N Brown : Replacement - Final Results

About N Brown Group:

N Brown is a top 10 UK clothing & footwear digital retailer. We are size inclusive, focusing on the needs of underserved customer groups - size 20+ and age 50+. We offer an extensive range of products, predominantly clothing, footwear and homewares, and our Financial services proposition allows customers to spread the cost of shopping with us. We are headquartered in Manchester where we design, source and create our product offer and we employ over 2,400 people across the UK.

Next reporting date

The next reporting date is the Q1 trading statement on 20 June 2019.

REVIEW OF THE YEAR

1 Revenue excluding stores

2Adjusted EBITDA is defined as operating profit, excluding exceptionals, with depreciation and amortisation added back. The directors believe

that adjusted EBITDA represents the most appropriate measure of the Group's underlying trading performance.

Group revenue declined 0.8% to £914.4m, with Product revenue down 5.6% and Financial services revenue up 10.8%.

JD Williamsrevenue was down 2.4% during the year due to the drag from migrated Fifty Plus customers, one of our legacy offline brands. Excluding Fifty Plus, JD Williams revenue increased 6.8%. JD Williams also displayed strong growth in digital sales with an 8.8% increase in digital revenue compared to the previous year. Simply Bedelivered another good performance, growing revenue by 4.4% during the period excluding stores. Simply Be also reported an 8.7% growth in digital revenue compared to the prior year. Within the second half of FY19 we increasingly moved to customer lifetime value modelling which will continue to impact Simply Be digital revenue growth in the first half of FY20. Jacamoproduct revenue was up 3.9% excluding stores. Jacamo digital revenue increased by 5.1% compared to the prior year.

Secondary brandsrevenue decreased by 4.6% excluding stores, reflecting our continued shift in marketing investment towards profitable, digital growth. Following the success of its Simply Be and JD Williams apps, the Group launched its third app in August, Fashion World. This is targeted at improving the digital experience for our Fashion World customers.

Revenue in the Traditionalsegment decreased by 17.2% as the Group continued to increase its focus on its digital business and scaled back its unprofitable offline marketing and recruitment. Within the Traditional segment we were pleased with the performance of Ambrose Wilson which delivered digital growth of 7.4% in the year. Given that this segment is more heavily weighted towards offline than the rest of the Group, as it typically serves more mature customers, this segment it is expected to experience the fastest rate of offline revenue decline going forward.

The Group's transformation to a leading digital retailer continues, with digital sales now accounting for 80% of product revenue¹ in the year. In FY19 digital revenue grew by 4.1% and was ahead by 8.0% for our Power Brands. Offline revenue decreased by 29.9% as the Group continued to shift its focus to its growing digital businesses. As the Group focuses more of its resources on growing its digital businesses, going forward it expects a continued double-digit decline in offline revenue.

International revenue declined 6.6% to £32.4m. Ireland delivered revenues of £18.5m, up 5.9% year on year (up 5.1% in constant currency terms) and continues to perform well. USA revenue was £13.9m, down 19.3% year on year (down 18.0% in constant currency terms).

During the year we undertook a review of our store estate. Given the continuation of very disappointing footfall, and despite significant cost efficiencies being achieved, we entered into a consultation with store colleagues to consider closing our 20 stores ahead of lease expiry. Following the consultation, we took the decision to close all 20 stores and at the end of the financial year the Group had no physical stores. In FY19 the Group's stores generated £6.9m revenue all within the first half of the financial year (FY18: Revenue of £17.3m).

Financial services delivered a strong performance during the year, driven by increased interest revenue and a continued strong management of arrears. Financial services revenue was up 10.8% year on year. Within this, interest payments were up 12.7% reflecting the increased level of receivables and the impact of management initiatives such as risk-based pricing which was implemented in the year. This increase was offset by a 3.6% reduction in other fees and income reflecting general improvements in the early arrears profile.

In a challenging and highly promotional market we delivered a stable product gross margin at 52.1%, down 10bps for the year as a whole. As expected, Financial services gross margin decreased by 200bps to 59.2%. This was driven by the change in accounting methodology to provide for receivables under IFRS 9, which results in a provision being made against every customer account regardless of whether they are in arrears. As a result of this change, the impairment charge for the year was £19.5m higher than that charged in FY18 under the previous accounting standard IAS39. The increased level of provision also increased the level of profit generated from the sale of payment arrangement debtors, with total profits on debt sales of £10.7m, £4.9m higher than the prior year. These two factors contributed to a net £14.6m increase in bad debt charges during the year. Compared to the same period last year (restated on an IFRS 9 basis), the provision rate decreased by 370bps due to an underlying improvement in the quality of the loan book and the disposal of some high-risk payment debt which was sold at a better rate than the book value.

