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FatFace Group Limited Annual Report and Financial Statements

for the 52 weeks ended 28 May 2016

Registered Number: 06148029

Our Vision

Our vision is central to the FatFace ethos and underpins our product development, the FatFace store environment and the differentiated service

style our Crew offer customers.

2 FatFace Group Limited Annual Report and Consolidated Financial Statements 2016 3 FatFace Group Limited Annual Report and Consolidated Financial Statements 2016

Our Values

Our values are embraced throughout the organisation and help to make FatFace a great place to work.

Ultimately FatFace is about having a positive attitude to life which resonates with our customers and all our Crew.


Two young British guys were skiing in the French Alps, had an idea, and started to talk. What if they started selling tees and sweats, and made enough money to carry on skiing? And what if it was possible to live their dreams by setting up a small business with a big heart?

Their favourite ski run was ‘La Face’ in Val d’Isere, a ‘black-run’ which inspired our company name FatFace. Over 25 years later we still love adventure, love life and have the same strong values. We still make clothes that reflect the happy, healthy and active lifestyles of our customers.

Our clothes are proudly designed by our team in England with a focus on modern styling and ‘hero’ pieces for your wardrobe. We care about the detail and we create clothes that are built to last, at prices you can trust. We wash them again and again, until they have that relaxed ‘old favourite’ feel, from new. We believe our clothes are washed in happiness, before they find their way to you. It’s what makes FatFace different. We like that and we hope you do too.

It was

1988The FatFace Story

ContentsGROUP STRATEGIC REPORT

Our Heritage, Store and Sales Growth 8

Chairman’s Letter 10

FatFace, Our Strategy, Business Review and Key Performance Indicators 12

Principal Risks and Uncertainties 24

Current trading and Outlook 26

DIRECTORS’ REPORT

Sustainability 28

Our Directors 35

Statement of Directors’ Responsibilities 36

FINANCIAL STATEMENTS

Independent Auditor’s Report to the Members of FatFace Group Limited 37

Consolidated Income Statement 39

Statement of Comprehensive Income 40

Statement of Financial Position 41

Statement of Changes in Equity 42

Statement of Cash Flows 45

Notes to the Financial Statements 46

6 FatFace Group Limited Annual Report and Consolidated Financial Statements 2016

1988The founders Tim and Jules sell T-shirts and sweatshirts from their campervan to fund their skiing on La Face, Val d’Isere

1992First store opens, in Fulham

1993The first catalogue rolls off the press and is mailed to customers

1997The women’s and kids ranges were introduced

2001www.fatface.com goes live

200250th store opens

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


2006Relationship with John Lewis begins

2007Bridgepoint acquires FatFace

2010Anthony Thompson joins the business

2011‘Deliver to store’ launches


2013FatFace wins Retail Week store design of the year award

FatFace wins Retail Week EPOS initiative of the year award

2014Record Year of EBITDA

2015US dedicated website launched

2016Another record year of sales, opened first stores in the US and exchanged lease on a new 80,000 square foot Distribution Centre

our heritage

Store & Sales Growth

morerecent times

0 stores 1 store

27 stores

£10m sales

£45m sales

£132m sales

80 stores

142 stores

228 stores

£220m sales

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Group Strategic Report


STRONG ECOMMERCE PERFORMANCE AND A RECORD CHRISTMAS

“ Revenue grew by 7.4% (2015: 2.7%) to over £220 million. The Group has continued to grow revenues every year since it was founded in 1988. Ecommerce continued its strong momentum with over 20% growth in the year and is now over 18% of the business (2015: 16%)”

Investment in the business continued with a record year of capital expenditure of £10.1m (2015: £9.2m), focused on enhancing and expanding the store portfolio and strengthening our IT platform. During the year we also exchanged on a lease for a new 80,000 square foot Distribution Centre.

Our Black Friday campaign, “Thanks for Giving”, donated £200,000 to local charities and was the start of our most successful Christmas ever. The Group pursued, for the 6th Christmas running, its policy of maintaining a full price offering until Boxing Day. It paid off as we saw revenue up 8%; we had our largest ever week of revenue at

£11.2m (previous £10.0m) and a record EBITDA of £14.3m (2015: £13.5m) in December. The autumn and spring periods were softer for the Group and are a key focus area in the coming year.

FATFACE CREWFatFace has a distinctive culture encapsulated in the Group’s vision and values and an enthusiastic and positive attitude to life, which is shared throughout the organisation. This results in a highly engaged crew and differentiated service style. Headcount at the year end was 2,814 across the UK & US. Our crew training programme, ‘Love Selling’, launched its initial module, with every crew member participating. Results are encouraging.

On behalf of the Board, I would like to thank all of the Crew in stores and at Head Office for their contribution in another challenging year for the Group.

US STORES The Group opened its first stores in the US, an exciting development as we look to take the Brand to new territories. We now have 3 stores trading across New England and we are watching their progress closely.

COMPOSITION OF THE BOARDDuring the year, Simon Pickering, the Trading Director decided to pursue his career outside of the Group and I would like to thank him for all his efforts over the last 5 years.

Following Simon’s departure, the current Head of Design (Emma Shaw), Head of Buying (Kate Brown) and Head of Merchandising (Nick Stevenson) were invited to join the internal management Board (“the FFB”) reporting to Anthony Thompson along with the Head of Ecommerce (Paul Wright).

We believe that this structure allows the business to be stronger and faster in its decision making processes and, under the experienced guidance of our Chief Executive, Anthony Thompson, will ensure the Company’s board of directors’ remains well placed to drive growth.

LOOKING TO THE FUTUREThe UK public voted in favour of leaving the EU in June 2016. This result may create uncertainty which could impact the UK Retail industry. The Group has robust contingency plans in place. Short term foreign exchange movements have been predominantly mitigated through hedging for the next 12 months. Overall, the outlook remains challenging.

Lord Rose Chairman

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Chairman’s Letter


I am pleased to present the FatFace Annual Report and Accounts for the 52 weeks to 28 May 2016. While market

conditions have continued to be challenging, the Group has returned a good year of revenue growth, development of the

brand (both in the UK and the US) and investment that will support the Group in the longer term. However, a combination

of unseasonal weather, customer reaction to product and adverse foreign exchange movements have impacted results.


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FatFace: Group Strategic Report

FatFace is a UK based lifestyle clothing brand, with a unique heritage, offering a wide range of high quality and affordable clothing, footwear and accessories for all the

family. FatFace has a distinct and highly recognisable brand image centred on five key characteristics: Authentic,

British, Fun, Relaxed/Casual and Family. Our customers are predominantly family oriented women and men who

are attracted by an active, casual outdoor lifestyle and we want them to love wearing our clothes. Our products are

designed with purpose and built to last.

THE UK MARKETFatFace operates primarily in the UK clothing and footwear market which was worth £50.4 billion in 2015 with FatFace having a 0.4% market share. This market is expected to grow by 4.5%- 6.6% CAGR from 2014-2020. Management believe that a subset of this market is more relevant to the business. That subset is the premium casualwear market (a bespoke definition) and was worth £10.5 billion in 2014. The Group’s market share of 2.0% reflects the opportunity for the Group to grow in the UK both through like for like sales growth and the acquisition of further new space.

FatFace competes with a number of large retailers (e.g. Next and Marks & Spencer), department stores (e.g. Debenhams and John Lewis) as well as smaller specialist retailers. Customer pricing is regularly reviewed by benchmarking against a number of retailers.

OUR STRATEGYThe Group’s strategy is centred on harnessing its heritage and adapting it to develop and grow the FatFace brand within its existing and new markets. The Group intends to expand its integrated multi-channel business through stores, ecommerce and international growth.

The business continues to have ambitious but sustainable growth plans.

WHAT IS OUR STRATEGY?

1. Drive core business

4. Improve our range and gross margin

2. Thoughtfully grow UK property

5. Develop our routes to market

3. Grow ecommerce

6. Strengthen our infrastructure


1. Drive core business

STRATEGY:

The Group intends to continue to drive growth of the core retail business through a full price business, marketing investment and strong customer service.

PROGRESS IN YEAR:Overall retail performanceThe retail segment comprises the revenue and contribution from stores, ecommerce and concessions.

Retail sales were £219.2m (2015: £203.1m), up 7.9% (2015: 2.7%). Following a challenging year last year,

like for like sales increased by 1.8% (2015: decline of 3.3%). Contribution from Retail was £46.7m (2015: £48.4m). Underlying contribution margin fell by 2.5% to 21.3% (2015: 23.8%), primarily impacted by unfavourable movements in the USD/GBP exchange rate. The Group buys product from the Far East in US dollars and the average rate of purchase fell to $1.57:£1 (2015: $1.67:£1).

Underlying trading conditions across the retail market in quarter two did not improve as expected after the unseasonable weather in the prior year. Discounting remained prevalent in the market across this period right up until Christmas.

A full price business

FatFace is a full price retailer and this is central to the brand.

For the 6th Christmas in a row, we did not discount in the run up to Christmas and started our sale on Boxing Day. It means our customers can trust our price integrity at a time when they were buying gifts for their families and friends. This will not change in December 2016. This stance was vindicated with a good Christmas and record profits across the festive season.

The Group once again took the decision not to discount on Black Friday and as an alternative the “Thanks for Giving” campaign was launched (for further information please refer to the sustainability section of the Directors’ Report).

203.1219.2

2016 2015

W A S H E D I N H A P P I N E S S


Marketing investmentDuring the year, the Group made a tactical investment into further marketing and advertising spend to improve brand awareness across the geographies in which we operate. An additional £1.2m was invested across TV, Cinema and Outdoor advertising. Further circulation of catalogues was also undertaken. The campaign was well received by our customers and we will look to develop the marketing mix over the next financial year.

