#1BOOHOO GROUP PLC 12 CASTLE STREET ST HELIER JERSEY JE2 3RT UK BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 BOOHOO GROUP PLC stock code: BOO E ANNUAL REPORT & ACCOUNTS 2021#2BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 BOOHOO GROUP PLC A LEADING E-COMMERCE RETAIL GROUP Our multi-brand platform comprises boohoo, boohooMAN, PrettyLittleThing, Nasty Gal, MissPap, Karen Millen, Coast, Oasis, Warehouse, Debenhams, Dorothy Perkins, Wallis and Burton, and targets fashion- conscious 16 to 45 year-olds in the UK and internationally. VISIT US ONLINE AT BOOHOOPLC.COM / STRATEGIC REPORT AGENDA FOR CHANGE 20 BOARD OF DIRECTORS 50 STRATEGIC REPORT BUSINESS MODEL 16 CHAIRMAN'S STATEMENT 118 Group financial and operational highlights Our vision Our values About our group and our global brands Our business model Chairman's statement Agenda for Change 20 COVID-19 response 24 Review of the business 26 Financial review Risk management 9 680060001 31 34 Environmental, social and governance report 39 GOVERNANCE Board of directors 50 Corporate governance report 52 Directors' report 60 Directors' remuneration report 66 Statement of directors' responsibilities in respect of the annual report and financial statements 85 FINANCIAL STATEMENTS Independent auditor's report to the members of boohoo group plc 86 Consolidated statement of comprehensive income 90 Consolidated statement of financial position 91 Consolidated statement of changes in equity Consolidated cash flow statement Notes to the financial statements Five-year financial summary 92 93 94 119 CONTENTS 01#3BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 GROWTH FOR A SUSTAINABLE FUTURE / STRATEGIC REPORT WHILE GROWING OUR BRANDS At the beginning of our financial year, we had seven brands. There now are thirteen brands in boohoo group. In May 2020, we acquired the remaining 34% minority stake in PrettyLittleThing.com Limited. We acquired the online businesses and all associated intellectual property of Oasis and Warehouse in June 2020, and have successfully integrated and relaunched these brands onto our multi-brand platform. In January 2021, we acquired Debenhams' online business and associated intellectual property (including the brands Maine, Mantaray, Principles and Faith). We are rebuilding and relaunching Debenhams as a digital department store and marketplace; the acquisition also allows us to grow into additional categories including beauty, sport and homeware. In February 2021, we acquired the Dorothy Perkins, Wallis and Burton brands, which give us the opportunity to grow our market share across a broader demographic and strengthen our menswear proposition. These acquisitions represent an important step towards achieving our strategic priority of investment to deliver growth through organic means and acquisitions. WE ARE ENCAPSULATING THE FUTURE OF RETAIL As an online fashion retailer, we are well placed to capitalise on the growth opportunities that are arising from globally changing shopping habits, with an ever-increasing number of consumers now shopping online. We know what they want, and we are committed to providing value for them. Underpinning our growth potential, we delivered strong gains in all major KPIs - including new customer growth, which remains high and across all our brands. We have continued our strong track record of revenue growth, delivering 41% this year. In addition, we have continued to grow our market share across all geographies. This has been supported by our world-class marketing abilities, enabling us increased presence as our customers' use of social media further expands. FOR MORE INFORMATION ABOUT OUR PERFORMANCE, GO TO PAGES 26 TO 33 OF THE STRATEGIC REPORT FOR MORE INFORMATION ABOUT OUR BRANDS, GO TO PAGES 10 TO 15 OF THE STRATEGIC REPORT 02 FOR MORE INFORMATION ABOUT OUR STRATEGY, GO TO PAGES 16 TO 17 OF THE STRATEGIC REPORT 03#4BOOHOO GROUP PLC GROWTH FOR A SUSTAINABLE FUTURE AND FOCUSING ON HIGHER STANDARDS OF OVERSIGHT ANNUAL REPORT AND ACCOUNTS 2021 Our Agenda for Change programme was introduced following an independent review of our supply chain in September 2020, and demonstrates our commitment to strengthening our corporate governance, environmental footprint and social impact. This programme focuses on a number of key areas across the group including: corporate governance; redefining our purchasing practices; raising standards across our supply chain; supporting Leicester's workers and workers' rights; providing better support for suppliers; and demonstrating best practice in action. Sir Brian Leveson PC is providing independent oversight of the programme, supported by a team from KPMG, and we are committed to publishing his progress reports. As part of the changes we are implementing, we have strengthened our governance and teams with key appointments, significantly increased oversight of our supply chain, and demonstrated best practice in action by focusing on setting a new industry-wide standard for ethical supply chains. AS WE LOOK TO THE FUTURE, WE ARE COMMITTED TO CHANGE THAT BRINGS SUSTAINABLE GROWTH AND THAT BENEFITS ALL OUR STAKEHOLDERS FOR MORE INFORMATION ABOUT OUR SUSTAINABILITY, GO TO PAGES 39 TO 49 FOR MORE INFORMATION ABOUT OUR AGENDA FOR CHANGE PROGRAMME, GO TO PAGES 20 TO 23 04 05 / STRATEGIC REPORT#5| 06 BOOHOO GROUP PLC GROUP FINANCIAL AND OPERATIONAL HIGHLIGHTS OUR PERFORMANCE £36m £31m Profit before tax £125m £43m £60m 2017 2018 2019 2020 Adjusted EBITDA £174m £57m £85m £127m 2017 2018 2019 2020 2021 Revenue £1,745m £1,745m £174m £92m 2021 £125m ANNUAL REPORT AND ACCOUNTS 2021 . . . . Financial Revenue £1,745 million, up 41% (41% CER¹) Strong revenue growth across all geographies, with UK 39% and up international 44%. International revenue up is now 46% of total, up from 45% Gross margin 54.2%, up 20bps Adjusted EBITDA £173.6 million up 37%, with Adjusted EBITDA margin of 10.0% (2020: 10.2%), notwithstanding COVID-19 cost headwinds and significant investment in acquisitions Robust balance sheet with net cash of £276.0 million (2020: £240.6 million). High cash generation with operating cash flow of £201.1 million (2020: £127.3 million). £195.7 million capital raised 1. CER designates Constant Exchange Rate translation of foreign currency revenue, which gives a truer indication of the performance in international markets by removing year-to-year exchange rate movements when local currency sales are converted to sterling. Operational made Significant group- -wide progress on Agenda for Change programme, which has independent oversight from Sir Brian Leveson PC Strengthening corporate governance through a new non-executive director appointment, establishment of a Risk Committee and committed in excess of £10 million in supply chain monitoring and compliance Successful integration and relaunch of Oasis and Warehouse brands on our multi-brand platform Acquisition of Debenhams online business and investing to transform the business into a digital department store with significant potential Acquisition of Dorothy Perkins, Wallis and Burton brands, adding to the group's diversity and reach Third distribution centre on track for operational use in spring 2021 and long-term lease agreed for fourth distribution centre, expected to go live in the second quarter of the new financial year 18 million active customers, up 28% Over 1,000 jobs secured through recent acquisitions £295m £580m £857m £1,235m 2017 2018 2019 2020 2021 YEAR TO FEBRUARY Revenue Gross profit Gross margin Adjusted EBITDA² % of revenue Adjusted EBIT³ % of revenue Adjusted profit before tax4 Profit before tax Adjusted diluted earnings per share Diluted earnings per share Net cash at year end 2021 2020 £ million £ million Change 1,745.3 1,234.9 +41% 945.2 666.3 +42% 54.2% 54.0% +20bps 173.6 126.6 +37% 10.0% 10.2% -20bps 149.3 107.0 +40% 8.6% 8.7% -10bps 149.9 108.3 +38% 124.7 92.2 +35% 8.67p 5.88p +47% 7.25p 5.35p +36% 276.0 240.6 +£35.4 million 2. Adjusted EBITDA is calculated as profit before tax, interest, depreciation, amortisation, and share-based payment charges. 3. Adjusted EBIT is calculated as profit before tax, interest, share-based payment charges, and amortisation of acquired intangible assets. 4. Adjusted profit before tax is calculated as profit before tax, excluding share-based payment charges, and amortisation of acquired intangible assets. 5. Adjusted diluted earnings per share is calculated as diluted earnings per share, adding back amortisation of acquired intangible assets, share-based payment charges, and adjusting to 34% of the non-controlling interest as in previous years. 6. Net cash is cash less bank borrowings. 07 / STRATEGIC REPORT#6BOOHOO GROUP PLC AT A GLANCE A GROWING BUSINESS OUR VISION The group's multi-brand platform enables us to service groups of consumers efficiently with ranges of products differentiated in style and price point. The appeal of online shopping, with its convenience and value proposition, continues to resound with consumers globally and supports high-growth rates. Our vision is to be leading the e-commerce fashion market for 16 to 45 year-olds, which we will drive through our strategic priorities: INSIGHT creating a competitive customer proposition INVESTMENT delivering growth through organic means and acquisitions to increase market share INNOVATION driving customer engagement INTEGRATION integrating new brands HIGHLIGHTS HIGH GROWTH Revenue +41% GLOBAL CUSTOMER BASE Active customers¹ 18M 1. Active customers defined as having shopped on the website in the last year. PROFITABLE Profit before tax +35% REVENUE BY GEOGRAPHY USA ₤435M LUK ₤945M MAN ANNUAL REPORT AND ACCOUNTS 2021 OUR BUSINESS PRINCIPLES / STRATEGIC REPORT OUR VALUES PASSION Each day we are inspired to be the best we can be. We are focused and committed to giving our customers the experience they want. AGILE We are constantly evolving to stay one step ahead. We embrace change and grab new opportunities with both hands. We are lean, effective and efficient. CREATIVE We are unique and aspirational. We are not afraid of doing things our way; daring to be different. We are creative in thinking and design. TEAM We listen and respond to create a place where everyone's contribution is important. Building success through our people and sharing in it together. We remember to have fun along the way. 01 CHALLENGING THE FASHION MARKET We understand what customers want. We operate in an efficient and profitable way, delivering value to our stakeholders. We invest to create a sustainable business. RESPONSIBLE We operate with responsibility towards all our stakeholders - our customers, employees and partners and in a sustainable way to reduce environmental impact. INSPIRED With a finger on the pulse of fashion, we spot the latest trends from all over the world. REST OF EUROPE ₤245M REST OF THE WORLD ₤120M GLOBAL We operate in a global market, unhindered by borders, languages and physical presence. CONNECTED Through a large social media following, we connect with millions globally. FAST Hundreds of new products added daily and top sellers are re-bought within days, with the group built on its successful "test and repeat" model. 08 09#7BOOHOO GROUP PLC GROUP STRUCTURE AND BRANDS ABOUT OUR GROUP AND OUR GLOBAL BRANDS EACH BRAND IS DIFFERENTIATED IN ITS MESSAGE, APPEAL AND TARGET AGE GROUP boohoo group plc owns the brands boohoo, boohooMAN, PrettyLittleThing, Nasty Gal, MissPap, Karen Millen, Coast, Oasis, Warehouse, Debenhams, Dorothy Perkins, Wallis and Burton. It designs, sources, markets and sells clothing, shoes, accessories and beauty products targeted at 16 to 45 year-old consumers globally. 10 ANNUAL REPORT AND ACCOUNTS 2021 count / STRATEGIC REPORT BOOHOO boohoo is the young girl's fashion best friend, offering the most up-to-date fashion at incredible prices with unbeatable choice, great quality and excellent service. The brand's core values are fun, fashion, social and inclusive. This translates into a product range for every young woman around the world. BOOHOOMAN Combining cutting-edge design with an affordable price tag, boohooMAN brings young men the latest styles and looks in a youthful package, 24/7. | 11#8BOOHOO GROUP PLC GROUP STRUCTURE AND BRANDS CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 G / STRATEGIC REPORT PRETTYLITTLETHING PrettyLittleThing is a youthful trend leader in online women's fashion, offering a wide range of products at great prices, supported by an engaging global social media presence. The brand aims to help every girl feel like a celebrity with her clothes. NASTY GAL Rooted in LA, Nasty Gal is a bold and distinctive brand for fashion-forward, free-thinking young women, offering limited edition clothing and vintage pieces to a global audience. The brand's largest market so far has been in the USA, giving them a global reach with enormous potential for growth. MISSPAP MissPap is aimed at fashion- conscious young women who love fashion and want to create looks that are worth sharing with friends. KAREN MILLEN Karen Millen is known globally for creating beautifully crafted fashion for confident women who know their own style. Targeted at driven and career-minded women in their 30s and 40s, the brand offers high-quality clothes for that modern, polished and feminine look. COAST Coast believes that life is for living, fashion should be fun and dressing up is for every day. The brand produces versatile pieces that are easy to wear and are an effortless addition to a woman's own style. 12 13#9BOOHOO GROUP PLC GROUP STRUCTURE AND BRANDS CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 / STRATEGIC REPORT OASIS Oasis creates hard-working, easy pieces that are made for modern life and non-stop schedules. The brand's collection of crafted silhouettes, beautiful shapes and pretty detailing breathes life into faithful staples. WAREHOUSE Warehouse is a British-born fashion brand with a city state of mind. With trending pieces designed for every moment, an urban edge and essence of tough femininity, the brand captures the spirit of club culture in styles that look good now and even better later. DOROTHY PERKINS Dorothy Perkins is a feminine, versatile and affordable brand with rich British heritage. The brand has been inspiring and dressing women for over 100 years, striving to provide flattering fits across all pieces with the mantra: if you feel good, you should wear it. WALLIS "We understand real women and design clothes to help them look and feel great." Wallis is a British brand offering exclusive, modern styles aimed at women in their 30s and 40s. BURTON Burton is a British brand offering menswear clothing and accessories that combine heritage tailoring with modern style. Burton's exclusive collection includes everything from suits to casuals. DEBENHAMS A digital department store offering everything from fashion, beauty, sport, and homeware, Debenhams provides its customers with a unique, differentiated and exclusive mix of brands. 14 | 15#10OUR BUSINESS MODEL BOOHOO GROUP PLC We have created a formidable suite of relationships and resources, and have combined this with our insight and understanding of changing consumer demands to build a business platform that delivers value to all our stakeholders. DELIVERING VALUE FOR ALL OUR STAKEHOLDERS RELATIONSHIPS AND RESOURCES RELATIONSHIPS Employees Our employees are our greatest asset, delivering a truly awesome package of skill and knowledge that enables us to tackle the most challenging feats Suppliers We have developed a comprehensive network of suppliers from all corners of the world and we continue to work with them to bring us the product and services that drive our success Customers and partners Our customers and partners are our life-blood. We engage, listen, learn, create and repeat successfully. Our partners help us reach customers globally HOW WE OPERATE We design, source, market and sell fashion clothing, shoes, accessories and beauty products to 16 to 45 year-old consumers globally. We implement a "test and repeat" model that brings the latest trends and fashion inspiration in a matter of days to our consumers across the world. Design and inspiration Our skilled designers and buyers have their fingers on the pulse of fashion around the world to spot the latest trends ANNUAL REPORT AND ACCOUNTS 2021 VALUE GENERATED FOR STAKEHOLDERS EMPLOYEES We provide our employees with the opportunity to develop their skills and experience in a dynamic business and give them a share in its success through share ownership plans and bonuses SUPPLIERS We operate with our suppliers in a transparent way and enable suppliers to participate in our success as we grow, and we work to improve factory standards where required RESOURCES Brands A portfolio of diverse brands, with a rich heritage and consumer loyalty, renewed and developed for today, enables us to grow market share Infrastructure We have invested millions in state-of-the-art, automated distribution centres and great office facilities for our talented teams Technology Our formidable technology platform comprises best-of- kind systems and enables us to operate a huge volume business with efficiency and accuracy Financial Financial resources from our shareholders have been boosted by retained profits that have enabled us to build a debt-free business with the capacity for investment and acquisitions Sourcing and production Buyers tap into a global network of approved suppliers to find the best mix of quality and price to deliver outstanding value to our customers Marketing and customer engagement We connect with our consumers through social media and innovative advertising, supported by influencers and celebrities, and through our engaging websites and apps, offering the customer the very best online shopping experience Engagement and repeat Sophisticated monitoring of marketing and product success enables us to respond rapidly to consumer demand and optimise customer reach Delivery and customer care Great customer service is provided by a comprehensive choice of delivery options, payment methods and a highly rated customer service centre takes care of the entire customer journey CUSTOMERS We provide our customers with great product and value at prices below those of the high street and with a service that is convenient and safe at home We COMMUNITY engage with the wider community through our charitable work, the Leicester Garment and Textile Workers' Trust, and through the provision of jobs in our offices and distribution centres that benefit the local area INVESTORS Investors have seen substantial capital growth as the share price has risen, along with the growth and profitability of the group PLANET We are determined to play our part in reducing the environmental impact of clothing and our operations through our greatly increased focus on sustainability 16 17 / STRATEGIC REPORT#11CHAIRMAN'S STATEMENT BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 Mahmud Kamani EXECUTIVE CHAIRMAN 4 MAY 2021 MOTEL MAX CLEARANCE 8"-3" HIGH GROWTH ₤1.745BN Revenue up 41% GLOBAL CUSTOMER BASE 18M Active customers PROFITABLE +35% Profit before tax AGENDA FOR CHANGE Undoubtedly, the most significant issue that we, as a group, have been addressing since last July has been that of unacceptable practices within the group's Leicester supply chain. We are implementing many important changes to the way we work with suppliers to eliminate these practices, while ensuring Leicester becomes a centre of excellence for British garment manufacturing and supporting British jobs. I want to reassure our stakeholders that this matter is of the highest priority and has the full attention of your board and me, as Executive Chairman. The progress we are making is detailed in the Agenda for Change section later in this report, and is also summarised in the review of the business. The board is acting with determination to implement every change recommended by Alison Levitt QC in her review. To guarantee transparency and independence in the oversight of the programme, progress is being monitored by Sir Brian Leveson PC, KPMG and other highly respected third parties. COVID-19 Like every other organisation, we faced COVID-19 and the many challenges it presented - none more so than how to keep our colleagues safe, while continuing to maintain our business for the benefit of all our stakeholders. None of the decisions we have made have been taken lightly, especially during the worst periods of the pandemic. I believe that we have been able to control the risk and the preservation of our business through careful implementation of safety processes in all our facilities. In addition, we have sought to be fair in all our dealings with stakeholders: we have kept to our promise of paying UK suppliers on 14-day terms; we have paid self-isolating colleagues their full pay; and we have not drawn on any government support. The board is immensely grateful to our colleagues for their adaptability into new working practices and hard work during these difficult times. BUILDING FOR THE FUTURE GROUP ACTIVITIES AND PERFORMANCE From a trading perspective, the fact that we are exclusively an online business has enabled us to continue to operate and, with our compelling customer proposition, we have been able to grow revenue by 41% to £1.745 billion. We have maintained our 10% EBITDA profit margin; an achievement that we are proud of. We are fortunate to have been in a strong cash position and, as a result, we have been able to undertake a number of strategic acquisitions. We purchased the minority interest in PrettyLittleThing, well in advance of the date of the option agreement, and we acquired the online businesses of Oasis, Warehouse and, towards the end of the financial I year, Debenhams, Dorothy Perkins, Wallis and Burton. These acquisitions are very exciting for us: Debenhams gives us the opportunity to open up a digital department store and marketplace, while the other iconic brands give us the opportunity to extend our target demographic and reach. We have become experts at revitalising brands and making them appeal strongly to the consumer, as our track record shows. Our other investment activities planned over the next financial upon year are centred automation at the Sheffield warehouse that serves PrettyLittleThing, the opening of third and fourth warehouses in Wellingborough and Daventry for our growing brands, the set up of our Leicester factory and showcase facility, and in enhancements to our IT infrastructure. 66 These acquisitions are very exciting for us: Debenhams gives us the opportunity to open up a digital department store and marketplace, while the other iconic brands give us the opportunity to extend our target demographic and reach." We are also passionate about making boohoo a sustainable business for the longer term. Our new Group Director of Sourcing and Sustainability, Andrew Reaney, is leading a programme of change and has developed a roadmap to ensure we put that into effect. You can read about this in Andrew's section on sustainability in this report. Finally, on behalf of the board and myself, I would like to thank our colleagues, suppliers and partners for their invaluable contributions and support in this unprecedented year and I wish them all the best for the next, as we look forward to a return to normality. Mahmud Kamani EXECUTIVE CHAIRMAN 18 19 /STRATEGIC REPORT#12BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 AGENDA FOR CHANGE John Lyttle CEO 4 MAY 2021 / STRATEGIC REPORT | 5 21 66 From the meetings in which I have been involved, I have no doubt about the determination of all at boohoo to address the issues in respect of which it has been criticised and both to promote and embed a new way of working. boohoo has enthusiastically embarked upon and pursued a review of its supply chain and has initiated improvements by way of learning and development in relation to responsible purchasing practices. It has visualised the high standards to which it aspires in every aspect of its business and is taking steps to bring them into being not least through its newly established charitable trust and the development of Thurmaston Lane in Leicester as a factory and training academy." Sir Brian Leveson PC, FORMERLY A COURT OF APPEAL JUDGE. In July 2020, allegations emerged of poor and potentially illegal practices by garment manufacturers in Leicester, some of which supplied clothing to the boohoo group. I am proud to lead a business that, instead of choosing to walk away from the allegations, took the immediate decision to do everything within its power to address them and play its part in rebuilding a thriving garment sector in the heart of the UK - a sector that provides good employment and makes a significant contribution to the local and UK economies. We took the allegations of malpractice and poor working conditions extremely seriously and immediately launched an in-depth investigation. We appointed senior barrister, Alison Levitt QC, to conduct a thorough review of the supply chain in Leicester with a particular focus on the treatment of workers. As of our part commitment to deal with these issues in an open and transparent manner, the group published Ms Levitt's report in full. On receipt of the report, we launched our Agenda for Change, a programme to ensure that we resolve the issues identified in Leicester and accepted all 17 recommendations from the Levitt report. In the eight months that have passed since publication, my team has showed outstanding leadership and driven significant change, and are on track to deliver against all of Ms. Levitt's recommendations; these are outlined in this section. The changes we have made are creating a much stronger, more transparent and more sustainable business that will benefit everyone involved in the garment industry and the UK economy. GOVERNANCE AND CORPORATE RESPONSIBILITY go Strengthening our internal governance structures was one of Ms Levitt's key recommendations and we have made a number of new appointments to ensure that our business continues to from strength to strength. External appointments include Shaun McCabe, an independent non-executive director, who is leading the group's Risk Committee, and former High Court Judge, Sir Brian Leveson PC, who has been appointed to provide independent oversight and governance of the Agenda for Change programme. Internally, responsibility for oversight of the group's supply chain and sustainability programmes sits within the group's ethical trade and sustainability teams. Since July 2020, we have made a number of strategic appointments in this team including: • Director of Responsible Sourcing & Group Product Operations . Head of Sustainability . Head of Ethical Product Compliance • Head of Ethical Compliance . Head of Product Operations . Senior UK Ethical Compliance Manager INCREASED TRANSPARENCY has: In September, the group committed to operating in a more open and transparent way. Following the publication of the full Alison Levitt QC report in full, the group volunteered and subsequently appeared in front of the UK's Environmental Audit Select Committee in December 2020 published and will continue to publish every report that Sir Brian Leveson PC produces for the group's board proactively and regularly updated a broad of stakeholders including range No. 10, the Secretary of State for Business, the Chancellor of the Exchequer, the Secretary of State for International Trade, the Shadow Cabinet, local MPs, local NGOs and many government, other interested parties published its UK supply chain and a new sustainability strategy in March 2021, and has committed to publishing the full international manufacturers list in September 2021 20 20#13AGENDA FOR CHANGE CONTINUED BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 / STRATEGIC REPORT RAISING STANDARDS ACROSS OUR SUPPLY CHAIN MAPPING AND AUDITING The group continues to map and audit the UK supply chain, a piece of work that was already underway in February 2020 and was accelerated in July 2020. To increase the capacity and speed at which audits were completed, the group's external supply-chain auditors, Verisio, increased their auditing teams and presence 'on the ground'. A new Head of Ethical Compliance, Head of Product Compliance and a Senior UK Ethical Sourcing Manager were appointed to strengthen the UK in-house team, and Sir Brian Leveson PC has appointed a team of investigators led by Tim Godwin OBE, ex Deputy Commissioner of the Metropolitan Police, to assist him. By March 2021, this team collectively had audited the majority of suppliers in the UK at least twice. These audits were unannounced and included visits conducted in the evening and weekends to investigate allegations of illegal working hours. As well as accompanying the boohoo compliance team and Verisio on audits, Tim Godwin's team also undertook 'deep dives' and analyses into the corporate structures to identify directors and people exercising significant control, who were then interviewed. The government also deployed teams of investigators from the GLAA, NCA, DWP and HMRC. The group has been working closely with the Director of Operations for the GLAA who, on 21 April 2021, confirmed that they had uncovered no evidence to support claims of modern-day slavery in the boohoo supply chain. Every supplier was provided with the opportunity to remedy issues identified during their audit process and to implement additional measures required by the business to provide more protection to workers, including adoption of biometric clocking-in systems. The has been encouraged by the group actions of many suppliers who have demonstrated that they fully support the approach taken by the and the values group they share to improve the UK garment sector. CONSOLIDATION One of Alison Levitt's key recommendations was to consolidate the group's UK supply chain. The insight from the auditing and mapping process has led to the group's ceasing to trade with some suppliers who were unable or unwilling to demonstrate the required level of transparency. Each supplier, with whom we have ceased business relations, was given numerous warnings and opportunities to remedy issues, but some failed to do so. It is key to the group's policy that suppliers are given an opportunity to remedy any issues an audit may bring to light. Unauthorised subcontracting was identified as a key problem in the Levitt review. To resolve this and prevent reoccurrence, the in-house ethical compliance team worked side-by-side with suppliers to support them in bringing their nominated Cut Make and Trim ('CMT') units in-house. This shift in approach ensures that ownership, responsibility and accountability sits with the direct supplier while critically- workers are fully protected by the group's code of conduct. The group remains committed to sourcing in Leicester and the UK, and growing volumes with good and compliant suppliers. The FY21 volume of units sourced in Leicester remains at levels of growth consistent with the previous year. THE GARMENT AND TEXTILE WORKERS' TRUST The Trust's founding mission will be to create positive and lasting change for the benefit of the wider industry - providing guidance, advocacy and remedy to anyone working in the garment industry in Leicester, whether they work for one of boohoo's suppliers or not. The purpose of the Garment and Textile Workers' Trust has been informed from months of ongoing engagement with local and government stakeholders. In addition to seeking guidance from individual experts and NGOs, the group hosted a consultation workshop, where over 30 different organisations and individuals were invited to share their insights. In its first year, we envisage that the Trust will be grant giving, complementing rather than competing with existing charities and community and NGO initiatives in Leicester. As it grows and develops, the trustees will look to expand on the remit and deliver a more comprehensive package of services for garment workers in the city. This could include community initiatives, such as outreach workers and educational opportunities, such as scholarships. The five founding trustees reflect a broad spectrum of stakeholders with group NGO, enforcement, local government and local community representation. The trustees are: Tim Nelson, International Development Director for Hope for Justice David Lindley, QPM Deputy Lieutenant Councillor Luis Fonseca, Leicester Alison Tripney, Head of Community, Leicester City Football Club . Cheryl Chung, Head of Corporate Affairs, boohoo group A CENTRE OF MANUFACTURING EXCELLENCE In June 2020, the group finalised the purchase of a site to establish a manufacturing facility in Leicester. The site on Thurmaston Lane will be a world-class, end-to-end garment production facility for The aims of the site include: group. establishing a state-of-the art production facility in Leicester that will provide a benchmark for the sector; the ensuring there is a detailed understanding of our ability to produce garments at our price points ethically, safely and legally; and creating great jobs and adding value to the community of Leicester The group is working with all education providers across Leicester to understand how our local presence can support their students. A4C ROADMAP boohoo July 2020 group plc Appointed Alison Levitt QC to undertake independent review of boohoo group • Meeting with Deputy Mayor and senior team from Leicester City Council Aug 2020 . . . New Head of Ethical Compliance and Head of Sustainability start Supply chain auditors Verisio given additional resources to accelerate audit programme Work with Slave-Free Alliance to strengthen our whistleblowing policy October 2020 • New non-executive director, Sean McCabe, appointed Agenda for Change programme launched, committing the boohoo group to implement all 17 recommendations in the Levitt review Bureau Veritas begin mapping and auditing international suppliers Development of new 'Responsible Purchasing Practices' begins Work a new portal to manage all interactions with suppliers Agenda for Change and supply chain updates mandated at board meetings November 2020 Sir Brian Leveson PC appointed to oversee Agenda for Change New Sustainability Manager starts New Risk Committee established Announce exclusion of 64 suppliers from approved supply chain Provided evidence to the Business, Energy & Industrial Strategy Select Committee on Xingjian February 2021 • New boohoo group Modern Slavery Statement published • New requirement for suppliers to bring CMT units in-house Consultation to inform establishment of Garment and Textile Workers' Trust . Became a member of the Unseen National Modern Slavery helpline and portal New whistleblowing escalation process boohoooo September 2020 . New Director of Responsible Sourcing starts Alison Levitt QC review published in full Begin work with Apparel & General Merchandise Public and Private Protocol New Supply Chain Committee established 00 December 2020 New supplier app launched, strengthening our purchasing procedures Sir Brian Leveson PC appoints new investigative and inquiry team, led by Tim Goodwin OBE, to conduct further checks on suppliers Provided evidence to the Environmental Audit Committee Modern slavery training mandated for managers and above January 2021 Sir Brian's first report to boohoo group board published in full Internal communications update business progress on Agenda for Change programme Engagement with local community partners in Leicester, hosted by Leicester City Football Club charitable foundation New Head of Product Operations starts Listening sessions with our buying and merchandising teams to inform Responsible Purchasing Practices May 2021 • Launch our first economic impact report Launch our Responsible Purchasing Practices: Publish a new sustainability report, charting progress September 2021 Publish our international supply chain Open new manufacturing centre of excellence in Leicester March 2021 New Senior UK Ethical and Compliance Manager starts New Head of Ethical Product Compliance starts Publish our UK supply chain Launch new group sustainability strategy Sir Brian Leveson's second board report published Andrew Reaney delivers keynote address at Draper's 2021 sustainability conference Sign contracts with Cotton Connect and Better Cotton Initiative to expand sustainable cotton sourcing . Around 500 audits completed since July 2020 44 For those of us in Leicester who take pride in the clothing manufacturing industry, the last year has been really tough. We are grateful for boohoo sticking by UK manufacturers and taking a stance with an Agenda for Change. With our joint efforts, all the good suppliers are confident that this will start building Leicester to be a great manufacturing hub. We hope that the work boohoo has done gives other retailers the confidence to begin buying British once again." Sajid Esa 5TH AVENUE CLOTHING 22 || 23#14OUR COVID-19 RESPONSE BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 THE GROUP IS CONTINUING TO MONITOR AND IMPLEMENT GOVERNMENT ADVICE ON SAFE WORKING CONDITIONS IN ALL OF ITS FACILITIES AND OFFICES IN THE UK AND OVERSEAS. SO THAT ALL COLLEAGUES ARE KEPT SAFE AND CAN CONTINUE TO WORK EFFECTIVELY. These measures have been subject to change throughout the pandemic, meaning there have been periods when all office staff worked from home, periods with limited rotational workplace visits, and periods when all but essential workers worked at home. In the distribution centres, we invested significantly to implement measures to ensure the safety and protection of all our colleagues. These include, but are not limited to, scheduling of colleagues' workdays to be on staggered starting and break times, and monitored social distancing in all areas where closer contact might occur within the otherwise large spaces of the warehouses. In all instances, appropriate signage, screening, traffic management, sanitising stations and additional regular deep cleaning has been implemented. We installed thermal imaging detectors in our distribution centre and Manchester offices to ensure no colleagues with symptoms could enter. In addition, we have been broadcasting frequent reminders and updates to colleagues on safety procedures and practices, and have been monitoring and tracking COVID-19 cases. The business also pioneered a rapid lateral flow testing programme run by the British Army and Lancashire County Council. Following two days of onsite testing of colleagues, the Army returned in January 2021 to train our teams to conduct the tests. In early February 2021, we rolled this programme out to all office locations to keep our colleagues, their families and the community as safe as possible. Our office and warehouse COVID-19 safety processes have been verified and approved by public health officials in England. The group has not utilised any government support, and maintains rigorous control over its finances in order to react rapidly to developments. Further, the group has drawn on its own resources to support colleagues during the pandemic, ensuring that all colleagues in self-isolation receive their full pay. COOO 24 25 / STRATEGIC REPORT#15REVIEW OF THE BUSINESS BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 PERFORMANCE DURING THE YEAR OVERVIEW Revenue Gross profit Gross margin EBITDA +41% 2021 2020 £ million £ million Change 1,745.3 1,234.9 945.2 666.3 +42% 54.2% 54.0% +20bps 153.9 115.6 +33% % of revenue 8.8% 9.4% -60bps Profit before tax 124.7 92.2 +35% Diluted earnings per share 7.25p 5.35p +36% Net cash at year end 276.0 240.6 +£35.4 million Adjusted measures: Adjusted EBITDA² % of revenue Adjusted EBIT³ % of revenue Adjusted profit before tax4 Adjusted diluted earnings per share 1. Net cash is cash less borrowings. 