Poundland Group plc

Annual Report & Financial Statements for period ended 30 March 2014 Poundland Group plc Annual Report & Financial Statements for period ended 30 March 2014

...Every week ...Every month

Poundland Group plc ...Every year Registered Office: Wellmans Road, Willenhall, West Midlands, WV13 2QT

Registered in England.

Company No: 08861243 STOCK CODE: PLND OUR GOAL AT POUNDLAND WE DELIVER AMAZING VALUE TO OUR CUSTOMERS EVERY DAY. WE WILL BE FAMOUS FOR OUR WIDE RANGE OF GREAT PRODUCTS AND TOP BRANDS, OFFERING MANY EXCITING NEW LINES EVERY WEEK. POUNDLAND WILL ALWAYS BE FUN AND FRIENDLY WITH SOMETHING FOR EVERYONE.

OUR VALUES POUNDLAND AT A GLANCE CONTENTS Who we are Introduction

Poundland is the largest single price value general merchandise retailer in Our Goal and Values i Introduction Europe by both sales and by number of stores. Poundland operates a network Poundland at a Glance 1 of 528 stores across the UK and Ireland. Stores are sited in convenient locations, typically with high footfall, across a mixture of high streets, Operational Highlights 2 shopping centres and retail parks and are all operated on a leasehold basis. Financial Highlights 3 What we do Market Overview 4 Poundland is a price driven, volume-led business offering an extensive range Our Business Model 6 of products across 17 categories, with the average Poundland store carrying approximately 3,000 core range SKUs including over 1,000 branded products. These branded products account for the majority of sales, with popular brand Strategic Report names such as Cadbury, Mars, Heinz, Nestle and Colgate representing an

Our Group Strategy 7 Strategy important footfall driver. Chairman’s Statement 8 How we do it Chief Executive Officer’s Review 10 Poundland is headquartered in Willenhall, West Midlands, and we employed Chief Financial Officer’s Report 14 on average 12,829 colleagues in the 2014 financial year, of which approximately 70% were employed on a part-time basis. We operate three Risks and Uncertainties 20 distribution centres. A new warehouse is expected to open in 2014 in Harlow in the South East of England to replace the existing temporary facility at Corporate and Social Responsibility Report 22 Hoddesdon. Governance Our Directors 26 OUR HISTORY Our Executive Team 28 Governance 1990 – Opened first store in 2006 – Jim McCarthy joined the Directors’ Report 29 Burton-upon-Trent company as CEO Corporate Governance 32 Audit and Risk Committee Report 35 Directors’ Remuneration Report 38

Financials

1996 – Opened Hong Kong 2010 – Company acquired Statement of Directors’ Responsibilities office to provide direct by funds advised by in Respect of the Annual Report and the Financial Statements 54 support operations Warburg Pincus Independent Auditor’s Report to the Members of Poundland Group plc 56 Financials Consolidated Income Statement 58 Consolidated Statement of Other Comprehensive Income 59

2002 – Company acquired 2011 – 2011 launched new Consolidated Statement of Financial Position 60 by funds advised by Dealz format into Consolidated Statement of Changes in Equity 61 Advent International plc Republic of Ireland Consolidated Cash Flow Statement 62 Notes to the Consolidated Financial Statements 63 Company Balance Sheet 96 Notes to the Company Financial Statements 97

2005 – Opened second distribution centre in Bilston

Poundland Group plc Annual report and financial statements for p/e 30 March 2014 - 1 OPERATIONAL HIGHLIGHTS

Over 1,000 net new 70 net new stores, jobs created growing the estate by 15.3% to 528 stores (2013: 458)

Announced Spanish trial of Dealz with a plan to open an initial 10 stores over 2 year Group sales area period Nearly five million +18.9% to 2.80m.sq.ft. customers served each (2013: 2.35m.sq.ft.) week, including over 200,000 in Ireland

Clear evidence of universal appeal of the Poundland and Dealz brands with over 22% of customers now from Opening of our 500th store the AB demographic Awarded Grocer Variety in Corporation Street, Discounter of the Year Birmingham

New 350,000 square foot warehouse in WORKING TOGETHER Harlow will open in late Poundland and Macmillan Cancer Care August have been working together since 2009. Our customers and colleagues have worked hard to raise money by giving donations, running marathons, climbing mountains and various other fundraising events. Together we’ve raised over £1,000,000 CORPORATE AND SOCIAL The money raised will fund vital Macmillan support services, to RESPONSIBILITIES help ensure that no one faces cancer alone. For example, £158,159 could pay for a Macmillan nurse for three years, helping people In addition to delivering amazing value to our customers every day, living with cancer and their families receive essential medical, we put our customers first and fully understand and recognise our practical and emotional support. Thank you to everyone involved. responsibilty to demonstrate to them that we trade fairly and take our corporate and social responsibilities seriously. We recognise our duty to operate our business in an ethical and responsible manner.

2 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 FINANCIAL HIGHLIGHTS Introduction

Revenue 1000 2014 150 2013 +13.3% (£m) 800 2013 120 2012 600 2012 90 2011 2010 400 60 2009 1000 150 Underlying EBITDA 2014 200 2013 30 800 2013 120 2012 0 +18.9% (£m) 0 600 2012 90 2011 2010 400 60 2009 200 30

60 2014 150Strategy 2013 0 0 50 2013 120 2012 40 2012 90 2011 30 2010 1000 2014 150 2013 60 20 2009 60800 20142013 150120 20132012 10 30 50 20132012 120 20122011 600 900 0 40 2012 20112010 400 90 60 30 20102009 60 20200 30 2009 10 0 30 0 12 2014 25 2013 0 0 10 2013 20 2012 8 2012 15 2011 6 2010 60 2014 150 2013 10 4 2009 12 50 20142013 25120 20132012 2 5 10 40 20132012 20 20122011 900 0 8 30 2012 20112010 15 60 6 20Underlying Adjusted EPS 20102009

10 Governance 4 10 30 2009 2 0 +25.1% (p) 5 0 0 0 Net Debt (£m)

12 2014 25 2013 10 2013 20 2012 8 2012 2011 2515 2014 6 2010 20 2013 10 2009 4 2012 2 155 0 100

5

0 Financials

KPI PERFORMANCE

2014 2013 Change Number of stores 528 458 70 Number of new stores (net) 70 69 Sales (£m) 997.8 880.5 13.3% Gross margin (%) 36.93 36.74 19 bp Underlying EBITDA (£m) 54.0 45.5 18.9% Underlying EBITDA margin (%) 5.41 5.16 25 bp Underlying profit for the period (£m) 27.3 21.8 25.1% Operating cash flow less maintenance capex (£m) 66.8 37.6 77.7% Cash conversion (%) 123.7 82.7 Operating cash flow less maintenance and expansion capex (£m) 52.2 23.2 125.4% Net debt (£m) 4.7 9.2 -48.3%

Poundland Group plc Annual report and financial statements for p/e 30 March 2014 - 3 MARKET OVERVIEW Although we operate in an attractive sub-sector of the overall UK retail market, (the value general merchandise retail market), this Poundland’s market share of the total retail market (%) does not tell the whole story. Because we offer our customers a broad range of products across 17 different retail categories, 0.30 2013 we compete against a very wide range of retailers, including WH 0.25 2012 Smith in stationery, Holland & Barrett in healthy snacks, Claire’s 0.20 2011 Accessories in hair accessories and Boots in health and beauty. In 0.15 2010 2013, the total retail market in the UK was worth £360 billion, of 0.10 2009 which our share was less than 0.3%. 0.05 2008 This low share of the total retail market and the growing appeal of 0.00 the discount sector to UK shoppers, underpins our belief that we can double our store base in the UK. UK value general merchandise sector’s share of The key trends and features of the UK value general merchandise addressable market (%) market are listed below: • One of the fastest growing sectors within UK retail, having 2012 grown at a CAGR of approximately 15% since 2007, 3.0 2011 2010 predominantly driven by rapid store roll out; 2.5 2.0 2009 • An established sector that continues to benefit from a structural 1.5 2008 2007 shift in consumer behaviour towards value retailing; 1.0 2006 • Significant long-term growth potential with the market forecast 0.5 2005 by PwC to grow at a CAGR of approximately 9.3% per year 0.0 between 2012 and 2017, driven by a combination of supply and demand factors, and also supported by evidence in the more mature US value general merchandise market; and UK value general merchandise market (£bn) • While the value general merchandise market has primarily been targeted towards less affluent consumers, there is an 10 increasing penetration of more affluent consumers. 2012 2011 While many new consumers entered the discount retail market 8 2010 during difficult economic times, research suggests that the majority 6 of these consumers will continue to use value retailers, even as 2009 2017 4 the economy improves. Research suggests that a number of these 2008 2016 customers are from the higher socio demographic groups. (source: 2 2007 2015 PwC, ‘‘The UK Value General Merchandising Market’’, November 2006 2014 0 2013). We think that this will benefit us and the discount market as 2005 2013 a whole, as its addressable market increases. Estimated figures shown for 2013 – 2017 Source – PwC, the UK Value General Merchandising Market, November 2013

4 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Introduction Strategy Governance Financials

Poundland Group plc Annual report and financial statements for p/e 30 March 2014 - 5 OUR BUSINESS MODEL

Supply How we source products We source from nearly 1,000 suppliers across the world and have an office in Hong Kong and an exclusive sourcing arrangement in India, which together provide a key competitor advantage in our sourcing of general merchandise products. No one supplier has more than 5% of our turnover. We aim to buy and sell our products responsibly – so our customers know that everything they buy is produced under fair conditions. We have a clear social and ethical accountability policy that we ask all our suppliers to comply with. Our customer proposition is enhanced by our strong track record of product innovation and range development. We work closely with suppliers in developing exclusive products and pack sizes. We also have strong in-house product development capabilities, offering over 50 own label brand families. We believe that Poundland’s own label offering in Fast Moving Consumer Goods (“FMCG”) categories, as well as its strength in developing new product ranges, typically non-consumable, general merchandise products, are key differentiators versus other single price value general merchandise retailers in the UK.

Distribution How we manage our distribution across UK and Ireland We operate from three distribution centres, including two regional distribution centres located in the Midlands and South East England (Springvale and Hoddesdon, respectively), and one national distribution centre located in the Midlands (Willenhall). All products are taken to one of our distribution centres before onwards distribution to our stores, with the exception of fresh products which are delivered direct to stores by the supplier or a third-party. The Springvale, Hoddesdon and Willenhall distribution centres have capacities of approximately 300,000 square feet, 200,000 square feet and 200,000 square feet, respectively. The regional distribution centres cater mostly for FMCG products and the national distribution centre caters predominantly for other products. In the financial year, 96% of product sales in Ireland were supplied via our UK distribution centres. The Hoddesdon distribution centre was opened as a temporary facility in 2012 and marked our first major distribution expansion outside the West Midlands. It enabled the Company to reduce the distance travelled to deliver inventory to our stores and help reduce our carbon footprint. In 2014, we plan to replace the Hoddesdon distribution centre with a 350,000 square foot purpose-built warehouse in Harlow, which will serve as our main depot for South East England and will also provide initial support to the business as we look to expand into continental Europe. The adjacency of the new site enables us to transfer the majority of existing, experienced colleagues to the new operation. The Harlow distribution centre will increase our total distribution capacity to be able to operate approximately 750 stores in the UK, Ireland and Europe. By opening the Harlow facility, we expect to achieve gains in efficiency, including enhanced route efficiency and productivity through increased use of double-decker trailers. We also have four cross-docking facilities, located in Scotland (in Coatbridge), the North East of England (in Spennymoor), Ireland (in Dublin) and Northern Ireland (in Larne). The cross-docking facilities in Scotland and the North East of England are operated by our logistics partner, DHL. Northern Ireland and Ireland are serviced by AM Nexday, a transportation services company based in Belfast. We provide our own transportation services for our Hoddesdon, Springvale and Willenhall distribution centres.

Retail Our stores and product range We have established our market-leading position as Poundland in the UK by focusing on delivering amazing value to our customers every day. We believe that this is achieved by selling a wide range of great products and top brands, offering many new exciting lines each week, at a clear, consistent price point which offers our customers amazing value for money. The same commitment to delivering amazing value is met in Ireland under our Dealz brand. We sell a wide range of products across 17 product categories including household goods, grocery, impulse and health and beauty, with all products in our stores in the UK selling for £1. Some of the most recognised consumer brands in the world are sold in our stores, including Cadbury, Mars, Heinz, Nestlé and Colgate. This branded product offering drives footfall to stores, and of the approximately 3,000 core range SKUs in our average Poundland store, over 1,000 SKUs are third-party branded. Our own label, typically higher margin brands, provide our customers with even greater choice and better value. Over the course of the year, our product offer is refreshed continuously, with around 200 new products introduced each week. This drives footfall to the stores, as our customers in the UK and Ireland love this treasure trove appeal. We believe that the single price point in the UK provides us with a competitive advantage to other retailers as it sets a clear and consistent base for price comparison. Customers are able to compare prices on identical products across retailers knowing that at Poundland, product will be on sale for £1.

6 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 OUR GROUPSTRATEGY profitable and have a higher average transactionvalue. average ahigher profitable andhave stores aspartoftheoverallnewstoremix, astheytendtobemore by Poundland in2013). We areincreasinglyfocusedonretailpark affluent group, ABsocio-demographic conducted basedonasurvey (22%ofPoundland’sdemographics UKcustomersarefromthe feet), (highstreet, formats shoppingcentre, retailpark)andmarket a widevarietyofstoresizes(between1,700and12,000square and inIreland, asthePoundland businessmodelisrobustacross thereareopportunitiestoaddstoresthroughouttheUK believe that 10%areexpectedtobeinIreland.of whichapproximately We last threeyears, 60netnewstoresperyear, addingapproximately asthe similarrates plan thereforetocontinueopeningstoresat there ispotentialformorethan70DealzstoresinIreland.that We more thandoubleourexistingUKportfolio. Inaddition, webelieve more than1,000Poundland stores intheUK, makingitpossibleto Group,research conductedbytheJavelin thereispotentialfor that sustainable shoppingvenues. We believe, supportedbyexternal so itmakessensetocontinueaddourstorebasebutonlyin We paybacksfromournewstoresinaroundoneyear, generate growth. We expecttoremainasoneofthewinnersinthissector. general merchandisemarketisforecasttocontinueitsexciting proven abilitytoidentifystronglyperforminglocations. The value storeroll outintheUK,We atrackrecordofrapid have witha 2. Continuedstorerollout promotions, vouchersandmarketingactivity. on increasingstoremarketingwithtailoredoffersandthird-party consumer demands. We will, whereappropriate, continuetofocus committed torefreshinganddevelopingourproductrangemeet andthereforeweremain are keycompetitiveadvantages andexclusiveWe productinnovation believethat productranges day.customers every we willremaintruetoourgoalofdeliveringamazingvalue retailer intheUK. To continuetodriveourbusinessperformance, as themarket-leading, singlepricevaluegeneralmerchandise ourabilitytomaintainandstrengthenposition demonstrated We have, throughourlongtrackrecordofprofitablegrowth, 1. Continuedfocusondelivering every day every amazing value toourcustomers Poundland Groupplc 4. Plannedexpansion into and theirlongtermsustainability. half ofthesestores, whichshouldenhanceboththeirperformance competitor set, weseeopportunitiestoresiteand/orexpandaround and sizedfortheirlocation some ofthesestoresareappropriately Around 120ofourstoresaresmallerthan4,000squarefeet. While to improveourproductrangeinthesecategories. builds, tosellmoregeneralmerchandiseproductsandwillcontinue We alsoexpect, overthelongterm, astheconsumerrecovery • • • this through value andinnumberoftransactions. We seeopportunitiestodrive transaction We inbothaverage willcontinuetoseekdrivegrowth 3. Optimisationofexisting store explore asandwhentheyarise. merchandise retailmarketforfurther consolidation, which wewill In additiontheremaybeopportunities withinthevalueandgeneral withafocusonimpulseandconvenience purchases. locations inhighfootfallcitycentre is asmallerstoredesignedtooperate suchasacitycentreformat,developing newstoreformats which new customersandfulfildifferentshoppingmissions, aswell the potentialdevelopmentofatransactionalwebsitetoaccess We opportunities, willcontinuetoexplorenewgrowth suchas 5. Format andchanneldevelopment opportunity. totestmarket riskstrategy costandlow itrepresentsalow that continental Europe. andwebelieve The costofthistrialwillbelow furtherrolloutinSpainorelsewhere carefully aheadofany ROI productbase. The pilotstores’performancewillbeassessed withthe significant brandandsupplieroverlap Poundland andDealz team.UK-based seniormanagement We therewillbe expectthat extensive Spanishretailexperienceandwillbesupportedbya willbestaffedbyacorelocalteamwith The Spanishoperations which willinitiallybesuppliedfromourUKdistributioncentres. We expecttoopen uptotenstoresoveratwo-yearperiod, periods (e.g. two-yearbreakperiods). rental terms, withtypicalleasesoftenyearsshortbreak propertycosts, andfavourable site availability including favourable and sustainable. Propertyresearchhasidentifiedgoodlevelsof Dealzpricingiscompetitive that Pricing analysishasalsoillustrated identified highinterestintheconceptthroughconsumersurveys. marketconditionsforDealzinSpain,addition tofavourable wehave opportunityforexpansionunderourDealzbrand.highly attractive In logistics andsiteavailability. Spainpresentsa Itisourbeliefthat differentials, withtheUK, brandoverlap supplierconsiderations, prospects incontinentalEurope, including marketsize, price We carriedoutadetailedassessmentoftheexpansion have Improved micromarketing management Better category range anddevelopmentofourexclusiveContinued innovation product continental Europe portfolio Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -7

Financials Governance Strategy Introduction CHAIRMAN’S STATEMENT

We have achieved another record profit performance“ across the Group, with our store opening programme on track, underlying profits in line with market consensus and good cash generation.” Andrew Higginson - Chairman

2014 was a very important year for Poundland. We Trading Performance opened our 500th store in November, listed on the London This has been another record year for Poundland with total sales Stock Exchange in March and achieved sales of nearly £1 just short of £1 billion, up 13.3% on the previous year and the total billion. Demand for shares in Poundland was high and the number of 70 net new stores opened during the year bringing the offer was more than 15 times oversubscribed. The flotation total estate to 528 at the year end. Between the end of the year and has been well received. the date of this Report we have opened a further 12 stores. Against a backdrop of continuing difficulties in the Further details of the Trading Performance are given in the Chief economy for consumers, and retailers in particular, Financial Officer’s Report beginning on page 14. Poundland has stood firm in offering its customers amazing value. We believe, as the economy begins its Stock Exchange Listing turnaround, our future prospects are even brighter, with Poundland Group plc completed its premium listing on the London Poundland having become a retailer of choice. Stock Exchange and was admitted to the Main Market on 17 Our successful international expansion into the Republic March 2014. The IPO was very successful, being many times of Ireland under the Dealz brand has continued. Our sales oversubscribed and the shares continue to trade at a level above are growing strongly. Expansion of the Dealz brand into the initial issue price of 300p. continental Europe is an exciting prospect and we are The Board and Corporate Governance planning a small number of trial stores in Spain in the year ahead. I firmly believe that we have a high calibre and experienced Board of Directors who will continue to drive the Company to an even more successful future. In addition to Chief Executive Officer, Jim McCarthy, Chief Financial Officer, Nick Hateley and Trading and Marketing Director, Richard Lancaster, I was delighted to announce Andrew Higginson earlier in the year that we had four new independent Non- Chairman Executives joining the team. All four Non-Executives bring a wealth 2 July 2014 of experience to the Board. Darren Shapland as Senior Independent Non-Executive Director; Trevor Bond as Chair of the Audit and Risk Committee; Tea Colaianni as Chair of the Remuneration Committee and Grant Hearn as Chair of the Governance and Nominations Committee. Full details of the Committees and their duties are contained in the Corporate Governance Report beginning on page 32 and the reports from the Audit and Risk Committee and Remuneration Committee beginning on pages 35 and 38 respectively. We believe these Non Executives will enhance the diversity of the board and bring independent judgements on issues of strategy and performance as we go forward as a plc.

8 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 is expected to be paid in January 2015. is expectedtobepaidinJanuary dividend inrespectofthefirsthalf2015financialyear, which first dividendtobedeclared willbetheinterim bytheCompany beingavailable,distributable reserves the theDirectorsintend that prospective Shareholderspriortolisting, subjecttosufficient With regardtodividend, asnotedintheProspectusissuedto progress inthenewfinancialyear. andareconfidentinmakingfurther opportunities forfuturegrowth thebusinesstightlywhileinvestinginclearcontinue tomanage consensus andgoodcashgeneration. Lookingahead, wewill opening programmeontrack, underlyingprofitsinlinewithmarket another recordprofitperformanceacrosstheGroup, withourstore as aresultofthesupportfromourcustomers, achieved wehave Poundland dayand, delivers amazingvaluetoourcustomersevery Outlook is theircontinuedhardworkwhichwillensureourfuturesuccess. tosuccessfullylistontheStockMarketandit enabled theCompany they givetoourcustomers. Ithasbeentheirhardworkwhich that service andthegreat totheCompany and continuetoshow Customer SupportCentre, shown theyhave that forthededication the businesswhetherinourstores, distributioncentresorthe across teamsandcolleagues immensely proudofourmanagement Iam IspeakforthewholeBoardwhensaythat that I know Our People 26to27. standing committeescanbeseenonpages Full detailsoftheDirectorsandtheirmembershipsBoard’s invaluable totheBoard. and highlytalentedexperiencedExecutive Team willbe the insightofExecutiveDirectors, theNon-ExecutiveDirectors of representatives Warburg Pincus. The combinedexperienceand whocontinueontheBoardasappointed and StephenCoates We thebenefitofconsiderableexpertise alsohave Paul Best Poundland Groupplc Average circa storeserves 10,000 4.9m Average of £4.55 +2.5% Average customer spendpertransaction Our customers Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements

+11.4% customersperweek transactionsperweek -9

Financials Governance Strategy Introduction CHIEF EXECUTIVE OFFICER’S REVIEW

Shopping in the value sector is now“ worn as a badge of honour with a sense of pride for those who realise it is sensible to save money.” Jim McCarthy - Chief Executive Officer

Overview Poundland started trading from its first store at Burton-upon- In September 2011, Poundland successfully entered the Republic of Trent in 1990. Since then, the business has expanded rapidly and Ireland under the “Dealz” brand where we sell the vast majority of now serves approximately 5 million value conscious customers products for a1.49. Our Dealz stores in Ireland became profitable every week from over 500 stores across the UK and Ireland. The in their first full year and, at the 2014 year end, we were operating Poundland retail proposition is simple and compelling, based on from 31 Dealz stores in Ireland and 2 further stores on the Isle selling over 2,000 general merchandise products and over 1,000 of Man and Orkney. We intend to further strengthen our market mainly branded FMCG goods at the single price point of just £1. presence with additional openings during the coming year. The Our admission to the Main Market of the London Stock Exchange Republic of Ireland and Isle of Man delivered sales of £59.6 million in March 2014 marked a significant milestone in the Company’s during the year, representing 6% of our Group sales. development and is testament to the growth and performance of We have continued to expand our presence in the UK and Republic the business that has been providing amazing value to shoppers for of Ireland with the opening of 70 net new stores, taking our overall nearly a quarter of a century. estate to 528 stores, with our total trading space expanding by We have a track record of delivering strong profitable growth and 18.9%. believe we have significant future opportunities through the delivery Our entry into Ireland under the Dealz brand demonstrates that we of amazing value every day to millions of discerning customers. are not only capable of generating attractive financial returns but, This is underpinned by our trusted brands, differentiated value also of rapidly establishing a successful brand in a new geography. proposition, strong supplier relationships and our well-invested and Consequently, as previously advised, Poundland will following scalable infrastructure. extensive market research later this year trial the Dealz format In recent years there has been significant structural change in the in Spain with preparations well advanced for our low cost, low UK’s retail market with the value sector becoming a mainstream risk entry. Once this is successfully established we will continue feature. As the UK’s single price market leader, Poundland has been to research the opportunities to extend into additional European instrumental in that change. Our £1 price point and our amazing countries and will tailor our offer appropriately to local markets. value appeal to an increasingly broad section of shoppers, with What is clear to us is that consumers across the globe increasingly nearly a quarter of our UK customers now coming from the more appreciate and understand value for money and we are confident affluent AB demographic. that Continental Europe offers the Group substantial future growth opportunities. I am pleased to report another record year for Poundland with significant sales and profit growth together with a strong new The continuing expansion of our retail estate within the United store opening programme. I thank all of our colleagues throughout Kingdom, the Republic of Ireland and, shortly, in Spain has led us the Company for their commitment, hard work and dedication in to invest in a third purpose built 350,000 square foot distribution delivering our strong performance. We are also indebted to our large centre at Harlow which will open later in the year, replacing and loyal customer base who continue to find Poundland’s amazing the 200,000 square foot temporary facility at Hoddesdon. The value and single £1 price point helpful in providing certainty in their adjacency of the new site enables us to transfer the majority of household budgeting. This has been especially important in the existing experienced colleagues to the new operation. purchase of everyday essential products that have become even more important to consumers during the economic turbulence of recent years.

10 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 openings has once again increasedthevisibility ofourbrand, openings hasonceagain recognised andwellregarded. innewstore Our stronggrowth The Poundland andDealzbrandscontinuetostrengthen, andare customers. purchasing requirementsofourvalue savvy in thesameweek, the ourstore teamscouldsatisfy ensuring that a recordbreaking2millioncasestoPoundland andDealzstores Chain team, including distributioncentresandtransport, delivered customers duringthepeakChristmasweek. OurcentralSupply in boththeUKandRepublicofIreland, over7million serving proposition remainsstrong. We recordChristmassales, enjoyed ofouruniquefixedsinglepricepointretail The continuingappeal continuing toinvestingrowth. ofsaleswhencomparedtotheprioryearwhilst a percentage costsas reducedouroperating and carefulcostcontrolwehave I amdelightedtoreportthat, onceagain, throughsalesgrowth Furthermore, ourbusinesscontinuestoremainwellinvestedand 2014 was36.93%, broadlyinlinewiththepreviousyear. weachievedinthefinancialyearto30March margin percentage significant VAT increases. thegross Iampleasedtoreportthat circumstances, otherchallenges, competitionandmany including itsgrossmarginthroughawidevarietyofeconomic managed Poundland has, fornearlyaquarterofcentury, successfully daytoourcustomers. our goalofofferingamazingvalueevery element inourDNAandisacriticalcomponentdelivering costpressuresasafixedsinglepriceretaileriskey Managing money.a senseofprideforthosewhorealiseitissensibletosave wornasabadgeofhonourwith shopping inthevaluesectorisnow an increasinglyimportantpartoftheirshoppingrepertoire. Clearly moreandconsumerswillusethevaluesectoras likely that We thePoundland anditis believethat brandhasuniversal appeal from anincreasinglybroadspectrumofsocio-economicgroups. Poundland that customersare week withresearchdemonstrating and creativity. aroundfivemillioncustomerseach We serve now tailor ourbroadofferbasedonconsumerresearch, innovation recordlevels.sales andunderlyingEBITDAat We continueto Over theyear, ourtradingperformancehasbeenstrongwith value consciousconsumersthroughouttheUKandIreland. Poundland perfectly positionedtocontinuemeettheneedsof day.customers every This hasneverbeenmorerelevant, with Poundland’s goalremainsclear; toofferamazingvalueour Performance Poundland Groupplc in delivering amazing value every day.in deliveringamazingvalueevery We are proudofour and Iamimmenselyproudoftheir commitment andpassion Our achievementswouldnotbepossible withoutourcolleagues Colleagues point. theamazing£1price deliver valuethroughqualityandat labelrangesthat inthemarketforown ofgaps take advantage nut rangeswhichdeliveredstellarnumbers. We shallcontinueto thelaunchofhealthysnackandindulgent ranges andtheyearsaw overall offer. label continuedtodevelopourown Inadditionwehave ofour All ofoursupplierpartnersremainimportanttothedelivery Poundland withthegrowing brand. long-termrelationships enjoy supplierswho andtertiary recognise therelevanceofsecondary our offerfromothersinglepricecompetitors. We continueto anddifferentiate us toincreasesalesthroughimprovedavailability securing continuityofsupplythroughthesedirectchannelsallows Top importanttoourcustomersand very brandsarenaturally is offeredtothemexpandtheirbrandreachandincreaseprofits. opportunitythat to consumerstogetherwiththeoutstandinggrowth recognise thesignificanceof Poundland andthewidervaluesector direct basis. Majormanufacturersofbrandedproductsincreasingly manufacturerssupplyusona an overwhelmingnumberofprimary continuetoimproveand goodUKvendorrelationships Our already under fairconditions. theybuyfromusisproduced everything customers confidencethat our clear socialandethicalaccountabilitypolicy. This givesour products responsiblyandaskalloursupplierstocomplywith quality assuranceandcontrol. We aimtobuyandsellour locations, especiallyintheareasofnewproductdevelopment, strategy. We continuetostrengthenourteamsinboththese and NewDelhicontinuetobeanimportantpartofoursourcing Therefore, ourFar basedinHongKong andNearEastoperations theabilitytosourceanddevelopproductsonaglobalbasis. have sourced throughUKsuppliers. However, we wherevernecessary We onavaluebasisover80%ofourproductsare areproudthat Sourcing transactional Poundland website, www.poundland.co.uk. and thePoundland Blog. We continuetodevelopthesoonbe onsitesincludingmedia followers Facebook, Twitter, Pinterest numberofsocial which hasbeenfurtherenhancedbyourgrowing Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -11

Financials Governance Strategy Introduction CHIEF EXECUTIVE OFFICER’S REVIEW continued

diverse colleague base and support the investment in meeting the Many forward thinking suppliers are also changing their sales, development and training needs of our 12,000 plus colleagues account structures and supply chains to adapt to these changes. This through a detailed training programme, more details of which are set complements Poundland and the discount sector as a whole and, out on page 25. Having progressed personally from the shop floor to more importantly, is in the best interests of the consumer. We will the Board, there is nothing quite like the pride I feel when colleagues continue to work with our supplier partners to bring amazing value, choose Poundland for their career development and successfully brands, new products and innovation to our customers. progress through the Company. Poundland remains fully committed to our single price point in the UK. I am also proud that our colleagues have once again demonstrated We will continue to develop our multi-price Dealz format outside the that they operate at the heart of their local communities. Macmillan UK. Cancer Care has, for the fifth consecutive year, been voted by our colleagues as their chosen charity. This partnership has worked Due to our strong pipeline of new stores we expect to deliver the well and has provided an easy way for our caring customers and unique Poundland retail proposition to circa three quarters of a million colleagues to support Macmillan. Donations have now exceeded £1 consumers each week by the end of the current financial year. We are million with money being raised through a number of different events, planning to open at least 60 net new stores during the next financial including the London Marathon, product sample sales and numerous year, including a number of new Dealz stores in Ireland and Spain. As themed fundraising events including dress down days and coffee a result, we estimate that we will create a net 1,000 new jobs. mornings in Poundland stores, distribution centres and our Customer Support Centre. Trading in the first three months of the new fiscal year has been In our Republic of Ireland Dealz stores we support “Make-A-Wish” strong as our retail proposition continues to gain traction through as our chosen charity. Make-A-Wish has one simple aim, to grant offering amazing value to savvy consumers. Our single price point the wishes of children and young people living with life-threatening continues to help consumers plan their household budgets with medical conditions. certainty and confidence. Our programme of new store openings, international expansion and continuing productivity improvements Following Admission in March 2014, Poundland has introduced three are all key drivers of growth. Additionally, while the economy, and new employee share plans; the Poundland Performance Share Plan, thus consumer confidence, is improving, we believe the shopping the Poundland Restricted Share Plan and the Poundland Company behaviours adopted during the last five or six years will remain, and Share Option Plan. We will also be introducing the Poundland Save As that consequently we will further benefit from increased footfall and You Earn Plan for eligible colleagues later this year. Details of the plans discretionary spending. We expect the Poundland Group to continue to are contained in the Directors’ Remuneration Report starting on page perform well over the forthcoming year. 38 of this report. On behalf of the Poundland Board I thank all of our colleagues Store portfolio throughout the company that work so hard and tirelessly to deliver the unique shopping experience that allows us to deliver amazing value to We commenced the year operating from 458 stores. The Group our customers every day, every week, every month and every year. opened a net 70 stores during the year, and at the year-end we operated from 495 Poundland locations, 31 Dealz stores in the We also take this opportunity to thank all of our supplier partners in Republic of Ireland and 2 Dealz stores on the Isle of Man and Orkney, the UK and abroad for their invaluable help in providing products and making the year-end total 528. I am delighted that our store growth services that are essential in maintaining our reputation for creating programme over the last 2 years has created even more opportunities the unique Poundland and Dealz shopping experience. for new colleagues to join us, which in time has enabled us to bring the Poundland and Dealz retail proposition to thousands more I look forward to the future with confidence. customers every day.