Strong customer service and our people

Customers are at the centre of everything that we do.

Our new ‘Love Selling’ training programme saw its first chapter delivered in the year to all of our crew in stores. The aim of the training is to make the FatFace shopping experience distinctive and positive. We measure

this through customer feedback and net promoter scores (see KPIs). We will roll out further elements of this programme in the coming year.

The National Living Wage came into existence on the 1st April 2016 at a rate of £7.20 for over 25s. The Group does not differentiate based on age and all of our crew start on a minimum rate of £7.50.

The Apprenticeship Levy is due to come into force in April 2017. The Group is well positioned and continues to review opportunities of how we can utilise our contributions for the benefits of our crew.

KEY PERFORMANCE INDICATORS:The key performance indicators that the Group utilises to measure the success in driving the core business include the following:

Retail sales growth1

Retail sales growth has picked up this year but the market remains challenging. Retail sales growth slowed during the prior year as a result of the impact of the unseasonably warm weather that was experienced in quarter two. Sales of outerwear and knitwear, two categories the Group is well known for, were in common with many clothing retailers, impacted.

Net promoter scoreNPS is a measure of customer feedback received where a customer has fed back that they would actively promote our brand to a friend. 2015/16 is the first full year of data that we have available for this KPI.

81.2%

2016

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2.7%

12.2%10.0%

2016 2015 2014 2013

7.9%

1 As a truly multichannel business Retail represents the performance of the stores and ecommerce channel.


2. Thoughtfully grow UK property

STRATEGY:

The Group will continue to open new stores in attractive and well-researched locations in the UK, as well as continuing with the development of the existing UK store portfolio, through store relocations, extensions and refurbishments. FatFace is targeting an extension of the store portfolio to between 400,000 and 500,000 sq. ft. over the next five years.

UK stores play a critical role in our multi-channel approach. The store estate is continually growing with strong, profitable, diverse and differentiated locations. Our property team applies a rigorous approach to site selection considering the local market dynamics and demographics. Our target lease term is 5 years, generally on the basis of a 10 year lease with a 5 year break option, and our average number of years to lease renegotiation is 4.3.

Our relocation strategy is specifically focused on stores where there is a pitch or a range opportunity to grow sales. Relocations are targeted to pay back

within two years. The larger footprint of the new stores allows us to stock a greater proportion of the range and offer more choice to our customers.

Our 218 (2015: 207) strong UK store estate is well spread across the country in great locations offering good reach to our customers.

Our big stores in primary locations and retail parks showcase our product and bring the brand alive for our customers. A significant proportion of our estate is in beautiful affluent market towns where our customers live or visit to shop for leisure. We also have a number of transport stores which offer convenience and a strong presence in UK holiday destinations where our ALOA (at location of activity e.g. Salcombe and Padstow) stores are located.

PROGRESS IN THE YEAR:During the year we added 10 new full priced stores (2015: 8), 5 relocations (2015: 7), and 6 extensions (2015: 2). All stores opened strongly and on average are on track to pay back within the targeted period. Store estate square footage increased by 12.2% in the year. The average square footage of new and relocated stores opened in the year was 3,000 square foot.

During the year, we closed 2 stores taking advantage of circumstances specific to each property such as lease end or landlord redevelopment.

We have a strong pipeline of target locations and follow a rigorous assessment process to ensure we meet our financial targets.

Our typical store fit out is hardwearing with longevity.

KEY PERFORMANCE INDICATORS:The key performance indicators that the Group utilises to measure the success in driving the growth of UK property include the following:

New stores and relocations

During the year we added 10 new full priced stores, 3 outlets and 5 relocations. There continues to be a strong pipeline available to the Group for further UK expansion.

Square footage

Square footage has continued to grow during the year primarily through investing in new stores and relocations to larger stores but also through 6 extensions. The Group is targeting a store portfolio of between 400,000 to 500,000 Sq. Ft.


1518

16

2016 2015 2014 2013

341,780383,502

315,690295,071

2016 2015 2014 2013

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16


3. Grow e-commerce

STRATEGY:

FatFace is a multi-channel retailer. We work hard to be a connected retailer offering our customers a seamless FatFace experience however they choose to shop with us. “Shop your way” is central to this philosophy offering customers the opportunity to “Click & Collect” - order through FatFace.com for delivery to their chosen store or, “Order in Store” for delivery to their home or place of work.

Our strategy is to continue to support growth in ecommerce sales, both in transaction volume and as a percentage of the Group’s revenue, through making further website enhancements, developing existing channels such as ‘Order In-Store’ and ‘Click-and-Collect’, and increasing the number of customer database records in order to maximise the benefit of marketing activity.

PROGRESS IN THE YEAR:Sales in our ecommerce business grew by 20.6% (2015: 11.1%) during the year and now accounts for 18.2% (2015: 16.2%) of total Group revenue.

Increasingly customers are shopping across both stores and the website and it is important that their FatFace experience is consistent however they choose to access the brand. To aid the growth of ecommerce, we have continued to invest in our website technology. Mobile phones are now the “go to” device for browsing FatFace.com with 66% of our web visits being generated through mobile devices. 30% of our customers place their order online and pick it up from store (2015: 27%).

We continue to support our ecommerce sales through our catalogues and other physical and on-line activity. The growth in our customer database has enabled us to target mailings more effectively, driving brand awareness and sales as a result.

During 2015/16 we added to this approach by introducing multi-channel gift cards allowing customers to buy and redeem their gift cards either online or in store.

KEY PERFORMANCE INDICATORS:The key performance indicators that the Group utilises to measure the success in growing ecommerce include the following:

Ecommerce revenue as a % of total revenue

Following further investment in the ecommerce site in the year, the revenue generated by the website has continued to grow as a percentage of total revenue.

Website Visits

By increasing the number of visitors to the website we increase the profile of the Group, assist the growth of ecommerce and drive the core business. We continue to support our website visits through our catalogues and other physical and on-line mailings. The growth in our customer database has enabled us to target mailings more effectively, driving brand awareness and sales as a result. The Group also invested further in online marketing activities during the year.


16.2%18.2%

14.9%12.0%

2016 2015 2014 2013

18.9m19.6m16.2m

13.5m

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4. Improve our range &

gross margin5. Develop our routes

to market

STRATEGY:

We have a clear product formula that combines trusted quality with considered style to offer our customers

great value.

At FatFace, trusted quality means products that are built to last, that get better with wear, made from high quality fabrics and trims, which offer consistent fits and authentic finishes and washes. Our clothes are considered and purposeful, designed and developed by our in-house design team who pay attention to detail, focusing on getting the colour or fit just right, developing unique prints with our suppliers or finding the perfect trim or button to finish a garment. We aim to offer great value; so that our prices are accessible and competitive but most importantly to build trust in our prices, so that the first price is always a great price for the product’s quality and style.

PROGRESS DURING THE YEAR:We regularly refresh our core products and introduce new designs throughout the year to ensure our ranges are relevant and interesting for our customers. Womenswear accounts for 53% of our retail sales (2015: 52%), menswear 26% (2015: 27%), accessories 11% (2015: 12%) and, kidswear & footwear together 10% (2015: together 9%).

During the year we launched our Kid range on John Lewis.com which is performing well. Our seasonal gifting product ranges were increased both in our own stores and within Boots. We are pleased with the results and see this as an important area for future growth. We are continuing to develop these ranges in line with the brand principles.

KEY PERFORMANCE INDICATORS:The key performance indicators that the Group utilises to measure the range and gross margin improvements include:

Gross margin %During the year margin has been impacted by the movement in USD/£ from a hedged average rate of $1.67 to $1.57.

STRATEGY:

FatFace is looking to develop a more significant international presence. The first stage of this includes a carefully controlled trial of stores on the east coast of the United States and the launch of a dedicated website for the US. The east coast was chosen for its similar weather patterns to the UK and the number of existing FatFace customers located here.

The Group is also researching and assessing other opportunities for a physical presence in appropriate markets that align well with our brand, and in addition to this further international websites are planned over the next two to three years.

PROGRESS IN THE YEAR:During the year the Group opened its first 3 US stores in Portland (Maine), Lynnfield (Massachusetts) and Newport (Rhode Island). In addition to the 3 new stores in the US, FatFace also has 7 (2015: 7) stores in the Republic of Ireland.

A dedicated US website was also launched in March 2015 to allow us to fully access this market and target our offer specifically to US customers who have previously been required to use the UK website.

KEY PERFORMANCE INDICATORS:The key performance indicators that the Group utilises to measure the development of our routes to market include:

International revenue2

With the opening of the US stores in the last quarter of the year international revenue has grown. In the prior year revenue was impacted by the unseasonably warm weather in Republic of Ireland in quarter two.

£4.9m£5.2m £5.3m £4.9m

2016 2015 2014 2013

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61%60% 64% 62%

2016 2015 2014 2013 2 International revenue includes Euro sales that have been translated on a constant currency basis using a rate of €1.35/£ and USD sales that have been translated at a rate of $1.49/£.


6. Strengthen our infrastructure

PROGRESS IN THE YEAR:During the year, we have upgraded a number of our core systems including our stock and logistics platforms. These are robust systems and the upgrade has allowed us to access improved functionality and improve reliance. We also concluded our work formulating the plan for a new Distribution Centre, selecting the new development at Dunsbury Hill Farm as our preferred location. Leases have been exchanged post year end and we look forward to moving in during the early part of the 2017 calendar year. This shows our commitment to the local area (the new site is 3 miles from the existing Distribution Centre) and we are excited about the opportunities that it brings.

In the prior year, we completed the implementation of the new planning system to support our Design, Buying, Merchandising and Sourcing (“DBMS”) team.

KEY PERFORMANCE INDICATORS:The key performance indicators that the Group utilises to measure the strengthening of our infrastructure include:

Investment in infrastructure

This is measured by reporting our total non-store capital expenditure in the year.

