ANNUAL REPORT and ACCOUNTS 2020 N Brown Group Plc Annual Report and Accounts 2020
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A TRANSFORMING DIGITAL RETAILER N BROWN GROUP PLC ANNUAL REPORT AND ACCOUNTS 2020 N Brown Group plc Annual Report and Accounts 2020 STRATEGIC REPORT AT A GLANCE 2 CHAIR'S STATEMENT 4 CHIEF EXECUTIVE'S STATEMENT 5 A STRATEGY FOR GROWTH 1 STRATEGY 8 MARKETPLACE 18 A STRATEGY BUSINESS MODEL 20 FOR GROWTH KEY PERFORMANCE INDICATORS 22 UNIQUE BRANDS, DIGITAL GROWTH p8 BRAND ACTIVITY 24 FINANCIAL PERFORMANCE 28 ENVIRONMENTAL, SOCIAL AND GOVERNANCE 32 RISK MANAGEMENT 40 SECTION 172 STATEMENT 46 GOVERNANCE REPORT CHAIR’S INTRODUCTION 49 LEADERSHIP AND PURPOSE GROUP BOARD DIRECTORS 50 UNIQUE BRANDS, EXECUTIVE BOARD DIRECTORS 52 DIGITAL GROWTH 2 BOARD ENGAGEMENT WITH THE WORKFORCE 56 p24 DIVISION OF RESPONSIBILITY GOVERNANCE STRUCTURE 58 COMPOSITION, SUCCESSION AND EVALUATION BOARD COMPOSITION 60 NOMINATION AND GOVERNANCE COMMITTEE REPORT 63 AUDIT, RISK AND INTERNAL CONTROL AUDIT AND RISK COMMITTEE REPORT 64 FINANCIAL SERVICES BOARD COMMITTEE REPORT 71 LEADERSHIP ENVIRONMENTAL, SOCIAL AND AND PURPOSE GOVERNANCE (“ESG”) COMMITTEE REPORT 72 REMUNERATION p50 REMUNERATION COMMITTEE REPORT 73 OTHER DISCLOSURES 91 FINANCIAL STATEMENTS For the detailed contents of the Financial statements go to p96. INDEPENDENT AUDITOR’S REPORT 97 DIVISION OF RESPONSIBILITY 3 CONSOLIDATED STATEMENTS 106 NOTES TO THE GROUP ACCOUNTS 110 p58 COMPANY STATEMENTS 154 NOTES TO THE COMPANY ACCOUNTS 156 SHAREHOLDER INFORMATION 165 N Brown Group plc Annual Report and Accounts 2020 ADAPTING TO CONSUMER TRENDS In a challenging marketplace, we believe that our strategy is the right one to ensure long-term growth. We believe a relentless focus on our customers and a renewed energy to improve our products across our compelling but distinct report Strategic portfolio of brands will make a big difference. Restructuring takes time, but we’ve been working hard all year, making sure the shape of the business will deliver long-term sustainable value for shareholders. Governance reportGovernance HIGHLIGHTS REVENUE ADJUSTED PRE-TAX PROFIT2 £858.2m £59.5m 2019: £914.4m -6.1% 2019: £83.6m -28.8% ADJUSTED EBITDA1 STATUTORY PROFIT BEFORE TAX £106.7m £35.7m Financial statements 2019: £128.0m -16.6% 2019: £-57.5m n/m 1 Adjusted EBITDA is defined as operating profit, excluding exceptionals, with depreciation and amortisation added back. The Directors believe adjusted EBITDA represents the most appropriate measure of the Group’s underlying trading performance. 2 Defined as excluding exceptionals and fair value movement on financial instruments. The Directors believe that adjusted pre-tax profit represents the most appropriate measure of the Group’s underlying pre-tax profit as it removes items that do not form part of the recurring activities of the Group. nbrown.co.uk 1 N Brown Group plc Annual Report and Accounts 2020 AT A GLANCE OUR VISION OUR MISSION Championing inclusion, we’ll become the We’re obsessed with our customers and have most loved and trusted fashion retailer. been for generations. We delight them with products, service and finance to fit their lives. OUR PURPOSE We exist to make our customers look and feel amazing. WE ARE A TOP 10 UK CLOTHING AND FOOTWEAR DIGITAL RETAILER WITH A FOCUSED BRAND PROPOSITION WOMENSWEAR JD WILLIAMS SIMPLY BE AMBROSE WILSON An online boutique experience An online fashion and beauty brand A womenswear fashion led brand showcasing fashion and home product for plus size women, targeting plus size supported by home, available on for 45-65 year old women. women aged 25-45. and offline that truly values the mature customer. Digital revenue growth Digital revenue growth Digital revenue growth +2.0% +8.2% +10.5% 2 nbrown.co.uk N Brown Group plc Annual Report and Accounts 2020 OUR COMMITMENT TO REVENUE BREAKDOWN1 OUR PEOPLE AND OUR PLANET A WOMENSWEAR £326.5m Our strategy is designed to embrace 1 D the ESG pillars of Our People and Our 1 JD WILLIAMS £153.1m A Planet. It aims to fully align our ethical 2 SIMPLY BE £128.0m policies with our commercial activities, 3 AMBROSE WILSON £45.4m 2 achieving tangible results and benefits B MENSWEAR £66.9m for all our stakeholders. 4 JACAMO £66.9m 3 4 C PRODUCT BRANDS £170.2m C B D FINANCIAL SERVICES £290.5m Strategic report Strategic MENSWEAR PRODUCT BRANDS FINANCIAL SERVICES JACAMO An online fashion and grooming brand Our product brands complement An important part of our overall for plus size men, targeting plus size our Womenswear and Menswear proposition, strengthening customer men aged 25-50. brands by focusing on distinct loyalty and enabling our retail business customer niches which are not served to thrive. In order to offer our customers by JD Williams, Simply Be, Ambrose excellent convenience and flexibility, Wilson and Jacamo. we allow customers to either pay us immediately or utilise a credit account for their purchases, spreading the cost of their purchase over time. Governance reportGovernance Digital revenue growth Revenue decrease (exc Stores and US) Revenue decrease +5.5% -5.7% -2.7% Gross customer loan book SEE MORE ABOUT