumptions and are therefore
not considered to be key assumptions.
The long-term growth rate used is purely for the impairment
testing of intangible assets 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 27 February
2021, taking into account the cost of capital and borrowings, to
which specific market-related premium adjustments are made.
The key assumptions are as follows:
Years 1 to 3 expected product revenue and EBITDA margin growth;
Replacement Capital expenditure of £22m per year; and
Pre-tax discount rate: 13.1% (2020: 11.2%).
The impairment review performed over the Group’s CGU has
indicated that no impairment is required over the remaining
assets of the Group. The recoverable amount exceeds its
carrying amount by £242m.
The following sensitivities have been performed:
a) Within years 1-3 expected cashflows, if product revenue
growth were to drop to less than 1.2% on average per
annum, or EBITDA margin improvement was less than 0.12%
on average per annum the value in use would indicate
an impairment;
b) An increase to replacement capital expenditure cashflows
by greater than £23.6m per year (108% increase) would
result in an impairment; and
c) Increasing the discount rate by 1% reduces the headroom
calculated through the value in use by £94m, an increase to the
discount rate of more than 3.7% would result in an impairment.
It is reasonably possible that the Revenue and EBITDA margin
growth assumptions may not be realised in full or in the
timescale envisaged. An impairment would be required if,
all other things being equal, Group EBITDA per annum was
£19.9m lower than forecast.
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 13 PROPERTY, PLANT AND EQUIPMENT
Cost
At 2 March 2019
Additions
Reclassifications
Disposals
At 29 February 2020
Additions
Disposals
At 27 February 2021
Accumulated depreciation and impairment
At 2 March 2019
Charge for the period
Disposal
At 29 February 2020
Charge for the period
Impairment
Transfer to intangible assets
Disposal
At 27 February 2021
Carrying amount
At 27 February 2021
At 29 February 2020
At 2 March 2019
Land and
buildings
£m
Fixtures and
equipment
£m
59.1
–
-
–
59.1
–
–
59.1
16.6
1.2
–
17.8
0.9
–
–
–
18.7
40.4
41.3
42.5
122.7
6.5
0.9
(50.1)
80.0
1.7
–
81.7
105.8
3.0
(50.1)
58.7
2.8
0.1
(0.4)
–
61.2
20.5
21.3
16.9
Total
£m
181.8
6.5
0.9
(50.1)
139.1
1.7
–
140.8
122.4
4.2
(50.1)
76.5
3.7
0.1
(0.4)
–
79.9
60.9
62.6
59.4
Assets in the course of development included in fixtures and equipment at 27 February 2021 total £0.7m (2020: £8.7m), and in
land and buildings total £nil (2020: £nil). No depreciation has been charged on these assets.
At 27 February 2021, the Group had not entered into any contractual commitments for the acquisition of property, plant and
equipment (2020: £nil).
14 SUBSIDIARIES
A list of all investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest,
is given in note 35 to the Company’s separate financial statements.
15 INVENTORIES
Finished goods
Sundry stocks
2021
£m
77.4
0.3
77.7
2020
£m
94.6
0.3
94.9
The inventory balance is net of stock provisions amounting to £6.0m (2020: £7.5m).
A charge of £6.0m (2020: £11.2m) has been made to the income statement in respect of written-down inventories. £1.1m
(2020: £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 £2.2m (2020: £3.9m).
There was no inventory pledged as security for liabilities in the current or prior period.
Sundry stocks relate to packaging stocks.
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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
Trade and other receivables
2021
£m
605.8
(85.2)
520.6
28.4
549.0
2020
£m
656.9
(71.7)
585.2
29.2
614.4
Other debtors include a balance of £3.0m (2020: £2.6m) relating to amounts due from wholesale partners.
Trade receivables are measured at amortised cost.
The weighted average Annual Percentage Rate (“APR”) across the trade receivables portfolio is 58.2% (2020: 57.9%). 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.
The following table provides information about the exposure to credit risk and ECLs for trade receivables as at 27 February 2021.
The carrying amount of trade receivables whose terms have been renegotiated but would otherwise be past due totalled
£13.4m at 27 February 2021 (2020: £8.7m). Interest income recognised on trade receivables which were impaired as at 27 February 2021
was £13.5m (2020: £16.0m).
The amounts written off in the period of £134.6m (2020: £159.3m) include the sale of impaired assets with a net book value of
£14.3m (2020: £19.9m).
There is no significant concentration of credit risk due to the large number of credit customers 0.95 million (2020: 1.0 million) with
individually small balances. Credit quality analysis is further analysed in note 19.
2021
£m
Trade
receivables
on payment
arrangements
Trade
receivables
Total trade
receivables
522.8
20.5
12.3
9.9
7.4
17.8
590.7
(76.4)
514.3
13.4
1.1
0.2
0.2
0.1
0.1
15.1
(8.8)
6.3
536.2
21.6
12.5
10.1
7.5
17.9
605.8
(85.2)
520.6
Trade
receivables
550.7
35.9
19.5
13.0
8.9
16.4
644.4
(66.3)
578.1
Stage 1
Stage 2
Stage 3
13.1
35.0
(31.8)
16.3
20.8
49.4
(39.1)
31.1
37.8
63.7
(63.7)
37.8
2020
£m
Total trade
receivables
559.4
37.4
20.2
13.6
9.3
Trade
receivables
on payment
arrangements
8.7
1.5
0.7
0.6
0.4
0.6
12.5
(5.4)
7.1
2021
Total
71.7
148.1
(134.6)
85.2
2021
£m
148.1
(12.4)
3.4
139.1
17.0
656.9
(71.7)
585.2
2020
Total
97.1
142.7
(168.1)
71.7
2020
£m
142.7
(17.0)
1.9
127.6
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
134
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 17 BANK BORROWINGS
Bank loans
Net overdraft facility
The borrowings are repayable as follows:
Within one year
In the second year
In the third to fifth year
Amounts due for settlement after 12 months
All borrowings are held in sterling.
The weighted average interest rates paid were as follows:
Net overdraft facility
Bank loans
The principal features of the Group’s borrowings are as follows:
2021
£m
(381.9)
–
–
–
(381.9)
(381.9)
2021
%
1.6
2.5
2020
£m
(544.6)
–
–
(544.6)
–
(544.6)
2020
%
2.3
3.0
The Group operates a notional pooling and net overdraft facility whereby cash and overdraft balances held with the same
bank have a legal right of offset. The Group had a net overdraft balance of £nil at 27 February 2021 (2020: £nil). The facility had
a maximum overdraft limit of £7.5m at 27 February 2021 (2020: £27.5m) and was amended after the year end to a maximum
overdraft limit of £12.5m. The overdraft is repayable on demand, unsecured and bear interest at a margin over bank base rates.
In line with the requirements of IAS 32, gross balance sheet presentation is required where there is no intention to settle any
amounts net. The net balance has therefore been separated between overdrafts and cash balances and the Group has restated
both the Cash and cash equivalents and the Bank loans and overdraft balances as at 29 February 2020 to show these amounts
gross. Further detail is included in note 25.