Distribution centre cost per unit

This measures the cost to pick, pack and despatch units, this KPI has been reported as a KPI by the business since 2014.

This shows our commitment to the local area (the new site is 3 miles from the existing Distribution Centre) and we are excited about the opportunities that it brings.

STRATEGY:

We will assess our current infrastructure and consider if it’s fit to support and enable our future growth plans. We will look to invest in improving our infrastructure where appropriate.

£0.07£0.07 £0.07

2016 2015 2014

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£2.8m

£2.1m£2.6m

2016 2015 2014


Principal Risks & Uncertainties

The Board is responsible for identifying significant risks to the

business and for ensuring that appropriate internal controls and

risk management is in place to allow the Group to achieve its

strategic objectives.

The Audit Committee3 monitors these risks via the risk register, with executive directors and operational management delegated with the task of implementing these processes and reporting to the Committee on their outcome.

The risks and uncertainties described below represent those which the Directors consider to be the most significant to delivering the Group’s strategy. This list is not exhaustive; there may be additional risks and uncertainties currently not known to the Directors, and other risks which the Directors believe to be less material, which may have an adverse effect on the Group:

STRATEGIC RISKS

Our Strategy number:

Issue Potential Impact Mitigation

All External events

The economic and financial environment may be impacted by external events, for example the UK vote to leave the EU or unseasonably warm weather. This could impact our suppliers and have a negative impact on consumer confidence, buying behaviour, or purchasing power in turn increasing our cost base and having an adverse effect on revenue.

By focusing on our core strengths and continuing to invest in the business, the Group has seen good performance in what have proved to be difficult market conditions in recent years.

Factors which impact the external environment are monitored continually, allowing for mitigating action to be taken on a timely basis. Diversity within the supply chain/product range also helps to mitigate these risks.

In terms of the vote to leave the EU, management are closely monitoring impacts on consumer confidence, foreign exchange, inflationary pressure and regulatory change. Management will react accordingly and aim to be proactive wherever possible to mitigate any associated risk.

All Brand andreputational risk

The strength of the FatFace brand and our reputation are fundamental to the business. There is a risk of damage to the brand by either our internal actions or due to the actions of external business partners.

Careful consideration is taken before embarking on new opportunities and before starting a relationship with wholesale or licensing partners. These are monitored on an on going basis.

Any negative publicity, such as customer complaints, is dealt with in a timely manner.

1,2,3,4 & 5 Fashion anddesign trends

As with all clothing retailers, there is a risk that our product will not satisfy the needs of our customers, resulting in excess inventory and reduced sales.

We have a strong team in place to allow us to maintain a high level of market awareness and understanding of fashion and consumer trends to ensure that we can respond to changes in consumer needs.

While our offering includes items which reflect market trends, a significant proportion of our sales relate to core staple items which do not change significantly year on year and which continue to be well received by our customers.

5 Internationalexpansion

The success of international expansion is reliant upon selecting the right markets with strong execution.

Significant market research has been carried out to ensure that the most appropriate locations are selected for international expansion.

The Group is now building experience of international expansion from operating 3 stores in the US.

OPERATIONAL RISKS



All Supplychain

We are reliant upon our suppliers meeting our quality and ethical standards. If product is not delivered on time and to the required specifications, there is a risk that revenue will be impacted. In addition if suppliers do not work within our required ethical standards, it could have a negative impact on our brand and reputation.

We work closely with our suppliers to mitigate these risks. In addition we have ethical and operating trading standards in place which we ensure that all suppliers are in agreement with. We are also a member of the Ethical Trading Initiative. For further details please refer to the Directors’ Report.

All Infrastructure Any significant interruption in the activities of our distribution centre or administrative offices could be highly disruptive to the business and could result in a loss of revenue, data and inventory.

We maintain usual commercial insurance policies for a business of this type and undertake a critical review of all policies during each annual review process.

We have a business continuity plan in place.

All Crew Performance of the business is closely linked to the performance of our people. Performance could be negatively impacted by the loss of key individuals or the inability to obtain suitable replacements in a timely manner.

Active steps are taken to retain key individuals, including:

• Annual benchmarking to ensure that remuneration and reward packages are competitive;

• Positive culture and environment; and• A succession planning process for management.

1,2,5 & 6 Health and Safety

The health and safety of the employees, customers, contractors, sites and equipment is very important to the Group. Breaches in health and safety could result in a significant cost to the business and also damage to reputation.

We have processes and procedures in place to mitigate health and safety risks, including risk assessments, accident reporting and nominated health and safety representatives across the business. Policies and procedures are reviewed and audited regularly to ensure health and safety management is robust and up to date.

All Regulatory and legal framework

Failure to comply with regulatory frameworks across all markets in which we operate, could result in financial penalties or reputational damage.

Changes in the legal and regulatory framework are closely monitored with specialists used where required to ensure compliance.

3 The role of the Audit Committee, which acts independent of management, includes monitoring the integrity of the financial statement, the adequacy and effectiveness of the Group’s internal controls and risk management systems and the policies employed to mitigate risk across the organisation.

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FINANCIAL RISKS



All Covenants Our external financing arrangements include a conventional covenant test as is customary with agreements of this type. Failure to comply with this could result in the financing being cancelled.

Performance against the covenant is measured quarterly with forecasts maintained. For further details of the assessment of the going concern principle please refer to the Directors’ Report.

All Exchange risk

The supply chain is predominantly based overseas with substantial creditors denominated in US dollars and, to a lesser extent, Euros and Indian Rupees. This therefore exposes the business to risk of exchange rate fluctuations which could have a significant impact on margins.

Exchange rates are monitored on a daily basis. Currency hedge instruments are put in place to manage foreign currency risk in accordance with our treasury policy.

Increased monitoring took place during the referendum and hedging instructions were amended in line with our treasury policy. There will continue to be increased monitoring following the Brexit result while stabilisation occurs.

All Interest rate risk

Whilst interest rates are currently low, a significant increase in LIBOR would increase the cost of debt which would have a negative impact on cash flow and overall profit of the Group.

Exposure to interest rate risk is managed by the use of an interest rate cap covering all of the variable rate debt. In addition, detailed reporting and cash forecasting ensures that liquidity is maintained.



The directors present their Directors’ Report and the audited financial statements for the 52 week period ended 28 May 2016. As permitted by legislation, some of the matters normally included in the Directors’ Report have instead been included in the Strategic Report, and the notes to the financial statements. Specifically, these are:

• Future business developments (throughout the Strategic Report)

• Risk management (pages 24 to 25, 68 to 72)

• Financial Instruments (pages 47 to 48)

• Services provided by the Auditors (page 53).

The Directors consider the annual report and financial statements to comply with all aspects of the Guidelines for Disclosure and Transparency in Private Equity.

The vote by the UK public to leave the European Union is still relatively fresh and so the impacts of this are still relatively unknown. At present there are signs that this has started to impact consumer confidence which will impact the retail clothing market. We also anticipate some inflation in the clothing market. We expect the market to remain highly competitive this year as all participants react to the outputs of the leave vote.

Despite these market conditions, by continuing to focus on our customers, by developing our product ranges and offering high levels of customer service enables FatFace to remain in a strong position to continue to grow and invest in the future.

The Board remains confident in the Group’s prospect for the current financial year.

The Strategic Report was approved by the Board on 30 January 2017.

By order of the board:

Anthony Thompson Chief Executive Officer

Unit 3, Ridgway, Havant,

Hampshire, PO9 1QJ

30 January 2017

Current trading & outlook

Directors’ Report

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Sustainability

At FatFace we are committed to our sustainability policy across all areas of our business, in particular to our engagement with suppliers, employees and the environment. Sustainability is regarded as part of FatFace’s DNA.

CEO STATEMENTI’m a firm believer that business leaders today must recognise the need to achieve social and environmental sustainability in-order to deliver long term sustainable growth. As a result, in 2015 we took the decision to strengthen our approach to sustainable business, leveraging the energy and enthusiasm which characterise our business to develop a long term road-map to underpin our approach to doing business.

Having been involved in the retail industry for over 30 years I’ve seen how the garment industry has lifted some of the poorest people in society out of poverty and I have also seen first-hand many of the social and environmental challenges that exist. As such I’m committed to ensuring that FatFace has a robust, industry-leading approach to sourcing responsibly. Not only are our customers increasingly expecting

this from us but fundamentally, it is the right thing to do. We’ve taken some great steps this year to ensure we continue to source our product responsibly including the introduction of our new supplier code of conduct and roll out of our innovative supplier improvement programme. I have no doubt that the implementation of the Modern Slavery Act this year will continue to push the boundaries and support the steps we are taking in this area.

I’m very pleased with the achievements made by the FatFace Foundation this year and the commitment we have shown to communities both in the UK and abroad. I’m particularly proud of our ground breaking ‘Thanks for Giving Campaign’ where we donated £200,000 to 221 local charities instead of discounting on Black Friday bringing the total figure raised by the Foundation to £295,000 in 2015/16. We have used

over £55,000 to help garment workers in Nepal to rebuild their lives after the devastating earthquake in 2015. I look forward to continuing on this journey as we look to grow our business in a sustainable way.

OUR STRATEGIC APPROACH TO SUSTAINABILITYTrue to our vision, this year we launched our ‘360’ sustainability plan to help us make conscious decisions that have a positive impact on the natural environment, people and local communities where we trade. Our approach to sustainability forms a core part of our business model and is made up of 3 pillars, covering the full value chain of our product. As part of the development of our ‘360’ sustainability plan we consulted a wide variety of stakeholders to help inform and prioritise our focus to ensure that we continue to grow in a socially and environmentally conscious manner.

