Annual Report and Accounts 2020 - Superdry

1 Annual Report and Accounts 2020 Annual Report and Accounts 2020 Superdry plc Annual Report 2020 Read more within our Business Model on page 07 Inspire and engage style obsessed consumers always. financial OverviewGroup revenue ( )% underlying (loss)/profit before tax ( )m( )% year-on-year20202019*2018( ) basic earnings per share( )p( )% year-on-year20202019*2018( ) end net cash statutory (loss)/profit before tax ( ) year-on-year20202019*2018( )( ) earnings per share( ) year-on-year20202019*2018( )( ) ReportFinancial Overview 01 Chairman s Statement 04 Covid-19 Statement 06 Business Model 07 Section 172 Statement 24 Chief Executive Officer s Review 28 Chief financial Officer s Review 32 Key Performance Indicators 40 How We Manage Our Risks 42 Non- financial Information Statement 51 Sustainability and People 52 GovernanceChairman s Governance Review 70 Board of Directors 72 Corporate Governance Report 74 Nomination Committee Report 77 Audit Committee Report 79 Directors Remuneration Report 85 Directors Report 105 Our FinancialsIndependent Auditor s Report 112 Group Statement of Consolidated Income 127 Balance Sheets 128 Cash Flow Statements 129 Statements of Changes in Equity 130 Notes to the Group and Company financial Statements 132 Five Year History 183 Shareholder Information 184 Visit us online at.

2 * FY19 profit was restated following a prior year adjustment of relating to stock variance accounting, as detailed in Note ReportSuperdry plc Annual Report 202004 Chairman s Statement06 Covid-19 Disclosure07 Business Model24 Section 172 Statement28 Chief Executive Officer s Review32 Chief financial Officer s Review40 Key Performance Indicators42 How We Manage Our Risks51 Non- financial Information Statement52 Sustainability and PeopleChairman s Statement Resetting an iconic global brand in the most extraordinary of times PETER WILLIAMS Chairman financial Year 2020 ( FY20 ) has been a tough year for Superdry , as we began the process of resetting our business, against a backdrop of increasingly difficult global trading conditions. We have worked together to put in place the foundations for a turnaround, starting with the replenishment of our Board and Executive team, re-examining our short term strategies and objectives, making our business more efficient and putting the health and safety of our customers and colleagues at the top of our witnessed the devastating impact of Covid-19 on customers, colleagues and our business partners.

3 Clothing retailers have been impacted particularly and our stores were forced to close in March 2020. The financial impact of Covid-19 is still being experienced and the full extent of that impact will not be clear for some time yet. The organisation reacted with speed and decisiveness to the emerging crisis, focusing on reducing any short-term cash flow pressures and costs wherever possible and utilising government assistance where appropriate. Our people responded to the challenges faced by Covid-19 efficiently and purposefully. I want to take this opportunity to thank every colleague at Superdry for the hard work, loyalty and dedication demonstrated throughout this exceptional time and to all of our customers for their patience and support. By the end of June, the majority of our stores were open, with appropriate health and safety measures put in place.

4 Full information about the impact of Covid-19 on our business, our risk mitigation strategies and how we prioritised the health and safety of our customers, colleagues and partners can be found in our Covid-19 statement on page 06, in the Chief financial Officer s ( CFO ) review on page 32 and in How We Manage Our Risks on page 42. A new Board Following the general meeting of shareholders on 2 April 2019 and the subsequent resignation of the previous Board, we recruited an entirely new Board during 2019 for the individual biographical details of our Board of Directors please refer to the Corporate Governance Report on page 74. After initial periods in interim roles, Nick Gresham was appointed Chief financial Officer in August 2019 and Julian Dunkerton was appointed Chief Executive Officer ( CEO ) in October 2019. Helen Weir, Alastair Miller, Georgina Harvey and Faisal Galaria joined as independent Non-Executive Directors in July 2019.

5 As a new team, I am very pleased with the way the Board has quickly formed both a strong and supportive presence within the business. With a wealth of retail and financial expertise, it is committed to and focused on overseeing and supporting the delivery of a turnaround in Superdry s business Board and Executive team are returning Superdry to its design led heritage. Please refer to Julian s CEO review to read about the work he has undertaken to start to put Superdry firmly back on the path to success during his first full year back in the decisions, strategic changes and a disappointing performanceThe Board and Executive are actively reviewing the long-term strategy for the business to ensure the brand continues to have relevance and purpose. There are also a number of areas within the infrastructure of the Group that require modernisation, including core IT systems and improvement in the control environment.