173.6 126.6 +37% 10.0% 10.2% -20bps 149.3 107.0 +40% 8.6% 8.7% -10bps 149.9 108.3 +38% 8.67p 5.88p +47% 2. Adjusted EBITDA is calculated as profit before tax, interest, depreciation, amortisation, and share-based payment charges. 3. Adjusted EBIT is calculated as profit before tax, interest, share-based payment charges, and amortisation of acquired intangible assets. 4. Adjusted profit before tax is calculated as profit before tax, excluding share-based payment charges and amortisation of acquired intangible assets. 5. Adjusted diluted earnings per share is calculated as diluted earnings per share, adding back amortisation of acquired intangibles, share-based payment charges, and adjusting to 34% of the non-controlling interest as in previous years (affects prior year comparative only). GROUP OVERVIEW Group revenue for the year increased by 41% (41% CER) to £1.745 billion (2020: £1.235 billion). Revenue growth across all territories and brands was strong. Our longer- established brands continued their strong growth, whilst the newer brands delivered rapid incremental growth as they were refreshed and relaunched. Adjusted EBITDA was £173.6 million (2020: £126.6 million), an increase of 37% on the previous year. Through leverage of overheads and tight control of costs, we were able to largely offset the increase in overseas distribution costs caused by the pandemic and were able to deliver an adjusted EBITDA margin of 10.0% (2020: 10.2%). Profit before tax was £124.7 million (2020: £92.2 million), an increase of 35%. Adjusted diluted earnings per share was 8.67p, up 47% on the prior year. Diluted earnings per share rose to 7.25p, an increase of 36% (2020: 5.35p). Cash generation was strong, with operating cash flow of £201.1 million (2020: £127.3 million). Net cash flow was £30.6 million (2020: £47.6 million), following significant infrastructure capital expenditure of £49.3 million, the acquisition of the new brands and associated intellectual property for £73.4 million and the remaining minority interest in PrettyLittleThing for £161.9 million (a related party transaction). The share placing raised £195.7 million net of issue costs and £39.4 million was spent on the purchase of own shares for the Employee Benefit Trust. Our net cash balance at the period end increased to £276.0 million (2020: £240.6 million). Our priority throughout the pandemic has been to ensure the safety of our colleagues, customers and partners by following government guidelines on safe working practices. We have been able to continue operating our facilities on this basis, which has kept the business functioning with the support of all parties involved. During this period, in light of its strong trading performance, the has not claimed any of the UK Government's financial support packages for businesses. The group group has continued to benefit from strong growth across all brands and geographies, as the convenience, pricing, product range and customer service resonated with consumers, even more so in these unprecedented times. Customer return rates across all geographic regions have been lower than in the pre-pandemic period, with fluctuations towards levels closer to normal during periods of easing of lockdowns. Active customer numbers in the last 12 months increased by 28% to 17.8 million. We have seen an 8% increase in the number of items per basket, which we are attributing largely to the impact of the pandemic. Session growth was 27%. Website conversion rate to sale remained steady at 4.28%. The three brands that we acquired in the previous financial year, MissPap, Karen Millen and Coast, are growing well, with solid foundations being built and the promise of bright futures. In June 2020, we acquired a further two new womenswear brands, Oasis and Warehouse, which have a great heritage and a strong following in the UK. Both brands started to trade on new websites from late July and have made excellent progress. In January 2021, we acquired the online business and intellectual property of Debenhams for £55.0 million, which we will develop into a digital department store and marketplace. In February 2021, we acquired the Dorothy Perkins, Wallis and Burton brands and inventory for £25.2 million, which will broaden our demographic reach and product offering. These three new brands continued to trade on the former Arcadia platform for a three-month period, pending transition to our platform. We are very excited about the potential of these new brands, as they complement our successful and comprehensive, multi-brand platform. The remaining 34% minority interest in PrettyLittleThing was acquired in May 2020, ahead of the original 2022 option- to-acquire date, for a combination of cash and shares with initial consideration £269.8 million, potentially rising to £323.8 million. PrettyLittleThing is continuing to trade very well, with high-growth rates across all territories and the acquisition resulted in substantial earnings enhancement for the group's shareholders. We remain excited about PLT's long-term prospects and the value creation opportunity that exists for the group's shareholders. 26 27 སུ། / STRATEGIC REPORT#16REVIEW OF THE BUSINESS CONTINUED BOOHOO GROUP PLC PERFORMANCE BY MARKET UK group, accounting The UK market continues to be the largest for the for 54% of revenue (2020: 55%). Growth of 39% to £945.1 million was strong across all brands, with the three new brands acquired in the prior year augmenting this growth as they built from a low base. Our multi-brand strategy continues to enable us to gain market share in the UK, through our compelling consumer proposition. Gross margin increased from 50.3% to 50.9%, supported by a small increase in basket size and a strong product offering. During the lockdown period, we increased the offering of activewear, loungewear and tops, reacting quickly to the changes in demand from home working, which was highly successful. Return rates have been lower than in the previous year, due to a different mix of product and consumer behaviour during the pandemic. Online shopping clearly benefitted from the lockdown, with strong customer growth continuing and, with a prudent strategy to reduce marketing costs as a percentage of sales, we were able to achieve improved profitability. The convenience of our comprehensive range of customer payment options has also added to customer growth and purchase frequency. REST OF EUROPE It is apparent that the restrictions on movement and the effect of lockdowns in Europe have impacted growth variably at different points in time across the continent, but nevertheless, overall performance was pleasing. Revenue growth of 30% to £244.7 million was good across all brands and all major countries, starting with exceptional growth rates in Q1, resulting from consumers shifting to online shopping during lockdown, and continuing with moderating growth in subsequent quarters. Overall, return rates have been significantly lower than in the previous year, with some resumption to normal levels during easing of lockdowns. Gross margin declined from 58.0% to 56.2%. The group had planned for many months to ensure that it could continue to trade effectively with EU countries after the end of the transition period on 31 December 2020, following Brexit. As a result, operations continued uninterrupted in January and February 2021, although additional customs compliance costs and duty on some products does increase costs moderately. Whilst these costs will continue to provide a modest headwind in the new financial year, the group will look to mitigate these costs, for example, through operational efficiencies. UK GROWTH USA GROWTH +39% RoE +30% +65% RoW +16% 28 ANNUAL REPORT AND ACCOUNTS 2021 / STRATEGIC REPORT USA The group's highest territorial growth rates have been seen in the USA, as the brands' momentum builds and market share increases. PrettyLittleThing, Karen Millen and boohooMAN continued their exceptional growth, whilst boohoo and Nasty Gal grew strongly too. With all brands supported by the success of social media outreach and the compelling customer proposition, group USA revenue increased by 65% to £435.1 million. Return rates have also been significantly lower than in the previous year. Gross margin improved slightly from 59.8% to 59.9%. Increases in basket size and reduced return rates have only partially offset the significant rise in distribution costs caused by the pandemic's impact on carrier capacity. We expect higher distribution costs to continue for some time to come until there is a resumption of a more normal level of air traffic. REST OF WORLD Growth in the rest of the world has been moderate at 16% to £120.4 million, impacted undoubtedly by the delays in the distribution network caused by greatly reduced airfreight capacity. Gross margin declined slightly from 55.8% to 54.9%, a small reduction given the challenging conditions in overseas territories brought about by the pandemic. Airfreight capacity constraints, caused by the pandemic, also increased distribution costs to the more distant markets, and this is expected to continue for some time to come. 29#17REVIEW OF THE BUSINESS CONTINUED BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 CONTINUED PROFITABLE GROWTH FINANCIAL REVIEW "The group has achieved a strong performance with revenues and profits increasing in all territories and across all brands." REVENUE BY GEOGRAPHICAL MARKET UK Rest of Europe USA Rest of world KPIs Active customers¹ Number of orders Order frequency² Conversion rate to sale³ Average order value4 Number of items per basket 2021 2020 Change £ million £ million Change CER 945.1 679.4 +39% +39% 244.7 188.4 +30% +30% 435.1 263.6 +65% +63% 120.4 103.5 +16% +19% 1,745.3 1,234.9 +41% +41% 2021 17.8 million 2020 13.9 million Change 53.4 million 42.2 million +28% +27% 3.00 3.04 -1% 4.28% 4.26% +2bps £46.06 £43.50 +6% 3.32 3.06 +8% / STRATEGIC REPORT 1. Defined as having shopped in the last 12 months on the website. 2. Defined as number of website orders in last 12 months divided by number of active customers. 3. Defined as the percentage of website orders taken to internet sessions. 4. Calculated as gross sales including sales tax divided by the number of orders. CONSOLIDATED INCOME STATEMENT 2021 2020 £ million £ million Change 1,745.3 1,234.9 +41% (800.1) (568.6) +41% 945.2 666.3 +42% 54.2% 54.0% +20bps (772.6) (539.9) 1.0 0.2 173.6 126.6 +37% Adjusted EBITDA margin % 10.0% 10.2% -20bps Depreciation (20.1) (16.6) Amortisation of other intangible assets (4.2) (3.0) Adjusted EBIT 149.3 107.0 +40% Adjusted EBIT margin % 8.6% 8.7% -10bps Adjusting items: Amortisation of acquired intangible assets (5.5) (5.1) Equity-settled share-based payment charges (19.7) (11.0) Operating profit 124.1 90.9 +37% Finance income 0.9 1.7 Finance expense (0.3) (0.4) Profit before tax 124.7 92.2 +35% Tax (31.3) (19.3) Profit after tax for the year 93.4 72.9 +28% Diluted earnings per share 7.25p 5.35p +36% Adjusted profit after tax for the year 113.8 86.0 +32% Amortisation of acquired intangible assets (5.5) (5.1) Share-based payment charges (19.7) (11.0) Adjustment for tax 4.8 3.0 Profit after tax for the year 93.4 72.9 share Adjusted profit for the period attributable to shareholders of the company Adjusted diluted earnings per 108.5 69.9 +55% 8.67p 5.88p +47% AGENDA FOR CHANGE Our for the Agenda for Change programme commenced with the publication of Alison Levitt QC's independent review of the group's UK supply chain, published in full in September 2020. We followed the review with the appointment in November 2020 of Sir Brian Leveson PC to oversee progress on implementation of the review's recommendations, which the board intends to implement in full. Sir Brian's first board report, which was published in full, reported progress at pace in January 2021, while noting that recommendations remain work in progress. Sir Brian's most recent update, published in March 2021 alongside the group's UK supplier list, notes that the depth and detail of supplier audits have dramatically changed the way the industry is run in Leicester and the determination of boohoo to embed a new way of working, which, despite a number of acquisitions in recent months, remains its top priority. The areas the group is committed to bring to fruition are: enhancing corporate governance; redefining our purchasing practices; raising standards across our supply chain; supporting Leicester's workers and workers' rights; supporting suppliers; and demonstrating best practice in action. Significant progress on the Agenda for Change has been delivered by our teams over the last six months and the group expects to make further great progress in the coming year, with publication of our global supplier list expected by September 2021. Further details of the progress of the Agenda for Change are contained in a separate section in this report on page 20. CORPORATE GOVERNANCE The board is committed to strengthening corporate governance and progress to date includes: the appointment of Shaun McCabe as an independent non-executive director and Chair of the Audit and Risk Committees; the appointment of a Group Director of Responsible Sourcing and resourcing of a the publication support team; of the group's first Sustainability Report; and the search for an additional non-executive director with ESG experience. The Risk Committee is a high-profile board function created to oversee, in particular, the Supply Chain Compliance Committee as part of the Agenda for Change, demonstrating our commitment to change at the highest level in the company. Additionally, the group appointed Sir Brian Leveson PC to provide oversight of its Agenda for Change programme in November 2020. SUSTAINABILITY The group published its first sustainability strategy, UP.FRONT, in March 2021, in which we have addressed key priority areas and time-based targets to achieve our goals. The three key areas of focus are on smarter manufacturing of clothes, better terms for suppliers and action in responsible business practices to reduce our carbon footprint. This strategy has been formulated over the past year by the sustainability team, with board I support demonstrating the group's firm commitment to tangible progress in this area. Revenue Cost of sales Gross profit Gross margin Operating costs Other income Adjusted EBITDA 30 31#18BOOHOO GROUP PLC CONTINUED PROFITABLE GROWTH CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 / STRATEGIC REPORT Operating costs comprise distribution costs and administrative expenses excluding depreciation and amortisation and have increased by 60bps to 44.3% of revenue, with tight control of overheads and marketing costs mitigating the increase in overseas distribution costs caused by the pandemic. Adjusted EBITDA, which is not a statutory measure, represents earnings before interest, tax, depreciation, amortisation, non-cash share-based payments charges and exceptional items. It provides a useful measure of the underlying profitability of the business. Adjusted EBITDA increased by 37% from £126.6 million to £173.6 million and, as a percentage of revenue, moved from 10.2% to 10.0%. Adjusted profit after tax, as with Adjusted EBITDA, provides another more consistent measure of the underlying profitability of the business by removing non-cash amortisation of intangible assets relating to the acquisition of new brands (being their trademarks and customer lists), share-based payment charges and exceptional items. TAXATION The effective rate of tax for the year was 25.1% (2020: 21.0%), which is higher (2020: higher) than the blended UK statutory rate of tax for the year of 19.0% (2020: 19.0%), due to expenditure not deductible for tax purposes, being principally depreciation on buildings and fit out, disallowable legal claims and share-based payment charges on growth shares. CONSOLIDATED STATEMENT OF FINANCIAL POSITION Intangible assets Property, plant and equipment Right-of-use assets Financial assets Deferred tax asset Non-current assets Working capital Lease liabilities Net financial assets/(liabilities) Cash and cash equivalents Interest-bearing loans and borrowings Deferred tax liability CONSOLIDATED CASH FLOW STATEMENT Profit after tax for the year Share-based payments charge Depreciation charges and amortisation Finance income Finance expense Loss on sale of fixed assets Tax expense Increase in inventories Increase in trade and other receivables Increase in trade and other payables 2021 2020 £ million £ million 93.4 72.9 19.7 11.0 29.8 24.7 (0.9) (1.7) 0.3 0.4 0.2 31.3 19.3 (45.8) (32.3) (8.8) (9.4) 82.1 42.2 Operating cash flow 201.1 127.3 Capital expenditure and intangible asset purchases (49.3) (26.2) Acquisition of new brands (73.4) (19.4) 2021 2020 Acquisition of non-controlling interest in PrettyLittleThing (161.9) £ million £ million Tax paid (38.3) (11.6) 118.3 42.3 Free cash (outflow)/inflow after tax (121.8) 70.1 141.6 119.2 Net proceeds from the issue of ordinary shares 201.4 2.7 16.7 14.6 Purchase of own shares by EBT (39.4) (14.9) 13.1 4.5 1.2 1.8 3.2 6.0 (0.1) (0.3) 292.9 186.6 (3.4) (90.9) (63.9) (5.9) (6.0) (18.3) (16.2) (4.8) (2.4) 12.6 (9.0) 30.6 47.6 276.0 245.4 245.4 197.8 (4.8) 276.0 245.4 (4.2) (3.6) 4.4 (6.6) 472.5 327.9 Finance income received Finance expense paid Dividend paid to non-controlling interests Net current tax asset/(liability) Net assets The increase in intangible assets is due to the purchase of the new brands. The right-of-use-assets are the capitalised value of property leases. Working capital has decreased in line with business growth and because of the increase in provisions of £23.4 million due to a number of claims. The lease liability is the discounted value of future lease The payments. has repaid all its borrowings. group Purchased intangible and fixed assets INTANGIBLE AND FIXED ASSET ADDITIONS Intangible assets Trademarks and customer lists Software Tangible fixed assets Distribution centres Offices, office equipment, fixtures and fit outs Motor vehicles Total intangible and fixed asset additions LIQUIDITY AND FINANCIAL RESOURCES 2021 2020 £ million £ million 73.4 19.4 12.3 3.8 85.7 23.2 16.9 15.4 20.0 6.6 0.1 0.4 37.0 22.4 122.7 45.6 Operating cash flow was £201.1 million compared to £127.3 million in the previous year, and free cash outflow after tax was £121.8 million compared to an inflow of £70.1 million in the previous financial year. Capital expenditure and intangible asset purchases were £49.3 million, which includes a £16.9 million investment in our distribution centres to support projected growth in the business, acquisition of new brands was £73.4 million and purchase of the remaining non-controlling interest in PrettyLittleThing was £161.9 million. The closing cash balance for the group was £276.0 million. Lease payments Repayment of borrowings Net cash flow Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year TRENDS AND FACTORS LIKELY TO AFFECT FUTURE PERFORMANCE The market for online fashion is forecast to continue to grow and, along with the increasing use of the internet globally, provides a favourable backdrop for the group with much opportunity for further growth. Customers throughout the world are seeking a wide choice of quality products at value prices lower than those available on the high street, with the convenience of home delivery. The group's target market has a high propensity to spend on fashion and the market is quite resilient to external macroeconomic factors. OUTLOOK As always, our focus is to maintain an outstanding customer proposition, with the latest fashion at great prices, combined with excellent customer service. To this end, we have a plan of continuous investment in our systems, infrastructure and technology to ensure we offer an optimal online shopping experience as we look to further cement our position as a leader in global fashion e-commerce. Revenue growth for the full year to February 2022 is expected to be around 25% at a group level, with newly acquired brands expected to deliver approximately five percentage points of this growth. Growth within our established brands remains strong, and over the last two years we have achieved a revenue CAGR of 42%. Trading in the first few weeks of the financial year has been encouraging; however, the economic outlook remains uncertain and we expect the benefits seen from reduced returns over the last 12 months to begin to unwind this year, whilst still experiencing significantly elevated levels of carriage and freight costs. Margins for established brands are expected to be in line year-on-year. We expect investment in newly acquired brands to dilute the group's overall adjusted EBITDA margin by 50-100bps, with the group's adjusted EBITDA margin expected to be in the region of 9.5-10% for the full year. Adjusted EBITDA is likely to see more of a weighting towards the second half of the year, reflecting a strong comparative period in the first half. This is consistent with financial prior to the one herein reported, and the group expects a higher adjusted EBITDA margin in the second half, reflecting investments in our scalable multi-brand platform. years group As announced on 12 April 2021, the acquired a new office in the heart of London's West End for £72 million. Capital expenditure for the remainder of the financial year is expected to be in the region of £125-175 million. This relates to growth investments in our new warehouse sites in Wellingborough and Daventry, as well as continued enhancements to our existing facilities, including automation at our Sheffield site to increase both capacity and efficiency. We are focused on building the business for the future and continued investment in our brands, infrastructure, people and technology will drive this growth and further economies of scale. We are also committed to continued improvements across our environmental responsibilities and to accelerate our sustainability journey. The group's medium- term target of sales growth of 25% per annum and an adjusted EBITDA margin of around 10% remains unchanged. 32 33#19HOW WE MANAGE RISK BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 / STRATEGIC REPORT RISK MANAGEMENT The board has overall responsibility for risk management, validating the appropriateness of the supporting system of internal controls and for reviewing their effectiveness. Effective risk management is an evolving and continuous process; our aim is to intrinsically embed effective risk management throughout the business in order to manage risk in a way that helps the group achieve its objectives. During the last financial year, there have been considerable ongoing improvements to the risk management framework at boohoo and the way we manage risk. This includes: " . . . The introduction of a new risk management policy, approved by the board; The establishment of risk-focused governance structures; The provision of risk management training to senior executives; The introduction of the assessment of risk appetite at board level; and Additional resourcing within the internal audit and risk team. RISK GOVERNANCE The group has established an Executive Risk Group and Risk Committee to oversee and monitor the improvements being made in relation to risk management. Below this level, we have established functional risk groups across the business to identify, assess, monitor and manage risks held at a functional level. Strategic risk reporting PLC Board Twice yearly monitoring of STRATEGIC RISK Risk appetite Risk Committee Quarterly monitoring of STRATEGIC RISK Strategic risk reporting Executive Risk Management Group Quarterly monitoring of STRATEGIC RISK and escalated FUNCTIONAL RISK Functional risk reporting Executive Focus Groups At least quarterly monitoring of FUNCTIONAL RISK Functional risk reporting Risk owners Continuous identification and management of FUNCTIONAL RISK OUR RISK MANAGEMENT APPROACH Identify - Top down and bottom up identification methods including workshops, interviews and focus groups Assess Prioritisation and measurement of risks using consistent risk assessment methods and against risk appetites agreed with the board Manage Identifying, improving and reviewing control measures that reduce risk impact or likelihood - Monitor Monitoring and reporting on the status of risks At a functional level, each business function is responsible for preparing and maintaining their functional risk registers and, with the assistance of the risk team, identifying, assessing, managing and monitoring risks and reviewing emerging risks within their function. Each risk is assigned an owner, through which ongoing activities and any actions related to that risk are updated. At strategic level, the Executive Risk Group oversees the monitoring of escalated functional risks as well as key strategic risks to the group. The board, assisted by the Risk Committee, reviews the strategic risks facing the group and assesses the mitigating factors, reviews emerging risks, performs deep dives on key risks, and assists the board in setting the risk appetite of the group, against which risks are evaluated. Each risk is assigned to a senior executive, through which ongoing activities and any actions related to that risk are updated. Both functional and strategic risk registers are prepared using consistent risk factors and evaluate business impact and likelihood ratings, both before (inherent) and after (residual) the effect of any mitigating activities or controls. Our risk management process is an ongoing assessment of the key risks facing our business, such that it is updated whenever there is a major change in the principal risks and uncertainties. The following are considered to be the principal risks and uncertainties as at the year-end. STRATEGIC RISKS Risk factors Risk owner SUPPLY CHAIN ETHICS Director of Responsible Sourcing & Group Product Operations As a result of complexity inherent within the supply chain, there is a risk that inappropriate, unethical and illegal non-compliance with required supply chain practices go undetected, which could lead to investigations from regulatory bodies and may cause reputational damage. COMPETITION RISK CEO and CFO . many The business operates in a broad and open market, with competitors. There are many factors that influence customers' choice, including service, fashion, price and brand. As a result of the above factors, there is a risk that market share may not grow or could decline European customers may be deterred from purchasing from a UK company following the UK's decision to leave the EU SUSTAINABILITY Director of Responsible Sourcing & Group Product Operations As a result of sustainability and environmental factors, there is a risk that customer perception is damaged, which could negatively impact the brand Longer term, consumers may reduce consumption of fast fashion due to environmental concerns GOVERNANCE CFO As a result of governance issues there is a risk of the business not meeting the best interests of its stakeholders Mitigation Agenda for Change outputs defining current and future policy, with actions rigorously monitored and reported Establishing the right structure and team by building out the sourcing and ethical compliance team, across the UK and regional offices Mapping the supply chain ready for reporting in 2021 (March/September) Scheduling regular audits against boohoo code of conduct • Transparency systems and tools are in place for UK (Leicester) manufacturing Creating a series of behaviours which align with boohoo values Operating a differentiated business model, across brand and geographies insulates against specific brand competitors as a group • Investment in brands, both at an individual level and through acquisition . • Competitor activity and offerings are reviewed regularly to remain abreast of market developments and identify competitive advantages Consumers' changing preferences are monitored internally and by market research to ensure product and service is relevant to demand Developments in e-commerce trends are monitored to keep abreast of the latest developments and innovations Performance targets control key deliverables (product quality, customer service and traffic) A defined supplier framework and governance structure, which outlines the relationship owners, exists Supplier security assessments are conducted Diversification of the service providers, where appropriate to spread risk Sustainable change is being driven by Agenda for Change and embedded within business practices Governance is a constant board agenda item New non-executive directors have been recruited, which improves governance New committee structure established 34 35#20HOW WE MANAGE RISK CONTINUED BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 / STRATEGIC REPORT STRATEGIC RISKS Risk factors Risk owner CONTINUED ETHOS AND CULTURE Chief People Officer . As a result of business change, developing and implementing new systems, controls and significant acquisitions, there is a risk that culture is impacted, which could lead to a decrease in brand ethos and morale, impacting operations REGULATORY COMPLIANCE Group Legal Counsel . . . . As a result of complex data privacy regulations and continuous increase in threats to data, there is a risk of a regulatory breach, which could lead to regulatory investigation and financial penalties As a result of operating in many international markets and variations in local regulation in those different markets, compliance risks are increased. Specifically, those where websites are located, pricing and promotion restrictions are in place and any countries with complex legal marketplace compliance (e.g. US) laws, there is a risk of non- compliance and regulatory-related investigations that could lead to financial penalties and reputational damage As a result of emerging regulations, there is a risk that additional compliance costs are incurred in the future As a result of a large or high-profile acquisitions and the associated market share implementation, there is a risk of investigation and review by the competition authority, which may lead to financial costs and delays to processing of the deal TAXATION AND DUTIES CFO . . Governments may impose additional corporation taxes on online businesses Governments are increasingly reducing duty and tax-free thresholds on imports and imposing tax collection responsibility on sellers, thereby increasing prices to consumers BREXIT CFO As a result of required operational changes caused by the Brexit agreement, specifically in relation to trading costs and regulation, there is a risk of unplanned operational and financial impact, which could lead to unexpected trading levels and/or downtime in operations Mitigation Board commitment to positive change, led from within the business Investment in colleague engagement, including regular town hall meetings Investment in colleague training to support change Training of colleagues on GDPR and data security Additional resource relating to data privacy Privacy policies and procedures reviewed and updated Understanding and compliance to key laws and regulations Impact reduced by skilled legal team in house and utilising specific expert advice from external lawyers in territories concerned Monitoring of emerging regulations to ensure the business is best placed for any new compliance requirements - e.g. buy-now-pay- later Expert counsel taken to fully understand M&A risks prior to acquisitions Impact of potential future corporation tax rates is considered in future plans Sales taxes are already imposed in all major markets and the group believes that its products will remain competitive due to its online proposition and with customs warehousing, the impact of duty costs can be minimised Impacts are understood and additional costs are factored in to future plans and budgets, together with mitigating actions and cost savings Consideration being given to the availability of staffing and potential increase in labour costs OPERATIONAL RISKS Risk factors Risk owner IT AND CYBER SECURITY CIO There is a risk of a cyber-attack, which could lead to application, system and operational downtime, which may impact trading and operations across the group CHANGE CIO As a result of a high number of critical projects running in parallel, there is a risk that delivery is not completed in line with proposed timelines and business as usual activities are not appropriately established, thereby not meeting the expectations of both internal and external stakeholders, which could lead to reputational damage THIRD PARTIES CFO/CIO/Supply Chain Director As a result of reliance placed on third parties, there is a risk that key third parties are not performing in line with expectations, which could lead to operational and technological disruption BUSINESS CONTINUITY/DISASTER RECOVERY CFO/CIO/Supply Chain Director As a result of an unplanned business continuity incident/event, there is a risk that warehouses and key operations facilities are required to close, which could lead to reduced productivity and operations across the group As a result of a critical IT failure, when enforcement of disaster recovery is required, there is a risk that key recovery objectives are not met, which could lead to data and financial loss Mitigation Board I engagement in cyber risks, mitigations and plans Perimeter security regularly updated and tested • Industry leading tooling to prevent and detect attacks 24/7 security operations centre. Continued and expanding investment in IT and security teams Training of both technical and non-technical teams regarding cyber security Growth of projects capability including head of delivery and project function, business analysts and project managers • Change Advisory Board ('CAB') ensures that approvals are obtained in advance of changes being implemented Project Prioritisation Group ('PPG) - Assesses and agrees the need for changes/projects IT team includes appropriate skillset and talent within the team to deliver what is required Established project methodology including the right level of governance for each project • Sustainability strategy and targets in place First sustainability strategy published in March 2021 on group website ⚫ Recruitment of key roles to deliver the strategy . Warehouses are protected by 24-hour security, access control, fire protection and sprinkler systems Head office is protected by security alarm, access control, fire protection and sprinkler systems Electric power continuity is protected by back-up generators Consideration has been given to location diversification, resulting in more options to move sites in the event that a major incident occurs at one site IT disaster recovery covers critical applications and third party contracts with appropriate service level agreements Investment in monitoring and alerting, governance, change management 36 | 37#21BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 HOW WE MANAGE RISK CONTINUED Mitigation OPERATIONAL RISKS Risk factors Risk owner PEOPLE RISK Chief People Officer CONTINUED Competitors are inclined to poach key staff and talented individuals Employees may leave the company for better pay and prospects elsewhere Incentive schemes across all levels of staff are operated, including share ownership, bonus and incentive schemes linked to business and personal performance Succession planning aims to reduce key person dependencies Training, development and progression opportunities to retain staff . . . . PRODUCT RISK Director of Responsible Sourcing & Group Product Operations As a result of health and safety regulations in relation to products, there is a risk of product liability costs and potential legal implications As a result of product quality issues, there is a risk of a decline in customer satisfaction Head of Product Compliance joined in early 2021 Quality control teams check the products at distribution centres and within factories Policies and procedures in place for suppliers to follow • Testing of products for chemical components to legal limits ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT Andrew Reaney DIRECTOR OF RESPONSIBLE SOURCING AND GROUP PRODUCT OPERATIONS 4 MAY 2021 / STRATEGIC REPORT FINANCIAL RISKS Risk factors Risk owner FINANCIAL RISK CFO . . Poor business performance or lack of appetite for the sector may impede raising of capital Exchange rate fluctuations may erode margins Mitigation Regular budgeting and forecasting ensures working capital is sufficient for business requirements and rapid reaction to adverse business performance Uncertainty due to fluctuating exchange rates is reduced by appropriate forward looking hedging policies We're facing up to the future, doing more for our clothes, suppliers, communities and our impact on the environment. We've looked hard both inside and outside our business, and come up with a plan that will help us get ready for the future. There is work to be done, and we're going to be open, up front, and frank on the progress we are making. Our next chapter is still in the making. The importance of responsible purchasing practices and the need to improve suppliers' social and environmental practices is recognised now more than ever. Important issues arising during the year include labour standards concerns in UK and international manufacturing, and traceability and human rights concerns in global supply chains, including allegations of forced labour risks linked to cotton sourced from the Xinjiang region of China. We are conscious that many workers have also become more vulnerable as a result of the COVID-19 crisis. In 2020, we tackled these challenges head on, communicating our insights, views and approaches transparently. We published an independent review on our Leicester supply chain by Alison Levitt QC, and launched our Agenda for Change, setting out how we would deliver her recommendations. We also took part in the Environmental Audit Committee on Fast Fashion and the UK Government consultation on cotton sourcing. 