The Group has a bank loan of £381.9m (2020: £419.6m) 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 which is committed to December 2023, following refinancing in December 2020 where the term of the facility was
extended. An assessment was undertaken as required under IFRS 9 as to whether a substantial modification had occurred
resulting in the derecognition of the existing liability, however the modification was not considered to substantially modify the
liability on either a quantitative or qualitative basis. Unamortised fees relating to this facility of £2.3m are offset against the
carrying amount of the loan.
The Group also has unsecured bank loans of £nil (2020: £125m) drawn down under a medium-term bank RCF. The facility was
amended during the year to a maximum limit of £100m from £125m, and is committed to December 2023, after being extended
during the year from an end date of September 2021. On modification, a substantial modification of the existing liability was
deemed to have taken place under IFRS 9, and the existing liability was derecognised, with a new liability recognised under the
revised terms. The remaining loan drawdown was repaid in full on completion of the refinancing and continues to be £nil as at
the year end.
During the year, the Group secured a new up to £50m three-year Term Loan facility, provided by its lenders under the
government’s CLBILS. The facility, which was committed until May 2023 was fully repaid and handed back without penalty on
24 December 2020, following the completion of the equity raise, on which a loss on derecognition of previously capitalised fees
of £0.4m was incurred.
The covenants inherent to these borrowing arrangements are closely monitored on a regular basis. Borrowing covenants
continue to be in place on the securitisation and RCF facilities respectively. The key covenants for the RCF are as follows:
Leverage, representing the ratio of adjusted net debt on adjusted EBITDA, <1.5; and
Interest cover, representing the ratio of adjusted EBITDA on net finance charges, >4.0.
Throughout the period, all covenants have been complied with. As part of the revised banking facilities secured in May 2020, it
was agreed with our lenders to relax the quarterly leverage covenant ratio to not exceed 2.0:1 as at 29 August 2020, rather than
1.5:1. Despite this relaxation the actual measure at 29 August 2020 was 0.38, well within the actual and previous limit.
135
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17 BANK BORROWINGS CONTINUED
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 fair value of interest rate caps outstanding at the year end was £0.7m (2020: £0.8m),
the caps cover the whole facility of £500m on a notional basis. Based on current weighted average interest rates and the value of
bank loans at 27 February 2021 the estimated future interest cost per annum until maturity is £9.5m (2020: £16.2m).
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 Group continues to have a supplier financing arrangement which is facilitated by HSBC. The principal purpose of this
arrangement is to enable the supplier, if it so wishes, to sell its receivables due from the Group to a third-party bank prior to
their due date, thus providing earlier access to liquidity. From the Group’s perspective, the invoice payment due date remains
unaltered and the payment terms of suppliers participating in the programme are similar to those suppliers that are not
participating. The maximum facility limit as at 27 February 2021 was £10.0m (2020: £10.0m). The facility limit was increased to
£15m after the year end. At 27 February 2021, total of £8.0m (2020: £6.3m) had been funded under the programme. The scheme
is based around the principle of reverse factoring whereby the bank purchases from the supplier’s approved trade debts
owed by the Group. Access to the supplier finance scheme is by mutual agreement between the bank and supplier, where the
supplier wishes to be paid faster than standard group payment terms; 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 bank. The bank 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 within trade payables and all cash flows associated with the arrangements are included
within operating cash flow as they continue to be part of the normal operating cycle of the Group. There is no fixed expiry date
on this facility.
There is no material difference between the fair value and carrying amount of the Group’s borrowings.
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 (liability)/asset recognised
2021
£m
211.2
(7.1)
2020
£m
305.9
3.1
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 charge of £10.0m (2020: credit of £4.7m) to income in the period.
Financial instruments that are measured subsequent to initial recognition at fair value are all grouped into Level 2 (2020: 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.
136
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk GEARING RATIO
The gearing ratio at the year end is as follows:
Debt
Cash and cash equivalents
Bank overdrafts
Adjusted net debt
Lease liability
Net debt
Equity
Gearing ratio
2021
£m
381.9
(94.9)
14.1
301.1
4.9
306.0
425.7
71.9%
2020
£m
(Restated)*
544.6
(161.7)
114.2
497.1
6.9
504.0
317.5
159%
* Both Cash and cash equivalents and Bank overdrafts have been restated in 2020 to gross up the effect of bank accounts in overdraft and cash separately
(see note 25)
Debt is defined as long-term 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.
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
2021
£m
97.1
87.7
20.8
5.6
211.2
2020
£m
142.6
99.2
41.2
22.9
305.9
Forward contracts outstanding at the period end are contracted at US dollar exchange rates ranging between 1.29 and 1.37.
137
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19 FINANCIAL INSTRUMENTS CONTINUED
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 takes out forward contracts to manage its foreign currency exposure.
Euro
currency impact
US Dollar
currency impact
Income statement
Sterling strengthens by 10%
Sterling weakens by 10%
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
2021
£m
(0.6)
0.8
2020
£m
(0.9)
1.1
2021
£m
1.2
(1.4)
2021
£m
0.4
80.0
520.8
5.7
606.9
2021
£m
7.5
381.9
57.4
446.8
2020
£m
(3.0)
1.2
2020
£m
5.3
47.5
585.2
6.3
644.3
2020
£m
2.2
544.6
73.0
619.8
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 initially 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 the London Interbank Offered Rate (“LIBOR”) increase above a certain level.
Following recent reform and replacement of benchmark interest rates such as GBP LIBOR and other interbank offered rates
(‘IBORs’), LIBOR fixings will no longer be representative after 31 December 2021 which creates a requirement for the Group’s
contracts which currently reference LIBOR to use an alternative benchmark rate. The Group’s stakeholders have been engaged
and a review is currently being undertaken of impacted documentation to ensure the Group is ready for the cessation of LIBOR
at the end of this year. The Group’s most significant risk exposure affected by these changes relates to its secured borrowings.
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 27 February 2021 would have decreased by £1.9m (2020: £2.7m).
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.
The Group has a number of support options for customers in financial difficulty, which include a temporary suspension of
repayments, and revision of minimum payment terms. Over the last year, the Group has also provided additional extended support
for customers impacted by Covid-19, by allowing customers to defer payments for up to 6 months as a Covid-19 payment deferral.
The concentration of credit risk is limited due to the customer base being large and unrelated.
138
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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
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
Stage 2
Stage 3
441.0
–
–
–
–
–
441.0
(16.3)
77.1
20.0
10.8
–
–
–
107.9
(31.1)
18.1
1.6
1.7
10.1
7.4
18.0
56.9
(37.8)
Stage 1
Stage 2
Stage 3
516.2
–
–
–
–
–
516.2
(13.1)
29.5
35.3
17.5
–
–
–
82.3
(20.8)
13.7
2.0
2.6
13.7
9.3
17.1
58.4
(37.8)
2021
Total
536.2
21.6
12.5
10.1
7.4
18.0
605.8
(85.2)
2020
Total
559.4
37.3
20.1
13.7
9.3
17.1
656.9
(71.7)
As at 27 February 2021 current debtors were included in Stage 2 if the receivable had suffered from a significant increase in credit risk.
