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Annual Report and Accounts 2020
Superdry plc
Annual Report 2020
“ Inspire and
engage style
obsessed
consumers
always.”
Read more within our Business Model on page 07
Financial Overview
Group revenue
£704.4m
(19.2)% year-on-year
Year end net cash
£36.7m
2.2% year-on-year
2020
2019
2018
2017
2016
704.4
871.7
872.0
752.0
597.5
2020
2019
2018
2017
2016
36.7
35.9
75.8
65.4
100.7
Group underlying (loss)/profit before tax
Group statutory (loss)/profit before tax
£(41.8)m
(210.0)% year-on-year
£(166.9)m
86.9% year-on-year
2020
2019*
2018
2017
2016
(41.8)
38.0
97.0
87.0
72.4
2020
2019*
2018
2017
2016
Underlying basic earnings per share
Basic earnings per share
(43.5)p
(234.3)% year-on-year
(174.9)p
40.8% year-on-year
2020
2019*
2018
2017
2016
(43.5)
32.4
93.6
84.5
70.9
2020
2019*
2018
2017
2016
(166.9)
(89.3)
65.3
84.8
55.4
(174.9)
(124.2)
62.2
81.2
50.7
* FY19 profit was restated following a prior year adjustment of £3.9m relating to stock variance accounting, as detailed in Note 36.
01
04
06
07
24
28
32
40
42
51
52
70
72
74
77
79
85
105
112
127
128
129
130
132
183
184
Contents
Strategic Report
Financial Overview
Chairman’s Statement
Covid-19 Statement
Business Model
Section 172 Statement
Chief Executive Officer’s Review
Chief Financial Officer’s Review
Key Performance Indicators
How We Manage Our Risks
Non-Financial Information Statement
Sustainability and People
Governance
Chairman’s Governance Review
Board of Directors
Corporate Governance Report
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Our Financials
Independent Auditor’s Report
Group Statement of
Consolidated Income
Balance Sheets
Cash Flow Statements
Statements of Changes in Equity
Notes to the Group and
Company Financial Statements
Five Year History
Shareholder Information
Visit us online at:
corporate.superdry.com
Superdry plc
Annual Report 2020
Strategic Report
04 Chairman’s Statement
06 Covid-19 Disclosure
07 Business Model
24 Section 172 Statement
28 Chief Executive Officer’s Review
32 Chief Financial Officer’s Review
40 Key Performance Indicators
42 How We Manage Our Risks
51 Non-Financial Information Statement
52 Sustainability and People
04
PETER WILLIAMS
Chairman
“ Resetting an iconic
global brand in the
most extraordinary
of times”
Chairman’s
Statement
Financial Year 2020 (‘FY20’) has been a tough year for
Superdry, as we began the process of resetting our
business, against a backdrop of increasingly difficult
global trading conditions. We have worked together to
put in place the foundations for a turnaround, starting
with the replenishment of our Board and Executive
team, re-examining our short term strategies and
objectives, making our business more efficient and
putting the health and safety of our customers and
colleagues at the top of our agenda.
Covid-19
FY20 witnessed the devastating impact of Covid-19
on customers, colleagues and our business partners.
Clothing retailers have been impacted particularly and
our stores were forced to close in March 2020. The
financial impact of Covid-19 is still being experienced
and the full extent of that impact will not be clear for
some time yet. The organisation reacted with speed
and decisiveness to the emerging crisis, focusing
on reducing any short-term cash flow pressures and
costs wherever possible and utilising government
assistance where appropriate. Our people responded
to the challenges faced by Covid-19 efficiently and
purposefully. I want to take this opportunity to thank
every colleague at Superdry for the hard work,
loyalty and dedication demonstrated throughout this
exceptional time and to all of our customers for their
patience and support. By the end of June, the majority
of our stores were open, with appropriate health and
safety measures put in place. Full information about
the impact of Covid-19 on our business, our risk
mitigation strategies and how we prioritised the health
and safety of our customers, colleagues and partners
can be found in our Covid-19 statement on page 06, in
the Chief Financial Officer’s (‘CFO’) review on page 32
and in ‘How We Manage Our Risks’ on page 42.
A new Board
Following the general meeting of shareholders on
2 April 2019 and the subsequent resignation of the
previous Board, we recruited an entirely new Board
during 2019 – for the individual biographical details of
our Board of Directors please refer to the Corporate
Governance Report on page 74. After initial periods
in interim roles, Nick Gresham was appointed Chief
Financial Officer in August 2019 and Julian Dunkerton
was appointed Chief Executive Officer (‘CEO’) in
October 2019. Helen Weir, Alastair Miller, Georgina
Harvey and Faisal Galaria joined as Independent
Non-Executive Directors in July 2019. As a new
team, I am very pleased with the way the Board has
quickly formed both a strong and supportive presence
within the business. With a wealth of retail and
financial expertise, it is committed to and focused
on overseeing and supporting the delivery of a
turnaround in Superdry’s business performance.
The Board and Executive team are returning Superdry
to its design led heritage. Please refer
to Julian’s CEO review to read about the work
he has undertaken to start to put Superdry firmly
back on the path to success during his first full year
back in the business.
Difficult decisions, strategic changes
and a disappointing performance
The Board and Executive are actively reviewing the
long-term strategy for the business to ensure the brand
continues to have relevance and purpose. There are
also a number of areas within the infrastructure of the
Group that require modernisation, including core IT
systems and improvement in the control environment.
Work to substantially review operational costs, which
had commenced during financial year 2019 (‘FY19’),
continued throughout FY20 and into the current
financial year (‘FY21’). This has involved periods of
staff consultation, which have led to head office
and retail stores being the subject of organisational
restructuring in FY21. This has been a difficult but
necessary part of Superdry’s path back to sustainable
success. Please see note 39 for further details.
The Board, Executive and senior leadership teams
worked together to identify short-term priorities for
strategic change – these priorities include returning
to a full price stance, focusing on the Superdry design
and brand construct, re-examining US and China
strategy and operations, reviewing our Ecommerce
roadmap, renegotiating terms across our retail store
estate and cutting operational costs as far as possible.
Further information can be found in the CEO review on
page 28 and in our Business Model on page 07.
STRATEGIC REPORTSuperdry plc Annual Report 2020 05
Stakeholder focus
This year has brought with it a renewed focus on
stakeholders – our Section 172 Statement can be
found on page 24. Stakeholder consideration has
always been at the forefront of our Board decision
making and, this year, the Board considered a variety
of matters with its stakeholders in mind, including
our remuneration arrangements, the enhancement of
employee engagement forums and the appointment
of a director for workforce engagement, our
sustainability projects, including bringing forward our
organic cotton targets, and our overall strategic path.
The start of a turnaround
Our CEO review (on page 28) and CFO review (on page
32) provide further information on our operational
and financial performance in FY20 and up to the date
of this report. This has been the toughest of years in
which to significantly reset the brand, but progress
has been made in terms of strategic overhaul, cost
reduction and, above all, brand and design reignition.
The post-Covid-19 economic landscape remains
unclear and with Brexit on the horizon, it will be
necessary for all businesses to be ready to adapt and
evolve in order to survive. I believe that Superdry is in
a good position to take on that challenge. This Board
is committed to continuing to work with the Executive
leadership team to return Superdry to its place as one
of the most iconic of British brands and to put the
Group firmly back on the path to financial stability and,
ultimately, success.
PETER WILLIAMS
Chairman
20 September 2020
On 10 January 2020, following a disappointing
Christmas and January sale trading period, Superdry
plc and its subsidiary companies (‘The Group’)
issued a profit warning. On 18 March 2020, as the
pandemic began to take hold, the Group issued
a further statement on current trading, alongside
an overview of our Covid-19 risk mitigation activity
and our financial position; the Group also withdrew
its previous financial guidance in relation to FY20.
Our pre-close trading statement issued on 7 May
2020, announced that in line with a number of listed
companies, given the unprecedented levels of
uncertainty and the Group’s financial performance,
the Board would not be recommending the payment
of a final dividend to shareholders in relation to FY20.
This has led to an uncertain trading outlook for stores,
resulting in the exceptional store impairment charge.
For full information on our FY20 results, our financial
position, including going concern and material
uncertainty and on our path back to growth, please
refer to the CEO and CFO reviews on pages 28 and 32
respectively.
Cash preservation and reducing
our inventory
The Group introduced a series of cash preservation
measures in response to the Covid-19 pandemic,
to ensure that it was positioned to weather future
disruption in the global economy and to allow for
a programme of investment in the future of the
business. We have exercised considerable control
on our cash flows and worked hard to reduce stock
levels and maintain a high level of liquidity and strong
net cash position. On 10 August 2020 the Group
announced that it had completed a refinancing of its
facilities to an Asset Backed Lending (‘ABL’) facility
for up to £70m due to expire in January 2023, with
amended covenants. For full details, please refer to
the CFO review on page 32 and to our going concern
statement on page 39.
Partners in Design
Julian Dunkerton’s return to the helm of Superdry
has been enhanced by a new collaborative design
partnership - with Phil Dickinson, our Creative Director,
who joined Superdry in 2019. This partnership has been
at the heart of our new consumer-targeted designs
and brands, which will be appearing in our stores this
Autumn.
For further information on these, please turn to our
Business Model on page 07 and to the CEO review
on page 28.
STRATEGIC REPORTcorporate.superdry.com Covid-19 Statement
The impact of Covid-19 on our business to date
This financial year witnessed extraordinary events caused by
the Covid-19 pandemic, which has had a substantial impact on
a wide range of businesses and on the retail sector in particular.
The welfare, health and safety of our stakeholders, and in
particular our colleagues and our customers, has been our top
priority, while taking decisive actions to protect the Group and
its long-term financial position.
06
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On 18 March 2020, in line with global government advice, we
announced that we had closed 78 stores in Europe and that the
previously advised financial guidance given by the Group on 10
January 2020 was to be withdrawn. By 22 March 2020, all Superdry
stores in the UK, Europe and in the USA had been closed. We
closed our Cheltenham head office on 23 March 2020 and those
head office colleagues who had not been furloughed continued
to work from home, fully supported by our IT team. We continued
to trade online throughout the lockdown period, with effective
operations continuing in our distribution centres with all appropriate
measures taken to ensure the health and safety of our staff, while
allowing us to continue to serve our customers.
By the end of June 2020, following local government guidance,
after carrying out appropriate risk and health and safety
assessments, and in consultation with colleagues, nearly all of
our stores had reopened (the main exceptions being airports and
a small number of our US stores). At the time of writing, our head
office is making cautious preparations to reopen in line with UK
government advice, but the majority of head office colleagues
continue to work remotely where possible.
Our Covid-19 risk mitigation strategy
Further details on our approach to Covid-19 risk can be found in
‘How We Manage Our Risks’ on page 42.
From late March 2020, the Superdry Board scheduled at least
twice-weekly video conference calls to monitor and guide the
Group’s careful management of the Covid-19 crisis. The Executive
team scheduled twice-weekly Incident Management Team (‘IMT’)
meetings by video conference, to ensure that the business
reaction to the crisis was robust, with a subset of the Executive
team meeting daily under the guidance of the Head of Internal
Audit and Risk, to ensure swift decision making in a rapidly
evolving environment. The Group’s trusted advisors, such as our
corporate brokers, lawyers, accountants and public relations
advisors, provided regular insight and sound advice throughout
this period, attending meetings when required.
The Executive team took early and decisive cash preservation
measures across the business which included:
•
reduced FY20 capital expenditure when Covid-19 hit,
approximately £7m lower versus our pre-Covid-19
investment plans;
Superdry plc Annual Report 2020
•
applied careful but considered cash control measures to our
day-to-day operations including, but not limited to, reducing
staff travel, the reduction of marketing budgets and the
reduction of logistics costs, resulting in an immediate
reduction in overheads and discretionary spend of ~£2m per
month during lockdown;
•
•
•
requested £20m of rent deferrals, the majority of which were
achieved. The UK 12 month rates relief represents a £16m
benefit, with £1.7m realised in FY20;
deferred VAT, PAYE and Customs Duty of more than £5m, and
recovered historic corporation tax overpayments of £11.5m;
furloughed 88% of staff upon closure of our store estate and
corporate sites, and applied for government job retention support
in relevant markets (£2.9m in FY20). Executive Directors and
members of the Board took temporary pay reductions beginning
in April 2020, and no bonus schemes were payable in FY20; and
• worked collaboratively and with the support of our long-
standing supply base, we have extended payment terms,
increased discounts and substantially rebalanced and
rescheduled our stock intake, reducing the number of future
buys by 20%.
Through our global network of regional offices, we ensured
there was regular communication and on the ground support for
our long standing supplier base. China and the Far East were
significantly impacted from the middle of February to the end of
March, however, this region had recovered to near full capacity
by the end of July. In Turkey, production was affected from the
middle of March; recovering to 80% capacity by the end of
August. India was operating at 60% average capacity by the
end of August. Capacity in both these territories is in line with
our expectations for the AW20 season. We have worked closely
with our supplier base to phase deliveries, as well as utilising air
freight when there is no other option available, to ensure we get
the right balance between managing our working capital and
being fully ranged for the AW20 launch.
We also worked with our wholesale partners to minimise returns
and mitigate cancellation risks as far as possible. During these
negotiations we at all times considered the importance of our long-
standing and valued relationships with suppliers and contractors,
attempting to balance their needs with ours, wherever possible.
Base salaries for the CEO and CFO and fees for the Non-
Executive Directors were reduced by 25% from 1 April 2020, with
the base salaries of the Executive committee reduced by 20%.
The reduction continued until 30 June 2020 for the CFO and
Executive committee and will continue until 30 September 2020
for the CEO and Non-Executive Directors.
In line with a number of listed companies and with reference
to the FRC guidance update issued in March 2020, given the
unprecedented levels of uncertainty and the Group’s financial
performance, the Board agreed to recommend to shareholders
that no final dividend be paid in respect of FY20.
In April, Superdry donated more than 300,000 items of
Personal Protective Equipment (‘PPE’) to local care homes in
Gloucestershire.
The business monitored events and government
announcements in each of its territories in order to put plans for
reopening in place at the earliest possible time, always placing
the health and safety of colleagues and customers ahead of all
other considerations. Our first priority was to ensure that each
store could meet or exceed local health and safety regulations.
We ensured that stores and colleagues were fully equipped
with all necessary PPE, cleaning materials and other equipment
such as sneeze screens before any reopening, following local
government guidelines at all times.
Our Ecommerce activity continued to trade online throughout
the period. We experienced and were able to fulfil a strong level
of demand switching from stores to online. Ecommerce sales
in this period outperformed expectations, offsetting one third
of lost stores sales. Our distribution centres remained open
throughout the period with rigorous controls in place to protect
employees, including social distancing, protective work wear,
more frequent cleaning and segregated spaces for working.
We estimate that the profit impact of Covid-19 across all of our
operations, including lost sales and additional costs experienced
in FY20, amounted to ~£62m. This has been calculated as the
gross margin miss to forecast in March and April, the increase
in bad debt for the same period as well as the Covid-19 stock
obsolescence provision at the year end, less the impact of the
furlough benefit and UK rates holiday in April.
Covid-19 is likely to continue to impact global economies,
consumer demand, shopping patterns and working practices. We
will continue to monitor events and adapt accordingly, investing in
our Ecommerce channel to maximise consumer demand changes,
change store layouts to accommodate social distancing, ensure
safe working practices in all of our operations and continue to
review future head office requirements and working from home
routines. The temporary closure of stores in the early part of
FY21 and the uncertainty of consumer demand through our
seasonal peak period is likely to impact FY21 results. While we
remain cautious about the continuing impact of Covid-19 and we
remain ready to react to any further disruption, we will continue to
execute our plans for an AW 2020 brand reset.
Business Model
Superdry has grown rapidly from where it began in 2003,
founded by Julian Dunkerton and James Holder. From
its first own store in 2004, to listing on the London Stock
Exchange(‘LSE’) in 2010, the Group has continued to excite
customers through an obsession with detail and passion
for a unique style.
07
1985
• Cult Clothing
founded by
Julian Dunkerton
(current CEO)
and a former
business partner
• Original Cult
store opens in
Cheltenham
in the late
1980s, followed
by further
openings,
predominantly in
university towns
2003
• Having
previously
retailed external
brands such
as Bench
and Carhartt,
the Group’s
first in-house
brand, SDRY, is
developed with
James Holder
(Bench founder),
who joined SDRY
that year
2004
• Second store
format opens,
branded as the
Superdry Store
and dedicated to
selling Superdry
products
• Significant UK
•
and international
wholesale
business
commences
Fully
transactional
Ecommerce
website
developed
2010
•
• By 2010,
IPO on LSE
Superdry is
sold in over 30
countries in
Europe, Asia,
Australia and
the Americas;
40 standalone
stores and
54 Superdry
concessions in
House of Fraser
Flagship Regent
Street store
opens the
following year
•
2014
•
Julian Dunkerton
stepped down as
CEO to enable
him to focus on
design
• Euan Sutherland
was appointed
2015–17
• The Design Lab,
led by James
Holder, launched
Sport and
Snow ranges,
underpinning
double-digit like-
for-like sales
• Efforts made to
move the retail
and wholesale
businesses to
a single stock
pool – reducing
product range
2018
•
Julian Dunkerton
steps down as
an Executive
Director and
the Group
introduces a new
strategy and four
season model,
which has
subsequently
been reviewed
2019
•
Julian Dunkerton
elected to the
Board in April
2019, becoming
interim CEO and,
in October 2019,
appointed as
CEO
• Several other
new leadership
appointments
in FY20 and
refreshed
strategy
STRATEGIC REPORTcorporate.superdry.com Business Model
CONTINUED
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Our mission and purpose
We are a brand that inspires
and engages the contemporary
style obsessed consumer, while
leaving a positive environmental
legacy.
Our brand
One Brand.
Four Style Choices.
Nine Consumer Types.
Our clear brand positioning is centred on creating amazing clothes, through
an obsession with design, quality and fit and, is underpinned by relentless
innovation and commitment to operational excellence in everything we do.
Our customers are loyal and
global and are defined by
attitude, not age.
Core to our brand DNA is the combination of market leading quality
and design detail delivered at astonishing value for money. Superdry
has democratic appeal, offering affordable premium-quality clothing,
accessories and footwear, complemented by newer lifestyle categories
such as Sport and Snow.
Superdry plc Annual Report 2020
Our global reach
Through our franchises, wholesalers and owned estate, we reach customers from all parts of the globe.
We operate in 61 countries, in 241 stores. We have 44 international websites (including third party websites).
UK & ROI
Owned stores
Franchises & licenses
Rest of world
Franchises & licenses
09
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USA
Owned stores
Europe
Owned stores
Franchises & licenses
corporate.superdry.com
Business Model
CONTINUED
Our Business Model
We design, produce and sell premium branded
apparel to a global marketplace. Adopting a flexible,
capital-light, multi-channel approach to markets
means we are able to evolve quickly to maximise
opportunity. We embrace digital technology in every
aspect of our business model, be that in design,
sourcing, marketing or selling. We take time to
understand the needs of consumers and leverage the
skills and capabilities of our colleagues and business
partners to be efficient and responsive to market
trends and demands.
Our Design Excellence
Our creative centre produces design-led products
that incorporate style, quality, fit and affordability.
Their relentless commitment to attention to detail,
getting the right fit and style, combined with the
drive to surprise, delight and engage our customers
is central to our design excellence.
Led by Phil Dickinson (Creative Director) and Julian,
shared passions for creativity, innovation, quality
and putting the consumer first are the driving forces
behind the new designs. A key milestone in the brand
reset will be the launch of the AW20 collection in the
10
Autumn, the first range to be designed end-to-end
under their leadership. See the CEO review on page
28 for more details.
We offer a wide range of options, clearly segmented
into four style collections, across menswear and
womenswear. Each style collection includes
elements of our core product categories, ‘never
out of stock’ orange label t-shirts; jackets and
coats; hoodies; underwear; swimwear; sunglasses;
loungewear; and hand drawn graohics – all of which
are augmented by limited edition drops throughout
the season.
All of our collections are a reflection of contemporary
culture, with a celebration of individuality,
contemporary style and creativity. Our products
stand out as a reflection of our brand story, our
beliefs and how we connect with our consumers.
Our People and Culture
Change is the only constant in the world right now.
But it’s our culture and colleagues that will be
key to seeing Superdry through a period of rapid
transformation while staying true to our brand
mission. Our six colleague-driven values launched in
2017 continue to remain important to us, yet a sense
of unity and togetherness, the opportunity to truly be
yourself, creativity and passion have come through
stronger than ever throughout the challenging last
few months.
As part of our mission to reset the brand, we have
an ambitious people and talent agenda in progress
which is fully aligned to our unique culture and which
helps us attract and retain the talent that we need
for our future, while unlocking the potential of our
existing talented teams. We are looking forward
to making this culture more transparent to every
single colleague in order to ensure we continue to
pull in the same direction as one team, and enable
our teams the autonomy and freedom they need to
do the right thing to help us deliver. We’ll do this
through very practical changes to some of our key
people processes including: our reward framework;
our talent and development processes; our internal
communications capabilities, and more.
To learn more about Our People and Culture
see pages 58 to 63
Superdry plc Annual Report 2020
STRATEGIC REPORT Our Customers
Our customers are global, aspirational and
appreciative of style, quality and attention to detail,
with a focus on value for money.
Following extensive research into the frequency,
rationale and target of their shopping missions
(from initial research and browsing, through to final
purchase), which involved surveying over 18,500
consumers across six core markets, together with
more detailed focus groups, we identified nine
consumer types across two dimensions.
The first of these is life stage, representing the
changing role of fashion for people as they move
through their lives.
The second dimension is around consumer mindset,
which represents the different attitudes towards
fashion, that unites people no matter what age they
are. Our consumer insights research identified three
fashion mindsets within this: Trendsetter, Fashion
Follower and Mainstream.
These two segments, ‘life stage’ and ‘mindset’, come
together to create nine very clear consumer profiles.
16→24
25→34
35+
GAP YEAR
GRADUATE
CULTURED
GAP YEAR
GRADUATE
CULTURED
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GAP YEAR
GRADUATE
CULTURED
The three life stages are Gap Year, Graduate and Cultured.
GAP YEAR
Our youngest consumers are 16-24
year olds, they are Generation Z,
with less disposable income who
favour brand transparency and
sustainability and are experimental
with most trends.
GRADUATE
Our 25-34 year old consumers;
they are Millennials with increasing
disposable income who are
becoming more selective and
individual in their own style.
CULTURED
Our 35+ consumers, who are
cultured and know their own
identity through and through.
With the highest level of disposable
income, they value product quality
over quantity.
The three fashion mindsets are:
Mainstream, Fashion Follower
and Trendsetter
TRENDSETTER
A consumer who creates trends
rather than follows them,
confident and distinctive in their
own style, shops all the time and
loves to stand out.
FASHION FOLLOWER
A consumer who embraces new
trends, shops frequently and
dresses appropriately, looking
stylish in a number of situations.
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MAINSTREAM
A consumer who values
functionality over style, not
concerned with followings
trends, shops infrequently.
corporate.superdry.com
Our Product
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1 brand, 4 style choices, 9 consumer opportunities.
By leveraging the insights that
we gained from our consumer
segmentation work, we have created
four distinct style choices which we
believe will inspire and engage our
style-obsessed customers.
Our AW20 brand reset is built on
the value of style, and these four
style choices will allow consumers to
navigate the brand more easily than in
previous seasons.
Each of these style choices is targeted
against the segments that represent
the largest opportunity, and will also
define where we focus our marketing
activity, tailoring it to the target
demographic across the most relevant
platforms. Further detail on the brand
values that inspired each of these
distinct style choices can be found on
page 10.
The best expression of each will
be delivered through our Pinnacle
concepts, which will allow us to elevate
and reposition the brand, through
limited-volume, premium versions of
the mainline collections.
Consumer Style Choice
01
Casual & Vintage
02
Sophisticated &
Minimal
03
Sport
Superdry Mainline Collection Name
04
Streetwear &
Energy
Original & Vintage
Superdry Studios
Sport Style
Superdry X
DRY
Cult Studios
Sport Performance
SDX
Pinnacle Concept
STRATEGIC REPORTSuperdry plc Annual Report 2020 CASUAL & VINTAGE
Original & Vintage
The Soul of the Brand
SOPHISTICATED & MINIMAL
Superdry Studios
The Future Vision for Style & Sustainability
THE GAP YEAR
ADVENTURER
THE GRADUATE
ADVENTURER
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THE GAP YEAR
ADVENTURER
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SPORT
Sport Style
An Authentic Credible Premium Aesthetic
STREETWEAR & ENERGY
Superdry X
A Culture Clash for the Next Generation
THE GAP YEAR
ADVENTURER
THE GRADUATE
ADVENTURER
THE CULTURED
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THE GAP YEAR
ADVENTURER
THE GRADUATE
ADVENTURER
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STRATEGIC REPORTcorporate.superdry.com
14
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STYLE
CASUAL
& VINTAGE
THE SOUL OF THE BRAND.
Obsession with:
CRAFTSMANSHIP
SPIRIT OF ADVENTURE
ICONIC SILHOUETTES
CLASSIC STYLE
50%
Options
Superdry plc Annual Report 2020
Mainline:
ORIGINAL & VINTAGE
Inspired by the style choice
of casual and vintage, with
craftsmanship, culture and
authenticity at the heart of each
product. Introducing the soul of
the brand…
Built upon the foundations that made the brand
great, the ‘Original and Vintage’ mainline collection
celebrates the development of the styles that
Superdry pioneered.
Inspired by the legacy of the American West,
counterculture and workwear, this style choice
represents a true expression of the trailblazing style
of Americana.
Each garment within the range expresses an
authentic narrative, which is underlined by a sense
of adventure and freedom.
THE GAP YEAR
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Pinnacle concept:
DRY
The pinnacle concept ‘Dry’ is an
elevated representation of the
Casual & Vintage style choice.
Within this exclusive concept, Superdry highlights
its obsession with artisan craftsmanship, captured
through signature details such as hand embroidery
and hand-drawn artwork.
Individuality threads through each of the designs to
create the distinctive qualities of a modern heirloom.
STRATEGIC REPORTcorporate.superdry.com
STYLE
SOPHISTICATED
& MINIMAL
16
The future vision
of style.
Less is more philosophy
Responsible & sustainable
Simple silhouettes
Clean & Contemporary style
15%
Options
Superdry plc Annual Report 2020
THE GAP YEAR
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STRATEGIC REPORT
17
Mainline:
SUPERDRY STUDIOS
Inspired by minimal sophistication
with sustainability at the core.
Introducing the future vision of
style…
Superdry Studios embraces the modern art of
restraint, and echoes the mindset of cultural
consumers who are going back to fashion basics,
whilst retaining a smart style and advocating a less-
is-more philosophy.
The brand champions clean and contemporary
wardrobe staples designed to last, in line with an
ethos of simplicity, neutral colour palettes of natural
materials mixed with modern fabrication.
Pinnacle concept:
CULT STUDIOS
Founded on the pillars of
innovation, sustainability and
freedom of expression, the
pinnacle concept of Cult Studios
is evolving the meaning of
refined style and represents a
responsible pledge to the future of
manufacturing.
Focusing on natural and eco-friendly elements, the
brand has sourced the finest, sustainable and high-
performing materials.
STRATEGIC REPORTcorporate.superdry.com STYLE
STREETWEAR
& ENERGY
18
Youth culture
Rebellious & disruptive
experimental
Silhouettes
Unique sense of style
5%
Options
Superdry plc Annual Report 2020
THE GAP YEAR
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STRATEGIC REPORT
19
Mainline:
SUPERDRY X
Inspired by the Streetwear &
Energy style choice. Created for
trendsetters with a unique sense of
style. A culture clash for the next
generation...
The exciting mainline collection; Superdry X,
showcases statement pieces with a youthful attitude.
Although highly expressive and eye-catching, each
design is clean enough for everyday wear.
Inspired by the street attitudes of cities that Superdry
has always drawn inspiration from – namely London,
New York and Tokyo – Superdry X invites the
consumer to a club of hyperconnected, rebellious,
boundary breakers.
Pinnacle concept:
SDX
The SDX pinnacle concept
deconstructs, displaces and
disrupts. The result is pure,
uncut energy.
With a pioneering approach to mixing materials, the
SDX team are energized by the unrestricted style of
youth culture and designing without restraints.
With a focus on high-end fabrication, unexpected
textures and impactful graphics, the garments are
designed for those who have an innate individuality.
From remixed classic silhouettes to ultra-bold
contemporary styles, each piece is distinctive yet
undefined, ready to be worn without limits.
STRATEGIC REPORTcorporate.superdry.com STYLE
SPORT
Maximum
versatility
Innovation & quality
Authentic credible premium aesthetic
Standout sense of style
20
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Options
Superdry plc Annual Report 2020
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21
Mainline:
SPORT STYLE
Superdry brings you a collection
and concept inspired by the
Sport style choice. Each new
Sport range is designed to drive
everyone beyond their personal
best and Win Differently.
The Sport Style collection is created to engage the
style obsessed consumer featuring premium athletic
aesthetic designs. With incredible attention to detail
and a contemporary look and feel, we deliver iconic
styles with the best expression of the brand.
Attracting those with a standout sense of style, the
range’s colourful and comfortable coordinates are
designed for maximum versatility.
Pinnacle concept:
SPORT PERFORMANCE
From AW20, we are proudly
repositioning Superdry as a
credible performance brand,
fuelling imagination to push beyond
the possible, to run, to stretch,
to overcome. Using pinnacle
innovation and industry leading
design.
Whether enthusiast or athlete, prepare in the City and
excel in the Mountains with four specialist categories
– Run, Flex, Train and Snow.
STRATEGIC REPORTcorporate.superdry.com Business Model
CONTINUED
Our routes to market
Superdry continues to occupy a niche position within the branded fashion
market, defined by our unique product ranges, superb quality and the design
detail for which we are famous.
22
Owned Stores
Mono-branded stores, operated by
the Group, in prime locations split
between High Streets and shopping
centres
Franchise & Licence
business
Freestanding Superdry Stores
operated by partners
Concessions
Smaller stores, largely
located in airports,
operated by the
Group in retail space
owned by partners
Outlets
Sale of previous
seasons’ product in
specialist stores
d stores
nnels
e
n
w
O
a
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c
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Ecom m e r
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Key & Independent
Partners
Freestanding multi-brand
stores owned and run by
retail partners, selling
Superdry merchandise
Online distribution
via partners
Distribution of Superdry
merchandise using our
Key & Independent retail
partners’ own online
platforms
Online store
superdry.com
Digital flagship store, with localised
sites in key markets
Online distribution via off-
price Ecommerce
Sale of previous seasons’ product
on outlet websites (eBay UK,
Germany and USA)
Our global footprint has been achieved through a truly
multi-channel approach, leveraging our eight routes to
market to maximise the addressable market. Following
Julian’s return to the business, we view stores as an
integral element of the customer journey, and are
focusing on returning these to profitability.
Consumers’ shopping habits continue to change –
and this change has been accelerated with Covid-19,
with online channels increasingly used to research,
compare and purchase products. Recognising this
macroeconomic trend, we are investing in our digital
marketing and social media capabilities, as well as
refreshing the user experience and branding across our
owned websites this Autumn, to support the brand reset.
Our Fulfil From Store and Click & Collect technology
creates a seamless customer experience between digital
and physical, as well as allowing us to optimise working
capital management.
We have an agile, lean and responsive operational base.
We distribute our products to customers seamlessly
across multiple channels. We want our customers to be
able to order from anywhere, from any device, with any
payment method and have it delivered to any location
from our distribution centres in the UK, Belgium and
the US.
Our approach to each market is considered and seeks
to optimise returns and minimise risk by tailoring the
channel and marketing strategy to each country and its
particular stage of development.
In delivering this strategy, we benefit from deep
experience and established capability in the following
eight routes to the customer.
STRATEGIC REPORTSuperdry plc Annual Report 2020
Wholesale channels
1 Multi-brand independents and distributors
2 Franchise and license stores in secondary catchments
and developing markets
3 Physical and online department stores
The capital-light and flexible nature of the wholesale model
allows us to expand rapidly into locations, drive brand awareness
and gain market share without significant capital investment.
Our return to a full price trading stance has strengthened the
relationship with these key partners.
Wholesale channels represent the most significant path to customers
for the brand and consist of three distinct routes to market:
•
Independent retailers and distribution partners represent the
largest part of our Wholesale routes to market, accounting for
42% of total Wholesale revenue, through around 3,800 (2,700
customer accounts) points of distribution.
Ecommerce
4 Superdry branded websites (18 in all)
5 Partner websites that build brand awareness and
access a different customer base (23 in all)
6 Off-price Ecommerce (eBay UK, Germany and USA)
Within the Ecommerce channel, owned Superdry branded
websites have been our vehicle for initial entry into new, scalable
markets, allowing us to access unmet customer demand and to
build brand awareness, with minimal capital investment and the
ability to fulfil orders from our expended distribution network
and most recently, from stores. We recognise the increased
Owned stores
7 Owned stores in primary catchments
8 Outlet stores
We are committed to the high street, and view owned stores
as crucial to our brand proposition, with our store estate
predominantly based on short term, flexible property terms.
Covid-19 presented us with the opportunity to accelerate our rent
renegotiations, and we have agreed an average reduction of 43%
across 49 stores to date. In addition to this, we have moved to
Turnover Rent Agreements in a number of our stores, rebalancing
the risk-reward economics between lessors and lessee. Following
these new agreements, we have maintained flexibility and short
term commitments, illustrated by over 65% of the Group’s current
owned store portfolio having an exit opportunity within the next
three financial years.
Owned stores total 241 across 11 countries where the brand has been
established, primarily through Wholesale and Ecommerce.
•
Franchise and license partners represent the majority of our
store portfolio. Our franchise estate now stands at 499 mono-
branded Superdry stores, across 61 countries. Franchise and
license stores generate 36% of total Wholesale revenues,
with 61% of this in Continental Europe.
• Physical and online department store key accounts, such as
Next in the UK, and Zalando in Europe, allow us to capture
incremental sales and grow brand awareness with consumers
we could not otherwise directly reach. In FY20, our 31 key
account relationships generated 22% of total Wholesale
revenues.
• Consistency and quality continue to be critical to the
development of Superdry and this is controlled through
our Wholesale channels, via a combination of contractual
requirements and quality-control audits.
importance of online, particularly in the wake of Covid-19, and
continue to accelerate our online presence to capture growing
consumer demand.
This year, we have worked to improve this channel by enhancing
customer experience on our website, redesigning our home
and category pages, introducing ‘FitAnalytics’ and ‘ZigZag’, our
paperless returns portal.
Ecommerce connects to wholesale, through our partner
programme, for example Zalando, Next or ShopDirect, and
to stores via Click and Collect and ikiosk.
Similar to eBay within Ecommerce, Superdry outlet stores are an
important element of the business model, complementing our
full price stores. While adapted to meet the different positioning
of outlet locations in different geographies, they serve a key role
in optimising the value generated from excess inventory while
protecting brand integrity. We have halted the production of
‘made for outlet’ product, which undermined the value of the
brand, and instead are refocusing our outlet estate as one of
the key clearance channels to clear ageing stock, allowing us to
optimise our inventory buy and stock management.
We saw encouraging results when we introduced Fulfil from
Store this year, delivering 67,000 orders, 7% of online sales, from
31 stores. We will look to roll out this capability globally going
forward.
Global Sourcing
The Group’s products are predominantly manufactured overseas
by our long-standing supply base who we have proven and
resilient relationships with. The current split of the majority of our
manufacturing is 26% in India, 19% in Turkey and 45% in China.
Learn more about our suppliers and how we are working with
them within our Sustainability section on page 61
Distribution Centres
We closed three distribution centres in North America in the
current year, with the remaining one warehouse, ‘The Eagle’ (140
sq. ft.), evolving into our first truly multi-channel fulfilment centre
in our network.
23
Outside of the US, we have two warehouses which deal with the
inbound stock for retail and Ecommerce customers as well as a
small element of wholesale. These distribution centres are in the UK
and Belgium – ‘The Duke’ (500 sq. ft.) and ‘The Baron’ (720 sq. ft.).
Currently, the only warehouse outside of the US which deals with
wholesale orders is situated in Ghent, Belgium (335 sq. ft.).
In the current year, we focused our efforts on the first stages
of increasing efficiencies within the distribution centres. This
continues to be an ongoing project; however, we have made great
progress with the integration of robotics, significantly increasing
pick and return productivity.
Digital Capabilities and Ecommerce
We are in the process of step-changing our digital and
Ecommerce capabilities to enable us to better compete with the
best in class digital organisations.
We will do this by becoming more agile; creating an immersive
consumer style and brand experience online; and building out
architecture and features that allow our consumers to be served
across all our routes to market seamlessly.
Sustainability
Creating clothes in a sustainable way is a key priority for us
which is why in FY20 we revised our Organic Cotton campaign,
accelerating our aim to reach 100% organic cotton production by
2030; 10 years earlier than our previous goal.
Read about our Sustainability Goals and our work to
positively impact our environment and the communities in
which we operate on pages 52 to 66
STRATEGIC REPORTcorporate.superdry.com
Section 172 Statement
Stakeholder engagement
24
How the Board of Directors has
promoted the success of the Group
for the benefit of its members as a
whole; whilst having regard to the
matters set out in Section 172 of the
Companies Act 2006
We recognise that Superdry is run for the benefit
of shareholders, but that the long-term success of
the Group is reliant on the fostering and nurturing of
relationships with a variety of stakeholders and the
regular consideration of the impact of the Group’s
activities on them. The Board considers all relevant
factors and stakeholders in deciding on a course
of action that is most likely to result in sustainable
success for all shareholders. Stakeholder interests
are not always aligned and, on some occasions, it is
necessary for the Board to prioritise the needs of one
stakeholder group over another.
With that in mind, we have identified our stakeholders,
what matters to them and how we engage with them,
to facilitate the regular consideration of stakeholders in
Board discussions and decision making. Consideration
of the impact that the Group and its operations has
on all stakeholders is central to the culture and values
of Superdry - please refer to page 10 to read about
our values and to page 58 for more information on our
Superdry culture. For further information on Board
decision making, please refer to page 26 and to our
Governance section on page 70. The Board and the
Group strive to maintain the highest standards of
business conduct – additional information on this can
be found in the People section of the Sustainability
report on page 58, in the Corporate Governance report
on page 74, the Audit Committee report on page 79 and
in the Directors’ Report on page 105.
Shareholders
What they care about
• Value of their investment
• Results
• Strategy
• Efficiency
• Corporate governance/transparency
• Remuneration
• Sustainability
Consumers/
Trade Customers
What they care about
• Product design and range
• Value for money
• Product availability
• Product quality and safety
• Sustainability
• Customer Service
How Superdry engages
• Annual General Meeting
• Annual/interim results/reports
• Corporate website
• Meetings with investors
•
Investor events
• Stock market news
• Direct engagement by Investor Relations
and the Company Secretariat
How Superdry engages
• Contact with store colleagues
• Monitoring of sales and footfall
• Customer satisfaction surveys
• Customer services
• Social media/website/direct contact
• Annual Supplier conference
What they care about
• Charitable donations and support
•
• Environmental impact/Sustainability
Local sport sponsorship
What they care about
• Corporate governance
• Compliance
• Health and Safety
• Environment/Sustainability
What they care about
• Stories/reports
• Regular communication
Community/
Wider Society
Government/
Regulators
Media
How Superdry engages
•
Family and friends events
• Work/school placements
•
• Support for local charities
•
Invictus Games support
• Media coverage
Jobs/Careers
How Superdry engages
• Meetings/briefings
• Consultations
• Dialogue with trade bodies
• Specialist advisors
How Superdry engages
• News releases
• Stock market announcements
•
• Visits and meetings
• Social media
Interviews
STRATEGIC REPORTSuperdry plc Annual Report 2020 Environment
What it cares about
• Statistics/information on global climate change
impact, extinction rates and pollution levels
• Sustainable farming practices/organic cotton
How Superdry engages
• Sustainability Goals/reporting
• Engagement with organic cotton farmers
• Dialogue with specialist advisors and groups
production
Suppliers
Colleagues
Fair terms
What they care about
•
• Payment
• Communication
• Success of the business
• Anti-Bribery and Corruption
• Ethical behaviour
• Environment
• Sustainability
What they care about
• Working conditions and rights
• Pay, pension and benefits
• Health and Safety
• Training and development
• Diversity and Inclusion
• Culture
•
Leadership
• Communication
How Superdry engages
• Supplier conferences
•
Face to face engagement at meetings and visits
How Superdry engages
• Superdry Voice Groups (UK Retail and Head
•
Office) and Senior Women’s Forum
‘Supersay’ staff engagement surveys and pulse
feedback surveys
• Workplace (Intranet)
• Super Tuesdays (Head Office colleague
communications)
• Work Councils (Europe)
• Designated Non-Executive Director for workforce
engagement
• Biannual appraisals process and the use of
personal development plans
• The Superdry Academy
• Talent Review Framework
25
300,000
items of PPE donated
to care homes in
Gloucestershire
during the Covid-19
lockdown
STRATEGIC REPORTcorporate.superdry.com Section 172 Statement
CONTINUED
Governance and stakeholder consideration
Our stakeholder table is reviewed and considered on an annual basis as part of our governance arrangements. Our Board and Committee
Chairs and Executive Committee ensure that the stakeholder perspective is discussed in the consideration of matters relevant to stakeholder
groups. All Board and Committee decision making that impacts stakeholders is noted in a central stakeholder consideration table to record
stakeholder discussions.
Board and Committee discussions and decision making during FY20
Decision making of a strategic
nature/with a long term impact
Stakeholder/s
26
Brexit risk mitigation strategies
Covid-19 risk mitigation strategies
Brand and design revival/short term strategic
initiatives
US and China operations restructuring
Reducing central costs and driving efficiencies
across the business
Sustainability – including organic cotton production
and the reduction of our sustainability targets
Remuneration Policy consideration, including the
alignment of pension contributions for all colleagues
Effective colleague engagement
All
All
• Shareholders
• Suppliers
• Consumers
• Shareholders
• Colleagues
• Suppliers
All
• Environment
• Suppliers
• Consumers
• Trade
Customers
• Shareholders
• Colleagues
All
For further information refer to page
42 in How We Manage Our Risks
See case study below
28 in the CEO report
32 in the CFO report
34 in the CFO review
34 in the CFO review
• Trade
Customers
• Environment
• Consumers
• Trade
Customers
• Community/
55 in the Sustainability report
Wider Society
• Shareholders
85 in the Directors’ Remuneration Report
58 in the Sustainability report
Board decision making takes place with reference to the Group’s
risk management framework, including its principal risks and
uncertainties – further information can be found on page 42. Please
refer to our case study on Covid-19 decision making below.
Employee engagement and communication
In FY20 our existing informal workplace engagement forum in the UK
was reconstituted to form Superdry Voice (SD Voice) and our Senior
Independent Director, Helen Weir, took on the role of employee
representative Non-Executive Director, to give a voice to employees
at the Board.
SD Voice groups are composed of our UK retail colleagues and our
UK Head Office colleagues. Representatives are nominated by their
team mates and they provide input into Superdry decisions, support
communication and help tackle issues on behalf of their colleagues.
Colleague engagement is really important to us as a brand and
we value feedback and suggestions from all colleagues to help
us to improve. In 2019, over 90% of colleagues used our annual
engagement survey as a way to give us honest feedback about how
they feel and how we are doing. We actively use and encourage
the use of Workplace, our social media channel, so that colleagues
can communicate and share successes or messages to a wider
population and also bring to work an element of fun.
Culture and Values
Our unique culture in Superdry is defined by our heritage and continues
to be a real strength of the Brand. Our colleagues are the key to our
success and Superdry’s past and future success is due to the energy,
passion, creativity and genuineness of our 4,500 colleagues.
As we look towards the future, we will continue to find ways to evolve
and strengthen our unique culture and values across our family.
This will be through a mixture of working more collaboratively with
our colleagues through SD Voice forums and through investment in
our internal communications capabilities across the Group. We’ve
worked hard during the Covid-19 crisis to keep our colleagues
informed, engaged, aligned and supported while we have been
working remotely, or in some cases stepped back from work, while
stores were temporarily closed or activity reduced.
Equality, diversity and inclusion – our intent
We know that diversity reinforces who we are as a brand; we believe
that strength lies in our individual differences. Our diversity is one of
the highest scoring items every year in colleague feedback through our
engagement surveys. Diversity is part of our agenda around inspiring
positive change; we are committed to enhancing and improving our
diversity through reporting, training, recruitment and listening to our
teams. This will enable us to understand our demographic and take
actions to effect change. We are actively investing
more resources into unconscious bias training, trialling
‘blind’ applications and utilising our steering groups
to ensure that diversity and inclusion are at the centre
of our decision making. We intend to continuously
improve our approach to diversity and inclusion by
truly understanding our data, listening to our people,
learning and reflecting.
Gender Diversity at Superdry
at the end of FY20
Male
Directors – 5
Superdry plc Board of Directors
Female
Directors – 2
Group Senior Managers*
Female Senior
Managers – 12
Group employees
Female –
2,538
Male Senior
Managers – 21
Male –
1,800
Non-Disclosed –
1
* Senior Managers is defined as the Executive team and Heads
of Department.
Policy on disabled persons
Superdry is committed to ensuring that all people are
treated equally. We ensure that anyone who joins our
business in any capacity, or anyone who we work with, is
not treated differently and does not suffer discrimination,
harassment, bullying or victimisation in any form. Our
Equality and Diversity policy denotes a range of protected
characteristics, which includes disability. Full and fair
consideration will be given to all job applications made
by disabled persons. Our policy clearly states that we will
always do our best to make reasonable adjustments to
accommodate the needs of a colleague who has become
disabled during their employment. Disabled persons will
be offered the same opportunities for training, career
development and promotion and will not be treated
differently on the grounds of their disability.
Further information on
stakeholder matters
Our Sustainability section on pages 52 to 66 provides
information on a range of matters that are important
to several stakeholder groups, including the impact
of the Group’s operations on the environment, the
community, suppliers and consumers. The People
section in the Sustainability report on page 58 gives
further insight into our Superdry culture and values. Our
Non-Financial Information statement on page 51 also
signposts readers to information relevant to Section 172
matters, such as our whistleblowing arrangements and
charitable giving.
STRATEGIC REPORTSuperdry plc Annual Report 2020 Covid-19
Stakeholder Consideration
In Action
CASE STUDY
27
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
Global store closures
Stakeholders impacted
Donation of PPE to care homes in
Gloucestershire
Stakeholders impacted
Not paying a final dividend
Stakeholders impacted
Board consideration of our stakeholders
The impact of store closures on all of these
stakeholders was considered, but compliance
with law and the health, safety and wellbeing of
colleagues outweighed those concerns.
Updates to investors
Stakeholders impacted
Board consideration of our stakeholders
Shareholders were kept fully informed of
performance and of the measures that the
Group took to preserve shareholder value.
Decision to place colleagues
on furlough
Stakeholders impacted
Board consideration of our stakeholders
All factors were considered when agreeing which
colleagues were placed on furlough. This included:
the levels of activity remaining; the Group’s
financial position; colleague health and wellbeing.
Line managers were consulted to ensure the best
outcomes in the interests of Superdry and all
colleagues.
Board consideration of our stakeholders
The donation of PPE equipment was in line with our
values.
Measures to mitigate stock levels
including the reduction of A/W orders
Stakeholders impacted
Board consideration of our stakeholders
The Board and Executive team took the necessary
measures to reduce orders and stock levels of
product as much as possible, while considering the
long term impact of those actions on stakeholders
and preserving good relations with our business
partners for the future.
Head office closure
Stakeholders impacted
Board consideration of our stakeholders
The decision not to pay a final dividend, which was
in line with FRC guidance and seen widely across all
business sectors, was taken in order to ensure the
long term sustainable success of the Group.
Measures to carefully manage cash
flow and reduce our operating costs
Stakeholders impacted
Board consideration of our stakeholders
The long term sustainable success of Superdry
was dependent on the prioritisation of cash
preservation measures during this period of
reduced revenue, as a result of the closure of
our stores.
Store reopening and
head office reopening plans
Stakeholders impacted
Board consideration of our stakeholders
The impact of closure on these stakeholders was
considered, but compliance with law and the health,
safety and wellbeing of colleagues outweighed those
concerns.
Pay cuts for Board and Executive team
Stakeholders impacted
Board consideration of our stakeholders
The Board and Executive team wished to demonstrate
their commitment to the future of Superdry.
Board consideration of our stakeholders
Stores were reopened in line with the law and
government advice in each country in which we
operate, ensuring the health and safety of our
colleagues, our customers and business partners at
every stage. The efficient, rapid and safe reopening
of stores was essential for the future success of the
Group. Colleagues (including our SD Voice groups)
were fully consulted and informed throughout the
reopening process. A task force has been created to
enable the reopening of our head office in the best
interests of colleagues.
Key
Colleagues
Community
Customers
Environment
Government and
Regulators
Media
Shareholders
Suppliers
corporate.superdry.com
28
JULIAN DUNKERTON
Chief Executive Officer
Chief Executive
Officer’s Review
Overview
This year has been one of considerable change for
Superdry. In addition to our journey to reset the brand
and deliver our transformational plans, we now face
an unprecedented challenge from Covid-19, which
is affecting all companies, sectors and geographies.
Although the pandemic continues to dominate
all aspects of our business, I see this as a unique
opportunity to accelerate change, reposition our
brand and for the business to emerge stronger.
By focusing on the retail basics, prioritising
Ecommerce and increasing our social media
engagement, we can now properly showcase the
fantastic new product that will be available from
Autumn 2020, building on the core strengths of the
brand and providing an elevated customer experience.
We made the difficult but necessary shift to protect
the brand by reducing promotions and returning to
a full-price stance, which is core to our turnaround
plan. As a result of this, as well as the exceptionally
challenging economic backdrop, full year Group
revenue was down (19.2)% year-on-year, with the FY19
comparable driven by persistent levels of discounting.
Full year underlying loss before tax was £41.8m,
significantly below the prior year underlying profit
of £38.0m, reflecting the revenue impacts of a
challenging peak trading period, which contributed
to our trading update and profit reforecast in early
January, with full year performance exacerbated by
Covid-19 related disruption in the fourth quarter.
Statutory loss before tax was £166.9m including
impairment of £136.8m as a consequence of the
downgraded store outlook, additional inventory
provisions of £6.1m, a direct consequence of Covid-19
and an increase in bad debt expense of £13.6m,
recognising the heightened collection risk from the
economic impact of Covid-19.
Covid-19 has impacted our strategic roadmap and,
in the short term, has required us to act quickly and
decisively to preserve cash. Despite the temporary
closure of our entire store estate through late March,
April and May, we were able to mitigate some of these
headwinds, working closely with our landlords and
suppliers, accessing government furlough schemes,
as well as managing and controlling our costs closely.
Having taken a tight control of cash, it was very
pleasing to close this year with a positive net cash
balance of £36.7m, above FY19 (£35.9m), despite
the impact of the pandemic. More importantly, we
have maintained this position post-year end, and our
net cash position as at 16 September was £49.2m,
substantially better than the same time last year
(£4.9m).
We have completed the refinancing of our facilities
to an Asset Backed Lending facility (‘ABL’) of up to
£70m due to expire in January 2023, with amended
covenants. Although there are going concern material
uncertainties, we believe this new facility, together
with our strong net cash position, gives us the
necessary flexibility and liquidity going forward.
Prior to the outbreak of the pandemic, we had started
to make progress towards the strategic goals I set out
on my return to the business. It is unknown when the
impacts of the Covid-19 pandemic will end and how
different the retail environment will be; however, I
believe the strategic initiatives we have set out remain
important and, indeed, even more vital to return the
Superdry business to sustainable, profitable growth.
• Product and Design: Successfully segmented
customers into nine consumer types, with four
overarching style choices, beginning our return
journey to a design-led philosophy. We reverted
back to a two-season model, with intermittent
capsule drops and limited edition products,
taking decisions and acting swiftly in response to
consumer defined opportunities. We made great
strides in sustainability, reducing the time frame
to achieve our Super Responsible organic cotton
goal by 10 years, to 2030.
STRATEGIC REPORT • Brand health: Implemented an enhanced and targeted social
media strategy, helping grow our followers by 14% year-on-
year. On an ongoing basis, the improvements in social media,
such as quality and frequency of posts, allow us to leverage
this expanded range to personalise our offering to customers,
supporting our return to a full-price stance.
• Stores: Accelerated our review of the owned store
portfolio, with renegotiated rents reducing by an average
of 43% as at the end of August. AW20 will see options
increase in store by nearly 80% vs AW19, providing our
customers with far greater choice and reinvigorating the
store experience through improved layouts and clearly
segmented collections.
• Ecommerce: Increased the options online by over 70%, in
addition to enhanced photography and website navigation,
to improve our customer experience. Implemented ‘Fulfil
from Store’ in 31 stores, delivering 7% of online orders.
On-boarded and enhanced strategic new and existing third
party Ecommerce relationships with a number of partners,
including Next.
• Wholesale: Strengthened our partnerships through our
commitment to selling at full price, as well as aligning
deliveries to match their requirements during the year.
• Sourcing and Logistics: Rebalanced our sourcing mix
towards Turkey, reducing lead times and responding
to trends in the market quickly. Future stock buys
were reduced by 20% and we closed three of our four
warehouses in the US as planned, following a material
reduction in inventory during FY20, even despite the
headwinds from Covid-19.
These are all examples of the great work being done by the team
to support our future plans to return this business to strong
revenue growth and rebuild profitability.
Below I will expand on each of our key areas, providing further
detail and clarity around what exactly we have done,
how we got there and how we plan to build on the momentum
of that success in FY21.
Product and Design
Phil Dickinson, Creative Director, joined the business in January
2019. Since then, our pivotal relationship has grown from strength
to strength and this is reflected in the new product we have
designed. The first full collection we have been able to influence,
and the mark of our brand reset, will be the AW20 collection. This
will be released in September and I am very excited to see the
results of all the hard work come to fruition, especially given the
positive early feedback from wholesale partners.
Understanding our customer is key, and we are committed to
providing exceptional product quality at a price that is achievable
to everyone. For AW20, we have segmented our customers
into nine consumer profiles built around buying behaviour and
attitudes towards fashion. The consumer profiles are overlaid
with four style choices which best express our brand – Casual
& Vintage; Sophisticated & Minimal; Sport; and Streetwear &
Energy. This allows us to design product and communicate to
customers on a more personal and relevant level.
Leveraging our shortened lead times and Ecommerce platform,
the creative team are increasing drops of limited edition
products throughout the season, contributing to the premium
element and newness of our brand. This allows us to respond
quickly to the market, releasing online exclusives to capitalise
on trends, and use social media to build engagement and
excitement for this limited edition product.
We have increased our full price online range by over 70% options
and our in-store range by nearly 80% to provide customers with
greater choice, improving our offer and securing more loyal
customers.
In FY21, we will continue to develop and build our range
across the four style choices, and have begun the process of
restructuring the design and marketing functions into integrated
teams across these collections, rather than product categories,
creating much clearer design direction and authenticity.
Brand and Marketing
During the year, we have made positive steps in reigniting the
brand DNA, building consumer engagement through a more
active and better targeted social media strategy, growing our
social media followers by 14% to 3.2 million.
29
This is supported by the up-weighting of our marketing
department headcount and skillset and a more intelligent use of
our brand and production marketing budget, which we will ramp
back up as we look towards the AW20 launch.
A crucial element of the strategy we set out last year was to
limit discounting and return to a full price stance, and as a result
our full-price mix for the year, despite unplanned promotional
activity during Covid-19, was 59%, up 12% year-on-year. By
limiting our promotional windows to just two end of season sales
and a Black Friday event (prior to the onset of Covid-19), being
more targeted and considered with the product that is on mark-
down, and properly utilising our existing clearance channels, we
have been able to clear aged stock while maintaining a full price
proposition in our full price channels. In FY21 we will return to
these disciplined discounting windows, reverting to a full price
stance aligned with the AW20 reset.
In the AW19 ‘My Way’ campaign we adopted a different
approach, working with leading influencers to support the
campaign, who had a combined reach of 2.5+ million Instagram
followers, localising this for key territories. We will build on this
approach in FY21, engaging with higher profile influencers with
an authentic style to promote Superdry, enhancing the brand
and reaching new audiences.
Channels to market – Retail
Across our stores we are resetting the customer journey,
repopulating our retail estate with nearly 80% more options
in AW20 versus AW19, improving product density and
customer choice. We have introduced new store designs which
better showcase the new collections and four style choices,
reinvigorating our visual merchandising to bring back the
excitement and brand experience that has been severely lacking
in our store estate in recent years.
STRATEGIC REPORTcorporate.superdry.com 30
Chief Executive’s Review
CONTINUED
We continue to believe stores will remain a core element in
allowing our customers to experience the brand. However,
despite the sector being a major employer, for a long time the
imbalance for physical store tenants has been growing, both
in terms of the rental burden, but also from inflationary cost
pressures and business rates. We welcome one of the UK
government’s first decisions during the pandemic to grant a 12
month holiday on business rates, and hope that this becomes
permanent legislation.
A consequence of the Covid-19 pandemic has been the
acceleration of our programme of rent renegotiations. To date,
this has resulted in a 43% reduction in rent across 49 stores,
a number of which have moved to turnover rent agreements.
This is an essential re-gearing and has allowed us to improve
profitability across our own store estate. We are continuing
negotiations with landlords and see this as a structural
adjustment in rental costs; however, where a sufficient
adjustment to lease commitments cannot be agreed, we will not
hesitate in making the right decision for the business and exit a
store.
In addition to rent renegotiations, the forced temporary closure
of our store estate allowed us to bring forward a planned
staffing restructuring in store. Though a difficult decision
to make, payroll costs as a share of revenue in FY19 were
significantly above the sector average. While ensuring no
negative impact on the customer journey, we expect to reduce
our overhead staff costs by 20% in FY21, representing a £12m
annualised cost saving.
Leveraging our multi-channel operation, we have also
implemented in-store fulfilment of Ecommerce orders from 31 of
our stores – we have processed over 67,000 orders in this way,
representing 7% of online orders. This allows the same item to
be available to both physical and online customers, providing an
additional route to clear aged and broken lines. We will continue
to roll this out at pace in FY21.
Channels to market – Ecommerce
Superdry continues to be a brand with huge digital potential,
and we still expect Ecommerce to be the fastest growing
division of our business over the next five years, a trend that
has likely accelerated as a result of Covid-19, which encouraged
customers to shop online while stores were closed. Change
in consumer behaviour has been fast-tracked as a result of
the pandemic, which may see some customers never return
to shopping in store, but also providing us an opportunity to
capture new customers that haven’t shopped with us before,
highlighting how integral this channel is to the future growth
of the business.
We were particularly pleased with Ecommerce performance
during the Covid-19 related closure of our stores which have
seen increases of 55% year-on-year, year to date. Some of this
outperformance will have benefited from channel shift from
temporarily closed stores and targeted promotional activity to
generate cash and clear aged stock, but some of which will also
be due to the improving product and enhanced photography.
This year, we more than doubled the number of options
available online, helping clear aged stock which was previously
sat dormant in warehouses, and maintained a full price stance
on current season product to protect margin and brand.
Across our own sites we delivered a number of payment and
customer experience innovations ahead of the peak trading
season, including refreshed home and category pages, and the
introduction of a fit analytics tool. These customer experience
enhancements, together with more considered and selective
discounting on aged products, helped us achieve our best
Black Friday event to date.
Even when handling the record levels of demand we saw
on Black Friday, and operating with unprecedented levels
of disruption during Covid-19 more recently, our logistics
infrastructure allowed us to continue to fulfil our customer
delivery proposition throughout.
Improvements in our digital channels will continue to be the
focus of our capital investment over the next year. We have
a dynamic rolling programme of enhancements, each of which
will continue to improve the customer experience.
Investment in robotics this year has enhanced our returns
processing, reducing direct labour costs, resulting in a more
cost-effective and efficient system. Our autonomous mobile
robots are now in two of our warehouses, processing over
600,000 units since going live. In FY21, we plan to invest further
in robotics, starting first in our UK site, to not only include
returns processing, but multi-channel picking too.
Channels to market – Wholesale
The commitment to reduce our promotional activity has not
only helped to protect our brand globally, but it has also rebuilt
our relationships with wholesale partners, who continue to be
crucial partners in our multi-channel operation.
Acknowledging this two-way relationship, we have adjusted
our wholesale deliveries to match the requirements of our
wholesalers, and not that of our financial year. In the year, we
closed accounts in the US due to unprofitable contracts, and
in Russia and Norway due to bad debts. We will continue to
monitor and review existing and new potential opportunities
country by country, ensuring sustainable growth rather than
chasing revenues and damaging margins.
We have begun to implement our strategy to provide
wholesalers with a constant flow of exciting and innovative
new product – with new capsule injections beginning from
September 2019 – strengthening these relationships by
providing them with product which delights and engages their
own customers.
Covid-19 presented significant challenges with the SS20
season, with many of our partners, particularly our franchisees
that experienced store closures, suffering similar disruption as
the Superdry owned store estate. Delays in shipping product,
initially due to supply challenges in China, and latterly due to
suppressed demand and an inability for partners to receive
product meant we saw delays in the fourth quarter. However, we
have worked closely with all of our Wholesale customers during
the pandemic, and are pleased to have reconfirmed most of the
AW20 order book.
This year we opened 13 franchise stores (including seven in India
and four in the UK). We now have around 500 franchises and
licenses across 57 countries, and expect to add an additional
net 30+ stores in FY21, having added more than 10 by the end of
August 2020, a testament to the strength of the brand.
In FY21 we’ll continue to support our partners in their recovery
from Covid-19. The improved and clearly segmented collections
will allow us to optimise our distribution, expanding with new
buyers and markets not previously accessible.
China
During the current year, the Board and management reviewed
the long term business plan for the China joint venture with our
partners Trendy International. Following those discussions, and
taking into account the current challenging retail environment
due to Covid-19, both parties agreed to end the relationship.
We provided for exceptional costs of £1.5m in FY20, relating to
the wind-up of the China joint venture. We have subsequently
recovered £4.2m of stock from the joint venture as at the end
of August 2020, resulting in a lower than expected bad debt
provision of £2.2m. Consequently, we do not anticipate any
further material costs in relation to the joint venture.
STRATEGIC REPORTSuperdry plc Annual Report 2020 31
Sustainability
We continue to elevate sustainability to be at the heart
of our brand DNA, and have made great progress this
year against our milestones. We are working directly
with farmers in India to convert to organic cotton, which
was used in 19% of our FY20 products, and means we
are confident enough to accelerate our goal of 100%
organic cotton in our products by 10 years to 2030. This
commitment to responsible production can be found
across our collection – in SS20 all of our padded jackets
and gilets jackets used recyclable fills, and in AW20 we
are launching a range of vegan footwear.
Our sustainability goals aren’t just limited to products.
Since 2018, our entire store and corporate office
estate have been converted to 100% renewable
electricity, and we are on a journey with our
distribution, franchise partners and supply base to
switch by 2030.
For more information, see our Sustainability section
on pages 52 to 67.
Summary
We have made some good operational progress this
year, but have also faced some huge challenges. We
have been clear that a comprehensive turnaround will
take time, and we must be realistic in respect of the
impact Covid-19 has had on us and the wider global
community. Despite these headwinds, I have great
confidence that the product reset in AW20 will be the
first of many successes along this journey.
Our aim remains the same – to restore Superdry to a
full price proposition, with strong brand recognition
and a loyal customer base, and to accelerate our
Ecommerce business by leveraging our social media
presence and following.
I am incredibly proud of the hard work and dedication
to Superdry of all colleagues this extraordinary
year. I want to thank you all for continuing to be the
embodiment of our core values. We will continue to
drive forward the strategy and emerge a stronger
Superdry than ever before.
JULIAN DUNKERTON
Chief Executive Officer
20 September 2020
STRATEGIC REPORTcorporate.superdry.com
Chief Financial
Officer’s Review
Revenue
In an already difficult retail climate and with the added
challenges of the Covid-19 pandemic, Group revenue
fell 19.2% year-on-year to £704.4m (2019: £871.7m).
