Annual Report 2020 our values Delivering

ScS Group plc Annual Report 2020 Strategic Report Financial Statements 2-49 78-112 2 At a Glance 78 Independent Auditors’ Report 4 Delivering our Values to the Members of ScS Group plc 14 Our Business Model 85 Consolidated Statement of Comprehensive Income 16 Our markets 86 Consolidated Statement 18 Chairman’s Letter of Financial Position 20 CEO’s Review 87 Consolidated Statement 24 Our Strategy of Changes in Equity 26 Key Performance Indicators 88 Consolidated Statement 28 Financial Review of Cash Flows 32 Stakeholder Engagement 89 Notes to the Consolidated Financial Statements 34 Risk and Risk Management 106 Company Statement of Financial Position 36 Principal Risks and Uncertainties 107 Company Statement of Changes in Equity 49 Viability Statement 108 Company Statement of Cash Flows Corporate Governance 109 Notes to the Company Financial Statements 50-77 112 Company Information

50 Board of Directors 52 Corporate Governance Statement 57 Audit Committee Report 62 Directors’ Remuneration Report 69 Remuneration Policy Report 74 Directors’ Report 77 Statement of Directors’ Responsibilities STRATEGIC REPORT CORPORATE GOVERNANCE

ScS is one of the UK’s leading furniture and flooring retailers, operating from 100 stores. FINANCIAL STATEMENTS

After more than 100 years of offering customers the best combination of value, quality and choice, this year has been like 1 no other we have faced. Despite the challenges, our dedicated colleagues have lived our values and continue to deliver for all of our stakeholders.

Read more on pages 4 to 13 2 ScS Group plc Annual Report 2020 furniture and retailing experience. have and retailers over 100 years flooring of and furniture We UK’s of are one the leading fields. highly-trained their in are team choice. dedicated of specialists Our product and combination of customer service, value-for-money, quality us day-to-day customers best our ensures the and we offer Specialist’. We have drives which strategy purpose and aclear UK’sAt the ourselves ScS, we being on pride Carpet ‘Sofa About us At aGlance the forefront of our business strategy; and inspiring an team outstanding is at building and are, we who us make people Our Our values with value, outstanding quality and choice. on providing an excellent customer experience focus we ScS, At values. and culture purpose, our through do, we what of heart the at them place we and us to paramount are customers ranges and our specialist offering. flooring Our throughout our bespoke and extensive sofa choice, and quality great on focus relentless a with this We combine experience. excellent value-for-moneyoutstanding along with an business and reputation is built on offering Our them. to are value and experience customers and how customer important business in Sunderland, we understand our afamily-owned as 1890s the in Founded price. furniture and flooring, and all at the right quality of choice available best the have they sure make to We want families. their with time quality enjoy and relax they where are they – places special are homes customers Our Our purpose value, quality and choice experience with outstanding Providing excellent customer pages 14-15 pages on Model Business Our on more Read – key areas: three on is focus Our and sustainable. ethical both is that amanner in operate to we have business an obligation responsible a as that recognise we time, same At the retailer. carpet and sofa value best Britain’s be to vision aclear have we At ScS, responsibility Our – and inspiring an team; outstanding building on afocus with work, to place People, to continue to make ScS a great agreat ScS make to continue to

– – – – pages 32 to 32 33 pages on Engagement Stakeholder on more Read Hard working: right: it Get goals; common achieve to other each with Inclusive: working; of ways new and markets Responsive: our work and our culture is underpinned by to place agreat creating to committed We are do. they what enjoy and best very their give to people our encourages it to be a part of. apart be to a community that our people are proud build and evolve grow, business our help Delivering our values will continue to doing the right thing. for people reward and recognise we and equal an as treated is member staff Every that all our colleagues feel supported. We inspire success in our teams, ensuring when engaging with our stakeholders. culture honest and open an We encourage honesty and integrity. Trusted: and attitude; awinning with driven and on local charitable fundraising; and Community, ethical sourcing. working with our supply base to ensure consumption and emissions, and energy reducing waste, recycling on is Sustainability, RIGHT

Operating with fairness, respect,

Working and communicating values: Doing things right time; first To our customers, colleagues,

where we put emphasis Passionate, committed Passionate, committed where our emphasis

(FY19: 1,784) (FY19: 1,707 Employees * £333.3m) (FY19: £268.1m Gross sales breakdown*

Flooring (in-store) Furniture (in-store) andDelivery warehousing teams teams support and office Head teams Store (page 94) (page credit free interest of deduction before warranties and goods of sale the on turnover represents sales Gross Online STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Where we are Over the past few years, we have focused on optimising our store footprint to ensure our estate is sustainable and efficient. We want to ensure that our stores are accessible and reach as many potential customers as possible. The right store in the right location works hand-in-hand with having great people, great product, excellent service and value.

We currently trade from 100 stores across the UK – from Aberdeen to Plymouth, and believe the reach offered by our existing and targeted network is optimum to meet customer demand, whilst ensuring we make an appropriate return. As customer shopping habits evolve and the demand for online shopping increases, we are able to support 3 our physical estate through offering all of our ranges on our website.

A new website was launched this summer, with increased speed, mobile optimisation and functionality. This has been coupled with other improvements including increased product visualisation. The progress made in our online capability allows customers not only to purchase with more confidence online but perform detailed research before visiting one of our stores. Our statistics show that our online sales are complementary to our stores, attracting a different customer base. The retail network is then further supported by nine strategically placed regional distribution centres.

Our stores and distribution centres

Stores Distribution

Stores across the UK Distribution centres 100 9

Average retail space per store 14,374 sq ft 4 ScS Group plc Annual Report 2020 Responsive Values our Delivering STRATEGIC REPORT CORPORATE GOVERNANCE

To our customers, colleagues, markets and new ways of working FINANCIAL STATEMENTS

Our product range is carefully selected with our customers at the forefront of our procurement decisions and during the year we continued to respond to the latest customer demands by launching over 100 new products across our furniture and flooring ranges.

Ahead of re-opening our stores we wanted to make sure that our customers felt safe and we understood that they would prefer to avoid queues, therefore we introduced an appointment system. Customers are now able to book a convenient time slot at any our 100 stores, giving them dedicated time in our branches with a member of the sales team. As well as benefiting our customers, the system has resulted in increased conversion rates and positive customer feedback on Trustpilot.

Throughout lockdown it was important that we were still able to respond 5 to aftercare issues for our customers. Our team of technicians adapted to working from home and were able to carry out virtual product inspections using video conferencing software.

“We recently launched our own ‘Inspire’ brand in response to our customers’ desire for a classic, timeless and stylish range. We understand that our customers want their home to be as individual as they are, which is why we offer a superior range of famous sofa brands to suit all tastes. Ensuring we offer the right products at the right price is key to what we do.”

Melissa Maddison Merchandising manager 6 ScS Group plc Annual Report 2020 common goals to other each achieve communicating with Working and customers receive the best product at the right price. price. right the at product best the receive customers our ensure to collaboratively work to We continue re-opened. we as orders deliver to them with quickly work to us enabling lockdown, during payment full received suppliers our all partnerships, these to commitment our of part As together. grow to continue we as chain supply quality high and resilient efficient, an having of importance the We recognise reviews. Trustpilot positive in reflected been has consideration and care Our This was followed by regular communications to provide reassurance. status. order their on updated and contacted personally were customers our all ensure to lockdown of week first the in tirelessly worked teams Our latest lockdown DIY projects! communicate with other colleagues, sharing their concerns or even their to able were and fingertips their at information latest the had views, their share could they that so forum interactive an created we re-opening, to approach our on opinions colleagues our get to vital was it knew we As developments. latest the on date to up kept was everyone that sure made we conferences, video team regular and emails weekly including channels, during lockdown. Through our increased internal communication important especially was this and success, key our to is community ScS the of part and business the to connected feel people our that Ensuring

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

7

Delivering our Values Inclusive “During lockdown ScS supported me to set up and run an ScS team radio station. I thoroughly enjoyed being able to provide support and entertainment to my colleagues during such a challenging time. With more than 900 people tuning in it was great to stay connected and boost morale! I’m very proud to be a part of the ScS community.”

Paul Hillier Sales Professional at our Plymouth store 8 ScS Group plc Annual Report 2020 right it Get Values our Delivering

STRATEGIC REPORT CORPORATE GOVERNANCE

Doing things right first time FINANCIAL STATEMENTS

We know that at times balancing the challenges of work and home life can be difficult, that’s why our colleague’s mental health and wellbeing is of utmost importance to us. We have teamed up with an external organisation to offer support to our people through a free, confidential employee assistance programme, available 24/7.

To further enhance the support available, we have also trained 32 of our people to become mental health first aiders, and our senior managers have participated in mental heath awareness training, so that if anyone needs extra support they can turn to a trained colleague for help.

Ahead of re-opening our stores and distribution centres, risk assessments were carried out for all of our main operational processes and activities to ensure the safety and wellbeing of our colleagues and customers. Our risk assessments are published on our plc website.

Teams were issued with a ‘Safety First’ booklet which contained details of the new measures which were to be implemented, such as one way 9 systems, deep cleaning procedures and checks to be performed before entering a customer’s home for our distribution crews, flooring surveyors and technicians. COVID-19 specific mandatory training was rolled out across the business and PPE was made available alongside a demonstration video of how to use it effectively.

“Asking for help and offering a helping hand when it’s needed is part of what our ‘get it right’ value is all about. With the psychological impact of COVID-19 leading to elevated levels of stress and anxiety, it was more important than ever for us to focus on mental health and wellbeing.”

Hannah English Engagement and Internal Communications 10 ScS Group plc Annual Report 2020 interaction with others! needed much that and ups catch regular had they that ensure to mile extra video conferencing and other communication channels. Teams went the utilising working, of way new their to adapted quickly people Our lockdown. where possible, to work from home ahead of the government imposed staff, move and COVID-19 the to pandemic respond to quick We were service. consistent and efficient an providing to committed are and roles their embraced has team new The timeframe. awider for available team adedicated from benefit to customers our allows team support experience customer new our of creation The attitude drivenand with awinning Passionate, committed check-out process for customers. information showcasing our products, and increased in functionality the improving navigation and user experience for mobile devices, enhanced made significant improvements to our website, including increasing speed, have experts of team dedicated Our planning. and preparation careful requiring effectively, managed was transition the that vital was it year the launched in July 2020. Given the increased via activity our website during which website new our on hard working been have team e-commerce Our

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Delivering our Values

Hard 11 working

“Working from home was a new concept for a lot of my colleagues and my main focus was to ensure that they had an appropriate workstation that complied with our health and safety guidelines. I performed virtual assessments and offered advice on how they could make their space more suitable.”

Mark Forster Health and Safety Officer 12 ScS Group plc Annual Report 2020 “We are really grateful are really “We for organisations you “Thank so to much for this ScS Loughborough Foodbank like yours stepping at up this time.” Gateshead Foodbank those food in poverty.”support us appreciated to help will and is It much donation. generous very Trusted Values our Delivering

STRATEGIC REPORT CORPORATE GOVERNANCE

Operating with fairness, respect, honesty and integrity FINANCIAL STATEMENTS

As a trusted and responsible employer we take our commitment to our people very seriously and we strive to support and reward our colleagues as best we can. The Board took the decision to top up the basic pay of those furloughed to 100% so that no one was financially impacted during these already challenging times.

With over 230,000 Trustpilot reviews our customers take comfort in the positive experience of others and recognising that they are shopping with a trusted business. Throughout the year we have maintained our ‘Excellent’ Trustpilot rating and continuously monitor our reviews to reward our teams and identify any areas for improvement.

With demand for food bank support being unprecedented during lockdown, ScS supported the Trussell Trust by donating £48,000 to the 13 food banks located closest to each of our 100 stores. We recognise the importance of supporting our local communities and we are proud to have been able to support such a great cause and make a difference.

Trustpilot rating Excellent

ScS donation to food banks closest to our 100 stores £48,000 14 ScS Group plc Annual Report 2020 Our Business Model sales platform. and a rapidly growing Showcasing product Online locations.in prime stores quality High keyOn parks retail team.passionate caring and service delivered by our ‘Excellent’ Trustpilot rated Service brands. and flooring furniture leading with Long-term relationships Brands buying affordable. making interest-free credit Long-term waysEasy to pay for our customers. choice and creating value £5,295, to £299 From of priceRange points Our key ingredients value, and choice quality outstanding for our customers. providing chain, supply stores, efficient team, an modern and by expert an supported of products, quality, range A high value-led market target for our choice and value Creating

sample service. flooring afree offer we home their for flooring right the purchase customers To our ensure products. our of all across credit interest-free offer we flexibility customers To our give quality. and value for demands our from suppliers, ensuring our customers benefit our of key all to are we size ensures Our strong relationships. building years, many for with worked have we whom of most suppliers, UK-based from a small group of specialists, mainly source and suppliers our select We carefully it do we How value. possible best the at products our offer and points key price target Working closely with our suppliers allows us to something for everyone. is There tiling. vinyl luxury and laminate to rugs Our offering flooring ranges from carpets and needs. customers’ our meet to tailored and Our furniture products are made-to-order value. great deliver that points price at all brands across our furniture and ranges, flooring famous and designs of range awide We offer do we What Product

complete orders in the customer’s home. customer’s the in orders complete to surveyors carpet allow to functionality added also We have process. ordering the app, nYwhere, into the business to improve sales store in our integrated fully We have job. agreat doing are we that customers our and teams our reassures rating ‘Excellent’ our and offer, we what improve and monitor we ensure to us allow reviews Trustpilot and products flooring displayed together. in their home, with complimentary furniture products our envisage and stores our browse to customer our allows vision brands’ of ‘home Our it do we How covering for their home. floor of quantity size and correct the ordered have they that assured be can customers flooring so service surveying afree We provide within our large, modern stores. the customer choose the right product for them help to hand on are teams sales dedicated Our house a home. their make to help and roof one under flooring the to opportunity purchase their furniture and customers our offer we stores 100 our Across do we What In-store expertise

STRATEGIC REPORT CORPORATE GOVERNANCE “We have a clear vision to be Britain’s best value sofa and carpet retailer.” Alan Smith Chairman FINANCIAL STATEMENTS

Website Delivery Customer experience 15 What we do What we do What we do Our store network is supported by our new We offer a two-man home delivery and We have a dedicated, central customer mobile and tablet friendly transactional website. installation service for our furniture products, experience team who have the tools, knowledge and a full fitting service for our flooring range. and technology to ensure we can resolve With improved computer generated imagery our customers’ queries quickly. The team (CGI) of our products and a more efficient Our delivery teams provide customers with are available to provide assistance seven checkout process, our website allows an efficient and friendly service, taking pride in days a week. customers the chance to browse our their work and having respect and consideration products at their leisure and convenience. for our customers’ homes. Our team of highly skilled service technicians, and flooring surveyors, are on hand to visit We have introduced an electronic ‘contact us’ Working with our fitting partners our flooring customers’ homes to take care of any issues form to allow our customers to contact us is cut, delivered and fitted to our customers’ arising after delivery or fitting. 24 hours a day, seven days a week, at a time specifications. and location convenient to them. Our dynamic appointment scheduling system allows us to offer the earliest possible appointment to a customer, which can include a same day service.

How we do it How we do it How we do it Our full product portfolio, clear pricing, detailed From our nine distribution centres operating Utilising contact centre technology and a product information and buying guides ensure across the UK, our delivery teams ensure job optimisation solution, our team is able to our customers have a first class experience, that customers receive their furniture in manage customer enquiries and our service whether looking to buy online or simply using a timely manner. technician appointments. These appointments the site to research and view our great products are scheduled to give the shortest possible and offers, prior to visiting a store. Our two-man home delivery operation uses wait times, ensuring that our customers electronic proof of delivery software which benefit from an efficient service. We have introduced web-only products as we integrates with our core system, giving recognise the needs of our online customers our teams real-time visibility and improving Our service technicians benefit from support may differ to those who chose to come in store. query resolution. tools which allows them to electronically submit high quality, media rich reports which means that our aftercare team can respond quickly to their recommendations and we can feedback to our suppliers to ensure product quality continues to improve. 16 ScS Group plc Annual Report 2020 Our Markets Our * source GlobalData (as of 1 Sept 2020) 1Sept of (as GlobalData * source £1,403m Flooring* size: market 2020 Forecast -29.1% £2,462m Furniture* size: market 2020 Forecast -22.1% market uncertain but recovering a in opportunity Potential

will largely reverse in 2021, with the market market the 2021, in with reverse largely will 2020 in 22.1% the decline that forecasting are GlobalData period. EUtransition the of end the and October, of end the at scheme furlough current the of end the COVID-19 pandemic, will become challenging with the developing conditions market forecast and purchases forward brought have customers that predict activities on home improvements. GlobalData leisure other and holidays for earmarked previously was that money spending position, cash-rich amore in lockdown from emerged customers as occurred Pent-up demand stores. of closure the counterbalance to able not was increase this meant web the via transacted is that market the of proportion small relatively and whilst online orders grew significantly, the consumers deferring non-essential purchases with lockdown, national COVID-19 the and by March in interrupted was growth this but that 2020 initially began relatively buoyantly, is view Their 2020. 22.1% in fall afurther by followed be 2019 in will market size the of the in reduction a0.7% suggests GlobalData from market upholstery the of analysis latest The Market commentary furniture markets. and flooring We operate both the in Current UK market UK Current

is forecast to be 5.8% higher than 2019. than higher 5.8% be to forecast is market the 2025, By 2019 market. the below 2% to 2021 recovering with 2020 in market forecasting a 29.1% fall in the floorcoverings are GlobalData purchases. ticket bit making on off hold to customers lead will security job over concerns and scheme furlough the of end on entering installers customer’s homes, the GlobalData highlight that potential restrictions however as with other big-ticket purchases, house, move to people more encouraged also lockdown, and the stamp-duty holiday has of end the since demand in recovery slight a been has There growth. stunted already had years two past the for market housing weak the and online, transfer not did flooring essential purchases. Unlike other sectors, shoppers to be more considered with non- and installation of and flooring, encouraged that lockdown prevented the measurements within retail in 2020. Their commentary outlines sub-sectors hit hardest the of one be 2019, will it in 0.9% of growth following that suggest market GlobalData analysis on the floorcoverings higher than 2019. 5.6% be to forecast is market the 2019. 2025, By to compared when 2% down be to forecasted * GFK Consumer Confidence Index, August 2020 although this may be temporary in nature. market, the to recovery arapid encouraged have towards more home working, initially appear to re-assess their housing needs, including a shift people as shifts behavioural wider as well as freeze, duty stamp a temporary moves, house prior year. Post-lockdown, pent-up demand for the in period same the to compared when lower 25.1% are 2020 August to transactions total housing market entirely during mid-2020, and the COVID-19 of halted impact The 2016 peak. the than lower 2019 for 4.5% transactions total year, with each fall to continued have number since 2007), housing transactions customers. Since a peak in 2016 (the highest our of many for furniture and flooring new of purchase the triggers move A house Housing market increased spending on home furnishings. for allowed has 2020, in holidays on spend to spending attitude, where a reduction in ability consumer in achange by balanced be to appears markets our on impact the that suggests August 2019. Recent post-lockdown trading -14 from down 2020, in -27 to August in fallen in the GfK Consumer Confidence Index has consumers. Consumer confidence as reported for concern biggest the was employment security, job of years on affect potential pandemic’s the with that, reported GfK* worldwide. COVID-19 as impacted lows has consumer confidence, which has reached new by affected heavily usually are sales ticket Big Consumer confidence key factors: similar by influenced heavily are markets core our of Both drivers Key

STRATEGIC REPORT CORPORATE GOVERNANCE Consumer confidence Housing market Availability of consumer credit -24.8 -25.1% +0.7%

2015 2015 +0.3% 2015

2016 2016 +0.5% 2016 FINANCIAL STATEMENTS

2017 2017 -0.8% 2017

2018 2018 -2.8% 2018

2019 2019 -1.1% 2019

YTD YTD -25.1% YTD AUG AUG JUL 2020 2020 2020 GfK Consumer Confidence Index – Average of HMRC UK Property Transaction statistics – Bank of England – Average 12 month growth rate individual scores for each year. Research carried Total of number of residential property transactions for the calendar year of total (excluding the Student out by GfK on behalf of the European Commission. completions with a value over £40,000 within the UK, Loans Company) sterling net consumer credit lending seasonally adjusted. to individuals (in percent), seasonally adjusted.

Availability of consumer credit With nearly half of our customers choosing to 2020 upholstery market share* 2020 floor coverings market share* utilise our finance options to pay for their products, the availability of consumer credit helps facilitate 17 sales, and provide opportunities for upselling. Early 2020 continued to show growth of net consumer credit lending, albeit slower than that seen in recent years. However, availability is now reported 9.8% 2.8% as beginning to reduce from May 2020 onwards. ScS ScS Other Other Our place in the market 2019 market share: 9.4% 2019 market share: 2.5% Increasing market share Although the market remains volatile, our strong Retailer 2019 (%) 2020e (%) Retailer 2019 (%) 2020e (%) re-opening performance, together with the DFS 24.8 28.1 Carpetright 15.6 16.0 loss of some competitors during the lockdown ScS 9.4 9.8 B&Q 6.2 6.0 period suggests we continue to grow market Sofology 7.5 8.0 Tapi 5.0 5.8 share. GlobalData estimate that our upholstery Furniture Village 5.6 6.2 Wickes 4.9 4.5 market share has increased from 7.9% in 2013 IKEA 5.3 5.6 Dunelm 3.3 4.0 to 9.8%, and our flooring market share increased Next 3.9 4.0 United Carpets 3.3 3.7 from 1.6% to 2.8%, over the same time frame. Made.com 2.0 3.1 IKEA 2.8 3.5 John Lewis 2.3 2.1 Amazon 1.9 3.1 Value retailer Argos 1.8 2.0 John Lewis 3.4 3.0 We recognise what we do best, and believe our customers recognise this too. Our continued Wayfair 1.0 1.7 ScS 2.5 2.8 focus on our key strengths ensures we have * Market share data provided by GlobalData a strong and growing reputation for delivering consistently great value, and the continued growth in our market share in upholstery and floor coverings demonstrates this. Our refreshed strategy will continue to support this. Our advantages in the market Opportunities for further growth Our continued aim to provide a value proposition at a range of price points allows us to offer best-in-class The online market has grown significantly through prices to customers searching for the best deal. 2020, both as a result of the closure of physical Our product offering has continued to evolve in line with our strategy to broaden our appeal by offering stores, and through the desire of people to shop a wider range of brands – including third-party brands – as well as flooring, dining and occasional ranges. from the safety of their own homes. Our new Flooring now represents 11.4% of total gross sales. website and the continued improvements planned Our partnerships with multiple finance houses ensure competitive tension and drive the best cost prices should allow us to continue the significant growth and levels of acceptance for our finance offerings. we have experienced already. As the economic recovery begins, our focus is to continue to provide Our strategy targets the key areas we believe will improve our position in the industry in the coming years. value, quality and choice for our customers and There is still considerable room to grow our market share in both furniture and flooring. appeal strongly to a broad demographic of aspiring homemakers, families and retired couples. 18 ScS Group plc Annual Report 2020 Chairman’s Letter unprecedented time. this in than more important of teams been abusiness in neverand strength the has values, our personify who ateam tofortunate chair been predicted. very Iam a year have not could that to responded has business at howproud well the very I write report this andprofitability resilience, of building the Group’s Following of years anumber 44.6% sales gross %of margin Gross 2.6p Underlying EPS £268.1m Gross sales increased our visibility across the business, Ihave and members board year, fellow my the of our teams and customers. Throughout above all prioritising the safety and wellbeing and consideration, into taken were concerns all ensuring people, our from effort a collaborative andplanning preparation for re-opening was across the UK during this challenging time. The banks food 100 to support provide to able were time and in full. Additionally, I was delighted we on partners supply our all pay to continued we that pay, and full received furloughed were our commitment to ensuring colleagues who colleagues, and customers our of all with communication of levels increased our close, to stores and distribution centres were required our when lockdown into reaction quick our of detailfurther throughout the report, I am proud in this into go we Whilst values. RIGHT our by living to committed remained have people our Despite such a challenging year, the Group and Overview this report. impact of the pandemic is explained throughout the to response year. Our the of half second COVID-19 of the in outbreak global the of effects the by dominated naturally are results progress was made throughout the year, our which ended 25 July 2020 and, whilst strategic year, 2019/20 our financial covers report This Dear Shareholder, -0.4% -91.4% -19.5%

STRATEGIC REPORT CORPORATE GOVERNANCE visiting stores upon re-opening, contributing to the weekly internal communications and leading companywide video conference calls. Our culture Financially, our efforts in previous years to build a strong and resilient business have been key Listening & improving to ensuring our continued success. As would be expected with such a tactile ‘big-ticket’ As a Board we are committed to listening to our employees. We received many

purchase, the temporary closure of our stores responses to the Group’s annual employee survey and are committed to: FINANCIAL STATEMENTS led to a material reduction in order intake and, whilst online bookings increased significantly, –– Greater openness to change and a willingness to challenge the status quo; this could not offset the overall decline. We –– Improved clarity on our key strategic objectives and prioritisation; welcomed the government’s swift action in –– Enhanced communication to all levels of the business; and suspending business rates for a year and the support for continued employment through –– Making ScS a great place to work. the job retention scheme. Our flexible cost base enabled the Group to minimise cash outflow over this critical time.

Our extensive planning, coupled with the way we communicated and looked after our customers and colleagues during lockdown, has played a key part in our performance since re-opening in late May, with order intake growth of 92.2% in the 9 weeks ending 25 July 2020. To finish the year with order intake down only 5.9%, despite our stores being closed for two months, is an outstanding result. 19 The year also saw the Group reach an important milestone with regards to its ownership structure. On 11 February, Parlour Products Holdings (LUX) S.A.R.L (‘Parlour’) sold its entire stake in the Group. Parlour owned the business prior to the flotation in January 2015 and had retained 40.25% of the shareholding as at the start of the year. As part of this event, we were pleased to return value to our shareholders by acquiring and subsequently cancelling 2 million shares.

Dividends Despite the strength of our balance sheet, the Board did not feel it was right to pay an interim dividend at a time when the economy was I have been delighted with the ongoing support re-opening and we remain focused on our facing such uncertainty and that the Group from my board colleagues in these challenging vision to become Britain’s best value sofa and was receiving government support. It seemed times. As might be expected, the board has carpet retailer. The Board would like to thank inappropriate to use the cash for anything met more frequently both as a board and with our customers for their continued support and other than protecting the financial strength colleagues in the business to provide increased our colleagues for their ongoing dedication and and resilience of the business at such a crucial guidance, support and to share their knowledge professionalism. time. The Board recognises the importance and experience. of income to the Group’s shareholders and will ScS is a resilient business, with a strong balance continue to assess when it is sensible to Summary sheet and a flexible cost base, and we are well re-commence dividend payments. Clearly, the year is not what we had planned or positioned to navigate the challenges ahead and hoped for. Nevertheless, the performance and maximise opportunities as and when they arise. Board reaction of the team gives me every confidence During the year, Paul Daccus, who was Parlour’s that the business has all the attributes to Alan Smith representative on the Board, resigned following continue to deliver in these uncertain times. Chairman their sale of its stake in the Group. I strongly believe that if the COVID-19 outbreak 1 October 2020 had not interrupted its progress, the Group would As previously announced, David Knight notified have been delivering results showing an increase the Board of his intention to retire as Group CEO in profits and resilience for the fifth year in a row. and has agreed he will not retire before the end of July 2021. The search for David’s replacement Whilst it is too early to provide clarity on the has commenced and we will provide a further outlook for the weeks and months ahead, update when appropriate. we are encouraged with the trading seen since 20 ScS Group plc Annual Report 2020 CEO’s Review challenges of COVID-19. the manage confidently to able respond tobeen and has that business resilient few years we have a built over help their with past the team of colleagues, and ScS. my in other 32 years with likeThis year been no has I am very proud of my of my proud very Iam -5.9% intake Order £19.1m Online sales £7.2m Underlying EBITDA (pre IFRS 16) outstanding value, quality and choice. an excellent customer experience with purpose remains unchanged, to provide our and strongly, positioned is Group the impending end of the Brexit transition period, COVID-19, of the and impact further the to regards in both economy, UK wider the in Although there remains continued uncertainty CEO. as year final my Ibegin as particularly team, dedicated and passionate this of part be to me for aprivilege is It colleagues. customers, local communities and to their our to commitment and care of level inspiring an shown have they how and ways, new in operating to quickly adapt to needed change the embraced have people our how see to humbling During these unprecedented times, it’s been business. our of success long-term the protect to and customers our to service quality a high support our colleagues, to continue to provide Throughout the year our priorities have been to Overview -5.9% +13.6% -63.5%

STRATEGIC REPORT CORPORATE GOVERNANCE Results Year in review Attracting, recruiting, developing and retaining The two-month lockdown period from late Autumn the right people is key to our success. The retail March to late May meant deliveries to customers Early in the year, our nYwhere in-store sales regional and branch manager roles are critical were temporarily paused. Due to this, the Group app was fully integrated into the business to as they lead the local store teams. Further saw a £65.2m (19.5%) decrease in gross sales in facilitate a streamlined sales ordering process. developing these teams was identified as a great the year to £268.1m (2019: £333.3m). In-store nYwhere allows our salespeople to complete opportunity for investment and early in the year furniture sales decreased £55.2m (20.1%), in- an order from a tablet-friendly, intuitive and we enlisted the help of business coaches and store flooring sales decreased £12.3m (29.2%), easy to navigate tile-based interface which links former Olympians Steve Backley and Roger and online sales increased £2.3m (13.6%). directly to our core system. Our customers have Black to deliver their ‘Olympic Experience’ FINANCIAL STATEMENTS benefited from a simple step-by-step process, training programme. We remain focused on The year started with a challenging autumn increased speed and order accuracy levels, investing in the development and wellbeing trading period, impacted by the ongoing and the convenience of receiving their order of our people, and helping our teams achieve low consumer confidence levels due to the documents electronically. their potential. uncertainty arising from Brexit and the political landscape. Following a level of Brexit clarity A transformative change for the business Winter and the general election in December 2019, then followed, with the centralisation of The centralisation of administrative tasks we enjoyed a successful winter sales period, administration from our individual stores to was complete in late November, with the new returning to growth. This momentum increased a dedicated central team. This step naturally processes and procedures rolled out across in February and March and the Group was on followed the introduction of nYwhere, as the the whole network and the new customer track to deliver another year of growth before app removed the need for orders to be manually experience team now established. This meant the UK went into lockdown, forcing temporary input into our system in-store. A specialist that throughout the key winter sales period store closures and a suspension of deliveries. central customer experience team was created our in-store teams were able to benefit from Encouragingly, since re-opening our stores at and customers now benefit from a larger team the use of the nYwhere app, focusing on the end of May, the demand for our product has available for a wider timeframe, providing a more maximising sales in-store and allowing the exceeded our expectations and we were very consistent service. On top of the efficiencies new central customer experience team happy to be able to welcome our customers achieved, taking all support requests in to one to deal with customer queries. back into our stores for a safe shopping team has enabled the business to identify experience. Our delivery teams have also been areas where the customer journey can be A review of the in-store space allocation and merchandising was also completed prior to the working at full capacity to deliver orders placed further improved, which was more difficult 21 before and during lockdown. when support was split across the UK in 100 winter sales period. This identified opportunities stores. This was a big change for the Group, to increase the product range in a number of Gross profit decreased to £119.6m (2019: as a number of the local administrators had our stores and the introduction of our ‘home £149.9m), with the gross margin percentage been in the business for some time and we of brands’ vision, resulting in a revised and falling slightly to 44.6% (2019: 45.0%). Pre-IFRS appreciate this was a significant period of improved customer journey in our stores, 16 underlying EBITDA decreased to £7.2m change for our store teams. creating an increased concession feel across (2019: £19.7m) and pre-IFRS 16 underlying profit our key external and internal brand areas. before tax decreased to £1.8m (2019: £14.6m). This review led to greater consistency across our stores, including product placement, visual merchandising and range, with complimentary furniture and flooring products displayed Compared to the prior year our bookings performance was as follows: together. Throughout the year, we were able to Order intake vs introduce and showcase new brands, including Period Weeks Date prior year our ‘Inspire’ range followed by our ‘Living’ and Pre-lockdown 1 to 34 28 July 2019 to 21 March 2020 (4.2%) ‘Signature’ ranges. We continue to review our product offerings to meet our customer’s needs. Lockdown 35 to 43 22 March to 23 May 2020 (92.5%) Post-lockdown 44 to 52 24 May to 25 July 2020 92.2% Customer service remains a key focus area Full year 1 to 52 28 July 2019 to 25 July 2020 (5.9%)* and our Trustpilot rating is testament to the continued work and efforts of our people alongside our continued investment in * like-for-like order intake declined 6.0%. technology and processes to improve the customer journey. We were very proud to reach the 200,000 reviews milestone on Trustpilot and maintain our ‘Excellent’ rating.

Investment in technology continued with the roll-out of Microsoft Power BI across our retail management teams. This mobile optimised tool allows instant drill down on performance from the Group view to region, store, sales person and order level detail by day, week, period and year. Managers are presented with a daily dashboard with KPIs highlighting key areas for opportunity. 22 ScS Group plc Annual Report 2020 CEO’s Review continued – – – – to protect the business, including: implemented were initiatives saving cost of reforecasting and scenario modelling, a series constant with together and, business the for Cash management was an immediate priority station. radio team ScS an a furloughed colleague voluntarily set up and run had even and forum, discussion a companywide up set emails, communication weekly of use our increased we Internally, reassurance. them offer latest information regarding their order and had placed orders and provide them with the who customers 25,000 over contact directly to able were teams dedicated our lockdown, of week first the Within informed. kept were colleagues and customers our all ensure to were vital during this lockdown period in order Increased internal and external communications working. of ways new to adjusted all we as work support the business in recognition of their hard to continue to needed were who those to given challenging time. Additional holiday was also this during pay full received colleagues our all ensure to decision the took and employees our to commitment our demonstrate to continued and distribution centres were closed. We into furlough during the period when our stores placed were employees 1,400 over peak, At the being our main focus. customers and people our of safety the with home, at remain to asked were colleagues centres were temporarily closed and our operations across our stores and distribution and lockdown measures were imposed. All retailers ‘non-essential’ all of closure the ordered government UK the March 23 on action, initial from home where possible. Following that head office-based support colleagues to work our for management by made was decision aproactive developed, situation the As (RCF). facility credit revolving its from £12m down drew Group the 17 2020, on March order intake, and as a precautionary measure, and footfall reduced see to began we UK, the to and world the across spread outbreak the As operations. their reduce to forced were COVID-19 of they and outbreak initial the by impeded were suppliers Far East year, our the of half second the in start apromising After Spring team. telesales our of rates conversion and efficiencies which optimises sales campaigns and increases led to the implementation of technology, further was also restructured and strengthened, which e-commerce capability, our online sales team In line with our ongoing investment in our – – – – our landlords. Secured rent deferral agreements with and date; to paid instalments tax corporation of Recovery Cancellation of the interim dividend; spend and bonuses; Reductions in advertising costs, capital

removing the need for a customer to queue. queue. to acustomer for need the removing salesperson, adedicated with slot time specific a customers allow to system appointment an introduced also we store in people of number the and flow customer To manage help bacterial wipes. anti- and gloves disposable visors, facemasks, personal protective equipment (PPE) including have been supplied with the necessary new procedures in action. All of our colleagues delivery safety measures alongside videos of the our website to include details of our in-store and updated We also homes. customers’ at arriving before steps vigorous take now crews delivery and working of ways new implemented centres protocols. Likewise, the teams at our distribution stations located throughout and deep cleaning sanitiser hand system, way one marked a clearly customer experience. Our stores introduced social distancing without compromising the implement to us allowed stores our of footage square and layout The website. corporate our on published are assessments These detailed risk assessments prior to opening. re-commenced with all locations out carrying teams received training before business our of All plan. re-start comprehensive our implemented we as us to paramount was and distribution teams and our customers retail our of safety and health the Ensuring our distribution activities gradually resumed. 19 May from Similarly, guidance. legal and their doors on 22 June in line with government opened stores Welsh our finally and 5June on stores Scottish by followed stores, English our with May 23 on began re-opening phased Our Summer – of: form the in government The business also received support from the – colleagues and customers. our of safety the on being focus primary the with centres, distribution and stores our of re-opening the for preparation in completed of our new website. Detailed planning was projects including the continued development focused heavily on business improvement During the lockdown, the team still working 78%. up were orders online May website increased significantly. Over April and shopping habits as orders placed through our customer in ashift saw stores our of closure The arose. need the if line funding this to access have to continue to Group the allowing on our existing £12m revolving credit facility bank our with covenants the re-negotiated business the period, same the May. In and April in costs operating cash monthly our reduce to us enabled actions flow cash and cost These – – – – (£6.1m); VAT, of Deferral PAYE and NI payments Retail business rates holiday (£3.4m); and Furlough scheme (£5.0m).

our people post-lockdown. become mental health aiders first to support to employees 30 trained have we mind in this to re-adjust back into their work routines. With and working of ways new to adapt to had have truly unprecedented times and our colleagues are these that appreciate We also presence. reinforced the importance of a strong online and products web-only introduce us seen has the increased through activity the website example, For operations. day-to-day our in and habits work culture, of terms in acompany as things do we how consider to and back a step take to us allowed has COVID-19The outbreak implement on our new mobile optimised site. can we that enhancements further to forward look and site new the launch to excited were we customers, our for ever than role important amore and sales, overall our of proportion With online sales providing an ever increasing displays. in-store on and online, nYwhere app, our across use allowing captured, are colours weimagery do in-house, ensuring all models and generated computer of level the increased significantly also We have devices. mobile for navigation clearer and range) exclusive online showcasing of our products (including our new more engaging checkout process, increased the customer’s online journey by providing a online sales platform which aims to improve anew in significantly invested have we year demands of our customers, throughout the the meeting to respond to continue we As light of the challenging trading conditions. in changes landscape retail the and sector our as particularly share, market our grow to base this use to able being in confident We are re-open. fully to longer took who competitors, our of we appeared to gain an advantage against some and so, do to permission given were we when impact, with and quickly, re-open to us enabled on brand awareness throughout lockdown, also planning, coupled with commitment to spend periods in their homes. Our thorough advance to spend on furnishings following extended demand, and a willingness from our customers pent-up from benefited we as 2020, July 25 ending weeks nine the in 92.2% of growth intake experienced very strong trading with order Following the stores re-opening, we through our Trustpilot reviews. seen be can as customers, our by received positively very been have taken have we steps The conversion. in-store our on benefits The appointment system also had noticeable

STRATEGIC REPORT CORPORATE GOVERNANCE Current trading and outlook Despite the uncertainty, our value-led Trading since the start of the new financial year proposition is underpinned by a strong balance has remained strong, with like-for-like order sheet, and our clear offering has continued intake growth of 45.8% for the nine weeks to prove successful. We are confident it will to 26 September 2020. We believe current continue to appeal to our customers who want performance has continued to benefit from to buy great products at the lowest possible price. pent-up demand and an increased investment by UK consumers in their homes. This growth David Knight has significantly exceeded our expectations Chief Executive Officer FINANCIAL STATEMENTS and the Board continues to be encouraged 1 October 2020 by recent trading.