Debtors which were on a Covid-19 payment hold, or within a post Covid-19 payment hold observation window of three months were
included in Stage 2. 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 27 February 2021 included the following key indicators, provided by Experian as external advisers,
for the UK for the calendar years 2021 to 2025:
Unemployment rate (%)
Annual real wage growth (%)
Base
Upside
Downside
Base
Upside
Downside
2021
7.7
7.2
8.3
(1.2)
0.7
(2.1)
2022
2023
2024
2025
6.3
5.6
7.1
1.1
2.4
0.2
5.0
4.4
5.6
1.2
2.3
0.4
4.5
3.8
5.1
1.5
2.5
0.7
4.3
3.6
5.0
1.4
2.3
0.8
The scenarios above have been applied to all customers within the Group’s ECL model.
Predicted relationships between the key indicators and default and loss rates on various portfolios of financial assets have been
developed based on historical data.
The amounts derecognised in the period include the sale of impaired assets with a net book value of £14.3m (2020: £19.9m).
139
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19 FINANCIAL INSTRUMENTS CONTINUED
INCORPORATION OF FORWARD-LOOKING INFORMATION CONTINUED
Expected Credit Losses
Balances as at 29 February 2020
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 27 February 2021
Stage 1
Stage 2
Stage 3
Total
13.1
0.0
3.1
2.4
(2.9)
3.9
(1.0)
(2.2)
16.3
20.8
(3.1)
0.0
1.5
22.0
2.4
(3.2)
(9.4)
31.1
37.8
(2.4)
(1.5)
0.0
78.6
3.8
(24.5)
(54.0)
37.8
71.7
(5.5)
1.5
3.9
97.7
10.1
(28.8)
(65.6)
85.2
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:
2021
Non-derivative financial liabilities
Secured bank loans
Trade payables
Lease liabilities
Other creditors
Accruals and deferred income
Derivatives: gross settled
Cash inflows
Cash outflows
2020
Secured bank loans
Trade payables
Lease liabilities
Other creditors
Accruals and deferred income
Derivatives: gross settled
Cash inflows
Cash outflows
2021
Carrying
amount
£m
2021
Contractual
cash flows
£m
(381.9)
(46.7)
(4.9)
(4.7)
(59.2)
(497.4)
0.4
(7.5)
(504.5)
(383.4)
(46.7)
(5.2)
(4.7)
(59.2)
(499.2)
0.4
(7.5)
(506.3)
2020
Carrying
amount
£m
(544.6)
(65.9)
(6.9)
(7.1)
(37.5)
(662.0)
2020
Contractual
cash flows
£m
(549.5)
(65.9)
(7.7)
(7.1)
(37.5)
(667.7)
5.3
(2.2)
(658.9)
5.3
(2.2)
(664.6)
2021
1 year
or less
£m
(9.5)
(46.7)
(1.8)
(4.7)
(59.2)
(121.9)
0.4
(6.2)
(127.7)
2020
1 year
or less
£m
(16.4)
(65.9)
(2.3)
(7.1)
(37.5)
(129.2)
4.0
(1.3)
(126.5)
2021
1 to <2
years
£m
2021
2 to <5
years
£m
2021
5 years
and over
£m
(9.5)
–
(1.1)
–
–
(10.6)
–
(1.3)
(11.9)
2020
1 to <2
years
£m
(533.1)
–
(1.9)
–
–
(535.0)
1.3
(0.9)
(534.6)
(364.4)
–
(1.1)
–
–
(365.5)
–
–
(365.5)
2020
2 to <5
years
£m
–
–
(2.1)
–
–
(2.1)
–
–
(1.2)
–
–
(1.2)
–
–
(1.2)
2020
5 years
and over
£m
–
–
(1.4)
–
–
(1.4)
–
–
(2.1)
–
–
(1.4)
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 2021nbrown.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 2 March 2019
Adjustment on initial application of IFRS 9
Adjustment on initial application of IFRS 16
(Charge)/credit to income
Charge to equity
As at 29 February 2020
(Charge)/credit to income
Charge to equity
As at 27 February 2021
Share-
based
payments
£m
0.2
–
–
(0.2)
–
–
0.1
–
0.1
Accelerated
tax
depreciation
£m
(6.1)
–
–
1.2
–
(4.9)
0.6
–
(4.3)
Retirement
benefit
obligations
£m
(8.4)
–
–
(0.5)
(0.3)
(9.2)
(0.4)
0.7
(8.9)
IFRS 9
transitional
adjustment
£m
10.4
–
–
(1.2)
–
9.2
(0.2)
–
9.0
Other
deferred tax
assets and
liabilities
£m
0.6
–
0.1
(0.8)
–
(0.1)
1.8
–
1.7
Tax
losses
£m
7.6
–
–
(4.0)
–
3.6
(1.7)
–
1.9
Total
£m
4.3
–
0.1
(5.5)
(0.3)
(1.4)
(0.4)
0.7
(0.5)
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 27 February 2021
2021
£m
12.7
(13.2)
(0.5)
2020
£m
13.2
(14.6)
(1.4)
At the balance sheet date, the Group has unused tax losses of £17.5m (2020: £17.5m) and capital losses of £3.2m (2020: £3.2m)
available for offset against future profits on which deferred tax is not recognised. The Group has recognised a deferred tax
asset of £1.9m in relation to trading losses carried forward. As at 27 February 2021, 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
Trade and other payables
2021
£m
46.7
4.7
59.2
110.6
2020
£m
65.9
7.1
37.5
110.5
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 41 days (2020: 54 days).
The Group has financial risk management policies in place to ensure that all payables are paid within agreed credit terms.
The Group continues to have a supplier financing arrangement which is facilitated by HSBC. The principal purpose of this
arrangement is to enable the supplier, if it so wishes, to sell its receivables due from the Group to a third party bank prior to their
due date, thus providing earlier access to liquidity. From the Group’s perspective, the invoice payment due date remains unaltered
and the payment terms of suppliers participating in the programme are similar to those suppliers that are not participating.
The maximum facility limit as at 27 February 2021 was £10.0m (2020: £10m). The facility limit was increased to £15m after the year
end. At 27 February 2021, total of £8.0m (2020: £6.3m) had been funded under the programme. The scheme is based around the
principle of reverse factoring whereby the bank purchases 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, where the supplier wishes to be paid faster
than standard Group payment terms; 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 bank. The bank 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 within trade
payables and all cash flows associated with the arrangements are included within operating cash flow as they continue to be part of
the normal operating cycle of the Group. There is no fixed expiry date on this facility.
141
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
22 PROVISIONS
Balance as at 29 February 2020
Provisions made during the period
Provisions used during the period
Balance as at 27 February 2021
Non-current
Current
Balance as at 27 February 2021
Customer
redress
£m
8.3
–
(6.7)
1.6
–
1.6
1.6
Strategic
Change
£m
2.8
5.7
(5.7)
2.8
–
2.8
2.8
Other
£m
–
0.7
(0.4)
0.3
–
0.3
0.3
Total
£m
11.1
6.4
(12.8)
4.7
–
4.7
4.7
CUSTOMER REDRESS
The provision relates to the Group’s liabilities in respect of costs expected to be incurred for payments for historic Financial Services
customer redress, which represents the best estimate of redress obligations, taking into account factors including risk and uncertainty.