This was driven by a decline in both divisions, with
Retail declining 18.2% and Wholesale declining
20.7%. Revenues declined 11.0% in the first half,
largely attributed to returning to a disciplined full price
trading stance as a long term commitment to brand
protection, against a background of an increasingly
promotional high street. We delivered a strong Black
Friday trading period in volume and contribution;
however, our trading in the immediate pre- and
post- Christmas period was below expectation and
contributed to our trading update and profit reforecast
in early January. In the second half, trading declined
26.6% year-on-year, largely due to Covid-19 forced
store closures, where the entire estate was closed
for five weeks, reducing demand given the general
uncertainty in the global economy, affecting all our
markets. Prior to the impact of Covid-19 in Week 46,
which is when Superdry first saw store closures in
Italy, Group Revenue year to date was down 12.7%,
declining 71.0% in the remaining six weeks of the year
as the pandemic disrupted all areas of the business.
The currency translation impact of the Group’s
international operations was (0.3)% and therefore
a minimal impact to Group revenues on a constant
currency basis.
Our Retail division
Our Retail division includes Owned Store and
Ecommerce as routes to market. Owned Store decline
of 22.7% and Ecommerce decline of 8.0% resulted
in the Retail division delivering revenue of £438.8m
(2019: £536.7m), down 18.2% year-on-year.
Retail store performance was affected by 0.6% space
decline in the year, closing seven unprofitable stores
to finish the year with 241 owned stores across the UK,
Europe and the USA. Like-for-like (‘LFL’) store sales
saw a decline of 14.4%, following a decline of 9.6%
in FY19. An explanation of LFL can be found in the
Alternative Performance Measures in note 37. Owned
stores started to close in Europe in early March 2020
and the whole estate was closed for a period of five
weeks starting 22 March, before starting to reopen
late April 2020. The store estate was substantially
reopened on 15 June when stores in England began
trading, though ~5% of stores remain closed as at
the end of August, predominantly airports and in
other specific locations. Closures due to the Covid-19
pandemic are estimated to have contributed towards
the miss to revenue forecast of £29m during the final
two months of FY20, equating to 7.8%pts of the full
year decline of 22.7%.
Ecommerce revenue declined by 8.0%, driven by
owned sites as we traded on a less promotional
stance pre-Covid-19, partially offset by the growth
from new EU third party sites. Throughout the period
stores were closed, our online business kept trading
across all 18 owned sites. During the early stages of
the pandemic customer demand was suppressed,
before recovering strongly as we exited the year,
benefiting from promotional activity to clear excess
Spring/Summer 2020 stock as well as channel shift
from closed stores. The net impact of this in the last
two months contributed towards the miss to revenue
forecast of £1m in the final two months of FY20.
This change in performance between stores and
Ecommerce, exacerbated by the temporary store
closures in March and April, resulted in FY20
Ecommerce participation within FY20 Retail revenue
increasing from 30.4% to 34.2%.
Retail revenue
Owned Retail Stores
Ecommerce
Total Retail revenue
Ecommerce revenue
as a proportion of
Total Retail revenue
Ecommerce revenue
as a proportion of
Group revenue
2020
£m
288.8
150.0
438.8
2019
£m Change
373.7
163.0
536.7
(22.7)%
(8.0)%
(18.2)%
34.2%
30.4%
21.3%
18.7%
32
NICK GRESHAM
Chief Financial Officer
Total revenue (£m)
-19.2%
£704.4m
Underlying loss before tax (£m)
-210.0%
(£41.8m)
Statutory loss before tax (£m)
-86.9%
(£166.9m)
STRATEGIC REPORTSuperdry plc Annual Report 2020 33
These accounts equated to £11.9m, 3.6%pts of the
total 20.7% wholesale channel decline.
Wholesale revenue
by territory
UK and Republic of
Ireland
Europe
Rest of World*
Total Wholesale
revenue
2020
£m
2019*
£m Change
39.1
188.0
38.5
47.0
235.5
52.5
(16.8)%
(20.2)%
(26.7)%
265.6
335.0
(20.7)%
* In the prior year, all clearance activity was allocated to ‘Rest of
World and Other’ within Wholesale. In FY20 clearance has been
allocated to the relevant territories for clarity. In order to ensure
accurate comparatives, this methodology has been applied
retrospectively to FY19.
Gross Margin
The reduction in Group gross margin by 150bps
to 53.6% (2019: 55.1%) was driven by 110bps drag
from one-off activity, including increased stock
obsolescence provisioning as a result of Covid-19
(£6.1m, 90bps).
Despite the negative mix impact to group margin of
store closures and the Covid-19 related promotional
activity online during Q4, our disciplined full price
stance during 2019 resulted in retail full price mix
increasing +12pts year-on-year, contributing +90bps
to gross margin.
FX headwinds, driven by the strong USD also
impacted gross margin by 140bps, increasing our cost
of sales and the sales in EUR not being enough to
offset this.
Performance in our largest market, the UK and ROI,
saw revenues decline 18.3%, predominately due to the
return to a full price trading stance impacting the first
10 months of the year, followed by the unprecedented
impact of Covid-19, impacting both store and online
trading. We saw similar dynamics across European
and Rest of World territories.
Retail revenue by
territory
UK and Republic of
Ireland
Europe
Rest of World
Total Retail revenue
2020
£m
2019
£m Change
215.3
173.7
49.8
438.8
263.4
208.1
65.2
536.7
(18.3)%
(16.5)%
(23.6)%
(18.2)%
Our Wholesale division
Our Wholesale division includes multi-brand
independents and distributors, franchise and license
stores in secondary catchments and developing
markets, and physical and online department stores
as routes to market. Wholesale revenue of £265.6m
was down 20.7% year-on-year (2019: £335.0m). We
rebuilt our relationships with Wholesale partners
including re-setting delivery timelines in H1 to reflect
their needs, however, the expected recovery in H2 was
hampered by Covid-19, with suppressed demand and
an inability for us to deliver stock prior to the year end.
Wholesale partners with store operations faced the
same closures as our owned retail stores, with a
greater proportion of revenues coming from Europe
contributing to the adverse impact of Covid-19.
Closures due to the Covid-19 pandemic are estimated
to have contributed towards the miss to revenue
forecast of £42m during the final two months of FY20,
equating to 12.5%pts of the full year decline of 20.7%.
At the end of the year, the Group had Wholesale
operations in 61 countries (2019: 69) including 473
franchise stores (2019: 464) and 26 Superdry branded
licensed stores (2019: 22). In the year, we closed
accounts in the US due to unprofitable contracts, and
in Russia and Norway due to bad debts.
STRATEGIC REPORTcorporate.superdry.com Chief Financial Officer’s Review
CONTINUED
Wholesale margin suffered as a result of lower forward orders
and the higher mix of clearance activity during the year as well
as the allocation of the accounting adjustments mentioned
above.
Central costs (which include the costs of our global operations
teams, support functions and related depreciation), £70.1m
(2019: £74.6m), a decrease of 6.0%, due to tighter control over
costs, particularly towards the year end as a result of Covid-19.
Underlying loss before tax (as defined in note 37) for the 52-
week trading period was £(41.8)m (2019: £38.0m profit restated
after a non-cash prior year adjustment to stock of £3.9m – see
note 36 for further details).
Gross Margin by channel
2020
2019
Change
Retail
Stores
Ecommerce
Wholesale
34
Total Gross Margin
64.5%
67.0%
59.6%
35.7%
53.6%
63.4% 1.1%pts
64.5% 2.5%pts
60.8% (1.2)%pts
41.9% (6.2)%pts
55.1% (1.5)%pts
Operating Costs
Selling, general and administrative expenses pre-exceptional
costs of £412.1m (2019: £447.0m) and impairment losses on
trade receivables of £9.2m (2019: nil), total £421.3m (2019:
£447.0m). This includes the sales and distribution costs for the
Retail and Wholesale channels and Central costs.
Sales and distribution costs (which include costs associated
with operating stores, depreciation and transporting products)
totalled £351.2m (2019: £372.4m), a decrease of 5.7%. Drivers of
the decrease in store costs (£8.3m year-on-year), included the
benefit of the ongoing lease renegotiations, with an average rent
saving of 43% secured on the 49 leases that have been re-geared
to date. The UK business rates holiday announced on 11 March
2020 resulted in £1.7m of benefit in FY20, with a further £14.3m of
savings to be realised in FY21. Distribution costs declined £9.6m,
following the planned consolidation of our US warehouses from
four to one, as well as benefiting from reduced volumes. Head
office costs were broadly flat, with investment in Ecommerce
development offset by disciplined cost management, including
a temporary pay cut for the Executive team and Board, and
no bonus across the Group. The planned restructuring across
stores and head office, completed in FY21, is expected to reduce
overhead staff costs by 20%, representing a £12m annualised
cost saving.
The savings in FY20 were offset by additional bad debt
charges of £13.6m year-on-year (£9.4m recognised at H1
FY20), recognising the heightened collection risk as a result of
Covid-19, with the majority attributable to wholesale as a result
of our partners suffering the same challenges as Superdry and
the remaining £2.2m relating to the China Joint Venture. We
also increased our marketing spend by £2.4m (11.9%) year-on-
year, albeit less than originally planned, with Q4 savings made
as part of cash preservation measures.
Underlying other gains and losses (which include royalty income
and other income) were £9.1m (2019: £10.8m), a decrease of
15.7%. This is largely the result of a reduction in royalty income
following the decrease in Wholesale revenue.
Net finance costs were £7.5m (2019: £1.0m), of which £5.7m
relates to interest expense on leases following the transition
to IFRS 16 (2019: nil). The net underlying share of loss of our
China joint venture is £nil (2019: £3.7m). Having invested £18m
since FY16, on 18 June 2020 the Group announced the plans
to exit its joint venture agreement in China. The investment
had been written down to nil value in 2019. We provided for
exceptional costs of £1.5m in FY20, relating to the wind-up of
the China joint venture. We have subsequently recovered £4.2m
of stock from the joint venture as at the end of August 2020,
resulting in a lower than expected bad debt provision of £2.2m.
Consequently, we do not anticipate any further material costs in
relation to the joint venture.
Underlying (Loss)/Profit Before Tax
Underlying
2020
£m
Underlying
2019*
£m
Revenue:
Retail
Wholesale
Group revenue
Underlying operating profit:
Retail
Wholesale
Central costs
Underlying total operating
profit/(loss)
Underlying operating margin
Net finance income – Central costs
Impairment losses on financial assets
– Wholesale and Central costs
Share of joint venture – Central costs
Total underlying (loss)/profit
before tax
438.8
265.6
704.4
5.3
31.4
(71.0)
(34.3)
(4.9)%
(7.5)
–
–
536.7
335.0
871.7
25.5
93.3
(74.6)
44.2
5.1%
(1.0)
(1.5)
(3.7)
(41.8)
38.0
In addition to the items above, the statutory operating loss
before tax is after charging net exceptional and other items
of £125.1m (2019: £116.3m).
Underlying (loss)/profit before tax
Exceptional and other items
Unrealised gain/(loss) on financial
derivatives
Store asset impairment and onerous
property related contracts
Restructuring, strategic change and
other impairment costs
IFRS 2 charge on Founder Share Plan
Total exceptional and other items
in operating (loss)/profit
Impairment of losses on financial assets
Share of joint venture exceptional costs
Total exceptional and other items
before tax
Reported (loss)/profit before tax
2020
£m
(41.8)
Group
2019*
£m
38.0
1.9
23.9
(124.8)
(129.5)
(1.9)
(0.3)
(125.1)
–
–
(125.1)
(166.9)
(8.1)
(2.6)
(116.3)
(8.5)
(2.5)
(127.3)
(89.3)
Exceptional and other items in the period totalled a charge of
£125.1m in the year (2019: £127.3m), primarily due to a £121.2m
impairment relating to the right-of-use assets, together with a
£15.6m impairment relating to PPE and intangibles, offset by a
£12.0m release for the onerous lease provision. In the prior year,
a non-cash impairment and onerous lease charge was made of
£129.5m, affecting 114 stores.
Exceptional items also include a charge of £1.9m, made up of
predominately wind-up costs in relation to our China joint venture
(£1.5m), as well as restructuring and changes in strategy following
the change in management in April 2019 (£0.4m).
Other items in the year include a £1.9m credit in respect of the
fair value movement in financial derivatives (2019: £23.9m),
which has been driven by changes to the timing and type of
derivatives used to hedge Euro receivables and US Dollar
payables and by rate movements during the hedging period.
STRATEGIC REPORTSuperdry plc Annual Report 2020 The IFRS 2 charge of £0.3m in respect of the Founder Share Plan is also included within other items (see note 9 for further details).
IFRS 16 has been adopted by the Group from 28 April 2019, and replaces IAS 17 Leases and its related interpretations. It has been
adopted using the modified retrospective transition approach, therefore neither the 52 weeks ended 27 April 2019 nor the 26 weeks
ended 27 October 2018 have been restated, and continue to be shown under IAS 17. As a result of the transition to IFRS 16, the Right
of Use assets within Non-Current Assets increased by £287.3m. The subsequent significant impairment in the current year reduces
profit by £136.8m as a consequence of the downgraded store outlook, a direct consequence of Covid-19.
The impact of this change compared to the accounting under IAS 17 is as follows:
Income Statement £m
Sales
Gross margin
Rental charge
Net depreciation
Other costs
Onerous related property contract utilisation
Store impairment adjustment
Operating profit
FX and interest
(Loss)/profit before tax
Underlying
FY20
Pre-IFRS 16
£m
IFRS 16 impact
£m
Underlying
FY20
Post-IFRS 16
£m
Exceptional
items
£m
Reported
FY20
Post-IFRS 16
£m
704.4
377.9
(78.1)
(42.4)
(323.3)
17.5
10.2
(38.2)
(1.8)
(40.0)
704.4
377.9
(8.9)
(96.7)
(323.3)
6.5
10.2
(34.3)
(7.5)
(41.8)
69.2
(54.3)
(11.0)
3.9
(5.7)
(1.8)
704.4
377.9
(8.9)
(96.7)
(448.4)
6.5
10.2
(159.4)
(7.5)
(166.9)
(125.1)
(125.1)
(125.1)
The non-IFRS 16 onerous lease provision utilisation and reduced depreciation as a result of the impairment charge will unwind over
the remaining life of the impacted leases, benefiting the underlying profit before tax. The implementation of IFRS 16 has changed the
forecast release from what was reported in the FY19 annual report.
For further details on the transition to IFRS 16, please see note 3.
The determination of exceptional items and other items is further explained in note 6.
35
STRATEGIC REPORTcorporate.superdry.com Chief Financial Officer’s Review
CONTINUED
36
Taxation in the period
Our tax credit on underlying losses is £6.1m (2019: £11.5m tax
expense on restated underlying profit). This represents an
underlying effective tax rate of 14.6% (2019: 30.2%).
Our tax credit on statutory losses is £23.5m (2019: £12.4m tax
expense on restated loss). This represents an effective tax rate
of 14.1% (2019: 13.8%).
The Group’s underlying effective tax rate is lower than the
statutory rate of 19% (2019: 19%). This is primarily due to the
level of overseas losses and lease liabilities on the balance
sheet to which no tax benefit has been recognised, China joint
venture exit costs which are non-deductible for tax purposes,
the level of lease liabilities held on the balance sheet to which
no tax benefit has been recognised, together with depreciation
and amortisation on non-qualifying assets.
The net tax credit on exceptional and other items totals £17.4m
(2019: £0.9m tax credit). An exceptional tax credit of £16.7m
arises as a result of impairments to the right of use asset values,
due to the transition to IFRS 16 in the current year, and a £1.5m
credit is a result of impairments to PPE, at the balance sheet
date. The remaining charge of £0.8m arises due to movements on
the derivative contracts and an updated onerous lease review.
(Loss)/profit for the period
After exceptional and other items, Group statutory loss after tax
for the year was £143.4m, compared to a £101.7m loss in 2019.
Earnings/loss per share
Reflecting the loss achieved by the Group during the year,
underlying basic EPS is (43.5)p (2019: EPS 32.4p).
The underlying performance of the business, offset by the
exceptional and other items outlined above, results in a reported
basic EPS of (174.9)p (2019: EPS (124.2)p) based on a basic
weighted average of 82,001,955 shares (2019: 81,870,875
shares). The increase in the basic weighted average number of
shares is predominantly due to 15,540 5p ordinary shares being
issued during the year under the Buy As You Earn scheme.
Underlying diluted EPS is (43.3)p (2019: EPS 32.3p) and diluted
EPS is (174.1)p (2019: EPS (123.9)p. These are based on a diluted
weighted average of 82,389,450 (2019: 82,068,659) shares.
Dividends
An interim dividend for the six months to 26 October 2019 of
2.0p per share was paid on 21 January 2020. In the light of
the current situation, the Board has made the decision not to
recommend paying a final dividend in relation to FY20.
Cash flow
Superdry remains a strongly cash-generative business, with
operating cash generated before working capital movements of
£75.5m (2019: £78.5m), and retained net cash balances of £36.7m
(2019: £35.9m) at the end of the year after funding continued
investment across our business and despite the significant impact
of the Covid-19 pandemic. Following the outbreak of Covid-19
in our core markets, management took a number of decisive
cash preservation actions to mitigate the lost revenues as a
consequence of temporary store closures, which included:
• Reduced FY20 capital expenditure when Covid-19
hit, approximately £7m lower versus our pre-Covid-19
investment plans;
• Applied careful but considered cash control measures to
our day-to-day operations including, but not limited to,
reducing staff travel, the reduction of marketing budgets
and the reduction of logistics costs, resulting in an
immediate reduction in overheads and discretionary spend
of approximately £2m per month during lockdown;
• Requested £20m of rent deferrals, the majority of which
were achieved. The UK 12 months business rates relief
represents a £16m benefit, with £1.7m realised in FY20;
• Deferred VAT, PAYE and Customs Duty of more than £5m,
and recovering historic corporation tax overpayments of
£11.5m;
•
Furloughed 88% of staff upon closure of our store estate
and corporate sites, and applied for government job
retention support in relevant markets (£2.9m in FY20).
Executive Directors and members of the Board took
temporary pay reductions beginning April 2020, and no
bonus scheme was payable in FY20; and
• Worked collaboratively and with the support of our long-
standing supply base, we have extended payment terms,
increased discounts and substantially rebalanced, reduced
and rescheduled our stock intake, reducing the number of
units of future buys by 20%.
After the year end, on 10 August 2020 the Group announced
that it had completed a refinancing of its facilities, from a
Revolving Credit Facility for £70m due to expire in January 2022
to a new Asset Backed Lending (‘ABL’) facility for up to £70m
due to expire in January 2023, with amended covenants. Having
thoroughly stress tested trading scenarios and despite a going
concern material uncertainty relating to the covenant tests,
management believes that the new facility provides sufficient
liquidity to continue trading through what is likely to remain a
difficult trading environment for some time.
£m
Operating cash flow before
movements in working capital
Working capital movement
Interest paid
Taxes
Net cash generated from
operations
Long term loan to joint venture
Purchase of PPE and intangible
assets
Proceeds from disposal of assets
held for sale
Dividend payments
Net interest paid*
Proceeds of issued share capital
Drawdown of RCF
Repayment of RCF
Repayment of lease liability principal
Net (decrease)/increase in cash
Other (including foreign currency
movement)
Net cash and cash equivalents
at end of period
2020
£m
75.5
12.0
–
(2.2)
85.3
–
2019
£m
78.5
(23.9)
(1.0)
(15.9)
37.7
(5.0)
(13.9)
(24.4)
2.4
(3.4)
(7.5)
–
(30.0)
30.0
(61.1)
1.8
–
(46.0)
–
0.1
(21.5)
21.5
–
(37.6)
(1.0)
(2.3)
36.7
35.9
* The line indicated is impacted by the application of IFRS 16 in the current
year only. Refer to note 3 for further details.
Net cash generated from operations of £85.3m has increased
versus the prior year (2019: £37.7m), resulting mainly from the
reclassification of rental payments under IFRS 16 (£61.1m) from
operational activities to financing activities. Excluding the lease
principal repayments and lease liability interest, there is a reduction
in net cash generated from operations of £19.2m year-on-year,
which is the result of the change in underlying trading performance.
Working capital cash flow was an inflow of £12.0m, including a
decrease in inventories of £21.6m and a net reduction in trade
and other debtors of £14.6m. Trade and other payables were an
outflow of £24.2m.
STRATEGIC REPORT Working capital
Inventory levels decreased by 15.1% to £158.7m (2019: £186.9m), despite lower sales, the closures of stores from Covid-19 and the inherited
stock position. This reduction is a direct consequence of targeted clearance activity and a more disciplined forward season buy. The
inventory balance includes a one-off charge of £6.1m relating to Covid-19 related obsolescence provisioning and £3.9m for expensing
sample stock in the year.
Total trade and other receivables decreased by 21.5% to £96.1m (2019: £122.4m), reducing broadly in line with Wholesale revenue
(-20.7%), as a result of cash collections and the disruptive impact of Covid-19 over the period end on both shipments and sales.
Included within the trade receivables balance is a bad debt provision of £14.6m (2019: £5.4m).
Total payables decreased by 18.9% to £103.3m (2019: £127.3m) including deferred payments for rent, partially offset by delayed
stock intake in relation to Covid-19.
Total working capital decreased 16.8% during the year to £151.5m (2019: £182.0m) and as a proportion of Group Revenue was 21.5%
(2019: 20.9%).
Current assets
Working capital
Total working capital
Inventories
Trade and other receivables
Trade and other payables
2020
£m
158.7
96.1
(103.3)
151.5
2019
£m
186.9
122.4
(127.3)
182.0
Change
(15.1)%
(21.5)%
(18.9)%
(16.8)%
Investments
Cash investment in property, plant and equipment and
intangible assets totalled £13.9m (2019: £24.4m).
As at 25 April 2020, the net book value of property, plant
and equipment decreased to £41.7m (2019: £74.1m) as a
consequence of the impairment. During the year, £6.5m (2019:
£14.6m) of capital additions were made, of which £1.6m (2019:
£7.0m) related to leasehold improvements across the Group.
The remaining balance of capital additions includes furniture,
fixtures and fittings (£2.7m) and computer equipment (£2.2m).
Capital expenditure reduced significantly as a result of reduced
investment in the store portfolio and short term cash preservation
initiatives during Covid-19.
Intangible assets, comprising goodwill, lease premiums,
distribution agreements, trademarks, website and computer
software, stood at £48.4m at the year end (2019: £51.5m).
Additions in the year were £7.2m (2019: £9.2m), comprising
mainly website and software additions.
In response to the identification of a prior year stock accounting
adjustment in December 2019 and an internal audit review
highlighting control weaknesses in Credit Control, Accounts
Receivable and the IT environment, a review of the Groups key
internal controls was undertaken, including both financial and
non-financial processes. During FY21, outstanding remedial
actions will be completed, along with a programme to embed
the controls framework into the business and to monitor
ongoing compliance and further improvements to the control
environment has been established. For further information
please see the Audit Committee report section on page 79.
Outlook
The Covid-19 pandemic has created material uncertainty
including, but not limited to, the recovery in consumer
demand and the impacts of social distancing measures, levels
of competitive discounting, supply chain disruption, and
geopolitical impacts. From a strategic perspective the Group
will continue to focus on design, product, consumer targeting
and becoming more efficient in operations, to ensure that it
maximises performance where possible to drive the business
turnaround, grow scale and return the brand to sustainable,
profitable growth.
Despite a stronger than anticipated performance in Q1
(historically our lowest trading period), we remain cautious on
the shape of the economic recovery, and recognise there is a
material uncertainty (see going concern statement below for
further details) relating to our covenant tests in FY21, and are
not providing formal guidance.
In the balance of the year we anticipate:
• An improvement in store trading from current levels, though
expect LFLs to remain negative on a FY basis, given the
pressure on consumer demand and uncertainty relating
to any disruption from Covid-19, even considering the
comparable trading in March and April when stores were
temporarily shut;
• Wholesale sales to see some improvement from current
trading levels through in-season sales, with franchise store
LFLs in Europe recovering strongly, and normalisation of
Spring/Summer forward order shipment timing;
37
• Most recent Ecommerce performance trends to continue
over the remainder of the year, benefiting from the
continued channel shift as a result of social distancing
measures in stores, and from the investments in our brand
and digital infrastructure;
• Gross margin impacted by a number of dynamics, with
a heavily discounted promotional stance to clear excess
stock and generate cash, negatively impacting full price
mix year to date, but partially offset by the unwind of FY20
non-trading headwinds;
• Costs to reduce substantially in FY21, due to rent
renegotiations, volume-driven and efficiency savings in
logistics, and a substantial reduction in bad debt expense,
together with net overhead savings from discretionary
spend and payroll;
• Even under a downside scenario, closing net cash
is expected to be positive, benefiting from the cash
preservation measures implemented at the start of
the year.
STRATEGIC REPORTcorporate.superdry.com Chief Financial Officer’s Review
CONTINUED
38
Assessment of the Group’s Prospects
Background
The financial position of the Group, its cash flows and liquidity
position are set out in the financial statements. Furthermore,
the Group Financial statements include the Group’s objectives
and policies for managing its capital, its financial risk
management objectives, details of its financial instruments and
exposure to credit and liquidity risk (please refer to note 34).
In addition to the journey to reset the brand and deliver on our
transformation plans which began in April 2019, the Group now
faces the unprecedented and global impact of the Covid-19
pandemic, which has resulted in substantial disruption across
all aspects of our business. By 22 March 2020, our whole
owned store portfolio was temporarily closed, with the vast
majority of our physical wholesale locations (franchise stores
and department stores) similarly impacted. After initially
suppressed demand, our Ecommerce business was able to
offset some of these lost store sales, albeit benefiting from
extended promotional activity to drive cash generation and
sell-through current season stock during this trading disruption.
From early May 2020, our store portfolio started to reopen
with ~95% stores now trading, and though performance
continues to recover, social distancing measures, together
with broader economic and health concerns are impacting
on consumer demand for discretionary retail, at least in the
short-term. Despite these headwinds, management have taken
a number of swift and decisive actions to preserve cash, and
as at 16 September, the Group has £49.2m net cash on the
balance sheet (2019: £4.9m), significantly ahead of the FY21
budget. Our total creditor position as at the end of July 2020
was only £3.1m higher year-on-year, with deferred property
costs and taxes broadly offset by the delayed intake of future
season stock. The medium term financial plan incorporates the
unwinding of these measures, primarily in H2 21.
Liquidity headroom
On 10 August 2020 the Group announced that it had completed
a refinancing of its facilities to an Asset Backed Lending facility
up to £70m due to expire in January 2023, with amended
covenants (detailed in the Covenant Testing section below) and
the option to extend at the discretion of the lender for a further
12 months.
The RCF facility was not drawn-down at the year-end but was
partially utilised during FY20, with a maximum drawdown of £30m
ahead of our peak trading period, reflecting the seasonality of
cash flows during the Group’s annual trading cycle.
In addition, the Group has an overdraft facility of up to
£20m available on a rolling annual basis, albeit as this is not
committed, it has not been considered by management as part
of the going concern and viability assessment.
Base Case:
The CEO’s strategy for the Group is described within the annual
report (see pages 28 to 31). This turnaround strategy has been
used to develop a medium-term financial plan (the ‘Plan’), which
builds from the FY21 internal budget and has been used for the
basis of management’s going concern and viability conclusions.
The Plan, which is in its early stages of implementation, assumes
the Group halts the underlying decline in performance which
began in FY19, and reverses the incremental impact of store
closures and operational disruption resulting from Covid-19. Key
assumptions used in the Base Case were:
• The Q1 FY21 (May, June and July 2020) trading
performance and cash position materially ahead of the Plan.
• All trading channels benefiting from the ongoing product
improvements, operational initiatives and planned marketing
activity to support the AW20 reset from October 2020.
• Store trading continues to recover as stores reopen
and consumer demand returns, benefiting from store
refurbishments and presentation of the new ranges,
stabilising at an underlying 10% revenue decline year-on-
year, reflecting the macroeconomic uncertainties in H2
21, and excluding the comparable impact of store closures
in late FY20. While store revenues in FY22 recover to a
‘normalised’ position, this is still materially below FY19
levels, reflecting the ongoing channel shift towards online,
with profitability delivered through full price trading
margins, renegotiated leases and payroll restructuring.
• Ecommerce trading benefiting from the underlying and
recently accelerated channel shift towards digital (from
physical retailing), together with planned development
activities to improve website user experience, supporting
FY21 and FY22 growth, and continuing to accumulate
through investment throughout the Plan.
• Wholesale performance declining in FY21 reflecting the lower
forward order books from partners suffering similar headwinds
from Covid-19, with a similar level of decline forecast into the
SS21 season, before recovering over the medium term due to
continually improving product and growing partner confidence,
the result of the change to a full price trading stance and
corresponding brand health improvement.
• Gross margin reflects a flexible trading stance in the early
part of FY21 to clear excess stock, before a step change into
FY22 and onwards as we return to full price trading and see
the benefits of product initiatives and brand investment.
• Disciplined cost management and savings programmes,
• A reduction in marketing spend in FY21, as a consequence of
reduced activity during lockdown and a reallocation towards
consumer focused spend and away from wholesale and
internal events, before accelerating the marketing spend
at 2.5–3.05 revenue growth from FY22 onwards to support
brand health and new customer acquisition.
Due to the timing of the disruption occurring over the FY20 year
end, the plan sees a recovery in profit and revenues in FY21
and FY22, particularly in the store estate as we lap the periods
where stores were temporarily closed, before trending towards
a sustainable growth profile as the strategic initiatives are
executed. In the medium term, the plan assumes the return to
profitability and revenue growth, with sales recovering to FY19
levels by FY24. As a consequence, the Board believes four years
is the most appropriate time period over which to assess the
viability of the business.
Reverse stress test
Given the base case reflects both the results of the turnaround
plan, and the uncertainties surrounding forecasts due to the
Covid-19, the Group has modelled a reverse stress test scenario.
The reverse stress test models the decline in sales that the Group
would be able to absorb before requiring additional sources of
financing in excess of those that are committed.
In addition to a revenue-only reverse stress-test, a further
downside scenario was modelled, to determine the revenue
headroom after these additional impacts:
•
200bp margin dilution in all channels for the duration of the
viability period;
• A proportion of the incremental revenues and/or cost
savings not achieved, modelled annually throughout the
viability period; and
• An acceleration of stock payments from September to
December, impacting working capital.
Whilst management consider this downside scenario to be unlikely,
it is considered to be more than remote. However, the Directors have
considered the feasible mitigating actions that are available to them
and could reasonably be implemented, together with the availability
of its banking facilities until at least January 2023.
This assessment is linked to a robust assessment of the
principal risks facing the Group. The principal risks are outlined
in the How we manage our risks section on page 42. Though the
impact of Brexit is not specifically modelled, the impacts are
assumed to be within the downturn scenario detailed above.
including an acceleration of lease renegotiations, store payroll
savings and logistics benefits relating to operational changes
and DC closures in FY20. At the time of writing this report a
number of these measures have been implemented and are
on-track to deliver the cash savings envisaged in the medium
term financial plan.
Mitigating actions
If there are different outcomes to the Base Case that have
a materially adverse impact on the Group, the continued
impact of these events could result in a reduction in liquidity
and/or a longer period of lower EBITDAR, which in turn risks
covenant breaches. Management have considered the plausible
STRATEGIC REPORTSuperdry plc Annual Report 2020 mitigating actions available to them. Potential mitigating actions
considered by management are a reduction in uncommitted
capital expenditure, suspension of the dividend, reduction in
discretionary spend and a reduced purchase of new season
stock in line with the lower sales values.
Management believe that the likelihood of this revenue decline
scenario together with other downside impacts occurring is low,
albeit more than remote, in the event of an even more severe and
prolonged downside trading scenario than that modelled by the
reverse stress test and, should the mitigating actions outlined
above not be sufficient, management would likely adapt the
current store portfolio strategy to exit a greater proportion of
stores, with ~65% of leases falling due in the next 3 years.
Covenant testing
The covenants in the new ABL facility are tested quarterly and
are based around the Group’s EBITDAR (relative to the internal
Budget) until the end of FY21 and fixed charge (rent and interest)
cover thereafter. The covenants are tested on a ‘frozen GAAP’
basis and hence the adoption of IFRS 16 will not impact them.
In addition, due to these ratios being tested on a trailing 12
months basis (much of which has already occurred as at the
first EBITDAR test in October 2020), there is also a drawdown
limit of £35m on the facility for the month of October 2020
only (after which time the facility is capped at £70m, subject
to the borrowing base availability), which is intended to give
the debt providers additional comfort around short-term cash
management. Based on the Group’s current net cash position
of £49.2m as at 16 September, and the short-term cash flow
forecast over the next six weeks until 31 October 2020, the
Directors believe there is adequate liquidity over this period,
even in the event of a severe downside in the short-term.
The Base Case forecast indicates that the banking covenants
will be met throughout the going concern period. Under the
reverse stress test, which management considers to be more
than a remote possibility, liquidity headroom remains adequate,
though the covenants would be under pressure over the 12
month going concern period in this scenario. Consequently,
they are most sensitive to the macroeconomic recovery and
performance over the peak trading period in Q3 FY21. If this
were to occur management would approach lenders for a
covenant waiver. Whilst there would be no guarantee that such
a waiver would be made available, in making their assessment
management note that they currently have a good relationship
with their lenders, the lenders have been made aware of
all key inputs into the medium term financial plan and it is
management’s view that the combination of events required
for such a breach to occur, whilst possible, is not expected to
occur. In addition, it should be noted that the Group would be
cash positive at the point these covenants were breached, given
the seasonal working capital cycle, with substantial liquidity
maintained throughout the going concern period.
Significant judgements
In using these financial forecasts for the going concern
assessment, the Directors recognise that significant
judgements were required in deciding what assumptions to
make regarding the impact of the coronavirus pandemic on the
retail sector and wider economy, and specifically to Superdry,
the ability to execute the turnaround plans required to recover
brand health and return the business to profitable growth.
Whilst we have seen short-term trading ahead of expectations,
the medium term macroeconomic environment, and its impact
on the efficacy of our strategic turnaround initiatives, result in
greater uncertainty than would usually be the case in making
the key judgements and assumptions that underpin the
financial forecasts for the business. The coronavirus pandemic
is unprecedented, and so in making their assessment of the
future prospects of the Group the Directors have incorporated
additional risk adjustments into the FY21 internal budget.
The Directors noted that the risks set out above indicate
that a material uncertainty exists and may cast significant
doubt on the Group’s ability to continue as a going concern
and, therefore, that it may be unable to realise its assets and
discharge its liabilities in the normal course of business.
The material uncertainty relates to:
•
•
the recovery in consumer demand, and the Group’s ability
to capture this during the AW20 reset season; and
the ability of the Group to meet the new covenants from
debt providers.
This uncertainty relates specifically to the covenant tests over
the 12 month going concern period; the Directors have assessed
the liquidity requirements of the Group under these downside
scenarios and believe them to be adequate.
Going concern statement
After considering the forecasts, sensitivities and mitigating
actions available to management and having regard to the risks
and uncertainties to which the Group is exposed (including the
material uncertainty referred to above), the Directors have a
reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the
foreseeable future, and operate within its borrowing facilities
and covenants for a period of at least 12 months from the date
of signing the financial statements, taking into account the
working capital troughs in both FY21 and FY22. Accordingly,
the financial statements continue to be prepared on the going
concern basis.
39
Viability
In line with the UK Corporate Governance Code, the Directors
have assessed the prospects of the Group over a longer
period than that required by the ‘going concern’ provision.
The Directors have assessed the viability of the Group over
the four year period through to FY24 using the medium term
financial plan. The Plan is in its early stages of implementation
and assumes the successful implementation of the turnaround
strategy to reset the brand, reversing the decline in
performance which began in FY19 and return the Group to FY18
profitability and growth over the medium/longer term horizon.
The four year viability period coincides with the Group’s
strategic review period for the turnaround, and is consistent
with previous viability assessment periods. Furthermore,
beyond this period, performance is impacted by global
macroeconomic conditions which become increasingly difficult
to predict, exacerbated by the impact of Covid-19.
The viability assessment has considered the potential impact of
the principal risks on the business, in particular future performance
(including the success of the brand reset and turnaround strategy)
and liquidity over the period. In making this statement, the
Directors have considered the resilience of the Group under varying
market conditions together with the effectiveness of any mitigating
actions and the availability of financing facilities.
As already described in the statement on going concern, as
part of this assessment the Directors have considered a severe
but plausible trading scenario modelled (which is considered to
be more than a remote possibility), using an extended reverse
stress test over the period with similar mitigations as under
the going concern assessment, and have taken account of the
availability of the Group’s ABL.
Whilst recognising the challenging retail environment will
increase the risks and costs around the future refinancing of
this facility, based on current market conditions the Directors
believe that Superdry has the appropriate plans, current
assets and mitigations in place to maximise the prospects of a
successful renewal in advance of the January 2023 expiry.
The reverse stress testing indicated that, after taking
account of the mitigating actions and the material uncertainty
highlighted in the going concern assessment above, the Group
is able to operate within its funding facilities and covenants for
the four-year assessment period.
Based on this assessment, the Directors have a reasonable
expectation that the Group will have sufficient resources to
continue in operation and meet its liabilities as they fall due over
the period to April 2024. However, a sustained downturn as a
result of the new strategy not turning the business around, and
a failure to renew the ABL in January 2023, would threaten the
viability of the business over this four year assessment period.
STRATEGIC REPORTcorporate.superdry.com Key Performance Indicators
Financial
•
Foreign currency sales are translated at the average rate for the months in which they were made
•
Fully diluted EPS is profit after income tax attributable to the owners of the Group divided by the diluted weighted number of shares and
• Underlying is defined as reported results before exceptional items and other items, and is further explained in note 37 to the financial statements.
40
(£m)
1 Group revenue
£704.4m
(19.2)% year-on-year
(£m)
2 Underlying Group profit before tax1
£(41.8)m
(210.0)% year-on-year
(p)
3 Underlying basic EPS1
(43.5)p
(234.3)% year-on-year
0
200
400
600
800
1000
-40
-20
0
20
40
60
80
100
2020
2019
2018
704.4
871.7
872.0
2020
2019*
2018
(41.8)
38.0
97.0
2020
2019*
2018
Operational
7 Group gross margin
53.6%
(%)
(1.5)%pts year-on-year
(£m)
8 Retail store revenue
£288.8m
(22.7)% year-on-year
(%)
9 Retail like-for-like
(14.4)%
(4.8)%pts year-on-year
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
2020
2019*
2018
53.6
55.1
58.1
2020
2019
2018
288.8
373.7
387.4
2020
2019
2018
(43.5)
32.4
93.6
(14.4)
(9.6)
(6.0)
Definition
Gross margin percentage is gross profit expressed as a
percentage of Group revenue
Definition
Retail Store revenue is revenue representing amounts
receivable for goods supplied, net of discounts, actual
returns, returns provisions and value added taxes from all of
our owned store estate including concessions
Definition
Like-for-like sales growth is defined as the year on year
increase in revenue from stores and concessions open for
more than one year, and allowing for store upsizing of no
more than 100% in original trading space less the impact of
store closures
‘Underlying’ and ‘Net Cash’ are used as alternative performance measures (‘APMs’). A definition of APMs and explanation as to how they are calculated are included in note 37 to the Group and Company Financial Statements.
1.
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36 in the Notes to the Group and Company Financial Statements.
STRATEGIC REPORTSuperdry plc Annual Report 2020 Financial
(£m)
4 Year end net cash1
£36.7m
2.2% year-on-year
2020
2019
2018
(£m)
5 Group statutory (loss)/profit before tax
£(166.9)m
86.9% year-on-year
(p)
6 Basic EPS
(174.9)p
40.8% year-on-year
36.7
35.9
75.8
2020
2019*
2018
(166.9)
(89.3)
65.3
2020
2019*
2018
41
(174.9)
(124.2)
62.2
Operational
10 Total retail selling space
(100 square feet)
1,178sq ft
(1.6)% year-on-year
(£m)
11 Wholesale revenue
£265.6m
(20.7)% year-on-year
(£m)
12 Ecommerce revenue
£150.0m
(8.0)% year-on-year
0
500000
1000000
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
2020
2019
2018
1,178
1,197
1,179
2020
2019
2018
265.6
335.0
323.4
2020
2019
2018
1500000
2000000
2500000
3000000
3500000
150.0
163.0
161.2
Definition
Total retail selling space is defined as the trading floor area
of all stand-alone stores, excluding concessions, and does
not include stockrooms, administration and other non-
trading areas
Definition
Wholesale revenue represents amounts receivable for goods
supplied, net of discounts, actual returns, returns provisions
and value added taxes all of our wholesale activities
Definition
Ecommerce revenue represents amounts receivable for
goods supplied, net of discounts, actual returns, returns
provisions and value added taxes from all of our websites
including third parties
STRATEGIC REPORTcorporate.superdry.com How We Manage Our Risks
We understand the need for an effective system of risk management.
To ensure processes identify and prioritise those risks of greatest
exposure to Superdry and the benefits of risk management can be
achieved, a number of activities have been undertaken in producing
a revised set of Principal Risks and Uncertainties (‘PRUs’)
To facilitate enhancements to the risk management
practices a review of governance arrangements
was carried out. This included changes to our Risk
Committee including the composition, agenda,
frequency and focus of risk reviews. A Risk Management
policy was developed and introduced to provide
clarity, consistency and an understanding of the
approach to revised risk management practices. These
enhancements were reviewed with and approved by
Superdry’s Executive team and Audit Committee in
October 2019.
risk landscape, given its current difficulties and
uncertainties. A review of other organisations, where
corporate governance practices are considered
strong and where lessons could be learned, was also
completed. In tandem with the research undertaken
in the previous activities, discussions with senior
management to understand the key areas of exposure
from their perspectives also took place.
42
The output of these activities culminated in a revised
set of PRUs, which was consolidated and further
prioritised, so that the ongoing assessment, through
quarterly reviews with senior management and Audit
Committee of risk, is focused on the most significant
risks faced by Superdry and also ensures that emerging
risks that could, for example, impact the Group’s ability
to continue as a going concern are assessed.
As well as considering existing PRUs, research into
the global risk landscape was undertaken to consider
the nature of risks being identified by organisations
in the one to five year term to ensure Superdry is
aware of the shorter and longer term exposures it
may face. Insight was also sought from research
into the wider retail sector and the associated
Risk Review Process
01
Existing/
emerging risks
• Top down risk Identification
02
Risk Committee
evaluation
• Deep dive into significant risks
03
Executive
Committee sign-off
• Monitoring Risks
• Global risk landscape
• Risk assessment
• Horizon scanning across the
• Review Risk Score
1–5 year time frame
•
Independent Risk Assessment
• Principal Risks and
Uncertainties
• Assessing Risk
04
Audit Committee
sign-off
• Review of Risk Committee
minutes
• Evaluation of Effectiveness
of Risk
• Management and Strategic Risk
Review
05
Board
sign-off
• Setting Risk Appetite
• Review and Sign-off
• Principal Risks and
Uncertainties
STRATEGIC REPORTSuperdry plc Annual Report 2020 Given the uncertainty, pace of change and wide ranging
impact of Covid-19, it is difficult to accurately model
the level of risk associated with the virus at the time
of writing, although it is highly likely the pandemic
will continue to adversely impact the Group in FY21.
It is clear that Covid-19 has impacted the risk profile
of the business including the nature and severity of
exposure faced and this is reflected in the individual
PRUs described below. It is also clear that Covid-19
represents an emerging risk as the impact of further
waves of the virus and the associated impact on our
business cannot be assessed with any certainty.
We have undertaken planning exercises that consider
different possible scenarios associated with further
waves of the virus, e.g. local store or town lockdown
through to regional, country and global level lockdowns
including the impact during different times of the
year. We have followed local government advice in the
countries we operate in and this led to the closure of
all our stores during the final quarter of FY20. While
our stores have reopened, there remains a risk of
further government lockdowns, which could impact
non-essential stores like ours and would be especially
impactful during peak trading, e.g. the Christmas period,
as well as presenting significant supply chain risk. Lost
store revenues may be partially offset by increased
Ecommerce channel revenues, but it is unlikely to fully
compensate and we may see an accelerated shift away
from retail as a result of the virus impacting consumer
habits and preferences. We will continue to monitor
the health and safety of our colleagues as a priority and
this includes independent auditing of our factory base.
Additionally, Covid-19 has increased the probability of
a sustained economic recession, which would have a
significant and adverse impact on Superdry.
Coronavirus
The impact that Covid-19 has had on the FY21 outlook
has been covered in the Chief Financial Officer’s
Review on page 32 and the impact on the wider
business to date can be found on page 06 as part of
the Covid-19 Statement.
Given the significance of Covid-19 related risks and the
associated impact they have had and could have on
the Group, we have developed and continue to develop
measures designed to try and reduce their impact.
To oversee the response to the virus, we assembled
a Covid-19 Incident Management Team (‘IMT’)
formed of members of the Group’s Executive team.
Given the scale and speed of the impact Covid-19
has had on Superdry, the IMT initially met daily
and needed to operate flexibly across multiple
aspects associated with the response to the crisis.
Specifically, it has been responsible for: crisis and
emergency management, Incident management and
Business Continuity management. The objectives of
the IMT have been to protect the safety of colleagues
and customers and effectively carry out the
responsibilities above.
The IMT considers the impact Covid-19 is having or
could have on the Group, and challenges itself and
/or engages the relevant Executive colleague, the
wider Executive as a group, the Board or other critical
parties about the optimal preparation, response or
decision being made.
Initial crisis management activity focused on our
supply chain in China, given the impact on factory
capacity, shipping from and travel to the region in the
period after Chinese New Year.
However, it quickly became apparent that the impact
of the virus would have much wider implications,
with uncertainty remaining over customer sentiment
and behaviours over the longer term. Throughout the
crisis, the welfare of our colleagues and customers
has and will always be our top priority. In addition, we
have sought to protect our cash position through a
number of initiatives, including utilising government
support where available.
43
STRATEGIC REPORTcorporate.superdry.com How We Manage Our Risks
CONTINUED
Risk
Risk Category: Brand
Damage may occur to the Superdry
Brand or the Brand may lose its
resonance.
Mitigation
The deterioration of the Superdry Brand is a ‘risk theme’ that underpins many of the principal
risks and uncertainties identified by management – both in terms of cause and effect.
For example: diminishing brand health caused by the failure to meet consumer needs, poor
quality or counterfeit product and loss of/unauthorised access to customer data.
Associated effects include customer perception, investor sentiment, recruitment and retention of
colleagues, revenue and margin detriment (across all channels) and financial penalties. As such,
brand is identified as a significant risk that impacts multiple areas.
44
Specific mitigating activities are considered within individual risk areas below.
Change in
Risk 2020
Movement in the year
While significant progress has been
made to implement the foundations to
deliver the brand reset for AW20, brand
risk remains at a similar level to prior
year on the basis that it will take time to
rebuild and optimise the brand.
Risk Category: Operational
Design and Product: Superdry’s
ability to achieve success depends on
setting a commercial product strategy
that is aligned to brand position,
market dynamics and consumer
aspiration.
A poor product strategy will prevent
us addressing consumer needs and
trends leading to a product range
that is insufficiently differentiated or
unattractive to target consumers, as
seen over the last couple of years.
Risk Category: Operational
Significant business interruption:
Compromise to our key technological/
physical assets would significantly
impede our ability to trade, particularly
during the peak trading period from
November to January.
Key assets include:
i. Ecommerce platform
ii. Distribution Centres
iii. Critical IT
iv. Head Office
v. Large stores
Product strategy: The Creative Director has combined 3 functions (Design / Brand Business
Management/Marketing) under a ‘creative centre’ umbrella which enables a strong brand
approach versus a retail approach, and thus creating a brand that can be positioned to target
specific consumer segments.
Design: Heads of function continually review the design, selection and performance of product
ranges. The Creative Director and senior management (Design, BBM and Merchandising)
regularly review product range trends to assess and correct any key selection or product issues.
An insight driven AW20 range is based on 9 consumer segments and 4 style choices. Increased
investment is now taking place at an earlier stage so we can understand how to prioritise in each
of the consumer segments and style choices and drive towards where the largest opportunity
exists.
Recent development of Business Continuity tools and measures to improve capability in the
event of significant interruption:
For example, understanding where the Group is most exposed to interruption, the formation
of an Incident Management Team (IMT) with relevant, cross departmental representation and
formation of Incident Management Plan that has been communicated to stakeholders.
In October 2019, the IMT undertook its first desktop training exercise responding to a scenario
where the Head Office had fallen victim to a significant fire on the morning of Black Friday. These
tools and measures have been utilised to respond to the Covid-19 crisis.
Resilience is provided to our Ecommerce platform through Amazon Web Services (AWS) which
also enables performance testing of peak load and hourly maximum visitors. We have also
implemented 24/7 monitoring of key interfaces, user experience and support team availability.
Through operating a series of multi-channel Distribution Centres capable of serving all channels
in a specific geographic region, with a common operating system, we have built-in resilience
in the event of the failure of a single Distribution Centre. We continue to develop our upstream
inventory holding capability which allows inventory to be held closer to origin, allowing for more
flexible allocation to serve individual geographical markets.
Progress has been made during the year
to align the wider business to the product
strategy that was approved during FY20,
including changes to store layout and our
websites to showcase our style choices.
Improvements in photography and social
media representation is driving improved
perception.
However, the ability to drive success as
a result of our new product is subject to
the retail and wider economic climate we
are operating in and as such, we believe
the risk has remained at a similar level to
last year.
The risk has various components across
different asset types, which are often
interlinked. However, the development,
communication and deployment of
scalable and adaptable business
continuity measures has provided
assurance that the Group can effectively
respond to significant business
interruption incidents.
However, while we have demonstrated
an ability to respond to significant
business disruption, not least in
response to the Covid-19 crisis,
further waves of the virus represent an
increased risk from last year in terms of
our ability to trade without interruption.
Key
No change
Increased risk
Decreased risk
STRATEGIC REPORTSuperdry plc Annual Report 2020 Risk
Risk Category: Operational
Stock levels: Elevated stock levels
represent a risk in terms of shortfall
in cash flow and additional storage
costs.
Trading volatility may create an excess
of stock to clear that may be brand
damaging if continued discounting
and third party clearance operators
are regularly used.
Mitigation
Since January 2020, we have introduced fortnightly meetings with a sub-set of the Executive to
determine buy levels for each channel per season. This is designed to ensure that buying decisions
reflect the need to meet changing stock levels across the estate. We have also sought to increase the
visibility of stock reporting, where it is a standing agenda item at Executive Committee and regularly
communicated to Board.
Movement in the year
Significant reduction in year-on-year
stock levels from c.19m units to c.17.3m
units. The significant increase in stock
provision in the year is largely related to
uncertainty caused by Covid-19.
We have contracted with a clearance partner to assist in further reducing stock levels and developed
an essential collection of products (Minimum Credible Offer) that each store should stock and reduce
supplier minimum order quantities, enabling us to buy the right volume of product and capitalise on
popular items.
Progress has been made in securing
a clearance partner and enhancing
governance processes associated with
season buys.
Change in
Risk 2020
45
Performance across our global, omni-channel proposition represents a risk. Specifically:
Risk Category: Operational
Retail store performance represents a
risk and in line with market trends, the
ongoing consumer preference shift
towards digital shopping channels
has seen declining consumer visits
to stores and declining profitability
in the physical retail environment.
It is anticipated that Covid-19 will
accelerate the shift towards digital
shopping channels.
Store profitability has been a focus during FY20 with the objective to reduce the number of loss
making stores by 50% and implement a new strategy that is consistent with our future view of the
high street.
Underperforming stores were targeted with a view to implementing a corrective action plan that
can include both cost reduction and revenue improvement.
Significant rental savings of c.40%, have been achieved where lease events have been due, with
a target to achieve this across the whole estate.
A retail restructuring exercise was undertaken in June 2020, delivering cost savings of c.20%.
We have achieved gross margin improvement from reduced promotional activity and increased
sales opportunities, by introducing more stock with a wider range through the estate.
Risk Category: Operational
Wholesale performance is at risk from
a number of factors, including brand
perception, grey market distribution
(where products are manufactured by
Superdry but are sold outside of our
approved distribution channels), an
inability to deliver on time and in full
to customers.
To reduce grey market distribution, we carry out customer due diligence and conduct investigatory
measures where appropriate. The integration of RFID has also served to reduce grey market risk, by
being able to identify the origin of the stock.
Critical path management is in operation to ensure we deliver on time and in full to customers.
Reviews of the customer order book are carried out before committing to stock purchasing,
reducing the risk of overstocking.
As such, we believe the risk to the
business has decreased during the year.
The foundations are now in place to
deliver the wider Group initiatives and
long term store initiatives, e.g. more
fixtures to stores, improved option
count, Fulfil From Store trial and RFID
(Radio Frequency Identification) roll-out
continues.
However, we believe the risk to the
business has increased especially
if further government lockdowns
are imposed due to further waves of
Covid-19, which could impact non-
essential stores like ours.
The focus on full price trading in ‘own
retail’ is improving brand perception and
we have seen the AW20 range received
very positively by our Wholesale
customers.
However, the probability of the risk
materialising remains significant due to
the impact Covid-19 is having on timely
deliveries to our customers and potential
for debt. Additionally, if a second wave of
the virus materialises, franchisees would
have to close. As such, the risk has
increased since last year.
STRATEGIC REPORTcorporate.superdry.com How We Manage Our Risks
CONTINUED
Risk
Risk Category: Operational/
Technology
Mitigation
Investment in Ecommerce has been a focus for the business and in FY20 that has been about getting
the basics right, full price proposition and a re-architect of the site to enable growth opportunities.
Movement in the year
Delivery of the first phase of the
Ecommerce roadmap.
Change in
Risk 2020
46
Ecommerce performance represents
a significant growth opportunity;
however, it also represents a risk in
terms of delivery of short, medium,
and long term business objectives.
We will be unable to achieve these
objectives if the consumer is moving
faster than we can adapt and our
Ecommerce platforms are perceived
to be behind competitor propositions.
Consumers are drawn to Ecommerce
platforms that make the experience
of browsing, shopping, discovering
and ultimately purchasing, engaging,
efficient and cost-effective.
Risk Category: Strategy/
Operational
Failure to deliver on our growth
aspirations in the Group’s key future
development markets, in particular,
China and USA, could lead to
investment without sufficient return in
a reasonable timeframe and/or losses,
and the deployment of significant
management resource at a time when
we have multiple priorities.
A robust roadmap which is broken down in line with the Customer journey: Attract, Engage, Convert
& Retain is in delivery, and every element of the Roadmap is designed to give best in class customer
functionality.
Investment in the Ecommerce teams to
support ongoing developments.
Greater visual impact across sites
with home pages being refreshed
more regularly and enhanced product
photography.
As such, we believe the risk to have
remained constant during the year.
In the US, we have exited loss making wholesale contracts, rationalised our staffing structure,
re-geared some of our leases and streamlined our DC arrangements, so we can fulfil all selling
channels from a single location.
In China, we have taken the decision to exit existing operations, retaining the full rights to future
trading when the Board believes it to be the right time to do so.
Despite losses continuing in both the
USA and China in the year, a number
of specific actions, including exiting
existing operations in China, will prevent
these recurring in the next year.
As such, we believe the risk to the
business has decreased during the year.
Key
No change
Increased risk
Decreased risk
STRATEGIC REPORTSuperdry plc Annual Report 2020 Risk
Risk Category: Finance
Exchange rates and debt
Our financial results could be
impacted by changes in exchange
rates.
The majority of our stock purchases,
are made using foreign currency
(US$ or €) and therefore our costs
are exposed to foreign exchange
movements. This is partially offset by
a proportion of sales receipts being in
foreign currencies.
Almost 40% of Group revenue is
from our wholesale channel, made
up of over two thousand individual
accounts. The risk of one or more of
these accounts being unable to pay
debt represents a bad debt risk.
Risk Category: Talent
Recruit, develop and retain quality
leaders, including key man risk
We need to recruit, develop and
retain the calibre of leadership that
will enable us to achieve our strategic
goals. Failure to do so could limit our
opportunities for growth and increase
costs of recruitment and retention.
The General Meeting on 2 April 2019
saw Julian return to the business as
interim CEO with the appointment
being made on a permanent basis in
October 2019. Julian is core to the
operation of the business and his
death, disability or absence could
have a significant adverse impact to
the business.
Mitigation
The Group’s operations are geographically diversified, introducing a partial natural currency
hedge. However, we maintain constant management oversight, including Audit Committee review
and a Treasury Committee, which consider foreign exchange exposure and opportunities and use
forward foreign exchange contracts to provide planning certainty in the major currencies in which
we trade.
We investigate the financial health of our wholesale partners and utilise mitigating measures
such as deposits and credit insurance. We also have processes to service debt and deploy credit
control resources to recoup monies owed.
During FY20, we have also undertaken a review of controls that operate within key financial and
non-financial systems to provide assurance over our internal control framework.
Following the resignation of the Executive and Non-Executive members of the Board in April
2019, we have successfully appointed a new Board in FY20 as well as having a fully resourced
Executive team.
Nomination and Remuneration Committees exist to assist the Board in ensuring that the Board
and Executive Committee retain an appropriate structure, size and balance of skills to support
Superdry’s strategic objectives and values.
We adopt a progressive approach to talent management, developing leaders of the future and
promoting from within the business wherever possible. We also utilise a consistent performance
review programme to assess the calibre of individuals and provide development plans.
Succession plans have been developed in the year to ensure the business has leadership and
decision making ability in the short term if something untoward happened to Julian.
Since 2 April 2019, there have been significant changes to the composition of the Executive
and the Board, with recruitment nearing completion. This will ensure that there is alignment to
strategic direction, an understanding of the brand and key operating principles.
Change in
Risk 2020
47
Movement in the year
The Treasury policy has been updated
during the year and approved by the Audit
Committee, reflecting the strengthening of
Treasury controls and reporting. Forward
foreign exchange contracts have also been
entered into where appropriate to do so.
An updated credit policy was adopted in
the year, improving controls on account
creation and debt management. The
significant increase in bad debt provision
in the year is largely a result of uncertainty
caused by Covid-19.
As such, we believe the risk to the business
has remained constant during the year,
with enhanced controls associated with
foreign exchange increase in the bad debt
provision being offset by an increased
risk of future wholesale debt, largely
attributable to Covid-19.
While there was an inevitable churn of
staff in the aftermath of the change in
leadership of the Group, we have a fully
resourced Executive and Non-Executive
management team since January 2020.
The change in management of the
business has led to a change in the
strategy of the brand. It is recognised
that development of the new strategy is
not yet finalised, but significant work has
been undertaken to ensure the business
is design led and returning to the quality
of product that the brand became
famous for. A focus on key operating
principles will also support the Group’s
ability to maximise growth opportunities.
As such, we believe the risk to have
remained constant in the year as we
continue to develop the new strategy
with the talent we now have in place.
STRATEGIC REPORTcorporate.superdry.com How We Manage Our Risks
CONTINUED
Mitigation
We continue to enhance controls associated with the National Cyber Security Centre’s guidance,
including: managing user privileges, incident management, monitoring, home and mobile
working, secure configuration, removable media controls, malware prevention, user education
and awareness and network security.
We have enhanced our capability in the period by investing in dedicated IT Security resource to
implement a roadmap associated with an external, independent review of our cyber capability and
maturity assessment.
A key part of this has been to introduce training and proactive communication that is
disseminated to the wider business with a focus on areas that represent risk areas to Superdry,
as part of a 12-month Information Security awareness programme. We have also conducted a
number of phishing exercises to test the extent to which staff click onto potentially malicious
links/emails etc. with subsequent lessons learnt exercises and communications.
Superdry holds limited special category (e.g. race, religion, genetics, health, etc.) personal
data, encrypts payment card information, but carries out large-scale processing and systematic
monitoring of customers (in the form of online behaviour tracking/profiling).
We continue to embed controls associated with data privacy. The aim is to both reduce the
likelihood to a breach and implement a leading process for issue mitigation and management.
For example: our Data privacy steering group meets regularly and focuses on both the proactive
and reactive components of effective GDPR management. The steering group demonstrates
Superdry’s commitment to a culture of compliance and governs the management of data privacy
risks including monitoring performance of data protection activities, updating data inventories,
making decisions or escalations and monitoring the changing external threat landscape.
Change in
Risk 2020
Movement in the year
While the risk surrounding information
security continues to develop, actions
taken in the year have enhanced our
understanding of the risk profile and
investments in people and systems have
aimed to protect us to within our risk
appetite.
The implementation of the Data privacy
steering group has provided a level of
assurance over our exposure to a breach
of data privacy.
Although there have been improvements
in the year noted above, given
the changing external landscape
(particularly as a result of Covid-19),
we believe the risk to the business has
increased during the year.
48
Risk
Risk Category: Compliance/
Technology
Information security and threat of
data privacy breach
There is a risk our information security
is breached causing data and/or
systems compromise. This could
impact our ability to trade, lead to
regulatory scrutiny and fines and
cause damage to the brand. The
cyber threat landscape has seen an
increase in organised crime groups
using Covid-19 to carry out targeted
campaigns against a number of
organisations.
Unauthorised disclosure or use of
personal data could lead to financial
loss to the customer, have a negative
impact on the Group’s reputation
and may lead to regulatory censure,
restrictions or fines. The penalty for
failing to demonstrate compliance
with GDPR can lead to fines of up to
€20m or 4% of Group turnover. GDPR
brings with it the requirement for full
accountability of data controllers
managing and processing data with
data subjects having increased rights
over how their data is processed by
organisations.
Key
No change
Increased risk
Decreased risk
STRATEGIC REPORTSuperdry plc Annual Report 2020 Mitigation
Superdry is a global business with corporate and operational capability both in the UK and
mainland Europe, which provides some natural resilience compared to a solely UK based
company.
We operate a cross-functional working group which is implementing plans for Brexit covering all
possible outcomes – be it departure from the EU in December 2020 with or without a full deal in
place.
Contingency/mitigation plans exist for all impacted areas. For example, the Economic Operator
Registration and Identification (EORI) Licence is in place to enable us to operate in specific EU
countries in the event of leaving the EU.
Wholesale fulfilment will continue to be managed from Belgium. However, the wholesale returns
process has been amended so that returns will be managed in the UK post Brexit, thus reducing
cross border movement of stock.
Our HR and Line Managers have met with affected EU national staff to discuss the implications
that Brexit could have for them and the required steps to take, e.g. application for EU Settlement
scheme.
We have also sought to ensure our key stakeholders (e.g. wholesale partners) are aware of our
plans for Brexit by creating FAQs and setting up dedicated communication streams to respond to
queries.
Change in
Risk 2020
49
Movement in the year
While we are unable to influence the
type of Brexit we will see, we have more
clarity over the nature and timing of
the impact. Our work in FY20 has been
designed to reduce the impact it has on
the business.
While we believe we have the right team
in place, given the impact of Covid-19
and the ongoing focus on the response
to the crisis, coupled with the potential
for government not to seek an extension
to the transition period, we believe there
is an increased risk since last year in
terms of implementing the necessary
measures on a timely basis.
Risk
Risk Category: Compliance
Brexit
Brexit introduces significant risks to
our business. For example, reduction
in consumer spending, delays on
goods crossing borders, increased
direct and indirect costs, and shortage
in labour especially in distribution
centres. The UK has now passed an
EU withdrawal agreement bill and
legally exited the EU on 31 January
2020. At this stage, we are working on
the assumption that we will continue
to be in the transition period until
December 2020.
Covid-19 has delayed the timing of
a potential UK-EU trade deal (now
expected to be end of September
2020). An orderly exit with defined
time frames, following the end of
the transitional period would allow
the business to implement changes
required more effectively. However,
there remains uncertainty in terms
of the extent of change required – a
‘no deal’ scenario would have a more
significant impact.
STRATEGIC REPORTcorporate.superdry.com How We Manage Our Risks
CONTINUED
Mitigation
The Group is cash positive and generative, and has sufficient liquidity having recently refinanced
and extended its borrowing capacity through a £70m asset based lending facility expiring January
2023, together with flexibility to manage outflows to protect its ability to meet liabilities, including
reducing capital investment and capital returns in the form of dividends.