We are delighted with the strong trading since the start of the new financial year. However, we are now entering our key autumn trading period and it remains difficult to predict the potential impact of the increased economic uncertainty, including the cessation of the government’s Coronavirus Job Retention Scheme (CJRS) at the end of October.

Delivering value for over 100 years

1894 2010 2015 2019 23 We commenced trading in Expanded our range to Listed on the London Stock Launched our nYwhere app Sunderland as a family-owned include occasional tables Exchange in January Refit of flooring department general home furnishings and dining furniture Opened three new ScS stores in in every store store, under the name G Plan was added to our Abbotsinch, Slough and Croydon Built our own in-house ‘Suite Centre Sunderland’ third-party brand range photography studio Our first own-brand, SiSi Italia, Exited House of Fraser was introduced 2016 1980 concessions 5-star ‘Excellent’ rating achieved We grew to operate from eight on independent customer review stores in the North East of 2011 site Trustpilot England under the ScS brand Began to offer interest-free credit One new store opened in 2020 on all products in every store Bromborough New store opened in Kirkcaldy 1993 Reached 200,000 reviews Following a management buyout, 2012 2017 on Trustpilot, one of only four we began to expand outside companies in the UK to reach Expanded to add flooring Four new store openings: of the North East of England, this milestone to the ScS range Aberdeen, Thanet, Edinburgh opening in regional clusters Created a specialist centralised (Straiton) and Plymouth across the UK Re-branded as ‘ScS, the Sofa customer experience team Carpet Specialist’ 5-star Trustpilot rating Introduced new brands as part maintained and overall of our ‘home of brands’ vision: 2007 score improved ‘Signature’, ‘Inspire’ and ‘Living’ Our store expansion programme 2013 Tetrad became the latest (all ScS brands) saw the store estate grow to 95 We added Endurance, our second brand to be added to the range Effective handling of the stores nationwide own-brand, to the range challenges of COVID-19 2018 Launched our new website 2009 2014 One new store opening in Launched a transactional Launched our new website Chelmsford online website to provide enhanced online First furniture retailer to reach shopping experience La-Z-Boy, the first third-party 100,000 Trustpilot reviews – brand, was added to the ScS House of Fraser with a 5-star ‘Excellent’ rating product range concessions launched First UK company to be accredited with FIRA certified compliance Interiors Monthly, Flooring Retailer of the Year 24 ScS Group plc Annual Report 2020 03. 03. 02. 01. Strategy Our our customersour to love home. their retailer, carpet sofa and value best it easy for making us toto achieve enable vision: our Britain’s Becoming long-term and goals short defined with ofeach them seven around is strategy structured keyOur priorities, Focusing seven on priorities an outstanding team outstanding an Building and inspiring By sourcing the best value products. value best the sourcing By How offers something for everyone. brands famous and in-house core, of mix Our points. price of arange at money for value offer that products of selection a wide from choose to able are customers our that ensure to We want strategy product Optimising our By relentless focus on customer experience. How to our purpose, values and critical to our success. central is experience buying excellent an customers our Giving from. buy they who choose to freedom greater have and demanding more informed, better are today Consumers customer experience exceptional an Delivering sector. our in team best the having By How for progression and development. the contribution individuals make and creating opportunities recognising work, to place agreat creating on focused We are experience. customer excellent an deliver us help they ensure to aim we business, our of heart the at people our putting By

– – – – – – – – – – – – – – – – – – – we’ve done What – to do we’re going What – we’ve done What – to do we’re going What – we’ve done What – to do we’re going What – – – – – – – – – – – – – – – – – – – – – – – –

across our retail and distribution network support greater provide to environment working flexible amore to Move updates news weekly and video media, social of Enhanced employee communications across the network, including the use Continued focus on product value, including promotions and enhancements More pro-active customer communications at ease whilst feel shopping customer the helping stores, our across distancing social Implemented business the of areas different the from feedback tailored and frequent more getting of aim the with surveys, employee to approach our Change implemented changes and survey employee annual our in given feedback the to Listened Consideration of products with shorter lead times lead shorter with products of Consideration of online shoppers Introduced web exclusive products, recognising the different requirements Extending customer support hours us contact to choose they how in Introduced a customer enquiry web portal,allowing customers greater flexibility Re-define and re-launch employee engagement and communication activities partners business field-based additional of recruitment the by teams HR and development and learning our Strengthened customer expectations customer exceed to continue we ensure to quality and capacity supplier of Review newest brands, ‘Inspire’, ‘Signature’ and ‘Living’ Launched new products to increase our product offering and showcased our Targeting product further quality enhancements and increasing customer service Centralised and strengthened customer support, extending support hours business the across plans induction Improve management teams providing greater support and guidance to our branch and regional Implement a more structured retail management development programme, tables) to maximise market share opportunities share market maximise to tables) Product range review (of both upholstered furniture and dining and occasional and allowing consistency across the network Rolled out our ‘home of brands’ vision, creating branded ‘mini-showrooms’ journey customer the in improvement for areas identify to business the allowed has support customer of centralisation The to maintain and improve our TrustScore feedback customer of use our increased and Trustpilot on focus to Continued Continue the increased investment in the development of managers and teams

STRATEGIC REPORT CORPORATE GOVERNANCE

What we’ve done Driving sales densities –– Reviewed in-store layouts and model ranges as part of our ‘home of brands’ roll out 04. in our ScS network –– Implemented individual branch business plans (supported by Power BI analytics) to identify and deliver greater returns In a challenging marketplace where competition between –– Launched new training aids for our sales teams, giving them the latest retailers is tougher than ever, we will strive to create a shopping product information to increase their knowledge and confidence experience which ensures our customers feel confident in –– Introduced store appointments to enhance customer service and increase choosing to purchase with us. conversion levels FINANCIAL STATEMENTS How What we’re going to do By having modern stores in great locations. –– Increase in store visualisation with the implementation of new point of sale material and the increased use of in store media –– Removal of redundant store office space to allow increased range size in all stores –– Enhance the performance management framework to help support staff development –– Trial the use of technology in smaller footprint stores to allow customers to see the full range

What we’ve done Creating a market-leading –– Launched a new ‘mobile first’ website –– Increased product visualisation by utilising our in-house photography studio 05. website and increasing and CGI image experts –– Implemented new campaign management into our telesales team, optimising digital awareness conversion and efficiencies Continued success will increase website new visitor count, online What we’re going to do sales, and improve the quality of store footfall, with consumers –– Further enhance product visualisation tools, including 360° image technology increasingly using websites to research products prior to making –– Improve the online customer journey by streamlining the finance journey a purchase. Consumers are also becoming more comfortable –– Increase online integration to core systems to improve productivity and time buying ‘big ticket’ items online. spent on value add activities How 25 By providing an excellent omnichannel offering.

What we’ve done Accelerating our –– Continued increase in our online sample service –– Increased our flooring specific training for our sales teams to aid product 06. flooring growth knowledge and conversion –– Worked with our suppliers to improve service levels and product offerings With a range that rivals our largest flooring competitors, together with our recognised brand and excellent customer What we’re going to do service, we have a great platform to continue to take –– Enhance product range, introducing a greater range of carpets and other market share. flooring products –– Increase promotional activity in the flooring range How –– Streamline and improve the customer journey, including process and By having a market-leading flooring offering. technology changes

What we’ve done Improving our –– Implementation of Power BI reporting to allow dynamic analysis of critical KPIs across our retail network 07. profitability –– Full tender programme for areas of non-product spend –– Improved management focus, including better reporting, has led to We continue to focus on increasing the Group’s profits, margins a reduction in stock held across the business and resilience, whilst maintaining the flexible cost base. What we’re going to do How –– Further technology enhancements to increase business efficiency By running a lean and efficient business model. –– Implementation of changes to the warranty product in line with FCA guidelines –– Roll out of Power BI across other parts of the business 26 ScS Group plc Annual Report 2020 operations only. continuing include to restated been have KPIs KPIs is contained within the review. financial All our strategic priorities. Commentary on these to links KPI each how as well as below, detailed is years three last the over performance The of definition these KPIs and our Board. the by basis relevant measures monitored on an ongoing most the are summary this in out set KPIs The ongoing performance of the business over time. are making with our strategy, and to monitor the fundamental to understanding the progress we are (KPIs) indicators Key performance Overview Key Indicators Performance to Group’s the future success The Group’s strategy key remains 1 23456 priorities to strategic Link telesales. and website online our to attributable above, defined as figure sales gross the of portion the is growth sales Online measure we What online. transact to wanting customers of share its maximise to needs Group The it’s important Why £19.1m Online sales 1 234567 priorities to strategic Link stores. our of all across and VAT, online both excluding total of all furniture and delivered flooring sales made, combined the is and accounts, of statement primary our from directly taken ameasure is sales Gross measure we What creating opportunities. and share market increasing success, long-term our to key is sales delivered in growth Sustainable it’s important Why £268.1m sales gross Total year-on-year KPIsFinancial 2 2 2 2 2 2 0 0 0 0 0 0 1 1 1 1 20 20 9 8 9 8 7

-6.0% Like-for-like order intake growth 1 23 priorities to strategic Link 44.6% sales gross %of margin Gross 1 234567 priorities to strategic Link future delivered sales performance. to as aview gives also growth order times, lead to Due year provides a guide to underlying store performance. year-on- perform stores same the how understanding Whilst overall delivered sales growth is important, it’s important Why excluding VAT, as a proportion of total gross sales. gross total of VAT, aproportion as excluding product, of sale from made margin total the is and directly from our statement primary of accounts, taken ameasure is sales gross %of margin Gross measure we What margin. gross the growing or maintaining by supported is growth sales that ensure must Group the To profitably, grow it’s important Why stores. our of all across and VAT, online both including booked, orders flooring and furniture all of total acombined is value Order stores. closed and new excludes therefore It trading performance from comparable stores. year-on-year compares growth order Like-for-like measure we What 2 2 2 2 2 2 0 0 0 0 0 0 1 1 1 1 20 20 9 8 9 8 4567

STRATEGIC REPORT CORPORATE GOVERNANCE

Non-Financial KPIs “This year our KPIs reflect the significant impact FINANCIAL STATEMENTS

Underlying EBITDA (pre IFRS 16) Sales density per square foot COVID-19 has had on the business, and are £7.2m £184 not a true measure of

2018 2018 the Group’s ability to deliver its strategy. The 2019 2019 Board has outlined what 2020 2020 we have done, and what we’re going to do, in the Why it’s important Why it’s important EBITDA is a good indicator of the cash generation For our business to grow without increasing the store Our Strategy section on capability and direct profitability of the business. estate, we must generate increasing revenues in the trading space we currently occupy. pages 24 and 25 and is What we measure EBITDA is earnings before interest, tax, depreciation What we measure comfortable the current and amortisation, as well as any exceptional Sales density per square foot takes total gross sales 27 expenditure. We explain how this reconciles made, excluding VAT, divided by the trading space strategy remains key to profit before tax in the Financial Review. available across our store network. to the Group’s future success.”

David Knight Link to strategic priorities Link to strategic priorities CEO 1 2 3 4 5 6 7 1 2 3 4 5 6 7

Underlying Earnings per share (EPS) Trustpilot customer satisfaction 2.6p 4.7

2018 p 2018

2019 p 2019

2020 p 2020

Why it’s important Why it’s important EPS is key to the business to understand the return Customers want confidence that their retailer being generated from profits to our shareholders. of choice can deliver on their promises. We focus on our TrustScore to ensure we maintain our What we measure ‘Excellent’ rating. EPS is calculated by dividing profit attributable to shareholders by the average number of outstanding What we measure shares. The underlying measure excludes any Our TrustScore, marked out of 5, is a measure exceptional items arising in the year. provided by Trustpilot, an independent review platform used by our customers which asks them to rate our customer service. Link to strategic priorities Link to strategic priorities 1 2 3 4 5 6 7 1 2 3 4 5 6 7 28 ScS Group plc Annual Report 2020 Financial Review year ending 31year ending 2021. July order book for the financial opening resulted alarger in intake order recovery has The strong post-lockdown profits. and sales on impact to amaterial deliveries had pandemic. by COVID-19impacted the year have been significantly the for results The financial This disruption disruption This £8.4m to COVID-19 response Government support provided in £119.6m profit Gross -20.2% £82.3m Cash +42.7%

STRATEGIC REPORT CORPORATE GOVERNANCE Year ended Year ended Year ended 25 July 2020 25 July 2020 27 July 2019 (Post-IFRS 16) (Pre-IFRS 16) (IAS 17) £m £m £m Gross sales 268.1 268.1 333.3 Revenue 255.5 255.5 317.4 Gross profit 119.6 119.6 149.9 Distribution costs (17.0) (17.4) (17.3) Administration expenses before exceptionals and government support (106.3) (108.9) (118.3) FINANCIAL STATEMENTS Business rates relief 3.4 3.4 – Coronavirus Job Retention Scheme (CJRS) 5.0 5.0 – Total operating expenses (114.9) (117.9) (135.6) Underlying operating profit 4.7 1.7 14.3 Exceptional items (4.0) (3.2) (0.3) Operating profit 0.7 (1.5) 14.0 Net finance (expense)/income (3.8) 0.1 0.3 (Loss)/profit before tax (3.1) (1.4) 14.3 Tax 0.9 - (2.9) (Loss)/profit after tax (2.2) (1.4) 11.4 Underlying earnings per share 2.6p 4.3p 30.3p

Underlying EBITDA from continuing operations 33.0 7.2 19.7

The financial statements for the year have been prepared under IFRS 16 on a modified retrospective basis. To aid comparability with the prior year, the table above shows the current year on both a post and pre-IFRS 16 basis. 29

Underlying EBITDA from continuing operations An analysis of underlying EBITDA is as follows:

Year ended Year ended Year ended 25 July 2020 25 July 2020 27 July 2019 (Post-IFRS 16) (Pre-IFRS 16) (IAS 17) £m £m £m Underlying operating profit from continuing operations before government support (3.7) (6.7) 14.3 Government support 8.4 8.4 – Underlying operating profit 4.7 1.7 14.3 Depreciation and amortisation 28.3 5.5 5.4 Underlying EBITDA from continuing operations 33.0 7.2 19.7 Exceptional costs (4.0) (3.2) (0.3) EBITDA from continuing operations 29.0 4.0 19.4

Impact of IFRS 16 on the are delivered, hence this disruption to deliveries Revenue, which represents gross sales less financial statements had a material impact on sales and profits. charges relating to interest-free credit sales (see The following financial information and The strong post-lockdown order intake recovery note 3 – Segment information), also decreased commentary, unless otherwise stated, have has resulted in a larger opening order book for by 19.5% to £255.5m (2019: £317.4m). This is been presented on a consistent accounting the financial year ending 31 July 2021. again reflective of the period of closure of our basis and do not reflect the impact of IFRS 16. store and distribution network in the second half The impact of the new standard on the Group Gross sales and revenue of the year. financial statements is shown in note 2. Gross sales decreased by £65.2m (19.5%) to £268.1m (2019: £333.3m) and is reflective of the Gross profit Overview period of closure of our store and distribution Gross margin (gross profit as a percentage of The financial results for the year have been network following the government’s COVID-19 gross sales) decreased to 44.6% (2019: 45.0%). significantly impacted by the COVID-19 response. The decrease is attributable to: The decrease of 37 basis points is largely due to pandemic and the related national lockdown –– A decrease in furniture sales in stores of the increasingly promotional pricing and value from late March to late May. Whilst we were 20.1% to £219.0m (2019: £274.2m); offers which we feel are more important than pleased with the post-lockdown order intake –– A decrease in flooring sales in stores of ever, as consumers continue to seek value. recovery, which meant order intake finished the 29.2% to £30.0m (2019: £42.3m); and The 44.6% gross margin achieved in the current year only 5.9% below that seen in the previous –– An increase in online sales of 13.6% to year is in line with levels achieved by the business financial year, the two-month national lockdown £19.1m (2019: £16.8m). in the past few years. The lower volume resulted in deliveries to customers being year-on-year resulted in a decrease in gross temporarily suspended. Gross sales, revenue profit of £30.3m (20.2%). and related profit is not recognised until orders 30 ScS Group plc Annual Report 2020 Financial Review order growth. the significant level of post-lockdown sales This increased investment helped achieve historically marketing spend was at a minimum. throughout June and July, a period in which re-opening launch campaign which ran levels. Post-lockdown, we invested in a strong brand awareness by increasing sponsorship TV During lockdown, investment was made in periods. trading holiday bank May and Easter key the on spend planned the deferring by quickly to the nationwide lockdown measures reacted business (2019: the as year £22.4m), the in £20.4m to decreased costs Marketing costs. utility and property in fall a£1.6m and spend marketing in reduction pay, a£2.0m related performance in reduction a£6.4m by predominantly driven £9.4m, of costs There was an overall decrease in administrative year. prior the in 35.5% from up sales, gross of 40.6% were costs Administrative year. prior £118.3m to the in compared £108.9m, totalled year the for costs Administration – – – Administrative expenses comprise: government support before exceptional items and Administrative expenses via the government grant scheme. distribution employee salary savings obtained claim, these costs do not include the related CJRS the presented separately have we As (2019: 5.2%). 6.5% were costs distribution year, the for sales gross of apercentage As year. the of half second the in deliveries reduced the to relation in savings by offset largely was This sector. logistics the in seen being pressures cost by driven increased, costs staff-related and £17.4m at year prior (2019: the £17.3m). Property Distribution costs remained broadly in line with peak delivery periods. support to contracted services delivery party third- of costs as well as centres, distribution (principally rent, rates and utilities) for the nine costs property and costs running related and vehicles leasing of cost the costs, employment the in-house distribution function and includes of cost total the comprise costs Distribution Distribution costs – – – central costs. central office-based support functions and other directors, senior management and all head includes the employment costs for the General administrative expenditure, which Marketing expenditure; and store repairs and depreciation); utilities, rates, and (rent costs employment costs, property-related Store operating costs, principally

continued

– This support is attributable to: provided in response to the COVID-19 outbreak. fromsignificantly £8.4m of government support During the year the Group has benefitted Government support – of: up made are and discretionary, (2019: or £237.7m) variable are (2019: 72% 76%), £194.5m costs, or total Of years. previous to compared when costs total of percentage larger a slightly up make costs fixed and semi-variable costs, total and variable lower the of consequence in line with the decrease in turnover. As a reduced expected, as which, costs, variable in fall the of aresult as largely £44.3m, fell costs (2019: £269.3m Total £313.6m). were year the for across amortisation and depreciation tax, interest, before costs total items, Excluding government support and exceptional should there be wider economic pressures. as revenue changes, protecting the business base cost its flex to ability the with business the sales. As demonstrated this year, this provides to proportional being costs of majority the in where almost all sales are made to order, results The nature of the Group’s business model, Flexible costs – – – 11%). (2019: £36.2m; (13%) costs total of £34.6m heating, and lighting make up the remaining rates, Rent, costs. store and costs payroll related and are predominantly other non-performance- (2019: year £39.7m; 13%) the for costs, total of Semi-variable costs totalled £40.2m, or 15% – – – – – – – claims under the CJRS; and further no had has Group the therefore and 1August, on furlough from back brought was an unprecedented period. The last colleague levels in order to support them through such normal their to colleagues our of salaries the top-up to decision the We took close. to required were operations Group’s the period employees who were during the ‘furloughed’ employees’ payroll costs of over 1,400 grant provided support for 80% of Retention Scheme (CJRS). This government Job Coronavirus the via received £5.0m finance and warranty costs (2019: £183.4m); costs warranty and finance including sold, goods of cost £148.5m a £7.2m further benefit. receive to year,expects it financial new the Group continues to utilise this into benefit enabled a significant cash saving. As the 31 2021) to 2020 has March (1 year April tax 2021 to 2020 the for bill rates business retail of COVID-19 of 100% cut to impact the to business, and the government’s response the to cost asignificant is bill rates property retail Our relief. rates business retail of £3.4m £17.4m distribution costs (2019: £17.3m); costs £17.4m distribution £20.4m marketing costs (2019: and £22.4m); costs marketing £20.4m (2019: £14.6m). (2019: costs payroll performance-related £8.2m

in January 2019. January in aborted acquisition of sofa.com, as announced professional fees in connection with the the to relate costs exceptional year Prior in Sunderland. office head our to stores individual our of each centralisation of administrative support from for redundancy costs incurred relating to the Exceptional costs also include amounts payable equipment and right-of-use lease asset. impairment to the Group’s property plant and of recognition 16, in IFRS under presented as results Group’s the of part as recognised been has charge A£3.4m equipment. and impairment of the Group’s property plant to relates charge £2.6m 16, this Pre-IFRS potentially weakened economic environment. a in performance store term longer on view acautious of a consequence as impairment an Exceptional items predominantly comprise of Exceptional costs £6.7m. of loss operating underlying an recorded have would the additional government support, the Group frombenefit government support. Without the and costs operating in decrease the by offset partially profit, gross in reduction £30.3m the by year, driven last period same the for £14.3m to £1.7m year,was compared the for costs exceptional before profit operating The Underlying operating profit A full reconciliation of EPS is shown in note 10. note in shown is EPS of reconciliation A full year. previous the in 28.5p of EPS an to compared 5.8p was 2020 July 25 ended year the for share per loss basic Statutory year. previous the in 30.3p to compared 2.6p was costs, exceptional excludes which 2020, July 25 ended year the for EPS underlying Basic 16 IFRS Post – (EPS) share per Loss/earnings tax purposes. the share based payment credit not included for to due mainly applied, been had tax corporation of rate standard the if than (2019: higher) lower is year financial the for credit tax 16, the Pre-IFRS Taxation where required. where increased to flexibility exit or relocate stores in length. This provides the business with 10 are years into entered leases recent of majority The stores. new on and renewals lease on tenures low targeting by and managed by ensuring the property portfolio is carefully remaining lease tenure on our store portfolio The Group continues to maintain a low average

STRATEGIC REPORT CORPORATE GOVERNANCE Cash and cash equivalents Our people Cash increased £24.6m in the year to £82.3m The welfare of all colleagues and stakeholders (2019: £57.7m). A summary of cash flows is is of paramount importance to the Group. shown below: We have implemented actions to protect the wellbeing of our teams, including significant Year ended Year ended changes across our stores, where their 25 July 2020 27 July 2019 large layout and square footage enables £m £m us to implement social distancing without

Cash generated from operating activities 59.5 24.1 compromising the customer experience, FINANCIAL STATEMENTS Payment of capital and interest elements of leases (20.0) – together with supply of appropriate PPE, hand Net capital expenditure (3.9) (5.6) sanitiser stations located throughout and deep Net taxation and interest payments (1.5) (2.5) cleaning protocols. Our distribution centre Free cash flow 34.1 16.0 and upholstery teams have implemented best Dividends (4.3) (6.5) practices for visiting customers, and many head Purchase of own shares (5.2) – office employees continue to work from home. We continue to minimise non-essential travel Net cash generated 24.6 9.5 to Europe, the Far East and within the UK and we continually remind and train our colleagues The business continued to be cash generative Cash flows also include returns to investors of the need to maintain the highest possible in the year with cash generated from operating made during the first half of the year. The standards of hygiene. activities of £59.5m (2019: £24.1m). However, it Group paid a £4.3m final dividend relating to the should be noted that the different presentation previous financial year, and also acquired £5.2m Our customers under IFRS 16 improves the reported number worth of its own shares. £4.4m of these shares Our customers have been very understanding as a result of removing rent charges. On an were purchased from Parlour Product Holdings of the trading environment the Group is IAS 17 comparable basis, cash generated from (LUX) S.A.R.L, and were subsequently cancelled. operating in, and we have engaged well with operating activities was £39.5m (2019: £24.1m). The remaining £0.8m of shares were bought them throughout the period impacted by into treasury for the purposes of satisfying COVID-19, with positive Trustpilot reviews Of the £39.5m underlying cash generated from Long-Term Incentive Plan (LTIP) awards. reflecting their appreciation of the steps we operating activities, £27.9m has been generated More information can be found in note 22. have taken to ensure safety throughout the 31 through improved working capital, largely customer journey. reflecting the negative working capital business Dividend model whereby: The Board recognises the importance of a return Our suppliers –– For cash/card sales, customers pay deposits on investment to the Group’s shareholders and All of our manufacturing suppliers have returned at the point of order and settle outstanding aims to reinstate a progressive dividend policy to operation. High order levels combined with balances before delivery; as soon as is appropriate given the general new methods of working are applying pressure –– For consumer credit sales, the loan uncertainty that the UK currently faces. to lead times. There remains the further provider pays ScS within two working days potential risk that one of the factories needs to of delivery; and Despite the strength of the Group’s balance close for a period of time, impacting our supply –– The majority of product suppliers are paid at sheet, in light of the current uncertain economic chain, creating delivery delays and lengthening the end of the month following the month environment, coupled with the support product lead times further. of delivery into the distribution centres. received from the UK government, it seemed inappropriate to use the cash for anything Chris Muir Customer deposit balances have increased by other than protecting the financial strength Chief Financial Officer £19.9m in the year to £34.6m (2019: £14.7m), and resilience of the business. 1 October 2020 reflecting the strong post-lockdown sales order growth seen across the business. Additionally, We will continue to assess when it is appropriate the year-end cash position has benefited from to re-commence dividend payments. a £6.1m working capital benefit on PAYE/NI and VAT, due to deferment of payments in line with Ongoing impact of COVID-19 the government support offered as part of its The Group’s annual result and ongoing trade has response to COVID-19. been significantly impacted by COVID-19, and the Group continues to monitor developments. Following negotiations with landlords, rent It remains difficult to predict with any certainty deferrals totalling £4.3m were achieved. This how the situation will evolve in future weeks and has reduced the payment of capital and interest months. An update on the current situation elements of leases, and the majority of this in relation to key stakeholders is set out below. benefit will unwind in the new financial year. 32 ScS Group plc Annual Report 2020 172(1)(a)-(f) in the Companies Act 2006. Act 172(1)(a)-(f) Companies the in section in out set factors of arange to regard having but awhole as members its of benefit the for company the of success the promote likely most would faith, good in considers, she or he way the in act to acompany of a director requires 2006 Act 172 Companies the of Section Section 172 Statement Stakeholder Engagement page 33. page on found be can 2020 in place taken have that stakeholders our with interactions of Examples Social matters Employees Environmental matters Reporting requirement the by required as matters, Non-financial Reporting requirements non-financial to as relates detailed in that the Companies Act 2006. Report Strategic our in information find can stakeholders where out sets below table The Statement Information Non-Financial to minimise this impact. to impact. this minimise future we the now in seek and to a duty ensure both that we and have environment, the on impact will operations our we aretailer recognise As that Principal risks and uncertainties Non-financial KPIs Description of business model anti-corruption Anti-bribery and rights Human Environment

out on pages 52 56. to pages on out set are decisions reaches it which in way the and operates Board the how on Details stakeholders. Group’s the of all for outcome apositive in result necessarily not will makes it decision every although the Board acknowledges that not decisions, making when account into views engaging with stakeholders and taking their The Board recognises the importance of has reduced 57.1%. reduced has usage gas Our period. that in stores electric all 12 opening of abackdrop against is reduction electrical 41.3%; by the consumption energy electrical our reduced have 2013, we Since energy-efficient heating and cooling systems. all new sites include LED store lighting and develops from our existing position where our energy and carbon management. This energy saving opportunities to progress Scheme assessment and further identified completed our Energy Savings Opportunity have we months, twelve last the During N/A N/A N/A Anti-bribery and corruption statement Whistle-blowing Political donations Modern Slavery policy Responsible sourcing and supply chain and charities localSupporting communities Apprenticeship programmes COVID-19 conduct Business of Code Engagement safety and Health inclusion and Diversity Monitoring our carbon footprint Sustainability Responsible sourcing and supply chain Regulatory and compliance Our policies Our

Where you can find out more out find can you Where Page 36 Page 26 Page 14 Page 42 Page 42 Page 76 Page website our visit and 44 Page 44 Page 33 Page 33 Page 36 Page 76 Page 33 Page 45 Page 76 33 and Page 75 Page 32 Page 33 Page 44 Page across all of our operations including our fleet. fleet. our including operations our of all across management improvements to our efficiency continue to pursue wider behavioural and systems (electrically powered). We also replaced with air-conditioning high efficiency being are which systems heating gas-fired of replacement through stores our in usage gas of reduction the and lighting LED with stores We are progressively changing our existing Governance Code July 2018. July Code Governance Corporate UK the 2018 and Regulations with The Companies (Miscellaneous Reporting) compliance in presented is report This groups. these with engaged has Board the which in ways the and concerns interests, stakeholders each of overview an providing 2020, July 25 ending year financial the in 2006 Act s172 Companies approached and met their responsibilities under have Directors the how out sets statement This STRATEGIC REPORT CORPORATE GOVERNANCE Who are our Why we focus on How do we engage What have we done stakeholders? these stakeholders? with them? during FY20?

Our people are our greatest We engage with our people This financial year has been a challenging year for our People asset and key to our success, through a variety of channels: people and engaging with our teams has been more Building and inspiring an incorporating their views –– Discussion Groups important than ever before. A number of examples outstanding team is at the into Board decision-making –– Weekly newsletters of interaction are set out below: forefront of our business is essential to achieving our –– Conferences –– The Board members have been out visiting stores strategy. We are committed to business objectives and creating a –– Employee surveys and distribution centres, listening to the views of FINANCIAL STATEMENTS creating a great place to work workplace which treats everyone –– Performance reviews our colleagues. and to live by our RIGHT values. equally. We also monitor gender –– Employee forums –– The group’s CEO David Knight and Board member diversity across the business. George Adams have hosted companywide zoom calls In 2020, our gender balance to discuss financial performance and to get feedback remained unchanged with 33% and opinions on matters that affect our colleagues. of our workforce being female. –– Our new ‘Engagement and Internal Communications’ Further details on our gender pay team have been collating the results of the annual gap are published at scsplc.co.uk. employee survey and putting an implementation plan in place to address our people’s concerns. –– We have trained and funded various qualifications for our people such as CIMA, AAT, 7.5 tonne vehicle drivers and apprenticeship programmes. –– Through our training offerings we have developed and enhanced the skills of our teams.

Working closely with our suppliers We engage with our suppliers Throughout the year we worked with our suppliers to Suppliers ensures that we have the through regular meetings to launch over 100 new products across our furniture and Vital to our purpose of right product offerings for our review product quality and flooring ranges. delivering outstanding value, customers. We collaborate with performance to ensure quality and choice to our some of the most iconic brands in that we are meeting our We brought 5 new suppliers on board to make and customers. We have 16 major furniture which is essential to our customers’ needs. source our products and we look forward to building our furniture suppliers based in ‘home of brands’ vision. relationships with these suppliers and to see mutually the UK who make and source As a responsible business we work beneficial volume growth. products for us from within the with our suppliers and with SEDEX UK, Europe and the Far East. to ensure that Modern Slavery Although our operations were paused due to the 33 Regulations are adhered to within COVID-19 pandemic, we worked with our supplying our supply chain. partners to ensure they received payment as normal, and were in a strong position to re-start delivery as soon We collaborate with our suppliers as possible. to reduce our environmental impact by reducing the use of single use plastics and looking for more sustainable packaging options, for example offering a carpet made entirely from recycled plastics and using reusable packaging.

Our purpose is built around Our customers are encouraged We are very proud to have maintained our ‘Excellent’ Customers providing an excellent customer to rate their experience with us rating on Trustpilot and we are in the process of utilising We seek to offer our customers experience and this focus is on Trustpilot and we are thrilled data analysis tools to help us gain further insight from outstanding value, quality and crucial to the Board’s strategy. to have received over 230,000 our reviews. choice for their homes. reviews which we regularly review and use to reward our staff and During the first week of the lockdown period, our teams identify areas for improvement. contacted over 25,000 customers individually to offer them reassurance regarding their order.

Through the newly launched appointment system our dedicated sales team have enjoyed welcoming customers back into our stores and ensuring that they choose the right product for them.

Our store network is spread As part of our daily operations We have recruited 557 new colleagues throughout Communities across the UK and they our customer facing colleagues the year, creating job opportunities for people across During the year, the Group play an active role in their connect with people and various locations. and its people continued local communities. customers in their local to support many local and communities every day. We have continued to support local charities with national great causes, As a socially responsible business We continue to support many donations of £18,000. close to the hearts and it is important to us to contribute charities chosen by our people. minds of the ScS family. to society and the economy. Throughout lockdown we donated £48,000 across a number of Trussell Trust Foodbanks to support our local communities in what was a worrying time for many households.

The Group’s strategy and We engage with our shareholders We have continued to update our shareholders with Shareholders purpose have been built with through a range of channels regular trading updates throughout the period as events We have two main shareholder the long-term success of including meetings, the Annual have unfolded. groups; Institutional investors the business in mind and for Report, our AGM and our financial and individual shareholders. the benefit of our members and trading statements. Investors We held a live analyst meeting open to all shareholders, The majority of our as a whole. are able to keep up-to-date and a webcast of the meeting is published to our website shareholders are institutional through our dedicated for those unable to attend. investors. This has been the corporate website. case since our flotation in 2015. Our CFO is on hand to speak to our shareholders and address any queries they have. 34 ScS Group plc Annual Report 2020 Risk and Risk Management Risk and Risk management processes and framework related control environment. the existing principal and emerging risks and the Committee, including the robust assessment of Audit every at management risk of consideration and Board, Operating the to risks of reporting is set out in detail below and includes monthly underpinning our approach to risk management Board. The established governance framework the to reports and management risk of oversight managing risk. The Audit Committee has for responsibility overall has Board The Risk management framework them. mitigate to processes and systems control the with along undertaken are Regular reviews of existing and emerging risks level. acceptable an to risk the reduce to place in are controls mitigating consequently achievement of strategic its objectives and the affect could that uncertainties and risks faces it that accepts Group The accordingly. along with opportunities and manages them risks account into takes strategy Group’s The management to risk approach Our business of our reputation and performance the affect could that risks on report and framework to isdesigned manage risk management Our implementing agreed Progress in executing improvement and agreed process risk mitigation 04. monitored and reported to the the to reported and monitored This process is then reviewed, reviewed, then is process This Board and Audit Committee on an ongoing basis ongoing an on

05. against each risk required actions management Identifying the 03. process

Risk Risk

context of the Group’s overall risk appetite. appetite. risk overall Group’s the of context the in undertaken is risk of governance The year. prior the from risk the in change any the likelihood of the risk materialising, and and impact, potential the on based is risks Management’s assessment of our principal are performed in line with this approach. operations to high-level strategic decisions, day-to-day from activities, all that ensures organisation. The culture of the organisation approach cascades all the way through the this and agenda Board’s the on high remains management risk effective on focus The Risk appetite emerging risks. assurance over the existing principal and with senior management to review and provide workshops risk facilitated who experts risk party third- engaging by year this reviewed been has process This risks. those manage and mitigate report, to systems developing for and Group theidentifying major business risks facing the team have a clearly responsibility defined for management senior Group’s the and Board The of risksIdentification

any changes since the the since changes any Key risks by area (and (and area by risks Key last review) last 01. evaluating each risk and assigning ascore assigning Risk ratings – by –by ratings Risk 02.

of the principal risks and mitigating controls. assessment arobust performed also has Board The Report. Annual this of approval of date the to up and review under year the for place in been has This Group. the by faced risks significant evaluating, managing and reporting on the There is an ongoing process for identifying, Monitoring of risks – – – are: this of key features The statements.financial consolidated preparing for process the to relation in systems management risk and controls internal established has Group The statementsfinancial Process for preparing consolidated within the principal risks on the following pages. and below, table the in out set is risks principal the of each for appetite Board’s The forward. business the drive and objectives its achieve to compliance but is willing to accept greater risk statutory of areas for appetite risk aminimal has Group The risk. of type each for appetite risk of level the define to used is five to one scoring of model acalibration basis, annual an On – – – external auditors. external the by reviewed are statements financial half-year the and audit external to subject The full-year financial statements are consolidated statements; financial and the to matters relevant other and estimates in accounting policies, changes in accounting auditors on significant judgements, changes fromreports management and the external account into takes review This Board. the and Committee Audit the by reviewed are The consolidated statements financial appraised of these developments; Board the keep also Committee Audit the and auditors external The statements. developments in the consolidated financial regulation and, where appropriate, reflects considers developments in reporting Management regularly monitors and

STRATEGIC REPORT CORPORATE GOVERNANCE The key roles and delegated responsibilities:

Top-down Board Governance and oversight Overall responsibility for the leadership of risk management, sets strategic objectives, risk appetite and identification, assessment monitors performance. and mitigation of existing and emerging risk at

corporate level. FINANCIAL STATEMENTS Executive Directors The Audit Committee Audit, Risk and Compliance Responsible for disseminating The Audit Committee Responsible for the risk policies. They support oversees risk management monitoring of the Group’s risk and help the Operating Board and internal controls. The management approach and assess risk. The Executive Committee reviews the provides a link between the Directors also oversee risk Group’s internal controls, operational managers and the management throughout the sets objectives and monitors Audit Committee. The Head Group and encourage open the effectiveness of the of Audit, Risk & Compliance communication on risk matters. Internal Audit team. The reports formally to the Audit The Executive Directors assess Committee also monitors the Committee and has direct the materiality of risks in the independence and expertise access to the Chair of the Audit context of the whole Group. of the external auditors. Committee. The Audit, Risk and Compliance team takes a risk-based approach to planning audit work.