Redress activity, other than the Official Receiver complaints, has been concluded in the current year and as at 27 February 2021
the Group holds a provision of £1.6m (2020: £8.3m), which will be paid in the next 12 months.
STRATEGIC CHANGE
During the prior year the Board undertook a strategic review and 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 five strategic brands.
During the current year, and in line with the Group’s refined strategy and focus on the five key strategic brands, the decision
was taken to transfer the Figleaves business under the Simply Be brand. Figleaves now operates under the Simply Be brand
and trades from our Head Office in Manchester with fulfilment out of the Distribution Centres in Oldham and Hadfield.
Total restructuring costs in the year amounted to £4.0m, relating primarily to redundancy costs of £1.7m, stock write down of
£1.1m, onerous contract provisions of £0.8m and other transfer and logistic costs of £0.4m.
Additional redundancy costs of £3.5m were also incurred relating to the rest of the Group, in order to align the Group’s people
costs with the lower volumes incurred during the year.
The restructuring plans for both Figleaves and rest of the Group were announced to the affected employees prior to the end of
the year, which represents a constructive obligation for the Group at the year end.
OTHER
The total charge in the current period of £0.3m relates to further costs and interest in relation to matters under discussion with
HMRC relating to FY19 or prior years.
23 SHARE CAPITAL
Allotted, called-up and fully paid ordinary shares of 11 1/19p each
Opening as at 29 February 2020 (2 March 2019)
Issued in the year
At 27 February 2021 (29 February 2020)
2021
Number
2020
Number
285,817,178
174,666,053
460,483,231
285,817,178
–
285,817,178
2021
£m
31.4
19.5
50.9
2020
£m
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.
In December 2020, the Group completed an equity raise where a total number of 174,666,053 ordinary shares was issued at
an offer price of 57p per share. Net proceeds, after accounting for direct transaction costs, amounted to £93.5m. The nominal
value of the shares issued of £19.5m has been accounted for within share capital with the remaining £74.0m accounted for within
share premium.
142
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 24 OWN SHARES
Balance at 29 February 2020
Issue of own shares
Balance at 27 February 2021
2021
£m
0.3
–
0.3
2020
£m
0.3
–
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 27 February 2021 the employee trusts held 2,240,321 shares in the Company (2020: 1,573,598).
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 £0.5m (2020: £0.6m)
of restricted cash which is held in respect of the Group’s customer redress programmes and £3.0m (2020: £3.6m) in respect of our
securitisation reserve account. This cash is available to access by the Group. In addition £1.9m (2020: £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
Net cash and cash equivalents and bank overdrafts
Made up of:
Cash and cash equivalents
Bank overdrafts
2021
£m
69.1
6.2
5.5
80.8
94.9
(14.1)
2020
£m
10.2
10.3
27.0
47.5
161.7
(114.2)
The Group operates a notional pooling and net overdraft facility whereby cash and overdraft balances held with the same bank
have a legal right of offset. In line with requirements of IAS 32, gross balance sheet presentation is required where there is no
intention to settle any amounts net. The balance has therefore been separated between overdrafts and cash balances and the
Group has restated both the Cash and cash equivalents and the Bank loans and overdraft balances as at 29 February 2020 to
show these amounts gross.
This adjustment has no impact on the Group’s net profit or loss in the prior and preceding years, not its net assets. In addition,
there was no impact on net cashflows in the prior or preceding years.
The prior period has accordingly been restated for this adjustment as demonstrated below:
Balance Sheet (extract)
Current Assets
Cash and cash equivalents
Current liabilities
Bank loans and overdrafts
Net current assets
Net assets
Total Equity
29 February 2020
£m
Adjustment
£m
29 February 2020
£m
47.5
–
621.9
317.5
317.5
114.2
161.7
(114.2)
–
–
–
(114.2)
621.9
317.5
317.5
143
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
26 CONTINGENT LIABILITIES
BANK OVERDRAFTS
The Group operates a net overdraft facility that was undrawn
at 27 February 2021 (2020: £27.5m undrawn). The parent
Company bank account which at 27 February 2021 was in
£11.8m overdraft (2020: £102.7m overdraft) is part of this net
overdraft facility, and offset by other subsidiary accounts
in a debit position. Parent Company loans amounted to
£nil (2020: £125.0m) at 27 February 2021. Both balances are
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) PPI to its customers when they bought
JDW products. This insurance was underwritten by Allianz
plc (“the Insurer”). 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 the Insurer.
In recent years, JDW and the Insurer have paid out significant
amounts of redress to customers in respect of certain
insurance products, including PPI. In July 2014 JDW and the
Insurer entered into an indemnity agreement in respect of
certain PPI mis-selling liabilities (“Indemnity Agreement”).
In September 2018 JDW and the Insurer 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 the
Insurer in respect of all payments of redress the Insurer has
made to JDW’s PPI customers together with all associated
costs. The Insurer has 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 the Insurer. JDW has
claimed that:
The Insurer 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); and
The Insurer 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 the Insurer in respect of
sums paid by JDW pursuant to the CHA as the Insurer was
also liable for the same damages in relation to Payment
Protection Insurance.
144
On 9 April 2020 JDW received a Reply and Defence to JDW’s
counterclaim. This document asserted that the amount of the
Insurer’s claim was £28m plus interest. A Claims Management
Conference was held in September 2020 following which a timetable
to trial was set by the Court. The deadline for disclosure was extended
due to challenges resulting from searching legacy systems and the
very substantial volumes of data and documentation involved and
was substantially completed in April 2021. Assessment and analysis of
disclosures will be undertaken over the coming months. Witness and
Expert evidence will play a significant role in helping to establish likely
quantum and merits in relation to both the claim and the counter
claim and is expected to be completed later in 2021.
The claim and counterclaim remain at an early stage of the
legal process.
All claims made by the Insurer, 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, and both parties only recently completed the
lengthy disclosure exercise, and will continue to gather detailed
and factual expert and witness evidence in relation to multiple
elements of the claim and counterclaim over the coming months.
There is also considerable uncertainty as to the timing of
any resolution of the claim/counterclaim given that the legal
court process will continue well into 2021 and the trial is not
scheduled until 2022. Legal fees are expected to continue to be
incurred during FY22 but it is likely that the cashflows resulting
from the claim and/or counterclaim may not arise until FY23.
Having taken legal advice on its own position, the Group has
concluded that as the case remains at an early stage and there
has been no meaningful progress in relation to either quantum
or merits during the year, it is still not possible to reliably estimate
the amount of any potential financial outcomes and has therefore
continued to not provide any amount for this claim.
IAS 37 (Provisions, contingent liabilities and contingent assets)
requires a provision to be recognised when there is a present
obligation as a result of a past event, it is probable that there will
be an outflow of economic benefits to settle the obligation and
a reliable estimate can be made of the amount of the obligation.