38 39#22BOOHOO GROUP PLC ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 / STRATEGIC REPORT This spirit of openness and transparency is central to our first group sustainability strategy, UP.FRONT, published in March 2021 on the group's website. Importantly, we've designed the strategy to address key priority areas and set clear, time-bound goals to help demonstrate our progress. They are stretching and will be tough to achieve, but we are committed to making it happen. This strategy hasn't come out of nowhere. We have been laying the foundations over the last two years, recruiting ethical trade and sustainability experts, joining and contributing to industry groups like the British Retail Consortium, WRAP and the Sustainable Apparel Coalition ('SAC'), and analysing our current approach to sustainability management. UP.FRONT is about taking this work further, driving measurable progress on our issues like materials, carbon and waste. And we've already got started. Our buying teams are working with existing and new suppliers to develop more sustainable garments, focusing on materials like recycled polyester and organic cotton, and over the coming year, we will be making big changes to the way we purchase our cotton. We'll communicate these changes to our customers, too. Shoppers will increasingly see a consistent message across our brands, bearing the strapline READY FOR THE FUTURE, and as we move ahead on our journey, more and more products will meet these criteria. In addition, we've signed up to WRAP's Textiles 2030, which is a call to action to all UK fashion brands and retailers to transform our industry through better materials, more circular product design and alternative business models. With the introduction of new brands including Debenhams, we're going to be looking closely at sustainability in our beauty and home offering too. This year, alongside our annual report and accounts, we are also publishing a standalone sustainability report where stakeholders can find more information on how we plan to meet our goals and what steps they will see us take first. I joined the business in September 2020, and took responsibility for the full sustainability strategy in March 2021, bringing together our ethical and environmental programmes. I am excited to lead our delivery of the strategy, driving change in our own operations and through our supply chains. Andrew Reaney DIRECTOR OF RESPONSIBLE SOURCING AND GROUP PRODUCT OPERATIONS HOW WE DEVELOPED OUR STRATEGY We've been through a comprehensive process to develop our sustainability strategy. We began by conducting a materiality assessment - an evaluation of the key environmental, social and, governance issues that matter most to our business and stakeholders, and on which we stand to make the greatest impact. We worked with an expert third I party to make sure that this was an effective, objective exercise. They interviewed people across our business, reviewed sustainability indices, analysed major industry and sustainability campaigns, mapped industry-wide issues and stakeholder views. This helped to prioritise the issues and focus our strategy. CLOTHES. MADE SMARTER There's an environmental cost to producing clothes, but there are ways we can be smarter and leave a lighter footprint. We're focusing our efforts on the areas that will have the biggest impact on the future of the clothes that we produce - materials, design, waste, packaging and finding ways to keep our clothes in use for longer. And this is just the start. We are going to work with experts to develop more focused plans on water, chemicals, biodiversity and microfibres. On top of this assessment, we layered on further insight from our business and customer research, using this to refine our priorities and identify relevant goals and targets. We involved teams around the business, including buying, marketing and operations and consulted the executive team and board too. UP.FRONT FASHION.READY FOR THE FUTURE UP.FRONT is about making progress on the sustainability issues where we can make a real difference, and working in an open, collaborative way to get there. THERE ARE THREE FOCUS AREAS SUPPLIERS. SUPPLIERS. ON BETTER TERMS Our business is growing. We rely on strong relationships with our suppliers to provide our customers with on trend products at great prices. We've been building our team so we can engage with suppliers in the UK and beyond to make sure we have a clear map of all the factories producing our clothes, and that our standards are followed to protect the workers in those factories. We will embed enhanced ethical and environment standards in the UK and globally, working alongside those who make our clothes to help ensure that our role in the fashion supply chain is a positive one. OUR BUSINESS. TAKING ACTION We're passionate about fashion, our business and the role that we can play in the wider industry. - We're going to be up front about how we work, our environmental impact and our role in the global fashion community - starting with tackling carbon emissions across our value chain, creating great jobs, promoting responsible marketing and strong governance, and acting as a force for good in local communities. In the coming pages, we will share an overview of our sustainability strategy. More information can be found in our 2020 Sustainability Report, which can be downloaded at boohooplc.com/sustainability. 40 41#23BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 / STRATEGIC REPORT ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT CONTINUED boohoo group plc FOCUS AREA 1: UP.FRONT FASHIONREADY FOR THE FUTURE CLOTHES MADE SMARTER BETTER MATERIALS 2025 All our polyester and cotton will be recycled or more sustainable 2030 All our clothes made with more sustainable materials SUSTAINABLE DESIGN 2025 Design innovation to reduce waste, increase durability and improve recyclability Making our clothes in a smarter way - with better materials, more sustainable design and less waste and packaging. Buying more sustainable alternatives to traditional materials is a top priority. Working with our industry partners like WRAP and the SAC, we've analysed our materials mix and developed guidelines on more sustainable options. Around 80% of the materials we use (by volume) are polyester and cotton, so our most ambitious targets focus on these areas. However, we're also working with our suppliers on other materials like viscose, acrylic and animal-derived products. We're launching a consistent strapline across our brands to help customers identify which products helping to achieve our goals, so look out for READY FOR THE FUTURE across our sites, as products displaying this criterion will meet our standards. Building on our materials strategy, we want to develop a set of standards to incorporate this and consider other relevant elements of product design, such as upcycling, recyclability and durability. We've appointed one of our most experienced designers in the business as Sustainable Product Design Director to lead this work, and we're excited about the potential innovations in the pipeline. FUTURE FOCUS on water, chemicals, biodiversity and microfibers, developed in partnership with experts 2023 Announce our goals FOCUS AREA 2: SUPPLIERS ON BETTER TERMS TRANSPARENCY 2021 2021 Disclose our supplier and factory list Publish our purchasing practices 2025 Map our raw materials supply chain for key fibres There are other important issues to address like water, chemicals, biodiversity and microfibres. Our work in areas such as better materials and improved supply chain standards will help us make progress on these areas, as well as our contribution to industry groups like the Microfibre Consortium and Textiles 2030. But we will also develop dedicated goals on each of these issues and work with experts to understand the best role we can play in tackling them. Find out more in our sustainability report on pages 39 to 49. Doing more for our suppliers - transparent supply chains, improved standards and management, and a long-term commitment to those that work in fashion. Transparency is central to the commitments we've made through our Agenda for Change. We have already delivered in a number of areas by publishing Alison Levitt QC's independent review of our supply chain in full, and sharing updates by Sir Brian Leveson PC, who is holding our board to account on delivering our Agenda for Change programme and publishing our list of UK suppliers. In 2021, we will continue to deliver against our Agenda for Change commitments by publishing our global supplier list and our purchasing practices. Longer term, we're going to work with key suppliers to map priority raw materials through our supply chain, right back to the fields and factories where they were produced. TEXTILE WASTE 2023 Launch resale and recycling offers across out brands 2025 No textile waste direct to landfill in our UK supply chain We've been working for some time on diverting any textile waste in our own operations from landfill, working with recycling partners and charities. Now, we want to extend this to our UK supply chain. In particular, we hope to launch a pilot project to make sure that Iany offcuts are put to the best use, through upcycling or recycling, for example. We're also committed to developing different ways for customers to recycle their garments and investing in resale platforms to keep clothes in use for longer. STANDARDS 2023 Demonstrated improvements in UK garment factories and the positive impact on workers 2025 Demonstrate the impact of our improved supplier management programme over five years Our new sourcing team includes ethical trade, product compliance, quality assurance and environmental sustainability experts. Together, they are implementing a more robust set of supplier standards and a rigorous management programme. They're also improving the systems we use to order, monitor and track our products. All this work will drive positive changes for suppliers, factories and workers, and we are committed to monitoring the impact of these improvements over the coming year and publishing the findings. PACKAGING 2030 All customer garment packaging will be reusable, recyclable or compostable, and any plastic used will contain over 50% recycled content We've made a lot of progress on key types of packaging and labelling. For example, our despatch bags contain over 80% recycled plastic, and we're working with a local supplier on poly-bags (which we use to keep clothes protected in transport) with a high proportion of recycled content. Now, we want to go further by working with our suppliers to ensure this is consistent across all our garment packaging. We'll also keep innovating to explore more sustainable, recyclable packaging materials. 42 43#24BOOHOO GROUP PLC ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 / STRATEGIC REPORT PROGRAMMES 2021 up Set and donate £1 million to the Garment Workers' Trust in Leicester 2021 Launch manufacturing centre of excellence One of our key Agenda for Change commitments was to set up a Garment Workers' Trust in Leicester to help champion workers' rights and provide support for vulnerable garment workers in Leicester. The Trust will be overseen and managed by an independent Board of Trustees (for whom we're currently recruiting), and we will provide grants and crisis funds for those in need. We hope that it will become a recognised and trusted source of support for anyone working in the fashion and textiles industry, providing both hardship funds and clear and understandable guidance in multiple languages for those who may need independent support. We've also purchased a site in Leicester where we want to establish a manufacturing facility in partnership with one of our strategic suppliers. We're obtaining planning permission for the facility, which is due to launch in 2021. We hope that it will showcase how our products can be made legally, ethically and safely. We hope to create up to 100 local jobs and offer a community hub to inspire new talent in the industry. Our growing team in charge of checking standards among our Leicester suppliers will also work from this facility. CLIMATE CHANGE 2030 Achieve carbon reductions across our value chain aligned with science-based targets equivalent to 52% reduction in emissions relative to our growth.* *4.2% absolute reduction in operational emissions year-on-year, and 7% reduction in value chain emissions year-on-year relative to our growth. The climate crisis is one of the biggest challenges facing the planet and urgent action is needed. We know that boohoo has a key role to play in this fight and are determined to be a proactive presence in the retail industry. Working with an independent and expert carbon management consultancy, we have calculated our carbon footprint across both our own operations and value chain. We have identified key areas where we can - and must- make the most significant reductions. These are our products, product logistics and marketing channels. We are setting a bold climate change commitment. By 2030, we will achieve carbon reductions across our value chain aligned with science-based targets equivalent to a 52% reduction in emissions relative to our growth.* Furthermore, we have joined the BRC Climate Action Roadmap and the WRAP Textiles 2030 initiative. Find out more in our sustainability report on pages 39 to 49. FOCUS AREA 3: OUR BUSINESS TAKING ACTION GOVERNANCE 2021 Embed sustainability risks and opportunities in business decisions and KPIs Running our business responsibly - strong governance, a great place to work, tackling climate change, responsible marketing and a role in communities we can all be proud of. In 2020, we strengthened our approach to governance with a Supply Chain Compliance Committee, which reports to our Risk Committee and the group board. Improving supply chain standards is an important agenda item at every board meeting. In 2020, these discussions focused on our Agenda for Change, UK supplier management programme and UP.FRONT sustainability strategy. In 2021, we will discuss broader sustainability issues through this s governance process. And to drive change, teams across our business will have KPIs linked to our sustainability strategy. For example, buying teams are focusing on better materials. Find out more in business governance on pages 52 to 59. OUR PEOPLE 2025 Aspire to be independently recognised as the best online retailer to work for We want to attract and retain the best talent in the industry, building a diverse, inclusive boohoo family where all our colleagues feel valued, have the opportunity to reach their full potential and are proud of what we achieve together. We'll listen to colleagues' needs, make diversity and inclusion a part of everything we do, and create a thriving workplace culture. We'll focus on health and wellbeing, and provide first-class learning and development opportunities and market-leading reward and benefit packages. And we'll improve the way we monitor performance and plan for the future. Find out more in our people section on pages 48 to 49. 44 MARKETING 2021 Publish responsible marketing principles ONGOING Make it easier for customers to make sustainable choices with us We live and breathe marketing and social media. It's how we get inspiration, talk with our customers, sell our products and get feedback on what we do. Our marketing approach and discounting strategies mean that customers from all walks of life are able to access our on-trend products at great prices. We've published our responsible marketing principles. Our teams are also working hard to make it easier for customers to make more sustainable choices by launching READY FOR THE FUTURE products and clearly communicating how products are meeting these guidelines. Find out more in our sustainability report on pages 39 to 49. COMMUNITY 2021 Publish our social impact strategy to support local communities Our teams are passionate about giving back to their local communities and supporting charities. In addition, all our brands have their own charitable giving programmes, which include sample donations, cash donations, volunteering and partnerships. To amplify our positive impact, in 2021, we plan to launch a group-wide social impact strategy, bringing all this work together under shared ambitions. This won't stop our brands supporting the causes that they and their customers love, but it will help us reach more people and measure the impact on their lives. Find out more in our sustainability report on pages 39 to 49 45#25BOOHOO GROUP PLC ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT CONTINUED CARBON REPORTING Our carbon footprint has been calculated in accordance with the internationally recognised standard the Greenhouse Gas Protocol, a corporate accounting and reporting standard, developed by the World Resources Institute ('WRI) and the World Business Council for Sustainable Development ('WBCSD'). The data in this report has been prepared in line with the HM Government's guidance: Environmental Reporting Guidelines: Including streamlined energy and carbon reporting. This is the second year that the group has reported on its carbon footprint. PERFORMANCE This is the first year we have calculated our emissions across all three scopes for both this and the previous reporting year and have made the results publicly available. The group's 2020 carbon footprint is 782,264 tCO2e, which is mainly attributable to purchased goods and services (including sold goods) as well as the transport and distribution thereof. Since the previous reporting year, market-based emissions have increased by 33% from 587,983 to 782,264 tCO2e. This is predominately driven by business growth and an increase in goods sold since the previous reporting period. Operational market-based emissions (scope 1 & 2) have decreased by 84% from 3,120 to 499 tCO2e, which was largely driven by a switch to 100% renewable energy supply in our operations. We also saw a reduction in business activities, such as building use and business travel due to COVID-19 restrictions. CARBON EMISSIONS (metric tonnes of carbon dioxide equivalent) Scope 1 Company cars Natural gas Other fuels Refrigerant Scope 2 Electricity (market-based) Electricity (location-based) Scope 3 categories Upstream emissions 2020 2019 tCO2e tCO2e 66 111 273 240 13 146 15 . 146 2,674 2,608 2,928 Purchased goods and services Capital goods Fuel and energy-related activities 613,877 4,188 285 436,700 Upstream transportation and distribution 149,883 310 139,120 Waste generated in operations 91 63 Business travel 526 2,436 Employee commuting 505 459 Upstream leased assets 20 22 Downstream emissions Downstream transportation and distribution 3,710 2,730 End of life treatment of sold products 8,681 3,023 Total emissions market-based 782,264 587,983 Total emissions location-based 784,938 Energy reporting: total energy usage (kWh) 12,717,546 588,303 13,065,849 Intensity metrics (UK and offshore) Total revenue (£ million) 1,674 1,172 All scopes (1,2 & 3) emissions (tCO2e)/total revenue (£ million) 467 502 Emissions intensity by revenue has decreased by 7%, highlighting an improved carbon efficiency by turnover. 46 ANNUAL REPORT AND ACCOUNTS 2021 / STRATEGIC REPORT ENERGY EFFICIENCY ACTION Since 2019, the group o has carried out several initiatives to drive energy efficiency across our own operations. These include: Continued LED roll out across Burnley and Manchester Commenced the installation of solar panels at Burnley and Manchester METHODOLOGY boohoo group plc's carbon footprint has been calculated in accordance with the internationally recognised standard the Greenhouse Gas Protocol, a corporate accounting and reporting standard, developed by the World Resources Institute ('WRI) and the World Business Council for Sustainable Development (WBCSD'). It adheres to the best practice practices of relevance, completeness, consistency, transparency and accuracy. The carbon footprint assessment was carried out by an independent sustainability consultancy Avieco. The group's carbon emissions are measured in carbon dioxide equivalents or CO2e. This metric includes the six greenhouse gases covered by the Kyoto Protocol: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulphur hexafluoride (SF6). The carbon reporting period is from 1 January 2020 to 31 December 2020. This is offset from the business's financial reporting period 1 March 2020 to 28 February 2021 to allow sufficient time to capture 12 months of data for our carbon assessment in preparation for the group's end of year reporting. The carbon emissions calculations followed the operational control approach, which means that all emissions over which the group has direct control is included in its scope 1 & 2 boundary. . . The emissions calculations breakdown into three reporting scopes. These include: - this includes all direct emissions Scope 1 from assets over which the has group control, including company cars, natural gas and other fuels used in our operations I any refrigerant gas leakages and - Scope 2 this includes indirect emissions associated with the generation of electricity. In line with best practice, market and location-based emissions are both reported on: - Market-based emissions - which reflect the actual emissions from the electricity agreements with the business's suppliers Location-based - which reflect the average emissions intensity of the grids in which the consumption occurs Scope 3 this includes other indirect emissions generated along our value chain, which predominately consists of goods for resale, goods not for resale, and distribution - and transportation of goods. It also includes non-company cars as per the SECR regulations The group's carbon emissions calculations used two approaches depending on the availability of data across its operations and supply chains in accordance with the GHG Protocol. These approaches included: Process-based approach - uses quantity- based consumption data to estimate the carbon emissions associated with a . . given activity e.g. litres of fuel used. This approach was used for scope 1, 2, and some scope 3 emissions. For goods for resale, a subcategory of purchased goods and services the Higgs Index carbon emissions benchmarks were applied Spend-based approach - using extended economic input-output modelling. This approach combines industry and trade flow data between industries with total emissions data from a given industry to estimate the carbon emissions associated with £1 million spend in each industry. This approach was used for good not for resale (a subcategory of purchased goods and services and capital goods) 47#26BOOHOO GROUP PLC ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 / STRATEGIC REPORT PEOPLE INTRODUCTION People are at the very heart of everything we do here at the boohoo group. It is vital for boohoo's growth and success that we maintain focus on the development and wellbeing of our colleagues. We want to continue to create a supportive environment where our colleagues feel energised, motivated and valued. We have developed an outstanding reward and benefits framework where, irrespective of role, all our colleagues can share in the success of boohoo's incredible growth. We focus on listening to our teams to always understand what matters most to them. We offer an inclusive and diverse working environment, where we make people feel respected and valued for who they are as individuals. Our colleagues continue to have a voice through our ever-evolving listening and engagement forums. We offer a strong learning and development experience with online training, check ins and webinars delivered throughout the past 12 months. SENIOR ROLES HELD BY WOMEN 41% DIVERSITY AND INCLUSION Creating a working environment that is free from discrimination and harassment, and where everyone can be heard is essential if we are to operate in an inclusive workplace. This year, we took part in National Inclusion Week with the theme being 'Each One Reach One'. Various activities were held throughout a week in October to celebrate each other's uniqueness and to also share and promote inspiring inclusion practices and ideas across the business. Also, in the autumn of 2020, a D&I steering group was formed to ensure that all areas and brands within the business are represented. The group meet six times a year to discuss group strategy and initiatives. A charter was developed and suggestions are brought to life and embedded by each of our working groups, ensuring each brand keeps their own distinct personality while operating as one business. One of the immediate actions has been to begin to collect demographic data from everyone to inform our future strategy. This is a sensitive topic and so, with the support of colleagues from across the business, a short video was produced explaining why this is important. A comprehensive guide was also produced with information on how to submit demographic data via our people system. We will continue to support an inclusive and diverse workforce by sustaining momentum through our designated groups. GENDER PAY AND DIVERSITY We encourage diversity in the workforce: at the -end, the year- percentage of males was 46% (2020: 42%) and females 54% (2020: 58%), with 41% (2020: 45%) of our senior management positions held by women. NUMBER OF EMPLOYEES OF EACH GENDER AT THE YEAR-END Directors of the parent company Senior managers Other employees Male Female 7 1 43 30 1,621 1,671 1,919 1,950 Our gender pay gap data for the group, prepared up to March 2020, showed females were paid 4.1% more than males, using the median results, and males were paid 6.2% more than females, using mean results (male average pay being the higher due to a greater proportion of males in the most senior roles), which is significantly below the national average as reported by ONS. OPERATIONS Colleague safety and wellbeing remains our number one priority, and we have all worked tirelessly during the pandemic to support colleagues in our distribution centres and offices. We have teams of COVID-19 marshals who review our processes daily, keeping wellbeing at the top of the agenda. We invested in various measures (including temperature scanners and lateral flow test centres) across all offices and distribution centres to ensure we are keeping our colleagues, their families and our local communities safe. Our international customer services team, who were based at Burnley, have experienced a complete change of working environment. At the start of the pandemic, they transitioned to work from home and they are just as effective working remotely. Colleagues are kept informed and engaged through new online learning modules and a mental health support package, which are facilitating the change from a busy office environment to working remotely. HEALTH, WELLBEING AND ENGAGEMENT ACTIVITIES We take the health and wellbeing of our colleagues very seriously and place a huge importance on supporting teams to navigate their busy lives and critically their mental and physical health. The people team are trained mental health first aiders and work with managers to provide guidance to anyone that needs some additional wellbeing support. We also focus on days that raise awareness of issues that matter to our boohoo family. These days give us the perfect chance to bring vital conversations to the forefront and get people talking about topics beyond the immediate working day. Some of the wellbeing areas we highlighted in 2020 included breast cancer screening and mental health (through the charity, CALM). Across the group, we now have digital wellness hubs for all our colleagues, which provide articles, videos, hints and tips on how to improve wellbeing in a specific area of their world. Alongside our healthcare app MediCash, sits our Employee Assistance Programme. This service allows our colleagues to access around-the-clock support and high-quality advice from experts on health and wellbeing. DRIVING EMPLOYEE ENGAGEMENT WITHIN OUR FAMILY group This s year, all our employees across the were invited to participate in a Wellbeing and Engagement survey, which allows us to measure wellbeing and engagement levels and identify ways to improve how we do things. This year, 57% of colleagues participated in survey across all brands and locations and over 75% of employees see themselves working for the o in 12 months' time. survey group The confirmed that we have an engaged workforce, our colleagues feel valued and respected, they know what's expected of them in their role and they also have the right tools to do their role effectively. This survey has also drawn out great results in the Diversity and Inclusion space, with 85% of colleagues who participated in the survey saying their manager has a focus on Diversity and Inclusion, and 81% would feel comfortable raising concerns around D&I, bullying or unfair treatment. BOOHOOFAMILY INSTA To improve communication and engagement, the boohoofamily Instagram platform was introduced in 2019. This allows us to share colleague stories on any engagement activities and also to showcase what it's like to be part of boohoo This continues to be group. very successful, uniting our global locations and providing an insight into all the different aspects of working at the boohoo group. We now have circa 6,000 followers up from 3,000 followers this time last year. PLTHQ ON INSTAGRAM Our PLTHQ account on Instagram is one of our crucial tools to engage with colleagues and external audiences across the globe. The account acts as a showreel to highlight what it's really like to work at PrettyLittleThing (PLT') and gives us a platform to interact with our wide following from a people perspective. We post our live vacancies, host all our famous competitions, shout about important causes we are supporting, and promoting our wellbeing activity that we are hosting at our Manchester HQ. YOUR VOICE Your Voice started back in 2014 and it is a two-way communications channel where colleagues can share their ideas and suggestions with the leadership team. The group supports on all decisions from policy work to events to health and safety matters across our sites and truly enables our colleagues to feel listened to and to have a voice in the business. REWARD AND BENEFITS From our very early days, supporting the growth and retention of talent has been central to our success. We pride ourselves on our competitive total reward package, and especially the opportunity every colleague receives to join in our incredible success by making regular savings into our SAYE share save scheme. We also like to recognise the contribution each and every one of us makes by gifting every colleague a free number of shares each year in our SIP scheme. We offer a great range of benefits for our colleagues to enjoy, such as staff discount across our rapidly growing brands, annual incentive schemes, life assurance and health and wellbeing benefits, as well as free gym access and classes. We aim to be a leader in our field and we continue to evolve and improve our offering to make sure we find and retain the very best people. LEARNING AND DEVELOPMENT We are committed to developing our boohoo family in our own distinct way, promoting a culture that supports, develops and challenges us to deliver success. We champion microlearning and training on demand, which really fit with the fast-paced world of fashion. Our learning offer provides webinars, access to coaching and support to all our colleagues and leadership. At PLT, we quickly pivoted our face-to-face training to online during the pandemic with a brand new learning offer tailored to responding to the 'new normal' with initiatives like virtual check ins and a fresh collection of new webinars with titles like 'Building resilience in uncertainty' and 'Being a remote leader'. Across Operations and PLT, we have pioneered a fresh approach to training by rolling out a coaching programme across the business. This approach really shifted the perception that training only happens in the classroom. SUMMARY With the backdrop of a global pandemic our customers have demanded more from us than ever before. The continued commitment and support from our colleagues has allowed us to step up and deliver exceptional results in an extraordinarily challenging year. Our colleagues are our strongest asset, and we will always strive to support them to grow, develop and thrive within our boohoo family. On behalf of the board John Lyttle 4 May 2021 Neil Catto 4 May 2021 48 49#27BOARD OF DIRECTORS BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE MAHMUD KAMANI GROUP EXECUTIVE CHAIRMAN Mahmud founded boohoo with Carol Kane in 2006, leveraging over 30 years of experience in the fashion and clothing industry. Mahmud is an entrepreneur, with expertise encompassing all areas of the supply chain from sourcing, to import and wholesale. Mahmud is an inspirational leader, having built a strong team and engendered loyalty from many long-serving employees. CAROL KANE GROUP CO-FOUNDER AND EXECUTIVE DIRECTOR Carol has over 30 years of experience in the fashion industry. Starting her career as a designer, then fashion buyer, Carol has worked with Mahmud Kamani for the past : 27 years supplying high street retailers. Carol co-founded boohoo in 2006 and since inception has worked on marketing, product and brand strategy both domestically and abroad. JOHN LYTTLE CHIEF EXECUTIVE John previously spent eight years at Primark, a division of Associated British Foods, as Chief Operating Officer. During his tenure, turnover grew 158% to £7bn. Prior to joining Primark, John held senior roles at Matalan and Arcadia group. NEIL CATTO CHIEF FINANCIAL OFFICER Neil qualified as a chartered accountant with Ernst & Young and spent nine years working in their Manchester, Palo Alto and Reading offices. He was previously Finance Director of dabs.com plc and has held senior financial positions in BT plc and The Carphone Warehouse Group plc. BRIAN SMALL DEPUTY CHAIRMAN, NON-EXECUTIVE DIRECTOR AND SENIOR INDEPENDENT DIRECTOR NARIR Brian is Deputy Chairman, Senior Independent Director, Chairman of the Nomination Committee and sits on the Audit, Risk and Remuneration Committees. Brian was most recently CFO of JD Sports plc for nearly 15 years. Prior to this role, he was Operations Finance Director at Intercare Group Plc and has also been finance director of a number of other companies. Brian is also a non-executive director and Audit Committee Chair at Mothercare plc and Pendragon plc. He qualified as an accountant with Price Waterhouse in 1981. PIERRE CUILLERET NON-EXECUTIVE DIRECTOR ANRIR Pierre sits on the Audit, Nomination, Risk and Remuneration Committees. Pierre founded The Phone House in 1996, a large European mobile phone retailer. Between 2005 and 2014, Pierre was CEO and shareholder of Micromania, the number one video game retailer in France. From 2011 to 2014, he was Senior VP of GameStop Europe to whom he had sold Micromania. Other previous non-executive directorships include DIA, listed on the Madrid Stock Exchange and p part of Ibex, and fashion retailer Desigual. Pierre currently supports and invests in rapid growth companies in Europe and the US and serves on the advisory boards of Antwort Capital in Luxembourg and DianaCapital in Spain. SHAUN MCCABE NON-EXECUTIVE DIRECTOR ARIRN Shaun is Chairman of the Audit and Risk Committees and sits on the Remuneration and Nomination Committees. Shaun has extensive financial experience across e-commerce and retail. He is currently serving as Chief Financial Officer at Trainline plc and as a non- executive director at AO World plc where he is a member of its Audit and Remuneration Committees. Prior to joining Trainline plc, he held the roles of International Director at ASOS and Chief Financial Officer for Amazon Europe. IAIN MCDONALD NON-EXECUTIVE DIRECTOR RARIN lain is Chairman of the Remuneration Committee and sits on the Audit, Risk and Nomination Committees. lain is the founder of Belerion Capital, a specialist technology and e-commerce company and was an early investor in a number of technology businesses, including Asos, The Hut Group, Eagle Eye Solutions, Anatwine and Metapack. lain is a non-executive director of the Hut Group, and also AIM-listed software business Central Nic. Prior to founding Belerion Capital, lain was a partner of the William Currie Group, a technology and e-commerce private family office. 