“84% of our customers tell us that ethical concerns influence their buying decisions”

2015 – 600 respondents

This mapping has helped inform and prioritise our focus to ensure that we continue to grow in a socially and environmentally conscious manner.

The 3 pillars are:

1. Sourcing responsibly to create sustainable products

2. Protecting our environment

3. Our people & communities

1. SOURCING RESPONSIBLY TO CREATE SUSTAINABLE PRODUCTS

The garment industry employs millions of people around the world and is an important creator of income in many developing countries, especially for women and families. FatFace doesn’t own garment factories, instead we work with over 150 factories across 14 countries.

The relationships between ourselves and our top 20 suppliers are based on trust and longevity, with our top 20 suppliers having a combined 160 year relationship with FatFace. We pride ourselves on working with manufacturing partners that share our values, meet our high expectations and recognise that we have a duty to understand and address social and environmental issues that may exist within our supply chain, working together with key partners and stakeholders in order to create sustainable change.

Evaluating sustainability performanceDuring the year we introduced an updated supplier code of conduct, ‘The FatFace Way of Life’, and requested FatFace product suppliers to sign up to this in order to promote fair, safe and environmentally conscious

working environments. This now forms a fundamental part of our relationship with existing and new manufacturing partners. In order to continuously review the performance of our sourcing partners against our code of conduct we are members of the collaborative SEDEX4 platform that enables us to analyse 3rd party audit assessments. In addition we also conduct verification assessments of our key manufacturing partners. In 2015/16, 85% of our manufacturing partners had signed our code of conduct and 89% had undergone a 3rd party audit or verification assessment. During the year we also held regular supplier meetings and facilitated workshops in Delhi and China involving over 40 of our manufacturing partners, where we shared our responsible sourcing expectations alongside outlining new legislative requirements, including the Modern Slavery Act 2015.

Beyond audits to facilitating improvementsWe have developed and began implementing a supplier improvement programme (SIP) with the aim of delivering sustainable improvements within our supply chain. Through this programme we have worked closely with 7 factories to deliver targeted improvements in the areas of health and safety, worker communication and environmental performance. This has included the implementation of a training workshop in Shanghai for factory management and an

anonymous worker survey involving over 200 worker voices in southern China. In 2016/17 we will continue to move this work forward to implement improved workers communication systems to enhance the working environment.

Creating positive change at a scale that reflects the globalised nature of our supply chain requires collaboration and engagement at an international level. Our active membership of the Ethical Trading Initiative is a fundamental cornerstone to deepening our understanding of sourcing challenges whilst enabling us to build collaborative cross industry relationships to address issues.

In 2012 FatFace became a signatory to the Bangladesh Accord for building and fire safety along with 226 other retail brands and manufacturers globally. We’re proud of the progress being made to date with over 60% of the corrective actions originally identified within our manufacturing partner sites in Bangladesh now resolved.

Sourcing materials sustainablyIn order to create quality products that our customers feel proud to wear we believe that sustainability should be built into the product from design. An example of this is our approach to leather which is a key part of ensuring we offer high-quality products to our customers yet it is also a product that can, if manufactured incorrectly, have damaging impacts on people,

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4 SEDEX is a not for profit membership organisation dedicated to driving improvements in ethical and responsible business practices in global supply chains.


1 SOURCING RESPONSIBLY TO CREATE SUSTAINABLE PRODUCTS

Key achievements in 2015/16• 85% of manufacturing

partners have signed up to our relaunched ‘FatFace Way of Life’ and 89% had undergone a sustainability assessment in the past 12 months

• We continue to be an active member of the Ethical Trading Initiative and are signatories to the Bangladesh ACCORD.

• We launched our innovative supplier improvement programme (SIP) in China with 7 key sourcing partners.

• We’ve trained 40 of our Indian & Chinese manufacturing partners on the Modern Slavery Act 2015.

Goals for 2016/17• Ensure that our first tier

manufacturing partners are signed up to our social and environmental standards (the ‘FatFace Way of Life’).

• Our first tier manufacturing partners will have undergone an ethical assessment in the past 12 months.

• Engage our manufacturing partners in improvement programmes that go beyond compliance audits.

• Continue to ensure our partners in Bangladesh are actively improving safety standards through the Bangladesh Accord.

• Our suppliers are signed up to our sustainable material and animal welfare policy.

2 PROTECTING OUR ENVIRONMENT

Key achievements in 2015/16• We’ve successfully rolled out

LED lighting in 15 stores.

• We created a bag-less footwear box which will reduce our carrier bag usage by approximately 75,000 carrier bags annually.

• We introduced our manufacturing partners to environmental requirements as part of our sourcing code of conduct.

Goals for 2016/17• Explore a closed loop textile

recycling process.

• Look to capitalise on our LED trials and further roll out LED lighting.

• Continue to source our carrier bags, catalogue and store marketing material from certified sustainable sources.

3 SUPPORTING OUR PEOPLE AND LOCAL COMMUNITIES

Key achievements in 2015/16• We donated £200,000 to

221 local charities in the UK through our ground-breaking “Thanks for Giving” campaign.

• We’re helping to rebuild the homes of over 100 garment workers in Nepal after the 2015 earthquake.

• In partnership with the Prince’s Trust we have supported 12 work placement schemes in 2015/16.

Goals for 2016/17• Maintaining a diverse

workforce that is focused on equality.

• Continue to support our international / national charity partners as well as keeping up the good work with our chosen charities close to our store locations.

animals and the natural environment. As a result, we introduced our supply partners to our strict animal welfare policy in 2014 which won the support of animal welfare charity PETA and in 2015/16 joined the multi-disciplinary Leather Working Group with the aim of ensuring that we source leather from tanneries that uphold stringent environmental standards.

2. PROTECTING OUR ENVIRONMENT

Energy usage, packaging and recyclingOur strategy is to promote environmental stewardship across our product value chain.

During the year we integrated robust environmental standards into our sourcing code of conduct to ensure the production of FatFace products does not have a negative impact on the environment. We also achieved a reduction in the use of energy across our business and in turn supporting a reduction in our CO2 footprint. We have expanded the number of our stores installed with Smart Meters to help us manage energy better across our estate. Our smart metered stores now accounts for 40% of our estate.

Textile recycling and packaging reduction is key to our approach to sustainability. All of our carrier bags, catalogues and ecommerce bags are sourced from certified sustainable sources. Throughout the year we have also identified a number of opportunities to reduce the impact that product packaging has upon the environment. We are working on these opportunities over the coming period.

3. OUR PEOPLE & COMMUNITIES

At FatFace we believe that our brand heritage, identity and image are shared by our people, at all levels, which helps to distinguish us from competitors and has been part of the success of our business. This is why it is important to us to engage, listen to, reward, develop and respect our employees.

Employee EngagementWe engage with our employees in a number of ways to encourage active participation and alignment with business strategy. Regular updates are held to inform employees of performance and the key drivers of this. These include an annual retail conference where the Group communicates and engages with its store managers on its key priorities and business plans as well as reinforcing the vision and values of the brand.

Diversity and equalityAt FatFace, the Group is committed to being an equal opportunities employer and it is our policy to provide employment and development opportunities to persons regardless of age, race, colour, religion, gender, sexual preference, marital status, nationality, ethnic origin or disability. It is Group policy to, wherever possible, retain in employment employees who have become disabled during their employment and to arrange appropriate training for them.

We continue to ensure all our processes and practices are inclusive. We monitor our diversity through regular questionnaires and ensure

that our recruitment practices are all-encompassing, based on talent and experience and that we give full and fair consideration to applications for employment from disabled candidates. Our approach on the gender pay gap is positive - as is our approach to pay in general; with the recent introduction of living wage, we made the decision to pay all store crew at the same rate, regardless of their eligibility under age criteria.

At the end of the financial year there were:

• 4 Directors of the Group who are male.

• 14 Senior managers of the Group, 7 of who are male and 7 of who are female.

• 2,891 employees of the Group, 752 were male and 2,139 of these were female.

Health and Safety The health, safety and well-being of our employees and customers are of great importance to us. There is a comprehensive structure of processes and procedures to mitigate health and safety risk, including risk assessments, accident reporting and nominated health and safety representatives across the business. Within stores, each of its store managers are provided with a ‘‘Stay Safe Guide’’ which informs them of their responsibilities to take reasonable precautions to ensure the safety, health and welfare of those likely to be affected by the operation of the business. Policies and procedures are reviewed and audited regularly to make safety management more robust and up to date.

3 PILLARS OF OUR SUSTAINABILITY STRATEGY

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Thanks for Giving – “A national campaign with a local feel”

As part of the FatFace initiative for Black Friday, we turned an event traditionally about discounting into something more positive; making a huge difference for the communities we trade in. Between Thursday 26th and Monday 30th November 2015, FatFace donated 10% of net profits generated from revenue to the Foundation.

This money was then equally divided and granted by the Foundation to local charities chosen by the crew members in each of our 221 locations. This combined effort resulted in 221 small charities receiving an even proportion of the £200,000 created over five days. Not content with this donation many of the stores took it upon themselves to engage with the charity on a more personal level. A case study of what our Glasgow store did for the event can be found below.

Store: Glasgow Byres RoadCharity: ErskinePurpose: Providing practical

help and support to war veterans

Erskine was founded in 1916 with the aim of caring for the service men and women who had been injured in active service. The support provided ranges from residential & palliative care to physiotherapy and speech & language therapy. The charity is solely reliant on charitable donations as they don’t receive monies from the government; as such the charity was excited about the prospect of working with the local FatFace team to spread awareness and raise additional funds.

The Glasgow Byres Road team chose this charity as it was close to our Store Manager, Kirsten Thomson’s heart. Kirsten put this charity forward in memory of her Grandfather; Flight Lieutenant J W Thomson, who spent his final year at Erskine’s residential care home.