The Insurer’s claim represents a present obligation and it is likely
than there will be an outflow of economic benefits to settle it.
However, given the complexities of the claim, the volume of the
data elements involved, the historic nature of the claims and the
difficulties associated with establishing all the relevant facts, it is not
possible to estimate reliably the amount of the obligation. In these
circumstances, IAS 37 requires a contingent liability to be disclosed.
The protracted nature of the disclosure process and the volume of
material to assess has contributed to the lack of progress in the year.
IAS 37 defines a contingent asset as a possible asset that arises
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.
A contingent asset is only recognised in the financial statements
when an inflow of economic benefits is virtually certain. It is
disclosed as a contingent asset when an inflow of economic
benefits is probable. The counter claim does not meet either of
these criteria and the description of the counterclaim is provided
in accordance with requirements of IAS 1 (Presentation of
financial statements) on the basis that claim and counterclaim are
relevant to an overall understanding of the overall position.
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 27 LEASES
The Group leases various buildings, equipment and vehicles under non-cancellable 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.
AMOUNTS RECOGNISED IN THE BALANCE SHEET
The consolidated balance sheet as at 27 February 2021 shows the following amounts relating to leases.
Right-of-use assets
29 February 2020
Depreciation
Impairment
Disposals
27 February 2021
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)
Land and
buildings
£m
3.6
(1.0)
(0.1)
–
2.5
Fixtures and
equipment
£m
2.0
(0.6)
–
(0.3)
1.1
2021
£m
1.8
3.1
4.9
2021
£m
1.0
0.7
0.4
1.1
0.1
Total
£m
5.6
(1.6)
(0.1)
(0.3)
3.6
2020
£m
2.2
4.7
6.9
2020
£m
1.1
0.2
0.1
0.8
0.1
The total cash outflow for leases during the year was £3.4m (2020 : £4.4m). The portfolio of short-term and low-value leases to which
the Group is committed is not dissimilar to the portfolio for which the expense has been incurred during the year, and future expenses
are expected to be on a similar level annually.
145
N Brown Group plc Annual Report and Accounts 2021nbrown.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 share save 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)
August 2017
August 2018
June 2019
September 2019
November 2020
November 2020
Deferred annual bonus scheme awards (DABs)
August 2018
June 2019
Deferred share bonus plan (DSBP)
June 2019
Movements in share options 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
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
605,262
89,049
60,450
1,740,653
89,049
60,450
–
–
–
–
–
–
–
–
–
August 2020 – August 2027
August 2021 – August 2028
September 2022 – August 2029
September 2022 – September 2029
November 2023 – November 2030
August 2021 – November 2030
73,333
1,223,591
120,440
2,379,429
2,425,386
2,763,554
770,817
1,586,211
285,409
3,230,819
–
–
August 2020 – August 2028
June 2021 – June 2029
–
129,689
175,401
163,766
June 2022 – June 2029
35,410
84,246
2021
Weighted
average
exercise
price
£
1.55
–
1.54
–
1.55
2.49
Number
of share
options
1,890,152
–
(1,135,391)
–
754,761
149,499
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
No options were exercised in the period and the weighted average share price during the period was 46p (2020: 116p).
The options outstanding at 27 February 2021 had a weighted average remaining contractual life of 1.32 years (2020: 2.21 years).
The aggregate estimated fair values of options granted in the period is £nil (2020: £502,043).
146
N Brown Group plc Annual Report and Accounts 2021nbrown.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
2021
Weighted
average
exercise
price
£
–
–
–
–
–
–
Number of
share awards
6,717,660
4,457,764
(4,567,899)
(310,856)
6,296,669
–
2020
Weighted
average
exercise
price
£
–
–
–
–
–
–
Number
of share
awards
6,296,669
5,243,189
(2,060,062)
(328,964)
9,150,832
73,333
The awards outstanding at 27 February 2021 had a weighted average remaining contractual life of 3.53 years (2020: 8.52 years).
The aggregate estimated fair values of options granted in the period is £2,598,794 (2020: £3,579,266).
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 (%)
2021
55
–
47.0
3.0
(0.1)
–
2020
112
24
46.5
2.5 - 4.3
1.0
0.6
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 charge of £0.8m and a credit of £1.3m related to equity-settled share-based payment transactions
in 2021 and 2020 respectively.
147
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
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 £6.1m (2020: £6.0m) represents contributions payable to the schemes by the Group at rates
specified in the rules of the plans. As at 27 February 2021, contributions of £0.2m (2020: £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. The scheme 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 next triennial review will commence during
June 2021. 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:
Past service cost
Net interest credit
Administrative expenses paid from plan assets
Profit recognised in the income statement
2021
2.10%
2.10%
3.35%
2.75%
2020
1.75%
2.00%
2.85%
2.05%
22.0
23.9
23.4
25.7
2021
£m
0.1
(0.5)
0.4
–
22.0
23.4
23.8
25.7
2020
£m
–
(0.7)
0.1
(0.6)
The actual loss on scheme assets was £0.2m (2020: actual return £23.8m).
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
2021
£m
(127.0)
152.5
25.5
2020
£m
(130.9)
157.2
26.3
148
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk The amount included in the statement of comprehensive income is as follows:
Remeasurement gain/(loss)
(Loss)/Return on scheme assets
(Loss)/Gain recognised in the statement of comprehensive income
2021
£m
1.0
(2.9)
(1.9)
2020
£m
(19.3)
20.1
0.8
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 29 February 2020
Past service cost
Interest cost
Remeasurement (gain)/loss
Effect of changes in financial assumptions
Effect of changes in demographic assumptions
Benefits paid
At 27 February 2021
Movements in the fair value of the scheme assets were as follows:
At 29 February 2020
Interest income
Return on scheme assets excluding interest income
Contributions from sponsoring companies
Benefits paid
Admin expenses
At 27 February 2021
2021
£m
130.9
0.1
2.2
(0.8)
(0.2)
(5.2)
127.0
2021
£m
157.2
2.7
(2.8)
1.0
(5.2)
(0.4)
152.5
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
22.3
26.2
36.6
49.0
2.6
14.6
0.3
0.9
152.5
2021
%
14.6
17.2
24.0
32.1
1.7
9.6
0.2
0.6
100.0
£m
15.2
0.4
13.8
89.2
1.8
14.4
1.5
20.9
157.2
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
2020
%
9.7
0.3
8.8
56.6
1.1
9.2
1.0
13.3
100.0
All assets had an observable market price (2020: 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 £6.2m (2020: £6.9m).
An increase of 0.25% in the inflation assumption would increase the defined benefit obligation by £3.7m (2020: £3.8m).
An increase of one year in the life expectancy assumption would increase the defined benefit obligation by £4.5m (2020: £4.6m).
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.
149
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE GROUP ACCOUNTS CONTINUED
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 £4.2m (2020: £2.3m).
This was split as follows: employment benefits of
£3.9m (2020: £2.1m), other benefits of £0.3m (2020: £0.2m) and
share-based payments of £nil (2020: £nil).
31 GOVERNMENT GRANTS AND OTHER
SUPPORT
The UK government has offered a range of financial support
packages to help companies affected by coronavirus.