Covid-19 has meant that our requirements for future buys for stock has reduced as we do not
expect to sell as much stock versus previous projections. Additionally, given that a number of
brands and retailers have also reduced their orders for Autumn / Winter buys, this has allowed us
to negotiate our position more effectively with our suppliers through improved credit terms.
Introduction of a more detailed cash flow forecast, to enable daily updates of the cash position
and our resulting expectation of cash balances.
Significant liquidity is provided by the Group’s bank funding with the Board monitoring headroom
between forecast cash positions and facilities, which have been modelled under multiple stress
test scenarios as a consequence of the material uncertainty around going concern.
Change in
Risk 2020
Movement in the year
The Group has maintained healthy cash
balances, despite the significant impact
of Covid-19.
New, enlarged and extended facilities
provide the Group with additional
funding and headroom.
Despite these positive actions, the
volatility created by Covid-19 means the
risk has increased during the year.
50
Risk
Risk Category: Finance
Cash management
Given the cyclical nature of the Group’s
revenue and expenditure, there are
points within the year when there
are significant outflows of cash, e.g.
payments in September for Black
Friday and Christmas stock and
dividend payments – the timing of
which can change. Significant cash
inflows, e.g. peak trading, do not align
with the timing of the peak outflows of
cash. As such, there is a requirement
to manage working capital within the
business to ensure we have sufficient
cash at all times to meet our payment
obligations, receive stock on time
and therefore fulfil orders and ensure
compliance with our borrowing
obligations. This is also important in
terms of maintaining relationships with
suppliers and therefore protecting our
payment terms.
Historically, the Group has had
significant cash reserves. However,
with recent trading, Covid-19 and the
prospect of a no deal Brexit, pressure
on the cash balance has increased
resulting in the need for closer cash
management.
Key
No change
Increased risk
Decreased risk
STRATEGIC REPORTSuperdry plc Annual Report 2020 Non-Financial Information Statement
The table below shows where information can be found in relation to the requirements of Companies Act 2006
section 414CA and 414CB, including information on policies and policy outcomes (where applicable):
Reporting Requirement
Review of the business
Annual Report Section(s)
Pages 28 to 39
Principal risks and uncertainties
Pages 42 to 50
The main trends and factors likely
to affect the future development,
performance
and position of the business
Business Model
Environmental matters, including
the impact of the business on the
environment
Social and Community matters
Employees
Strategic Report
Pages 07 to 23
Pages 52 to 66
Pages 52 to 66
Page 24 to 27
Pages 52 to 66
Respect for Human Rights
Pages 26, 52 to 66
Anti-Bribery and Corruption
Pages 107
Culture
Non-Financial Key
Performance Indicators
Page 10
Pages 52 to 66
Page 40
Page 55
This report was approved by the Board of Directors of Superdry plc on 20 September 2020 and signed on its
behalf by:
JULIAN DUNKERTON
Chief Executive Officer
20 September 2020
NICK GRESHAM
Chief Financial Officer
20 September 2020
51
STRATEGIC REPORTcorporate.superdry.com Sustainability and People
“ As a responsible, sustainable and
ethical business, I am proud of the
progress we have made in FY20 to
embed sustainability at the heart
of our culture and brand DNA. Even
during these challenging times due
to the global impact of Covid-19,
we believe that it is crucial to
challenge ourselves and continue
to work in partnership with our
suppliers, recognising that they
are fundamental to delivering our
sustainability ambitions.”
We will continue our journey to use the most
sustainable production processes and materials
available when making our garments, to limit our
impact on the planet. Nineteen per cent of the cotton
we use has already been converted to the gold
standard of organic cotton, significantly exceeding
our 2020 target of 13%. 100% of our owned stores
and offices have also been converted to renewable
electricity. These successes have enabled us to
radically reduce our timeframe to achieve our Super
Responsible Goals for Product, People and Planet by
10 years, to 2030. This reflects the dedication of our
Sustainability and Ethical teams and the commitment
from all of our colleagues and wider supply chain
partners to support the delivery of our sustainability
strategy, as described below.
Working closely with our Creative Centre, our aim
is to drive positive change across our industry and
move the conversation towards a future of sustainable
fashion.
SHAUN PACKE
Sourcing and Sustainability Director
52
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SHAUN PACKE
Sourcing and Sustainability
Director
CARLY THOMAS
Head of
Sustainability
This section provides:
1 Progress we have made so far
against each Sustainability Goal
2
Update on wider Sustainability activities
to make the best product sustainably,
to protect our planet and support our
people.
Superdry plc Annual Report 2020
Accelerating our Goals
In 2017 we announced three challenging
Sustainability goals: our SuperResponsible40.
These goals focused on producing the best
product sustainably, while protecting our planet
and supporting our people.
In 2019 we exceeded initial targets and in 2020 we updated and accelerated
these goals with full support and commitment from our CEO and Board.
• All cotton will be Organic by 2030.
•
•
•
•
100% renewable electricity used across our own business by 2020.
100% renewable electricity used by our key suppliers by 2030.
100% packaging to be reusable, recyclable or compostable by 2025.
We will continue to empower, inspire and engage young and vulnerable
people across our communities globally.
Accelerating our goals is the right thing to do – it means our commitments
align with the United Nations Sustainable Development Goals (SDGs)
deadline for 2030 – building our accountability as global citizens to deliver
against more challenging targets.
Our sustainability goals are future facing. We continue to run core ethical and
environmental programmes to ensure we meet our corporate responsibilities
in our business operations and supply chains. This section covers progress
made in both Sustainability and Corporate Responsibility.
SUPER
RESPONSIBLE
30
53
PRODUCT
100% organic cotton
used in Superdry
garments by 2030
PLANET
100% renewable
electricity in ours and
our main direct suppliers’
businesses by 2030
PEOPLE
We will continue to
empower, inspire and
engage young and
vulnerable people across
our communities globally
STRATEGIC REPORTcorporate.superdry.com
Sustainability: Amplifying our Impact
To achieve acceleration,
we have:
Central Sustainability Approach
54
01
Centralised our Sustainability team
to deliver our Sustainability Strategy
across our business.
02
Built ownership using cross functional
‘Squads’ and ‘Sustainability Warriors’
to drive change whilst continuing to
engage and activate our colleagues.
03
Embedded and delivered our goals
with our suppliers through our regional
offices across the world.
By changing the way we work, we have
embedded our environmental legacy at
the heart of our products and operations
– amplifying our impact.
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SUSTAINABILITY WARRIORS
Global Sustainability Team
This year we restructured into one central
sustainability team – led by our Director of Sourcing
and Sustainability – enabling us to drive Group Ethical
Trading priorities, Environmental Management and
Sustainable Materials targets.
Sustainability Warriors
In March 2020, we ran a recruitment campaign for
Retail Sustainability Warriors. These are a group of 19
Superdry retail colleagues from across the globe who
were handpicked based on their active enthusiasm for
sustainability actions – and they join existing Warriors
operating across functions in Head Office and within
our Regional Teams.
The Warriors will be our voice for sustainability, acting
to reduce our impact, scope out future possibilities
and to encourage change through the Group.
Squads
Our sustainability goals have measurable and
achievable milestones which are delivered by focused
Squads. Each Squad consists of core representatives
from the critical functions with skills needed to deliver
our goals globally. We have one Squad for each
priority area – Product, Planet, and People.
Squads often reach out and form focused groups
outside of the Superdry family – including other
retailers, industry associations and subject specialists
to share and develop best practice on key initiatives
and further amplify their impact.
STRATEGIC REPORTSuperdry plc Annual Report 2020
Sustainability: Our Targets
As a business we use the Sustainable Development Goals (SDGs) to track
our impacts and prioritise focus by source country.
We have prioritised four out of the 17 SDGs, as these goals represent where we can maximise our impact as a
brand. We continuously monitor our impacts as applicable across the remaining thirteen SDGs.
Target: 100% Renewable
Electricity in owned &
controlled operations by 2020.
Results – FY20: 100%
Progress: Complete
Target: 100% Renewable
Electricity in all Global
Distribution Partners by 2030.
Results – FY20: 25%
Progress: On Track
Target: 100% Renewable
Electricity in all key Franchise
Partners by 2030.
Results – FY20: N/A
Progress: Commencing 2022.
Target: 100% Renewable
Electricity in all key Suppliers*
by 2030 – % factories utilising
Renewable Electricity.
Results – FY20: 18%
Progress: On Track
55
Target: 35% efficiency
improvement in electricity used in
own estate by 2020 (against 2014
baseline).
Results – FY20: 38%
Progress: Complete
Target: 100% packaging to
be reusable, recyclable or
compostable by 2025
Results – FY20: 91%
Progress: On Track
Target: All plastic packaging used
contains a minimum of 70% recycled
content by 2025 – % recycled content
across all plastic packaging.
Results – FY20: 30%
Progress: On Track
Target: 100% Organic cotton
by 2030.
Results – FY20: 19%
Progress: On Track
Target: 100% Volume produced
in Tier 1 and Tier 2 Ancillary
process factories subject to
ethical approval and monitoring
processes.
Results – FY20: 100%
Progress: Maintain
Target: 100% nominated/preferred
Trims sources subject to ethical
approval and monitoring processes by
2025.
Results – FY20: 20%
Progress: On Track
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Target: 60% female workers in our India supply
base given training and ongoing support on rights
and empowerment†
Results – FY20: 51%
Progress: Focus to achieve in FY21
Target: NEW Equal access to training for Men and
Women included in Organic/Transitional Farmer
Agronomic training by 2025.
Results – FY20: 10%
Progress: Maintain
* Key suppliers defined as Top 20 which supply 68% of Superdry product volume utilising 38 factories.
† Training activity held in FY20 to review sustainability of systems established in factory.
STRATEGIC REPORTcorporate.superdry.com Progress Report: Product
56
Organic cotton roll-out plan
100
80
60
40
20
0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
New Target
Achieved
At Superdry, our continued
ambition is to innovate using
more sustainable materials in our
products – starting with cotton.
All cotton we use will be organic
cotton by 2030.
Organic cotton
Cotton remains our largest single raw material,
representing 53% of the total volume of raw materials
we buy annually.
Our focus on converting all Cotton to Organic follows
extensive research and consultation with the cotton
sector. Organic is the best possible virgin cotton –
growing organic uses between 60 and 90% less water
compared to conventional cotton – it also benefits soil
quality, farmer health and enables farmers to charge a
premium to the market.
This year we accelerated our annual targets to
ensure we meet our 2030 goal; we also committed
to switching a minimum of one category to organic
cotton per year between 2020 and 2030 in order to
ensure we reach these targets.
A clear roll-out plan, and cross functional support
through our Product Squad, means we have exceeded
our accelerated target of 13% in FY20 – reaching 19%
by converting all Underwear, Socks, Orange Label T
Shirts, Polos and Sleepwear.
Having converted almost a fifth of our cotton volume
to date, we are entering the next phase of our roll-out
and plan to continue in our approach in overachieving
against our annual targets to 2030.
Superdry demand for organic cotton is growing year-on-
year. According to Textile Exchange’s Organic Cotton
Market Report (2019), organic cotton continues to
represent less than 1% of global cotton production.
To make our goal sustainable we committed to tackling
supply issues at the bottom of the chain. Since joining
the Organic Cotton Accelerator (‘OCA’) in 2018 we have
been collaborating with other brands, retailers and
supply chain actors in addressing sector-wide challenges
to bring integrity, supply security and measurable social
impact to our organic supply chains.
Traceable and Sustainable Alternative
Materials
This year we have piloted sustainable alternative
materials in our products – from using recycled
polyester fill in our jackets to Tencel and Linen blends
in our apparel. We will continue to drive the use of
sustainable alternatives materials in our products
through FY21 – particularly where we identify
opportunities in tracing our impact on people and
planet through the supply chain.
Recycled Fill
This year, we used recycled fill in all SS20 mainline
padded jackets and outerwear on a trial basis. We
made no product based claim to our consumer to
enable us to test the supply chain and to ensure
impact. Our test indicated that on average, 10 plastic
bottles are utilised per Superdry Padded Jacket, with
a maximum opportunity of 30 million plastic bottles
diverted from landfill upon conversion of the full range.
These jackets utilised bottles traced back to household
recycling plants located in Jiangsu province in China
which is located nearby to our factories piloting this
product. We plan to continue with this programme
going forward while continuing to review impact on our
business, product, supply chain and planet.
Tencel
Featuring in key styles across our AW19 and SS20
Women’s collection, Tencel is biodegradable and
grown sustainability with enhanced traceability
through the supply chain.
Linen
Biodegradable and recyclable, linen uses 60% less
water than cotton to grow and needs fewer pesticides.
We have used linen in tops and shirting options across
our Men’s and Women’s collections in AW19 and SS20
– offering consumers additional benefits in linen’s
hypoallergenic and absorbent qualities.
Recycling supply chain waste
In January 2020, we trialled segregating cut fabric
waste and unusable second quality product from
key factories in Turkey, which was then picked up
by a fabric recycler and converted back into yarn,
processing 84.50 tonnes of 100% cotton cut waste
which was then blended into 114.80 tonnes of yarn.
This can be used to produce the equivalent of 120,000
Superdry sweatshirts. We are now working with our
product development team to look at how to close the
loop and utilise this in future Superdry production.
STRATEGIC REPORTSuperdry plc Annual Report 2020 Transitional
Farmers
57
‘Symbiofarm’
Madhya Pradesh, India
CASE STUDY
Superdry is working with 369 farmers
located in Khargone, Madhrya
Pradesh, India to help them through
the conversion process to organic.
These farmers grow cotton in addition
to other food crops and are looking
to achieve full organic status within
three years – by 2022.
To support their conversion process, we engaged a local
partner to build their knowledge of optimal organic farming
practices. This curriculum was overseen by bioRe India – a
leading foundation spearheading organic cotton research
and seed development. All farmers attended group and
individual training over a six month period. We also helped
them by directly funding an incremental premium per kilo
of transitional seed cotton produced.
All outcomes of this work will be measured by the Organic
Cotton Accelerator to ensure farmers have benefited in
their first year of training and support. We are expecting
the validation results later in the year.
corporate.superdry.com
STRATEGIC REPORT Progress Report: People
58
We know that our people, whether directly or
indirectly engaged by Superdry, are fundamental to
our success and it’s our people that provide the rich
heritage upon which Superdry’s success has been
founded.
Supporting and looking after our people means the
following:
• Providing a safe, healthy and unique culture for
our colleagues;
• Ensuring our suppliers have access to fair and
safe conditions that respect human rights and
adhere to our code of practice; and
• Supporting local communities, young people
and charities.
Our People
It’s our colleagues that are the heart of our Brand
and without people we know we would not be able
to achieve the things that we’re doing now and in
the future. FY20 has been a year of change and
throughout this challenging period, we’re proud that
we’ve stayed true to our core values launched in
2017. We know that continuing to put these values
at the front and centre of decisions helps us to build
a unique and strong culture, one that attracts and
retains the best talent in the industry. But above all,
a sense of unity and togetherness, passion, creativity
and individuality seem to resonate the most with all
colleagues across the globe and help to align us all
in building something amazing.
We’re a diverse business employing 4,638 colleagues
across 16 different countries. We rely heavily on our
online communications network, Workplace, to ensure
that no matter where our colleagues are, they feel
part of the Superdry family - informed, engaged and
motivated. Throughout the Coronavirus crisis, this has
mattered more than ever and, as such, we’ve ramped
up communications from Superdry to keep our teams
engaged, also seeing a huge spike in self-generated
content as colleagues globally have looked to use this
business networking tool to keep connected and stay
in touch with each other to share their stories.
The changes to the business and challenging
performance in 2018/2019 were reflected in our
annual colleague engagement survey, where we give
every single colleague a chance to feed back on what
it’s like to work at Superdry and what could be better.
We continue to see strong levels of engagement and
honesty from our teams, with over 90% of colleagues
responding, which is a great reflection of our culture.
Although engagement fell by 6ppts to 66% positive,
over two thirds of our global colleagues feel strongly
that Superdry is a Great Place to Work. We’ve used
this honest feedback to work with our leaders, and put
into place changes which we are confident will help
to continue to improve our culture and grow Superdry
into an even better place to work in the future.
As Superdry continues to look to reset the business,
we continue to need to attract talented individuals
across a range of job roles and levels in the business.
We take talent seriously, by having regular reviews
and touch points with individuals to provide feedback,
set goals and priorities, and review performance. In
FY20 we invested heavily in coaching, putting over
150 managers through our ‘Coaching for Growth’
programme, which focused on building a coaching
culture throughout the business, unlocking personal
growth and autonomy.
Looking forward we will be evolving and building our
talent pipeline and performance to ensure we get the
best from our talent. To do this, we are looking at ways
to simplify our talent processes and build in more
agility. One of the changes being implemented is the
removal of annual and half-year reviews and replacing
them with continuous development conversations
in order to support a more agile method of setting
priorities, given the rapid changes happening in
our industry. To support ongoing learning, we will
be investing in moving to a more ‘digitally based’
Learning Academy, ensuring that colleagues
everywhere have access to virtual content up to
and including leadership development. And we’re
transitioning all of our onboarding processes to be
digital, so that we can continue to set newly engaged
colleagues up for success.
STRATEGIC REPORTSuperdry plc Annual Report 2020 59
STRATEGIC REPORTcorporate.superdry.com Progress Report: People
CONTINUED
Gender split
1,800
1
60
Female
Male
Non Disclosed
2,538
Diversity
At Superdry diversity, fairness, inclusion and equality
are at the heart of what we do. Diversity comes
through time and time again as a key strength
with 85% of our team saying they are confident in
themselves at work, and 86% of colleagues feeding
back that they feel they are treated fairly, regardless
of their backgrounds
No matter what your background, everyone should
have the opportunity to grow, learn, develop and feel
fulfilled. We ensure that we are focused on providing
this to all of our colleagues. Our approach to gender,
diversity and equality are reflected in our Annual
Gender Pay Gap Report, which was published in April
2020 and can be found on our website.
The gender pay gap is calculated using the approach
defined by law and compares the difference in average
pay between men and women. Overall, the Group’s gap
is 22.6% and our retail business, C Retail has a gap of
3.5%. The difference in percentages is because in C
Retail, the majority of pay is fixed with a limited number
of job variation, whereas when you view the Group as
a whole, this then incorporates a variety of roles and
pay, ranging from a Sales Assistant to the CEO and in
turn increases the percentage. Whilst we aspire for
this gap to be zero, we are confident it is not driven by
inequality or unequal pay between men and women
and instead is driven by the fact that our most senior
roles are predominantly held by male employees. This
can be seen within the Section 172 statement on page
24 which demonstrates our % split between male and
female colleagues, across different job levels in our
Global business.
An Equality and Diversity Policy is in place, which sets
out our expectations of all colleagues.
In addition, our Raising a Concern policy
demonstrates the support available to all our
employees in raising concerns. We provide global
access to a whistleblowing line, Safecall, which means
that colleagues have the opportunity to speak out
anonymously if they believe issues need to be brought
to the attention of senior management - they are
always treated with the appropriate gravitas.
In FY20 we are especially proud to have committed to
two actions. Firstly the establishment of a global Senior
Women’s Leadership Forum, to help ensure Superdry
is on track with the enablement and empowerment
of not just women, but all individuals throughout the
organisation, with a specific focus on Family, given the
alignment with one of our core values. And secondly,
establishing the Superdry Voice. Two representative
bodies for our UK Head Office and Retail Colleagues,
launched in April 2020, to ensure colleagues views,
opinions and ideas are heard and reflected in Superdry’s
decisions and future strategy, which aligns to the
recommendations set out in the Corporate Governance
Reform Paper. Black Lives Matter has been a high profile
global campaign that has impacted many around the
world. Like many organisations, we have used this as an
opportunity to reflect on our approach to diversity and
inclusiveness with our employees and customers. We
have openly encouraged our colleagues to educate each
other and share their stories as well as to ask how we can
improve things. We want to ensure we have a sustainable
approach and plan, are not just simply reacting to the
moment, and so are now putting plans in place to drive
meaningful change within Superdry.
STRATEGIC REPORTSuperdry plc Annual Report 2020 61
Our Suppliers’ People
We work closely with suppliers, factories, local
experts, auditors and multi-stakeholder organisations
to ensure our suppliers’ people work in fair and safe
conditions that respect human rights. Our factories
(Tiers 1, 2 and 3) provide jobs to c. 125,000 people
globally – 56% are women, 44% are men.
Our Ethical Trading Code of Practice represents our
baseline requirements which work alongside local
laws to ensure a minimum standard of protection
is afforded to all people in our supply base in all
countries. Our Code of Practice aligns with the Ethical
Trading Initiative Base Code (‘ETI Basecode’) which
in turn is based on international standards including
the Universal Declaration of Human Rights and the
International Labour Organisation’s Core Conventions
on Labour Standards.
Following recommendations set out by the UN Guiding
Principles for Business and Human Rights, our ethical
trading programme aims to ensure:
1. Respect: We maintain accurate benchmark
information on factory conditions in line with our
Ethical Trading Code of Practices – whichever
affords the worker the greater protection.
2. Remedy: Where we find issues we support
factories to make improvements with the aim
of providing Decent Work and Economic
Growth (SDG 8) to all people operating in
our supply chain.
We have Superdry dedicated labour standard
experts operating in each key source region –
EMEA, India (including Sri Lanka) and the Far East.
Global oversight is provided from our Head Office
Sustainability team.
Directly reporting into the Director of Sourcing
and Sustainability, the Head Office team provides
benchmark data on factory ethical performance to
inform sourcing priorities.
Respect: maintaining an accurate
benchmark of Factory Conditions
We have employed dedicated ethical trading experts
covering all key source countries. Our teams work
closely with factories to secure transparent disclosure
with the aim of obtaining an accurate baseline view
of working conditions and agreeing relevant and
achievable action plans.
We regularly audit 100% of main production sites (Tier
1) and their subcontracted units (Tier 2) on a semi-
announced and unannounced basis in all territories.
In the last 12 months, we have extended our audit
processes to nominated or preferred trims and label
suppliers (Tier 3) in key source territories – fully
onboarding Turkish factories.
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Remedy: Access to local innovative
solutions to issues
While factories often share common issues, we
have found that sustainable solutions are often best
adopted when developed locally, in consultation with
local groups.
Our regional offices work closely with factories to
establish practical action plans, training, and capacity
building with management, supervisors and worker
committees. We prioritise bi-weekly or monthly training
and capacity building where factories demonstrate non
compliances which pose the greatest risk to worker
well-being – and closely monitor improvement in line
with agreed milestones. Where factories fail to engage
in this process and fail to meet the minimum required
standard within a defined time period, we implement a
phased exit plan.
We continue to prioritise Worker Voice in all key
factories and work to ensure these factories have
effective means to raise issues to management
collectively. This year we completed a full review
of our Gender Awareness programme (‘Respect’)
– aligning impacts alongside the UN Women’s
Empowerment Principles with a view to relaunching
to make learnings sustainable in factories which have
already completed the programme, and reviewing
extension possibilities globally.
Our communities
With a business that employs 70% of its workforce under
30, youth well-being and employment opportunities are
at the top of Superdry’s priorities to give back to local
environments.
Local Education
Through Superdry School Days, we have continued
to work with local schools to provide opportunities for
students to experience working for Superdry through
engagement in focus groups, job shadowing and
discussing career journeys with Superdry colleagues.
This year we have welcomed over 40 children into
our offices to show them about the world of work and
given them access to our colleagues.
We relaunched our ethical audit programme in FY20,
working closely with our global audit partner – Bureau
Veritas, and local audit partners – The Reassurance
Network (TRN) and Social Compliance Services Asia
Ltd (SCSA). Our relaunched programme is designed to:
1.
2.
Detect and respond to evolving risks in
regions: Extension of issue level risk assessment
and audit scope to include inherent risk
factors associated with Modern Slavery and
Environmental Sustainability. We have also
introduced a ‘severity vs. likelihood/scale of
impact’ framework to help accurately assess
issues as they emerge.
Prioritise transparency, accuracy and clarity in
results: Audit results are initially reviewed locally
by our regional team to ensure they are clear and
any action plans agreed with factories are relevant
and achievable. The flexibility to adapt using
multiple audit partners also drives accuracy and
transparency enabling us to switch partners and
then cross-check audit results over time.
Superdry’s in-house ethical experts work closely with
our external audit partners and factories to fulfil the
above objectives. We continuously monitor audit
quality by shadowing a minimum of 15% of third
party audits, and the process is further strengthened
using system control (repeated) audits completed
by dedicated external integrity auditors to ensure
consistent results.
Having Superdry ethical teams alongside preferred
audit partners allows us to respond to risks quickly
as they emerge, and is critical in negotiating and
facilitating transparent risk assessments with
factories by building partnerships locally.
Where we struggle to obtain transparency,
accuracy and clarity or where we seek feedback
on improvements made in factories – we may elect
to work with local community organisations, and
wider labour standards experts to complete offsite
interviews. This additional step often provides a
further depth of results and root causes.
In addition to ethical audits, we continue to review
policies and procedures to protect more vulnerable
groups of workers including migrants, contract
workers, Syrian refugees (Turkey) and homeworkers
on an annual basis. These are included in our Supplier
Manual and form a condition of doing business for our
suppliers.
STRATEGIC REPORTSuperdry plc Annual Report 2020 University partnership
We are in the fifth year of our partnership with the
University of Gloucestershire where we work closely
with undergraduates studying for degrees in Fashion,
Graphic Design and Photography setting projects,
providing work placements, judging final coursework
and providing materials and support to their
respective programmes. We have placed a number
of undergraduates within the business as part of the
requirements to complete their degree courses. In
addition to this, our design centre has also embarked
on creating a new partnership with Birmingham
University, providing lectures, personal tutorials and
judging the final year fashion show and working with
the London College of Fashion to provide student
teams with a course project centred around design
and range planning – with the winning team spending
two weeks with Superdry in Cheltenham.
Charitable activity
Our charity and community support programme
continues. This year we have continued our
partnership with the Prince’s Trust and their incredible
work. In 2019 we made a financial donation of
£200,000 to the Prince’s Trust and our retail stores
continue to work closely with the Prince’s Trust
foundation. Here are some of the highlights of this
year’s partnership:
Over 100 Store Managers joined us at the Prince’s
Trust Manchester centre in September 2019 to learn
about the ways they can support young people in their
store through fundraising and employability initiatives;
In February 2020 our teams walked 3.5 laps of the
world for the Future Steps challenge, raising £1,052 to
change the lives of young people;
After hearing that a local café run by Donna, a Prince’s
Trust Young Ambassador, had been broken into and
vandalised, employees self-funded £250 to help her
repair the damage;
Our stores raised £1,947 through our annual store
fundraising challenge;
We continued to work with the Trust on our
employability programmes and supported 44 young
people with their development as well as offering job
outcomes to 18 young people across the year;
Our annual IT Auction in aid of the Trust raised over
£13,323; and
Our colleagues at Head Office continue to freely
give up their time to support the charity Shout - a
fantastic charity powered by volunteers, that supports
individuals facing times of crises and is a place to go
for those who are struggling and need help.
In addition to this, our colleagues have continued
to engage and support a number of charities in the
local area. In order to maximise the breadth of our
charitable impact, we have continued to match funds
raised by our colleagues to benefit various valuable
causes across the globe. During the financial year
2020 we matched £3,395 of our colleague’s activities
in support of their chosen charitable causes.
Wellbeing
This year we’ve made large inroads into the support
of our colleagues’ mental health. We have done
this through the establishment of our Healthy Mind
Ambassador programme launched in 2019. We took
a team of 15 committed colleagues across Superdry
and gave them accredited mental health first aid
training to take up the roles of Superdry Healthy Mind
Ambassadors. We also upskilled the Shout volunteers
we have to join our Ambassador group, giving us a
total group of 30 employees passionate about driving
mental health initiatives across the business. These
roles are in place to raise the profile of mental health
issues at work, and enable us to provide personal
additional support to all colleagues through a network
of well-trained colleagues. Our fantastic ambassadors
are identifiable around the office by their unique blue
lanyards.
We continue to provide independent and local
support for every colleague globally through our
Employee Assistance Programmes, ensuring that
every colleague has the opportunity to access free
advice and face to face counselling where needed,
on subjects ranging from mental health through to
financial planning and support.
Modern Slavery Act (2015)
Our Modern Slavery programme incorporates the
principles of the California Transparency in Supply
Chains Act (2010) and the Modern Slavery Act (2015) by
working to prevent human trafficking and slave labour
within our business and across our supply chain.
We are now in our fourth reporting year and our
Modern Slavery statement will be published alongside
this report on our website.
Covid Impact:
Factory
Conditions
CASE STUDY
During the Covid pandemic we extended factory
re-audit timelines to respect local operating
requirements.
At the time of writing this report, our teams of dedicated ethical trading
experts continue to work with factories to track conditions remotely –
providing online training, and following up with interviews and systems
assessments covering health and wellbeing, in line with local requirements
and WHO Health and Safety guidelines.
Audit processes have been revised to account for additional Covid
requirements, with monitoring restarting as countries relax lockdown
measures.
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Superdry plc Annual Report 2020
We understand that using resources sustainably
minimises our impact on the natural environment and
very much constitutes the ‘right’ way to do business.
Our environmental focus spans our entire direct and
core indirect business operations.
100% Renewable Electricity
Superdry will be a 100% renewable electricity brand
by 2030 in order to maximise our contribution towards
SDG 7 and reduce our carbon emissions to support
SDG 13.
Superdry is committed to supporting the achievement
of ‘SDG 12 – Responsible Consumption and
Production’ in our approach to packaging and waste,
as well as ‘SDG 7 – Clean and Affordable Energy’
and ‘SDG 13 – Climate Action’ through reducing our
energy consumption and greenhouse gas emissions.
Packaging
In 2019, Superdry became a signatory to the Ellen
Macarthur Foundation’s ‘New Plastics Economy’
charter aimed at championing ‘Elimination’,
‘Innovation’ and ‘Circulation’ to ensure plastics never
become waste or pollution. By 2025 we will:
1. Only use packaging where necessary, with 100%
of the packaging we must use being reusable,
recyclable or compostable; and
2. Move from single use to reuse models where
possible, supporting a closed loop economy
whereby all our plastic packaging contains a
minimum of 70% recycled content.
In FY20, we successfully introduced:
1. A 6% lighter, 100% ‘FSC Recycled’ paper carrier
bag. This new bag is fully recyclable due to an
innovative knitted paper handle;
2. A 17% lighter Ecommerce bag utilising 50%
recycled plastic;
3. Craft card packaging to replace plastic boxes
used for packaging underwear, loungewear,
socks, belts, and flip-flops;
4. 100% recycled plastic swimwear hangers; and
5. 100% Recycled Polyester Care Labels.
We will continue to work towards our 2025 goal
prioritising Reduce, Reuse, and Recycle.
Faulty Garments
We continue to donate unsellable product to our
partners Newlife, the Charity for Disabled Children.
Our garments are de-branded and sold by Newlife,
contributing £561,033 to the charity this year.
This approach eliminates any need for landfill and
extends the life of these garments – making maximum
use of the embedded energy and water consumed
during the manufacturing process.
We will bring a positive shift towards renewable
energy use and therefore zero carbon emissions,
globally, by switching electricity sources across both
our own and our key value chain partners.
1. All Superdry global stores and offices (248 stores
and 31 offices and showrooms) switched by 2020:
We achieved this goal in 2018 and continue to
maintain 100% renewable electricity in our own
operations.
2. All global distribution partners (4 Primary
Distribution Centres + 13 Warehouses and
Consolidation Centres) switched by 2025: Two of
our primary global distribution centres switched
to 100% renewable electricity during this year,
increasing our progress on this goal to 25%. The
rooftop solar array at our UK distribution centre
(operated by Clipper) generated 14% of its own
electricity needs and we are exploring options to
install further solar arrays with our other partners.
3. Main global franchise partners switched by 2030:
we have undertaken an initial energy consumption
mapping exercise of our franchise partners. The
next step will map the use of renewable electricity
against this to baseline our progress against this
goal.
4. Main global supplier factories switched by 2030:
we continue to improve our understanding of
energy consumption and use of renewable
electricity throughout our supplier factories. This
year, 18% of our key factories generated their own
renewable electricity on site. We will continue
to improve this data to track this milestone
accurately.
Where possible, we champion installing renewable
power on site. Where we must purchase it, we support
national renewable generation, specifically wind
and solar power using Energy Attribute Certificates
(EACs).
Our global gas consumption accounts for just 3% of
our owned global energy use; however, we are actively
exploring the use of renewable gas where possible.
STRATEGIC REPORT Our absolute energy use decreased in FY19, owing to
both the impact of Covid-19 towards the latter end of
the year, as well as a small decrease in the size of our
estate. Compared with our FY14 baseline, however, we
have seen an increase of 37.5% linked to our growth
in business both in an increased physical presence
through our stores and increased workforce across
our global offices.
We previously set a goal to improve energy efficiency
(kWh/m2) across our global retail estate by 35% by
2020 compared to a 2014 baseline. This year we met
that goal with a 38.5% improvement on our FY14
baseline (a 4.8 percentage point improvement over
last year) and resulting in a saving of 3,831 tonnes of
CO2e emissions. This reduction includes the impact of
Covid-19 on our energy consumption; however, prior
to closing all stores in March 2020, we were on track
to meet our goal, achieving 34.4% energy reduction.
We achieved this saving through continued
installation of Building Management Systems (BMS)
within our retail estate, allowing us to implement
optimised building control strategies. In FY20, we
installed eight new BMS systems which, based on
historic savings from similar systems, will achieve
20–25% energy reductions in those stores. We also
continued with our rolling asset upgrade programme
including lighting, heating and cooling equipment,
such as replacing all lighting with LEDs as and when
the old lights break.
Having met our initial target, we are now reviewing
future opportunities for further savings.
We closely scrutinise our energy data and this year we
were required to comply with both ESOS compliance
in the UK and Article 8 compliance in Germany
and Italy, which we successfully did. We received
recommendations, which we can use to verify
consumption and identify further savings to help
achieve future goals.
ISO 50001: Energy Management Systems
In addition to close monitoring and reduction of our
direct energy use (see Energy and Carbon reporting
section), this year we began working with our main
supplier factories to do the same, by supporting them
to adopt the internationally recognised ISO 50001
standard for Energy Management Systems.
This standard ensures widespread adoption of the
best energy management practices across our main
supplier factories by providing a proven approach to
develop an energy management plan that addresses
critical aspects of their energy performance.
Certification enables our factories to have control
of their own system to continually improve their
energy performance. Within the first seven months of
engaging suppliers for our pilot phase, six out of our
38 key factories (16%) have achieved certification.
Energy and Carbon Reporting
Our Energy Use
We measure our energy performance through an
efficiency measure using both our total floor area
occupied and our annual revenue. This allows us
to track our performance within changing market
conditions and a growth in online sales.
Total Global Energy
Use (MWh)
Change from
Baseline (%)
Global Energy
Efficiency
(kWh/m2)
Change from
Baseline (%)
Global Energy
Efficiency
(MWh/£m)
Change from
Baseline (%)
Global Retail
Electricity Efficiency
(kWh/m2)
Change from
Baseline (%)
FY14
(Baseline)
FY19
FY20
18,137
27,511
24,946
–
51.7%
37.5%
294.3
193.8
183.0
–
-34.1% -37.8%
42.09
31.56
35.36
–
-25.0% -16.0%
317.8
210.7
195.5
–
-33.7%
-38.5
First five
factories
successfully
certified
CASE STUDY
We initially approached three Turkish suppliers to
pilot the ISO 50001 certification process.
The process includes creating an internal implementation team, training,
document creation, an onsite energy audit and a two-stage certification audit.
The onsite energy audit provides a useful tool for the factory to track energy
consumption as well as highlighting energy saving opportunities. Opportunities
identified include optimising boilers, upgrading air compressors, switching
lights for LEDs, insulatiing valves and fixing air leaks.
Each site developed an implementation plan for the improvements within a
few months.
Between these three suppliers 1.3Gwh of energy saving potential was
identified, relating to an average saving of 18% per factory, most of which
were implemented in the first six months.
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of electricity used by our
stores and offices is from
renewable sources
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improvement in energy
efficiency between 2014
and 2020
Global Greenhouse Gas Emissions
(Tonnes CO2 equivalents)
FY19 (1 May
2018 to
30 April 2019)
FY20 (1 May
2019 to
30 April 2020)
Scope 1: Combustion of fuel and
operation of facilities
Scope 2: Electricity, heat, steam
and cooling purchased for own use
– Location based method
Scope 2: Electricity, heat, steam
and cooling purchased for own use
– Market based method
Total of Scope 1 & 2 Emissions
(Location based Scope 2
emissions)
% Change on FY19
Emissions Efficiency (Location
based Scope 2 emissions)
(Tonnes CO2e / £m Revenue)
% Change on FY19
301
163
8,457
7,264
149
200
8,758
–
10.05
–
7,426
-15.2%
10.53
+4.8%
We amended our process of reporting this year to account for
challenges related to Covid-19 at the time of writing this report.
1. We are delaying release of Scope 3 emissions to later in the year.
These figures will be published on our website.
2. Although we have followed rigorous internal checking processes
on accuracy, we have not assured our Carbon Emissions to the
AA1000 Assurance Standard, as in prior years. We will resume
the assurance or verification process next year.
We measure our annual operational carbon footprint, to provide
us growing insight into where our largest climate impacts are and
set appropriate and positive ambitions. Although our normalised
emissions (Tonnes CO2e / £m revenue) increased by 4.8% over
the past 12 months due to a reduction in revenue, this represents a
41.5% reduction compared with our FY14 baseline year 18.01 Tonnes
CO2e / £m Revenue, continuing our long term trend of reduced
environmental impact.
In absolute terms our carbon emissions reduced by 15.2%. This
is a result of reduced gas consumption at our head office, an
improvement in electrical efficiency in our stores and a decline in
the emission intensity of grid electricity, especially in the UK.
As per the guidance, we also track and report our ‘Scope 2’
emissions using a ‘market based’ method, which allows us to
demonstrate our reduced environmental impact as we choose to
purchase 100% renewable electricity. The ‘market based’ method
shows the emissions created from the generation of electricity
supplied specifically to our estate rather than using a ‘grid average’
of all generating technologies, as per the ‘location based’ method
instead. We therefore report zero GHG emissions for electricity
within the ‘market based’ method, as 100% of electricity we use is
from renewable sources. The remaining emissions within our ‘market
based’ Scope 2 emissions relate to a small volume of heating and
cooling purchased for certain stores, where we are not able to switch
the source of this energy to renewable. Our absolute market-based
emissions show a 19.6% reduction vs last year, due to efficiency
improvements in non-electrical energy.
GHG emission methodology
We have reported on all of the emission sources required under
the Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013. We report our emissions data using a financial
control approach, meaning we include emissions from all parts
of the business where we have the ability to direct financial and
operating policies — this includes our owned and operated retail
stores and office space. Data has been prepared in accordance
with the WRI/WBCSD GHG Protocol Corporate Accounting and
Reporting Standard (revised edition), WRI/WBCSD GHG Protocol
Scope 2 Guidance 2015 and emission factors from the DEFRA GHG
Conversion Factors for Company Reporting 2019.
Although we strive to ensure the source data used to calculate our
emission figures is accurate, access to actual consumption data is not
always possible. Some estimation is therefore necessary, with 13.5% of
our emissions this year calculated from estimated source data.
Conclusion
Overall we have seen some great progress in FY20 and we will be
looking to build on these learnings and extend our targets from FY21
and beyond. We are committed to driving positive change across
the Superdry brand, our supply base, with our wider partners and
through our industry and moving the conversation towards a future
of sustainable fashion.
STRATEGIC REPORTSuperdry plc Annual Report 2020 67
STRATEGIC REPORTcorporate.superdry.com Superdry plc
Annual Report 2020
Governance
70 Chairman’s Governance Review
72 Board Of Directors
74 Corporate Governance Report
77 Nomination Committee Report
79 Audit Committee Report
85 Directors’ Remuneration Report
105 Directors’ Report
(including Directors’ Responsibility Statement)
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PETER WILLIAMS
Chairman
“ Corporate governance
is the foundation upon
which a sustainable
business is built.”
Governance
Corporate Governance Report
Chairman’s Governance Review
Compliance with the UK Corporate
Governance Code 2018 (the ‘Code’)
I am pleased to introduce this year’s Corporate
Governance Report. Good governance is the
foundation for long-term sustainable growth and
Superdry is committed to fully complying with the
new Code. During this financial year, Superdry has
complied with the provisions of the Code, with three
exceptions, which are fully explained in this report.
How we have applied the
Principles of the Code
Board leadership and company purpose
Superdry’s corporate governance framework ensures that
the Board is composed of committed and experienced
individuals who work effectively together to promote
long-term sustainable success for all stakeholders.
This is initially achieved via a careful selection process
which aims to recruit suitably experienced, high calibre
candidates. Service contracts set out our expectations
and the anticipated time requirements for our Board
members. We have an established induction process for
new Directors in order to assimilate them with the culture
and practices of the Group.
We design, produce and sell premium-branded
apparel to a global marketplace. We have a clear set
of values, endorsed by colleagues, in order for them
to understand and participate in our Superdry culture.
The Board approves and monitors strategy, which is
developed and led by the Executive team. The Board
meets regularly and reviews detailed information from
all areas of the business to monitor progress against
business objectives. The Board receives detailed
reports on, and analysis of, financial and operational
management information to allow for the appropriate
allocation of resources. The reports contain key
performance indicators to allow progress to be
monitored effectively.
A framework of internal controls is in place and is
reviewed on an annual basis to ensure it remains
effective. A risk management and mitigation
framework is in place, to allow the Board to have
oversight of risk via regular risk reports.
The Group’s stakeholders have been identified; the
Board engages with its stakeholders and the Board
regularly considers stakeholders during its decision-
making process. For further information please refer
to our Section 172 statement on page 24.
Workforce policies and practices are aligned to our
values and promote long-term sustainable success.
As well as via traditional internal processes, our
colleagues are able to raise concerns via our formal
workforce engagement forum, Superdry Voice, or via
the workforce engagement designated Independent
Non-Executive Director (‘NED’). A forum for female
leaders in the business meets regularly and escalates
any concerns to the Executive Committee. The
Group also operates an independent and confidential
whistleblowing line.
Division of responsibilities
The recruitment processes in place at Superdry, using
specialist search agents where necessary, ensures
that the positions of Chairman of the Board, Executive
Directors and NEDs are occupied by persons of
appropriate calibre and standing. With the support
of the company secretariat, the Chairman ensures
that the Board receives the right level of accurate
information, in advance of meetings. All NEDs were
considered to be independent on appointment (for
further information on independence, please see
below). A majority of the Board are independent NEDs
and there is a clear division of responsibilities between
Executives and NEDs. NEDs have sufficient time to
discharge their duties and their service contracts
specify the time commitments expected of them. Our
NEDs regularly challenge and scrutinise the Executive
leadership of the Group to hold management to
Superdry plc Annual Report 2020GOVERNANCE 71
account. The Company Secretary and their deputy
each support the Board to ensure that they are
equipped to perform their tasks effectively, with regular
and open lines of communication and a willingness to
provide the levels of support that are required.
Composition, succession and evaluation
There is a formal and robust process for the
appointment of new directors to the Board. Candidate
lists are drawn up with the assistance of specialist
search agencies and initial interviews are conducted
by the Chairman of the Board. Suitable candidates
are shortlisted for longer, in-depth interviews with
NEDs and Executive Directors. Candidates are
scrutinised to ensure that they have sufficient time
to dedicate themselves to the role and their relevant
skills, knowledge and experience is weighed up against
those that are already in place. Once the best overall
candidate has been identified, a recommendation is
made by the Nomination Committee to the Board,
which has responsibility for all Board appointments.
Succession plans are in place and are reviewed by
the Board and Nomination Committee on a regular
basis. The Board believes that a diverse Board and
senior leadership team, consisting of directors and
colleagues from a range of different backgrounds and
with a mix of gender, ethnicity, skills, knowledge, life
and professional experiences, promotes both better
decision making and long-term sustainable strategic
and business success. The Board believes that it has
the right balance of skills, experience and knowledge
to perform its duties effectively, but remains mindful of
the need to keep its composition under regular review.
The Board considers length of service on an annual
basis, prior to sending out notice of its annual general
meeting (‘AGM’). An annual Board evaluation takes
place, with externally facilitated evaluations scheduled
to take place every three years. Composition, diversity,
how effectively the Board works together and the
effectiveness of each director’s individual contribution
are each assessed.
Audit, risk and internal control
The Group has an Audit Committee, to which it
delegates responsibility for the oversight of the
internal and external audit functions and the integrity
of the annual report. The Board reviews the annual
report to ensure that it presents a fair, balanced and
understandable assessment of the Group’s position
and prospects. Risk management and internal
controls frameworks have been established and the
Group’s principal risks have been determined and are
set out in a risk register, which is regularly reviewed
and considered.
Remuneration
The Group has a remuneration policy in place, which is
scheduled for review every three years, and is subject
to consultation with our largest shareholders and with
investor advisory agencies. The policy is set before
shareholders for approval at our AGM. Full details of
our remuneration policy can be found in the Directors’
Remuneration Report (‘DRR’) on page 85, including
the alignment of remuneration to the Group’s purpose
and values and how we link remuneration to long-
term strategy. Formal and transparent procedures for
developing policy on remuneration and on determining
director and senior management remuneration are in
place – please refer to the DRR for further details.
No director is involved in deciding their own
remuneration outcome.
Non-compliance with Code provisions
From 2 July 2019 to 11 July 2019, the Board was not
able to comply with provision 11 (at least half of the
Board should be independent NEDs) – please see our
annual report for FY19 for further details of the Board
changes that took place as a result of the general
meeting held on 2 April 2019. During the same short
period, we were also not compliant with provision 12
(appointment of a Senior Independent Director). Helen
Weir, who joined the Board on 11 July 2019, became
our Senior Independent Director on appointment.
In relation to provision 38 (pension contributions to
be aligned to those of the workforce), Superdry has
reviewed its pension arrangements and has revised its
remuneration policy to align pension contributions for
all colleagues by the end of FY21. Please refer to the
DRR on page 85 for more details.
Governance highlights in FY20
Induction – a new Board
We are a new Board, having come together in July
2019, and our induction process has been on-going
throughout FY20. A formal induction day and a strategy
day with the Executive and senior leadership teams
have been held, alongside informal meetings on a
one-to-one basis. Investor engagement has taken
place by way of one-to-one meetings with our largest
shareholders. Board members have visited a number of
UK and European stores and our UK distribution centre.
Engaging with our stakeholders
This year, the Executive team considered and formally
identified the Group’s main stakeholders and the
issues which were of greatest concern to each (for
further information on our stakeholders, please
refer to our Section 172 statement on page 24). As
a new Board, it has been important for us to spend
time familiarising ourselves with our stakeholders,
in order to understand the issues that impact each
of them and that work continues. Dialogue with
colleagues plays an important role in enabling
the Board’s understanding of Superdry’s unique
culture. The annual Supersay staff engagement
and feedback survey in September 2019 gave the
Board an important window to colleague sentiment
following a period of significant change at Superdry.
During FY20, Superdry developed its existing
‘Champs’ employee engagement forum into a formal
colleague engagement forum, Superdry Voice. The
forum met for the first time in May 2020. Helen Weir,
Senior Independent Director, also became our first
designated NED for workforce engagement. For more
information on colleague engagement, please refer to
page 25.
Remuneration Policy review
Superdry’s Remuneration Policy (‘Policy’) was
scheduled to have been reviewed during the course of
FY20 and will be put before shareholders at this year’s
AGM. The Group is facing significant challenges in
respect of Covid-19 and, due to the pace of change
and the uncertainty surrounding the outlook, the
Remuneration Committee has concluded that, at this
time, the existing Policy should be rolled forward with
only limited changes, in order to ensure Superdry
continues to be aligned with developments in good
remuneration governance. The Committee may revert
with more substantive changes to the Policy for
consultation and shareholder approval in advance of
the 2023 AGM (i.e. before the end of the next Policy
period), should a more normal business environment
resume.
Our largest shareholders were consulted on our
remuneration policy proposals in June 2020. For
further details on that shareholder consultation,
please refer to the DRR on page 85.
PETER WILLIAMS
Chairman
20 September 2020
corporate.superdry.comGOVERNANCE Board of Directors
The Board has collective responsibility for promoting the long-term sustainable success of the Group for all stakeholders and for ensuring that robust and effective governance processes and
frameworks are in place to facilitate that outcome. For full biographical details of our Board members and the committees they serve on, please see below.
72
Peter Williams
Chairman
Julian Dunkerton
Chief Executive Officer
Nick Gresham
Chief Financial Officer
Ruth Daniels
Group General Counsel and
Company Secretary
Appointed: 2 April 2019
Appointed: 2 April 2019
Appointed: 3 June 2019
Appointed: 3 February 2020
Peter was appointed as a director and
Chairman of the Board in April 2019. Peter is
Chairman of the Nomination Committee. In
his non-executive career, Peter played a major
role in the growth of two major online fashion
retailers in the UK – at ASOS, he was the
Senior Independent Director for eight years
during which time the market value grew from
£70m to over £4.5bn; and at Boohoo he was
Chairman for five years, during which time the
market value grew from £560m to £2.2bn. In
his executive career he was Chief Executive
at both Selfridges plc and Alpha Airports plc.
Peter is Chairman of U and I Group plc, the
leading property regeneration company; DP
Eurasia N.V., owner of the Domino’s Pizza
franchise in Turkey and Russia; Mister Spex
GmbH, the multi-channel retailer for eyewear
online and in stores from its base in Berlin; and
Sophia Webster, the accessories brand.
Julian is the co-founder of Superdry and a
serial entrepreneur. In 2010, he led the listing
of Superdry on the London Stock Exchange, at
an initial value of £400m. A retail guru, Julian is
respected across the industry, winning multiple
awards including PLC Entrepreneur of the Year
in 2013. A strategic move in 2015 saw Julian
become Superdry’s Brand Founder and Product
Development Director. Julian returned to lead
Superdry in 2019, as a director of the Board
and CEO, to reignite the original passion and
originality of the brand, to invigorate product
offering and design, and restore Superdry to its
position as a global retail phenomenon.
Nick was appointed as a director of the Board
and CFO in June 2019. With over 30 years’
retail experience, Nick brings a wealth of
experience in global multi-channel brands,
having worked for Debenhams, Virgin Retail,
Home Retail Group, including Finance Director
of Argos Financial Services and Homebase,
before becoming CFO at Connect Group, a UK-
listed specialist distribution company. Nick
then went on to be CFO at Oak Furnitureland
and at WiggleCRC. A qualified accountant,
Nick also brings strong operational controls
and strategic thinking to his roles.
Ruth joined Superdry in February 2020 and
brings 30 years of legal, governance and
commercial experience from private practice
as well as in-house roles at Ancestry.com, CPA
Global and Global Media & Entertainment.
Ruth has acted for key brands and brings
extensive experience of working in digital and
international environments, as well as those
undergoing transformation. Before qualifying
as a lawyer, Ruth began her career in retail.
Board gender split
5
2
0
Female
Male
Non Disclosed
Superdry plc Annual Report 2020GOVERNANCE Committee membership:
Audit committee
Remuneration committee
Nomination committee
Chair of committee
73
Faisal Galaria
Independent Non-Executive Director
Georgina Harvey
Independent Non-Executive Director
Alastair Miller
Independent Non-Executive Director
Helen Weir
Senior Independent Director
Appointed: 29 July 2019
Appointed: 29 July 2019
Appointed: 11 July 2019
Appointed: 11 July 2019
Faisal was appointed as a director of the
Board in July 2019. Faisal is a member of each
of the Remuneration, Nomination and Audit
Committees. Faisal is the CEO of Blippar, a
global Augmented Reality technology company.
Previously, he was the Chief Strategy and
Investment Officer of Gocompare Group, where
he helped lead its listing on the London Stock
Exchange in November 2016 and oversaw
several successful acquisitions. He has held
senior roles at a number of leading global
digital businesses including Spotify, Kayak.
com and Skype and has extensive experience in
management consulting, as a partner at Alvarez
& Marsal and Andersen. Faisal brings extensive
digital expertise to the Superdry Board.
Georgina was appointed as a director of the
Board in July 2019. Georgina is Chair of the
Remuneration Committee and a member of
each of the Nomination and Audit Committees.
Georgina is an experienced Non-Executive
Director and is a member of the Board of
McColls Retail Group plc, where she is
Senior Independent Director and Chair of the
Remuneration Committee, and a member of
the board of Capita plc, where she is Chair
of the Remuneration Committee. Prior to
developing her portfolio career, Georgina
spent seven years as managing director of
Regionals at Trinity Mirror, sitting on the
Executive Committee.
Departures during FY20
Dennis Millard, Minnow Powell, John Smith and Sarah Wood left the Board on 1 July 2019, having tendered their
resignations following a General Meeting on 2 April 2019.
Simon Callander, Group General Counsel and Company Secretary, left Superdry on 15 January 2020.
For further information on the General Meeting on 2 April 2019, please refer to our Annual Report and Accounts
2019 and also to the results of that meeting, which are available on our website.
Alastair was appointed as a director of the
Board in July 2019. Alastair is Chairman
of the Audit Committee and a member of
each of the Nomination and Remuneration
Committees. Alastair is a Non-Executive
Director of NewRiver REIT plc, a FTSE 250
property investment company specialising
in retail assets where he is the Senior
Independent Director and Chairman of the
Audit Committee. Alastair was Chief Financial
Officer at New Look from 2000 until 2014 and
was one of the MBO team who helped take the
company private in 2004 and led a number of
subsequent refinancings. Previously he was
the Group Finance Director at RAC, having
joined from Price Waterhouse where he was a
management consultant. Prior to that, he was
Finance Director of a company within the BTR
plc Group. Alastair qualified as a Chartered
Accountant with Deloitte Haskins and Sells
and holds a BSc in Economics.
Helen was appointed as a director of the
Board and Senior Independent Director in July
2019. Helen is a member of each of the Audit,
Nomination and Remuneration Committees.
Helen is a member of the Supervisory Board
of Koninklijke Ahold Delhaize NV and a Non-
Executive Director of Greencore Group, where
she is also a member of the Audit Committee.
Helen’s previous Non-Executive roles include
SABMiller, Royal Mail, and GEMS Education.
Helen has extensive experience of publicly
quoted companies and retail businesses,
having been Finance Director of Marks and
Spencer, John Lewis, Lloyds Bank (where
she was also the CEO of the Retail Bank)
and Kingfisher. Helen is also Non-Executive
Director of the RFU and a Trustee of Marie
Curie. Helen is a qualified accountant and was
awarded the CBE for services to Finance in the
2008 honours list.
corporate.superdry.comGOVERNANCE Corporate Governance Report
Board meeting attendance
74
Peter
Williams
Member since:
2 April 2019
Meetings
attended:
10/10
Julian
Dunkerton
Member since:
2 April 2019
Meetings
attended:
10/10
Nick
Gresham
Member since:
3 June 2019
Meetings
attended:
8/8
Helen
Weir
Member since:
11 July 2019
Meetings
attended:
7/7
Alastair
Miller
Member since:
11 July 2019
Meetings
attended:
7/7
Faisal
Galaria
Member since:
29 July 2019
Meetings
attended:
7/7
Georgina
Harvey
Member since:
29 July 2019
Meetings
attended:
7/7
Dennis
Millard
Resigned:
1 July 2019
Meetings
attended:
3/3
John
Smith
Resigned:
1 July 2019
Meetings
attended:
3/3
Sarah
Wood
Resigned:
1 July 2019
Meetings
attended:
3/3
Minnow
Powell
Resigned:
1 July 2019
Meetings
attended:
3/3
The Board held 10 scheduled meetings in FY20 – the attendance of individuals is set out above. The Chairman ensures that regular meetings
are held with the Non-Executive Directors and with the Senior Independent Director, without the presence of the
Executive Directors.
Governance framework
Superdry has a corporate governance framework
with defined responsibilities and accountabilities.
Board committees have been established – full terms
of reference are available on our website and are
reviewed by the Board annually. Each committee is
chaired by a different independent non-executive
director. The Board maintains a schedule of matters
reserved, which is reviewed annually and is also
available on our website. The matters reserved
are those matters which affect the Group as a
whole, including long-term strategic plans, capital
expenditure over a certain level, budgets, approval of
financial statements and dividends. The duties of the
Chairman and Senior Independent Director are set out
in a document and are reviewed regularly – these are
also available on our website.
Responsibility for the day-to-day running of the Group
is delegated to the Chief Executive Officer, who in
turn delegates certain responsibilities to business
area heads through the Executive Committee,
which is a business operating committee. To ensure
that decisions are taken at the right level and to
reduce business and operational risk, a delegation
of authority matrix is in use, which clearly sets out
the authorities given to individuals in the business.
The Delegation of Authority matrix is reviewed on
an annual basis to ensure it remains relevant to
Superdry’s structure and activities.
Audit
Committee
Superdry Plc
Board of Directors
Nomination
Committee
Remuneration
Committee
Executive Committee
Membership includes the CEO, CFO, Group
General Counsel and Company Secretary, HR
Director and heads of business areas
Risk Committee
Membership includes the CFO, the Head of Risk Management and
Internal Audit and the Group General Counsel and Company Secretary
Superdry plc Annual Report 2020GOVERNANCE The agendas for each scheduled Board meeting contain standing
items that cover key business areas to ensure that reporting is
balanced. Board papers are circulated in advance of meetings to
allow the Board adequate time for review and preparation ahead
of the meeting. The right level of information is contained in Board
packs to allow full consideration of strategic matters, whilst not
over-burdening the Board with an unnecessary level of detail on
operational or ‘business as usual’ matters.
Where directors are not able to attend part of any Board or
Committee meeting, they will have reviewed the papers circulated
for that meeting and will have provided comments to either the
Senior Independent Director or the Group General Counsel and
Company Secretary.
Name of attendee
Phil Dickinson
Jon Wragg
Lucy Maitland Walker
Role
Creative Director
Wholesale and E-Commerce Director
Global Merchandising Director
Lucy Maitland Walker
Craig McGregor
Global Merchandising Director
Retail Director
Board activities during FY20
Strategy
Strategic change was the subject of significant Board discussion
time throughout FY20. The Executive team, led by Chief Executive
Officer Julian Dunkerton, implemented a number of immediate
changes to the retail strategy in the early part of the year, including
the move from a four season model to a two season model and a
reduction in discounting and promotional activity. Brand, consumer
and design strategies were further developed by Julian Dunkerton
in partnership with Creative Director Phil Dickinson, the results of
which will be a revitalised Autumn/Winter 20 collection, comprising
new ‘pinnacle’ brands. Short-term areas of focus were also identified
by the Executive team, with seven short term strategic goals
identified and actions taken to achieve them. Long-term strategy
was the subject of two Board strategy days, designed for the
Directors to spend time with the Executive team in order to discuss
and formulate strategic changes of direction.
US operations
Our US operations have undergone extensive review during FY20
and an update to the Board on progress was given by the CEO in
January 2020. Warehouse operations have been consolidated and
staffing levels were reduced in both retail and head office operations.
China
The Board has spent time throughout FY20 reviewing the
performance of its Chinese joint venture company and considering
how operations and profitability in China could be enhanced.
Board and Committee calendars are used to ensure that items are
scheduled for review at appropriate times in the year and care is
taken by the Chairman and Secretary to ensure that sufficient time
is allowed for the discussion of agenda items and that stakeholder
perspectives are considered. Strategic and business area ‘deep
dives’ are undertaken throughout the year. For further information on
the Board’s activities in FY20, please see below.
Covid-19
In March 2020, the impact of Covid-19 resulted in
Superdry closing its retail stores and head office. For
full details on the impact of Covid-19, please refer
to page 06 and in particular to our Section 172 Case
Study on page 27. A full update was issued to the
market on 18 March 2020.
Members of the Executive Committee are invited to attend Board
meetings to allow for more in-depth presentations and further examination
of specific areas of the business. The table below highlights such
occasions during FY20, although it should be noted that a number of
detailed presentations were given by Executive team members during the
induction and strategy days that took place during FY20. Further details of
our Executive team can be found on our website.
Area examined
Brand and consumer segmentation
Ecommerce roadmap
Stock Management and Seasonal Buy
Activity
Store re-opening plans following
Covid-19 closures
Date attended
20 May 2019
15 November 2019
30 January 2020
29 April 2020
A number of options for the future strategy were considered by
the Board, resulting in a decision taken on 18 March 2020 to exit
operations under the current joint venture agreement via a solvent
liquidation, retaining IP and trading rights in order to re-enter the
Chinese market, when it is the right time to do so.
Investor relations
In September 2019, the Board’s corporate brokers attended a
Board meeting to present on and explore current investor relations
and sentiment. Matters for discussion included the perception of
Superdry with investors following Julian Dunkerton’s return to the
business and the on-going strategy for engaging with shareholders.
Half year results and dividend
In December 2019, the Board met to discuss its half-year results
and approved the payment of an interim dividend of 2 (two) pence
per share. On 6 May 2020 the Board agreed to recommend to
shareholders that no final dividend be paid in relation to FY20,
resulting in a total ordinary dividend in relation to FY20 of 2 (two)
pence per share.
Profits warning in January 2020
In January 2020 the Board met to discuss poorer than anticipated
trading results for the Christmas and post-Christmas sale period,
set against the very difficult trading conditions experienced by many
high street retailers. A trading update was issued by the Board on 10
January 2020, notifying the market that operating profits for FY20
were now anticipated to be lower than forecast.
Preliminary results and trading update
A comprehensive fourth quarter trading update was
provided to the market on 7 May 2020, which included
the decision to postpone the publishing of our
financial results for FY20.
75
New Financing Facility
In August 2020, the Group entered into a new
financing facility, which has given Superdry an
increased level of flexibility and liquidity for the future.
We have agreed with our existing lenders, HSBC
and BNPP, a £70m Asset Backed Lending facility,
extending the term until January 2023.
Other governance matters
Non-Executive Director independence
and time commitments
The Chairman was considered by the Board to be
independent on his appointment on 2 April 2019
by the Board at a meeting held on 1 July 2019. The
Chairman ensures that the Board is made up of a
majority of independent NEDs, who provide the
necessary level of challenge to management.
The independence of the NEDs is reviewed on an
annual basis and was reviewed this year as part of
the externally facilitated Board evaluation (see below
for more information). The time commitments and
performance of the NEDs are also reviewed as part
of that process; service contracts clearly set out the
anticipated time commitments of their roles. Further
terms ensure that the Chairman and NEDs continue
to meet the requirements of the Code. No NED has
exceeded the maximum nine-year term of service
noted in the Code.
The Board therefore considers that each of its NEDs
continue to be independent and that each continues
to dedicate sufficient time to their roles. During
FY20, due to the impact on the Group of the Covid-19
pandemic and lockdown, the NEDs spent significant
additional time on their Board duties, far exceeding
the requirements of their service contracts.
corporate.superdry.comGOVERNANCE Corporate Governance Report
CONTINUED
Lintstock has no connections with either the Group or with any
of the directors of Superdry plc.
Risk management and internal controls
The Board confirms that there are processes for identifying and
mitigating risks and a system of internal financial and non-
financial controls. For further information on Risk Management,
please refer to page 42. For further information on our internal
controls framework, please refer to page 83 and to the
Audit Committee report on page 79. During FY20 the Group
undertook a review of its internal controls environment, which
continues in the current financial year - for full details please
refer to the Audit Committee report, from page 79 onwards.
Whistleblowing arrangements
The Group operates an independent, confidential whistleblowing
line for the reporting of unethical conduct in any area of the
business. For further information, please refer to page 82.
Re-election of Directors and AGM
At the AGM, all Directors will offer themselves for re-election.
We consider the Directors offering themselves for re-election to
be effective, committed to their roles and to have sufficient time
available to perform their duties. For further information on the
specific reasons why each Director’s contribution is considered
to be important to the Group’s long-term sustainable success,
please refer to the resolutions proposed in the Notice of the AGM.