Not content with FatFace donating a percentage of their profits, the team joined forces with local FatFace stores Silverburn and Glasgow Fort to “Zip Slide the river Clyde” on the weekend of the ‘Thanks for Giving’ event, and in true FatFace style, the team joined forces with the Charity to create a Christmas wrapping station in store.

In addition to the corporate donation, the store crew and the local community raised a further £850 for Erskine.

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The FatFace Foundation - “Changing people’s lives wherever FatFace goes”The FatFace Foundation is a registered charity and separate legal entity, set up in 2009 to make a positive and enduring difference to the lives of people in communities where FatFace sources, manufactures, retails and distributes its products. Through the Foundation, we pride ourselves in enabling our partners, chosen local charities, suppliers, customers and crew to make a difference.

During the year the Company donated £241,000 to the Foundation, which was distributed to various worthy causes on behalf of the FatFace Group.

For this last period the proceeds from Welsh carrier bags has been donated to the Search And Rescue Dog Association (SARDA) Wales which is a voluntary organisation that supports the emergency services to locate missing people in rural and urban environments.

The Foundation’s Mission - To inspire families and young people in our local communities to lead happy and fulfilling lives.

The Foundation’s purpose - Raising money and distributing grants that will change people’s lives wherever FatFace goes. Engaging our local communities, chosen charity partners, crew and customers alike by providing them the chance to get actively involved and make a real difference to people around us and in our communities.

Prince’s Trust – supporting young lives in the UKThe Prince’s Trust helps 9 to 30 year-olds who are unemployed or struggling at school to transform their lives. Their programmes give people the practical and financial support needed to stabilise their lives. The Group donated £30,000 to the Foundation in the year who then provided funding to the Trust. FatFace is proud to support the trust and has done so for just over a year. To date we’ve delivered 12 work placement schemes within selected stores and supported two talented individual’s graphic design ideas, which will be used on products in our stores this autumn.

The Movember FoundationIn 2015/16 FatFace & the FatFace Foundation was awarded one of the official partnerships with Movember. Movember focuses on men’s health issues such as testicular cancer and suicide. In the last 5 years FatFace have seen more and more crew wanting to be actively involved in supporting the charity, growing moustaches to raise cash. This year we were able to take our donations to the next level through the production and distribution of a small line of targeted t-shirts, the proceeds of which were given to the charity via the Foundation in support of all the work they’ve done and continue to do.

Supporting garment workers after the 2015 Nepal earthquakeIn the aftermath of the devastating Nepalese earthquake in April 2015, the Group organised on behalf of the crew

and customers fundraising. The crew at FatFace raised an amazing £57,474 to support our friends at one of our sourcing partner factories. With the support of our sourcing partner and a local non-governmental organisation ‘Clean Up Nepal’ we have fully

assessed the damage and needs of each of the families of the 151 workers in Bhaktapur. The next step for us is to start to distribute the funds in a manner that can help each of these families in a way that addresses their specific needs.

Our Partners

Directors’ Report


Our DirectorsThe directors who held office during the year were as follows:

EXECUTIVE DIRECTORSAnthony Thompson - Chief Executive Officer

William Crumbie - Finance Director

Simon Greene - International and Property Director

Mark Seager - Multi-Channel Director

Simon Pickering - Trading Director (Resigned 18th April 2016)

NON-EXECUTIVE DIRECTORSLord Rose (Chairman – appointed by Bridgepoint)

Guy Weldon (Investor Director – appointed by Bridgepoint)

Benoit Alteirac (Investor Director – appointed by Bridgepoint)

The Group provides directors’ and officers’ insurance protection for all of the directors of the companies in the Group.

SHAREHOLDERSBridgepoint has been the Company’s major shareholder since 2007. The investment in the Group is held within the Bridgepoint Europe III Fund. For details of their shareholding, please refer to note 26.

Guy Weldon and Benoit Alteirac (Investor Directors) are monitoring the fund’s investment on behalf of Bridgepoint. They are active and supportive investors who attend Board and Audit Committee meetings and have weekly dialogue with the Executive Directors. At least one of the Investor Directors were present at all Board and Audit Committee meetings held.

PROPOSED DIVIDENDThe directors do not recommend the payment of a dividend (2015: nil).

COMPANYDetails of the Company’s principal activity, strategy, performance, future developments, principals, risks & uncertainties and key performance indicators can be found within the Strategic Report

GOING CONCERNIn adopting the going concern basis for preparing the financial statements, the directors have considered the principal activities as well as the business risks as set out on pages 24 to 25.

Following the UK’s decision to leave the EU in June 2016 and the subsequent devaluation of sterling, the Board took the prudent and proactive decision to review its long term headroom. As a result, on 27th January 2017 the Group completed a covenant reset in relation to its external financing agreement changing the future Net Leverage covenant to create material headroom on this covenant. As part of the agreement, the Group will use its available cash resource to prepay a further £15m of the Term B facility.

At the date of signing the financial statements, the Group has debt facilities that mature between September 2019 and September 2021. At the time of this report these comprise a £130m Term B loan, £17.8m Term D1 loan, £22.2m Term D2 loan and £30m Revolving Credit Facility. The Group retains strong liquidity having not used its Revolving Credit Facility in the last 18 months, having prepaid £10m of Term B in December 2015 and having a healthy cash position at 30th January 2017. The Directors confirm that, in their view, liquidity is not a material risk to the Group’s financial position.

Taking the above into consideration, the Directors have reviewed updated financial forecasts covering at least twelve months from the date of approving these financial statements and notwithstanding the net liabilities of £28,475,000 (2015: £43,953,000) and net current liabilities of £105,000 (2015: £36,000) the Board continues to be satisfied that the Group will be able to operate within the requirements of its amended facilities for the foreseeable future.

For this reason, the Directors continue to adopt the going concern basis in preparing the Annual Report and Financial Statements.

DISCLOSURE OF INFORMATION TO AUDITORThe 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 auditor is unaware; and each director has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.

The Directors’ Report was approved by the Board on 30 January 2017.




Hampshire, PO9 1QJ

30 January 2017

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Statement of Directors’Responsibilities

Independent Auditor’s Report

The directors are responsible for preparing the Strategic Report, the Directors’ Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law they have elected to prepare both the Group and the parent company financial statements in accordance with IFRSs5 as adopted by the EU and applicable law.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group and parent company financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably

open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.

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




Hampshire, PO9 1QJ

30 January 2017

We have audited the financial statements of FatFace Group Limited for the period throughout 30 May 2015 - 28 May 2016 set out on pages 46 to 75. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR As explained more fully in the Directors’ Responsibilities Statement set out on page 36, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate

OPINION ON FINANCIAL STATEMENTS In our opinion:

• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 28 May 2016 and of the group’s profit for the year then ended;

• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Based solely on the work required to be undertaken in the course of the audit of the financial statements and from reading the Strategic report and

the Directors’ Report:

• we have not identified material misstatements in those reports and

• in our opinion, those reports have been prepared in accordance with the Companies Act 2006.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTIONWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Steve Masters Senior Statutory Auditor for and on behalf of KPMG LLP, Statutory Auditor

Gateway House, Tollgate, Chandlers Ford,

Hants, SO53 3TG

30 January 2017

in respect of the Annual Report and Accounts to the members of FatFace Group Limited

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5 International Financial Reporting Standards.


FinancialStatements

Note Trading Results

2016 £000

Non- Recurring

Items £000

2016£000

Trading Results

2015 £000

Non- Recurring

Items £000

2015£000

Revenue 220,365 — 220,365 205,181 — 205,181

Other income 306 — 306 220 — 220

2 220,671 — 220,671 205,401 — 205,401

Changes in inventories of finished goods 1,593 — 1,593 1,838 — 1,838

Staff costs 3-4 (37,498) (964) (38,462) (34,039) (3,484) (37,523)

Other trading expenses 3-4 (151,250) 339 (150,911) (136,704) (307) (137,011)

Total trading expenses before depreciation, amortisation, impairment and share-based payments

(187,155) (625) (187,780) (168,905) (3,791) (172,696)

Operating profit/(loss) before interest, tax, depreciation, amortisation, impairment and share-based payments

33,516 (625) 32,891 36,496 (3,791) 32,705

Depreciation, amortisation, impairment, and loss on disposal

3,8,9 (9,639) — (9,639) (9,495) — (9,495)

Share-based payments 18 (167) — (167) (6,367) — (6,367)

Operating profit/(loss) 23,710 (625) 23,085 20,634 (3,791) 16,843

Finance income 6 7,214 — 7,214 414 — 414

Finance costs 6 (13,973) — (13,973) (21,758) — (21,758)

Net finance (costs) (6,759) — (6,759) (21,344) — (21,344)

Profit/(loss) before tax 16,951 (625) 16,326 (710) (3,791) (4,501)

Taxation 7 (368) 125 (243) (3,030) 787 (2,243)

Profit/(loss) for the period 16,583 (500) 16,083 (3,740) (3,004) (6,744)

All of the Group’s activities in the period derived from continuing operations and are attributable to equity holders of the Company.

The notes on pages 46 to 75 are an integral part of these financial statements.