50 A Audit Committee N Nomination R Remuneration Risk Committee RI Chairman Committee Committee Committee Key 51#28BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 CORPORATE GOVERNANCE REPORT Mahmud Kamani EXECUTIVE CHAIRMAN 4 MAY 2021 offer // GOVERNANCE I'M PLEASED TO PRESENT THIS YEAR'S CORPORATE GOVERNANCE REPORT. As Group Executive Chairman it is my responsibility to ensure that boohoo has an effective board and corporate governance framework. Following the publication of the Independent Review by Alison Levitt QC, we made a commitment to adding further independent experience, increasing oversight on matters of compliance and business practices and adopting higher standards of corporate governance. We have endeavoured to do this in a way that is transparent and provable by our Agenda for Change, which will build a sustainable foundation for the long-term success of the business and for the benefit of our stakeholders. The board has worked hard during the year to implement our Agenda for Change. We recognise there is further work to be done and I personally undertake that this will remain a key focus and priority throughout 2021 and beyond. A summary of the considerable improvements to our governance framework is detailed below. INDEPENDENT OVERSIGHT On 26 November 2020, the group announced the appointment of Sir Brian Leveson PC to provide independent oversight of the Agenda for Change and committed to publishing progress reports. In his reports, Sir Brian Leveson acknowledges the pace the group is making towards affecting change and these reports can be viewed in full on our group website. The board also appointed KPMG as consultants to advise and monitor the implementation and governance of the Agenda for Change programme. STRENGTHENING GOVERNANCE WITH KEY APPOINTMENTS The board is committed to additional expertise and independent challenge through the appointment of non-executive directors. Shaun McCabe was appointed on 17 November 2020 as an independent non-executive director and Chair of the group's Audit and Risk Committees. Shaun's full biography can be found on page! 51 of this report. We are also in the process of recruiting a second independent non-executive director experienced in dealing with environmental, social and governance ('ESG') matters. RISK MANAGEMENT The board takes ultimate responsibility for the effectiveness of risk management within the group and acknowledges that it must satisfy itself that the significant risks faced by the group are being managed appropriately. We have implemented a new governance framework to ensure effective monitoring and reporting of risks across the group going forwards. We have also constituted a new risk committee to enable better identification and closer monitoring of risk at board level. Further information on risk management can be found on page 34 of this report. EXECUTIVE REMUNERATION We have redesigned the executive directors' remuneration policy to align the interests of the executives with stakeholders, including the introduction of performance conditions linked to ESG criteria. This is an important part of the board's response to the findings of the Independent Review and the successful implementation of the corporate governance aspects of our Agenda for Change programme. BOARD EVALUATION In February 2021, the board participated in an external evaluation of its performance to assess and address any areas for development through an independent lens. The aim of the evaluation was to identify ways to enable the board to achieve its full potential and operate more effectively. Looking ahead, I will commission a further externally facilitated board evaluation by the end of the next financial year to consider the effectiveness of these changes, implemented following the initial review. BOARD EFFECTIVENESS AND DEVELOPMENT This year, as part of the board's commitment to ensuring the highest standards of governance for the group, each board member will attend training on the practical application of the QCA Corporate Governance Code and issues raised in the Independent Review, including how to operate as an effective board as well as latest trends and developments in areas such as the ESG agenda and risk management. GOVERNANCE FRAMEWORK Under my leadership, it is the responsibility of each member of the board to ensure that we uphold the highest standards of corporate governance. We embraced the Independent Review as a critical, but fair, assessment of our business practices and governance framework. Whilst we remain on track to deliver the Agenda for Change, and by doing so improving our governance framework, we recognise that it will take time to demonstrate real change and rebuild stakeholder trust. We will continue to focus on delivering the Agenda for Change and maintaining momentum to make boohoo a better and more responsible business. We will be transparent about the progress we're making through open and regular communication with our stakeholders. Mahmud Kamani GROUP EXECUTIVE CHAIRMAN CHAIRMAN'S GOVERNANCE STATEMENT 52 53#29BOOHOO GROUP PLC CORPORATE GOVERNANCE REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE THE COMPANY HAS ADOPTED THE 2018 QUOTED COMPANIES ALLIANCE CORPORATE GOVERNANCE CODE ('QCA CODE'). The board believes that the QCA Code provides the most appropriate framework of governance arrangements for a public listed company of boohoo's size and complexity. The board acknowledges the importance of the ten QCA Code principles and sets out the group's current approach below. DELIVER GROWTH 1. Establish a strategy and business model which promotes long-term value for shareholders The group owns the brands boohoo, boohooMAN, PrettyLittleThing, Nasty Gal, Miss Pap, Coast, Karen Millen, Warehouse, Oasis, Debenhams, Dorothy Perkins, Burton and Wallis and designs, sources, markets and sells clothing, shoes, accessories and beauty products targeted at 16-45 year-old consumers in the UK and internationally. The group has a strong presence in the UK, US, Australia, France and Ireland, and sells products to customers in almost every country in the world. The group's business model is entirely focussed on its customers and every element of the model begins and ends with them - we engage, we listen, we learn, we create and repeat. The group's ambition and growth prospects are underpinned by forecast growth in both the domestic and international online fashion retail markets, a highly efficient product- sourcing model and a robust infrastructure development plan. The group's vision is to be a leading e-commerce fashion market for 16-45 year-olds, which will be driven through the following strategic priorities: Insight creating a competitive customer proposition ⚫ Investment delivering organic growth to increase market share Innovation-driving customer engagement Integration integrating new brands A fuller explanation of how the strategy and business model are executed can be found on page 16. 2. Seek to understand and meet shareholder needs and expectations The board is informed of shareholder views as part of the regular reporting process and matters for discussion, and maintains an active dialogue with its shareholders through a planned programme of investor relations. This activity is a keystone of boohoo's corporate communications programme and is headed by the Executive Board, supported by an Investor Relations team and the Company Secretary. The group's s non-executive Deputy Chairman (who is also Senior Independent Director) acts as an additional link between the shareholders and the group's executive directors. The programme includes formal presentations of the group's full year and interim results and meetings between institutional investors, analysts and senior management on a regular basis. Regular communication with shareholders also takes place through the group's annual and interim report and via the group o website (www.boohooplc.com), which contains up-to-date information on the group's activities. The Chairman of the Remuneration Committee has actively engaged and consulted with shareholders on major changes to the remuneration policy during the year. The board recognises that the annual general meeting is an important opportunity for communication with both institutional and private shareholders. There is also a designated email address for shareholder liaison - investorrelations@ boohoo.com and all contact details are included on the investor relations website. - 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success The board recognises the importance of maintaining strong relationships with its stakeholders in order to create sustainable long-term value, and the board encourages active dialogue and transparency with all its stakeholder groups. Further information on stakeholder engagement can be found on page 64. The board believes that modern slavery is a significant global issue presenting a challenge for businesses worldwide and has committed to continually reviewing its practices to combat slavery. The board has a zero-tolerance approach to modern slavery and is committed to ensuring that its group companies and supply chain acts ethically and with integrity. Our Modern Slavery Statement can be found on the group's website. Further information on the Agenda for Change and our Supply Chain can be found on page 20. 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation The board has overall responsibility for the group's systems of internal control and risk management and for reviewing the effectiveness of those systems. Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives. Any system can only provide reasonable and not absolute assurance against material misstatement or loss. The board confirms that there are new procedures for identifying, evaluating and managing significant risks faced by the , and will review these formally with group, management before each financial year end (as well as the ongoing review of risks which emerge throughout the year). The board has implemented a new internal risk management procedure to identify, with relevant management, the major business risks facing the group and to put in place appropriate policies and procedures to manage those risks. Internal and external risks, which are assessed on a continual basis, may be associated with a variety of internal or external sources, including control breakdowns, disruption in information systems, competition, inadequate financing, poor business performance, natural catastrophe and regulatory requirements. These involve a process of control, self-assessment and reporting that will be established to provide a documented trail of accountability, which will be reported to the board. The newly constituted Executive Risk Group reports on its review of the risks and how they are managed to both the board and Risk Committee, whose role it is to review the key risks inherent in the business and the systems of control necessary to manage those risks. The Executive Risk Group, which includes the CEO and CFO, reports to the Risk Committee and provides independent assurance over risks and internal controls. The Risk Committee presents its findings to the board as appropriate. The Executive Risk Group also reports to the Risk Committee on major changes in the business and external environment which affect significant risks. Where areas for improvement in the systems are identified, the board considers the recommendations made by the Executive Risk Group and the Risk Committee. 54 55#30BOOHOO GROUP PLC CORPORATE GOVERNANCE REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK 5. Maintain the board as a well- functioning, balanced team led by the chair The board currently comprises four executive directors and four non-executive directors. The board has an Executive Chairman and a Non-executive Deputy Chairman and intends to recruit a further independent non- executive director to maintain the balance on the board in favour of non-executive directors. Further details of the governance structure are set out at Principle 9. The board as a whole is collectively responsible for the success of the boohoo group and provides entrepreneurial leadership of the group within the framework of effective controls, which enable risk to be assessed and managed. It sets out the group's values and standards and ensures that its obligations to shareholders and other stakeholders are understood and met. ATTENDANCE AT BOARD AND COMMITTEE MEETINGS Guidelines are in place concerning the content, presentation and timely delivery of papers by management to directors for each board meeting so that the directors have enough information to be properly briefed. Where issues arise at board meetings, the Chairman ensures that all directors are properly briefed and, when necessary, appropriate further enquiries are made. The current division of responsibilities between the Chairman and Chief Executive and the Chairman and the Deputy Chairman have each been agreed by the board. It is intended that the board meets at least eight times a year, the Audit Committee at least three times a year, the Nomination Committee at least once a year, the Remuneration Committee at least twice a year and the Risk Committee four times per year. 6. Ensure that, between them, the directors have the necessary up-to-date experience, skills and capabilities The directors' biographies appear on pages 50 and 51. The table below shows the attendance of individual directors at board meetings and committee meetings of which they are members during the year. As at 4 May 2021, the board has met twice since the end of the financial year. All directors have access to the advice and services of the Chief Financial Officer and Company Secretary, who are responsible for ensuring that the board procedures are followed and that applicable rules and regulations are complied with. In addition, procedures are in place to enable the directors to obtain independent professional advice in the furtherance of their duties, if necessary, at the company's expense. Board Eligible to attend Mahmud Kamani 9 Carol Kane 9 John Lyttle Neil Catto 0 Audit Committee Eligible Attended to attend Attended 9 の σ 3 Remuneration Committee Eligible to attend Attended Nomination Committee Eligible to attend 1 Attended st Risk Committee Eligible to attend Attended Pierre Cuilleret 3 2 2 4 4 2 2 Shaun McCabe 3 1 2 2 2 2 2 lain McDonald 9 9 3 3 2 4 4 2 2 Sara Murray 1 1 1 1 Brian Small 9 3 3 2 2 3 3 2 2 σ The board has a blend of different experience and backgrounds. Each of Brian Small, Pierre Cuilleret, lain McDonald, and Shaun McCabe were, prior to appointment, considered to be "independent" non-executive directors under the criteria identified in the QCA Code. The board has access to independent advice, in particular from boohoo's Nominated Adviser (Zeus Capital), TLT LLP (from a legal perspective), and our auditor PKF Littlejohn LLP. During the year, the Remuneration Committee took advice from KPMG, Korn Ferry and Paul Hastings LLP. The board is kept informed on an ongoing basis by the Company Secretary about their duties and any update in relation to legal and governance requirements for the group. Training is provided to the board each regarding their duties. year 7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement The most recent external evaluation of the board (including sub-committees and individual board members) was completed in early 2021 by Korn Ferry. The evaluation confirmed that the board continued to operate effectively. The evaluation was structured around seven key areas, each addressed through a series of critical questions that all directors responded to through an online survey. The survey was supported by telephone interviews on specific areas for further questioning. The key recommendations from the external evaluation include:- a. Clearer succession plans across the business and its brands; b. A regular review of the key roles and organisation structure to ensure that they remain appropriate as the business continues to scale; c. Consideration of the most appropriate method of engaging non-executive directors in strategic opportunities so that they are fully utilised in the strategic decision-making process; and d. Review the extent to which cultural change is effectively permeating throughout the organisation with the newly appointed Chief People Officer. boohoo's wider succession plan is the role and responsibility of the Nomination Committee, to ensure that the board is comprised of appropriately skilled and capable individuals. The Nomination Committee chair will identify gaps in the skill set required to oversee the group's development, and will seek to recruit suitably qualified individuals. 8. Promote a corporate culture that is based on ethical values and behaviours boohoo is guided by its values of Passion, Agility, Creativity and Teamwork. The company prides itself on its inclusive culture and team spirit, and in operating in a fair and sustainable manner. boohoo takes the welfare of all its employees extremely seriously and continues to invest in its people, who are encouraged to develop and grow with the business. boohoo strives to continually improve the working environment and benefits of its people. This is done by listening to and actioning feedback given through the open Your Voice sessions, and internal HR channels, with immediate attention paid to any concerns raised. boohoo is continually improving the support provided to managers to help ensure they are leading, and ensuring the people in our organisation feel valued and are listened to, shown in the significant investment made to upgrade all the facilities and working environment. Further information can be found on pages 48 to 49 of this report. purpose 9. Maintain governance structures and that are fit for processes and support good decision-making by the board The board has a formal schedule of matters reserved to it for decision, including approval of strategic plans and the annual operating plan, significant investments and capital projects, treasury and risk management policies. All directors take decisions objectively in the interests of the group. Further details of the roles and responsibilities of the directors is set out at principle 6. boohoo continues to look at how to best improve its corporate governance; and as a fast growing company, boohoo is constantly for looking ways to strengthen its board, whilst ensuring that the business is led by people with the right experience, passion and enthusiasm. In order to ensure there are enough independent directors to maintain the balance of the board in favour of non- executive directors, the company will be appointing one more. The search process to recruit a further independent non-executive director is ongoing. The enlarged and strengthened board structure has substantially enhanced the bandwidth to formulate, plan and begin to execute a multi-brand The structure strategy. enables the directors to use their extensive commercial experience in developing the wider group and its strategy for the benefit of the company's stakeholders. Brian Small has been appointed as Deputy Chairman to lead the independent non- executive directors on matters where independence is required. In summary, this structure enables the retention of key skill-sets within the company whilst facilitating the enhancement of the executive director base and the continuing development of the board and committee membership otherwise in line with the QCA Code's key principles. There are four board committees - Audit, Nomination, Remuneration and Risk Committees on the following pages. BUILD TRUST 10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders The AGM is an important opportunity for communication with both institutional and private shareholders and also involves a short statement on the company's latest trading position. Shareholders may ask questions of the full board, including the chairs of the Audit, Remuneration, Nomination and Risk Committees. The result of the proxy votes submitted by shareholders in respect of each resolution will be available on the company's website or on request to the Company Secretary. As outlined at principle 2, the company maintains an active dialogue with its shareholders through a planned programme of investor relations. 56 57#31BOOHOO GROUP PLC CORPORATE GOVERNANCE REPORT CONTINUED THERE ARE FOUR BOARD COMMITTEES - AUDIT, NOMINATION, REMUNERATION AND RISK COMMITTEES. THE ROLES AND RESPONSIBILITIES OF EACH ARE DETAILED HERE. AUDIT COMMITTEE Following his appointment in November 2020, Shaun McCabe is currently the Chairman of the Audit Committee, which has primary responsibility for monitoring the quality of internal controls, ensuring that the financial performance of the company is properly measured and reported on and reviewing reports from the company's auditors relating to the company's accounting and internal controls, in all cases having due regard to the interests of shareholders. Brian Small, lain McDonald and Pierre Cuilleret are the other members of the Audit Committee. The Audit Committee meets three times a year and also after the year end. Matters considered at these meetings include: reviewing and approving the annual report and financial statements for the year and half-year end; ⚫ discussion with the external auditors to confirm their independence and scope for audit work; ⚫ considering the reports from the external auditors identifying any accounting or judgemental issues requiring the Board's attention and the auditors' assessment of internal controls; reviewing and approving the group's tax strategy; corporate considering the work of the social responsibility and supplier conformance functions; reviewing compliance with minimum pay legislation and fairness at work procedures; and considering the adequacy of the whistle- blowing facility, the anti-bribery training and monitoring and data protection policy and procedures. The Audit Committee Chairman maintains dialogue with the auditors outside of the scheduled meetings and meets with the auditors without the presence of executive directors and members of the finance team. The group's internal audit function is overseen by and reports independently to the Audit Committee. The Audit Committee reports to the board on the effectiveness, value and independence of the auditors on an annual basis. The board is satisfied with the independence and objectivity of PKF Littlejohn LLP who, following a competitive tender process, replaced PricewaterhouseCoopers as the company's auditor on 21 December 2020. 58 RISK COMMITTEE COMMIT COMMI ANNUAL REPORT AND ACCOUNTS 2021 TION COM NOMINATION COMMITTEE // GOVERNANCE REMUNERATION COMMITTEE ATION C The chairman of the Risk Committee is Shaun McCabe. This committee reviews management's recommendations on risk management, particularly in relation to the structure and implementation of the risk strategy, system of governance, risk management framework, the quality and effectiveness of the related internal controls and reporting processes, risk appetite limits and , and the overall risk profile of exposures, the business. The Risk Committee meets at least four times a year. Brian Small, Pierre Cuilleret and lain McDonald are the other members of the Risk Committee. The responsibilities and activities of the Risk Committee are set out in more detail in the Risk Management report on page 31. Brian Small is the chairman of the Nomination Committee which identifies and nominates, for the approval of the board, candidates to fill board vacancies as and when they arise. The committee also considers matters of succession planning. The Nomination Committee meets at least once a year and otherwise as required. Pierre Cuilleret, lain McDonald and Shaun McCabe are the other members of the Nomination Committee. The chairman of the Remuneration Committee is lain McDonald. This committee reviews the performance of the executive directors and determines their terms and conditions of service, including their remuneration and the grant of share awards, having due regard to the interests of shareholders. The Remuneration Committee meets at least twice a year. Pierre Cuilleret, Shaun McCabe and Brian Small are the other members of the Remuneration Committee. The responsibilities and activities of the Remuneration Committee are set out in more detail in the Directors' Remuneration Report on page 66. 59#32DIRECTORS' REPORT BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 THE DIRECTORS PRESENT THEIR DIRECTORS' REPORT AND ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 28 FEBRUARY 2021. REGISTERED OFFICE The registered office is 12 Castle Street, St Helier, Jersey, JE2 3RT. PRINCIPAL ACTIVITIES The principal activity of the company is that of a holding company. The principal activity of its subsidiary undertakings is that of online clothing retailers. BUSINESS REVIEW The directors are required by Company Law to set out a fair review of the business, its position at the year end and a description of the principal risks and uncertainties facing the group and to prepare the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union. The review of the business on pages 26 to 33 provides this review and financial position and these are incorporated by cross-reference and form part of this report. The corporate governance report on pages 52 to 59 should be read as forming part of the directors' report. RESULTS AND DIVIDENDS Group profit after tax for the year to 28 February 2021 was £93.4 million (2020: £72.9 million). The audited financial statements for the for the year and group company are set out on pages 90 to 118. The directors do not recommend the payment of a dividend (2020: no dividend) so that cash is retained in the group for capital expenditure projects that are required for the rapid growth and efficiency improvements of the business and for suitable business acquisitions. DIRECTORS AND COMPANY SECRETARY The biographies of the directors who held office throughout the year and subsequently are set out on pages 50 to 51. The Company Secretary is Thomas Kershaw. The interests of the directors in the shares of the company and their share options and awards are detailed in the remuneration report on page 81. The company maintains directors' and officers' liability insurance, which gives appropriate cover for any legal action brought against the directors. The company has also provided an indemnity for its directors, which is a qualifying third-party indemnity provision for the purposes of section 234 of the Companies Act 2006 and was in place during the year and up to the date of approval of the financial statements. SHARE CAPITAL AND RESTRICTIONS ON SALE OF SHARES The authorised and issued share capital of the company and details of shares issued during the year are shown in note 23. The issued share capital as at 28 February 2021 was 1,263,255,457 shares of 1p. Powers related to the issue and buy-back of the company's shares are included in the company's articles of association and such authorities are renewed annually by shareholders at the annual general meeting. SHARE INCENTIVE PLAN TRUST The Share Incentive Plan ('SIP') trust is used by the company to provide free shares as share incentives to its employees. The trustees are Link Asset Services, an independent UK professional body. The SIP trustee buys shares and holds them in trust for the benefit of employees who remain with the company for three years. The trust held 22.6 million shares as at 28 February 2021. The trustees may vote on the beneficiaries' shares in accordance with the beneficiaries' instructions. SUBSTANTIAL SHAREHOLDERS Shareholders holding more than 3% of the company's shares as at 31 March 2021: 60 Shareholder Number of ordinary shares held Percentage held Mahmud Kamani* 152,979,880 12.53% Jupiter Asset Management 114,054,515 9.04% T Rowe Price Associates 82,165,541 6.51% Invesco Advisers Inc 76,328,033 6.05% Rabia Kamani* 56,944,782 4.51% Hargreaves Lansdown 40,932,989 3.25% Shareholders marked as * are considered to be a concert party. ASSESSMENT OF PROSPECTS AND VIABILITY The group's business activities together with the factors that are likely to affect the future development, performance, position and risks of the group are set out in the review of the business on pages 26 to 33. The continued impact of the COVID-19 crisis on the. group is not expected to change materially over the next year, provided that governments' actions in controlling the virus continue to be effective. Trading during the year to February 2021 has shown that online sales have been resilient during lockdowns in many countries. The group has substantial cash resources and undrawn credit facilities sufficient to continue solvent trading in the face of an unforeseen downturn in demand. As of the date of this report, we are continuing to operate, with the warehouses functioning under government-compliant safe working conditions and many office staff working from home. The directors considered the prospects of the group through an analysis of the markets for the group's product offering online in the UK and overseas and concluded that potential growth rates remain strong as the markets continue to develop as more customers become comfortable with online shopping. This provides great opportunities for future expansion. There is a diverse supply chain with no o key dependencies, enabling sourcing to be dynamic. Major expense categories relate to carriage and marketing services, which are widely diversified amongst suppliers. The business model affords a great deal of flexibility in responding to demand and economic changes: the wide range of products and relatively low buy quantities reduce inventory risk; a large customer base across many countries reduces specific economic and fashion dependencies; retail customers pay at the time of order with a small risk of default; and the high marketing expenditure is very controllable over a short time period. 61 // GOVERNANCE#33DIRECTORS' REPORT CONTINUED BOOHOO GROUP PLC ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE The group operates a regular budgeting, forecasting and long-range planning cycle, which is integrated with strategic plans and objectives. This planning cycle, in which the board is substantively involved, ensures, as far as is possible, that the profitability, cash flow and capital requirements of the business are sufficient to ensure its ongoing viability. Annual budgets, against which performance is compared, are prepared in advance of the next financial year. A cadence of weekly, monthly and quarterly forecasts is operated to monitor, control and report on performance in the current financial year. These forecasts form the basis upon which the board satisfies its requirements to update stakeholders with relevant financial performance and prospects. Once a year, three-year financial plans are prepared to assess the medium and longer-term prospects of the group and its finance requirements, based on its strategic plans. The directors have reviewed the group's profitability in the three-year plans, the annual budgets and medium-term forecasts, including assumptions concerning capital expenditure and expenditure commitments and their impact on cash flow. The directors consider that a three-year plan is the appropriate period to project financial plans with a reasonable level of certainty in line with their current strategic objectives. prospects Based on their assessment of and viability, and having taken into account a worst-case scenario arising from a continuation of the COVID-19 pandemic, the directors confirm that they have a reasonable expectation that the group will be able to continue in operation and meet its liabilities as they fall due in the three-year period ending February 2024. GOING CONCERN Having considered the prospects and viability as detailed above, the directors considered it appropriate to prepare the financial statements on the going concern basis, as explained in the basis of preparation in note 1 to the financial statements. FINANCIAL RISK MANAGEMENT Financial risk management is detailed in note 27 to the financial statements. Our impacts on, and engagement with, our stakeholder groups is considered further within the group's Sustainability Strategy on 39 to 49. pages HEALTH AND SAFETY The group is committed to providing a safe place of work for employees. Group policies are reviewed on a regular basis to ensure that policies regarding training, risk assessment, safe working and accident management are appropriate. There are designated officers responsible for health and safety and issues are reported at each board and executive meeting. GREENHOUSE GAS EMISSIONS As a group, boohoo recognises that its global operations have an environmental impact and we have a responsibility to understand, manage and minimise such impacts. That is why we have chosen to set our goal aligned with science-based targets and reduce our carbon emissions year-on-year in line with the Paris Agreement. We are also aware of the UK reporting obligations under The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, which the board is following voluntarily as a Jersey registered company. As such, this year we have enhanced our energy and carbon reporting to meet these new requirements and to increase the transparency with which we communicate our environmental impact to our stakeholders. The section on environment, social responsibility and governance on pages 39 to 49 is incorporated into this report by cross-reference. STATEMENT ON DISCLOSURE OF INFORMATION TO AUDITORS The directors who held office at the date of approval of this directors' report confirm that, so far as they are each aware, there is no relevant audit information of which the company's auditors are unaware and each director has taken all the steps that he/she ought to have taken as a director to make himself/herself aware of any relevant audit information and to establish that the company's auditors are aware of that information. INDEPENDENT AUDITORS The auditors, PKF Littlejohn LLP, have indicated their willingness to continue in office and a resolution that they be reappointed will be proposed at the annual general meeting. ANNUAL GENERAL MEETING Further details of the format and date of the annual general meeting will be communicated to shareholders in due course and in the usual way and the notice of the meeting will be available to view on the group's website www.boohooplc.com at least 21 days before the meeting. 62 63#34BOOHOO GROUP PLC Stakeholders ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE What they care about Working environment Culture Learning and development Pay and benefits Wellbeing Payment Transparency Human rights Material sourcing Future business growth Product quality, design and safety Affordable On-trend fashion Sustainability Customer service Sustainability Climate change Charity Support . How the board engaged during the year . . . Engaged with external experts to run wellbeing and diversity and inclusion workshops. Created a new internal engagement strategy and an employee-led diversity and inclusion steering group Launched a new internal intranet site called boohooforyou and employee Instagram page Enforced industry-leading payment terms to ensure suppliers' cash flow is robust Hosted a virtual conference for all UK manufacturing suppliers, sharing strategies and information on ethical and product compliance, sourcing, sustainability, Thurmaston Lane and the Agenda for Change. Reviewed monthly reports on customer brand perceptions, including quality, value, trends, and CSR measures, including sustainability. Proactively communicated to around 2 million customers throughout the year about delays relating to weather, COVID-19 or carrier failures. . . Introduced regular global town hall meetings for the board and other senior management to engage with employees about key issues Engaged employees in developing our sustainability strategy Visited suppliers whenever practical (COVID-19 safety protocols adhered to) Interaction with customers on WhatsApp and social media channels Engaged experts in developing our sustainability strategy Engaged experts, customers and employees in developing our sustainability strategy EMPLOYEES SUPPLIERS CUSTOMERS COMMUNITY & ENVIRONMENT GARMENT SHAREHOLDERS WORKERS AND NGOS GOVERNMENT SECTION 172 STATEMENT: BOARD ENGAGEMENT WITH STAKEHOLDERS "A fresh and proactive approach to stakeholder engagement to create mutually positive opportunities and outcomes." AN AGENDA FOR CHANGE The significant and clearly unacceptable supply chain issues identified in Leicester have had a marked impact on all our stakeholders. The board recognises that a fresh and proactive approach to stakeholder engagement is required to create mutually positive opportunities and outcomes for all our stakeholders, and to promote long- term sustainability and success. How we have responded to protect the garment workers, suppliers, our business and manage the expectations of all our stakeholders is set out in full on pages 20 to 23. THE BOARD'S APPROACH The board has voluntarily chosen to follow the section 172 guidance from UK law, although this is not required under Jersey regulations. The board recognises the importance of maintaining strong relationships with our stakeholders in order to create sustainable long- term value, and encourages active dialogue and transparency with all its stakeholder groups. Speaking with those we work with, deliver products for and who invest their money, , is essential to running a successful business. We take time to engage with, and listen to, the views of our stakeholders in order to shape our decision-making and to continue improving the way we do things. The board exercises skill and judgement in good faith, having regard to the likely consequences of their decisions, to promote actions that lead to the long- term success of the group. When developing strategy, the board has regard to financial considerations as well as the need to engage with a wide range of stakeholders. The board ensures that these relationships are managed effectively and that there is sufficient visibility of stakeholder engagement activities in the boardroom to inform decision-making and delivery of strategy. Board materials and discussions therefore seek to appropriately consider the impact and views of key stakeholder groups swhilst always ensuring the need to promote the success of the group for the benefit of its members as a whole. You can read more about board decision-making on pages 52 to 59. As well as acknowledging a responsibility towards society and the environment, the board recognises that effective engagement with key stakeholders is a key component of long-term sustainability and success. The board considers that the interests of the group and its shareholders are aligned in seeking sustainable value creation over the longer term through the group's operations. Consideration of the impact that the group and its operations has on all stakeholders is central to the culture and values of boohoo - more information about our values and culture can be found on page 9. HIGH STANDARDS OF BUSINESS CONDUCT The way we work and boohoo's expectations for conduct and behaviour are set out in our group policies. These policies cover areas such as environmental protection, animal welfare, employee and supplier conduct and human rights and are available on our website. The board recognises the importance of corporate governance and a description of how the group has adopted the QCA Corporate Governance Code 2018 can be found on pages 54 to 57. ACTING FAIRLY BETWEEN DIFFERENT STAKEHOLDERS OF THE GROUP As a board of directors, we recognise our shareholders as an important stakeholder group and treat them fairly and equally, so they too may benefit from the growth of the business and the value we create. Here we have mapped out our six key stakeholder the material issues groups, that they have raised throughout the year and how the board has responded. 