Our AGM will take place on 22 October 2020 at 11.30am. This
year, we will be holding a closed AGM due to the impact of
Covid-19. The notice of AGM, which includes details of how
shareholders can ask the Board questions, is available on our
website. The Directors consider that each of the proposed
resolutions in that notice are in the best interests of the Group
and its shareholders as a whole. All resolutions will be put to a
poll. Proxy forms allow for shareholders to vote for, against, or to
withhold their vote for each resolution. All Board members will
attend the AGM.
Approved and signed on behalf of the Board
RUTH DANIELS
Company Secretary
20 September 2020
76
Time commitments of the Chairman of the Board
Over the course of FY20, the Board has also carefully considered
and reviewed the time commitments of the Chairman, Peter
Williams. In addition to his role as Chairman of Superdry, Peter
is also Chairman of U and I Group plc and of DP Eurasia NV.
The Board believes that from his appointment on 2 April 2019,
Peter has demonstrated substantial commitment to his duties
as Chairman of the Board, both in terms of the time he has
dedicated to the work of the Board and its committees and to the
time he has spent working alongside fellow Board members and
the Executive team at Superdry.
Directors’ conflicts
The Board has established formal procedures for the
declaration, review and authorisation of any conflicts of interest
of Board members. The Board is satisfied that none of the
Directors had any conflicts of interest during FY20, which could
not be authorised by the Board.
Director’s indemnity insurance
We maintain Directors’ and Officers’ liability insurance, which
provides appropriate cover for any legal action brought against our
Directors and/ or Officers. In accordance with section 236 of the
Companies Act 2006, qualifying third party indemnity provisions
are in place for all Directors of Group companies in respect of
liabilities incurred as a result of their office, as far as is permitted
by the law.
Board evaluation
A performance evaluation of the Board is completed every
year and an externally facilitated evaluation was completed in
February 2020 by Lintstock. The evaluation, conducted using
a survey-based analysis, provided an opportunity to assess
the effectiveness of the Board’s decision-making processes
and the quality and dynamic of relationships, discussions and
deliberations. The Board and individual committees were each
evaluated and the effectiveness of the induction process and
Board strategy days were also examined. Specific areas of
scrutiny included Board composition and diversity, stakeholder
oversight, training, time management and the quality of Board
support, including Board packs.
The results of the review were caveated by the fact that the
Board was still very new – having had only six months together
as a Board at the time of the evaluation, and therefore very little
time in which to form and build strong working relationships.
Overall, the evaluation results were positive. Further work was
needed in engaging with and understanding all of the Group’s
stakeholders. The composition of the Board was rated well, but
the possibility of further enhancing the Board’s international
and digital experience was noted. A number of objectives
and actions have been identified, including further focus on
strategic direction and the establishment of a number of key
metrics for tracking progress.
Superdry plc Annual Report 2020GOVERNANCE PETER WILLIAMS
Committee Chairman
Committee membership
• Tenure of Board members is regularly reviewed by the Committee – each
member of the current Board was appointed at the end of FY19, or in FY20.
• Prior to joining the Board, the time commitments of all potential Non-Executive
Directors are scrutinised to gauge whether or not they have sufficient time to
discharge their duties. Independence criteria are carefully examined.
Peter
Williams
Committee
chairman
Faisal
Galaria
Georgina
Harvey
Helen
Weir
Alastair
Miller
Member since:
02 Apr 2019
Member since:
29 July 2019
Member since:
29 July 2019
Member since:
11 July 2019
Member since:
11 July 2019
Meetings
attended:
7/7
Meetings
attended:
5/5
Meetings
attended:
5/5
Meetings
attended:
5/5
Meetings
attended:
5/5
Departures during the year:
Dennis Millard
Resigned 1 July
2019
(Member since
1 Feb 2018)
John Smith
Resigned 1 July
2019
(Member since
2 April 2019)
Meetings
attended:
2/2
Meetings
attended:
2/2
The Committee held seven scheduled meetings during
FY20. In addition to the members of the Committee, the
Chief Executive Officer and Group HR Director attended
each meeting. The role of Secretary is performed either
by the Company Secretary or their nominee. A report on
the Committee’s activities is given to the Board at each
Board meeting that follows a Committee meeting.
Nomination Committee Report
“ We continue to work together to put in place
the right blend of technical skills, specialist
knowledge and diverse experience at Board and
senior level to support the transformation of
Superdry.”
The main focus for the Nomination Committee at
the beginning of FY20 was to replenish the Board
and senior leadership team with outstanding people
who would work collaboratively to start the process
of resetting Superdry. With the appointments of
Helen Weir and Alastair Miller on 11 July 2019, closely
followed by the appointments of Faisal Galaria and
Georgina Harvey on 29 July 2019, we believe that we
have been successful in doing that. We will closely
monitor the needs of the business through the
turnaround and are continually considering the skills
and technical knowledge that will be required, as we
fully implement the new strategy.
Committee activities in FY20
During the period from April to July 2019, the main
focus of Committee meetings was the recruitment
of a new Board and a number of roles in the senior
leadership team. In addition to the recruitment of four
Independent Non-Executive directors, the Committee
also considered candidates for the roles of Chief
Financial Officer and Group HR Director.
After joining Superdry on an interim basis in June 2019,
Nick Gresham was appointed Chief Financial Officer in
August 2019. In October 2019, Julian Dunkerton, who
had been serving on an interim basis since 2 April 2019,
was appointed Chief Executive Officer and his contract
was extended until April 2021.
77
In September 2019, Phil Dickinson, Creative Director,
joined the Group on a permanent basis and Guy
Youll was promoted internally to Group HR Director.
In November 2019, the Committee considered and
recommended the appointment of Ruth Daniels as
Group General Counsel and Company Secretary and,
in January 2020, the Committee considered and
recommended the appointment of Craig McGregor
as Retail Director.
The Committee also considered the appointment of
new members to the Executive Committee during
FY20, recommending the appointments of Shaun
Packe as Sourcing and Sustainability Director and
Gordon Knox as Logistics Director in July 2019.
The Committee reviewed the Board’s Diversity Policy
in June 2019, identifying a need to increase the
number of women in senior leadership and executive
level roles. The Committee considered an updated
Board Diversity and Inclusion Policy in April 2020 –
please see below for further information on this and
on Diversity and Inclusion at Superdry.
Committee roles and responsibilities
• The Committee regularly reviews the composition and size of the Board and Executive team, taking
into consideration the balance of skills (including soft skills such as openness, tact and honesty),
experience, knowledge and all forms of diversity. The Committee makes recommendations for
changes where appropriate.
• The Committee regularly considers the succession needs of the Board and senior leadership of the
Group.
• The Committee ensures that appropriate procedures are in place to enable the nomination, induction,
training and evaluation of directors.
• Please refer to our website for the full terms of reference of the Nomination Committee.
corporate.superdry.comGOVERNANCE
Nomination Committee Report
CONTINUED
The Committee considered colleague engagement in September
2019 and oversaw the development of a formal colleague
engagement forum, SD Voice, to replace the existing Champions
forum (originally set up to drive engagement). The annual
colleague engagement survey, Supersay, was also reviewed,
and a number of actions were identified. Please refer to pages
24 and 25 for further details of our colleague and stakeholder
engagement work. During FY20, Helen Weir was designated as
Non-Executive Director to represent colleagues at Board level
and to work closely with the new SD Voice forum.
78
Board Diversity and Inclusion Policy
The Board believes that a diverse Board and senior leadership
team, consisting of directors and colleagues from a range
of different backgrounds and with a mix of ethnicity, skills,
knowledge, life and professional experiences promotes both
better decision-making and long-term sustainable strategic
and business success.
In April 2020, the Committee reviewed a new Board Diversity
and Inclusion Policy and made a number of recommendations for
changes. The Committee has asked the Executive team to consider
those changes and how the Group’s present diversity and inclusion
policies and arrangements should be reviewed and updated
in order to reflect them. This work continued into FY21 and the
Committee reviewed a revised Board Diversity and Inclusion Policy
in July 2020. The Superdry Board is fully committed to increasing
minority ethnic representation on its Board and in its Executive and
senior leadership roles. Superdry recognises that it needs to take
more action to help ensure representation from black and minority
ethnic communities and the Executive team will present an
updated strategy to address diversity and inclusion, which will be
communicated in FY21 to all colleagues, to include a wide range of
stakeholder views. More information about Superdry’s diversity and
inclusion policies and practices can be found on our website.
For more information on how Superdry’s future strategy
is promoting the employment of a greater proportion of
women, please refer to page 60 in the People section of our
Sustainability report. Please also refer to our Gender Pay Gap
reporting on page 103. For details of our Board gender diversity,
please refer to the Corporate Governance report on page 72.
Board appointments – process
There is a formal and robust process for the appointment of new
Directors to the Board. Candidate lists are drawn up with the
assistance of specialist search agencies and initial interviews
are conducted by the Chairman of the Board. Suitable
candidates are shortlisted for longer, in-depth interviews with
Committee members and Executive Directors. Candidates are
scrutinised to ensure that they have sufficient time to dedicate
themselves to the role and their relevant skills, knowledge and
experiences are weighed up against those that are already in
place. Once the best overall candidate has been identified, a
recommendation is made by the Committee to the Board, which
has responsibility for all Board appointments.
A similar process is followed for appointments to the Executive
Committee, whereby candidate long lists are drawn up by the
Group HR Director, sometimes with the assistance of specialist
search agencies. Interviews are then conducted by the Group
HR Director and Chief Executive Officer. Shortlisted candidates
are then interviewed by other members of the Executive
Committee and by members of the Nomination Committee.
A proposal is then made to the Nomination Committee, which
is responsible for approving all appointments to the Executive
Committee to ensure that the Group has the right people in
place at senior level.
Where prospective Board and Executive Committee candidates
are of equal merit, the Committee will advocate the selection
of candidates that will positively enhance the organisation’s
diversity in all ways.
External search agencies used during FY20 include Korn Ferry,
MBS and Odgers Berndtson.
Board composition and succession planning
The Committee regularly reviews the existing and future needs of
the Business and is at all times mindful of the Board’s objectives
on diversity and inclusion. The Committee is aware that the
Board’s present balance of skills is weighted strongly in the
area of financial expertise, but believes that this experience
is important to the Group during this turnaround phase. The
Committee reviewed the organisational structure, talent
management and succession plans of the Group at a meeting
in April 2020 and approved a number of objectives and actions to
ensure that effective succession plans are in place.
External evaluation
An externally facilitated Board and Committee evaluation
took place during March 2020. Please refer to page 76 in the
Corporate Governance report for full details.
PETER WILLIAMS
Nomination Committee Chairman
20 September 2020
Superdry plc Annual Report 2020GOVERNANCE Audit Committee Report
ALASTAIR MILLER
Committee Chairman
“The Audit Committee provides effective oversight
of the financial leadership of the Group, scrutinising
financial information, challenging judgements, and
regularly reviewing the risk management, internal
control and audit systems and processes.”
79
Committee membership
The Committee consists of the independent Non-Executive Directors (but not the
Board Chairman). Alastair Miller is Chairman of the Audit Committee.
Alastair
Miller
Committee chairman
Faisal
Galaria
Georgina
Harvey
Helen
Weir
Member since:
11 July 2019
Member since:
29 July 2019
Member since:
29 July 2019
Member since:
11 July 2019
Meetings
attended:
4/4
Meetings
attended:
4/4
Meetings
attended:
3*/4
Meetings
attended:
4/4
* Georgina joined the Board in July 2019 and on reviewing the schedule of proposed Board and
committee meetings for FY20, confirmed to the Secretary that she would not be able to attend the
Audit Committee meeting scheduled for 2 October 2019, due to previously arranged and accepted
appointments. The commitments of fellow Board members had meant that it had not been possible
to re-schedule the meeting; however Georgina was fully briefed on matters for the meeting by the
Committee Chairman prior to the meeting and provided any comments to the Chairman accordingly.
Departures during the year:
Dennis Millard
Resigned 1 July
2019
(Member since
2 April 2019)
Minnow Powell
Resigned 1 July
2019
(Member since
1 December 2012)
John Smith
Resigned 1 July
2019
(Member since
2 April 2019)
Meetings
attended:
2/2
Meetings
attended:
2/2
Meetings
attended:
2/2
In addition to the members of the Committee, the Chair of the Board, Chief Executive Officer,
Chief Financial Officer and the Head of Risk Management and Internal Audit normally attend each
meeting. Representatives of the Company’s external Auditor, Deloitte, also attend each meeting.
From time to time, other heads of business areas are invited to attend the meetings to enable a
better understanding of processes, functions and activity. The role of Secretary is performed either
by the Company Secretary or their nominee. A report on the Committee’s activities is given to the
Board at each Board meeting that follows a Committee meeting.
Main roles
• The Committee monitors the integrity of the Group’s financial statements, the half-year report and any
formal announcements relating to the Group’s financial performance, including reviewing significant
financial reporting judgements. The Committee receives reports from the Group’s external auditor.
• The Committee provides advice, when requested by the Board, on whether 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 Committee monitors the adequacy and effectiveness of the Group’s internal control and risk
management systems.
• The Committee reviews and monitors the independence of the external auditor and the objectivity and
effectiveness of the external audit process and the audit plan. The Committee ensures that the provision of
non-audit services by the external auditor does not impair its independence or objectivity. The Committee
recommends the appointment of the external auditor to the Board.
Principal responsibilities
• The Committee reviews all information in the financial statements relating to risk management and audit
and keeps under review the effectiveness of the internal audit function and the systems of internal controls
and for risk management. The Committee provides oversight of the Group’s Risk Committee.
• The Committee reviews and challenges significant accounting policies, whether the Group has followed
appropriate accounting standards and the clarity and completeness of financial disclosures.
• The Committee reviews the effectiveness of the Group’s internal audit function and ensures that it is
adequately resourced.
• Please see below for further information about the independence of the external auditor.
• The full terms of reference for the Audit Committee are available on our website.
Other governance arrangements
The Committee reviews the Group’s whistleblowing arrangements on an annual basis.
Introduction from the Committee
Chairman
As Chairman of the Audit Committee, I am pleased to
present the Audit Committee report for the financial
year ended 26 April 2020. This is my first report as
Chairman of the Audit Committee and I would like to
take this opportunity to thank the previous Chairman,
Minnow Powell, for his service to the Committee during
his tenure. We are a new Committee, and each of us a
new Board member to Superdry, in FY20.
This has been an extraordinary year for reasons
already set out in this Annual Report, but it is worth
stating that FY20 presented Superdry with a number
of additional challenges, such as the implementation
of IFRS 16, Brexit uncertainty and difficult trading
conditions, before the advent of the Covid-19
pandemic in January 2020. A full examination of
the financial impact of Covid-19 on the Group can
be found in the statement at the front of the Annual
corporate.superdry.comGOVERNANCE Audit Committee Report
CONTINUED
80
Report on page 06, in the CFO review on page 32 and
in the How We Manage Our Risks section on page 42.
Along with many other listed companies, and in line
with FRC guidance, Superdry took the decision in May
2020 to postpone the publication of its FY20 results.
This postponement was agreed with the full support
of our external auditor in order to allow sufficient time
for the preparation of the financial statements and for
a fuller consideration of the disclosures that may be
required. Covid-19 has placed a substantial additional
workload on my colleagues at Superdry and I would
like to personally thank each member of our Finance,
Legal, Risk Management and Internal Audit teams,
who have continued to complete their tasks to the
best of their ability, in difficult circumstances and at
times with stretched resources. Working remotely,
as many businesses were forced to do from March
2020, presented its own challenges for Superdry and
for our external auditor, Deloitte, whom I would also
like to thank for their additional work on this year’s
audit. Covid-19 and the many uncertainties around its
financial impact has meant that there have been many
additional layers of work to complete, diligence to
perform and judgements to apply, each of which have
been duly considered by this Audit Committee.
The Committee plays an integral role in the
governance framework of the Group, using our
combined financial and commercial knowledge to
probe and to challenge wherever necessary. This
report is intended to provide further information
on how the Committee has discharged the
responsibilities delegated to it by the Board. Those
responsibilities and the governance arrangements of
the Committee are set out in more detail below.
The biographies of my fellow Committee members (all
of whom are Independent Non-Executive Directors)
Faisal Galaria, Georgina Harvey and Helen Weir are
on page 72 of this report. As required by the Code, at
least two members of the Committee are considered
by the Board to have competence in accounting
and all members have recent and relevant financial
experience, alongside significant retail sector
expertise.
Committee activities and
discussions during FY20
The Committee’s meetings follow a standing agenda
which covers the key Audit Committee areas of
oversight according to its terms of reference: financial
information, external audit, internal audit, risk
management, internal controls and any other matters
which it considers it should review. The overall work
of the Committee is governed by an annual calendar,
which is reviewed each year.
The principal matters under the Committee’s
consideration during FY20 can be found below and
this is intended to provide shareholders with a more
rounded understanding of our work this year.
ALASTAIR MILLER
Audit Committee Chairman
20 September 2020
Superdry plc Annual Report 2020GOVERNANCE Financial reporting, accounting judgements
and other matters
The Committee reviewed and evaluated the appropriateness of the
interim and annual financial statements with management and with
the external auditor. At the request of the Board, the Committee
considered whether the annual report and accounts, taken as a
whole, were fair, balanced and understandable and whether they
provided the information necessary for shareholders to assess the
Group’s position and performance, business model and strategy.
The Committee discussed the critical accounting policies,
assumptions and estimates, including key accounting judgements,
concluding that those estimates, assumptions and judgements were
reasonable based on the information available.
The Committee reviewed the going concern and viability of the Group
over the longer term, as part of its assessment of the Group’s risk.
The Committee’s work in FY20 focussed on a number of accounting judgements and on other significant matters, as set out in
the table below.
Key accounting judgements
IFRS 16 implementation and impact The Group first adopted IFRS 16 within its half year accounts in October 2019. The
Committee reviewed the approach to IFRS 16 transition and considered the overall
impact of the new standard on the financial results. A modified, retrospective approach
was applied and the Committee reviewed the key judgements and assumptions used in
that model. The result of this standard is that the majority of leases are reflected on the
balance sheet, recognising the right to use the asset for an agreed period of time and
the associated liability for future payments. Calculations were updated for the year end
position and reviewed by the Committee. The net P&L impact of adopting IFRS 16 is a
net charge of £1.8m. The right-of-use asset at the year end is £118.0m and the lease
liability at the year end is £320.9m.
81
Fixed asset and goodwill
impairment and Company
investments in subsidiaries
China Joint Venture
The Committee reviewed and challenged management’s impairment testing of the
Group’s store cash generating units and goodwill. The Committee considered the
appropriateness of the valuation methodologies, the sensitivity analysis performed
and the key assumptions underpinning the modelling. This included challenging the
projected cash flows, growth rates and discount rates used in the model.
The Committee also reviewed the recoverability of the intercompany receivables and
carrying value of investments in its subsidiaries, which use the same key assumptions
as the goodwill impairment calculations to estimate the value in use of each subsidiary.
The Committee considered the sensitivity impact of changes in assumptions and
potential additional impairment if performance is adverse to forecast.
The Group reviewed its operations in China during FY20 and announced on 18 June
2020 that the joint venture would be put into solvent liquidation. The Committee also
reviewed the accounting treatment of the winding up of its operations in China.
Debtors and Bad Debt provisioning The Committee reviewed the debtor summary, associated aging profiles and the overall
provisions for bad debt to ensure that they remained realistic and appropriate, after the
consideration of other forms of mitigation, such as deposits and credit insurance.
Covid-19 related additional/
exceptional provisions, including
receivables, inventory and costs
As a result of the exceptional impact Covid-19 has had on the Group, a number of
additional provisions have been created, including bad debts on receivable balances
and obsolescence on inventory. The Committee reviewed the assumptions and
estimates behind each of these and satisfied itself that they were reasonable.
Stock valuation
An error associated with the accounting for inventory in the prior year of £3.9m was
identified during the year. The error related to the system of recording and allocating
cost variances related to freight, duty and other charges, and transfers between
warehouses. The accounting for stock has historically been complex and involved
a number of different systems. Following the discovery of the error, a review was
undertaken to investigate the cause of the error and establish processes to identify and
resolve any issues in the future.
The Committee reviewed the inventory balance, noting that whilst total inventory
had reduced year on year, a provision for obsolescence was required, and supported
management’s view of the ongoing provision policy.
corporate.superdry.comGOVERNANCE Audit Committee Report
CONTINUED
Key accounting judgements
Going Concern and material
uncertainty
82
Other matters
Five year plan
The Committee reviewed and challenged management’s FY21 Budget and medium-
term forecast, including the detailed assessment of a number of downside scenarios,
predominantly using a reverse stress-test approach. This review focused on the
assumptions made regarding the impact of the Covid-19 pandemic on the retail
sector and wider economy and specifically to Superdry; and the ability to execute the
turnaround plans required to recover brand health and return the business to growth.
Following this review, the Committee noted that these risks indicate that a material
uncertainty exists and may cast significant doubt on the Group’s ability to continue as a
going concern. The material uncertainty relates to:
• The recovery in consumer demand, and the Group’s ability to capture this during
the AW20 reset season; and,
• The ability of the Group to meet the new covenants from debt providers in the next
12 months.
The Directors have assessed the liquidity requirements of the Group under these
downside scenarios and believe them to be adequate. The detail behind this conclusion
can be found in the Assessment of the Group’s Prospects on page 38.
The Committee have reviewed the long term planning assumptions used in the going
concern and viability considerations as well as in the calculations for impairment.
Whilst there remains a high level of uncertainty as a result of Covid-19 and the macro-
economic outlook, the Committee’s stress testing, along with external diligence,
supports the plan adopted.
Internal controls framework review The identification of a prior year stock accounting adjustment in December 2019
(described in Note 36), and an internal audit review highlighting significant control
weaknesses in Credit Control, Accounts Receivable and the IT environment raises
a challenge to the effectiveness of the internal control environment throughout the
period under review. In response to the challenge, a review of the Group’s key internal
controls was undertaken, including both financial and non-financial processes. The
Committee reviewed the scope and progress of this project throughout the second
half of the financial year, approving external expertise support from PWC. For further
information about this review, please see the ‘Review of the Effectiveness of Internal
Controls’ section below.
Risk Management – policy,
processes and principal risks
and uncertainties
The Risk Management processes and principal risks and uncertainties were reviewed
during FY20. A new Risk Management Policy was also approved by the Committee. For
further information please refer to ‘How We Manage Our Risks’ on page 42.
Information technology and
Information Security
Treasury Policy
Annual Report
The Committee reviewed an analysis of the current state of the Group’s information
technology capabilities and structures and its information security maturity, concluding
that a roadmap for ongoing improvements against an external benchmark had been
implemented during FY20 and that work would continue in the current financial year.
The Committee reviewed and approved an updated Treasury Policy, including changes
to strengthen controls around treasury management and improve hedging policy and
visibility through updated reporting.
The Committee reviewed this Annual Report and the disclosures contained within it,
concluding that the report was fair, balanced and understandable.
Areas of focus for FY21
As we move into FY21, areas of Committee focus will be the
continuing impact of Covid-19 and implications of this across the
business on customers, colleagues and operational processes as
well as monitoring the impact on financial results which could impact
covenants and future property related matters, including impairment
and right of use asset valuations. The Committee will also focus
on monitoring the work being carried out to reduce any disruptive
impact that Brexit may have on the Group. In addition, there will
be focus on the changing IT security landscape and required
improvements, including support from external partners to assess
progress, as well as the continuing project to substantially improve
the control environment, ensuring all control deficiencies in the
Auditor’s report are captured and embedded within the new controls
framework into the business, monitoring ongoing compliance and
recommending continuous improvement.
External evaluation
An externally facilitated Board and Committee evaluation took place
during 2020. As Chairman, I am pleased with the honest reflections
from my Committee colleagues, noting that we have a great deal of
financial experience to support the Committee and, notwithstanding
that the Committee members are all relatively new to Superdry, the
Audit Committee is functioning well. Please refer to page 76 in the
Corporate Governance Report for further details on the external
evaluation.
Whistleblowing arrangements
The Group has a Whistleblowing Policy and an independent,
externally facilitated Whistleblowing line is in operation. The
Committee has reviewed Whistleblowing arrangements and
found them to be fit for purpose. The Committee is satisfied that
colleagues continue to have the opportunity to raise concerns in
confidence about possible fraudulent activity or unethical behaviour.
The Committee is also satisfied that arrangements are in place
for the full investigation and escalation of matters reported to the
whistleblowing line. During the year the Committee received a
summary report of the calls received by the whistleblowing line and
an update on instances of reported fraud, if any.
Bribery Act
Controls are in place to ensure ongoing compliance with the Bribery
Act 2010. The Committee reviews on an annual basis a report on the
Group’s gift register, which includes gifts and hospitality received by
colleagues from external business relationships, above an agreed
threshold.
Superdry plc Annual Report 2020GOVERNANCE Internal audit
The Group’s internal audit plan is developed by the Head of
Internal Audit, Risk Management and Business Continuity and
agreed with the Audit Committee.
During the year, internal audit activity has been undertaken in
the following key areas: Stock, Accounts Receivable and Credit
Control, Business Continuity and Cyber maturity. The Head
of Internal Audit, Risk Management and Business Continuity
has also led the business’ response to the Covid-19 crisis. The
findings and agreed actions from internal audit reviews are
agreed with the relevant business area, communicated to the
Audit Committee and tracked through
to completion.
The plan is subject to ongoing review throughout the year
so that it remains relevant and adapts to any changing
circumstances. For example, following the identification of the
prior year stock adjustment and the subsequent independent
audit of the area, it was decided that the internal audit function
works with management to develop an internal controls
framework. The internal controls framework will form the basis
of future internal audit plans.
The Head of Internal Audit, Risk Management and Business
Continuity attended all Audit Committee meetings, has direct
access to all Committee members and has met the Committee
Chairman and Committee members separately. At each meeting,
the Committee was provided with updates on the audit plan,
work undertaken, findings and agreed actions from internal
audit reviews, and progress on the implementation of agreed
actions. These updates, the interaction with the Head of Internal
Audit, Risk Management and Business Continuity and a review
of the resources available enable the Committee to consider the
effectiveness of the internal audit function. To further strengthen
the internal audit function, an Internal Audit Manager was
appointed in February 2020.
Review of the effectiveness
of internal controls
As discussed in the ‘Other Matters’ section above, in response
to the challenge to its effectiveness, a review of the internal
controls environment was undertaken by an internal project
team, assisted by PWC, in the last quarter of FY20. For each
key financial and non-financial control area, workshops were
held with the process owners to: develop a framework of
expected controls to address risks to the business; assess the
current operating effectiveness of controls; agree and manage
an action plan of remediating control failures and implement
further controls identified as part of the framework; and to
embed the new framework into the business with a system
of monitoring progress established. The majority of actions
were completed before 31 July 2020 and the remainder are
scheduled for completion by the end of December 2020,
although the disruption caused by the impact of the Covid-19
pandemic may influence this timing. Actions identified included
improvements to IT controls, including access and segregation
of duties, and financial review controls and processes and
balance sheet reconciliations. Where actions could not be
completed by the year end or there were potential gaps in the
effectiveness of the controls during the year, a review of the
potential impact on the financial statements was undertaken
and other compensatory controls identified to provide
confidence that there was no material risk of error. This included
performing detailed, transaction verification in certain areas.
The deferral of the announcement of our FY20 results has
provided more time for both the finance team and the external
auditors to undertake this additional work which has contributed
significantly to the size of the audit fee. In particular, issues
around month end closure routines have been identified by
Deloitte which need to be included in the internal controls
framework project and addressed as a matter of urgency. The
completion of this project during FY21 will be overseen by the
CFO and Head of Internal Audit, with additional resource and
will report regularly to the Audit Committee.
In conjunction with the internal controls framework project,
a separate project reviewing stock variances following the
identification of the prior year adjustment was instigated. This
reviewed the interaction between the different stock systems
for individual transactions that were posted to the accounts. As
a result of the project, new processes have been implemented
and additional monthly reconciliations undertaken, with key
steps identified to resolve any material differences.
The controls framework developed is designed to manage the
risk that is inherent in pursuit of our business strategy and
objectives and to provide reasonable assurance against material
misstatement or loss. During FY21, outstanding remedial
actions will be completed. A programme to embed the controls
framework into the business and to monitor ongoing compliance
and further improvements to the control environment has
been established. The project has been useful in reminding the
business of the need to continue to challenge the effectiveness
of the controls environment and to look for ongoing
improvements. It has identified the interaction of controls
83
between processes and their reliance on common controls and
emphasised the importance of the timely resolution of issues
identified by reconciliations and other checks within the control
process.
The Audit Committee will be regularly updated on progress
and compliance during FY21. The Committee will continue
to review the effectiveness of the programme implemented
and any further actions or recommendations to improve the
internal controls environment, including control observations
raised by the external audit of the FY20 financial statements.
Management, based on the review of the control environment
described above and in the financial statements close process,
have provided the Committee with assurance that there are
sufficient controls or mitigating actions in place to conclude
that the financial statements contain no material errors. It
is recognised that there will be further improvements in the
current year with the completion of the remaining remediation
actions.
Effectiveness of external audit
A review of the effectiveness of the FY19 external audit,
undertaken by an internal survey of members of the Committee,
the Chief Financial Officer, and the internal finance team, was
undertaken and the results considered by the Committee in
October 2019. The review adopted the Financial Reporting
Council (‘FRC’) guidance on effectiveness. The review
concluded that the external audit was executed effectively by
Deloitte.
The FRC’s Audit Quality Review team selected to review the
audit of the Group’s FY19 financial statements as part of its
annual inspection of audit firms. The focus of the review and the
team’s reporting is on identifying areas where improvements
are required rather than highlighting areas performed to or
above the expected level. The Chairman of the Audit Committee
received a full copy of the findings of the Audit Quality Review
team and has discussed these with Deloitte. The Committee
confirmed that there were no significant areas for improvement
identified within the report and was satisfied that there is
nothing within the report which might have a bearing on the
audit appointment.
corporate.superdry.comGOVERNANCE Audit Committee Report
CONTINUED
Audit fees
The Committee was satisfied that the level of audit fees payable in respect of the audit services provided of £1,750,000 (FY19:
£961,000) was appropriate. The Committee noted that the increase in fees was commensurate with the additional work undertaken
by the external auditor in relation to the complexity of the FY20 audit.
Non-audit services
The general policy in respect of non-audit work by the external auditors is that they should not be requested to carry out a prohibited
non-audit service as defined under provision 5.167 of the Financial Reporting Council’s Ethical Standard and/or non-audit services
on any material activity of the Group where they may, in the future, be required to give an audit opinion or act as management, in
accordance with the Audit Practices Board’s Ethical Standard for Auditors.
In certain limited areas it is in the Group’s and its shareholders’ interests to engage the external audit firm to deliver certain services.
To protect auditor objectivity and independence the Committee approves each individual non-audit service that is not considered
to be ‘clearly trivial’ (less than £10,000 in value) and every piece of work, once an agreed threshold, which is capped at a value
equivalent to the audit fee, is reached. The level of non-audit fees are monitored to ensure they do not exceed 70% of the average
annual statutory audit fees payable over the last three years.
Details of all non-audit services provided during the year are set out within the note on Auditor’s remuneration in note 10 on page 147
in the Financial Statements and are summarised in the table below:
Total audit fees payable to the Company’s Auditors and its associates
Non-audit fees
Audit-related assurance services
All other services
Total non-audit fees
Audit fees as a percentage of total auditor remuneration
Total Auditor’s remuneration
2020
£’000
1,750
200
-
200
89.7%
1,950
2019
£’000
961
41
-
41
89.4%
1,075
Non-audit fees were 10.3% and were incurred in respect of the interim review.
The Committee has reviewed and agreed the non-audit services as set out above provided by the external auditors, together with the
associated fees, and is satisfied that these did not prejudice the external Auditor’s independence or objectivity.
ALASTAIR MILLER
Audit Committee Chairman
20 September 2020
84
Supervision of the external auditors
The Committee oversees the external auditors by reviewing,
challenging, and approving the audit plan and ensuring that
it is consistent with the scope of the audit engagement. The
Committee meets regularly with the external auditors, both
with and without management present. During the review of
the audit plan, the Committee discussed and agreed those
financial statement risk areas identified by the auditors that
required additional audit emphasis, including newly adopted
IFRS 16 and the impact on the Group of the Covid-19 pandemic
and global economic uncertainly. The Committee discussed and
challenged the auditor’s assessment of materiality, including
the level for reporting unadjusted differences. The audit opinion
on pages 112 to 126 provides a full explanation of the scope
of the audit, concept of materiality and key accounting and
reporting judgements.
Independence of external auditors
Auditor independence is maintained by reviewing Deloitte’s
confirmation of their independence and monitoring the nature
and value of non-audit services carried out. The Committee
will continue to ensure that employees of the external auditors
who have worked on the audit in the past two years are not
appointed, without prior approval of the Committee, to senior
financial positions within the Group. In addition, the rotation of
the lead partner occurs every five years.
The Committee assessed the independence of the external
auditors and concluded that they were independent.
Reappointment of auditor
Following a formal tender process in 2017, Deloitte LLP was
appointed as Auditor at the 2017 AGM. The senior statutory
auditor, Ed Hanson, has overseen the audit of the Group since
the financial period ended 28 April 2018. The Group intends
to put the external audit out to tender at least as often as is
required by applicable law, rules, regulations and best practice
in line with the Competition and Markets Authority and EU
requirements for mandatory tendering and rotation of the
audit firm. Under current regulations the external audit must
be put out to tender by 2027. The Group has complied with
The Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Processes and
Audit Committee Responsibilities) Order 2014 (Article 7.1)
during the financial year. With respect to the re-appointment
of Deloitte as auditor, their performance and the quality of the
audit was an important consideration for the Committee. The
Committee has recommended to the Board that Deloitte be re-
appointed at the forthcoming AGM.
Superdry plc Annual Report 2020GOVERNANCE Directors’ Remuneration Report
GEORGINA HARVEY
Committee Chair
Principal responsibilities
• Review workforce remuneration and remuneration policy to ensure that it is aligned with the Group’s
strategy, culture and values whilst promoting its long-term success;
• Responsibility for all elements of the remuneration of the Executive Directors and senior Executives and the
design of and targets for annual and long-term performance related pay;
• To put in place a remuneration framework and policy that attracts, retains and motivates executive
management who will successfully and sustainably run the Group for the benefit of shareholders as a
whole, whilst having regard to the views of all stakeholders;
• When setting the policy, have regard to pay and employment conditions across the Group; and
• Exercise independent judgement and discretion when approving remuneration outcomes.
85
• No annual bonus will be operated during the
2020/21 financial year for Executive Directors
given the current climate of uncertainty.
In respect of our Remuneration Policy, which will
shortly reach the end of its three-year life, due to the
impact of Covid-19 and general economic uncertainty,
the Committee has concluded that at this time, the
existing Remuneration Policy should be rolled forward
with only limited changes in order to ensure Superdry
continues to be aligned with developments in good
remuneration governance. That said, the Committee
may revert with more substantive changes to the
Policy for consultation and shareholder approval in
advance of the 2023 AGM (i.e. before the end of the
next Policy period) once a more normal business
environment exists.
Membership and meeting attendance
The Committee met eight times during the year. In addition to the members
of the Committee, the Chief Executive Officer (or Interim Chief Executive
Officer) and the Group HR Director attended each of the meetings. By
invitation of the Committee Chairman, other Non-Executive Directors
attended meetings of the Committee during the year.
The role of secretary to the Committee is performed by the Company
Secretary or her nominee. A report on the Committee’s activities is given to
the Board at each Board meeting, following a meeting of the Committee.
Georgina
Harvey
Committee chair
Faisal
Galaria
Helen
Weir
Alastair
Miller
Member since:
29 July 2019
Member since:
29 July 2019
Member since:
11 July 2019
Member since:
11 July 2019
Meetings
attended:
5/5
Meetings
attended:
5/5
Meetings
attended:
5/5
Meetings
attended:
5/5
Departures during the year:
Peter Williams
Resigned 11 Sept
2019
(Member since
2 April 2019)
Dennis Millard
Resigned 1 July
2019
(Member since
2 April 2019)
John Smith
Resigned 1 July
2019
(Member since
1 Feb 2018)
Sara Wood
Resigned 1 July
2019
(Member since
1 Oct 2018)
Minnow Powell
Resigned 1 July
2019
(Member since
1 Dec 2017)
Meetings
attended:
4/4
Meetings
attended:
3/3
Meetings
attended:
3/3
Meetings
attended:
3/3
Meetings
attended:
3/3
Part 1: Annual Statement
Dear shareholders, on behalf of the Board, I am pleased
to present our FY20 Directors’ Remuneration Report
for the financial period ending 25 April 2020, my first as
Chair of the Committee.
This year, in conjunction with our regular duties, the
Committee has been preparing and discussing an
updated Remuneration Policy and we have consulted
with our major shareholders on our proposed Policy
which will be presented for approval at the 2020 AGM.
I would like to thank those shareholders who have
participated in this process for their feedback and
guidance, which resulted in a change to the original
proposals.
As I write, the Committee is continuing to consider
the impacts of Covid-19 on remuneration at Superdry.
We have faced significant challenges in respect of
Covid-19 and these are certainly unprecedented times
for all of our stakeholders. As such, the Committee has
undertaken the following actions:
• Base salaries for the CEO and CFO and fees for
Non-Executives were reduced by 25% from
1 April 2020, whilst base salaries for the Executive
committee were reduced by 20%. The reduction
continued until 30 June 2020 for the CFO and
Executive Committee and will continue until 30
September 2020 for the CEO and Non-Executive
Directors;
• Pension provision for incumbent Directors (7.5%
of salary) will be reduced to align it with the
general workforce provision (4% of salary) by the
end of the financial year ending 24 April 2021.
Pension provision for new appointments will also
be workforce aligned as per the Policy change
explained below; and
corporate.superdry.comGOVERNANCE Directors’ Remuneration Report
CONTINUED
Preparation of this Report
This report has been prepared in accordance with the Large and
Medium-sized Companies and Group (Accounts and Reports)
Regulations 2013, as amended, and the principles of the
prevailing UK Corporate Governance Code. As required, this
report is split into three sections:
• This Annual Statement of the Remuneration Committee
Chair for the period ended 25 April 2020, which summarises
remuneration outcomes and how the Remuneration Policy will
operate for the financial year 2021;
86
• The Remuneration Policy Report, which sets out our new
Remuneration Policy which will be subject to a binding vote
at our 2020 AGM, given that the current Policy is reaching
the end of its three-year life; and
• The Annual Report on Remuneration which sets out
remuneration for the financial year 2020 and how it will
be implemented for the financial year 2021. The Directors’
Remuneration Report, excluding the Directors’ Remuneration
Policy, will be subject to an advisory vote at our 2020 AGM.
In addition, a resolution will be proposed to renew the current
Performance Share Plan, which is nearing the end of its 10 year
life. The terms of the new plan will broadly mirror the existing plan,
other than the removal of the exceptional award limit and the
incorporation of a number of developments in market and good
practice (including updating the malus and clawback provisions).
Remuneration framework
The Board is committed to ensuring that its remuneration
framework supports our strategy and provides balance between
motivating and challenging our senior leaders to deliver our
business priorities and strong performance whilst also driving
Superdry’s long-term sustainable success. As a result, a
significant proportion of performance related reward is delivered
through shares. This ensures that our leaders have meaningful
long-term investment in our business and that their interests are
closely aligned with our shareholders.
This year a sixth principle has been added around driving
an agenda in remuneration that is simple, fair and easy to
understand. The Remuneration Policy for Senior Executives and
other senior managers is based on the principles below.
Key responsibilities of the
Remuneration Committee
The key responsibilities of the Remuneration Committee are to:
•
•
•
•
determine the framework and policy for the remuneration of
the Chairman, Chief Executive Officer, the other Executive
Directors, the Company Secretary and other senior
executives (together ‘the Senior Executives’) and ensure it
remains appropriate;
advise on the design of, and to determine and agree,
the total individual remuneration package of each of the
Senior Executives, giving due regard to any relevant legal
requirements, the provisions and recommendations set out
in the Code and the UK Listing Authority’s Listing Rules and
associated guidance;
approve the design of, and targets for, annual and long-term
performance related pay schemes operated for the Senior
Executives and other senior managers, the total annual
payments made under such schemes and provide oversight
and guidance in relation to other Group-wide incentive
proposals to ensure that these are aligned to performance,
Superdry’s core values and the Board’s risk appetite; and
oversee remuneration and benefits structures and policies
throughout Superdry’s business and to give advice on any
major changes.
Activities during the year
The key activities undertaken by the Committee during the
year were:
•
•
•
•
reviewing the salary, benefits and bonus schemes for the
Senior Executives and agreeing the level of bonus awards to
be made to them;
reviewing the operation of the Performance Share Plan
including the grant and vesting of awards and reviewing the
TSR comparator group;
reviewing and approving the reporting on Superdry’s Gender
Pay Gap;
consideration of thematic points arising from voting
recommendations of proxy advisers;
•
•
•
•
•
•
reviewing the Directors’ Remuneration Policy and Group-
wide remuneration practices;
approving the remuneration terms relating to senior
new hires and departures and associated share scheme
implications;
reviewing and approving the Committee’s terms of
reference;
reviewing the effectiveness of the Committee’s operation
against its terms of reference;
considering remuneration related measures to mitigate the
impact of the Covid-19 outbreak on the business as noted
above; and
reviewing the results of the external Committee evaluation
in February 2020.
In addition, the Committee has considered how the Policy and
practices are consistent with the six factors set out in Provision
40 of the 2018 UK Corporate Governance Code:
Clarity – our Policy is well understood by our senior team and
employees more generally and has been clearly articulated to
our shareholders;
Simplicity – the Committee is mindful of the need to avoid
overly complex remuneration structures which can be
misunderstood and deliver unintended outcomes. As such, our
executive remuneration policies and practices are as simple to
communicate and operate as possible, while ensuring that they
are aligned to our strategy;
Risk – our Remuneration Policy is based on: (i) a combination
of both short and long term incentive plans based on financial,
non-financial and share-price-linked targets; (ii) a combination
of cash and equity; and (iii) a number of shareholder protections
(i.e. bonus deferral, shareholding guidelines, malus/clawback
provisions) which have been designed to reduce the risk of
inappropriate risk-taking;
Recruit and retain high
calibre talent
Embeds our unique
values
Drives share ownership
Delivers long-term
sustainable growth
Aligned to the Business
Objectives
Simple and fair
V
V
V
V
V
V
Building a team of
talented people
Reinforcing our unique
family culture
Aligning shareholder and
colleague interests
Encouraging behaviours
that will deliver long-term
sustainable Brand growth
Delivering the strategic
plan
Easily understood by
others and balanced
against the wider
workforce
Superdry plc Annual Report 2020GOVERNANCE 87
Predictability – our incentive plans are subject to individual
caps, with our share plans also subject to market standard
dilution limits. The scenario charts in the Remuneration
Policy illustrate how the rewards potentially receivable by our
Executive Directors vary based on performance and share price
growth;
Proportionality – there is a clear link between individual
awards, delivery of strategy and our long-term performance. In
addition, the structure of our short and long-term incentives,
together with the structure of the Executive Directors’ service
contracts, ensures that poor performance is not rewarded; and
Alignment to culture – Superdry’s culture and strategy is fully
supported through the metrics in both the annual bonus and
long-term incentive which measure how we perform against
our main KPIs that underpin the delivery of our strategy.
Board changes
The following Board changes took place during the 2020
financial year:
• Dennis Millard, Minnow Powell, Sarah Wood and John
Smith stood down as Non-Executive Directors with effect
from 1 July 2019;
• The following Non-Executive Directors were appointed
during the financial year: Helen Weir (from 11 July 2019);
Alastair Miller (from 11 July 2019); Georgina Harvey (from
29 July 2019); and Faisal Galaria (from 29 July 2019); and
• Nick Gresham, was appointed as an Executive Director on
3 June 2019. Full details of the remuneration arrangements
for the new appointments and resignations are set out in
part 3: Annual Report on Remuneration.
Remuneration for financial year 2020
The outbreak of Covid-19 is unprecedented and has had a
significant impact on Superdry. We closed all of our stores
globally, reducing our actively at work employees by 88%.
Stores started to open in Europe from the end of April and from
June in the UK and US; however, the majority of stores have
not returned to full capacity. Executives and Non-Executive
Directors reduced their pay by 25% accordingly. The reduction
continued until 30 June 2020 for the CFO and will continue until
30 September 2020 for the CEO and Non-Executive Directors.
On the basis that the overall financial performance of the
business has fallen short of expectations this year, there will be
no annual bonus awards in relation to FY20 and nil vesting under
the 2017 PSP awards which were due to vest in July 2020.
Summary of policy changes
A summary of the policy changes being proposed, which reflect
only limited changes in order to ensure Superdry continues to
be aligned with developments in good remuneration governance
as detailed above, are as follows:
• A commitment to introducing a more conventional approach
to bonus deferral to the extent that bonus potential is
restored to normal levels during the 2020-2023 Policy Period.
Under the current Policy, any bonus above 100% of salary is
deferred into shares for three years, albeit given that recent
potential has been capped at 100% of salary, no deferral has
operated (noting that no bonus will operate for 2020/21).
Going forward, to the extent that bonus potential is restored
to the 150% of salary Policy maximum, one third of any bonus
will be deferred into shares for three years;
• The maximum pension contribution rate of 15% of salary
will be removed. Going forwards, pension provision for
Executive Directors and new employees promoted to the
Board will be aligned, in percentage of salary terms, to the
general workforce contribution rate. This change will align
the Policy to the 2018 UK Corporate Governance Code;
• The exceptional PSP award limit of 300% of salary will be
removed, leaving a single 200% of salary annual PSP grant
limit, given that the 200% of salary is considered sufficient
for the next three-year Policy period;
• The CFO’s shareholding guideline will be increased from
150% to 200% of salary, in line with that operated for the
CEO role and in line with best and market practice;
• A post-cessation shareholding guideline will be introduced.
Going forward, Executive Directors will need to retain
shares equal to 100% of the in-employment shareholding
guideline up until the first anniversary of cessation,
reducing to 50% of the guideline between the first and
second anniversary. Any shares that have been purchased
by an Executive Director, shares acquired through buyout
awards and share awards granted prior to the 2020 AGM
will be excluded from this post cessation guideline. This
change is consistent with the provisions of the 2018 UK
Corporate Governance Code; and
• Malus and clawback triggers in the bonus and PSP will be
enhanced (e.g. corporate failure and insolvency triggers will
be added).
corporate.superdry.comGOVERNANCE Directors’ Remuneration Report
CONTINUED
Implementing the Policy for Financial Year 2021
As explained above, at the 2020 AGM we will be submitting our Directors’ Remuneration Policy for renewal by our shareholders. The Policy is materially unchanged from our current Policy, which was
approved at our 2017 AGM, with the changes proposed being made to align the Policy with the UK Corporate Governance Code and regulatory reporting requirements.
Base salaries
Pension
Reduced by 25% until 30 June 2020 for Nick Gresham and until 30 September 2020 for Julian Dunkerton
Pension provision for incumbent Directors will be reduced to align it with the general workforce provision (4% of salary) by the end of the 2021 financial year. Pension
provision for any new appointments will also be workforce aligned
Annual bonus
No bonus will be operated for 2020/21
PSP
88
The Committee intends to grant PSP awards during the 2020/21 financial year (although Julian Dunkerton does not participate in the PSP). To the extent that PSP
awards are granted, consideration will be given to the prevailing share price and appropriate performance metrics/targets will be set and disclosed in the post grant
RNS at the relevant time
Shareholding guidelines
Post-employment shareholding guidelines will be introduced going forward, requiring Executive Directors to retain their relevant shareholding at the date of leaving for
two years post cessation
Shareholder consultation in respect of the new Policy
In formulating our revised Policy, the Committee consulted with our largest 20 shareholders and the main representative bodies. The Committee is grateful for the level of support received from
investors for the Committee’s approach and as such, only one change has been made to the proposed Remuneration Policy (the introduction of a more conventional bonus deferral) as set out above.
Conclusion
I hope you are supportive of our revised Policy and the approach to Policy implementation for financial year 2021, which is a continuation of our considered and prudent approach to remuneration
at Superdry, and that you will therefore vote in favour of the remuneration related resolutions that will be tabled at the forthcoming AGM.
GEORGINA HARVEY
Remuneration Committee Chair
20 September 2020
Superdry plc Annual Report 2020GOVERNANCE Part 2: Directors’ Remuneration Policy (unaudited)
Policy scope
The Policy applies to the Chairman, Executive Directors and Non-Executive Directors.
Policy duration
Given that the current Directors’ Remuneration Policy Report (approved at the 2017 AGM) will shortly reach the end of its three-year life, a new Policy will be put to shareholders for approval at the 2020
AGM. Subject to approval, the new Policy will apply from that date for a maximum of three years, albeit the Committee may revert with more substantive changes to the Policy for consultation
and shareholder approval in advance of the 2023 AGM (i.e. before the end of the next Policy period) once a more normal business environment exists.
Changes from the current Policy
The Policy changes being proposed are as follows:
•
Introduce a more conventional approach to bonus deferral to the extent that bonus potential is restored to normal levels during the 2020-2023 Policy Period. Under the current Policy, any bonus
above 100% of salary is deferred into shares for three years, albeit given that recent potential has been capped at 100% of salary, no deferral has operated (noting that no bonus will operate for
2020/21). Going forward, to the extent that bonus potential is restored to the 150% of salary Policy maximum, one third of any bonus will be deferred into shares for three years;
• The maximum pension contribution rate of 15% of salary will be removed. Going forwards, pension provision for new Executive Directors and new employees promoted to the Board will be aligned, in
percentage of salary terms, to the general workforce contribution rate. This change will align the Policy to the 2018 UK Corporate Governance Code;
• The exceptional PSP award limit of 300% of salary will be removed, leaving a single 200% of salary annual PSP grant limit, given that the 200% of salary is considered sufficient for the next three-
89
year Policy period;
• The CFO’s shareholding guideline will be increased from 150% to 200% of salary, in line with that operated for the CEO role and in line with best and market practice;
• A post cessation shareholding guideline will be introduced. Going forward, Executive Directors will need to retain shares equal to 100% of the in-post shareholding guideline up until the first
anniversary of cessation, reducing to 50% of the guideline between the first and second anniversary. Any shares that have been purchased by an Executive Director, shares acquired through buyout
awards and share awards granted prior to the 2020 AGM will be excluded from this post cessation guideline. This change is consistent with the provisions of the 2018 UK Corporate Governance
Code; and
• Malus and clawback triggers in the bonus and PSP will be enhanced (corporate failure and insolvency triggers will be added).
Proposed Policy
This section sets out a summary of the Remuneration Policy which will be voted on by Shareholders at the 2020 AGM.
Remuneration Policy overview
We aim to provide a remuneration structure and approach that helps align the interests of Executives and shareholders, and enables the attraction, retention and motivation of high calibre people with
the capability to drive continued growth of the business. Where the Committee has discretion in implementing the Remuneration Policy, that discretion will be exercised diligently and in a manner
aligned with shareholder interests. Discretion will only be exercised within the boundaries and limits set out in the Remuneration Policy.
corporate.superdry.comGOVERNANCE Directors’ Remuneration Report
CONTINUED
Summary of the Executive Director Remuneration Policy
Element: Base Salary
Purpose and link to strategy
Set at levels to attract and retain talented Executive Directors of the high calibre required to
develop and deliver our ambitious growth strategy. Base salary will reflect each Executive
Director’s individual skill, experience and role within the Group. Any changes to salary will take
account of average increases across the Group.
90
Maximum opportunity
Salary increases will typically be in line with the general level of increase awarded to other
employees in the Group and/or the Executive Director’s country of employment.
In exceptional circumstances (e.g. where there is an increase in scale, scope and/or responsibility,
to reflect the development and success of the individual within the role, and/or to take account of
relevant levels/market movements) a higher increase may be awarded.
There is no prescribed maximum base salary level or maximum annual increase.
Current salaries are detailed in the Annual Report on Remuneration.
Operation
Performance measures
When determining base salary the Committee typically takes into account:
Individual and business performance are taken into consideration when deciding salary levels.
•
•
•
•
salary levels for comparable roles at companies of a similar size, industry, global scope and
complexity;
business and individual performance;
changes to the scale and complexity of the role; and
salaries paid to other employees across the Group.
Base salary is normally paid on a monthly basis in cash. The base salary for each Executive
Director is normally reviewed annually in May by the Committee although an out of cycle review
may be conducted if the Committee determines this is necessary. A salary review will not
necessarily lead to an increase in salary.
Superdry plc Annual Report 2020GOVERNANCE Element: Retirement Benefits
Purpose and link to strategy
To provide retirement benefits which are market competitive and to enable us to attract and
retain Executive Directors of the right calibre.
Maximum opportunity
New Executive Directors: In line with the general workforce contribution rate (as a % of salary).
Current Executive Directors: Pension provision of incumbent Executive Directors will be aligned to
the general workforce contribution rate by the end of the 2020/21 financial year.
Operation
Performance measures
Executive Directors can choose to participate in the personal pension plan relevant to the country
where they are employed, and/or to receive a cash allowance, or a combination of the two. Our
Group personal pension plan is a defined contribution plan.
Element: Other Benefits
Purpose and link to strategy
Maximum opportunity
91
To ensure Superdry is broadly competitive on benefits with broader market practice.
There is no maximum level of benefits provided to an individual Executive Director.
To support personal health and well-being.
Participation by Executive Directors in the SAYE scheme, and any other all-employee share
plan operated in the future, is limited to the maximum award levels permitted by HM Revenue &
Customs.
Operation
Performance measures
Benefit provision is set at an appropriate market level taking into account market practice in the
Executive Director’s home jurisdiction, the jurisdiction where they are based, and benefits for
similar roles at similar companies and the level/type of benefits provided elsewhere in the Group.
The benefits to which Executive Directors are entitled include (but are not limited to) private
medical insurance (for the individual and their family), company sick pay, holiday pay, life
assurance, car allowance and staff discount on Superdry products. Other benefits may be
provided where appropriate.
In-country and global relocation support may also be provided where appropriate.
Executive Directors are eligible to participate, on the same basis as other employees, in our SAYE
and BAYE schemes. They may also be granted eligibility to participate on the same terms in any
new benefit plans, including all-employee share incentives, set up for the wider employee group.
corporate.superdry.comGOVERNANCE Directors’ Remuneration Report
CONTINUED
Element: Annual Performance Bonus
Purpose and link to strategy
To encourage and reward the achievement of challenging financial and strategic performance
targets during a financial year. The performance measures set each year align to our strategy
and shareholder value creation.
Maximum opportunity
Up to 150% of base salary (currently set at 100% of salary).
Operation
Performance measures
92
Bonus payments up to 100% of salary are normally awarded in cash and are not pensionable.
An individual Executive Director may choose to defer bonus awarded into our Group personal
pension plan.
Bonus deferral: Noting that current bonus potential is set at 100% of salary (and no annual bonus
will be operated for 2020/21), should bonus potential be restored to the 150% of salary Policy
maximum during the Policy period (following appropriate shareholder consultation), one third of
any bonus will be deferred into shares for three years.
Performance is normally assessed over one financial year.
The annual performance bonus may be based on a mix of financial, personal and/or strategic
business objectives relevant to the particular performance year and is aimed at securing a
sustainable long-term business model.
The performance criteria and performance targets are determined by the Committee each year
and include threshold levels for minimum award (below which no bonus will be awarded), on-target
award and maximum award.
The Committee will set demanding performance targets to encourage stretch performance. These
targets are considered to be commercially confidential and will therefore be disclosed in due
course after the performance period has ended.
A straight-line sliding scale between threshold (0% of opportunity), target (50% of opportunity)
and maximum (100% of opportunity) is used to determine the level of award.
Malus and clawback provisions apply as described below.
Element: Performance Share Plan
Purpose and link to strategy
To incentivise and reward Executive Directors to develop and deliver Superdry’s ambitious
strategy, that create long-term value and to ensure a strong link between executive reward and
Group performance / total shareholder return.
To support recruitment, long-term retention and collaborative working through share ownership.
Maximum opportunity
200% of salary.
Operation
Performance measures
Awards are granted on a discretionary basis and are normally subject to performance and
continued employment at the end of a three-year performance period with a two-year post-vest
holding period. Awards may be structured as conditional awards or nil or nominal cost options.
Executive Directors may benefit, in the form of cash or shares, from the value of any dividend paid
between the date of grant and the date of vesting to the extent that awards vest.
The Committee determines performance targets for each new cycle to ensure that the targets
are stretching and support value creation for shareholders while remaining motivational for
management. Performance measures will be based on financial, strategic and/or share price-
related metrics.
A maximum of 25% of an award will vest for threshold performance increasing to 100% vesting for
maximum performance.
Malus and clawback provisions will apply as described below.
Superdry plc Annual Report 2020GOVERNANCE Element: Share Ownership Guidelines
Purpose and link to strategy
Level
To help further strengthen the alignment between management and shareholders.
Minimum of 200% of base salary.
Operation
Performance measures
In employment: Executive Directors not holding shares worth at least 200% of their base salary
will be expected to retain 50% of any PSP awards which vest (net of tax) until such time as that
level of holding is met.
Post cessation: Executive Directors will need to retain shares equal to 100% of the in-post
shareholding guideline up until the first anniversary of cessation (or actual shareholding if lower),
reducing to 50% of the guideline (or actual shareholding if lower) between the first and second
anniversary. Any shares purchased by an Executive Director, shares acquired through buyout
awards and share awards granted prior to the 2020 AGM will be excluded from this post cessation
guideline.
93
Selection of performance measures
Financial performance measures (e.g. underlying diluted EPS (‘EPS’)) and TSR are normally used for the majority of the PSP’s performance criteria. The Group’s key performance indicators, as set out
in the Strategic Report, contribute to the delivery of EPS and TSR. The combination of EPS and TSR as performance conditions for the PSP provides a balance between rewarding management for
growth in sustainable profitability and stock market outperformance. TSR is a clear indicator of the relative success of the Group in delivering shareholder value and, as a performance measure, firmly
aligns the interests of PSP participants and shareholders. The EPS target range will require significant levels of growth and the TSR condition will be based on relative outperformance of relevant listed
companies. That said, performance measures other than EPS and TSR may be operated where the Committee considers it appropriate to do so.
Malus and clawback provisions
The Committee has discretion to cancel, reduce or clawback individual or all annual bonus awards in certain circumstances including:
•
•
•
•
a misstatement of results that resulted in an award being paid at too high a level;
a material failure of risk management or health and safety;
serious reputational damage to Superdry; and/or personal misconduct; and
corporate failure or insolvency.
The Committee may at any time before the vesting of PSP awards reduce the number of shares in certain circumstances, including if:
•
•
a material misstatement of financial results has resulted in the award having been granted over a higher number of shares than would otherwise have been the case; and
the number of shares awarded was based on any other kind of error or basis of information or assumption that turns out to be inaccurate and resulted in the award having been granted a higher
number of shares than would otherwise have been the case.
For three years after any PSP award vests, the Committee may decide that the individual is subject to clawback if:
•
•
•
•
there has been a material misstatement of results that resulted in an award being paid at too high a level;
there has been an error in assessing any performance condition or there was inaccurate or misleading information or assumptions that resulted in the award vesting at a higher level than otherwise
would have been the case;
there has been serious reputational damage to Superdry; and/or personal misconduct; and
there is a corporate failure or insolvency.
Legacy arrangements
The Group will honour any commitments entered into prior to the approval and implementation of the Remuneration Policy as detailed in this report, and Executive Directors will be eligible to receive
payment from any historical awards made.
corporate.superdry.comGOVERNANCE Directors’ Remuneration Report
CONTINUED
Scenario chart
The charts below show how the Directors’ Remuneration Policy set out above is expected to be applied for Executive Directors during the Policy period using the following assumptions:
94
Minimum
Target
• Consists of base salary, benefits and pension.
• Base salary from 1 May 2020 (excluding any Covid-19 reductions).
• Benefits are based on estimated values for 2020/21.
• Pension is based on 4% of salary given the intention for pension to be workforce aligned by the end of 2020/21.
Julian Dunkerton
Nick Gresham
Base salary
£600,000
£400,000
Benefits
£16,000
£12,000
Pension
£24,000
£16,000
Total fixed
£640,000
£428,000
Based on what the Executive Director would receive if performance was on-target (excluding share price appreciation and dividends):
• Assumed 50% of the maximum bonus potential and 50% of PSP awards (where relevant)
Based on the maximum remuneration receivable (excluding share price appreciation and dividends):
Maximum
operated for 2020/21.
• Annual bonus: based on a maximum bonus of 100% of salary, noting that this is below the normal 150% of salary Policy maximum and that no bonus will be
•
Long term incentive: based on a 150% of salary PSP award for the CFO (noting that actual award levels may be lower). The CEO does not currently participate
in the PSP.
Maximum with 50%
share price growth
• As the Maximum scenario plus the value resulting from a share price growth of 50% from the PSP award.
£’000
£2,000
£1,750
£1,500
£1,250
£1,000
£750
£500
£250
£0
Julian Dunkerton
Chief Executive Officer
Nick Gresham
Chief Financial Officer
0
4
6
£
0
4
9
£
0
4
2
,
1
£
0
4
2
,
1
£
8
2
4
£
8
2
9
£
8
2
4
,
1
£
8
2
7
,
1
£
17%
32%
48%
48%
42%
35%
28%
23%
32%
22%
100%
68%
52%
52%
100%
46%
30%
25%
Minimum
On-target
Maximum
Maximum with
share price
growth
Minimum
On-target
Maximum
Maximum with
share price
growth
■ Share price growth ■ PSP ■ Annual Bonus ■ Fixed pay (salary, benefits, pension)
Superdry plc Annual Report 2020GOVERNANCE Remuneration arrangements across Superdry
The reward philosophy continues to be consistent across
Superdry, namely that reward should support our business
strategy and be sufficient to attract, motivate and retain
high performing individuals. Within this framework, there are
differences for a range of reasons, including global location,
culture, best practice, employment regulation and the local
employment market conditions.
• Salaries and benefits – a range of factors are considered
including business performance, individual capability and
performance, the pay of other employees and external
market data.
• Annual performance bonus – consistent with the
Remuneration Policy for Executive Directors, annual
bonuses are typically linked to business performance with a
focus on underlying profit before tax, although the business
retains the right to void a bonus award in circumstances
where we deem an individual has not performed to an
acceptable level or has acted inappropriately during the
performance period.
• PSP – a small number of the management team who
provide significant strategic input or lead a significant
function within Superdry, and more junior employees who
have made an exceptional contribution, may be invited to
participate in the PSP in any financial year.
• Founder Share Plan (FSP) – All of our colleagues across
Superdry were invited to participate in the FSP. Funded
by the generosity of our two founders, Julian Dunkerton
and James Holder, the plan gives every colleague the
opportunity to share in a proportion of any wealth gain due
to the growth in Superdry’s share price. Executive Directors
do not benefit from the FSP.
• All employee share schemes – in the UK the Group
operates SAYE and BAYE share schemes which are open to
all eligible employees. Under the SAYE scheme employees
can elect to save up to £500 each month for a fixed period
of three years. At the end of the savings period, individuals
may use their savings to buy Superdry ordinary shares at a
discount capped at up to 20% of the market price set at the
launch of the scheme. The BAYE scheme gives employees
the opportunity to buy shares up to the value of £1,800 per
year using pre-tax earnings. For every 10 shares purchased
through this scheme the Group offers one free matching
share.
• Retirement benefits – in line with local country practices,
we encourage all employees to contribute appropriate
savings toward their retirement. In the UK, we operate
pension arrangements within the Occupational and
Personal Pension Schemes (Automatic Enrolment)
Regulations 2010.
Executive Directors’ service agreements
The following table sets out a description of any obligations on Superdry, contained in the current Executive Directors’ contracts,
which could give rise to, or impact, remuneration payments or payments for loss of office.
Element
Notice period
Terms
Julian Dunkerton – 12 months by Superdry and 3 months by the Executive Director.
Nick Gresham - 6 months by Superdry and 6 months by the Executive Director.