Our new store selection process includes detailed internal analysis and input from various consultants to help determine site Jim McCarthy longevity and thus the long term profit opportunity by location. The Chief Executive Officer overwhelming number of new stores are acquired under normal 2 July 2014 commercial arrangements with property landlords; typically ten year leases with monthly rent payments. However, under certain opportunistic circumstances we are prepared to enter into short term lease arrangements with landlords that deliver attractive returns without long-term liabilities. At the end of the period we operated 26 stores on such short-term leases.

Outlook Clearly there are two types of consumer; those who need to shop for value and increasingly, those who choose to shop for value. Our goal is to provide amazing value every day and we are therefore perfectly positioned to meet demand from both types of consumer. Our strong sales and volume increases demonstrate the relevance of our proposition to consumers from all socio economic groups.

Manufacturers recognise the increased demand for value and are working hard to deliver products that meet these requirements.

12 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -13

Financials Governance Strategy Introduction CHIEF FINANCIAL OFFICER’S REPORT

Group revenue net of VAT was £997.8 million, which“ represents growth on the prior year of 13.3%. This improvement was driven by both the impact of a strong store opening programme and a return to like- for-like sales growth.” Nick Hateley - Chief Financial Officer

The 2014 financial year was a good one for Poundland. Sales grew by 13.3% and, due to strong margin management and cost control, this translated into an 18.9% increase in underlying EBITDA and a 25.1% increase in underlying EPS, and we managed our cash well. Net debt almost halved, despite costs related to our successful stock market flotation and the redemption of preference shares (£20).

Results Summary

2014 2013 Growth Sales (£m) 997.8 880.5 13.3% Like-for-like sales growth 1.9% -1.7% Gross margin (%) 36.93 36.74 up 19 bp Underlying EBITDA (%) 54.0 45.5 18.9% Underlying Pre tax profits (%) 36.8 29.8 23.5% Underlying adjusted EPS (p) 10.9 8.7 25.1% Net debt (£m) 4.7 9.2 (48.3%)

Key Performance Indicators

2014 2013 Change Number of stores 528 458 70 Number of new stores (net) 70 69 1 Sales (£m) 997.8 880.5 13.3% Gross margin (%) 36.93 36.74 up 19 bp Underlying EBITDA (£m) 54.0 45.5 18.9% Underlying EBITDA margin (%) 5.41 5.16 25 bp Underlying profit for the period (£m) 27.3 21.8 25.1% Operating cash flow less maintenance capex 66.8 37.6 77.7% Cash conversion (%)* 123.7 82.7 Operating cash flow less maintenance and expansion capex 52.2 23.2 125.4% Net debt (£m) 4.7 9.2 (48.3%)

*Derived as underlying EBITDA plus changes in working capital minus maintenance capex divided by underlying EBITDA. We performed strongly across all of the key performance indicators (KPIs) set out in our IPO prospectus, especially in the growth of our store estate and in our strong cash flow.

14 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 branded goodswithinoursalesmixincreasedby30basispointsto63.4%(2013: 63.1%). our salesmixofbrandedgoods. duringourfinancialyearwas1.6%(2013: Consumerpriceinflation 2.8%;Source: ONS)andtheproportionof number ofDealzandretailparkstoresincreasedby35to85. andanincreasewithin impactofinflation These positivefactorsoffsetthenegative mixwithinourstorebaseofDealzandretailparks. andthegreater ofourimprovedbuyingpower increase wasdrivenbyacombination The Gross profitsincreasedby13.9%to£368.5m(2013: £323.5m)andgrossmarginsincreasedby19basispointsto36.93%(2013: 36.74%). This Gross Margin normal competitoropeningactivity. 1.9% (2013: -1.7%), dayandareturntomore whichwasdrivenbyourcontinuedfocusonprovidingcustomerswithamazingvalueevery both theimpactofastrongstoreopeningprogrammeandreturntolike-for-like salesgrowth. We grewlike-for-like salesduringtheyearby Group revenuenetof VAT was£997.8m(2013: £880.5m), ontheprioryearof13.3%. whichrepresentsgrowth This improvementwasdrivenby Revenue 2014 financialyear. metricsand,The IPOprospectusalsoidentifiedanumberofotherkeyoperating asthetableaboveshows, ourperformancewasstronginthe Other OperatingMetrics Gross sales(£m) Average transactionvalue(£) Average Average numberoftransactionsperweek(millions) Average Average netstoresize(squarefeet) Average Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements 1,160 5,233 4.55 2014 4.9 1,024 5,143 4.44 2013 4.4 Growth (%) 13.3 11.4 -15 2.5 1.7

Financials Governance Strategy Introduction CHIEF FINANCIAL OFFICER’S REPORT continued

Underlying Operating Costs

2014 2013 £m £m Distribution expenses 297.0 261.3 Administration expenses 31.5 28.7 Total overheads 328.5 290.0

Wages 144.5 127.1 Underlying depreciation and amortisation 14.0 12.0 Operating leases 78.5 68.7 Other (including rates) 91.5 82.2 Total overheads 328.5 290.0

% of sales Wages 14.48 14.43 Underlying depreciation and amortisation 1.40 1.36 Operating leases 7.87 7.80 Other (including rates) 9.17 9.35 Total overheads 32.92 32.94

Total overheads excluding depreciation and amortisation (£m) 314.5 278.0

% of sales 31.52 31.57

Underlying operating costs in the financial year increased by 13.3% to £328.5m (2013: £290.0m). This increase in the cost base in the period was primarily a result of the increase in the number of stores in the portfolio. Operating costs now account for 32.92% of sales (2013: 32.94%). The fact that this was flat year on year, reflects continued investment in the business. Stripping out depreciation and amortisation, costs as a proportion of sales fell by 5 basis points to 31.52% (2013: 31.57%). EBITDA and EBIT

Reconciliation to underlying EBITDA 2014 2013 £m £m Reported EBITDA 42.8 43.1 Adjustments Costs in respect of the IPO 10.0 – Distribution centre set up – 1.4 New store format trial – 0.5 Strategic initiatives 1.3 0.5 Underlying EBITDA 54.0 45.5

16 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 (£0.4m), £3.2m. at This wasaconsequenceoftheGroup’s strongtradingperformanceandhighcashconversionrates. in withthedebtfacilityagreed the writeoffofunamortisedfeesassociated August 2010. Underlyingfinanceexpensereducedby11.7% In the2014financialyearGroupincurredanon-underlyingchargeof£2.9m, ofitsdebtfacility, totherenegotiation relating whichincluded Net FinanceCosts 5.41% inthecaseofformer(2013: (2013: 5.16%)andby21basispointsto4.01%inthecaseoflatter 3.80%). EBIT grewby19.6%to£40.0m. boththeunderlyingEBITDAandEBITlevel, Groupmarginsincreasedat by25basispointsto of£1.1m(2013:amortisation expenses, andamortisation £1.1m)fromdepreciation asweregardthischargenon-underlying. Underlying underlyingEBITandmovementinmargins.The tableaboveshows afterstrippingoutbrand UnderlyingEBITiscalculated Underlying EBITDAgrewby18.9%to£54.0m(2013: £45.5m), drivenbythestrongtradingmarginperformanceofGroup. trialandbrandamortisation. toanewstoreformat relating development, inecommerceandinternational initiatives distributioncentreandcosts costsresultingfromtheopeningofanewtemporary development(£1.3m). inecommerceandinternational initiatives strategic Inthepreviousfinancialyear, tostrategic weincurredcostsrelated performance ofthebusiness. tothe2014financialyear, Inrelation theseincluded to costsinrespectofourIPO(£10.0m)andrelated investorstobetterunderstandtheunderlying one-offitemsandtoallow We toshow reportnon-underlyingitemsinourincomestatement Underlying EBITmargin(%) Underlying EBITDAmargin(%) Underlying EBIT(£m) Underlying depreciation and amortisation (£m) andamortisation Underlying depreciation Underlying EBITDA(£m) Underlying netfinancecosts Total netfinancing expense Total Ineffective portion of changes in fair value of cash flow hedges Ineffective portionofchangesinfairvaluecashflow Net change in fair value of interest rate swap cash flow hedgesrecycled cashflow swap Net changeinfairvalueofinterestrate fromequity Non-underlying fees associated withrefinancing Non-underlying feesassociated Totalat amortisedcost interestexpenseonfinancialliabilitiesmeasured Financial expense Total Ineffective portion of changes in fair value of cash flow hedges Ineffective portionofchangesinfairvaluecashflow Interest incomeonunimpairedfinancialassets Financial income Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements 4.01 5.41 40.0 14.0 54.0 2014 (3,236) (6,218) (6,470) (2,981) (3,432) £’000 252 252 2014 (56) 3.80 5.16 33.5 12.0 45.5 2013 (1) – Growth (%) (3,666) (3,574) (3,945) (3,865) 21 bp 25 bp £’000 371 279 19.6 16.7 18.9 2013 (80) -17 92 – –

Financials Governance Strategy Introduction CHIEF FINANCIAL OFFICER’S REPORT continued

Statutory Profit Before Tax

Reconciliation to underlying profit before tax 2014 2013 £m £m Reported total profit before tax 21.5 26.5 Adjustments: Costs in respect of the IPO 10.0 – Amortisation 1.1 1.1 Distribution centre set up – 1.4 New store format trial – 0.4 Strategic initiatives 1.3 0.5 Net financing expense 2.9 (0.1) Underlying profit before tax 36.8 29.8

Underlying profit before tax was £36.8m, which represented an increase of 23.5% on last year (2013: £29.8m). Statutory profit before tax fell by 18.9% to £21.5m (2013: £26.5m), due to an increase in net non-underlying charges, primarily costs associated with the Group’s stock market flotation. Taxation The underlying tax charge for the period was £9.6m (2013: £8.0m). The full year underlying effective tax rate was 26.0% (2013: 27.0%). There was a non-underlying adjustment to the tax charge in the 2013 financial year of £4.9m principally relating to a one-off corporation tax refund (£4.0m). Statutory Profit After Tax

Reconciliation to underlying profit after tax 2014 2013 £m £m Reported total profit after tax 13.9 23.4 Adjustments: Costs in respect of the IPO 10.0 – Amortisation 1.1 1.1 Distribution centre set up – 1.4 New store format trial – 0.4 Strategic initiatives 1.3 0.5 Net financing expense 3.0 (0.1) Taxation (1.9) (4.9) Underlying profit after tax 27.3 21.8

Underlying profit after tax was £27.3m, which represented an increase of 25.1% on last year (2013: £21.8m). Statutory profit after tax fell by 40.7% to £13.9m (2013: £23.4m), due to an increase in net non-underlying charges, primarily costs associated with the Group’s stock market flotation. Adjusted Earnings Per Share Underlying basic and fully diluted earnings per share increased by 25.1% to 10.90p per share (2013: 8.71p per share). Non-underlying basic and diluted earnings per share fell by 40.7% to 5.54p per share (2013: 9.35p per share). The weighted average number of shares in issue during the period was 250m. Capital Expenditure

2014 2013 £m £m New stores 13.0 12.4 Existing stores 3.0 2.0 Other 1.6 2.0 Total 17.6 16.4 % of sales 1.8% 1.9%

18 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 2015 financialyear, 2015. inJanuary payable 2.5 to3.5timesbasedonearnings. We thefirstdividendtobedeclared intendthat willbetheinterimdividendinrespect ofthefirsthalf We intendtoadoptadividendpolicy potential, whichreflectsourlong-termearningsandcashflow targeting alevelofannualdividendcover Dividend £30m oftherevolvingcreditfacility, activitiestorepayourtermdebt. fromoperating togetherwithcashgenerated On 17March2014, facilityof£55m. weenteredintoanewbankingfacilityconsisting ofarevolving creditandaworking capital We utilised New debtfacility 82.7%). Working waswellmanaged, capital intheyear(2013: witha£15.8minflow of£5.8m). outflow at123.7%(2013: Cashconversionwasstrong trading performanceandourcontinuedfocusonday-to-daycashmanagement. shareholders. of£58.6mrepresentedanincrease57.2%onlastyear(2013: cashflow Operating £37.3m). Thisreflects Poundland’s strong withoursuccessfulstockmarketflotation.in costsassociated We receivednocashbenefitfromtheIPO, asallproceedswenttoselling theendofyearwas£4.7m(2013:Net debtat £9.2m). This isafterpaying£20mredeemingpreferencesharesandthe paymentof£4.9m Net DebtandCashflow in distribution centreinHarlow August. We andwewillopenournewpurpose-built350,000squarefeet continuetoinvestinourinfrastructuresupportplannedgrowth year intheUKandIrelandourpipelineisstrongforcurrentyear. 2 intheIsleofManandOrkney, along-termtargetof1,000storesintheUKand70Ireland. andhave We plantoopen60netnewstoresa We endedtheyearwith528stores(2013: 458), including 495Poundland storesintheUKand33Dealzincluding 31storesinIrelandand closures andresites. inIreland.to rolloutthePoundland intheUKandDealzformat format We openedatotalof82storesinthe2014financialyear, or70netof During the2014financialyear, expenditure, weinvested£17.6millionincapital totheopeningofnewstores. primarilyrelated We continued Capital Expenditurecontinued Cash conversion Net debt Net (decrease)/increaseincash Net cashfromfinancingactivities Net financialexpensepaid Redemption ofpreferenceshares Repayment ofborrowings Proceeds fromnewloan Net cashfrominvestingactivities Acquisition ofintangibleassets Capital expenditure Capital Net cashfromoperatingactivities Tax paid Operating cashflow Operating Change innetworkingcapital EBITDA Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements 123.7% (17.6) (48.1) (17.6) (20.0) (54.9) (16.6) (10.4) (4.7) (2.5) 29.3 (1.0) 48.2 58.6 15.8 42.8 2014 £m 82.7% (10.0) (16.5) (15.2) (9.2) (2.8) (7.2) (1.3) (3.9) 33.4 (5.8) 37.3 43.1 2013 -19 6.9 £m – –

Financials Governance Strategy Introduction RISKS AND UNCERTAINTIES The tables below summarise the material financial and operational risks to the Group and how the Group seeks to mitigate them in the day-to-day running of the business. Operational Risks Explanation Mitigation The Group operates in the The retail industry, including the value general Poundland works extremely hard to ensure that it highly competitive merchandise retail market, is highly competitive, responds adequately to these multiple sources and retail market. particularly with respect to price, product selection types of competition, including online competition and quality, store location and design, inventory, whether from existing retailers or new entrants, to customer service and advertising. The Group ensure that competition does not have a material competes at national and local levels with a diverse adverse effect on the Group’s business, results of group of retailers of varying sizes and covering operations and financial condition. different product categories and geographic markets. These competitors include other single price value general merchandise retailers, multi-price value general merchandise retailers, supermarkets and certain high street retailers in particular categories, such as health and beauty. The Group may not be able to Part of the Group’s growth strategy is to open new The Group’s highly motivated and experienced open profitable new stores stores across the UK and Ireland, and the Group property department are constantly working to on a timely basis or at all. is also developing plans to trial Dealz stores in identify and secure attractive locations for new stores, continental Europe, with a low-cost pilot launch including selecting the right store formats. planned for Spain in the 2015 financial year. If Poundland does not open new stores on a timely or profitable basis, it may not realise its growth strategy.

The Group may not be able Poundland’s growth from existing stores is dependent Once open, our retailing colleagues ensure that they to increase sales in upon its ability to increase sales, manage costs gain experience of the new market and develop name existing stores. and improve the efficiencies and effectiveness of recognition and identify customer demand with a view its operations. Increases in sales in existing stores to successfully competing against local competition are dependent on factors such as competition, on a store-by-store basis. The Group seeks to hire, merchandise sourcing and selection, store operations train and retain qualified store management and other and customer satisfaction. high quality personnel. At the same time colleagues within our Distribution Centres and Customer Support Centre look to maintain or improve sourcing and distribution capacity, information systems and other operational system capabilities and manage additional expenses and costs.

The Group’s success The success of Poundland’s business depends on its Poundland operates from three distribution centres, is dependent on its ability to transport goods from its three distribution including two regional distribution centres located logistics and distribution centres to its stores throughout the UK and Ireland in in the Midlands and South East England, and one national distribution centre located in the Midlands. All infrastructure. a timely and cost-effective manner. Any unexpected products are taken to one of Poundland’s distribution delivery delays, such as due to severe weather centres before onwards distribution to Poundland’s or disruptions to the national or international stores, with the exception of fresh products which transportation infrastructure, or increases in are delivered direct to stores by the supplier or a transportation costs, such as due to increased fuel third-party. costs, could materially adversely affect the Group’s In late 2014, Poundland plans to replace the business. Hoddesdon distribution centre with a 350,000 square foot purpose-built warehouse in Harlow, which will serve as Poundland’s main depot for South East England and will also provide initial support to the business as it looks to expand into continental Europe. The Harlow distribution centre will increase Poundland’s total distribution capacity to be able to operate approximately 750 stores in the UK and Ireland. By opening the Harlow facility, Poundland expects to achieve gains in efficiency, including enhanced route efficiency, and productivity through increased use of double-decker trailers.

The Group’s cash flows To be successful, Poundland must maintain sufficient Poundland has been successfully maintaining from operations may be inventory levels to meet its customers’ demands sufficient inventory levels throughout its 24 year negatively affected if it is not without allowing those levels to increase to an extent history and continues to employ the good habits that successful in managing its such that the costs to store and hold the goods it has gained through this extensive experience. inventory balances or level unduly impact its financial results. If Poundland is Poundland, like other retailers, experiences inventory of inventory shrinkage. not successful in managing its inventory balances, shrinkage, and employs measures that will reduce the its cash flows from operations may be negatively problem. Although some level of inventory shrinkage affected. is an unavoidable cost of doing business.

20 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 currency exchange rates. to adversefluctuationsin The Groupmaybesubject Ireland andglobally. other factors intheUK, economic conditionsand be adverselyaffectedby The Group’s businessmay brands. to manageitsbusinessand highly qualifiedemployees Executive Team andother The Groupdependsonthe Employment Risks Ireland. majority ofitsproductsin the UKanda1.49for keep pricingat£1in affect Poundland’s abilityto Inflation orother factors may Economic Risks qualified suppliers. a significantnumberof maintain relationshipswith to identify, developand party suppliersandneeds Poundland reliesonthird- disadvantageous changesinexchangerates. disadvantageous Ireland. Consequently, theGroupbearsriskof for productsinsterlingtheUKandeuros dollars; however, Poundland’s customerspay The GrouppayscertainsuppliersoverseasinUS result in lower sales. result inlower income ofPoundland’s customers, whichcould and taxrates, mayadverselyaffectthedisposable credit,of available fuelcosts, inflation, interest levels,unemployment consumerdebtlevels, lack globally, aswelleconomicfactorssuch Poor economicconditions intheUK, Irelandand Explanation Explanation experienced andtalentedretailexecutives. Group’s of businessduetothelimitedavailability isespeciallyimportantinthe qualified employees Retention oftheExecutive Team andotherhighly and retainotherhighlyqualifiedemployees. the Group’s abilitytocontinueattract, motivate oftheExecutive the continuingservices Team and The successofPoundland’s dependson strategy Ireland. UK ora1.49forthevastmajorityofproductsin at asinglepricepointof£1inthe profitable resale on providingawiderangeofmerchandisefor Poundland’s ispredicated currentpricingstrategy way astomeetourneeds. timely mannerbutmaynotbeabletodosoinsucha sufficient quantities,low costandina at sufficiently able tosourcesuitableproductsfromsuppliersin retailers,Like many Poundland isdependentonbeing Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements set lower thanthehedgedrate. set lower forproducts,given targetedbuyingrates whichare gross marginstrategy. Itenablesbuyerstobe contracts areputinplaceaspartoftheGroup’s and forwardforeignexchangecontracts. These through theuseofforeigncurrency bankaccounts the costinpoundssterling. Hedgingisperformed hedged forupto18monthsforwardinorderfix The Group’s policy theseexposurestobe allows or joint cheapest 90%ofthetime. or jointcheapest Tesco andSainsbury), Poundland wasthecheapest chains(Asda, comparable productstoUKgrocery the Groupcomparingpricesonarangeof106 into thefuture. preparedfor Ina2013study value formoney, anditwillcontinuethisstrategy price pointintendedtooffercustomersamazing newexcitinglineseachweek,offering many a at productsandtopbrands, wide rangeofgreat We thiswasachievedbysellinga believethat the recentperiodofsevereeconomicdownturn. significantlyduring buttogrow not onlytosurvive Poundland hasallowed day anditisthisfocusthat delivering amazingvaluetoitscustomersevery position intheUKbycontinuouslyfocusingon Poundland hasestablished itsmarket-leading appropriate riskmanagement. appropriate governance and the principlesofgood corporate paid andhasbeenstructuredsoas toadhere is nomorethanisnecessary aims toensurethat ownership. Inpromoting these objectivesthepolicy equity those ofShareholdersthroughencouraging and membersoftheExecutiveCommittee with and toaligntheinterestsofExecutive Directors performance culture, toincentivisehighgrowth objectives, topromoteastrongandsustainable oftheGroup’sthe delivery andbusiness strategic andtofocusthemon calibre seniormanagement of whichistoattract, high retainandmotivate policy aremuneration The Groupoperates theaim Mitigation Mitigation point strategy. factors whichmayaffecttheGroup’s singleprice whilstclosely thisstrategy monitoringany apply withsuppliers,renegotiating anditwillcontinueto costeconomiesand sources ofsupplytolower products), re-engineeringpacksizes, moving margin labelproductsordiscontinuinglow own by introducingnewhighermarginbrandedand itsproductrange(suchas years bymanaging for24 its currentUK£1singlepricestrategy Poundland hasbeenabletoprofitablymaintain is offeringthemtoexpandtheirbrandreach. recognising thesignificantopportunitythat Poundland manufacturers andsuppliersareincreasingly manufacturers supplyusonadirectbasis. Major improve asanoverwhelmingnumberofprimary with mostofitssupplierswhicharecontinuingto Poundland hasgood, long-termrelationships source anddevelopproductonaglobalbasis. However, whenevernecessary, theabilityto wehave of ourproductsaresourcedfromUKsuppliers. Poundland isproudthat, onavaluebasis, over80% -21

Financials Governance Strategy Introduction CORPORATE AND SOCIAL RESPONSIBILITY REPORT

Our Goal This year we have set challenging targets for further reductions in our energy consumption. At Poundland we deliver amazing value to our customers every day. We are famous for our wide range of great products and top brands, Packaging offering many exciting new lines every week. Poundland will always be fun and friendly with something for everyone. As the largest UK national retailer of single price amazing value products, we recognise the need to conserve natural resources Our values that underpin our goal are as follows: and to protect the environment. Therefore, we have adopted a • We put customers first policy that will reduce the environmental impacts associated with our product (primary) packaging and as a minimum comply with • Keep it simple all relevant legislation. Where possible, the objective is to fit the • Individual responsibility team delivery packaging around the product to reduce consumer waste, recycling costs, comply with the Packaging and Packaging Waste Directive • Treat every £ as your own and reduce supply chain transport costs by utilising container space • Respect each other more affectively. • Recognise and celebrate success The values are representative of the way we aspire to operate our business and our colleagues are encouraged to live these values during everyday interaction with our customers and each other. We put our customers first, and fully understand and recognise our responsibility to demonstrate to them that we trade fairly and take our corporate and social responsibilities seriously. We recognise our duty to operate our business in an ethical and responsible manner. Packaging Policy Statement Our CSR strategy focuses on 3 key areas: Primary packaging, at its most fundamental level, protects • Environment and contains the contents and communicates safety and legal • Social Responsibility requirements. • Employee Responsibility Poundland will:

HEALTH AND SAFETY • Meet all legislative requirements as a minimum. • Work toward a continuous reduction in the use of packaging We are aware, and take very seriously, our responsibility for the materials, reducing size and weight through improved design health and safety of our customers, colleagues and anyone else and appropriate use of materials. who comes into contact with our business or visits one of our sites. We are constantly seeking ways to improve health and safety • Always view packaging from our customers’ perspective i.e. practices to ensure the safety of all. can I re-cycle it, can I re-use it, does it have an alternative use?

ENVIRONMENT • Wherever possible, provide information to customers concerning which packaging has a recycled content and/or We recognise that our operations impact the environment and that can be recycled. Ensure all environmental claims are simple, this is an increasingly important issue for consumers. We actively meaningful, relevant, accurate, used in the appropriate context pursue policies that help us to reduce our carbon footprint and and can be substantiated. costs. We focus on four key areas; using less electricity; maximising • Require suppliers to provide information on the size, weight, recycling opportunities; improving fuel efficiency; and reducing design and materials content of packaging on all own brand packaging waste. We consider this key to the ongoing success of products sold. our business. • Monitor developments in packaging technologies for We continually investigate and test new solutions to reduce the opportunities to reduce environmental impacts. environmental impact of our operations and constantly seek to reduce our energy consumption to deliver efficiencies and meet • Encourage suppliers of proprietary brands to adopt best the exacting environmental requirements of our socially aware environmental practice in the design of packaging used for their customers. During 2013/14 we reduced our same store emissions products. by 1,064 tonnes CO and 1,836 tonnes CO overall. 2 2 • Comply with all rules, licences, copyrights, codes of practice Our focus on waste management this year has resulted in the and official guidance concerning environmental labelling and recycling of 12,596.24 tonnes of cardboard, an improvement of claims. 10.1% on the prior year. We also recycled 801.88 tonnes of plastic, a 16.4% increase year on year. We have invested significantly in fuel efficient vehicles. We have improved vehicle aerodynamics, used low energy tyres, and trained our transport colleagues in more fuel efficient driving techniques.