CONSOLIDATED INCOME STATEMENT for the 52 weeks ended 28 May 2016

(2015: 52 weeks ended 30 May 2015)

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Note Group2016

£000

Group2015

£000

Company2016

£000

Company2015

£000

Profit/(loss) for the period 16,083 (6,744) 4,525 187,975

Other comprehensive (loss)/income Items that may be reclassified to profit and loss

Effective portion of changes in fair value of cash flow hedges net of tax

(448) 656 — —

Change in fair value of cash flow hedges transferred to income statement net of tax

72 55 — —

Net other comprehensive income (376) 711 — —

Total comprehensive income/(loss) 15,707 (6,033) 4,525 187,975

Total comprehensive income/(loss) is attributable to:

Equity holders of the parent 15,707 (6,033) 4,525 187,975

Note Group2016

£000

Group2015

£000

Company2016

£000

Company2015

£000

Non-current assets

Property, plant and equipment 8 25,786 20,403 — —

Intangible assets 9 151,524 154,552 — —

Investments in subsidiaries 10 — — 284,160 283,849

Deferred tax assets 12 1,276 2,342 — —

Financial assets 11 — 25 — —

178,586 177,322 284,160 283,849

Current assets

Inventories 13 24,421 22,496 — —

Trade and other receivables 14 4,772 5,581 82 79

Cash and cash equivalents 15 19,660 10,719 — —

Other financial assets 11 98 443 — —

48,951 39,239 82 79

Total assets 227,537 216,561 284,242 283,928

Current liabilities

Trade and other payables 17 (36,567) (30,323) (5,734) (2,921)

Employee benefits (51) (137) — —

Provisions 19 (278) (636) — —

Tax payable (12,160) (8,179) — —

(49,056) (39,275) (5,734) (2,921)

Non-current liabilities

Other interest-bearing loans and borrowings 16 (164,449) (172,069) — —

Other payables 17 (25,101) (29,296) (12,694) (19,489)

Provisions 19 — (79) — —

Deferred tax liabilities 12 (17,406) (19,795) — —

(206,956) (221,239) (12,694) (19,489)

Total liabilities (256,012) (260,514) (18,428) (22,410)

Total net current (liabilities) (105) (36) (5,652) (2,842)

Total net non-current (liabilities)/assets (28,370) (43,917) 271,466 264,360

Net (liabilities)/assets (28,475) (43,953) 265,814 261,518

Equity

Share capital 20 933 933 933 933

Share premium 20 3,474 3,474 3,474 3,474

Hedging reserve 20 12 388 — —

Retained earnings (32,894) (48,748) 261,407 257,111

Total equity (28,475) (43,953) 265,814 261,518

STATEMENT OF COMPREHENSIVE INCOME for the 52 weeks ended 28 May 2016

(2015: 52 weeks ended 30 May 2015)

STATEMENT OF FINANCIAL POSITION as at 28 May 2016

(2015: as at 30 May 2015)


These financial statements were approved by the board of directors on 30 January 2017 and were signed on its behalf by:

William Crumbie Finance Director


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STATEMENT OF CHANGES IN EQUITY: GROUP for the 52 weeks ended 28 May 2016

(2015: 52 weeks ended 30 May 2015)

STATEMENT OF CHANGES IN EQUITY: COMPANY

for the 52 weeks ended 28 May 2016 (2015: 52 weeks ended 30 May 2015)

Note Share Capital

£000

SharePremium

£000

RetainedEarnings

£000

TotalParentEquity

£000

Balance at 31 May 2014 1,184 15,805 89,183 106,172

Profit for the period — — 187,975 187,975

Total comprehensive income for the period — — 187,975 187,975

Transactions with owners

Equity settled share-based payments

18 — — 6,103 6,103

Capital reduction 20 — — — —

Share redemption (251) (12,331) (26,150) (38,732)

Total transactions with owners recorded in equity (251) (12,331) (20,047) (32,629)

Balance at 30 May 2015 933 3,474 257,111 261,518

Profit for the period — — 4,525 4,525

Total comprehensive income for the period — — 4,525 4,525


Equity settled share-based payments 18 — — (229) (229)

Total transactions with owners recorded in equity — — (229) (229)

Balance at 28 May 2016 933 3,474 261,407 265,814

Note Share Capital

£000

Share Premium

£000

HedgingReserve

£000

RetainedEarnings

£000

TotalEquity

£000

Balance at 31 May 2014 1,184 15,805 (323) (21,957) (5,291)

Loss for the period — — — (6,744) (6,744)


— — 656 — 656


— — 55 — 55

Total other comprehensive income for the period — — 711 (6,744) (6,033)


Share buyback 20 (251) (12,331) — (26,150) (38,732)

Equity settled share based payments 18 — — — 6,103 6,103

Total transactions with owners recorded in equity (251) (12,331) — (20,047) (32,629)

Balance at 30 May 2015 933 3,474 388 (48,748) (43,953)

Profit for the period — — — 16,083 16,083


— — (448) — (448)


— — 72 — 72

Total other comprehensive income for the period — — (376) 16,083 15,707


Equity settled share-based payments 18 — — — (229) (229)

Total transactions with owners recorded in equity — — — (229) (229)

Balance at 28 May 2016 933 3,474 12 (32,894) (28,475)

The notes on pages 46 to 75 are an integral part of these financial statements. The notes on pages 46 to 75 are an integral part of these financial statements.

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STATEMENT OF CASH FLOWS for the 52 weeks ended 28 May 2016

(2015: for the 52 weeks ended 30 May 2015)

Note Group2016

£000

Group2015

£000

Company2016

£000

Company2015

£000

Cash flows from operating activities

Profit/(loss) before tax for the year Adjustments for:

16,326 (4,501) 4,355 188,855

Depreciation, amortisation, impairment and loss on disposal 3,8,9 9,639 9,495 — —

Share-based payment expenses 18 167 6,367 — —

Finance income 6 (7,214) (414) (7,192) (8,551)

Finance cost 6 13,973 21,758 499 10,421

Non-recurring debt cost — 1,671 — —

(Gain) on transfer of investment — — — (189,577)

Cash generated from operations 32,891 34,376 (2,338) 1,148

Change in trade and other receivables 809 (997) (260) (2)

Change in inventory (1,925) (1,838) — —

Change in trade and other payables 5,588 (3,194) 2,598 (1,234)

Change in provisions and employee benefits (523) (2,286) — —

36,840 26,061 — (88)

Tax received/(paid) 1,592 (1,265) — —

Net cash from operating activities 38,432 24,796 — (88)

Cash flows from investing activities

Interest received 6 22 25 — —

Acquisition of property, plant and equipment (13,607) (9,163) — —

Lease incentives, net of amortisation 4,070 1,601 — —

Acquisition of other intangible assets 9 (588) (1,671) — —

Net cash from investing activities (10,103) (9,208) — —

Free cash flow 28,329 15,588 — (88)

Cash flows from financing activities

Buyback of share capital — (38,732) — (38,732)

Proceeds from new loans — 189,000 — —

Debt costs paid — (11,154) — —

Acquisition of a hedging instrument — (169) — —

Repayment of borrowings (10,000) (155,594) — —

Proceeds from intercompany loans — — — 39,736

Interest paid (9,388) (9,576) — (1,004)

Net cash from financing activities (19,388) (26,225) — —

Net decrease in cash and cash equivalents 8,941 (10,637) — (88)

Cash and cash equivalents at start of period 10,719 21,356 — 88

Cash and cash equivalents at end of period 15 19,660 10,719 — —


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44 45 FatFace Group Limited Annual Report and Consolidated Financial Statements 2016

Notes to the Financial

Statements

• Provisioning for onerous leases and dilapidations (note 19); and

• Calculation of the exit fee (note 6).

MEASUREMENT CONVENTION

The financial statements are prepared on an historical cost basis with the exception of derivative financial instruments which are stated at their fair value.

BASIS OF CONSOLIDATION – SUBSIDIARIES

Subsidiaries are entities controlled by the Group. The Group controls an entity when it 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 financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated.

FOREIGN CURRENCY

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the statement of financial position date are translated at the foreign exchange rate ruling at the date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates ruling at the date of transaction the fair value was determined.

Exchange differences related to qualifying hedges are taken directly to the hedging reserve. They are released into the income statement upon disposal. Where the Group

holds applicable hedged positions the accounting policy is reported below.

Financial statements of foreign operationsUpon consolidation, the assets and liabilities of the Group’s foreign operations are translated at the rate of exchange ruling at the reporting date. Income and expense items of foreign operations are translated at the actual rate or average rate if not materially different. Differences on translation are recognised in other comprehensive income.

CURRENCIES

The Group uses Sterling as its presentational currency and all values have been rounded to the nearest thousand unless otherwise stated. The Company’s functional currency is Sterling.

GOING CONCERN

In adopting the going concern basis for preparing the financial statements, the directors have considered the principal activities as well as the business risks as set out on pages 24 to 25. For further details of the assessment of the going concern principle please refer to the Directors’ Report.

NON-DERIVATIVE FINANCIAL INSTRUMENTS

Non-derivative financial instruments comprise investment in equity and debt securities, trade and other receivables, cash and cash equivalents, trade and other payables and interest-bearing loans and borrowings.

Investments in debt and equity securities Investments in debt and equity securities held by the Company are stated at the lower of original cost and fair value with any resultant cumulative impairment losses recognised in profit or loss. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in profit or loss.

Trade and other receivablesTrade and other receivables are recognised at their nominal amount

less any impairment losses and provisions for bad and doubtful debts.

Cash and cash equivalentsCash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purposes of the statement of cash flows only.

Trade and other payables Trade and other payables are recognised at face value.

Interest-bearing loans and borrowingsInterest-bearing loans and borrowings are recognised initially at fair value being proceeds less attributable transaction costs. Subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

The effective interest basis is the implicit interest rate which, over the life of an investment or liability, will compound to the expected final asset or liability value, including all of the costs and revenues expected from that asset or liability over its life. Debt instruments issued by Group companies that are held by other Group companies are reported net in these Consolidated Financial Statements.

Debt modification/cancellationIf the Group modifies its debt arrangements, it considers how substantive the change is in determining the appropriate accounting. This includes both qualitative analysis, and quantitative analysis of the level of change in the cash flows of the new and old arrangements. If the Group re-assesses the likely repayment date of its debt facility, it calculates the required gain or loss on re-measurements of financial liabilities carried at amortised cost.