Contract date
Julian Dunkerton – 2 April 2019 to 1 April 2021 (subject to review).
Nick Gresham – 3 June 2019 (6 months’ notice period).
95
Base salary
As per contracts.
Pension contributions
Employer pension contribution.
Contractual benefits
Contractual entitlement to:
•
•
•
•
•
•
private medical insurance;
company sick pay;
life assurance
holiday pay;
car allowance; and
discount on Superdry products.
Annual bonus
Participation is subject to the Committee’s discretion.
Long-term incentive plan
Participation is subject to the Committee’s discretion.
The service contract for any new Executive Director is likely
to include provisions for a notice period of up to six months by
either party, an annual salary review and participation in the
Company’s annual bonus and PSP.
All Executive Director service contracts are available for
inspection at our registered office during normal hours of
business, by arrangement with the Company Secretary.
Discretions retained by the Committee
The Committee will operate the annual bonus plan and PSP
according to their respective rules (or relevant documents),
in line with the applicable approved Remuneration Policy
and in accordance with the Listing Rules where relevant. The
Committee retains certain discretions, consistent with market
practice, with regard to the operation and administration of
these plans. These include, but are not limited to, the following
in relation to the PSP: the participants; the timing of grant
of an award; the size of an award; within policy limits the
determination of vesting; the discretion that may be required
if dealing with a change of control or restructuring of the
Group; determination of the treatment of leavers; adjustments
required in certain circumstances (e.g. rights issues, corporate
restructuring events and special dividends); reviewing
performance measures and weighting; and targets for the PSP
from one cycle to the next.
In relation to the annual bonus plan, the Committee retains
discretion over: the participants; the timing of grant of a payment;
the determination of the bonus payment; dealing with a change
of control; determination of the treatment of leavers based on the
rules of the plan and the appropriate treatment chosen; the annual
review of performance measures and weighting; and targets for
the annual bonus plan from year to year.
In relation to both our PSP and annual bonus plan, the Committee
retains the ability to adjust the targets and/or set different measures
if events occur (e.g. material acquisition and/or divestment of a
business) which cause it to determine that the conditions are no
longer appropriate and that an adjustment is required so that the
conditions achieve their original purpose and are not materially
more or less difficult to satisfy. We have used EPS as a determining
measure since inception for the PSP; it is therefore consistent
and transparent to participants and shareholders. The Committee
may exercise discretion if required to adjust EPS to reflect what it
considers to be a fairer outcome for shareholders and participants.
corporate.superdry.comGOVERNANCE Directors’ Remuneration Report
CONTINUED
96
Any use of the above discretions would, where relevant, be
explained in the Annual Report on Remuneration and may,
as appropriate, be the subject of consultation with our major
shareholders.
The operation of our SAYE and BAYE share schemes will be as
permitted under HM Revenue & Customs’ rules and the Listing
Rules. Details of shares or interests in shares held by Executive
Directors at the end of the financial year are set out in the
Annual Report on Remuneration. These remain eligible to vest
based on their original award terms.
Approach to the recruitment and retention of
Executive Directors - principles
When hiring a new Executive Director or promoting to the Board
from within Superdry, the Committee will offer a package that is
sufficient to attract, retain and motivate the right talent, while at
all times aiming to pay no more than is necessary. In determining
an appropriate remuneration package, the Committee will take
into consideration all relevant factors including but not limited
to the impact on other existing remuneration arrangements, the
candidate’s location and experience, external market influences
and internal pay relativities.
The remuneration package for a new Executive Director would
be set in accordance with the terms of our prevailing approved
Remuneration Policy at the time of appointment and take into
account the skills and experience of the individual, the market
rate for a candidate of that experience and the importance of
securing the relevant individual.
Salary would be provided at such a level as required to attract
the most appropriate candidate and may be set initially at
a below mid-market level on the basis that it may progress
towards the mid-market level once expertise and performance
has been proven and sustained. The annual bonus potential
would be limited to 150% of salary and grants under the PSP
would be limited to 200% of salary.
Pension provision will be workforce aligned and other benefits
will be offered in line with local market practices dependent on
where an Executive Director is located.
In addition, the Committee may offer additional cash and/or share
based elements to replace deferred or incentive pay forfeited by
an Executive Director leaving a previous employer. It would seek
to ensure, where possible, that these awards would be consistent
with awards forfeited in terms of vesting periods, expected value
and performance conditions. For an internal Executive Director
appointment, any variable pay element awarded in respect of
the prior role may be allowed to pay out according to its terms.
In addition, any other ongoing remuneration obligations existing
prior to appointment may continue. For external and internal
appointments, the Committee may agree that certain relocation
and/or incidental expenses (as appropriate) will be met.
Policy on payment for loss of office
We are committed to ensuring a consistent approach and to
not paying more than is necessary in the circumstances of loss
of office. In the event of an early termination of a contract, the
policy is to seek to minimise any liability. When managing such
situations the Committee takes a range of factors into account,
including contractual obligations, shareholder interests,
organisational stability and the need to ensure an effective
handover. Executive Directors may be entitled to a payment in
lieu of notice (‘PILON’) if notice is served by us. In the normal
course of events, the Executive Director would work their
notice period. In the event of termination for cause (e.g. gross
misconduct or negligence), neither notice nor PILON would
be given and the Executive Director would cease to perform
services immediately.
In the event of termination for reasons other than cause (for
example, resignation) where the individual is requested by us to
cease working before the end of the notice period, PILON may
be payable. If a portion of the notice period is served, the PILON
payment will be reduced on a pro rata basis. Payments may be
made on a phased basis. Alternatively, rather than making a
PILON, we may place an Executive Director on garden leave for
the duration of some or all of their notice period.
Where an Executive Director leaves during a financial year, the
annual bonus will not be payable with respect to the period of
the financial year worked in line with the Group’s annual bonus
scheme rules.
Any share based entitlements granted to an Executive
Director under our share plans will be determined based
on the relevant plan rules. The default treatment under the
PSP is that any outstanding awards lapse on cessation of
employment. However, in certain prescribed circumstances,
such as death, ill health, injury, disability, retirement, sale of the
employing company or business outside the Group or any other
circumstances at the discretion of the Committee, ‘good leaver’
status may be applied. For good leavers, awards will normally
vest on their normal vesting date, subject to the satisfaction
of the relevant performance conditions at that time and will be
reduced pro rata to reflect the proportion of the performance
period actually served. However, in the event of the death of an
Executive Director, the Committee has discretion to determine
that awards vest at cessation, subject to performance targets,
with no service pro rata reduction.
Payment may also be made in respect of accrued benefits,
including untaken holiday entitlement, in line with the treatment
of other employees.
In addition, as is consistent with market practice, we may
pay a contribution towards an Executive Director’s legal
fees for entering into a settlement agreement and may pay a
contribution towards fees for outplacement services as part
of a negotiated settlement.
There is no provision for additional compensation on termination
following a change of control, nor liquidated damages of any kind.
Consideration of conditions elsewhere
in Superdry
The Committee has oversight of the main compensation
structures throughout Superdry’s business and actively
considers the relationship between general changes to
employee remuneration and to Executive Director remuneration.
When considering changes to Executive Director remuneration,
the Committee is provided with relevant comparative employee
information (for example, average salary review) across
Superdry.
The Committee does not consider it appropriate to consult
directly with employees when formulating Executive Director
reward policy. However, it does take into account employee
feedback on remuneration from employee surveys, as provided
to the Committee by the Group HR Director.
Consideration of shareholder views –
consultation on remuneration policy
The Committee consulted with Superdry’s top investors and the
main proxy advisory agencies (the IA, ISS and Glass Lewis) in
respect of rolling forward the current Remuneration Policy, with
some updates for developments in good governance. During the
consultation exercise, it was clear that the Committee should
adopt a more conventional approach to bonus deferral and as
such, this change has been incorporated into the policy table
above. At the end of the consultation exercise a wrap-up letter
was sent to those who had been consulted, which set out the
feedback received and the Committee’s response.
Superdry plc Annual Report 2020GOVERNANCE Summary of the Non-Executive Director Remuneration Policy
The Board aims to recruit high calibre Non-Executive Directors with broad commercial, international or other relevant experience. The Remuneration Policy is as follows:
Element
Fees
Purpose and link to strategy
Fees are set at an appropriate level to attract and retain high calibre Non-Executive Directors, and reflect the time commitment and responsibilities of each role
and fees paid in other companies of a similar size, industry, global scope and complexity.
Operation
Fees are normally reviewed annually and are normally paid in cash.
Each Non-Executive Director is paid a basic fee for undertaking Non-Executive Director and Board duties. A higher fee is paid to the Chairman of the Board and the
Senior Independent Director. Additional fees may also be payable for taking on Committee responsibilities and other Board duties.
Non-Executive Directors also receive staff discount on Superdry products. Non-Executive Directors do not receive any other benefits other than reasonable
expenses. Travel and other appropriate expenses (including fees incurred in obtaining professional advice in the furtherance of their duties) incurred in the course
of performing their duties are reimbursed to Non-Executive Directors along with any associated taxes.
97
Non-Executive Directors are covered by the Directors’ and Officers’ insurance and indemnification.
Maximum opportunity
As is the case for the Executive Directors, there is no prescribed maximum fee or maximum fee increase. The aggregate fees payable to all Non-Executives
combined are capped as set out in Superdry’s Articles of Association.
Performance measures
No performance measures apply. Fees are set at an appropriate level to attract and retain high calibre Non-Executive Directors.
When recruiting a new Non-Executive Director, the remuneration arrangements offered will be consistent with the policy presented above.
Non-Executive Directors are appointed for an initial period of three years (subject to election at the Company’s AGM) and then continue to serve subject to annual re-election at the AGM. Appointments
may be terminated by either the Company or the Non-Executive Director giving three months’ written notice. Save in respect of retirement by rotation, a Non-Executive Director being removed from
office will be entitled to compensation equal to the fee during any remaining notice period.
Name
Alastair Miller
Helen Weir
Faisal Galaria
Georgina Harvey
Date of appointment
11 July 2019
11 July 2019
29 July 2019
29 July 2019
All Non-Executive Director letters of appointment are available for inspection by shareholders at our registered office by arrangement - please see our AGM notice for further details.
corporate.superdry.comGOVERNANCE Directors’ Remuneration Report
CONTINUED
Part 3: Annual Report on Remuneration
The following part of the Directors’ Remuneration Report, together with the Annual Statement, will be subject to an advisory vote at the 2020 AGM and sets out how the Remuneration Policy will be
implemented in financial year 2021, and how it was implemented in financial year 2020.
The following sections of the Annual Report and Financial Statements are identified as audited or unaudited as appropriate.
Implementation of the Remuneration Policy for financial year 2021:
Base salary (audited)
Executive Directors’ base salaries are normally reviewed annually on 1 May, taking into account business and individual performance, salary levels at companies of a similar size, industry, global scope,
growth and complexity and the salaries paid to other employees across Superdry. Current annual base salary levels are as follows:
98
Julian Dunkerton
Nick Gresham
Chief Executive Officer
Chief Financial Officer
From
1 May 2020*
£600,000¹
£400,000²
From
1 May 2019
£600,000¹
£375,000²
Increase
0%
6.67%
* Excluding a 25% reduction from 1 April to 30 September 2020 and 30 June 2020 for Julian Dunkerton and Nick Gresham respectively.
1.
2.
Julian Dunkerton was appointed as Interim Chief Executive Officer on 2 April 2019. As per the announcement on 14 October 2019, he assumed the title of Chief Executive Officer from this date and his contract was extended until April 2021.
Nick Gresham was appointed as Interim Financial Officer on 3 June 2019. He was appointed Chief Financial Officer on 13 August 2019 and as part of his appointment to the permanent role, received a 6.67% increase to his base salary to
reflect a number of material changes to areas of responsibility, including the addition of the property portfolio, and reporting lines.
Benefits in kind and pension (unaudited)
No changes will be made to benefit provision. Executive Director pension provision will continue to be set at 7.5% of salary (into the Group’s personal pension plan and/or in the form of a salary
supplement) although as explained in the Policy report, pension provision will be reduced from 7.5% of salary to 4% of base salary for incumbents during the financial year 2021. Pension provision for
new appointments will also be workforce aligned at 4% of salary.
Annual bonus (unaudited)
As a result of the challenges facing Superdry, no annual bonus will be operated for the financial year 2021.
Long-term incentives (unaudited)
The Committee intends to grant PSP awards during the 2020/21 financial year (although Julian Dunkerton does not participate in the PSP). To the extent that PSP awards are granted, consideration will
be given to the prevailing share price and appropriate performance metrics/targets will be set and disclosed in the post grant RNS at the relevant time.
Non-Executive Directors (audited)
No change will be made in 2020 to the annual fees for Non-Executive Directors and the Chairman.
Annual fee levels for financial year 2021 are as follows:
Role
Chairman (Peter Williams from 2 April 2019)
Base fee
Senior Independent Director increment
Audit/Remuneration Committee Chair increment
1.
Excluding 25% fee reduction for a period of 6 months from 1 April to 30 September 2020.
From
1 May
2020
£200,0001
£55,0001
£17,500
£12,500
From
1 May
2019
£200,000
£55,000
£17,500
£12,500
Superdry plc Annual Report 2020GOVERNANCE Single Figure Remuneration (audited)
Base salary/
Fees
Taxable
benefits1
Pension
contributions2 Annual bonus
LTIPS
Other
payments
Executive Directors
Julian Dunkerton3
Nick Gresham4
Non-Executive Directors
Peter Williams3
Alastair Miller5
Faisal Galaria6
Georgina Harvey6
Helen Weir5
Former Executive Directors
Euan Sutherland7
Ed Barker7
Nick Wharton8
Former Non-Executive Directors
Peter Bamford7
Penny Hughes7
John Smith9
Sarah Wood9
Minnow Powell9
Dennis Millard9
Keith Edelman10
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
587,500
46,027
352,083
–
195,833
16,110
53,029
–
40,548
–
49,763
–
56,957
–
–
672,412
–
346,233
–
74,800
–
184,444
–
62,250
9,315
55,000
9,315
32,083
11,431
67,500
14,395
73,507
–
15,639
15,352
767
12,183
–
5,063
711
2,467
–
1,457
–
2,183
–
1,499
–
–
35,922
–
15,413
–
3,188
–
2,195
–
2,464
371
2,155
415
1,025
993
3,852
404
1,993
–
2,911
48,625
3,452
27,031
–
–
–
–
–
–
–
–
–
–
–
–
100,862
–
54,099
–
11,220
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
107,461
–
–
–
–
–
275,809
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.
2.
Benefits include a car allowance, medical insurance and expenses in
relation to the performance of duties
Euan Sutherland, Nick Wharton and Ed Barker received a Company
contribution of 15% of base salary in the form of either pension
contribution or cash allowance. Julian Dunkerton received a Company
contribution of 7.5% of base salary in the form of a cash allowance
3.
4.
5.
6.
Appointed on 2 April 2019
Appointed on 3 June 2019 and made permanent on the 1 August 2019
Appointed 11 July 2019
Appointed 29 July 2019
7.
8.
9.
Stepped down from the Board on 2 April 2019
Stepped down from the Board on 5 July 2018
Stepped down on the 1 July 2019
10. Stepped down on the 11 September 2018
99
Total
651,477
50,246
391,297
–
200,896
16,821
55,496
–
42,005
–
51,946
–
58,456
–
–
809,196
–
799,015
–
89,208
–
186,639
–
64,714
9,686
57,155
9,730
33,108
12,424
71,352
14,799
75,500
–
18,550
corporate.superdry.comGOVERNANCE
Directors’ Remuneration Report
CONTINUED
Annual bonus for the year ended 25 April 2020 (audited)
For financial year 2020, no bonus was awarded to Julian Dunkerton or Nick Gresham. The performance against the targets is set out below.
Underlying Profit Before Tax (80%)
Central Cost Control (20%)
Target
For FY20, the start to earn threshold was set at £32m underlying profit before
tax (offering 25% of the opportunity), on target at £36m (offering 50% of the
opportunity) and a maximum award at £40m (100% of the opportunity).
This element is a shared business objective based on controlling Business
Operating Costs in Head Office:
A ‘start to earn’ central cost budget of £95m, above which no annual bonus pays out.
An ‘on target’ performance of under £95m, triggers 50% of this part of an award
‘Stretch’ performance of £93m or less triggers 100% of this part of an award.
100
Performance
Group underlying profit before tax out-turn for the year was below threshold.
Below threshold as contingent on achieving UPBT threshold
Performance share plan (audited)
The PSP awards granted on 20 July 2017 were based on a three-year performance period ended 25 April 2020. As disclosed in previous annual reports, the performance conditions for these awards was
as follows:
Metric
Performance condition
Earnings per share
(70%)
25% of this part vests for average annual EPS growth of 8% in excess of RPI, increasing on a straight-
line basis to 100% of this part vesting for EPS growth of at least 12% per annum.
Total shareholder
returns (30%)
25% of this part of the award vests if the Group’s TSR is ranked at the median of the comparator
companies, increasing on a straight-line basis to 100% vesting of this part if the Group’s TSR is ranked
at the upper quartile of the comparator group (comprising FTSE All-Share companies in the following
subsectors: Apparel Retailers, Broadline Retailers, Clothing and Accessories, Furnishings, Home
Improvement Retailers, Speciality Retailers and Toys).
Threshold
target (p.a)
Stretch target
(p.a)
8%
12%
Actual
% Vesting
Below
threshold
0%
(max. 70%)
Median
Upper
quartile
Below median
0%
(max. 30%)
0%
Share awards granted in the year (audited)
PSP Awards
PSP awards were granted in the financial year 2020 as conditional awards to Nick Gresham as follows:
Executive
Date granted
Nick Gresham
24 September 2019
Number of PSP awards
143,8851,2
Basis
Face value
Performance condition
Performance period
150% of base salary
£600,000
Vesting will be determined by EPS and TSR
over the performance period (see below)
Three financial years ending
2021/2022
1.
2.
In addition to the performance conditions attached, the Committee will review the value at vesting to ensure that this is aligned with the shareholder experience and the per share gain under the award is limited to five times the share price at grant.
Based on a share price of £4.17 which was the 10 day weighted average share price.
The performance targets were as follows:
Earnings per share (30%)
10% of this part vests for EPS growth of 15% p.a., increasing to 50% of this part vesting for EPS of 23% p.a., increasing to 100% of this part vesting for EPS
growth of 30% p.a.
Total shareholder returns (70%)
25% of this part of the award vests if the Group’s TSR is ranked at the median of the comparator companies, increasing on a straight-line basis to 100% vesting of
this part if the Group’s TSR is ranked at the upper quartile of the comparator group (Comprising FTSE AllShare companies in the following sub-sectors: Apparel
Retailers, Broadline Retailers, Clothing and Accessories, Furnishings, Home Improvement Retailers, Speciality Retailers and Toys).
Given the uncertainty surrounding earnings at the time that the PSP awards were made, the Committee felt that it was appropriate to switch the weighting of the awards from 70:30 EPS:TSR to 30:70
for the 2019 PSP awards.
Superdry plc Annual Report 2020GOVERNANCE Directors’ interests in share awards (audited)
The table below sets out details of the Executive Directors’ outstanding share awards:
Executives
Nick Gresham
Total
Scheme
PSP
At 28 April
2019
–
Granted
during
the period
143,885
Vested during
the period
Lapsed during
the period
At 25 April
2020 Date of award
143,885
24/09/2019
Performance
period
Normal
vesting date
Share price on
date of grant
3 financial years
ending 2021/2022
24/09/2022
£4.17
143,885
All awards granted under the PSP are subject to continued employment. They are subject to the satisfaction of the performance conditions set out for each award. PSP awards are all structured as
conditional awards.
101
Share ownership (audited)
The beneficial and non-beneficial interests of the Directors in the share capital of Superdry at 25 April 2020 are set out below:
Executive Directors
Julian Dunkerton
Nick Gresham3
Non-Executive Directors
Faisal Galaria
Georgina Harvey
Alastair Miller
Helen Weir
Peter Williams
Interests in ordinary shares
Interests in shares
25 April
2020
27 April
2019
Shareholding
guideline %
% Against
Salary
Guideline
met?
15,172,105
–
15,122,105
–
200%
150%
3,277%2
0%
Yes
Not yet
–
–
–
5,000
27,222
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
PSP1
–
143,885
–
–
–
–
–
Deferred
shares
SAYE
BAYE
Total
–
–
–
–
–
–
–
–
5,309
–
3854
15,172,105
149,579
–
–
–
–
–
–
–
–
–
–
–
–
–
5,000
27,222
1.
2.
3.
4.
PSP are subject to performance conditions being met
Calculation based on the share price as of 24 April 2020 (129.6p)
Nick Gresham was appointed interim CFO with effect from 3 June 2019 and permanent CFO with effect from 13 August 2019
This consists of 350 partnership shares, 35 matching shares and 0 (zero) dividend shares
Executive Board Director leavers (audited)
Payments to past Directors
Euan Sutherland resigned as Chief Executive Officer on 2 April 2019 and left his employment on 31 December 2019. In respect of the 2020 financial year, Euan received £485,520 in basic salary,
£20,942 in taxable benefits, and £72,828 in pension contributions. No termination payments were paid to Euan and his entitlement to the 2016, 2017 and 2018 PSP awards lapsed on his resignation. He
remained entitled to benefit from two deferred bonus share plan (‘DBSP’) awards relating to the 2016 and 2017 annual bonus plan awards. As such, 13,539 shares vested on 1 August 2019 (being 11,712
shares due under the 2016 plan, plus 1,827 dividend equivalent shares, the total value at vesting was £59,598.97) and 23,066 shares vested on 20 July 2020 (being 20,067 shares due under the 2017
plan, plus 2,999 dividend equivalent shares, the value at vesting was £28,140.52).
Ed Barker resigned as Chief Financial Officer on 2 April 2019 and left employment on the 1 October 2019. In respect of the 2020 financial year, Ed received £157,258 in basic salary, £6,510 in taxable
benefits, £23,589 in pension contributions and £5,453.39 in other payments during the financial year 2020 until 1 October 2019 being the date he ceased employment. No termination payments were
paid to Ed and his entitlement to the 2018 PSP awards lapsed on his resignation. He remained entitled to two Restricted Share Plan awards granted to him on his appointment in 2018 as part of the
buyout of shares he forfeited on leaving his previous employer. 14,012 shares vested on 31 May 2019 (the value at vesting was £64,432.01) and 9,338 vested on 1 October 2019 (the value at vesting was
£38,528.59).
corporate.superdry.comGOVERNANCE Directors’ Remuneration Report
CONTINUED
Payments for loss of office
Minnow Powell, Sarah Wood, Dennis Millard and John Smith ceased to be Non-Executive Directors on 1 July 2019. Their fees were paid up to 1 July 2019 and no further payments were made in
connection with their resignations from office.
The following sections of the Annual Report and Financial Statements are unaudited.
Relative importance of the spend on pay (unaudited)
The following table sets out the percentage change in distributions to shareholders and employee remuneration costs.
102
Employee remuneration costs (£m)
Ordinary dividends (pence)
Special dividends (pence)
2020
103.7
0.02
0
2019
115.4
25.5
20.5
Change
-7.6%
-99.9%
-100%
CEO pay ratio
Under new disclosure legislation, we are required to calculate and publish our CEO pay ratio on an annual basis. The table below shows how the CEO’s single figure remuneration for financial year 2020
(as taken from the single figure remuneration table) compares to equivalent single figure remuneration for full-time equivalent UK employees, ranked at the 25th, 50th and 75th percentile.
For the calculation method, Option A was chosen (based on data as at 30 March 2020) as this was considered to be the most robust approach to calculating the ratios.
Year
2020
The underlying data for salary and total remuneration is as follows:
Method
Option A
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
44:1
38:1
28:1
Year
2020
Salary
Total remuneration
25th percentile
£15,015
Median
£16,770
75th percentile
25th percentile
£22,252
£15,015
Median
£17,261
75th percentile
£23,077
The Superdry Remuneration Committee believes in reward packages that are competitive and balanced against the wider workforce aligned to our principles. On the appointment of Julian to the role of
CEO, thorough benchmarking was conducted to ensure the package was competitive yet consistent with the pay and reward opportunities covering our UK colleagues and that of our senior leadership
team. The CEO is the employee with the highest level of pay because he has the highest level of responsibility. Although the CEO ratio is likely to vary, no bonus was payable in FY20 and Julian does not
participate in the PSP meaning although the ratio is lower than it could be in other years, the range of variable pay outcomes will be smaller.
Percentage increase in the remuneration of the Chief Executive Officer (unaudited)
The table below shows the movement in salary, benefits and annual bonus for the Chief Executive Officer between the current and previous financial year compared to the average of all employees of
the Group.
Element of remuneration
Salary
Taxable benefits
Annual bonus
1.
Bonus payments are only made to a small group of senior leaders and Wholesale sales roles.
CEO
Employees
CEO
Employees
CEO
Employees
% change
0%
1.51%
nil
nil
-100%
n/a1
Superdry plc Annual Report 2020GOVERNANCE Gender Pay Gap Report
The annual sharing of our Gender Pay Gap report provides further insight and is enhancing our diversity conversation and ensuring equality. Like many organisations, we currently have a gender pay
gap, which we would, of course, aspire not to have.
The Committee recognises that the gender pay measures are very different from equal pay comparisons and is confident that our Group-wide approach to pay means that we do not allow unequal pay to
exist within Superdry. The Committee has concluded that the Superdry gender pay gap demonstrates that, as our most senior roles are largely filled by men, we need to continue to improve diversity in
our most senior job levels.
Our full report on gender pay is available at https://corporate.superdry.com/sustainability/gender-pay-gap/. Further details on our approach to diversity and diversity data can be found in our
Nomination Committee report and on page 77.
Performance graph (unaudited)
The graph below shows the total shareholder return for the Group compared with the TSR of the FTSE 250 (excluding Investment Trusts) and FTSE SmallCap (excluding Investment Trusts) over the 10
years to 25 April 2020. The FTSE 250 and SmallCap indexes were selected as Superdry was a constituent of one or the other of them for the period shown.
103
Total Shareholder Return (value of £100 invested on 2 May 2010 over the ten years to 25 April 2020)
Source: Thomson Reuters Datastream
£300
£250
£200
£150
£100
£50
£0
02/05/2010 01/05/2011
29/04/2012
28/04/2013 26/04/2014 25/04/2015 30/04/2016 29/04/2017 28/04/2018 27/04/2019 25/04/2020
Superdry
FTSE Small Cap Ex Investment Trusts
FTSE 250 Ex Investment Trusts
corporate.superdry.comGOVERNANCE Directors’ Remuneration Report
CONTINUED
Historic single figure table (audited)
The table below sets out the Chief Executive Officer’s single figure remuneration over the past nine years.
104
Year ended
2020
2019
2019
2018
2017
2016
2015
2015
2014
2013
2012
Chief Executive Officer
Julian Dunkerton*
Julian Dunkerton*
Euan Sutherland†
Euan Sutherland†
Euan Sutherland†
Euan Sutherland†
Euan Sutherland†
Julian Dunkerton*
Julian Dunkerton*
Julian Dunkerton*
Julian Dunkerton*
Total
remuneration
£651,477
£50,246
£809,196
£2,662,526
£4,000,708
£1,677,125
£602,862
£419,180
£419,412
£419,406
£419,463
Annual bonus
(% of max)
0%
n/a
0%
65.5%
96.1%
85.0%
33.3%
–
–
–
–
Long-term
incentives
(% of max)
n/a
n/a
0%
100%
58.2%
n/a
n/a
n/a
n/a
n/a
n/a
* Julian Dunkerton was appointed as Interim Chief Executive Officer on 2 April 2019 and assumed the title of Chief Executive Officer from 14 October 2019. He previously held the role of Chief Executive Officer from 2012 to
22 October 2014 when he switched to the role of Product and Brand Director.
† Euan Sutherland was appointed as Group Chief Executive Officer on 22 October 2014 and stepped down on 2 April 2019. His 2018 total remuneration figure has been updated to reflect the actual value of his 2015 PSP awards which vested in
August 2018. The figure disclosed in the 2018 Annual Report was based on an estimate.
Advisors to the Committee
FIT Remuneration Consultants LLP was appointed as the Committee’s independent remuneration advisor during 2019 following a competitive tender process. Fees for the financial year 2020 charged by
FIT on the basis of time and materials amounted to £52,830 (ex VAT). The Committee is satisfied that the advice provided was independent. FIT is a member of the Remuneration Consultants Group and
complies with its code of conduct.
Dilution
In accordance with current guidance for employee share scheme dilution, the Committee applies a limit on the amount of shares which can be issued to satisfy employee share plan awards of 10% of
issued share capital in any rolling 10 year period. Of this 10%, only half can be issued to satisfy awards under the discretionary arrangements.
Statement of shareholder voting
Shareholder voting in respect of the Directors’ Remuneration Policy (2017 AGM) and last year’s Annual Report on Remuneration (2019 AGM) received the following votes from shareholders:
Directors’ Remuneration Policy (2017 AGM)
Total number of votes
% of votes cast
Directors’ Remuneration Report (2019 AGM)
Total number of votes
% of votes cast
The Directors’ Remuneration Report, excluding the Directors’ Remuneration Policy, will be subject to an advisory vote at the AGM on 22 October 2020.
GEORGINA HARVEY
Remuneration Committee Chair
20 September 2020
For
Against
72,447,443
97.68
1,717,915
2.32
For
Against
61,116,241
99.68
197,277
0.32
Votes
withheld
42,000
Votes
withheld
1,281
Superdry plc Annual Report 2020GOVERNANCE Directors’ Report
We present the Directors’ report, for Superdry plc and
subsidiary companies (together, the ‘Group’s) audited Financial
Statements for FY20. This Directors’ report includes the
information required by the Companies Act 2006, but where
information is provided in other parts of this Annual Report,
you will be referred to the relevant page(s). The Corporate
Governance Report is on pages 70 to 76 and forms part of this
Directors’ report.
Superdry is UK domiciled, but has a number of overseas
subsidiaries and has branches in Austria, Italy, Norway, Portugal
and Switzerland.
This Directors’ Report and the Strategic Report on pages 04
to 66 comprise the ‘management report’ for the purposes of
the Financial Conduct Authority’s Disclosure and Transparency
Rules (DTR 4.1.8R). The management report includes an
indication of likely future developments for Superdry.
Results and dividends
Our Financial Statements for FY20 are on pages 110 to 182.
An interim ordinary dividend of 2.0 pence per share was paid
to shareholders on 24 January 2020. The Directors do not
recommend the payment of a final dividend, resulting in a total
ordinary dividend in respect of FY20 of 2.0 pence per share.
Significant events since the
end of the financial year
Details of significant events since the balance sheet date are
contained in note 39 to the financial statements. Indications
of likely future developments in the business of the Group are
included in the Strategic report section on pages 32 to 39.
Coronavirus (Covid-19)
The impact of Covid-19 on our business and its operations in
FY20 and the mitigation of the risks arising from it are disclosed
in our statement on page 06, in the CFO review on pages 32 to
39 and in How We Manage Our Risks on page 42.
Brexit
The United Kingdom left the European Union on 31 January
2020 and is now in a period of transition until at least the end of
2020, whilst the UK and EU negotiate additional arrangements.
The Group’s Brexit working party continues to meet to plan
the management and mitigation of risks arising from the UK’s
departure. For further information on Brexit risk mitigation,
please see the risk section, starting on page 42.
Risk management and internal controls
A description of the principal risks facing the business,
emerging risks and the Group’s approach to managing those
risks is on pages 42 to 50 in ‘How We Manage Our Risks’.
Further information on the Group’s system of internal controls
and the review of those controls can also be found in that
section and in the Audit Committee report on pages 79 to 84.
Financial risk management, policy and objectives
For further information on financial risk management, policy,
objectives, the use of financial instruments and hedging policy,
please refer to note 34 to the Financial Statements.
Approach to taxation and taxation governance
Our tax strategy seeks to ensure that the approach taken to
our tax affairs is aligned with the high standards of corporate
governance set by our Board to promote the interests of our
investors, customers, colleagues and other stakeholders. We
believe that our obligation is to pay the amount of tax legally due
in any country in accordance with the rules set by the relevant
government.
The Group’s taxation strategy is determined by the Board
and is reviewed on an annual basis by the Audit Committee.
Operational responsibility for the taxation strategy rests with
the Chief Financial Officer. The tax strategy is published on
our website.
The Audit Committee considers taxation risk as any risks
manifest themselves, or when they are identified by the Group’s
risk management framework. Where risks are reviewed, actions
are agreed to mitigate them or to eliminate them, if possible.
Internal controls are in place and these are subject to periodic
internal audits. The Audit Committee reviews the management
of tax risk on an annual basis.
105
Share capital, control and restrictions
on voting rights
Details of our issued share capital are shown in note 35 to the
Financial Statements on page 174.
We have one class of ordinary shares which carry no right to
fixed income. Each share carries the right to one vote at general
meetings. The ordinary shares are listed on the Official List and
traded on the London Stock Exchange.
There are no restrictions on the transfer of ordinary shares
other than:
•
•
•
certain restrictions which may from time to time be imposed
by laws and regulations (for example, insider dealing);
pursuant to the Listing Rules of the Financial Conduct
Authority and Superdry’s share dealing code whereby
certain employees of the Group require approval to deal
in its ordinary shares; and
a letter of understanding in favour of the Group, under
which Julian Dunkerton has agreed not to sell, dispose of
or otherwise deal with (other than in the course of ordinary
exceptions) his shareholding for a period expiring on
1 April 2021.
We are not aware of any arrangements between shareholders
that may result in restrictions on the transfer of securities
and/or voting rights.
The rules relating to the appointment and replacement of the
Directors are contained in our Articles of Association. Specific
rules regarding the election and re-election of Directors are
referred to in the Corporate Governance report on pages 70 to
76. Changes to the Articles of Association must be approved by
our shareholders.
Notifiable interests in issued share capital
As at 25 April 2020, the Group had been notified under the
Disclosure and Transparency Rules (DTR5) of the following
notifiable interests in the issued share capital. The information
provided below was correct at the date of notification. These
holdings may have changed since the Group was notified;
however notification of any change is not required until a further
notifiable threshold is crossed:
corporate.superdry.comGOVERNANCE Directors’ Report
CONTINUED
Notifications received as at 25 April 2020
No of voting
rights at date
of notification
% of voting
rights at date
of notification
106
Schroders plc
Aggregate of Standard Life Aberdeen plc affiliated
investment management entities with delegated voting rights
on behalf of multiple managed portfolios
Schroders plc
Investec Asset Management Limited
Aggregate of Standard Life Aberdeen plc affiliated
investment management entities with delegated voting rights
on behalf of multiple managed portfolios
Aggregate of Standard Life Aberdeen plc affiliated
investment management entities with delegated voting rights
on behalf of multiple managed portfolios
Aggregate of Standard Life Aberdeen plc affiliated
investment management entities with delegated voting rights
on behalf of multiple managed portfolios
Aggregate of Standard Life Aberdeen plc affiliated
investment management entities with delegated voting rights
on behalf of multiple managed portfolios
Aggregate of Standard Life Aberdeen plc affiliated
investment management entities with delegated voting rights
on behalf of multiple managed portfolios
Aggregate of Standard Life Aberdeen plc affiliated
investment management entities with delegated voting rights
on behalf of multiple managed portfolios
4,121,379
13,262,584
5.026%
16.17%
Nature of
holding Date of notification
Indirect
Indirect
16 July 2019
23 September 2019
4,550,799
8,165,460
13,052,893
5.55%
9.96%
15.92%
Indirect
Indirect
Indirect
17 October 2019
13 November 2019
23 December 2019
12,232,755
14.92%
Indirect
2 March 2020
12,167,922
14.84%
Indirect
3 March 2020
11,166,732
13.62%
Indirect
23 March 2020
10,616,134
12.95%
Indirect
30 March 2020
10,461,454
12.76%
Indirect
3 April 2020
Share buy-backs
The Group proposes to renew the authority granted by
shareholders at the AGM in 2019 to repurchase up to 10%
of its issued share capital. During FY20, we did not purchase
any of our own shares. Further details are set out in the notice
of the AGM.
Share schemes
The Group presently operates three employee share schemes: a
Performance Share Plan (‘PSP’), Save As You Earn (‘SAYE’) and
Buy As You Earn (‘BAYE’). All shares allotted under these share
schemes have the same rights as those already issued.
Under the BAYE share scheme, employees are entitled
to acquire shares. These shares are held in trust by
Computershare Trustees (the ‘Trustees’). Voting rights
are exercised by the Trustees on receipt of participant’s
instructions. If a participant does not submit an instruction to
the Trustees, no vote is registered. In addition, the Trustees do
not vote on any unawarded shares held under the BAYE scheme
as surplus assets. The Trustees have also elected to waive
dividends on any unawarded shares held under Trust relating
to dividends payable during the year. As at 25 April 2020, the
Trustees had no unawarded shares held in trust.
Superdry’s Employee Benefit Trust (‘Trust’) has also waived all
dividends payable in respect of the ordinary shares held by it.
As at 25 April 2020, one share was held by the Trust.
Founder share plan
On 12 September 2017, the founders of Superdry launched
a long-term incentive scheme (the ‘FSP’) under which they
would share a percentage of the increase in their wealth with
all colleagues in the business worldwide (excluding members of
the Board). At the conclusion of the FSP, Julian Dunkerton and
James Holder will transfer into a fund 20% of any gain from any
increase in the share price over a threshold of £18. The shares
to be used for the purpose of the FSP remain beneficially owned
by Julian and James.
Directors and Directors’ interests
Details of the Directors as at the date of this report can be
found on pages 72 and 73. Details of Directors who served
during FY20 can be found in the Corporate Governance report
on page 70.
The interests of the Directors and their closely associated
persons in the share capital as at 25 April 2020, along with the
details of Directors’ share awards are contained in the Directors’
Remuneration Report on pages 85 to 104.
No Director has any other interest in any shares or loan stock
of any Group company or was or is materially interested in any
contract, other than his or her service contract, which was
subsisting during or existing at the year end and which was
significant in relation to the Group’s business.
Details of Director indemnity provisions can be found in the
Corporate Governance Report on page 76.
Related party transactions
Details of Related Party Transactions can be found in note 21
on page 159 of the Financial Statements. For details of
Directors’ service contracts please refer to page 95 in the
Remuneration Report.
UK Code of Corporate Governance statement
Our statement can be found in the Corporate Governance
Report on page 70.
Superdry plc Annual Report 2020GOVERNANCE incidents in relation to the ABC Policy in FY20. Controls associated
with our ABC Policy have been captured within our newly
developed Internal Controls Framework and assurance over their
operational effectiveness will be provided as part of the ongoing
embedding of this framework.
Political donations
No political donations or political expenditure have been made
by the Group during this financial year.
107
The takeover directive
The rights and obligations attached to the issued share capital
are set out in the Articles of Association, which are available
on our website.
At the AGM in 2019, shareholders approved resolutions
authorising the Group to:
•
•
•
allot shares up to an aggregate nominal value of £1,366,647
(representing one third of our issued share capital as at
31 July 2019);
approve the disapplication of pre-emption rights for cash
issues of shares in respect of ordinary shares with a nominal
value of £204,997 (representing approximately
5% of our issued share capital as at 31 July 2019); and
approve an additional authority following changes in
The Pre-Emption Group’s Statement of Principles which
provided that an allotment of up to an additional 5% of
our issued share capital may also be made on a non-
pre-emptive basis if that allotment was used only for
the purposes of financing a transaction which the Board
determined to be an acquisition or other capital investment
(within the meaning of The Pre-Emption Group’s Statement
of Principles.)
Resolutions will be proposed at this year’s AGM to renew these
authorities. Further details are set out in the notice
of the AGM.
Health and safety
The Group is committed to providing a safe and healthy
environment to all of its employees, customers, suppliers
and partners. Practices and policies are regularly reviewed to
ensure that our approach to health and safety, training, risk
assessments, safe systems of working and accident reporting
remain appropriate. For further information on internal audit and
risk management please see page 83.
Legal and regulatory compliance
The legal team is responsible for identifying and carrying out
assessments of those areas of the business where material
legal and regulatory risks may be present.
We continue to increase our controls on the use of standard
agreements to achieve greater consistency and protection
where we licence and franchise our brand.
We continue to train and advise the organisation with respect to
our obligations under data protection, competition, anti-bribery
and corruption and other applicable laws. We are also continually
reviewing our intellectual property portfolio in light of our strategy
for growth, and have made and will continue to make further
registrations to ensure that our protection is robust.
Where issues are identified, mitigating actions are built into a
plan involving the drafting and communication of policies and
the delivery of training where appropriate, or are approached by
way of a revision to key contractual terms. The Board receives
regular reports on material litigation and the legal actions taken
to support our strategy. The Audit Committee reviews the
effectiveness of the internal controls framework
on an annual basis.
Confidential whistleblowing lines are in place internationally
and are managed through a third party provider. These cover
all countries in which we operate. All matters arising from the
use of the whistleblowing line are referred to the Company
Secretarial team and investigated by the Human Resources
team. The Audit Committee receives a summary of all matters
arising through the whistleblowing line on an annual basis.
Greenhouse gas emissions, energy consumption
and energy efficiency action
Please refer to the table on page 66 of the Sustainability
Report. The proportion of carbon dioxide emissions reported
that relates to the United Kingdom and offshore area is 43%
(location based) and 26.2% (market based). The proportion
of energy consumption reported that relates to the United
Kingdom and offshore area is 50.1%.
Anti-Bribery and Corruption
The Group has an Anti-Bribery and Corruption Policy (the ‘ABC
Policy’) in place, which is reviewed regularly by the Board. The
ABC Policy was reviewed, updated and approved in July 2020. The
ABC Policy sets out the legal obligations and responsibilities of
employees in relation to Anti-Bribery and Corruption law, including
decision trees for employees in relation to gifts and hospitality.
A gift register is in place and colleagues must report and seek
permission to accept gifts and hospitality over a prescribed
financial value. The gift register is reviewed by the Audit Committee
on an annual basis. Anti-Bribery and Corruption training is
mandatory for all colleagues. Guidance is provided to colleagues
along with information on how to manage these risks. ABC Policy
information and compliance requirements are incorporated into
our Supplier Manual and in our contractual arrangements with our
partners. Annual supplier independent audits are used to ensure
compliance with our Ethical Trading Code of Practice and we have
strong escalation routes upon any breach of our ABC Policy. A
Board-approved and Group-wide Code of Conduct is in place and
is also reviewed by the Audit Committee on an annual basis. Any
reported incidents of fraud are escalated to our Legal and Risk
teams for immediate investigation and action and are also reported
to the Board on an annual basis (or more frequently if necessary).
There have been no such incidents in FY20. A whistleblowing line
is in operation (‘Safecall’), and details of how to contact Safecall
are widely available to colleagues; there have been no reported
corporate.superdry.comGOVERNANCE Directors’ Report
CONTINUED
Location of Disclosures
The table below sets out the location of disclosures that have been incorporated into the Directors’ report by reference, including
those required by LR 9.8.4:
108
Disclosure
Allotment of equity securities
Annual General Meeting
Business relationships with suppliers, customers and others
Corporate Governance Report (including the reports of each committee of the Board)
Directors’ interests
Directors’ statement of responsibility
Disability – fair treatment
Diversity policy
Emoluments (Directors’)
Employee participation in share schemes
Employee engagement and communication
Environment
Financial instruments and financial risk management
Financial Review
Going Concern and Viability Statement
Internal Controls
Key Performance Indicators
Long-term incentive plans
People
Related Party Transactions
Risk Management
Share Capital
Sustainability
Page
130
76
24
70 to 109
101
108
26
78
98
106
24
52
169 to 173
32 to 39
39
76
40
145 and 146
58 to 63
159
42 to 50
174
52 to 66
Non-financial information statement
In accordance with Companies Act 2006 sections 414 (CA) and
(CB), a non-financial information statement can be found in
the Strategic Report on page 51, which sets out non-financial
information reporting requirements and their locations.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report
(including the Directors’ Report) and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group financial
statements for each financial year. Under that law, the Directors
have prepared the Group and Company financial statements in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU)
and Article 4 of the IAS Regulation.
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 their profit or loss
for that period. In preparing each of the Group and Company
financial statements, the Directors are required to:
•
•
•
properly select and apply accounting policies;
present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
provide additional disclosures when compliance with the
specific requirements in IFRS Standards are insufficient
to enable users to understand the impact of particular
transactions, other events and conditions on the entity’s
financial position and financial performance; and
• make an assessment of the Group’s ability to continue as a
going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy, at any time,
the financial position of the Group and enable them to ensure
that the financial statements comply with the Companies
Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation. 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 hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
Superdry plc Annual Report 2020GOVERNANCE Under applicable law and regulations, the Directors are also
responsible for preparing a strategic report, Directors’ report,
Directors’ Remuneration Report and corporate governance
statement that comply with law and regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Group’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed on
pages 72 and 73, confirms that to the best of their knowledge:
•
•
•
the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair
view of the assets, liabilities, financial position and profit
or loss of the Group and the undertakings included in the
consolidation taken as a whole;
the strategic report includes a fair review of the
development and performance of the business and the
position of the Group and the undertakings included in the
consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face; and
the annual report and financial statements, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess
the Group’s position, performance, business model and
strategy.
Statement on disclosure of information
to auditors
The Directors confirm that, so far as each is aware, there is no
relevant audit information of which the auditors are unaware.
Each of the Directors has taken all the steps he or she should
have taken as a Director to make himself or herself aware of any
relevant audit information and to establish that the auditors are
aware of that information. This confirmation is given and should
be interpreted in accordance with the provisions of s418 of the
Companies Act 2006.
AGM
The AGM will be held on 22 October 2020 at 11.30am. The
notice of the meeting will be available to view on our website in
advance of the AGM.
The Directors’ report was approved by the Board on
20 September 2020 and signed on its behalf by
RUTH DANIELS
Company Secretary
20 September 2020
Registered office:
Unit 60, The Runnings, Cheltenham, Gloucestershire GL51 9NW
Registered in England and Wales, registered number 07063562
109
corporate.superdry.comGOVERNANCE SUPERDRY PLC
ANNUAL REPORT 2020
Our Financials
112
INDEPENDENT AUDITOR’S REPORT
127 GROUP STATEMENT OF
COMPREHENSIVE INCOME
128 BALANCE SHEETS
129 CASH FLOW STATEMENTS
130 STATEMENTS OF CHANGES IN EQUITY
132 NOTES TO THE GROUP AND
COMPANY FINANCIAL STATEMENTS
183 FIVE YEAR HISTORY
184 SHAREHOLDER INFORMATION
Independent Auditor’s Report
to the members of Superdry Plc
112
Report on the audit of the financial statements
1. Opinion
In our opinion:
•
•
•
•
the financial statements of Superdry plc (the ‘parent
Company’) and its subsidiaries (the ‘Group’) give a true
and fair view of the state of the Group’s and of the parent
Company’s affairs as at 25 April 2020 and of the Group’s
loss for the 52 week period then ended;
the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union;
the parent Company financial statements have been
properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance with
the provisions of the Companies Act 2006; and
the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation.
We have audited the financial statements which comprise:
•
•
•
•
•
the Group Statement of Comprehensive Income;
the Group and parent Company Balance Sheets;
the Group and parent Company Statements of Changes
in Equity;
the Group and parent Company cash flow statements; and
the related notes 1 to 40.
The financial reporting framework that has been applied in
their preparation is applicable law and IFRSs as adopted by the
European Union and, as regards the parent company financial
statements, as applied in accordance with the provisions of the
Companies Act 2006.
2. Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described
in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and the parent Company in
accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as
applied to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. The non-audit services provided to the Group and
parent Company for the 52 week period are disclosed in note
10 to the financial statements. We confirm that the non-audit
services prohibited by the FRC’s Ethical Standard were not
provided to the Group or the parent Company.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
3. Material uncertainty relating to going concern
We draw attention to note 1a in the financial statements and the
detailed information on page 132, which indicates that a material
uncertainty exists that may cast significant doubt on the Group
and parent Company’s ability to continue as a going concern.
The Group was in a net cash position of £36.7m (FY19 £35.9m)
at the year-end and has since completed a refinancing of its
facilities from a Revolving Credit Facility of £70m (available until
January 2022) to a new Asset Backed Lending (“ABL”) facility of
up to £70m. The ABL is subject to a number of financial and non-
financial covenants and the borrowing base will vary throughout
the year dependent on the level of the Group’s eligible inventory
and receivables. The ABL expires in January 2023, with the option
of the lender to extend for a further 12 months.
The covenants are tested quarterly and are based around the
Group’s earnings before interest, tax, depreciation, amortisation
and rent (“EBITDAR”) (calculated on frozen accounting
standards, not adopting IFRS 16– see note 26) until the end
of FY21 and fixed charge (rent and interest) cover thereafter.
The EBITDAR covenant is with reference to an absolute level
of profit, rather than a ratio. Consequently, it is most sensitive
to the macroeconomic recovery and performance of the Group
over the peak trading period in Q3 FY21.
The Group’s cash flow forecasts indicate the requirement to
draw down on the facility during the going concern period, but
the ability to access sufficient funding to meet the business’s
cash flow needs is not guaranteed if the covenants in the ABL
are not met. The ability of the Group to continue to trade as
a going concern is dependent on the availability of sufficient,
committed bank facilities.
The medium term plan has been used as the basis for
Going Concern assessment and assumes the successful
implementation of the turnaround strategy and a return to
FY18 profitability and growth over the medium/longer term
horizon. A material uncertainty with respect to going concern
arises therefore on the ability of the Group to capture sufficient
recovery in consumer demand.
Management’s Base Case forecast indicates that the banking
covenants will be met throughout the going concern period.
Under the reverse stress test, which management considers
to be more than a remote possibility given the uncertainty
in the recovery in consumer demand, the Q3 FY21 and Q4
FY21 EBITDAR and Q1 FY22 fixed charge covenants would be
breached. A material uncertainty with respect to going concern
arises therefore on the ability of the Group to have access to
sufficient, committed bank facilities.
The Audit Committee has included the adoption of the going
concern basis of accounting as a key risk on page 82.
In response to this, we:
• Used specialists to perform testing on the mechanical
accuracy of the model used to prepare the Group’s cash flow
forecast;
• Considered the consistency of management’s forecasts
with other areas of the audit, including the store impairment
review;
• Challenged the key assumptions within the going concern
assessment including the key assumptions in the Group’s
brand reset strategy which relate to revenue and gross
margin growth and the ability of the Group to achieve
estimated cost savings. We have challenged with reference
to the historical trading performance, current trading
uncertainty, market expectations and peer comparison;
• Engaged our internal restructuring services team to assist
us in challenging the working capital assumptions within the
going concern model;
• Obtained an understanding of the financing facilities
available to the Group, including repayment terms and
covenants;
• Assessed the impact of reverse stress testing on the
Group’s funding position and covenant calculations,
including the appropriateness of coronavirus and Brexit
assumptions;
• Assessed and challenged the mitigating actions available to
management, should these be required to offset the impact
of the forecast performance not being achieved;
• Assessed the appropriateness of risk factors disclosed in
the Group’s going concern statement; and
• Challenged the sufficiency of the Group’s disclosures over
the going concern basis and material uncertainties arising.
The deterioration of the trading performance of the Group in
both FY19 and FY20 (pre and post coronavirus) together with
the uncertainties arising from the volatility in the retail sector
and macro-economic environment (including Brexit), result in a
greater level of management judgement in forecasting the Group’s
future trading and funding position compared to previous years.
As stated on page 82, these events or conditions, along with
the matters as set forth in note 1a to the financial statements,
indicate that a material uncertainty exists that may cast
significant doubt on the Group’s and the parent Company’s
ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
Superdry plc Annual Report 2020OUR FINANCIALS 4. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• Going concern (see material uncertainty section above);
•
Impact of control deficiencies;
• Store asset impairment and onerous property related contract provision;
• Parent Company investment in subsidiaries and expected credit losses on intercompany loans;
•
Inventory provision;
• Wholesale and other trade debtor recoverability;
• Calculation of right of use asset and liability in the opening balance sheet upon adoption of IFRS 16 ‘Leases’; and
• Classification and disclosure of exceptional and other items.
Within this report, key audit matters are identified as follows:
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Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
The materiality that we used for the Group financial statements was £3.5m, which was determined with reference to 0.5% of Group revenue. Given
the volatility in performance during the year, Group revenue was considered the most appropriate performance measure on which to base materiality.
£3.5m represents approximately 2% of Group statutory loss before tax and 3% of Group net assets.
We focused our Group audit scope primarily on the audit work at 9 components. These components represent the principal business units and
account for 91% of the Group’s net assets, 91% of the Group’s revenue and 94% of the Group’s underlying profit before tax.
Significant changes in our approach We have revised the basis for materiality and reduced our performance materiality percentage in the current year. Further details on this are
provided in section 7 below.
Our external audit for the 52 week period ended 27 April 2019 identified a number of control deficiencies which continue to be present in the current
period. As such, we have identified the ‘impact of control deficiencies’ on our audit approach as a key audit matter in the current year.
We have devised our audit strategy to respond to the risks within the retail market and the impact of coronavirus on the Group’s future trading
performance. As a result, we have elevated and extended the risk assessment associated with certain balances and judgement areas since the FY19
audit as set out below:
• Wholesale and other trade debtor recoverability represents a new key audit matter given the increased likelihood of non-payment or delayed
payment of debtor balances in the current economic environment; and
• The implementation of IFRS 16 “Leases” has had a material impact on the Group’s balance sheet and a key audit matter has been identified
relating to the accounting judgements made by management on transition.
In the prior year we identified management override of controls as a key audit matter given the significant changes to the Board and governance
structure, as these changes have not re-occurred in the current year this is no longer identified as a key audit matter.
corporate.superdry.comOUR FINANCIALS Independent Auditor’s Report
to the members of Superdry Plc
5. Conclusions relating to principal risks and viability statement
Based solely on reading the Directors’ statements and considering whether they were consistent with the knowledge we obtained in the course
of the audit, including the knowledge obtained in the evaluation of the directors’ assessment of the Group’s and the parent Company’s ability to
continue as a going concern, we are required to state whether we have anything material to add or draw attention to in relation to:
Viability means the ability of the Group to
continue over the time horizon considered
appropriate by the directors.
•
•
•
the disclosures on pages 44–50 that describe the principal risks, procedures to identify emerging risks, and an explanation of how these are
being managed or mitigated;
the directors’ confirmation on page 105 that they have carried out a robust assessment of the principal and emerging risks facing the group,
including those that would threaten its business model, future performance, solvency or liquidity; or
the directors’ explanation on page 39 as to how they have assessed the prospects of the Group, over what period they have done so and
why they consider 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.
114
We are also required to report whether the directors’ statement relating to going concern and the prospects of the Group required by Listing
Rule 9.8.6R (3) is materially inconsistent with our knowledge obtained in the audit.
We highlight the impact on the viability of the
business over the viability period of the matters
disclosed in the material uncertainty relating to
going concern section.
We also highlight the impact of a sustained
downturn on the Group as a result of the new
strategy not turning the business around and the
inability of the Group to obtain further financing
when the ABL is due for renewal in January 2023.
Both of these matters would potentially threaten
the viability of the business over the viability
period as disclosed by the Directors’ in their
viability statement on page 39.
6. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to
the matter described in the material uncertainty relating to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.
6.1.
Impact of control deficiencies
Key audit matter description
As discussed in the Audit Committee Report on page 79, the assessment of the effectiveness of the control environment is a significant issue
which has been a focus area for the Group in the current year.
Our external audit for the 52 week period ended 27 April 2019 identified a number of control deficiencies which were reported to the Audit
Committee. The nature of these deficiencies primarily related to the management review controls, balance sheet reconciliations and
transactional processing controls. In addition, general IT control deficiencies relating to access, segregation of duties and change management
controls were also identified. During FY20, a £3.9m prior year adjustment was identified in relation to inventory cost variances, which reflected
the control deficiencies in this area of accounting, see note 36 for detail on this.
As a result of this, management commenced an exercise during the year assisted by a third party, to identify any control deficiencies in their
business processes and design and implement new controls to address the issues identified. This project was still underway at 25 April 2020;
the control deficiencies have been identified but management are continuing to address the improvements required.
As a result of the control deficiencies identified in the previous audit and the ongoing improvement project by management, we did not plan to
adopt a controls reliant audit approach for FY20.
A significant number of misstatements have been identified during the FY20 external audit. In aggregate, the errors identified were material.
These have subsequently been corrected by management. The misstatements identified are indicative of the ongoing control deficiencies within
the Group as highlighted above. In addition, we have identified transactional processing control deficiencies relating to accounts payable. The
control environment is a significant area of focus for the Audit Committee in the forthcoming year as discussed in their Report on page 79.
Deficiencies in the control environment increase the risk of fraud and error within the financial statements.
Superdry plc Annual Report 2020OUR FINANCIALS How the scope of our audit responded
to the key audit matter
In order to respond to the pervasive risks arising from the deficiencies in the control environment we modified the nature, extent and timing of
our audit procedures. Specifically:
• We revised our materiality assessment (as described in section 7.2 below) to determine performance materiality as 60% of materiality as
compared to 70% in the previous year. This increases the volume of substantive testing completed in the current year.
• We conducted certain audit procedures on the period 10 balance sheet before the year end, in order to provide an earlier insight of the
control environment to the Audit Committee. This also allowed us to modify our planned testing approach at year end (as set out below) in
order to respond to the matters identified.
•
In response to the control deficiencies identified, we have elevated the risk assessment on a number of transactional balances including
accounts payable and inventory, and have therefore performed increased sample testing.
• We assessed each of the control deficiencies identified by management as a result of their internal controls review project, and designed
specific audit procedures to mitigate the risks.
• Senior members of the audit team have performed the audit testing directly in the more complex areas of accounting, for example inventory
variance accounting.
• We have increased the use of data analytics in our testing particularly with regards to revenue and stock where there are large volumes
of transactional data. We have performed sample testing on the underlying transactional data used in this analysis in order to confirm its
completeness and accuracy given the IT control deficiencies noted above. We have also used spreadsheet analysing tools to detect formula
errors and other anomalies.
•
In response to the prior year error in stock cost variance accounting, we have performed detailed testing on stock cost variances held on the
balance sheet at the year end to assess their validity and verified that the prior year adjustment itself was calculated correctly.
• Specifically with regards to the control deficiencies identified in accounts payable we have increased the sample of supplier balances
reconciled to third party confirmations at the year end as well as increasing our testing on the sufficiency of year end accrual balances.
• The extension of the Company’s reporting timetable required in order to give us additional time to perform the incremental audit work
required as a result of the control deficiencies identified. It has also enabled us to use an extended hindsight period to assess the
appropriateness of year end judgements.
115
Key observations
Whilst improvements have been made to the control environment over the year, there are still a number of significant improvements that need
to be made in order to improve the accuracy and completeness of the underlying accounting records and reduce the number of misstatements
identified. We appropriately increased the scope of our audit procedures to address the risks identified.
corporate.superdry.comOUR FINANCIALS
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Independent Auditor’s Report
to the members of Superdry Plc
6.2. Store asset impairment and onerous property related contract provision
Key audit matter description
Under IFRS, the Group is required to complete an impairment review of its store portfolio where there are indicators of impairment.
The net book value of the store assets and IFRS 16 right of use asset as at 25 April 2020 was £208.1m. This is after the recording of an
impairment charge of £136.8m, following the assessment that was undertaken during the year, of which £15.6m relates to the store assets and
£121.2m the IFRS 16 right of use asset. The impairment charge relates to 177 stores (2019: 114 stores). An onerous property related contract
credit of £12.0m (2019: £86.9m charge) has also been recognised.
The store impairment review involves management making several estimates to determine the Value In Use of the stores (being the net present
value of the forecast cash flows). This is then compared to the book value of stores’ assets (including the right of use asset), to identify whether
any impairment is required. In making this assessment, management determines each store to be a cash generating unit.
Stores are also assessed to determine whether an onerous property related contract provision for other property costs (e.g. service charge) is
required. This includes those stores forecast to generate a net loss over the remainder of the lease term. The provision represents the present
value of the estimated unavoidable property costs over the period of the remaining lease agreement, excluding rental and other costs which are
accounted for separately under IFRS 16 ‘Leases’.
The key audit matter relates to the appropriateness of management’s estimate of future trading performance of the stores, which is used to
derive Value In Use. Value In Use is calculated from cash flow projections and relies upon management’s assumptions and estimates of future
trading performance, allocation of direct costs and overheads, long-term growth rates and discount rates. This is particularly challenging in
light of the significant impact of coronavirus and uncertainty over the pace and extent of recovery of the Group and the wider economy as the
lockdown restrictions and associated store closures are eased.
The impairment and onerous property related contract model is complex and is prepared using Excel spreadsheets which increases the scope
for error.
The impairment model utilises the forecasts included in the Board’s medium term plan, which covers the periods up to April 2026. Assumptions
beyond this period do not exceed the local country growth rate. The cash flows are discounted at the local discount rate. As set out in note 2, the
model is highly sensitive to changes in forecast performance, most notably sales.
The Board’s medium term plan is prepared on a top down basis and not at an individual store level. For the purpose of the impairment review,
an exercise has therefore been performed to allocate the forecast performance across the individual stores. This has involved management
judgement.
The forecast performance in the Board’s medium term plan represents the change in strategy implemented by the new Board members last
year. The implementation of this strategy is still in its early stages and has been impacted by the coronavirus pandemic. Consequently there is
uncertainty regarding the ability to achieve the forecast store performance. The Group’s trading performance post-Christmas (Q3 FY20) was
below market expectations. The impact of coronavirus on the wider economy and the challenging environment in the retail sector add to this
uncertainty.
The key assumption in forecast store performance is a stabilisation of the like-for-like sales decline experienced in FY19 and FY20, reversing the
impact of store closures as a result of coronavirus and returning the Group to FY18 profitability over the medium/longer term.
Refer to notes 1 and 2 for the group’s impairment accounting policies and the key assumptions used in the impairment assessment, as well as the
significant issues section of the Audit Committee report.
Superdry plc Annual Report 2020OUR FINANCIALS How the scope of our audit responded
to the key audit matter
Our audit focused on whether the judgements made by management in determining the store-based asset impairments and onerous property
related contract provisions were appropriate. Our audit procedures included:
•
•
•
•
•
•
•
•
•
•
obtaining an understanding of key controls around the impairment review and onerous property related contract provisioning process;
assessing the methodology applied in performing the impairment review and onerous provision calculation, with reference to the
requirements of IAS 36 ‘Impairment of Assets’ and IAS 37 ‘Provisions’ respectively;
determining whether management had appropriately modelled the impact of IFRS 16 when considering the cash flows within the impairment
model;
assessing management’s process of allocating the top-down medium term plan to the individual store impairment review and challenging
the judgements applied by analysing both historic store performance data and performing a search for contradictory evidence;
challenging the key assumptions utilised in the cash flow forecasts including the key assumptions in the Group’s brand reset strategy which
relate to revenue and gross margin growth and the ability of the Group to achieve estimated cost savings, with reference to the historical
trading performance, market expectations, and peer comparison;
117
challenging the allocation of direct and other costs to stores by assessing the individual costs against the criteria within IAS 36 and IAS 37;
assessing the long term growth rates and discount rates applied to the store cash flows by comparing the rates used to third party evidence.
In relation to the discount rate, we have compared the rates used to our independently estimated discount rates determined by our internal
valuations team;
engaging our specialist modelling team to assist in auditing the integrity of the excel model;
assessing management’s sensitivity analysis in relation to the key assumptions used in the cash flow forecasts; and
evaluating the adequacy of the Group’s disclosures regarding the store asset impairment and onerous contract provision in notes 2 and 6 of
the financial statements.
Key observations
While a number of modelling improvements were identified and separately reported to management, we are satisfied with the integrity of the model.
As set out above, the store impairment and onerous property related contract provision has required significant management judgement.
In particular, it requires the successful implementation of the turnaround strategy which is still in its early stages and is in the context of a
challenging retail sector where the long term impact of coronavirus on customer shopping habits is not yet known. The impairment and onerous
contract provision is underpinned by the assumption the decline in like for like store sales is reversed and returned to growth in FY22.