Operating expenses excluding exceptional costs continue to be tightly controlled, decreasing by 4.5% for the year. Admin & Payroll and Marketing expenses were the primary drivers. Admin & Payroll expenses as a percentage of Group revenue declined from 14.9% to 14.0%, driven both by the actions taken to close our store estate during FY18 and FY19 as well as increased Head Office efficiencies. Marketing costs improved as a percentage of Group revenue from 17.8% to 17.3% as a result of our continued focus on shifting our marketing expenditure to drive digital growth. Warehouse and fulfilment costs as a ratio of Group revenue declined from 9.3% to 9.2% driven by lower volumes and operational efficiencies.

Depreciation and Amortisation increased by 7.1% to £30.1m due to historical and ongoing investment in IT systems.

Adjusted EBITDA increased by 7.9% to £128.0m and adjusted EBITDA margin increased from 12.9% to 14.0%. Adjusted profit before tax was £83.6m, up 2.5% year on year as a result of a strong financial services performance and the delivery of marketing and other operational efficiencies. The statutory loss for the year of £57.5m was wholly driven by exceptional costs of £145.6m which in the main relate to legacy issues and our decision to close the store portfolio.

In October, the Board took the decision to rebase the dividend to a more sustainable level from which we will seek to grow as its earnings progress. As a result, we are recommending a final dividend of 7.1p per share.

REFOCUSED CUSTOMER CENTRIC STRATEGY TO DRIVE PROFITABLE, DIGITAL GROWTH

The rapidly changing shopping habits of our customers, coupled with a continually challenging consumer environment, emphasises the need for a retail-led strategy which is robustly focused on profitable digital revenue growth.

To this end, we have assessed the business to ensure that N Brown is well placed to take advantage of the opportunities in its markets and remains resilient to present and future challenges.

N Brown is a business with a clearly differentiated position and areas of market-leading innovation, underpinned by a strong enabler of customer choice and loyalty from our financial services proposition. From this core, we believe that we have a real opportunity to delight our customers more consistently - customers who understandably expect more and demand continued relevance and personalisation in their N Brown shopping experience.

We have a solid foundation from which to build, with 80%, or around £500m, of our product revenue now digital, meaning we are a top 10 UK Clothing & Footwear retailer by digital revenue. We also have industry leading expertise in fit, and a financial services business which continues to perform well. Whilst we have made solid progress in growing our online market, we know that there is more to do to improve our digital retail model, and our proposition is not yet well enough developed. A re-focusing of our strategy on delighting our customers is now required.

The past year has seen a marked acceleration in the business's transition as we continue to target profitable, digital growth by focusing on our digital customers and managing the decline of our offline business. We have increased our profitability despite this significant change and against a backdrop of an ongoing challenging retail climate and decline in consumer confidence. This represents the start of a material shift for N Brown as it further strengthens its digital offering.

Our assessment of the business has identified a number of core focus areas around which we are aligning our operational planning and delivery. We will focus on the UK and target a simplification of our customer brand proposition; continue to enhance our product offering; and accelerate our use of data and analytics to enhance operational efficiency. Underpinning all of this will be improvements in our colleague engagement, as we inspire our colleagues to further delight our customers.

Our vision is to be the leading inclusive fashion retailer and we will pursue this vision by executing on

our purpose of responsibly improving people's lives by making our customers look and feel amazing.

1. We will focus on the UK

Strategic Objective: Maximise the UK core market before leveraging our international opportunity

What we are doing:The UK is our core market and we can do much more to enhance our offering to UK customers every day before focusing time and resource elsewhere. In the UK, the online clothing & footwear market is forecast to grow by 7% per year for the next five years. We currently have online

market shares of 4.0% and 3.2% respectively in our addressable womenswear and menswear markets, giving us plenty of headroom to grow in the UK.

We remain confident that the international opportunity continues to exist following a detailed review of the potential for our brands - but the way in which we go to market in the USA will mean an immediate step back from solely driving direct customer business in that market. We will continue to explore international territories through selected, targeted partnerships. To this end, we have recently closed JD Williams in the USA and, for now, will only focus on servicing our existing Simply Be USA customers. Our Irish business, Oxendales, continues to perform well and the strategy there remains unchanged.