OUR BRANDS p24 £656.9m -3.7% Financial statements 1 Excludes US revenue. Digital revenue is revenue from all online channels. Offline revenue is revenue from telephone or mail channels, FY19 offline revenue also includes revenue from Stores. nbrown.co.uk 3 N Brown Group plc Annual Report and Accounts 2020 CHAIR’S STATEMENT REVIEW OF THE YEAR to its financing facilities which included accessing the Government’s Coronavirus The retail environment remained highly Large Business Interruption Loan promotional during the year and our Scheme (“CLBILS”). For as long as the focus was on continuing to build our £50m CLBILS facilities remain in place, digital business across our core brands. the Group will be restricted from paying In line with the strategy of scaling back cash dividends. The Board does not unprofitable marketing and recruitment, anticipate declaring cash dividends in whilst managing the decline of our respect of the 2021 financial year. offline brands, Group revenue declined 6.1% to £858.2m. We were pleased, however, with our focus on growing BOARD CHANGES digital revenue. Womenswear and This year has seen further changes to Menswear digital revenue both grew the Board. We were pleased to welcome 5.5% and 85% of our Product revenue is Vicky Mitchell as a new Non-Executive now digital. Director. Vicky brings over 20 years of consumer finance experience to the I would like to thank all In response to wide-sweeping Board and was formerly Chief Operating our colleagues for their regulatory changes across the retail Officer of Capital One (Europe) plc, credit financial services sector, the previously holding the positions of Chief commitment and hard Group has continued to develop our Risk Officer and Chief Legal Counsel. work, especially in their credit business to ensure we offer an Vicky is currently a Non-Executive attractive and flexible payment option Director and Chair of the Risk Committee recent response to the to customers, whilst ensuring we are of Lookers plc and is also a Non- challenges posed by set up for the future. We have made Executive Director of West Bromwich a number of significant changes to Building Society where she sits on both Covid-19. I am proud of the way we manage the debtor book the Risk and Audit Committees. the way in which our team and as a result our Financial Services revenue declined 2.7% in the year. During the year, Craig Lovelace resigned has reacted, ensuring the as Chief Financial Officer. I would like to safety of our colleagues Our continued focus on a more thank Craig for his contribution over the sustainable cost base continued with last five years. We wish him every success whilst maintaining their operating costs down 9.9% in the year, for the future. We were delighted to commitment to serving as we found more efficient ways of appoint Rachel Izzard as our new Chief running the business. Adjusted profit Financial Officer. Rachel joins us from our customers. before tax was £59.5m, a 28.8% decline Aer Lingus where she was the Chief compared to the prior year; this was Financial Officer since 2015. driven by lower Product and Financial Services gross profit and higher interest costs. However, we were pleased to LOOKING FORWARD report a material increase in statutory The Board undertook a thorough profit before tax, driven by significantly review of the strategy during the year Matt Davies reduced exceptional items in the year. and the details are contained within Chair the Chief Executive’s statement. Building blocks for future success have Since we undertook the review the been put in place with important changes trading environment has changed with to the ways of working and key hires to the outbreak of Covid-19 but we are the executive team during the year. confident that the refreshed strategy is right for our business over the long DIVIDEND term. We have renegotiated our debt The Board declared an interim dividend financing arrangements to ensure that of 2.83 pence per share in respect we have the necessary flexibility to trade of the first half of the financial year. in these challenging times. The past few Following the outbreak of Covid-19 and months in particular with Covid-19 have the subsequent impact on the business been challenging for all stakeholders and the wider economy, the Board in the business. I would like to say a announced in March that it would not huge thank you to all our stakeholders, be recommending a final dividend for especially our brilliant colleagues for this financial year. Following the year their hard work and commitment over end, the Group secured amendments these uncertain times. 4 nbrown.co.uk N Brown Group plc Annual Report and Accounts 2020 CHIEF EXECUTIVE’S STATEMENT A YEAR OF TRANSITION RESPONDING TO THE COVID-19 PANDEMIC Our absolute priority has been The Company took a number of to protect the wellbeing of our immediate and proactive measures colleagues, both across our to reduce costs and strengthen distribution centres and at Head liquidity, including: Office, whilst maintaining continuity A significant reduction in of service for our customers shopping marketing expenditure; our brands.