From the work performed, we concluded that the level of impairment and onerous property related contract provision recognised on the store
estate is appropriate. Given the uncertainties noted, the disclosure sensitivities in note 2 provide important information to assess the impact of a
change in key assumptions. We note that using the scenario determined by the reverse stress in management’s going concern analysis on page
38, this would increase the impairment charge by £39.0m.
corporate.superdry.comOUR FINANCIALS Independent Auditor’s Report
to the members of Superdry Plc
6.3. Parent Company investment in subsidiaries and expected credit losses on intercompany loans
Key audit matter description
The carrying value of the investment in subsidiaries of £257.5m (2019: £411.7m) and the intercompany receivables of £252.1m (2019: £164.5m)
have been assessed for impairment by reference to IAS 36 Impairment of Assets and IFRS 9 Financial Instruments respectively.
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How the scope of our audit responded
to the key audit matter
Key observations
Following the continued decline in business performance in the year, the revision of the Group’s forecast performance and the reduction in the
market capitalisation of the Group, this is considered to be a key audit matter.
In assessing the recoverability of the intercompany receivables and the carrying value of the investment in subsidiaries, the Board’s medium
term plan has been used to estimate the value in use of each of the subsidiaries held. This is the same medium term plan used for the goodwill,
intangibles and store impairment, deferred tax asset recoverability, going concern and long term viability assessments.
As discussed in our key audit matter on store asset impairment, the forecast performance of the business is subject to uncertainty and requires
management make several estimates to determine the Value In Use. Significant judgement is involved. The key audit matter relates to the
appropriateness of management’s assumptions and estimates of the future trading performance of the subsidiaries, which is particularly
challenging in light of the impact of coronavirus. The model is highly sensitive to changes in the forecast performance, most notably sales.
We note that the net assets of the parent Company (£225.4m) are significantly higher than the consolidated Group net assets of £112.7m. This
reflects the difference in the basis of the impairment calculation between the two balance sheets. The impairment in the parent Company is
determined using the cash flows in the medium term plan across all three channels (stores, Ecommerce and wholesale) extrapolated for a further
five years, whereas the cash flows used for the impairment of store assets in the Group balance sheet is based on the store cash flows only
limited to the existing lease term, which on average is four years.
An impairment charge of £158.7m (2019: £51.3m) has been recognised in relation to the investment in subsidiaries and the loan loss allowance of
£26.5m (2019: £44.2m) has been recognised in relation to intercompany balances.
Our audit procedures included:
•
•
•
•
•
•
•
challenging the key assumptions within management’s forecasts as described in the store impairment key audit matter and material
uncertainty relating to going concern section in notes 1 and 2;
comparing the economic value of the Group implied by the impairment model to the Group market capitalisation over FY20 in order to
challenge the tenure of the cash flows (10 years) used in the impairment model;
testing the mechanical accuracy of the model;
assessing the methodology applied in reviewing the investments for impairment and assessing the recoverability of intercompany balances,
with reference to the requirements of IAS 36 ‘Impairment of Assets’ and IFRS 9 ‘Financial Instruments’ respectively;
considering the consistency of management’s forecasts with other areas of the audit, including the goodwill, intangible and store
impairment, deferred tax asset recoverability and going concern;
assessing management’s sensitivity analysis in relation to the key assumptions used in the cash flow forecasts; and
evaluating the adequacy of the Group’s disclosures regarding the investment impairment and intercompany recoverability in notes 2, 20 and
24 of the financial statements.
As set out above, the recoverability of the carrying value of the parent Company investment in subsidiaries and expected credit losses on
intercompany loans requires significant management judgement regarding the future trading performance of the Group’s subsidiaries. Future
trading performance is based on the successful implementation of the Group’s medium term financial plan. This is still in its early stages and is in
the context of a challenging retail sector where the long term impact of coronavirus on customer shopping habits is not yet known.
From the work performed, we are satisfied that the impairment recorded and the carrying value of the investments in subsidiaries and
intercompany receivables are appropriate. Given the uncertainties noted, the disclosure sensitivities in note 2 provide important information to
assess the impact of a change in key assumptions.
We note that a 5% reduction in revenue would lead to an additional impairment of subsidiaries of £9.6m. Refer to note 2 for the assessment
undertaken and sensitivity disclosures.
Superdry plc Annual Report 2020OUR FINANCIALS 6.4. Inventory provision
Key audit matter description
How the scope of our audit responded
to the key audit matter
As at 25 April 2020, the Group held £158.7m of inventory (2019 restated: £186.9m). The stock provision was £9.8m (2019: £4.8m), representing
6% (2019: 3%) of the balance. The increase in the inventory provision in the current year relates to additional provisions made for excess stock
held as a result of the store closures and global lockdown restrictions as a result of the coronavirus pandemic.
The valuation of inventory involves management judgement in recording provisions for slow moving or obsolete inventory. The Group accounting
policy is based upon the ageing of inventory by season, with a percentage provision applied which reflects the actual historical rate of losses
made. In addition, specific provisions are made for known product quality issues and product ranges which management considers unlikely to be
sold through regular clearance channels. An additional provision has been recorded in the year based on excess stock units held at the balance
sheet date. The calculation of the stock provision requires management judgement to assess the quality of products provided for and the
expected realisable value based on the quantities held and expected sell through patterns.
Historically, negligible stock was sold at a loss or written off and as such, management’s provisioning policy was applied only to stock over 6
seasons old. Following the coronavirus outbreak the level of stock less than 6 seasons old has increased significantly compared to budgeted
levels and there is less certainty of being able to sell through the stock above cost. Management has therefore recognised an additional provision
of £6.1m against newer stock based on excess stock units held.
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Refer to note 1 for the Group’s inventory provisioning policy, note 23 and the Audit Committee report.
We obtained evidence over the appropriateness of management’s assumptions applied in calculating the value of inventory provisions by:
•
•
•
•
•
obtaining an understanding of controls that the Group has established regarding the inventory provision;
considering the historical accuracy of management’s provisioning percentages for inventory through a retrospective review of the level of
provision recorded in prior years compared to the actual level of stock written off to the provision held;
considering the post year end sell through and margin of stock less than 6 seasons old compared to the additional provision recognised to
assess the appropriateness of management’s additional coronavirus related provision;
comparing the methodology applied in calculating the inventory obsolescence provision to the Group’s policy and recalculated the provision,
with reference to the policy;
using data analytics to analyse the sell through rates of stock in the year and post year end in order to determine an independent expectation
of the year end stock provision; and
•
verifying the accuracy of the data used in the calculation by testing the season ageing of a sample of stock items back to supplier invoice.
Key observations
From the work performed above, we concluded that the level of inventory provision is appropriate. We note the sensitivity disclosures in note 2.
corporate.superdry.comOUR FINANCIALS Independent Auditor’s Report
to the members of Superdry Plc
6.5. Wholesale and other trade debtor recoverability
Key audit matter description
At 25 April 2020, gross trade debtors of £75.8m of were held by the Group (2019: £93.0m) with a provision for expected credit losses of £14.6m
(2019: £5.4m).
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How the scope of our audit responded
to the key audit matter
Many businesses are struggling financially due to coronavirus and one of the first steps taken by some is delaying payments to suppliers. As a
result there is an increased risk over wholesale and other trade debtor recoverability and increased management judgement regarding expected
credit losses.
Under IFRS 9, management is required to consider all expected credit losses based on historic, current and forward-looking information.
Management has reassessed the expected credit losses on trade receivables, including considering whether their existing bad debt policy
remains appropriate. This required significant judgement around future lifetime expected credit losses on the entire debtor book and resulted in
a greater provisioning rate than that previously applied by management.
Refer to note 1 for the Group’s receivable provisioning policy, note 24 receivables and the Audit Committee report.
Our audit procedures included the following;
•
•
•
•
•
obtaining an understanding of the key controls regarding management’s provisioning policy and the assessment of expected credit losses;
assessing management’s provision policy including mechanical accuracy, and considering expected credit losses by country and validating
country specific risk factors to external reports in light of the coronavirus macroeconomic impact;
assessing subsequent cash receipts and write-offs with reference to the provision recognised by management;
discussing ongoing disputes with legal counsel; and
reading correspondence with key debtors regarding payment plans.
Key observations
From the work performed above, we concluded that wholesale and other trade debtors are recoverable and a sufficient provision has been
recognised. We note that the provision is based on management’s estimate of future credit losses and irrecoverable debt; there could be a
material movement in the provision in future periods if these debts were recovered, see note 2 for further details.
Superdry plc Annual Report 2020OUR FINANCIALS 6.6. Calculation of right of use asset and liability in the opening balance sheet upon adoption of IFRS 16 ‘leases’
Key audit matter description
How the scope of our audit responded
to the key audit matter
The current period is the first period in which the business has implemented IFRS 16 ‘Leases’. The Group has elected to apply IFRS 16 Leases
under the modified retrospective transition option from 27 April 2019. Management determined there to be an increase in total assets of
£282.4m and an increase in total liabilities of £279.1m for the opening transition balance sheet at 27 April 2019.
Our key audit matter focused on determining the accuracy of the calculation for the right of use asset and liability recognised on transition,
including the determination of the incremental borrowing rate used to discount the cash flows and the judgement regarding lease tenure where
a break clause existed in the contract. Our work also focused on testing that all leases were identified and accounted for under IFRS 16 and the
adequacy of the disclosures made regarding the impact of transition on the Group’s financial position.
We have also assessed whether lease modifications made as a result of the coronavirus pandemic have been accounted for correctly under
IFRS 16.
121
The Audit Committee considers this to be a significant matter. Their consideration is on page 79. Further information is set out in note 3 to the
financial statements.
To address this risk our audit procedures included:
•
•
•
•
•
•
•
obtaining an understanding of key controls over the identification of new leases, the underlying lease data and the associated disclosures;
verifying the accuracy of the underlying lease data by agreeing a representative sample of leases to original contract or other supporting
information;
checking the integrity and mechanical accuracy of the IFRS 16 calculations for each lease sampled through recalculation of the expected
IFRS 16 adjustment;
assessing management’s assumption regarding lease length used in the calculation of the right of use asset and liability to determine
whether it was consistent with the medium term financial plan and the Group’s strategic initiatives to remain in stores rather than exit at the
break;
considering the completeness of the IFRS 16 adjustments by testing the reconciliation to the Group’s operating lease commitments as
reported in the prior year’s financial statements to reported IFRS 16 numbers;
involving experts to test the incremental borrowing rate used by management to calculate the right of use asset and liability;
through discussions with those involved in the lease re-negotiations understanding any modifications made in the period and assessing the
relevant accounting implications; and
•
assessing whether the IFRS 16 disclosures within the financial statements are accurate and complete.
Key observations
From the work performed above, we are satisfied that the lease data underpinning the IFRS 16 disclosures is complete and accurate and that
new lease arrangements entered in during the financial 52 week period ended 25 April 2020 have been captured appropriately. The disclosures
management have made in relation to IFRS 16 are appropriate.
corporate.superdry.comOUR FINANCIALS Independent Auditor’s Report
to the members of Superdry Plc
6.7. Classification and disclosure of exceptional and other items
Key audit matter description
122
How the scope of our audit responded
to the key audit matter
Exceptional and other items for the 52 week period ended 25 April 2020 are £107.7m charge (2019: £128.2m charge) and includes the store
impairment and onerous property related contract provision, restructuring, strategic change and other costs, the fair value movement in
financial instruments and the IFRS 2 charge associate with the Founder Share Plan. Further details are contained within note 6 of the financial
statements.
The appropriateness of the classification of items excluded from underlying trading performance, alongside the related alternative performance
measures, is a key area of audit focus particularly in light of the coronavirus pandemic and the potential for management to attribute exceptional
items to the pandemic which are difficult to quantify and could be misleading.
The impairment and onerous property related contracts provision of £124.8m (2019: £129.5m) has been disclosed as an ‘exceptional and other
item’ due to its size, nature and incidence.
The costs of £1.5m associated with the Group’s exit from the joint venture in China have also been disclosed as exceptional due to their nature as
they relate to the Group’s strategic change.
The £1.9m fair value re-measurement of foreign exchange contracts (2019: £23.9m) has been classified as ‘exceptional and other’ due to both
the size and nature. This is because the unrealised gains and losses on these trades are not a reflection of the underlying trading performance of
the business. When the contracts mature, the profit or loss is reflected in underlying profit/loss before tax. Further details are set out in note 37.
This is consistent with the disclosure adopted in the prior year.
As set out in note 6, the Founder Share Plan Scheme is one off in nature and unusual in that the share awards are funded exclusively by the
Founders. Whilst the charge is spread over a number of years, the plan is a one-time scheme and will not be renewed should the share price fail
to reach the target vesting price. Accordingly, the IFRS 2 charge in respect of the FSP is considered to be ‘exceptional and other’ due to the size,
nature and incidence of the scheme. This is consistent with the disclosure adopted in the prior year.
The Group has established definitions of exceptional items which are disclosed in note 37. The Group’s principal accounting policy on use of non-
GAAP measures is in note 1 and the judgements made in applying the accounting policy are disclosed in note 2.
The classification and presentation of exceptional items is a significant issue considered by the Audit Committee as discussed on page 79.
We carried out the following procedures in assessing the classification of “exceptional items and other”:
•
•
•
•
•
•
obtaining an understanding of controls around the Group’s classification of “exceptional items and other”;
agreeing a sample of exceptional items to supporting evidence;
evaluating the presentation of exceptional items, both individually and in aggregate, considering consistency with the Group’s definition
of exceptional items, IAS 1 and latest guidance from the FRC and the European Securities and Markets Authority, specifically considering
recent guidance in light of the coronavirus pandemic;
assessing management’s application of the policy on exceptional items for consistency with previous accounting periods;
assessing whether the disclosures within the financial statements provide sufficient detail for the reader to understand the nature of these
items; and
for all significant adjustments recorded in calculating underlying profits, discussing the appropriateness of the item and any disclosure
considerations with the Audit Committee. We determined whether these items are adequately disclosed and reconciled in the Alternative
Performance measures disclosure (note 37).
Key observations
From the work performed above, we concluded that the classification and disclosure of the exceptional and other items is appropriate.
We note that the inclusion of the Founder Share Plan Scheme and fair value re-measurement of foreign exchange contracts whilst recurring
items and therefore not one off in nature are included within ‘exceptional and other items’ which is consistent with the prior year.
Superdry plc Annual Report 2020OUR FINANCIALS 7. Our application of materiality
7.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Materiality
£3.5m (2019: £3.8m)
Group financial statements
Parent company financial statements
£3.0m (2019: £3.4m)
Basis for determining
materiality
The materiality that we used for the Group financial statements was £3.5m which
was determined with reference to 0.5% of Group revenue. In 2019, materiality was
determined as 5% of the three year average of underlying profit before tax for the years
ending April 2017 to April 2019 and equated to 9.1% of underlying profit before tax or
approximately 0.5% of Group revenue.
The basis of materiality is net assets. The materiality is 1.3% (2019: 0.9%)
of the parent Company’s net assets.
123
Rationale for the
benchmark applied
In our professional judgement we believe that revenue is the most appropriate
benchmark to determine materiality as it reflects the size and scale of the Group and
is more stable than profit before tax. £3.5m represents approximately 2% of Group
statutory loss before tax and 3% of Group net assets.
In determining our final materiality, based on our professional judgement,
we have considered net assets as the appropriate measure given the
parent Company is primarily a holding company for the Group. We then
capped materiality at 85% of Group materiality (2019: 90%).
Revenue
£704.4m
Group materiality
£3.5m
Component
materiality range
£2.5m to £0.3m
Audit Committee
reporting threshold
£0.2m
Revenue
Group materiality
7.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial
statements as a whole. Group performance materiality was set at 60% of group materiality for the 2020 audit (2019: 70%). In determining performance materiality, we considered the following factors:
•
•
our risk assessment, including our assessment of the Group’s overall control environment and that as described above in a key audit matter a number of control deficiencies were identified; and
our past experience of the audit, including the value and quantum of corrected and uncorrected misstatements in prior periods and our expectation of the likelihood of misstatements recurring in
the current period as a result of the continuing control deficiencies.
7.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £175,000 (2019: £190,000), as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
corporate.superdry.comOUR FINANCIALS Independent Auditor’s Report
to the members of Superdry Plc
124
8. An overview of the scope of our audit
8.1.
Identification and scoping of components
Our group audit was scoped by obtaining an understanding of the
Group and its environment, including group-wide controls, and
assessing the risks of material misstatement at the group level.
Based on that assessment, we focused our group audit scope
primarily on the audit work at 9 (2019: 7) components. 4 (2019:
4) of these were subject to a full audit being DKH Retail Limited,
C-Retail Limited, SuperGroup Internet Limited and Superdry
Plc (parent Company). The remaining 5 components (2019: 3)
being Germany, Austria, Belgium, US wholesale and US retail
were subject to specified audit procedures where the extent of
our testing was based on our assessment of the risks of material
misstatement and of the materiality of the Group’s operations
at those components. In the current year, the US wholesale
and retail components have been split into two separate
components, as have Germany and Austria. This accounts for
the overall increase in the number of components year on year,
although the scope of the audit is consistent with the prior year.
These components represent the principal business units and
account for 91% (2019: 92%) of the Group’s net assets, 91%
(2019: 89%) of the Group’s revenue and 94% (2019: 92%) of
the Group’s underlying loss before tax. They were also selected
to provide an appropriate basis for undertaking audit work to
address the risks of material misstatement identified above.
Our audit work at the components was executed at levels of
materiality applicable to each individual entity which were lower
than group materiality and ranged from £0.3m to £2.5m (2019:
£1.5m to £2.3m).
At the parent entity level we also tested the consolidation
process and carried out analytical procedures to confirm our
conclusion that there were no significant risks of material
misstatement of the aggregated financial information of the
remaining components not subject to audit or audit of specified
account balances.
All audit work for the purpose of expressing an opinion on the
Group’s financial statements is performed by the Group audit
team as the accounting records are held centrally, with the
exception of stock counts which are performed by local country
Deloitte audit teams all of whom receive a briefing by the Group
audit team prior to attending the count. Consistent with the
prior year, the investment in the joint venture in China and the
recoverability of loan balances was audited by the Group
audit team.
Revenue
9%
16%
Profit before tax
6%
19%
Net assets
9%
4%
75%
75%
87%
Full audit scope
Specified audit procedures
Review at group level
8.2. Our consideration of the control environment
We identified the main finance systems, stock systems and
in-store transaction processing systems as the key IT systems
relevant to our audit. The IT systems are primarily managed from
the centralised IT function in the UK. We engaged our IT audit
specialists to evaluate the IT systems and determine whether
they could be relied upon to support our audit.
A number of IT control deficiencies were identified in the 2018
audit which remain unresolved, primarily relating to third party
operated controls for which a service auditor’s report was not
available and hence the operation of these controls could not be
tested. We also identified deficiencies in access, segregation of
duties and change management controls. As a result of these
findings we are unable to adopt a controls based audit approach,
consistent with the 2018 and 2019 audits.
As described by in the Audit Committee Report on page
79, management has implemented a controls improvement
project which has identified a significant number of areas
for improvement. Accordingly, we extended the scope of our
substantive audit procedures in response to the identified
deficiencies. Further details are set out in the ‘impact of control
deficiencies’ key audit matter in section 6.1 above.
9. Other information
The directors are responsible for the other information. The
other information comprises the information included in the
annual report, other than the financial statements and our
auditor’s report thereon.
Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there
is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
Superdry plc Annual Report 2020OUR FINANCIALS In this context, matters that we are specifically required to
report to you as uncorrected material misstatements of the other
information include where we conclude that:
• Fair, balanced and understandable – the statement given
by the directors that they consider 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, is materially
inconsistent with our knowledge obtained in the audit; or
• Audit committee reporting – the section describing the
work of the audit committee does not appropriately address
matters communicated by us to the audit committee; or
• Directors’ statement of compliance with the UK
Corporate Governance Code – the parts of the directors’
statement required under the Listing Rules relating to the
company’s compliance with the UK Corporate Governance
Code containing provisions specified for review by the
auditor in accordance with Listing Rule 9.8.10R(2) do not
properly disclose a departure from a relevant provision of
the UK Corporate Governance Code.
We have nothing to report in respect of these matters.
10. Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group’s and the parent Company’s
ability to continue as a going concern, disclosing as applicable,
matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate
the group or the parent company or to cease operations, or have
no realistic alternative but to do so.
11.
Auditor’s responsibilities for the audit of
the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on
the basis of these financial statements.
Details of the extent to which the audit was considered capable
of detecting irregularities, including fraud and non-compliance
with laws and regulations are set out below.
•
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
12.
Extent to which the audit was considered
capable of detecting irregularities,
including fraud
We identify and assess the risks of material misstatement of
the financial statements, whether due to fraud or error, and
then design and perform audit procedures responsive to those
risks, including obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
12.1. Identifying and assessing potential risks related
to irregularities
In identifying and assessing risks of material misstatement in
respect of irregularities, including fraud and non-compliance
with laws and regulations, we considered the following:
•
•
•
the nature of the industry and sector, control environment
(in particular the deficiencies we identified in this area, see
6.1 above) and business performance including the design of
the Group’s remuneration policies, key drivers for directors’
remuneration, bonus levels and performance targets;
the Group’s own assessment of the risks that irregularities
may occur either as a result of fraud or error that was
approved by the board on 18 September 2020;
results of our enquiries of management, internal audit and
the audit committee about their own identification and
assessment of the risks of irregularities;
•
•
the Group’s compliance with rules and regulations
associated with government grants and assistance which
have been taken advantage of in the current period;
any matters we identified having obtained and reviewed
the Group’s documentation of their policies and procedures
relating to:
− identifying, evaluating and complying with laws and
regulations and whether they were aware of any
instances of non-compliance;
− detecting and responding to the risks of fraud and
whether they have knowledge of any actual, suspected
or alleged fraud;
125
− the internal controls established to mitigate risks of
fraud or non-compliance with laws and regulations;
the matters discussed among the audit engagement team
and involving relevant internal specialists, including tax,
valuations, IT, and industry specialists regarding how and
where fraud might occur in the financial statements and any
potential indicators of fraud.
As a result of these procedures, we considered the opportunities
and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following areas:
• Store asset impairment and onerous property related
contract provisions;
•
Inventory provision;
• Wholesale and other trade debtor provisions;
• Completeness of Wholesale returns provision; and
• Classification and disclosure of exceptional and other items.
In common with all audits under ISAs (UK), we are also required
to perform specific procedures to respond to the risk of
management override.
We also obtained an understanding of the legal and regulatory
frameworks that the Group operates in, focusing on provisions
of those laws and regulations that had a direct effect on
the determination of material amounts and disclosures in
the financial statements. The key laws and regulations we
considered in this context included the UK Companies Act,
Listing Rules, UK Corporate governance legislation, and tax
legislation etc.
In addition, we considered whether there were provisions of
other laws and regulations that do not have a direct effect
on the financial statements but compliance with which may
be fundamental to the Group’s ability to operate or to avoid
a material penalty such as HMRC legislation in relation to
government grants.
corporate.superdry.comOUR FINANCIALS 126
Independent Auditor’s Report
to the members of Superdry Plc
12.2. Audit response to risks identified
As a result of performing the above, we identified store asset
impairment and onerous property related contract provisions,
inventory provision, wholesale and other trade debtor provisions,
and classification and disclosure of exceptional and other items
as key audit matters related to the potential risk of fraud. The
key audit matters section of our report explains the matters
in more detail and also describes the specific procedures we
performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks
identified included the following:
•
•
•
•
•
•
•
reviewing the financial statement disclosures and testing
to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as
having a direct effect on the financial statements;
enquiring of management, the audit committee and
in-house legal counsel concerning actual and potential
litigation and claims;
performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
reading minutes of meetings of those charged with
governance, reviewing internal audit reports and reviewing
correspondence with HMRC;
engaging specialists to assist in assessing the Group’s
compliance with rules and regulations associated with
government grants and assistance which have been taken
advantage of in the current period;
performing specific procedures on the completeness of the
wholesale provision including challenging the assumptions
made with reference to historical data and post year end
returns received; and
addressing the risk of fraud through management override
of controls, testing the appropriateness of journal entries
and other adjustments; assessing whether the judgements
made in making accounting estimates are indicative of a
potential bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the
normal course of business.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members
including internal specialists, and remained alert to any
indications of fraud or non-compliance with laws and regulations
throughout the audit.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by
13.
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.
In our opinion, based on the work undertaken in the course of
the audit:
•
•
the information given in the strategic report and the
directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
the strategic report and the directors’ report have been
prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group
and the parent Company and their environment obtained in
the course of the audit, we have not identified any material
misstatements in the strategic report or the directors’ report.
14.
Matters on which we are required to report
by exception
14.1. Adequacy of explanations received and
accounting records
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
• we have not received all the information and explanations
we require for our audit; or
•
•
adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent Company financial statements are not in
agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report
if in our opinion certain disclosures of directors’ remuneration
have not been made or the part of the directors’ remuneration
report to be audited is not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
15. Other matters
15.1. Auditor tenure
We were appointed by the Board of Directors on 12 September
2017 to audit the financial statements for the 52 week period
ended 28 April 2018 and subsequent financial periods. The
period of total uninterrupted engagement including previous
renewals and reappointments of the firm is three years, covering
the years ended 28 April 2018 to 25 April 2020.
15.2. Consistency of the audit report with the additional
report to the audit committee
Our audit opinion is consistent with the additional report to the
audit committee we are required to provide in accordance with
ISAs (UK).
16. Use of our report
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and
the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Edward Hanson
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
20 September 2020
Superdry plc Annual Report 2020OUR FINANCIALS Group Statement of Comprehensive Income
to the members of Superdry Plc
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Other gains and losses (net)
Impairment losses on trade receivables
Operating (loss)/profit
Finance income
Finance expense
Impairment losses on other financial assets
Share of loss of joint venture
(Loss)/profit before tax
Tax credit/(expense)
(Loss)/profit for the period
Attributable to:
Owners of the Company
Other comprehensive expense net of tax:
Items that may be subsequently reclassified to profit or loss
Currency translation differences
Total comprehensive (expenses)/income for the period
Attributable to:
Owners of the Company
Earnings per share:
Basic
Diluted
Underlying*
2020
£m
Exceptional
and other
items (note 6)
£m
704.4
(326.5)
377.9
(412.1)
9.1
(9.2)
(34.3)
0.2
(7.7)
–
–
(41.8)
6.1
(35.7)
–
–
–
(127.0)
1.9
–
(125.1)
–
–
–
–
(125.1)
17.4
(107.7)
Note
4
5
11
24
12
13
13
20,24
20
4
14
Total
2020
£m
704.4
(326.5)
377.9
(539.1)
11.0
(9.2)
(159.4)
0.2
(7.7)
–
–
(166.9)
23.5
(143.4)
Restated**
Underlying
2019
£m
Exceptional
and other items
(note 6)
£m
Restated**
Total
2019
£m
871.7
(391.3)
480.4
(447.0)
10.8
–
44.2
0.3
(1.3)
(1.5)
(3.7)
38.0
(11.5)
26.5
–
–
–
(140.2)
23.9
–
(116.3)
–
–
(8.5)
(2.5)
(127.3)
(0.9)
(128.2)
127
871.7
(391.3)
480.4
(587.2)
34.7
–
(72.1)
0.3
(1.3)
(10.0)
(6.2)
(89.3)
(12.4)
(101.7)
(35.7)
(107.7)
(143.4)
26.5
(128.2)
(101.7)
(2.5)
(38.2)
(38.2)
pence
per share
–
(107.7)
(107.7)
16
16
(43.5)
(43.3)
(2.5)
(145.9)
(1.4)
25.1
(145.9)
pence
per share
25.1
pence
per share
(174.9)
(174.1)
32.4
32.3
–
(128.2)
(128.2)
(1.4)
(103.1)
(103.1)
pence
per share
(124.2)
(123.9)
* Underlying is defined in note 37.
** The reported comparatives have been restated to reflect a prior year adjustment, see note 36 in the Notes to the Group and Company Financial statements.
2020 is for the 52 weeks ended 25 April 2020 and 2019 is for the 52 weeks ended 27 April 2019.
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 not to present the Company statement of comprehensive income.
The notes on pages 132 to 182 inclusive are an integral part of the Group and Company financial statements.
corporate.superdry.comOUR FINANCIALS Balance Sheets
to the members of Superdry Plc Registered number: 07063562
128
ASSETS
Non-current assets
Property, plant and equipment
Right of use assets
Intangible assets
Investments in subsidiaries
Deferred tax assets
Derivative financial instruments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Assets classified as held for sale
Current tax receivables
Cash and bank balances**
Total current assets
LIABILITIES
Current liabilities
Borrowings**
Trade and other payables
Provisions for other liabilities and charges
Derivative financial instruments
Lease liabilities
Total current liabilities
Net current assets/(liabilities)
Non-current liabilities
Trade and other payables
Provisions for other liabilities and charges
Deferred tax liabilities
Derivative financial instruments
Deferred liabilities
Lease liabilities
Total non-current liabilities
Net assets
EQUITY
Share capital
Share premium
Translation reserve
Merger reserve
Retained earnings
Total equity
Note
25 April 2020
£m
Group
Restated*
27 April 2019**
£m
25 April 2020
£m
Company
Restated
27 April 2019**
£m
18
30
19
20
22
34
23
24
34
18
25
26
27
28
34
30
27
28
22
34
30
35
41.7
118.0
48.4
–
53.3
0.1
261.5
158.7
91.6
2.5
–
6.8
307.4
567.0
270.7
103.3
4.2
2.1
80.1
460.4
106.6
2.2
10.8
–
0.2
1.4
240.8
255.4
112.7
4.1
149.1
(5.5)
(302.5)
267.5
112.7
74.1
–
51.5
–
32.8
1.3
159.7
186.9
122.4
0.4
2.4
0.3
49.5
361.9
13.6
127.3
18.1
1.4
–
160.4
201.5
39.3
61.6
0.8
2.0
–
–
103.7
257.5
4.1
149.1
(3.0)
(302.5)
409.8
257.5
5.2
5.5
16.3
257.5
2.0
–
286.5
2.3
257.9
–
–
4.2
3.2
267.6
60.1
260.2
0.1
–
1.8
322.2
(54.6)
–
0.2
–
–
6.3
6.5
225.4
4.1
149.1
–
–
72.2
225.4
8.2
–
17.0
411.7
1.2
–
438.1
2.1
184.0
–
2.4
–
1.0
189.5
0.5
248.4
1.0
–
–
249.9
(60.4)
0.3
1.8
–
–
–
2.1
375.6
4.1
149.1
–
–
222.4
375.6
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36 in the Notes to the Group and Company Financial Statements ** 2019 balances for cash and borrowings have been restated to reflect the grossing
up of cash and overdraft balances subject to the group’s cash pooling arrangements and to ensure the Group’s presentation of these balances is in line with the requirements for offsetting in accordance with IAS 32. See note 36.
The Company loss for the year is £148.0m (2019: £136.5m loss). The notes on pages 127 to 182 inclusive are an integral part of the Group and Company financial statements. The financial statements
on pages 112 to 184 were approved by the Board of Directors and authorised for issue on 20 September 2020 and signed on its behalf by:
JULIAN DUNKERTON
Chief Executive Officer
NICK GRESHAM
Chief Financial Officer
Superdry plc Annual Report 2020OUR FINANCIALS
Cash Flow Statements
to the members of Superdry Plc
Cash generated from operating activities
Interest paid
Tax paid
Net cash generated from operating activities
Cash flow from investing activities
Investments in subsidiaries
Investment in joint ventures
Long-term loan to joint venture
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from disposal of assets held for sale
Net cash used in investing activities
Cash flow from financing activities
Dividend payments
Proceeds of issue of share capital
Draw down of RCF**
Repayment of RCF**
Net interest paid*
Repayment of leases – principal amount
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Net cash and cash equivalents at beginning of period
Exchange (losses)/gains on cash and cash equivalents
Net cash and cash equivalents/(debt) at end of period
* The lines indicated are impacted by the application of IFRS 16 in the current year only. Refer to note 3 for further details.
** The 2019 figures have been represented to show the draw down and repayment of the RCF.
2020 is for the 52 weeks ended 25 April 2020 and 2019 is for the 52 weeks ended 27 April 2019.
The notes on pages 132 to 182 inclusive are an integral part of the Group and Company financial statements.
Note
32
20
20
20
17
30
33
33
2020
£m
87.5
–
(2.2)
85.3
–
–
–
(6.4)
(7.5)
2.4
(11.5)
(3.4)
–
(30.0)
30.0
(7.5)
(61.1)
(72.0)
1.8
35.9
(1.0)
36.7
Group
2019**
£m
54.6
(1.0)
(15.9)
37.7
–
–
(5.0)
(15.7)
(8.7)
–
(29.4)
(46.0)
0.1
(21.5)
21.5
–
–
(45.9)
(37.6)
75.8
(2.3)
35.9
129
2020
£m
(30.7)
–
(4.2)
(34.9)
(3.6)
–
–
(1.5)
(4.7)
2.4
(7.4)
(3.4)
–
(30.0)
30.0
(9.8)
(1.8)
(15.0)
(57.3)
0.5
(0.1)
(56.9)
Company
2019**
£m
67.9
(5.2)
(13.9)
48.8
(2.3)
–
(5.0)
(3.7)
(5.7)
–
(16.7)
(46.0)
0.1
(21.5)
21.5
–
–
(45.9)
(13.8)
14.0
0.3
0.5
corporate.superdry.comOUR FINANCIALS Statements of Changes in Equity
to the members of Superdry Plc
Group
Balance at 28 April 2018
Comprehensive expense
Loss for the period
Effect of prior year restatement (see Note 36)
Restated loss for the period
Other comprehensive expense
Currency translation differences
130
Total other comprehensive expense
Restated total comprehensive expense for the period
Transactions with owners
Employee share award schemes
Shares issued
Dividend payments
Total transactions with owners
Restated balance at 27 April 2019
Effect of change in accounting policy for initial application of IFRS 16 (see Note 3)
Restated balance at 27 April 2019
Comprehensive expense
Loss for the period
Other comprehensive expense
Currency translation differences
Total other comprehensive expense
Total comprehensive expense for the period
Transactions with owners
Employee share award schemes
Dividend payments
Total transactions with owners
Balance at 25 April 2020
Note
Share
capital
£m
4.1
Share
premium
£m
149.0
Translation
reserve
£m
(1.6)
Merger
reserve
£m
(302.5)
Retained
earnings*
£m
554.0
–
–
–
–
–
–
–
–
–
–
4.1
–
4.1
–
–
–
–
–
–
–
4.1
–
–
–
–
–
–
–
0.1
–
0.1
149.1
–
149.1
–
–
–
–
–
–
–
149.1
–
–
–
(1.4)
(1.4)
(1.4)
–
–
–
–
(3.0)
–
(3.0)
–
(2.5)
(2.5)
(2.5)
–
–
–
(5.5)
–
–
–
–
–
–
–
–
–
–
(302.5)
–
(302.5)
–
–
–
–
–
–
–
(302.5)
8,9
17
8,9
17
Total
equity
£m
403.0
(98.5)
(3.2)
(101.7)
(1.4)
(1.4)
(103.1)
3.5
0.1
(46.0)
(42.4)
257.5
3.3
260.8
(98.5)
(3.2)
(101.7)
–
–
(101.7)
3.5
–
(46.0)
(42.5)
409.8
3.3
413.1
(143.4)
(143.4)
–
–
(143.4)
1.2
(3.4)
(2.2)
267.5
(2.5)
(2.5)
(145.9)
1.2
(3.4)
(2.2)
112.7
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36 in the Notes to the Group and Company Financial Statements
Superdry plc Annual Report 2020OUR FINANCIALS Statements of Changes in Equity
to the members of Superdry Plc
Company
Balance at 28 April 2018
Comprehensive expense
Loss for the period
Total comprehensive expense for the period
Transactions with owners
Employee share award schemes
Shares issued
Exchange differences
Dividends paid
Total transactions with owners
Balance at 27 April 2019
Comprehensive income
(Loss)/profit for the period
Total comprehensive income for the period
Transactions with owners
Employee share award schemes
Dividends paid
Total transactions with owners
Balance at 25 April 2020
Distributable reserves for the Company as at 25 April 2020 are £72.2m (2019: £222.4m).
The notes on pages 132 to 182 inclusive are an integral part of the Group and Company financial statements.
Note
15
8,9
17
15
8,9
17
Share
capital
£m
4.1
Share
premium
£m
149.0
Retained
earnings
£m
401.5
–
–
–
–
–
–
–
4.1
–
–
–
–
–
4.1
–
–
–
0.1
–
–
0.1
149.1
–
–
–
–
–
149.1
(136.5)
(136.5)
3.5
–
(0.1)
(46.0)
(42.6)
222.4
(148.0)
(148.0)
1.2
(3.4)
(2.2)
72.2
131
Total
equity
£m
554.6
(136.5)
(136.5)
3.5
0.1
(0.1)
(46.0)
(42.5)
375.6
(148.0)
(148.0)
1.2
(3.4)
(2.2)
225.4
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
132
to the members of Superdry Plc
1. Principal accounting policies
a) Basis of preparation
The financial statements of Superdry Plc (the ‘‘Company’’)
and Superdry Plc and its subsidiary undertakings in the UK,
the Republic of Ireland, Belgium, France, India, Hong Kong,
Germany, the Netherlands, Spain, Turkey, Scandinavia and the
United States of America as detailed in note 20 (the ‘‘Group’’)
have been prepared on a going concern basis under the historical
cost convention as modified by fair values, in accordance with
International Financial Reporting Standards (IFRS) adopted for
use in the European Union and therefore the Group financial
statements comply with Article 4 of the EU IAS Regulation. Also,
they have been prepared in accordance with the Companies Act
2006 applicable to companies reporting under IFRS.
For the reasons set out in the going concern statement on page
39 the Directors noted that the risks set out there indicate that
a material uncertainty exists that may cast significant doubt on
the Group’s and the Company’s ability to continue as a going
concern and therefore, that it may be unable to realize its assets
and discharge its liabilities in the normal course of business.
Material uncertainty relates to:
•
•
the recovery in consumer demand, and the Group’s ability
to capture this during the AW20 reset season; and,
the ability of the Group to meet the new covenants from
debt providers
As detailed on pages 38-39 management has considered
the forecasts, sensitivities and mitigating actions available
and having regard to the risks and uncertainties to which
the Group is exposed (including the material uncertainty
referred to above and in pages 38-39), the Directors have a
reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the
foreseeable future, and operate within its borrowing facilities
and covenants for a period of at least 12 months from the date
of signing the financial statements, taking into account the
working capital troughs in both FY21 and FY22. Accordingly,
the financial statements continue to be prepared on the going
concern basis.
The Company is a public company limited by shares
incorporated in the United Kingdom under the Companies Act
and is registered in England and Wales. The address of the
Company’s office is shown on page 182. The current period
(“2020”) is for the 52 weeks ended 25 April 2020 (2019: 52
weeks ended 27 April 2019 (“2019”)).
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates and
requires management to exercise its judgement (note 2) in the
process of applying the Group’s accounting policies. These
policies have been consistently applied to all periods presented
unless otherwise stated. The Group financial statements are
presented in Sterling and all values are rounded to the nearest
hundred thousand except where indicated.
b) Basis of consolidation
Consolidated subsidiaries are those entities over which the
Group has control. The Group controls an entity when the
Group 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.
The results of any subsidiaries acquired during the period
are included in the Group statement of comprehensive
income from the date on which control is transferred to the
Group. Accounting policies of subsidiaries are changed when
necessary to ensure consistency with the accounting policies
adopted by the Group.
Under IFRS 11 ‘Joint Arrangements’, investments in joint
arrangements are classified as either joint operations or joint
ventures. The classification depends on the contractual rights
and obligations of each investor, rather than the legal structure of
the joint arrangement.
The Group determines, at each reporting date, whether there is
any objective evidence that the investment in joint ventures is
impaired. If this is the case, the Group calculates the amount of
impairment as the difference between the recoverable amount
of the joint ventures and the carrying value and recognises the
amount adjacent to “share of profit or loss of joint venture” in
the Group statement of comprehensive income. Intercompany
transactions and balances are eliminated on consolidation.
c) Business combinations
The Group uses the acquisition method of accounting to
account for business combinations of entities not under
common control. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred and the equity interests
issued by the Group. The consideration transferred includes
the fair value of any asset or liability resulting from a contingent
consideration arrangement. Acquisition related costs are
expensed as incurred.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date.
The excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the acquiree over the fair
value of the Group’s share of the identifiable net assets acquired
is recorded as goodwill. If this is less than the fair value of the net
assets of the subsidiary acquired in the case of a bargain purchase,
the difference is recognised directly in profit or loss.
d) Foreign currencies
The consolidated financial information is presented in Sterling,
which is the Company’s functional and the Group’s presentation
currency. Transactions in foreign currencies are recorded at the
rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
are translated at the rates ruling at the balance sheet date. Resulting
exchange gains and losses are recognised in the Group statement
of comprehensive income. Upon consolidation, the assets and
liabilities of the Group’s foreign operations are translated at the rate
of exchange ruling at the balance sheet date. Income and expense
items of foreign operations are translated at the actual rate or
average rate if not materially different. Differences on translation are
recognised in other comprehensive income.
e) Revenue recognition
Revenue is measured at the fair value of the consideration
received, or receivable, and represents amounts receivable
for goods supplied, stated net of discounts, returns and value
added taxes.
Own store revenue – retail stream
Own store revenue from the provision of sale of goods is
recognised at the point of sale of a product to the customer.
Own store sales are settled in cash or by credit or payment
card. It is the Group’s policy to sell its products to the customer
with a right to exchange or full refund within 28 days subject
to discretionary extension. Provisions are made for own store
returns based on the expected level of returns, which in turn is
based upon the historical rate of returns. At the point of sale,
a refund liability and corresponding adjustment to revenue is
recognised for those products expected to be returned.
Concession revenue – retail stream
Concession revenues from the provision of sale of goods are
recognised gross at the point of sale of a product to the customer;
this is on the basis that the vendor acts as principal. Concession
revenues are settled in cash, by the concession grantors net of
commissions or other fees payable. It is the concessions’ policy to
sell its products with a right to exchange within 28 days and a cash
refund within 14 days. Provisions are made for concession returns
based on the expected level of returns, which in turn is based upon
the historical rate of returns. At the point of sale, a refund liability
and corresponding adjustment to revenue is recognised for those
products expected to be returned.
Superdry plc Annual Report 2020OUR FINANCIALS 133
1. Principal accounting policies CONTINUED
Ecommerce revenue – retail stream
Revenue from the provision of the sale of goods on the internet is
recognised at the point that control of the inventory has passed
to the customer, which is when the goods are received by the
customer. Transactions are settled by credit card, payment card
or PayPal. Customers have a right to exchange or full refund
within a range of 21 to 100 days, depending on the website the
purchase is made from. Provisions are made for e-commerce
credit notes based on the expected level of returns, which in turn
is based upon the historical rate of returns. At the point of sale,
a refund liability and corresponding adjustment to revenue is
recognised for those products expected to be returned.
Wholesale revenue – wholesale stream
Wholesale revenues from the sale of goods are recognised
at the point that control of the inventory has passed to the
customer, which depends on the specific terms and conditions
of sales transactions and which is typically upon delivery.
Revenues are settled in cash, net of discounts. Provisions are
made for Wholesale credit notes based on the expected level
of returns, which in turn is based upon the historical rate of
returns. At the point of sale, a refund liability and corresponding
adjustment to revenue is recognised for those products
expected to be returned.
f) Other income
Royalty income
The Group receives royalty income from its franchise partners
based on specific agreements in place. The income is recognised
based on the specific performance obligations within the
agreements. This income is recognised within other income as it
does not relate to consideration for goods supplied to customers.
g) Finance income
Finance income comprises interest receivable on funds invested
and cash deposits. Finance income is recognised in the Group
statement of comprehensive income using the effective interest
method.
h) Finance expenses
Finance expenses comprise interest payable on interest-
bearing loans, lease liabilities and short-term borrowings.
Finance expenses are recognised in the Group statement of
comprehensive income using the effective interest method.
i) Leasing and similar commitments
IFRS 16 became effective for periods starting on or after
1 January 2019 and replaces the standard IAS 17 Leases and
related interpretations. IFRS 16 requires entitles to apply a single
lease accounting model, with lessees recognising right of use
assets and lease liabilities on the balance sheet for all applicable
leases except for certain short-term and low value leases.
The right of use assets are measured at transition at an amount
equal to the lease liability, adjusted for prepaid and accrued lease
payments recognised in the Group balance sheet immediately
before the date of initial application. The right of use assets
are subsequently measured at the transition amount less any
accumulated depreciation and impairment losses. Depreciation
is provided on a straight-line basis over the expected useful life,
which is taken as being equal to the lease term.
Lease liabilities are measured at transition at the present value
of the remaining lease payments discounted at the incremental
borrowing rate of each lease as at the date of initial application.
Lease liabilities are subsequently measured at amortised
cost, increased for interest charges and reduced for lease
payments made.
Full details on how the transition to IFRS 16 has been accounted
for can be found in note 3.
The Group assesses whether a contract is or contains a lease,
at inception of the contract. The Group recognises a right-of-
use asset and a corresponding lease liability with respect to all
lease arrangements in which it is the lessee, except for short-
term leases (defined as leases with a lease term of 12 months or
less), leases of low value assets (such as personal computers,
small items of office furniture and telephones) and variable
lease agreements. For these leases, the Group recognises the
lease payments as an operating expense on a straight-line basis
over the term of the lease unless another systematic basis is
more representative of the time pattern in which economic
benefits from the leased assets are consumed.
Lease premiums
Lease premiums are only recognised on leases that do not fall
under the scope of IFRS 16. Lease premiums paid to tenants are
initially recognised as an intangible asset, in the balance sheet, at
the point the recognition criteria in the lease are met, and debited
to selling, general and administrative expenses in the Group
statement of comprehensive income on a straight-line basis over
the term of the lease commencing from the opening date.
j) Property, plant and equipment Property, plant and
equipment is stated at historical cost less accumulated
depreciation and impairment. Cost includes the original
purchase price and the costs attributable to bringing the asset
into its working condition. Gains and losses on disposals are
determined by comparing the proceeds received with the
carrying amount and are recognised in the Group statement of
comprehensive income.
Depreciation is provided at rates calculated to write down the
cost of the assets, less their estimated residual values, over
their remaining useful economic lives as follows:
Freehold buildings
Leasehold improvements
Furniture, fixtures and
fittings
Computer equipment
– 50 years on a straight-line basis
– 5 – 10 years on a straight-line basis
– 5 – 10 years on a straight-line basis
– 3 – 5 years on a straight-line basis
Land is not depreciated. Residual values and useful economic
lives are reviewed annually and adjusted if appropriate.
Property, plant and equipment is reclassified as held for sale
assets if their carrying amount will be recovered through a highly
probable sale transaction rather than through continuing use.
k) Impairment of non-financial assets
The carrying values of non-financial assets are tested annually
to determine whether there is any indication of impairment. If
any such indication exists, the recoverable amount of the asset
is estimated. Where the asset does not generate cash flows
which are independent from other assets, the recoverable
amount of the cash generating unit (“CGU”) to which the asset
belongs is estimated.
The recoverable amount of a non-financial asset is the higher
of its fair value less costs to sell, and its value in use. Value in
use is the present value of the future cash flows expected to be
derived from an asset or CGU. An impairment loss is recognised
in the Group statement of comprehensive income whenever
the carrying amount of an asset or CGU exceeds s recoverable
amount. An impairment loss in a subsidiary consolidated
under predecessor accounting (note 1 (ad)) is recognised
as a movement in the merger reserve and retained earnings
in addition to recognising a loss on the Group statement of
comprehensive income. Further information on how impairments
have been calculated can be found in note 2.
l) Intangible assets
Intangible assets acquired separately from a business are
recognised initially at cost. An intangible asset acquired as
part of a business combination is recognised outside goodwill if
the asset is separable or arises from contractual or other legal
rights and its fair value can be measured reliably. Following
initial recognition, intangible assets are carried at cost less
accumulated amortisation and impairment losses. Intangible
assets with a finite life have no residual value and are amortised
on a straight-line basis over their expected useful lives as follows:
Trademarks
Website and software
Lease premiums
Distribution agreements
– 10 years
– 5 years
– Over the life of the lease on a
straight-line basis
– 6 – 23 years
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
134
to the members of Superdry Plc
1. Principal accounting policies CONTINUED
Trademarks comprise the external cost of registration and
associated legal costs. Website and software costs consists of
externally incurred development costs for the order management
system, product life cycle management system and multi
warehouse management system for regional distribution centres.
Lease premiums comprise the amount paid to the previous
tenant to acquire the lease. Distribution agreements comprise
the fair value, at the date of acquisition, of distribution
agreements acquired as part of a business combination.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer’s
previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed. If, after reassessment,
the net of the acquisition-date amounts of the identifiable
assets acquired and liabilities assumed exceeds the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer’s
previously held interest in the acquiree (if any), the excess is
recognised immediately in profit or loss as a bargain purchase
gain. Goodwill on acquisitions of subsidiaries is included in
intangible assets. Goodwill is not amortised but is tested annually
for impairment and carried at cost less accumulated impairment
losses. Impairment losses on goodwill are not reversed.
m) Investments
Investments in subsidiaries are recorded at historical cost, less
any provision for impairment.
Equity investments where the shareholding is less than 20%
are accounted for as financial assets at fair value through the
profit or loss. Gains and losses arising from changes in the fair
value are recognised in the Group statement of comprehensive
income within other gains and losses.
The Group applies IFRS 11 to all joint arrangements. Under IFRS
11, investments in joint arrangements are classified as either joint
operations or joint ventures depending on the contractual rights
and obligations of each investor. The Group has assessed the
nature of its joint arrangements and determined them to be joint
ventures. Interests in joint ventures are accounted for using the
equity method of accounting after initially being recognised at
cost in the consolidated balance sheet. When the Group’s share of
losses exceed the Group’s interest in the joint venture, the Group
discontinues recognising its share of further losses. Additional losses
are recognised only to the extent that the Group has incurred legal or
constructive obligations on behalf of the joint venture.
n) Derivative financial instruments and hedging activities
Derivative financial instruments are recognised initially at their
fair value and re-measured at fair value at each period end.
Derivative financial instruments are categorised as held at fair
value through the profit and loss account. The gain or loss on
re-measurement to fair value is recognised immediately in the
Group statement of comprehensive income. The Group has not
applied hedge accounting. Foreign forward exchange derivative
gains and losses are recognised in other gains and losses (net).
o) Inventories
Inventories are valued at the lower of cost or net realisable
value. Cost comprises costs associated with the purchase and
bringing of inventories to the distribution centres and is based
on the weighted average principle. Provisions are made for
obsolescence, mark-downs and shrinkage. The cost formula
used for measuring inventory is moving average cost.
From 28 April 2019, the Group refined its estimate of how the
cost of sample stock purchases are released to the Group
statement of comprehensive income. Sample stock is now
expensed but previously it was included in stock and released
over the season to which it relates. As a result of this change in
estimate a charge of £3.9m has been recognised within cost of
sales in the 2020 financial year.
p) Trade receivables
Trade receivables are initially recognised at transaction price
and subsequently measured at amortised cost, less a loss
allowance. The loss allowance is measured at an amount
equal to lifetime expected credit losses using simplified model
(provision matrix).
q) Assets classified as held for sale
Non-current assets are classified as held for sale when their
carrying amount will be recovered through a sale transaction
rather than through continuing use. This condition is met only
when the sale is highly probable, the asset is available for
immediate sale, and when it is expected to complete within one
year. These assets are stated at the lower of carrying amount and
fair value less costs to sell.
r) Cash and bank balances
Cash and bank balances comprise cash at bank and in hand
and short-term deposits with an original maturity date of three
months or less. In order to align with the requirements of IAS 32,
the Group has reviewed the cash pooling arrangement and has
revised the presentation of this for both the prior year and the
current year. This results in a Group cash position for the year
of £307.4m with an overdraft of £270.7m, please see note 33 for
further detail. For the purpose of the cash flow statement, cash
and cash equivalents consist of cash and short-term deposits,
less overdrafts, which are repayable on demand.
s) Provisions
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a
past event, it is more likely than not that an outflow of economic
benefits will be required to settle the obligation and the obligation
can be estimated reliably. Provisions are discounted using the risk
free rate if the impact on the provision is deemed to be material.
Provisions for onerous property related contracts are
recognised when the Group believes that the unavoidable costs
of meeting or exiting the lease obligations exceed the economic
benefits expected to be received under the lease.
t) Employee benefit obligations
Wages, salaries, payroll tax, paid annual leave, sick leave, bonuses,
and non-monetary benefits are accrued in the year in which the
associated services are rendered by employees of the Group.
The Group operates a defined contribution pension scheme
for the benefit of its employees. The Group pays contributions
into an independently administered fund via a salary sacrifice
arrangement. The costs to the Group of providing these benefits
are recognised in the Group statement of comprehensive
income and comprise the amount of contributions payable to
the scheme in the year.
u) Share based payments – Group operated schemes
The Group operates several equity settled share based
compensation plans. The fair value of the shares under such
plans is recognised as an expense in the Group statement
of comprehensive income. Fair value is determined using
the Black–Scholes Option Pricing Model. The amount to be
expensed over the vesting period is determined by reference
to the fair value of share incentives excluding the impact of any
non-market vesting conditions. Non-market vesting conditions
are considered as part of the assumptions about the number
of share incentives that are expected to vest. At each balance
sheet date, the Group revises its estimate of the number of
share incentives that are expected to vest. The impact of the
revision on original estimates, if any, is recognised in the Group
statement of comprehensive income, with a corresponding
adjustment to equity over the remaining vesting period.
v) Share based payments – Founder Share Plan
The founders of Superdry operate a share based compensation
plan that awards both cash and shares; for the purposes of
IFRS 2 it is considered to be an equity settled share based
compensation plan. The Founder Share Plan (‘‘FSP’’) (see note
9 for further details) falls within the scope of IFRS 2 despite
the Group neither purchasing, nor issuing the shares, nor
the cost of the cash being a Company expense. Fair value is
determined using the Monte Carlo Pricing Model. The amount
to be expensed over the vesting period is determined by
reference to the fair value of share incentives, adjusted at the
grant of each of share incentive for dilution assumptions. These
dilution assumptions are not revised after the grant of the share
incentive. Non-market vesting conditions are considered as
part of the assumptions about the number of share incentives
that are expected to vest. The impact of the revision on original
estimates, if any, is recognised in the Group statement of
comprehensive income, with a corresponding adjustment to
equity over the remaining vesting period.
Superdry plc Annual Report 2020OUR FINANCIALS 135
1. Principal accounting policies CONTINUED
w) Long-term loans (receivable)
Long-term loans are recognised on an amortised cost basis less
any loss allowance for expected credit losses. The loan meets
the solely principal and interest on the principal (SPPI) test
and it is held in order to collect all contractual cash flows. The
loss allowance is measured at an amount equal to 12-months
expected credit losses unless there was a significant increase
in credit risk since inception. In such cases, the loss allowance
is measured at the amount equal to lifetime expected credit
losses. The movement in the provision is recognised in the
Group statement of comprehensive income.
x) Trade and other payables
Trade and other payables, excluding lease incentives, are non-
interest bearing and are initially recognised at their fair value
and subsequently measured at amortised cost. Generally, this
results in their recognition at their nominal value.
y) Taxation
The policy for current and deferred tax, when relevant, is as
follows:
•
•
•
•
•
•
tax on the profit or loss for the period will comprise current
and deferred tax;
current tax expense is calculated using the tax rates which
have been enacted or substantively enacted at the balance
sheet date, and any adjustment to tax payable in respect of
previous years;
deferred tax is provided using the balance sheet liability
method, providing for temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation
purposes;
the amount of deferred tax provided is based on the
expected realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or
substantively enacted by 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 asset can be utilised. Deferred tax assets
are reduced to the extent that it is no longer probable that
the related tax benefit will be realised (see note 22); and
deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred tax assets
and liabilities relate to taxes levied by the same taxation
authority on either the same taxable entity or different
taxable entities where there is an intention to settle the
balances on a net basis.
z) Dividends
Dividends are recognised as a liability and deducted from equity
at the balance sheet date only if they have been approved
before or on the balance sheet date and not paid. Interim
dividends are recognised in the period they are paid.
aa) Share capital
Ordinary shares are classified as equity. The share capital
represents the nominal value of shares that have been issued.
ab) Share premium
The share premium account represents the excess of the issue
price over the nominal value on ordinary shares issued, less
incremental costs directly attributable to issue the new shares.
ac) Retained earnings
The retained earnings reflect the accumulated profits and
losses of the Group.
ad) Merger reserve and other reserves The consolidation
of the subsidiaries acquired in advance of the Initial Public
Offering in March 2010 (C-Retail Limited, DKH Retail Limited,
SuperGroup Concessions Limited, SuperGroup International
Limited, SuperGroup Internet Limited and SuperGroup Retail
Ireland Limited) into the financial statements of Superdry
Plc has been prepared under the principles of predecessor
accounting, whereby an acquirer is not required to be identified,
and all entities are included at their pre-combination carrying
amounts. This accounting treatment leads to differences
on consolidation between consideration and fair value of
the underlying net assets and this difference is included
within equity as a merger reserve. All subsequent business
combinations are accounted for using the acquisition method of
accounting (note 1c).
ae) Segment reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the Chief Operating
Decision-Maker. The Chief Operating Decision-Maker, which is
responsible for allocating resources and assessing performance
of the operating segments, has been identified as the Executive
Committee.
af) Cost of sales
Cost of sales comprises movements between opening and
closing inventories, purchases, carriage in, commissions
payable, and other related expenses. As explained in note 1e,
customers have a right of return. When customers exercise this
right, the Group has a right to recover the product and as such
recognises a right to returned goods asset and a corresponding
adjustment to cost of sales. This is based on the historical rate
of return.
ag) Government grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions
attaching to them and that the grants will be received.
Government grants are recognised in the Group statement of
comprehensive income on a systematic basis over the periods
in which the Group recognises an expenses for the related costs
for which the grants are intended to compensate. The income is
directly offset against the expense.
ah) Exceptional and other items
Non-underlying adjustments constitute exceptional and other
items and are disclosed separately in the Group statement
of comprehensive income. In determining whether events
or transactions are treated as exceptional and other items,
management considers quantitative as well as qualitative
factors such as the frequency or predictability of occurrence.
Examples of charges or credits meeting the above definition
and which have been presented as exceptional and other items
in the current and/or prior years include:
Exceptional items
•
acquisitions/disposals of significant businesses and
investments;
•
impact on deferred tax assets/liabilities for changes in tax
rates and;
•
business restructuring programmes.
Exceptional and other items
•
derecognition of deferred tax assets; and
•
asset impairment and onerous property related contracts
charges.
Other items
•
the movement in the fair value of unrealised financial
derivatives; and
•
IFRS 2 charges in respect of FSP.
In the event that other items meet the criteria, which are
applied consistently from year to year, they are also treated
as exceptional and other items. Further information about the
determination of exceptional and other items in financial year
2020 is included in notes 6 and 37.
ai) Impairment of financial assets
The Group recognises a loss allowance for expected credit
losses on investments in debt instruments that are measured
at amortised cost or at FVTOCI, lease receivables, trade
receivables and contract assets, as well as on financial guarantee
contracts. The amount of expected credit losses is updated at
each reporting date to reflect changes in credit risk since initial
recognition of the respective financial instrument.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
136
to the members of Superdry Plc
1. Principal accounting policies CONTINUED
The Group always recognises lifetime expected credit losses
(’’ECL’’) for trade receivables, contract assets and lease
receivables. The expected credit losses on these financial
assets are estimated using a provision matrix based on the
Group’s historical credit loss experience, adjusted for factors
that are specific to the debtors, general economic conditions
and an assessment of both the current as well as the forecast
direction of conditions at the reporting date.
For all other financial instruments, the Group recognises
lifetime ECL when there has been a significant increase in
credit risk since initial recognition. A significant increase in
credit risk was defined in note 34. However, if the credit risk on
the financial instrument has not increased significantly since
initial recognition, the Group measures the loss allowance for
that financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will
result from all possible default events over the expected life of a
financial instrument. In contrast, 12-month ECL represents the
portion of lifetime ECL that is expected to result from default
events on a financial instrument that are possible within 12
months after the reporting date.
2. Critical accounting estimates and judgements
in applying accounting policies
The preparation of the financial statements requires
judgements, estimates and assumptions to be made that affect
the reported value of assets, liabilities, revenues and expenses.
The nature of estimation and judgement means that actual
outcomes could differ from expectation.
Critical accounting estimates and assumptions
Management consider that accounting estimates and
assumptions made in relation to the following items have a
significant risk of resulting in a material adjustment to the
carrying amounts of assets and liabilities within the next
financial period.
Store impairments
Retail store assets (as with other financial and non-financial
assets) are subject to impairment based on whether current or
future events and circumstances suggest that their recoverable
amount may be less than their carrying value. Recoverable
amount is based on the higher of the value in use and fair value
less costs to dispose, although as all of the Group’s retail owned
stores are leasehold, only value in use has been considered in
the impairment assessment. Value in use is calculated from
expected future cash flows using suitable discount rates and
including management assumptions and estimates of future
performance. Store asset carrying values are inclusive of
any right-of-use assets following the transition to IFRS16.
An exceptional impairment of £136.8m (2019: £42.6m) was
recognised in the period.
For impairment testing purposes, the Group has determined
that each store is a CGU. Each CGU is tested for impairment
if any indicators of impairment have been identified. Given the
decline in store like-for-like sales in the year, all 241 owned
stores have been tested for impairment in the current year.
The value in use of each CGU is calculated based on the Group’s
latest budget and forecast cash flows, covering a five-year
period (the “medium-term financial plan”), which have regard
for historic performance, knowledge of the current market and
the impact of the Covid-19 pandemic, together with the Group’s
views on the achievable growth, all of which have been reviewed
and approved by the Board. The cash flows are discounted using
the appropriate discount rate. The medium-term financial plan
is prepared on a ‘top down’ basis and has been attributed to
individual stores based on their historic performance relative
to the rest of the store estate. Cash flows beyond this five-year
period as set out in the Plan are extrapolated using a long-term
growth rates that approximate to country-specific rates. The cash
flows are modelled for each store through to their lease expiry
date. No lease extensions have been assumed in the modelling,
unless they were committed at the balance sheet date.
Management estimates discount rates using pre tax rates that
reflect the current market assessment of the time value of
money and the risks specific to the CGUs. The discount rates
are derived from the Group’s post-tax WACC and range from
9.2% to 11.9% (FY19: 9.2% to 15.5%).
The key estimates for the value in use calculations are those
regarding discount rates and expected changes to future cash
flows used in the value in use calculation. The key assumptions
used in determining store cash flows are the growth rates in
both sales and gross profit margins as set out in the medium-
term financial plan. The medium-term financial plan reflects the
impact of the Covid-19 pandemic and the proposed Brand re-
set as set out on page 06. Further significant costs (or credits)
may be recorded in future years dependent on the longer term
impact of Covid-19 and the success of the Brand re-set.
During the year, the Group has recognised an exceptional
impairment charge of £15.5m relating to property, plant and
equipment, an exceptional impairment charge of £121.2m
relating to right-of-use assets and an exceptional impairment
charge of £0.1m relating to intangible assets. These impairment
charges have been recognised as part of exceptional items
within selling, general and administrative expenses. The
carrying value of property, plant and equipment, right-of-use
assets and intangible assets after the impairment assessment
was £208.1m.