1. ACCOUNTING POLICIESFatFace Group Limited (the ‘Company’) is a company incorporated in the UK.

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the ‘Group’). The parent company financial statements present information about the Company as a separate entity and not about its Group.

Both the parent company financial statements and the Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU (‘Adopted IFRSs’). On publishing the parent company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income statement and related notes that form a part of these approved financial statements.

The accounting policies set out in the sections below have been applied consistently to all periods presented within the financial information and have been applied consistently by all subsidiaries.

Judgements and estimates made by the directors, in the application of these accounting policies that have significant effect on the financial statements and judgements and estimates with a significant risk of material adjustment in the next accounting period are highlighted below. On an on-going basis the following areas involve a higher degree of judgement or estimation complexity and are explained in more detail in the related notes:

• The valuation of share-based payments at grant date and for intrinsically valued schemes, at each reporting date (note 18);

• Assumptions for valuations used in impairment testing (notes 8 & 9);

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(forming part of the Financial Statements)

46 47 FatFace Group Limited Annual Report and Consolidated Financial Statements 2016

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

Derivative financial instrumentsDerivative financial instruments are recognised initially at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (see below).

Cash flow hedgesWhere a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the income statement.

For cash flow hedges, the associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects profit or loss.

When a hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss in equity is recognised in the income statement immediately.

Classification of financial instrumentsFinancial instruments often consist of a combination of debt and equity and the Group has to decide how to attribute values to each. Instruments are treated as equity only to the extent that they meet the following two conditions:

(a) where the instrument includes no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and;

(b) where the instrument will or may be settled in the Group’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Group’s own equity instruments, or is a derivative that will be settled by the Group exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability, and where such an instrument takes the legal form of the company’s own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes direct costs incurred in bringing assets into their present condition, including certain incremental labour costs. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Depreciation is provided to write off the cost less the estimated residual value of tangible fixed assets by equal instalments over their estimated useful economic lives as follows:

Asset Class:

Depreciation Policy

Freehold buildings

50 years

Leasehold land and buildings

Life of lease

Equipment and fixtures:

Computer and communications equipment

3 years

Shopfit, fixtures and fittings, furniture, mannequins

5 years

Plant and machinery 4 years

Motor vehicles 4 years

Assets in the course of construction refer to expenditure on new stores not yet trading and are not depreciated. On-going refurbishment projects in respect of existing stores are charged directly into the appropriate asset categories.

Contributions received from landlords are deemed to be lease incentives and as such are deferred and subsequently released over the life of the lease.

GOODWILL AND INTANGIBLE ASSETS

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised but is tested annually for impairment.

All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of subsidiaries, associated and jointly controlled entities being the difference between the cost of the acquisition and the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.

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

Internally generated intangible assets arising from the Group’s development activities are recognised only when all of the following conditions are met:

• an asset is created and can be identified;

• it is probable that the asset will generate future economic benefit; and

• the development costs of the asset can be measured reliably.

Where these conditions are met the costs of the asset comprise of the external direct costs of goods, and services, in addition to internal payroll related costs for employees who are directly associated with the project.

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of the assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment, at each reporting date. Property leases are valued against their estimated marketability and an impairment charge is recorded if appropriate. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

Asset Class:

Estimated Useful Life

Trademarks acquired

Over the registered life

Trademarks – Internally generated value

50 years

Customer lists 4 years

Software and Licences

3-5 years

INVENTORIES

Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Provisions are made for obsolescence, mark-downs and shrinkage.

IMPAIRMENT

The carrying amounts of the Company’s and the Group’s assets other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. The result of the impairment loss is recognised whenever the carrying amount of an asset or its lowest level of cash generating unit exceeds its recoverable amount. This is the lowest level at which goodwill is monitored. Impairment losses are recognised in the income statement.

EMPLOYEE BENEFITS

Defined contribution plan The Group operates a defined contribution pension plan under which the Group pays fixed

contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.

Share-based payment transactionsSome employees of the Company and Fat Face Limited, an indirect subsidiary, have been granted shares in the Company. The Group has both equity-settled and cash-settled share-based payments.

The value of equity-settled share-based payments is derived from the fair value of shares acquired. This is recognised as an employee expense with a corresponding increase in equity. The Company financial statements also record an increase in investment in subsidiaries and corresponding increase in equity.

The fair value of the shares acquired by an employee (the equity-settled share-based payment) is based on an estimate of the market value of the business, taking into account the terms and conditions upon which the shares were granted. The market value of the business is principally derived from discounted cash flow techniques, which are based on management’s latest projections, growth rates and discount rates as applied to the calculated free cash flows. The resulting fair value is then allocated over a vesting period during which the employee became unconditionally entitled to the fair value of the shares or over a vesting period to the anticipated exit date (whichever is considered to be earlier).

For the tranches of C2 shares issued in 2010, the directors of the Company considered that the fair value could not be estimated reliably. In accordance with IFRS2 the Group adopted the intrinsic value methodology of these shares, whereby the intrinsic value of this share-based payment is re-measured at each reporting date, with changes recognised in profit or loss until the instrument is settled.

In respect of cash-settled share-based payments, the fair value of these awards is measured at the date of grant to the employee and allocated over a vesting period to the anticipated exit date using the same discounted cash flow valuation methodology as that is used for equity-settled. This is recognised as an employee expense annually. As these awards are deemed to be cash-settled their fair value will be reviewed at each reporting date with a corresponding movement in the liability being recognised.

REVENUE

Revenue represents the invoiced amounts of goods sold and services provided during the period, stated net of value added tax. Revenue arising from ‘sale or return’ represents the invoiced amounts of goods sold and services provided during the period, stated net of value added tax and after any concession fees.

Revenue arising from the sale of gift vouchers and gift cards is deferred and recognised at the point of redemption. Revenue arising from wholesale is recognised upon delivery of stock to the wholesaler.

Other revenue represents royalty income and rent receivable which is recognised at the point of invoice.

EXPENSES

Cost of inventories recognised as an expenseCost of inventories recognised as an expense represents variable expenses (excluding VAT and similar taxes) incurred from revenue generating activity. Product sold by the Group is the principal expense included under this category.

Operating lease paymentsPayments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised on a straight-line basis over the term of the lease.

Net finance costsNet finance costs comprise interest payable, finance charges on finance leases, interest receivable on funds

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invested and foreign exchange gains and losses that are recognised in the income statement. Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method.

Non-recurring items

Non-recurring items comprise of material items of income and expense which are not considered to be part of the normal operations of the company. These are separately disclosed on the face of the income statement in arriving at operating profit to assist with the understanding of the financial statements.

PROVISIONS

A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that the Group will be required to settle the obligation at the end of the reporting period, and are discounted to present value where the effect is material.

TAXATION

Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the income statement 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 period, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:

• the initial recognition of goodwill;

• the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and

• differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

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 assets can be utilised.

Taxation is recognised directly in Other Comprehensive Income when the taxable items are accounted for there.

NEW STANDARDS AND INTERPRETATIONS

A full list of new accounting standards and interpretations that have been implemented in the year or will be implemented next year, and which have no significant impact, can be found in note 25.

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2. SEGMENT INFORMATIONThe Group’s chief operating decision maker (the Chief Executive Officer) reviews internal daily and weekly sales reports and an internal monthly reporting pack. The Chief Executive Officer assesses the performance of the operating segment based on contribution, being operating profit before depreciation and amortisation, excluding head office costs.

The Group has one reportable segment; Retail. Retail includes revenue from store, ecommerce and sale or return activities. US Sales are reported as part of the total revenue from store and e-commerce activities. Wholesale activities, other income, rent receivables and royalty income are aggregated and disclosed as ‘Other’.

The internal monthly reporting pack includes a Consolidated Statement of Financial Position and no separate measures are provided of assets and liabilities on a segmental basis. In accordance with IFRS8, this information has therefore not been disclosed.

3. EXPENSES AND AUDITOR’S REMUNERATIONIncluded in the loss for the period are the following non-recurring items:

2016£000

2015£000

Within staff expenses:

Staff restructuring costs expensed as incurred6 964 3,484

Within other operating expenses:

Impairment of loan notes issued by external party7 — (290)

Professional fees and services and other one off items8 (339) 597

Non-recurring items included within Operating Profit 625 3,791

2016£000

2015£000

Non-recurring items before income tax 625 3,791

Non-recurring items income tax credit (125) (787)

Non-recurring items for the period 500 3,004

2016£000

2015£000

Other charges:

Inventories written down in the period 199 336

Inventories loss recognised as an expense in the period 1,342 1,241

Operating leases: Land and buildings 23,824 22,636

Operating leases: Other 217 183

Depreciation of tangible assets (net of third party contributions) 5,333 5,377

Impairment of tangible assets 141 475

Loss on disposal 549 —

Amortisation 3,616 3,643

35,221 33,891

2016£000

2015£000

Auditor’s remuneration:

Amounts receivable by auditors and their associates in respect of:

Audit of these financial statements 12 10

Audit of financial statements of subsidiaries pursuant to legislation 74 72

Services relating to corporate finance transactions — 217

Other services relating to taxation and sundry matters 107 158

193 457

Segmental information for the one reportable segment of the Group is included below.

2016 £000

2015 £000

Retail 219,205 203,149

Other 1,466 2,252

Revenue & other income 220,671 205,401

Retail 46,736 48,360

Other 810 729

Contribution 47,546 49,089

Other operating costs (23,669) (22,088)

Non-recurring items (625) (3,791)

Share-based payments (167) (6,367)

Finance income 7,214 414

Finance cost (13,973) (21,758)

Profit/(loss) before tax 16,326 (4,501)

The Group sells products through its Retail channel to customers located overseas.