During the year, the Group has received a total government
grant of £3.8m (2020: £nil) in respect of the furlough scheme.
The Group has elected to deduct the grant in reporting the
related expense.
In May 2020, the Group also secured a new up to £50 million
three-year Term Loan facility, provided by its lenders under
the government’s Coronavirus Large Business Interruption
Loan Scheme (“CLBILS”). The facility, which was committed
until May 2023 was fully repaid and handed back without
penalty on 24 December 2020, following the completion
of the equity raise.
29 RETIREMENT BENEFIT SCHEMES
CONTINUED
The Group has updated its approach to setting Retail Price
Index (“RPI”) and Consumer Price Index (“CPI”) inflation
assumptions in light of the RPI reform proposals published
on 4 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 0.25% at
29 February 2020 to 0.05% at 27 February 2021, 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
0.6% per annum. The estimated impact of the change in the
methodology is approximately a £3.7m increase 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 (2020 actual contributions: £1.0m)
to the defined benefit scheme in the next financial year.
The weighted average duration of the defined benefit
obligation at 27 February 2021 is approximately 20 years
(2020: 20 years). The defined benefit obligation at 27 February
2021 can be approximately attributed to the scheme members
as follows:
Active members: 0% (2020: 0%)
Deferred members: 64% (2020: 64%)
Pensioner members: 36% (2020: 36%)
All benefits are vested at 27 February 2021 (unchanged from
1 March 2020).
150
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 32 PRIOR YEAR ADJUSTMENT
During the year, the Group identified that the relief claimed in respect of the value added tax element on customer debt written
off was, in prior years, accounted for within product revenue, whilst the cost of the write off was recorded in Financial Services
cost of sales. On further review of the Group’s revenue recognition, management have come to a conclusion that this is not an
income stream within revenue and rather it has no income statement effect.
For the year ended 29 February 2020, £20.7m of value added tax relief was recognised within revenue, rather than being
offset against cost of sales, leading to the overstatement of Group revenue and overstatement of Group cost of sales by
£20.7m respectively.
A prior year adjustment of £20.7m has therefore been made in both revenue and cost of sales respectively. This adjustment has
no impact on the Group gross profit or profit after tax, nor its net assets or equity in the prior year, and therefore no impact on
basic or diluted earnings per share. In addition, there was no impact on net cashflows from operating activities in the prior year.
The prior period has accordingly been restated for this adjustment, as demonstrated below.
Consolidated income statement (extract)
Revenue
Credit account interest
Total Revenue
Cost of sales
Impairment losses on customers
Profit on sale of customer receivables
Gross Profit
Operating Profit
Profit before tax
Profit for the period
29 February 2020
£m
594.9
263.3
858.2
(291.0)
(133.9)
6.3
439.6
48.1
35.7
27.4
Adjustment
£m
(20.7)
–
(20.7)
20.7
–
–
–
–
–
–
29 February 2020
£m
574.2
263.3
837.5
(270.3)
(133.9)
6.3
439.6
48.1
35.7
27.4
151
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report COMPANY BALANCE SHEET
Fixed assets
Investments
Debtors
Cash and cash equivalents
Current assets
Bank overdrafts
Creditors: Amounts falling due within one year
Current liabilities
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
* Refer to prior year adjustment note 41
As at
27 February
2021
£m
Note
As at
29 February
2020
£m
(Restated)*
35
36
38
37
38
39
366.8
111.6
1.3
112.9
(13.1)
(210.6)
(223.7)
(110.8)
256.0
–
256.0
50.9
85.0
(0.3)
120.4
256.0
366.0
169.9
–
169.9
(102.7)
(209.3)
(312.0)
(142.1)
223.9
(125.0)
98.9
31.4
11.0
(0.3)
56.8
98.9
The financial statements of N Brown Group plc (Registered Number 814103) were approved by the Board of Directors and
authorised for issue on 19 May 2021.
They were signed on its behalf by:
Rachel Izzard
CFO and Executive Director
152
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk COMPANY STATEMENT OF CHANGES IN EQUITY
Changes in equity for the 52 weeks ended 27 February 2021
Balance at 29 February 2020
Comprehensive income for the period
Profit for the period
Total comprehensive loss for the period
Transactions with owners recorded directly in equity
Issue of shares
Issue of own shares by ESOT
Share-based payment charge
Total contributions by and distributions to owners
Balance at 27 February 2021
Changes in equity for the 52 weeks ended 29 February 2020
Balance at 2 March 2019
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 29 February 2020
Share
capital
(note 38)
£m
Share
premium
£m
Own shares
£m
Retained
earnings
£m
31.4
–
–
19.5
–
–
19.5
50.9
11.0
–
–
74.0
–
–
74.0
85.0
(0.3)
–
–
–
–
–
–
(0.3)
56.8
62.8
62.8
–
–
0.8
0.8
120.4
Total
£m
98.9
62.8
62.8
93.5
–
0.8
94.3
256.0
31.4
11.0
(0.3)
88.8
130.9
–
–
–
(10.6)
(10.6)
(10.6)
(10.6)
–
–
–
–
31.4
–
–
–
–
11.0
–
–
–
–
(0.3)
(20.1)
–
(1.3)
(21.4)
56.8
(20.1)
–
(1.3)
(21.4)
98.9
153
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE COMPANY ACCOUNTS
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 accounting standards in conformity with the
requirements of 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 accounting
standards in conformity with the requirements of the
Companies Act 2006 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; and
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; and
Disclosures required by IFRS 2 Share-based payment.
GOING CONCERN
For the reasons set out below, the Directors of the Company
believe that it remains appropriate to prepare the financial
statements on a going concern basis. The Company is
relying on the Going Concern assessment performed for the
purposes of the Group. After reviewing the Group’s forecasts
and risk assessments and making other enquiries, the
Directors have formed a judgement at the time of approving
the financial statements, that there is a reasonable expectation
that the Group and the Company have adequate resources
to continue in operational existence for the 12 months from
the date of signing this Annual Report and Accounts. For this
reason, the Directors continue to adopt the going concern
basis in preparing the financial statements.
In arriving at their opinion, the Directors considered:
a) the Group’s cash flow forecasts and revenue projections
for the 12 months from the date of signing (the “Base Case”),
reflecting, amongst other things the following assumptions:
The business continues to be fully operational throughout
the remainder of the pandemic (as has been the case since
the outset);
Product gross margin pressure continues due to mix, a highly
promotional retail market and industry-wide increase in
freight rates;
Financial Services revenue reduces as the size of the loan book
reduces as a function of the lower product sales;
FS gross margin declines due to an increase in bad debt and
write offs due to the impact of Covid-19; and
Operating cost efficiencies are maintained in that they
continue at a similar cost to revenue ratio as achieved in FY21.
b) the impact on trading performance of severe but plausible
downside scenarios (the “Downside Case”), including
continued Covid-19 restrictions, the removal of government
support schemes such as Stamp Duty Relief, Mortgage
holiday, and the Coronavirus Jobs Retention Scheme and
adverse macro-economic conditions.In particular, the
downside scenario assumes that the lockdown restrictions
experienced in the second half of the year ended February
2021 will apply throughout the year ending February 2022
resulting in an adverse impact on retail sales, a reduction in
collection rates with a consequent increase in bad debts and
a reduction in the debt securitisation advance rate. It has also
been assumed that the current unusually high freight rates will
continue to apply with an adverse effect on gross margins.