The Group has carried out a sensitivity analysis on the
impairment tests for its owned store portfolio on an aggregated
basis for property, plant and equipment (note 18), right of
use assets (note 30) and intangibles (note 19), using various
reasonably possible scenarios based on recent market
movements including discount rates and a change to the sales
and margin assumptions in the medium-term financial plan:
•
•
•
•
•
•
An increase of 200bps in the gross margin rate for each
territory would decrease impairment by £8.4m
A decrease of 200bps in the gross margin rate for each
territory would increase impairment by £8.6m
An increase of 3% in the discount rate for each territory
would increase impairment by £5.6m
A decrease of 3% in the discount rate for each territory
would decrease impairment by £6.3m
An increase of 5% in year 1 sales growth for each territory
would decrease impairment by £8.8m
A decrease of 5% in year 1 sales growth for each territory
would increase impairment by £8.9m
In addition, the Group has considered a range of reasonably
possible outcomes within the Plan period. The scenario
modelled is consistent with the sensitivities applied for the
viability assessment, set out on page 39. This would increase
the impairment charge by £39.0m.
During FY20 an impairment of land of £0.4m and an impairment
of a lease premium of £1.9m were recorded within underlying
expenses. These impairments did not result from the store
impairment review.
Onerous property related contracts provisions
Management has also assessed whether impaired and unprofitable
stores require an onerous provision for the property related
contracts. An onerous property related contracts provision is
recognised when the Group believes that the unavoidable costs
of meeting or exiting the property related obligations exceed the
benefits expected to be received under the lease. The property
related contracts relates primarily to service charges. Onerous
property related contracts provisions are no longer recognised on
fixed rental expenses, following the transition to IFRS 16.
The calculation of the net present value of future cash flows is
based on the same assumptions for growth rates and expected
changes to future cash flows as set out above, discounted at
the appropriate risk adjusted rate. The costs of exiting property
related contracts as set out in the lease agreement, either at the
end of the lease or the lease break date (whichever is shorter),
have been considered in the calculation.
Based on the factors set out above, the Group has reassessed the
onerous property related contract provision for the year of £12.4m
(2019: £86.9m) following the transition to IFRS 16. This value is
after a £12.0m release to the Group statement of comprehensive
income following the reassessment of the provision. The onerous
property related contracts provision credit has been recognised
within exceptional items within selling, general and administrative
expenses. Further significant costs (or credits) may be recorded
in future years dependent on the longer term impact of Covid-19
and the success of the Brand re-set.
Superdry plc Annual Report 2020OUR FINANCIALS 2. Critical accounting estimates and judgements
in applying accounting policies CONTINUED
The Group has performed sensitivity analysis on the onerous
property related contract provisions using reasonably possible
scenarios based on recent market movements, consistent with
those sensitivities disclosed above in the ‘store impairment’
section:
•
•
•
•
•
•
An increase of 200bps in the margin rate for each territory
would decrease the onerous property related contracts
charge by £0.3m
A decrease of 200bps in the margin rate for each territory
would increase the onerous property related contracts
charge by £0.4m
An increase of 3% in the risk free rate for each territory
would decrease the onerous property related contracts
charge by £0.7m
A decrease of 3% in the risk free rate for each territory
would increase the onerous property related contracts
charge by £0.8m
An increase of 5% in year 1 sales growth for each territory
would decrease the onerous property related contracts
charge by £0.3m
A decrease of 5% in year 1 sales growth for each territory
would increase the onerous property related contracts
charge by £0.4m
The downside scenario modelled in the viability assessment
(see page 39 for further details), would decrease the onerous
property related contracts credit by £9.7m.
Impairment of investments in subsidiary undertakings and
intercompany debtor balances
Management has estimated the loss allowance required on
its intergroup receivables under IFRS 9’s expected credit loss
model. Where there has been no significant increase in credit
risk since initial recognition of the asset the loss allowance
is estimated using the 12-month expected credit losses (that
is cash shortfalls arising from events of default taking place
within one year of the balance sheet date). The loss allowance
recorded in respect of such financial assets is £nil. Where
there has been a significant increase in credit risk since initial
recognition of a financial asset the loss allowance is estimated
based on the lifetime expected credit loss. A significant
increase in credit risk is considered to exist where any
contractual cash flow relating to the financial asset is 30 days or
more overdue or otherwise where there is a significant adverse
change in the borrower’s financial condition or anticipated
performance.
The lifetime expected credit loss reflects management’s estimate
of the expected future receipts from the borrower based on the
borrowers’ medium-term financial plans discounted using the
effective interest rate relevant to each receivable.
The downside scenario modelled in the viability assessment
(see page 39 for further details), would increase impairment in
subsidiaries by £185.3m and increase intercompany debtor loss
allowance by £7.1m.
137
Recoverability of trade debtors
The impairment of trade and other receivables is based on
management’s estimate of the ECL. These are calculated using
the Group’s historical credit loss experience, with adjustments
for general economic conditions and an assessment of
conditions at the reporting date. Part of the adjustments
for general economic conditions at 25 April 2020 includes
consideration of the impact that the Covid-19 pandemic has
had on customers’ ability to repay invoices when they fall due.
Management has estimated country-specific ECL percentages
derived using externally generated economic data. These
estimates have been applied to the lower risk trade receivables
(those under 30 days overdue or under £30k), as well as being
compared to the credit loss calculated on specific higher risk
trade receivables (those over 30 days overdue and over £30k).
See notes 24 and 34 for further details.
The Group has carried out sensitivity analysis using various
reasonably possible scenarios based on recent market
movements.
•
•
•
•
•
•
An increase of 15% in the estimated country-specific
expected credit loss percentage would increase the ECL
by £1.0m
An increase of 20% in the estimated country-specific
expected credit loss percentage would increase the ECL
by £1.3m
An increase of 25% in the estimated country-specific
expected credit loss percentage would increase the ECL
by £1.6m
A decrease of 15% in the estimated country-specific
expected credit loss percentage would decrease the ECL
by £1.0m
A decrease of 20% in the estimated country-specific
expected credit loss percentage would decrease the ECL
by £1.3m
A decrease of 25% in the estimated country-specific
expected credit loss percentage would decrease the ECL
by £1.6m
The carrying value of the investment in subsidiary undertakings
has also been assessed for impairment in accordance with
IAS 36. The value in use of each subsidiary is based on the
discounted cash flows available to be paid to the Company from
the relevant subsidiaries after the settlement of each entity’s
liabilities based on estimated cash flows determined using the
Group’s medium-term financial plan period extended to cover
a period of 10 years using a long-term growth rate of 2.1%. The
recoverable amount is compared to the investment carrying
value and any difference recorded as impairment.
An IFRS 9 loan loss allowance on intercompany receivables of
£26.5m (2019: £44.2m) and an impairment charge of £158.7m
(2019: £51.3m) on the Group’s investment in subsidiary
undertakings has been recognised. The loss allowance based on
the calculated NPV of the subsidiary compared to intercompany
balance. There is a difference between the group and parent
company net assets due to the impairment in the parent company
being determined using the cash flows in the Group medium-
term financial plan across all channels extrapolated for a further
5 years, whereas the retail cash flows used for the impairment of
fixed assets and right of use assets in the Group balance sheet is
limited to the existing lease term, which on average is four years.
The most significant estimation input related to the lifetime
expected credit losses and value in use calculations is the expected
future performance of each entity in the Plan; most significantly
the sales growth assumptions. Further significant loan loss and
impairment charges may be recorded in the future dependent on
actual performance compared to the Group’s Plan. The lifetime
expected credit loss could also be impacted by changes in
estimation of the impact of alternative economic scenarios.
The Group has carried out sensitivity analysis using various
reasonably possible scenarios based on recent market
movements including discount rates and a change to the sales
assumptions in the Plan.
•
•
•
•
If sales were 5% higher in year 1 forecast, this would
decrease intercompany debtor loss allowance by £0.27m
and decrease impairment in subsidiaries by £8.3m
If sales were 5% lower in year 1 forecast, this would
increase intercompany debtor loss allowance by £0.26m
and increase impairment in subsidiaries by £9.6m
An increase of 1% in discount rate, would increase
impairment in subsidiaries by £13.2m and increase
intercompany debtor loss allowance by £0.8m.
A decrease of 1% in discount rate, would decrease
impairment in subsidiaries by £12.8m and decrease
intercompany debtor by £0.8m.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
138
to the members of Superdry Plc
2. Critical accounting estimates and judgements
in applying accounting policies CONTINUED
Inventory provision
Inventories are valued at the lower of cost or net realisable
value. Provisions are calculated for the obsolescence of
inventory based on its age by season, at rates determined
through historical observations on subsequent saleability and
recoverability of aged inventory.
In light of the current Covid-19 pandemic, management have
reviewed the existing inventory provision policy to determine
whether there is any additional risk to the net realisable value
of stock as at 25 April 2020. The temporary closure of owned
stores and wholesale customer’s operations meant that
there were higher than budgeted levels of stock remaining
at the balance sheet date, so it was concluded that a one-off
adjustment is required in respect of this excess stock. This
provision percentage was calculated by considering excess
stock held and then applying a percentage based on a number
of factors such as age of stock, forward orders and ability to sell
this stock. The additional obsolescence provision resulting from
this estimate is £6.1m.
The Group has carried out sensitivity analysis using various
reasonably possible scenarios based on factors mentioned above.
•
•
•
•
An increase of 10% in the estimate percentage applied
would increase the inventory provision by £2m
A decrease of 10% in the estimate percentage applied
would decrease the inventory provision by £2m
An increase of 10% in the excess stock units would
increase the inventory provision by £0.6m
A decrease of 10% in the excess stock units would
increase the inventory provision by £0.6m
IFRS 16 Accounting
Break and extension options
The lease term over which the applicable lease payments are
discounted to calculate both the right of use asset and lease liability
is set as the non-cancellable period of a lease, together with:
•
•
periods covered by an option to extend the lease where it
is reasonably certain that this will be exercised; and
periods covered by an option to break the lease where it is
reasonably certain that this will not be exercised.
Except for certain specific leases where there is a reasonable
possibility of the break option being exercised, the Group has
determined that the exercise of break options is not reasonably
certain and therefore have determined the lease term as being
until the lease end date.
The Group has carried out a sensitivity analysis on the effect of
this estimate. Continuing the lease term to the end of the lease,
rather than exercising an option to break the lease, has the
effect of grossing up the transitional right of use asset and lease
liability by £50.0m.
Discount rates
The interest rate implicit in all leases is considered to be readily
determinable and therefore the incremental borrowing rate
has been used to calculate lease liabilities. The incremental
borrowing rate has been calculated at a territory level with
reference to the risk-free rate for that territory and a Group-
specific credit risk adjustment, both of which require the use of
estimates. A 0.5% increase in the incremental borrowing rate
for each lease would result in a grossing up of the transitional
right of use asset and lease liability by £5.0m.
Critical judgements in applying the Group’s
accounting policies
Management consider that judgements made in the process
of applying the Group’s accounting policies that could have
a significant effect on the amounts recognised in the Group
financial statements are as follows:
Attributing Ecommerce sales and costs to stores
Judgement is required as to whether Ecommerce sales (and
associated costs) could be attributed to stores for the purposes
of impairment testing when calculating the value in use of each
store CGU. While management believes that a proportion of
Ecommerce sales could be attributed to stores, the basis of
such attribution was difficult to determine, due to insufficient
evidence to reliably estimate and the introduction of fulfil from
store. For this reason, sales directly attributable to Ecommerce
has not been calculated but the same judgement applies.
Exceptional and other items
Judgements are required as to whether items are disclosed as
exceptional and other items, with consideration given to both
quantitative and qualitative factors. Further information about
the determination of exceptional and other items in financial
year 2020 is in note 37.
Going concern
After considering the forecasts, sensitivities and mitigating
actions available to management and having regard to the risks
and uncertainties to which the Group is exposed (including the
material uncertainty referred to on page 39), the directors have
a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the
foreseeable future, and operate within its borrowing facilities
and covenants for a period of at least 12 months from the date
of signing the financial statements, taking into account the
working capital troughs in both FY21 and FY22. Accordingly,
the financial statements continue to be prepared on the going
concern basis with the highlighted material uncertainty.
3. New accounting pronouncements
IFRS 16
IFRS 16 became effective for periods starting on or after
1 January 2019 and replaces the standard IAS 17 Leases
and related interpretations. The Group adopted IFRS 16 with
effect from 28 April 2019 using the modified retrospective 2B
transition approach. Therefore, under the specific transitional
provisions in the standard, the 52 weeks ended 27 April 2019
has not been restated and continues to be shown under IAS 17
with the cumulative adjustment shown in current year reserves.
IFRS 16 requires entities to apply a single lease accounting
model, with lessees recognising right of use assets and lease
liabilities on the balance sheet for all applicable leases except
for certain short-term and low value leases. The Group’s leased
portfolio comprises various store and head office properties and
motor vehicles.
Approach used
IFRS 16 Leases outlines how to recognise, measure, present
and disclose leases. The Group has elected to use the transition
approach set out in IFRS 16.C8(b)(ii). As a result, lease
liabilities were measured at transition at the present value of
the remaining lease payments discounted at the incremental
borrowing rate of each lease as at the date of initial application.
The right of use assets are measured at transition at an amount
equal to the lease liability, adjusted for prepaid and accrued
lease payments recognised in the Group balance sheet
immediately before the date of initial application.
Practical expedients and exemptions
On transition to IFRS 16, the Group elected to apply the
following practical expedients on a lease by lease basis:
•
•
•
•
•
accounting for leases with a lease term ending within 12
months of the date of initial application in the same way as
short-term leases, and including the cost of such leases in
the disclosure of the short-term lease expense;
applying a single discount rate to a portfolio of leases with
reasonably similar characteristics is reasonably certain
that this will be exercised; and
the exclusion of initial direct costs for the measurement of
the right of use asset at the date of initial application;
using the assessment of whether a lease is onerous under
IAS 37 Provisions, Contingent Liabilities and Contingent
Assets as the basis of the impairment on transition of
right of use assets, rather than performing an impairment
review under IAS 36 Impairment of Assets; and
the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract
is or contains a lease at the date of initial application. Instead,
for contracts entered into before the transition date, the Group
relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
Superdry plc Annual Report 2020OUR FINANCIALS 3. New accounting pronouncements CONTINUED
Accounting policy
Initial recognition – Lease liabilities
At transition, lease liabilities are measured at the present value
of the remaining lease payments, which are then discounted
at the Group’s incremental borrowing rate. Lease payments
included within this comprise the following:
•
•
•
fixed lease payments (including in substance fixed
payments), less any capital contributions and lease
incentives receivable;
variable lease payments that depend on an index or rate;
and
payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
Any lease payments that relate to turnover rent or service
charges are excluded from the scope of IFRS 16. These will
therefore continue to be recognised selling, general and
administrative expenses in the condensed Group statement of
comprehensive income.
Other considerations
Variable lease payments that depend on an index or a rate are
included in the initial measurement of the lease liability and
are initially measured using the amount at the commencement
date. When these variable amounts become known, these
subsequent amounts not included in the liability will be
recognised in the profit or loss in the period in which the event
or condition that triggers payment occurs.
Extension and termination options are included in a number
of property leases across the Group. The Group has assessed
commercial factors to determine the lease term for some lease
contracts in which it is a lessee that include renewal options and
break clauses. The Group has reviewed whether it is reasonably
certain to exercise such options; the impact of this decision will
affect the amount of the lease liability and in turn the associated
right of use asset.
Initial recognition – Right of use assets
The right of use assets are then formed based on the initial
measurement of the corresponding liability, which is then
adjusted for the following:
•
•
•
•
any lease payments made before the commencement of the
lease (including lease premiums);
any initial direct costs;
any restoration costs; and
any residual lease incentives balances previously recognised.
On transition to IFRS 16, this right of use asset has then been
assessed for impairment. As identified above, a practical
expedient has been taken over this point, by relying on a
previous assessment of whether a lease is onerous under IAS 37
Provisions, Contingent Liabilities and Contingent Assets.
Subsequent measurement of lease liabilities and right of
use assets
The lease liability unwinds over the lease term, increasing
the carrying amount to reflect interest on the lease liability
(calculated using the effective interest method) and reducing
the carrying amount to reflect the lease payments made. The
right of use assets are measured at cost less accumulated
depreciation and impairment losses.
Except for certain specific leases where there is a reasonable
possibility of the break option being exercised, the Group has
determined that lease term runs until the lease end date. This
is because of the requirement under IFRS 16 to be reasonably
certain that options to break the lease will be taken. This differs
to the assumption taken in the operating lease commitment
note therefore there has been an alignment of lease dates.
Similarly, there has been an alignment of rent where the specific
requirements under IFRS 16 have resulted in a different annual
rental charge to the operating lease commitments note.
139
Impact of IFRS 16 on the financial statements
Condensed Group balance sheet
Non-current assets
Current assets
Total assets
Other liabilities
Onerous property related contracts provision
Lease incentives
Fair value market rent liability
Deferred liability
Total liabilities
Net assets
Total equity
April 2019 Pre-
IFRS 16
£m
159.7
361.9
IFRS 16 Impact
£m
287.8
(5.4)
April 2019 Post-
IFRS 16
£m
447.5
356.5
521.6
(137.6)
(78.5)
(47.2)
(0.8)
–
(264.1)
257.5
257.5
282.4
(372.1)
48.4
45.7
0.8
(1.9)
(279.1)
3.3
3.3
804.0
(509.7)
(30.1)
(1.5)
–
(1.9)
(543.2)
260.8
260.8
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
3.New accounting pronouncements CONTINUED
The below shows the reconciliation between the 27 April 2019 operating lease note commitment and the lease liability recognised as at 28 April 2019:
Operating lease commitment note as at 27 April 2019
Exclude:
Service charge and turnover rent element
Practical expedients taken
Impact of discounting
Alignment of lease dates
Alignment of annual rent
Other differences
Adjust:
140
Lease liability per IFRS 16 on transition
Condensed Group statement of comprehensive income
Pre-IFRS 16 items:
Operating lease rental expense
Onerous property related contracts utilisation
Amortisation of lease incentives
Amortisation of fair value market rent liabilities
IFRS 16 items:
Depreciation of right of use assets and deferred liability
Interest expense on lease liabilities
Deferred liability release
Loss before tax from IFRS 16
£m
424.4
(64.1)
(4.6)
(19.5)
27.1
11.6
(2.8)
372.1
£m
77.2
(11.0)
(7.5)
(0.5)
(54.7)
(5.7)
0.4
(1.8)
Statement of changes in equity
The Group has implemented the modified 2B transition
approach. Due to the restriction of the onerous property related
contracts provision used as impairment an amount of £0.5m
has been taken against retained earnings. This was restricted as
the onerous property related contracts provision was used as a
proxy for impairment and had to be capped in some instances to
avoid creating a negative asset.
Additionally, in line with IFRS 3 (Business Combinations) a fair
value market rent liability was previously recognised to align US
market value with rental payments, which was being released
over the life of the lease. However, following the implementation
of IFRS 16, where possible this was required to be deducted
from the right of use asset. Due to the restriction of this amount
(where the right of use asset was otherwise taken to nil), £0.6m
was taken to retained earnings.
The above instances outlined above give a total retained
earnings increase of £1.1m. Deferred tax on the transition to IFRS
16 totals £2.2m and therefore the total amount taken to retained
earnings on transition to IFRS 16 was £3.3m.
Cash flow
The only impact on the cash flow is the re-categorisation of
some items on the face of the condensed Group cash flow
statement. These include: repayment of principal and interest
lease liability amounts and depreciation of right of use asset.
Following the introduction of IFRS 16, there has been a change
in accounting policy to reflect interest paid within financing
activities whereas in the prior year this was disclosed in
operating activities.
Lessor accounting
When the Group is an intermediate lessor, it accounts for its
interests in the head lease and the sub-lease separately. It
assesses the lease classification of a sub-lease with reference
to the right of use asset arising from the head lease, not with
reference to the underlying asset. The original lease liability
continues to be recognised in accordance with the accounting
model and the Group will recognise a net investment in the
sublease and evaluate this for impairment. The net investment in
the sub-lease is £0.4m.
Other new standards
Other new standards and interpretations in issue and effective,
which are not expected to have a material impact on the Group
are:
• Annual improvements to IFRS: 2015 – 2017 cycle.
•
IFRIC 23 Uncertainty over Income Tax Treatments
• Amendments to IAS 28 Long-term Interests in Associates
and Joint Ventures
Superdry plc Annual Report 2020OUR FINANCIALS 4. Segment information
Revenue is generated from the same products (clothing and accessories) in all segments, the reporting of segments is based on how these sales are generated. The accounting policies of the reportable
segments are the same as the Group’s accounting policies described in note 1. Segment profit represents the profit earned by each segment without allocation of central administration costs including
directors’ salaries, non-operating gains and losses in respect of financial instruments and finance costs, and income tax expense. This is the measure reported to the Group’s Chief Executive for the
purpose of resource allocation and assessment of segment performance.
The Group derives its revenue from contracts with customers for the transfer of goods and services over time and at a point in time.
Segmental information for the business segments of the Group for financial years 2020 and 2019 is set out below:
Total segment revenue
Less: inter-segment revenue
Revenue from external customers
(Loss)/profit before tax
The following additional information is considered useful to the reader:
Revenue
Retail
Wholesale
Total revenue
Operating (loss)/profit
Retail
Wholesale
Central costs
Total operating (loss)/profit
Net finance expense – Central costs
Net finance expense – Retail costs
Impairment losses on financial assets – Wholesale and Central costs
Share of loss of investment – Central costs
(Loss)/profit before tax
Retail
Wholesale
Central costs
Total (loss)/profit before tax
Retail
2020
£m
438.8
–
438.8
(125.1)
Wholesale
2020
£m
Central costs
2020
£m
510.9
(245.3)
265.6
32.1
–
–
–
(73.9)
141
Group
2020
£m
949.7
(245.3)
704.4
(166.9)
Underlying*
2020
£m
Exceptional
and other items
£m
Reported
2020
£m
438.8
265.6
704.4
5.3
31.4
(71.0)
(34.3)
(1.9)
(5.6)
–
–
(0.3)
31.4
(72.9)
(41.8)
–
–
–
(124.8)
0.7
(1.0)
(125.1)
–
–
–
–
(124.8)
0.7
(1.0)
(125.1)
438.8
265.6
704.4
(119.5)
32.1
(72.0)
(159.4)
(1.9)
(5.6)
–
–
(125.1)
32.1
(73.9)
(166.9)
* Underlying is defined as reported results before exceptional items and other items, and is further explained in note 37.
The impairment losses on store assets net of the onerous property related contracts release amounts to £124.8m and all relates to the retail segment.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
4. Segment information CONTINUED
Total segment revenue
Less: inter-segment revenue
Revenue from external customers
(Loss)/profit before tax
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36.
142
The following additional information is considered useful to the reader:
Revenue
Retail
Wholesale
Total revenue
Operating (loss)/profit
Retail
Wholesale
Central costs
Total operating (loss)/profit
Net finance income – Central costs
Impairment losses on financial assets – Wholesale and Central costs
Share of loss of investment – Central costs
(Loss)/profit before tax
Retail
Wholesale
Central costs
Total (loss)/profit before tax
* Underlying is defined as reported results before exceptional items and other items, and is further explained in note 37.
** The reported comparatives have been restated to reflect a prior year adjustment, see note 36
The Group has subsidiaries which are incorporated and resident in the UK and overseas.
Revenue from external customers in the UK and the total revenue from external customers from other countries are:
External revenue – UK
External revenue – Europe
External revenue – Rest of world
Total external revenue
Retail
2019*
£m
539.5
(2.8)
536.7
(89.3)
Wholesale
2019*
£m
Central costs
2019*
£m
637.3
(302.3)
335.0
98.8
–
–
–
(98.8)
Group
2019*
£m
1,176.8
(305.1)
871.7
(89.3)
Underlying*
2019**
£m
Exceptional and
other items
£m
Reported
2019**
£m
536.7
335.0
871.7
25.5
93.3
(74.6)
44.2
(1.0)
(1.5)
(3.7)
25.5
91.8
(79.3)
38.0
–
–
–
(114.8)
7.0
(8.5)
(116.3)
–
(8.5)
(2.5)
(114.8)
7.0
(19.5)
(127.3)
2020
£m
254.4
361.7
88.3
704.4
Group
536.7
335.0
871.7
(89.3)
100.3
(83.1)
(72.1)
(1.0)
(10.0)
(6.2)
(89.3)
98.8
(98.8)
(89.3)
2019*
£m
310.4
443.6
117.7
871.7
* Prior year has been restated to reflect the change in the internal reporting of these figures.
Included within external revenue overseas is revenue of £176.3m (2019: £226.7m) generated by overseas subsidiaries. The total of non-current assets, other than deferred tax assets, located in the UK is
£84.5m (2019: £56.1m), and the total of non-current assets located in other countries is £123.6m (2019: £70.8m).
Superdry plc Annual Report 2020OUR FINANCIALS 5. Selling, general and administrative expenses
Staff costs (note 7)
Operating lease rentals for leasehold properties*
Short term, low value and variable rent payments*
Depreciation and amortisation
Impairment of property, plant and equipment, right of use assets and intangibles
Restructuring, strategic change and other costs
Onerous property related contracts (credit)/charge
Other (including rates, service charges and professional fees)
Total selling, general and administrative expenses
Group
2020
£m
103.3
–
2.4
87.2
139.1
1.9
(12.0)
217.2
539.1
2019
£m
115.7
68.8
–
41.9
42.6
8.1
86.9
223.2
587.2
143
* The lines indicated are impacted by the application of IFRS 16 in the current year only. Refer to note 3 for further details.
Staff costs include a credit of £0.4m (2019 £0.3m) which does not relate to staff costs for the purpose of note 7. Government grants are netted off against staff costs, see note 38.
6. Exceptional and other items
Non-underlying adjustments constitute exceptional and other items. Further information about the determination of exceptional and other items in financial year 2020 is included in note 37. They are
disclosed separately in the Group statement of comprehensive income.
Exceptional and other items
Unrealised gain/(loss) on financial derivatives
Store asset impairment and onerous property related contracts provision
Restructuring, strategic change and other costs
IFRS 2 charge on Founder Share Plan (note 9)
Total exceptional and other items in operating (loss)/profit
Impairment losses on financial assets
Share of joint venture exceptional costs
Total exceptional and other items
Taxation
Tax impact of non-underlying adjustments (note 14)
Deferred tax – exceptional (note 22)
Total taxation
Total exceptional and other items
Exceptional and other items before tax in the period totalled a charge of £125.1m in the year (2019: £127.3m charge).
Group
2020
£m
1.9
(124.8)
(1.9)
(0.3)
(125.1)
–
–
(125.1)
0.1
17.3
17.4
(107.7)
2019
£m
23.9
(129.5)
(8.1)
(2.6)
(116.3)
(8.5)
(2.5)
(127.3)
1.7
(2.6)
(0.9)
(128.2)
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
6. Exceptional and other items CONTINUED
During the prior year, a comprehensive review was performed across the owned store portfolio to identify any stores which were either unprofitable, or where the anticipated future performance would
not support the carrying value of assets. This resulted in a non-cash impairment and onerous property related contracts provision in the prior year of £129.5m, affecting around 100 stores.
A subsequent review was performed in the current year, as a consequence of the downgraded forecast in the medium-term plan as driven by Covid-19. This subsequent review identified additional
stores which were either unprofitable, at risk of becoming unprofitable over time, or where anticipated future performance would not support the carrying value of assets. The overall costs charged to
the Group statement of Comprehensive Income of non-cash exceptional impairment in the year were £136.8m, affecting around 177 stores. In addition, a reassessment of the onerous property related
contracts provision in the year resulted in a release of £12.0m, affecting around 35 stores. The onerous property related contracts provision are no longer recognised on rental expenses, following the
transition to IFRS 16. A significant level of estimation has been used to determine the charges to be recognised, for which further disclosure and sensitivities can be found in note 2 on pages 136 to 138.
There were no releases of impairment provisions against specific stores in the year (2019: £nil).
144
The 2019 Group Annual Report FY19 included exceptional items in relation to a cost-saving restructuring programme, and the strategic change with Julian Dunkerton re-joining the business on 2 April
2019. The same restructuring programme and strategic change has also seen an additional £0.4m of cost in the current year. The Directors consider these to be “exceptional and other” costs due to
their nature and they are a true up of costs classified as exceptional in the prior year. These are not considered to be a reflection of the trading performance in the period.
During the current year, the Board and management reviewed the long-term business plan for the Trendy & Superdry Holding Limited joint venture. Following discussions with the joint venture partner,
and taking into account the current challenging retail environment due to Covid-19, both parties agreed to end the relationship. Costs for the wind-up of the business totalling £1.5m have been accrued
for; these are considered to be exceptional based on the one-off nature of this decision. See note 39 for further details.
Other items in the year include a £1.9m credit in respect of the fair value movement in financial derivatives (2019: £23.9m credit) which has been driven primarily by the devaluation of Sterling against
the Euro and US Dollar, and its impact on forward currency contracts, selling Euro for Sterling or buying US Dollar with Sterling (see notes 34 and 37 for further details). The IFRS 2 charge of £0.3m
(2019: £2.6m) in respect of the Founder Share Plan is also included within other items (see note 9 for further details).
There is a deferred tax charge on derivative trades of £0.4m (2019: £4.6m charge) and a deferred tax credit of £17.7m (2019: £11.5m credit) in respect of temporary timing differences on the store
impairment and onerous property related contracts provision charge and IFRS 16. There is also a current tax credit of £0.1m relating to store impairment and onerous property related contracts
provision. 2019 exceptionals included a deferred tax exceptional charge of £7.5m resulting from changes to the forecast of the future profitability of the US business, resulting in the de-recognition of
deferred tax on losses. No similar expense has been recognised in 2020.
7. Employee expense
Wages and salaries
Social security costs
Share awards charge
Pension costs – defined contribution scheme
Total employee expense
Group
Company
2020
£m
89.1
11.1
1.2
2.3
103.7
2019
£m
97.4
12.1
3.5
2.4
115.4
2020
£m
12.1
1.7
0.2
0.5
14.5
2019
£m
14.2
2.1
2.2
0.7
19.2
Details of the share based compensation plans are detailed under notes 8 and 9.
The total employee benefit expense does not include £0.4m (2019: £0.3m) which has been credited within exceptional and other items but is excluded from the table above. The closing pension creditor
for the Group is £0.4m (2019: £0.4m).
The average monthly number of full-time equivalent employees, including Directors on a service contract, are as follows:
Administration
Retail
Total average headcount
Directors’ remuneration is detailed in the Directors’ Remuneration Report on pages 85 to 104.
Group
Company
2020
No.
722
2,494
3,216
2019
No.
737
2,542
3,279
2020
No.
208
77
285
2019
No.
223
85
308
Superdry plc Annual Report 2020OUR FINANCIALS 7. Employee expense CONTINUED
The list outlined below differs from who was deemed to be key members of management in the prior year following an internal review. The following were members of key management last year who are
not members this year; Chief Operating Officer, Digital Director, Group Marketing and Business Development Director.
Remuneration of current key members of management, who are the Executive Directors, Group General Counsel, Group HR Director, Wholesale & E-commerce Director, Retail Director, Creative
Director, Merchandising Director, Business Transformation & Logistics Director, Sourcing & Sustainability Director, and Vice President (USA) recorded in the Group statement of comprehensive income.
Their remunerations is as follows:
Short-term employee benefits
Post-employment benefits
Share based payments
Payment for loss of office
Total remuneration of key members of management
The total amounts for Directors’ remuneration in accordance with Schedule 5 to the Accounting Regulations were as follows:
Short-term employee benefits
Share based payments
Money purchase pension contributions
Total aggregate Directors’ remuneration
145
Group
2020
£m
3.1
0.3
0.5
–
3.9
Group
2020
£m
1.4
–
0.1
1.5
2019
£m
3.0
0.4
0.8
0.2
4.4
2019
£m
2.0
0.1
0.2
2.3
8. Share based Long-Term Incentive Plans (“LTIP”)
Equity settled awards are granted to employees in the form of share awards. No consideration is payable by the employees when share awards vest, other than the nominal value of 5p per share.
The vesting period is three years. Share awards will also expire if the employee leaves the Group prior to the exercise or vesting date subject to the discretionary powers of the Remuneration Committee.
Performance Share Plan
The award of shares is made under the Superdry Performance Share Plan (“PSP”). Shares have no value to the participant at the grant date, but subject to the satisfaction of diluted earnings per share and total
shareholder return performance targets can convert and give participants the right to be granted nil-cost shares (other than the nominal value of 5p per share) at the end of the performance period.
The movement in the number of share awards outstanding is as follows:
At start of the period
Granted
Exercised
Forfeited
Cancelled
Total number of outstanding share awards at end of the period
None of the share awards were exercisable at the period end date (2019: nil).
Group and Company
2020
Number of
shares
684,868
1,026,040
–
(176,041)
(169,177)
1,365,690
2020
Weighted
average
exercise price
–
4.05
–
13.51
15.82
–
2019
Number of
shares
950,566
461,225
(321,762)
(405,161)
–
684,868
2019
Weighted
average
exercise price
–
12.39
14.58
13.88
–
–
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
8. Share based Long-Term Incentive Plans (“LTIP”) CONTINUED
Performance Share Plan (continued)
The terms and conditions of the award of shares granted under the PSP during the year are as follows:
Grant date
September 2019
146
Opening weighted average exercise price
Closing weighted average exercise price
Group and Company
Number of
shares
1,026,040
Vesting
period
3 years
Type of award
Share awards
Group and Company
2020
£
14.06
6.39
2019
£
10.03
14.06
The fair value of the shares awarded at the grant date during the year is £2.9m (2019: £4.7m). The fair value of the award is determined using a Black–Scholes pricing model. A charge of £0.5m (2019:
charge of £0.5m) has been recorded in the Group statement of comprehensive income during the year.
No share options were exercised during the period. The options outstanding at 25 April 2020 had a weighted average remaining contractual life of 15 months; these shares have an exercise price of 5p.
The inputs into the Black–Scholes pricing model are as follows: expected volatility of 51.8%; expected term of three years; risk free rate of 0.42%; and an expected dividend yield of nil. Expected volatility
was determined by calculating the historical volatility of the Group’s share price over the previous 2.59 years. 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.
Save As You Earn
A Save As You Earn scheme is operated by the Group. No charge has been recorded in the Group statement of comprehensive income during the year (2019: credit of £0.1m).
Buy As You Earn
A Buy As You Earn scheme is operated by the Group which commenced in August 2016. In the year 15,540 shares (2019: 10,392 shares) have been purchased under the scheme. The charge
to the Group statement of comprehensive income is highly immaterial and therefore has not been accounted for.
Other schemes
Share options were issued in the year as part of recruitment packages for certain members of senior management. These options are subject to leavers’ provisions and the exercise period is up to two
years. The charge to the Group statement of comprehensive income in financial year 2020 for these awards is £0.4m (2019: £0.5m).
9. Founder Share Plan
On 12 September 2017, the Founders of Superdry (“the Founders”), Julian Dunkerton and James Holder, announced the launch of a long-term incentive scheme, the Founder Share Plan (“FSP”) under
which they will share their wealth with employees of the Group.
The FSP will run from 1 October 2017 to 30 September 2020. At the conclusion of the scheme, the Founders will transfer into a fund 20% of their gain from any increase in the Group’s share price over
a threshold of £18.
The gain to be transferred into the fund will be calculated using the market value of the shares calculated as the average price of a Superdry Plc share over the 20 dealing days prior to the maturity date
(30 September 2020).
The proceeds from this fund will be shared across the Superdry colleague base worldwide, including those who work part-time. Each £5 increase in the share price over the £18 threshold would see the
Founders putting £30m into the fund.
Awards will be made to employees in shares or an equivalent cash award if considered more appropriate. The vesting period for the awards differs depending on the seniority of the colleagues in
question. To be eligible for the award, employees need to remain in employment on the vesting date, details of which are as follows:
Share settled element – Senior management
•
•
50% – 31 January 2021
50% – 31 January 2022
Superdry plc Annual Report 2020OUR FINANCIALS
9. Founder Share Plan CONTINUED
Cash and share settled elements – All other colleagues
•
•
50% – 31 January 2021
50% – 31 July 2021
The award will be settled in full by the Founders with no cost to the Group and hence in accordance with IFRS 2 has been accounted for as an equity settled share based payment scheme. The fair value
of the award is determined using a Monte Carlo pricing model.
The share based payment charge associated with the FSP will accrue over five financial periods, up until financial year 2022.
A charge of £0.3m (2019: £2.6m) has been recorded in the Group statement of comprehensive income during the year. The total fair value of the entire outstanding share awards (not including any
future share award issues), taking into consideration management’s estimate of the share awards meeting the vesting conditions and achieving the performance targets, is £2.0m (2019: £6.2m).
The number of share awards granted in the period is nil. The number still in issue as at 25 April 2020 is 3,291,458. The weighted average remaining contractual life of the outstanding options as at
25 April 2020 is 3 months; these options have a nil exercise price.
147
10. Auditor’s remuneration
During the period, the Group obtained the following services from the Company’s Auditors as detailed below:
Audit services
Fees payable to the Company’s Auditors for the audit of the Company and the consolidated financial statements
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees payable to the Company’s Auditors and its associates
Fees payable to the Company’s Auditors and its associates for other services
Audit-related assurance services – interim review
All other services
Total fees payable to the Company’s Auditors and its associates for other services
Total Auditor’s remuneration
11. Other gains and losses (net)
Unrealised fair value gain/(loss) on foreign exchange forward contracts
Royalty income
Other income
Total other gains and losses
Group
Group
2020
£’000
1,500
250
1,750
200
–
200
1,950
2020
£m
1.9
7.2
1.9
11.0
2019
£’000
686
275
961
41
–
41
1,075
2019
£m
23.9
9.1
1.7
34.7
The unrealised fair value gain on foreign exchange forward contracts of £1.9m (2019: £23.9m gain) has been treated as an exceptional and other item, see note 6.
Royalty income relates to Wholesale royalty agreements, see note 1f) for further detail. Other income in the both financial years includes rent and profit from the sales of fixtures and fittings to
franchisees.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
12. Operating (loss)/profit
Group operating (loss)/profit is stated after charging/(crediting):
Depreciation on property, plant and equipment – owned (note 18)
Depreciation on right of use assets (note 30)
Loss on disposal of property, plant and equipment (note 18)
Amortisation of intangible assets (note 19)
Impairment of property, plant and equipment and right of use assets (note 5)
Impairment of intangibles (note 5)
Restructuring, strategic change and other property costs (note 5)
Cost of inventories recognised as an expense
Impairment of inventories included in the above figure (note 23)
148
Operating lease rentals for leasehold properties (note 5)
Short term, low value and variable lease payments (note 5)
Onerous property related contracts charge (note 5)
Net foreign exchange losses
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36.
Group
2020
£m
23.5
55.0
0.2
8.7
138.7
0.4
1.9
300.5
–
–
2.4
(12.0)
2.2
2019*
£m
32.6
–
0.4
9.3
36.5
6.1
8.1
362.1
0.8
68.8
–
86.9
4.6
The above Group operating profit/(loss) includes £10.2m (FY19: £2.6m) of depreciation savings and £6.5m (FY19: £8.5m) of onerous lease utilisation, following store asset impairment (see further
details in note 2).
13. Finance income and expense
Bank interest
Total finance income
Bank interest
Interest on lease liabilities
Total finance expense
Group
2020
£m
0.2
0.2
(2.0)
(5.7)
(7.7)
2019
£m
0.3
0.3
(1.3)
–
(1.3)
Superdry plc Annual Report 2020OUR FINANCIALS 14. Tax expense
The tax expense comprises:
Current tax
– UK corporation tax charge for the period
– Adjustment in respect of prior periods
– Overseas tax
Exceptional tax (credit)/expense
Total current tax (credit)/expense
Deferred tax
– Origination and reversal of temporary differences
– Deferred tax asset movements in respect of tax losses
– Adjustment in respect of prior periods
Exceptional tax (credit)/expense
Total deferred tax (credit)/expense
Total tax (credit)/expense
Group
2019*
£m
149
6.8
(2.0)
3.5
(1.7)
6.6
9.5
(5.8)
(0.5)
2.6
5.8
12.4
2020
£m
–
(6.1)
1.8
(0.1)
(4.4)
(1.0)
(5.8)
5.0
(17.3)
(19.1)
(23.5)
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36
The tax credit on underlying loss is £6.1m (2019: £11.5m charge). The net tax credit on exceptional and other items totals £17.4m (2019: £0.9m tax charge). An exceptional tax credit of £16.7m (2019:£nil)
arises as a result of impairments to the right of use asset values and a £1.5m (2019:£11.1m) exceptional tax credit as a result of impairments to property, plant and equipment, at the balance sheet date.
An exceptional tax charge of £0.8m (2019:£12.0m) arises in connection with movements on the derivative contracts and an updated onerous lease review.
Factors affecting the tax expense for the period are as follows:
(Loss)/profit before tax
(Loss)/profit multiplied by the standard rate in the UK – 19.0% (2019: 19.0%)
Non-deductible joint venture loss
Permanent differences
Overseas tax differentials
Deferred tax not recognised
Difference in UK deferred tax to corporation tax rate
Adjustment in respect of prior periods
Total tax (credit)/expense excluding exceptional items
2019 balances have been reallocated between categories to be consistent with FY20 presentation.
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36
Group
2020
£m
(166.9)
(31.7)
–
1.2
(10.9)
19.6
(0.6)
(1.1)
(23.5)
2019*
£m
(89.3)
(16.9)
0.9
1.9
(9.1)
36.8
0.5
(1.7)
12.4
The Group’s tax credit on underlying losses of £6.1m represents an effective tax rate of 14.6% and the Group’s tax credit on exceptional losses of £17.4m represents an effective tax rate of 13.9%. Taken
together the Group’s tax credit of £23.5m represents a total effective tax rate of 14.1% for the period ended 25 April 2020. The Group’s total effective tax rate of 14.1% is lower than the statutory rate of
tax of 19%.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
14. Tax expense CONTINUED
This is primarily due to the level of overseas losses to which no tax benefit has been recognised, China exit costs which are non-deductible for tax purposes, the level of lease liabilities on the balance
sheet to which no tax benefit has been recognised together with depreciation and amortisation on non-qualifying assets.
Finance Bill 2016 enacted provisions to reduce the main rate of UK corporation tax to 17% from 1 April 2020. However, in the March 2020 Budget it was announced that the reduction in the UK rate to
17% will now not occur and the Corporation Tax Rate will be held at 19%. This was enacted on 17 March 2020 and therefore applies at the balance sheet date. Deferred tax balances relating to the UK as
at 25 April 2020 have been measured at a rate of 19% resulting in a rate changes impact of £0.6m credit.
15. (Loss)/Profit attributable to Superdry Plc
The after tax loss for the 52 weeks ended 25 April 2020 for the Company was £148.0m (52 weeks ended 27 April 2019: loss of £136.5m). There was a credit to equity reserve of £1.2m (2019: £3.5m credit) in respect of
employee share schemes. The Directors have approved the statement of comprehensive income for the Company. Retained earnings of the Company at 25 April 2020 were £72.2m (2019: £222.4m).
150
16. Earnings per share
Earnings
Loss for the period attributable to owners of the Company
Number of shares at year-end
Weighted average number of ordinary shares – basic
Effect of dilutive options and contingent shares
Weighted average number of ordinary shares – diluted
Basic earnings per share (pence)
Diluted earnings per share (pence)
Underlying earnings per share
Earnings
Underlying (loss)/profit for the period attributable to the owners of the Company
Weighted average number of ordinary shares – basic
Weighted average number of ordinary shares – diluted
Underlying basic earnings per share (pence)
Underlying diluted earnings per share (pence)
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36
There were no share-related events after the balance sheet date that may affect earnings per share.
Group
2020
£m
2019*
£m
(143.4)
No.
82,010,788
82,001,955
387,495
82,389,450
(174.9)
(174.1)
(101.7)
No.
81,995,248
81,870,875
197,784
82,068,659
(124.2)
(123.9)
Group
2020
£m
Restated
2019
£m
(35.7)
No.
82,001,955
82,389,450
(43.5)
(43.3)
26.5
No.
81,870,875
82,068,659
32.4
32.3
Superdry plc Annual Report 2020OUR FINANCIALS 17. Dividends
Equity – ordinary shares
Interim for the 52 weeks to 25 April 2020 – paid 2.0p per share (2019: 9.3p)
Final dividend for the 52 weeks to 27 April 2019 – paid 2.2p per share (2019: 21.9p)
Special dividend – nil (2019: 25.0p per share)
Total dividends paid
Group and Company
2020
£m
1.6
1.8
–
3.4
2019
£m
7.6
17.9
20.5
46.0
In light of the current situation outlined in the Chief Financial Officer’s Review, the Board has made the decision not to recommend paying a final dividend in relation to the financial period ended
25 April 2020.
151
18. Property, plant and equipment
Movements in the carrying amount of property, plant and equipment were as follows:
52 weeks ended 25 April 2020
Cost
At 28 April 2019
Exchange differences
Additions
Disposals
At 25 April 2020
Accumulated depreciation and impairments
At 28 April 2019
Exchange differences
Depreciation charge
Impairments
Disposals
At 25 April 2020
Net balance sheet amount at 25 April 2020
Land and
buildings
£m
Leasehold
improvements
£m
Group
Furniture,
fixtures and
fittings
£m
Computer
equipment
£m
5.3
–
–
–
5.3
0.5
–
0.1
0.4
–
1.0
4.3
212.5
2.2
1.6
(2.8)
213.5
164.7
1.6
13.3
13.1
(2.6)
190.1
23.4
63.6
0.5
2.7
(0.4)
66.4
46.3
0.4
6.7
2.2
(0.4)
55.2
11.2
27.8
0.2
2.2
(0.1)
30.1
23.6
0.2
3.4
0.2
(0.1)
27.3
2.8
Total
£m
309.2
2.9
6.5
(3.3)
315.3
235.1
2.2
23.5
15.9
(3.1)
273.6
41.7
Of the above impairment of £15.9m, £15.5m constitutes part of the total impairment of £136.8m in FY20 (2019: £42.6m) and relates to an impairment review performed on retail store assets, for further
details on this please see note 2. This impairment has been included within exceptional expenses in the year. The remaining £0.4m relates to impairment of land during the year as a result of a re-
valuation triggered by the land sale in FY19. This land impairment has been included within underlying expenses in the year as the disposal was undertaken through the normal course of business.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
18. Property, plant and equipment CONTINUED
152
52 weeks ended 27 April 2019
Cost
At 29 April 2018
Exchange differences
Additions
Disposals
Reclassified as held for sale
At 27 April 2019
Accumulated depreciation and impairments
At 29 April 2018
Exchange differences
Depreciation charge
Impairments
Disposals
At 27 April 2019
Net balance sheet amount at 27 April 2019
52 weeks ended 25 April 2020
Cost
At 28 April 2019
Exchange difference
Additions
Disposals
Reclassified as held for sale
At 25 April 2020
Accumulated depreciation
At 28 April 2019
Exchange differences
Depreciation charge
Impairments
At 25 April 2020
Net balance sheet amount at 25 April 2020
Land and
buildings
£m
Leasehold
improvements
£m
Group
Furniture,
fixtures and
fittings
£m
Computer
equipment
£m
7.5
–
0.1
–
(2.3)
5.3
0.3
–
0.1
0.1
–
0.5
4.8
206.8
(0.3)
7.0
(0.9)
(0.1)
212.5
115.7
(1.1)
20.4
30.3
(0.6)
164.7
47.8
59.6
–
4.2
(0.2)
–
63.6
33.0
(0.2)
8.3
5.3
(0.1)
46.3
17.3
24.3
0.2
3.3
–
–
27.8
19.0
–
3.8
0.8
–
23.6
4.2
Land and
buildings
£m
Leasehold
improvements
£m
Company
Furniture,
fixtures and
fittings
£m
Computer
equipment
£m
1.5
–
0.4
–
–
1.9
–
–
0.1
0.4
0.5
1.4
10.7
0.1
0.3
(0.1)
–
11.0
7.1
–
1.4
0.5
9.0
2.0
3.7
–
0.1
–
–
3.8
2.3
–
0.5
–
2.8
1.0
17.3
–
1.2
–
–
18.5
15.6
–
2.1
–
17.7
0.8
Total
£m
298.2
(0.1)
14.6
(1.1)
(2.4)
309.2
168.0
(1.3)
32.6
36.5
(0.7)
235.1
74.1
Total
£m
33.2
0.1
2.0
(0.1)
–
35.2
25.0
–
4.1
0.9
30.0
5.2
Superdry plc Annual Report 2020OUR FINANCIALS 18. Property, plant and equipment CONTINUED
52 weeks ended 27 April 2019
Cost
At 29 April 2018
Additions
Disposals
Reclassified as held for sale
At 27 April 2019
Accumulated depreciation
At 29 April 2018
Exchange differences
Depreciation charge
Impairments
At 27 April 2019
Net balance sheet amount at 27 April 2019
Land and
buildings
£m
Leasehold
improvements
£m
Company
Furniture,
fixtures and
fittings
£m
Computer
equipment
£m
3.8
–
–
(2.3)
1.5
–
–
–
–
–
1.5
10.2
0.6
–
(0.1)
10.7
2.4
(0.1)
1.3
3.5
7.1
3.6
3.1
0.6
–
–
3.7
1.2
(0.1)
0.7
0.5
2.3
1.4
14.8
2.5
–
–
17.3
13.5
–
2.1
–
15.6
1.7
153
Total
£m
31.9
3.7
–
(2.4)
33.2
17.1
(0.2)
4.1
4.0
25.0
8.2
Assets reclassified as held for sale during financial year 2019
Land held by the Group and the Company was marketed for sale during the financial year 2019, and as such this asset was reclassified as held for sale. This sale was completed in January 2020 and the
loss in relation to this was £0.2m.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
19. Intangible assets
154
52 weeks ended 25 April 2020
Cost
At 28 April 2019
Reclassified under transition to IFRS 16
Exchange differences
Additions
At 25 April 2020
Accumulated amortisation
At 28 April 2019
Exchange differences
Amortisation charge
Impairments
At 25 April 2020
Net balance sheet amount at 25 April 2020
Trademarks
£m
Website and
software
£m
Lease
premiums
£m
Distribution
agreements
£m
Goodwill
£m
Total
£m
Group
3.8
–
–
0.5
4.3
2.5
–
0.4
–
2.9
1.4
47.5
–
–
6.7
54.2
23.4
–
7.7
–
31.1
23.1
15.9
(1.6)
–
–
14.3
13.9
–
–
0.4
14.3
–
15.4
–
0.3
–
15.7
12.5
0.2
0.6
–
13.3
2.4
21.2
–
0.3
–
21.5
–
–
–
–
–
21.5
103.8
(1.6)
0.6
7.2
110.0
52.3
0.2
8.7
0.4
61.6
48.4
Lease premiums in 2019 included a lease premium with a net book value of £1.6m, during 2020 this amount has been transferred as part of the transition to IFRS 16, the remaining £0.3m of lease
premiums have been impaired in underlying expenses. See note 1 for further information on treatment of lease premiums.
Of the above impairment of £0.4m, £0.1m constitutes part of the total impairment of £136.8m in FY20 (2019: £42.6m) and relates to an impairment review performed on retail store assets, for further
details on this please see note 2. This impairment has been included within exceptional expenses in the year. The remaining £0.3m relates to impairment of lease premiums mentioned above.
52 weeks ended 27 April 2019
Cost
At 29 April 2018
Exchange differences
Additions
At 27 April 2019
Accumulated amortisation
At 29 April 2018
Exchange differences
Amortisation charge
Impairments
At 27 April 2019
Net balance sheet amount at 27 April 2019
Trademarks
£m
Website and
software
£m
Lease
premiums
£m
Distribution
agreements
£m
Goodwill
£m
Total
£m
Group
3.5
–
0.3
3.8
2.2
–
0.3
–
2.5
1.3
38.6
–
8.9
47.5
16.1
–
7.3
–
23.4
24.1
15.9
–
–
15.9
6.9
–
0.9
6.1
13.9
2.0
15.2
0.2
–
15.4
11.8
(0.1)
0.8
–
12.5
2.9
21.6
(0.4)
–
21.2
–
–
–
–
–
21.2
94.8
(0.2)
9.2
103.8
37.0
(0.1)
9.3
6.1
52.3
51.5
Superdry plc Annual Report 2020OUR FINANCIALS 19. Intangible assets CONTINUED
52 weeks ended 25 April 2020
Cost
At 28 April 2019
Additions
At 25 April 2020
Accumulated amortisation
At 28 April 2019
Amortisation charge
At 25 April 2020
Net balance sheet amount at 25 April 2020
52 weeks ended 27 April 2019
Cost
At 29 April 2018
Additions
At 27 April 2019
Accumulated amortisation
At 29 April 2018
Amortisation charge
At 27 April 2019
Net balance sheet amount at 27 April 2019
Company
Website and
software
£m
Trademarks
£m
0.6
0.1
0.7
0.1
0.1
0.2
0.5
35.9
4.7
40.6
19.4
5.4
24.8
15.8
Company
Website and
software
£m
Trademarks
£m
0.4
0.2
0.6
–
0.1
0.1
0.5
30.4
5.5
35.9
13.9
5.5
19.4
16.5
155
Total
£m
36.5
4.8
41.3
19.5
5.5
25.0
16.3
Total
£m
30.8
5.7
36.5
13.9
5.6
19.5
17.0
Amortisation of intangible assets is included within selling, general and administrative expenses in the Group statement of comprehensive income.
Impairment of goodwill
Goodwill of £21.5m is split into £14.3m for Wholesale and £7.2m for Retail. An impairment test is a comparison of the carrying value of assets of a business or cash generating unit (“CGU”) to their recoverable
amount. For goodwill impairment testing purposes, the Group has defined its CGUs as Retail and Wholesale. The recoverable amount is estimated based on using a value in use model using discounted cash
flows. Where the recoverable amount is less than the carrying value, an impairment results. The medium-term plan have been used as the basis for this calculation.
Key assumptions
In determining the recoverable amount it is necessary to make a series of assumptions to estimate the present value of future cash flows. In each case, these key assumptions have been made by
management reflecting historical performance and are consistent with relevant external sources of information.
Discount rates
Management estimates discount rates using pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the CGUs. The pre-tax discount rate of 10.1%
(2019: 9.8%) is derived from the Group’s post-tax weighted average cost of capital of 9.8% (2019: 8.7%).
Operating cash flows
The key assumptions within the forecast operating cash flows include the growth rates in both sales and gross profit margins, changes in the operating cost base as set out in the medium-term financial
plan, and the level of capital expenditure over a ten-year period.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
19. Intangible assets CONTINUED
Long-term growth rates
To forecast beyond the four years, a long-term average growth rate of 2.2% (2019: 1.5%) has been used. The recoverable amount has been calculated using a ten year total period (2019: ten year
total period).
Goodwill sensitivity analysis
The results of the Group’s impairment tests are dependent on estimates made by management, particularly in relation to the key assumptions described above. A sensitivity analysis as to potential
changes in key assumptions has therefore been performed.
The present values of the future cash flows of the Retail and Wholesale CGUs are significant and are insensitive to any changes to reasonably possible changes to key assumptions.
20. Investments
156
52 weeks ended 25 April 2020
Cost
At 28 April 2019
Additions
At 25 April 2020
Provision for impairment
At 28 April 2019
Write-downs
At 25 April 2020
Net balance sheet amount at 25 April 2020
Company
27 April 2020
£m
28 April 2019
£m
463.0
4.5
467.5
51.3
158.7
210.0
257.5
458.5
4.5
463.0
–
51.3
51.3
411.7
The total net book value of investments is £257.5m (2019: £411.7m). During 2020, an investment of £3.6m was made in SuperGroup Sweden AB as a capital injection. An addition of 0.3m (2019: £2.6m)
has been booked in relation to the IFRS 2 charges, that are accounted for in Group subsidiaries but relate to shares in the ultimate parent, being Superdry Plc.
Impairment of investments in subsidiary undertakings
The Company tests investments in subsidiary undertakings annually for impairment.
The recoverable amount of each subsidiary is calculated in reference to the value over the medium-term financial plan period, extrapolated for a total of 10 years at the long-term growth rate of 2.1%
(adjusting for any intercompany impairment as explained in note 24). This recoverable amount is calculated using a value in use model based on the discounted cash flows. The recoverable amount is
compared to the investment carrying value and any difference recorded as impairment.
Management estimates discount rates using pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the CGUs. The pre-tax discount rates range
from 9.5% to 11.5% and are derived from the Group’s post-tax WACC which range from 9.4% to 11.4%.
This review has led to an impairment of £100.9m being recognised in respect of subsidiaries in the retail segment, £17.0m has been recognised in respect of subsidiaries in the wholesale segment while
£40.8m has been recognised in respect of subsidiaries in the central segment.
The cash flows used within the impairment model are based on assumptions which are sources of estimation uncertainty and small movements in these assumptions could lead to an increased
impairment. The Company has carried out a sensitivity analysis on the impairment tests for its investment in subsidiary undertakings, using various reasonably possible scenarios. Further detail is set
out in note 2.
Superdry plc Annual Report 2020OUR FINANCIALS 20. Investments CONTINUED
Subsidiaries
All of the subsidiaries have been included in the consolidated financial statements. A list of the subsidiaries held during the year is set out below:
Subsidiary
C-Retail Limited1 – (07139142)
DKH Retail Limited1,4 – (07063508)
SuperGroup Belgium NV1
SuperGroup Belgium Finance NV1
SuperGroup Concessions Limited1 – (07139101)
SuperGroup Europe BVBA
Superdry France SARL1
Superdry Germany GmbH1,3
SuperGroup India Private Limited1
SuperGroup Internet Limited1 – (07139044)
SuperGroup Netherlands BV
SuperGroup Netherlands Retail BV
SuperGroup Retail Spain S.L.U.1,2
SuperGroup Retail Ireland Limited1
SuperGroup Mumessillik Hizmet ve Ticaret Limited Sirketi1
SuperGroup Limited1,6 – (07938117)
Superdry Hong Kong Limited1
Superdry Sweden AB1
Superdry Norway A/S1
Superdry Retail Denmark A/S1
SuperGroup Nordic and Baltics A/S1
SD 1 Aps
SD 2 Aps
Superdry Retail LLC5
Superdry Wholesale LLC5
SuperGroup USA Inc1,5
Directly owned by the Company.
1.
2.
3.
4.
5.
Holds the investment in the Portuguese branch which is not material.
Holds the investment in the Austrian branch which is not material
Holds the investment in the Switzerland and Norway branches which are not material.
Exempt from statutory audit.
Exempt from statutory audit under s448A exemption
All shares held by the Company are ordinary equity shares.
Principal activity
Clothing retailer in UK
Worldwide wholesale distribution
Holds the investment in SuperGroup Netherlands BV
Provides finance to the European entities
Clothing retailer in concessions
Clothing retailer in Belgium
Clothing retailer in France
Clothing retailer in Germany
Manages supplier relationships in India
Clothing retailer via the Internet
Holds the investment in SuperGroup Europe BVBA
Clothing retailer in the Netherlands
Clothing retailer in Spain
Clothing retailer in the Republic of Ireland
Manages supplier relationships in Turkey
Dormant
Manages supplier relationships in China
Clothing retailer in Sweden
Norway wholesale agent
Clothing retailer in Denmark
Denmark wholesale agent
Clothing retailer in Denmark
Dormant
Clothing retailer in USA
USA wholesale distribution
Holds investment in USA
Country of
incorporation
2020
% shares
UK
UK
Belgium
Belgium
UK
Belgium
France
Germany
India
UK
Netherlands
Netherlands
Spain
ROI
Turkey
UK
Hong Kong
Sweden
Norway
Denmark
Denmark
Denmark
Denmark
USA
USA
USA
157
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
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
20. Investments CONTINUED
Joint ventures
Set out below are the joint ventures of the Group as at 25 April 2020. The joint ventures have share capital consisting solely of ordinary shares, 50% of which are held directly by the Group. The country
of incorporation is also their principal place of business.
Name of entity
Trendy & Superdry Holding Limited
Horace SARL (France)
Year-end
25 April
31 Dec
Country of
incorporation
Hong Kong
France
Ownership
interest
% shares
50
50
Measurement
method
Equity
Equity
158
The non-coterminous year end for Horace SARL (France) was historically determined and is of no material consequence to the Group.
As at 25 April 2020, the carrying value of the investment in Trendy & Superdry Holding Limited and Horace SARL was £nil. Under equity accounting, no charge was recognised in the financial
statements in respect of the Group’s share of the joint venture losses in the year, as the opening investment asset was £nil. Further information about exit of investment in Trendy & Superdry Holding
Limited is included in note 39.
Trendy & Superdry Holding Limited operates in China through its wholly owned subsidiaries, Tianjin Trendy SuperGroup Clothing Sales Co. Ltd and Tianjin Trendy SuperGroup Commercial Co. Ltd, who
act as clothing retailers and wholesale distributors.
The below table outlines the closing net assets in relation to the joint ventures held:
Opening net assets
Investment in the period
Share of loss for the period – Group only
Share of deferred tax de-recognition
Share of onerous property related contracts provision charge
Share of store asset impairment
Impairment of investment
Closing net assets
Group
Company
2020
£m
–
–
–
–
–
–
–
–
2019
£m
6.2
–
(3.7)
(0.7)
(1.4)
(0.4)
–
–
2020
£m
–
–
–
–
–
–
–
–
The Group’s residual share of the joint venture’s results is unrecognised in line with the Group policy, totalling £8.8m in losses at 25 April 2020 (FY19:£5.1m).
Long-term loan to joint venture
The loans advanced by Superdry Plc to the trading subsidiaries of Trendy & Superdry Holding Limited have a term of three years and interest accrues at 5% per annum.
Opening loan balance
Additional loans in the period
Interest in the period
Impairment of loan recoverability
Closing loan balance
Group
Company
2020
£m
–
–
–
–
–
2019
£m
3.3
5.0
0.2
(8.5)
–
2020
£m
–
–
–
–
–
The 2019 loan balance was impaired under IFRS 9 to reflect the uncertainty of the time line for repayment of the joint venture loans. This loan was deemed to be credit impaired and was therefore
categorised as level 3 in the impairment model.
2019
£m
12.4
–
–
–
–
–
(12.4)
–
2019
£m
3.3
5.0
0.2
(8.5)
–
Superdry plc Annual Report 2020OUR FINANCIALS 21. Balances and transactions with related parties
Directors’ emoluments
Directors’ remuneration is set out in the audited section of the Directors’ Remuneration Report on pages 85 to 104.
Transactions with Directors
Other than in respect of arrangements set out below and in relation to the employment of Directors, details of which are provided in the Directors’ Remuneration Report on pages 85 to 104, there
is no material indebtedness owed to or by the Company or the Group to any employee or any other person or entity considered to be a related party.
During the prior period, Julian Dunkerton was appointed as a Director of Superdry Plc, and became a related party. The Group has spent £0.1m (2019: £nil) on travel and subsistence through companies
in which he has a personal investment during the period. The balance outstanding at 25 April 2020 was £nil (2019: £nil). This expenditure includes the provision of corporate travel, hotel and catering
services supplied on an arm’s-length basis. These interests have been disclosed and authorised by the Board.
In addition, the Group occupies two properties owned by J M Dunkerton SIPP pension fund whose beneficiary and member trustee is Julian Dunkerton. The properties are rented to the Group on an
arm’s-length basis. Following a reassessment of the market rates for these properties, the rental expense has increased £0.5m (2019: £0.1m). The balance outstanding at 25 April 2020 was £0.4m
(2019: £nil).
159
Company transactions with subsidiaries
The Company has made management charges and has intercompany receivable balances included within trade and other receivables as follows:
Management charges
Intercompany receivable
C-Retail Limited
DKH Retail Limited
SMAC
Superdry France SARL
Superdry Germany GmbH
Superdry Retail Denmark
SuperGroup Concessions Limited
SuperGroup Internet Limited
SuperGroup Retail Ireland Limited
SuperGroup Retail Spain S.L.U.
SuperGroup Europe BVBA
SuperGroup Netherlands BV and SuperGroup Netherlands Retail BV
SuperGroup Nordic and Baltics A/S
Superdry Retail LLC
Superdry Wholesale LLC
Superdry Retail Sweden AB
Balance
sheet
25 April 2020
£m
Balance
sheet
27 April 2019
£m
18.8
46.7
1.0
1.4
4.7
–
(0.4)
22.2
0.8
0.7
2.5
1.9
–
–
31.9
–
51.3
50.5
–
1.1
4.2
–
–
37.4
0.6
0.4
1.7
8.5
1.0
8.9
0.1
–
2019
£m
8.4
16.2
–
1.1
2.7
–
–
7.6
0.6
0.4
0.9
0.7
–
2.9
0.7
–
2020
£m
8.2
16.6
–
1.1
2.6
–
–
8.9
0.6
0.4
0.9
0.7
–
3.1
0.5
–
The above intercompany receivable amounts are disclosed net of impairment charges during the year.