2. We will simplify the business to improve the customer experience

Strategic Objective: A crisper, clearer brand proposition for our customers

What we are doing:We will start by simplifying our customer brand proposition. Our brands will be 'fashion' led and there will be an increased focus on the older customer. We currently trade through 11 brands and categorise them under Power Brands, Traditional and Secondary; from FY20 onwards we will not be using these descriptions and will move to 'Womenswear' and 'Menswear'. Within Womenswear our brands will be Simply Be, for fashionable size 12-32 women; JD Williams, for 45-60-year-old women; and Ambrose Wilson for women 60 and over. Menswear will be the Jacamo brand. Our other brands will remain complementary to Womenswear and Menswear while we finalise our plans and we will provide an update in due course.

To support this, we are continuing to invest in our core technology platforms to streamline digital user experience in both our product and financial services areas. At the same time, we expect to accelerate the pace of simplification in our IT estate to increase efficiency but optimise further investment for innovation. This will make us more agile and we will be able to develop new customer propositions more quickly. We anticipate the migration of our brands to an enhanced technology infrastructure in the medium term which will deliver a better customer experience.

We are focused on further improving our customer proposition. Recent improvements include an enhanced Mobile Web experience bridging the gap between desktop and mobile functionality; the launch of Mobile Apps on our in-house Mobile App framework for iOS & Android with a 4.8* rating; and a simplified account registration process which has reduced dropout by a substantive degree. We have also recently opened Europe's largest Hyphen Interactive Live Photo (HILP) technology for our new in- house photo studio, which will transform our ecommerce photography capabilities and deliver cost efficiencies. Our plans incorporate ongoing investment and innovation in our supply chain. These already include the commencement of a new returns automation facility at our distribution centre in Shaw.

Finally, financial services remains an integral part of the N Brown proposition and we will focus on both increasing customer loyalty through our credit offer as well as continuing to improve the experience for those currently using our personal account.

3. We will deliver better products for our customers

Strategic Objective: Increase the number of customers, purchase frequency and basket size

What we are doing:We will drive further innovation through our market-leading body scanning technology and pioneering 3D design & product development to deliver continued fit improvements in quality products at affordable prices. In addition, we will continue to evolve from design influenced by seasonal trends to key product 'shouts' dropped cohesively in three weekly cycles and thus allow substantially reduced lead times. Our experience of recent peak trading periods gives us confidence in our ability to buy more promotional product to complement our core ranges and maintain a freshness in our offering. In our Home and Gift proposition, we anticipate a tightened curation, built on a strong central range with more brand specific product.

The purpose of the Group is to be as customer-inclusive as possible which ensures we remain focused on our product truly resonating with our customers' needs. Here, our fit-focus expertise remains an essential part of our DNA. The strongest customer feedback we receive is the emotional response that a good or poorly fitting piece of clothing elicits. Harnessing this feedback ever more quickly and channeling it into agile product re-orders or improvements in quality is essential.

We will invest further in design and sourcing. All these areas will be underpinned with a renewed and enhanced sustainability and ethical sourcing investment plan to build upon strong foundations in this area.

Finally, we will continue to evolve the way we engage with our customers, improving the quality and breadth of our brand and influencer reach, and substantively better targeted marketing and promotional activity to ensure a more personalised experience.

4. We will trade smarter with Data

Strategic Objective: Improve operating efficiency and customer targeting

What we are doing:Enhanced use of our rich data has already unlocked operational efficiencies and improved customer insight in our business, but our strategy is underpinned by a further step change in how we harness and use this data. Substantive investment in new skills and technology platforms, established partnerships with third-party analytics leaders and a 'test-and-learn' data culture embedded throughout the organisation are progressing, and there remains significant opportunity to develop these much further.

Through a mix of tactical quick wins and longer-term initiatives, we will enhance personalisation and use data to optimise fit for our customers to ensure we create the right product for them. We have used Artificial Intelligence modelling, which predicts size profiles and return rates, along with the effectiveness of product attribution and image data in predication. Early results from this have been successful and will be further developed in this financial year.