22 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 • We arefullyfocusedandcompliantonallareasofwaste: Waste Initiatives • Progress sofar: Electricity andGas • • • • the constituent parts are used again. the constituentpartsareusedagain. arecollected,These batteries sortedand recycled, ensuringthat intocollection containerswhenvisitingastore. of portablebattery all ofourstores. type customerscandepositany This meansthat collectionfacilitiesthroughout with Poundland toprovidebattery with UKPackaging Waste Regulations, areworkinginpartnership Budget Pack, thePackaging Consultantsfocusedoncompliance toemissionsof39,478tonnesCO equates warehousing,gas acrossitstradingportfolioandassociated this In 2013/14Poundland consumed 75.3GWhofelectricityand annual costs under the CRC Energy Efficiencyannual costsundertheCRCEnergy Scheme. We carbonemissionstominimize willmaintainfocusonlowering lightingschemeforour energy a low Willenhall warehouse. a suitablereturnoninvestment. For investedin examplewehave give projectsthat add tothemwithtargetedinvestmentinenergy We tomaintaingoodhousekeepingstandardsand willendeavour like consumptionby6.2%inoursmartmeteredstores. In thefirst12monthsofthiscampaignwereducedourlikefor housekeeping. useprimarilybygood theirenergy themtomanage allows that costs. information The campaignfocusedongivingstoresenergy reducingouremissionsandtheirassociated campaign aimedat In 2012/13Poundland’s efficiency committedtoanenergy 2 . Poundland Groupplc • • • • • • & Waste Recycling • • meaning noneofitswasteispassedtolandfill. ourHoddesdondepotistakenforincineration, Waste at generated opportunities torecycle. We othersourcesofwasteand continuetoinvestigate than inthepreviousyear. In 2013/14werecycled 10.6%morecardboardandsoftplastics andpackaging. paper Our CustomerSupportCentrecollectsandrecycles allofitswaste intheirdailyoperation. plastics generated All ourstoresanddistributiondepotsrecycle cardboardandsoft volumes ofwastebyrecycling whereverpossible. fromouractivities;wethereforeseektoreduce generated We recognisethe potentialimpactonthecommunityofwaste aluminium, steel, plastic, wood, mixedrecycling). (paper, wastematerials on theweightofpackaging data glass, Packaging Waste (PRN’s) - We providethegovernmentwith system viahelpdeskfortheUK&NI. Waste Electrical (WEEE)- We atakeback currentlyoperate Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -23

Financials Governance Strategy Introduction CORPORATE AND SOCIAL RESPONSIBILITY REPORT continued

SOCIAL RESPONSIBILITY Poundland supports Macmillan with a number of fundraising activities in store, distribution depots and at our Customer Support Centre. Sourcing Colleagues have participated in sponsored runs such as the London During the last few years we have strengthened our supplier code of Marathon, Land’s End to John O’Groats cycle ride and held samples conduct and social accountability processes. In 2011, an independent sales. audit of all processes and procedures was undertaken. We have In our Republic of Ireland Dealz stores, our charity of the year is implemented in full the recommendations arising out of the audit, “Make-a-Wish” who grant magical wishes to children and young increasing the number and quality of audits of our suppliers. We have people fighting life threatening illnesses. joined Sedex, the largest organisation of its kind that shares ethical trade information with its members. During 2013 and 2014, further EMPLOYEE RESPONSIBILITY independent audits of factories have been commissioned to ensure compliance with Poundland’s supplier Code of Conduct. Continuous Our Colleagues improvement of our ethical, moral and social processes remains one We recognise and celebrate success through various initiatives in the of our key priorities. business. For example we offer seasonal incentives where our store We are proud that on a value basis over 80% of our products colleagues can receive vouchers to spend at their leisure. Eligible are sourced through UK companies. However, where necessary, colleagues are also rewarded for meeting objectives which impact Poundland has the ability to source and develop products on a global business performance and show evidence of living the Company basis. Therefore, our Far East and Near East operations based in Hong values via an annual bonus scheme. In addition we offer at 5 year Kong and New Delhi continue to be an important part of our sourcing intervals long service awards to our colleagues. strategy. Accordingly we have strengthened our teams in both these All colleagues have access to a wide range of benefits via our benefits locations, especially in the areas of new product development, quality platform offering discounts for colleagues and their families to enjoy. assurance and control. From childcare vouchers and improved healthcare, through to special Our good UK vendor relationships have continued to improve during discounts in leisure and lifestyle, we offer something for everyone. the period and virtually all primary manufacturers supply us direct. It is Our colleagues’ welfare and wellbeing is important to us and we pleasing that major manufacturers of branded products recognise the work in partnership with the Retail Trust who offer our colleagues significance of Poundland to consumers and the outstanding growth an employee assistance program which is a free, confidential and opportunity that we offer them to expand their brand reach. Top independent service to support colleagues at times of need. This brands are very important to our customers and securing continuity service is offered 7 days a week and 365 days a year. of supply through these direct channels allows us to increase sales through improved availability and differentiate our offer from other We are interested in what our colleagues have to say and use various single price competitors. During the year we have once again been means of communicating with them on a regular basis. Our colleagues able to add a number of important new branded suppliers to our are represented at the biannual JCC meetings held between the existing large portfolio of primary manufacturers. We continue to Company and our union (USDAW). In addition the Company has a recognise the relevance of secondary and tertiary suppliers who enjoy whistleblowing policy which allows colleagues to raise any concerns long term relationships with our growing Poundland brand. These in confidence. We also use colleague surveys as a way of gaining suppliers remain important to the delivery of our overall offer. feedback on matters that are important to our colleagues and encourage their engagement in company projects. Code of Conduct – Social Accountability Policy Local community support All suppliers commit to achieving the standards outlined. The policy, based on International Labour Organisation Core (ILO) conventions Our new store opening programme and expansion plans means that covers topics including: we are creating jobs and opportunities for over 1,000 new colleagues annually. We work closely with local job centres and the DWP in • Child/forced labour helping the unemployed gain long term employment and skills and • Health & safety qualifications to improve their employability. We take our corporate responsibility seriously and the role we play is having a positive • Freedom of Association & collective bargaining impact on local communities. • Non-discrimination • Hours worked • Wage compliance

Charity Poundland supports Macmillan Cancer Care’s aim to reach everyone affected by cancer. Since the partnership began in 2009, Poundland colleagues and customers have raised over a million pounds, helping Macmillan to make sure people living with cancer have the best team in their corner, every step of the way. We have built and strengthened the partnership engagement with both colleagues and customers and created awareness in the media, providing an easy and desirable way for people to support Macmillan.

24 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 ‘The Poundland Way’. ‘The andlead wemanage tounderstandhow and supportourManagers programmes forourManagers, threemonths thesemodulesrunevery theirjobs.can bebrilliantat We launchedanumberoftraining have andskillssothey We therightknowledge wantallourpeopletohave Training Manager. theytakeresponsibilityfor,month programmethat supportedbya business andtheirinduction. The newinductionisastructuredthree they joinus, aboutour theyneedtoknow whichtellsthemeverything receivea now Managers Organiser’ondayonewhen ‘Management practical tounderstand. their job. asitiseasy, lovethisnewapproach Colleagues simpleand onallaspectsof totraintheircolleagues informal andhelpManagers introduced called Cards’.‘Conversation These cardsarerelaxed, classroom andontotheshopfloor. been have Brandnewmaterials improve practice. hasseentrainingtakenoutofthe A recentupdate role theywillperform. We and reviewourtrainingregularlytoupdate receiveaninductionprogrammetailoredtothe All newcolleagues Training Poundland Groupplc days to help young people understand what acareerinretailislike. days tohelpyoungpeopleunderstandwhat school. riskyouthsat with at Poundland hasrunanumberoftalent interview. We’ve alsosupportedthecharity “Think Forward” whowork towritetheirCVsanddeliveragreat support providedonhow lifeinretailisallabout, ofwhat were givenaflavour withadditional want topursueacareerinretail. They visitedPoundland storesand in whichworkshopswereofferedaroundtheUKtoyoungpeoplewho Poundland supportedIGD’s once again ‘Feeding Britain’s Future’event Sharing ourknowledge Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -25

Financials Governance Strategy Introduction OUR DIRECTORS

Andrew Thomas James John Nicholas Roger Richard Lancaster Stephen Coates Higginson McCarthy Hateley (Trading Director) (Non-Executive Director) (Independent Non- (Chief Executive Officer) (Chief Financial Officer) Executive Chairman)

Andrew joined the Board as Jim joined Poundland as Nick is a Fellow of the Richard joined Poundland Steve joined Poundland as Independent Non-Executive Chief Executive Officer Chartered Institute of as Trading Director in July a Non-Executive Director in Chairman in July 2012. in August 2006. Prior to Management Accountants 2012 and is responsible for April 2010. Having joined Having started his career joining Poundland, Jim and holds an MBA. Trading & Marketing. He Warburg Pincus in 2003, in FMCG with Unilever and was Managing Director of was appointed an Executive Steve focuses on the firm’s Guinness, Andrew has spent Convenience, J Sainsbury Nick joined Poundland as Director in 2014. Richard European investment the last 22 years in retail. plc and was a member of Chief Financial Officer in joined the industry from activities in Consumer and His roles have included the operating, retail and October 2006. He joined Cambridge University in Industrial markets. Previously Group Finance Director of investment boards. from J Sainsbury plc where 1986 developing the family Steve worked at Permira, 3i Laura Ashley Holdings, The he was the Finance Director chain of convenience stores and Arthur Andersen. Burton Group, and 15 years Jim’s experience extends of Sainsbury’s Convenience which was subsequently sold as an Executive Director of to over 40 years in retail Stores. to Jacksons Convenience He is also a director of Tesco plc including 11 years including ten years as Chief Stores. Richard became Survitec (Finance 1) Limited Executive of T&S Stores Nick has 25 years’ experience and Clondalkin Group as Finance and Strategy in finance and business Trading Director for J Director, and four years plc (operated over 1,200 Sainsbury local convenience (Holdings) B.V. stores and sold to Tesco improvement which he gained running their Retail Services at PricewaterhouseCoopers, format. He then became Division (Tesco.com, Tesco plc), Managing Director of Managing Director of Netto Neighbourhood Retailing (part Accenture and Lucas Bank, Tesco Telecoms and Industries plc. Food Stores followed by his DunnHumby). of Next plc) and Managing appointment at Wm Morrison Director of Birmingham Post Supermarkets PLC, firstly Andrew retired from Tesco plc & Mail Limited’s retail estate. as Senior Trading Director and is now Chairman of both Jim is also non-executive - ambient, then Marketing N Brown plc and Poundland. Director. He is also a non-executive chairman at AIM listed director of BSkyB, Woolworths Wynnstay Group plc. (South Africa), McCurrach UK and the Rugby Football Union.

COMPANY INFORMATION

Company Secretary Financial Calendar. 19 September 2014 – Annual General Meeting November 2014 – Interim Results. Each Shareholder is entitled to attend and vote at the Annual General Meeting.

Registered & Head Office Wellmans Road, Willenhall, West Midlands WV13 2QT Registered in England No: 8861243 Jinder Jhuti Website: www.poundlandcorporate.com We encourage our Shareholders to visit our website to keep up to date on information specifically for them.

26 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Registrars: Corporate Solicitors: Joint Brokers: Bankers Auditors: ADVISORS INEA S.A. Paul iscurrentlyadirectorof as adirectorofZiggoN.V. activities inEurope. Heserved involved incableinvesting divisions andhasalsobeen banking andfixedincome Stanley intheinvestment Paul Morgan workedat to joining Warburg Pincus, and healthcaresectors. Prior in theEuropeanconsumer is responsibleforinvestments Warburg Pincusin2002. Paul 2010,April joined having Non-Executive Directorin Paul joinedPoundland asa (Non-Executive Director) Paul Best Non-Executive Director) (Independent Darren Shapland plc. Executive Directorof Wolseley Ladbrokes plcandNon Non ExecutiveDirectorat Audit Committeeanda Darren isChairofthe Development Director. subsequently astheGroup Chief Financial Officerand plc,J Sainsbury initiallyas Darren spentsixyearsat Carpetright plc. Priortothis, Chief ExecutiveOfficerof career, mostrecentlyas gained throughouthis experience public company andbroad retail knowledge in 2014. Hebringsextensive Senior IndependentDirector Darren joinedtheBoardas Computershare Investor Services PLC,Computershare InvestorServices The Pavilions, Road, Bridgwater BristolBS138AE Freshfields BruckhausDeringerLLP, 65FleetStreet, LondonEC4Y1HS StockbrokersLimited,Shore Capital BondStreetHouse, 14CliffordStreet, London W1S 4JU J.P. MorganSecuritiesplc, 25BankStreet, LondonE145JP Santander UKplc BankofScotlandplc The Royal Barclays Bankplc Bankplc Lloyds KPMG LLP, OneSnowhill, Queensway, Snowhill Birmingham B46GH Poundland Groupplc Non-Executive Director) (Independent Trevor Bond mature markets. mature inthese impressive growth Britain andIreland, delivering businessin led theCadbury Kraft Foods Europe, Trevor and Asia. Priortohisroleat across Europe, the Americas andfinanceroles management increasingly seniorgeneral track recordasheassumed in 1986. Hebuiltastrong 2010), joiningthecompany in Mondelez International (acquiredby with Cadbury spent mostofhiscareer commercial units. Hehas responsibility forthecountry Kraft Foods Europe, with Markets andSalesfor 2012 Trevor wasPresident, Foods, Inc.)From 2010to (formerlyKraft International at Mondelez Customer Officer is PresidentandChief and RiskCommittee. He 2014 andchairsthe Audit Trevor joinedtheBoardin Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements Non-Executive Director) (Independent Teresa Colaianni Hotels Corporation. function inEuropeforHilton up theHumanResources industries, recentlyheading worked acrossanumberof toLondon.located Tea has and subsequentlyre- moved intoHumanResources affairs,on EUrelated she companies multinational inBrussels,lawyer advising as aEuropeanEmployment begunhercareer Having Exchange inNovember2013. ontheLondonStock floated Entertainments plc, which HR DirectorforMerlin Committee. SheisGroup and ChairstheRemuneration Tea joinedtheBoardin2014 Non-Executive Director) (Independent Grant Hearn Whitbread. HiltonGroupand positions at previouslyheldsenior having industry the hotelandtravel has awealthofexperiencein as ExecutiveChairman. He business Grantalsoserved year careerwiththehotel Travelodge. Duringhis10 Chief ExecutiveOfficerof Committee. Heistheformer Governance andNominations in 2014andChairsthe Grant joinedtheBoard -27

Financials Governance Strategy Introduction OUR EXECUTIVE TEAM

Tim McDonnell Craig Bales Andy Monk Mike Gray Mark Powell (Retail Operations (Property Director) (Supply Chain Director) (IT Director) (Human Resources Director) Director)

Tim joined Poundland in Craig joined Poundland in Andy joined Poundland Mike joined Poundland in Mark joined Poundland in August 2006 as Regional December 2004 as Property in 2009 as Supply Chain 2003 as a Senior Controller 2011 as Human Resources Manager with responsibility Director with responsibility Director. He now has with responsibility for Director and was appointed for Retail Operations in the for the effective management responsibility for the entire developing IT capability. to the Board of Poundland north of the country. Prior and development of supply chain where his Appointed to the Board of Limited in March 2012. to that, Tim worked for the Poundland property priorities are managing the Poundland Limited in March His responsibilities include Kwik Save and Somerfield portfolio. Craig has 20 years’ distribution of stock around 2012 Mike is responsible looking after the Group’s Stores Ltd for over 20 years experience in commercial the Group, optimising the for IT Strategy and the people and continuous holding a number of roles property specialising in retail level of stock holding through ongoing development and improvement strategies. in both Retail Operations agency. He spent ten years as the supply chain whilst management of all aspects Mark has over 20 years of and Human Resources. He Partner at Johnson Fellows improving the availability of of IT. Mike has over 25 years’ Human Resources experience was a Regional Director at and then created niche retail stock on the shelf in stores. IT experience spanning travel spanning the aerospace, food Somerfield prior to joining agency business-Craig Bales Prior to joining Poundland, and retail sectors. Prior to manufacturing, supply chain Poundland. & Company, which was Andy was Distribution Director joining Poundland, Mike was and retail sectors. Prior to subsequently sold to Lambert for Somerfield Stores Ltd Head of IT Services for TUI UK joining Poundland, Mark was Smith Hampton. Prior to where he rationalised their Limited. People Director at Fat Face joining Poundland, he sat on network by consolidating Limited. the board of Lambert Smith the former Kwik Save and Hampton. Somerfield networks and latterly the sale of Kwik Save. He has 30 years’ experience in distribution and has held a wide number of Development and Operational roles within own-account and third-party David Coxon Jinder Jhuti logistics companies. He also gained international (International (Company Secretary and experience whilst working for Development Director) General Counsel) Tibbett and Britten in North America.

David joined Poundland in Jinder joined Poundland October 2005 as Buying & in 2006 as Sole Counsel Merchandising Director, and and Assistant Company now focuses on international Secretary and was appointed development. David has to the Board in January over 25 years’ commercial retailing experience in buying, 2014. Jinder is responsible marketing, retail operations for managing legal risk, and supply chain, both UK and corporate compliance, International, having worked insurance, customer relations at Kwik Save, Allied Domecq, and health and safety. She Minit Group and more has over 24 years’ experience recently Somerfield Stores in the legal sector. Prior to Ltd. David will be retiring from joining Poundland Jinder Poundland in July 2014. worked in-house at Alliance & Leicester (now Santander Bank) and Barclays Bank plc in addition to having worked in private practice at Martineau Johnson.

28 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 future, politicaldonations. any The Grouphasnotmadeinthepast, nordoesitintendtomakeinthe Political Donations 2015. which isexpectedtobepaidinJanuary interim dividendinrespectofthefirsthalf2015financialyear, be declared bytheGroupfollowing Admission toListingwillbethe Shareholders priorto Admission toListing, thefirstdividend to that being available, asnotedintheProspectusissuedtoprospective The Directorsintend, subjecttosufficientdistributablereserves is£13.9million. Shareholders oftheCompany The Group’sattributable to profit fortheyear consolidated Results andDividend andGroupfinancialstatements. oftheCompany preparation Consequently, thegoingconcernbasishasbeenusedin 20and21. ofthefinancialrisksdetailedonpages management facilitiesandexposuresto ofborrowing and theavailability trading performance, levelsofborrowings currentandanticipated conclusion theBoardhastakenaccountofcurrentandanticipated existencefortheforeseeablefuture.in operational this Inarrivingat resourcestocontinue andtheGrouphasadequate the Company that thereisareasonableexpectation The Boardisoftheopinionthat Going Concern Group duringtheyear. Report,Strategic andcontainsdetailsoftheprincipalactivities The ReportoftheDirectorsshouldbereadinconjunctionwith with theseissuesandtheireffectiveness. theGrouphasinplacetodeal community issuesandthepoliciesthat about environmentalmatters, theGroup’s andsocial employees and positionoftheGroup’s business. Italsoincludes information trends andfactorslikelytoaffectthefuturedevelopmentperformance performance orpositionoftheGroup’s business, includes themain foranunderstandingofthedevelopment, to theextentnecessary aquotedcompany, isnow As theCompany Reportalso, theStrategic Group’s business, analysisusingfinancialkeyperformanceindicators. understanding ofthedevelopment, performanceorpositionofthe year.end ofthat The reportincludes, foran totheextentnecessary the financialyearandpositionofGroup’sat the business of thedevelopmentandperformanceGroup’s businessduring The reviewisintendedtobeabalancedandcomprehensiveanalysis description oftheprincipalrisksanduncertaintiesfacingGroup. and whichcontains(a)afairreviewoftheGroup’s businessand(b)a bytheBoardofDirectorson2July2014,approved 7to28, onpage Report, presentedtheirStrategic The Directorshave whichwas Strategic Report Directors on2July2014. bytheBoardof the yearended30March2014whichwereapproved The Directorspresenttheir Annual ReportandFinancial for Statements DIRECTORS’ REPORT Poundland Groupplc promotion. bytheGroupandfortheirtraining,employed careerdevelopmentand becomedisabledpersonsduringtheperiodwhentheywere who have of,employment trainingfor, andforarrangingappropriate employees andabilities,regard totheirparticularaptitudes forcontinuingthe madebydisabledpersons, foremployment applications having The Grouphasapolicy to ofgiving fullandfairconsideration ofconcernwiththemduringthesevisits. raise matters to areencouraged a regularbasisthroughouttheyearandcolleagues Directors andExecutive Team alsovisitretailanddistributionsiteson areasinwhichtheGroupoperates.geographical The Executive inpersonandaseriesofannualconferencescoveringall updates bywayofnoticeboards,matters ofemails, thecirculation monthly elsewhere, ofconcerntothemandonmoregeneral onmatters withitscolleagues,The Groupcommunicates bothUKbasedand hasaffectedtheGroupinrecentyears. industrial actionthat all offices, distributioncentresandretailstores. Therehasbeenno and Allied Workers, basisacross onacompany-wide whichapplies withtheUnionofShop,party toarecognitionagreement Distributive withitstradeunionsarealsogood.relations Poundland Limitedis beenandcontinuetobegood.have The Directorsalsobelievethat theGroup’sThe Directorsbelievethat withitsemployees relations 5,981 maleand7,992femalecolleagues. 13,973colleagues; ofthisreporttheGroupemployed At thedate Employees Association whichwereadoptedon11March 2014. Association arecontainedwithintheCompany’sof theCompany Articles of sharecapital totheordinary attaching The rightsandobligations 85 whichformpartofthisreportonpage financial statements ofthisreport,up tothedate aresetoutinNote21totheconsolidated intheyearunderreviewandsinceyear-endissued ShareCapital Details oftheCompany’s ShareCapital, including changesinthe Share CapitalandShareholders be heldin2015. not berequiredtoseekre-electionuntilthe Annual GeneralMeetingto from office. Consequently, theDirectorscurrentlyholdingofficewill subsequentnoticeof of any date Annual GeneralMeetingshallretire the first AnnualGeneralMeetingduethisyear,at the allDirectors As detailedinthe Articles, annualgeneralmeetingotherthan every at end oftheFinancial Year ofthisreport. andthedate beennochangesinthemake-upofBoardbetween There have each oftheExecutiveDirectors. terms ofwhichareinaccordancewiththeCompanies Act 2006)with hasenteredintoaqualifyingthird-partyindemnity(the Company insurance inplacerespectofeachtheExecutiveDirectors. The directors’andofficers’indemnity hascustomary The Company 49. onpage areshown in thesharesofCompany 30March2014andtheirinterests asat The DirectorsoftheCompany Directors Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -29

Financials Governance Strategy Introduction DIRECTORS’ REPORT continued

Details of awards outstanding under share-based incentive schemes are given in Note 22 to the consolidated financial statements Name % which form part of this report on page 86. Details of the share- Warburg Pincus LLC 30.40 based incentive schemes in place are provided in the Directors’ FIL Limited/FMR LLC 10.22 Remuneration Report on pages 40 to 41. Kensico Capital Management Corp. 5.69 On a show of hands at a general meeting of the Company, every AXA Investment Management 4.61 holder of ordinary shares present in person or by proxy and entitled to J P Morgan Asset Management 4.20 vote shall have one vote and, on a poll, every holder of ordinary shares James John McCarthy 3.87 present in person or by proxy and entitled to vote, shall have one vote AXA Framlington 3.27 for every ordinary share held. 1. Includes shares owned by connected persons. The notice of the Annual General Meeting specifies deadlines for exercising voting rights and appointing a proxy or proxies to vote in relation to resolutions to be put to the Annual General Meeting. Additional Information for Shareholders All proxies are counted and the numbers for, against or withheld With regard to the appointment and replacement of Directors, the in relation to each resolution are announced and published on the Company is governed by its Articles of Association, the UK Corporate Group’s website after the meeting. Governance Code and the Companies Act 2006 and related legislation. The Articles of Association themselves may be amended by special There are no restrictions on the transfer of ordinary shares in the resolution of the Shareholders. Company other than in relation to certain restrictions that are imposed from time to time by laws and regulations (for example insider trading The powers of the Directors are detailed in the Corporate Governance laws). In addition, pursuant to the Listing Rules of the Financial Report on pages 32 to 34. Conduct Authority, Directors and certain officers and employees of the Group require the approval of the Company to deal in the ordinary The Directors will, at the 2014 Annual General Meeting, seek authority shares of the Company. In Pursuant to the Underwriting Agreement, to purchase the Company’s own shares within certain limits. Although the Company and the Warburg Pincus Funds have each agreed, no such purchases are planned at this time, details are given in the subject to certain customary exceptions, during the period of 180 days Notice of the Annual General Meeting. from the date of Admission, not, without the prior written consent of Our Current Joint Brokers, to issue (in the case of the Company only), Change of Control offer, lend, sell or contract to sell, grant any option, right or warrant to subscribe or purchase or allow any encumbrance to be created over A number of agreements take effect, alter or terminate upon a change or otherwise dispose of, directly or indirectly, or announce an offer of of control of the Group, such as bank loan agreements and employee any Ordinary Shares (or any interest therein or in respect thereof) or share-based incentive schemes. enter into any transaction with the same economic effect as, or agree to do, any of such things, or publicly announce any intention to do any The Company’s main credit facilities, including the committed bank of the foregoing. facilities dated 17 March 2014, contain a provision such that in the event of a change of control, the facilities will be cancelled and all Pursuant to the Underwriting Agreement, the Directors, the Exective outstanding amounts, together with accrued interest, will become Team and certain other Shareholders have agreed that, subject to repayable on the date falling 30 days following written notice being certain customary exceptions, during the period of 365 days from given by the lenders that the facilities have been cancelled. the date of Admission, not, without the prior written consent of the our current Joint Broker, to offer, lend, sell or contract to sell, grant Annual General Meeting (“AGM”) any option, right or warrant to subscribe or purchase or allow any A notice convening the Company’s first AGM will be issued to encumbrance to be created over or otherwise dispose of, directly shareholders separately. In addition to the ordinary business of an or indirectly, or announce an offer of any Ordinary Shares (or any AGM, the Directors are seeking certain other authorities, details of interest therein or in respect thereof) or enter into any transaction with which are set out in the notice. the same economic effect as, or agree to do, any of such things, or publicly announce any intention to do any of the foregoing. Corporate Governance The Company is not aware of any other agreements between Shareholders that restrict the transfer of shares or voting rights The Statement of Compliance with the UK Corporate Governance Code attached to the shares. and description of the Group’s corporate governance framework with the Corporate Governance Report are included on pages 32 to 34 Greenhouse Gases which form part of this report. A summary of how the Group recognises its responsibility to colleagues, Disclosure of information to Auditors customers, environment (including greenhouse gas emissions) and community is contained with the Corporate and Social Responsibility As at the date of this report, as far as each Director is aware, there Report on pages 22 to 25 which forms part of this report. is no relevant audit information of which the Group’s Auditors are unaware, and each Director has taken all the steps that ought to Substantial Shareholders have been taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s At 2 July 2014, the following interests exceeding the 3% disclosure Auditors were aware of that information. threshold were recorded in the register of the Company kept in accordance with Section 808 of the Companies Act 2006.