64 Working conditions Safety Communication Living wage Transparency Open communication ESG management Financial performance Compliance with laws and workers' rights Established a cross-functional steering group to lead the creation of the group's new sustainability strategy Actively contributed to Waste Resources Action Programme's Textiles 2030 initiative, the sustainable apparel coalition and the microfibre consortium Gave evidence to the BEIS committee session on sourcing from the Xinjiang Province of China and the Environmental Audit Committee session on fashion Established the Garment and Textile Workers' Trust with the aim of delivering a package of services for garment workers in the city. This will include community initiatives, such as outreach workers and educational opportunities, such as scholarships. Investor roadshows in May and September following annual and half-year results Attended virtual investor conferences through a series of one-to-one and group meetings ⚫ Extensive shareholder engagement as part of the Independent Review of the group's supply chain Reviewed value creation opportunities for the group through: a fund- raise in May 2020, acquisitions of the Oasis and Warehouse brands as well as selected brands from the Arcadia Group, and strategic purchase of Debenhams Volunteered to appear in front of three House of Commons select committees in 2020 to illustrate the approach that the group is taking on particular issues Proactively engaged with government, local government, NGOs, charities and local stakeholders, sharing regular updates on Agenda for Change. . . . . Engaged with key campaigns such as the changing markets campaign on responsible viscose sourcing Considered value-creation potential for shareholders through an early purchase of the remaining 34% minority interest in PrettyLittleThing.com Limited Conducted non-executive director roadshows on governance- related matters, directly engaging with approximately 40% of independent shareholders with shareholder representative group, Extensive engagement the Investor Forum Hosted consultation workshops for local stakeholders Engaged with broad range of government stakeholders and APPG on Textiles to provide an update on our sustainability strategy One-to-one meetings between CEO and local MPs, Mayor of Manchester and NGO leaders 65 On behalf of the board John Lyttle 4 May 2021 Neil Catto#35BOOHOO GROUP PLC DIRECTORS' REMUNERATION REPORT ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE ANNUAL STATEMENT BY THE CHAIRMAN OF THE REMUNERATION COMMITTEE Dear shareholder, I am pleased to present the report of the Remuneration Committee on behalf of the directors. This directors' remuneration report will be put to an advisory shareholder vote at the forthcoming annual general meeting. REMUNERATION POLICY The Remuneration Committee is committed to complying with the principles of good corporate governance in relation to the design of the directors' remuneration policy. As such, our policy takes account of the UK Corporate Governance Code and the QCA Corporate Governance Code (against which the company formally reports compliance). The Committee also considers other best practice guidance (for example, the QCA Remuneration Committee Guide and the Investment Association's Principles of Remuneration), as far as is appropriate to the group's management structure, size and listing. We also endeavour in this report to provide information on the remuneration policy and its implementation in a manner broadly consistent with the reporting regulations as they apply to Premium Listed companies. Our approach to remuneration is governed by our directors' remuneration policy. The primary objectives of the policy continue to be to attract and retain the highest calibre directors and to design remuneration which promotes the long-term success of the group. In order to put these objectives into effect, we provide the opportunity for executives to receive short-term and long-term variable pay, dependent upon appropriate performance conditions, ensuring a clear link is established between shareholder value creation and the of our directors. pay Each year, the Committee reviews overall levels of and the operation of the pay incentive arrangements for executive directors to ensure they remain appropriate in light of the current business strategy and the interests of shareholders. This has been a particular area of focus for the Committee during the year under review in light of the heightened level of scrutiny of the business, the size of the vote against the directors' remuneration report at the 2020 AGM, feedback from leading shareholders and our desire to ensure that, going forwards, there is the strongest possible alignment between executive pay and the long-term interests of all stakeholders. After a detailed review, we have agreed a number of changes to directors' remuneration, which are explained in more detail below. We discussed these changes with major shareholders earlier this year and I was pleased to report that we received overwhelmingly positive feedback. PERFORMANCE AND REWARD FOR THE YEAR ENDED 28 FEBRUARY 2021 For the year ended 28 February 2021, in relation to the annual bonus plan, the group achieved outstanding revenue and Adjusted EBITDA growth above the top end of the stretching target ranges, which are disclosed on page 77. As a result, the executive directors received 100% of their bonus potential, which the Committee believes was an excellent result in what have been challenging business conditions. We considered the financial performance in the context of the wider supply chain and governance issues which occurred during the course of the year and noted the outstanding response of the management team in seeking to resolve the complex and difficult problems that have been the subject of much debate internally and externally. Although there is still some way to go, progress to date has been excellent and the Committee does not believe that reducing bonus outcomes would be necessary or desirable. Bonuses have also been paid to employees throughout the company to recognise the every strong level of performance over the year and we have made a one-off share award to all full-time employees worth £3,600 per person, in recognition of their outstanding commitment and performance in what has been an exceptionally challenging year from an operating perspective. MANAGEMENT INCENTIVE PLAN A new, one-off, long-term incentive plan for directors and senior managers, the Management Incentive Plan ('MIP') was introduced in June 2020 to align long- term growth in the share price and market capitalisation to executive reward. Participants include the founders of the business, Mahmud Kamani and Carol Kane, neither of whom have participated in any long-term incentive scheme since the flotation in 2014, despite being integral to the success of the group since its inception. The MIP is broad-based and includes 13 other participants, including the CFO, Neil Catto, and key contributors below board level. The ultimate value of MIP awards will depend on the growth of the business over the three years to June 2023, with the market capitalisation of the company needing to reach £6.295 billion (equal to a compound annual growth rate of 11%) by June 2023 before any value is realised. A maximum amount of £150 million may be shared by all participants if market capitalisation is £7.554 billion (equal to a CAGR of 18%) or higher. The Committee believes that the targets, required to be achieved in just over two years' time from now, are exceptionally demanding. The MIP is a central part of the remuneration arrangements for our leading executives over the mediumterm and is intended to drive further growth in the business. It is consistent with our performance-based culture and has many similarities with the structure of the Growth Share Plan introduced for John Lyttle in 2019, thus ensuring a broadly consistent approach to long-term incentives across the executive director and senior management team. Although participants have the ability to earn considerable amounts under the MIP, this would be a very small fraction of the overall returns delivered to shareholders and will only become payable if boohoo achieves exceptional growth for the benefit of all shareholders. The MIP was implemented after it was announced to the market and, as permitted by the AIM Rules, there was no requirement to seek shareholder approval for the plan. As announced at the time, the Committee took the view that the interests of shareholders would be best served by granting the awards immediately without recourse to a shareholder vote, which ensured participants were immediately incentivised to deliver stretching share price growth as the executes its group multi-brand online strategy. We subsequently received a number of comments about this decision and, with hindsight, we recognise that it would have been more consistent with our philosophy of transparency and shareholder openness to seek shareholder approval before implementing the plan. We have also reviewed the MIP in light of the supply chain issues raised over the course of the financial year. Whilst we ultimately believe that the full resolution (or otherwise) of these issues will be reflected in long-term share price performance (and thus have an impact on the value of awards) we have also agreed with participants to add a new non- financial performance condition. Under this new target, the Committee must be satisfied that the Agenda for Change programme has been successfully implemented over the three-year performance period before the vesting of any MIP awards. The Agenda for Change programme is centred around the implementation of the recommendations from the Alison Levitt Independent Review. These recommendations are a set of clear, measureable and focused targets, which have been published in full. The level of programme oversight provided by KPMG, together with the overall programme oversight provided by Sir Brian Leveson, will ensure that performance against these recommendations and the wider programme is constantly monitored and reported on by independent third parties. In line with its wider commitment to the highest standards of transparency, the group has committed to publishing each of Sir Brian Leveson's reports, in full. Through the Agenda for Change programme, the Committee has a clear structure in place to assess performance. In the event of the Committee determining that the Agenda for Change programme has not been successfully implemented in full, we will have the ability to reduce the level of vesting of awards, irrespective of the share price growth achieved over the performance period. In addition, John Lyttle has agreed to a similar amendment to his award under the Growth Share Plan, meaning that he will only benefit from his award to the extent that there is both sufficient growth in boohoo's market capitalisation and a successful implementation of Agenda for Change. REMUNERATION FOR THE YEAR ENDING 28 FEBRUARY 2022 We have also reflected on how we should implement the remuneration policy for the financial year ending 28 February 2022, taking into account the events of the past year and the views of major boohoo shareholders. These changes are as follows: Basic salaries for the executive directors will increase by 3% with effect from May 2021, in line with the average increase for the workforce as a whole. Maximum bonus opportunity will continue to be up to 100% of salary for Neil Catto, up to 150% for John Lyttle and up to 200% for Mahmud Kamani and Carol Kane. In line with common practice for companies of a similar size to boohoo, we will introduce an equity deferral element such that a minimum of one-third of any bonus earned must be invested in shares and held for at least two years. We will supplement the current financial performance conditions for the annual bonus with a mix of ESG and strategic non-financial targets. As a result, 45% of . . the 2022 bonus will be based on EBITDA, 30% on revenue, 15% on continued progress on the 2022 Agenda for Change milestones and 10% on the successful integration of the newly-acquired brands. The Remuneration Committee will also have the discretion to scale back the entire bonus if it is considered that the Agenda for Change has not been implemented successfully over the financial year. These changes are designed to ensure that the management team remains focused both on growing the business and continuing to make progress on addressing the supply chain issues. to No awards will be made to the executive directors under the Long-Term Incentive Plan ('LTIP) in the 2022 financial year, ensure full focus on the targets which must be met under the MIP and the Growth Share Plan. To date, Neil Catto has been the only director to receive standard awards under the LTIP, which vest subject to stretching three-year performance targets. He received an award during the ended year 28 February 2021 as part of his standard remuneration package. Whilst executives will not receive an award in the 2022 financial year, we will review the position at a later date with regards to awards in future years, mindful of the need to have suitable ongoing long-term incentive arrangements in place. The shareholding requirements for the executive directors have been extended and increased from 150% of basic salary to 200% of basic salary. For John Lyttle, the holding requirement currently increases to 300% on maturity of the Growth Share Plan and this will rise to 400%. On maturity of their awards under the MIP, the other executive directors will then also be required to hold shares equivalent to 400% of their basic salary. We are also requesting that the executive directors hold shares equivalent to the level of their in-service shareholding guideline for a minimum of two years after cessation of employment. These changes further enhance the alignment between directors' remuneration and the interests of shareholders, and are consistent with best of boohoo's size. practice for a company The clawback and malus provisions in the incentive schemes have been extended, with the Committee now able to invoke them in circumstances of serious reputational damage or corporate failure (in addition to the existing trigger events). Again, this change brings our practice into line with what investors expect for a large listed company. We have decided to make a small but important change to the pension provision for the directors. Currently, certain directors receive a cash supplement equivalent to 6.2% of basic salary in lieu of a pension contribution. With effect from 1 January 2023, we will reduce this to 5% of basic salary to align with the provision for the wider workforce. This approach ensures that boohoo complies with the UK Corporate Governance Code and the guidance of the Investment Association (notwithstanding that the Code and the IA guidance apply primarily to premium listed companies). ENCOURAGING EQUITY OWNERSHIP ACROSS THE BUSINESS The Remuneration Committee regularly reviews the pay arrangements for all employees. We remain committed to encouraging all our employees, as well as our senior executives, to be shareholders in the business. As part of facilitating this policy objective, as stated above, we made a further award of free shares worth £3,600 per person to all eligible employees under a UK HMRC-approved Share Incentive Plan in February 2021. This award recognised the outstanding contribution made by boohoo employees to the performance of the business over a challenging period. The award follows those made in the 2015, 2016, 2019 and 2020 financial years and our intention will be to make another award in the financial year ending 2022. Discounted options were issued under an HMRC-approved Save As You Earn ('SAYE') plan in each of the financial years ended 2016 to 2021. There has been a high level of participation by employees, and we intend to continue with similar arrangements in subsequent years. SHAREHOLDER FEEDBACK The Remuneration Committee recognises that dialogue with shareholders plays a key role in informing the design of the remuneration policy and we welcome the interactions we have had with investors over the last 12 months. The comments received have been instrumental in informing the changes that we have made, as set out above. We would welcome any additional feedback either before or after the forthcoming AGM. We will keep executive remuneration under regular review and will continue to consult with significant shareholders where major changes are proposed. We hope you will support the advisory vote on the directors' remuneration report at the forthcoming annual general meeting, as the directors will do in respect of their own beneficial shareholdings. lain McDonald CHAIRMAN OF THE REMUNERATION COMMITTEE 66 67#36BOOHOO GROUP PLC DIRECTORS' REMUNERATION REPORT CONTINUED UK CORPORATE GOVERNANCE CODE As indicated in the Remuneration Committee Chairman's Annual Statement, the remuneration policy takes into account the provisions of the UK Corporate Governance Code, despite boohoo not being formally required to report the extent of its compliance against the Code. The Remuneration Committee believes that in the vast majority of areas the remuneration policy complies with the principles and provisions of the Code. This has been enhanced through proposed changes to the policy such as the alignment of directors' pension provision with the wider workforce with effect from January 2023 and the introduction of post- employment shareholding requirements. The main point where the policy is not currently fully compliant with the Code is that certain share awards do not have a total vesting and holding period of five years or more. This applies to standard awards made to the CFO and other senior executives under the LTIP, and to the Management Incentive Plan (MIP) structure introduced for certain executive directors during 2020. In both cases, awards vest subject to extremely challenging performance conditions to be met over a three-year period. Although there are no formal post-vesting holding periods in place for these awards, the executive directors are obliged to comply with shareholding requirements which have recently been strengthened and which, as noted above, will now apply for a period of time following cessation of employment. As such, the Committee believes that the current structures are sufficiently long-term in nature. It should also be noted that the Growth Share Plan, introduced for the CEO in 2019, has a five-year performance period and is thus compliant with the Code. The Committee has considered the principles set out in Provision 40 of the Code and believes that the policy sufficiently addresses these principles, as set out below: ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE Principle Clarity Simplicity Risk Predictability Proportionality Alignment to culture How it is addressed The remuneration policy and its application are set out in detail in this Directors' Remuneration Report, providing shareholders with full information on all elements of directors' pay and how the policy is set. The level of detail provided has been extended this year to reflect the Committee's desire to report in line with best practice, and the vast majority of the reporting requirements for Premium Listed companies have been adopted. The Committee believes strongly that simple remuneration structures based around easily-understood performance measures are likely to be the most effective in terms of incentivising outperformance. For example, the annual bonus scheme rewards performance against a relatively small number of financial and (with effect from FY2022) non- financial metrics. The Growth Share Plan (for the CEO) and the MIP (for the other executive directors) pay out primarily due to the growth in the market capitalisation of boohoo and are not complicated through the use of metrics such as relative Total Shareholder Return. The remuneration policy is designed to be compatible with the group's risk policies and systems. The policy rewards strong levels of growth in the business and has been instrumental in the group's success since admission. The Committee has considered very carefully the current incentive structures in light of the issues raised during the course of the financial year and has recognised the merits of making some enhancements. For example, participants in the Growth Share Plan and the MIP have agreed that no awards will vest unless the Committee is satisfied that the Agenda for Change programme has been successfully implemented over the performance period. This is intended to provide additional reassurance that executives are directly focused on resolving the supply chain issues which have emerged and not focused solely on growth without due recognition of wider stakeholder interests. The extent of potential remuneration outcomes for directors is clear from the policy and implementation disclosures in this report. There is a limit on the size of annual bonus payments and awards under the standard LTIP. Although there is a wide range of potential outcomes under the Growth Share Plan and MIP, both plans are capped in the sense that individual participants cannot earn more than specified amounts. The incentive schemes are designed to support our strategic growth programme as we strive to lead the fashion e-commerce market globally. The schemes operate with ambitious targets which are closely aligned to the growth aspirations of the business. There is no potential for rewards for failure or poor performance. boohoo's fast-moving and performance-driven culture has been integral to its success and the incentive schemes have been designed to reflect this approach. The changes to the remuneration policy as discussed in this report will also help ensure that incentives take due account of the need for growth to be matched with a focus on the management of stakeholder relationships which are critical to the long-term value of the brand. POLICY REPORT PAY PHILOSOPHY The Remuneration Committee ('Committee') is responsible for determining, on behalf of the board, the group's pay philosophy and the policy on the remuneration of the executive directors, the Chairman and other senior executives of the group. The aim of the remuneration policy is to ensure that high calibre senior executives are provided with remuneration, which is designed to promote the long-term success of the group. The policy includes performance- related elements, which are transparent, stretching and rigorously applied so as to enhanced performance and to reward, in a fair and responsible manner, individual contributions to the success of the group. encourage The remuneration policy is designed to be compatible with risk policies and systems and to be aligned with the group's long-term strategic goals. The policy framework is structured so as to adhere to the principles of good corporate governance and has been developed taking into account the principles of the UK Corporate Governance Code and the QCA Corporate Governance Code. The performance-related variable pay component makes up a significant proportion of the overall package for senior executives and is designed to incentivise the delivery of the group's growth strategy and other strategic and business objectives. The interests of the executives are designed to align with the interests of shareholders through encouraging equity ownership and, in support of this, awards under the group's equity incentive plans are made where appropriate. CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN THE GROUP When setting the remuneration policy for executive directors, the Committee takes into account the overall approach to reward for, and the and employment conditions pay of, other employees in the group, especially when determining annual salary increases. This process ensures that increase to any the of executive directors is set in an pay appropriate context, especially relative to increases proposed for other employees. The Committee is also provided with periodic updates on employee remuneration practices and trends across the group. The principle of encouraging our senior executives to be shareholders in the business is reflected across the group as a whole and a key aim of the remuneration policy is to encourage widespread equity ownership across the whole employee base. In support of this objective, we operate an HMRC- approved Share Incentive Plan and an approved SAYE option plan. The Committee has not consulted directly with employees in designing the remuneration policy for the directors. However, in line with the recommendation of the UK Corporate Governance Code, the Committee intends to engage with employees to explain how executive remuneration aligns with wider company pay policy. CONSIDERATION OF SHAREHOLDER VIEWS The Committee pays close attention to the views of shareholders when setting the remuneration policy for executive directors. This includes consideration of shareholder voting on the Directors' Remuneration Report resolution at each AGM, the published guidelines of investors and their representative bodies and individual feedback received by the Committee. In recent months, the Committee has also consulted with major shareholders on the proposed changes to the policy. 68 69#37BOOHOO GROUP PLC DIRECTORS' REMUNERATION REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE CHANGES TO THE REMUNERATION POLICY In general, we believe that our pay philosophy and the broad structure of our remuneration policy has served the company well and has been a key factor in driving exceptional levels of performance. We intend to retain the overall broad framework but, as explained in the Annual Statement by the Chairman of the Remuneration Committee, we intend to make a number of changes to improve the alignment with shareholders and key stakeholders in the business. The revised policy is as follows: Purpose and link to strategy Element Base salary To aid recruitment and retention To reflect experience and expertise To provide an appropriate level of fixed basic income Annual To reward the bonus annual delivery of short to medium- term objectives relating to the business strategy Operation . . . . . Normally reviewed annually, with any increase usually becoming effective 1 May Set initially at a level required to recruit suitable executives, reflecting their experience and expertise Any subsequent increase influenced by: - - Scope of the role - Experience and personal performance in the role - Average change in total workforce salary - Performance of the group - External economic conditions, such as inflation Account taken of practice in comparable companies (e.g. those of a similar size and complexity) No recovery or withholding provisions apply All bonus payments are at the discretion of the Committee . Not pensionable year Maximum opportunity . Annual increases will generally be restricted to those of the of the average wider workforce Increases beyond those awarded to the wider workforce (in percentage of salary terms) may be awarded in certain circumstances, such as where there is a change in responsibility or experience, or a significant increase in the scale or complexity of the role and/or size and value of the company . Up to 200% of salary . for Mahmud Kamani and Carol Kane, up Framework used to assess performance The Committee reviews the salaries of executive directors each year, taking due account of all the factors described in the salary policy Element Long-Term Incentive Plan ('LTIP') Growth Share Plan Management Payable following the end of the based on targets set at the start of the year Targets are set and/or reviewed annually With effect from the financial year ending 28 February 2022, a minimum of one-third of any bonus earned must be invested in shares and held for at least two > years. The remainder of the bonus is payable in cash Recovery provisions apply in certain circumstances at the discretion of the Committee (including where there has been a misstatement of accounts, an error in assessing any applicable performance condition, misconduct on the part of the participant, serious reputational damage to the company, and/or corporate failure) to 150% of salary for John Lyttle and up to 100% of salary for all other executive directors, dependent on performance Bonuses are based on performance measures with appropriate targets set and assessed by the Committee at its discretion Those financial measures which are identified as the key indicators of success against the strategy (e.g. EBITDA and revenue) will represent the majority of bonus, with other measures (e.g. any strategic, ESG and/or personal objectives), where appropriate, representing the balance Performance is measured over a single financial year 30% of maximum bonus will be payable for achievement of a threshold level of performance, rising to 100% of maximum bonus for reaching stretch targets • Measures and weightings may change each year to reflect any year-on-year changes to business priorities at the discretion of the Committee Targets for threshold and stretch performance will be disclosed retrospectively Incentive Plan (MIP) . Purpose and link to strategy . . . . . Intended to align the long-term interests of senior executives with those of shareholders Neil Catto is the only executive director to participate in this plan To incentivise the delivery of key strategic objectives over the longer term Intended to align the long-term interests of the CEO with those of shareholders To incentivise the delivery of key strategic objectives over the longer term Intended to align the long-term interests of certain executive directors (Mahmud Kamani, Carol Kane and Neil Catto) and senior executives with those of shareholders To incentivise the delivery of key strategic objectives over the longer term Operation . Awards are normally granted in the form of nominal cost options Ability to exercise is dependent on performance targets being met during the performance period and continued service of the directors Recovery and withholding provisions apply in certain circumstances at the discretion of the Committee (including where there has been a misstatement of accounts, an error in assessing any applicable performance condition, misconduct on the part of the participant, serious reputational damage to the company, and/or corporate failure) John Lyttle was required to pay an amount to the company on grant of the award. This investment is intended to reflect his commitment to the group Vesting of the award is dependent on performance targets being met during the performance period and John Lyttle's continued service Recovery and withholding provisions apply in certain circumstances at the discretion of the Committee (including where there has been a misstatement of accounts, an error in assessing any applicable performance condition, misconduct on the of the part participant, serious reputational damage to the company, and/or corporate failure) Participants were required to pay an amount to the company on grant of the award. This investment is intended to reflect their commitment to the group Vesting of the award dependent on performance targets being met during the performance period and continued service of the participants Recovery and withholding provisions apply in certain circumstances at the discretion of the Committee (including where there has been a misstatement of accounts, an error in assessing any applicable performance condition, misconduct on the part of the participant, serious reputational damage to the company, , and/or corporate failure) Maximum opportunity . . The maximum annual limit contained within the plan rules is 150% of salary for executive directors Awards are at the discretion of the Committee and may be made at lower levels than this Exceptionally, at the discretion of the Committee, awards may be made in excess of 150% of salary per annum The maximum value that can be paid out to John Lyttle is £50 million (satisfied at the discretion of the company by either cash or boohoo group plc shares valued at the end of the five- year performance period) The maximum value that can be paid out to all participants is £150 million (satisfied at the discretion of the company by either cash or in boohoo group plc shares valued at the end of the three-year performance period) The maximum value that can be paid out to Mahmud Kamani and Carol Kane is £50 million each ⚫ The maximum value that can be paid out to Neil Catto is £10 million . .. Framework used to assess performance . . Award vest based on challenging targets measured over a three- year period and are dependent upon continued service At least half of awards will normally be based on financial performance metrics (such as, inter alia, PBT or EPS) Prior to each award, the Committee will set threshold and stretch targets along with an intermediate vesting range. Details of these will be disclosed in the annual report on remuneration for the in which the award year was granted unless the targets are commercially sensitive, in which case they will be disclosed retrospectively The performance measure is based on the compound annual growth rate of the company's market capitalisation measured over a five-year performance period In addition, John Lyttle has agreed to an amendment to the terms of the award such that vesting of any part of the award will require the successful implementation of the Agenda for Change programme The performance measure is based on the achievement of stretching increases in market capitalisation measured over a three-year performance period starting in June 2020 In addition, all participants have agreed to an amendment to the terms of their award such that vesting of any part of the award will require the successful implementation of the Agenda for Change programme 70 71#38BOOHOO GROUP PLC DIRECTORS' REMUNERATION REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 Purpose and Element link to strategy Pension To aid Other benefits recruitment and retention ⚫ To provide an appropriate level of fixed income To provide a competitive benefits package Shareholding requirement To support long-term commitment to the company and the alignment of executive director interests with those of shareholders Operation . Executive directors may receive an employer's pension contribution or cash allowance Executive directors may receive benefits including health care, income protection and life assurance, as well as other standard group-wide benefits offered by the company from time to time Executive directors are also eligible to participate in any all-employee share plans operated by the company on the same basis as for other eligible employees (and in line with relevant HMRC rules) The Remuneration Committee has adopted formal shareholding guidelines that will encourage executive directors to build I up over a five-year period and then subsequently hold a shareholding equivalent to a percentage of base salary. Adherence to these guidelines is a condition of continued participation in the equity incentive arrangements These guidelines will continue to apply for a minimum of two years following a director's cessation of employment Maximum . opportunity . . Employer's defined contribution or cash allowance up to 6.2% of salary From 1 January 2023 this will be aligned with the average contribution rate for the wider workforce (currently 5%) Framework used to assess performance N/A . The value of benefits N/A may vary from year to year depending on the cost to the company 200% of salary for executive directors, rising to 400% of salary on maturity of the Growth Share Plan/MIP None CHOICE OF PERFORMANCE MEASURES AND APPROACH TO TARGET SETTING Growth Share Plan and MIP The primary performance measure selected for John Lyttle's Growth Share Plan and for the MIP is market capitalisation growth over a five-year and three-year period respectively. The targets reflect the ambitious growth plans for the group and the performance measure ensures that executive directors' and senior managers' interests are fully aligned with shareholders. As explained in the Annual Statement by the Chairman of the Remuneration Committee, an additional measure has been added to both plans which means that vesting of any awards requires successful implementation of the Agenda for Change programme, thus tying management reward more closely to this critical priority for the business. The performance metrics and targets that are set for the executive directors via the annual bonus plan and LTIP awards are carefully selected to align closely with the group's strategic plan and key performance indicators. Annual bonus In terms of annual performance targets, the bonus is determined on the basis, primarily, of performance against financial measures, which are identified as the key indicators of success against the strategy set annually. For the financial year ending 28 February 2022, additional non-financial metrics have been introduced to the bonus scheme. The precise metrics chosen, along with the weightings of each, may vary from year to year. The Committee will review the performance measures and targets each year vary them as appropriate to reflect the priorities for the business in the year ahead. LTIP and In terms of the LTIP, metrics will be set at the time of each grant but will normally include at least half based on financial performance in line with our key objectives of delivering returns to shareholders through achievement of our growth strategy. The Committee will disclose the targets for each award to the executive directors in advance in the annual report on remuneration unless the targets are commercially sensitive, in which case they will be disclosed retrospectively. The Committee will review the choice of performance measures and the appropriateness of the performance targets prior to each LTIP grant. Challenging targets are set whereby modest rewards are payable for the delivery of threshold levels of performance, rising to maximum rewards for the delivery of substantial outperformance of our financial and operating plans. DIFFERENCES IN REMUNERATION POLICY FOR EXECUTIVE DIRECTORS COMPARED TO OTHER EMPLOYEES The Committee has regard to pay structures across the wider group when setting the remuneration policy for executive directors. The Committee, in particular, considers the general basic salary increase for the broader workforce when determining the annual salary review for the executive directors. Overall, the remuneration policy for the executive directors is more heavily weighted towards performance-related pay than for other employees. Performance-related long-term incentives are provided for those employees considered to have the greatest potential to influence overall levels of performance and those whose retention within the group is regarded as important. That said, whilst the use of the LTIP, Growth Share Plan and MIP is confined to the more senior management in the group, there is a commitment to encouraging widespread equity ownership through, for example, our use of an HMRC-approved Share Incentive Plan and SAYE share option scheme. The level of performance-related pay varies within the group by grade of employee and is informed by the specific responsibilities of each role, as appropriate. The Committee has not consulted directly with employees in designing the remuneration policy for the directors. SERVICE CONTRACTS AND LOSS OF OFFICE PAYMENTS Executive directors are not employed on fixed term contracts. Service contracts normally continue until the executive director's agreed retirement date or such other date as the parties agree. The company's policy is that executive directors will be employed on a contract that can be terminated by the company on giving no more than one year's notice, with the executive director required to give up to one year's notice of termination. A director's service contract may be terminated without notice and without any further payment or compensation, except for sums earned up to the date of termination, on the occurrence of certain events such as gross misconduct. The circumstances of the termination (taking into account the individual's performance) and an individual's duty and opportunity to mitigate losses are taken into account by the Committee when determining amounts payable on/following termination. Our policy is to reduce compensatory payments to former executive directors where they receive remuneration from other employment during the compensation period. The Committee will consider the particular circumstances of each leaver on a case-by-case basis and retains flexibility as to at what point, and the extent to which, payments would be reduced. Details will be provided in the relevant annual report on remuneration should such circumstances arise. 