In addition, specific opportunities have been identified targeting a more optimised product range in terms of breadth, frequency of newness/lifecycle analysis, and price using historical data of product performance, customer journeys and price architecture. Recent positive peak-season success with newly implemented promotional tools in merchandising will now be more widely embedded. This will be complemented by improvements in the targeting of discount codes to each customer, as well as a further unification of all promotional planning in the business to ensure enhanced forecasting of marketing promotions.

Data and analytics initiatives are also driving innovation to ensure we appeal to more customers who value a flexible credit offering. During FY19, we significantly reduced our headline interest rates and launched an introductory six-month interest free offer for new credit accounts. Analytics has also supported a new arrears management strategy which has led to an improved level of balances in arrears at our year end. We will also launch an initiative to enhance new customers' credit assessment in the account opening process.

5. We will inspire colleagues toward further delighting our customers

Strategic Objective: Better engaged colleagues will deliver an improved customer experience

What we are doing:Our people strategy is focused on creating the right culture and environment which attracts, retains and inspires colleagues to thrive and deliver a great experience for our customers. As our customers' shopping habits have rapidly changed, we are supporting colleagues to be more customer focused. Changes to our internal reward and performance management processes will reflect this - notably to ensure a more nimble, real-time feedback and appraisal approach.

We have already made changes to a variety of commercial teams to increase pace and customer ownership, whilst at the same time, we are also investing further in critical skills in data science and user experience. Engaging our colleagues in the new strategy and more closely aligning their roles to delight our customers, we believe fundamentally underpins the business in delivering sustainable profit growth.

Strategy summary

There is a substantial amount of activity already underway at N Brown but a refocusing of our strategy on delighting our customers is fundamental to successful delivery of the Group's potential. Decisions taken in the previous financial year are in the short-term likely to marginally hold back Group revenue growth. Notwithstanding this, our strategy is expected to maintain short-term profitability. Going forward, our strategy is very much focused on driving sustainable digital revenue, profit and free cash flow growth to deliver improved shareholder value.

On behalf of the Board, I would like to thank all of our colleagues for their very significant contributions in what has been a challenging but developmental year for the business. This commitment, together with our recent progress in a number of our focus areas, has embedded momentum for N Brown to now measurably deliver upon its digital retail proposition for customers.

Outlook

We have made solid progress focusing on profitable, digital growth in the second half of the year despite the challenging external environment. Whilst mindful of the continued challenging macro-economic environment and uncertainties surrounding Brexit, we are focused on driving sustainable digital revenue, profit and free cashflow growth to deliver improved shareholder value.

Steve Johnson, CEO 2 May 2019

KPI PERFORMANCE

1 Revenue excluding stores

*UK Institute of Customer Service survey (UKICS)

** Defined as customers who have ordered in each of the last four seasons

*** FY18 restated for IFRS 9

**** Rollers are those customers who roll a credit balance. Figures represent last 6 months.

Market shares are estimated using internal and Kantar data, 52 weeks ended 11th February 2019 compared to 52 weeks ended 12th February 2018.

Digital accounted for 80% of our product revenue¹ during the year, up 7ppts and 91% of sales from new customers were generated digitally, up 10ppts. By brand, Ambrose Wilson saw the most significant increase in new customer digital penetration, from 31% to 61%. Mobile devices (smartphones and tablets) accounted for 78% of digital traffic in the year, up 4ppts. Within this, smartphones remain the device of choice for customers, with web sessions here increasing 8ppts to account for 61% of all traffic. The conversion rate declined 40bps in the year. The ongoing increase in mobile devices, both smartphone and tablet, as a proportion of traffic represents a natural drag on overall conversion rates however at 4.9% our conversion rate remains above the industry standard.

Our most recent customer satisfaction score from the UK Institute of Customer Service was 86.3%, an improvement of 50bps on the prior year rating. Our active customer file decreased by 12.4% to 3.90m, primarily driven by a focus on digital growth and a managed decline of our offline recruitment. Our most loyal customers, being those who have ordered in each of the last four seasons, was down 2.6% year on year. This again is as a result of the managed decline of our offline business.

In the 52 weeks to 12 February we gained 20bps of market share in Ladieswear (size 16+) to 5.8%. Menswear (chest 44'+) declined 20bps to 2.5%. We saw a slight increase in our returns rate, up 90bps to 28.0%. As a digital retailer, we expect our returns rate to slightly increase due to the nature of the higher returns rate of a digital customer.