154
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk c) the committed facilities available to the Group and the
covenants thereon. Details of the group’s committed facilities
are set out in note 17, the main components of which are:
A £500msecuritisation facility committed until December
2023, drawings on which are linked to prevailing levels of
eligible receivables (£381.9m drawn to the maximum of eligible
customer receivables);
An RCF of £100m committed until December 2023, which is
fully undrawn; and
An overdraft facility of £12.5m which is subject to an
annual review every July (undrawn as at date of signing of
these accounts).
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.
d) that there are no forecast breaches of any covenants
in either the Base Case or Downside Case, without any
additional management actions being required. In the
event that trading deteriorated further than envisaged in
the Downside Case additional management actions could
be implemented which would include sale of customer
receivables, working capital deferrals, temporary reductions
in inventory and capital expenditure and further discretionary
cost reductions.
e) the Group’s robust policy towards liquidity and cash flow
management. As at 30 April 2021, the Group had cash of
£84.3m, net restricted cash of £3.3m and undrawn facilities
of £112.5m, giving rise to total accessible liquidity (“TAL”) of
£193.5m (FY20: £75m) reflecting, amongst other things, the
benefit of the equity raise in December 2020 (£93.5m, net) and
positive cash generation in the current financial year offset
by a decision by the Board to reduce the RCF by £25m and to
hand back the £50m CLBILS Term Loan Facility.
f) the Group management’s ability to successfully manage
the principal risks and uncertainties outlined on p35 to 38
during periods of uncertain economic outlook and challenging
macro-economic conditions.
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.
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.
155
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE COMPANY ACCOUNTS CONTINUED
33 SIGNIFICANT ACCOUNTING POLICIES
CONTINUED
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.
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.
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.
156
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk 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 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.
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:
CARRYING VALUE OF INVESTMENTS
Critical judgement
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.
34 PROFIT FOR THE PERIOD
As permitted by section 408 of the Companies Act 2006 the
Company has elected not to present its own profit and loss
account for the period.
N Brown Group plc reported a Profit after tax for the financial
period ended 27 February 2021 of £62.8m (2020: loss £10.6m)
which includes dividends received of £70.0m (2020: £nil).
The Non-Executive Directors’ remuneration was £0.6m
(2020: £0.6m) and nine Non-Executive Directors were
remunerated (2020: seven). The Executive Directors were
remunerated by a subsidiary company in both years; the total
was £1.3m (2020: £0.9m). Further details are provided on p86
of the Directors’ Remuneration Report.
Fees in relation to non-audit related services include fees
of £60,000 (2020: £30,000) relating to assurance services
and £450,000, of which £45,000 was required by regulation
(2020: £nil), in relation to the equity raise completed by the
Group during the year.
Fees payable to the Company’s auditor for the audit of the
Company’s annual accounts were £20,000 (2020: £20,000).
157
N Brown Group plc Annual Report and Accounts 2021nbrown.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)
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
Griffin House, 40 Lever Street, Manchester M60 6ES
29 Earlsfort Terrace, Dublin 2, Ireland
N Brown Pension Trustees Ltd
N Brown Funding Ltd*
Griffin House, 40 Lever Street, Manchester M60 6ES
Griffin House, 40 Lever Street, Manchester M60 6ES
N Brown Holdings Ltd
Griffin House, 40 Lever Street, Manchester M60 6ES
158
2021
£m
366.0
0.8
366.8
2020
£m
367.3
(1.3)
366.0
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
Status
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Trading Company
Intermediate
Holding company
Dormant
Active
Active
Active
Dormant
Dormant
Dormant
Intermediate
Holding Company
Active
Intermediate
Holding Company
Intermediate
Holding Company
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk Status
Intermediate
Holding Company
Dormant
Dormant
Dormant
Intermediate
Holding Company
Intermediate
Holding Company
Company
Registered Office Address
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)
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
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
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
* Entities exempt from preparing audited statutory financial statements by virtue of s479A of Companies Act 2006.
36 DEBTORS
Amounts falling due within one year:
Amounts owed by Group undertakings
Prepayments and accrued income
* Refer to prior year adjustment note 41
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
2020
£m
(Restated)*
2021
£m
115.1
0.1
111.6
169.8
0.1
169.9
The amounts owed by Group undertakings, whilst there is no fixed term of expiry, are expected to be repaid within the next 12 months.
159
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report NOTES TO THE COMPANY ACCOUNTS CONTINUED
37 CREDITORS
Amounts falling due within one year:
Amounts owed to Group undertakings
38 BANK LOANS AND OVERDRAFTS
Bank overdrafts
Bank loans
* Refer to prior year adjustment note 41
2021
£m
2020
£m
210.6
210.6
209.3
209.3
2020
£m
(Restated)*
102.7
125.0
227.7
2021
£m
13.1
–
13.1
The Company’s bank account which at 27 February 2021 was in £13.1m overdraft (2020: £102.7m overdraft) is part of the Group’s
notional pooling and net overdraft facility of £7.5m, as described in note 17, and offset by other subsidiary accounts in a debit
position. This facility of £7.5m was undrawn at 27 February 2021 (2020: £27.5m undrawn). The Company has unsecured bank
loans of £nil (2020: £125.0m) drawn down under a medium-term bank RCF committed until December 2023.
At 27 February 2021, the Company had available £100m (2020: £nil) of undrawn committed borrowing facilities in respect of
which all conditions precedent had been met.
The weighted average interest rates paid were as follows:
Net overdraft facility
Bank loans
39 SHARE CAPITAL
Allotted, called-up and fully paid ordinary shares of 11 1/19p each
At 29 February 2020
Issued during the year
At 27 February 2021
The Company has one class of ordinary share which carries no right to fixed income.
2021
%
1.6
1.5
2020
%
2.3
2.5
Number
£m
285,817,178
174,666,053
460,483,231
31.4
19.5
50.9
40 GUARANTEES
Parent Company bank account which at 27 February 2021 was in £13.1m overdraft (2020: £102.7m overdraft) is part of the
Group’s net overdraft facility, as described in note 17, and offset by other subsidiary accounts in a debit position. The net
overdraft facility of £7.5m was undrawn at 27 February 2021 (2020: £27.5m undrawn). Parent Company loans amounted to £nil
(2020: £125.0m) at 27 February 2021. Both balances are guaranteed by certain subsidiary undertakings.
41 PRIOR YEAR ADJUSTMENT
During the year end close, the Group identified that one of the Group’s bank accounts which was thought to be owned by one of
the Group’s subsidiary undertakings, JD Williams & Co Limited, and therefore accounted for in that subsidiary’s balance sheet,
was actually held by the Parent entity, N Brown Group plc. The bank account is being used to make payments to JD Williams
customers and as at 29 February 2020 was in an overdraft position of £54.7m.