72 73 // GOVERNANCE#39BOOHOO GROUP PLC DIRECTORS' REMUNERATION REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE In summary, the contractual provisions are as follows: Provision Notice period Termination payment Change of control Detailed terms Maximum of 12 months from both the company and the executive director Payment in lieu of notice of base salary only, normally subject to mitigation and paid monthly', subject to the discretion of the Committee In addition, any statutory entitlements would be paid as necessary There are no enhanced provisions on a change of control 1. The Committee may elect to make a lump sum termination payment (up to a maximum of 12 months' base salary) as part of an executive director's termination arrangements where it considers it appropriate to do so. Annual bonus on termination There is no contractual entitlement to annual bonus on termination. At the discretion of the Committee, in certain circumstances a pro rata bonus may become payable at the normal payment date for the period of active service only. LTIP, Growth Share Plan and MIP on termination Any share-based entitlements granted under the company's share plans will be determined on the basis of the plan rules. In determining whether an executive director should be treated as a good leaver under the plan rules, the Committee will take into account the performance of the individual and the reasons for his/her departure and, in the event of this determination being made, will set out its rationale in the following annual report on remuneration. APPROACH TO RECRUITMENT AND PROMOTIONS The remuneration package for a new executive director would generally be set in accordance with the terms of the company's remuneration policy in force at the time of appointment and would be subject to the individual limits set out in the policy table above. In addition, with specific regard to the recruitment of new executive directors (whether by external recruitment or internal promotion), the remuneration policy will allow for the following: . . . . . Where new joiners or recent promotions have been given a starting salary at a discount to the mid-market level, a series of increases above those granted to the wider workforce (in percentage of salary terms) may be awarded over the following few years, subject to satisfactory individual performance and development in the role. The Committee may offer additional cash and/or share-based elements when it considers these to be in the best interests of the company and its shareholders. Any such additional payments would aim to reflect the terms and value of remuneration relinquished when leaving the former employer. The annual bonus would operate in accordance with the terms of the policy, subject to the overriding discretion of the Committee. Depending on the timing and responsibilities of the appointment, it may be necessary to set different performance measures and targets in the first year. For an internal executive appointment, any variable pay element awarded in respect of the former role would be allowed to pay out according to its terms, adjusted as relevant to take into account the appointment. In addition, any other ongoing remuneration obligations existing prior to appointment would continue. For external and internal appointments, the Committee may agree that the company will meet certain relocation expenses as appropriate. For the appointment of a new chairman or non-executive director, the fee arrangement would generally be set in accordance with the fee policy in force at that time. EXTERNAL NON-EXECUTIVE DIRECTOR POSITIONS The company allows executive directors to hold external directorships subject to agreement by the Chairman on a case-by-case basis and, at the discretion of the Committee, to retain the fees received from those roles. NON-EXECUTIVE DIRECTORS' LETTERS OF APPOINTMENT The non-executive directors do not have service contracts with the company, but instead have letters of appointment. The letters of appointment are usually renewed every three years. Termination of the appointment may be earlier at the discretion of either party on one month's written notice for non-executive directors. None of the non-executive directors is entitled to any compensation if their appointment is terminated. Appointments will be subject to re-election at the annual general meeting by rotation. NON-EXECUTIVE DIRECTORS' FEES The non-executive directors' fees policy is described below: Element Fees Purpose and link to strategy . To recruit and retain high calibre non-executives Operation Fees are determined by the board, with non-executive directors abstaining from any discussion or decision in relation to their fees • Non-executive directors are paid an annual fee for all board duties, which will include an annual award of shares (with the value of shares normally determined at the market price in February of each year) In relation to the cash element, fees are normally paid monthly . In relation to the share element there will be certain restrictions which prevent the director selling these shares during the period of their appointment . ⚫ Non-executive directors will not receive awards under any of the company's incentive arrangements or receive any pension provision The fee levels are reviewed on a periodic basis, with reference to the time commitment of the role and market levels in companies of comparable size and complexity . In exceptional circumstances, if there is a temporary yet material increase in the time commitment for non-executive directors, the board may pay extra fees to recognise the additional workload . Non-executive directors shall be entitled to have reimbursed all expenses that they reasonably incur in the performance of their duties, including taxes payable thereon Maximum opportunity There is no cap on fees Fees be increased to ensure they may continue to appropriately recognise the time commitment of the role, increases to fee levels for non-executive directors in general and fee levels in companies of a similar size and complexity 74 | K 75#40BOOHOO GROUP PLC DIRECTORS' REMUNERATION REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE ANNUAL REPORT ON REMUNERATION This section of the remuneration report contains details as to how the group's remuneration policy was implemented during the year ended 28 February 2021. DISCLOSURE OF DIRECTORS' SINGLE-FIGURE TOTAL REMUNERATION FOR THE YEAR - AUDITED INFORMATION The total single-figure remuneration of the directors during the year ended 28 February 2021 is set out below: Fixed remuneration Variable remuneration Base salary and fees £ Benefits E Pension equivalent £ Other £ Annual bonus Long-term incentives Annual bonus Total £ £ £ Executive directors Mahmud Kamani 2021 450,000 42,747 900,000 1,392,747 2020 433,333 42,488 900,000 1,375,822 Carol Kane 2021 450,000 5,331 27,900 900,000 1,383,231 2020 433,333 8,572 23,467 900,000 1,365,372 John Lyttle 2021 615,000 3,777 33,388 3,599 922,500 1,578,264 Benefits 2020 592,947 4,283 19,267 6,498 922,500 1,156,695 2,702,190 year: Figures in the single total figure remuneration include the following for the financial The amount of salary or non-executive directors' fees. Base salary and fees Pension and pension equivalent Other Long-term incentives Where an executive has elected to forego company pension contributions, due to pension cap restrictions, an amount of 6.2% is paid as a supplementary element, being the company cost-neutral equivalent of the pension cost and employer's NI foregone. The value of SIP awards and SAYE options granted in the financial period for executive directors (SAYE option calculated as the 20% discount at grant on the three-year plan) and the value of free shares issued to non- executive directors as part of their fees. The amount of performance-related bonus receivable. Further details of the performance outcome can be found below. The value of long-term incentives vesting based on performance ending in the year under review. Further details of the share options granted in 2018 and vesting on 28 June 2021 based on performance measured to 28 February 2021 can be found below. A share price of 338p (the three-month average share price to 26 February 2021) has been used for the purposes of valuing the gain. Of the amount stated in the table, £175,156 is attributable to share price appreciation. The value of private medical insurance, income protection, life assurance, company car and fuel costs based on the taxable value and driver services. Neil Catto 2021 300,000 2,959 18,600 3,599 300,000 435,155 1,060,313 2020 294,833 2,925 14,317 6,498 300,000 513,084 Total executive directors 2021 1,815,000 54,814 79,888 7,198 3,022,500 435,155 1,131,706 5,414,555 2020 1,754,496 58,269 57,051 12,996 3,022,500 1,669,779 6,575,091 Non-executive directors Pierre Cuilleret 2021 60,000 10,000 70,000 2020 56,667 10,000 66,667 Shaun McCabe 2021 20,192 10,000 30,192 Threshold £1,500 million ANNUAL BONUS For the year ended 28 February 2021, Mahmud Kamani's and Carol Kane's maximum potential bonus was 200% of basic salary, John Lyttle's 150% and Neil Catto's 100%. 40% of the potential bonus related to a revenue target and 60% of the potential bonus related to an target. Bonus entitlement targets were as follows: Financial target range Revenue target: adjusted EBITDA 2020 lain McDonald 2021 70,000 10,000 80,000 Upper limit £1,600 million or more Bonus entitlement % 12.0% 40.0% 2020 65,000 10,000 75,000 Adjusted EBITDA target: Sara Murray 2021 Threshold £145 million 18.0% 2020 75,000 10,000 85,000 Upper limit £160 million or more 60.0% Brian Small 2021 126,859 20,000 146,859 2020 59,679 20,000 Total non-executive 2021 277,051 50,000 79,679 327,051 directors The amount of bonus payable varies on a sliding scale between the threshold and upper limit shown above. For the financial year ended 28 February 2021, revenue was £1,745 million and adjusted EBITDA £173.6 million, resulting in payments of 40% and 60% of bonus entitlement respectively. Bonuses payable were as follows: 2020 256,346 50,000 306,346 Name Bonus % of salary Total 2021 2020 2,092,051 2,010,842 54,814 79,888 57,198 3,022,500 435,155 5,741,606 Mahmud Kamani 200% 58,269 57,051 62,996 3,022,500 1,669,779 6,881,437 Carol Kane 200% John Lyttle 150% Neil Catto 100% 76 | F 77#41BOOHOO GROUP PLC DIRECTORS' REMUNERATION REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE LONG-TERM SHARE INCENTIVES Neil Catto holds options under the LTIP subject to the achievement of performance conditions as follows: No. of ordinary Name Option scheme Neil Catto Neil Catto Neil Catto Neil Catto 2016 LTIP shares under option 404,822 Exercise Date price pence of grant 1 30/06/16 2017 LTIP 120,546 1 13/06/17 2018 LTIP 128,744 1 28/06/18 30/06/19 to 30/06/26 13/06/20 to 13/06/27 28/06/21 to 28/06/28 Neil Catto 2019 LTIP 168,570 1 11/12/19 21/04/22 to 21/04/29 Neil Catto Neil Catto 2016 grant 2020 LTIP 164,865 1 03/11/20 03/11/23 to 03/11/30 Neil Catto Neil Catto John Lyttle John Lyttle Exercise period ALL-EMPLOYEE SHARE INCENTIVE PLAN ('SIP') The HMRC-approved all-employee Share Incentive Plan purchases shares and holds them in trust for the benefit of employees who remain with the company for three years. There are no performance criteria for the SIP shares. The directors hold the following options over shares under this scheme: Name Neil Catto No. of ordinary shares held in trust Purchase price pence Date of Maturity grant 6,000 50 14/03/14 date 14/03/17 3,571 28 19/06/15 19/06/18 938 213 27/09/18 27/09/21 884 226 23/08/19 23/08/22 974 370 19/02/21 19/02/24 884 226 23/08/19 23/08/22 974 370 19/02/21 19/02/24 SAVE AS YOU EARN SHARE SCHEME ('SAYE') The performance targets for the shares granted on 30/06/16 were based upon the achievement of two key criteria, Three-Year Aggregate Adjusted Earnings per Share (67%) and Total Shareholder Return (33%) over a three-year period to the end of FY2019. Minimum "threshold" and "stretch" targets were established by the Committee against these criteria. The EPS element vested on a straight-line basis between target intervals from 1.6p for a 25% vesting to 2.4p for 100% vesting. The actual vesting was 100%. The TSR element vested on a straight-line basis between target intervals from 50% growth in TSR for a 25% vesting to 125% growth in TSR for a 100% vesting. The actual vesting was 100%. The combined vesting was therefore 100%. 2017 grant The performance targets for the shares granted on 13/06/17 were based upon the achievement of two key criteria, Three-Year Aggregate Adjusted Earnings per Share (67%) and Total Shareholder Return (33%) over a three-year period to the end of FY2020. Minimum "threshold" and "stretch" targets were established by the Committee against these criteria. The EPS element vested on a straight-line basis between target intervals from 7.5p for a 25% vesting to 12p for 100% vesting. The actual vesting was 100%. The TSR element vested on a straight-line basis between target intervals from 50% growth in TSR for a 25% vesting to 125% growth in TSR for a 100% vesting. The actual vesting was 62%. The combined vesting was therefore 87.3%. 2018 grant The performance targets for the shares granted on 28/06/18 were based upon the achievement of two key criteria, Three-Year Aggregate Adjusted Earnings per Share (67%) and Total Shareholder Return (33%) over a three-year period to five days after publication of the FY2021 Annual Report and Accounts. Minimum "threshold" and "stretch" targets were established by the Committee against these criteria. The EPS element vests on a straight-line basis between target intervals from 11.3p for a 20% vesting to 14.9p for 100% vesting. The actual vesting will be 100%. The TSR element vests on a straight-line basis between target intervals from 20.4% growth in TSR for a 25% vesting to 73.9% growth in TSR for a 100% vesting. 2019 grant The performance targets for the shares granted on 11/12/19 are based upon the achievement of two key criteria, Three-Year Aggregate Adjusted Earnings per Share (67%) and Total Shareholder Return (33%) over a three-year period to the end of FY2022. Minimum "threshold" and "stretch" s have been established by the Committee against these criteria. The EPS element vests on a straight-line basis between target intervals from targets 16p for a 20% vesting to 19p for 100% vesting. The TSR element vests on a straight-line basis between target intervals from 55.3% growth in TSR for a 25% vesting to 84.1% growth in TSR for a 100% vesting. 2020 grant The performance targets for the shares granted on 03/11/20 are based upon the achievement of two key criteria, Three-Year Aggregate Adjusted Earnings per Share (67%) and Total Shareholder Return (33%) over a three-year period to the end of FY2023. Minimum "threshold" and "stretch" targets have been established by the Committee against these criteria. The EPS element vests on a straight-line basis between target intervals from 28p for a 20% vesting to 33p for 100% vesting. The TSR element vests on a straight-line basis between target intervals from 50% growth in TSR for a 25% vesting to 75% growth in TSR for a 100% vesting. The award granted to Neil Catto on 03/11/20 had a face value of 150% of basic salary. The HMRC-approved all-employee Save As You Earn scheme allows employees to purchase shares at a 20% discount to market price at date of grant on the future option date. There are no performance criteria for the SAYE shares. The directors hold the following options over shares under this scheme: Name Neil Catto John Lyttle OTHER BENEFITS Estimated shares to be purchased at option date 8,297 8,297 Option price pence 216.9 216.9 Date of grant 30/10/19 30/10/19 Option date 30/10/22 30/10/22 In the prior year, and as previously disclosed, a one-off conditional award over 357,446 ordinary shares was made to John Lyttle in compensation for the loss of short and long-term incentive awards, which lapsed on leaving his previous employer, provided John stayed in his role as Chief Executive for a period of 12 months to 15 March 2020. The award vested in March 2020 and the value of £1.2 million was recognised in the single total figure table for the financial year ended 29 February 2020. PERFORMANCE GRAPH AND TABLE The graph below illustrates boohoo's total shareholder return since admission in March 2014 relative to two broad equity market indices, the FTSE AIM 100 index and the FTSE 250 index. TOTAL SHAREHOLDER RETURN Value (E) (Rebased) 800 700 600 500 400 300 200 100 0 13/03/14 28/02/15 29/02/16 28/02/17 28/02/18 Boohoo FTSE 250 28/02/19 29/02/20 28/02/21 - FTSE AIM 100 78 Source: Datastream (Thomson reutuers) 79#42BOOHOO GROUP PLC DIRECTORS' REMUNERATION REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 The table below sets out the total remuneration of the CEO over the period since admission, as disclosed in the Single Figure table in each year's Directors' Remuneration Report. Mahmud Kamani and Carol Kane served as Joint CEOs until John Lyttle's appointment in March 2019. DIRECTORS' INTERESTS IN SHARES The table below sets out the beneficial and non-beneficial interests in the number of ordinary shares as at the year end. // GOVERNANCE 2015 2016 2017 2018 2019 2020 2021 Mahmud Carol Mahmud Carol Kamani Kane Kamani Kane Mahmud Carol Mahmud Carol Mahmud Carol Kamani Kane Kamani Kane Kamani John John Kane Lyttle Lyttle Name of director Beneficially owned at 29 February 2020 Mahmud Kamani 152,679,880 Free share award under NED remuneration policy Total Shares acquired during the Shares disposed of during the Beneficially owned at year year 28 February 2021 Total Single Figure (£k) 217 235 379 390 396 410 893 914 Annual bonus payment 0% 0% 90% 90% 100% 100% 100% 100% 1,062 100% 1,072 2,702 1,578 Carol Kane 31,330,421 5,300,000 2,000,000 157,979,880 33,330,421 As a % of Outstanding share capital share options 12.55% Shares held under SIP SAYE options granted interests in shares at 28 February 2021 157,979,880 2.65% 100% 100% 100% John Lyttle Neil Catto 73,910 5,825 79,735 357,446 0.01% 1,005,038 1,858 12,367 33,330,421 8,297 367,601 8,297 1,105,437 (% of maximum) LTIP vesting level n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a (% of maximum)1 Pierre Cuilleret lain McDonald Shaun McCabe Brian Small 214,481 468,481 2,855 217,336 0.02% 217,336 46,770 2,855 2,855 5,711 150,000 621,336 0.05% 621,336 100,000 10,000 102,855 0.01% 102,855 62,481 0.01% 62,481 GROWTH SHARE PLAN 1. During their tenure as Joint CEOs, Mahmud Kamani and Carol Kane did not participate in long-term incentive arrangements. For John Lyttle, there were no long-term incentives which vested in respect of FY2020 or FY2021. This excludes the shares he received as compensation for the loss of short and long-term incentives which lapsed on leaving his previous employer, as disclosed in last year's Directors' Remuneration Report. CHIEF EXECUTIVE'S REMUNERATION COMPARED TO ALL OTHER EMPLOYEES OF THE GROUP Percentage change of Chief Executive's base salary in the year compared to that of all employees: Percentage increase in Chief Executive's annualised base salary Average percentage increase in all employees' base salaries 0% 5.9% The Chief Executive's total single figure remuneration ratio to the equivalent pay for the lower quartile, median and upper quartile UK employees, calculated using option A of the Companies (Miscellaneous Reporting) Requirements 2018 is as follows: Year 2021 20201 25th percentile ratio 76:1 151:1 50th percentile ratio 75th percentile ratio 65:1 130:1 49:1 95:1 1. Prior year numbers restated based on total single figure remuneration and not basic pay as previously reported Option A was chosen as it represents the most accurate means of identifying the relevant employees at each percentile level. The workforce comparison is based on data for the years ended 28 February. The median is considered to be representative of the wider pay and reward of the UK workforce. As indicated in the table, there has been a significant reduction in the pay ratio reported for 2021 when compared to that reported for 2020. This is primarily a consequence of the notably lower total single figure remuneration reported for the CEO for 2021 as a result of his having no long-term incentive award vesting in respect of 2021. (In 2020, his single figure remuneration included the value of the buyout award he received on joining boohoo.) The group believes that the median pay ratio accurately reflects the comparison between the CEO's remuneration and the pay for UK employees and is consistent with wider pay, reward and progression policies affecting UK employees. There is an obvious differential between the pay for the CEO and for the wider employee base, with the CEO's remuneration reflecting market norms for leaders of listed companies. For all employees, we strive to offer a competitive pay and benefits package relevant to the roles performed. This includes participation in the SIP and SAYE share schemes (offered to all eligible employees) and, at more senior levels, participation in additional bonus and long-term incentive schemes. Pay data £000 Chief Executive remuneration UK employees 25th percentile UK employees 50th percentile UK employees 75th percentile 2020 As explained in last year's report, John Lyttle, Chief Executive, has subscribed for 1,950 A ordinary shares of 0.1 pence each ('A Ordinary Shares) in boohoo Holdings Limited, an intermediary holding company of the group, as part of a Growth Share Plan. The value of the award under the Growth Share Plan is directly linked to the creation of significant growth in shareholder value as set out below: The value of the award will be determined by the compound annual growth rate ('CAGR') in market capitalisation of the group over the five-year period starting on the date John joined as Chief Executive, 15 March 2019 ('the Period'). . The CAGR will be calculated using a base market capitalisation of £2.037 billion, being the market capitalisation on the date of the announcement on 17 September 2018 that John would be joining the group. The value of the award under the Growth Share Plan is capped at £50 million of gross s value before tax in the event of achieving CAGR of at least 23% at the end of the Period. CAGR of less than 10% yields nil value. The Growth Share Plan provides for adjustments to be made for increases in market capitalisation arising from corporate events, such as the issue of shares for acquisitions, so that the benefits derived from the Growth Share Plan only arise from organic growth and the Growth Share Plan also provides clawback and malus provisions, which allow repayment in defined circumstances. As explained in the Annual Statement by the Chairman of the Remuneration Committee on page 66, John Lyttle has agreed to an amendment to the terms of his award under the Growth Share Plan such that the vesting of the award is also subject to the Committee being satisfied that the Agenda for Change programme has been successfully implemented over the performance period. MANAGEMENT INCENTIVE PLAN In line with the announcement to the market on 26 June 2020, Mahmud Kamani, Carol Kane and Neil Catto have subscribed for 1,950, 1,950 and 390 B ordinary shares of 0.1 pence each ('B Ordinary Shares), respectively, in boohoo Holdings Limited, an intermediary holding company of the group, as part of a Management Incentive Plan (the MIP'). The value of the award under the MIP is directly linked to the creation of significant growth in shareholder value as set out below: . 2021 Total pay and Base salary benefits Base salary (annualised) Total pay and . 615 1,578 615 benefits 2,702 19 21 18 21 24 19 21 29 32 26 29 18 The value of the award will be determined by the achievement of stretching targets of market capitalisation growth of the group over the three- year period starting on 16 June 2020 ('the Period'). The value of the award under the MIP is capped at £50 million of gross value before tax for Mahmud and Carol and £10 million for Neil in the event of achieving a market capitalisation of £7.554 billion (18% CAGR and 66% growth in market capitalisation from 16 June 2020). A market capitalisation of less than £6.295 billion (11% CAGR) yields nil value. The MIP provides for adjustments to be made for increases in market capitalisation arising from corporate events, such as the issue of shares for acquisitions, so that the benefits derived from the MIP only arise from organic growth and the MIP also provides clawback and malus provisions, which allow repayment in defined circumstances. As explained in the Annual Statement by the Chairman of the Remuneration Committee on page 71, the executive directors have agreed to an amendment to the terms of their MIP awards such that the vesting of the awards is also subject to the Committee being satisfied that the Agenda for Change programme has been successfully implemented over the performance period. 80 81#43BOOHOO GROUP PLC DIRECTORS' REMUNERATION REPORT CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 // GOVERNANCE COMPOSITION OF THE REMUNERATION COMMITTEE The members of the Committee are lain McDonald, Pierre Cuilleret, Shaun McCabe and Brian Small. Executive directors are invited to attend meetings, if requested by the Committee, in order to provide information and advice, to enable the Committee to make informed decisions. Each director is, however, specifically excluded from any matter concerning his own remuneration. Representatives of the Committee's retained advisers may also attend meetings by invitation. The Company Secretary attends meetings as secretary to the Committee. ADVISERS TO THE REMUNERATION COMMITTEE During the year, the Committee received advice from KPMG LLP. The total fees paid to KPMG LLP in respect of its services during the year were £15,000 (2020: £61,850). The Committee also appointed Korn Ferry to provide advice on remuneration matters and reporting. The total fees paid to Korn Ferry in respect of its services during the year were £23,200 (2020: Enil). KPMG LLP and Korn Ferry are signatories to the Remuneration Consultants Group Code of Conduct and operate voluntarily under this Code, which sets out the scope and conduct of the role of executive remuneration consultants when advising UK listed companies. The Committee regularly reviews the external adviser relationship and is comfortable that the advice received during the year was objective and independent. The Committee received additional advice on the Management Incentive Plan from Paul Hastings (Europe) LLP during the year, for which fees of £8,625 (2020: Enil) were payable. SHAREHOLDER VOTING AT AGM The table below sets out the results of voting on the Directors' Remuneration Report resolution at the AGM held on 19 June 2020: Resolution Approve the Directors' Remuneration Report for the year ended 29 February 2020 For Against Withheld 677,473,350 (65.92%) 350,227,062 (34.08%) 10,171 The Committee has reflected on the level of votes cast against the above resolution and has taken this into account when proposing the changes to the remuneration policy and its implementation as set out in this report. IMPLEMENTATION OF REMUNERATION POLICY FOR THE YEAR ENDING 28 FEBRUARY 2022 - UNAUDITED BASE SALARY The annual base salaries (excluding any substitution allowance for a company pension foregone) of the executive directors are as follows. The Committee has agreed salary increases of 3% with effect from 1 May 2021, as set out in the table below. These increases are in line with the average increase for the wider workforce. Mahmud Kamani Carol Kane John Lyttle Neil Catto Group Executive Chairman Group Co-founder and Executive Director Chief Executive CFO PENSION AND OTHER BENEFITS 2020 £450,000 From 1 May From 1 May 2021 £463,500 £463,500 £450,000 £633,450 £615,000 £309,000 £300,000 Carol Kane, John Lyttle and Neil Catto receive a 6.2% compensatory salary element for electing to discontinue receiving a company pension due to the pension cap provisions. This will be revised in 2023 to 5%, in line with the majority of colleagues' pension contributions. Mahmud Kamani does not receive a company pension contribution. Carol Kane, John Lyttle and Neil Catto receive company health care benefits and life assurance. Carol Kane receives driver services and Mahmud Kamani driver services and a company car and fuel. ANNUAL BONUS All of the executive directors are eligible to participate in the company-wide annual bonus plan. The Committee oversees the bonus plan, and a any bonus payments are at the discretion of the Committee. The maximum bonus payable for the year ending 28 February 2022 as a percentage of salary will be as follows: Mahmud Kamani and Carol Kane 200%, John Lyttle 150% and Neil Catto 100%. The maximum bonus will be payable based on performance measured over the single financial year ending 28 February 2022. The performance targets are based on a combination of financial and non-financial performance measures. Of the total bonus payable, 45% will be based on EBITDA, 30% on revenue, 15% on continued progress on the 2022 Agenda for Change milestones and 10% on the successful integration of the group's newly acquired brands. The Remuneration Committee will also have the discretion to scale back the entire bonus if it is considered that Agenda for Change has not been implemented successfully over the financial year. This choice of metrics reflects measures that have been identified as key indicators of the group's success against its growth strategy, with non- financial metrics introduced to provide for a more rounded assessment of performance and to ensure that the management team continues to make progress on addressing the supply chain issues. The amount of bonus payable will be calculated as a percentage of base salary modified by a factor linked to the performance targets. An equity deferral element for the bonus has been introduced such that a minimum of one-third of any bonus must be invested in shares and held for at least two years. The remaining portion of the bonus will be payable in cash immediately after the announcement of the financial results. The annual bonus targets, in relation to the financial year ending 28 February 2022, are considered to be commercially sensitive at this stage. Details of the targets, performance against those targets, and any payments resulting, will be disclosed in next year's annual report on remuneration. LONG-TERM INCENTIVE PLAN ('LTIP') No new awards under the LTIP or any other long-term incentive arrangement will be made to executive directors during the financial year ending 28 February 2022. ALL-EMPLOYEE SHARE PLANS The board granted free shares in the financial year ended 28 February 2021. It is intended to grant a further issue of free shares to all employees in the financial year ending 28 February 2022. The company offered HMRC-approved SAYE plans in each of the financial years ended from 2016 to 2021 and it is intended that a further SAYE grant be offered for the financial year ending 28 February 2022. The executive directors are eligible to participate in the schemes on the same basis as other employees. 82 83#44BOOHOO GROUP PLC DIRECTORS' REMUNERATION REPORT CONTINUED REMUNERATION FOR NON-EXECUTIVE DIRECTORS The non-executive directors all receive a fee and annual allocation of shares each year to cover all their duties. The current annual remuneration is: From 1 March 2021 Share awards Pierre Cuilleret NED lain McDonald NED and Chairman of Remuneration Committee Shaun McCabe Chairman of Audit and Risk Committees Brian Small The above remuneration will be reviewed annually by the board. £10,000 £10,000 Fees £60,000 £70,000 From 1 March 2020 Share awards £10,000 £10,000 Fees £60,000 £70,000 £10,000 £80,000 Deputy Chairman, SID, Chairman of Nomination Committee £20,000 £120,000 £20,000 £120,000 lain McDonald CHAIRMAN OF THE REMUNERATION COMMITTEE 4 May 2021 84 ANNUAL REPORT AND ACCOUNTS 2021 STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS The directors are responsible for preparing financial statements for each financial year, which give a true and fair view, in accordance with applicable Jersey law and International Financial Reporting Standards, of the state of affairs of the group and of the profit or loss of the group that period. In preparing those 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; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors confirm that they have complied with the above requirements in preparing the financial statements. for The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law, 1991. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. On behalf of the board John Lyttle 4 May 2021 Neil Catto 4 May 2021 85 // GOVERNANCE#45BOOHOO GROUP PLC INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF BOOHOO ANNUAL REPORT AND ACCOUNTS 2021 /// FINANCIAL STATEMENTS OPINION We have audited the consolidated financial statements of boohoo group plc and its subsidiaries (the 'group') for the year ended 28 February 2021, which comprise the Consolidated Statement of Financial Position, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. . In our opinion: the financial statements give a true and fair view of the state of the group's affairs as at 28 February 2021 and of the group's profit for the year then ended; . the financial statements have been group properly prepared in accordance with IFRSS as adopted by the European Union; and the financial statements have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAS (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. CONCLUSIONS RELATED TO GOING CONCERN In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the group's ability to continue to adopt the going concern basis of accounting included obtaining management's assessment of going concern and associated budgets for a minimum period of 12 months from the date of approval of the financial statements. We have reviewed the inputs to the forecast financial information for reasonableness, compared to historic financial information, and stress-tested where appropriate. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's ability to continue as a going concern for a period of at least 12 months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. OUR APPLICATION OF MATERIALITY The scope of our audit was influenced by our application of materiality. We determined materiality for the financial statements as a whole to be £6.2m for the consolidated financial statements using 5% of profit before tax as a basis. We consider profit before tax to be the most relevant determinant of the group's performance used by shareholders. Whilst materiality for the financial statements as a whole was set at £6.2m, each significant group was audited to an component of the. overall materiality ranging between £3.9m and £4.3m with performance materiality set at 70% and a triviality threshold of 5%, above which any differences noted have been reported to the Audit Committee. We applied the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatement. OUR APPROACH TO THE AUDIT In designing our audit, we determined materiality, as above, and assessed the risk of material misstatement in the financial statements. In particular, we looked at areas requiring the directors to make subjective judgements, for example in respect of significant accounting estimates, including inventory provision, returns provision, and judgements related to the fair value of the consideration in respect of the acquisition of the NCI in PrettyLittleThing.com. We also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represents a risk of material misstatement due to fraud. A full scope audit was performed on the complete financial information of the group's operating components located in the United Kingdom, with the group's key accounting function for all being based in the same location. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter Acquisition of the 34% minority stake in PrettyLittleThing.com [Note 1] As part of the pre-existing shareholder agreement, boohoo had an existing option to buy the remaining 34% non-controlling interest in PrettyLittleThing.com Limited ('PLT') for market value or a lesser sum, depending upon financial performance over the five years to 2022. The performance period for the option commenced on 1 March 2017 and attracted an equity-settled share-based payment charge over the five-year performance period in accordance with IFRS 2. During FY2021, boohoo exercised this option and now holds 100% of the shares in PLT. The 34% stake was acquired for initial consideration of £269.8 million, with a further £54 million of contingent consideration, with the initial consideration settled through shares in the Group totalling £107.9 million and an up-front cash payment of £161.9 million. As part of the transaction, the share-based payment charge under the option agreement was accelerated. There is a risk that this transaction has not been appropriately accounted for, and that it did not take place on arms-length terms. There is a further risk that the share-based payment element of the transaction has not been appropriately valued and recorded. Valuation of inventory [Note 1 and Note 16] Inventory is carried at the lower of cost and net realisable value. The provision in respect of inventory requires significant judgement. There is a risk that the provision is understated and inventory is therefore not held at the lower of cost and net realisable value in accordance with the group's accounting policy. How the scope of our audit responded to the key audit matter Our audit work in this area included the following: • Obtaining copies of the original share purchase agreement in respect of PLT, and the share purchase agreement relating to the current year 34% interest acquired, and reviewing the key terms; Vouching cash and share elements of consideration to supporting records; Obtaining and reviewing the reports produced by KPMG in respect of the NCI acquisition, including the accounting treatment of the transaction and the valuation of the consideration and the Non- Compete agreement; Engaging auditor's expert to review key inputs to fair value calculations in respect of the contingent consideration and the non-compete agreement, and reperform these calculations using Monte-Carlo models, providing challenge to the work performed by management's expert; Reviewing the accounting entries made in existing share-based payment, and ensuring the charge was appropriately accelerated in the year; respect of the pre- Reviewing accounting entries made at acquisition date to ensure compliance with IFRS 10; Reviewing disclosures made in the financial statements surrounding the transaction to ensure compliance with IFRS. Our audit work in this area included the following: . . Discussing with management the rationale and methodology used in making such provision in order to gain an understanding of key assumptions and inputs to the model; Obtaining management's year-end provision against inventory calculation and performing the following: - Agreement of the provision per stock listing to the financial statements; - Recalculation of the provision using the IT team to reproduce underlying data; - Prior year lookback - FY21; review of utilisation of FY20 provision in - Performing sensitivity analysis on the calculation; - Assessing completeness of the provision; - Testing accuracy of inputs to management's model; - Testing the mathematical accuracy of the model. For a sample of items included within the inventory listing at year end, vouching to pre-year end purchase documentation and post- year end sales information to ensure inventory is held at the lower of cost and net realisable value. 