Credit arrears (>28 days) were broadly flat at 8.9% (vs 8.7% LY). In the last 6 months we recruited 111k new credit customers who rolled a balance, down from 122k in the prior year, albeit an improvement from the 90k recruited in the first half of the financial year. The reduction was largely driven by tighter control around lending decisions.

FINANCIAL RESULTS

Revenue

Group revenue declined 0.8% to £914.4m with product revenue declining 5.6% offset by a 10.8% increase in Financial services revenue. Product revenue was £615.8m, reflecting a continued shift in focus from our legacy offline business to digital growth, the ongoing challenging market conditions for fashion retail and the closure of our store portfolio. Excluding stores, which are all now closed, Product revenue was down 4.2%. Financial services revenue was £298.6m as we benefited from increased interest received from the Group's growing customer loan book.

Revenue performance by quarterwas as follows:

Revenue by category was as follows:

Product category performance was impacted by the managed decline of the offline business and the closure of stores in the year. Ladieswear declined as a result of lower sales in branded ladies clothing. Both Menswear and Footwear & Accessories declined largely due to Premier Man. Home & Gifts performance was principally due to lower revenue at House of Bath.

Gross margin

The Group's gross margin was 54.4%, down 40bps compared to FY18. This decline was as a result of a 10bps decline in the product gross margin to 52.1% and a 200bps decline in the financial services margin to 59.2%.

The product gross margin represented a solid performance in a highly promotional retail environment. The decline in the financial services gross margin was driven by the requirement under IFRS 9 to make a provision against every new credit customer, including those that are trading normally.

Operating performance

1 Adjusted EBITDA is defined as operating profit, excluding exceptionals, with depreciation and amortisation added back. The directors believe that 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. 3 Excludes debt securitised against receivables (customer loan book) of £390.2m (2018: £280.0m). ⁴ Total liabilities from financing activities less cash.

Operating Costs before exceptionals

Warehouse and fulfilment costs decreased by 2.1% to £84.0m. This was driven by lower volumes and continued efficiencies. The decrease in Warehouse and fulfilment was greater during the second half, with 3.7%, compared to the first half decrease of 0.3%.

Marketing costs were down 3.8% year on year, as the Group continued to scale back offline marketing and recruitment, consistent with the strategy of focusing on digital growth and improving marketing efficiency.

Admin and payroll costs decreased by 6.8%, driven both by the actions taken to close our store estate during FY18 and FY19 as well as increased Head Office efficiencies.

Adjusted EBITDA increased by 7.9% to £128.0m, with Adjusted EBITDA margin increasing by 1.1ppts to 14.0% (FY18: 12.9%). Depreciation and Amortisation increased by 7.1% reflecting historical and ongoing investments in IT systems. Overall, operating profit before exceptional items was £97.9m, up 8.2% year on year, with operating margin increasing by 0.9ppts to 10.7%. Adjusted profit before tax was £83.6m, up 2.5% year on year as a result of a good margin performance, strong financial services and the delivery of marketing and other operational efficiencies. Statutory loss before tax was (£57.5m), as a result of the exceptional costs incurred during the year.

Net finance costs

Net finance costs were £14.3m, up 60.7% compared to FY18, due to the increase in net debt driven by growth in our customer loan book.

Financial services and IFRS 9

IFRS 9 has replaced the IAS39 standard and came into effect in FY19, therefore this is the first full year in which we are reporting under IFRS 9. IFRS 9 significantly increases our provision for receivables. Importantly, it has no cash flow impact and neither does it materially change how we operate our Financial services business. As a result of IFRS 9 our gross bad debt charge increased by 19.6% to

£119.0m (FY18: £99.5m).

Compared to the same period last year (restated on an IFRS 9 basis), the provision rate decreased by 370bps due to an underlying improvement in the quality of the loan book and the disposal of some high- risk payment debt which was sold at a better rate than the book value.

* restated for IFRS 9. The bad debt provision previously reported under IAS39 was £48.8m (provision ratio of 7.5%).

Exceptional items

Exceptional costs of £65.4m were incurred during the first half, as previously announced. In the second half we incurred £80.2m primarily relating to an impairment charge on the Group's VAT debtor asset, legacy customer redress payments and costs associated with the closure of the store estate. Of the

£22.7m additional provision made for customer redress in the second half of the financial year, £14.1m has already been paid out in cash.