30 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 forward-looking statements. the Company’s andotherfutureeventsorprospectsare strategy inwhichitoperates.industry Inparticular, regarding thestatements store rolloutplans), anddividendpolicy andthe oftheCompany financial condition, prospects, growth, (including strategies continued concerning,Company amongotherthings, theresultsofoperations, the intentions, oftheDirectorsor beliefsorcurrentexpectations Reports andFinancial andinclude Statements regarding statements historical facts. inanumberofplacesthroughoutthese They appear include arenot These forward-lookingstatements that allmatters terminology. thereof,or thenegative thereonorcomparable othervariations ‘‘predicts’’, ‘‘continues’’, ‘‘assumes’’, ‘‘positioned’’or ‘‘anticipates’’ ‘‘should’’, ‘‘shall’’, ‘‘risk’’, ‘‘intends’’, ‘‘estimates’’, ‘‘aims’’,as ‘‘believe’’, ‘‘plans’’,such terminology ‘‘expects’’, ‘‘may’’, ‘‘will’’, ‘‘could’’, aresometimesidentifiedbytheuseofforward-looking statements aboutfutureevents.current beliefsandexpectations Forward-looking Company’s controland allofwhicharebasedontheDirectors’ risksanduncertainties,unknown ofwhicharebeyondthe many statements. and involveknown These forward-lookingstatements These ReportsandFinancial include Statements forward-looking regardingInformation forward-looking statements General Meeting. the willbeproposedat Directors todetermineitsremuneration Annual KPMGLLPas Resolutions tore-appoint Auditor andtoauthorisethe Auditor Poundland Groupplc the Annual ReportandFinancialStatements Responsibility statementoftheDirectors in respect of 2 July2014 Secretary Company Jinder Jhuti By orderoftheBoard • • • We tothebestofourknowledge: confirmthat 7to28. Reportonpages Strategic inthe theyfaceasshown the principalrisksanduncertaintiesthat takenasawhole,the consolidation togetherwithadescriptionof andtheundertakingsincludedand thepositionofCompany in a fairreviewofthedevelopmentandperformancebusiness Report,Strategic 7andthisDirectors’Reportinclude onpage shown undertakings included takenasawholeandthe intheconsolidation assets, liabilities, financialpositionandprofitoftheGroup with IFRSasadoptedbytheEUgiveatrueandfairviewof financialstatements,the consolidated preparedinaccordance The BoardofDirectorsconfirmthat, tothebestoftheirknowledge, the Annual ReportandFinancial includes Statements afair the Annual ReportandFinancial takenasawhole, Statements is the financialstatements, preparedinaccordancewiththe principal risks and uncertainties that theyface. principal risksanduncertaintiesthat the Grouptakenasawhole, togetherwithadescriptionofthe review ofthedevelopmentandperformancebusiness and business modelandstrategy; forshareholderstoassesstheGroup’snecessary performance, fair, balancedandunderstandableprovides theinformation taken asawhole; andtheundertakingsincludedthe company intheconsolidation of theassets, liabilities, financialpositionandprofitorlossof setofaccountingstandards,applicable giveatrueandfairview Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -31

Financials Governance Strategy Introduction CORPORATE GOVERNANCE

The Board and its Role The Company does not comply with this recommendation of the UK Corporate Governance Code. As mentioned above, Messrs. Best and The Board is committed to the highest standards of corporate Coates are not independent as they have been nominated to act governance. Other than as set out below the Company has complied, as Non-Executive Directors by Poundland’s principal shareholder, and intends to continue to comply, with the requirements of the UK Warburg Pincus Funds who have entered into a Relationship Corporate Governance Code. Agreement with the Company under the terms of which, for as long as The Board has a schedule of matters which are reserved for its own they and their associates control in excess of 30% of the votes able consideration, which includes: to be cast, they are entitled to appoint two Non-Executive Directors. When they control between 15% and 30% of votes they will be • The overall management of the Company and the Group and the entitled to appoint one Non-Executive Director. They currently control approval of long-term objectives and commercial strategy; 30.4% of votes. • Changes relating to the capital structure of the Company; The Directors believe that the terms of the Relationship Agreement • Approval of financial reporting, dividend policy and significant will enable Poundland to carry on its business independently of changes in accounting policies and practices; Warburg Pincus Funds. • Ensuring the maintenance of a sound system of internal control Conflicts of Interest and risk management; Paul Best and Stephen Coates are principals at Warburg Pincus. • Major capital projects and corporate actions, acquisitions, Warburg Pincus wholly owns the Warburg Pincus Funds which control disposals or material joint ventures; 30.4% of the voting rights in the Company. • Ensuring a satisfactory dialogue with Shareholders based on a Save as set out in the paragraph above, there are no potential mutual understanding of objectives; conflicts of interest between any duties owed by the Directors or • Board membership and senior appointments within the Group; Senior Management to the Company and their private interests or other duties. • Remuneration of Board members and Executive Team; and • Approval of the Group’s principal professional advisors. Committees of the Board The Board has delegated a number of these responsibilities to As envisaged by the UK Corporate Governance Code, the Board standing committees of the Board, as detailed below, and also to has established an Audit and Risk Committee, a Governance and the executive management of the Group having first approved the Nomination Committee and a Remuneration Committee. If the need terms of reference of those committees and the authority limits of should arise, the Board may set up additional committees. management and receives regular reports in respect of all delegated authorities. Audit and Risk Committee The Board comprises ten members, including three Executive The Audit and Risk Committee’s role is to assist the Board with the Directors and seven Non-Executive Directors (including the Chairman). discharge of its responsibilities in relation to financial reporting, For the purposes of the UK Corporate Governance Code, the Board including reviewing the Group’s annual and half year financial regards Andrew Higginson, the Chairman, as independent on his statements and accounting policies, internal and external audits and appointment and regards Darren Shapland, Trevor Bond, Tea Colaianni controls, reviewing and monitoring the scope of the annual audit and and Grant Hearn as independent Non-Executive Directors. Darren the extent of the non-audit work undertaken by external auditors, Shapland is the Company’s Senior Independent Director. Paul Best advising on the appointment of external auditors and reviewing the and Stephen Coates, as Non-Executive Directors nominated by the effectiveness of the internal audit, internal controls, whistleblowing Warburg Pincus Funds, are not regarded as independent for the and fraud systems in place within the Group. The Audit and Risk purposes of the UK Corporate Governance Code. Committee will normally meet not less than three times a year. In addition to his Chairmanship of Poundland Group plc, Andrew The Audit and Risk Committee is chaired by Trevor Bond and its other Higginson is also Chairman of N Brown plc and a Non-Executive members are Darren Shapland, Tea Colaianni, and Grant Hearn. The Director of BSkyB, Woolworths (South Africa), McCurrach UK and the UK Corporate Governance Code recommends that all members of the Rugby Football Union. Audit and Risk Committee be Non-Executive Directors, independent in character and judgement and free from any relationship or Independence is determined by ensuring that, apart from receiving circumstance which may, could or would be likely to, or appear to, their fees for acting as Directors, Non-Executive Directors do not have affect their judgement and that one any other material pecuniary relationship or transactions with the such member has recent and Company, its promoters, its management or its subsidiaries, which relevant financial experience. in the judgement of the Board may affect their independence of The Board considers that judgement. the Company complies with The UK Corporate Governance Code recommends that at least the requirements of the UK half the Board of Directors of a UK-listed company, excluding the Corporate Governance Code in Chairman, should comprise Non-Executive Directors determined by this respect. the board to be independent in character and judgement and free from relationships or circumstances which may affect, or could appear to affect, the directors’ judgement.

32 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 formulating and introducing a sustainable remuneration policy. andintroducingasustainable remuneration formulating specialises inexecutiveremuneration, to adviseandassistin external advisors, NewBridgeStreet, aconsultingagency which Since thetimeofitsinauguration, theCommitteehasemployed in thisrespect. GovernanceCode complies withtherequirementsofUKCorporate to,appear affecttheirjudgement. theGroup The Board considers that orcircumstancewhichmay,relationship couldorwouldbelikelyto, or Directors, independentincharacterandjudgementfreefrom any CommitteebeNon-Executive allmembersoftheRemuneration that and GrantHearn. GovernanceCode recommends The UKCorporate other membersare Andrew Higginson, DarrenShapland, Trevor Bond Committeeischairedby The Remuneration Tea Colaianniand its Committee willnormallymeetnotlessthanthreetimesayear. the Shareholders at Annual GeneralMeeting. The Remuneration and preparesan bythe Reportforapproval Annual Remuneration Executive DirectorsandtheChairmanotherseniorexecutives executive remuneration, for determinesthelevelsofremuneration CommitteerecommendstheGroup’sThe Remuneration policy on Remuneration Committee actionsaretakenifrequired. relevant mitigating arekeptunderconstantreviewand allsuchmatters entities andthat todowiththegoodandethicalgovernanceofcorporate regulations complieswith,Company andwherepossibleexceeds, and alllaws In addition, the theCommitteewillberesponsibleforensuringthat rotation. The CommitteewillalsoconsiderthediversityofBoard. about there-electionofDirectorsputforwardforretirementby theendoftheirtermofficeandmakerecommendations Directors at regarding themake-upofBoardCommittees, whethertoreappoint totheBoard The Committeewillalsomakerecommendations Board asawhole. bythe appropriate, forconsideration willidentifysuitablecandidates and expectedtimecommitmentand, if usingexternalagencies Board, willprepareadescriptionoftherole, requiredcapabilities of skills, knowledge, experience, independenceanddiversityonthe the leadinprocessand, aftertakingdueaccountofthebalance aDirector,When theBoardwishestoappoint theCommitteewilltake GovernanceCodeinthisrespect. the UKCorporate complieswiththerequirementsof theCompany Board considersthat could orwouldbelikelyto, to, orappear affecttheirjudgement. The orcircumstancewhichmay, relationship judgement andfreefromany Committee beNon-ExecutiveDirectors, independentincharacterand amajorityoftheGovernanceandNomination recommends that Tea ColaianniandPaul Best. GovernanceCode The UKCorporate Hearn anditsothermembersareDarrenShapland, Trevor Bond, CommitteeischairedbyGrant The GovernanceandNominations than twiceayear. Committeewillnormallymeetnotless Governance andNomination governance. complianceinrespectofcorporate and regulatory The Executive Officerandotherseniorexecutivesensuringlegal succession plansfortheDirectors, including theChairmanandChief reviewing thestructure, sizeandcompositionoftheBoard, reviewing CommitteeassiststheBoardin The GovernanceandNominations andNominationsCommittee Governance Poundland Groupplc Grant Hearn Tea Colaianni Trevor Bond Shapland Darren Paul Best Coates Stephen Lancaster Richard Nick Hateley Jim McCarthy Committee meetings have beenheldsincetheyearend. Committee meetingshave Audit andRiskCommitteeGovernanceNominations Higginson Andrew Director up to30March2014: ofincorporation detailsmeetingsfromthedate The schedulebelow Chart Director’s Attendance needs to canvass views before taking any particularcourseof action. needs tocanvassviewsbeforetaking any todosoorwhereit issueonwhichitconsidersappropriate any In addition, willconsultwithitslargerShareholderson theCompany attendance. and theChairsofBoard’s standingcommitteeswhowillallbein provide ShareholderstheopportunitytoaskquestionsofChairman of theprogressduringprecedingyear, reviewcurrentissues and the whichtheBoardwillgiveanaccount Annual GeneralMeetingat withitsShareholdersthrough willalsocommunicate The Company releases, publications. andvisitsCompany investorpresentations media usedtoimpartinformation, including financialresults, arenews Shareholdersmayhave.concerns that The principalcommunication stakeholders, including Shareholdersandalsotounderstandany developments andfinancialresultstoalloftheCompany’s itisimportanttoexplainbusiness The Boardbelievesthat Shareholder Communication withanexternalagencyengage toassistintheprocess. thirdyear,every GovernanceCode, asrequiredbytheUKCorporate Board asawholewillbeundertakenonanannualbasisandwill, individual directors, thestandingcommitteesofBoardand toassesstheeffectivenessofChairman, performance evaluation Board hasnotyetcompletedaperformanceevaluation. However, a ithasbeeninexistence, shorttimethat Due totherelatively the EvaluationBoard Performance Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements Board Meetings (4 meetings) 4 4 3 4 4 4 3 4 4 4 Remuneration Remuneration (2 meetings) Committee 2 2 1 2 1 2 - - - - Audit andRisk Committee ------Governance and Nominations Nominations Committee ------33

Financials Governance Strategy Introduction CORPORATE GOVERNANCE continued

Internal Controls and Risk Management External Auditors’ Independence Statement Overall responsibility for the system of internal control, reviewing its Professional ethical standards require KPMG LLP (“KPMG”) to effectiveness and ensuring that there is a process to identify, evaluate communicate to the Company as part of planning all significant facts and manage any significant risks that may affect the achievement of and matters, including those related to the provision of non-audit the Company’s strategic objectives lies with the Board. services and the safeguards put in place that, in their professional judgement, may reasonably be thought to bear on KPMG’s The Board and the Audit Committee have reviewed the effectiveness independence and the objectivity of the audit partner and audit team. of the Group’s internal control and risk management systems in accordance with the UK Corporate Governance Code for the period KPMG have confirmed that they are satisfied that their general ended 30 March 2014 and up to the date of approving the Annual procedures support their independence and objectivity. Report and Financial Statements. The internal control and risk management system is designed to manage, rather than eliminate, UK Corporate Governance Code the risk of failing to achieve business objectives and can provide only reasonable, and not absolute, assurance against material – Compliance Statement misstatement or loss. The UK Corporate Governance Code published by the Financial The Group’s Executive Team principally reviews the effectiveness Reporting Council in September 2012 (“the Code”) applies to the of controls operating within the business. The Audit Committee is Company and is available on the FRC website at www.frc.org. reviewing and assessing whether or not an independent, standalone uk/Our-Work/Publications/Corporate-Governance/UK-Corporate- Internal Audit function would be more appropriate to the needs of the Governance-Code-September-2012.pdf. In addition, the Financial business. Conduct Authority has yet to change the Listing Rules and therefore requires that certain compliance statements are made in relation to The assessment and control of risk are considered by the Board to be the predecessor edition of the Code, issued in June 2010. This report fundamental to achieving corporate objectives. An ongoing process of addresses the requirements of both editions of the Code. For the identifying and evaluating the significant risks faced by the Group and period from 17 March 2014 to 30 March 2014, the Company complied the effectiveness of related controls has been established. The key with the provisions of both editions of the Code, as applicable, except elements are: where stated. • a comprehensive system of reporting from executives identifying performance against budget, analysis of variances, major business issues, key performance indicators and regular forecasting; • well defined policies governing appraisal and approval of capital expenditure and treasury operations; and • reviews of key business risks and of management’s controls and plans to mitigate these risks. During the financial period to 30 March 2014 and up to the date of this report, the Audit Committee and management considered the Company’s Risk Register and its alignment with the Company’s strategic objectives, reporting the findings to the Board. The Board considered the key risks and relevant mitigating actions and determind that they were acceptable for a retail business of the size and complexity as that operated by the Company. More information on the key risks and uncertainties faced by the Company are shown on pages 20 to 21.

Whistleblowing Policy Unfortunately from time to time all companies face the risk of things going wrong or of malpractice taking place. Poundland is no exception. The Company has a duty to conduct its affairs in an open and responsible way. We are committed to high standards of corporate governance and compliance with legislation and appropriate codes of practice. By knowing about any wrong doing or malpractice at an early stage, we stand a good chance of taking the necessary steps to stop it. We have a policy in place which is designed to encourage colleagues to identify such situations and report them without fear of repercussions or recriminations provided that they are acting in good faith. The policy sets out how any concerns may be raised and response can be expected from the Company and in what timescales.

34 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 2 July2014 Chairman ofthe Audit andRisk Committee Trevor Bond day.to ourcustomersevery environmentaswellcontinuingtoprovideamazingvalue company look forwardtocontinuinglearnfromourexperiencesinthelisted large,the worldat inparticularourcustomers, wereconcerned. We controlsand maintaining adequate “business asusual” asfar whilststill withbecomingapubliclistedcompany work associated succeededincopingwithalltheextra across thebusinesswhohave busyyearforcolleagues 2013/14 hasbeenanunusualandvery the at recommending KPMGbereappointed AGM. Based ontheirperformanceduring2013/14, theCommitteewillbe risk. raisedbyKPMGwhichtheyconsidertobeofsignificantaudit matters theyear-end facingtheGroupandat treatments willfocusonthe thesignificantaccounting The Committeewillberoutinelylookingat auditors. oftheexternal and advisingontheindependenceappointment annual andhalf-yearresults, externalauditing, internalcontrols, responsibilities inrespectoffinancialreporting, including reviewing The CommitteewassetupbytheBoardtoassistitwithits Committee isgivenintheReportbelow. Non-Executive DirectorsoftheplcBoard. The make-upofthe with thisinmind, theCommitteeiscomprisedofIndependent member hasrecentandrelevantfinancialexperience. Consequently, be likelyto, to, orappear onesuch affecttheirjudgementandthat orcircumstancewhichmay, relationship free fromany couldorwould Executive Directors, independentincharacterandjudgement allmembersoftheCommitteebeNon- Code”) recommendsthat As youarenodoubtaware, GovernanceCode(“the theUKCorporate Admission toListinginMarch2014. Directors on27February 2014in readinessfortheCompany’s byresolutionoftheBoard The Committeewasinaugurated of the Audit andRiskCommittee. I ampleasedtopresentyou, onbehalfoftheBoard, thefirstreport Dear Shareholder, AUDIT ANDRISKCOMMITTEEREPORT Poundland Groupplc Exchange on17March2014. The CommitteebecameeffectivefromListingontheLondonStock itsmeetingheldon27February 2014. a resolutionoftheBoardat committee oftheBoardDirectorsCompany, establishedby The Audit andRiskCommittee(“theCommittee”)isastanding Listing ontotheLondonStock Exchange risks containedtherein. Risk Register, totheCommittee reviewofthe ithasdelegated In addition, whilsttheBoardhasretainedoverallresponsibility for the andfraudpoliciestomeasuretheireffectiveness. the whistleblowing is aneedtoestablishaninternalauditfunctionandwillalsoreview In addition, goingforward, theCommitteewillreview whetherthere • • • • • • of theCommitteeare: Governance”. Investors/Corporate “Corporate/ purposes The primary toShareholdersontheCompany’sare available websiteunder and reportingassetoutinitswritten Terms ofReference, which to assistitinitsresponsibilitiesrespectoffinancialcontrols authorityfromtheBoard The Committeehasreceiveddelegated Role oftheCommittee auditors. ofexternal Advising ontheindependenceandappointment and extent ofthenon-auditworkundertakenbyexternalauditors; Reviewing andmonitoringthescopeofannualaudit financial controls; Reviewing theexternalauditor’s letteroninternal management effectiveness; Reviewing externalauditsandinternalcontrolsensuringtheir understandable; the Ensuring that Annual Reportisfair, balancedand and accountingpolicies; Reviewing theGroup’s annualandhalf-yearfinancialstatements Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -35

Financials Governance Strategy Introduction AUDIT AND RISK COMMITTEE REPORT continued

Composition of the Audit and Risk Committee This item was considered by the Committee at the time they reviewed and agreed the external auditor’s Group audit plan, to ensure that The Committee is comprised exclusively of Independent Non-Executive due consideration was given at that point, as well as at the time of Directors of the plc Board. The Committee is chaired by Trevor Bond reviewing the external auditor’s final audit findings. and its other members are Darren Shapland, Tea Colaianni, and Grant Hearn. The Secretary of the Committee is the Company Secretary, With regard to the valuation of inventory, the Committee reviewed the Jinder Jhuti. inventory balances and the related provisions against carrying values. Having considered the appropriateness of such provisions and taking The Board is satisfied that Trevor Bond has recent and relevant into account the results of the external audit, the Committee concurred financial experience appropriate to his position as Chairman of the with management’s judgement on this issue. Audit and Risk Committee. In addition Darren Shapland is also a qualified accountant. Another area of audit focus which was considered at the time of the Committee review and agreed with its external auditors for inclusion Although not a member of the Committee, there is a standing in the Group’s audit plan was: Intangible Assets - goodwill and brand invitation to the Company Chairman, Andrew Higginson, to attend value. The Committee reviewed the assumptions used to justify that meetings. The Committee also invites to attend, on a regular basis, there was no impairment to goodwill and brand value and were Nick Hateley in his capacity as Chief Financial Officer, along with the comfortable with them. Significant headroom was identified so it was external auditor. Also, the Committee intends to meet regularly with concluded that this was not a significant risk that could give rise to the external auditor with no members of management present. misstatement of the Group’s financial statements.

Number of Audit and Risk Committee meetings and Management have reported to the Committee that they were not attendance aware of any material misstatements made intentionally to achieve a The Committee will meet a minimum of three times per year and all particular presentation. The auditors reported to the Committee any members expect to be available for all meetings. misstatements that they had found in the course of their work and no material adjustments were required. No meetings of the Committee were held in the year under review but two meetings have been held between the start of the current After reviewing the presentations and reports from management and financial year and the publication of this Annual Report and Financial consulting where necessary with the auditors, the Committee was Statements. satisfied that the financial statements appropriately addressed the critical judgements and key estimates both in respect of the amounts Work undertaken by the Committee in relation to 2014 reported and the disclosures. The Committee was also satisfied that Financial Statements the significant assumptions used for determining the value of assets and liabilities had been appropriately scrutinised and challenged and Although the Committee did not come into operation until 17 March were sufficiently robust. 2014, a number of significant matters have been discussed and considered: The Committee confirmed that it was satisfied that the auditors had • Approved 2014 audit plan, audit fee proposal and set performance fulfilled their responsibilities with due diligence and professionalism. expectations for the auditors; Internal audit • Reviewed the integrity of the draft financial statements for the year ended 30 March 2014, appropriateness of accounting The Company does not have a stand-alone Internal Audit Department. policies and going concern assumption; Its internal controls are currently maintained by the Group’s management. Whilst the Committee is happy that the current system • Considered the auditors’ report regarding their findings on the is adequate it will, as part of its remit, evaluate the effectiveness and 2014 annual results; robustness of the current system of control as the Group grows before • Reviewed and recommended approval of the 2014 Annual Report deciding whether or not it should remain in place or to recommend and Financial Statements; changes to the way it operates or to recommend to management that a new and independent Internal Audit Department would be more • Confirmed compliance or explained deviation from the UK appropriate and to set down the guidelines for the operation of such a Corporate Governance Code; department. • Reviewed audit and non-audit expenditure with the external auditors during the year; and Internal controls • Having reviewed the performance, effectiveness and qualifications The Company operates various levels of control against which of the auditors, recommended their re-appointment at the AGM. the risks of the business are managed. As with any business, the Company faces risk in all its activities. Management is responsible for, inter alia, establishing and maintaining adequate internal controls over Significant issues considered by the Audit and Risk financial reporting, including over the Group’s consolidation processes. Committee Following discussion with both management and the external auditors, The Board is responsible for the Group’s systems of internal the Committee determined that the area of significant risk that could control and risk management and for reviewing their effectiveness. give rise to misstatement of the Group’s financial statements included, The Committee has considered the process by which the Group but were not limited to: approaches risk management and is satisfied that the Group has systems and procedures in place to identify, evaluate and manage • valuation of inventory all material risks to the business, in accordance with the Turnbull Guidance.

36 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 the Groupisnecessary. adetailedunderstandingof that where theworkisofsuchanature arecloselylimited toassignmentsthat totheannualauditor related supplieroftheseservices. arenormally Non-audit services appropriate their skillsandexperiencemakethemacompetitivethemost onlytotheextentthat for selectiontoprovidenon-auditservices of theBoard, theauditfee. approving The auditors areeligible auditors, including theannualworkplanand, approving onbehalf The Committeeisresponsiblefortheoversightofexternal process withinthetimescalesrequired. wasrequiredtocompletethat the considerableamountofworkthat KPMGwereuniquelyplacedtoundertake were oftheopinionthat Group, theIPOwasunderconsideration thetimethat theBoardat but, ofthePoundland becauseoftheirextensiveworkingknowledge provider tothemostappropriate tender ortestsandareawarded aresubjecttomarket Under normalcircumstancesnon-auditservices auditors toPoundland throughout theyear. prepared bytheDirectors. KPMGLLP “KPMG” actedastheexternal andcertainotherdisclosuresopinion onthefinancialstatements byShareholderstoprovidean The externalauditorsareappointed services Appointing theauditorandsafeguards on non-audit • • • • • • effectiveness oftheexternalauditor, theCommitteereviewed: To fulfilitsresponsibilitiesinrespectoftheindependenceand effectiveness withinit. views onthecontrolandgovernanceenvironmentmanagement’s presentwiththepurposeofunderstandingauditor’smanagement auditor. The Committeeholdsmeetingswiththeauditorwithout The CommitteeoverseestheGroup’s withtheexternal relationship auditeffectiveness Assessing external by theBoard. theprocesswillberegularlyreviewed Financial andthat Statements ofthe ofapproval under reviewanduptothedate Annual Reportand thisprocesshasbeeninplacefortheyear that Committee issatisfied andtheinternalcontrolsinplace.financial riskcategory Similarlythe orloss.misstatement SpecificallytheCommitteehasreviewed provide reasonable, andnotabsolute, material assuranceagainst riskoffailuretoachievebusinessobjectives.eliminate They canonly than rather These systemsandproceduresaredesignedtomanage KPMG in respect of its work in the areas that driveauditquality.KPMG inrespectofitsworktheareasthat The Committeespecificallychallengedandsoughtcomfortfrom the year;and providedduring The auditfeeandtheextentofnon-auditservices The letterfromKPMGconfirmingitsindependenceandobjectivity; aroseduringtheaudit; major issuesthat The detailedfindingsoftheaudit, including adiscussionofany The auditworkplanfortheGroup; letter; external auditorassetoutintheengagement The terms, areasofresponsibility, dutiesandscopeofworkthe Poundland Groupplc 2 July2014 Chairman ofthe Audit andRiskCommittee Trevor Bond restrictitschoiceofauditor. arrangements)that borrowing The Grouphasnocontractualarrangements(forexample, within on audittenderingandrotation. Code, therecentCompetitionCommissionandEUrecommendations tothetimingofnextformaltenderinlight consideration year, beingtheperiodended30March2014. The Groupwillbegiving asauditorsofPoundlandKPMG hasbeenappointed Groupplcfor1 external auditors. not suchastocompromisetheobjectivityandindependenceof andnon-auditfees,related provided, ofservices andthenature are On balance, theoveralllevelsofaudit- that theCommitteeissatisfied 74. Note 7totheFinancial onpage Statements undertaken byKPMGinrespectoftheIPO. Fulldetailsaregivenin the auditfee. This figureisdistortedbythelargeamountofwork During theyearunderreviewnon-auditfeeswere12times the Company’s externalauditor. built inlevelsofauthority, ofnon-auditworkto tocontroltheawarding not impaired. aformalpolicy,The Committeewillbeformulating with auditorobjectivityandindependenceis toensurethat management Committee willregularlyreviewand, wherenecessary, challenge assignments. non-auditrelated material proposals ofany The on audit, andnon-auditexpenditure, audit-related togetherwith willregularlyprovidetheCommitteewithreports Management • • • • • which: auditors maynotprovideaservice the isthat withregardtonon-auditservices The principlefollowed Puts the auditors in the role of advocate forPoundland.Puts theauditorsinroleofadvocate Poundland. of oremployee Results intheauditorsfunctioningasamanager with Poundland employees. Results intheauditorsdevelopingclose personalrelationships amutualityofinterest. Creates work. Places theminapositiontoaudittheirown Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -37

Financials Governance Strategy Introduction DIRECTORS’ REMUNERATION REPORT Annual statement by the Chairman of the Remuneration Committee

Dear Shareholder, The key components of remuneration are set out in detail within the Remuneration Policy Report, which will be subject to a binding vote at I am pleased to present, on behalf of the Board, the first remuneration our AGM. report of the Remuneration Committee (the ‘Committee’) following the initial public offering (IPO) on 17 March 2014. Performance and reward for 2013/14 The work of the Remuneration Committee Financial performance in 2013/14 was very strong, representing a record year in Poundland’s profits. However, despite the financial The year ended 30 March 2014 was a major milestone in Poundland’s success, the Executive Directors together with the remainder of the history. The Committee was formally constituted at IPO, but the Executive Team indicated that for this year they did not wish to be majority of its work took place prior to that event with a full review of considered for a bonus, and agreed to spread the bonus pool more the Company’s remuneration policy undertaken. widely in celebration of the landmark IPO event. A key objective of this review was to ensure an appropriate On listing, the Executive Directors received their first awards under the remuneration policy was in place for a listed company, whilst also Company’s new Performance Share Plan (PSP), which was adopted at ensuring that it continued to drive the core behaviours and values that IPO. These awards will vest after three years provided that stretching have been fundamental to the Company’s success to date. The policy performance targets are met. No further awards will be made until is designed to closely align variable pay with future company success, the financial year beginning 30 March 2015. with rigorous and stretching targets in place for performance-related elements to be paid out. Shareholder feedback Additionally since its formation, the Committee has adopted a range The Committee recognises that building a close relationship with of new employee share plans, reviewed the bonus awards for the last Shareholders can complement the work of the Committee in financial year and considered broader all-employee pay review for the developing the remuneration policy. Prior to the publication of our first current year. Directors’ Remuneration Report we consulted with a number of our major Shareholders and leading investor representative bodies. One Objectives of the Remuneration policy of our overarching aims has been to develop a remuneration policy which closely aligns the interests of our senior executives and our In setting the remuneration policy the Committee focused on simple Shareholders, and with this in mind we have adopted share ownership and transparent market competitive remuneration and incentive guidelines and included clawback provisions in both our annual bonus schemes. The proposed policy is designed to: and long-term incentive plans. • attract, retain and motivate high calibre senior management and to focus them on the delivery of the Company’s strategic and As this is the first time we are reporting to you, and the first time we business objectives; will be asking you to approve the remuneration policy, we appreciate • promote a strong and sustainable performance culture; any feedback you may have. • incentivise high growth; • align the interests of Executive Directors and members of Tea Colaianni the Executive Committee with those of shareholders through Chairman of the Remuneration Committee encouraging equity ownership; 2 July 2014 • be simple and constructed taking into account best practice guidelines for UK listed companies; and • encourage widespread equity ownership by colleagues through the operation of several tailored share plans, including an all- employee SAYE plan.