86 87#46BOOHOO GROUP PLC INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF BOOHOO CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 /// FINANCIAL STATEMENTS Key audit matter Returns provision [Note 1 and Note 20] The provision for sales returns is estimated based on recent historical returns and management's best estimates and is allocated to the period in which the revenue is recorded. Actual returns could differ from these estimates. The group's provisioning model takes into account current trends as far as possible, product mix, seasonal change and other factors based largely on historic events, with the output being the overall return rate to be applied and resulting provision. There is a risk that the returns provision is understated. OTHER INFORMATION The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements group does not cover the other information and we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information. is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. How the scope of our audit responded to the key audit matter Our audit work in this area included the following: . Discussing with management the rationale and methodology used in making such provision in order to gain an understanding of key assumptions and inputs to the model; Obtained the management's year end returns provision calculation and performed the following: - Agreeing underlying data used to the accounting records using the IT team to reproduce the relevant reports; ― Prior lookback review of utilisation of FY20 provision in year FY21; review PY monthly returns as well as actual returns average in March 2020 to assess reasonableness of the provision; - Post-year end returns review - look at actual returns in March 2021; - Performing sensitivity analysis on the calculation; - Assessing completeness of the provision; - Testing accuracy of inputs to the management's model; - Testing the mathematical accuracy of the model. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION In the light of the knowledge and understanding of the group and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' report. We have nothing to report in respect of the following matters in relation to which the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion: proper accounting records have not been kept, or proper returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records; or we have not received all the information and explanations we require for our audit. RESPONSIBILITIES OF DIRECTORS As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the group financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so. AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAS (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in of respect irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: We obtained an understanding of the group and the sector in which it operates to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management and the internal legal team. We also selected a specific audit team based on experience with auditing entities within this industry facing similar audit and business risks. We determined the principal laws and regulations relevant to the, in this group regard to be those arising from: - AIM Rules _ UK employment law - Local tax laws and regulations . We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group with those laws and regulations. These procedures included, but were not limited to: Making enquiries of management; - A review of board minutes; - A review of legal ledger accounts; - A review of RNS announcements; Discussions with internal legal personnel, and liaising with external legal consultants; - Review of internal and external reports on key practices, including supply chain and payroll reviews. We also identified the risks of material misstatement of the financial statements due to fraud. Aside from the non- rebuttable presumption of a risk of fraud arising from management override of controls, we did not identify any significant fraud risks. As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals, reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/ auditorsresponsibilities. This description forms of our auditor's report. part USE OF OUR REPORT This report is made solely to the company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Mark Ling (Engagement Partner) For and on behalf of PKF Littlejohn LLP Recognised Auditor London, UK 15 Westferry Circus Canary Wharf London E14 4HD 4 May 2021 88 89#47BOOHOO GROUP PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 28 FEBRUARY 2021 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Amortisation of acquired intangibles Other administrative expenses Other income Operating profit Finance income Finance expense Profit before tax Taxation Profit for the year Profit for the year attributable to: Owners of the parent company Non-controlling interests Total other comprehensive income for the year Impact of adoption of IFRS 16 Loss reclassified to profit and loss during the year Fair value gain/(loss) on cash flow hedges during the year 1 Total comprehensive income for the year Total comprehensive income attributable to: Owners of the parent company Non-controlling interests Earnings per share ANNUAL REPORT AND ACCOUNTS 2021 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 28 FEBRUARY 2021 2021 Note £ million 2 1,745.3 (800.1) (568.6) 945.2 666.3 (422.0) (278.3) (400.1) (297.3) (5.5) (394.6) (5.1) 2020 £ million 1,234.9 Assets Non-current assets Intangible assets Property, plant and equipment Right-of-use assets Financial assets Deferred tax 2021 Note £ million £ million 2020 (292.2) 11 118.3 42.3 12 141.6 119.2 13 16.7 14.6 27 13.1 4.5 15 3.2 6.0 292.9 186.6 Current assets 3 1.0 0.2 Inventories 16 144.9 99.1 124.1 90.9 Trade and other receivables 17 40.6 31.8 4 0.9 1.7 Financial assets 27 17.1 6.6 (0.3) (0.4) Current tax asset 4.4 6 124.7 92.2 Cash and cash equivalents 18 276.0 245.4 10 (31.3) (19.3) Total current assets 483.0 382.9 93.4 72.9 775.9 569.5 Basic Diluted 1. Net fair value gains on cash flow hedges will be reclassified to profit or loss during the three years to 29 February 2024. All activities relate to continuing operations. Notes 1 to 30 form part of these financial statements. 90 90.7 63.7 2.7 9.2 93.4 72.9 (0.5) 9.0 1.3 21.2 (13.6) 123.6 60.1 Total assets Liabilities Current liabilities Trade and other payables Provisions Interest-bearing loans and borrowings Lease liabilities Financial liabilities Current tax liability Total current liabilities /// FINANCIAL STATEMENTS 22222 19 (222.9) (165.5) 20 (53.5) (29.3) 21 (2.4) 22 (6.7) (5.4) 27 (2.6) (8.7) (6.6) (285.7) (217.9) 120.9 50.9 Non-current liabilities 2.7 9.2 Interest-bearing loans and borrowings 21 (2.4) 123.6 60.1 Lease liabilities 22 (11.6) (10.8) 7 Financial liabilities 27 (1.9) (6.9) 7.43p 5.48p Deferred tax 15 (4.2) (3.6) 7.25p 5.35p (303.4) 472.5 (241.6) 327.9 Total liabilities Net assets Equity Share capital Shares to be issued Share premium Hedging reserve EBT reserve Other reserves Non-controlling interest Total equity Retained earnings Notes 1 to 30 form part of these financial statements. 32 23 12.6 11.7 24 31.9 916.2 608.4 25.7 (4.5) (56.5) (17.1) 25 (795.2) (515.2) 17.3 337.8 227.3 472.5 327.9 These financial statements of boohoo group plc, registered number 114397, on pages 90 to 118 were approved by the board of directors on 4 May 2021 and were signed on its behalf by: John Lyttle DIRECTORS Neil Catto | 91#48BOOHOO GROUP PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ANNUAL REPORT AND ACCOUNTS 2021 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2021 /// FINANCIAL STATEMENTS Balance at 28 February 2019 Impact of adoption of IFRS 16 Profit for the year Other comprehensive income/(expense): Loss reclassified to profit and loss in revenue Fair value loss on cash flow hedges during the year Total comprehensive income for the year Share capital Shares to be issued £ million £ million 11.6 Non- Share premium £ million 606.1 Hedging reserve EBT reserve reserves Other controlling interest Retained earnings equity £ million 7.8 £ million £ million £ million £ million £ million (2.2) (515.2) 8.4 153.9 270.4 (0.5) 9.2 63.7 (0.5) 72.9 Total Cash flows from operating activities Profit for the year Adjustments for: Share-based payments charge Depreciation charges and amortisation Loss on sale of fixed assets Finance income Finance expense Tax expense 1.3 1.3 Issue of shares Share-based payments credit Excess taxation on share- based payments Translation of foreign operations Non-controlling interests' (13.6) (13.6) (12.3) 9.2 63.2 60.1 0.1 2.3 (14.9) 0.3 (12.2) 0.5 10.5 11.0 Increase in inventories Increase in trade and other receivables Increase in trade and other payables Cash generated from operations Tax paid 2.0 2.0 Net cash generated from operating activities 2021 2020 Note £ million £ million 93.4 72.9 19.7 11.0 29.8 24.7 0.2 (0.9) (1.7) 0.3 0.4 31.3 19.3 173.6 126.8 16 (45.8) (32.3) 17 (8.8) (9.4) 19 82.1 42.2 201.1 127.3 (38.3) (11.6) 162.8 115.7 1 Cash flows from investing activities Acquisition of intangible assets 11 (85.7) (23.2) increase in share of net assets 2.3 (2.3) Acquisition of property, plant and equipment 12 (37.0) (22.4) Dividend paid to non- Acquisition of non-controlling interest in PrettyLittleThing 1 (161.9) controlling interests (3.4) (3.4) Finance income received 1.2 Balance at 29 February 2020 11.7 608.4 (4.5) (17.1) (515.2) 17.3 227.3 327.9 Net cash used in investing activities (283.4) 1.8 (43.8) Profit for the year 2.7 90.7 93.4 Cash flows from financing activities Other comprehensive income/(expense): Loss reclassified to profit and loss in revenue 9.0 9.0 Fair value gain on cash flow hedges during the year 21.2 21.2 Total comprehensive income for the year 30.2 2.7 90.7 123.6 Issue of shares 0.6 169.8 (39.4) 0.8 (0.2) 131.6 Share-based payments credit 0.5 19.2 19.7 Excess taxation on share- based payments 0.1 0.6 0.7 Acquisition of non-controlling interest (see note 1). 0.3 31.9 138.0 (281.3) (20.4) (131.5) Translation of foreign operations Balance at 28 February 2021 12.6 31.9 916.2 25.7 (56.5) 0.5 (795.2) 0.5 337.8 472.5 Notes 1 to 30 form part of these financial statements. 92 Proceeds from the issue of ordinary shares Share issue costs written off to share premium Purchase of own shares by EBT Finance expense paid Dividend paid to non-controlling interests Lease payments Repayment of borrowings Net cash used in financing activities Increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Notes 1 to 30 form part of these financial statements. || 2 93 204.9 2.7 (3.5) (39.4) (14.9) (0.1) (0.3) (3.4) (5.9) (6.0) (4.8) (2.4) 151.2 (24.3) 30.6 47.6 245.4 197.8 276.0 245.4#49BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 /// FINANCIAL STATEMENTS 1 ACCOUNTING POLICIES GENERAL INFORMATION boohoo group plc operates as a multi-brand online retailer, based in the UK and is a public limited company incorporated and domiciled in Jersey and listed on the Alternative Investment Market ('AIM') of the London Stock Exchange. Its registered office address is: 12 Castle Street, St Helier, Jersey, JE2 3RT. The company was incorporated on 19 November 2013. BASIS OF PREPARATION The consolidated financial statements of the group have been approved by the directors and prepared on a going concern basis in accordance with International Financial Reporting Standards as adopted by the European Union (Adopted IFRSS), IFRS IC Interpretations and the Companies (Jersey) Law 1991. The financial statements have been approved on the assumption that the group and company remain a going concern as explained on page 62. The continued impact of the COVID-19 crisis on the group is not expected to change materially over the next year, provided that governments' actions in controlling the virus continue to be effective. Trading during the year to February 2021 has shown that online sales have been resilient during lockdowns in many countries. The group has substantial cash resources and undrawn credit facilities sufficient to continue solvent trading in the face of an unforeseen downturn in demand. As of the date of this report, we are continuing to operate, with the warehouses functioning under government-compliant safe working conditions and many office staff working from home. NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP The following new standards, and amendments to standards, have been adopted by the group for the first time during the year commencing 1 March 2020: Amendments to References to the Conceptual Framework in IFRS Standards Amendments to IFRS 3: Business Combinations • Amendments to IAS 1 and IAS 8: Definition of Material STANDARDS, AMENDMENTS AND INTERPRETATIONS TO EXISTING STANDARDS THAT ARE NOT YET EFFECTIVE AND HAVE NOT BEEN EARLY ADOPTED BY THE GROUP AND/OR COMPANY The following standards have been published and are mandatory for accounting periods beginning after 1 March 2020 but have not been early adopted by the group or company and could have an impact on the and group financial statements: company Amendments to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Amendments to IAS 1: Classification of Liabilities as Current or Non-current - Deferral of Effective Date - effective 1 January 2023 . . . . Amendments to IFRS 3: Business Combinations - Reference to the Conceptual Framework - effective 1 January 2022 Amendments to IAS 16: Property, Plant and Equipment - effective 1 January 2022 Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets - effective 1 January 2022 Annual Improvements to IFRS Standards 2018-2020 Cycle - 1 January 2022 Measurement convention The consolidated financial statements have been prepared under the historical cost convention, excluding financial assets and financial liabilities (including derivative instruments) held at fair value through profit or loss. The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of consolidation The group financial statements consolidate those of its subsidiaries and the Employee Benefit Trust. All intercompany transactions between group companies are eliminated. Subsidiaries are entities controlled by the group. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. Subsidiary undertakings acquired during the year are accounted for using the acquisition method of accounting. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The cost of the acquisition is the aggregate of the fair values of the assets and liabilities and equity instruments issued on the acquisition date. The excess of the cost of acquisition over the group's share of the fair values of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the assets, the difference is recognised directly in the statement of comprehensive income. The Employee Benefit Trust is considered to be a special purpose entity in which the substance of the relationship is that of control by the order that the group may benefit from its control. The assets held by the trust are consolidated into the group. Business combinations group in The group uses the acquisition method of accounting for business combinations of entities not under common control. Separable identifiable assets and liabilities are measured initially at their fair values on the acquisition date. Any non-controlling interest is measured at either fair value or at the non-controlling interest's share of the acquiree's net assets. Acquisition costs are expensed as incurred. The excess of any consideration paid over the fair value of the net assets is recognised as goodwill and any shortfall of consideration paid against the fair value of net assets is recognised directly in the statement of comprehensive income. Intangible assets Trademark and licences are stated at cost less accumulated amortisation and impairment losses and are amortised over their expected lives of ten years and charged to administrative expenses. Customer lists are amortised over expected customer lifetime value of three years. The costs of acquiring or developing software are recorded as intangible assets and stated at cost less accumulated amortisation and impairment losses. The costs include the payroll costs of employees directly associated with the project and other direct external material and service costs. Costs are capitalised only where there is an identifiable project that will bring future economic benefit. Other website development and maintenance costs are expensed in the statement of comprehensive income. Software costs are amortised over three to five years based on their estimated useful lives and charged to administrative expenses in the statement of comprehensive income. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate property, plant and equipment. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of each item of property, plant and equipment is written off evenly over its estimated remaining useful life. Depreciation is charged to the statement of comprehensive income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, as follows: short leasehold alterations over the life of the lease or 2% if it is likely the lease is extended; buildings 2%; motor vehicles and computer equipment 33%; and fixtures and fittings 33%, 20%, 10% or 7%. The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at each reporting date. Financial instruments Financial instruments are recognised at fair value and subsequently re-measured at fair value at the end of each reporting date or at amortised cost. Further details are shown in note 27. Derivative financial instruments and cash flow hedges The group o holds derivative financial instruments to hedge its foreign currency exposures. These derivatives, classified as cash flow hedges, are initially recognised at fair value and then re-measured at fair value at the end of each reporting date. Hedging instruments are documented at inception and effectiveness is tested throughout their duration. Changes in the value of cash flow hedges are recognised in other comprehensive income and any ineffective portion is immediately recognised in the income statement. If the firm commitment or forecast transaction that is the subject of a cash flow hedge results in the recognition of a non-financial asset or liability, then at the time the asset is recognised, the associated gains or losses on the derivative that had been previously recognised in other comprehensive income are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or liability, amounts deferred in other comprehensive income are recognised in the statement of comprehensive income in the same period in which the hedged item affects net profit. To qualify for hedge accounting, the hedging relationship must meet all of the following requirements: . There is an economic relationship between the hedged item and the hedging instrument . The effect of credit risk does not dominate the value changes that result from that hedging relationship 94 The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually uses to hedge that quantity of hedged item 95#50BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 /// FINANCIAL STATEMENTS 1 ACCOUNTING POLICIES CONTINUED At inception of the hedge relationship, the group documents the economic relationship between hedging instruments and hedged items, including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedged items. The group documents its risk management objective and strategy for undertaking its hedge transactions. Hedge ineffectiveness may occur due to: . Fluctuation in volume of hedged item caused due to operational changes . Index basis risk of hedged item vs hedging instrument ⚫ Credit risk as a result of deterioration of credit profile of the counterparties Hedge ineffectiveness in relation to all designated hedges was negligible during 2021 and 2020. Further details of derivative financial instruments including fair value measurements are disclosed in note 27. Trade and other receivables Trade receivables (including supplier advances) are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Under IFRS 9, the group elected to use the simplified approach to measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables and contract assets that result from transactions that are within the scope of IFRS 15, irrespective of whether they contain a significant financing component or not. The group establishes a provision for impairment of trade receivables when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the counterparty, probability that the counterparty will enter bankruptcy or financial reorganisation, and default in or delinquency in payments are considered indicators that the trade receivable is impaired. In addition, IFRS 9 requires the group to consider forward-looking information and the probability of default when calculating expected credit losses. The measurement of expected credit losses reflects an unbiased and probability-weighted amount that is determined by evaluating the range of possible outcomes as well as incorporating the time value of money. The group considers reasonable and supportable customer-specific and market information about past events, current conditions and forecasts of future economic conditions when measuring expected credit losses. The amount of the provision is the difference between the carrying amount and the present value of estimated future cash flows of the asset, discounted, where material, at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement within administrative expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against administrative expenses in the income statement. Trade and other payables Trade and other payables are recorded initially at fair value. Subsequent to this, they are measured at amortised cost. Provisions Provisions are accounted for where there is a liability of uncertain timing or amount, such as a legal or constructive obligations, where it is probable that an outflow of cash or other economic resource will be required to settle the provision. Inventories Inventories are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. Inventories are valued on a first in, first out basis. Inventory includes the cost price of estimated returns. Cash and cash equivalents Cash and cash equivalents, for the purpose of the cash flow statement and the statement of financial position, comprises cash in bank. Revenue Revenue is attributable to the one principal activity of the business. Revenue represents net invoiced sales of goods, including carriage receipts, excluding value added tax. Revenue from the sale of goods is recognised when the customer has received the products, which is when it is considered that the performance obligations have been met, and is adjusted for actual returns and a provision for expected returns. Internet sales are paid by customers at the time of ordering using a variety of payment methods. Wholesale sales are paid in accordance with agreed credit terms with business customers. A provision for returns, based on historical customer return rates, is deducted from revenue and included in provisions within trade and other payables. Rebates Retrospective rebates from suppliers are accounted for in the period to which the rebate relates to the extent that it is reasonably certain that the rebate will be received. Early settlement discounts are taken when payment is made. Leases The group assesses whether a contract is or contains a lease, at inception of the contract. The group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (less than £0.1 million p.a.), which fall out of IFRS 16 scope and are charged to the statement of comprehensive income on a straight-line basis over the period of the lease. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the group uses its incremental borrowing rate. The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability based on the effective interest method and by reducing the carrying amount to reflect the lease made. payments Right-of-use assets The right-of-use asset comprises the initial measurement of the corresponding lease liability, lease payments made at or before the commencement date and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Where the group has an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. The costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories. The right-of-use asset is presented as a separate line in the balance sheet. For subsequent measurement, right-of-use assets are depreciated over the shorter of the lease term and useful life of the underlying asset. Finance costs Interest payable is recognised in the statement of comprehensive income as it accrues in respect of the effective interest rate method. Finance income Interest receivable is recognised in the statement of comprehensive income as it is earned. Pension costs The group contributes to a Group Personal Pension Scheme for certain employees under a defined contribution scheme. The costs of these contributions are charged to the statement of comprehensive income on an accruals basis as they become payable under the scheme rules. Share-based payments The group issues equity-settled share-based payments in the parent company to certain employees in exchange for services rendered. These awards are measured at fair value on the date of the grant using an option pricing model and expensed in the statement of comprehensive income on a straight-line basis over the vesting period after making an allowance for the estimated number of shares that are estimated will not vest. The level of vesting is reviewed and adjusted annually. Free shares awarded are expensed immediately. Taxation Tax on the profit for the year comprises current and deferred tax. Tax is recognised in the statement of 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 on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustments to tax payable in respect of previous years. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax is provided for on the fair value of intangible assets acquired in subsidiaries. Foreign currency translation The results and cash flows of overseas subsidiaries are translated at the average monthly exchange rates during the period. The statement of financial position of each overseas subsidiary is translated at the year end rate. The resulting exchange differences are recognised in a translation reserve in equity and are reported in other comprehensive income. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates on the day of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the year end rate and exchange differences are recognised in the statement of comprehensive income. 96 97#51BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 /// FINANCIAL STATEMENTS 1 ACCOUNTING POLICIES CONTINUED Significant estimates and judgements The preparation of financial statements in conformity with IFRS as adopted by the EU requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. The estimates and assumptions are based on historical experience and various other factors believed to be reasonable under the circumstances. Actual results could differ from these estimates and any subsequent changes are accounted for when such information becomes available. The judgements, estimates and assumptions that are the most subjective or complex are discussed below: Returns provision The provision for sales returns is estimated based on recent historical returns and management's best estimates and is allocated to the period in which the revenue is recorded. Actual returns could differ from these estimates. The historic difference between the provision estimate and the actual results, known at a later stage, has never been, nor is expected to be, material. A difference of 1%pt in the percentage of sales returns rate would have an impact of +/- £1.6 million on reported revenue and +/- £0.8 million on operating profit. The choice of a 1%pt change for the determination of sensitivity represents a reasonable, but not extreme, variation in the return rate. Claims provision Management makes judgements in respect of the likelihood of the realisation of a claim. The provision for claims is then estimated from the settlement amount of similar claims in the relevant jurisdiction, with assistance from legal counsel. Factors taken into account are the degree of loss to the appealing party, the likelihood of success in defence and the possible bases of the amount of the settlement claims. Inventory valuation Inventory is carried at the lower of cost or net realisable value. The judgement of net realisable value may be different from the future actual value realised, but that difference is not expected ever to be material. A difference of 1%pt in the provision as a percentage of gross inventory would give rise to a difference of +/- £1.4m in gross margin. The choice of a 1%pt change for the determination of sensitivity represents a reasonable, but not extreme, variation in the provision. Acquisition of the non-controlling interest in PrettyLittleThing.com Limited The remaining 34% non-controlling interest in PrettyLittleThing was acquired in May 2020, ahead of the original 2022 option-to-acquire date, for a combination of cash and shares with initial total consideration £269.8 million, potentially rising to £323.8 million subject to the group's share price averaging 491 pence per share over a six-month period up until a longstop date of 14 March 2024. If this condition is not met, (although management has judged it will be met), this final £54 million element of consideration will lapse. The amount written off to equity, in other reserves, as shown in the consolidated statement of changes in equity is as follows: Cash consideration Share consideration Fair value of future performance-related share consideration Less: carrying value of non-controlling interest Amount written off to other reserves 2 SEGMENTAL ANALYSIS IFRS 8, 'Operating Segments', requires operating segments to be determined based on the group's internal reporting to the chief operating decision maker. The chief operating decision maker is considered to be the executive board, which has determined that the primary segmental reporting format of the group for the year ending February 2021 is by geographic region. This is a change to the segments reported in previous periods, since the group has become multi-brand and now focusses on geographic performance at a group level and not on individual brand performance. The group strategy is to increase market share in each territory using the optimum mix of brands that is appropriate for each market, taking into account factors such as consumer preference, established presence and brand appeal. Revenue Cost of sales Gross profit Distribution costs - Administrative expenses other Amortisation of acquired intangibles Other income Operating profit Finance income Finance expense Profit before tax Revenue Cost of sales Gross profit Distribution costs Administrative expenses other - Total Year ended 28 February 2021 Rest of Rest of UK Europe USA world £ million 945.1 (464.2) 480.9 £ million £ million £ million £ million 244.7 (107.1) 435.1 (174.5) 120.4 1,745.3 (54.3) (800.1) 137.6 260.6 66.1 945.2 (422.0) (394.6) (5.5) 1.0 124.1 0.9 (0.3) 124.7 Year ended 29 February 2020 Rest of Rest of UK Europe USA world Total £ million 679.4 (337.8) 341.6 £ million £ million £ million £ million 188.4 263.6 103.5 1,234.9 (79.2) (105.9) (45.7) (568.6) 109.2 157.7 57.8 666.3 (278.3) (292.2) (5.1) 0.2 90.9 1.7 (0.4) £ million 161.9 107.9 Amortisation of acquired intangibles Other income 31.9 Operating profit (20.4) Finance income 281.3 Finance expense Profit before tax Due to the nature of its activities, the group is not reliant on any individual customers. 92.2 98 No analysis of the assets and liabilities of each operating segment is provided to the chief operating decision maker in the monthly management accounts; therefore, no measure of segmental assets or liabilities is disclosed in this note. Non-current assets located outside the UK comprise offices in the USA with a net book value of £2.5 million. || 2 99#52BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED 3 OTHER INCOME Property rental income 4 FINANCE INCOME AND EXPENSE Finance income: Bank interest received Finance expense: Loan interest paid Finance expense: IFRS 16 lease interest ANNUAL REPORT AND ACCOUNTS 2021 2021 £ million 1.0 2020 £ million 0.2 2021 2020 £ million £ million 0.9 1.7 (0.1) (0.1) (0.2) (0.3) (0.3) (0.4) 7 EARNINGS PER SHARE Basic earnings per share is calculated by dividing profit after tax attributable to members of the holding company by the weighted average number of shares in issue during the year. Own shares held by the Employee Benefit Trust are eliminated from the weighted average number of shares. Diluted earnings per share is calculated by dividing the profit after tax attributable to members of the holding company by the weighted average number of shares in issue during the year, adjusted for potentially dilutive share options. Weighted average shares in issue for basic earnings per share Dilutive share options Weighted average shares in issue for diluted earnings per share Earnings (£ million) Basic earnings per share Diluted earnings per share 2021 1,220.7 2020 1,161.4 31.4 27.7 1,252.1 1,189.1 90.7 63.7 7.43p 5.48p 7.25p 5.35p 90.7 63.7 /// FINANCIAL STATEMENTS 5 AUDITOR'S REMUNERATION Share-based payments charges Audit of these financial statements Disclosure below based on amounts receivable in respect of services to the Share-based payment charge adjustment for non-controlling interests Adjustment for tax group Amounts receivable by auditors and their associates in respect of: Pro forma non-controlling interest adjustment to 34% Audit of financial statements of subsidiaries pursuant to legislation 0.2 Other services relating to taxation - 0.2 0.4 0.4 The auditor's remuneration in 2021 is payable to PKF Littlejohn LLP, whereas that in 2020 was payable to PricewaterhouseCoopers LLP. 6 PROFIT BEFORE TAX Profit before tax is stated after charging: Short-term operating lease rentals for buildings 2021 2020 £ million £ million Earnings (£ million) Adjusting items: Amortisation of intangible assets arising on acquisitions 5.5 5.1 19.7 11.0 (0.7) (0.7) (4.8) (3.0) (1.9) (6.2) 0.4 Adjusted earnings Adjusted basic earnings pers share 108.5 69.9 8.89p 6.02p Adjusted diluted earnings per share 8.67p 5.88p Adjusted earnings and adjusted earnings per share gives a more consistent measure of the underlying performance of the business excluding non- cash accounting charges relating to the amortisation of intangible assets valued upon acquisitions, non-cash share-based payment charges and increasing the non-controlling interest in PrettyLittleThing.com Limited to 34% of net profit for the year, as in previous years (see note 1). 2021 2020 8 STAFF NUMBERS AND COSTS £ million £ million 0.2 0.2 The average monthly number of persons employed by the group (including directors) during the year, analysed by category, was as follows: Equity-settled share-based payment charges Acquisition and restructuring costs Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Amortisation of acquired intangible assets 19.7 11.0 Number of employees 0.3 1.3 2021 2020 14.4 11.5 Administration 1,767 1,599 5.7 5.1 Distribution 1,275 1,020 4.2 3.0 3,042 2,619 5.5 5.1 100 The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Post-employment benefits Equity-settled share-based payment charges 101 2021 2020 £ million £ million 106.6 84.9 9.2 8.7 2.5 1.7 19.7 11.0 138.0 106.3#53BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED 9 DIRECTORS' AND KEY MANAGEMENT COMPENSATION 2020 11 INTANGIBLE ASSETS ANNUAL REPORT AND ACCOUNTS 2021 /// FINANCIAL STATEMENTS 2021 £ million £ million Patents and licences Short-term employee benefits Post-employment benefits 17.6 15.1 £ million Trademarks £ million Customer lists Computer software Total £ million £ million £ million 0.2 0.2 Cost Equity-settled share-based payment charges 2.7 2.2 20.5 17.5 Balance at 28 February 2019 Additions 0.6 25.1 5.8 11.9 43.4 19.1 0.3 3.8 23.2 Disposals (1.1) (1.1) Directors' and key management compensation comprises the group directors and executive committee members. Directors' emoluments and pension payments of boohoo group plc are detailed in the directors' remuneration report on page 76. Balance at 29 February 2020 0.6 44.2 6.1 14.6 65.5 10 TAXATION Additions Disposals 71.4 2.0 12.3 85.7 (3.4) (3.4) Balance at 28 February 2021 0.6 115.6 8.1 23.5 147.8 2021 £ million 2020 £ million Accumulated amortisation Analysis of charge in year Current tax on income for the Adjustments in respect of prior year taxes Deferred taxation Balance at 28 February 2019 0.3 5.2 4.1 6.6 16.2 27.0 19.0 year Amortisation for year 0.1 3.4 1.8 2.8 8.1 1.1 0.6 Disposals (1.1) (1.1) 3.2 (0.3) Balance at 29 February 2020 0.4 8.6 5.9 8.3 23.2 Tax on profit 31.3 19.3 The Income tax expense computations are based on the jurisdictions in which taxable profits were earned at prevailing rates in those jurisdictions. company is subject to Jersey income tax at the standard rate of 0%. The reconciliation below relates to tax incurred in the UK where the is tax resident. The total tax charge differs from the amount computed by applying the UK rate of 19.0% for the year (2020: 19.0%) to profit before tax as a result of the following: Amortisation for Disposals year 0.1 5.3 0.2 4.1 9.7 (3.4) (3.4) group Balance at 28 February 2021 0.5 13.9 6.1 9.0 29.5 Net book value 2021 2020 At 28 February 2019 £ million £ million At 29 February 2020 Profit before tax Profit before tax multiplied by the standard rate of corporation tax of the UK of 19.0% (2020: 19.0%) Effects of: 124.7 92.2 At 28 February 2021 0.3 19.9 1.7 5.3 27.2 0.2 35.6 0.2 6.3 42.3 0.1 101.7 2.0 14.5 118.3 23.7 17.5 Expenses not deductible for tax purposes Change in deferred tax rate Adjustments in respect of prior year taxes Overseas tax differentials Depreciation on ineligible assets Tax on profit Tax recognised in the statement of changes in equity Deferred tax (debit)/credit on movement in tax base of share options 5.8 0.4 0.1 1.1 0.6 0.2 0.5 0.7 31.3 19.3 (0.2) 2.2 Within the statement of comprehensive income, amortisation of acquired intangible assets (trademarks and customer lists) of £5.5 million (2020: £5.2 million) is shown separately. The amount of amortisation of the other intangible assets included in distribution costs is £0.2 million (2020: £0.4 million) and in administrative expenses is £4.1 million (2020: £2.6 million). Trademarks and customer list additions represent amounts paid for those of the acquired brands: Oasis, Warehouse, Dorothy Perkins, Wallis and Burton £18.4 million and Debenhams £55 million. No current tax was recognised in other comprehensive income (2020: Enil). 