See Note 5 for more details

Taxation

The effective underlying rate of corporation tax is 26.9% (FY18: 23.3%). The overall tax charge is £0.8m (FY18: £3.7m charge).

VAT partial exemption

The Group has been in a long running dispute with HMRC with respect to the VAT treatment of certain marketing and non-marketing costs and the allocation of those costs between our retail and credit business. The case in respect of marketing costs was heard in a first tier VAT tribunal in May 2018 with a draft decision being issued in November 2018 which was published in March 2019.

The case has two key aspects, those being attribution which is in respect of whether marketing costs can be directly attributed to product revenue or financial services income and secondly apportionment which is surrounding the allocation of marketing costs between the retail and financial services business. With respect to attribution, the judge agreed with HMRC, finding that when the Group is marketing goods it is also in effect marketing financial services, even if there is no reference to this in its marketing materials.

The judge however ruled against HMRC's standard method of apportionment of costs (which is based

upon the proportion of total UK revenue which is generated from product sales).

Whilst discussions are on-going with HMRC and a final outcome not yet achieved, following the ruling management have reviewed the likelihood of recovering the carrying value of the asset held as at

February 2018 of £43.8m and as a result of this review have written down the value by £37.9m.

As the Group has not yet been assessed by HMRC for the period June 2017 to March 2019 this has also resulted in an additional charge of £11.5m. This results in a total exceptional charge of £49.4m and a VAT creditor at year end of £6.6m (2018: £43.8m asset).

Earnings per share

Loss per share from continuing operations was (20.50)p (FY18 earnings per share: 4.41p). Adjusted earnings per share from continuing operations were 21.38p (FY18: 23.06p).

Dividends

In October, the Board took the decision to rebase the dividend to a more sustainable level from which we will seek to grow as earnings progress. As a result, we are proposing a full year dividend of 7.1p per share.

Balance Sheet and Cash Flow

Capital expenditure was £36.3m (FY18: £39.2m). Inventory levels at the period end were down 9.8%, to

£99.8m (FY18: £110.6m) as a result of tighter stock management.

Gross trade receivables increased by 5.3% to £682.2m (FY18: £647.6m) as a result of the growth in the loan book.

Net cash used in operations (excluding taxation) was £35.0m compared to £44.3m generated last year, principally driven by a cash outflow of £84.6m related to exceptional items. After funding capital expenditure, finance costs, taxation and dividends, net debt increased from £346.8m to £467.9m, in line with guidance. The £585.1m net customer loan book significantly exceeds this net debt figure.

The Group has an available financing facility totalling £625m, made up of a securitisation facility of

£500m and an RCF of £125m, both secured until 2021.

The Group's balance sheet is underpinned by its customer loan book, which at 2 March 2019 was

£682.2m on a gross basis and £585.1m on a net basis, calculated under IFRS 9.

Compared to 3 March 2018 the Group's overall net debt increased by £121.1m to £467.9m, in line with guidance, principally due to exceptional cash outflows of £84.6m and the growth in the loan book of

£34.6m.

Core debt, which is defined as the amount drawn on the Group's RCF less cash was £77.7m. On this

basis, the Group's leverage is 0.6x on a net debt/EBITDA basis.

The group's defined benefit pension scheme has a surplus of £23.9m (FY18: £19.3m surplus). The

increase in the surplus is as a result of general market changes in asset returns during the year.

FX sensitivity

For FY20 we have hedged 100% of our net purchases at a blended rate of $/£1.34. At a rate of $/£1.30, and before any mitigating actions or changes in annual requirements, this would result in a c.£0.3m PBT tailwind compared to FY19 (hedged rate $/£1.33).

For FY21 we have, to date, hedged 60% of our net purchases at a blended rate of $/£1.32. At a rate of

$/£1.30, and before any mitigating actions or changes in annual requirements, this would result in a c.£2.0m PBT headwind compared to FY20. Every 5 cents move from this rate in our unhedged position would result in a PBT sensitivity of c.£2m.

FY20 Guidance

We are providing the following guidance for FY20:

· Product gross margin flat to -100bps

· Financial services gross margin flat to -100bps

· Group operating costs -2.5% to -4.5%

· Depreciation & Amortisation £31m to £33m

· Net interest £17m to £18m

· Tax rate 20-21%

· Capex c.£ 35-40m

· FY20 Year-end net debt £440m to £460m, although half year net debt will be in the range

£475m to £500m given continued customer redress and tax settlement payments