38 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 to ensureoptimalbenefitdelivery. which aredesignedwithclose regardtothevariousrecipient groups adoptedseveralnew shareplans support ofthisobjectivewehave throughouttheCompany, bycolleagues share ownership andin policyA furtheraimoftheremuneration widespread istoencourage riskmanagement. governanceandappropriate good corporate is paidandhasbeenstructuredsoastoadheretheprinciplesof participants andShareholders, nomorethanisnecessary ensurethat aims tobesimpleindesign, transparentandunderstandablebothto with shareholdingguidelines. Inpromotingtheseobjectivesthepolicy equityownership with thoseofShareholdersthroughencouraging and toaligntheinterestsofExecutiveDirectors Team strong andsustainableperformanceculture, incentivisehighgrowth of theCompany’s andbusinessobjectives, strategic topromotea andtofocusthemonthedelivery high calibreseniormanagement policyThe aimoftheremuneration istoattract, retainandmotivate cost controlandsimplicityinpaystructures. helped todrivetheCompany’s success priortoIPO, suchaseffective However, thepolicy alsoretainssomeofthekeyelementswhich competitiveandstructuredinlinewithbestpractice. appropriately and theRetailSector, thearrangementsare soastoensurethat with close regardtomarketpracticeinotherUKlistedcompanies Committee.by theRemuneration The Committeedesignedthispolicy On Admission inMarch2014, policy anewremuneration wasadopted Company’s website. Executives. The Committee’s onthe termsofreferenceareavailable fortheChairman,remuneration ExecutiveDirectorsandotherSenior Committeehasresponsibilityfordetermining The Remuneration Policy overview Remuneration Policy Report Poundland ofitssubsidiaries. Group HoldingsLimitedorany ofthesedirectorswhentheywere the remuneration accounting,keeping withthat haschosentoalsoinclude theCompany existing GroupheadedbyPoundland GroupHoldingsLimited. In Group’s ofthepre- reflectthecontinuation financialstatements accountingpolicy,As explainedinthebasisofconsolidation the the voteat an advisory AGM. Committee andthe willbesubjectto Annual ReportonRemuneration The fromtheChairmanofRemuneration Annual Statement date. effect fromthat General Meetingon19September2014. The policy willtakeformal the Directors willbeputtoabindingshareholdervoteat Annual PolicyThe Remuneration ReportfortheExecutive andNon-Executive guidelines. Rules andshareholders’executiveremuneration GovernanceCode2013,principles oftheUKCorporate theListing as amended. The policy hasbeendevelopedtakingintoaccountthe 2008, Companies andGroups(AccountsReports)Regulations It hasbeenpreparedinaccordancewiththeLargeandMedium-sized discloses totheyearended30March2014. theamounts paidrelating for theCompany, policy ofthat describestheimplementation and policy Reportsetsouttheremuneration The Directors’Remuneration What isinthisreport? Poundland Groupplc Directors’ Remuneration Report. Directors’ Remuneration votingoutcomesinnextyear’s related publish detailsofremuneration an AGM sincelisting, andwewill novotingoutcomesareavailable policy.are tobemadetheremuneration As Poundland hasnotheld changes material any bodieswhenitisproposedthat representative withShareholdersandtheir The Committeewillseektoengage policy. considered aspartoftheCommittee’s annualreviewofremuneration This, additionalfeedbackreceivedfromtimetotime, plusany willbe tothe feedback receivedinrelation AGM. advance ofpublication. Inaddition, Shareholder wewillconsiderany policyShareholders theopportunitytodiscussourremuneration in Company’s IPOandwiththisinmindweofferedourlargest policyShareholders willvoteontheremuneration sincethe thisisthefirsttimethat The Committeeisconsciousthat understandingofthewiderworkforce. appropriate toExecutiveDirectors’payaremadewithan made inrelation wider workforce. Thus, thedecisions that theCommitteeissatisfied terms)inlinewiththoseofthe ofsalary ordinarily be(inpercentage increaseswill andsalary intheCompany to rewardforemployees Executive Directors, theCommitteetakesnoteofoverallapproach As setoutinthepolicy tableoverleaf, forthe insettingremuneration andbonusreviewsacrosstheCompany. tosalary Director inrelation fromtheGroupHR executive paybutdoesreceiveperiodicupdates on The Committeedoesnotformallyconsultdirectlywithemployees taken intoaccount How theviewsofShareholders andemployees are aspects oftheCompany’s policy remuneration forExecutiveDirectors. pay focusedonlong-termincentives. The tablesummarisesthekey significant proportionofthepackage, withtheemphasisonvariable elements (annualbonusandlong-termincentives)makeupa variable isstructuredsothat package The totalremuneration The remuneration policy forExecutiveDirectors Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -39

Financials Governance Strategy Introduction DIRECTORS’ REMUNERATION REPORT continued

Element Purpose and link to strategy Salary To recruit and reward executives of a suitable calibre for the role and duties required.

Recognises individual’s experience, responsibility and performance.

Benefits To provide market competitive benefits to ensure the well being of employees.

Pension To provide retirement planning to employees.

Annual bonus To incentivise and reward individuals for the achievement of pre-defined, Committee approved, annual financial and operational objectives which are closely linked to the Corporate strategy.

Poundland Performance Share Plan ('PSP') To incentivise and recognise execution of the business strategy over the longer term.

Rewards strong financial performance over a sustained period.

Poundland Sharesave Plan (SAYE) All employees including Executive Directors are encouraged to become shareholders through the operation of an all-employee share plan.

Share ownership guidelines To increase alignment between executives and shareholders.

Notes A description of how the Company intends to implement the policy set out in this table for 2014/15 is set out in the Annual Report on Remuneration.

40 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 the guidelinelevelismet. Executive Directorsarerequiredto retain 50%ofthenettaxvestedPSPshares until toIrishemployees. A similarplanisalsoavailable onasimilarbasistoother employees. Directors eligibletoparticipate discounted byupto20%. toUKemployees, Providestaxadvantages withExecutive period andcanbeusedtofundtheexerciseofanoption, wheretheexercisepriceis aremadeovera3or5year planunderwhichregularmonthlysavings HMRC approved dividends. thetimeofvestingandmayassumereinvestment shares (incashorshares)at theCommitteetopaydividendsonvested A dividendequivalentprovisionallows instances ofindividualgrossmisconduct. an errorindeterminingtheextenttowhichperformancetargetswere met or in oftheresults, Committee withinthreeyearsofvestingintheeventamisstatement canbereduced(viaclawback thediscretionof The awards and/ormalus)at in the Annual ReportonRemuneration. targets setandassessedbytheCommittee. willbesetout The targetsforeachaward arangeofchallengingEPS Awards vestbasedonthreeyearperformanceagainst normally vestafterthreeyearssubjecttoperformanceandcontinuedservice. maytaketheformofnil-costoptionsorconditionalshareawards.PSP awards Awards ofbonusoutcomeorininstancesindividualgrossmisconduct. calculation ofresults, misstatement intheeventofmaterial provisions apply anerrorinthe willbepaidinsharesanddeferredforthreeyears.100% ofsalary Clawback/malus ispaidentirelyincash. bonuspaidupto100%ofsalary Any bonusinexcessof Any themisprovidedinthe against Report. Annual Remuneration Details oftheperformancetargetssetforyearunderreviewand bonus. objectives.strategic/personal Financial measureswillrepresentthemajorityof pool willthenbedividedamongparticipantsusingamixoffinancialmeasures and A bonuspoolistobedeterminedbyfinancialmeasures(e.g. profitaftertax). This objectives assetandassessedbytheCommitteeonanannualbasis. The annualbonusisbasedpredominantlyonstretchingfinancialandoperational of allorsomesuchbenefit. inadefinedcontributionplan,Directors mayparticipate orelecttoreceivecashinlieu holidays. perannum,Executive Directorsarealsoentitledto30days’leave plusbankandpublic • • • • • • • currentlyprovides: The Company package. increaseonthetotalremuneration salary The Committeeconsiderstheimpactofany and complexity. Salaries aresetwithreferencetosimilarrolesinFTSE250companiesofa size determining annualincreases. performanceisonefactorconsideredbytheCommittee when personal andcompany Hence, whilsttherearenoperformanceconditionsconditionalonsalariesbeing paid, • • • • into account: Salaries arenormallyreviewedannuallywithchangeseffectivefrom1st taking April conditions Operation andperformance Other ancillary benefits,Other ancillary including expenses(asrequired) relocation Medical healthcheck Income protectioninsurance Dependent pensioninsurance Life assurance Family medicalinsurance Car allowance Increases elsewhereintheCompany Individual’s experience performance Company Personal performance Poundland Groupplc level astheCommitteemaydetermine fromtimetotime. forotherExecutive Directors,100% ofsalary orsuchhigher least fortheChief Executiveandat At least150%ofsalary time totime. basedonHMRClimitsfrom Maximum permittedsavings performance vestsforachievingmaximum 100% oftheaward performance vestsforachievingthreshold 25% oftheaward retention) (exceptionallimit–e.g.300% ofsalary recruitmentor (normallimit) 200% ofsalary Plan Limits: full. targetsin formeetingallfinancialandstrategic payable bonus willbecomepayable, risingto100%ofbonusbeing At athresholdlevelofperformance, nomorethan20%of salary, maximummaybeoperated. althoughalower The maximumbonusopportunitywillnotexceed150%of 15% ofsalary required foranewhire. excludes costswhichmaybe This cap relocation any cost ofaparticularbenefitweretosignificantlyincrease. which maybeexceededinexceptionalcircumstancesifthe Executive and£17,500fortheotherDirectors, Totalat £25,000fortheChief costofbenefitscapped years orinresponsetomarketfactors. executive’s inlinewithmarketoveranumberof package ofanewexecutivetobringthat theappointment following (but notlimitedto): inresponsetoacuteretentionissues, Committee,discretion oftheRemuneration forexample the workforce. the at Higherincreasesmaybeawarded annualincreaseof Committee isguidedbytheaverage There isnoprescribedmaximumannualincrease. The Maximum Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -41

Financials Governance Strategy Introduction DIRECTORS’ REMUNERATION REPORT continued

How the Remuneration Committee operates the Awards granted prior to the effective date variable pay policy In approving this Directors’ Remuneration Policy, authority is given to The Committee operates the share plans in accordance with their the Company to honour any commitments entered into with Directors. respective rules, the Listing Rules and HMRC requirements where Details of any such payments will be set out in the Annual Report on relevant. The Committee, consistent with market practice, retains Remuneration as they arise. discretion over a number of areas relating to the operation and administration of certain plans, including: Remuneration policy for other employees • Who participates in the plans; The policy described above applies specifically to the Company’s • When to make awards and payments; Executive Directors and is designed with regard to the policy for • How to determine the size of an award, a payment, or when and employees across the Company as a whole. Overall there is more how much of an award should vest; emphasis on variable pay for the Executive Directors; however the • The testing of a performance condition over a shortened Company is committed to promoting widespread share ownership. On performance period; IPO it made a number of awards under the Poundland Company Share • How to deal with a change of control or restructuring of the Group; Option Plan (CSOP) and the Poundland Restricted Share Plan (RSP), to • Whether a participant is a good/bad leaver for incentive plan selected managers. Executive Directors are not eligible to participate purposes, what proportion of an award vests at the original in these plans. vesting date or whether and what proportion of an award may vest at the time of leaving; The RSP provides for the grant of share awards which vest after three • How and whether an award may be adjusted in certain years subject only to continued employment. Under the CSOP, the circumstances (e.g. for a rights issue, a corporate restructuring or Board may grant eligible employees share options at a price not less for special dividends); than the market value of a share on the date of grant. In the UK the • Whether to enforce an additional 2 year holding period on PSP first £30,000 of CSOP share options held at any time by an individual awards post vesting; and will be granted as an HMRC approved option. The share options • What the weighting measures and targets should be for the normally vest after three years, subject to continued employment, but annual bonus plan and PSP from year to year. without further performance conditions. The Committee also retains the discretion within the policy to adjust More specifically, on IPO, awards were made to 55 senior managers existing targets and/or set different measures for the annual bonus under the RSP and around 550 management grade employees and for the PSP if events happen that cause it to determine that the (including approximately 400 Store Managers) under the CSOP. targets are no longer appropriate and amendment is required so they Awards may be made in future at the Committee’s discretion but there can achieve their original intended purpose and provided the new is no proposal for regular annual grants. In general, differences arise targets are not materially less difficult to satisfy. in quantum and structure of remuneration for various categories of employees in the Company from the development of remuneration Any use of the above discretions would, where relevant, be explained arrangements that are market competitive. However, our underlying in the Annual Report on Remuneration and may, as appropriate, be the remuneration philosophy is consistent across the whole company. subject of consultation with the Company’s major shareholders.

Choice of performance measures for Executive Directors’ awards The choice of the performance conditions applicable to the annual bonus plan, being a primary financial performance target with additional strategic metrics specific to each Executive Director reflect the principle that the bonus plan should be self-funding, appropriately challenging and tied to both the delivery of profit growth and strategic/ personal objectives.

EPS was selected by the Committee as the sole performance condition applicable to the PSP on the basis that it rewards the delivery of the Company’s objective of delivering significant growth in profits. The Committee will review the performance scales applying to each award prior to each grant.

The Company’s ethos of ensuring that costs are carefully controlled is reflected in both the annual bonus and PSP, which are designed to be self-funding.

In line with HMRC regulations for such schemes, the SAYE does not operate performance conditions.

42 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Change ofcontrol Termination payments Notice period Provision There hasbeennopaymentforlossofofficeintheyearended30March 2014 (31March2013: nil) monthly instalmentsoverthenoticeperiod. compromisesettlement. mayalsopayreasonablelegalcostsinrespectofany The Company bywayofpaymentacashsum.make provisionforearlytermination Payment inlieuofnoticecanbepaideitherasalumpsumorequal ortheExecutiveDirectorontwelvemonths’noticeand contractsfortheExecutiveDirectorsareterminablebyeitherCompany The service contracts andpaymentsforlossofoffice Service • • • • • Notes: under the2014policy, opportunityandasatotalvalue: oftotalremuneration bothasapercentage differentlevelsofperformance variesat packages thecompositionofExecutiveDirectors’remuneration how illustrates The chartbelow Illustrations ofapplicationremuneration policy No share price appreciation hasbeenassumedforthePSPaward No sharepriceappreciation andLancaster Mr McCarthyand125%forMessrsHateley grantusingthecurrentpolicy at The maximumvalueofthePSPistakentobe100%face oftheaward of150%for grant at The on-targetlevelofvestingunderthePSPistakentobe50% the facevalueofaward maximumbonusopportunityof100%salary The on-targetbonusistakentobe40%ofthecurrentoperating cap aggregate Valueat theoverall ofbenefits assumed Poundland Groupplc There arenoenhancedprovisionson achangeofcontrol. • • • comprising: 118% ofsalary 12 months Detailed terms 3% inrespectofotherbenefits 15% inrespectofpensioncontributions 100% ofsalary Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -43

Financials Governance Strategy Introduction DIRECTORS’ REMUNERATION REPORT continued

Annual bonus on termination Approach to recruitment and promotions There is no automatic or contractual right to bonus payment. At the The recruitment package for a new Director would be set in discretion of the Committee, in certain circumstances a pro-rata accordance with the terms of the Company’s approved remuneration bonus may become payable at the normal payment date for the policy. Currently, this would facilitate an annual bonus payment of period of employment and based on full year performance. Where no more than 150% of salary and policy PSP award of up to 200% of the Committee decides to make a payment, the rationale will be fully salary (other than in exceptional circumstances where up to 300% of disclosed in the Annual Report on Remuneration. salary may be made). PSP on termination On recruitment, salary policy may (but need not necessarily) be to set below the normal market rate, with phased increases as the executive Share-based awards are outside of service contracts. The default gains experience. The rate of salary should be set so as to reflect the treatment is that any outstanding awards would lapse on termination. individual’s experience and skills. However, under the Rules of the PSP, in certain prescribed circumstances, such as death, disability, injury, redundancy or other In addition, on recruitment the company may compensate for amounts circumstances at the discretion of the Committee, ‘good leaver’ status foregone from a previous employer (using Listing Rule 9.4.2) taking can be applied. In determining whether an Executive Director should into account the quantum foregone, the extent to which performance be treated as a good leaver the Committee will take into account the conditions apply, the form of award and the time left to vesting. performance of the individual and the reasons for their departure and For an internal appointment, any variable pay element awarded in the event of this determination being made will set out its rationale in respect of their prior role should be allowed to pay out broadly in the following Annual Report on Remuneration. according to its terms. Any other ongoing remuneration obligations existing prior to appointment may continue, provided that they are put In circumstances where an Executive Director is treated as a good to shareholders for approval at the earliest opportunity. leaver, awards will ordinarily vest on a time pro-rata basis subject to the satisfaction of the relevant performance criteria with the balance For all appointments, the Committee may agree that the Company will of the awards lapsing. The Committee retains discretion to decide meet certain appropriate relocation costs. not to pro-rate, to alter the basis of time pro-rating, and to alter the Policy on external appointments date on which performance is calculated, if it feels such decisions are appropriate in particular circumstances. However, if the time Subject to Board approval, Executive Directors are permitted to take pro-rating is varied from the default position under the PSP Rules, on non-executive positions with other companies and to retain their an explanation will be set out in the following Annual Report on fees in respect of such positions. Details of outside Directorships Remuneration. Performance conditions will always apply to awards held by the Executive Directors and any fees that they received are for good leavers, although the Committee may determine that it is provided in the Annual Report on Remuneration. appropriate to assess performance over a different period than the default three year period.

Service contracts are available for inspection at the Company’s registered office.

44 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 remuneration policy time. remuneration that inforceat For ofa newChairmanorNon-ExecutiveDirector, theappointment thefeearrangementwouldbesetinaccordancewithapproved Approach torecruitment theCompany’s forinspectionat areavailable Letters ofappointment registeredoffice. entitled toanoticeperiodof3months. the at AGM. ontermination. ispayable nocompensation lettersfortheNon-ExecutiveDirectorsprovide that The appointment The Chairmanis foraninitialperiodofthreeyears, withtheCompany lettersofappointment All Non-ExecutiveDirectorshave subjecttoannualre-appointment Letters ofappointment policyThe tablesummarisesthekeyaspectsofremuneration fortheChairmanandNon-ExecutiveDirectors: The feesfortheNon-ExecutiveDirectorsarereviewedbyBoard, excluding theNon-ExecutiveDirectors. Chairman’sThe Company Chairmanhimself). feeisdeterminedbytheCommittee(otherthanCompany The remuneration policy andNon-ExecutiveDirectors fortheChairman Fees Element competitive feelevel. Directors byofferingamarket Chairman andNon-Executive To andretainthehigh-calibre attract Purpose andlinktostrategy Non-Executives. support, forthe orincentiveschemesinoperation of upto£15,000theChairmanforsecretarial There arenobenefits, otherthanacontribution related. Fees arepaidincashandnotperformance for eachrole. and reflecttimecommitmentsresponsibilities market levelsincomparablysizedFTSEcompanies in thecaseofChairman, withreferenceto Committee Executives) andfromtheRemuneration and ExecutiveDirectors(inthecaseofNon- fromtheChairman Board uponarecommendation Fees bythe arereviewedannuallyandapproved Operation Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements commitments. in responsibilityand/ortime recognise, forexample, change but onoccasionsmayneedto in theNon-Executivemarket is guidedbythegeneralincrease annual increase. The Committee There isnoprescribedmaximum Maximum opportunity -45

Financials Governance Strategy Introduction DIRECTORS’ REMUNERATION REPORT continued

Implementation of the remuneration policy for the year The Strategic bonus elements for the Executive directors are: ending 29 March 2015 Underlying PAT performance Jim Nick Richard A summary of how the Directors’ Remuneration Policy will be applied McCarthy Hateley Lancaster during the year ending 29 March 2015 is set out below: Successful delivery of the international trial in Spain P P P Base salary Opening of the third distribution The Executive Directors’ salaries were reviewed during early 2014 centre in Harlow P O O and set on IPO. Salaries will be reviewed again in early 2015 and any increases will take effect from 1 April 2015. Launch and trial of an e-commerce trading site P P P The current salaries are as follows: Ensure that overall business costs Jim McCarthy £440,000 are delivered in line with 2015 budget (% to sales basis) O P O Nick Hateley £325,000 Delivery of budgeted company Richard Lancaster £325,000 sales growth (UK + ROI) and gross margin O O P Pension and benefits The Committee intends that the implementation of its policy in relation to pension and benefits will be in line with the disclosed Any bonus payment will be self-funding and clawback provisions policy on page 39 of this report. Jim McCarthy has elected to receive apply. a 15% cash payment in lieu of pension contributions rather than a contribution into a pension plan. The specific targets for the 2014/15 year are considered commercially sensitive. However, the Committee intends to disclose these Annual bonus retrospectively in next year’s Directors’ Remuneration Report to the The maximum annual bonus for the year ending 29 March 2015 will extent that they do not remain commercially sensitive. be 100% of salary for all Executive Directors. Awards are determined based on a combination of both financial results, being underlying Performance share plan Company profit after tax (PAT), and strategic/personal performance. PSP awards were made on Admission, and accordingly, other than for A bonus pool is to be determined by reference to PAT achievement, any new appointments or promotions, it is intended that no further with a sliding scale of performance to be set around budget as awards will be made until the financial year ending 27 March 2016. follows: Fees for Chairman and Non-Executive Directors Underlying PAT performance Provisional bonus pool as a % of Maximum entitlement (with straight The Company’s approach to Non-Executive Directors’ remuneration line between) is set by the Board with account taken of the time and responsibility Less than threshold 0% involved in each role, including where applicable the Chairmanship of Board Committees. A summary of current fees is shown below: Threshold 20% Chairman £200,000 Budget 40% Non-Executive Director base fee £45,000 Stretch and above 100% Additional fees: Senior Independent Director £10,000 80% of the Pool will be distributed based on the PAT result. The Audit Committee Chairman £5,000 remaining 20% available for the performance against strategic targets Remuneration Committee Chairman £5,000 (so that, only for full achievement of the strategic objectives would the Governance & Nominations Committee Chairman £5,000 whole Pool pay out). Paul Best and Stephen Coates will not be entitled to an annual fee.

46 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Directors’ remuneration fortheyearended30March2014wasasfollows: Directors’ remuneration Remuneration received by Directors fortheyear ended30March 2014-audited 1. Notes 2. 3. 4.

G Hearn T Colaianni T Bond D Shapland S Coates P Best A Higginson Non-Executive R Lancaster N Hateley J McCarthy Executive £000 Benefits include: Carallowance/car, medicalinsurance, fuel. This comprises a 15% of salary contributiontotheCompany’sThis comprisesa15%ofsalary MoneyPurchasePension (cashequivalentforJMcCarthy) The Director was appointed in July 2012 and therefore the salary presentedisfora9monthperiod. inJuly2012andthereforethesalary The Directorwasappointed No comparision is presented as the Director was appointed inFebruary 2014. No comparisionispresentedastheDirectorwasappointed (4) (4) (4) (4) (3) (3) 2014 2014 2014 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 6 6 6 6 Nil Nil 94 128 236 320 225 233 395 400 Salary &FeesSalary Poundland Groupplc 10 17 16 16 22 22 Benefits (1) 35 48 34 36 59 59 Pension (2) Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Annual Bonus Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Incentives Long-Term 6 6 6 6 Nil Nil Nil Nil 94 128 282 386 275 284 476 482 Total -47

Financials Governance Strategy Introduction DIRECTORS’ REMUNERATION REPORT continued

Annual bonus for the year ended 30 March 2014 Financial performance in 2013/14 was very strong, representing a record year in Poundland’s profits. However, the Executive Directors together with the remainder of the Executive Team indicated that for this year they did not wish to be considered for a bonus, and agreed to spread the bonus pool more widely in celebration of the landmark IPO event.

Performance share awards made during the year – audited On 17th March 2014, the first day of Admission to trading, the following awards were granted to Executive Directors

Number of % of face value Share price at shares over that would vest Type of date of grant which award Face value of at threshold Vesting determined by Executive award Basis of award granted (1) was granted award (£000) performance performance over 150% of salary of Three financial Nil cost £440,000, based on years to March J McCarthy option admission share price £3.75 220,000 £825,000 25% 2017 125% of salary of Three financial Nil Cost £325,000, based on years to March N Hateley Option admission price £3.75 135,417 £507,813 25% 2017 125% of salary of Three financial Nil Cost £325,000, based on years to March R Lancaster Option admission price £3.75 135,417 £507,813 25% 2017

The number of shares comprising the IPO awards was determined based on the Admission share price of £3.00. On the first day of unconditional trading, the close price was £3.75 resulting in a higher face value. The performance condition for these awards is set out below:

% of award subject Compound annual % of PSP award Performance condition to condition growth in EPS which will vest Compound annual growth in underlying earnings per share (EPS) 100% <19% 0% 19% 25% 26% 50% 30% or above 100% Pro-rata vesting between the above points

48 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 graph shows performance of a hypothetical £100 invested and its performance over that period. performanceofahypothetical£100investedandits overthat shows graph excluding isaconstituent, investmentcompaniesofwhichtheCompany fromthestartofconditionalsharedealingon11March2014. The theCompany’s illustrates below The graph Total totheconstituentsofFTSE250index ShareholderReturn(TSR)performancerelative graph Performance receivedbyDirectors’table. ‘Remuneration (or cashequivalent). Detailsofthevaluepensioncontributionsreceivedin yearunderreviewareprovidedinthe ‘Pensions’ columnofthe intodefinedcontributionarrangements During theyearunderreviewExecutiveDirectorsreceivedpensioncontributions of15%salary Total pensionentitlements–audited 1. March 2014. setsoutthenumberofsharesheldorpotentiallybyDirectors (includingThe tablebelow 30 theirconnectedpersonswhererelevant)asat oftheExecutiveDirectorssignificantlyexceedsrequirement. ownership least50%ofthenettaxvestedsharesunder the Company’sthey arerequiredtoretainat shareplansuntiltheguidelineismet. The current shareholdinginPoundland.build upandmaintaina100%(150%fortheCEO)ofsalary Where anExecutivedoesnotmeetthisguidelinethen playsakeyroleinthealignmentofourexecutiveswithinterests ofShareholders.Share ownership OurExecutiveDirectorsareexpectedto Directors’ shareholding andshare interests –audited

J McCarthy Director N Hateley R Lancaster A Higginson D Shapland T Bond T Colaianni G Hearn P Best S Coates Includes byconnectedpersons. sharesowned theshareholdingguideline. owned sharescounttowards Onlybeneficially Beneficially ownedshares 9,668,249 4,207,378 1,111,413 1,432,234 30 ------1 Number of awards heldunderthe Number ofawards PSP conditionalonperformance Poundland Groupplc 220,000 135,417 135,417 ------Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements Target shareholdingguideline (as a%ofsalary) 150% 100% 100% N/A N/A N/A N/A N/A N/A N/A 30 March2014

Percentage heldin ofsalary shares asat30March2014 8350% 4919% 1675% N/A N/A N/A N/A N/A N/A N/A -49

Financials Governance Strategy Introduction DIRECTORS’ REMUNERATION REPORT continued

Change in Chief Executive Officer’s remuneration The table below sets out total Chief Executive Officer remuneration for 2013/14, together with the percentage of maximum annual bonus awarded in that year. No share awards were held by the Chief Executive Officer prior to admission. As the Company listed in 2014, the comparative for 2013 only is provided.

2014 2013 CEO total remuneration £481,655 £476,374 Annual bonus (% of maximum) % Nil % Nil Share award (% of maximum) N/A2 N/A

Notes 1. Please see note on 2014 bonus payment. 2. No long-term incentive plan in place.

Percentage increase in the remuneration of the Chief Executive Officer The table below shows the percentage change in the Chief Executive Officer’s salary, benefits and annual bonus between the financial year ended 31 March 2013 and 30 March 2014, compared to that of the total amounts for all Group employees of the Group for each of these elements of pay.

Element of remuneration % change Salary Chief Executive Officer 1.3% Average per employee 2.14% Benefits Chief Executive Officer 1.1% Average per employee 3.85% Annual bonus Chief Executive Officer 0% Average per employee 121.6%

Relative importance of the spend on pay The following table shows the Company’s actual spend on pay for all employees compared to distributions to Shareholders and underlying profit after tax PAT performance, which is shown as it is considered to be the key indicator of the Company’s growth, and is the primary metric used to measure performance under the bonus plan.

TOTAL SPEND ON PAY 2014 2013 % Change Distributions to shareholders by way of dividend and share buyback £20.0m Zero N/A Revenue £997.8m £880.5m 13.3% Underlying Profit after tax £27.3m £21.8m 25.1%

1. The above were calculated on a like for like employee basis, due to the number of temporary and part time colleagues employed by the Group, and excludes promotions. 2. The above change in CEO benefits (1.1%) is not visible in the remuneration table (page 50) due to rounding.

50 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 2 July2014 Committee Chairman oftheRemuneration Tea Colaianni Signed onbehalfoftheBoardDirectors. Report,This Directors’Remuneration including boththePolicy and bytheBoardof Directors. Reporthasbeenapproved Annual Remuneration Approval votingoutcomesinnextyear’s related remuneration Report. Directors’Remuneration As mentionedpreviously, Poundland hasnotheldan AGM sincelistingandthereforenovotingoutcomesareavailable. We willpublishdetailsof Statement ofShareholder voting structures. the financialyearunderreviewwas£163K. tothedevelopmentandroll-outofpost-Admissionremuneration Thisadviceprimarilyrelated which requiresitsadvicetobeobjectiveandimpartial. over toexecutiveremuneration The feespaidtoNBSforprovidingadviceinrelation independent. ConsultantsGroupCodeofConduct, ConsultantsGroupandabidesbytheRemuneration NBSisamemberoftheRemuneration duringtheyearwasobjectiveand matters toexecutiveremuneration theadvicereceivedfromNBSinrelation that The Committeeissatisfied fromNewBridgeStreet(NBS),executive remuneration partof Aon plc. NeitherNBSnor totheCompany. otherservices Aon provideany Committeehasaccesstoindependentadvicewhereitconsiders itappropriate.The Remuneration to The Committeeseeksadvicerelating advisors External • • • keyareas: In 2014themeetingsofCommitteecoveredfollowing isbasedonthesemeetings. below shown meeting attendance members oftheCommitteepresent, policy. theremuneration theCommitteewasabletofullydebate inordertoensurethat Accordingly, the of The Committeewasformallyconstitutedonthedate Admission. However, inadvanceof Admission, twomeetingswereheldwiththe Chairman. Committeecomprises4independentNon-ExecutiveDirectors togetherwiththeCompany The Remuneration Membership oftheRemuneration Committee fee fortheyearto31October2014willbe£49,000. Jim McCarthyisthenonexecutiveChairmanof Wynnstay GroupPLC. Hewaspaidfeesof£33,000intheyearto31October2013, andhistotal directorships External Grant Hearn Darren Shapland Trevor Bond Andrew Higginson Tea Colaianni Name Consideration andadoptionof2014PSP,Consideration RSP, CSOPandSAYE plans, ofgrantson andapproval Admission under PSP, RSPandCSOP. ofstructuresandmeasuresfor2014/15annualbonus; Consideration policy; priortoIPOandadoptionofthenewremuneration considerations Detailed remuneration Poundland Groupplc Role Committee Member Committee Member Committee Member Committee Member Committee Chair Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements Number ofmeetingsattendedout maximum number 2 outof 2 outof 1 outof2 2 outof 2 outof -51

Financials Governance Strategy Introduction Poundland Group plc Consolidated Financial Statements Registered number 08861243

52 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 financialstatements Notes totheCompany BalanceSheet Company financialstatements Notes totheconsolidated Statement CashFlow Consolidated ofChangesinEquity Statement Consolidated ofFinancial Statement PositionConsolidated ofOtherComprehensiveIncome Statement Consolidated IncomeStatement Consolidated Independent Auditor’s ReporttotheMembersofPoundland GroupPlc ofDirectors’ResponsibilitiesinRespectthe Statement Annual ReportandtheFinancial Statements Contents Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -53 97 96 63 62 61 60 59 58 56 54

Financials Governance Strategy Introduction Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the Parent Company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent Company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU; • for the Parent Company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Parent Company financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

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

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

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;

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

• the Annual Report and Financial Statements includes a fair review of the development and performance of the business and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face.