In addition, loan interest of £0.2m (2019: £0.2m) has been charged to Superdry Retail LLC, £0.2m (2019: £0.2m) of loan interest to Superdry Wholesale LLC and £0.1m (2019: £0.1m) of loan interest to
Superdry Sweden AB in the period.
There have been no further transactions in the period.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
22. Deferred tax assets and liabilities
The movement on the Group deferred tax account is as shown below:
Depreciation
in excess of
capital
allowances
Temporary
differences
Tax
losses
At 27 April 2019
Credited/(charged) to equity– underlying
Credited/(charged) to the Group statement of comprehensive income – underlying
Credited/(charged) to the Group statement of comprehensive income – exceptional
160
At 25 April 2020
3.0
–
1.2
1.5
5.7
16.6
(4.7)
(3.4)
(0.7)
7.8
2.8
–
6.3
–
9.1
Intangible
assets –
Deferred tax
asset
10.2
–
(1.9)
–
8.3
Intangible
assets –
Deferred tax
liability Derivatives
IFRS 16
(0.8)
–
–
–
(0.8)
0.2
–
–
(0.2)
–
–
6.9
(0.4)
16.7
23.2
Total
32.0
2.2
1.8
17.3
53.3
Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. Where deferred tax liabilities exist
at the balance sheet date these are offset against deferred tax assets where the entity has a legal right to settle on a net basis and the deferred tax amounts are levied by the same taxing authority.
There are gross unrecognised deferred tax assets of £42.7m (2019: £37.8m) at the balance sheet date to which £20.2m (2019: £24.9m) relate to US operations and £16.7m in connection with IFRS 16
(2019: £nil).
Of the unrecognised deferred tax assets attributable to US operations, £7.6m relates to losses which accrued in the periods to 29 April 2017. US tax losses arising in periods ending prior to 31 December 2017
have an expiration period of twenty years. The Group also have unrecognised deferred tax assets of £1.5m at 25 April 2020 in relation to Dutch tax losses which have an expiration period of six years.
The movement on the Company deferred tax account is as shown below:
Net deferred tax assets £m
At 27 April 2019
Credited/(charged) to the Group statement of comprehensive income – underlying
Credited/(charged) to the Group statement of comprehensive income – exceptional
Credited/(charged) to equity
At 25 April 2020
23. Inventories
Finished goods
Net inventories
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36
Depreciation
in excess of
capital
allowances
0.7
0.8
0.3
–
1.8
Company
Temporary
differences
Tax
losses
Intangible
assets
Derivatives
0.4
(0.3)
–
–
0.1
0.1
–
–
–
0.1
2020
£m
158.7
158.7
–
–
–
–
–
–
–
–
–
–
Group
Company
2019*
£m
186.9
186.9
2020
£m
2.3
2.3
Total
1.2
0.5
0.3
–
2.0
2019
£m
2.1
2.1
Superdry plc Annual Report 2020OUR FINANCIALS 23. Inventories CONTINUED
Inventory write-downs for each period are as follows:
At start of period
Provision charge in the period
Utilised in period
At end of period
* 2019 numbers have been represented. There is no impact on the primary statements
24. Trade and other receivables
Trade receivables
Less: allowance for expected credit losses
Net trade receivables
Other amounts due from related parties
Less: impairment of amounts due from related parties
Net amounts due from related parties
Taxation and social security
Other receivables
Prepayments
Rent deposits held by landlords
Total trade and other receivables
Group
Company
2019*
£m
3.3
3.9
(2.4)
4.8
2020
£m
0.1
0.1
–
0.2
Group
Company
2019
£m
93.0
(5.4)
87.6
–
–
–
0.2
8.8
18.9
6.9
122.4
2020
£m
–
–
–
278.6
(26.5)
252.1
–
1.0
4.8
–
257.9
2020
£m
4.8
7.7
(2.7)
9.8
2020
£m
75.8
(14.6)
61.2
–
–
–
–
20.0
3.1
7.3
91.6
161
2019
£m
0.1
–
–
0.1
2019
£m
–
–
–
208.7
(44.2)
164.5
15.4
1.1
3.0
–
184.0
In 2019 the movement in allowances for expected credit losses was shown within ‘Impairment losses on other financial assets’ in the Group statement of comprehensive income, in 2020 this is represented
in ‘Impairment losses on trade receivables’.
Prepayments for the Group include £nil (2019: £10.0m) of prepaid rent and rates.
The fair values of trade and other receivables are equal to their carrying value. The balances due from related parties are repayable on demand.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. Trade and other receivables are not provided as security.
Impairment of trade receivables – Group accounts
The table below shows the credit risk exposure on the Group’s trade receivables at 25 April 2020:
Expected loss rate %
Gross carrying amount – trade receivables
Loss allowance
Carrying
amount
£m
19.3%
75.8
(14.6)
Current
£m
Overdue
1-30 days
Overdue
31-60 days
Overdue
60 days +
5.6%
36.6
(2.0)
6.2%
15.8
(1.0)
8.9%
8.4
(0.8)
71.8%
15.0
(10.8)
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
24. Trade and other receivables CONTINUED
The table below shows the credit risk exposure on the Group’s trade receivables at 27 April 2019
Expected loss rate %
Gross carrying amount – trade receivables
Loss allowance
Carrying
amount
£m
5.8%
93.0
(5.4)
Current
£m
Overdue
1-30 days
Overdue
31-60 days
Overdue
60 days +
0.3%
67.2
(0.2)
1.0%
10.4
(0.1)
2.0%
5.1
(0.1)
47.6%
10.3
(5.0)
162
Other receivables are tested for impairment on individual basis. The credit risk is low and the loss allowance measured as 12-months expected credit loss is highly immaterial. Due to the nature of the
other classes within trade and other receivables there is not expected to be any credit loss allowance and as such there is no expected credit loss allowance to recognise on those assets.
The closing loss allowances for trade receivables as at 25 April 2020 reconciles to the opening loss allowances as follows:
At start of period – calculated under IAS 39
IFRS 9 adjustment
Opening loss allowance calculated under IFRS 9
Change in allowance, net of recoveries charged to the Group statement of comprehensive income
Receivables written off during the year as uncollectable
At end of period
*The 2019 balances have been represented to be in line with presentation of the 2020 balances.
2020
£m
5.4
–
5.4
15.3
(6.1)
14.6
2019*
£m
1.5
3.2
4.7
1.7
(1.0)
5.4
The individually impaired receivables relate wholly to the Wholesale segment with the exception of the China joint venture impairment of receivables which is attributable to central costs. The other
classes within trade and other receivables for the Group do not contain impaired assets.
Impairment of intercompany receivables – Company accounts
At 25 April 2020 net intercompany receivables of £67.0m are included in stage 3 of the general impairment model. The Company has carried out sensitivity analysis on the loan loss allowance using
reasonably possible scenarios. Further detail is set out in note 2. At the start of the year, the provision recognised against the intercompany subsidiaries was £44.2m. During 2020, there has been a
release of £17.7m of the impairment of amounts due to related parties bringing the year-end balance within intercompany receivables that are classified as stage 3 to £26.5m. All other intercompany
receivable amounts are classified as stage 1, and as such no material expected credit loss has been recognised on these.
The table below shows the credit risk exposure on the Company’s receivables:
Expected loss rate %
Gross carrying amount – receivables
Loss allowance
2020
Carrying
amount
£m
9.8%
269.1
(26.5)
2019
Carrying
amount
£m
21.2%
208.7
(44.2)
The reduction in the rate of expected credit losses has mainly been impacted due to impairment of receivables from Superdry US entities which moved from £41.5m in 2019 to £20.6m in 2020. The
closing loss allowances for intercompany receivables as at 25 April 2020 reconciles to the opening loss allowances as follows:
Opening loss allowance calculated under IFRS 9
Change in allowance, net of recoveries charged to the Group statement of comprehensive income
At end of period
2020
£m
44.2
(17.7)
26.5
2019
£m
–
44.2
44.2
Superdry plc Annual Report 2020OUR FINANCIALS 25. Cash and bank balances
Cash at bank and in hand
Total cash and cash balances
Group
Company
2020
£m
307.4
307.4
2019*
£m
49.5
49.5
2020
£m
3.2
3.2
2019*
£m
1.0
1.0
* 2019 balances for cash and borrowings have been restated to reflect the grossing up of cash and overdraft balances subject to the group’s cash pooling arrangements and to ensure the Group’s presentation of these balances is in line with the
requirements for offsetting in accordance with IAS 32. See note 1.
Cash and bank balances comprise cash at bank with major UK and European clearing banks and earn floating rates of interest based upon bank base rates. At 25 April 2020, the Group had £285.3m (2019:
£25.6m) deposited with HSBC Bank Plc, £1.9m (2019: £0.8m) deposited with Barclays Bank Plc, £1.6m (2019: £1.3m) deposited with Santander UK Plc, £10.1m (2019: £11.2m) deposited with BNP Paribas,
£1.7m (2019: £3.6m) deposited with ING Bank, £0.3m (2019: £1.2m) deposited with Sydbank and £0.6m (2019: £0.6m) deposited with Banque Populaire Alsace Lorraine Champagne. The remainder of the
cash is deposited in other bank accounts.
163
The Moody’s credit rating as at 22 April 2020 for HSBC bank is Aa3 (2019: Aa3), Barclays Bank Plc is A1 (2019: A2), Santander UK Plc is A2 (2019: A2), BNP Paribas is Aa3 (2019: Aa3), ING Bank is Aa3
(2019: Aa3), Sydbank is A1 (2019: A2) and Banque Populaire Alsace Lorraine Champagne is A1 (2019: A1).
Included with cash and bank balances is £0.2m (2019: £0.2m) of rent deposits held for sub-tenants of the Regent Street Store, and £1.5m (2019: £1.0m) of cash deposits from franchise customer
guarantees. Additionally, there is 1.9m Euros (2019: £nil) deposited in a bank in the European Bank of Iran. These amounts are restricted cash.
26. Borrowings
Unsecured borrowings
RCF
Bank overdraft
Group
Company
2020
£m
–
270.7
270.7
2019*
£m
–
13.6
13.6
2020
£m
–
60.1
60.1
2019*
£m
–
0.5
0.5
* 2019 balances for cash and borrowings have been restated to reflect the grossing up of cash and overdraft balances subject to the group’s cash pooling arrangements and to ensure the Group’s presentation of these balances is in line with the
requirements for offsetting in accordance with IAS 32. See note 36.
The Group has up to a net £20m uncommitted overdraft facility which has no financial covenants and is included within the cash pooling arrangements. The RCF had two financial covenants: a
leverage covenant, this being the ratio of the Group’s consolidation net debt to consolidated EBITDA and a fixed charge cover covenant, this being the ratio of EBITDA plus consolidated rent payable to
consolidated net interest payable and consolidated net rent payable. Both covenants are measured over a 12-month period and are tested twice per year.
The Lenders agreed to waive the fixed charge cover financial covenant test relating to the period ending 25 April 2020 on 6 May 2020 under the Waiver Agreement (the “Waiver Agreement”). An event
of default of the RCF was triggered on 20 December 2019 as a result of late submission of subsidiary statutory accounts. The Event of Default was waived by the lenders on 6 May 2020 subject to a
number of conditions which have been met, including the securing of a new lending facility. See note 39 for further detail.
On 7 August 2020, the Group entered into a 30 month up to £70m committed Asset Backed Lending Facility (“ABL Facility”) which replaced the Group’s RCF facility, see note 39 for further detail.
The ABL can be extended by up to 1 year, at the request of the Group and the agreement of the lenders. The ABL Facility has two financial covenants: an EBITDAR (earnings before interest, tax,
depreciation, amortisation and rent) covenants which is calculated on an internal budget basis and a fixed charge cover covenant, this being the ratio of EBITDA plus consolidated rent payable to
consolidated net interest payable and consolidated net rent payable. The covenants are calculated on frozen accounting standards, and exclude the impact of IFRS 16. Both covenants are measured
over a 12-month period and are tested quarterly.
The Group has revised its presentation of bank overdrafts to be compliant with IAS 32: Financial instruments: Presentation, which prescribes the treatment of overdrafts in cash-pooling arrangements.
As a result, the Group has presented an additional £270.7m within borrowings in the current period and increased its cash balances by equal and opposite amount. Comparatives at 27 April 2019 have
been similarly restated by £13.6m, see note 36.
Bank overdrafts are shown within borrowings in current liabilities on the Balance Sheet.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
27. Trade and other payables
164
Non-current
Deferred cash contributions and rent-free periods
Other payables
Total non-current trade and other payables
Current
Trade payables
Amounts due to related parties
Taxation and social security
Other payables
Deferred income
Accruals
Deferred cash contributions and rent-free periods
Total current trade and other payables
Total trade and other payables
The balances due to related parties are repayable on demand.
The maturity analysis of non-current deferred cash contributions and rent-free periods is as follows:
1 – 2 years
2 – 5 years
Greater than 5 years
Non-current deferred cash contributions and rent-free periods
Group
Company
2019
£m
37.9
1.4
39.3
64.2
–
2.7
0.2
19.8
31.1
9.3
127.3
166.6
2020
£m
–
–
–
1.9
246.0
1.4
0.3
–
10.6
–
260.2
260.2
Group
Company
2019
£m
7.8
18.1
12.0
37.9
2020
£m
–
–
–
–
2020
£m
0.4
1.8
2.2
50.3
–
2.6
1.9
18.7
29.8
–
103.3
105.5
2020
£m
0.1
0.3
–
0.4
2019
£m
0.3
–
0.3
3.1
237.0
0.4
0.2
–
7.6
0.1
248.4
248.7
2019
£m
0.1
0.1
0.1
0.3
Some of the non-current deferred cash contributions and rent-free period balances have been moved to the right of use asset under the transition to IFRS 16 reporting.
Gift voucher liability
Gift cards constitute contract liabilities for the purpose of IFRS 15. This is the case where payment is received in advance of the performance obligations, which will be discharged at a later point in time.
IFRS 15 therefore requires disclosure of the value of these outstanding liabilities at year-end, and the value recognised during the year for those performance obligations being met. The below amounts
are included within trade and other payables:
Opening balance
Effect of change in accounting policy for IFRS 15
Adjusted opening balance
New issues
Released to the income statement
Closing balance
Substantially all of the revenue deferred at the current financial year-end will be recognised within in the following two financial years.
Group
2020
£m
3.5
–
3.5
6.7
(7.2)
3.0
2019
£m
2.3
1.1
3.4
8.1
(8.0)
3.5
Superdry plc Annual Report 2020OUR FINANCIALS 28. Provision for other liabilities and charges
Provisions for other liabilities and charges at the start of the period
New provisions
Adjustment on adoption of IFRS 16
Exchange differences
Utilisation in the period
(Release)/charge in the period
Provisions for other liabilities and charges at the end of the period
Analysed as:
Current provisions
Non-current provisions
Onerous
property
related
contracts
2020
£m
78.5
–
(48.4)
0.8
(6.5)
(12.0)
12.4
4.2
8.2
Other
provisions
2020
£m
1.2
1.4
–
–
–
–
2.6
–
2.6
Group
Total
2020
£m
79.7
1.4
(48.4)
0.8
(6.5)
(12.0)
15.0
4.2
10.8
Onerous
property
related
contracts
Other
provisions
2019
£m
2.5
86.9
–
(1.6)
(9.3)
–
78.5
18.1
60.4
2019
£m
2.8
–
–
–
–
(1.6)
1.2
–
1.2
165
Total
2019
£m
5.3
86.9
–
(1.6)
(9.3)
(1.6)
79.7
18.1
61.8
Note 2 outlines the nature, descriptions and sensitivities surrounding the onerous property related contracts.
Other provisions relates to the dilapidation provisions. Dilapidations provisions will be utilised upon the exit or expiry of various property leases which are expected to be between 2020 and 2031. Onerous property
related contracts are utilised over the remaining life of the lease, expected to be between 2020 and 2029.
Provisions for other liabilities and charges at the start of the period
New provisions – onerous property related contracts
Adjustment on adoption of IFRS16
Exchange differences
Utilisation in the period
Charge/release in the period
Provisions for other liabilities and charges at the end of the period
Analysed as:
Current provisions
Non-current provisions
Company
Onerous
property
related
contracts
Onerous
property
related
contracts
2020
£m
2.8
–
(2.1)
–
(0.3)
(0.1)
0.3
0.1
0.2
2019
£m
–
3.3
–
(0.1)
(0.4)
–
2.8
1.0
1.8
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
29. Contingencies and commitments
Capital expenditure commitments
Property, plant and equipment
Group
Company
2020
£m
–
2019
£m
–
2020
£m
–
2019
£m
–
The Group believes that future cash flows and funding will be sufficient to cover these commitments.
Contingent liability
The Company is party to an unlimited cross guarantee over all liabilities of the Group. The value of this amount is deemed not practical to disclose.
166
30. Leases
Right of use asset
52 weeks ended 25 April 2020
Cost
At 28 April 2019
Recognition of cost at transition
Additions
Disposals
Lease modifications
Exchange rate difference
At 25 April 2020
* The transition amount has been adjusted from the figure reported in the interim statements to reflect prepaid rent of £5.8m that was on the balance sheet as at 27 April 2019.
Accumulated depreciation
At 28 April 2019
Recognition of impairment at transition
Depreciation charge
Disposals
Impairment
At 25 April 2020
Net balance sheet amount at 25 April 2020
Group
Company
Right of use
asset*
£m
Right of use
asset
£m
–
335.7
7.7
(2.0)
(0.6)
3.4
344.2
–
6.3
–
–
0.3
0.1
6.7
Group
Company
Right of use
asset
£m
Right of use
asset
£m
–
48.4
55.0
–
122.8
(226.2)
118.0
–
–
1.2
–
–
1.2
5.5
Of the above impairment of £122.8m, £121.2m constitutes part of the total impairment of £136.8m in FY20 (2019: £42.6m) and relates to an impairment review performed on retail store assets, for further
details on this please see note 2. This impairment has been included within exceptional expenses in the year. The remaining £1.6m relates to impairment of the right of use asset which is recognised
in underlying expenses. The carrying amount of the right of use asset is split between motor vehicles of £0.4m (2019: £nil) and property of £117.6m (2019: £nil). Items in the Group statement of
comprehensive income not impacted by IFRS 16:
Lease expense relating to short-term assets
The expense of variable lease payments not included in the lease liabilities
£5.1m
£3.8m
Lease liability
Lease liabilities are calculated by discounting fixed lease payments using the incremental borrowing rate at the lease inception date determined with reference to the geographical location and length of
the lease. The discount rates applied to leases ranged between 0.1% and 8.5%.
Superdry plc Annual Report 2020OUR FINANCIALS 30. Leases CONTINUED
Analysed as:
Current lease liability
Non-current lease liability
Total lease liability
The remaining contractual maturities of the lease liabilities, which are gross and undiscounted, are as follows:
Less than one year
One to two years
Two to five years
More than five years
Total undiscounted lease liability
Reconciliation of liabilities to cash flow arising from financing activities:
At 28 April 2019
Recognition of lease liability on transition
Payment of lease liability
Increase in lease liability
Disposal of lease liability
Interest expense
Foreign exchange differences
Closing lease liability
31. Property commitments
The future aggregate minimum lease payments under non-cancellable commitments are as follows:
Due within 1 year
Due in more than 1 year, but no more than 5 years
Due in more than 5 years
Total operating lease commitments
Group
Company
Group
2020
£m
80.1
240.8
320.9
2020
£m
84.4
65.2
138.6
51.8
340.0
2019
£m
–
–
–
2019
£m
–
–
–
–
–
2020
£m
1.8
6.3
8.1
2020
£m
2.3
1.9
3.6
0.8
8.6
2019
£m
–
–
–
Company
2019
£m
167
–
–
–
–
–
Company
Group
2020
£m
–
372.1
(66.8)
7.8
(2.3)
5.7
4.4
320.9
2020
£m
–
8.8
(1.4)
0.4
–
0.2
0.1
8.1
2019
£m
2.3
7.0
2.4
11.7
Land and buildings
Group
Company
2020
£m
13.3
31.3
5.6
50.2
2019
£m
91.8
246.4
86.2
424.4
2020
£m
0.7
2.0
0.4
3.1
The group leases various retail stores, offices and vehicles under non-cancellable operating leases. The leases have varying terms, escalating clauses and renewal rights. On renewal, the terms of the
leases are renegotiated. From 28 April 2019, the group has recognised right-of-use assets for these leases, except for short term and low-value leases. In the prior year figures include rent and service
charge, due to IFRS 16 rent is recorded as a right of use asset in 2020 therefore the current figures relate to service charges only.
Not included in the above commitments are contingent rental payments which are linked to sales generated from stores. For individual stores, up to 100% of lease payments are on the basis of variable
contracts with various percentages within the terms.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
32. Note to the cashflow statement
Reconciliation of operating profit to cash generated from operations
Group
Company
168
Operating (loss)/profit
Adjusted for:
– Gain on derivatives
– Depreciation of property, plant and equipment and right of use assets
– Amortisation of intangible assets
– Impairment of property, plant and equipment, right of use assets and intangible assets
– Loss on disposal of property, plant and equipment
– (Decrease)/increase in onerous property related contracts provision
– Restructuring costs
– Release of lease incentives
– Employee share award schemes
– IFRS 2 charge – FSP
– Foreign exchange losses
– Write down of inventory
– Bad debt expense
Operating cash flow before movements in working capital
Changes in working capital:
–Decrease/(increase) in inventories
–Decrease/(increase) in trade and other receivables
–(Decrease)/increase in trade and other payables and provisions
Cash generated from operating activities
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36
Group cash flows arising from exceptional and other costs are £nil (2019: £2.5m).
33. Net cash/(debt)
Analysis of net cash/(debt)
Cash and bank balances
Overdraft
Net Cash and cash equivalents
Cash and short-term deposits
Overdraft
Net debt
Note
6
18,30
19
28
6
8
9
23
24
2020
£m
(159.4)
(1.9)
78.5
8.7
139.1
0.3
(12.0)
–
(0.1)
0.9
0.3
(1.9)
7.7
15.3
75.5
21.6
14.6
(24.2)
87.5
2019*
£m
49.5
(13.6)
35.9
2019*
£m
1.0
(0.5)
0.5
2019*
£m
(68.2)
(23.9)
32.6
9.3
42.6
0.4
86.9
0.5
(9.7)
0.9
2.6
4.5
–
–
78.5
(25.5)
9.4
(7.8)
54.6
2020
£m
2.5
–
5.3
5.5
0.8
0.3
(0.1)
–
–
0.6
(0.3)
0.1
0.1
–
14.8
(0.3)
(55.8)
10.6
(30.7)
Group
Cash flow
£m
258.9
(257.1)
1.8
Company
Cash flow
£m
2.3
(59.6)
(57.3)
Non-cash
changes
£m
(1.0)
–
(1.0)
Non-cash
changes
£m
(0.1)
–
(0.1)
2019
£m
(14.5)
–
4.1
5.6
4.0
–
3.3
–
(0.1)
0.7
0.6
(0.3)
–
–
3.4
0.2
(19.4)
83.7
67.9
2020
£m
307.4
(270.7)
36.7
2020
£m
3.2
(60.1)
(56.9)
* 2019 balances for cash and borrowings have been restated to reflect the grossing up of cash and overdraft balances subject to the group’s cash pooling arrangements and to ensure the Group’s presentation of these balances is in line with the
requirements for offsetting in accordance with IAS 32. See note 36.
The position outlined above is not inclusive of financial liabilities in relation to IFRS 16. Non-cash changes relates to exchange gains on cash and cash equivalents. Interest of £0.2m (2019: £1.0m) has
been incurred in respect of short-term facilities.
Superdry plc Annual Report 2020OUR FINANCIALS
34. Financial risk management
The Company’s and Group’s activities expose it to a variety of financial risks, including: market risk (including foreign currency risk and cash flow interest rate risk), credit risk and liquidity risk. The
Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses
derivative financial instruments to hedge certain foreign exchange exposures.
Credit risk – Group accounts
Credit risk is managed on a Group basis through a shared service centre based in Cheltenham. Credit risk arises from cash and cash equivalents, as well as credit exposures to Wholesale and to a
lesser extent Retail customers, including outstanding receivables and committed transactions. For Wholesale customers, management assesses the credit quality of the customer, taking into account
its financial position, past experience and other factors. The Group mitigates risk in certain markets or with customers considered higher risk with payments in advance and bank guarantees, as well as
adopting credit insurance where appropriate. The Group regularly monitors its exposure to bad debts in order to minimise risk of associated losses.
The Group is party to banking agreements that include a legal right of offset which enables the overdraft balances of £270.7m (2019: £13.6m) to be settled net with cash balances. These balances have
been excluded from contractual cash flows.
169
Sales to Retail customers are settled in cash, by major credit cards or by PayPal. Credit risk from cash and cash equivalents is managed via banking with well-established banks with a strong credit
rating.
Impairment of financial assets
From 29 April 2018, the Group applied the IFRS 9 simplified approach in measuring expected credit losses (“ECL“). The Group’s financial assets subject to the ECL model are primarily trade receivables.
A loss allowance is recognised based on ECL. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.
The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date. None of the trade receivables that have been written off are
subject to enforcement activities.
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument at
the reporting date with the risk of a default occurring on the financial instrument at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative
information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. Forward-looking information considered
includes the future prospects of the industries in which the Group’s debtors operate, obtained from economic expert reports, financial analysts, governmental bodies, relevant think-tanks and other
similar organisations, as well as consideration of various external sources of actual and forecast economic information that relate to the Group’s core operations.
In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition:
•
•
•
•
•
•
an actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating;
significant deterioration in external market indicators of credit risk for a particular financial instrument, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor, or
the length of time or the extent to which the fair value of a financial asset has been less than its amortised cost;
existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor’s ability to meet its debt obligations;
an actual or expected significant deterioration in the operating results of the debtor;
significant increases in credit risk on other financial instruments of the same debtor; and
an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt
obligations.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are
more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.
Despite the foregoing, the Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit
risk at the reporting date. A financial instrument is determined to have low credit risk if:
corporate.superdry.comOUR FINANCIALS
Notes to the Group and Company Financial Statements
to the members of Superdry Plc
34. Financial risk management CONTINUED
(1) the financial instrument has a low risk of default;
(2) the debtor has a strong capacity to meet its contractual cash flow obligations in the near term; and
(3) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.
The maximum exposure to credit risk is equal to the carrying value of the derivatives.
Measurement and recognition of expected credit losses
The measurement of ECL is a function of the probability of default, loss given default and the exposure at default. The assessment of the probability of default and loss given default is based on historical
data adjusted by forward-looking information. The exposure at default is represented by the asset’s gross carrying value, less specific insurance held, at the reporting date.
170
The ECL is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive. The Group
recognises an impairment gain or loss in profit for all financial instruments with a corresponding adjustment to their carrying amount through a loss account.
Credit risk – Company accounts
The ECL model is required to be applied to the intercompany receivable balances, which are classified as held at amortised cost. The increase in the loss allowance during the current year relates to a
deterioration in the borrower’s credit risk during the current period.
Foreign currency risk
The Group’s foreign currency exposure arises from:
•
transactions (sales/purchases) denominated in foreign currencies;
• monetary items (mainly cash receivables and borrowings) denominated in foreign currencies; and
•
investments in foreign operations, whose net assets are exposed to foreign currency translation.
The Group is mainly exposed to US Dollar and Euro currency risks. The exposure to foreign exchange risk within each company is monitored and managed at Group level. The Group’s policy on foreign
currency risk is to economic hedge a portion of foreign exchange risk associated with forecast overseas transactions, and transactions and monetary items denominated in foreign currencies.
The Group’s approach is to hedge the risk of changes in the relevant spot exchange rate. The Group uses forward contracts to hedge foreign exchange risk. As at 25 April 2020 and 27 April 2019, the
Group had entered into a number of foreign exchange forward contracts to hedge part of the aforementioned translation risk. Any remaining amount remains unhedged.
Forward exchange contracts have not been formally designated as hedges and consequently no hedge accounting has been applied. Forward exchange contracts are carried at fair value. Currency
exposure arising from the net assets of the Group’s foreign operations are not hedged.
At 25 April 2020, if the currency had weakened/strengthened by 10% against both the US Dollar and Euro with all other variables held constant, profit for the period would have been £29.9m (2019:
£0.6m) higher/lower, mainly as a result of foreign exchange gains/losses on translation of US Dollar/Euro trade receivables, cash and cash equivalents, and trade payables. The figure of 10% used for
sensitivity analysis has been chosen because it represents a range of reasonably probable fluctuations in exchange rates.
The Group’s foreign currency exposure is as follows:
Financial assets
Trade receivables
Cash and cash equivalents
Financial assets exposure
Financial liabilities
Trade payables
Lease liabilities
Overdrafts
Financial liabilities exposure
Net exposure
2020
US Dollar
£m
1.4
21.6
23.0
(11.2)
(47.2)
(86.4)
(144.8)
(121.8)
Group
2020
Euro
£m
46.4
74.7
121.1
(11.8)
(159.0)
(127.0)
(297.8)
(176.7)
2019
US Dollar
£m
1.7
4.6
6.3
(9.8)
–
–
(9.8)
(3.5)
2019
Euro
£m
57.3
4.6
61.9
(10.0)
–
–
(10.0)
51.9
Superdry plc Annual Report 2020OUR FINANCIALS 34. Financial risk management CONTINUED
Cash flow interest rate risk
The Group has financial assets and liabilities which are exposed to changes in market interest rates. Changes in interest rates impact primarily on deposits, loans and borrowings by changing their
future cash flows (variable rate). Management does not currently have a formal policy of determining how much of the Group’s exposure should be at fixed or variable rates and the Group does not use
hedging instruments to minimise its exposure. However, at the time of taking out new loans or borrowings, management uses its judgement to determine whether it believes that a fixed or variable rate
would be more favourable for the Group over the expected period until maturity. Sensitivity analysis has not been provided due to the low level of loans and borrowings within the Group. The Group’s
significant interest-bearing assets and liabilities are disclosed in notes 25 and 26.
Liquidity risk
Cash flow forecasting is performed on a Group basis by the monitoring of rolling forecasts of the Group’s liquidity requirements to ensure that it has sufficient cash to meet operational needs. The
maturity profile of the Group’s liabilities is analysed in notes 26, 27 and 30.
The Group is party to banking agreements that include a legal right of offset which enables the overdraft balances of £270.7m (2019: £13.6m) to be settled net with cash balances. These balances have
been excluded from contractual cash flows.
171
Following Covid-19, the Group is managing cash flows very closely, this involves working with landlords for rent relief and prioritising certain payments to ensure cash levels remain in surplus. The Group
benefited from the UK government’s decision to grant a 12 month holiday on business rates. The Group also took early and decisive cash preservation measures across the business including deferral
of tax payments and seeking reductions in business rates as a result of UK government support. The Group utilised government support packages offered in many countries where the Group operate
resulting in furloughing 4,000 staff (88% of our workforce and comprising mostly retail staff) during the period stores were closed. See note 38 for further details.
Maturity of undiscounted financial liabilities (excluding derivatives)
The expected maturity of undiscounted financial liabilities is as follows:
In one year or less
In two to five years
The above balances relate to trade and other payables and overdrafts. See note 30 for analysis of undiscounted lease liabilities.
Valuation hierarchy
The table below shows the financial instruments carried at fair value by valuation method:
2020
£m
352.7
1.8
Assets
Derivative financial instruments
– forward foreign exchange contracts
Liabilities
Derivative financial instruments
– forward foreign exchange contracts
Level 1
£m
Level 2
£m
Group
2020
Level 3
£m
Level 1
£m
Level 2
£m
–
–
2.6
(2.3)
–
–
–
–
1.7
(3.4)
2019
£m
109.1
1.4
2019
Level 3
£m
–
–
The level 2 forward foreign exchange valuations are derived from mark-to-market valuations based on observable market data as at the close of business on 25 April 2020. The notional principal amount
of the outstanding outright FX contracts as at 25 April 2020 was £245.2m (2019: £270.1m). Structured forward foreign exchange contracts are in place to sell up to €96m (£87.4m) depending on the
exchange rates set on fixing dates over the next 12 months (2019: to buy up to USD 86.5m (£67.0m) and sell up to EUR 183m (£158.1m) in exchange for a variable amount of GBP depending on the
underlying conditions at maturity.
Derivative financial instruments
There is a master netting agreement in place in relation to derivatives. All cash flows will occur within 24 months. All derivative financial instruments are carried at fair value as assets when the fair value
is positive and as liabilities when the fair value is negative.
corporate.superdry.comOUR FINANCIALS
Notes to the Group and Company Financial Statements
to the members of Superdry Plc
34. Financial risk management CONTINUED
The table below analyses the Group’s and Company’s derivative financial instruments. The amounts disclosed in the table are the carrying balances of the assets and liabilities as at the balance sheet date.
Forward foreign exchange contracts – current
Forward foreign exchange contracts – non-current
Total derivative financial assets
Forward foreign exchange contracts – current
Forward foreign exchange contracts – non-current
Total derivative financial liabilities
172
All financial derivative instruments are due within 24 months.
Group
Company
2020
£m
2.5
0.1
2.6
2.1
0.2
2.3
2019
£m
0.4
1.3
1.7
1.4
2.0
3.4
2020
£m
2019
£m
–
–
–
–
–
–
–
–
–
–
–
–
The full fair value of a derivative is classified as a non-current asset or liability where the remaining maturity of the derivative is more than 12 months and as a current asset or liability, if the maturity of
the derivative is less than 12 months.
Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders, and benefits for other stakeholders, and to maintain
an optimal capital structure to reduce the cost of capital. The Group is not subject to any externally imposed capital requirements. The Group’s strategy remains unchanged from financial year 2019.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital employed. Net debt is defined in note 37.
Total capital employed is calculated as “equity” as shown in the consolidated balance sheet plus net debt. The Group is in a net cash position at 25 April 2020.
The Board has put in place a distribution policy which takes into account the degree of maintainability of the Group’s profit streams as well as the requirement to maintain a certain level of cash
resources for working capital and capital investment purposes. The Board will recommend an ordinary dividend broadly reflecting the profits in the relevant period. In addition, the Board will consider
and, if appropriate, recommend the payment of a supplemental dividend alongside the final ordinary dividend. The value of any such supplemental dividend will vary depending on the performance of
the Group and the Group’s anticipated working capital and capital investment requirements through the cycle. It is intended that, in normal circumstances, the value of the ordinary dividends declared in
respect of any year are covered at least three times by underlying profit after tax (see note 37 for definition).
The capital structure is as follows:
Equity
Cash and cash equivalents
Overdraft
Net cash and cash equivalents
Group
Company
2020
£m
112.7
307.4
(270.7)
36.7
2019*
£m
257.5
49.5
(13.6)
35.9
2020
£m
225.4
3.2
(60.1)
(56.9)
2019*
£m
375.6
1.0
(0.5)
0.5
* 2019 balances for cash and cash equivalents have been restated to reflect the grossing up of cash and overdraft balances subject to the group’s cash pooling arrangements and to ensure the Group’s presentation of these balances is in line with
the requirements for offsetting in accordance with IAS 32. See note 36.
Superdry plc Annual Report 2020OUR FINANCIALS 34. Financial risk management CONTINUED
Financial instruments by category CONTINUED
Trade and other receivables excluding prepayments
Derivative financial instruments
Cash and cash equivalents
Financial instruments – assets
Derivative financial instruments
Lease liabilities
Overdrafts
Trade and other payables excluding non-financial liabilities
Financial instruments – liabilities
Trade and other receivables excluding prepayments
Cash and cash equivalents
Financial instruments – assets
Trade and other payables excluding non-financial liabilities
Lease liabilities
Overdrafts
Financial instruments – liabilities
Assets at fair
value through
profit or loss
2020
£m
Financial
assets at
amortised cost
2020
£m
–
2.6
–
2.6
88.5
–
307.4
395.9
Liabilities at fair
value through
profit or loss
2020
£m
2.3
–
–
2.3
Other financial
liabilities at
amortised cost
2020
£m
–
320.9
270.7
83.8
675.4
Group
Total
2020
£m
88.5
2.6
307.4
398.5
Group
Total
2020
£m
2.3
320.9
270.7
83.8
677.7
Assets at fair
value through
profit or loss
2019
£m
Financial assets
at amortised
cost
2019
£m
–
1.7
–
1.7
103.5
–
49.5
153.0
Liabilities
at fair value
through
profit or loss
2019
£m
3.4
–
–
3.4
Other financial
liabilities at
amortised cost
2019
£m
–
–
13.6
163.9
177.5
173
Total
2019
£m
103.5
1.7
49.5
154.7
Total
2019
£m
3.4
–
13.6
163.9
180.9
Company
Financial assets at
amortised cost
2020
£m
Financial assets at
amortised cost
2019
£m
243.6
3.2
246.8
Company
181.0
1.0
182.0
Other financial
liabilities at
amortised cost
2020
£m
Other financial
liabilities at
amortised cost
2019
£m
258.8
8.1
60.1
327.6
248.4
–
0.5
248.9
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
35. Share capital
Authorised, allotted and fully paid 5p shares
Group and Company
25 April 2020
27 April 2019
Number of
shares
Value of shares
(£m)
82,010,788
81,995,248
4.1
4.1
15,540 ordinary shares of 5p were authorised, allotted and issued in the period under the Superdry Share Based Long-Term Incentive Plans, Buy As You Earn and Save As You Earn schemes.
36. Prior year restatement
An error associated with inventory accounting in the prior year has been identified during the course of FY20. Inventories are valued at the lower of cost and net realisable value. Cost comprises costs
associated with the purchase and bringing of inventories to the distribution centres. The historic journal entries for stock cost are complex. The error of £3.9m relates to the system of recording and
allocating cost variances related to freight, duty, and other charges, and transfers between warehouses.
174
The Group have reviewed the recording processes and concluded that the record keeping process was overly complex. The Group have now simplified the accounting.
Within the period, it was determined that the Company’s cash and overdrafts within notional cash pooling arrangements did not meet the requirements for offsetting in accordance with IAS 32:
‘Financial Instruments: Presentation’. For presentational purposes, cash and bank balances in the prior year have been restated in accordance with IAS 8: ‘Accounting Policies, Change in Accounting
Policies and Errors’ with an additional £13.6m within borrowings and cash balances increased by an equal and opposite amount. There is no impact on net assets.
The impact of the adjustment on the relevant financial statement line items is set out below:
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Other gains and losses (net)
Operating loss
Loss before tax
Tax (expense)/credit
Loss for the period
Attributable to:
Owners of the Company
Earnings per share:
Basic
Diluted
52 weeks to
27 April 2019
Previously
reported
£m
52 weeks to
27 April 2019
Restated
£m
Adjustment
871.7
(387.4)
484.3
(587.2)
34.7
(68.2)
(85.4)
(13.1)
(98.5)
(98.5)
–
(3.9)
(3.9)
–
–
(3.9)
(3.9)
0.7
(3.2)
(3.2)
871.7
(391.3)
480.4
(587.2)
34.7
(72.1)
(89.3)
(12.4)
(101.7)
(101.7)
Pence per
share
As reported
Adjustment
Pence per
share Restated
(120.3)
(120.0)
(3.9)
(3.9)
(124.2)
(123.9)
Superdry plc Annual Report 2020OUR FINANCIALS 36. Prior year restatement CONTINUED
Group Balance Sheet as at 27 April 2019
ASSETS
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Assets classified as held for sale
Cash and bank balances
Current tax receivable
Total current assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Provisions for other liabilities and charges
Current tax liabilities
Derivative financial instruments
Total current liabilities
Total non-current liabilities
Net assets
EQUITY
Share capital
Share premium
Translation reserve
Merger reserve
Retained earnings
Total equity
52 weeks to
27 April 2019
previously
reported
£m
Stock
adjustment
Cash netting
adjustment
52 weeks to
27 April 2019
£m
159.7
190.8
122.4
0.4
2.4
35.9
–
351.9
127.3
–
18.1
0.4
1.4
147.2
103.7
260.7
4.1
149.1
(3.0)
(302.5)
413.0
260.7
–
(3.9)
–
–
–
–
0.3
(3.6)
–
–
–
0.4
–
0.4
–
(3.2)
–
–
–
–
(3.2)
(3.2)
–
–
–
–
–
13.6
–
13.6
–
13.6
–
–
–
13.6
–
–
–
–
–
–
–
–
175
159.7
186.9
122.4
0.4
2.4
49.5
0.3
361.9
127.3
13.6
18.1
–
1.4
160.4
103.7
257.5
4.1
149.1
(3.0)
(302.5)
409.8
257.5
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
37. Alternative performance measures
Introduction
The Directors assess the performance of the Group using a variety of performance measures, some are IFRS, and some are adjusted and therefore termed ‘‘non-GAAP’’ measures or “Alternative
Performance Measures” (‘‘APMs’’). The rationale for using adjusted measures is explained below. The Directors principally discuss the Group’s results on an ‘‘underlying’’ basis. Results on an underlying
basis are presented before exceptional and other items.
The APMs used in this Annual Report are: underlying gross profit and margin, underlying operating profit and margin, like-for-like revenue growth, underlying (loss)/profit before tax, underlying tax
expense and underlying effective tax rate, underlying earnings per share and net cash/debt.
A reconciliation from these non-GAAP measures to the nearest measure prepared in accordance with IFRS is presented below. The APMs we use may not be directly comparable with similarly titled
measures used by other companies. There have been no changes in definitions from the prior period.
176
Exceptional and other items
The Group’s statement of comprehensive income and segmental analysis separately identify trading results before exceptional and other items. The Directors believe that presentation of the Group’s
results in this way provides a useful alternative analysis of the Group’s financial performance, as exceptional and other items are identified by virtue of their size, nature or incidence. This presentation
is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee and assists in providing a relevant analysis of the trading
results of the Group. It is also consistent with the way that management is incentivised. In determining whether events or transactions are treated as exceptional and other items, management considers
quantitative as well as qualitative factors such as the frequency or predictability of occurrence.
Examples of charges or credits meeting the above definition and which have been presented as exceptional and other items in the current and/or prior years include:
Exceptional items
• Acquisitions/disposals of significant businesses and investments (including related to the joint venture);
•
Impact on deferred tax assets/liabilities for changes in tax rates;
• Business restructuring programmes;
• Derecognition of deferred tax assets (including related to the joint venture); and
• Asset impairment charges and onerous property related contracts provision.
Other items
• The movement in the fair value of unrealised financial derivatives; and
•
IFRS 2 charges in respect of Founder Share Plan (‘‘FSP’’).
In the event that other items meet the criteria, which are applied consistently from year to year, they are also treated as exceptional and other items.
Exceptional and other items in this period
The following items have been included within ‘‘exceptional and other items’’ for the period ended 25 April 2020:
Superdry plc Annual Report 2020OUR FINANCIALS 37. Alternative performance measures CONTINUED
Fair value re-measurement of foreign exchange contracts – financial years 2020 and 2019
The fair value of unrealised financial derivatives is reviewed at the end of each reporting period and unrealised losses/gains are recognised in the Group statement of comprehensive income.
The Directors consider unrealised losses/gains to be ‘‘exceptional and other items’’ due to both their size and nature. The size of the movement on the fair value of the contracts is dependent in
particular on the spot foreign exchange rate at the balance sheet date and an assessment of future foreign exchange volatility applied to the relevant contract currencies, as such the size of the
movements can be substantial. The unrealised foreign exchange contracts have been entered into in order to achieve an economic hedge against future payments and receipts and are not a reflection
of historical performance. The Directors do not therefore consider these unrealised losses/gains to be a reflection of the trading performance in the period.
Restructuring, strategic change and other costs – financial years 2020 and 2019
The Group Annual Report financial year 2019 included exceptional items in relation to a cost-saving restructuring programme, and the strategic change with Julian Dunkerton re-joining the business on
2 April 2019. In the financial year 2020 a credit was incurred in relation to this same programme. The Directors consider these to be “exceptional and other” charges and credits due to their nature and
they are a true up of costs classified as exceptional in the prior year. These are not considered to be a reflection of the trading performance in the period.
177
During the current year, the Board and management reviewed the long-term business plan for the Trendy & Superdry Holding Limited joint venture. Following discussions with the joint venture partner,
and taking into account the current challenging retail environment due to Covid-19, both parties agreed to end the relationship. Costs for the wind-up of the business totalling £1.5m have been accrued
for; these are considered to be exceptional based on the one-off nature of this decision.
Store asset impairment and onerous property related contracts provision – financial years 2020 and 2019
A store asset impairment and onerous property related contracts provision review was performed during the year across the Group’s store portfolio. An exceptional impairment of £136.8m of fixed
assets, intangible assets and right of use assets has been made on the basis that the recoverable amount is less than the carrying value. In addition, an onerous property related contracts provision of
£12.0m has been released, reflecting the surplus in the net present value of the future cash flows compared to the net present value of the future service charge obligations within the lease.
A similar exercise was performed in financial year 2019 across all store assets, resulting in a fixed asset impairment of £42.6m and an onerous property related contracts provision charge of £86.9m.
The Directors consider the store impairment and onerous property related contracts provision to be an ‘‘exceptional and other item’’ due to the materiality of the charge. See notes 2 and 6 for
further details.
Founder Share Plan (‘‘FSP’’) – IFRS 2 charge – financial years 2020 and 2019
While there are no cost or cash implications for the Group, the Founder Share Plan (‘‘FSP’’) falls within the scope of IFRS 2. The Group has included the IFRS 2 charge and related deferred tax movement
in relation to the FSP within ‘‘exceptional and other items’’ for the current and subsequent periods.
The Directors consider the plan to be one-off in nature and unusual in that the share awards are being funded exclusively by the Founders. The full-year charge for FY20 and FY21 has been estimated
between £0.3m – £2m each period. While the charge is spread over a number of financial years, the plan is a one-time scheme. Accordingly the IFRS 2 charge in respect of the FSP is considered to be
an ‘‘exceptional and other item’’ due to the size, nature and incidence of the scheme. There are no known recent examples within quoted companies of incentive arrangements operating in a similar way
to the FSP. While unusual in terms of size, the plan is also unusual with regard to its treatment in what is essentially a personal arrangement, with no net cost or cash and minimal administrative burden
to the Company. There are no other adjustments anticipated in respect of the scheme other than the IFRS 2 charge.
Therefore the Directors consider the charge to be significant in terms of its potential influence on the readers’ interpretation of the Group’s financial performance and not a reflection of the trading
performance in the period.
See note 9 for further details of the FSP.
Share of joint venture exceptional costs – financial year 2019
During financial year 2019 Trendy & Superdry Holding Ltd carried out a store asset impairment and onerous lease provision review, similar to the one mentioned above, which has led to exceptional
losses. This is a joint venture of the Group (see note 20).
As part of this review the profitability of the recoverability of the loan made to the joint venture was considered. As settlement of the loans is not expected within the four-year time horizon of
management’s strategic plan the full balance of £8.5m of these loans were provided for in the prior year.
The Directors consider these to be “exceptional and other items” due to their size and the expectation that they are one-off in nature.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
37. Alternative performance measures CONTINUED
Underlying gross profit and margin
In the opinion of the Directors, underlying gross profit and margin are measures which seek to reflect the underlying performance of the Group that will contribute to long-term sustainable profitable
growth. They are key internal management metrics for assessing segmental performance. As such, they exclude the impact of exceptional and other items.
A reconciliation from gross profit, the most directly comparable IFRS measure, to the underlying gross profit and margin, is set out below.
Reported revenue
Gross profit
Exceptional and other items
Underlying gross profit
178
Gross margin
Underlying gross margin
2020
£m
704.4
377.9
–
377.9
2020
£m
53.6%
53.6%
2019*
£m
871.7
480.4
–
480.4
Restated
2019
£m
55.1%
55.1%
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36
Underlying operating profit and margin
In the opinion of the Directors, underlying operating profit and margin are measures which seek to reflect the underlying performance of the Group that will contribute to long-term sustainable profitable
growth. The Directors focus on the trends in underlying operating profit and margins, and they are key internal management metric for assessing segmental performance. As such, they exclude the
impact of exceptional and other items.
A reconciliation from operating profit, the most directly comparable IFRS measure, to the underlying operating profit and margin, is set out below.
Reported revenue
Operating loss
Exceptional and other items
Underlying operating (loss)/profit
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36
Operating margin
Underlying operating margin
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36
2020
£m
704.4
(159.4)
125.1
(34.3)
2020
£m
(22.6)%
(4.9)%
2019*
£m
871.7
(72.1)
116.3
44.2
2019*
£m
(8.3)%
5.1%
Superdry plc Annual Report 2020OUR FINANCIALS 37. Alternative performance measures CONTINUED
Like-for-like revenue growth
In the opinion of the Directors, like-for-like revenue growth is a measure which seeks to reflect the underlying performance of the Group’s stores without the impact of new or closed stores in the year. It
is a key internal management metric for assessing revenue performance. Like-for-like sales growth is defined as the year-on-year increase in revenue from stores and concessions open for more than
one year, and allowing for store upsizing of no more than 100% in original trading space less the impact of store closures. As such, they exclude the changes to the store portfolio.
A comparison to reported revenue, the most directly comparable IFRS measure, to the like-for-like revenue growth, is set out below.
Reported revenue
Like-for-like store revenue
2020
£m
(19.2%)
(14.4%)
2019
£m
(3.7%)
(9.6%)
179
Underlying(loss)/profit before tax
In the opinion of the Directors, underlying (loss)/profit before tax is a measure which seeks to reflect the underlying performance of the Group that will contribute to long-term sustainable profitable
growth. As such, underlying (loss)/profit before tax excludes the impact of exceptional and other items. The Directors consider this to be an important measure of Group performance and is consistent
with how the business performance is reported to and assessed by the Board and the Executive Committee.
This is a measure used within the Group’s incentive plans. Refer to the Remuneration Report on pages 85 to 104 for explanation of why this measure is used within incentive plans.
A reconciliation from (loss) before tax, the most directly comparable IFRS measures, to the underlying (loss)/profit before tax, is set out below.
Loss before tax
Exceptional and other items
Underlying (loss)/profit before tax
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36
2020
£m
(166.9)
125.1
(41.8)
2019*
£m
(89.3)
127.3
38.0
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
37. Alternative performance measures CONTINUED
Underlying tax expense and underlying effective tax rate
In the opinion of the Directors, underlying tax expense is the total tax charge for the Group excluding the tax impact of exceptional and other items. Correspondingly, the underlying effective tax rate is
the underlying tax expense divided by the underlying profit before tax.
These measures are an indicator of the ongoing tax rate of the Group.
A reconciliation from tax expense, the most directly comparable IFRS measures, to the underlying tax expense, is set out below:
180
Underlying (loss)/profit before tax
Tax credit/(expense)
Exceptional and other items – current tax
Exceptional and other items – deferred tax
Underlying tax credit/(expense)
Underlying effective tax rate
2020
£m
(41.8)
23.5
(0.1)
(17.3)
6.1
(14.6)%
2019*
£m
38.0
(12.4)
(1.7)
2.6
(11.5)
(30.3)%
* The reported comparatives have been restated to reflect a prior year adjustment, see note 36
Net cash/debt
In the opinion of the Directors, net cash/debt is a useful measure to monitor the overall cash position of the Group. It is the total of all short and long-term loans and borrowings, less cash and cash
equivalents. See note 33 for the Group’s net cash/(debt) position. This position is exclusive of financial liabilities in relation to IFRS 16.
Underlying EPS
In the opinion of the Directors, underlying earnings per share is calculated using basic earnings, adjusted to exclude exceptional and other items net of current and deferred tax. See note 16 for the
Group’s underlying EPS.
38. Government assistance
In response to Covid-19, the Group took early and decisive cash preservation measures across the business including deferral of tax payments and seeking reductions in business rates as a result of UK
government support; utilising government support packages offered in many countries where we operate; furloughing 4,000 staff (88% of workforce and comprising mostly retail staff) during the period
stores were closed. The Group also deferred VAT, PAYE and Customs Duty of more than £5.0m and recovered historic corporation tax overpayments of £11.5m, of which £3.0m was received post year end.
Government grants in relation to the UK’s Coronavirus Job Retention Scheme (CJRS) and equivalent schemes in other territories represents a value of £2.9m. Government grants are not recognised
until there is reasonable assurance that the Group will comply with the conditions attached to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate.
The value is netted off against payroll costs in selling, general and administrative expenses.
Superdry plc Annual Report 2020OUR FINANCIALS 39. Post balance sheet events
Exit of China joint venture
In June 2020, the Group reached an amicable agreement with Trendy and Superdry Holding Limited to exit relationship with them. As a result, the Group completed the exit of retail operations within
China at the end of August 2020. The Group continues to focus on the Ecommerce and wholesale strategy in the region. In the current year £1.5m of exit costs relating to solvency, legal and logistics
costs have been incurred and are included within exceptional items (see note 6).
As at 27 April 2019, the carrying value of the investment in Trendy & Superdry Holding Limited was £nil after recognising a £3.7m loss in the 52 week period to 27 April 2019. No further investment has
been provided during FY20 by Superdry Plc. In FY20 no further losses were recognised as the investment value had already been written down to £nil. At the Balance Sheet date the Company holds a
£2.2m bad debt provision for outstanding debt in relation to stock supplied to the joint venture.
Refinancing
Subsequent to year end, the Group entered into a new financing facility with existing lenders, HSBC and BNPP in the form of a new Asset Backed Lending Facility (“ABL Facility”) which is up to £70m,
with a term until January 2023 with amended covenants.
181
This ABL Facility replaces the existing revolving credit facility that the Company had in place following the breach of non-financial covenants in respect of the timing of submission of subsidiary
statutory accounts. The RCF was due to expire in January 2022. The new facility is subject to a number of financial covenants and the borrowing base will vary throughout the year dependent on the
level of the Company’s eligible inventory and receivables.
The covenants outlined in this agreement include specific EBITDAR (earnings before interest, tax, depreciation, amortisation and rent) and Fixed charge cover (earnings before interest and tax over
fixed charges) to be achieved on specified dates throughout the year. Additionally the facility must be undrawn for 5 successive days in January 2021. The EBITDAR covenant is calculated on an internal
budget basis.
Due to these covenants being tested on a trailing 12 months basis (much of which has already occurred as at the first EBITDAR test in October 2020), there is also a drawdown limit of £35m on the
facility for the month of October 2020 only (after which time the facility is capped at £70m, subject to the borrowing base availability), which is intended to give the debt providers additional comfort
around short-term cash management. The Group’s projected trading scenarios have been thoroughly stress tested with the new facility providing sufficient liquidity to continue trading through an
expected difficult trading environment.
Restructuring announcement
In June 2020, it was announced that the Group would undergo a restructuring programme which included redundancies in order to make the Group fit for the future. This resulted in investing in certain
areas of the Group whilst changing the structure and reporting lines in other areas of the business.
This is expected to result in reduced overhead staff costs by around 20% representing a £12m annualised cost saving, with the changes impacting around 10% of staff.
corporate.superdry.comOUR FINANCIALS Notes to the Group and Company Financial Statements
to the members of Superdry Plc
Superdry Hong Kong Limited
1106-8, 11th Floor, Tai Yau Building
No 181 Johnston Road
Wanchai
Hong Kong
Trendy & Superdry Holding Limited
13th Floor Gloucester Tower
The Landmark
15 Queen’s Road
Central
Hong Kong
North America
Superdry Retail LLC
Superdry Wholesale LLC
SuperGroup USA Inc
160 Greentree Drive
Suite 101
Dover
DE 19904
USA
40. Details of related undertakings
Superdry Plc (the Company) is a public company limited by shares
incorporated in the United Kingdom under the Companies Act and
is registered in England and Wales. The address of the Company’s
registered office is shown below.
SuperGroup Retail Spain S.L.U
30-38 Carrer Pellaires
08019
Barcelona
Spain
Details of related undertakings including principal activity,
country of incorporation and percentage of shares held by the
Company are listed in note 20. The ultimate parent company and
controlling party is Superdry Plc. The registered office address
of each related undertaking is listed below:
SuperGroup Retail Ireland Limited
c/o Egan O’Reilly Solicitors
19, Upper Mount Street
Dublin 2
Ireland
182
UK
Superdry Plc
C-Retail Limited
DKH Retail Limited
SuperGroup Concessions Limited
SuperGroup Internet Limited
Unit 60 The Runnings
Cheltenham
Gloucestershire
GL51 9NW
United Kingdom
Europe
SuperGroup Europe BVBA
SuperGroup Belgium NV
SuperGroup Belgium Finance NV
Industrielaan 3
1702 Dilbeek
Brussels
Belgium
Superdry Germany GmbH
Sendlinger Str.6
80331
Munich
Germany
Superdry France SARL
16 Rue Portalis
75008
Paris
France
SuperGroup Netherlands BV
SuperGroup Netherlands Retail BV
Nieuwstraat 156
5126CH
Gilze
The Netherlands
SuperGroup Sweden AB
c/o CorpNordic Sweden AB
Box 16285
103 25 Stockholm
Sweden
Superdry Norway A/S
Dronningens gate 8B
0151 Oslo
Norway
Superdry Retail Denmark A/S
SuperGroup Nordic and Baltics A/S
Emdrupvej 26 1. Sal
2100 København Ø
Denmark
Horace
703 Route Nationale
83310
Grimaud
France
Asia
SuperGroup India Private Limited
14th Floor, Dr. Gopal Das Bhawan
28 Barakhamba Road
New Delhi – 110001
India
Superdry Mumessillik Hizmet ve Ticaret Limited Sirketi
Baglar Mahallesi Yavuz Sultan Selim
Caddesi Canel
Plaza no: 15
Kat 9 Bagcılar-istanbul
Turkey
Superdry plc Annual Report 2020OUR FINANCIALS Five Year History
(Unaudited)
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses – underlying
Impairment losses on trade receivables
Other gains and losses (net) – underlying
Operating profit before exceptional and other items – underlying
Exceptional and other items (net)
Operating profit/(loss)
Finance costs (net)
Impairment losses on financial assets
Share of loss in investment/joint venture
Profit/(loss) before tax
Tax expense
Profit/(loss) for the period
Profit attributable to non-controlling interests
Profit/(loss) attributable to equity shareholders
Underlying profit before tax
Basic earnings per share (pence)
Underlying basic earnings per share (pence)
Weighted average number of shares (m)
2016*
£m
597.5
(229.7)
367.8
(303.2)
–
8.5
73.1
(17.0)
56.1
(0.1)
–
(0.6)
55.4
(14.1)
41.3
0.1
41.2
72.4
50.7
70.9
81.1
2017
£m
752.0
(299.0)
453.0
(375.4)
–
11.8
89.4
(2.2)
87.2
0.2
–
(2.6)
84.8
(18.8)
66.0
–
66.0
87.0
81.2
84.5
81.3
2018
£m
872.0
(365.5)
506.5
(418.5)
–
12.3
100.3
(31.7)
68.6
(0.3)
–
(3.0)
65.3
(14.6)
50.7
–
50.7
97.0
62.2
93.6
81.5
183
2019**
£m
871.7
(391.3)
480.4
(447.0)
–
10.8
44.2
(116.3)
(72.1)
(1.0)
(10.0)
(6.2)
(89.3)
(12.4)
(101.7)
–
(101.7)
38.0
(124.2)
32.4
81.9
2020***
£m
704.4
(326.5)
377.9
(412.1)
(9.2)
9.1
(34.3)
(125.1)
(159.4)
(7.5)
–
–
(166.9)
23.5
(143.4)
–
(143.4)
(41.8)
(174.9)
(43.5)
82.0
* Accounting period consisting of 53 weeks.
** Financial year 2019 includes the implementation of IFRS 9 and IFRS 15. Financial periods 2016-2018 have not been restated for this. Financial year 2019 has been restated to adjust for an error that was identified during financial year 2020.
See note 36 for further details.
*** Financial year 2020 includes the implementation of IFRS 16. The comparative periods have not been restated for this
corporate.superdry.comOUR FINANCIALS Shareholder Information
Registered office and
contact information
Unit 60 The Runnings
Cheltenham
Gloucestershire
GL51 9NW
Registered in England and Wales
Registered Number 07063562
T: +44 (0) 01242 578 376
Shareholder enquiries may be submitted to
company.secretary@superdry.com
184
This report and other information on Superdry Plc is available to
download on corporate.superdry.com
General shareholder enquiries
Enquiries relating to shareholders, such as the transfer of
shares, change of name or address, lost share certificates
or dividend cheques, should be referred to the Company’s
registrar, Computershare, using the details below:
Computershare Investor Services Plc
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Shareholder information line: 0370 889 3102. Lines are open
Monday to Friday, excluding bank holidays and weekends,
8.30am to 5.30pm. Please dial +44 370 889 3102 if calling from
outside the UK.
* For those with hearing difficulties, a textphone is available on 0370 702
0005 for UK callers with compatible equipment.
Annual General Meeting
The Annual General Meeting will be held at 11.30am on Tuesday
22 October 2020 virtually with no physical attendance due to
Covid restrictions. The notice of the meeting, together with
details of the business to be conducted at the meeting, is
available on corporate.superdry.com
The voting results of the 2020 AGM will be accessible on
corporate.superdry.com shortly after the meeting.
Dividends
An interim dividend for the financial year ended 25 April 2020 of
2.0p per ordinary share was paid on 21 January 2020. No final
dividend is proposed.
Electronic communications
Shareholders may choose to receive all shareholder
documentation in electronic form rather than paper. If you elect
this option you will receive an email each time a shareholder
document is published on our website.
Tax vouchers and annual statements will be sent to your
Investor Centre account. You can register for the Investor
Centre at www.computershare.com/investor
To receive documentation in electronic form you just need to
change your preference on your Investor Centre account or,
alternatively, you can call the shareholder information line on
0370 889 3102.
Share dealing
Superdry Plc certificated shares can be traded through most
banks, building societies or stockbrokers. Computershare offers
telephone and internet dealing services. Terms and conditions
and details of the commission charges are available on request.
This service is available Monday to Friday from 8.00am to
4.30pm excluding bank holidays and weekends, where a
professional and qualified dealer will be pleased to assist you.
If you would like to use the service please call 0370 703 0084.
Please ensure you have your Shareholder Reference Number
(“SRN”) ready when making the call. The SRN appears on your
share certificate or your nominee statement.
To register for internet dealing services visit
www.computershare-sharedealing.co.uk
Share price information
The latest Superdry Plc share price is available on corporate.
superdry.com
Unauthorised brokers
(boiler room scams)
Shareholders are advised to be very wary of any unsolicited
advice, offers to buy shares at a discount or offers of free
company reports. If you receive any unsolicited investment
advice, get the correct name of the person and organisation
and check that they are properly authorised by the Financial
Conduct Authority (FCA) before getting involved by visiting
www.fca.org.uk/register/
If you think you have been approached by an unauthorised firm
you should contact the FCA consumer helpline on
0800 111 6768. More detailed information can be found at
www.fca.org.uk/consumers/protect-yourself/unauthorised-
firms
Cautionary statement
This Annual Report and Accounts (“Report”) contains certain
forward-looking statements with respect to the financial
condition, results of the operations and businesses of
Superdry Plc. These statements and forecasts involve risk,
uncertainty and assumptions because they relate to events
and depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results
or developments to differ materially from those expressed or
implied by these forward-looking statements. These forward-
looking statements are made only as at the date of this Report.
Except as required by law, Superdry Plc has no obligation
to update the forward-looking statements or to correct any
inaccuracies therein.
The information contained within this Report is deemed to
constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of
this Report, this inside information is now considered to be in
the public domain.
Superdry plc Annual Report 2020OUR FINANCIALS A
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a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
2
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Superdry Plc, Unit 60,
The Runnings, Cheltenham
GL51 9NW
Tel: +44 (0) 1242 578376
corporate.superdry.com