6 Work to substantially review operational costs, which had commenced during financial year 2019 ( FY19 ), continued throughout FY20 and into the current financial year ( FY21 ). This has involved periods of staff consultation, which have led to head office and retail stores being the subject of organisational restructuring in FY21. This has been a difficult but necessary part of Superdry s path back to sustainable success. Please see note 39 for further details. The Board, Executive and senior leadership teams worked together to identify short-term priorities for strategic change these priorities include returning to a full price stance, focusing on the Superdry design and brand construct, re-examining US and China strategy and operations, reviewing our Ecommerce roadmap, renegotiating terms across our retail store estate and cutting operational costs as far as possible.

7 Further information can be found in the CEO review on page 28 and in our Business Model on page REPORTS uperdry plc Annual Report 2020On 10 January 2020, following a disappointing Christmas and January sale trading period, Superdry plc and its subsidiary companies ( The Group ) issued a profit warning. On 18 March 2020, as the pandemic began to take hold, the Group issued a further statement on current trading, alongside an overview of our Covid-19 risk mitigation activity and our financial position; the Group also withdrew its previous financial guidance in relation to FY20. Our pre-close trading statement issued on 7 May 2020, announced that in line with a number of listed companies, given the unprecedented levels of uncertainty and the Group s financial performance, the Board would not be recommending the payment of a final dividend to shareholders in relation to FY20.

8 This has led to an uncertain trading outlook for stores, resulting in the exceptional store impairment charge. For full information on our FY20 results, our financial position, including going concern and material uncertainty and on our path back to growth, please refer to the CEO and CFO reviews on pages 28 and 32 preservation and reducing our inventoryThe Group introduced a series of cash preservation measures in response to the Covid-19 pandemic, to ensure that it was positioned to weather future disruption in the global economy and to allow for a programme of investment in the future of the business. We have exercised considerable control on our cash flows and worked hard to reduce stock levels and maintain a high level of liquidity and strong net cash position. On 10 August 2020 the Group announced that it had completed a refinancing of its facilities to an Asset Backed Lending ( ABL ) facility for up to 70m due to expire in January 2023, with amended covenants.

9 For full details, please refer to the CFO review on page 32 and to our going concern statement on page in DesignJulian Dunkerton s return to the helm of Superdry has been enhanced by a new collaborative design partnership - with Phil Dickinson, our Creative Director, who joined Superdry in 2019. This partnership has been at the heart of our new consumer-targeted designs and brands, which will be appearing in our stores this Autumn. For further information on these, please turn to our Business Model on page 07 and to the CEO review on page focusThis year has brought with it a renewed focus on stakeholders our Section 172 Statement can be found on page 24. Stakeholder consideration has always been at the forefront of our Board decision making and, this year, the Board considered a variety of matters with its stakeholders in mind, including our remuneration arrangements, the enhancement of employee engagement forums and the appointment of a director for workforce engagement, our sustainability projects, including bringing forward our organic cotton targets, and our overall strategic path.

10 The start of a turnaround Our CEO review (on page 28) and CFO review (on page 32) provide further information on our operational and financial performance in FY20 and up to the date of this Report . This has been the toughest of years in which to significantly reset the brand, but progress has been made in terms of strategic overhaul, cost reduction and, above all, brand and design reignition. The post-Covid-19 economic landscape remains unclear and with Brexit on the horizon, it will be necessary for all businesses to be ready to adapt and evolve in order to survive. I believe that Superdry is in a good position to take on that challenge. This Board is committed to continuing to work with the Executive leadership team to return Superdry to its place as one of the most iconic of British brands and to put the Group firmly back on the path to financial stability and, ultimately, WILLIAMSC hairman 20 September 202005 STRATEGIC StatementThe impact of Covid-19 on our business to date This financial year witnessed extraordinary events caused by the Covid-19 pandemic, which has had a substantial impact on a wide range of businesses and on the retail sector in particular.