Approved by order of the board

Andrew Higginson Chairman 2 July 2014

54 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -55

Financials Governance Strategy Introduction Independent auditor’s report to the members of Poundland Group plc only

Opinions and conclusions arising from our audit 1. Our opinion on the financial statements is unmodified We have audited the financial statements of Poundland Group plc for the year ended 30 March 2014 set out on pages 58 to 100. In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 March 2014 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with UK Accounting Standards; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

2. Our assessment of risks of material misstatement In arriving at our audit opinion above on the financial statements the risk of material misstatement that had the greatest effect on our audit was as follows.

Carrying value of inventory (£89.6 million)

Refer to page 36 (Audit and Risk Committee Report), page 66 (accounting policy), page 82 (financial disclosures) and page 95 (Accounting estimates and judgements). • The risk – The Group holds a significant amount of inventory across a broad and diverse product range. Changes in consumer tastes and demands may mean that it cannot be sold or that sales prices are discounted to less than the current inventory carrying value. Estimating the future demand for, and hence the net realisable value of, these products is inherently subjective. • Our response – Our audit procedures in this area included, among others, testing the design and effectiveness of the Group’s controls over the identification of slow moving or obsolete products and obtaining an understanding of the Group’s process for measuring the amount of provision required. We critically assessed the Group’s provision for those identified slow moving and obsolete products by assessing: the ageing of inventory; product lines with a cost in excess of expected net selling price; the level of expected price discounting; the historical accuracy of sales plans and the level of discounting activity in previous years. Furthermore, we performed analysis over the stock provision held at the year end as a percentage of stock and compared this to our expectations based on our knowledge of the business. We also considered the adequacy of the Group’s disclosures (see Note 29) about the degree of estimation involved in arriving at the provision.

3. Our application of materiality and an overview of the scope of our audit The materiality for the Group financial statements as a whole was set at £5 million. This has been determined with reference to a benchmark of Group Total Revenue (of which it represents 0.5%) which we consider to be one of the principal considerations for members of the company in assessing the financial performance of the Group. We agreed with the Audit and Risk Committee to report to it all corrected and uncorrected misstatements we identified through our audit with a value in excess of £0.25 million, in addition to other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds. The Group audit team performed the audit of the Group as if it was a single aggregated set of financial information. The audit was performed using the materiality levels set out above at the Group’s head office in Willenhall.

4. Our opinion on other matters prescribed by the Companies Act 2006 is unmodified In our opinion: • the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and • the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

56 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 2 July2014 Birmingham HillQueensway Snow One Snowhill Chartered Accountants for andonbehalfofKPMGLLP, Auditor Statutory Auditor) Graham Neale(SeniorStatutory undertaken andthebasisofouropinions. intothisreportasifsetoutinfullandshouldberead to provideanunderstandingofthepurposethisreport,which areincorporated theworkwehave anddisclaimerssubject toimportantexplanations regardingourresponsibilities, www.kpmg.com/uk/auditscopeukco2013a, publishedonourwebsiteat Financial Reporting Council’s www.frc.org.uk/auditscopeukprivate. websiteat This reportismadesolelytothecompany’s andis membersasabody theygiveatrueandfairview. that andforbeingsatisfied statements isprovidedonthe Adescriptionofthescopeanauditfinancialstatements 54, setoutonpage As explainedmorefullyintheDirectors’ResponsibilitiesStatement ofthefinancial thedirectorsareresponsibleforpreparation Scope ofreportandresponsibilities We nothingtoreportinrespectoftheaboveresponsibilities. have • • Under theListingRuleswearerequiredtoreview: • • • • Under theCompanies Act 2006wearerequiredtoreportyouif, inouropinion: • • In particular, wearerequiredtoreportyouif: fact, isotherwisemisleading. orthat inconsistency orthefinancialstatements, of containsamaterial knowledge misstatement intheannualreportthat witheitherthat amaterial information Under ISAs(UKandIreland)wearerequiredtoreportyouif, weacquiredduringouraudit, basedontheknowledge identifiedother wehave 5. We have nothingtoreport inrespect ofthemattersonwhich weare required toreport by exception Corporate GovernanceCodespecifiedforourreview.Corporate tothecompany’s 34relating onpage GovernanceStatement the partofCorporate compliancewiththenineprovisionsof2010UK the directors’statement, 29, setoutonpage togoingconcern;and inrelation werequireforouraudit. andexplanations notreceivedalltheinformation we have certain disclosures arenotmade;or specifiedbylaw ofdirectors’ remuneration records andreturns;or agreement withtheaccounting Reporttobeauditedarenotin andthepartofDirectors’Remuneration financialstatements the parentcompany not visitedbyus;or notbeenkeptbytheparentcompany, accountingrecordshave adequate notbeenreceivedfrombranches forouraudithave orreturnsadequate byustothe the communicated addressmatters Audit andRiskCommittee. Audit andRiskCommitteeReportdoesnotappropriately shareholders toassesstheGroup’s performance, or businessmodelandstrategy; takenasawholeisfair, theannualreportandfinancialstatements that for necessary balancedandunderstandableprovidestheinformation theyconsider that weacquiredduringourauditandthedirectors’statement inconsistenciesbetweentheknowledge identifiedmaterial we have Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -57

Financials Governance Strategy Introduction Consolidated Income Statement for the period ended 30 March 2014

52 weeks 2014 52 weeks 2013 Non- Non- Underlying Underlying Underlying (note 6) Total Underlying (note 6) Total Note £’000 £’000 £’000 £’000 £’000 £’000 Revenue 5 997,803 – 997,803 880,491 – 880,491 Cost of sales (629,279) – (629,279) (556,980) – (556,980)

Gross profit 368,524 – 368,524 323,511 – 323,511 Distribution costs (296,979) – (296,979) (261,337) (1,859) (263,196) Administrative expenses (31,500) (12,343) (43,843) (28,693) (1,571) (30,264)

Operating profit 7,8 40,045 (12,343) 27,702 33,481 (3,430) 30,051 Financial income 9 252 – 252 279 92 371 Financial expenses 9 (3,488) (2,982) (6,470) (3,945) – (3,945)

Net financing expense (3,236) (2,982) (6,218) (3,666) 92 (3,574)

Profit before tax 36,809 (15,325) 21,484 29,815 (3,338) 26,477 Taxation 10 (9,556) 1,932 (7,624) (8,034) 4,942 (3,092)

Profit for the period 27,253 (13,393) 13,860 21,781 1,604 23,385

Earnings per share - basic 3 5.20p (1.82p) 2.33p 3.19p - diluted 3 5.20p (1.82p) 2.33p 3.19p

Adjusted earnings per share - basic 3 10.90 5.54p 8.71p 9.35p - diluted 3 10.90 5.54p 8.71p 9.35p

All activities were continuing throughout the current and the preceding period.

Non-underlying items include brand amortisation and non-recurring exceptional costs and income (see note 6).

The notes on pages 63 to 95 form part of these financial statements.

58 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 for theperiodended30March2014 Consolidated StatementofOtherComprehensiveIncome oftheparent attributabletoequityholders Total comprehensiveincome tax fortheperiod, netofincome Other comprehensiveincome areor Income taxonitemsthat Net changeinfairvalueofcash Effective portionofchangesin Foreign currency translation statement areormayberecycledItems that Other comprehensiveincome Profit fortheperiod the incomestatement may berecycled subsequentlyto income statement hedgesrecycledflow tothe hedges fair valueofcashflow differences –foreignoperations subsequently totheincome Note 10 Underlying 27,253 27,253 Poundland Groupplc £’000 – – – – – – 52 weeks2014 Underlying (21,600) (14,154) (13,393) (8,207) (8,207) 2,203 3,791 £’000 Non- (47) Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements (14,154) 13,860 (8,207) (8,207) 2,203 5,653 3,791 £’000 Total (47) Underlying 21,781 21,781 £’000 – – – – – – 52 weeks2013 Underlying (1,100) 5,291 3,687 3,687 5,182 1,604 (421) £’000 Non- 26 27,072 23,385 (1,100) 3,687 3,687 5,182 (421) £’000 Total 26 -59

Financials Governance Strategy Introduction Consolidated Statement of Financial Position at 30 March 2014

30 March 2014 31 March 2013 Note £’000 £’000 Non-current assets Property, plant and equipment 11 41,607 38,283 Intangible assets and goodwill 12 183,711 184,506 Trade and other receivables 17 425 792 Other financial assets 13 – 403 Deferred tax asset 15 645 –

Total non-current assets 226,388 223,984

Current assets Inventories 16 89,561 81,004 Other financial assets 13 519 4,212 Tax receivable 365 – Trade and other receivables 17 24,960 20,734 Cash and cash equivalents 25,268 42,861

Total current assets 140,673 148,811

Total assets 367,061 372,795

Current liabilities Other interest-bearing loans and borrowings 18 – (1,532) Trade and other payables 19 (120,571) (94,576) Tax payable (3,807) (4,295) Provisions 20 (787) (366) Other financial liabilities 14 (5,110) (397)

Total current liabilities (130,275) (101,166)

Non-current liabilities Other interest-bearing loans and borrowings 18 (30,000) (50,486) Other payables 19 (18,617) (16,931) Provisions 20 (138) (138) Other financial liabilities 14 (1,556) – Deferred tax liabilities 15 – (3,491)

Total non-current liabilities (50,311) (71,046)

Total liabilities (180,586) (172,212)

Net assets 186,475 200,583

Equity attributable to equity holders of the parent Share capital 21 425,050 152,474 Merger reserve (259,642) – Reserves (4,849) 16,097 Retained earnings 25,916 32,012

Total equity 186,475 200,583 The notes on pages 63 to 95 form part of these financial statements. These financial statements were approved by the Board of Directors on 2 July 2014 and were signed on its behalf by:

NR Hateley Director Registered number: 08861243

60 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Balance at31March2013 Total transactionswithowners Issue ofshares Transactions withowners the period Total comprehensiveincomefor Other comprehensiveincome Profit fortheperiod Total comprehensiveincomefor Balance at 2 Balance at 2012 April Balance at30March2014 Total transactionswithowners Share basedpaymenttransactions Issue ofshares– transaction–subsidiary Capital Issue ofshares–(subsidiary) Redemption ofpreferenceshare Transactions withowners Total comprehensiveincomefor Other comprehensiveincome Profit fortheperiod Total comprehensiveincomefor Balance at 1 Balance at 2013 April for theperiodended30March2014 Consolidated StatementofChangesinEquity for theperiodended31March2013 Consolidated StatementofChangesinEquity recorded directlyinequity the period Poundland Groupplc share forexchange restructureand share capital capital –(subsidiary) capital recorded directlyinequity the period the period

152,474 152,341 425,050 272,576 286,993 (14,564) 152,474 capital capital Share £’000 Share £’000 133 133 50 97 – – – – – – – premium premium Share £’000 Share £’000 (48) 48 Poundland Groupplc – – – – – – – – – – – – – – – – (259,642) (259,642) (259,642) reserve Merger reserve Merger £’000 £’000 – – – – – – – – – – – – – – – redemption redemption (12,739) (27,303) 12,739 12,739 14,564 12,739 reserve reserve Capital Capital Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements £’000 £’000 – – – – – – – – – – – – Translation Translation reserve reserve £’000 £’000 (17) (38) (47) (47) 26 26 – – – 9 – – – – – – – 9 Cash flow Cash flow (4,811) (8,160) (8,160) reserve reserve 3,349 3,661 3,661 3,349 (312) hedge hedge £’000 £’000 – – – – – – – – – – (19,956) (20,000) Retained earnings 32,012 23,385 23,385 Retained earnings 25,916 13,860 13,860 32,012 8,627 £’000 £’000 44 – – – – – – – 200,583 173,378 186,475 (19,761) (20,000) 200,583 27,072 23,385 (8,207) 13,860 3,687 5,653 equity equity £’000 £’000 Total 133 133 Total 145 -61 44 50 –

Financials Governance Strategy Introduction Consolidated Cash Flow Statement for the period ended 30 March 2014

52 weeks 2014 52 weeks 2013 Note £’000 £’000 Cash flows from operating activities Profit for the year, before non-underlying items 27,253 21,781 Costs in respect of IPO 6 (9,954) – Other non-underlying items 6 (3,439) 1,604

Profit for the year 13,860 23,385 Adjustments for: Depreciation and amortisation 11,12 15,096 13,080 Financial income 9 (252) (371) Financial expense 9 6,470 3,945 Equity settled share based payment transactions 22 44 – Taxation 10 7,624 3,092 42,842 43,131

Increase in trade and other receivables (3,645) (627) Increase in inventories (8,557) (11,450) Increase in trade and other payables excluding IPO costs 22,537 7,168 Increase/(decrease) in provisions 422 (953) Increase in payable in respect of IPO costs 5,012 – 58,611 37,269

Tax paid (10,409) (3,852)

Net cash from operating activities 48,202 33,417

Costs in respect of IPO 4,942 –

Net cash from operating activities before IPO costs 53,144 33,417

Cash flows from investing activities Acquisition of property, plant and equipment 11 (16,563) (15,181) Acquisition of other intangible assets 12 (1,062) (1,257)

Net cash from investing activities (17,625) (16,438)

Cash flows from financing activities Proceeds from new loan 29,268 – Repayment of borrowings 18 (54,914) (7,200) Redemption of preference shares – subsidiary (20,000) – Net financial expense paid (2,524) (2,834)

Net cash from financing activities (48,170) (10,034)

Net (decrease)/increase in cash and cash equivalents (17,593) 6,945 Cash and cash equivalents at start of period 42,861 35,916 Effects of exchange rate changes on cash held – –

Cash and cash equivalents at end of period 25,268 42,861

Net debt 4,732 9,157

62 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 included in the consolidated financial statements from the date that control commences until the date that controlceases. that controlcommencesuntilthedate that included fromthedate financialstatements intheconsolidated currently exercisable. onwhich control istransferredtotheacquirer. isthedate The acquisitiondate ofsubsidiariesare The financialstatements of anentitysoastoobtainbenefitsfromitsactivities. Inassessingcontrol, are potentialvotingrightsthat theGroup takesintoconsideration Subsidiaries areentitiescontrolledbytheGroup. policies togovernthefinancialandoperating ControlexistswhentheGrouphas thepower Subsidiaries explains theimpactofshareforexchangeinmoredetail. arisingasaresultoftheshareforexchangetransaction.merger reserve 61 ofchangesinequityonpage statement The consolidated ownership oftheGroup, offinancialpositionpresentsthelegalchangein statement including of thesharecapital Poundland Groupplcandthe capital structureof offinancialpositionreflectstheshare PoundlandGroupHoldingsLimited.The priorperiodstatement Thecurrentperiod see1.19. details oftheimpactonearningspersharecalculation As aresult, resultsof aretheconsolidated Poundland GroupHoldingsLimited. presentedinthesefinancialstatements thecomparatives For of thepre-existinggroup, headedbyPoundland GroupHoldingsLimited. Although theshareforexchangeresultedinachangeoflegalownership, reflectthecontinuation insubstancethesefinancialstatements exchange. There werenochangesinrightsorproportionofcontrolexercisedas aresultofthistransaction. On 17March2014, ofPoundland obtainedcontroloftheentiresharecapital GroupHoldingsLimitedviaasharefor theCompany 1.3 requirements. periods. The Group’s cash headroomforitscurrentandfutureanticipated thenewfacilityprovidesadequate that forecastsandprojectionsshow ofbanks.million withasyndicate beenmetthroughoutboth facilitiescontainfinancialcovenantswhichhave The formerandnewborrowing with astrongongoingtradingperformance. On17March2014, facilityof£55 theGroupenteredintoanewrevolvingcreditandworkingcapital existencefortheforeseeablefuture. resourcestocontinueinoperational adequate The Grouphasconsiderablefinancialresources, together theGrouphas that areasonableexpectation arepreparedonagoingconcernbasisastheDirectors have The Groupfinancialstatements 1.2 tofinancialinstruments. relate variations arepreparedonthehistoricalcostbasisexceptwhereThe financialstatements treatment. AdoptedIFRSsrequireanalternative Theprincipal 1.1 adjustmentinthenextperiodarediscussednote29. withasignificantriskofmaterial estimates oftheseaccountingpolicies, and asignificanteffectonthefinancialstatements Judgements madebytheDirectorsinapplication have that statements. have,The accountingpoliciessetoutbelow unlessotherwisestated, consistentlytoallperiodspresentedintheseGroupfinancial beenapplied Standards asadoptedbytheEU(“AdoptedIFRSs”). approved bytheDirectorsinaccordancewithInternational Financial Reporting beenpreparedand have The Groupfinancialstatements anditssubsidiaries(togetherreferredtoasthe thoseoftheCompany consolidate The Groupfinancialstatements “Group”). 2014. January Poundland Groupplc(the anddomiciledintheUnitedKingdom. incorporated isacompany “Company”) on24 wasincorporated The Company 1 Notes totheconsolidatedfinancialstatements Basis ofconsolidation Going concern Measurement convention Basis ofpreparation andsignificantaccountingpolicies Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -63

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

1 Basis of preparation and significant accounting policies (continued)

1.4 Foreign currency Transactions in foreign currencies are translated to the functional currency of the Group at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the consolidated income statement with the exception of differences on transactions that are subject to effective cashflow hedges, which are recognised in other comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction, except for differences arising on qualifying cash flow hedges which are recognised in other comprehensive income.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group’s presentational currency, sterling, at foreign exchange rates ruling at the reporting date. The revenues and expenses of foreign operations are translated at an average rate for the period where this rate approximates to the foreign exchange rate ruling at the dates of the transactions.

Exchange differences arising from the translation of foreign operations are reported as an item of other comprehensive income and accumulated in the translation reserve.

1.5 Classification of financial instruments issued by the Group Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions: (a) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and (b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital exclude amounts in relation to those shares.

1.6 Financial Instruments Financial Assets The Group’s financial assets include cash and cash equivalents and trade and other receivables. All financial assets are recognised when the Group becomes party to the contractual provisions of the instrument.

i) Trade receivables

Trade receivables are recognised and carried at original invoice amount less provision for impairment.

A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is determined as the difference between the asset’s carrying amount and the present value of estimated future cash flows, and is recognised in the income statement in administrative expenses.

ii) Cash and cash equivalents

Cash and cash equivalents includes cash in hand and deposits held at call with banks. For the purpose of the consolidated cash flow statement, cash and cash equivalents includes bank overdrafts in addition to the definition above.

64 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 twelve months, orasacurrentassetliability, ofthehedgeditemislessthantwelvemonthsfromreportingdate. iftheremainingmaturity isclassifiedThe fullfairvalueofahedgingderivative ofthehedgeditemismorethan asanon-currentassetorliabilityiftheremainingmaturity intheincomestatement. reported inothercomprehensiveincomeisrecognisedimmediately recognisedintheincomestatement.ultimately When aforecasttransactionisnolongerexpectedtooccur, was gainorlossthat thecumulative timeremainsinothercomprehensiveincomeandisrecognisedwhentheforecasttransaction that existing inothercomprehensiveincomeat When ahedginginstrumentexpiresorissold, orwhenahedgenolongermeetsthecriteriaforaccounting, gainorloss cumulative any financial expenses. withinfinancialincomeor intheincomestatement doesnotmeetthecriteriaforaneffectivehedgeisrecognised immediately instrument that same periodorperiodsduringwhichthehedgedtransactionaffectsincome statement. elementoftheremeasurementderivative Any gainorlossisreclassified inthe cumulative ofchangesinequityandrecognisedtheincomestatement The associated fromthestatement hedgereserve. instrumentisrecogniseddirectlyinthecashflow gainorlossfromremeasuringthederivative element ofany theirfairvalue. acontractisenteredintoandaresubsequentlyremeasuredat fairvalueonthedate arerecognisedat Derivatives The effective hedges. ascashflow tohedgehighlyprobableforecasttransactionsandthereforethe instrumentsaredesignated the derivatives and fuelpricefluctuations. tradingpurposes. financialinstrumentsforspeculative TheGroupdoesnotholdorissuederivative TheGroupuses risksarisingfromchangesinforeigncurrency tothepurchaseofoverseassourcedproducts),to manage (relating exchangerates interestrates financialinstruments(comprisingforeigncurrencyDerivative andcommodityhedges)areused forwardcontracts, andcaps swaps interestrate iii) Trade fairvalue, areinitiallymeasuredat payables amortisedcost, andaresubsequentlymeasuredat method. usingtheeffectiveinterestrate ii) hedges. Financial andtheineffectiveportionofchangesinfairvaluecashflow expensescompriseinterestexpenseonborrowings usingtheeffectiveinterestmethod. overtheperiodofborrowings recognised intheincomestatement differencebetweentheproceeds(netoftransactioncosts)andredemptionvalueis amortisedcost;any at are subsequentlystated Term withtheborrowing. receivednetofissuecostsassociated thefairvalueofconsideration Borrowings loansareinitiallyrecognisedat i) amortisedcostusingtheeffectiveinterestmethod. and subsequentlymeasuredat The Group’s andborrowings. financialliabilitiescomprisetradeandotherpayables attheirfairvalue Allfinancialliabilitiesarerecognisedinitially evidencesaresidualinterestintheassetsof Groupafterdeductingallofitsliabilities. contractthat instrument isany Financial liabilitiesandequityinstrumentsareclassified accordingtothesubstanceofcontractualarrangementsenteredinto. Anequity Financial Liabilities 1.6 1 Derivative financialinstrumentsandhedgeaccounting Trade payables Bank borrowings Financial Instruments(continued) Basis ofpreparation andsignificantaccountingpolicies(continued) Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -65

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

1 Basis of preparation and significant accounting policies (continued)

1.7 Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Depreciation is charged to the consolidated income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows: Short leasehold property over the term of the lease Property improvements 6 - 7 years Plant and equipment 6 - 7 years Fixtures and fittings 6 - 7 years Depreciation methods, useful lives and residual values are reviewed at each reporting date.

1.8 Business combinations Business combinations are accounted for using the acquisition method at the acquisition date, which is the date on which control is transferred to the Group.

The Group measures goodwill at the acquisition date as: the fair value of the consideration transferred; plus the fair value of the existing equity interest in the acquiree: less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

Costs relating to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.

1.9 Intangible assets and goodwill Goodwill Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but tested annually for impairment.

Other intangible assets Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.

Amortisation Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: Brand 20 years Trademarks 5 years Software 3 years

1.10 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and other costs in bringing them to their existing location and condition.

66 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 recognised as an expense in the income statement in the periods during which services arerenderedbyemployees. intheperiodsduringwhichservices recognised asanexpenseintheincomestatement topayfurtheramounts. nolegalorconstructiveobligation will have forcontributionstodefinedcontributionpensionplansare Obligations entityand benefitplanunderwhichtheGrouppaysfixedcontributionsintoaseparate A definedcontributionplanisapost-employment Defined contributionplans 1.12 been recognised. beendetermined, wouldhave amountthat oramortisation,amount doesnotexceedthecarrying netofdepreciation ifnoimpairmentlosshad usedtodeterminetherecoverableamount.change intheestimates theasset’sAn impairmentlossisreversedonlytotheextentthat carrying thelosshasdecreasedornolongerexists. that indications forany each reportingdate at An impairmentlossisreversediftherehasbeena An impairmentlossinrespectofgoodwillisnotreversed. Inrespectofotherassets, impairmentlossesrecognisedinpriorperiodsareassessed totheunits,goodwill allocated basis. amountsoftheotherassetsinunitsonaprorata andthentoreducethecarrying amount ofany recognised intheincomestatement. firsttoreducethecarrying ImpairmentlossesrecognisedinrespectofCGUsareallocated recoverableamount. amountofanassetoritsCGUexceedsestimated An impairmentlossisrecognisedifthecarrying Impairmentlossesare areexpectedtobenefitfromthesynergiesofcombination. groups ofCGUsthat whichgoodwillismonitoredforinternalreportingpurposes. levelat to the lowest isallocated Goodwillacquiredinabusinesscombination whichimpairmentistestedreflects thelevelat goodwill impairmenttesting, sothat areaggregated CGUstowhichgoodwillhasbeenallocated purpose ofimpairmenttesting, units, tocash-generating isallocated (“CGU”). segmentceilingtest, Subjecttoanoperating forthepurposesof ofotherassetsorgroups(theof thecashinflows unit”). “cash-generating Thegoodwillacquiredinabusinesscombination, forthe arelargelyindependent fromcontinuingusethat cashinflows generates individually aregroupedtogetherintothesmallestgroupofassetsthat assessments ofthetimevaluemoneyandrisksspecifictoasset. For thepurposeofimpairmenttesting, cannotbetested assetsthat reflectscurrentmarket value inuse, that arediscountedtotheirpresentvalueusingapre-taxdiscountrate futurecashflows theestimated ofitsvalueinuseandfairlesscoststosell. unitisthegreater The recoverableamountofanassetorcash-generating Inassessing thesametime. year at available foruse,goodwill, arenotyet indefiniteusefullivesorthat each have therecoverableamountisestimated andintangibleassetsthat ofimpairment. indication exists,to determinewhetherthereisany suchindication Ifany thentheasset’s recoverableamountisestimated. For amountsoftheGroup’sThe carrying non-financialassets, at eachreportingdate otherthaninventoriesanddeferredtaxassetsarereviewed Non-financial assets the decreaseinimpairmentlossisreversedthroughincomestatement. continues toberecognisedthroughtheunwindingofdiscount. When asubsequenteventcausestheamountofimpairmentlosstodecrease, at theasset’s discounted futurecashflows the presentvalueofestimated originaleffectiveinterestrate. Interestontheimpairedasset amountand asthedifferencebetweenitscarrying at amortisedcostiscalculated An impairmentlossinrespectofafinancialassetmeasured reliably. canbeestimated assetthat ofthat of theasset, futurecashflows effectontheestimated thelosseventhasanegative andthat itisimpaired.evidence that alosseventhasoccurredaftertheinitialrecognition that A financialassetisimpairedifobjectiveevidence indicates date todeterminewhetherthereisobjective ateachreporting at fairvaluethroughprofitorlossisassessed A financialassetnotcarried Financial assets(including receivables) 1.11 1 Employee benefits excluding inventoriesanddeferredImpairment taxassets Basis ofpreparation andsignificantaccountingpolicies(continued) Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -67

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

1 Basis of preparation and significant accounting policies (continued)

1.12 Employee benefits (continued) Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Share-based payment transactions The Group operates a number of equity settled share based compensation plans.

The grant date fair value of share-based payment awards made to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted.

The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non market performance conditions at the vesting date, measured at the grant date fair value of the award.

At each reporting date, the group revises its estimates of the number of share incentives which are expected to vest. The impact of the revision of original estimates is recognised in the income statement with a corresponding adjustment to equity.

1.13 Provisions A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation.

1.14 Revenue recognition Revenue comprises the fair value of goods sold to external customers, net of value added tax and promotional discounts. Revenue is recognised on the sale of goods when the significant risks and rewards of ownership of the goods have passed to the customer and the amount of revenue can be measured reliably.

1.15 Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.

1.16 Financial income and expenses Financial expenses comprise interest payable and the ineffective portion of changes in the fair value of cash flow hedges that are recognised in the income statement. Financial income comprises interest receivable on funds invested and the ineffective portion of changes in the fair value of cash flow hedges.

Interest income and interest payable is recognised in the income statement as it accrues, using the effective interest method.