Operating Board Responsible for the identification and assessment of existing and emerging risks at an operational level. Bottom-up The Operating Board are responsible for the implementation of agreed mitigating controls. Risk management reporting. 35

Principal risk Risk appetite levels 2020 Low Low to medium Balanced Material Aggressive Strategic risks Economic environment Competition Key trading periods Regulation and compliance Infrastructure risks Business systems and infrastructure Supply chain, infrastructure and product Our people and culture Reputational risks Brand and reputation Financial risk Credit risk, liquidity and consumer credit The table shows that the majority of appetite for risk is low or low to medium, with only economic environment, competition, and key trading periods showing a balanced appetite. During the year the Board’s appetite has only changed in one area and this is a reduction in appetite for risk in business systems and infrastructure.

Risk Appetite Definition Low Control over processes is the most significant concern. Commercial considerations are secondary and should not influence decision making in this area. Low to medium Control over processes should be a strong concern. However, commercial impact should still be considered if significant. Balanced Controls and commercial impacts should be given equal weight in this area. Material Control over processes should be as strong as possible, however if commercial impacts are too great then controls should be sacrificed. Aggressive Commercial consideration is the primary concern. No controls should be implemented that impact on commercial aspects in this area. 36 ScS Group plc Annual Report 2020 – – – – – – – – – below: out set are which responses of range wide a cover implemented controls mitigating The government advice and best industry practice. follow we that ensure to procedures and assessments risk controls, new implemented uncertainties within our business. We have and risks principal the of anumber on impact COVID-19 has had a wide ranging and significant COVID-19 below. separately these outlined have and risks, principal our of anumber impact and significant be to COVID-19 Brexit and surrounding risks the We consider Officer). Financial Chief and Officer Executive Chief the (including Board Operating the to reported are controls mitigating and risks principal basis, a monthly On areas. key risk the of anumber on presentations regular has and reports Board through indicators performance formally review Board the the principal and risks and uncertainties three times Committee a year (including Audit The the consideration of regularly. the viability statement). reviewed are they The Board and also risks monitors key these mitigate to place in controls and processes of anumber We have below. out set are place in mitigation the and Group the facing uncertainties and risks principal the of assessment Board’s The reviews effectively and respond quickly and risks of all strategic robust of our objectives. out We to continue carry achievement the isessential to underpin risk management Good Uncertainties and Risks Principal – – – – – – – – – make suggestions and to raise concerns, concerns, raise to and suggestions make communication of the latest developments, two-way allow to created was forum A staff regulatory authorities; suppliers, along with dialogue with relevant key and customers our for support close with all external stakeholders including Communication channels were set up actions; agreed and issues emerging discuss and key messages communicate to weekly up set was meeting Board Operating and team management A senior working environments; of equipment and assessments of home to continue to work, including the provision required were who staff all for effectively and quickly implemented was working Home throughoutstaff the lockdown; our all retain to us allowing (CJRS), Scheme claims under the Coronavirus Job Retention furloughed and the Group made monthly were colleagues operational of majority The government timelines; with line in efficiently completed was centres The closure of our stores and distribution sheet; balance Group’s the of prior to the year end, reflecting the strength repaid was RCF The bank. the with agreed then were headroom greater for allowed secure our cash position. Covenants which revolving credit facility (RCF) to further £12m our down drew we 2020, March In March; late in centres distribution and stores our of closure temporary the to prior levels/lengths of lockdown were modelled different of impacts profit and flow cash The across business; the effectively communicated to all teams were these that and quickly, made be could decisions and ensure actions relevant to basis adaily on held were meetings period of lockdown, Operating Board Immediately prior to and post the initial

– – – – – – – – – – – – – – – – – – – – re-opening processes; the to related views shared including up to date with the latest information; information; latest the with date to up kept was everyone ensure to furlough, on was sent to all colleagues, including those a detailed regular business bulletin that Our communications team produced of the interim dividend; suspension the with along deferred and planned capital expenditure was reduced were costs non-essential All and rent-free periods; obligations and negotiate rent deferrals rent manage to engaged were Landlords equipment in place; protective personal and procedures correct the all with stores re-open quickly and staff re-deploy to able were we lockdown, detailed planning work carried out during the of aresult as and re-open could Following the announcement that stores in all areas of the business; the of areas all in followed, making ‘safety our first’ priority ensure that all best practice guidelines are to updated were processes Operating experienced by our online sales channel; existing team to support additional demand through new recruitment and from within our We provided additional resource, both considered severe and plausible downsides; severeconsidered plausible and we business, the on impact ongoing the predict not could we Although operate. to continue to us allow to preserved was cash that ensure and scenarios various assess to Detailed cash modelling was carried out Interruption Loan Scheme (CLBILS); Scheme Loan Interruption facility under the Coronavirus Large Business £20m three-year anew secured have we and cancelled and repaid been now has RCF The ensure the safety of our teams; and teams; our of safety the ensure practices and training was provided to working detailed and areas key operational our for performed were assessments Risk protective equipment. the business were provided with personal across people our of all and procedures safety our understand customers our help to We provided additional resource in our stores

following pages. within each of the principal risks set out in the highlighted is pandemic, the by created risk increased the of, and impact The Group. the effect on priorities and other existing risks facing aprofound have will and wide enterprise be will impact the that certain is it however, period, given any over have COVID-19 of will impact the what certainty any with predict to difficult is It Group. the of resilience the and suppliers impact and risk to employees, customers, to new ways of working, whist minimising the business has responded well, quickly adapting The advice. government and practice best to adhere we ensure to impacts associated and environment we continue to monitor this risk In this continually changing and challenging

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Brexit Brexit remains a significant economic event facing the UK for the coming year. This risk continues to increase due to the elevated uncertainty over the UK’s withdrawal from the EU in December 2020, and the disruption to trade negotiations caused by the COVID-19 pandemic. The potential impact of the risks facing the Group following withdrawal remain uncertain. In particular, we consider the highest risks being related to the UK economy and subsequent consumer confidence, the risk of supply chain disruption and cost increases, and labour availability, both within our operations and within our supply chain. We also recognise that there could be an impact on the regulatory guidelines that the Group operates within, although we expect those to be minimal in the short to medium term.

Actions taken include: –– Operating Board monitoring and review of the evolving impact of the post-transition trading relationship between the UK and the EU; –– The Operating Board has considered various scenarios depending on the outcome of trade negotiations and have prepared plans for each scenario; –– Working with our suppliers to ensure that they have made appropriate plans; –– Ongoing monitoring of regulatory changes that may affect our operations post-transition period; –– Reviews of impacts on staffing levels to ensure that staff retention is managed appropriately; and 37 –– Review of pricing strategy and changes in our cost base to ensure we can continue to offer the best value product in the market. The impact of, and the increased risk created by Brexit, is highlighted within each of the principal risks set out in the following pages.

Risk categories Each principal risk is grouped into an overarching risk category to enable better analysis of risk and improved risk reporting.

Strategic risks are those which affect the marketplace and environment in which our business operates. Principal risks in this category are: ‘Economic environment’, ‘Competition’, ‘Key trading periods’ and ‘Regulation and compliance’.

Infrastructure risks are those which affect the people and the resources that are required to operate our business. Principal risks in this category are: ‘Business systems and infrastructure’, ‘Supply chain infrastructure and product’ and ‘Our people and culture’.

Reputational risks are those which could damage the brand or perception of our business. The principal risk in this category is ‘Brand and reputation’.

Financial risks affect the ability to ensure sufficient funds are available to run our business. We also rely on the availability of consumer credit to customers to enable us to fulfil strategic plans. Principal risks in this category are: ‘Credit risk, liquidity and consumer credit’. 38 ScS Group plc Annual Report 2020 Strategic risks year: previous the since level risk in Key change to continued Uncertainties and Risks Principal 3 priorities to strategic Link level risk in Change environment Economic Risk 7 6 4 Chief Executive Officer Executive Chief Reports to Board Responsibility Medium controls Risk after profile mitigating Balanced Risk appetite Sales performance Performance indicator

Flooring growth Flooring density Sales Optimising product Improve profitability Risk higher (worsened) customer’s disposable income levels. reduce also and pressure cost to lead could fluctuations rate Interest finance house partners. our from Group the to acost in results which of provision the sell, we products all on options The Group offers interest-free credit Interest rates pressure. cost to lead could fluctuations rate Exchange Currency rates confidence continues to be subdued. consumer COVID-19, of means impact the and EU the from exit ongoing the given facing, currently is UK the The ongoing economic uncertainty of the Group. result in a decline in the performance could which flooring, and furniture as such items, value high discretionary on spending consumer on impact direct a have security, job in uncertainty concerns, including increased driven by political or economic Changes in consumer confidence, Consumer confidence Risk description

Risk stayed level stayed Risk

Risk lower (improved) (improved) lower Risk Mitigation service at the right cost. right the at service right the receive to continues Group the ensure to houses finance other Relationships are also maintained with Group. the with operate currently who relationships with three finance houses strong having by managed is finance consumer to access and of Cost pricing strategy. retail our and base cost our on impact any minimise to fluctuations rate exchange on suppliers our with closely worked always have We movements. rate exchange to sterling basis, minimising exposure a on products our all We purchase interest-free options. of arange and service excellent product for all budgets, along with value good find to customers our points across all categories allows price broad at products of range Our dining and occasional furniture. rangeflooring with complementary leading upholstered furniture and product offering, including a market- Maintaining our established diverse our markets. whilst remaining competitive in quickly, base cost the size right and adapt to us allows demand with flexible are that costs of proportion a high Operating a lean business model with debt. no and cash of levels sensible with sheet balance structured This includes having an appropriately throughout the economic cycle. Group the protect to resilience of level Maintaining a business with the right

Progress in 2020 to be minimal. forecast are charges to changes therefore, and, increase, to forecast are levels default customer However, Group. the to charges in areduction in reduced, which would normally result has LIBOR, year the of end the Since stable. remained have charges credit interest-free year, the Over years. prior to level asimilar at being margin Group’s the to led has This base. supplier our with continued to manage cost increases Throughout 2020, the Group has when shopping with the Group. mean customers can have confidence Improvements in our customer journey offer. we what and are we who knows customer core our that ensures and investment in marketing continues core demographic and our significant our to value providing on focus Our embedded across the Group. is and complete now is planning Our updated store layout and range focus. our be to continues this and points price of range awide with along value, best the offering on based been always has strategy pricing Our 72%. totalled 2020 in costs Flexible our business efficient model. maintain we that ensure to continue we and review under constantly is structure and base cost Our 2020. July of end the at 2019 £82.3m to July of £57.7m end from the at increased sheet balance the on cash Closing

STRATEGIC REPORT CORPORATE GOVERNANCE Key to change in risk level since the previous year:

Risk higher (worsened) Risk stayed level Risk lower (improved)

Risk Risk description Mitigation Progress in 2020 FINANCIAL STATEMENTS COVID-19 impact Our cautious approach and focus Following the outbreak of COVID-19, Economic The pandemic, coupled with the on building a resilient balance sheet a number of measures were put environment government’s response, has led to position in the past few years has in place to mitigate the risk to our a material impact on the Group’s allowed the Group to continue to business including: continued activities in the financial year. There satisfy customer orders, whilst treating –– Increased financial modelling is an ongoing risk of further disruption our teams and supply partners fairly to plan cash flow impact to the Group’s performance if further during the last few turbulent months. including increased downside restrictions are imposed. scenario modelling; The Group cash flow and financial –– Utilisation and amendment of The full extent of the impact forecasting is robust and allows the bank revolving credit facility (RCF) on employment and consumer business to model and minimise to maximise cash availability; confidence is not yet understood. potential impacts. –– Existing RCF replaced with a larger, Both are likely to reduce in the short longer tenure £20m CLBILS facility to medium term, leading to a reduction which is in place until August 2023; in demand and spending on high value –– Use of government schemes for discretionary items. a retail rates holiday, and to defer VAT payment until March 2021; The longer-term impact on exchange –– Cash management exercises with and interest rates is not yet known but most capital expenditure projects this could lead to increased operating put on hold, and rent deferral costs to the Group. agreements from landlords; –– Implementation of the Coronavirus Job Retention Scheme (CJRS) for over 1,400 staff; –– Investment in personal protective equipment (PPE) for use by staff 39 in order to increase consumer confidence; and –– Improved communication channels set up with colleagues, customers and suppliers.

Brexit Our review of the potential impact Our review highlighted that the The Group may be unable to of the Brexit outcome and mitigating exposure of the Group is partly identify and effectively respond actions that the Group can employ has reduced through our UK-based to the challenges of a post-Brexit been completed. Working closely with suppliers and that the level of finished business environment leading to our suppliers has enabled us to plan for goods that come from the EU are reduced performance. the Brexit process and to minimise any proportionately low. impact on our cost base and our retail The risks following Brexit include pricing strategy. The nature of our product also means an increase in supplier costs and that small delays in transportation will disruption to the supply chain. not have a material impact on our lead times or proposition offered. 40 ScS Group plc Annual Report 2020 Strategic risks year: previous the since level risk in Key change to continued Uncertainties and Risks Principal 5 4 priorities to strategic Link level risk in Change Competition Risk 7 6 Chief Executive Officer Executive Chief to Reports Commercial Director Responsibility Medium controls Risk after profile mitigating Balanced Risk appetite Sales performance Performance indicator

Sales density Sales Flooring growth Flooring Market-leading website Improve profitability Risk higher (worsened)

continued and profitability. growth for plans strategic Group’s the to arisk is environment competitive the in changes key to respond to Failing Changes in marketplace margins. and sales on pressure fragmented markets could increase online, and operating within Intensifying competition, particularly Competitive marketplace Risk description

Risk stayed level stayed Risk

Risk lower (improved) (improved) lower Risk Mitigation audience effectively. target our reaching are we that ensure to reviewed constantly are strategies marketing Our omnichannel offering. afull providing operation, atelesales operate We also a store. outcarry research before visiting to or online purchase to customers allow to experience user increase to website our in invest We constantly trends. emerging identify to competitors in and network the across We monitor product performance place. market the in position competitive a highly activities to ensure we maintain We regularly monitor competitor’s reviews. Business My Google and Trustpilot as such platforms through upon feedback from our customers act and review We diligently success. our to core is which experience, customer the on focused continually are teams retail Our purchase. to journey creates a compelling reason competition by ensuring the customer the from ourselves We differentiate Group. the to exclusive are ranges importance to our suppliers, our house brands. Due to our scale and includes third-party brands and ScS Our upholstered furniture range market. core our on demand, whilst remaining focused in patterns changing to respond our product range and continually develop and diversify to We continue

Progress in 2020 and digital media allocation. traditional of mix adifferent trial to Group the allowed March late in temporary closure of our stores The customers. our reach to channels maximises our opportunity investment into relevant advertising throughout 2020, ensuring our review continuous under been has strategies marketing of review Our 13.6%. by increasing sales online and traffic website more seeing Engine Optimisation (SEO) rankings, with digital marketing and our Search Continued progress has been made we showcase our products. how improve to Group the allows increases the user experience and optimised, mobile is which site, This more intuitive website was launched. and faster anew year, the of end the At the customer experience. and efficiency increasing operation, telesales our into implemented was software management During the year, new campaign product performance. reviewing of speed and insight the increased has year the during analytics data enhanced of introduction The 2020. in 2019 9.8% to in 9.4% from furniture continues to increase upholstered in share market Our arow. in year fourth the for increased TrustScore Group’s The focus. of area an remains market our in service customer best the having achieve to commitment Our store. in presented offering value demand, the Group increased the In light of market and opportunity range. the introducing new house brands to year, the in network store the across out rolled was concept Brands’ of ‘Home feel concession A new journey. the customer proposition and maximise we ensure to layouts store and ranges our of revamp and review our with continued we 2020, During

STRATEGIC REPORT CORPORATE GOVERNANCE Key to change in risk level since the previous year:

Risk higher (worsened) Risk stayed level Risk lower (improved)

Risk Risk description Mitigation Progress in 2020 FINANCIAL STATEMENTS COVID-19 impact The Group will continue to monitor At the end of the year, post the initial Competition The COVID-19 pandemic, consumer habits closely and is well COVID-19 lockdown period, two of the continued whilst challenging will also present placed to react to any changes, such Group’s largest competitors went into opportunities for the Group. The as the shift to online, and to also take administration. Whilst, one did re-open period of closure and post-lockdown advantage of a greater market share in post-administration, it now operates trading has and will cause financial the event of other businesses leaving with a smaller footprint than it distress to competitors such that they the market. did previously. may consider their level of participation in the market. The Group is committed to continue We continue to monitor risks and to increase expenditure on the digital explore opportunities that the Some competitors have ceased shopping experience where returns pandemic has presented, and ensure trading and others have been forced justify the investment. that any response to a change in risk or to scale back operations. opportunity is addressed accordingly.

The pandemic has also increased the As noted above, the online customer number of consumers who are willing proposition has been enhanced by the to buy bigger ticket items online. This launch of a new website. This has been presents both a risk and an opportunity complemented by introducing a range for the business. of online-only products.

41 Brexit We continue to work with our suppliers During the year we have continued The risk of supply chain disruption could to ensure we have a supply of products to monitor the political landscape reduce the availability of products and to continue our competitive offering. and our supplier arrangements. therefore our ability to compete.

Risk Risk description Mitigation Progress in 2020

Key trading periods Close monitoring and our ability to flex The year saw the Group react quickly to Key trading Furniture retailing has historically the marketing due to the strength of threats during or around the historical periods relied on certain key trading days our relationships with key advertisers key trading periods. Advertising was and periods, including bank holidays. enables us to react quickly to changes flexed appropriately, reducing spend Prolonged extreme cold, warm or in the marketplace, including extreme and risk. Change in risk level unseasonal weather conditions over weather events. Our marketing strategy is under these key trading periods may reduce footfall in our stores, resulting in weak We actively monitor and forecast constant review and we have sales and potentially adverse effects demand and, should this risk occur, undertaken significant work on Link to strategic priorities on profitability. we would review planned and tactical improving our presence on digital 4 Sales density promotional activity to determine channels. We continue to monitor whether strengthening this would our investments to achieve maximum 5 Market-leading website drive sales. impact with our core customers. 7 Improve profitability Our website enables customers Our recently launched and updated Performance indicator to purchase easily without needing website will improve the customer to visit a store. journey and experience to ensure that Sales performance we can continue to trade successfully throughout any impact of adverse Risk appetite periods of weather or closures due Balanced to a pandemic.

Risk profile after mitigating controls Medium

Responsibility COVID-19 impact The strength of our relationships with In response to the temporary key advertisers and our flexible cost closure of our stores in late March, all Chief Executive Officer The closure of shops in late March to late May due to COVID-19 impacted base enables the business to conserve advertising was cancelled or deferred. on the key trading period of Easter cash when an extreme event occurs. The strength of our relationships and the first May bank holiday. Future with key advertisers meant we were disruption is possible if a second wave able to re-allocate this spend with no of the pandemic results in further penalties, and to turn this promotional closures at a regional or national level activity back on following the on or around a key trading period. re-opening of the stores in May. 42 ScS Group plc Annual Report 2020 Strategic risks year: previous the since level risk in Key change to continued Uncertainties and Risks Principal 1 priorities to strategic Link level risk in Change compliance Regulation and Risk 2 7 4 Chief Executive Officer Executive Chief to Reports Director Corporate Services Responsibility Medium controls Risk after profile mitigating Low Risk appetite regulatory action Prosecution and Performance indicator

Outstanding teamOutstanding Sales density Sales Customer experience Improve profitability Risk higher (worsened) continued

cost, and/or reputational damage. regulations could result in a financial the of any with Non-compliance – – – – – – – – future profit levels. retrospective impact, effecting a have may changes legislation from this income stream. Further could affect future sales and profit and reporting of product warranties regulation the to changes Expected Warranty regulation – to a number of regulations, including: subject are operations Group’s The Key regulated activities Risk description – – – – – – – – –

Modern Slavery Financial Conduct Authority (FCA) Bribery Act Data protection (GDPR) protection Data Environment Health &safety Health Product safety and quality Advertising standards Trading standards Risk stayed level stayed Risk

Risk lower (improved) (improved) lower Risk Mitigation comply with all relevant regulations. relevant all with comply testing regularly to ensure our products We out carry due diligence product Group. the of employee any of part the on malpractice or or suspicions about any wrongdoing should report any serious concerns they that aware parties third or employees make to intended is policy Our concerns. any raise to colleagues whistle-blower hotline, which allows confidential established along We have team. Compliance and Risk Audit, the by out carried is policy the and registers hospitality and gifts of review A regular accepting of and gifts hospitality. out our approach for the giving and anti-bribery and corruption policy sets Our training. undergo to expected are all employees dealing with third parties anti-bribery and corruption policy and an We have intranet. our on published conduct, which is updated annually and of acode with issued are employees All and monitoring. review regular through promotions and pricing on guidelines current We review policies and procedures. internal re-issue and update regularly we and obligations existing our with compliance monitor We actively Audit Committee. the and Board Operating the to Compliance team and reported and Risk Audit, the by investigated areactivity reported to and Any complaints regarding regulated Board. Operating the to is monitored and reported monthly training of Completion role. their on with relevant training dependant All team members are provided of warranty income. level current the impact reporting or regulation to changes if these and we will consider implementing products, our for charge we what adjust to us allows model pricing Our sales. warranty to relation in particular in planned, be understood and appropriate action can are requirements relevant any ensuring FCA the by provided updates the to respond and monitor We actively

Progress in 2020 the business. to support all colleagues across training module was also introduced online PPE of use COVID-19 and A new enforced closures. temporary re-opening following the COVID-19 to prior network whole the across out carried were assessments Risk requests. access subject any to quickly processes systems to and respond our enhance to continued have we and focus of area an be to continues GDPR Monitoring of our compliance with and support to colleagues. of monitoring, compliance, reporting This will accommodate increased levels to customers has been implemented. our retail colleagues introduce finance A new online training course to help colleagues must complete annually. all that Six’ a‘Staple introduced have We FCA. the of requirements the particular in and areas regulated all and reporting processes, covering online training) to improve monitoring our training programme (including to made been have Enhancements required changes. required any with comply to continues Group the ensure to changes on working been has and regulation developments in potential warranty The business has continued to monitor

STRATEGIC REPORT CORPORATE GOVERNANCE Key to change in risk level since the previous year:

Risk higher (worsened) Risk stayed level Risk lower (improved)

Infrastructure risks

Risk Risk description Mitigation Progress in 2020 FINANCIAL STATEMENTS System availability A 24-hour system for monitoring During the past year our investment Business The Group’s performance is heavily performance is in place for business in IT has continued, in particular systems and reliant on the continuous operation of critical systems. A 24-hour third-party where this related to cyber our IT systems. Outages or disruption support contract is also in place for all security improvements. infrastructure could result in a decrease in sales critical systems. performance and impact our We have load tested our disaster delivery service. A business continuity plan is in place recovery site throughout the year, Change in risk level together with a disaster recovery including relocating half of our head Information security plan and alternative operating site. office support functions to operate Arrangements are reviewed annually from the site in March. There is a risk that a loss of data and updates made accordingly. Link to strategic priorities could have a significant adverse We have enabled a number of staff reputational impact. 2 Customer experience We have processes and systems to work from home, reducing the 5 Market-leading website in place to ensure system access is risks within our head office. 7 Improved profitability Cyber security and appropriately controlled and access performance to sensitive data is limited. Any major disruption (such as a Performance indicator cyber-attack), sustained performance The Group is committed to ensuring Number of major incidents problems, or failure to keep technology that its network, applications and data System performance up-to-date could constitute are protected and all relevant software a significant risk to our business. and hardware updates are installed on a regular basis. Risk appetite Low We use third-party experts to regularly test our resilience against 43 Risk profile after mitigating cyber-attack. This testing covers both external and internal penetration controls testing, including granting access Medium to hardware that sits within our physical network to understand what Responsibility weaknesses the latest cyber security tools can identify. Chief Financial Officer All access to networks and systems Reports to remotely are restricted to those Chief Executive Officer people using Virtual Private Network (VPN) tools.

Staff are provided with Company IT equipment and the use of other equipment is prohibited. All staff have been issued with information security guidance, which is updated annually.

COVID-19 impact Prior to moving to full remote working, To reduce the risk to our colleagues, Following guidelines introduced by the Group initially implemented the the business enabled all of our office- the government regarding increased business continuity plans to reduce based staff to work from home. home working, there is an increased the risk to employees located in our This demonstrated that the Group risk that the Group’s business systems head office. This involved splitting our has the ability to operate key support could be impacted by the number support teams across our head office functions remotely. of staff working remotely. and disaster recovery site along with increased home working. 44 ScS Group plc Annual Report 2020 Infrastructure risks year: previous the since level risk in Key change to continued Uncertainties and Risks Principal 3 priorities to strategic Link level risk in Change and product infra-structure Supply chain, Risk 7 6 4 Chief Executive Officer Executive Chief to Reports Commercial Director Logistics Director Responsibility Medium controls Risk after profile mitigating medium to Low Risk appetite Delivery optimisation Customer feedback Sales performance Performance indicator

Flooring growth Flooring density Sales Product strategy Improved profitability

Risk higher (worsened) continued in cost base. cost in increase in duties leading to an increase apotential with along chain supply the to disruption of arisk is There Brexit cost increases. increase in costs due to manufacturing an or orders delayed in result could This disruption to the Group’s supply chain. of arisk is there crisis pandemic the to, subsequent and During, COVID-19 impact confidence and reduction in demand. customer of loss in resulting Group, the of reputation the to arisk is there product safe and quality agood provide to unable are we If and safety quality Product over ethical practices. increased risk of ensuring compliance an is there Far East the in based are chain supply our of parts that Given Ethical practices to customers. to trade this would disrupt supply ceases or demand meet to unable is asupplier If UK. the in based suppliers key of number asmall from sourced are sell we products the of majority The capacity and Supplier resilience Risk description

Risk stayed level stayed Risk

Risk lower (improved) (improved) lower Risk

Mitigation relationship with the EU. impact of post-transition trading We continue to monitor the evolving order book. to our customer outstanding fulfil able to re-commence production are they ensure to period lockdown line with existing terms during the The Group has paid suppliers in pandemic. the of impact the with deal monitor their response and ability to to suppliers our with closely worked have COVID-19 to we response In action for continuous improvement. review quality and agree appropriate to suppliers with meetings regular hold team service customer Our current regulations. to compliance ongoing ensure to independent testing on our products regular of aprogramme We have practices. best and legislation relevant the with comply to suppliers our all expect we and Sedex of members be to required are suppliers All necessary. if addressed are failure of signs early any that ensures Our review of supplier stability financial basis. aregular on Board the to reported and monitored is quality product and delivery time On issue. asupplier of event the in disruption of risk the reducing sell, we product each for model factories can produce a comparable two least at that ensured We have

Progress in 2020 with them to reduce our exposure. work and monitor to continue we in place covering our suppliers and arrangements review to We continue increase in demand. planning following the post-lockdown levels of forecasting and capacity any disruption. This includes increased minimise to suppliers our with work and chain supply our COVID-19of on We continue to monitor the impact aware. made been have we as soon as customers to communicated been have delays product Any this. achieve to company UK first the was ScS that proud are and scheme, Compliance Certified Associated from the Furniture Research Industry We have maintained our accreditation trading within the supply chain. ethical of oversight our enhance to We are reviewing other opportunities modern slavery within our supply chain. of risks monitor to suppliers our with Sedex and promote the membership of amember as continued We have period, on-time delivery metrics. lockdown the of impact the until up independent safety testing and, quality, product on based year, the in Supplier performance has improved

STRATEGIC REPORT CORPORATE GOVERNANCE Key to change in risk level since the previous year:

Risk higher (worsened) Risk stayed level Risk lower (improved)

Risk Risk description Mitigation Progress in 2020 FINANCIAL STATEMENTS Team retention Forming part of our wider priority Following the successful launch of Our people and Our colleagues are critical to enable ‘Building and inspiring an outstanding our refreshed strategies we have culture the delivery of a high standard of team’ we are constantly reviewing our continued to promote the changes customer service. We rely on the terms and conditions of employment and significant investment in making quality, experience and engagement to ensure they remain competitive and ScS a great place to work. Change in risk level of all our colleagues across the whole fair within the sector. business. Poor retention will increase The prior year saw the Group the risk of loss of knowledge, Our succession planning has been enhance employee benefits, including increase the cost of recruitment in place for a number of years and the introduction of an employee and retraining, and impact on the includes strategic and contingency assistance programme. This has Link to strategic priorities customer experience. measures in the event that key been promoted during the lockdown 1 Outstanding team individuals are not available. The plan period to provide our staff with 2 Customer experience Payroll costs is refreshed and reviewed on an annual a support route. basis by the Board. Any future increase to the minimum 7 Improved profitability In collaboration with MHFA England, living wage will affect the Group’s cost We constantly review retention rates 32 mental health first aiders have also base and our ability to retain staff. Performance indicator and further insight is gained through had training on supporting colleagues Colleague retention an exit interview process. throughout our business. Appropriate rewards and incentives Enhanced personal development Risk appetite are in place to secure the retention programme commenced for Low to medium of our senior management team. our retail branch and senior The incentives focus on rewarding management teams. performance as well as recognising Risk profile after mitigating the need to retain the experience We continue to develop and improve controls of our senior managers. our training to identify and close 45 Medium training gaps. The Group is accredited with Investors in People status and forms part of Following the annual staff survey Responsibility a wider strategy for ‘Building and we have responded to staff feedback Corporate Services inspiring an outstanding team’. and we update our teams on the Director progress made.

Staff turnover has reduced by 9.2% Reports to during the financial year. Chief Executive Officer

COVID-19 impact Our flat management structure We invested and continue to supply The impact of COVID-19 and allows the business to react quickly personal protective equipment the resulting government action to minimise costs and maximise our along with guidance, and a safety resulted in staff being furloughed people focus during a lockdown period. first programme to ensure staff for a significant period of time. feel confident about coming back Staff returning to work could feel In response to COVID-19 and following to their workplace. anxious, which may impact efficiency the re-opening of business, the Group and absenteeism. invested in the re-training of staff Risk assessments and safe systems along with updated policies, of work were implemented for all There is a risk that a number of staff procedures and guidance. areas of the business. Improved staff from one location being diagnosed communications were implemented, with the virus, resulting in a temporary including the use of social media. closure of a store or distribution centre We updated training on COVID-19 which would impact our performance and safety processes for staff in and our ability to deliver the best preparation for re-start. Where customer experience. possible, staff were set up to work remotely from home. 46 ScS Group plc Annual Report 2020 Reputational risk year: previous the since level risk in Key change to continued Uncertainties and Risks Principal 1 priorities to strategic Link level risk in Change reputation and Brand Risk 2 7 Chief Executive Officer Executive Chief to Reports Board Responsibility Low controls Risk after profile mitigating Low Risk appetite Customer feedback Sales performance Performance indicator

Outstanding teamOutstanding Customer experience Improve profitability Risk higher (worsened) and increase costs. increase and customer’s experience, reduce sales the on impact may distancing, social under government guidance to allow required layout, store to Changes damage. reputational in result may orders and deliveries to customers in COVID-19, of adelay aresult As COVID-19 impact stakeholders. key other and colleagues customers, by confidence of aloss in result could brand the protect effectively to failure that recognises Group The do. we everything and success our to key is Protecting our brand and reputation Brand and reputation Risk description

Risk stayed level stayed Risk

Risk lower (improved) (improved) lower Risk Mitigation are evident. these as soon as customers our to ensure all delays are communicated to team management senior our with works team This dates. delivery customer orders including any revised all track who team, management The Group has a dedicated supplier our suppliers. with reviewed and monitored regularly The integrity of our product sourcing is whistle-blowing helpline. aconfidential to access have policies, and all and staff suppliers of conduct, equality and diversity code established along We have through engagement staff surveys. engagement colleague review we and through discussions with our suppliers quality product on We work feedback. through Trustpilot and social media to monitor customer service levels place in processes review We have product and service is maintained. quality ahigh for reputation our ensuring standards, relevant to adhere and monitor to place in processes have distribution and aftercare teams all Our retail, compliance, merchandise, regularly. Board the to reported are KPIs stakeholder Key Board. Operating the to reported regularly and channels various through closely monitored is reputation and brand our to risk Any

Progress in 2020 by relevant bodies. guidelines and best practice provided andstaff have followed all government personal protective equipment to all provided and signage installed We have shopping experience. revised our on advised and reassured are customers ensure to place in staff of member greet’ and a‘meet has store every that ensured We have of order. point the at times delivery extended any of aware are customers ensure to updated regularly are products on times Lead mitigated. be can impact any ensure to suppliers our with work to continue will and with worked We have team. management senior our of amember by directly contacted were to impacted customers. Customers lockdown period were communicated the to prior taken orders on delays All range. the into introduced are they as products new and products existing review to suppliers our with work to us enables that place in is A continuous improvement framework improvements. drive to focus of to guide suppliers through areas us help results audit and services customer from Data quality. product an improvement programme for our suppliers and have established with closely work to We continued shop. and work to place agreat ScS making on maintained is focus our throughout the business, ensuring values our promoted further We have Trustpilot. by set targets aspirational more new the achieve to strive and service customer on focus to continued have we 2020, During

STRATEGIC REPORT CORPORATE GOVERNANCE Key to change in risk level since the previous year:

Risk higher (worsened) Risk stayed level Risk lower (improved)

Financial risks

Risk Risk description Mitigation Progress in 2020 FINANCIAL STATEMENTS Supplier credit We have developed strong The Group has had increased dialogue Credit risk, The availability of supplier credit and relationships and credibility with in the year with credit insurers. liquidity and the ability of suppliers to obtain credit credit insurers through regular insurance could have a significant communication, information, ongoing Suppliers provided regular updates on consumer impact on our suppliers’ working trading performance and the Group’s their credit insurance arrangements. capital requirements, which may have resilience levels. None of our manufacturing suppliers credit a material impact on the Group’s cash saw a reduction in their credit position and overall financial position. We have robust forecasting facilities insurance levels. in place that enable early discussion of Change in risk level risks, which improves the chances of positive solutions for all stakeholders.

Link to strategic priorities 1 Outstanding team COVID-19 impact Embedded cash-flow forecasting and Despite the impact of COVID-19 2 Customer experience There is an increased risk that the the management and reduction in resulting in stores being closed in 4 Sales density Group’s credit rating is affected, costs allowed the Group to manage March 2020, the Group continues to cash appropriately. maintain a strong cash position on its 7 Improve profitability reducing the ability of our suppliers being able to obtain credit insurance. balance sheet. Whilst trading was significantly Performance indicator impacted by the lockdown, the Group Sales performance continued to pay our suppliers for goods delivered. This has meant that Customer feedback post the lockdown period our supply Cost of consumer finance chain has been able to re-start. 47 Net debt

Risk appetite Low Liquidity The Group’s treasury policy is to have Despite the COVID-19 lockdown, Risk profile after mitigating Cash generated from business a balance sheet that does not rely on we continued to maintain a strong controls activities is used to fund our working debt to fund its day-to-day operating financial position through careful Medium capital, any reduction or loss of access activities. Targeting to hold sufficient monitoring and management to cash would impact on the ability to cash balances to provide adequate of our cash flows. pay suppliers and continue operations. liquidity through the economic cycle. Responsibility The Group acted quickly to amend Chief Financial Officer The Group maintains a strong, long the terms of the existing RCF standing relationship with our bank. A to improve covenant headroom, £12m revolving credit facility (RCF) was and then subsequently replaced Reports to in place from January 2015 to August with an improved facility. Chief Executive Officer 2020, when it was replaced with a three-year £20m CLBILS facility which matures in August 2023.