As a result, the parent entity’s bank overdraft balance within creditors falling due within one year as at 29 February 2020 was
understated by £54.7m, whilst amounts owed by group undertakings within debtors were also understated by the same amount
and an adjustment has been made accordingly.
This adjustment has no impact on the Company’s net profit or loss in the prior and preceding years, nor its net assets.
160
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk The prior period has accordingly been restated for this adjustment as demonstrated below:
Balance sheet (extract)
Current assets
Debtors
Current liabilities
Bank overdrafts
Net current liabilities
Net assets
Total Equity
APM GLOSSARY
Alternative Performance Measure
Adjusted gross profit
Adjusted gross profit margin
Adjusted EBITDA
Adjusted EBITDA margin
Adjusted profit before tax
Adjusted profit before tax margin
Cash generation
Adjusted operating costs
Adjusted operating costs to revenue ratio
Adjusted net debt
Unsecured net cash/(debt)
Total Accessible Liquidity
Adjusted Earnings Per Share
29 February 2020
£m
Adjustment
£m
29 February 2020
(Restated)
£m
115.2
(48.0)
(142.1)
98.9
98.9
54.7
(54.7)
–
–
–
169.9
(102.7)
(142.1)
98.9
98.9
Definition
Gross profit excluding exceptional items. The Directors believe adjusted Gross profit represents the
most appropriate measure of the Group’s underlying trading performance
Adjusted gross profit as a percentage of Group Revenue. The Directors believe adjusted EBITDA
represents the most appropriate measure of the Group’s underlying trading performance
Operating profit, excluding exceptional items, with depreciation and amortisation added back. The
Directors believe adjusted EBITDA represents the most appropriate measure of the Group’s underlying
trading performance as it removes items that do not form part of the recurring activities of the Group
Operating profit, excluding exceptional items, with depreciation and amortisation added back,
as a percentage of revenue. The Directors believe adjusted EBITDA margin represents the most
appropriate measure of the Group’s underlying trading performance.
Profit before tax, excluding exceptionals items and fair value movement on financial instruments.
The Directors believe that adjusted profit before tax represents the most appropriate measure of the
Group’s underlying profit before tax profit as it removes items that do not form part of the recurring
activities of the Group.
Profit before tax, excluding exceptional items and fair value movement on financial instruments,
expressed as a percentage of Group Revenue. The Directors believe that adjusted profit before tax
margin 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 activities of the Group.
Net cash generated from the Group’s operating activities. The Directors believe that net cash
generated is the most appropriate measure of the Group’s cash generation from underlying
performance as it demonstrates the Group’s ability to support operations and invest in the future.
Operating costs less depreciation, amortisation and exceptional items. The Directors believe this is
the most appropriate measure of the Group’s operating cost base as it removes items that do not
form part of the recurring activities of the Group.
Operating costs less depreciation, amortisation and exceptional items as a percentage of Group
revenue. The Directors believe this is the most appropriate measure to demonstrate the efficiency of
the Group’s operating cost base.
Total liabilities from financing activities less cash, excluding lease liabilities. The Directors believe this
is the most appropriate measure of the Group’s net debt in relation to its unsecured borrowings and is
used to calculate the Group’s leverage ratio, a key debt covenant measure. A reconciliation is included
in note 19.
Amount drawn on the Group’s unsecured debt facilities less cash balances. The Director’s believe that
this is the most appropriate measure of the Group’s unsecured net cash/(debt) position.
Total cash and cash equivalents and available headroom on secured and unsecured debt facilities.
The Directors believe that this is most appropriate measure of the Group’s liquidity. A reconciliation is
included in note 2 in the going concern section.
Adjusted earnings per share based on earnings before exceptional items and fair value adjustments,
which are those items that do not form part of the recurring operational activities of the Group. These
are calculated in note 11. The Directors believe that this is the most appropriate measure of the Group’s
earnings per share as it removes items that do not form part of the recurring activities of the Group.
The reconciliation of the statutory measures to adjusted measures is included in the CFO report on page 31.
161
N Brown Group plc Annual Report and Accounts 2021nbrown.co.ukGovernance report Financial statementsStrategic report
SHAREHOLDER INFORMATION
FINANCIAL CALENDAR
2021
2022
February
May
June
July
October
January
Financial year end
Preliminary announcement of annual results
Publication of 2021 Annual Report and Accounts
Annual General Meeting
Interim results
Christmas Trading Statement
An updated version of the financial calendar is available at www.nbrown.co.uk
REGISTERED OFFICE
Griffin House
40 Lever Street
Manchester M60 6ES
Registered No. 814103
Telephone 0161 236 8256
REGISTRARS
Link Asset Services PXS
134 Beckenham Road
Beckenham, Kent BR3 4ZF
Telephone 0871 664 0300
(Calls cost 10p per minute plus
network extras)
AUDITOR
KPMG LLP 1 St Peter’s Square
Manchester M2 3AE
NOMINATED ADVISER
Shore Capital and Corporate Limited
BANKERS
HSBC Bank plc
The Royal Bank of Scotland plc
SOLICITORS
Pinsent Masons LLP
Eversheds LLP
Addleshaw Goddard LLP
CORPORATE BROKERS
Jefferies Hoare Govett
Shore Capital Stockbrokers Limited
SHAREHOLDER BENEFITS
Subject to certain conditions, shareholders are entitled to a 20% privilege discount off the selling price of consumer
merchandise in any of the Group catalogues. Shareholders interested in these facilities should write for further information to
the Company Secretary, N Brown Group plc, Griffin House, 40 Lever Street, Manchester M60 6ES stating the number of shares
held and the catalogue or product of interest.
CAPITAL GAINS TAX
For the purpose of capital gains tax, the value of the Company’s ordinary shares of 10p each was 6.40625p per share on
31 March 1982 and 1.328125p on 6 April 1965.
For more information and latest news on the Group, visit www.nbrown.co.uk
162
N Brown Group plc Annual Report and Accounts 2021nbrown.co.uk THANK YOU
We would like to thank everyone who
has helped to produce this report:
Aaron Yates
Alex Grimes
Alison Clifford
Alison Forbes
Alison Peet
Amy Linehan
Andrea Archer
Andrew Moseley
Angela Gaskell
Bruce Smith
Carolyn McNulty
Chris Kevill
Chris McAteer
Craig French
David Hulme
Dominic Jordan
Gary Marsden
Ian Williams
Jack Stenson
James Wheeler
Jo Clarke
Joanne Dickie
Joanne Roberts
Joe Barnfather
Kate Samba
Keith Nelson
Ken Mellis
Ken Kar Cheung
Louise Robinson
Maria Yiannakou
Mark Curran
Mark Hampson
Mark Williams
Matt Dawson
Paul Rostron
Rik Evans
Ryan Gallear
Sarah Nichol
Sian Scriven
Tim Price
Vanessa Lewis
Will MacLaren
Will Shaw
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N BROWN GROUP PLC
N Brown Group plc
Griffin House
40 Lever Street
Manchester M60 6ES
www.nbrown.co.uk