1.17 Taxation Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the income statement and statement of other comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

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

68 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 • • • • resultsorfinancialpositionoftheGroup impactontheconsolidated material bytheGroupinthesefinancialstatements.applied a wouldhave TheGroupdoesnotbelievetheadoptionofthesestandardsorinterpretations beenpublished, have standardsandinterpretations The following endorsedbytheEU, forearlyadoption, andareavailable not yetbeen buthave 1.20 measurerequiredbyIFRSisgiveninnote3. measuretothestatutory oftheadjustedandalternative A reconciliation items. andadjusted),For bothEPSmeasures(statutory versionwithprofitadjustedfornonunderlying theGrouphasalsopresentedanalternative beginning ofthepriorperiod). structureofPoundland thisstructurewasinplacefrom2 shares isbasedonthesharecapital Groupplcandassumesthat 2012(i.e.April the numberofshares.earnings andtheweightedaverage For thisadjustedmeasure, inbothreportedperiods, numberof theweightedaverage toaidcomparabilityandprovideaconsistentmeasureofperformance,calculation byexcluding theimpactofpreferencesharesfromboth entitlementtoadividendontheseshareswasforfeited.and any For theperiodsreported, theGrouphaschosentopresentanadjustedEPS As aprecursortotheshareforexchange, thepreferencesharesinPoundland shares GroupHoldingsLimitedwereconvertedtoordinary numberofshares. the weightedaverage ofthesharerestructure.current periodtothedate Inthiswaytheimpactofpreferenceshareshasbeenexcluded frombothearningsand periodandforthe sharesforthecomparative numberofordinary of Poundland GroupHoldings Limitedusedtocomputetheweightedaverage shareholders. shares ordinary thenumberofordinary tocalculate hasbeenapplied inthesharereorganisation The conversionfactorapplied share restructure,attributable to theaccruedpreferencesharedividendhasbeendeducted from profitfortheperiodtocomputeearnings thediscretionofDirectors.dividend at InaccordancewithIAS33, period, forthecomparative ofthe andforthecurrentperiodtodate headed byPoundland Group HoldingsLimited. hadpreferenceshares, company That theholdersofwhichwereentitledtoacumulative accountingpolicy,As explainedinthebasisofconsolidation theGroup’s ofthepre-existinggroup reflectthecontinuation financialstatements shares. sharesisadjustedtoassumeconversionofalldilutivepotentialordinary numberofordinary weighted average sharesoutstandingduringtheperiod. numberofordinary For shareholdersbytheweightedaverage toordinary dilutedEPS,attributable the shares. foritsordinary The Grouppresentsbasicanddilutedearningspershare(EPS)data bydividingtheprofit BasicEPSiscalculated 1.19 toenableafullunderstandingoftheGroup’s category identifiedwithintheirrelevantincomestatement be separately results. areunusualbecauseoftheirsize,Non underlyingitemsarethosethat orincidence. nature theseitemsshould The Directorsconsiderthat 1.18 can beutilised. difference against whichthetemporary available futureprofitswillbe itisprobablethat A deferredtaxassetisrecognisedonlytotheextentthat thereportingdate. substantively enactedat amountofassetsandliabilities, orsettlementofthecarrying provided isbasedontheexpectedmannerofrealisation enactedor usingtaxrates theywillprobablynotreverseintheforeseeablefuture. toinvestmentsinsubsidiariestheextentthat relating The amountofdeferredtax affectneitheraccountingnortaxableprofitotherthaninabusinesscombination,initial recognitionofassetsorliabilitiesthat anddifferences purposes.and theamountsusedfortaxation differencesarenotprovidedfor: temporary The following theinitialrecognitionofgoodwill; amountsofassetsandliabilitiesforfinancialreportingpurposes differencesbetweenthecarrying Deferred taxisprovidedontemporary 1.17 1 currently hasalegalrightofset-off; andwhengrosssettlementisequivalent to netsettlement. IAS32 ‘Financial (Amendment) –theamendmentclarifies instruments–presentation’ theoffsettingcriteria, specifically: whenanentity Group’s interestsinsubsidiaries, associates, structuresentities. joint arrangementsandunconsolidated IFRS12 ‘Disclosure ofinterestsinotherentities’requiresenhanceddisclosures ofthenature, withthe risksandfinancialeffects associated accounting willbemandatory. ofeachpartytothearrangement. andequity the rightsandobligation forjointventures willbeeliminated consolidation Proportionate IFRS11 oras a jointventuredependingon ‘Joint arrangements’requiresjointarrangements tobeaccountedfor as ajointoperation unchanged, asdothemechanicsofconsolidation. purpose entities. entitypresents aparentanditssubsidiariesasiftheyweresingleentityremains aconsolidated The coreprinciplethat IFRS10 inIAS27andSIC32: replacestheguidanceofcontrol andconsolidation financialstatements’ –special ‘Consolidated Consolidation Adopted IFRSnotyet applied pershare Earnings Non underlyingitems Taxation (continued) Basis ofpreparation andsignificantaccountingpolicies(continued) Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -69

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

1.20 Adopted IFRS not yet applied (continued) • IAS34 ‘Interim Financial Reporting’ (Amendment) – the amendment clarifies the requirements of IAS34 relating to segment information for total assets and liabilities for each reportable segment to enhance consistency with the requirements in IFRS8 ‘Operating Segments’.

• IAS36 ‘Impairment of assets’ (Amendment) – the amendments reverse the unintended requirement in IFRS13 to disclose the recoverable amount of every cash-generating unit to which significant goodwill or indefinite-lifed intangible assets have been allocated. Under the amendments, recoverable amount is required to be disclosed only when an impairment loss has been recognised or reversed.

In addition to the above, amendments to a number of standards under the annual improvements project to IFRS have been endorsed by the EU but not yet adopted. None of these amendments are expected to have a material impact on the Group’s financial statements

1.21 Reserves Cash flow reserve The cash flow hedge reserve represents the effective portion of cash flow hedges where the contract has not yet expired. The reserve is stated net of the associated tax. On expiry of the contract, the effective portion is recycled to the income statement.

Translation reserve The translation reserve represents the cumulative translation differences for foreign operations, namely Poundland Far East Limited.

Merger reserve The merger reserve arises on consolidation as a result of the share for share exchange on 17 March 2014. It represents the difference between the nominal value of shares issued by Poundland Group plc in this transaction and the share capital and reserves of Poundland Group Holdings Limited.

2 Operating segment The Group has one reportable segment, discount retailing of a variety of products.

The Chief Operating Decision Maker (“CODM”) is the Board of Directors. Internal management reports are reviewed by the CODM on a monthly basis. Key measures used to evaluate performance are Revenue and EBITDA. Management believes that these measures are the most relevant in evaluating the performance of the segment and for making resource allocation decisions.

All material operations of the reportable segment are carried out in the United Kingdom and the Republic of Ireland and all material non-current assets are located in the United Kingdom and the Republic of Ireland. The Group’s revenue is driven by the consolidation of individually small value transactions and, as a result, Group revenue is not reliant on a major customer or group of customers. All revenue is generated from external customers.

3 Earnings per share Basic earnings per share are calculated by dividing the profit attributable to ordinary Shareholders by the weighted average number of ordinary shares. For both periods, the weighted average number of shares is based on the share capital structure of Poundland Group plc and assumes that this structure was in place from 2 April 2012 (i.e. the beginning of the 52 weeks ending 31 March 2013). This ensures that basic earnings per share is calculated on a comparable basis and provides a consistent measure of performance. For diluted earnings per share, the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares. Proforma earnings exclude dividend payment of £xx million as part of restructure before floating.

70 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Statutory earningspershare Statutory 3 Earnings per share is calculated asfollows: Earnings pershareiscalculated Basic earnings per ordinary share Basic earningsperordinary Diluted earnings per ordinary share Diluted earningsperordinary Diluted earnings per ordinary sharebeforenon-underlyingitems Diluted earningsperordinary sharebeforenon-underlyingitems Basic earningsperordinary Underlying earningsbeforenon-underlyingitems redeemed Premium paidonpreferencesharecapital Non-accrued preferencesharedividends Profit fortheperiod Non-underlying items(seenote6) equityshareholders Basic earningsattributabletoordinary Effect ofshareoptionsonissue sharesinissue, numberofordinary Weighted average beingweighted Weighted sharesforcalculatingdiluted averagenumberofordinary Tax onnon-underlyingitems Operating expensesandfinancecosts Operating of shares for calculating basicearningspershare of sharesforcalculating earnings pershare Earnings pershare Earnings Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements 190,792,314 190,793,231 No ofshares (11,891) 52 weeks 52 weeks 52 weeks (1,932) (5,436) (3,467) 13,860 15,325 (1.82) (1.82) 9,926 £’000 5.20 5.20 2014 2014 2014 917 p 188,599,437 188,599,437 No ofshares (17,377) 52 weeks 52 weeks 52 weeks (4,942) 23,385 4,404 3,338 6,008 3.19 3.19 2.33 2.33 £’000 2013 2013 2013 -71 – – p

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

3 Earnings per share (continued) Adjusted earnings per share

52 weeks 52 weeks 2014 2013 No of shares No of shares Weighted average number of ordinary shares in issue, being weighted average number of shares for calculating basic earnings per share 250,000,000 250,000,000 Effect of share options on issue 917 – Weighted average number of ordinary shares for calculating diluted earnings per share 250,000,917 250,000,000

52 weeks 52 weeks 2014 2013 £’000 £’000 Profit for the period, being basic earnings attributable to ordinary equity Shareholders 13,860 23,385 Non-underlying items (see note 6) Operating expenses and finance costs 15,325 3,338 Tax on non-underlying items (1,932) (4,942) Underlying earnings before non-underlying items 27,253 21,781

Earnings per share is calculated as follows:

52 weeks 52 weeks 2014 2013 p p Basic earnings per ordinary share 5.54 9.35 Diluted earnings per ordinary share 5.54 9.35

Basic earnings per ordinary share before non-underlying items 10.90 8.71 Diluted earnings per ordinary share before non-underlying items 10.90 8.71

72 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 The associated tax implications oftheaboveitemsarepresentedasanon-underlying itemandaresummarisedbelow. taximplications The associated (2014: £1,000expense, 2013: £92,000 income). The ineffectiveportionofforeignexchangehedgingcontractsisrecognised as afinancialexpenseanddisclosed asanon-underlyingitem expenseispresentedasanon-underlyingitem(2014:being amortisedover20yearsandtheamortisation £1,112,000, 2013: £1,112,000). On theacquisitionofPoundland HoldingsLimitedinJune2010, tothePoundland theGrouprecognisedanintangibleassetrelating brand. This is trial. toanewstoreformat South EastofEnglandandafurther£435,000relating In theperiodended31March2013, totheopeningofanewdistributionfacilityin the theGroupincurred£1,424,000ofone-offcostsrelating expansion)(2013: (e-commerceandinternational initiatives tostrategic £459,000). The Groupincurred£1,277,000ofexpenditurerelated ofitsdebtfacility,renegotiation whichincludes in withthedebtfacilityagreed thewriteoffofunamortisedfeesassociated August 2010. In theperiodended30March2014, toitslistingof£9,954,000. theGroupincurredfeesrelating tothe Ithasalsoincurred£2,981,000relating 6 5 Revenue activities. performance. thismeasuremorefairlyreflectsactualoperating The Directorsconsiderthat Underlying EBITDAexcludes expenseswhichdonotcontributetocurrenttrading theimpactofthosedistributioncostsandadministrative finance costs, taxation, anddepreciation. amortisation performance.The DirectorsconsiderEBITDAtobeamoreconsistentmeasureofoperating profitisadjustedtoexclude Operating theimpactof 4 Underlying EBITDA Exclude: EBITDA Depreciation Amortisation Exclude: Operating profit Total revenues Sale ofgoods Non-underlying itemsexcluding brand amortisation, financialexpensesandtaxation Non-underlying items Reconciliation ofadjustedprofitmeasure (EBITDA) Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements 997,803 997,803 52 weeks 52 weeks 54,029 11,231 42,798 13,239 27,702 1,857 £’000 £’000 2014 2014 880,491 880,491 52 weeks 52 weeks 45,450 43,131 11,241 30,051 1,839 2,319 £’000 £’000 2013 2013 -73

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

6 Non-underlying items (continued) Additionally, in the prior period, the Group received a one-off corporation tax refund of £3,950,000 in respect of prior years, which has been presented as a non-underlying item.

52 weeks 52 weeks 2014 2013 £’000 £’000 Administrative expenses Costs in respect of IPO (9,954) – Amortisation expense (brand) (1,112) (1,112) Other administrative expenses (1,277) (459)

Distribution expenses – (1,859) (12,343) (3,430) Financial income and expenses Bank fees – refinancing (2,981) – Financial instruments (1) 92 (2,982) 92 Taxation Non-underlying items tax impact 1,390 800 Intangible assets – change in tax rate 542 192 Prior period adjustment – 3,950

Total non-underlying items (13,393) 1,604

7 Auditor’s remuneration

52 weeks 52 weeks 2014 2013 £’000 £’000 Fees payable for the audit of the Company’s financial statements 26 26 Amounts receivable by the Company’s auditor and its associates in respect of: Audit of financial statements of subsidiaries of the Company 97 52 Audit related assurance services 198 – Taxation compliance services 78 42 Taxation advisory services 188 116 Other non-audit services 1,006 15

Included within other non-audit services for the period ended 30 March 2014 are corporate finance transaction services fees incurred as part of the IPO process and included within audit related assurance services are fees in relation to the nine month period audit undertaken as part of the IPO process. These are disclosed within non-underlying items (see note 6).

74 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Full details of Directors’ remuneration and interests are set out in the Directors’ Remuneration Report on pages 38to51. Reportonpages andinterestsaresetoutintheDirectors’Remuneration Full detailsofDirectors’remuneration payrollcostsofthesepersonswereasfollows: The aggregate bytheGroup(including numberofpersonsemployed Directors)duringtheperiod,The average analysedbycategory, wasasfollows: 8 Selling anddistribution Administration Contributions todefinedcontributionplans Equity settledsharebasedpaymenttransactions Social securitycosts Wages andsalaries Staff numbersandcosts Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements Number of employees 144,548 136,110 52 weeks 52 weeks 12,829 12,451 1,266 7,128 £’000 2014 2014 378 44 127,130 120,099 52 weeks 52 weeks 11,757 11,422 6,296 £’000 2013 2013 335 735 -75 –

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

9 Financial income and expense

52 weeks 52 weeks 2014 2013 £’000 £’000 Financial income Interest income on unimpaired financial assets 252 279 Ineffective portion of changes in fair value of cash flow hedges – 92

Total financial income 252 371

Financial expense Total interest expense on financial liabilities measured at amortised cost 3,432 3,865 Non-underlying fees associated with refinancing (note 6) 2,981 – Net change in fair value of interest rate swap cash flow hedges recycled from equity 56 80 Ineffective portion of changes in fair value of cash flow hedges 1 –

Total financial expense 6,470 3,945

10 Taxation

Recognised in the income statement

52 weeks 52 weeks 2014 2013 £’000 £’000 Current taxation Corporation tax charge for the period 9,371 8,642 Adjustments for prior periods 186 (3,843) 9,557 4,799 Deferred tax income Origination and reversal of temporary differences (1,766) (1,566) Reduction in tax rate (107) (141) Adjustment for prior periods (60) –

Deferred tax income (1,933) (1,707)

Total tax charge for the period 7,624 3,092

76 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Recognised inothercomprehensiveincome taxasfollows: ofUKcorporation The taxchargeisreconciledwiththestandardrates 10 date. thereporting 21%)substantivelyenactedat at of20%(31March2013liabilitycalculated basedontherate 30 March2014hasbeencalculated 2015) weresubstantivelyenactedon2July2013. This willreducetheGroup’s futurecurrenttaxchargeaccordingly. The deferredtaxassetat enacted on26March2012and3Julyrespectively. Furtherreductionsto21%(effectivefrom1 2014)and20%(effectivefrom1 April April from26%to24%(effective1 taxrate Reductions intheUKcorporation 2012)andto23%(effective1 April 2013)weresubstantively April Factors mayaffect future currentandtotaltaxcharges that Total taxchargefortheperiod ondeferredtaxbalance Impact ofreductionintaxrate Impact ofoverseastaxrates Adjustments inrespectofpriorperiods expenses Disallowable onexpenditurenoteligiblefortaxrelief Depreciation Factors affectingthe chargefortheperiod: of23%(52weeks2013: standardrate taxat UK corporation 24%) Profit beforetax Net change in fair value of cash flow hedgesrecycledNet changeinfairvalueofcashflow toprofit or loss hedges Effective portionofchangesinfairvaluecashflow Taxation (continued) Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements 52 weeks 52 weeks 21,484 7,624 2,608 4,941 2,203 3,071 (107) (260) (868) £’000 £’000 2014 2014 126 316 52 weeks 52 weeks (3,843) (1,100) (1,201) 26,477 3,092 6,354 (141) £’000 £’000 2013 2013 434 295 101 -77 (7)

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

11 Property, plant and equipment

Land and Plant and Fixtures and buildings equipment fittings Total £’000 £’000 £’000 £’000 Cost Balance at 2 April 2012 6,365 23,380 20,129 49,874 Additions 1,966 6,512 6,703 15,181 Disposals (191) (164) (139) (494)

Balance at 31 March 2013 8,140 29,728 26,693 64,561

Balance at 1 April 2013 8,140 29,728 26,693 64,561 Additions 825 8,781 6,957 16,563 Disposals 129 (312) (279) (462)

Balance at 30 March 2014 9,094 38,197 33,371 80,662

Depreciation and impairment Balance at 2 April 2012 4,788 5,744 4,999 15,531 Depreciation charge for the period 2,422 4,684 4,135 11,241 Disposals (191) (164) (139) (494)

Balance at 31 March 2013 7,019 10,264 8,995 26,278

Balance at 1 April 2013 7,019 10,264 8,995 26,278 Depreciation charge for the period 2,591 5,750 4,898 13,239 Disposals 129 (312) (279) (462)

Balance at 30 March 2014 9,739 15,702 13,614 39,055

Net book value At 2 April 2012 1,577 17,636 15,130 34,343

At 31 March 2013 1,121 19,464 17,698 38,283

At 30 March 2014 (645) 22,495 19,757 41,607

78 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Amortisation is recognised in distribution and administrative expenses in the income statement as follows: expensesintheincomestatement isrecognisedindistributionandadministrative Amortisation Amortisation 12 At 30March2014 At 31March2013 At 2 2012 April Net bookvalue Balance at 30March2014 Balance at Amortisation fortheperiod Amortisation Balance at 1 Balance at 2013 April Balance at 31March2013 Balance at Disposals Amortisation fortheperiod Amortisation Balance at 2 Balance at 2012 April Amortisation Balance at 30March2014 Balance at Additions –externallypurchased Balance at 1 Balance at 2013 April Balance at 31March2013 Balance at Disposals Additions –externallypurchased Balance at 2 Balance at 2012 April Cost Administrative expenses Administrative Distribution costs Intangible assets Poundland Groupplc 163,856 163,856 163,856 163,856 163,856 163,856 163,856 Goodwill £’000 – – – – – – – – – –

Trademarks Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements £’000 65 49 22 15 87 31 56 56 56 – – – – – 7 7 7 Software 1,715 1,414 2,322 1,592 1,592 4,037 1,031 3,006 3,006 1,201 1,806 £’000 933 730 720 873 (1) (1) 52 weeks 1,857 1,561 £’000 2014 296 18,075 19,187 20,299 22,300 22,300 22,300 22,300 4,225 1,112 3,113 3,113 1,112 2,001 Brand £’000 – – – – 183,711 184,506 185,088 190,280 189,218 189,218 187,962 52 weeks 6,569 1,857 4,712 4,712 1,839 2,874 1,062 1,257 1,839 1,477 £’000 Total £’000 2013 362 (1) (1) -79

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

12 Intangible assets (continued) Impairment testing

Goodwill of £163.9 million arising on the acquisition of Poundland Holdings Limited in June 2010 is allocated to the Group’s one operating segment. For impairment testing purposes, goodwill has been allocated to a group of cash generating units (CGUs) comprising the Group’s one operating segment. This represents the lowest level within the Group at which goodwill is monitored for internal management purposes.

Goodwill is not amortised, but tested annually for impairment on the basis of value in use calculations using discounted cash flows. As the value in use exceeded the carrying value for the cash generating units, no impairment loss was recognised in the period.

In assessing the value in use, the four year business plan was used to provide cash flow projections to the period ended March 2018. The cash flow projections are subject to key assumptions in respect of discount rates, expected new store openings, achievement of future revenue and EBITDA growth. The Directors have reviewed and approved the assumptions inherent in the model as part of the annual budget process using historic experience and considering economic and business risks facing the Group.

In assessing the Group’s value in use a pre-tax discount rate of 13.7% (2013: 15.1%) has been applied to the group of CGUs.

The calculated value in use significantly exceeded the carrying value of goodwill and no further sensitivity calculations were necessary to conclude there was no impairment.

13 Other financial assets

30 March 31 March 2014 2013 £’000 £’000

Non-current Derivative financial assets held for trading – 403

Current Derivative financial assets held for trading 519 4,212

14 Other financial liabilities

30 March 31 March 2014 2013 £’000 £’000

Non-current Derivative financial liabilities held for trading 1,556 –

Current Derivative financial liabilities held for trading 5,110 397

80 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Liabilities Assets tothefollowing: Deferred taxassetsandliabilitiesareattributable Recognised deferred taxassetsandliabilities 15 Other financialliabilities Intangible assets Property, plantandequipment Tax valueoflossescarriedforward Trade andotherpayables Other financialassets Inventories Net deferredtaxliabilities Net ofdeferredtaxliabilities/(assets) Deferred tax(assets)/liabilities Net deferredtaxassets Net ofdeferredtaxliabilities/(assets) Deferred tax(assets)/liabilities Deferred taxassetsandliabilities Poundland Groupplc 2 April2012 (1,348) 4,098 4,871 (158) (130) £’000 870 (12) 5

Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements (credit)/charge Recognised in the income statement (1,075) (1,707) (459) (179) £’000 (17) 15 – 8 comprehensive (credit)/charge Recognised in 30 March 30 March (3,719) (4,364) 3,719 3,719 (645) £’000 £’000 income 1,100 1,041 2014 2014 £’000 other 59 – – – – – – 31 March2013 31 March 31 March (1,982) (1,982) (1,527) 3,491 1,982 1,061 4,412 3,491 5,473 (205) (130) £’000 £’000 £’000 2013 2013 (91) (29) -81 –

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

15 Deferred tax assets and liabilities (continued)

Recognised in Recognised in other the income comprehensive statement income 1 April 2013 (credit)/charge (credit)/charge 30 March 2014 £’000 £’000 £’000 £’000 Property, plant and equipment (205) (1,132) – (1,337) Intangible assets 4,412 (797) – 3,615 Inventories (130) 30 – (100) Other financial assets 1,061 (20) (937) 104 Trade and other payables (1,527) (52) – (1,579) Tax value of losses carried forward (29) 14 – (15) Other financial liabilities (91) 24 (1,266) (1,333) 3,491 (1,933) (2,203) (645)

No deferred tax liability has been recognised in respect of £156,000 (2013: £113,000) of undistributed earnings of overseas subsidiaries since such distributions would not be taxable.

16 Inventories

30 March 31 March 2014 2013 £’000 £’000

Finished goods 82,779 72,157 Goods in transit 6,782 8,847 89,561 81,004

All inventories are expected to be sold within 12 months of the reporting date. During the period £0.3 million (2013: £0.4 million) was recognised as an expense in cost of sales in respect of the write down of inventory to net realisable value. No unutilised provisions were reversed in the period. Inventory purchased in the period recognised as an expense was £646.7 million (2013: £577.7 million).

82 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 operating activities,operating torepaythetermdebtinfull. This isheldbyPoundland HoldingsLimited. The Grouputilised£30millionoftherevolvingcreditfacility, from togetherwithcashgenerated On 17March2014, facilityof£55.0million. theGroupenteredintoanewbankingfacilityconsistingof arevolvingcreditandworkingcapital margin. LIBORplusanagreed at The facilitycarriedaninterestrate insterling. The facilitywasdenominated million) andrepaidtheoutstandingbalanceof£33.1millionon17March2014. Term inoneinstalmenton10 loanB(£35million)wasrepayable August 2017. Duringtheperiod, theGroup repaid£0.9million(2013: £1.0 repaid £3.7million(2013: £6.1million)andrepaidtheoutstandingbalanceof£17.3millionon17March2014. Term loan insemi-annualinstalmentsoveraperiodofsixyearsfrominception.A (£30million)wasrepayable Duringtheperiod, theGroup credit facilityof£25million, heldbyoneoftheCompany’s undertakings, subsidiary Poundland HoldingsLimited. The Group’s previousdebtfacilitycameintoeffectin August 2010. andrevolving Itconsistedoftwotermloansandasixyearworkingcapital abouttheGroup’smore information andforeigncurrency exposuretointerestrate risk, seenote23. The contractualtermsoftheGroup’s interest-bearingloansandborrowings, amortisedcostaredescribedbelow. whicharemeasuredat For 18 17 Current Non-current notpaid Called upsharecapital Prepayments andaccruedincome andsocialsecurity Other taxation Trade receivables parties Other receivablesduefromrelated Total Revolver Term loanB Termloan A Other interest-bearing loansandborrowings Trade andotherreceivables 2019 2017 2016 maturity Year of Poundland Groupplc Face value 30,000 30,000

£’000 30 March2014 – –

Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements 30,000 30,000 Carrying amount £’000 – – 30 March 24,960 22,172 25,385 Face value 2,872 33,992 20,922 54,914

£’000 2014 425 291 £’000 50 - 31 March2013 – 31 March 32,789 19,229 52,018 20,734 19,412 21,526 Carrying amount 1,699 £’000 £’000 2013 145 792 270 -83 – -

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

18 Other interest bearing loans and borrowings (continued) The Group had the following undrawn committed borrowing facilities available at the reporting date in respect of which all conditions precedent have been met:

30 March 31 March 2014 2013 £’000 £’000

Expiring between two and five years 23,500 23,500

The facility relates to the Group’s revolving credit and working capital facility, which incurs commitment fees at market rates.

19 Trade and other payables

30 March 31 March 2014 2013 £’000 £’000

Current Trade payables 62,482 48,796 Other taxation and social security payable 12,498 10,052 Other payables 4,794 1,682 Accruals and deferred income 40,797 34,046 120,571 94,576 Non-current Accruals and deferred income 18,617 16,931

139,188 111,507

20 Provisions

Property related

30 March 31 March 2014 2013 £’000 £’000

At beginning of period 504 1,457 Provisions made during the period 809 169 Provisions utilised during the period (62) (600) Provisions reversed during the period (326) (522)

At end of period 925 504

Non-current 138 138 Current 787 366 925 504

Property related provisions consist of costs associated with vacant properties and outstanding rent reviews.

84 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 The table below sumarises the movements in share capital duringtheperiodended30March2014. sumarisesthemovementsinsharecapital The tablebelow ofPoundland representsthat GroupHoldingsLimited. sharecapital The comparative 21 whichthereviewwillbesettled. oftheamountat Directors’ bestestimate expectedasaresultofrentreview.A rentreviewprovisionisrecognisedwhenthereareadditionalobligations The provisionisbasedonthe expected benefitstobederivedfromit. Theeffectofdiscountingisnotconsideredmaterial. A provisionforvacantpropertiesisrecognisedwhentheGroup’s arehigherthanthe costsofmeetingitscontractualobligations unavoidable 20 Holdings Limited. On 17March2014, shares of£1.70inexchangeforallclasses issued249,999,000ordinary ofsharesPoundland thecompany Group sharewithanominalvalueof£1.70. 170 1pshareswereconvertedtooneordinary On 11March2014, shares. sharewassub-dividedinto1001pordinary the£1ordinary shares. thenissued701pordinary The company The par.at parand49,999preferencesharesof£1each shareof£1at 2014andissuedoneordinary Poundland on24January Group plcwasincorporated Balance at30March2014 restructureandshareforexchange sharecapital transaction–subsidiary Capital transaction Balance priortocapital Issue ofshares–Poundland Group plc Issue ofshares–Poundland Group HoldingsLimited –PoundlandRedemption ofpreferencesharecapital GroupHoldingsLimited 1 Balance at 2013 April 142,261,140 10%£1Preferencesharesofeach £1Csharesofeach 2,042,746 Ordinary £1Bsharesofeach 474,202 Ordinary £1 7,695,903 Ordinary A sharesof£1each 49,999 Preferencesharesof£1each sharesof£1.70each 250,000,000 ordinary Allotted andcalledup Share Capital Provisions (continued) Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements 425,050 425,000 30 March £’000 2014 50 – – – – 152,474 142,261 (14,564) 425,050 286,993 138,057 152,474 31 March 2,043 7,696 £’000 £’000 2013 474 -85 50 97 – –

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

21 Share Capital (continued) Rights attached to shares Ordinary shares

The rights attaching to the Ordinary Shares are uniform in all respects and form a single class for all purposes, including with respect to voting and for all dividends and other distributions thereafter declared, made or paid on the Ordinary Share capital of the Company.

Subject to any rights and restrictions attached to any shares, on a show of hands every Shareholder who is present in person shall have one vote and on a poll every Shareholder present in person or by proxy shall have one vote per Ordinary Share.

Except as provided by the rights and restrictions attached to any class of shares, Shareholders are under general law entitled to participate in any surplus assets in a winding up in proportion to their shareholdings.

Subject to the provisions of the Act, rights attached to any class of shares (unless otherwise provided by the terms of allotment of the shares of that class) may be varied or abrogated with the written consent of the holders of three-quarters in nominal value of the issued shares of the class, or the sanction of a special resolution passed at a separate general meeting of the holders of the shares of the class.

Preference shares Preference shares entitle their holder to receive notice of and to attend and speak at general meetings of the Company. Preference shares do not entitle their holder to vote at general meetings of the Company.

The rights attached to the Preference Shares may be waived, varied or abrogated with the consent in writing of the holders of at least 50% in nominal value of the Preference shares in issue. To the extent that such a waiver, variation or abrogation of any of the rights attached to the Preference shares adversely affects one group of Preference shares, such waiver, variation or abrogation must be approved by or on behalf of the holders of at least 50% in nominal value of the Preference shares in each respective group.