COVID-19 impact Embedded cash-flow forecasting and Following the amendment of the The closure of the stores and the management and reduction in covenant terms on the existing £12m distribution centres meant the cash costs allowed the Group to manage RCF, the Group agreed a new £20m position of the Group reduced, largely cash appropriately and engage in CLBILS RCF, which is in place until due to the unwind of working capital. discussions with its bank as required. August 2023. A prolonged period of closure or subdued demand post-re-opening Closing cash increased by £24.6m would reduce liquidity levels further. to £82.3m (2019: £57.7m)

Please see our Viability Statement on page 49 for further details. 48 ScS Group plc Annual Report 2020 Financial risks year: previous the since level risk in Key change to continued Uncertainties and Risks Principal credit consumer and liquidity risk, Credit Risk

Risk higher (worsened) continued continued a purchase. make to facility finance the use to able being customers fewer mean acceptance rates falling which would of arisk is there unemployment in increase potential the to Due medium term. in default levels will persist in the finance companies feel this increase the if Group the to costs increased and lender the to cost therefore, and risk, in increase an to lead would This resume. payments the when levels This could lead to an increase in default crisis. the during assist to customers lenders to provide payment holidays to prompted has government and FCA Following the lockdown period the COVID-19 impact customer proposition. Group’s the of part akey of thereby reducing the competitiveness – companies finance external the by of consumer credit facilities provided withdrawal or uncompetitive nature the or rates interest increased levels, default high of aresult as impacted be may customers to credit free interest- offer to ability Group’s The Consumer credit Risk description

Risk stayed level stayed Risk

Risk lower (improved) (improved) lower Risk Mitigation remain competitive in the marketplace. the in competitive remain and UK the across rates acceptance and costs benchmark can we ensures other national finance companies The Group’s ongoing discussions with front. up discussed are rates acceptance or costs to changes held with the finance companies, any relationships the of strength the to Due Board. Operating the to reported and Audit, Risk and Compliance team the by investigated are activity any complaints regarding regulated and staff retail to provided is Training met. are obligations our that finance providers to ensure compliance and work with our relevant monitor continually we FCA, the from permissions relevant our maintain we that ensure to order In challenge any emerging trends. and identify to week by provider by The Group monitors acceptance rates interest-free proposition. the offer to able being not of risk the reduce and rate acompetitive obtain finance providers to ensure that we can of anumber with closely We work

Progress in 2020 the new financial year. in normal to return levels seen have and basis aweekly on this monitor to continued have we and re-opening on slightly drop rates acceptance We saw finance companies. the by proposed been have costs Post-lockdown, no increase in staff. sales retail our all for We implemented new online training year. the during stable remained have levels acceptance and levels Default of options available. arange have to us enable to providers potential other with discussions ongoing in are we and providers, relationship with our three finance working close our maintained We have legislation and guidance. relevant to adhere we that ensure to with our existing finance providers closely worked have we 2020, During

STRATEGIC REPORT

Viability Statement CORPORATE GOVERNANCE

The UK Corporate Governance Code requires the Group to issue a ‘viability statement’ declaring whether we believe the Group can FINANCIAL STATEMENTS continue to operate and meet its liabilities, taking into account its current position and principal risks in the longer term

Assessment of viability The Strategic Plan makes certain assumptions Variable or discretionary total The Strategic Plan is stress tested for severe about the normal level of capital recycling likely Group costs but plausible scenarios and the effectiveness of to occur and therefore considers whether any mitigating actions that would reasonably be additional financing will be required. The Group taken. Given the current political and economic continues to hold a significant cash balance and 72% uncertainty, in particular surrounding potential the new undrawn £20.0m CLBILS committed further impact of COVID-19, together with the revolving credit facility. The facility was entered changes across the retail sector, it is reasonable into in August 2020 and extends to August to expect further volatility in the short term. The 2023. The Strategic Plan also encompasses the Undrawn CLBILS committed revolving Strategic Plan was therefore specifically stress projected cash flows and headroom against credit facility tested against the key risks identified within the financial covenants under the Group’s facility. 49 plan, with attention to the principal risks and uncertainties highlighted on pages 36 to 48. Conclusion £20m This included the modelling of: Based upon this assessment, the Directors have –– A second extended nationwide lockdown; a reasonable expectation that the Company –– Various severities of downturn in revenue; will be able to continue in operation and meet –– Various severities of downturns in its liabilities as they fall due over the period to Due to the inherent pace of change in the gross margin; 29 July 2023. In making this statement, the retail environment, and the wider economic –– The withdrawal of supplier credit insurance Directors have considered the resilience of the environment, the Group tends to ensure focus is (inclusive of the above downturns); and Group, taking into account its current position on delivery of short to medium-term goals. The –– A combination of all of the above. and the principal risks facing the business. strategy and associated principal risks underpin the Group’s three-year strategic planning Due primarily to the flexible nature of the cost This strategic report, which has been prepared process (‘the Strategic Plan’), which is updated structure of the Group, and additionally to the in accordance with the requirements of the annually. This process takes into account the significant cash reserves held currently, the Companies Act 2006, has been approved and current and prospective macro-economic outcome of this stress testing satisfied the signed on behalf of the Board. conditions in the UK and the competitive tension Directors with respect to the ongoing liquidity that exists within the markets that we trade. Our and solvency of the Group over the three-year David Knight current Strategic Plan has also been revisited in period under review. 72% of total Group costs Chief Executive Officer light of the more recent impact of COVID-19, are either variable or discretionary and as such, 1 October 2020 and the Board believes it remains relevant to even in difficult trading conditions, these costs ensuring success in this period. The period of would also reduce. The Group has also excluded three years, as set out within the Strategic Plan, any potential further assistance from the UK is considered appropriate for business planning, government. These reductions, together with measuring performance and aligns with the relevant mitigating actions and significant payback requirements of any significant capital cash reserves, would ensure the Group could investment (new stores). continue to meet its liabilities. Further to the above examples, the Directors are comfortable As explained in the Strategic Report, the Group’s that the work done to minimise the risk to the business model provides customers with supply chain, chiefly ensuring the use of a variety high quality, competitively priced upholstered of suppliers, and ensuring multiple factories are furniture, flooring and related products. The able to produce similar product ranges, would be Directors are confident that consumer demand sufficient to limit the effect on the Group should for these products will continue to remain in the that risk occur. longer term, and that our strategy (see pages 24 and 25) will ensure our business model will continue to bring long-term sustainable success to the Group. 50 ScS Group plc Annual Report 2020 Board of Directors Board Executive/Non-Executive Brambledown Aircraft Hire Trust Force Charitable Air Royal The Trust Enterprises Force Charitable Air Royal The Force Institutes Air and Army Navy, The External appointments Retail, finance, strategy, marketing Key strengths plc. B&Q of Director Managing and Group plc, Halshaw Evans of CEOChief of Executive Somerfield, Officer Dyas, Robert of Officer Executive Chief and quoted sector previously, including Chairman and equity private the across companies retail for roles of anumber held has Alan Biography Committee membership 2014 22 October Date of appointment Non-Executive Chairman Smith Alan N Chairman Chief Executive

R Non-Executives Chief Financial Officer

Chief Executive Officer David Knight Retail, strategy, marketing, supply chain 2002. January in Officer Executive Chief position of Managing Director, then to the to promoted was 1999 he October In Director. 1997 Merchandising as November in Board the to appointed was 1995 and October in Manager Sales National became He Gateshead. in Centre Metro the at located Branch Manager of the Group’s flagship store, the become to 1978. progressed in He joined he which Stores, Department Wades from Manager aGeneral as 1988 in ScS joined David 2002 1 January Board tenure

5-15 years 5-15 years 1-5

15 years+ 15

Chief Financial Officer Chris Muir change management and banking experience, restructuring, Financial and risk management, investor Northgate. of Director Finance Group was he ScS joining to 2014. of Prior summer the in CEO group acting and Director Finance UK number of senior UK and group roles, including a held and Accountant Group the as hire, leading specialist in light commercial vehicle Europe’s plc, Northgate joined he 2003, In inqualifying 1999 whilst working at Deloitte. accountant, achartered 2016. is He April in Officer Financial Chief as ScS joined Chris 2016 4 April

Homeserve plc Homeserve S.A. Retail Value European B&M plc Group N Brown risk management Finance, reporting, financial governance, sector. retail the in many including companies, listed major of anumber to leader engagement as acted he East, Middle the in PwC of Chairman Deputy and UK the in PwC of Chairman Regional Northern the As governance. and issues and experience of auditing, reporting financial knowledge deep has and years 38 for business assurance PwC’s in worked Ron Previously plc. Homeserve of Committee Audit the of Chairman and Director aNon-Executive is He S.A. Retail Value European B&M and plc Group NBrown of Committee Audit the of Chairman and Director Independent Senior the is Ron 2014 22 October Non-Executive Director Ron McMillan A

R

N

Non-Executive Director Adams George Bradford and Sons Limited Stiga S.A. Nobia AB Ltd FFX Retail, strategy, marketing, supply chain sector. goods consumer and private equity experience in the retail and plc both has and Group DIY Maxeda and Group Spicers at CEO positions held also has He and Commercial Managing Director for B&Q. Development, Group Commercial Director plc, in roles which included CEO of Europe Kingfisher with 16 years spent George SA. Stiga and AB Nobia for Director Non-Executive also is he ltd, Sons and Bradford and ltd FFX of Chair the is George Asia. and of international experience across Europe years 30 over with background, management and commercial astrong has George 2015 9 July R

A

N Non-Executive Director LugerAngela Majelan Limited The Hiring Hub Holdings Limited New Look Retailers Limited The Paint Shed Holdings Limited GroupPortmerion plc Retail, marketing, digital, strategy technology to optimise a value retail offering. e-commerce and retail, including leveraging Angela has significant experience in marketing, through a significant digital transformation. business the led she where plc, Group Brown CEO N of the was recently most and Shop Factory Original CEO The of Debenhams, of MD was She George. for Director Managing positions including Trading Director and Global of avariety holding Asda, at 10 years spent She retail. into moving to prior Mars, and Cola Coca her career in FMCG marketing with Cadbury’s, began Angela plc. Group Portmerion and Ltd Look New for Director Non-Executive also is she Ltd, Shed Paint The of Chair the is Angela 16 2019 May A

N

R STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Alan Smith David Knight Chris Muir Ron McMillan George Adams Angela Luger Non-Executive Chairman Chief Executive Officer Chief Financial Officer Non-Executive Director Non-Executive Director Non-Executive Director

Date of appointment 22 October 2014 1 January 2002 4 April 2016 22 October 2014 9 July 2015 16 May 2019 Committee membership

N R A R N R A N A N R Biography Alan has held a number of roles for retail David joined ScS in 1988 as a General Manager Chris joined ScS as Chief Financial Officer Ron is the Senior Independent Director and George has a strong commercial and Angela is the Chair of The Paint Shed Ltd, she companies across the private equity and from Wades Department Stores, which he in April 2016. He is a chartered accountant, Chairman of the Audit Committee of N Brown management background, with over 30 years is also Non-Executive Director for New Look quoted sector previously, including Chairman joined in 1978. He progressed to become the qualifying in 1999 whilst working at Deloitte. Group plc and B&M European Value Retail S.A. of international experience across Europe Ltd and Portmerion Group plc. Angela began and Chief Executive Officer of Robert Dyas, Branch Manager of the Group’s flagship store, In 2003, he joined Northgate plc, Europe’s He is a Non-Executive Director and Chairman and Asia. George is the Chair of FFX ltd and her career in FMCG marketing with Cadbury’s, Chief Executive Officer of Somerfield, CEO located at the Metro Centre in Gateshead. leading specialist in light commercial vehicle of the Audit Committee of Homeserve plc. Bradford and Sons ltd, he is also Non-Executive Coca Cola and Mars, prior to moving into retail. of Evans Halshaw plc, Group and Managing He became National Sales Manager in October hire, as the Group Accountant and held a Previously Ron worked in PwC’s assurance Director for Nobia AB and Stiga SA. She spent 10 years at Asda, holding a variety of 51 Director of B&Q plc. 1995 and was appointed to the Board in number of senior UK and group roles, including business for 38 years and has deep knowledge positions including Trading Director and Global November 1997 as Merchandising Director. UK Finance Director and acting group CEO and experience of auditing, financial reporting George spent 16 years with Kingfisher Managing Director for George. She was MD In October 1999 he was promoted to the in the summer of 2014. Prior to joining ScS issues and governance. As the Northern plc, in roles which included CEO of Europe of Debenhams, CEO of The Original Factory position of Managing Director, then to he was Group Finance Director of Northgate. Regional Chairman of PwC in the UK and Development, Group Commercial Director Shop and most recently was the CEO of N Chief Executive Officer in January 2002. Deputy Chairman of PwC in the Middle East, and Commercial Managing Director for B&Q. Brown Group plc, where she led the business he acted as engagement leader to a number He has also held CEO positions at Spicers through a significant digital transformation. of major listed companies, including many Group and Maxeda DIY Group and has both plc Angela has significant experience in marketing, in the retail sector. and private equity experience in the retail and e-commerce and retail, including leveraging consumer goods sector. technology to optimise a value retail offering. Key strengths Retail, finance, strategy, marketing Retail, strategy, marketing, supply chain Financial and risk management, investor Finance, financial reporting, governance, Retail, strategy, marketing, supply chain Retail, marketing, digital, strategy and banking experience, restructuring, risk management change management External appointments The Navy, Army and Air Force Institutes N Brown Group plc FFX Ltd Portmerion Group plc The Royal Air Force Charitable B&M European Value Retail S.A. Nobia AB The Paint Shed Holdings Limited Trust Enterprises Homeserve plc Stiga S.A. New Look Retailers Limited The Royal Air Force Charitable Trust Bradford and Sons Limited The Hiring Hub Holdings Limited Brambledown Aircraft Hire Majelan Limited

Committee membership key

A Audit Committee Chair A Audit Committee Member R Remuneration Committee Chair R Remuneration Committee Member N Nomination Committee Chair N Nomination Committee Member 52 ScS Group plc Annual Report 2020 Corporate GovernanceCorporate Statement “Whilst we are facing we are facing “Whilst Alan Smith Alan times; good corporate goodtimes; corporate

Chairman Group operations.”Group governance remains governance remains unprecedented an essential part of our of our essentialan part Role of the Board the of Role matters reserved for the Board. the for reserved matters whose appointment and removal is one of the Secretary, Group the to access have Directors All experienced and able senior management team. an by supported also are Directors Executive The Directors. Executive the to delegated are matters day-to-day operational and Board the by Detailed implementation of matters approved 57 73. to pages on out set Audit and Remuneration are Committee reports the and 54 page on out set is Committee each of reference of terms the of Asummary Board. the by approved matters of implementation the and duties its discharging in assist to committees to The Board has delegated certain responsibilities governance. and performance its on and strategy and values purpose, Group’s the on focuses Board The Group. the of success sustainable long-term the for responsible collectively is which Board the by controlled and led is Group The www.frc.org.uk. website: FRC’s the on available is Code the of acopy Code, Governance with the requirements of the 2018 UK Corporate comply to continue to intends and complied has Group The governance. corporate of standards high to committed is Board The pages 34 and 35. and 34 pages on section Management Risk and Risk the and 33, 32 and pages on Report Stakeholder and 172 Statement Section the in out set are pandemic, coronavirus the of on-set the from period the in and year the during operations business normal its in considered has Board Details of the stakeholder interests, which the and customers. and working environment, for colleagues experience in-store the of assessment own their form to order in restrictions, coronavirus done so following the re-opening under and distribution centres and have particularly stores Group’s the visit regularly Board the shareholders and employees. Members of meetings with the Group’s suppliers, including the Chair, have attended regular Board, the of year, members the During Board. the with concerns or issues raise to route colleagues and to provide them with a direct with engaging is Board the that ensure to forums with members of the wider workforce discussion regular holds who Adams, George Executive Workforce Engagement Director, Non- designated the by Board the to provided shareholders. Regular update reports are Group’s the in movements as well as customers indicators relating to suppliers, employees and key performance reviews Board the meeting, paramount importance. At each scheduled of been have pandemic coronavirus the of our colleagues and customers during interests and welfare The process. making decision its in interests their to regard having engaging with the Group’s stakeholders and The Board appreciates the importance of Stakeholder engagement

STRATEGIC REPORT CORPORATE GOVERNANCE Structure chart

Group Board FINANCIAL STATEMENTS

Executive Committees Directors

Operating Audit Remuneration Nomination Company Board

Culture and values programme, where employees can gain access –– Ensuring effective engagement with and The Board considers and monitors how the to help and support on a whole range of personal encouraging participation from shareholders Group’s values of being a responsive, inclusive, issues including mental health and financial and other stakeholders; getting it right, hardworking and trusted retailer worries. The Group works with Sedex to improve –– Understanding the views of the of sofas and carpets are reflected in the way in working conditions for employees of the Group’s Group’s key stakeholders, including which the Group operates. The Group’s vision is suppliers and responsibly source its supplies. the workforce, and setting and reviewing to be Britain’s best value sofa and carpet retailer, engagement mechanisms; making it easy for our customers to love their Matters reserved for the Board –– Approving the structure, size and home. Our values and purpose reflect how A formal schedule of matters is reserved composition of the Board and the the Group operates culturally as a business for the Board, which includes the Board: remuneration policy for all Directors 53 and how we engage with our stakeholders. –– Having responsibility for the overall and senior management; leadership of the Group to promote its long- –– Reviewing workforce remuneration and The Board recognises the importance of term sustainability, establishing its purpose, related policies and the alignment of ensuring a healthy and supportive culture values and strategy and ensuring that these incentives and rewards with culture; within the Group. The Board monitors culture and its culture are aligned; –– Aligning executive remuneration to the and values in a number of ways, including –– Approving any changes to the capital Group’s purpose and values and ensuring undertaking an annual survey of all employees, structure of the Group; that it is clearly linked to delivery of the undertaking pulse surveys throughout the –– Approving financial reporting, budgets, Group’s long-term strategy; year on specific topics, reviewing feedback dividend policy and any significant changes –– Agreeing the responsibilities of the Chair through Director discussion groups, as well as in accounting policies and practices of of the Board, the Chief Executive, Senior reviewing feedback provided by our customers the Group; Independent Director, the Board and through forums such as Trustpilot and Google –– Establishing procedures to manage risk, its Committees; My Business. All employees are able to access oversee the internal control framework and –– Undertaking a formal and rigorous annual a confidential helpline operated by Safecall determining the nature and extent of the review of the performance of the Board, should they want to report any wrongdoing risk appetite of the Group is willing to take to its Committees, the Chairman, individual anonymously. The Board are provided with achieve its long-term strategic objectives; Directors and corporate governance insight into any calls that are made. We also have –– Approving of any major capital projects and matters; and a dedicated, free to use employee assistance materially significant contracts for the Group; –– Approving and supervising of any material litigation and appointing the Group’s professional advisors. Directors’ attendance The Board held twelve meetings during the 2020 financial year and attendance at the meetings was There is a rolling programme of Board meetings as follows: throughout the year and there are six Board meetings presently scheduled for 2021. Remuneration Nomination PLC Audit Committee Committee Committee In 2020, meetings were held between the six scheduled meetings, as circumstances required. Total no. of meetings 12 3 5 1 The Board will continue to meet on this basis, David Knight 12 – – – when circumstances require. Chris Muir 12 – – – All Board and Committee members receive Alan Smith 12 – 5 1 sets of Board packs in advance of the Board and Ron McMillan 12 3 5 1 Committee meetings. For scheduled Board George Adams 12 3 5 1 meetings this includes progress on strategy, current trading, stakeholder KPIs, management Angela Luger 12 3 5 1 accounts and detailed papers on other matters Paul Daccus* 3 – – – where Board approval is required. The CEO and CFO present reports to the Board at Further meetings of the Board, Audit, Remuneration and Nomination Committees have also been held since the year end. each scheduled meeting on trading, financial performance and operational matters, along * Paul Daccus stepped down from the Board on 11 February 2020 in connection with the sale by Parlour Products with updates on any significant health and Holdings (LUX) S.A.R.L of its entire holding in the Group. safety, litigation or regulatory matters. For Board 54 ScS Group plc Annual Report 2020 on the time they need to devote to the Group. the to devote to need they time the on impact not do they that satisfied is Board the Where Directors have external appointments, training requirements with each Director. discusses Chairman the and reviewed regularly The development of the Group’s Directors is discharge their responsibilities effectively. to them enable to experience and skills of its Committees have an appropriate balance and Board current the believes Chairman The monitoring powers of the Executive Directors. the and balance its Board, the to relating matters discuss to present, being Directors Executive the year on a one-to-one basis, without the each of the Non-Executive Directors during of their members. The Chairman has met with commitment the and Committees its and Board the of working effective the ensure to skills and experience composition, Board’s the basis annual an on review will Committee Nomination The 73. 62 to pages on Report Remuneration Directors’ the in out set are these of terms of appointment in place and the details of the letters or agreements service have Directors All could affect their independent judgement. its Directors which in the opinion of the Board or Group the with Directors) Non-Executive as acting for fees their from (apart arrangements or relationships business material any have not do Directors Non-Executive the that ensuring judgement. Independence is determined by their affect, to appear could or affect, may free from relationships or circumstances which independent in character and judgement and be to Board the by considered is them of ofdefinition an independent Director. Each the meet to Group the by considered all are 16 2019 May appointed Luger, Angela and 2015, 9July appointed Adams, 2014, George Independent Director), appointed 22 October requirement and Ron McMillan (Senior be independent. The Group has met this to considers Board the whom Directors excluding the Chair, should be Non-Executive Board, the of half least at that recommends Code Governance 2018 Corporate UK The the 2018 Corporate Governance Code. with compliant is composition Board’s The independent Non-Executive Directors. three and Directors Executive two Chairman, Non-Executive the of comprised has Board of its entireS.A.R.L holding in the Group, the the sale by Parlour Products Holdings (LUX) with connection in 2020, 11 on February Board Following Paul Daccus stepping down from the Composition of the Board meeting. the at Board the of consideration the for matters other the of respect in as well as performance and operational matters, financial trading, on Board the to reports present still will CFO CEO and the generally but meeting, the of agenda the reflect packs Board the require, meetings which are held as circumstances GovernanceCorporate continued Statement

implementation ofimplementation other Board decisions. the with along or as well as Board the by implementation of strategies approved the and Group the of management day day-to the for responsible CFO, is as Muir David Knight as CEO, together with Chris information. clear and timely accurate, receive Directors that ensures and Directors Executive the and them between relations constructive and Directors Non-Executive the of contribution the directing the Group. The Chairman facilitates in effectiveness its overseeing and agenda responsible for leading the Board, setting its is Board, the of Chairman as Smith, Alan making. decision of powers unrestricted has the Chairman and the CEO and no individual between of responsibilities roles and division aclear is There individuals. different by occupied CEO are and Chairman of positions The Division of responsibilities head office or online at scsplc.co.uk. at online or office head plc Group ScS at available is Committees the of each of reference of terms full The below. out set is Committees these of each of reference of terms the of Asummary Committee. Remuneration Committee and a Nomination authority to an Audit Committee, a delegated and established has Board The Committees of the Board proposed transactions. any on it to presented be to evaluations and reports other any and external require may Board the which to extent the of consideration Wales Group Law. This process also includes meetings of shareholders under England and general to reporting and business of course ordinary the in transactions any of respect in exemptions any of appropriateness the and application of the Listing Rules, the applicability the on brokers corporate Group’s the and Board the by it of consideration and advice entities in the Group, including professional any with Directors of parties related by into entered be to proposed transactions reviewing for aprocess is there particular, In interest. of regularly reviewing actual or potential conflicts for Board the of process established an is There interests. private management within the Group and their senior or Directors the of any between interest of conflicts potential no are There of interest Conflicts and its shareholders. Group the of interests best the in considered is this and targets, gender of basis the on to opposed as criteria objective and merit Board, appointments will always be made on diverse amore have to preferred have would Group the Whilst diversity. of level its review and monitor to need the of aware is and diversity, on record its with overall satisfied is Group The Diversity

– – – – – – – – – – – – – – – – – – – – – – summary include: in which scsplc.co.uk, at online or office head plc Group ScS at available reference of terms the in contained are Board the by delegated as McMillan. The duties of the Audit Committee Ron by chaired is Committee Audit The Committee Audit Nomination Committee Remuneration Committee Committee Audit Sub-committee responsibilities – – – – – – – – – – – – – – – – – – – – – – Senior management appointments Board succession plans Board appointments structure Board pay Director Non-Executive Long-term incentive plans schemes Bonus policies and Review of workforce remuneration Senior management remuneration Director remuneration Chairman and Executive Data protection Going concern and viability Fraud and anti-bribery Risk management and internal audit audit External Financial reporting management systems. risk and control internal and controls financial internal Group’s the of effectiveness Keeping under review the adequacy and business model and strategy; and performance, and position Group’s the assess information necessary for shareholders to and understandable, and providing the balanced fair, is awhole, as taken accounts, and Report Annual the whether on Board) Providing advice (where requested by the register; risk Group’s the of maintenance emerging risk exposures, including the strategy, risk policies and current and management arisk of execution and Assisting the Board with the development function; Compliance and Risk Audit, Internal the of effectiveness Monitoring and reviewing the in them; reportingfinancial judgements contained performance and reviewing significant announcements relating to financial formal any statements, financial the of Reviewing and monitoring the integrity re-appointment and fee levels; auditors, approving their appointment, independence and of objectivity the external Monitoring the quality, effectiveness,

STRATEGIC REPORT CORPORATE GOVERNANCE The members of the Audit Committee are Ron Nomination Committee Board performance evaluation McMillan (Chair), George Adams and Angela The Nomination Committee comprises all of the Following last year’s externally facilitated Luger. Ron McMillan is an ICAEW chartered Non-Executive Directors. It is chaired by Alan evaluation by Fiseq Limited, the 2020 accountant and his experience formally as an Smith and its other members are Ron McMillan, evaluation of the performance of the Board, audit partner of PwC fulfils the requirement George Adams and Angela Luger. its Committees, the Chair and the individual under the UK Corporate Governance Code Directors was conducted by the Group’s Internal that one member of the Committee has recent The duties of the Nomination Committee as Audit Team. The evaluation confirmed that and relevant financial experience. delegated to it by the Board are contained in the the Board and its Committees have a good

terms of reference available at ScS Group plc balance of knowledge and experience and did FINANCIAL STATEMENTS The Committee as a whole has competence head office or online at scsplc.co.uk, which in not identify any concerns with performance, relevant to the retail sector, in which we operate. summary include: although opportunities were identified to –– Reviewing the structure, size and further develop the role of the Board to ensure In compliance with the 2018 Corporate composition of the Board, including a progressive and performance-led approach. Governance Code, Alan Smith, as Chairman of the balance of Executive and the Board, ceased to be a member of the Audit Non-Executive Directors; In accordance with the 2018 UK Corporate Committee with effect from the start of the –– Putting in place plans for the orderly Governance Code, the Group will continue to 2020 financial year but continues to attend the succession of appointments to the Board undertake annual evaluations and at least once Audit Committee meetings, along with David and to senior management positions; every three years with an external consultant Knight and Chris Muir, by invitation. –– Overseeing the development of a diverse facilitating the evaluation. pipeline for succession; and The Audit Committee meets not less than –– Identifying and nominating candidates Re-election of Directors three times a year. Details of the activities of the for the approval of the Board, to fill Board Based on the performance review by the Committee in the last financial year are set out vacancies when they arise. Nomination Committee of the size, structure on pages 57 to 61. and composition of the Board with regard to The Committee meets at least annually. the experience and skills represented on it, the Remuneration Committee Nomination Committee has recommended The Remuneration Committee is chaired by During the 2020 financial year the that each of the Directors be re-elected to the George Adams. The duties of the Remuneration Nomination Committee: Board, as they each continue to be effective Committee as delegated to it by the Board are –– Reviewed the size, structure and members of the Board and demonstrate 55 contained in the terms of reference available composition of the Board, with regard commitment to their roles. at ScS Group plc head office or online at to the experience, skills and knowledge scsplc.co.uk, which in summary include: represented on it and the balance of Risk management and internal control –– Setting the policy for the Group on executive Executive and Non-Executive Directors The Board has overall responsibility for ensuring remuneration and setting remuneration represented on it; that the Group maintains a strong system of for the Chair, the Executive Directors and –– Considered the succession planning for internal control. senior management; Board and senior management positions; and –– Reviewing workforce remuneration and –– Commenced the process of finding a The system of internal control is designed to related policies and the alignment of successor to David Knight, as the Group’s identify, manage and evaluate, rather than incentives and rewards with culture, and CEO, further to the Group’s announcements eliminate, the risk of failing to achieve business taking these into account when setting the concerned with his retirement. This objectives. It can therefore provide reasonable, policy for Executive Director remuneration; has involved agreeing a comprehensive but not absolute assurance against material –– Preparing an annual Directors’ Remuneration specification for the desired candidate and misstatement, loss or failure to meet objectives Report for approval by shareholders at the ensuring the role brief was aligned to the of the business due to the inherent limitations Annual General Meeting of the Group; desired Board composition. of any such system. –– Reviewing the design of all share incentive plans for approval by the The Committee recognises the need to The key elements of the Group’s system Board and/or shareholders; keep under review certain areas where over of internal controls are as follows: –– Determining and monitoring any share the course of time, appointments may be ownership requirements for the Executive appropriate to consider. The Nomination Financial reporting: Monthly management Directors and senior management including Committee also recognises the need to monitor accounts are provided to members of the post-employment requirements; and review diversity of gender, social and ethnic Board, which contain current financial reports. –– Determining the policy for termination backgrounds and cognitive and personal Reporting includes an analysis of actual versus payments and compensation payments strengths in relation to how the Group is led and budgeted and prior year performance and for the Executive Directors and senior represented. Appointments will always be made reasons for any significant differences. management; and on merit and objective criteria, recognising The annual budget is reviewed and approved –– Determining the policy for, and scope of, our diversity policy but without setting gender by the Board. The Group reports half-yearly pension arrangements for the Executive targets and this is considered to be in the best and publishes trading updates in line with Directors and senior management, and interests of the Group and its shareholders. market practice. aligning the same with those available The Board currently has one female Board to the Group’s wider workforce. member out of six members (16.7%). The Group’s Operating Board has one female The members of the Remuneration Committee member out of six members (16.7%). are George Adams (Chair), Alan Smith, Ron McMillan and Angela Luger.

The Remuneration Committee meets not less than twice a year. Details of the activities of the Committee in the last financial year are set out on pages 62 to 73. 56 ScS Group plc Annual Report 2020 anonymously. Group the to reported be can wrongdoing regarding concerns any where (Safecall) with access to an independent organisation addition, the Group has provided all employees any suspected malpractice or wrongdoing. In whistle-blowing, in relation to the reporting of and corruption anti-bribery, to relation in place in policies formal are Staff policies: There and the Audit Committee. managers operational between alink provides the Group’s risk management approach and which is responsible for the monitoring of function Compliance and Risk Audit, Internal Internal audit: Group. the by operated that as complexity size and type, the of abusiness for acceptable were they that actions mitigating relevant and business the to key risks the of a review after satisfied was Board The Statements. of approving the Annual Report and Financial date the to up period the for and 2020 July 25 ended year the during controls internal and management risk the of effectiveness the of areview out carried has Board The assets. its safeguard to and Group the of records accounting of accuracy and integrity the policies and procedures in place to ensure Monitoring of controls: information.for further Report Strategic the in 34 page to refer Please control. internal of systems the of effectiveness the of review annual an conducted also has and principal and emerging risks facing the Group the of assessment arobust out carried has Board the year financial 2020 the During 48. 36 to pages on out set are Group the of Information on principal risks and uncertainties Board. the by monitored are actions mitigating appropriate and Key risks Board. the to provided are registers risk The recorded. also is risk the of acceptance or The action required (where necessary) level of senior manager within the business. the at least at owner, an allocated is register risk the on identified risk ayear. Each times monitored, with full reviews occurring three risk register, which is continually updated and Risk management: The Group maintains a GovernanceCorporate continued Statement The Group has an established established an has Group The There are formal formal are There

during 2020. Code Governance 2018 Corporate the of provisions the with complied has Group The Compliance statement 1 October 2020 1 October Chairman Smith Alan Report. Annual this of acopy includes which and information other and market the to releases our with updated regularly is which scsplc.co.uk, at website acorporate runs also Group The Board. the of Committees the of each of Chairs the and Chairman the for shareholders to raise questions with the past year, and will provide the opportunity over business the of progress the of account an give will Chairman the which at Meeting, shareholders through the Annual General The Group will communicate with its market. the to information quality best the provide to institutional investors and analysts in order Meetings and calls are regularly made with to investor inquiries and feedback. respond to and basis aregular on results endeavour to explain our actions and financial will we such as and relations, shareholder communication is key to maintaining good that recognises Board The Shareholder relations

STRATEGIC REPORT

Audit Committee Report CORPORATE GOVERNANCE Dear Shareholder The Audit Committee is integral to the Group’s governance framework and continues to keep its activities under review to reflect regulatory developments and best practice. The Audit Committee advises the Board on financial reporting, viability and going concern and whether the Annual Report provides the

shareholders with the information necessary FINANCIAL STATEMENTS to assess the Group’s performance. It also monitors risks and risk mitigation.

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

Whilst risk management is a Board responsibility, the Committee has continued to work closely with the Board and Group management to ensure that all significant risks, including those which have arisen from COVID-19, are 57 considered on an ongoing basis and that all communications with shareholders are properly considered. In relation to risks and controls, the Committee ensures that these have been identified and that appropriate responsibilities and accountabilities have been set.