102 103#54BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED 12 PROPERTY, PLANT AND EQUIPMENT ' 13 RIGHT-OF-USE ASSETS ANNUAL REPORT AND ACCOUNTS 2021 Transition on adoption of IFRS 16 on 1 March 2019 Additions Balance at 29 February 2020 Short leasehold properties £ million 23.5 3.6 27.1 7.8 34.9 Short leasehold alterations Fixtures and fittings Computer equipment Motor Land & vehicles buildings Total £ million £ million £ million £ million £ million £ million Cost Cost Balance at 28 February 2019 6.0 71.8 4.6 0.4 40.2 123.0 Additions 3.6 15.7 2.1 0.5 0.5 22.4 Exchange differences 0.1 0.1 Disposals (0.5) (0.6) (0.4) (1.5) Additions Balance at 29 February 2020 9.1 86.9 6.3 0.9 40.8 144.0 Balance at 28 February 2021 Additions 10.2 16.1 3.6 0.1 7.0 37.0 Exchange differences (0.2) (0.2) Disposals (0.6) (0.8) (1.4) Balance at 28 February 2021 19.3 102.4 9.1 1.0 47.6 179.4 Accumulated depreciation Accumulated depreciation At 1 March 2019 Depreciation for year Balance at 29 February 2020 Depreciation for year Balance at 28 February 2021 Balance at 28 February 2019 1.2 Depreciation charge for the year 1.8 28 9.5 2.2 0.1 1.5 14.5 7.1 1.6 0.2 0.8 11.5 Net book value Exchange differences At 1 March 2019 Disposals (0.3) (0.6) (0.3) (1.2) At 29 February 2020 Balance at 29 February 2020 2.7 16.0 3.5 0.3 2.3 24.8 At 28 February 2021 Depreciation charge for the year 2.0 9.1 2.1 0.3 0.9 14.4 Disposals (0.6) (0.8) (1.4) Balance at 28 February 2021 4.7 24.5 4.8 0.6 3.2 37.8 Net book value At 28 February 2019 At 29 February 2020 At 28 February 2021 4.8 62.3 6.4 14.6 70.9 77.9 22 2.4 0.3 38.7 108.5 2.8 0.6 38.5 119.2 4.3 0.4 44.4 141.6 The amounts of depreciation included in the statement of comprehensive income in distribution costs is £8.7 million (2020: £7.1 million) and in administrative expenses is £5.7 million (2020: £4.4 million). 104 105 /// FINANCIAL STATEMENTS 7.4 5.1 12.5 5.7 18.2 16.1 14.6 16.7#55BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED 14 INVESTMENTS The subsidiaries held and consolidated in these financial statements are set out below: 15 DEFERRED TAX ASSETS ANNUAL REPORT AND ACCOUNTS 2021 /// FINANCIAL STATEMENTS Country of Name of company Principal activity incorporation Address Percentage ownership Direct investment Boohoo Holdings Limited Holdings UK 49-51 Dale St, Manchester 100% Depreciation in excess of capital allowances £ million Share-based Indirect investments 21Three Clothing Company Limited Dormant UK Wellington Mill, Pollard Street East, Manchester 100% Acraman 1878 Limited Dormant UK 49-51 Dale St, Manchester 100% Acraman 1879 Limited Dormant UK 49-51 Dale St, Manchester 100% Acraman 1880 Limited Boo Who Limited boohoo France SAS boohoo Germany GmbH boohoo Italy srl boohoo.com Australia Pty Ltd boohoo.com UK Limited Admin office Dormant UK 49-51 Dale St, Manchester 100% Dormant UK Marketing office France Marketing office Germany Italy 49-51 Dale St, Manchester 15, Rue Bachaumont, Paris Tucholskystrasse 13, Berlin 100% Asset at 28 February 2019 Recognised in statement of comprehensive income Credit in equity Asset at 29 February 2020 Recognised in statement of comprehensive income 100% Credit in equity 100% Asset at 28 February 2021 payments Total £ million £ million 0.1 3.9 4.0 0.2 1.6 1.8 0.2 0.2 0.3 5.7 6.0 0.3 (2.9) (2.6) (0.2) (0.2) 0.6 2.6 3.2 Marketing office Australia Via Sant'Antonio n. 30, Prato 468 St Kilda Road, Melbourne 100% LIABILITIES 100% Trading UK 49-51 Dale St, Manchester 100% Capital allowances boohoo.com USA Inc Marketing office USA 8431 Melrose Pl, Los Angeles 100% boohoo.com USA Limited Dormant UK 49-51 Dale St, Manchester 100% Burton Online Limited Trading UK 49-51 Dale St, Manchester 100% Coast London.com Limited Trading UK 49-51 Dale St, Manchester 100% Liability at 28 February 2019 Debenhams.com Online Limited Trading UK 49-51 Dale St, Manchester 100% Dorothy Perkins Online Limited Recognised in statement of comprehensive income Trading UK 49-51 Dale St, Manchester 100% Liability at 29 February 2020 Karenmillen.com Limited Trading UK 49-51 Dale St, Manchester 100% MissPap UK Limited Recognised in statement of comprehensive income Trading UK 49-51 Dale St, Manchester 100% NastyGal.com Limited Liability at 28 February 2021 in excess of Business depreciation combinations Total £ million £ million £ million (0.5) (1.6) (2.1) (1.9) 0.4 (1.5) (2.4) (1.2) (3.6) (0.8) 0.2 (0.6) (3.2) (1.0) (4.2) Trading UK NastyGal.com USA Inc Marketing office USA PrettyLittleThing.com Limited Oasis Fashions Online Limited Pancorp1 Limited PrettyLittleThing.com France SAS PrettyLittleThing.com USA Inc Shanghai Wasabi Frog Trading Co Limited Wallis Online Limited Warehouse Fashions Online Limited Trading UK Dormant UK 49-51 Dale St, Manchester 2135 Bay Street, Los Angeles 49-51 Dale St, Manchester 49-51 Dale St, Manchester 100% 100% 100% 100% Recognition of the deferred tax assets is based upon the expected generation of future taxable profits. The deferred tax asset is expected to be recovered in more than one year's time and the deferred tax liability will reverse in more than one year's time as the intangible assets are amortised. Deferred tax is likely to increase from 19% as enacted to 25% from April 2023 as announced by the UK Government. Marketing office France 81 Rue Reaumur, 75002, Paris 100% Trading UK Wellington Mill, Pollard Street East, Manchester 100% 16 INVENTORIES Marketing office USA 1209 Orange Street, Wilmington 100% Dormant China 49-51 Dale St, Manchester 100% Trading Trading UK UK 49-51 Dale St, Manchester 100% 49-51 Dale St, Manchester 100% Finished goods Finished goods returns - 2021 2020 £ million 133.5 11.4 144.9 £ million 89.8 9.3 99.1 106 The value of inventories included within cost of sales for the year was £791.7 million (2020: £566.5 million). An impairment provision of £15.8 million (2020: £7.4 million) was charged to the statement of comprehensive income. There were no write-backs of prior period provisions during the year. 107#56BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 /// FINANCIAL STATEMENTS 17 TRADE AND OTHER RECEIVABLES 2021 Trade receivables Prepayments Accrued income Taxes and social security receivable Trade receivables represent amounts due from wholesale customers and advance payments to suppliers. 2021 £ million £ million 18.3 20.6 10.4 7.3 0.3 0.3 11.6 3.6 40.6 31.8 The fair value of trade and other receivables is not materially different from the carrying value. Where specific trade receivables are not considered to be at risk and requiring a provision, the trade receivables impairment provision is calculated using the simplified approach to the expected credit loss model, based on the following percentages: Age of trade receivable 60-90 days past due 91-120 days past due Over 121 days past due Trade payables Other creditors Accruals Deferred income Taxes and social security payable The fair value of trade payables is not materially different from the carrying value. 20 PROVISIONS Provision at 29 February 2020 year provision utilised 2020 19 TRADE AND OTHER PAYABLES 2021 2020 £ million 47.9 £ million 33.9 6.4 2.7 144.0 99.3 10.2 10.7 14.4 18.9 222.9 165.5 2020 Dilapidations £ million Returns Claims Total £ million £ million £ million % % 4.2 25.1 29.3 1 1 5 90 5 Movements in provision charged/(credited) to income statement: 90 Prior (25.1) (25.1) Increase in provision in current year 1.7 24.2 23.4 49.3 The provision for impairment of receivables is charged to administrative expenses in the statement of comprehensive income. The maturing profile of unsecured trade receivables and the provisions for impairment are as follows: Provision at 28 February 2021 5.9 24.2 23.4 53.5 2021 2020 £ million £ million The dilapidation provision represents the estimated exit cost of leased premises; the returns provision represents the revenue reduction of estimated customer returns which occur over the two to three months after the date of sale; and the claims represents the estimate of claims against the group that are expected to settle in the period within nine to twelve months after the year end. Due within 30 days Provision for impairment Due in 31 to 90 days Provision for impairment Past due 18.3 13.1 (2.4) (2.4) 21 INTEREST-BEARING LOANS AND BORROWINGS 3.6 10.0 This note provides information about the contractual terms of the group's interest-bearing loans and borrowings, which are measured at amortised cost. (1.4) (1.0) 2021 2020 0.2 0.9 £ million £ million Provision for impairment Non-current liabilities Total amounts due and past due Total provision for impairment 18 CASH AND CASH EQUIVALENTS 22.1 24.0 Secured bank loans 2.4 (3.8) (3.4) Current liabilities 18.3 20.6 Current portion of secured bank loans 2.4 Terms and debt repayment schedule 2021 2020 £ million £ million At start of year Net movement during year 245.4 197.8 30.8 46.9 Effect of exchange rates (0.2) 0.7 At end of year 276.0 245.4 There is no material credit risk associated with the cash at bank due to the healthy credit ratings of the banks. 108 Currency Nominal interest rate GBE LIBOR +0.95% Year of maturity 2022 2021 2020 £ million £ million 4.8 Secured bank loan The bank loan of £4.8 million was repaid during the period in advance of its maturity date in 2022. Movement in interest-bearing loans and borrowings Opening balance Interest accrued Interest paid Capital paid Closing balance 109 2021 2020 £ million £ million 4.8 7.2 0.1 0.1 (0.1) (0.1) (4.8) (2.4) 4.8#57BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED 22 LEASE LIABILITIES 25 RESERVES ANNUAL REPORT AND ACCOUNTS 2021 /// FINANCIAL STATEMENTS More than Within 1 year 1-2 years 2-5 years 5-10 years 10 years Minimum lease payments due £ million £ million £ million £ million £ million £ million 28 February 2021 Lease payments Finance charges Net present value Current lease liability Non-current lease liability Total Movement in lease liabilities: Opening balance Transition on adoption of IFRS 16 Interest accrued Cash flow lease payments Additions Closing balance 23 SHARE CAPITAL 6.9 6.9 4.8 (0.2) (0.1) 6.7 6.8 4.8 18.6 Total Translation reserve Capital redemption reserve Reconstruction reserve 2021 £ million 0.5 2020 £ million 0.1 (515.3) 0.1 (515.3) (0.3) 18.3 Acquisition of non-controlling interest in PrettyLittleThing.com Limited Proceeds from issue of growth shares in boohoo holdings Limited (281.3) 0.8 (795.2) (515.2) 2021 2020 £ million £ million 6.7 5.4 11.6 10.8 The translation reserve arises from the movement in the revaluation of subsidiary balance sheets in foreign currencies; the capital redemption reserve arose from a capital reconstruction in 2014; the reconstruction reserve arose on the impairment of the carrying value of the subsidiary in 2014 at that date; and the acquisition of the non-controlling interest in PrettyLittleThing is the excess of consideration paid over the company carrying value of the non-controlling interest as at the date of acquisition in May 2020, written off to reserves. 18.3 16.2 2021 2020 26 RELATED PARTY DISCLOSURES £ million £ million 16.2 - 18.4 Related party Company transacting with the related party 2021 Nature of relationship £ million 2020 £ million 0.2 0.2 (5.9) (6.0) 7.8 18.3 3.6 16.2 Amounts included in the statement of financial position Amounts owed to related party undertakings 2021 2020 1,263,255,457 authorised and fully paid ordinary shares of 1p each (2020: 1,168,033,762) £ million 12.6 £ million 11.7 During the year, a total of 5.2 million shares were issued under the share incentive plans (2020: 5.1 million). On 27 February 2021, 14,276 (2020: 16,925) new ordinary shares were issued to non-executive directors as part of their annual remuneration. The directors do not recommend the payment of a dividend so that cash is retained in the group for capital expenditure projects that are required for the rapid growth and efficiency improvements of the business and for suitable business acquisitions (2020: £nil). 24 SHARES TO BE ISSUED 2021 2020 £ million 31.9 £ million The shares to be issued represents the fair value of the contingent shares to be issued to the non-controlling interests of PrettyLittleThing.com Limited, in accordance with the acquisition agreement entered into and announced on 28 May 2020. Under this agreement, 16,112,331 Ordinary Shares in boohoo group plc are to be issued subject to the group's share price averaging 491 pence per share over a six-month period, up until a longstop date of 14 March 2024. If this condition is not met, the consideration will lapse. Kamani Commercial Property Limited Lease liabilities boohoo.com UK Limited Common directors and shareholders boohoo.com UK Limited PrettyLittleThing.com Limited Common directors and shareholders Common directors and shareholders 2.2 3.1 0.1 Kamani Commercial Property Limited Kamani Commercial Property Limited Amounts included in the statement of comprehensive income Purchases The Pinstripe Property Investment Co. boohoo.com UK Limited Limited Kamani Construction Limited Kamani Commercial Property Limited Admin costs - marketing The White Cube Creative Limited Kamani Global Investments Limited Depreciation-right-of-use assets Kamani Commercial Property Limited Kamani Commercial Property Limited Pinstripe Hong Kong Limited Amounts included in equity Umar Kamani boohoo.com UK Limited. PrettyLittleThing.com Limited boohoo.com UK Limited boohoo.com UK Limited boohoo.com UK Limited PrettyLittleThing.com Limited boohoo.com UK Limited boohoo group plc Common directors and shareholders Common directors and shareholders Common directors and shareholders Director of supplier is the husband of Carol Kane, boohoo group plc director Common directors and shareholders 0.1 10 0.2 0.1 10 Common directors and shareholders Common directors and shareholders Common directors and shareholders 0.7 0.8 0.1 0.1 0.1 0.1 Umar is the son of Mahmud Kamani, Chairman of boohoo group plc 301.7 110 Kamani Commercial Property Limited has been the lessor of boohoo's and PrettyLittleThing's head office buildings in Manchester since the IPO in 2014. The company exercised its option to buy the non-controlling interest of 34% of the share capital of PrettyLittleThing.com Limited (formerly 21Three Clothing Company Limited) in May 2020, in advance of the original maturity date in March 2022. Umar Kamani, a related party as the son of Mahmud Kamani, executive chairman and director of boohoo group plc, is a director and shareholder of PrettyLittleThing.com Limited and held 31.5% of that company before the option was exercised. Related party transactions are considered to be on arm's length commercial terms. 111#58BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 /// FINANCIAL STATEMENTS 27 FINANCIAL INSTRUMENTS (A) FAIR VALUES OF FINANCIAL INSTRUMENTS Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date if the effect is material. Trade and other payables The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date if the effect is material. Cash and cash equivalents The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the reporting date. Interest-bearing borrowings Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. Cash flow hedges Fair value is calculated using forward interest rate points to restate the hedge to fair market value. Foreign exchange rates The key currency exchange rates used in the financial statements are: USD closing rate USD year average rate EUR closing rate EUR year average rate 2021 1.39269 2020 1.29532 1.15361 1.11678 1.80693 1.28198 1.27834 1.16257 1.14792 1.96778 AUD year average rate 1.83878 1.85513 The impact of any reasonable fluctuations in the exchange rates used to translate assets and liabilities at the year end is not considered to be material and has therefore not been disclosed. AUD closing rate Fair values (B) CREDIT RISK Financial risk management Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the group's receivables from customers and hedging and other financial activities. The group faces minimal credit risk from trade receivables as customers pay for their orders in full at the time of purchase and third-party sales are to a small number of large established corporations. The risk of default from related party undertakings is considered low. (C) LIQUIDITY RISK Financial risk management Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group's approach to managing liquidity is to use both short-term and long-term cash forecasts to assist in monitoring cash flow requirements. (D) CAPITAL RISK Financial risk management Capital risk is the risk that the group will not be able to continue as a going concern. The group's approach to managing capital risk is to safeguard the group's ability to continue as a going concern by securing an appropriate mix of debt and equity funding, a strong credit rating and sufficient headroom. The capital structure is regularly reviewed to ensure it is appropriate to the group's strategic objectives. The funding requirements of the group are ascertained by regular cash flow forecasts and projections. At 28 February 2021, the group had capital of £748.5 million (2020: £568.5 million), comprising equity of £472.5 million (2020: £327.9 million) and net cash of £276.0 million (2020: £240.6 million). (E) FOREIGN CURRENCY RISK Financial risk management The group trades internationally and is exposed to exchange rate risk on purchases and sales, primarily in Australian dollars, euros and US dollars. The group's results are presented in sterling and are exposed to exchange rate risk on translation of foreign currency assets and liabilities. The group's approach to managing foreign currency risk is to use financial instruments in the form of forward foreign exchange contracts to hedge foreign currency cash flows. The fair value of forward foreign exchange contracts recognised in the statement of financial position within financial assets at 28 February 2021 was £30.2 million (2020: £11.1 million) and within financial liabilities was £4.5 million (2020: £15.6 million). The non-current element of the financial assets is £13.1 million (2020: £4.5 million) and of financial liabilities is £1.9 million (2020: £6.9 million). Cash flows related to these contracts will occur during the three years to 29 February 2024 and gains or losses will be recognised in the statement of comprehensive income during those periods. The amount recognised in other comprehensive income during the year is a gain of £21.2 million (2020: £13.6 million loss) and the amount reclassified from other comprehensive income to profit and loss in revenue during the year is a loss of £9.0 million (2020: £1.3 million loss). Financial assets Cash and cash equivalents Cash flow hedges Trade and other receivables Financial liabilities Cash flow hedges Trade and other payables Interest-bearing loans and borrowings Fair value hierarchy 2021 2020 £ million £ million 276.0 245.4 30.2 11.1 Maturity of forward currency hedging instruments - notional amount £ million 30.2 24.5 1-6 7-12 13-18 336.4 281.0 Currency months months months 19-24 months More than 2 years Total USD 113.2 121.3 79.3 60.7 3.7 378.2 2021 2020 EUR 69.7 65.7 52.1 35.8 8.1 231.4 £ million £ million AUD 28.4 23.6 19.9 13.7 1.8 87.4 CAD 4.6 4.9 4.3 2.3 0.3 16.4 4.5 15.6 SEK 5.3 4.0 4.4 1.7 15.4 268.2 184.1 NZD 5.1 4.5 3.1 1.6 0.3 14.6 4.8 DKK 2.7 1.3 2.1 0.8 6.9 272.7 204.5 229.0 225.3 165.2 116.6 14.2 750.3 Financial instruments carried at fair value are required to be measured by reference to the following levels under IFRS 13 Fair Value Measurement: Average rate of forward currency hedging instruments - GBP: currency 1-6 7-12 13-18 19-24 More than Hierarchy level Inputs Level 2 Inputs other than quoted prices included within Level 1 that are Financial instruments Valuation methodology Currency months months months months 2 years Average USD 1.3154 1.3075 1.2951 1.3015 1.3514 1.3067 Derivative observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) financial instruments - cash flow hedges the foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies and interest rate curves Valuation techniques include forward pricing and swap models using net present value calculation of future cash flows. The model inputs include EUR 1.1277 1.1294 1.1190 1.0978 1.1111 1.1210 AUD 1.8521 1.8644 1.8794 1.8248 1.8333 1.8570 CAD 1.7391 1.7347 1.8372 1.8696 2.6667 1.7988 SEK NZD DKK 11.8868 1.9608 8.5185 12.0000 11.8182 11.7647 11.8831 1.9778 2.0323 2.0000 1.6667 1.9795 8.4615 8.2381 7.8750 8.3478 112 113#59BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 /// FINANCIAL STATEMENTS 28 SHARE-BASED PAYMENTS SUMMARY OF MOVEMENTS IN AWARDS The ESOP options were valued using a Black-Scholes model. The inputs into the model were as follows: ESOP LTIP 16,662,625 3,448,959 10,890,334 2,288,000 (1,107,247) (44,565) (2,294,250) (845,465) 24,151,462 4,846,929 2,195,821 434,971 SIP 2,919,338 2,074,748 SAYE 4,643,169 2,018,980 (84,855) (413,251) 4,495,980 654,910 (545,710) (1,556,512) 4,559,927 525,535 14,737,824 2,541,635 3,136,280 (3,289,819) (435,406) (596,247) (2,787,501) (583,942) (324,943) 32,811,966 6,369,216 6,711,070 2,808,871 716,151 478,580 group, Number of shares Outstanding at 28 February 2019 Granted during the year year Lapsed during the Exercised during the year Outstanding at 29 February 2020 Exercisable at 29 February 2020 Granted during the year Lapsed during the year Exercised during the year Outstanding at 28 February 2021 Exercisable at 28 February 2021 The group recognised a total expense of £19.7 million during the e year (2020: £11.0 million) relating to equity-settled share-based payment transactions. EMPLOYEE STOCK OWNERSHIP PLAN ('ESOP') The 2014 ESOP allows the grant of options to selected employees and executive directors of the group, based on a predetermined aggregate EBITDA for the three financial years 2015 to 2017. The 2015 ESOP allows the grant of options to selected employees and executive target directors of the group. With the exception of Neil Catto (CFO), there are no performance criteria. Neil Catto's options are subject to achieving performance criteria based on a predetermined aggregate EBITDA target and a measure of Total Shareholder Return for the four financial years ending 2016 to 2020. The 2016 to 2020 ESOPs allow the grant of options to selected employees of the without any performance criteria. Options may be granted by either the board or the trustees of the Employee Benefit Trust. Shares under option Vesting period (years) Expected volatility Option life (years) Expected life (years) Risk free rate Expected dividends expressed as a dividend yield Total 27,674,091 pence Weighted average exercise price Number of employees Shares under option Vesting period (years) Grant date Share price at grant date Exercise price 14/03/14 50.00 50.00 14 22/05/15 25.75 25.75 25 09/06/16 13/06/17 57.75 244.50 57.75 28 244.50 74 506,990 452,936 428,877 1,420,068 123.25 Expected volatility 17,272,062 165.43 Option life (years) 3 33.33% 10 3 36.33% 10 3 3 36.75% 10 40.85% 10 (1,782,377) 183.06 Expected life (years) 3 3 3 3.5 (5,109,478) 46.22 Risk free rate 0.976% 0.966% 0.523% 0.192% 38,054,298 150.52 Expected dividends expressed as a dividend yield 0% 0% 0% 0% 3,811,237 35.97 Possibility of ceasing employment before vesting 26% 16% 30% 30% 1,970,215 22,385,954 (645,931) (1,140,645) 4,743,566 345,078 201.87 Expectations of meeting performance criteria Fair value per option (pence) 78% 100% 100% 100% 11.93 6.64 14.76 73.35 (4,967,403) 170.49 (4,837,031) 137.27 Grant date 28/06/18 50,635,818 4,348,680 171.50 Share price at grant date 98.77 Exercise price Number of employees 201.95 201.95 278 6,409,229 30/04/19 245.70 266.95 11 23/07/19 03/11/20 219.65 272.95 80,358 219.65 339 8,950,604 272.95 523 14,562,824 3 44.17% 10 3.5 0.723% 3 43.14% 10 3.5 3 41.85% 10 3.5 3 36.56% 10 3.5 0.787% 0.434% 0.075% 0% 0% 0% 0% Possibility of ceasing employment before vesting Expectations of meeting performance criteria Fair value per option (pence) 30% 35% 30% 30% 100% 85% 100% 100% 66.47 72.39 68.06 73.31 29 February 2020 Date of grant no. of shares Granted during the year no. of shares Lapsed during Exercised the year during the year no. of shares no. of shares 28 February 2021 no. of shares Exercise price 14/03/14 612,070 (16,840) (88,240) 506,990 pence 50.00 22/05/15 837,836 (10,000) (374,900) 452,936 25.75 09/06/16 745,915 (45,000) (272,038) 428,877 13/06/17 3,847,500 28/06/18 7,582,802 (487,877) (1,112,093) (1,939,555) 1,420,068 57.75 244.50 Exercise period 14/03/17 13/03/24 22/05/18 - 21/05/25 09/06/19 08/06/26 Expected volatility was found using a historical volatility calculator with reference to the share price of competitors over a three-year period for dates grant up to 2016 and from the company's share price volatility from 2017. LONG TERM INCENTIVE PLAN ('LTIP') The LTIPs allow the grant of options to executive directors and senior management of the group, based on a predetermined aggregate Earnings per Share and Total Shareholder Return targets for three financial years. Options may be granted by either the board or the trustees of the Employee Benefit Trust. 30/04/19 23/07/19 03/11/20 102,834 10,422,505 24,151,462 14,737,824 14,737,824 (17,150) (1,425,859) (175,000) 14,562,824 (3,289,819) (2,787,501) 32,811,966 (61,480) 6,409,229 (5,326) 80,358 (45,962) 8,950,684 13/06/2012/06/27 201.95 28/06/21 28/06/28 266.95 30/04/22 30/04/29 219.65 23/07/22 23/07/29 272.95 03/11/23 03/11/30 Date of grant 30/06/16 29 February 2020 no. of shares 434,971 783,062 Granted during the year no. of shares Lapsed during Exercised during 28 February the year the year 2021 Exercise price no. of shares no. of shares no. of shares pence 434,971 1.00 Exercise period 30/06/19 29/06/26 13/06/17 28/06/18 1,088,382 03/10/18 11/12/19 03/11/20 252,514 2,288,000 (99,456) (13,409) (68,061) (254,480) (402,426) (55,915) 281,180 1.00 13/06/2012/06/27 1,019,058 1.00 28/06/21 28/06/28 4,846,929 2,541,635 2,541,635 (47,778) 136,665 (77,813) 1,955,707 2,541,635 (435,406) (583,942) 6,369,216 1.00 03/10/21 03/10/28 1.00 1.00 21/04/22 21/04/29 03/11/2003/11/30 114 115#60BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED 28 SHARE-BASED PAYMENTS CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 SAVE AS YOU EARN ('SAYE') SCHEME Under the terms of the SAYE scheme, the board or the trustees of the Employee Benefit Trust grants options to purchase ordinary shares in the company to employees who enter into an HMRC-approved SAYE scheme for a term of three years. Options are granted at up to a 20% discount to the market price of the shares on the day preceding the date of offer and are exercisable for a period of six months after completion of the SAYE contract. The LTIP options were valued using a Black-Scholes model. The inputs into the model were as follows: Grant date Share price at grant date 30/06/16 57.25 13/06/17 28/06/18 244.50 201.95 03/10/18 239.00 30/04/19 03/11/20 245.70 272.95 Exercise price 1.00 1.00 Number of employees 2 5 1.00 12 1.00 5 1.00 21 1.00 29 Shares under option Vesting period (years) Expected volatility 434,971 281,180 1,019,058 136,665 1,955,707 2,541,635 3 3 3 Option life (years) Expected life (years) 37.06% 10 3 40.85% 44.17% 3 43.37% 3 3 10 3.5 10 3.5 10 3.5 43.14% 10 3.5 36.56% Date of 25/10/16 06/11/17 grant 10 31/10/18 3.5 30/10/19 Risk free rate 0.173% 0.192% 0.723% 0.869% 0.787% 0.075% 03/11/20 Expected dividends expressed as a dividend yield 0% 0% 0% 0% 0% 0% Possibility of ceasing employment before vesting 42% 32% 33% 34% 35% 34% Expectations of meeting performance criteria 100% 67% 75% 75% 85% 75% Fair value per option (pence) 56.26 243.51 200.97 238.03 244.73 271.95 29 February 2020 Granted during Lapsed during Exercised during 28 February the year the year the year 2021 Exercise price no. of shares no. of shares no. of shares no. of shares no. of shares 525,535 (23,250) (502,285) pence 78.80 Exercise period 25/10/19 24/04/20 993,805 (55,867) (592,860) 345,078 169.00 06/11/20 06/05/21 1,106,225 (130,030) (26,736) 949,459 189.88 31/10/21 30/04/22 1,934,362 (385,666) (18,764) 1,529,932 216.92 30/10/22 30/04/23 4,559,927 1,970,215 1,970,215 (51,118) (645,931) 1,919,097 268.96 03/11/23 03/05/24 (1,140,645) 4,743,566 The SAYE options were valued using a Black-Scholes model. The inputs into the model were as follows: /// FINANCIAL STATEMENTS 29 February Granted during Lapsed during Exercised Expected volatility was found using a historical volatility calculator with reference to the share price of competitors over a three-year period for grant dates up to 2016 and from the company's share price volatility from 2017. SHARE INCENTIVE PLAN ('SIP') Under the terms of the SIP, the board or the trustees of the Employee Benefit Trust grant free shares to every employee under an HMRC- approved SIP. Awards must be held in trust for a period of at least three years after grant date and become exercisable at this date. There are no performance criteria. Shares under option Vesting period (years) Expected volatility Option life (years) Risk free rate Grant date Share price at grant date Exercise price Number of employees 25/10/16 06/11/17 31/10/18 119.25 209.25 212.90 78.80 169.00 119 345,078 189.88 380 949,459 30/10/19 265.00 216.92 615 1,529,932 03/11/20 272.95 268.96 847 1,919,097 3 3 3 3 Expected life (years) 38.40% 3.5 3 41.67% 3.5 3 43.36% 3.5 3 40.39% 3.5 3 36.56% 3.5 3 3 0.277% 0.513% 0.760% 0.463% 0.075% during 2020 the year the year the year 28 February 2021 Exercise price Expected dividends expressed as a dividend yield Possibility of ceasing employment before vesting 0% 0% 0% 0% 0% 28% 44% 48% 49% 49% Date of grant no. of shares no. of shares no. of shares 14/03/14 02/04/14 200,083 5,479 no. of shares (57,150) no. of shares pence Exercise period 142,933 nil 14/03/17 13/03/24 Expectations of meeting performance criteria Fair value per option (pence) 100% 100% 100% 100% 100% 51.02 76.86 72.90 93.94 69.56 5,479 nil 02/04/17 01/04/24 19/06/15 449,348 27/09/18 1,798,146 25/07/19 2,042,924 (3,571) (283,276) (309,400) (115,609) 330,168 (63,784) 1,451,086 (88,400) nil 19/06/18 - 18/06/25 nil 18/02/21 4,495,980 3,136,280 3,136,280 (596,247) (324,943) 1,645,124 3,136,280 6,711,070 nil - nil 27/09/21 - 27/09/28 25/07/22 25/07/29 18/02/24 18/02/31 The SIP options were valued using a Black-Scholes model. The inputs into the model were as follows: Expected volatility was found using a historical volatility calculator with reference to the share price of competitors over a three-year period for grant dates up to 2016 and from the company's share price volatility from 2017. SHARE-BASED PAYMENT CHARGE FOR OPTION TO ACQUIRE SHARES IN PRETTYLITTLETHING Under the terms of the Shareholders' Agreement relating to 21Three Clothing Company Limited (company name now changed to PrettyLittleThing. com Limited) (PLT), boohoo group plc had the option to acquire the remaining 34% of the share capital of PLT at any time after 28 February 2022. The company acquired the non-controlling interest ahead of the option period and so the unamortised balance of the share-based payment charge of £2.1 million was accelerated and written off to the income statement. The share-based payment charge was calculated using a discounted cash flow method using a discount rate of 40% and perpetuity growth rate of 2.1% on management's four-year projections as at March 2017. 01/03/17 £26,329 45% 2 340 5 60.00% 5 5 0.42% 0% 0% Ranging from 15% to 90% depending on the year £206,764 Grant date Share price at grant date Exercise price Number of employees 14/03/14 50.00 02/04/14 19/06/15 27/09/18 54.75 28.00 nil 27 nil 1 nil 99 Shares under option Vesting period (years) Expected volatility 142,933 5,479 330,168 213.10 nil 1,547 1,451,086 25/07/19 226.00 nil 1,861 1,645,124 18/02/21 369.4 nil 3,220 3,136,280 The option was valued using a Monte-Carlo simulation model. The inputs into the model were as follows: Grant date 3 3 3 3 Option life (years) Expected life (years) 33.33% 10 3 33.20% 10 3 35.89% 10 3 Risk free rate 0.976% 1.143% 0.979% 42.75% 10 3.5 0.883% 3 41.77% 10 3.5 0.462% 3 Share price at grant date, discounted for minority interest 36.56% Minority interest discount factor 10 Number of employees 3.5 Shares under option 0.004% Vesting period (years) Expected dividends expressed as a dividend yield 0% 0% 0% 0% 0% 0% Possibility of ceasing employment before vesting 44% 37% 31% 35% 35% 35% Expected volatility Option life (years) Expectations of meeting performance criteria 100% 100% Fair value per option (pence) 50.00 54.75 Expected volatility was found using a historical volatility calculator with reference to the share price of competitors over a three-year period up to 2016 and from the company's share price volatility from 2017. Risk free rate 100% 100% 100% 100% 28.00 213.10 226.00 369.40 Expected life (years) Expected dividends expressed as a dividend yield Possibility of ceasing employment before vesting Expectations of meeting performance criteria Total option fair value 116 Expected volatility was found using a historical volatility calculator with reference to the share price of comparators over a five-year period. 117#61BOOHOO GROUP PLC NOTES TO THE FINANCIAL STATEMENTS (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED ANNUAL REPORT AND ACCOUNTS 2021 FIVE-YEAR GROUP STATEMENT OF COMPREHENSIVE INCOME UNAUDITED 29 CAPITAL COMMITMENTS Capital expenditure contracted for at the end of the reporting year but not yet incurred is as follows: Property, plant and equipment 30 CONTINGENT LIABILITIES 2021 2020 £ million 5.5 £ million 9.8 include From time to time, the group can be subject to various legal proceedings and claims that arise in the ordinary course of business, which may cases relating to the group's brand and trading name. All such cases brought against the group are robustly defended and a liability is recorded only when it is probable that the case will result in a future economic outflow and that the outflow can be reliably measured. Revenue Cost of sales Gross profit Distribution costs Administrative expenses Other income Operating profit Net finance income Profit before tax Taxation /// FINANCIAL STATEMENTS 2017 2018 2019 2020 2021 £ million £ million £ million £ million £ million 294.6 579.8 856.9 1,234.9 1,745.3 (133.8) (273.4) (387.9) (568.6) (800.1) 160.8 306.4 469.0 666.3 945.2 (66.8) (126.8) (207.1) (278,3) (422.0) (68.5) (137.1) (203.4) (297.3) (400.1) 4.9 0.2 0.2 0.2 1.0 30.4 42.7 58.7 90.9 124.1 0.6 0.6 1.2 1.3 0.6 31.0 43.3 59.9 92.2 124.7 (6.3) (7.3) (12.4) (19.3) (31.3) 24.7 36.0 47.5 72.9 93.4 Profit for the year Other comprehensive income/(expense) for the year, net of income tax Impact of adoption of IFRS 16 (0.5) Net fair value gain/(loss) on cash flow hedges (6.7) 19.5 (0.1) (12.3) 30.2 Total comprehensive income for the year 18.0 55.5 47.4 60.1 123.6 Total comprehensive income (restated) attributable to : Owners of the parent 17.9 54.6 43.5 50.9 120.9 Non-controlling interests 0.1 0.9 3.9 9.2 2.7 Total comprehensive income 18.0 55.5 47.4 60.1 123.6 Earnings per share (restated) Basic Diluted 2.20p 3.09p 3.78p 5.48p 7.43p 2.17p 3.01p 3.71p 5.35p 7.25p 118 119#62BOOHOO GROUP PLC FIVE-YEAR GROUP STATEMENT OF FINANCIAL POSITION UNAUDITED 2017 2018 (restated) (restated) 2019 (restated) 2020 2021 £ million £ million £ million £ million £ million Non-current assets 72.2 111.8 143.5 186.6 292.9 Current assets 116.9 215.1 296.3 382.9 483.0 Total assets 189.1 326.9 439.8 569.5 775.9 Equity attributable to the owners of the parent 96.7 208.8 262.0 310.6 472.5 Non-controlling interest 3.8 4.0 8.4 17.3 Current liabilities 74.4 104.4 162.1 217.9 285.7 Non-current liabilities. 14.2 9.7 7.3 23.7 17.7 Total liabilities, capital and reserves 189.1 326.9 439.8 569.5 775.9 FIVE-YEAR GROUP CASH FLOW STATEMENT UNAUDITED 2017 2018 2019 2020 2021 £ million £ million £ million £ million £ million Net cash generated from operating activities 29.5 69.0 101.5 115.7 162.8 Net cash used in investing activities (29.4) (45.7) (45.7) (43.8) (283.4) Net cash generated from/(used in) financing activities 11.9 49.0 (0.6) (24.3) 151.2 Net movement in cash and cash equivalents 12.0 72.3 55.2 47.6 30.6 Opening cash and cash equivalents Closing cash and cash equivalents 58.3 70.3 142.6 197.8 245.4 70.3 142.6 197.8 245.4 276.0 120 SHAREHOLDER INFORMATION REGISTERED ADDRESS OF COMPANY Registered in Jersey, number 114397 12 Castle Street St Helier Jersey JE2 3RT HEAD OFFICE 49-51 Dale Street Manchester M12HF COMPANY SECRETARY Thomas Kershaw CORPORATE WEBSITE www.boohooplc.com NOMINATED ADVISER AND JOINT BROKER ZEUS CAPITAL 82 King Street Manchester M2 4WQ BERKELEY SQUARE Mayfair London W1J 6HE JOINT BROKER JEFFERIES INTERNATIONAL 100 Bishopsgate London EC2N 4JL INDEPENDENT AUDITORS PKF LITTLEJOHN LLP 15 Westferry Circus London E14 4HD SOLICITORS TLT LLP 3 Hardman Square Manchester M3 3EB PANNONE CORPORATE LLP 378-380 Deansgate Manchester M3 4LY OGIER Ogier House The Esplanade St Helier Jersey JE4 9WG FINANCIAL PR BUCHANAN 107 Cheapside London EC2V 6DN COMPANY REGISTRARS LINK ASSET SERVICES (JERSEY) LIMITED 12 Castle Street St Helier Jersey JE2 3RT PRINCIPAL BANKERS HSBC BANK 4 Hardman Square Spinningfields Manchester M3 3EB