Except as provided by the rights and restrictions attached to any class of shares, the holders of the Company’s shares are under general law entitled to participate in any surplus assets in a winding up in proportion to their shareholdings, provided that the assets of the Company available for distribution among the members shall be applied in paying to the Preference Shareholders in proportion to the number of Preference Shares held by each of them, in priority to any payment to the holders of any Ordinary Shares in the Company, the issue price per Preference Share. 22 Share based payments The Group operates three share award plans, all of which are equity settled.

The Performance Share Plan (PSP) The PSP was adopted by the directors on 27 February 2014. All employees of the Group are eligible to participate in the PSP at the discretion of the Remuneration Committee. The first issue of awards was made on 17 March 2014. All awards were granted for nil consideration.

A summary of the rules for this scheme and the related performance conditions are set out in the Directors’ Remuneration report.

The Restricted Stock Plan (RSP) The RSP was adopted by the Directors on 27 February 2014. Awards over ordinary shares are granted subject only to continued employment. There are no performance conditions attached to the award.

All employees of the Group (other than Executive Directors and members of the Executive Committee) are eligible to participate in the RSP at the discretion of the Remuneration Committee.

Initial RSP awards were made on 17 March 2014. Other than these initial awards, the intention is that RSP awards will only be made in special or unusual circumstances. All awards were granted for nil consideration.

The RSP awards will usually vest three years after the date of grant. Vested share awards will be released to participants automatically within 30 days of the vesting date.

86 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 model. ismeasuredusingtheBlack-Scholesvaluation The fairvalueofCSOPawards Measurementinputsandassumptionsareasfollows: ofgrant. thedate 100%ofthesharepriceat arevaluedat The PSPandRSPawards receivedinreturnforshareoptionsgrantedaremeasured byreferencetothefairvalueofshareoptionsgranted. The fairvalueofservices In theperiodended31March2013, sharebasedpaymentschemes. any theGroupdidnotoperate are presented. Therefore nocomparatives For theperiodended 30March2014 areasfollows: exercisepricesofsharebasedpaymentawards The numberandweightedaverage satisfied.awarded. Nodividendsarepaidonshares been toithave ofgrantandwhenallconditionsapplying ofthedate A CSOPoptionwillnormallyonlybeexercisablefromthethirdanniversary performance conditions. weregrantedfornilconsideration. All awards The CSOPoptionsmaybesubjecttoperformanceconditions. However, related any madeon18March2014didnothave theinitialaward thediscretionofDirectors. intheCSOPat oftheGroupareeligibletoparticipate All employees ofgrant. Shareonthedate anexercisepricewhichmaynotbelessthanthemarketvalue ofanOrdinary Sharesat Ordinary The CSOPwasadoptedbythedirectorson27February 2014. UndertheCSOP, optionstoacquire theDirectorsmaygranttoeligibleemployees ShareOptionPlan(CSOP) The Company 22 received. turnoverlevels. usingrecentemployee The sharebased paymentsexpensehasbeencalculated condition. aregrantedunderaservice CSOP awards fairvaluemeasurementoftheservices This isnottakenintoaccountinthe grantdate grantdate, at withtheexpectedterm. isequivalenttotheprevailing UKGiltsrate whichiscommensurate The riskfreerate (i.e.date theperiodequivalent totheexpectedterm). ofFTSE250companies withintheGeneralRetailerssectoroverfouryearspriorto grant volatility which hasbeenderivedastheaverage hasrecentlylisted,As theCompany ofshareprice movements. thereisnohistory figure, isthereforeaproxyvolatility The expectedvolatility Risk-free interest rate (based on national governmentbonds) (basedonnational Risk-free interestrate Expected dividendyield Expected life(years) Option life(years) Expected volatility Exercise price Fair grantdate valueat grantdate Share priceat Outstanding at 30March2014 Outstanding at Granted duringtheperiod Outstanding at 1 Outstanding at 2013 April Share basedpayments(continued) Weighted exercise price (£) average PSP - - - Poundland Groupplc Number of Options 1,248 1,248 (‘000) - Weighted exercise Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements price (£) average RSP - - - Number of Options (‘000) 293 293 - 30 March 92.48p 1.09% 32.5% £3.75 £3.75 1.3% 2014 Weighted 10 exercise price (£) average 4 3.75 3.75 CSOP - Number of 31 March Options (‘000) 2013 946 946 -87 – – – – – – – – -

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

22 Share based payments (continued) The total expense for share based payments recognised in the period is as follows:

52 Weeks 52 Weeks 2014 2013 £’000 £’000

Equity settled share based payment expense 44 –

23 Financial instruments and related disclosures Financial risk management The Directors have overall responsibility for the oversight of the Group’s risk management framework. A formal process for reviewing and managing risk in the business has been developed. A register of strategic and operational risk is maintained and reviewed by the Directors, who also monitor the status of agreed actions to mitigate key risks.

Credit risk Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligation. This risk arises from the Group’s foreign exchange, interest rate and commodity hedging agreements with its banking counterparties. The Group only deals with credit with Banks in the Banking Syndicate or with Banks who are creditworthy, and monitors the creditworthiness of these counterparties using publicly available information.

As the principal business of the Group is cash sales, the Group trade receivables are small. The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to credit risk and any associated impairments are immaterial.

Group policy is that surplus funds are placed on deposit with counterparties, who are either party to the Group’s Banking syndicate, or who are creditworthy counterparties with a minimum of BBB credit rating.

Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group ensures that it has sufficient cash or loan facilities to meet all its commitments when they fall due by ensuring that there is sufficient cash or working capital facilities to meet the cash requirements of the Group for the current Business Plan.

The risk is measured by review of forecast liquidity each month to determine whether there are sufficient credit facilities to meet forecast requirements and by monitoring covenants on a regular basis to ensure there are no expected significant breaches, which would lead to an “Event of Default”. Cash flow forecasts are submitted monthly to the Directors. These continue to demonstrate the strong cash generating ability of the business and its ability to operate within existing agreed banking facilities. There have been no breaches of covenants during the reported periods.

The Group has a £55.0 million Revolving Credit and Working Capital facility to support short and medium term liquidity.

Market risk Market risk is the risk that changes in the market prices, such as foreign exchange rates and interest rates will affect the Group’s income. The Group’s exposure to market risk predominantly relates to interest and currency risk, although the Group does hedge fuel used by its fleet of vehicles in the distribution of product to stores.

88 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 future growth. thiscanbeachieved. intheGrouptoensurethat The Directorsregularlymonitorthelevelofcapital Shareholders. The Board’s policy basesoastomaintaininvestor, istoretainastrongcapital creditor, andmarketconfidencetosustain The Group’s aretosafeguarditsabilitycontinueasagoingconcerninorderoptimisereturns capital objectiveswhenmanaging riskmanagement Capital of suchascheme. anumberofGroupPersonalThe Groupoperates Pension Plansforitscolleagues. definedbenefitpensionschemeandthereforecarriesnodeferred, withany The Grouphasnoassociation currentorfutureliabilitiesinrespect Pension liability risk amountoftheGroup’s isasfollows: The carrying thereportingdate liabilitiesat assetsandmonetary foreigncurrency monetary denominated businesses whilsttheyremainimmaterial. exposurearisingfromtheprofits,The Groupdoesnothedgeeithereconomicexposureorthetranslation assetsandliabilitiesofnon-sterling the costinsterling. Hedgingisperformedthroughtheuseofforeigncurrency bankaccountsandforwardforeignexchangecontracts. the RepublicofIrelandbranch, intosterling. The Group’s policy theseexposurestobehedgedforup18monthsforwardinorderfix allows trade beinginUSdollars. Inadditiontothis, ofsurplusEurobalances, theGroupisexposedtotransactionriskontranslation by generated The Grouphasasignificanttransactionexposurewithincreasing, directsourcedpurchasesfromitssuppliersinthe Far East, withmostofthe Foreign currency risk oftheexistingcontracts. furtherhedgesontheexpiry ofany appropriateness todecideonthe flows marketandfuturecash hedgeisadequate, thecurrentinterestrate swap The Groupbelievesthat andiscontinuingtomonitortheinterestrate risktotheendofOctober2014. interestrate tomitigate cap riskbypurchasinganinterestrate The Grouphashedgedinterestrate The Group’s policy theinterestcostofGroupwithinconstraintsitsfinancialcovenantsandBusinessPlan. aimstomanage The Group’s chargeslinkedtoLIBORplusamargindependentontheGroup’s revolvingcreditfacilityincursvariableinterestrate netdebtratio. risk Interest rate 23 Trade andotherpayables Cash andcashequivalents Financial instrumentsandrelated disclosures (continued) Poundland Groupplc

2,918 1,617 1,301 £’000 USD 30 March2014 Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements (3,027) 2,898 (129) £’000 Euro

1,011 1,135 £’000 124 USD 31 March2013 (2,776) 2,342 (434) £’000 Euro -89

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

23 Financial instruments and related disclosures (continued) Fair value disclosures The fair value of each class of financial assets and liabilities is the carrying amount, based on the following assumptions:

Trade receivables, trade payables, short term deposits and borrowings The fair value approximates to the carrying value because of the short maturity of these instruments.

Long term borrowings The fair value of bank loans and other loans approximates to the carrying value reported in the statement of financial position.

Forward currency contracts The fair value is determined using the market forward rates at the reporting date and the outright contract rate.

Fair value hierarchy Financial instruments carried at fair value should be measured with reference to the following levels:

Level 1: quoted prices in active markets for identical assets or liabilities

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

All financial instruments carried at fair value have been measured using a Level 2 valuation method.

The fair value and carrying value of financial assets and liabilities are as follows:

30 March 2014 31 March 2013 £’000 £’000 Carrying Fair Carrying Fair value value value value Cash and cash equivalents 25,268 25,268 42,861 42,861 Trade and other receivables 24,960 24,960 20,734 20,734 Derivative contracts used for hedging (assets) 519 519 4,615 4,615

Total financial assets 50,747 50,747 68,210 68,210

Trade and other payables (139,188) (139,188) (111,507) (111,507) Borrowings at amortised cost (30,000) (30,000) (52,018) (52,018) Derivative contracts used for hedging (liabilities) (6,666) (6,666) (397) (397)

Total financial liabilities (175,854) (175,854) (163,922) (163,922)

90 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 excluding below: ofbankborrowings isshown The contractualmaturity theimpactofnettingagreements Contractual cashflows Group’s purchases. are usedtohedgefutureinventory forwardcontractsthat fortheperiod. movementsintheincomestatement There arenomaterial tothefairvaluemovementson The movementinequityrelates rates, remainconstant. theendofreportingperiod.Group consideredtobereasonablypossibleat allothervariables,The analysisassumesthat inparticularinterest above. andretainedearningsbytheamountsshown hedge reserve This analysisisbasedonforeigncurrency the variancesthat exchangerate A strengthening/weakeningofsterling, increased/(decreased)thecashflow wouldhave asindicated, thereportingdate theUSdollarat against Group’s aredenominated: derivatives theGroup’s shows The tablebelow foritsUSdollarfinancialinstruments, sensitivitytoforeignexchangerates themajorcurrency inwhichthe Foreign sensitivityanalysis exchangerate ofothercomprehensiveincomeandequitywouldbe: statement weretochangeby+/-1%. ifinterestrates rates) floating interestat which attract and Theimpactontheresultsinincomestatement theGroup’s shows (i.e.The tablebelow borrowings rate onfloating cashandequivalentsbankborrowings sensitivity tointerestrates sensitivityanalysis Interest rate reporting period, theeffectofhypotheticalchangesininterestandcurrency areasfollows: rates andcurrency interestrate onitsearnings.In managing riskstheGroupaimstoreduceimpactofshort-termfluctuations Attheendofeach Financial instrumentssensitivityanalysis 23 10% depreciation oftheUSdollar 10% depreciation oftheUSdollar 10% appreciation -1 %movementininterestrates +1 %movementininterestrates Carrying amount Carrying Contractual cashflows Expiring betweentwoandfiveyears Expiring betweenoneandtwoyears Due inlessthanoneyear Financial instrumentsandrelated disclosures (continued) Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements Increase/(decrease) Increase/(decrease) Increase/(decrease) 30 March2014 30 March2014 30 March2014 (10,847) in equity in equity in equity 13,257 30,000 30,000 30,000 £’000 £’000 £’000 (47) 47 - - Increase/(decrease) Increase/(decrease) Increase/(decrease) 31 March2013 31 March2013 31 March2013 (9,924) 12,112 52,018 54,914 45,842 in equity in equity in equity 6,750 2,322 (121) £’000 £’000 £’000 121 -91

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

23 Financial instruments and related disclosures (continued) The following table provides an analysis of the anticipated contractual cash flows for the Group’s derivative contracts:

USD

30 March 2014 31 March 2013 Payable Receivable Payable Receivable £’000 £’000 £’000 £’000 Due in less than one year (96,036) 90,160 (89,040) 93,205 Expiring between one and two years (29,876) 28,852 (15,479) 15,864

Contractual cash flows (125,912) 119,012 (104,519) 109,069

Fair value (6,574) - - 4,615

Euro

30 March 2014 31 March 2013 Payable Receivable Payable Receivable £’000 £’000 £’000 £’000 Due in less than one year (19,013) 19,562 (18,661) 18,322

Contractual cash flows (19,013) 19,562 (18,661) 18,322

Fair value - 519 (339) -

Interest rate swap and cap

30 March 2014 31 March 2013 Payable Receivable Payable Receivable £’000 £’000 £’000 £’000 Due in less than one year - - (58) -

Contractual cash flows - - (58) -

Fair value - - (58) -

Fuel hedge

30 March 2014 31 March 2013 Payable Receivable Payable Receivable £’000 £’000 £’000 £’000 Due in less than one year (92) - - -

Contractual cash flows (92) - - -

Fair value (92) - - -

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

92 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 guarantee werePoundland Holdings Limited, Poundland RetailLimited, Poundland Willenhall LimitedandPoundland Limited). guarantees givenforbankloansandoverdraftsamountingto£31,500,000 andcertainsubsidiarieswithintheGroup,The Company namelyPoundland HoldingsLimitedandPoundland Limited, arepartytocross 26 Contingencies asfollows: leaserentalsarepayable Non-cancellable operating 24 Capital commitments for which no provision has been made in the financial statements oftheGroupwereasfollows: commitmentsforwhichnoprovisionhasbeenmadeinthefinancial statements Capital 25 Commitments During the year £78.5 million was recognised as an expense in the income statement in respect of operating leases(2013: inrespectofoperating During theyear£78.5millionwasrecognisedasanexpenseinincomestatement £68.7million). under therelevantleaseagreements. lengths, leasesofvarying The Groupleasesanumberofstoresandwarehousesunderoperating forwhichincentives/premiaarereceived/paid Contracted More thanfiveyears Between oneandfiveyears Less thanoneyear Operating leases Poundland Groupplc 30 March 10,179 5,894 4,285 £’000 2014 Other - (31 March2013: £56,414,000. The companiespartytothecross Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements 31 March 10,949 6,705 4,244 £’000 2013 - 591,201 229,585 283,338 30 March 30 March 78,278 Land andBuildings 1,986 £’000 £’000 2014 2014 527,848 205,657 251,081 31 March 31 March 71,110 1,212 £’000 £’000 2013 2013 -93

Financials Governance Strategy Introduction Notes to the consolidated financial statements continued

27 Related parties Transactions with key management personnel

Directors of Poundland Group plc control 6.57% of the voting shares of the Company. At 31 March 2013, Directors of Poundland Group Holdings Limited controlled 13.4% of that company’s voting shares.

The compensation of key management personnel (including the Directors) is as follows:

30 March 31 March 2014 2013 £’000 £’000

Key management personnel emoluments 2,334 2,125 Company contributions to money purchase pension schemes 228 205 Amounts receivable under long term incentive schemes 15 - 2,577 2,330

In March 2012, July 2012 and December 2013, loans were advanced to certain Directors of the Group’s subsidiary companies. No interest was payable on these loans. At 30 March 2014 £nil (2013: £145,000) was outstanding and is included within trade and other receivables. All loans were repaid during the period, on 17 March 2014.

At 30 March 2014, £50,000 is owed to the Company by Warburg Pincus Private Equity X, L.P. in respect of its initial share capital. This balance is included within trade and other receivables (note 17).

28 Subsidiary undertakings The Company has the following investments in subsidiaries: Country of incorporation Class of Ownership shares held 30 March 2014 % Poundland Group Holdings Limited* Investment company Great Britain Ordinary 100 Poundland Value Retailing Limited Investment company Great Britain Ordinary 100 Poundland Retail Limited Investment company Great Britain Ordinary 100 Poundland Holdings Limited Investment company Great Britain Ordinary 100 Poundland Willenhall Limited Investment company Great Britain Ordinary 100 Poundland Trustee Limited Trustee Great Britain Ordinary 100 Poundland Limited Single price value retailer Great Britain Ordinary 100 M&O Business Systems Limited Dormant Great Britain Ordinary 100 Bargain Limited Dormant Great Britain Ordinary 100 Homes & More Limited Dormant Great Britain Ordinary 100 Poundland Stores Limited Dormant Great Britain Ordinary 100 Poundland International Limited Dormant Great Britain Ordinary 100 Sheptonview Limited Dormant Great Britain Ordinary 100 Poundland Far East Limited Product sourcing Hong Kong Ordinary 100

These subsidiaries are included within these consolidated financial statements.

*Directly held subsidiary. All other subsidiaries are held indirectly.

94 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 pathfinder prospectus. pathfinder £1.70 to1p. Following thereduction, is£2.5million. thenominalvalueofsharecapital These eventsweredisclosed intheinitialpublicoffering reduceditssharecapital,On 14May2014theCompany process. viaacourtapproved The nominalvalueofeachsharewasreducedfrom On 16 ofBrandelirial, 2014Poundland Limitedacquiredtheentiresharecapital April International S.L. andrenameditDealzEspana, S.L.. On 2 2014DealzPoundlandApril ofPoundland RetailIrelandLimitedwasincorporated. Limited. subsidiary Itisawhollyowned 30 respective jurisdictions. willinclude inthe The estimate taxrates assumptions regardingfutureincomestreamsoftheGroup andthefuturemovementincorporation The Grouprecognisesdeferredtaxassetsandliabilitiesbaseduponfuturetaxable incomeandtheexpectedrecoverabilityofbalance. Deferred taxation usedinitsvaluation. anddiscountrate life andtheroyalty fairvalues.criteria ofIAS38andtheirattributable ofits aretheDirectors’bestestimate tothebrandvaluation The keyassumptionsinrelation contingent liabilitiesintheacquiredbusiness. ofintangibleassetsmeetingtherecognition The keyjudgementsrequiredaretheidentification requirestherecognitionandmeasurementofidentifiableassets,The assessmentoffairvalueinabusinesscombination liabilitiesand Valuation ofotherintangibleassets theendofitseconomiclife. ofthelifeassetanditsresidualvalueat Directors’ bestestimate Judgement isrequiredinassessingtheusefuleconomiclivesoftangiblefixed assetsandintangibleassets. Theseassumptionsarebasedonthe andamortisation Depreciation willbedependentonfutureevents.cash flows For detailsofassumptionsseenote20. available tothem. basedonthecurrentlevelofinformation offuturecashflows Provisions aremadeusingtheDirectors’bestestimates Actual Provisions performance. Detailsofassumptionsusedintheimpairmentgoodwillaredetailed innote12. its recoverableamount. ofexpectedfuturecashflows, Recoverableamountisbasedonacalculation whichinclude offuture estimates On anannualbasis, valueofgoodwillislessthan theGroupisrequiredtoperformanimpairmentreviewassess whetherthecarrying Impairment ofgoodwill offers. ofcostandnetrealisablevalue. thelower at isstated Judgementisrequiredinrespectofassessingfuturedemandandpromotional inventory linesbasedonexpecteddemandforitsproductstoensurethat amountofinventoriesforinventory thecarrying The Groupprovidesagainst amountofinventories thecarrying against Allowances areconsideredbelow. inthefinancialstatements employed The keyjudgementsandestimates futureperiodsimpacted. isrevisedandinany which theestimate andunderlyingassumptionsarereviewedonanongoingbasis.Estimates arerecognisedintheperiod Revisionstoaccountingestimates from theseestimates. arebelievedtobereasonableunderthecircumstances.based onhistoricalexperienceandvariousotherfactorsthat Actual resultsmaydiffer ofpoliciesandreportedamountsassetsliabilities,the application incomeandexpenses. assumptionsare andassociated The estimates requirestheDirectorstomakejudgements, financialstatements affect oftheconsolidated andassumptionsthat The preparation estimates 29 Events afterthereporting date Accounting estimatesandjudgements Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -95

Financials Governance Strategy Introduction Company Balance Sheet at 30 March 2014

30 March 2014 Note £’000 £’000 Fixed assets Investments 4 425,044 Current assets Debtors 5 917 Cash 4,480

5,397

Creditors: amounts falling due within one year 6 (13,836)

Net current liabilities (8,439)

Total assets less current liabilities, being net assets 416,605

Capital and reserves Called up share capital 7 425,050 Profit and loss account 8 (8,445)

Shareholders’ funds 9 416,605 The notes on pages 97 to 100 form part of these financial statements. These financial statements were approved by the board of directors on 2 July 2014 and were signed on its behalf by:

NR Hateley Director

Registered number: 08861243

96 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 Remuneration Report on pages 38to51. Reportonpages Remuneration otherthantheDirectors. hasnoemployees The Company andinterestsaresetoutintheDirectors’ FulldetailsoftheDirectors’ remuneration 3 Auditor’s isdetailed innote7totheGroupfinancialstatements. remuneration 2 statements. thediscretionofCompany.and arenolongerat donotmeetthesecriteriaaredisclosed Unpaiddividendsthat inthenotestofinancial authorised theyareappropriately totheextentthat date that areonlyrecognisedasaliabilityat thebalancesheetdate Dividends unpaidat Dividends onsharespresentedwithinShareholders’funds been included inthePoundland financialstatements. Groupplcconsolidated has cashflow asaconsolidated statement isexemptfromtherequirementtoprepareacashflow Under FRS1(revised1996)theCompany Cash flow diminution inthevalueofinvestment. provisionforimpairmentwhereintheopinionofDirectorstherehasbeena costlessany at undertakingsarestated Shares insubsidiary Investments withthecorrespondingcreditbeingrecogniseddirectlyinequity. financialstatements consolidated an increaseinthecostofinvestmentitssubsidiariesequivalenttoequity-settled share-basedpaymentchargerecognisedinits ofitssubsidiariesitrecognises, sharestotheemployees grantsoptionsoveritsown Where theCompany initsindividualfinancialstatements, Share basedpayments the Group’s cashrequirements. headroomforitscurrentandfutureanticipated thisnewfacilityprovidesadequate forecastandprojectionsshow existencefortheforeseeablefuture. resourcestocontinueinoperational adequate on17March2014and Newbankingfacilitieswereagreed arepreparedonagoingconcernbasis. financialstatements The Company headsaGroupwhichtheDirectorsbelievehas TheCompany Going concern was £8,489,000, tonon-underlyingcostsinrespectoftheIPO. mainlyrelated aspermittedbySection408oftheCompaniesNo profitorlossaccountispresentedfortheCompany Act2006. lossfortheperiod TheCompany the historiccostconvention applicable accountingstandardsandunder beenpreparedonagoingconcernbasisandinaccordancewithallUK have The financialstatements Basis ofpreparation wasregisteredasapubliclimitedcompany.Company On17March2014, itsshareswerelistedontheLondonStockExchange. 2014and, on24January wasincorporated therefore,The Company ispresented. information nocomparative On14February 2014, the statements. tothefinancial inrelation consistentlyindealingwithitemswhichareconsideredmaterial beenapplied accountingpolicieshave The following 1 financialstatements Notes totheCompany Staff numbersandcosts Fees payabletothe Auditors Accounting policies Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements -97

Financials Governance Strategy Introduction Notes to the Company financial statements continued

4 Investments in subsidiaries

Investment in subsidiary undertakings £’000

At beginning of period - Additions 425,000 Equity settled share based payments 44 At end of period 425,044

The Company has the following investments in subsidiaries: Ownership 30 March Class of 2014 Country of incorporation shares held % Poundland Group Holdings Limited* Investment company Great Britain Ordinary 100 Poundland Value Retailing Limited Investment company Great Britain Ordinary 100 Poundland Retail Limited Investment company Great Britain Ordinary 100 Poundland Holdings Limited Investment company Great Britain Ordinary 100 Poundland Willenhall Limited Investment company Great Britain Ordinary 100 Poundland Trustee Limited Trustee Great Britain Ordinary 100 Poundland Limited Single price value retailer Great Britain Ordinary 100 M&O Business Systems Limited Dormant Great Britain Ordinary 100 Bargain Limited Dormant Great Britain Ordinary 100 Homes & More Limited Dormant Great Britain Ordinary 100 Poundland Stores Limited Dormant Great Britain Ordinary 100 Poundland International Limited Dormant Great Britain Ordinary 100 Sheptonview Limited Dormant Great Britain Ordinary 100 Poundland Far East Limited Product sourcing Hong Kong Ordinary 100

* Directly owned subsidiary. All other subsidiaries are held indirectly. On 17 March 2014, the Company acquired 100% of the share capital of Poundland Group Holdings Limited in a share for share exchange transaction.

5 Debtors

30 March 2014 £’000

Group relief 3 Amounts owed by Warburg Pincus Private Equity X, L.P. 50 Other taxation and social security 239 Amounts owed by Group undertakings 625 917

98 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014 7 6 the holders of at least50%innominalvalueof the PreferenceSharesineachrespective group. the holdersofat Preference SharesadverselyaffectsonegroupofShares, suchwaiver, byoronbehalfof mustbeapproved orabrogation variation nominal valueofthePreferenceSharesinissue. To suchawaiver, the extentthat tothe oftherightsattached ofany orabrogation variation tothepreferencesharesmaybewaived,The rightsattached least50%in withtheconsentinwriting oftheholdersat variedorabrogated generalmeetingsoftheCompany.not entitletheirholdertovoteat generalmeetingsoftheCompany. andspeakat Preference Sharesentitletheirholdertoreceivenoticeofandattend Preference Sharesdo Preference shares class, generalmeetingoftheholdersshares theclass. aseparate orthesanctionofaspecialresolutionpassedat class)of that withthewrittenconsentofholdersthree-quartersinnominalvalue oftheissuedshares maybevariedorabrogated Subject totheprovisionsof Act, class toany rightsattached ofshares(unlessotherwise providedbythetermsofallotmentshares surplus assetsinawindingupproportiontotheirshareholdings. any class toany Except asprovidedbytherightsandrestrictionsattached ofshares, in entitledtoparticipate Shareholdersareundergenerallaw Share. onevoteperOrdinary Shareholderpresentinpersonorbyproxyshallhave and onapollevery onevote shares, Shareholderwhoispresentinpersonshallhave toany rightsandrestrictionsattached ofhandsevery Subject toany onashow and foralldividendsotherdistributionsthereafterdeclared, oftheCompany. Sharecapital madeorpaidontheOrdinary Sharesareuniforminallrespectsandformasingleclass totheOrdinary forallpurposes,The rightsattaching including withrespecttovoting shares Ordinary Rights attachedtoshares Holdings Limited. On 17March2014, Sharesof£1.70inexchangeforallclasses issued249,999,000Ordinary ofsharesPoundland theCompany Group Sharewithanominalvalueof£1.70. 170 1pshareswereconvertedtooneOrdinary On 11March2014, shares. sharewassub-dividedinto1001pordinary the£1ordinary shares. thenissued701pordinary The Company The par. parand49,999preferencesharesof£1at Shareof£1at 2014andissuedoneOrdinary on24January wasincorporated The Company 49,999 preferencesharesof£1each sharesof£1.70each 250,000,000 ordinary Allotted andcalledup togroupundertakings Amounts owed Accruals anddeferredincome Called upshare capital Creditors: Amounts fallingduewithinoneyear Poundland Groupplc Annual report and financial statements forp/e 30March2014 Annual report andfinancialstatements 425,050 425,000 30 March 30 March 13,836 9,189 4,647 £’000 £’000 2014 2014 -99 50

Financials Governance Strategy Introduction Notes to the Company financial statements continued

7 Called up share capital (continued) Except as provided by the rights and restrictions attached to any class of shares, the holders of the Company’s shares will under general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings, provided that the assets of the Company available for distribution among the members shall be applied in paying to the preference Shareholders in proportion to the number of Preference shares held by each of them, in priority to any payment to the holders of any Ordinary Shares in the Company, the issue price per Preference share.

8 Reserves

Profit and Loss account £’000

At beginning of period - Loss for the financial period (8,489) Equity settled share based payments 44 At end of period (8,445)

9 Reconciliation of movements in Shareholders’ funds

30 March 2014 £’000

Opening shareholders’ funds - Loss for the financial period (8,489) New shares issued 425,050 Equity settled share based payments 44

Closing Shareholders’ funds and net addition to Shareholders’ funds 416,605

10 Contingent liabilities The Company is party to cross guarantees given for bank loans, overdrafts, duty and letter of credit guarantees of Poundland Holdings Limited and certain fellow group companies amounting to £31,500,000.

11 Transactions with related parties The Company has taken advantage of the exemption conferred by paragraph 3(c) of FRS 8 ‘Related Party Transactions’ not to disclose transactions with other Group companies.

12 Events after the balance sheet date On 14 May 2014 the Company reduced its share capital, via a court approved process. The nominal value of each share was reduced from £1.70 to 1p. Following the reduction, the nominal value of share capital is £2.5 million.

These events were disclosed in the initial public offering pathfinder prospectus.

100 - Poundland Group plc Annual report and financial statements for p/e 30 March 2014