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

advises the Board on During the year, the Committee again oversaw the process used by the Board to assess the financial reporting, viability of the Group, the stress testing of key trading assumptions and the preparation of the viability and going viability statement which is set out on page 49 in the Principal Risks section of the Strategic concern and whether the Report. The Committee also continued to Annual Report provides monitor the implementation of IFRS 16. The Committee has considered the narrative in the Strategic Report and whether the shareholders with the 2020 Annual Report is fair, balanced and understandable and whether it provides the information necessary necessary information to shareholders to assess the Group’s performance, business to assess the Group’s model and strategy. The Committee considered management’s assessment of items performance. It also included in the financial statements and the prominence given to them. The Committee, monitors risks and and subsequently the Board, were satisfied that, taken as a whole, the 2020 Annual Report and risk mitigation.” Accounts are fair, balanced and understandable. The Committee reviewed, on behalf of the Ron McMillan Board, the Group’s compliance with the Modern Slavery Act and its policies in relation to money Chair of the Audit Committee laundering and anti-bribery. 58 ScS Group plc Annual Report 2020 and support during the year. colleagues on the Committee for their help my thank to like Iwould report. this on have may you questions any answer to November available at the Annual General Meeting in be shall and time any at shareholders with speak to available Iam audit. of effectiveness of published financial information and the of shareholders in regards to the integrity embrace its role of protecting the interests Committee continues to acknowledge and the that ensure Ishall forward, Going 1 October 2020 1 October Committee Audit the of Chair Ron McMillan Audit Committee Report

Ron McMillan (Chairman) McMillan Ron 2020 in attended meetings and Member where improvements can be made. considers and basis annual an on performance The Committee critically evaluates its own or more informally, outside of them. Directors whether at the Committee meetings, Executive the of absence the in have may they that concern of matters any raise to opportunity and external auditors are provided with the internal the year, and the during CFO the and auditors external the &Compliance, Risk Audit, Committee Chairman meets with the Head of In addition to scheduled meetings, the audit function and the external auditors. together with representatives from the internal meetings, CFO, attend as Muir, Chris CEO and Smith, as Group Chairman, David Knight, as Although not members of the Committee, Alan sectors. goods consumer and retail the in companies with or in working of have members Committee the that experience significant the 51 reflect and and 50 pages on found be can Committee the of members and external auditors. The biographies of the work programmes executed by the internal from outputs and scope the of approval the and information financial of releases of dates the accommodate to set is meetings Committee of timing The 53. page on Statement Governance Corporate the in out set are attendance and Angela Luger. Details of Committee meetings and Adams George McMillan, Ron were year The members of the Committee during the business. the of framework regulatory the and audit external and audit internal of functions and roles the legislation, corporate Group’s internal control environment, relevant have an understanding of reporting, financial the to expected are members All requirement. this experience. The Committee Chairman fulfils financial relevant and recent with member Committee must include one financially qualified the and aquorum constitute Two members whom are independent Non-Executive Directors. of all members, three comprises Committee The Committee composition attendance are noted above. The Audit Committee met three times during the year. Details of the Committee members’ Luger Angela Adams George continued – – – – – corporate website. They include the following: Group’s the on published are which reference of terms the in out set are Board, the by delegated The responsibilities of the Committee, as Responsibilities – – – – – – – comprised: Committee the of work recurring The and external auditors. internal the and management by assisted was Committee the report, this to letter referred to above and in the introductory matters the of oversight its discharging In Activities – – – – – – – – – – – – and risk management system. management risk and control internal and controls financial internal Group’s the of effectiveness Keeping under review the adequacy and and register; risk Group’s the of exposures, including the maintenance strategy, risk policies and current risk management arisk of execution and Assisting the Board with the development of the Internal Audit function; Monitoring the independence and activities approving their appointment and fees; independence of the external auditors and Monitoring the quality, effectiveness and thereto; related judgementsfinancial and estimates significant the and Group the of releases statements and other price sensitive financial Reviewing the integrity of the financial Approval of the Internal Audit Plan. Audit Internal the of Approval and fees; and plan audit reference, of terms auditors’ external the of Approval disclosures; related the and issues Consideration of going concern and viability in the Annual Report; Consideration of the principal risks included accounting estimation or judgement; Consideration of the significant areas of year; half the for Group the of and non-statutory statements financial Consideration of the Interim Results report statementsfinancial of the Group; and Report Annual the of Consideration Member since 2015 2019 2014 Meetings attended

3 3 3

STRATEGIC REPORT CORPORATE GOVERNANCE The meetings at which the above and certain other matters were discussed were as follows:

September March July 2019 2020 2020 Review of Interim Results X Review of Annual Report; approval of Audit Committee report, consideration of significant areas of accounting estimation or judgement and whether the Annual Report is fair, balance and understandable X Review of management representations X X Review and approval of Internal Audit Plan, reports and updates X X X FINANCIAL STATEMENTS Approval of the external audit strategy and fees X Update on the provision of any non-audit services and fees provided by the external auditors X X Effectiveness of the Internal Audit function X Effectiveness of the external audit X Risk management update and review of related disclosures, including warranty risk and COVID-19 X X X Review of internal control processes and related disclosures X X X Review of disaster recovery practices X X Review of Group IT systems X Update on the Group Data Protection compliance including policy review X X X Reviewed and agreed the structure and annual plan for compliance function X Effectiveness of procedures for detecting fraud X Update on Modern Slavery matters X Consideration of UK Corporate Governance Code 2018 and disclosure regulations X X Year-end final review of related party transactions X 59 Accounting policies and disclosures in relation to: – IFRS 16 X X – Corporation tax and VAT X X – Supplier rebates X X – Stock and related provisions X X – Impairment assessment for loss making stores X X Going concern and viability issues and disclosures, including the impact of COVID-19 X X

Accounting matters –– Warranty risk Risk management and internal control The significant accounting and related The Committee has continued to discuss The Board has overall responsibility for matters considered by the Committee the risk to warranty sales, following the FCA’s ensuring that the Group maintains a sound during the year were: proposal to enforce statistical reporting system of internal control. There are inherent –– Implementation of new of this type of insurance product, and also limitations in any system of internal control and accounting standards the risk that the product may become no system can provide absolute assurance IFRS 16 ‘Leases’ has had a material impact on regulated by changes to future legislation. against material misstatements, loss or failure. the financial statements and the Committee The Board remains focused on monitoring Equally, no system can guarantee elimination has continued to monitor and review the developments in this area. of the risk of failure to meet the objectives of disclosures in relation to IFRS 16. the business. Against that background, the –– COVID-19 Committee has helped the Board develop and –– Impairment The Committee discussed with maintain an approach to risk management which The Committee discussed with management the uncertainties and impact incorporates risk appetite, the framework within management the work performed in their of the coronavirus and considered various which risk is managed and the responsibilities calculation of the future cash flow models sensitivity scenarios and cash flow models and procedures pertaining to the application of poor-performing stores, which had been to satisfy itself that the Group was as well of the policy. used to determine whether any impairment positioned as it could be. had been suffered over the carrying values The Group is proactive in ensuring that of both the right-of-use asset and the corporate and operational risks are identified assets held at these stores. The Committee and managed. A corporate risk register discussed with management and the is maintained which details: external auditors the validity of cash flow projections and the significant financial 1. The risks and the impact they may have; assumptions used, including the selection 2. Actions to mitigate risks; of appropriate discount and growth rates 3. Risk scores to highlight the implications used over the remaining lease period. of occurrence; The Committee satisfied itself that asset 4. Ownership of risks; and values were not materially misstated. 5. Target dates for actions to mitigate risks. 60 ScS Group plc Annual Report 2020 – – – – – – – to: relation in Audit Internal from reports reviewed Committee year, the the During register. risk the to made are changes necessary that and managed and evaluated identified, are risks new that ensure established procedures within the business to also has Audit Internal covered. been have risk of key areas all that comfortable is and changes the agreed Committee the performed, be to work of elements certain prevented which lockdown, of period the to due year the during revised was plan this Whilst loss. financial potential of areas and management risk both address to and the Committee and which was designed discussed and agreed with both management was which work of aprogramme undertaken During the year, financial Internal Audit has internal audit and risk management reports. present to meeting Committee every attends and Committee the to line reporting a direct has &Compliance Risk Audit, of Head The Internal Audit the Board. Audit Committee meetings are circulated to of minutes the and Board the to discussed matters of update an provides Committee The Board reporting and related business financial reporting. guidance on risk management, internal control FRC the with complies Company the that reporting system. The Committee also believes responsibility and a comprehensive financial organisational structure with clear lines of awell-defined has Group the that Group, the appropriate controls are in place throughout that believe to continues Committee The of the statements. financial context the in material be to determined has it which control internal in weaknesses or nor has it itself, identified any failings, frauds, Committee the by advised been not has Board year, the the During (FRC). Council guidelines issued by the Financial Reporting the with compliance in and effective and robust undertaken by the Committee are appropriately processes the that considers Board The or liquidity. business model, future performance, solvency the Group, including those which threaten its facing risks principal the of assessment a robust out carried has it that confirmed has Board The 48. 36 to pages on out set is risks principal the of A description Audit Committee Report – – – – – – – to the Group’s principal risks, including IT effectiveness of mitigating actions in relation Risk management, including the outlets and distribution centres retail to relation in processes operating Group’s the of assessments Compliance Compliance with data protection Compliance with the Modern Slavery Act Anti-bribery and corporate crime Anti-money laundering controls internal related and risk Fraud

review by the FRC. However, the Committee Committee the However, FRC. the by review for chosen not was 2019 audit ScS The judgement and estimation. particularly in areas requiring management applied by in PwC executing their audit, scepticism of degree the considered also has Committee The effective. was auditors external the by undertaken work the that itself satisfied has and services non-audit and audit both to relation in auditors, external the of effectiveness the reviewed team, management the and Board The Committee has, in conjunction with the Internal Audit functions. management and the Group’s Finance and Board, the from sought is Feedback audit. conduct, and timeliness efficiency of the challenge, the quality of reporting and the of extent the and judgement of keyof areas PwC annually based on their understanding of performance the reviews Committee The Order 2014. Responsibilities) Committee Process Audit and Tender Competitive of use (Mandatory Investigation Market Companies Large for Services Audit Statutory the with complied has Group The 10 for years. auditors Group’s the been now have PwC office. Leeds PwC’s in apartner is who Ward, Andy is audit Group’s auditors. The new partner responsible for the Group’s the as continue to asked be PwC that Annual Report, the Committee recommended Following a tender process outlined in the 2019 External auditors – – – – – – – – – – – a realistic and commercial view of the business. the of view commercial and a realistic constructive challenge and demonstrates with the Committee, and which provides collaboration in developed plan astrategic has which afunction as viewed is Audit Internal that significant progress has again been made. of Internal Audit during the year and concluded performance the evaluated has Committee The being implemented. are or been have either and management by agreed were which of majority vast the made recommendations for improvement, audit internal above, the of each to relation In – continued – – – – – – – – – – – – systems, business continuity and cyber-risk returned to manufacturer products over controls and Processes Retail store operating processes operating store Retail Third parties and outsourced contracts outsourced and parties Third Product and pricing data integrity Estates management Deliveries and central arranging processes online commerce for processes sales and Order Information technology processes COVID-19 COVID-19 Health and safety including response to Finance house payment processes Fleet processes Fleet ecommerce data protection data ecommerce and calls telephone of recording to relation in security Information

lockdown with reduced sales post-lockdown in possibilities it did include a two-month national this scenario did not include the most severe of plausible downside sensitivity scenario. Whilst but asevere considered management end half-year 2020 the at viability and concern going considering In behaviour. consumer on have will it effect long-term to medium the assess to difficult therefore, is, it and UK the in precedence lacks scale this of A pandemic in the Financial Review. described as COVID-19 the of outbreak impact the availability of product and the long-term assumptions in relation to customer demand, statements,financial the Directors have made the of signing of date the from 12 months over future performance. In forecasting cash flows on the Group’s position, financial liquidity and COVID-19 of impact the considered carefully the statements, financial the Directors have of preparation of basis concern going the of adoption continued Group’s the assessing In Going concern and viability highlighted by PwC. areas other in controls in changes appropriate making to committed has management and any significant internal control weaknesses recommendations. did PwC not highlight with management’s responses to those together controls, and processes improve to PwC by made recommendations the as well as deficiencies in the control environment, significant any and findings key audit on PwC by prepared reports the reviewed Committee The Group. the for 2020 year perform any non-audit services during financial not did PwC period. athree-year over fees audit of 70% exceed to permitted not are auditors the the Audit Committee, and non-audit fees paid to and Officer Financial Chief the by authorisation pre- require work non-audit for fees All Financial Reporting Council. the by published Standards Ethical the by auditors may not perform any work prohibited external the Furthermore, interest. of conflict their and objectivity independence or create a affect might which or audit to required later be may they that work any perform to permitted not are auditors external The auditors. the by services non-audit of provision the to relation The Committee has established policies in regard. this in making is PwC The Committee will monitor the progress quality of their audits continue to improve. the that ensure to and FRC the by identified issues the address to hard working is PwC and required more than limited improvements reviewed audits FTSE350 35% the of FRC. the by reference to the Audit Quality Framework issues with quality audit ensure to taking is PwC steps the out sets and FRC the by conducted PwC of reviews quality audit the of results the summarises report 2019. That September in published was 2019, which June 30 ended year the for report transparency PwC’s reviewed

STRATEGIC REPORT CORPORATE GOVERNANCE the second half of the 2020 financial year with sales not expected to return to normal levels within the year. In the period post-half-year end, sales remained at materially elevated levels and in-store sales have outperformed those included within the COVID-19 adjusted forecast.

In considering going concern and viability

at the 2020 year end, management has again FINANCIAL STATEMENTS considered a severe but plausible down side scenario. Whilst this scenario again does not include the most severe of possibilities, it again reflects a two-month national lockdown in the first half of the 2021 financial year, followed by a period gradual recovery, only returning to normal levels by July 2021.

After making enquiries, the Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements (see basis of preparation on page 89). The Board’s Viability Statement is set out on page 49.

Fair, balanced and understandable The Committee considered whether the 2020 Annual Report is fair, balance and 61 understandable and whether it provides the necessary information to shareholders to assess the Group’s performance, business model and strategy. Also considered was management’s assessment of items included in the financial statements and the prominence given to them. The Committee and subsequently the Board were satisfied that, taken as a whole, the 2020 Annual Report and Accounts are fair, balance and understandable.

Ron McMillan Chair of the Audit Committee 1 October 2020 62 ScS Group plc Annual Report 2020 Directors’ Remuneration Report Remuneration Directors’ “On behalf of the Board, I I Board, of the “On behalf 25 July 2020.”25 July

George Adams Chairman of the Remuneration Committee Report for the year ended year the for ended Report Directors’ Remuneration am pleased to present the to pleased am present the Dear Shareholder Chair of the Remuneration Committee George Adams below. summarised are key principles the and shareholders’ information on starting page 69 for out set is policy current year. The this proposed being are changes no such as and continues to provide an appropriate framework policy three-year Our process. this of part forward looking business strategy is an integral that the alignment of remuneration with the essential to protecting shareholder value and are governance corporate of standards highest this. The Board considers that maintaining the remain appropriate to successfully deliver the current remuneration arrangements three-year strategy and the Committee believes its on focused remains Company the business, COVID-19 of the on impact the Notwithstanding General Meeting. Annual 2020 our at vote advisory an to subject be will Report Remuneration The Annual General Meeting, was applied for 2020. the Remuneration Policy, approved at the 2018 Our Annual Remuneration Report outlines how 1 October 2020 1 October

STRATEGIC REPORT CORPORATE GOVERNANCE Member and meetings attended in 2020 Member since Meetings attended George Adams (Chairman) 2015 5 Alan Smith 2014 5 Ron McMillan 2014 5 Angela Luger 2019 5

Remuneration principles FINANCIAL STATEMENTS The key aims of the Remuneration Policy are to: –– Attract, retain and motivate high-calibre senior management; –– Focus senior management on the delivery of the Group’s business objectives; –– Promote a strong and sustainable performance culture; –– Incentivise profitable growth; and –– Align the interests of the Executive Directors and senior management with those of the shareholders.

In promoting these objectives, the Committee’s aims are to implement the Remuneration Policy in a simple, transparent and understandable way, supporting the principles set out in Provision 40 of the 2018 UK Corporate Governance Code (‘the Code’):

Clarity –– The Remuneration Policy is closely aligned to the business, purpose and strategy and has a clear link between performance and reward. Simplicity –– The Policy has operated largely unchanged since IPO. Risk –– Performance targets are set to ensure the delivery of sustainable profitable growth and appropriate safeguards are in place to ensure that overall outcomes are aligned with underlying business performance and the stakeholder experience. Predictability –– Maximum limits for variable pay are set and disclosed. Proportionality –– Remuneration levels are periodically benchmarked against other similar sized companies and actual rewards closely linked to the performance outcomes delivered. 63 Alignment to culture –– The incentive schemes are focused on our strategy of sustainable profitable growth and are designed to encourage behaviours that are consistent with ScS’ purpose, culture and values.

Overview of performance and remuneration outcomes The COVID-19 pandemic has had a significant impact on the business, resulting in the temporary closure of our stores and distribution network for several weeks. Whilst the Group’s strong balance sheet and flexible cost base, has enabled us to be resilient to the challenges facing us, there was an inevitable impact on profitability during the year. As such, no bonuses will be paid to Executive Directors or senior management for 2020 and the LTIP award that was granted in 2017 will lapse.

As part of our commitment to our employees, the Board and senior management have worked tirelessly to keep the spirit and morale of employees high, planning quick responses to re-opening our stores and distribution centres whilst ensuring all employees were re-trained and comfortable with altered working conditions. There was a strong focus on communication and keeping our entire team updated whilst our stores and distribution centres were closed. The focus for FY21 will be on getting the business back on track to pre-COVID performance as soon as possible.

No changes are proposed to the Executive Directors’ salaries for 2021. Our incentive schemes (annual bonus and LTIP) will continue to focus on our long-term strategy of profitable growth, with stretching performance targets applied. The Committee will use its discretion to ensure that any rewards earned are commensurate with the underlying performance of the business and the employee and stakeholder experience.

The Committee has taken into account the Code, wider workforce remuneration and emerging best practice in relation to Executive Director remuneration. The Committee believes that our remuneration framework is clear and transparent and aligned with our culture; over 80% of the wider workforce are eligible to earn a bonus. The incentive framework consists of an annual bonus and LTIP, with capped award levels and a pay-out linked to group performance. Stretching but fair targets are set. This ensures that potential reward outcomes are clear and aligned to the performance achieved, with the Committee having the discretion to adjust outcomes where this is not considered to be the case.

Pay levels are set taking into account internal and external reference points to ensure that pay is competitive whilst remaining equitable within the Group. A number of additional factors are in place to mitigate reputational and other risks, including malus and clawback provisions, Committee discretion, a two-year holding period on LTIP awards, and minimum shareholding guidelines. 64 ScS Group plc Annual Report 2020 % maximum future LTIP arrangements. No changes are intended for in-flight awards. awards. in-flight for intended are changes No and current the LTIP arrangements. discuss to future shareholders of anumber with directly engaged has Committee The se. per targets agreed the to amendment an not 16 are and IFRS of aresult as created changes the reflect to purely intended is adjustment year. The relevant the reach we until known be not 16 will IFRS of final the impact leases, vehicle and property to regards with require we data the all have we Whilst 16 crystallised. has IFRS of impact 2018, 2019 and the the for when LTIP2020 awards targets EPS the adjust to intends therefore Committee The term. lease the over costs charge finance the and exist, longer depreciation no by will replaced charges being Rental sheet. balance the on shown and capitalised be will leases vehicle and property to that relating is flows impact cash The future vesting. of point the at awards these for performance EPS on impact will 16, changes IFRS of implementation the with that noted is It 38.7p 38.7p than less 31.6p but than Greater 31.6p 31.6p than Less 2022) (in figure EPS applied: were targets EPS following the Report, Annual year’s last in disclosed As 2019 236.0p. was 14 October grant, of date the on price share average The period. hold atwo-year plus period, vesting athree-year have awards CFO. The CEO and the for 195,319 153,191 for respectively were and and shares options nil-cost of form the in made were awards The each. salary of 150% of value aface with award Plan aLong-Term granted Incentive were Directors Executive year, the the During Report. 2017 the in Annual full in out set were attached conditions performance the and award the of 25.1p. of Details EPS aminimum set, condition performance the below was Group the for share per loss the as full in lapse will 2020, in 2017, vest to due 16 was on October LTIP which granted The Long-term incentives stretching EBITDA targets. The Committee does not disclose the targets in advance as they are commercially sensitive. Retrospective disclosure of the the of disclosure EBITDA Retrospective targets will be included in sensitive. next year’s report. commercially are they as advance in targets the disclose not does Committee The targets. EBITDA stretching of achievement the on based is bonus CFO. The CEO and the both for salary base of 140% at unchanged is opportunity bonus maximum 2021,For the David Knight Pre-bonus EBITDA below: out set are calculated be to was bonus the how and targets the of details The out. paid was bonus no required such as level and threshold the meet not did 2020 in performance EBITDA However, 2020. in bonuses annual receive to eligible were Directors Executive The Annual bonus salary. base times four to up of cover provides that assurance life and insurance medical private with provided also are Directors Executive The £17,000, £18,624 of respectively. and allowance acar receive CFO the CEO and The a as remain will capped fixed contribution. Any pension new the Executive Director salary, appointments will basic have a their to pension contribution in line uplift with that provided afuture of event to the the broader In workforce. pension. CFO’s CEO and the of value monetary current Committee 2019, the In the freeze to agreed allowance. acash as paid is balance The fund. pension their into benefits pension of respectively, receive CFO annum, the CEO per and The £9,960 and £10,000 non-contributory. are which salary, basic their of 20% to equating benefits pension to eligible are Directors Executive The Pension and other benefits median. market the with line in broadly benchmark salary CFO’s the and CEO’s salary The – – are: 2020 1October at as salaries basic current The 67. page on detailed is employees other to increase given average the of Details team. management senior the of any to given were increases pay basic No 2020. in remuneration their from remain will CFO unchanged the CEO and the of COVID-19, of salaries the light in and conditions market uncertain the given that, decided Committee The reviewed. Remuneration was Group, the of management senior the with along Company, the of Directors Executive two the of remuneration year, the the During Salary Elements of remuneration Annual Remuneration Report General 2020. Annual November 25 on our at Meeting Report Remuneration Annual our for support your receive to hope we and informative and helpful report this find you We hope criteria. performance looking forward the set to Committee the by in directly engaged have we basis; conversations looking aforward with LTIP’s on principal shareholders and to bonuses understand for fully their thoughts on forward-looking targets remuneration. The feedback appropriate obtained has been setting used in difficulties the and the Given uncertainties current implementation. its and Policy Remuneration our on feedback any welcome actively we and shareholders our of views the We value Shareholder feedback continued Report Remuneration Directors’ Chris Muir – – Chris Muir: £240,000 David Knight: £306,000 100% 100% and 25% between basis Straight-line 25% Nil Percentage of award that vests that award of Percentage £19,102,750 £42,000 £53,550 12.5% £21,231,000 £168,000 £214,200 50% £22,688,500 £252,000 £321,300 75% £24,146,000 £336,000 £428,400

100%

STRATEGIC REPORT CORPORATE GOVERNANCE A wider than normal target band has been applied to reflect both the current uncertainty and to provide a stretching level at the upper limit.

The Committee has agreed to award a Long-Term Incentive Plan in 2021. The CEO and CFO will be awarded nil cost options subject to EPS targets being met. The awards have a three-year vesting period, plus a two-year holding period, and are subject to the following targets:

EPS figure (in 2023) Percentage of award that vests Less than 18.3p Nil 18.3p 25% Greater than 18.3p but less than 31.0p Straight-line basis between 25% and 100% FINANCIAL STATEMENTS 31.0p 100%

The Committee considers that the targets are stretching and will ensure that significant reward is only available for delivery of a strong performance.

While the share price has trended lower recently due to external factors, the Remuneration Committee determined that the 2020 grants would be maintained at the normal levels (150% of base salary for the Executive Directors). However, the Committee has full discretion, under the plan rules, to ensure that the final vesting outcomes are justified based on the performance of the Group, including consideration of any windfall gains.

All-employee share plans The Company offers an all-employee UK Share Incentive Plan (SIP). All employees on completion of six months service become eligible to join. Under the SIP employees may elect to acquire up to £150 worth of shares in the Company every month or pay a maximum one-off lump sum of up to £1,800 in a tax year.

The Executive Directors are eligible to participate in the SIP on the same basis as other employees.

Single figure table of total remuneration Executive Directors – audited The audited table below shows the aggregate remuneration of the Directors of the Group during 2020 and 2019:

Total fixed Total variable Salary Benefits** Bonus LTIP*** Pension* Total remuneration remuneration £ £ £ £ £ £ £ £ David Knight 65 2019 306,000 20,798 425,187 281,787 61,200 1,094,972 387,998 706,974 2020 306,000 20,827 – – 61,200 388,027 388,027 – Chris Muir 2019 240,000 18,605 238,200 222,848 48,000 767,653 306,605 461,048 2020 240,000 19,035 – – 48,000 307,035 307,035 –

* David Knight and Chris Muir opt to receive part of their pension contributions as a cash allowance. ** Benefits of the Directors are discussed in detail on page 69. *** The value of the LTIP award vesting in 2019 has been updated to reflect the actual share price on the date of vesting.

Payments to past Directors and loss of office payments – audited There were no payments to past directors for loss of office in the year ended 25 July 2020 (2019: none).

Remuneration of the Chairman and Non-Executive Directors – audited The structure of Non-Executive Directors fees, and their levels, were set by the Board on admission. No review is expected during 2021.

The fees of the Non-Executive Directors are set by the Board and take account of the chairmanship of Board Committees and the time and responsibility of the roles of each Director.

The fees paid for 2020 to the Non-Executive Directors were as follows:

2020 2019 £ £ Alan Smith 125,000 125,000 Ron McMillan 60,000 60,000 George Adams 60,000 60,000 Angela Luger (appointed 16 May 2019) 50,000 10,642

Our Non-Executive Directors (excluding the Chairman) have a base salary of £50,000. Ron McMillan and George Adams each receive an additional £10,000 per annum for chairing the Audit and Remuneration Committees respectively.

Paul Daccus (resigned 11 February 2020) did not receive any remuneration for his services to the Group. There were no other amounts disclosable for the Non-Executive Directors for the year. 66 ScS Group plc Annual Report 2020 FTSE Fledgling Index. the in £100 of invested value the with 2015 compared 26 January on Group ScS in £100 of invested 2020, July 25 by value, the shows graph This Source: Datastream (Thomson Reuters). size. acomparable of companies includes which index market equity abroad represents it as date selected the was from index This Index, Group. the of IPO Fledgling the of FTSE the of performance the against performance (TSR) Return Total Shareholder Group’s the illustrates below chart The pay table and graph Performance LTIP. the under awarded options share of retention the by achieved be will which build to continue to ashareholding, up required is 50,474, he but currently is Muir Chris for shareholding beneficial The end. year the at level was this of excess in Knight David for significantly shareholding The salary. base of 200% to equivalent ashareholding maintain and build to required are Directors Executive The 152.47p. of 2020 July 25 on ending months three the in price share average the on based is end year the at interests share of value The ** * Number David Knight Luger Angela Adams George McMillan Ron Alan Smith Director 2020. end year relevant) where financial parties the at as related or persons connected (including Directors by held potentially or held shares of number the out sets below table The Directors’ shareholding and share interests – audited continued Report Remuneration Directors’ Value at year end year at Value Number Chris Muir end year at Value Total shareholder return (Rebased) Option awards vested (but unexercised) are 22,772 options at an exercise price of 175p. of price exercise an at options 22,772 are unexercised) (but vested awards 2020. 2019 and Option in granted awards to relates This period. athree-year over performance EPS to subject vest Awards 100 60 8 120 140 160 180 200

27 Jan 2015 0

27Apr 2015

27Jul 2015

27Oct 2015

27Jan 2016

27Apr 2016

27Jul 2016

27Oct 2016

27Jan 2017

27Apr 2017

27Jul 2017

27Oct 2017 held beneficially

27Jan 2018 interests Share £2,330,679 1,528,615 £76,958

27Apr 2018 50,474

27Jul 2018 Nil cost options

27Oct 2018 performance* £480,154 £612,196 401,519 subject to to subject 314,917

27Jan 2019

27Apr 2019

27Jul 2019 ScS Option awardsOption Shares held beneficially £34,720 22,772**

27Oct 2019 18,096 vested vested 2,000 - - FTSE FledglingIndex 27Jan 2020 – –

27Apr 2020 £2,977,595 1,952,906 £557,112

365,391 Unvested Unvested 31 Jul 2020

Total

– – – – STRATEGIC REPORT CORPORATE GOVERNANCE Changes in the remuneration of the CEO Total remuneration of the CEO in each of the past ten years is as follows:

Salary Bonus Benefits LTIP Pension Total £ £ £ £ £ £ David Knight 2020 306,000 – 20,827 – 61,200 388,027 2019 306,000 425,187 20,798 281,787 61,200 1,094,972 FINANCIAL STATEMENTS 2018 306,000 427,372 20,836 – 61,200 815,408 2017 306,000 203,418 20,685 – 61,200 591,303 2016 300,000 420,000 21,290 – 60,000 801,290 2015 300,000 – 20,183 – 60,000 380,183 2014 300,000 177,450 20,336 – 60,000 557,786 2013 247,500 274,073 16,302 – 49,500 587,375 2012 247,500 199,635 13,929 – 71,625 532,689 2011 247,500 – 17,265 – 49,500 314,265

Changes in the remuneration of the Directors The table below shows the percentage changes in the Executive and Non-Executive Directors’ remuneration between the financial year ended 25 July 2020 and the year ended 27 July 2019 compared to the amounts for full-time employees of the Group for each of the following elements of pay:

Percentage change from 2019 Salary Benefits Bonus Executive Directors David Knight - 0.1% (100)% Chris Muir - 2.3% (100)% 67 Non-Executive Directors Alan Smith - n/a n/a Ron McMillan - n/a n/a George Adams - n/a n/a Angela Luger - n/a n/a Average per employee (excluding Directors) 1.2% 7.3% (56.3%)

Relative importance of the spend on pay The table below shows the movement in spend on pay for all employees compared with the distributions to shareholders.

2020 2019 £’000 £’000 % Change Total pay for employees 52,230 60,308 (13.4%) Distributions to shareholders 4,336 6,547 (33.8%)

CEO pay ratio The table below shows the ratio of CEO pay for 2020 comparing the sum of the single total figures of remuneration for David Knight to the full-time equivalent total reward of those colleagues whose pay is ranked at the 25th, 50th and 75th percentile in our UK workforce.

We have adopted Methodology Option A to calculate the ratio, as we believe it provides the best comparison of colleague pay with that of our CEO by using a consistent methodology to value remuneration and identify our employees ranked at the 25th, 50th and 75th percentiles. Employee pay was calculated based on actual pay and benefits for the 12 monthly payrolls in respect of the full financial year to 25 July 2020. We can confirm that none of the three individuals received additional or exceptional pay within the year and no adjustments were made to the calculation of the total remuneration for these employees from the methodology set out for the CEO’s single total figure remuneration. The ratios as set out below:

Year Method 25th percentile 50th percentile 75th percentile 2020 Option A 21:1 16:1 12:1

This is the first year that ScS Group has disclosed the pay ratio and, as such, we have no historic data against which to compare this year’s ratio. We will provide additional commentary on the comparison year-on-year from next year’s report. The table below provides the individual remuneration information in relation to our employees ranked at the 25th, 50th and 75th percentiles:

Year Method 25th percentile 50th percentile 75th percentile

2020 Salary £17,601 £24,259 £19,727 Total pay and benefits £18,190 £24,259 £31,412 68 ScS Group plc Annual Report 2020 This report has been approved by the Board of Directors of the Group and signed on behalf of the Board by: Board the of behalf on signed and Group the of Directors of Board the by approved been has report This To approve the Remuneration Policy (2018 AGM) Policy Remuneration To the approve 1 October 2020 1 October Chairman of the Remuneration Committee George Adams (2019 AGM) Report Remuneration Annual To the approve Resolution votes following from the shareholders. 2018 received AGM the from Policy Remuneration the approve to resolution the 2019 and AGM the from Report Remuneration Annual the approve to resolution The 38,012,655. was rights voting with issued shares of number total 2019, the 27 on November Meeting General Annual At the Shareholder voting to remuneration advice provided to the Committee during 2020 amounted to relation £9,540, in excluding Mercer by VAT, received Total fees commitment. based time VAT, on £14,146, to the required required the excluding time on amounted commitment. 2020 based during provided advice Committee the to remuneration to relation in Street Bridge New by received Total fees independent. and objective been have they that year the during comfortable is Mercer and and Street Bridge New by provided advice received has Committee The UK. the in consulting in remuneration conduct of executive to code the relation under operate voluntarily such, as and, Group Consultants Remuneration the of members are Ltd Mercer and Street Bridge New process. aselection following Committee Remuneration the by appointed were Mercer Ltd. Mercer Hewitt 2020, Aon of July name from and Ltd, atrading Street, Bridge New from matters remuneration executive on advice independent received Committee year, the the During Committee to the Advisors Luger Angela McMillan Ron Alan Smith Adams George Name follows: as was meetings at Committee the of members of attendance The attendance in required. as were Director, Services Corporate Liston, Marie and Daccus Paul Muir, Chris Knight, year, David the of course the During remuneration. in Committee the its deliberations assist as and appropriate. No meetings person is present attend to during any deliberations management relating to senior their own the of remuneration or members involved other in or determining their own Directors Executive the invite may Committee The 55. page on Report Annual the of section Governance Corporate the in out set are Committee the of responsibilities The Directors. Non-Executive independent are Luger. members current Angela the of and All McMillan Ron Smith, Alan Chairman), (Committee Adams George were year financial 2020 the for Committee the of members The Remuneration Committee scsplc.co.uk. on found be can gap pay gender our on Information Gender pay gap continued Report Remuneration Directors’ 30,408,893 28,329,606 Votes for Votes of votes cast cast votes of Percentage 99.99% 99.96% in favour in Votes against 13,626 4,115 of votes cast cast votes of Percentage 0.04% 0.01% against withheld 2,368 Votes Votes - 30,422,519 28,336,089 Total votes cast capital voted Attendance Percentage 76.04% 74.54% of issued of issued share

5 5 5 5

STRATEGIC REPORT

Remuneration Policy Report CORPORATE GOVERNANCE Remuneration Policy overview Total remuneration packages for the Executive Directors established at the time of the IPO will provide the basis for the structure of Director remuneration for the Group. Variable elements of reward including performance-based annual bonuses and long-term incentives will form a significant part of the overall remuneration package for Executive Directors and senior management.

How the views of shareholders are taken into account The Committee recognises that developing a dialogue with shareholders is constructive and informative in developing and applying the Remuneration Policy. The Committee monitors the feedback received from shareholders during the year and takes into account the best practice guidance issued by institutional shareholders and their representative bodies. FINANCIAL STATEMENTS

The Directors’ Remuneration Policy The Directors’ Remuneration Policy was approved by shareholders at the 2018 AGM and took effect from that date. As part of the review process, feedback was sought and received from major shareholders. This report has been prepared on behalf of, and has been approved by, the Board. It complies with The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013.

Changes from the previously approved policy The key changes between the previous policy and this Policy were: –– Broadening the structure of the bonus scheme to include non-financial measures. –– The introduction of a minimum two-year holding period for LTIP awards and an increase in the maximum award that can be granted from 100% of basic salary to 150% of basic salary. –– An increase in shareholding requirements from 100% of basic salary to 200% of basic salary. –– Further minor amendments have been made either to clarify aspects of the previous policy or to reflect consequential amendments following the material amendments described above.

Remuneration element Purpose Operation Maximum Base salary This is the basic pay and Base salaries are reviewed annually with changes Base salaries will be benchmarked periodically against reflects the individual’s typically taking effect from the beginning of the companies that are both main and AIM listed, who are role, responsibilities and relevant financial year. On reviews, consideration is of a similar size, sector and complexity. contribution to the Group. given by the Committee to a range of factors, including the Group’s overall performance, market conditions Salaries will generally be set at the mid-market levels. 69 and individual performance of executives and the level of salary increases given to employees across the Group. Benefits To provide benefits which The Group will provide market competitive benefits, We ensure that benefits offered are in line with are valued by the individual which may periodically be reviewed. Executives will the market. and assist them in carrying generally be eligible to receive those benefits on similar out their duties. terms to other senior executives.

Executives are entitled to a car allowance or a company car, car insurance, other running costs and fuel, death in service life assurance, private medical care and any other Group-wide benefits including employee discount. Business travel and associated hospitality are provided in the normal course of business.

The Committee has the discretion to add or remove benefits to remain market competitive or to meet the needs of the business. In addition, where the Committee considers it appropriate to do so, additional relocation expenses may be paid. Pension To provide a market Executive Directors may take pension benefits as a A total maximum value of 20% of base salary for competitive pension contribution to defined contribution personal pension existing Executive Directors. contribution (or equivalent plans, or on reaching the lifetime limit for pension cash allowance). contributions the Executive Director can receive Since the policy was introduced, the Committee have cash in lieu. agreed to cap the pension contributions for existing Directors at their current pound value and committed to align the pension arrangement for future hires with the workforce rate. Bonus Provide an incentive The Committee intends for the majority of the The current annual bonus potential for the CEO and linked to the financial bonus to be based on financial measures, but has CFO is 140% of base salary. The threshold bonus levels performance of the the discretion to introduce operational, corporate, will be no more than 25% of their respective maxima. Group and any other divisional and/or individual performance measures As the regulations require a formal cap for a three-year appropriate individual if appropriate to the business. period, future bonus potential will only increase where or business measures. appropriate against market data and, in any event, Performance conditions, once set, will generally will be subject to an overall maximum of 200% of salary remain unaltered, but the Committee has the right in for any Executive Director. its absolute discretion to make adjustments during any performance period to reflect any events arising which were unforeseen when the performance conditions were originally set by the Committee. Bonuses are normally paid in cash. 70 ScS Group plc Annual Report 2020 Employee share plan Shareholding guidelines The Committee sets a threshold on-target and maximum pay-out target under the plan. the under target pay-out maximum and on-target athreshold sets Committee The year. each strategy Group’s the to relation in vary may them of weighting the and year. Committee the by adopted financial the for metrics The budget the against including factors of arange on based Committee the by set are targets financial performance and The plan strategic performance. Group’s the of account take to plan incentive annual the under annually targets performance the set will Committee The Annual incentive plan Operation of variable pay so. do to appropriate felt be it should workforce wider the with Directors, consultation Executive consider the for will and reviews salary annual undertaking when workforce broader the for increase salary base general the Committee The account into Group. takes broader the across structures pay to regard have also will Committee the forward, going Policy Remuneration the setting In employees. other all with consistent abasis on participate to eligible are Directors SIP, the Executive Under launched. been has admission, to prior adopted was which (SIP), Plan Incentive Share employee Group The ownership. share widespread to committed is Group The awards. share performance for Plan Long-Term the in Incentive participates also management senior of group under Asmall above. adopted be to Policy plan incentive Remuneration the annual performance-based the in participate also will management senior other Directors, Executive the as well As Remuneration Policy and other employees so. do to Group the of interests that best success of the in is it prospect areasonable have to claims such considers Committee the where Director Executive the of with employment of connection in termination made the claims any compromise or settle or entitled, is Director Executive an which to entitlements statutory any pay may Group The Payment of statutory entitlements and settlement of claims Long-term incentives Remuneration element continued Report Policy Remuneration adopted in April 2015. 2015. April in adopted was which employees UK for plan incentive share operates an employee the Group, the Group of success long-term the in participation and ownership by employees To encourage share been obtained. have they once levels minimum shareholding expected to maintain their are Directors Executive received by shareholders. received returns the and business the of performance long-term the with Directors the To align Purpose

employees of the Group in the UK. the in Group the of employees other as terms same the on (SIP) Plan Incentive Share employee the in participate can Directors Executive less onerous overall. of the policy but without making the guidelines any to alter the shareholding guidelines during the period right the reserves Committee The policy. against The Committee will review shareholding annually LTIP awards granted to others. to granted LTIP awards to relation in Committee) the of discretion the (at apply may and Directors Executive to granted LTIP awards A two-year post-vesting holding period shall apply to earlier). (if exercise or period holding the of expiry of date the to applies, period aholding and option an is award the or, where vested award the which on date the and date award the between period the of respect in award the under shares plan vested of number the on payable been have would that dividends the to value in equal amount an in shares plan of delivery or payment acash either as made be will equivalents Dividend satisfy. to difficult less materially not is and performance of measure afairer produces a waiver) of case the in than (other and reasonable is waiver or Committee, provided that such substitution, variation the by set first were conditions performance the when unforeseen were which arising events of case in period the performance conditions during any performance waive or vary substitute, to discretion absolute its in right the has Committee the but unaltered, remain Performance conditions, once set, will generally Committee. the of discretion the at awards future for share per earnings of instead or alongside used be may targets and measures different but targets, share per earnings on based normally is Performance period. a three-year may set performance conditions typically over based on performance conditions. The Committee awards share conditional as or options) cost nil (including options as annually made be may Awards Operation

to the published HMRC annual limits. subject is SIP the under free for awarded or amatch as offered purchased, be can that amount maximum The shares. free of award an make to or purchase), to chooses employee an shares of number the to proportion (in shares matching award also may Group the so, do to intention current no has Group the Although trust. SIP aresident through salary insurance pre-national and pre-tax their from shares purchase can employees SIP the of rules the Under of base salary of the relevant Executive. relevant the of salary base of The minimum required level of shareholding is 200% to awards from 2019 onwards. from awards to A two-year post-vesting holding period will be applied a threshold performance. for earned be can award an of 25% than more No year. financial each of respect in salary basic their of 150% than more no to equating options share cost nil Directors Executive award to is policy The Maximum

STRATEGIC REPORT CORPORATE GOVERNANCE Long-Term Incentive Plan (LTIP) The Committee will regularly review the performance targets in relation to the LTIP to take account of the Group’s strategic plan and financial performance. Targets will be set by the Committee at the time of the grant of each award.

The Committee will operate the scheme in accordance with the plan rules which were approved by shareholders in January 2015. Under the plan rules the Committee has authority to vary the terms of an existing award in certain circumstances. This includes the ability to: –– Settle awards in cash in extremis; –– Make adjustments to the number of shares under option, in the event of a change in the share capital of the Group; and

–– Permit the early vesting of awards in the event of a change in control of the Group or, if appropriate to do so, on cessation of employment (see policy FINANCIAL STATEMENTS on service contracts and payments for loss of office).

Clawback The annual incentive plan and the LTIP rules include provisions for malus and clawback within a three-year period following payment or vesting if the Committee concludes that there has been a material misstatement of financial results; an error has been made in assessing any performance targets; conduct of the individual which amounts to fraud or gross misconduct; events or behaviour of the individual leading to censure of the Group by a regulatory authority which has an impact on the reputation of the Group which justifies clawback being operated; or where the Committee discovers information from which it concludes that a bonus or award was paid or vested to a greater extent than it should have been. Malus and clawback provisions have applied to awards made since January 2015.

Potential reward scenarios The graphs below show an estimate of the Executive Directors’ remuneration package as it will be implemented for 2020.

Assumptions –– The minimum scenario reflects fixed remuneration only which is base salary, pension and benefits. –– The on-target scenario reflects the fixed remuneration plus 50% of the maximum annual bonus under the annual incentive plan, and 25% vesting under the LTIP being the threshold level (assuming an award of 150% of salary to Executive Directors under the LTIP). –– The maximum scenario reflects fixed remuneration plus 100% of the maximum annual bonus under the annual incentive plan which is 140% of base salary and 150% vesting under the LTIP (assuming an award of 150% of salary under the LTIP). –– The maximum plus scenario is the same above but shows the impact of a 50% increase in the share price on the value of the LTIP award (the on-target 71 and maximum scenarios exclude the impact of share price increase).

David Knight (Chief Executive Officer) Chris Muir (Chief Financial Officer)

£’000 £’000 1,500 1,200 1,200 900

900 600 600 300 300

0 M M O M 0 M M O M P P

Base Bonus LTIP

Discretions retained by the Committee in operating variable pay schemes The Committee operates the Group’s various incentive plans according to their respective rules and (in the case of the Share Incentive Plan) in accordance with relevant legislation and HMRC guidance. In order to ensure efficient administration of these plans, certain operational discretions are reserved to the Committee. These include: –– Determining who may participate in the plans; –– Determining the timing of grants of awards and/or payments under the plans; –– Determining the quantum of any awards and/or payments (within the limits set out in the policy table above); –– In exceptional circumstances, determining that a share-based award shall be settled (in full or in part) in cash; –– Determining the performance measures and targets applicable to an award (in accordance with the statements made in the policy table above); –– Where a participant ceases to be employed by the Group or relocates abroad, determining whether ‘good leaver’ status shall apply; –– Determining the extent of vesting of an award based on assessment of the performance conditions, including discretion as to the basis on which performance is to be measured if an award vests in advance of normal timetable (on cessation of employment as a ‘good leaver’ or on the occurrence of corporate events); –– Whether, and to what extent, pro ration shall apply in the event of cessation of employment as a ‘good leaver’ or on the occurrence of corporate events; –– Whether malus and/or clawback shall be applied to any award and, if so, the extent to which they shall apply; and –– Making appropriate adjustments to awards on account of certain events, such as major changes in the Group’s capital structure. 72 ScS Group plc Annual Report 2020 or (if later) the expiry of any holding period which the award was subject to. The Committee has the discretion to extend this period. period. this extend to discretion the has Committee The to. subject was award the which period holding any of expiry leaving the later) (if or after months six of aperiod for exercisable remain employment of termination of notice receiving or giving before vested have may which Awards Committee. the of discretion the at permitted be may awards outstanding of considers it if vesting Early requirement so. do to this appropriate it disapply to discretion has Committee the although basis, atime-apportioned on applied be Apro-rata normally would targets. reduction performance applicable any of achievement the account into take will Committee the vesting, any of extent the determining In discretion. absolute its in specify may it as terms such on vest to award an permits unless or discretion scenarios its in leaver’ ‘good Committee the prescribed certain in except employment, of termination of notice given being or giving individual the on lapse ordinarily shall LTIP, the awards of rules unvested the Under rules. plan relevant the by governed are plans share Group’s the under made awards Share-based Performance share plans on termination date. payment normal the paid be before may or at this and either awarded, be may bonus time-based pro-rata or Afull leaving. individual the for reasons the of Committee the by consideration to subject performance, part-year or full the on based notice under or aleaver to paid be to abonus permit to discretion plan, absolute has incentive Committee annual the the Under notice. under is Director Executive an if or termination on bonus annual to entitlement contractual no is There Annual bonus on termination Company. the of office registered the at inspection for available are Directors Executive the of contracts service The terms. similar on be will contracts new Any although basis the Committee has discretion atime-apportioned on to and disapply time-apportionment event, if it relevant considers the of date it appropriate the at met to been do have so. targets performance relevant the which to to extent pro-rated the be will reflect awards The date. event the after practicable as soon as payable become shall plans incentive long-term and bonus then the occur event under control of awards achange Should contracts. service Directors’ Executive the under control of achange on provisions enhanced no are There cessation. following period alimited for fees) legal or reasonable as (such allowances outplacement or benefits appropriate receive to continue to Director Executive an allow circumstances the However, exceptional in may employment. of Committee cessation their following allowances or benefits any receive to entitled be not shall Director Executive an Ordinarily, agreements. service Directors’ Executive the under paid be can notice of period unexpired the for only salary base the to equal notice of lieu in Payment misconduct. gross as such events certain of occurrence the on date the to up termination accrued pay for except compensation of payment or notice without terminated be also can contract service Directors’ Executive An 2016. 8January CFO 2014 the for and 19 December CEO dated is the for contract notice. service 12The months’ on Director Executive the or Company the by either terminable but indefinite is CFO CEO and the for contract service The Main provisions on termination office of loss for payments and contract Service – – – – – – – the following: Additionally, on appointment of any new Executive Director (whether by external recruitment or internal promotion) the Remuneration Policy will permit time the at of the Policy appointment. Remuneration Group’s the of terms the with accordance in set be would Director Executive anew for package remuneration The Recruitment and promotions continued Report Policy Remuneration – – – – – – – On any appointment, the Committee may agree that the Group will meet the appropriate relocation expenses. the to prior existing appointment would also obligations continue. remuneration ongoing other Any appointment. the of account take to adjustment relevant any with according out pay terms, to its to allowed be would role former individual’s the of respect in awarded element pay variable any appointment, internal an On appropriate. considers Committee the as set be might targets performance different appointment the on timing, depending and employment, of period the for pro-rated terms its with accordance in operate would plan incentive annual The vesting. for period time the and award the of nature the conditions, ongoing to remuneration provided addition under in the Policy (as employer permitted under former Listing Rules) taking account of individual’s the amount the forfeited, from the extent forgone of any performance amounts for Director Executive anew compensate may Group The situation. arecruitment in so do to necessary if salary of 20% of amaximum to up and this of excess in provision a pension provide to discretion the reserves Committee the However, team. senior management the of members and Directors Executive new all for workforce wider the as level same the to pension) of lieu in scheme allowance acash as contribution paid or adefined to contribution aCompany through either (provided provision pension the limit to is intention the pensions, On development. and performance individual’s the to subject awarded be may employees other to those generally above granted salary) of (as apercentage increases phased rates, market median the below appointment on set is salary Director’s Executive anew If in the Policy for existing Directors. levels such at pay as it considers fixed set to necessary although, in right practice, the it envisages abiding reserves by the caps set out Committee in this the Policy. and Variable recruit anew to pay will be apply capped pay at the limits set fixed out on caps that require not do regulations UK The

STRATEGIC REPORT CORPORATE GOVERNANCE Chairman and Non-Executive Directors Fees The level and structure of fees for the Non-Executive Directors was set by the Board from admission. The fees of the Non-Executive Directors are set by the Board taking account of the chairmanship of Board Committees and the time and responsibility of the roles of each of them. The fees are paid in cash. The Committee has responsibility for determining fees paid to the Chairman of the Board. All fees are subject to the aggregate fee cap for Directors in the Articles of Association, which is currently £400,000 per annum.

Details of the fees paid to the Non-Executive Directors are set out in the Remuneration Report. The Chairman and the Non-Executive Directors are entitled to be reimbursed for all expenses reasonably incurred by them in the performance of their duties. The Chairman and Non-Executive Directors FINANCIAL STATEMENTS do not participate in any bonus or share plans of the Company.

The Non-Executive Directors do not have service contracts. They are appointed for an initial three-year period subject to being re-elected by members annually.

Remuneration element Purpose Operation Maximum Non-Executive Directors’ fees Helps recruit and retain high quality, The level and structure of fees The aggregate amount of Directors’ experienced individuals. was set by the Board at admission. fees is limited by the Group’s Articles The fees consist of an annual basic of Association. Reflects time commitment and role. fee plus additional fees paid for the chairmanship of Board Committees. Limited benefits relating to travel and accommodation may be provided in relation to the performance of any Director’s duties.

Non-Executive Directors’ fees are set by the Executive Directors with reference to external data on fee levels in similar businesses, having taken account of the responsibilities 73 of individual Directors and their expected annual time commitment.

Letters of appointment Alan Smith and Ron McMillan have letters of appointment dated 22 October 2014 for an initial period of three years and are subject to three months’ notice of termination by either side at any time and subject to annual re-appointment as a Director by the shareholders. George Adams’ letter of appointment is dated 9 July 2015, and Angela Luger’s letter of appointment is dated 16 May 2019. Alan Smith and Ron McMillan were re-appointed for a further term of three years commencing 22 October 2020. George Adams was re-appointed for a further term of three years commencing 9 July 2018. The appointment letters provide that no other compensation is payable on termination.

Insurance All of the members of the Board have the benefit of Directors and Officers Liability Insurance which gives them cover for legal action which may arise against them personally. 74 ScS Group plc Annual Report 2020 under such plans to vest on atakeover. on vest to plans granted such awards under and options cause may plans share Company’s the of provisions that except bid, atakeover following occurs that employment or loss for office of compensation for provide that employees and Directors its and Company the between a agreements any of aware not following are Company Directors the of The control takeover. in achange upon terminate or alter effect, take would that agreements significant any to party not is Company The control of – change agreements Significant 2020. July 25 at shares treasury as held remained Group the in shares 77,275 shares. ordinary such to rights voting also waive to has and agreed it, by held shares ordinary of respect in receive to entitled be may it which dividends any waived has EBT The awards. satisfy to used were 290,025 which of share, ordinary per 232.2p of price average an at Group the in each £0.001 of shares ordinary 324,582 to year Trust purchased the 2020, financial July 25 the During schemes. incentive share Group’s the with connection in trust in shares hold to be to continues EBT January in the of Jersey in Trustees purpose the as 2015. The Limited Services Fiduciary Sanne with Trust (EBT) Benefit Employee plc Group ScS the established Company The Employee Trust Benefit cancelled. were Company the by purchased shares ordinary the purchase, this Following £4.4m. of consideration atotal for (LUX) Holdings S.A.R.L Product Parlour party related from share ordinary per 220.0p of a price at £1,996.45 of value nominal atotal with shares purchased ordinary Company 1,996,454 year, the the During AGM. 2020 the at proposed be will authority this of Arenewal Association. of Articles Company’s the under permitted as capital, share issued Company’s the of 10% to up market the in 2019 purchase to AGM the at shareholders by authorised was Company The Authority to purchase shares 103. 102 and pages 22 on note in shown are schemes relevant of operation the and options share employee outstanding of Details restrictions. such in result may that shares Company’s the of holders aware not are between Directors the agreements and any of Company the in securities of transfer the or rights voting on restrictions no are There paid. fully are capital shares share issued all Company’s and the over rights special any has person No Exchange. Stock London the on traded are and List Official ordinary the on The listed are shares meetings. general at vote one to right the carries share Each income. fixed no carry which shares ordinary of class one has Company The 111. page 9on note in shown are capital share issued Company’s the of Details Share capital shareholders. the of meeting ageneral at resolution special by amended be only may Association of Articles Company’s The of association Articles 87. page on Equity in Changes of Statement the in shown are reserves in Movements payments. dividend appropriate is it re-commence to when assess to continue will and shareholders Group’s the to income of importance the recognises Board and The Group. the of strength resilience financial the protect to used was cash the and government, UK the by provided mechanisms support the through cash when atime at receiving was it dividend afinal or interim an pay to appropriate was it feel not did Board the sheet, balance Group’s the of strength the Despite 85. page on Income Comprehensive of Statement Consolidated the in £11.4m) reported tax is after (2019: profit £2.2m of 2020 July 25 ended year for tax financial the after loss Group’s 105. to The 85 pages in contained are and 2020 July 25 ended year the for results Group’s the out set statements financial The Results and dividend 2006. Act 414CA 414CB Companies and the of sections in contained non-financial the with requirements accordance in reporting matters anti-bribery and anti-corruption rights, human for respect social, employee, information environment, the to activities, relating its of impact and performance, development, Group’s the understand Report stakeholders Annual help to the of 32 intended 33 to are sections pages on out set information non-financial and Index Stakeholder the Report, Annual the of sections referenced above the to addition In Non-financial informa 34 to 48 to 34 52 56 to 24 25 to Pages 77 33 32

STRATEGIC REPORT CORPORATE GOVERNANCE Streamlined energy and carbon reporting statement

Emission type kWh CO2e tonnes (Location based) Current year Previous year Current year Previous year (2019/2020) (2018/2019) Variance % (2019/2020) (2018/2019) Variance % Scope 1: combustion 12,796,459 16,200,593 (21%) 2,838 3,670 (23%) Scope 2: purchased energy 13,297,222 15,557,852 (15%) 3,399 4,404 (23%) Scope 3: indirect energy 1,991,785 333,736 497% 487 82 494% FINANCIAL STATEMENTS Total 28,085,466 32,092,181 (12%) 6,724 8,156 (18%)

Greenhouse gas emissions intensity ratio

Total footprint (scope 1, scope 2 and scope 3) – CO2e tonnes Current year Previous year (2019/2020) (2018/2019) Variance % Turnover (£’000) 268,119 333,267 (19.5%)

Intensity ratio (tCO2e/£100,000) 2.508 2.447 2.5%

The COVID-19 pandemic has had an impact on our turnover and carbon emissions. The relative impact on turnover is directly linked to reduced operations but we still have to produce some carbon emissions to maintain essential systems in our estate. This means that on a relative basis our performance is not directly comparable but is presented here for transparency and compliance with the Streamlined Energy and Carbon Reporting requirements. GHG protocol dual reporting

Emission type CO2e tonnes (dual reporting methodology) Market based Location based (Supplier specific) Var. % Scope 1: combustion 2,838 2,838 0% Scope 2: purchased energy 3,399 3,550 4% 75 Scope 3: indirect energy 487 487 0% Total 6,724 6,875 2%

–– Our methodology has been based on the principals of the Greenhouse Gas Protocol, taking account of the 2015 amendment which sets out a ‘dual reporting’ methodology for the reporting of Scope 2 emissions. In the ‘Total Footprint’ summary above, purchased electricity is reported on a location-based method. –– We have reported on all the measured emissions sources required under The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, except where stated. –– The period of our report is 1 August 2019 to 31 July 2020. –– This includes limited emissions under Scope 1 and 2 (gas & fuel used in transport; purchased electricity), except where stated, and limited emissions under Scope 3 (fuel used in personal/hire cars/vehicles for business purposes). –– Energy use and emissions figures relate to our UK operation (including offshore energy and emissions) only, except where stated. –– Conversion factors for UK electricity (location-based methodology), gas and other emissions are those published by the Department for Environment, Food and Rural Affairs for 2019/20. –– Conversion factors for UK electricity (market-based methodology) are published on the fuel mix disclosures on each supplier’s website. –– Gas data has not been estimated where non-billed months of data were received. This is due to a combination of known issues, such as supplier overbilling followed by periods of zero (catch-up) billing, sites moving to electricity only and expected variation in consumption (due to both seasonality and the COVID-19 outbreak). This approach is consistent with the ESOS methodology. Statement of exclusions –– No known exclusions. Directors and their interests Details of the Directors of the Company as at 25 July 2020 are shown on pages 50 and 51 and their interests in shares and share awards made to them under share incentive schemes in the Company are shown in the Directors’ Remuneration Report on page 66, all of which form part of this report. There have been no changes in the Board of the Company since that date.

The appointment and replacement of Directors is governed by the Company’s Articles of Association, the UK Corporate Governance Code, the Companies Act 2006 and related legislation. All the Directors will seek re-election at the AGM. A Director may be appointed by ordinary resolution of the shareholders or by the Board. The Board may from time to time appoint a Director to fill a vacancy or as an additional Director, provided that the individual seeks election at the next AGM.

The directors of the company who were in office during the year and up to the date of signing the financial statements were: Alan Smith Non-Executive Chairman George Adams Non-Executive Director Paul Daccus Non-Executive Director (Resigned 11 February 2020) Ron McMillan Non-Executive Director Angela Luger Non-Executive Director David Knight Chief Executive Officer Chris Muir Chief Financial Officer

Subject to provisions of the Companies Act 2006, the Company’s Articles of Association, and to any directions given by special resolution, the business of the Company shall be managed by the Board, which may exercise all the powers of the Company. 76 ScS Group plc Annual Report 2020 M&G Investment Management 1 October 2020 1 October Company Secretary Butts Richard Board the of order By information. that of aware are auditors the that establish to and information audit relevant any of aware themselves make to ought they directors as that taken steps have to all taken have Directors The unaware. are auditors the which of information audit relevant no is there aware, are Meeting. Directors the as General far So Annual the at members the to put be will auditors as PwC re-appoint to Aresolution office. in remain PwC that recommended has The Group’s independent auditors, PricewaterhouseCoopers LLP (PwC), have indicated their willingness to continue in and office the Audit Committee Auditors separately. shareholders to issued be will 2020 November 25 on Meeting General Annual Company’s the convening A notice Annual General Meeting capital: share issued Company’s the of more 3% or in interest their of Company the notified have shareholders following the 2020 9September at As interestMajor in shares basis. concern agoing on statements financial Group the have prepare to Directors appropriate is the it that scenarios, concluded testing stress plausible but severe including generation, flow cash and trading current Group’s the considered Having concern Going spending. capital and leverage cover, liquidity, charge fixed of respect in covenants certain to subject is RCF The date. maturity this of be advance in would well and 36 months of renegotiated aterm for committed is facility This (RCF). facility credit revolving CLBILS a£20.0m arranged Group the 2020, August 25 On date sheet balance the after Events (2019: £nil). incurred or made been have contributions or During the year, the Group made charitable donations, including funds raised by employees, of £66,000 (2019: £18,000). No political donations, expenditure Charitable and political donations their continued employment with the Group, with retraining being provided if necessary. and abilities. Training and career development support is provided where appropriate. Should an employee become disabled, are efforts made to ensure fair and Full origin. ethnic consideration or age is given to employment religion, applications by disabled persons orientation, wherever sexual suitable opportunities gender, exist, having regard ability, to their physical of particular aptitudes regardless employees, all for promotion and development The Group is committed to providing equality of to opportunity employees and potential employees. This applies to recruitment, training, career Equal opportunities with the ability to raise concerns regarding misconduct via an independent and confidential whistle-blowing service. policies on guidance such includes as: and anti-bribery, of people conflicts interest, our of all of and whistle-blowing procedures. expected We have behaviour of a zero-tolerance standard the out approach sets Group to and bribery the provide across our colleagues applies which Conduct of Code Our schemes. bonus Employee and share of engagement is considered avariety within further our Stakeholder through Index on business page 33. our of performance financial the in involved become to colleagues encourage We also virtually. Adams, George Director, Engagement Workforce Non-Executive designated our with group discussions page on Directors the detailed as hold to lockdown of continued we start and 6, the from increased significantly were communications Internal ahead. go to able was conference sales COVID-19 Autumn the of the outbreak, only aconsequence As employees. all to available made is which newsletter regular acomprehensive and basis, regional and a national sales three through principally conferences achieved is This (either manner. physically regular or virtually) and held at open meaningful an times in during the year supported by regular communicated are senior management meetings thereon, and both briefings, on impact which factors and economic and objectives and aims financial the the including them, to concern of matters that ensure to and business the in employees its involve actively to is policy Group’s The Employee involvement report. this of date the to through and 2020 July 25 ended year financial circumstances. certain in applicable is The Company which also purchased and maintains indemnity Directors’ an of and Officers’ liability insurance. benefit the Both have the insurance and indemnities Directors applied the throughout the Asso Tellworth Investments Tellworth InvestmentArtemis Management Fidelity International International Fidelity Stadium Capital Management SCION Asset Management Asset SCION continued 3.525,690 4,645,529 4,583,920 1,850,119 1,855,177 1,757,161 shares held Number of

share capital % of issued issued % of 12.06 12.22 4.88 4.87 4.62 9.28

Premier Miton Investors Huntington Management Mr David Knight Columbia Threadneedle Investments Bank of America Merrill Lynch International as principal 1,649,587 1,528,615 1,175,000 1,489,103 1,719,766 shares held Number of

share capital % of issued issued % of

3.09 4.34 4.03 4.52 3.92

STRATEGIC REPORT

Statement of Directors’ Responsibilities CORPORATE GOVERNANCE The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law). 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 company and of the profit or loss of the group and company for that period. In preparing the financial statements, the directors are required to:

–– Select suitable accounting policies and then apply them consistently; FINANCIAL STATEMENTS –– State whether applicable IFRSs as adopted by the European Union have been followed for the group financial statements and United Kingdom Accounting Standards, comprising FRS 101, have been followed for the company financial statements, subject to any material departures disclosed and explained in the financial statements; –– Make judgements and accounting estimates that are reasonable and prudent; and –– Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The directors are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation.

The directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors’ confirmations The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group and company’s position and performance, business model and strategy. 77 Each of the directors, whose names and functions are listed in Board of Directors section confirm that, to the best of their knowledge: –– The Company financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced Disclosure Framework’, and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company; –– The Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and –– The Directors’ Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.

By order of the Board

Richard Butts Company Secretary 1 October 2020 78 ScS Group plc Annual Report 2020 regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006. We evaluated management’s management’s We evaluated incentives 2006. Act and opportunities for fraudulent manipulation Companies of the as the statements financial such (including the risk of override statements of controls), financial the of and determined that the preparation the on impact adirect have and laws that those regulations considered We also statements. financial the on effect amaterial have might non-compliance which to statements, extent the financial considered we the on and effect amaterial have might non-compliance which to extent the considered we and the to related legislation, tax UK and regulations and Rules laws with Listing non-compliance of risks principal the that identified we industry, and group the of understanding our on Based Capability of the audit in detecting irregularities, including fraud statements. financial the in misstatement material of risks the assessed and materiality determined we audit, our designing of part As audit our of scope The Overview Our audit approach period 2020. the 2019 in July 25 to 28 July company from the or group the to services non-audit no provided have we statements, financial the 4to note in disclosed those than Other company. the or group the to provided not were Standard Ethical FRC’s the by prohibited services non-audit that declare we belief, and knowledge our of To best the accordance in responsibilities ethical other our with these requirements. fulfilled have we and entities, interest public listed to applicable as Standard, Ethical FRC’s the includes which We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the statements financial in the UK, Independence opinion. our for abasis provide to appropriate and sufficient is obtained have we (UK) ISAs under responsibilities Our are law. described further in the Auditors’ applicable responsibilities and for (UK)”) the audit of (“ISAs the statements financial (UK) section of our report. We Auditing on believe that the Standards audit evidence International with accordance in audit our We conducted Basis for opinion Our opinion is consistent with our reporting to the Audit Committee. statements, which financial include the to a description notes the of and the significant accounting ended; policies. then year the for equity in changes of statements company and consolidated the and statements company flows, and cash of consolidated the income, comprehensive of statement consolidated the 2020; July 25 at as position financial of statements We have audited the statements, financial included within the Annual Report 2020 (the “Annual Report”), which comprise: the consolidated and company – – – – In our opinion: Opinion statements financial the of audit the on Report to of Members ScS the Group plc Independent Auditors’ Report – – – – statements, Article 4 of the IAS Regulation. IAS the 4of Article financial group the regards statements, as and, 2006 Act Companies the of requirements the with accordance in prepared been have statements financial the and law); applicable and Framework”, Disclosure 101 FRS “Reduced comprising Standards, Accounting Kingdom the company statements financial have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United the by adopted as (IFRSs) Standards European Union; Reporting Financial International with accordance in prepared properly been have statements financial group the ended; then year the for flows cash company’s the and group’s the and loss group’s the of the of and 2020 state July the of 25 at as view fair and affairs atrue company’s give the of and group’s statements”) “financial (the statements financial company and statements financial group plc’s Group ScS scope Audit Audit Materiality Key audit matters

– – – – – – – – – – – – – – – – (loss)/profit before tax (2019: revenue). of 0.35% tax before (loss)/profit average year five the of 20% at capped 1% on revenue, of based (2019: £1,136,000), £2,000,000 materiality: group Overall Overall company materiality: £702,000 (2019: £700,000), based on 1% of total assets. 1% on total of based (2019: £700,000), £702,000 materiality: company Overall We performed an audit of the complete financial information of the Group’s trading entity, A Share & Sons Limited, as well as auditing ScS as group well plc as (the Company’s) Limited, &Sons equity balance. AShare This approach entity, provides 100% trading coverage Group’s the of over the Group’s information revenue. financial complete the of audit an We performed Desktop reviews were performed over all out of scope components. scope of out all over performed were reviews Desktop Group: Impairment of assets in relation to loss making stores. making loss to relation in assets of Impairment Group: Group: IFRS 16 (Leases) and recognition of right of use assets and lease liabilities. lease and assets use of right of recognition 16 and (Leases) IFRS Group: Group and Company: COVID-19 impact and consideration of Going Concern. Going of consideration and COVID-19 impact Company: and Group Company: value Carrying of Investments in subsidiaries.

STRATEGIC REPORT CORPORATE GOVERNANCE principal risks were related to posting inappropriate journal entries to increase revenue or increase the group’s EBITDA, or through management bias in manipulation of accounting estimates. The group engagement team included appropriate audit procedures in response to such risks in their work. Audit procedures performed by the group engagement team included: –– Discussions with management and internal audit, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud; –– Review of board minutes; –– Review of legal expenditure in the year to identify potential non-compliance with laws and regulation; –– Evaluation of management’s controls designed to prevent and detect irregularities, in particular their anti-bribery controls;

–– Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to impairment FINANCIAL STATEMENTS of assets, adoption of IFRS 16 (Leases) and consideration of the impact of COVID-19 on going concern and the impairment of the investment in the company (see related key audit matters below); –– Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.

There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

Key audit matters Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the 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) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, 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. This is not a complete list of all risks identified by our audit.

Key audit matter How our audit addressed the key audit matter Group Impairment of assets in relation to loss making stores We obtained the impairment workings from management and checked their 79 Refer to page 59 (Audit Committee Report) arithmetical accuracy.

ScS Group plc has 100 stores at the year end. The nature of We agreed that all store rent payments per management’s IFRS 16 calculation had been the business is such that, when all costs have been allocated allocated to stores and agreed allocation of fixed assets on a sample basis by vouching on a store by store basis, some stores’ fixed assets and right to invoice. We assessed the store by store allocation of revenue and direct costs for of use assets are not covered by the present value of its reasonableness by comparing to the store’s historical results over the previous two future cash flows. This gives rise to potential impairment years as a percentage of the total results achieved. We agreed that central costs had of the assets. been allocated on a reasonable basis to the underlying stores with no exceptions noted. We agreed that the rent was correctly excluded from the stores EBITDA. There were Management have used EBITDA as a proxy for cash flows, no issues noted with the underlying data used in calculating the impairment provision. exclusive of rent repayments. Management’s assessment of which stores were at risk of impairment was based on the We recognise that there are a number of judgements forecast future performance of individual stores in the group’s portfolio. We assessed involved in the asset impairment calculation, including the robustness of the groups’ forecasting process in the prior years and the underlying forecasting of future results, length of leases, allocation historical accuracy. This excluded forecasting of the current year result given the of costs and use of an appropriate discount rate. As such, unforeseen impact of COVID-19. We have also considered actual results achieved post the judgements involved in the impairment of asset year end. Management’s forecasting was considered to be suitably robust and accurate. calculation were an area of focus. We agreed the FY21 forecast results used in the asset impairment calculation were Management have calculated an impairment charge of consistent with board approved budgets. We assessed the reasonableness of the £3.4m, which has been treated as an exceptional item in the assumptions used in the calculation and performed sensitivities where appropriate. Statement of comprehensive income as it is management’s This included, but was not limited to, utilising our valuations experts to perform an view that the additional impairment required is a result of assessment of discount rate and store growth rates with reference to the macro- the impact of COVID-19 on the Group’s future cash flows. economic and industry predictions. We concluded that the level of impairment of fixed assets and right of use assets in the store portfolio was materially correct.

We assessed the reasonableness of the impairment charge being treated as an exceptional item within the Statement of comprehensive income and agreed this was acceptable based on the nature and magnitude of the impairment charge. We have assessed completeness and accuracy of the related disclosures within the financial statements.

We are satisfied the assumptions made by management in determining the asset impairment and the related disclosures in the financial statements are appropriate. 80 ScS Group plc Annual Report 2020 which were recognised as lease modifications during the year. agreements, lease their of respect in deferrals and waivers of anumber granted were COVID-19, of Group the aresult As asset. use of right corresponding the and liabilities lease of valuation the in change a material to lead could leases of anumber across assumptions rate discount in changes Small assets. leased of risks specific and risk credit Group’s the of assumptions on based input rate. The incremental borrowing rate is an unobservable Group bases the discount rate on the incremental borrowing the circumstances those In leases. store Group’s the in typical is as available, not is lease the in rate implicit the where rate discount the of respect in arises uncertainty Estimation have a significant impact on the lease liabilities recognised. can which rate, discount the to relation in made be to The calculation of lease liabilities requires assumptions impairment model and involves judgement. and calculation lease onerous Group’s the between rate discount and allocation cost in differences to due arose This reserves. in Group the by recognised was asset use of right the On transition a £5.8m adjustment relating to impairment of transition option. retrospective modified the 16 under IFRS apply to elected has Group The alease. of 16 criteria IFRS the meet which agreements the to relation in asset use of right corresponding and liability alease recognise to required is Group The leased. are which of majority the cars, of anumber and centres 9distribution end, year the at stores 100 has plc Group ScS Report) Committee 59 (Audit page to Refer and lease liabilities assets use of right of recognition and 16 (Leases) IFRS matter audit Key to of Members ScS the continued Group plc Independent Auditors’ Report

and lease liabilities, and the related disclosures in the statements financial are appropriate. asset use of right the of recognition 16, including IFRS to transition the satisfied We are statements. financial the within disclosures of accuracy and completeness the We assessed date. adoption the at as 16 calculation IFRS the to statements financial year prior the in reported as commitments lease operating Group’s the of reconciliation the testing by 16 calculation IFRS the of completeness We considered recognised. correctly been have they ensure to landlords the from evidence corroborating to back year the during deferrals and waivers lease the tested We have taken by management. discount rate applied with our and experts considered the reasonableness of judgements the integrity of the calculation methodology. We agreed the reasonableness of validated the and work audit year prior the to data underlying the of consistency agreed and We evaluated the transition model prepared by management in respect of impairment basis. asample on contracts lease underlying to transition on made modifications lease any We agreed found this to be supportable. methodology used to determine the discount rates applied to the lease portfolio and management’s assessed independently we experts, valuation our by Assisted leases. similar of population the across consistently applied was appropriately determined by management and ensured this calculation methodology been had entries accounting the that verify to contracts lease of asample recalculated We documents. lease underlying the to inputs key data corroborating accounting, lease its in management by used data the of accuracy and completeness the testing included 16. This IFRS of impact transition the over year prior the in performed work We leveraged with IFRS 16, and concluded that their policy was appropriate. compliant was it that verify to leases for policy accounting management’s We assessed How our audit addressed the key audit matter audit key the addressed audit our How

STRATEGIC REPORT CORPORATE GOVERNANCE Key audit matter How our audit addressed the key audit matter Group and Company COVID-19 impact and consideration of Going Concern We have considered the carrying value of the Groups fixed assets, including right of use Refer to page 59 (Audit Committee Report) assets, in relation to loss making stores within the specific key audit matter; impairment of assets in relation to loss making stores, and the carrying value of the Company’s The ongoing COVID-19 pandemic is having a significant investments in its subsidiaries within the specific key audit matter; Carrying value impact on the UK economy in which the Group operates. of investments in subsidiaries. As a result, the Group and Company have faced operational challenges and there remains significant uncertainty as to We have re-evaluated our risk assessment, including the going concern risk of the Group. FINANCIAL STATEMENTS the duration of the pandemic and what its lasting impact will Based on management’s assessment and our audit procedures thereon as described be on the economy. below, we consider our original risk assessment to remain appropriate and therefore consider going concern to be a significant risk for the Group. The pandemic was a present condition at 25 July 2020 and is something that is continually evolving. The Directors have In assessing management’s consideration of the potential impact on the Group going considered the potential impact of the evolving pandemic concern assessment of COVID-19, we have undertaken the following audit procedures: across the business and on the financial statements. –– We obtained from management their latest forecasts that support the board’s assessment and conclusions with respect to the going concern basis of preparation Management have considered the impact on the carrying of the financial statements. value of the Group’s fixed assets, including right of use assets, –– We assessed the management accounts for the financial year to date and checked in relation to loss making stores for impairment as a result that these were consistent with the starting point of management’s forecasts. of the ongoing pandemic, and have also considered the We also checked the arithmetical accuracy of management’s forecasts. impact on the Company’s carrying value of investment in –– We evaluated management’s board approved budget and cash flow forecast and its subsidiaries. severe yet plausible downside scenario for the period to July 2023. We challenged the adequacy and appropriateness of the underlying assumptions and significant In relation to the Group’s going concern assessment, forecast cash flows. management have considered the implications of COVID-19 –– We understood the mitigating actions taken by management to date and confirmed and have undertaken an assessment including a review of the the available mitigating actions in management’s model are within their control and anticipated performance and forecast future cash flows of can be taken on a timely basis, if needed. the Group and the potential ongoing impact of the ongoing –– We evaluated the level of forecast liquidity and forecast compliance with the bank 81 pandemic. Management have also stress tested the cash facility covenants, which included further downside sensitivity to management’s flow forecasts reflecting what they consider to be a severe yet severe but plausible downside and agreed to source documentation. plausible downside scenario resulting from the consequences of COVID-19. Our findings and conclusions in respect of going concern are set out in the ‘Going concern’ section below. Having taken into account these models, together with a robust assessment of planned and possible mitigating actions, We have evaluated management’s disclosures in the financial statements in relation to management has concluded that the Group remains a going COVID-19 and are satisfied that they are consistent with the risks affecting the Group, concern, and that there is no material uncertainty in respect of their impact assessment and the procedures that we have performed. this conclusion. Management has described its going concern and viability assessment on page 49 of the Annual Report. Company Carrying value of Investments in subsidiaries We have assessed the Company’s share price and market capitalisation, comparing this Refer to pages 109 and 110 (Notes to the Company to the aggregate carrying value of the investment in subsidiary balance. Financial Statements) Given the fluctuating nature of the share price during the year, we have obtained a cash The Company holds an investment in its subsidiary flow forecast model from management to support the carrying value of the investment undertakings, at a carrying value of £70m (2019: £70m). in subsidiary balance. We have checked the mathematical accuracy and integrity of the The Company is required to assess the investment in its model and assessed that it meets the requirements of IAS 36. subsidiary annually for impairment. We have agreed the forecasted EBITDA (used as a proxy for cash flow) has been agreed The test for impairment compares the carrying value of the to board approved budgets and is consistent with the forecasted model used within the investment in subsidiary balance to the higher of their fair impairment of asset calculation and going concern model. See details in the above key value or value-in-use using an impairment model. audit matters for work performed in relation to assessment of the appropriateness of the budgeted forecasts. Following the downturn in the market as a result of COVID-19 and the uncertainty of the future market, there is a risk that We used internal valuation experts to assess the appropriateness of the discount the valuation of the Company’s investment in its subsidiary rate assumptions and found this to be reasonable. We evaluated other material entities could be impaired. assumptions applied to the cash flow forecasts with reference to the macro-economic and industry predictions.

We assessed the completeness and accuracy of disclosures within the financial statements.

We are satisfied the assumptions made by management in determining the valuation and the related disclosures in the financial statements are appropriate. 82 ScS Group plc Annual Report 2020 Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below (required by ISAs (UK) (UK) ISAs by (required below unless described as otherwise stated). matters and opinions certain report to also us require (FCA) Authority Conduct the and Financial (UK) the of ISAs Rules (CA06), 2006 Listing Act Companies the audit, the of course the in undertaken work our and above described responsibilities the on Based have 2006 Act been included. Companies UK the by required disclosures the whether considered also we Report, Directors’ and Report Strategic the to respect With responsibilities. these on based report to nothing We have fact. that report to required are we information, other this of that conclude we misstatement a material is performed, there have we work the on If, based information. other the of misstatement amaterial or statements amaterial financial is the of there whether misstatement conclude to procedures perform to required are we misstatement, material or misstated. inconsistency materially be to material appears apparent an otherwise or identify we If audit, the in obtained knowledge our or statements financial the with inconsistent materially is information In connection with our audit of the statements, financial our responsibility is to read the other information and, in doing so, consider whether the other thereon. assurance of form any report, this in stated explicitly otherwise extent or, the to except opinion audit an and, express not do we information accordingly, other the cover not does statements financial the on opinion Our information. other thereon. the for report responsible are auditors’ our and directors The statements financial the than other Report Annual the in information the of all comprises information other The onReporting other information knowledge obtained in the audit. our with inconsistent materially is 9.8.6R(3) Rule Listing with accordance in Concern Going to relating statement directors’ the if report to required We are statements. financial the of approval of date the from months twelve least at of aperiod over concern a going as continue to ability company’s the and group’s the to uncertainties material any of identification directors’ the and statements financial the preparing in accounting of basis whether the directors considered it appropriate to adopt the going concern to in respect of the directors’ statement in the statements financial about attention draw or add to material anything have we if report to required We are Reporting obligation follows: as report we (UK) ISAs with accordance In Going concern reasons. qualitative for reporting warranted view, our in that, amounts those below misstatements as well as (2019: £35,000) audit) (Company £35,000 and We agreed with the Audit Committee that we would report to them misstatements during identified our audit above £100,000 (Group audit) (2019: £56,800) scope. in component only the was this £1,900,000, was allocated Limited &Sons materiality AShare to The materiality. group overall our than less is that amateriality allocated we audit, group our of scope the in component each For Rationale for benchmark applied it wedetermined How Overall materiality Based on our professional judgement, we determined materiality for the statements financial as a whole as follows: awhole. as statements financial the on aggregate in and individually both misstatements, of effect the evaluating in and disclosures and items line considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual statement financial The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative Materiality fraud. to due misstatement material of arisk represented that directors the by bias of evidence was there controls, whether internal of evaluating override including management of risk the addressed also we audits our of all in As uncertain. inherently are assumptions that events making future involved that considering and estimates accounting significant of respect in example for we judgements, particular, In subjective made statements. directors the where at financial looked the in misstatement material of risks the assessed and materiality determined we audit, our desi Group statements financial five year average profit/loss before tax. before profit/loss average year five the of 20% at applied level materiality the capped we in the context of the business’ profitability. Consequently, level materiality our of mindful are we that important is it However, plc. Group ScS as such businesses margin low which is a standard materiality benchmark particularly in 1% on revenue of based was materiality client, the of Based on our professional judgement and our knowledge (2019: revenue). of 0.35% tax before (loss)/profit average year five the of 20% at capped 1% revenue, of £2,000,000 (2019: £1,136,000). We have nothing to report. to nothing We have concern. agoing as continue to ability company’s and group’s the to as aguarantee not is statement this predicted, be can conditions or events future all not because However, to. attention draw to or add to material nothing We have Outcome

Company statements financial the decisions of the members. the of decisions the affect would what around judgement our and activity due to the entity being a holding company with limited calculations materiality our for benchmark the as assets total of 1.0% We used (2019: £700,000). £702,000 of (2019: 1.0%) of total assets giving an overall materiality 1.0% on based was materiality our client the of Based on our professional judgement and our knowledge assets. 1% total of £702,000 (2019: £700,000).

STRATEGIC REPORT CORPORATE GOVERNANCE Strategic Report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year ended 25 July 2020 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. (CA06)

In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06) The directors’ assessment of the prospects of the group and of the principal risks that would threaten the solvency or liquidity of the group

We have nothing material to add or draw attention to regarding: FINANCIAL STATEMENTS –– The directors’ confirmation on page 60 of the Annual Report that they have carried out a robust assessment of the principal risks facing the group, including those that would threaten its business model, future performance, solvency or liquidity. –– The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated. –– The directors’ explanation on page 49 of the Annual Report 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.

We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment of the principal risks facing the group and statement in relation to the longer-term viability of the group. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statements; checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the “Code”); and considering whether the statements are consistent with the knowledge and understanding of the group and company and their environment obtained in the course of the audit. (Listing Rules) Other Code Provisions We have nothing to report in respect of our responsibility to report when: –– The statement given by the directors, on page 77, that they consider the Annual Report taken as a whole to be fair, balanced and understandable, and provides the information necessary for the members to assess the group’s and company’s position and performance, business model and strategy is materially inconsistent with our knowledge of the group and company obtained in the course of performing our audit. –– The section of the Annual Report on page 59 describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee. 83 –– The directors’ statement relating to the company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified, under the Listing Rules, for review by the auditors. Directors’ Remuneration In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. (CA06)

Responsibilities for the financial statements and the audit Responsibilities of the directors for the financial statements As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also 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.

In preparing the financial statements, the directors are responsible for assessing the group’s and the 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 company or to cease operations, or have no realistic alternative but to do so.

Auditors’ 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 auditors’ 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.

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 auditors’ report.

Use of this report This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. 84 ScS Group plc Annual Report 2020 1 October 2020 1 October Newcastle upon Tyne Auditors Statutory and Accountants Chartered LLP PricewaterhouseCoopers of behalf on and for Auditor) Statutory (Senior Ward Andy 2018. 21 on November auditors as reappointed were we 2019 and 27 July end year the for tender competitive to out 2009 went 31 July audit ended The years 2020. the July 25 to covering 12 is years, engagement uninterrupted total of period The periods. financial the for subsequent and 2009 statements 31 July ended year financial the audit to 2009 3November on directors the by appointed were we committee, Audit the of recommendation the Following Appointment responsibility. this from arising report to exceptions no We have – – – – opinion: our if, in you to report to required are we 2006 Act Companies the Under reporting exception 2006 Act Companies Other required reporting to of Members ScS the continued Group plc Independent Auditors’ Report – – – – the company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records records accounting the returns. with and agreement in not are audited be to Report Remuneration Directors’ the of part the and statements financial company the or made; not are law by specified remuneration directors’ of disclosures certain or us; by visited not branches from received been not have audit our for adequate returns or company, the by kept been not have records accounting adequate or audit; our for require we explanations and information the all received not have we STRATEGIC REPORT

Consolidated Statement of Comprehensive Income For the year ended 25 July 2020 CORPORATE GOVERNANCE 2020 2019 Note £’000 £’000 Gross sales 3 268,119 333,267 Revenue 3 255,491 317,406 Cost of sales (135,911) (167,547) Gross profit 119,580 149,859 Distribution costs (16,988) (17,310) Administrative expenses (101,873) (118,610) FINANCIAL STATEMENTS Operating profit 4 719 13,939 Analysed as: Underlying operating profit 4,708 14,291 Exceptional items included within administrative expenses 5 (3,989) (352) Operating profit 719 13,939 Finance costs 7 (4,195) (96) Finance income 8 355 417 Net finance (costs)/income (3,840) 321 (Loss)/profit before taxation (3,121) 14,260 Tax credit/(charge) 9 898 (2,880) (Loss)/profit from continuing operations (2,223) 11,380 Loss from discontinued operations 31 – (4) (Loss)/profit for the period (2,223) 11,376

Attributable to: Owners of the parent (Loss)/profit and total comprehensive income for the year (2,223) 11,376 85 (Loss)/earnings per share (expressed in pence per share): Basic (loss)/earnings per share 10 (5.8p) 28.5p Diluted (loss)/earnings per share 10 (5.8p) 27.4p

There is no variance between the diluted and basic earnings per share in the current year.

There are no other sources of comprehensive income. 86 ScS Group plc Annual Report 2020 The financial statements on pages 85 to 105 were approved by the Board and authorised for issue on 1 October 2020 and signed on its behalf by: behalf its on signed and 2020 1October on issue for authorised and Board the by approved 105 to 85 were pages on statements financial The statements. financial consolidated these of part integral 105 to an 89 are pages on notes The Total equity and liabilities Total equity parent the of owners to the attributable Equity Retained earnings Treasury reserve Treasury Capital redemption reserve Share premium Merger reserve Share capital parent the of owners to the attributable reserves and Capital Total liabilities Total non-current liabilities L Provisions Deferred tax liability Trade and other payables Non-current liabilities Total current liabilities L Provisions equivalents cash and Cash Trade and other payables Current income tax liabilities Current liabilities assets Total assets Total current Current income tax receivable Trade and other receivables Inventories assets Current Total non-current assets Deferred tax asset asset tax Deferred Right-of-use asset Property, plant and equipment Intangible assets assets Non-current ScS Group plc: Registered number 03263435 number Registered plc: Group ScS Chief Executive Officer David Knight at 2020 25As July Position of Financial Statement Consolidated ease liabilities ease liabilities Note 20 20 13 13 28 13 15 18 19 19 18 12 14 16 17 11 244,439 244,439 138,788 105,461 118,499 218,935 105,651 112,253 113,474 82,282 25,504 25,504 18,207 24,167 81,169 25,511 17,209 4,804 1,084 2,358 £’000 (182) 2020 106 358 722 125 137 38 15 16 – – 108,336 108,336 65,440 42,896 42,896 19,209 85,629 21,065 58,575 56,624 25,511 22,707 57,666 17,407 6,865 1,642 6,413 8,754 1,951 £’000 2019 452 (91) 40 13 16 – – – – – – – STRATEGIC REPORT

Consolidated Statement of Changes in Equity For the year ended 25 July 2020 CORPORATE GOVERNANCE Capital Share Share redemption Merger Treasury Retained Total capital premium reserve reserve reserve earnings equity £’000 £’000 £’000 £’000 £’000 £’000 £’000 At 29 July 2018 40 16 13 25,511 (268) 11,990 37,302 Total comprehensive income – – – – – 11,376 11,376 Share-based payments (note 22) – – – – – 765 765 Treasury shares (note 28) – – – – 177 (177) – Dividend paid (note 21) – – – – – (6,547) (6,547) At 27 July 2019 40 16 13 25,511 (91) 17,407 42,896 FINANCIAL STATEMENTS

At 28 July 2019 40 16 13 25,511 (91) 17,407 42,896 Impact of change in accounting policy (note 2) – – – – – (5,826) (5,826) Tax impact of change in accounting policy (note 2) – – – – – 990 990 At 28 July 2019 (restated) 40 16 13 25,511 (91) 12,571 38,060 Total comprehensive loss – – – – – (2,223) (2,223) Share-based payment credit (note 22) – – – – – (818) (818) Purchase of own shares – – – – – (4,425) (4,425) Treasury shares (note 28) – – – – (91) (663) (754) Cancellation of repurchased shares (2) – 2 – – – – Dividend paid (note 21) – – – – – (4,336) (4,336) At 25 July 2020 38 16 15 25,511 (182) 106 25,504

87 88 ScS Group plc Annual Report 2020 Net increase in cash and cash equivalents cash and cash in increase Net Cash and cash equivalents at end of year of end at equivalents cash and Cash year of beginning at equivalents cash and Cash Net cash used flow activities in financing Repayment of borrowings loan bank from Proceeds Payment of capital element of leases of element capital of Payment Interest paid on lease liabilities shares own of Purchase Dividends paid Cash flows used activities in financing activities investing in used flow cash Net Interest received Interest Payments to acquire intangible assets Purchase of property, plant and equipment activities investing in used flows Cash Decrease in inventories in Decrease Changes in working capital: Finance income taxation before (Loss)/profit Cash flows from operating activities For year 2020 the 25 ended July Flows of Cash Statement Consolidated Net cash flow generated from operating activities operating from generated flow cash Net Income taxes paid Interest paid Cash generated from operating activities Decrease/(increase) in trade and other receivables Finance costs Finance Share-based payment (credit)/charge Impairment on non-current assets assets intangible of Amortisation – right-of-useDepreciation assets Depreciation of property, plant and equipment tax before operations discontinued from Loss for:Adjustments Increase in trade and other payables Note 13 15 28 22 12 21 14 31 11 8 8 7 7 5 (12,000) (29,550) (16,054) 12,000 82,282 59,466 31,558 24,616 26,715 22,787 57,666 57,656 (3,980) (3,490) (4,336) (2,694) (5,180) (1,595) (3,121) (1,151) 1,002 4,847 4,195 3,376 (818) £’000 (355) (215) 2020 647 355 191 – 14,260 20,199 48,162 21,251 57,666 24,121 (5,200) (6,547) (6,547) (4,377) (1,240) (2,774) 9,504 1,486 4,824 2,656 £’000 (220) (417) 2019 765 676 417 (96) 96 (5) – – – – – – – STRATEGIC REPORT

Notes to the Consolidated Financial Statements CORPORATE GOVERNANCE 1. General information ScS Group plc (the ‘Company’) is a public limited company, which is listed on the London Stock Exchange, incorporated and domiciled in England, within the UK (Company registration number 03263435). The address of the registered office is 45-49 Villiers Street, Sunderland, SR1 1HA.

The Company’s principal activity is to act as a holding company for its subsidiaries. The Company and its subsidiaries’ (the ‘Group’s’) principal activity is the provision of furniture and flooring, trading under the name ScS.

2. Accounting policies

Basis of preparation FINANCIAL STATEMENTS The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS) as they apply to the financial statements of the Group for the year ended 25 July 2020 and applied in accordance with the Companies Act 2006 as applicable to companies using IFRS and interpretations issued by the IFRS Interpretations Committee (IFRS IC) and under the historic cost convention. The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 25 July 2020. These policies have been consistently applied to all of the years presented, unless otherwise stated.

The Group financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£’000) except when otherwise indicated.

Going concern At the time of approving the financial statements, the Board is required to formally assess that the business has adequate resources to continue in operational existence for the foreseeable future and as such can continue to adopt the ‘going concern’ basis of accounting.

Liquidity The most significant factor in considering whether current resources are adequate is to consider the Group’s liquidity. At 25 July 2020, the Group’s cash balance totalled £82.3m, and £20.6m was owed as trade payables for goods delivered. The Group has no drawn down debt, and further liquidity is available through the £20.0m CLBILS revolving credit facility (RCF) granted on 25 August 2020. This facility is committed for a term of 36 months and would be renegotiated well in advance of this maturity date. The RCF is subject to certain covenants in respect of fixed charge cover, liquidity, leverage and capital spending.

Cash flows 89 As part of the Group’s ongoing review of going concern, management have modelled cash flow forecasts to July 2023. The cash flow forecasts for that period include assumptions in relation to customer demand, the availability of product and the estimated continued impact of COVID-19 on the Group’s performance.

Whilst the Group believes its initial cash flow forecasts are cautious, and current trading has exceeded those forecasts, the Group also recognises that there is considerable uncertainty as to the continued impacts of COVID-19. Whilst it is difficult to estimate the impact COVID-19 might have on the business, management have considered a further severe but plausible downside sensitivity scenario. The downside scenario includes the assumption that the Group’s stores and distribution network are forced to close for a further eight weeks, including across the crucial pre-Christmas trading period, followed by a period of gradual recovery, only returning to normal levels by July 2021. The scenario does not include any pent-up demand increase, despite the order increase experienced following the first lockdown period.

The Group has included within the downside scenario associated reductions in marketing, capital spend, management and staff bonus costs and sales- related commission payments. The government provided an 80% grant under the Coronavirus Job Retention Scheme (CJRS) as support for furloughed workers, which currently ends in October 2020. Further government support was provided through VAT and PAYE/NI deferrals and a 12-month business rates holiday for all retail businesses until March 2021. The Group also obtained further benefits through working with landlords for rent deferments. No additional government or landlord support has been included in the modelled downside scenario.

Throughout this ‘severe but plausible downside’ scenario, the Group would have significant cash headroom, with the cash low point at the end of July 2021 being substantial, before use of the £20m RCF. Furthermore, forecasts show sufficient headroom on all of the financial covenants and no requirement for any additional sources of financing (including any drawdown on the RCF).

Many of our large suppliers operate using credit insurance, which they use to support their payment terms with the Group. As these credit insurers are consistently reviewing their support for the companies involved, and a severe economic climate could mean that they withdraw their support for the Group, which could create working capital challenges for our suppliers, requiring them to request earlier payment dates. The Group has modelled the impact of the full withdrawal of this insurance, and noted that the cash headroom available ensures this does not pose a further risk to the Group’s going concern basis.

For the reasons set out in detail above, the Board believe that it remains appropriate to prepare the Group financial statements on a going concern basis.

New standards, amendments and interpretations At the date of authorisation of these financial statements, new standards, amendments and interpretations which had been issued but were not yet mandatory are not expected to have a material impact on the consolidated financial statements.

The following standards and amendments were adopted in the current financial year, and further details of their impact on the Group financial statements are given in note 13: –– IFRS 16 ‘Leases’, which has been applied using the modified retrospective transition approach –– ‘COVID-19-Related Rent Concessions amendment to IFRS 16’

Other standards, interpretations and amendments effective in the current financial year have not had a material impact on the Group financial statements. 90 ScS Group plc Annual Report 2020 Within one year Group The Group financial statements consolidate the financial statements of ScS Group plc and the entities it controls (its subsidiaries) drawn up to within within to up drawn subsidiaries) year. each (its 31 of days July controls seven it entities the and plc Group ScS of statements financial the consolidate statements financial Group The ofBasis consolidation below: shown are year prior the for leases operating 17 these IAS for under disclosures required The The Group presents lease liabilities separately in the consolidated balance sheet. 2019 28 July at recognised liabilities Total lease Discounted using the incremental borrowing rate at the date of initial application 2019 27 at July as disclosed commitments lease Operating transition: after immediately recognised accounts the in liabilities lease total 2019 the to 27 at July disclosed as commitment lease operating total the from areconciliation shows below table The 2019 2.9%. was 28 July on measurement of differences aresult as between provisioning under IAS 36 principally compared arose with IAS 37. impairment This The weighted average incremental £990,000. of borrowing assets rate tax applied to the lease deferred in liabilities increase anet of recognition leases the same and the to £514,000 of relating provisions lease onerous previous the in areversal by offset £6,340,000, of equipment and plant property, and assets right-of-use the both of impairment initial an of aresult as arose This £4,836,000. of 2019 adecrease was 28 July at earnings retained on impact net The Retained earnings Accruals Prepayments Lease liabilities asset tax Deferred Right-of-use assets Property, plant and equipment The impact on the balance sheet on transition is summarised below: summarised is transition on sheet balance the on impact The component. lease asingle as components non-lease associated any and lease each for component account will 16 and IFRS by permitted expedient practical the applied has it alessee, is Group the which in properties of leases For assets’). (‘low-value value low of is asset underlying the which for contracts lease and option, apurchase contain not do and 12 less of months or term alease have date, commencement the at that, contracts lease for exemptions first recognition 16 the for the IFRS use to elected applying In also Group the standard. time the of adoption initial the to related those including expedients, practical optional certain for 16 provides IFRS 2019. changed or into 28 July entered after or on contracts to only applied 16 been has IFRS under alease of definition the Therefore, 4. 17 IFRIC IAS and under previously were leases as that contracts to identified only applied be to standard the allowing expedient practical the apply to elected Group 16, the IFRS to transition On consideration. for exchange in time of aperiod for asset identified an of use the control to aright conveys contract the if alease 16, contains, IFRS or is, Under alease. of a contract definition new the on based alease contains, or is, acontact whether assesses now Group The aLease. an Contains Whether Arrangement 4Determining IFRIC under alease contained or was arrangement an whether acontract of inception the at determined Group the Previously, restated. been 2019 not for has presented information comparative the 2019. Accordingly, 28 July at rate borrowing incremental Group’s the at discounted payments, lease to remaining equal the of being value values present right-of-use asset the initial the of recognition with approach, transition retrospective modified the 16 using IFRS applied has Group The payments. lease make to obligation its representing liabilities lease and assets underlying the use to rights its representing right-of-use assets recognised has alessee, as Group, the aresult, As lessees. for model accounting sheet on-balance asingle, 16 introduced IFRS 16 IFRS 2. continued Statements Notes Financial to Consolidated the Within two to five years five to two Within years five After continued policies Accounting Land and buildings 27 July 2019 27 July Year ended 146,708 23,872 76,661 46,175 £’000 Plant and machinery 27 July 2019 27 July Year ended 3,252 1,458 1,794 £’000 – 28 July 2019 July 28 28 July 2019 2019 July 28 27 July 2019 27 July Total Year ended (134,857) 134,857 126,287 149,960 149,960 (15,103) 25,330

78,455 46,175 (3,760) 4,836 6,985 £’000 £’000 £’000 (480) 990

STRATEGIC REPORT CORPORATE GOVERNANCE 2. Accounting policies continued Subsidiaries Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. Control is generally accompanied by a shareholding of more than one-half of the voting rights. The financial information of subsidiaries is included in the consolidated financial information from the date that control commences until the date that control ceases.

Transactions eliminated on consolidation

Intra-Group balances, and any gains and losses or income and expenses arising from intra-Group transactions, are eliminated in preparing the FINANCIAL STATEMENTS consolidated financial information. Gains arising from transactions with jointly controlled entities are eliminated to the extent of the Group’s interest in the entity. Losses are eliminated in the same way as gains, but only to the extent that there is no evidence of impairment.

Exceptional items Exceptional items are defined as items of income and expenditure which are material and unusual in nature and which are considered to be of such significance that they require separate disclosure on the face of the income statement. Any future movements on items previously classified as exceptional will also be classified as exceptional.

Gross sales and revenue For the purposes of managing its business the Group focuses on gross sales, which is defined as the fair value of the consideration received or receivable, prior to any accounting adjustments for interest-free credit fees or aftercare product costs. The Board of Directors believe gross sales is a more transparent measure of the activity levels and performance of its stores and online channels as it is not affected by customer preferences on payment options. Accordingly, gross sales is presented in this Annual Report, in addition to statutory revenue, as an alternative performance measure, with a reconciliation between the two measures provided in note 3 to the financial statements.

Both gross sales and revenue are stated net of discounts, returns and value added taxes, and are recognised when the Group has satisfied its performance obligations by transferring control of the goods or service to the customer, and the revenue and costs in respect of the transaction can be measured reliably and collectability is reasonably assured. This is deemed to be when the goods and any associated warranty contracts have been delivered to the customer. Warranty services, once sold, are subsequently provided by third parties. Revenue is measured net of the charges associated with interest-free credit sales. 91 The Group operates a negative working capital model whereby customers pay a deposit at the point of order and, unless the order is to be financed using consumer credit, settle outstanding balances before delivery. Payment of part of the consideration is often therefore taken before the Group has fulfilled its performance obligation. These deposits taken from customers are referred to as contract liabilities under IFRS 15, and are presented as payments received on account within current liabilities, until the goods or services are delivered. A very small number of deposits are refunded without delivery of product, and therefore materially, the value of customer deposits will be realised within 12 months. Where the outstanding balance is settled subsequent to the delivery of goods via consumer credit, the full financed balance is received within two working days of delivery from our third-party finance providers, who are then responsible for collecting subsequent payments from the customer. There has been no significant changes to the methodology in recognising contract liabilities in the current year.

The Group holds a sales return provision in the Consolidated Statement of Financial Position to provide for expected levels of returns on sales made before year end. The Group recognises the expected value of revenue relating to returns within sales.

Segmental reporting As noted in the gross sales and revenue note above, segments are reported in a manner consistent with the internal reporting to the Board of Directors (see note 3 – Segment information on page 94).

Intangible assets Intangible assets purchased separately are capitalised at cost and amortised on a straight-line basis over their useful economic life. The useful economic lives used are as follows:

Computer software 20-33% straight-line per annum

The carrying value of intangible assets is reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

Property, plant and equipment Property, plant and equipment are stated at historic purchase cost less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost, less estimated residual value, of the tangible fixed assets over their anticipated useful lives at the rates shown below:

Fixtures and fittings 10-20% straight-line per annum Computer equipment 20-33% straight-line per annum Leasehold improvements The shorter of the term of the lease or 2% straight-line per annum Freehold buildings 2% straight-line per annum

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. 92 ScS Group plc Annual Report 2020 employees on furlough. There are no unfulfilled conditions or other contingences attaching to this grant. The Group did not benefit directly from any any from directly assistance. benefit not government of did forms Group The other grant. this to attaching contingences other or conditions unfulfilled no are There to paid furlough. been on has which employees Scheme Retention Job Government’s UK the under received was that £5.0m of income is expenses administrative in Included Government grants hand. on cash includes equivalents cash and cash flows, cash of statement the in presentation of purpose the For equivalents cash and Cash borrowings the of using the effective period interest the over method. statement income the in recognised is value redemption the and costs) difference any cost; transaction of (net proceeds amortised at the carried between subsequently are Borrowings incurred. costs transaction of net value, fair at initially recognised are Borrowings Borrowings Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. liabilities. non-current as presented are they not, If less. or year one within due is payment if liabilities current as payable Accounts classified are suppliers. from business of course ordinary the in acquired been have that services or goods for pay to obligations are Trade payables Trade payables ECL model. the of impact material no been has there previous no and therefore and likelihood, default, of low history, avery is there which with houses finance from due are receivables trade the of majority The receivables. other and trade provision less method, interest for impairment. As a requirement effective the of applying using IFRS cost 9, the Group has applied amortised at an expected credit measured loss (ECL) model subsequently when calculating and impairment losses value on fair at its initially recognised are Trade receivables assets. non-current as presented are they not, If assets. current as classified are they longer), if business the of cycle one in operating expected is normal the in (or less or collection year If business. of course ordinary the in performed services or sold goods for customers from due amounts are Trade receivables Trade receivables disposal. to incurred be to costs further any less price selling estimated the is value realisable Net condition. the and bringing location in present incurred its to costs product attributable directly other and goods of price purchase the comprises Cost stocks. defective and for made slow-moving is obsolete, provision necessary, Where resale. for held goods finished of consist and value realisable net and cost of lower the at stated are Inventories Inventories Interest payments. lease fixed the in charges are achange or included in term finance costs lease in the consolidated the in income achange statement. amodification, is there if remeasured is liabilities the lease of amount addition, In made. carrying payments lease for reduced and interest of accretion the reflect to increased is liability lease the date, commencement the After be can lease the in implicit readily rate determined. interest the unless rate borrowing incremental its uses Group the payments, lease of value present the calculating In circumstances. and facts relevant all considering option, termination the exercise not or option, extension the exercise to certain reasonably is Group whether to as the made is assessment an lessee, as Group, the by exercisable is which option atermination or option extension an contains lease the Where occurs. payment the that triggers condition or event the which in period the in expense an as recognised are rate or index an on depend not do that payments lease variable Any option. that exercise to reasonably is certain lessee the if option apurchase of exercise of cost the and guarantees; value residual under lessee the by rate; or payable be to index an on expected depend that amounts payments lease variable receivable; incentives lease any less payments fixed include: payments Lease term. over lease the made be to payments lease the of value present the at measured liabilities lease recognises Group the lease, the of date commencement At the Lease liabilities for tested is impairment continued policies Accounting STRATEGIC REPORT CORPORATE GOVERNANCE 2. Accounting policies continued Treasury shares The Employee Benefit Trust (EBT) provides for the issue of shares to Group employees, principally under share option schemes. Shares in the Company held by the EBT are included in the balance sheet as treasury shares at cost, including any directly attributable incremental costs. Subsequent consideration received for the sale of such shares is also recognised in equity, with any difference between the sale proceeds and the original cost being taken to retained earnings. No gain or loss is recognised in the financial statements on transactions in treasury shares.

The number of such shares is also deducted from the number of shares in issue when calculating the earnings per share. FINANCIAL STATEMENTS Share capital Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Pre-opening and launch costs Pre-opening and launch costs are charged to the income statement in the year they are incurred.

Advertising expenditure All routine and general advertising costs are expensed as incurred. Advertising costs paid to media companies are recognised as a prepayment until the advertising is placed in the media and communicated to the public, at which point the expenditure is expensed to the income statement.

Supplier contributions Contributions received from suppliers towards the cost of displaying and promoting their product are recognised as a reduction in the advertising and marketing costs to which they relate.

Supplier rebates Rebates receivable from suppliers are based upon the volume of business with each supplier and are recognised in the income statement in cost of sales or credited to stock as appropriate on an earned basis, by reference to the supplier revenue. 93 Pension costs Contributions to the defined contribution scheme are charged to the income statement in the year in which they become payable. The assets of the scheme are held separately from those of the Group in an independently administered fund.

Taxation Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to a business combination, or items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the liability method, on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes, to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Deferred tax is measured on an undiscounted basis at the average tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Foreign currency Transactions in foreign currencies are translated at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. All exchange differences are taken to the income statement in the period in which they arise.

Share-based payments The Company operates an equity-settled, share-based payment plan for Directors of the trading subsidiary undertaking, A. Share & Sons Limited, which includes the Executive Directors of the Group. The fair value of the Directors’ services received by the Group in exchange for the issue of shares in the Company is recognised as an expense in the financial statements of the subsidiary company to which services have been supplied. The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares issued, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of shares that are expected to vest. At each balance sheet date, the Group revises its estimates of the number of shares that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that a transfer of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 94 ScS Group plc Annual Report 2020 Revenue warranties of sale Associated goods of Sale follows: as is sales gross of analysis An Kingdom. United the services. in related other generated are and Group revenues the of and sales gross All activity principal the to attributable are liabilities and assets taxation, before profit revenue and flooring. sales and gross All furniture of retail the from revenue and sales gross generating business of type one operates Group the that consider Directors The 8 IFRS of requirements the reporting’.‘Segmental with accordance in makers decision operating chief the are team management senior the that decisions. identified have strategic Directors and The performance both assess to used are that Limited) &Sons Share A. subsidiary, trading the of Directors other Executive the (the and team Directors management senior the by reviewed reports operating the on based segments operating the determined have Directors The 3. basis. concern going statements the on prepared be to financial the continue Accordingly, statements. financial the signing of date the from 12 months least at of aperiod for operate and the for future, existence foreseeable operational in continue to resources adequate has Group the that which to expectation areasonable have uncertainties and management risks the to exposed, is regard Group the having and management to available actions mitigating and sensitivities forecasts, the considering After Going concern Critical judgements in applying the Group’s accounting policies adjusted by an indicative credit premium. external no has it As rate. borrowings discount the management as rate are required borrowing to determine an approximation, incremental calculated its based uses on Group UK Government the Gilt rates of Generally an appropriate duration and determinable. readily not is lease the in interest the if date implicit rate commencement lease the at rate borrowing incremental its uses Group the payments, lease of value present the calculating In 16 accounting IFRS within utilised rates Discount immediately. income as recognised is loss impairment an of Areversal years. prior in CGU or asset the for recognised amount, but so recoverable that the increased its of amount carrying does estimate not revised exceed the to the amount carrying that increased is would CGU or have asset been determined the of had no amount impairment loss been carrying the reverses, subsequently loss Where impairment an immediately. expense an as recognised is loss impairment An amount. recoverable its to reduced is CGU or asset the of amount carrying amount, the carrying its than less be to estimated is CGU or asset an of amount recoverable the If capital. of cost average weighted post-tax deriving Group’s CGUs, the from the to specific risks the and money of value time the of assessment market current the reflect that estimates rates and pre-tax market using the in rate discount changes future of expectations and experiences past on based budgets the sets Management flows. cash expected future to and used rate changes discount the regarding those are calculations use in value the for key estimates The rates. growth estimated of management’s and length, expectations lease store remaining the over extrapolated then are which budgets, internal Group’s the on based from projections flow calculated is cash use in Value use. in value and disposal, of costs less value fair of higher the are CGUs for amounts any. Recoverable if the of loss, extent the impairment determine to order in estimated is asset the of amount recoverable the exists, indication such any If performance. poor astore at following impairment of indication any is there whether determine to assets intangible and right-of-use assets and equipment and plant it’s of property, amounts carrying the reviews Group the date, sheet balance (CGU). At each unit acash-generating be to store each consider Management Impairment of property, plant and equipment and right-of-use assets significant. be potentially could differences total the and may sale values final the estimated from those differ held, currently stock of price sale the of uncertainty inherent the of because robust, and reasonable valuation the in adopted supportable, are assumptions and methodologies the that considers management Whilst levels. sales historic on ba Less: costs of interest-free credit interest-free of costs Less: sales Gross

Segment information continued policies Accounting 25 July 2020 July 25 Year ended 255,491 249,578 268,119 (12,628) 18,541 £’000 27 July 2019 27 July Year ended 333,267 309,932 317,406 (15,861) 23,335

£’000

STRATEGIC REPORT CORPORATE GOVERNANCE 4. Operating profit Operating profit is stated after charging:

Year ended Year ended 25 July 2020 27 July 2019 £’000 £’000 Fees payable to the Company auditors for the audit of Company and consolidated financial statements 25 25 Fees paid for other services: – audit of the Company’s subsidiaries 97 103

– other non-audit services 15 15 FINANCIAL STATEMENTS Depreciation of property, plant and equipment – owned 4,847 4,824 Depreciation of right-of-use assets 22,787 – Amortisation of intangible assets 647 676 Impairment of property, plant and equipment and right-of-use assets 3,376 – Operating lease rentals – plant and machinery – 2,198 Operating lease rentals – land and buildings – 24,400 COVID-19 related rent concessions (615) – Government support 8,420 –

During the year the Group received support from the UK government of £8.4m in response to the COVID-19 outbreak. This included £5.0m under the UK Government’s Job Retention Scheme which has been paid to employees on furlough. This has been recognised as a grant in accordance with the accounting policy set out in Note 2.

5. Exceptional items In order to provide a clearer understanding of underlying profitability, underlying operating profit excludes exceptional items, which relate to costs that, either by their size or nature, require separate disclosure in order to give a fuller understanding of the Group’s financial performance. Exceptional items, booked to operating costs, comprised the following: Year ended Year ended 25 July 2020 27 July 2019 £’000 £’000 Impairment charges associated with stores 3,376 – 95 Restructuring costs 613 – Professional fees – 352 3,989 352

Impairment charges associated with stores As a result of COVID-19 a revision in future projections for the business has resulted in an impairment charge of £3,376,000 being recognised on the assets associated with a number of our stores. This has been split between the right-of-use asset (£2,619,000) and tangible assets (£757,000), apportioned based on net book value.

Management have considered the potential impact of changes in assumptions on the impairment recorded against the Group’s network of store cash- generating units, While there is not a significant risk of an adjustment to the carrying amount of any one store cash-generating unit that would be material to the Group as a whole in the next financial year, management have considered sensitivities to the impairment charge as a result of changes to the post-tax discount rate. The discount rate used in management’s calculation was 8.5%. The sensitivities applied are an increase or decrease of 1.0% used to determine the impairment charge. It is estimated that a 1.0% decrease/increase in discount rate assumptions, with no change to forecast revenue assumptions, would result in a £667,000 increase/£599,000 decrease in the impairment charge of store assets in the 52 weeks to 25 July 2020.

Restructuring costs Current year exceptional items include £613,000 in relation to amounts payable for loss of office incurred as a result of restructuring, in particular, relating to the centralisation of administrative support from each of our individual stores to our head office in Sunderland.

Professional fees In the prior year, exceptional costs disclosed within continuing operations related to the unrealised acquisition of sofa.com. As announced in January 2019, the Group was in discussions regarding the potential acquisition of the business and assets of Sofa.com Limited. Ultimately, this transaction did not occur and the professional fees relating to the due diligence conducted were therefore deemed to be exceptional.

6. Employees and Directors 6.1 Staff costs The aggregate remuneration of all employees including Directors comprises:

Year ended Year ended 25 July 2020 27 July 2019 £’000 £’000 Wages and salaries 47,281 52,037 Social security costs 4,532 5,087 Other pension costs 1,235 1,172 Share-based payment (credit)/charge (note 22) (818) 765 52,230 59,061 Discontinued operations (note 31) – 1,247 Total 52,230 60,308 96 ScS Group plc Annual Report 2020 Interest on lease liability 8. 7. follows: as is compensation key management The Non-Executive the Directors. excludes and Directors Group the and Limited &Sons Share A. subsidiary, trading the of Directors the comprises Key management Key6.2 management compensation 68. 62 to pages on Details of Directors’ remuneration, share options, long-term incentive schemes and pension are entitlements disclosed in the Remuneration Report Total Discontinued operations Cleaning Services and warehousing and managerialOffice Sales The average monthly number of employees (including Executive Directors) during the year was as follows: 6. continued Statements Notes Financial to Consolidated the Income tax (credit)/charge in the statement of comprehensive income comprehensive of statement the in (credit)/charge tax Income Adjustments in respect of prior years prior of respect in Adjustments year the for profits on tax corporation UK Current tax: year the in (credit)/charge tax of (a) Analysis 9. received interest Bank Bank facility utilisation fees fees renewal facility Bank Bank facility non-utilisation fees below the falling minimum performance Group conditions. the for EPS to due recognised previously expenses of unwinding the to relates £818,000 of year the in credit payment share-based The Director. paid highest the by exercised shares of details with along Report Remuneration the in disclosed been have These Share-based payment (credit)/charge cost pension contribution Deferred Short-term employee benefits Total deferred tax (credit)/charge (note 18) (note (credit)/charge tax Total deferred years prior of respect in Adjustments andOrigination reversal of differences temporary Deferred tax: (credit)/charge tax Total current Taxation

Finance income costs Finance Employees and Directors continued 25 July 2020 July 25 2020 July 25 25 July 2020 July 25 2020 July 25 25 July 2020 July 25 Year ended Year ended Year ended Year ended Year ended 3,980 1,349 4,195 1,707 1,707 (898) (284) (818) (459) (184) £’000 £’000 £’000 £’000 (255) (714) 209 466 100 681 525 355 63 55 35 97 – 27 July 2019 27 July 27 July 2019 27 July 27 July 2019 27 July 2019 27 July 27 July 2019 27 July Year ended Year ended Year ended Year ended Year ended 2,880 3,299 1,829 2,857 3,073 1,784 £’000 £’000 £’000 £’000 (226) (244) (193) 680 620 240 765 451 417

96 96 33 45 51 – – – STRATEGIC REPORT CORPORATE GOVERNANCE 9. Taxation continued (b) Tax on discontinued operations

Year ended Year ended 25 July 2020 27 July 2019 £’000 £’000 Tax credit on profit from ordinary activities of discontinued operations – (1)

(c) Factors affecting tax credit/charge for the year FINANCIAL STATEMENTS The tax credit (2019: charge) assessed on the loss(2019: profit) for the year is higher (2019: higher) than the standard rate of corporation tax in the UK of 19.00% (2019: 19.00%). The differences are explained below:

Year ended Year ended 25 July 2020 27 July 2019 £’000 £’000 Continuing (loss) profit before taxation (3,121) 14,260 Profit before tax at 19.00% (2019: 19.00%) (593) 2,709 Effects of: Other expenses not deductible (146) 204 Deduction on exercise of share options (112) (5) Depreciation not eligible for tax purposes 161 111 Adjustments in respect of prior years (155) (175) Impact of changes in tax rates (53) 36 Income tax (credit)/charge in the statement of comprehensive income (898) 2,880

(d) Factors that may affect future tax charges The Chancellor confirmed in the March 2020 budget that the rate of corporation tax will remain at 19% from 1 April 2020, and consequently deferred tax at 25 July 2020 has been calculated based on the rate of 19%.

10. (Loss)/earnings per share 97 Year ended Year ended 25 July 2020 27 July 2019 pence pence a) Basic (loss)/earnings per share attributable to the ordinary equity holders of the Company From underlying continuing operations 2.6p 29.4p From underlying discontinued operation –p 0.9p Total basic earnings per share from underlying operations 2.6p 30.3p From exceptional costs (8.4p) (1.8p) Total basic (loss)/earnings per share (5.8p) 28.5p b) Diluted (loss)/earnings per share attributable to the ordinary equity holders of the Company From underlying continuing operations 2.6p 28.3p From underlying discontinued operation – p 0.8p Total diluted earnings per share from underlying operations 2.6p 29.1p From exceptional costs (8.4p) (1.7p) Total diluted (loss)/earnings per share (5.8p) 27.4p

Year ended Year ended 25 July 2020 27 July 2019 c) Reconciliations of earnings used in calculating (loss)/earnings per share £’000 £’000 (Loss)/profit from continuing operations (2,223) 11,380 – Add back exceptional costs net of tax 3,231 352 Profit from underlying continuing operations 1,008 11,732 Loss from discontinued operation – (4) – Add back exceptional costs net of tax – 359 Profit from underlying discontinued operations – 355 Total profits from underlying operations 1,008 12,087 Total (loss)/profit from operations (2,223) 11,376

Year ended Year ended d) Weighted average number of shares used as the denominator 25 July 2020 27 July 2019 Weighted average number of shares in issue for the purposes of basic (loss)/earnings per share 38,464,470 39,934,853 Effect of dilutive potential ordinary shares: – Share options 1,598,815 1,563,000 Weighted average number of ordinary shares for the purpose of diluted (loss)/earnings per share 40,063,285 41,497,853

A total of 1,598,815 potential ordinary shares have not been included within the calculation of diluted (loss)/earnings per share as at 25 July 2020 as they are antidilutive. 98 ScS Group plc Annual Report 2020 Charge for the year the for Charge At 27 July 2019 At 27 July 2020 July 25 At Net book amount 2020 July 25 At year the for Charge 2019 At 28 July Accumulated amortisation 2020 July 25 At Additions 2019 At 28 July Cost 11. continued Statements Notes Financial to Consolidated the 12. Amortisation is charged through the administration expenses line. 2018 July 28 At 2019 27At July Net book amount 2019 27At July year the for Charge 2018 July At 29 Accumulated amortisation 2019 27At July Additions 2018 July At 29 Cost At 27 July 2019 At 27 July 2020 July 25 At Net book amount 2020 July 25 At Impairment Opening IFRS 16 impairment adjustment 2019 At 28 July Accumulated depreciation and impairment 2020 July 25 At Additions 2019 At 28 July Cost At 27 July 2019 27At July year the for Charge 2018 July At 29 Accumulated depreciation and impairment 2019 27At July Additions 2018 July At 29 Cost At 27 July 2019 27At July Net book amount At 28 July 2018 At 28 July

Intangible assets Intangible Property, plant and equipment

Freehold land and buildings £’000 159 159 159 159 60 99 94 68 65 65 94 91 3 1 1 3 – – improvements Leasehold 12,202 38,326 54,073 41,871 15,378 53,704 38,326 35,038 16,833 15,378 53,704 51,871 2,806 3,288 1,833 £’000 284 369 455 equipment Computer 4,664 3,260 1,097 4,357 3,975 3,260 4,357 1,097 3,691 2,787 £’000 689 904 666 654 307 473 37 24 Fixtures and 26,560 31,085 28,379 32,637 25,500 26,560 31,085 29,145 4,258 4,525 fittings 1,060 1,384 4,525 3,645 1,940 1,552 £’000 264 171 Computer Computer software 68,240 89,305 software 21,065 91,533 74,324 84,866 68,240 17,209 89,305 21,065 21,450 63,416 8,256 6,893 5,898 2,358 1,363 5,251 25 July 4,847 6,893 2,228 1,642 1,642 4,824 5,251 4,439 4,575 5,726 27 July 27 1,167 1,151 £’000 £’000 £’000 Total 2020 480 2019 647 676 757 STRATEGIC REPORT CORPORATE GOVERNANCE 12. Property, plant and equipment continued The net book value of leasehold improvements is as follows:

Year ended Year ended 25 July 2020 27 July 2019 £’000 £’000 Short leaseholds (up to 25 years) 12,144 15,313 Long leaseholds (greater than 25 years) 58 65 12,202 15,378 FINANCIAL STATEMENTS

From 28 July 2019 the Group adopted IFRS 16 ‘Leases’. Leased assets are now presented as a separate line item in the balance sheet. Refer to notes 2 and 13 for the accounting policy and details about the changes in accounting policy, respectively.

Impairment of property, plant and equipment As a result of the impact of COVID-19 all stores have been tested for impairment as at the year end. The impairment review compared the value in use of each CGU based on the Group’s latest budget and forecast cash flows to the carrying values as at 25 July 2020. A charge of £757,000 relating to the impact of COVID-19, was recorded against property, plant and equipment and recognised as an exceptional item (see note 5).

As disclosed in the accounting policies (note 2), 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 a further impairment.

13. Leases The Group leases both properties and motor vehicles.

As a lessee, the Group previously classified leases as an operating lease or finance lease based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases, except for short-term leases and leases of low-value assets.

Consolidated Statement of Financial Position 99 The Consolidated Statement of Financial Position as at 25 July 2020 shows the following amounts relating to leases. As IFRS 16 has not been applied retrospectively the balances alongside represent the equivalent balances at the start of the accounting period after restating for IFRS 16.

Right-of-use assets Leasehold property Motor vehicles Total £’000 £’000 £’000 Cost At 28 July 2019 122,970 3,317 126,287 Additions 14,705 2,913 17,618 Disposals – (422) (422) At 25 July 2020 137,675 5,808 143,483 Accumulated depreciation At 28 July 2019 – – – Charge for the year 20,859 1,928 22,787 Depreciation on disposals – (422) (422) Impairment (note 5) 2,619 – 2,619 At 25 July 2020 23,478 1,506 24,984 Net book amount At 25 July 2020 114,197 4,302 118,499

Impairment of right-of-use assets As a result of the impact of COVID-19, all stores have been tested for impairment as at the year end. The impairment review compared the value in use of each CGU based on the Group’s latest budget and forecast cash flows to the carrying values as at 25 July 2020. A charge of £2,619,000 relating to the impact of COVID-19, was recorded against the right-of-use asset and recognised as an exceptional item (see note 5) as it is considered to be material and one-off in nature.

As disclosed in the accounting policies (note 2), 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 a further impairment.

Lease liabilities The following tables show the discounted lease liabilities included in the Group Consolidated Statement of Financial Position and a maturity analysis of the contractual undiscounted lease payments:

Year ended 25 July 2020 £’000 Current 24,167 Non-current 112,253 136,420 100

ScS Group plc Annual Report 2020 The charge for the year relating to inventories written off amounted to £640,000 (2019: £815,000). £640,000 to amounted off written inventories to relating year the for charge The (2019: £171,290,000). £138,663,000 to amounted operations continued to relating sales of cost in included and expense an as rebates, volume and discounts cash before inventories of cost The received on account was recognised as revenue during the year. the during revenue as recognised was payments of account on balance received forward brought The 12 months. next the in realised be will They orders. customer for services and goods provide to performance its obligations fulfilling Group the of advance in and order of point the at customers from taken deposits represent account on received Payments The fair value of liabilities financial approximates their value carrying due to short maturities. Financial liabilities are denominated in Sterling. Accruals payable security social and taxation Other account on received Payments Trade payables 16. Trade receivables 15. Finished goods 14. statement. income the to credited being £615,000 of payment lease variable has negative in This resulted conditions. specified the meet that concessions rent all to applied been has concessions rent COVID-19-related for expedient practical The Group income the to statement. expensed are less or 12 of months leases short-term and assets value low of Leases leases. these of respect in costs interest of £3,980,000 and charges depreciation £22,787,000 of recognised Group year, the the During £25,216,000. of charges rental than year, rather the for income the in statement leases operating as classified previously were that leases of respect in costs interest and depreciation recognised has Group The Consolidated Statement of Comprehensive Income The Group presents lease liabilities separately in the consolidated balance sheet. payments lease Total undiscounted years five After years five to two Within Within one year Group payments: lease undiscounted –contractual analysis Maturity 13. Leases continued Statements Notes Financial to Consolidated the The bad debt provision is not considered material for disclosure. for material considered not is provision debt bad The model. loss credit expected Group’s the of impact default, of material history, no been previous has no and there therefore and likelihood, low avery is there which with providers finance party third from due are receivables trade the of majority The The amounts carrying of trade and other receivables are all denominated in Sterling. date. due contracted the The fair value of trade and other receivables is approximate to their value. carrying Trade and other receivables are considered due once they have passed Prepayments receivablesOther

Inventories Trade and other payables –current payables other Trade and Trade and other receivables continued 25 July 2020 July 25 25 July 2020 July 25 2020 July 25 Year ended Year ended Year ended 34,592 18,207 20,638 12,834 13,105 81,169 4,804 1,948 1,279 1,577 £’000 £’000 £’000 25 July 2020 July 25 27 July 2019 27 July 27 July 2019 27 July 2019 27 July Year ended Year ended Year ended Year ended 150,508 81,366 28,010 41,132 12,005 19,209 25,859 56,624 14,697 5,200 4,063 1,084 8,754 2,470

£’000 £’000 £’000 £’000

STRATEGIC REPORT CORPORATE GOVERNANCE 17. Trade and other payables – non-current

Year ended Year ended 25 July 2020 27 July 2019 £’000 £’000 Lease incentives – 5,899 Onerous lease provision – 514 Accruals 137 – 137 6,413 FINANCIAL STATEMENTS

In the prior year the onerous lease provision of £514,000 related to commitments on leases for stores identified as loss-making as part of management’s ongoing review of store profitability. In the current year under IFRS 16, this provision along with the lease incentives has been reclassified to offset against the right-of-use asset recognised at the transition date.

18. Deferred tax The Group’s movements in deferred taxation during the current financial year and previous year are as follows:

Year ended Year ended 25 July 2020 27 July 2019 £’000 £’000 Opening deferred tax liability (452) (645) Adjustment on initial application of IFRS 16 990 – Opening deferred tax liability (restated) 538 (645) Adjustments in respect of prior years (100) – Credited to profit and loss account arising from the origination and reversal of temporary differences (note 9) 284 193 Closing deferred tax asset/(liability) 722 (452)

Deferred taxation has been fully provided for in respect of: Year ended Year ended 25 July 2020 27 July 2019 101 £’000 £’000 Accelerated capital allowances (407) (497) Losses 284 121 Other timing differences 43 45 Capital gains held over (135) (121) Adjustment on initial application of IFRS 16 937 – Closing deferred tax asset/(liability) 722 (452)

19. Provisions

Property obligations Total £’000 £’000 At 28 July 2019 – – Reclassification from accruals 1,209 1,209 At 25 July 2020 1,209 1,209

Property provisions relate to obligations in respect of the Group’s property leases for an estimate of dilapidation and decommissioning costs payable upon exiting a leased property. These provisions are expected to be utilised at the end of each specific lease.

Year ended Year ended 25 July 2020 27 July 2019 £’000 £’000 Current 125 – Non-current 1,084 – 1,209 –

20. Called-up share capital

Ordinary shares Share premium Total Number of shares £’000 £’000 £’000 As at 27 July 2019 40,009,109 40 16 56 Shares repurchased and cancelled (1,996,454) (2) – (2) As at 25 July 2020 38,012,655 38 16 54

Authorised, allotted and fully paid share capital is 38,012,655 of £0.001 each (2019: 40,009,109 of £0.001 each).

On 8 November 2019, the Group acquired 1,996,454 ordinary shares at a price of 220.0p per ordinary share from related party Parlour Product Holdings (LUX) S.A.R.L for a total consideration of £4,400,000. Following this purchase, the ordinary shares purchased by the Group were cancelled, and the Group’s issued share capital subsequently consists of 38,012,655 ordinary shares, each with one voting right. 102

ScS Group plc Annual Report 2020 Forfeited Exercised Granted Exercised Outstanding as at 25 July 2020 July 25 at as Outstanding 2019 27 July at as Outstanding Expired Granted Exercisable at 27 July 2019 27 at July Exercisable 2020 July 25 at Exercisable Forfeited 2018 July 28 at as Outstanding date. vesting the until up trued be will and date sheet balance estimated is the at vesting of level The life. expected the with consistent aterm of bonds government UK on yield the is rate interest risk-free dividend The receive to equivalents). entitlement an give that awards of exception the (with IPO at set yield dividend target the on based is yield the dividend The with life. commensurate expected aperiod over measured companies comparator of volatilities historic and grant of date the and from admission Company the of between period the volatility historic the to reference by calculated is volatility expected The exercise. to period time estimated the is life expected The The awards granted have been valued using the Black-Scholes model. No performance conditions were included in the fair value calculations. awards of Fair value (ix) (vii) (vi) (v) (iv) (iii) (ii) (i) made: been have plc Group ScS in shares over grants following the and awards of types various for LTIP allows The admission. upon 2015 conditional 21 on January (LTIP) adopted Plan was Long-Term plc Group Incentive ScS The Post-admission incentive arrangements business. the of success the to important considered are who key employees Directors and retain help to incentive along-term as act to intended are that employees certain for schemes share equity-settled operates Group The 22. £57,726,000. to amounted Company the of earnings retained the 2020, July At 25 appropriate to was it pay feel not the interim did dividend when Board receiving the However, government 2020. March 20 support. A dividend on has final not been proposed. Directors of Board the by declared was share ordinary per 5.50p of dividend interim An 2020. July 25 to year the in equity shareholders’ in recognised been 2019. has It 27 on November paid 2019 was 11.20p of 27 July ended year the for dividend A final 21. continued Statements Notes Financial to Consolidated the being lower than the minimum target set, these options will lapse. Further information on the LTIP is available in the Directors’ Remuneration Report. Remuneration Directors’ the in LTIP available is the on information Further lapse. will options these set, target minimum the than lower being EPS Group’s the to Due date. end year the at as LTIP, 2020 the vested to relate which options LTIP share 554,141 2020, outstanding July 25 the of at As year. the during LTIP awards all for price share average Weighted Note: financial statements of the Group for the financial year ended 30 July 2022). July 30 ended year financial the for Group the of statements financial audited consolidated the in out set as EPS on based is condition performance 2019 (the 14 on October granted options cost £nil Performance-based 2021). 31 July ended year financial the for Group the of statements financial audited consolidated the in out set as EPS on based is condition 2018performance (the 15 October on granted options cost £nil Performance-based 2020). July 25 ended year financial the for Group the of statements financial audited consolidated the in out set as EPS on based is condition 2017 performance (the 16 on October granted options cost £nil Performance-based 2020. July 25 at as awarded were options these of aproportion set, performance condition minimum the than higher was Group the for EPS 2019). the 27 As July ended year financial the for Group the of statements financial audited consolidated the in out set as EPS on based is condition 2016 performance (the 17 on October granted options cost £nil Performance-based 2018. 28 July at as forfeited been have awards these set, condition performance the than lower was Group the for 2017). EPS for the Group As the of statements financial audited consolidated the in out set as EPS on based is condition performance 2015 (the March 30 on granted options cost £nil Performance-based 2015). 21 on January (approved place taking IPO the on conditional options value market 2015).Unapproved 21 on January (approved place taking IPO the on conditional Plan Option Share Company approved HMRC an under options value Market 2015). 21 on January (approved place taking IPO the on conditional options cost £Nil Dividends Share-based payments Share-based Share awards LTIP (pre-IPO nil cost options) cost nil (pre-IPO LTIP 139,997 139,997 (34,285) (22,857) (82,855) 22,857 22,857 22,857 – – – – – – £0.000001 £0.000001 £0.000001 £0.000001 £0.000001 £0.000001 exercise price £0.000001 Average – – – – – Share awards 52,393 52,393 47,513 47,513 47,513 47,513 47,513 47,513 47,513 (4,880) LTIP (CSOP market market (CSOP LTIP value options) – – – – – – exercise price Average £1.75 £1.75 £1.75 £1.75 £1.75 £1.75 £1.75 £1.75 – – – – – – Share awards 1,028,266 1,028,266 1,492,630 1,492,630 1,551,302 1,551,302 (208,484) (258,226) (245,442) 2018, 2019 and 2020 LTIP LTIP 2020 and 2019 2018, 562,340 672,848 (Directors’ awards) – – – – £0.000001 £0.000001 £0.000001 £0.000001 £0.000001 £0.000001 £0.000001 £0.000001 exercise price Average – – – – Share awards 1,563,000 1,220,656 1,598,815 (268,299) (258,226) (247,649) 562,340 672,848 (82,855) 70,370 70,370 47,513 47,513 LTIP (all awards) – £0.000001 £0.000001 £0.000001 £0.000001 £0.000001 exercise price Average £0.08 £0.04 £0.05 £0.05 £1.75 £1.75 £1.18 £1.18

– STRATEGIC REPORT CORPORATE GOVERNANCE 22. Share-based payments continued The fair value of share options issued and the assumptions used in the calculation are as follows:

2015 2015 2017 2018 2019 2020 21 January 21 January 17 October 16 October 15 October 14 October Grant date 2015 2015 2016 2017 2018 2019 Share price at grant date £1.75 £1.75 £1.83 £1.75 £2.23 £2.36 Exercise price £nil £1.75 £nil £nil £nil £nil FINANCIAL STATEMENTS Number of employees 25 6 6 8 8 7 Shares issued 571,421 68,659 474,125 554,141 672,848 562,340 Expected volatility 33.7% 36.2% –1 –1 –1 –1 Expected life (years) 3 5 3 3 3 3 Risk-free interest rate 0.70% 1.06% –1 –1 –1 –1 Expected dividend yield 8% 8% –1 –1 –1 –1 Fair value per share £1.38 £0.24 £1.83 £1.75 £2.23 £2.36 Actual/estimated vesting 100% 100% 56% 0% 0% 0%

1. LTIP participants are entitled to receive dividend equivalents on unvested awards, and therefore dividend yield does not impact the fair value calculation. Furthermore, volatility and risk-free rates do not impact the fair value calculation for awards with no exercise price or market-based performance conditions.

The total credit for the year relating to employee share-based payment plans was £818,000 (2019: charge of £765,000) which is in relation to equity- settled share-based payment transactions. There are no liabilities arising from share-based payment transactions.

23. Capital commitments Capital commitments contracted for but not provided amounted to £480,000 (2019: £230,000).

24. Pension commitments The Group operates several defined contribution pension schemes for the benefit of its staff. The assets of the schemes are held separately from those of the Group in independently administered funds. The pension charges represent contributions payable by the Group to these funds and are shown in 103 note 6. Amounts outstanding at the year end were £227,000 (2019: £219,000) and are held in accruals.

25. Financial instruments – risk management Financial risk management policy The Group’s principal financial instruments comprise cash and cash equivalents. The main purpose of these financial instruments is to provide funds for the Group’s operations. The Group has other financial instruments being trade receivables and trade payables that arise directly from its operations.

It is, and has been, under review throughout the year, the Group’s policy that no trading in financial instruments shall be undertaken. The Group has not entered into derivative transactions during the years under review. The Group does not undertake any speculative transactions and continues to pursue prudent treasury policies by investing surplus funds only with reputable UK financial institutions.

Credit risk The finance for all the Group’s credit sales is provided from external financing companies who bear the whole risk of customer defaults on repayment. The Group’s financial assets which are past due and not impaired are deemed not material for disclosure. The remaining balance is deemed fully recoverable due to the use of finance houses to mitigate the risk of recoverability. There have been no gains/losses on financial liabilities.

Cash and deposits are invested with Lloyds Bank plc.

Liquidity risk The Group’s exposure to liquidity risk is low, as historically working capital requirements have been funded entirely by self-generated cash flow.

At 25 July 2020, the Group’s cash balance totalled £82.3m, and £20.6m was owed as trade payables for goods delivered. The Group has no drawn down debt, and further liquidity is available through the £20.0m CLBILS revolving credit facility (RCF) granted on 25 August. This facility is committed for a term of 36 months and would be renegotiated well in advance of this maturity date. The RCF is subject to certain covenants in respect of fixed charge cover, liquidity, leverage and capital spending.

Financial instruments by category Financial assets and liabilities are classified in accordance with IFRS 9. No financial instruments have been reclassified or derecognised in the year. There are no financial assets which are pledged or held as collateral. The Group does not hold any financial assets or liabilities held as fair value through the income statement, defined as being in a hedging relationship or any available for sale financial assets.

The Group’s main financial assets comprise cash and cash equivalents and trade receivables arising from the Group’s activities. These financial assets all meet the conditions to be recognised at amortised cost under IFRS 9 (previously loans and receivables under IAS 39).

Other than trade and other payables, the Group had no financial liabilities within the scope of IFRS 9 as at 25 July 2020 (2019: £nil). Balances within trade and other payables will mature within one year.

The fair value of the Group’s financial assets and liabilities is not materially different from their carrying values. Financial assets and liabilities comprise principally of trade receivables and trade payables and the only interest-bearing balances are the bank deposits and borrowings which attract interest at variable rates. 104

ScS Group plc Annual Report 2020 is subject to certain covenants in respect of fixed charge cover, liquidity, leverage and capital spending. capital and leverage cover, liquidity, charge fixed of respect in covenants RCF The certain to 36 months. of subject is aterm for committed is facility This (RCF). facility credit revolving CLBILS a£20.0m arranged Group the 2020, August 25 On events sheet balance Post 30. liability. alease of recognition the to due position debt anet in is Group 16, the IFRS of adoption the of aresult As Net debt Lease liabilities equivalents cash and Cash 29. purposes of satisfying management share incentive awards. the for 214.2 of pence price purchase average an at Group the in each 0.1 of pence shares ordinary 42,718 own its held of Group 2019 the 27 at July As pence. 234.9 of price purchase average an at Group the in each 0.1 of pence shares 77,275 ordinary own holds its of Group the 2020 July 25 at As shares. treasury as held remainder the satisfy to with used awards, been had shares these of 290,025 awards. incentive share management satisfying of purpose the for share ordinary per pence 232.2 of price average an at Group the in each £0.001 of shares ordinary 324,582 Trust purchased Benefit Employee Group’s year, the current the During 2020 July 25 at As Transfer to retained earnings shares own of Purchase 2019 27 July at As Transfer to retained earnings 2018 28 July at As 28. each of assets the over charges floating subsidiary and undertaking. fixed grants which plc Bank Lloyds with adebenture to party are Group the of undertakings subsidiary The 27. materiality. of grounds the on consolidation the in included not Trust are Benefit Furnishings Employee ScS Group Only 5. ScS note in the and Limited statements financial Company the in disclosed are transactions party related relevant any and subsidiaries in Holdings 26. flow. cash free forecast and period current the of context the in The Group manages its capital through continued focus on free cash generation flow and setting the level of capital expenditure and dividend disclosed are cash and Equity in the cash. consolidated and statement of equity be to position. financial capital considers Group The stakeholders. other for benefits and shareholders for returns The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern and retain to flexibility financial provide 25. continued Statements Notes Financial to Consolidated the Capital management

Net debt Net Treasury reserve parties Related Contingent liabilities Financial instruments – risk management continued 25 July 2020 July 25

(136,420)

Year ended (54,138)

82,282

£’000 £’000 (663)

(177) 182 268 754 91

STRATEGIC REPORT CORPORATE GOVERNANCE 31. Discontinued operations Following the closure of the final House of Fraser concession in January 2019, in accordance with IFRS accounting standards, the results of the House of Fraser concessions are now presented as discontinued operations.

The income statement relating to the discontinued operations is set out below:

Income statement of discontinued operations

Year ended Year ended 25 July 2020 27 July 2019 FINANCIAL STATEMENTS £’000 £’000 Gross sales – 7,279 Revenue – 7,193 Cost of sales – (3,956) Gross profit – 3,237 Distribution costs – (575) Administrative expenses – (2,667) Operating loss – (5)

Analysed as: Operating profit/(loss) before exceptional items – 438 Exceptional items* – (443) Operating loss – (5)

Loss before taxation – (5) Taxation – 1 Loss from discontinued operations – (4) 105 Attributable to: Owners of the parent – (4) Loss attributable and total comprehensive loss for the period – (4)

Net cash inflow from operating activities – 1,492 Net increase of cash generated from discontinued operations – 1,492

Underlying EBITDA An analysis of underlying EBITDA is as follows:

Year ended Year ended 25 July 2020 27 July 2019 £’000 £’000 Operating profit/(loss) before exceptional items – 438 Depreciation – 86 Underlying EBITDA from discontinued operations – 524 Exceptional items* – (443) EBITDA from discontinued operations – 81

* Exceptional costs disclosed within discontinued operations comprise amounts payable for loss of office and other costs incurred relating to the closure of the House of Fraser concessions. 106

ScS Group plc Annual Report 2020 The financial statements on pages 106 to 111 were approved by the Board and authorised for issue on 1 October 2020 and signed on its behalf by: behalf its on signed and 2020 1October on issue for authorised and Board 111 to the 106 by pages approved on were statements financial The (2019: £5,979,000). £3,612,000 is Company the of statements financial the within included year the for income comprehensive total The statements. financial these of part 109 111 to integral an pages on form notes The Total equity and liabilities Total equity Total shareholders’ funds Retained earnings reserve share Treasury Capital redemption reserve Share premium account Called-up share capital reserves and Capital Total liabilities Total current liabilities Trade and other payables Current liabilities assets Total Total current assets Total current hand in and bank at Cash asset tax Deferred Trade and other receivables assets Current Total non-current assets Investments assets Non-current Chief Executive Officer David Knight at 2020 25As July Position of Financial Company Statement Note 12 9 9 8 7 6 5 70,000 70,000 12,563 12,563 12,563 70,176 70,176 57,613 57,613 57,726 £’000 (182) 2020 149 176 38 15 27 16 – 70,000 70,000 70,004 70,004 63,538 63,516 63,516 6,488 6,488 6,488 £’000 2019 (91) 40 13 16 4 4 – – STRATEGIC REPORT

Company Statement of Changes in Equity For the year ended 25 July 2020 CORPORATE GOVERNANCE Called-up Share Capital share premium redemption Treasury Retained Total capital account reserve reserve earnings equity £’000 £’000 £’000 £’000 £’000 £’000 At 29 July 2018 40 16 13 (268) 64,283 64,084 Total comprehensive income – – – – 5,979 5,979 Transfer to retained earnings – – – 177 (177) – Dividends paid – – – – (6,547) (6,547) At 27 July 2019 40 16 13 (91) 63,538 63,516 FINANCIAL STATEMENTS At 28 July 2019 40 16 13 (91) 63,538 63,516 Total comprehensive income – – – – 3,612 3,612 Purchase of own shares – – – – (4,425) (4,425) Cancellation of repurchased shares (2) – 2 – – – Treasury shares (note 12) – – – (91) (663) (754) Dividends paid (note 10) – – – – (4,336) (4,336) At 25 July 2020 38 16 15 (182) 57,726 57,613

107 108

ScS Group plc Annual Report 2020 year of end at equivalents cash and Cash Cash and cash at equivalents beginning of year Net increase in cash and cash equivalents Net cash used flow activities in financing shares own of Purchase Dividends paid Cash flows used activities in financing activities investing in used flow cash Net activities operating from generated flow cash Net Cash generated from operations Increase in trade and other payables (Increase)/decrease in trade and other receivables Changes in working capital: Profit before taxation before Profit Cash flows from operating activities As at 2020 25As July Flows of Cash Company Statement Note 10 8 6 (4,336) (5,180) (9,516) 3,463 6,076 9,516 9,516 £’000 2020 (23) – – – – (6,547) (6,547) 6,547 6,547 5,979 £’000 2019 562 6 – – – – – STRATEGIC REPORT

Notes to the Company Financial Statements For the year ended 25 July 2020 CORPORATE GOVERNANCE 1. General information ScS Group plc (the ‘Company’) is a company limited by shares incorporated and domiciled in England, within the UK (Company registration number 03263435). The address of the registered office is 45-49 Villiers Street, Sunderland, SR1 1HA. The Company’s principal activity is to act as a holding company for its subsidiaries, and its shares are listed on the London Stock Exchange (LSE).

2. Accounting policies The principal accounting policies applied in the preparation of these financial statement are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. FINANCIAL STATEMENTS Statement of compliance with FRS 101 These financial statements were prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’ (FRS 101). The Company meets the definition of a qualifying entity under FRS 100, ‘Application of Financial Reporting Requirements’ as issued by the Financial Reporting Council.

Basis of preparation The financial statements have been prepared under the historical cost convention and in accordance with the Companies Act 2006.

As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to business combinations, financial instruments, capital management, presentation of comparative information in respect of certain assets, standards not yet effective, impairment of assets and related party transactions. Where required, equivalent disclosures are given in the consolidated financial statements of ScS Group plc.

Going concern The Company is the ultimate holding company to a group which is highly cash generative, and which holds sufficient medium and long-term facilities in place to enable it to meet its obligations as they fall due. The Directors are therefore satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future.

Further information on the Group’s going concern and ongoing viability is provided in note 2 of the Group financial statements.

Critical accounting estimates and judgements The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also requires management 109 to exercise its judgement in the process of applying the Company’s accounting policies. However, due to the nature of the Company, we do not consider there to be any critical accounting estimates or judgements made in the preparation of these financial statements, with the exception of the estimate noted below:

Carrying value of the investment Management have considered the carrying value of the investment, given the Group’s reported loss for the year. Management calculated a value in use from cash flow projections based on the Group’s internal budgets, which are then extrapolated into perpetuity and discounted using the Group’s cost of capital. The key estimates for the value in use calculations are those regarding the discount rate used and expected future cash flows. Management utilised the budget and discount rate consistent with those use in the Group’s underlying store impairment calculations. Management’s value in use calculation provided significant headroom over the carrying investment value.

Capital management The Company follows the same capital management as the Group – see page 103 in the Group financial statements.

New standards, amendments and interpretations For the latest amendments and interpretations, please refer to page 89 in the Group financial statements.

Fixed asset investments Fixed asset investments in subsidiary undertakings are recorded at cost plus incidental expenses less any provision for impairment.

Trade receivables Trade receivables for the Company refer to prepayments made for services performed in the ordinary course of business. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Treasury shares The Employee Benefit Trust (EBT) provides for the issue of shares to Group employees, principally under share option schemes. Shares in the Company held by the EBT are included in the balance sheet as treasury shares at cost, including any directly attributable incremental costs. Subsequent consideration received for the sale of such shares is also recognised in equity, with any difference between the sale proceeds and the original cost being taken to retained earnings. No gain or loss is recognised in the financial statements on transactions in treasury shares.

Taxation The tax charge for the financial period is based on the profit for the financial period. 110

ScS Group plc Annual Report 2020 ScS Furnishings Limited is exempt from audit as it is dormant. It’s aggregate amount of capital and reserves is £1. is reserves and capital of amount aggregate It’s dormant. is it as audit from exempt is Limited Furnishings ScS The Directors believe that the value carrying of the investments is supported by managements value in use model (see note 2). plc. Group ScS by controlled be to deemed are and rights voting equal carry shares All SR1 1HA. Sunderland, Street, 45-49 is Villiers subsidiaries the of all for address office registered The ScS Furnishings Limited A. Share & Sons Limited &Sons Share A. Parlour Product Holding Limited Held by subsidiary undertakings Closing deferred tax asset Losses of: respect in for provided fully been has taxation Deferred Closing deferred tax asset differences temporary of reversal and origination the from arising account loss and profit to Credited Opening deferred tax liability follows: as are year previous and year financial current the during taxation deferred in movements Company’s The 7. Prepayments follows: as are were Kingdom United the in incorporated and owned were which subsidiaries, The 2020 July 25 and 2019 27At July value book net and Cost 6. Parlour Product Topco Limited Name 5. above. noted Directors Non-Executive the than other staff any employ not does Company The 68. 62 to pages on Report Remuneration the within fees, Directors’ Non-Executive the with disclosed, are and along statements financial Group’s the into consolidated been have costs These Limited. Sons and Share A. company, Group borne was another by remuneration Directors’ Executive All (2019: £nil). Company the to services their for remuneration any received Directors’ Executive No 4. (2019: £5,979,000). £3,612,000 was year the for Company the for income Total comprehensive Company. the for income aStatement or Comprehensive of Statement Income the presenting from 2006 Act Companies the of 408 section under exemption the take to elected has Company The 3. – 101: FRS under – available exemptions disclosure following the of advantage taken has Company the statements, financial these In Related parties 2. For year 2020 the 25 ended July continued Statements Notes to Company Financial the – –

Investments

Deferred tax Directors’ emoluments Income statement exemption provided that any subsidiary which is party to the transaction is a wholly-owned by such amember. such by awholly-owned is transaction the to party is which subsidiary any agroup, of that provided members more or two between into entered transactions party related disclose to Disclosures’ Party 24 ‘Related IAS in requirements The and Transactions’; Party 17 24 ‘Related IAS of paragraph of requirement The Trade and other receivables continued policies Accounting Dormant company Specialist retailer of upholstered furniture Holding company Holding Holding company Holding Principal activity Ordinary Ordinary Ordinary Ordinary Class of shares held shares of Class 25 July 2020 July 25 2020 July 25 Year ended Year ended £’000 £’000 £’000 2020 149 149 149 149 27 – % of holdings undertaking 27 July 2019 27 July 2019 27 July Year ended Year ended Subsidiary 70,000 100% 100% 100% 100%

£’000 £’000 £’000 £’000 2019 4 – – – – – STRATEGIC REPORT CORPORATE GOVERNANCE 8. Trade and other payables

2020 2019 £’000 £’000 Amounts owed to Group undertakings 12,415 6,320 Accruals and deferred income 148 168 12,563 6,488

Amounts owed to Group undertakings are unsecured, interest-free and repayable on demand. FINANCIAL STATEMENTS

9. Called-up share capital

Ordinary shares Share premium Total Number of shares £’000 £’000 £’000 As at 27 July 2019 40,009,109 40 16 56 Shares repurchased and cancelled (1,996,454) (2) – (2) As at 25 July 2020 38,012,655 38 16 54

Authorised, allotted and fully paid share capital is 38,012,655 of £0.001 each (2019: 40,009,109 of £0.001 each).

On 8 November 2019, the Company acquired 1,996,454 ordinary shares at a price of 220.0 pence per ordinary share from related party Parlour Product Holdings (LUX) S.A.R.L for a total consideration of £4,400,000. Following this purchase, the ordinary shares purchased by the Company were cancelled, and the Company’s issued share capital subsequently consists of 38,012,655 ordinary shares, each with one voting right.

10. Dividends A final dividend for the year ended 27 July 2019 of 11.20p was paid on 27 November 2019. It has been recognised in shareholders’ equity in the year to 25 July 2020. 111 An interim dividend of 5.50p per ordinary share was declared by the Board of Directors on 20 March 2020. However, the board did not feel it was appropriate to pay the dividend when receiving government support. A final dividend has not been proposed.

At 25 July 2020 the retained earnings of the Company amounted to £57,726,000

11. Financial instruments The Company has financial instruments, being trade receivables and trade payables, that arise directly from its operations. The financial instruments – risk management policy has been included in note 25 of the Group financial statements.

12. Treasury reserve Details of the Company’s share capital and share buybacks are given in note 28 of the notes to the Group financial statements. 112

ScS Group plc Annual Report 2020 [email protected] [email protected] Tel: 7466 020 5000 6DN EC2V London 107 Cheapside Buchanan Financial PR www.lloydsbankinggroup.com Tel: 7616 020 1500 7AE EC2V London Street 10 Gresham PLC Group Banking Lloyds Principal bankers www.shorecap.co.uk Tel: 7408 020 4050 1LD SW1A London Street 57 St James’s Cassini House Ltd Group Capital Shore Brokers www.pwc.co.uk Tel: 0191 232 8493 3AZ NE1 Newcastle Upon Tyne Street Orchard Central Square South Floor & 6th 5th PricewaterhouseCoopers LLP Independent auditor www.equiniti.com Tel: 2030 0871 384 BN99 6DA West Sussex Lancing Spencer Road House Aspect Equiniti Share registrar Exchange. Stock London the on listing apremium with listed are plc Group ScS of shares Ordinary Listing Registered in England: 03263435 Company number www.scsplc.co.uk Tel: 0191 731 3000 Tyne &Wear 1HA SR1 Sunderland 45-49 Villiers Street plc Group ScS office Registered Company Information

The outer cover of this report has been laminated with a biodegradable film. Around 20 months after composting, an additive within the film will initiate the process of oxidation. ScS Group plc Annual Report 2020 SR1 1HA Sunderland ScS Group plc Tyne andTyne Wear www.scs.co.uk Tel. 0191 731 3000 731 0191 Tel. 45-49 Villiers Street Villiers 45-49