Revenue by geographical location 2016 £000

2015 £000

United Kingdom 215,435 201,146

Rest of World 5,236 4,255

220,671 205,401

Overseas revenue when calculated on a constant currency basis (using a Euro rate of €1.35/£ and a USD rate of $1.49) was £5,200,000 for the 52 weeks ended 28 May 2016 (2015: £4,880,000).

Non-current assets by geographical location

United Kingdom

Rest of World

Total

2016 £000 £000 £000

Property, plant and equipment 23,838 1,948 25,786

Intangible assets 151,524 — 151,524

175,362 1,948 177,310

2015 £000 £000 £000

Property, plant and equipment 20,285 118 20,403

Intangible assets 154,552 — 154,552

174,837 118 174,955

The majority of the rest of the world assets relate to our stores in the United States and the Republic of Ireland.

6. Staff restructuring costs relate to severance, relocation and one-off bonus costs of previous and current board members and senior members of management.

7. The impairment reversal in the prior year relates to loan notes issued to the employee benefit trust that had previously been impaired. The trust received funds as part of the Group Debt refinancing. These were impaired in 2014 and financial years prior to this date.

8. Costs in respect of professional fees and services in the current year are a credit due to the receipt of a lease surrender benefit in relation to store exits and an over accrual for professional fees. In the prior year the costs were primarily incurred in relation to the Group debt refinancing exercise undertaken in September 2014.

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4. STAFF NUMBERS AND COSTSThe average number of persons employed by the Group during the period, analysed by category, was as follows:

Number of employees

Group 2016

Number of employees

Group 2015

Head office 351 330

Stores 2,463 2,400

Total 2,814 2,730

FatFace Group Limited had six employees during the period.

The aggregate payroll costs of the persons employed by the Group were as follows:

2016£000

2015£000

Wages and salaries 34,665 31,348

Social security costs 2,300 2,212

Other pension costs 370 326

Healthcare costs 163 153

Total trading expense before share-based payments 37,498 34,039

Share-based payments (see note 18) 167 6,367

Total trading expense 37,665 40,406

5. DIRECTORS’ EMOLUMENTSDirectors’ emoluments on behalf of the Group were as follows:

2016£000

2015£000

Directors’ emoluments 1,428 3,399

Company contributions to defined contribution pension plans 58 57

Share-based payments (144) 5,365

Total 1,342 8,821

Directors’ emoluments on behalf of the Company are the same as the Group in 2016. During the year the Director’s emoluments were transferred to the Company as the Directors are employed by FatFace Group. In the prior year Directors’ emoluments on behalf of the Company were £nil.

The share-based payment credit in 2015/16 is driven by the intrinsically valued shares issued in 2010 as discussed in note 18. Accounting methodology under IFRS2 means these awards have to be re-valued each accounting period and so vary in amount.

The aggregate of emoluments of the highest paid director was £509,000 (2015: £1,658,000) and company pension contributions of £nil (2015: £nil) were made to a defined contribution scheme on their behalf. In 2015 following the successful refinancing of the Group, a one off bonus was paid to a number of directors and key management personnel reflecting the success of the business over the last 4 to 5 years.

Number of directors

2016

Number of directors

2015

Retirement benefits are accruing to the following number of directors:

2 3

Defined contribution benefit plans:

The amount accrued in respect of directors’ pensions at 28 May 2016 was £2,000 (2015: £10,000).

6. FINANCE INCOME AND EXPENSE

2016£000

2015£000

Finance income

In respect of assets held at fair value: Bank interest income

22

25

Other: Net foreign exchange gain

—

389

Exit fee credit 7,192 —

7,214 414

2016£000

2015£000

Finance cost

In respect of liabilities not held at fair value: Interest expense on financial liabilities carried at amortised cost

13,480

11,811

In respect of liabilities held at fair value: Other interest payable

—

602

Exit fee charge — 9,345

Net foreign exchange loss 493 —

13,973 21,758

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Interest expense includes £9,313,000 (2015:£7,427,000) relating to cash interest payable on the bank debt.

In the prior year a refinancing exercise (see note 16) was undertaken which altered the debt structure of the Group. Of the bank interest expenses in 2015 £1,319,000 related to cash interest payable and £1,023,000 related to payment in kind (PIK) interest on the previous debt facilities. This was fully paid as part of the refinancing exercise. In addition to these payments an exit charge of £1,004,000 was paid as a result of the share redemption.

Other interest payable in 2015 consists of non-cash interest on loan notes of £602,000, which were fully repaid as part of the refinancing exercise.

The exit fee credit (2015: charge) relates to the movement in valuation of the exit fee accrual included within non-current accrued expenses; further detail on this can be found in Note 24.


7. TAXATION

Recognised in income statement 2016Total£000

2015Total£000

Current tax expense

Current year 2,206 3,458

Adjustments for prior years (590) (180)

Total current tax 1,616 3,278

Deferred tax expense

Current year (454) (1,318)

Adjustments in respect of previous periods 871 240

Deferred tax rate change (1,790) 43

Total deferred tax (1,373) (1,035)

Total tax in income statement 243 2,243

Reconciliation of effective tax rate 2016£000

2015£000

Profit/(loss) before tax 16,326 (4,501)

Tax using the UK corporation tax rate of 20% (2015: 20.83%) 3,265 (938)

Non-deductible expenses 635 3,078

Non-taxable income (2,147) —

Utilisation of unrecognised losses — —

Under/(over) provided in prior years 280 60

Impact of rate change on brought forward balance (1,790) 43

Rate difference on deferred tax — —

Total tax in income statement 243 2,243

Recognised through the statement of other comprehensive income

2016£000

2015£000

Deferred tax association with effective portion of changes in fair value of cash hedges

50 29

8. PLANT, PROPERTY AND EQUIPMENT: GROUP

Freehold land and

buildings £000

Asset in the course of

construction £000

Short leasehold land and

buildings £000

Equipment and fixtures

£000

Motor vehicles

£000

Total

£000

Cost

Balance at 1 June 2014 124 80 4,190 52,942 35 57,371

Additions — 251 517 8,857 — 9,625

Transfers between categories — (80) 20 60 — —

Disposals — — (143) (1,594) — (1,737)

Balance at 30 May 2015 124 251 4,584 60,265 35 65,259

Additions — 999 847 10,912 — 12,758

Transfers between categories — (251) 69 182 — —

Disposals — — (220) (2,175) — (2,395)

Balance at 28 May 2016 124 999 5,280 69,184 35 75,622

Depreciation and impairment

Balance at 1 June 2014 (21) — (948) (38,462) (35) (39,466)

Depreciation charge for the period (3) — (374) (6,275) — (6,652)

Impairment — — — (475) — (475)

Disposals — — 143 1,594 — 1,737

Balance at 30 May 2015 (24) — (1,179) (43,618) (35) (44,856)

Depreciation charge for the period (3) — (332) (6,350) — (6,685)

Impairment — — (17) (124) — (141)

Disposals — — 220 1,626 — 1,846

Balance at 28 May 2016 (27) — (1,308) (48,466) (35) (49,836)

Net book value

At 31 May 2014 103 80 3,242 14,480 — 17,905

At 30 May 2015 100 251 3,405 16,647 — 20,403

At 28 May 2016 97 999 3,972 20,718 — 25,786

Cost includes direct costs incurred in bringing assets into their present condition, including certain incremental labour costs.

After reviewing the trade of individual stores and comparing the discounted future cash flows of these with the assets held within each store it was determined that an impairment should be recognised of £141,000 (2015: £475,000) due to the forecast value in use of the stores being lower than the assets carrying amount.

The depreciation charge is recognised in the following line items in the income statement together with the amortisation of lease incentives held on the statement of financial position and amortised over the life of the lease:

2016£000

2014£000

Depreciation of tangible property, plant and equipment

Tangible assets depreciation 6,685 6,652

Unwinding of deferred lease incentives (1,352) (1,275)

Total depreciation and lease amortisation 5,333 5,377

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Reductions in the UK corporation tax rate from 20% to 19% effective from 1 April 2017 and a subsequent further reduction to 18% with effect from 1 April 2020 were substantively enacted in Finance (No.2) Bill 2015 on 26 October 2015. In the Budget on 16 March 2016 the Chancellor announced a further reduction to 17% effective from 1 April 2020 which will be introduced in Finance Bill 2016. This will reduce the company’s future current tax charge accordingly.

The deferred tax balances at 28 May 2016 have been calculated based on the rate of 18% substantively enacted at the reporting date.

Deferred tax movements in the year are primarily as a result of the impact of the rate change.


9. INTANGIBLE ASSETS: GROUP

Goodwill

£000

TradeMarks£000

PropertyLeases

£000

CustomerLists

£000

Software and Licences

£000

Total

£000

Cost

Balance at 1 June 2014 263,150 118,105 1,500 84 3,211 386,050

Other additions – externally purchased — 89 — — 1,582 1,671

Balance at 30 May 2015 263,150 118,194 1,500 84 4,793 387,721

Other additions – externally purchased — 42 — — 546 588

Balance at 28 May 2016 263,150 118,236 1,500 84 5,339 388,309

Amortisation and Impairment

Balance at 1 June 2014 (209,700) (16,756) (1,500) (84) (1,486) (229,526)

Amortisation for the period — (2,395) — — (1,248) (3,643)

Balance at 30 May 2015 (209,700) (19,151) (1,500) (84) (2,734) (233,169)

Amortisation for the period — (2,400) — — (1,216) (3,616)

Balance at 28 May 2016 (209,700) (21,551) (1,500) (84) (3,950) (236,785)

Net book value

At 31 May 2014 53,450 101,349 — — 1,725 156,524

At 30 May 2015 53,450 99,043 — — 2,059 154,552

At 28 May 2016 53,450 96,685 — — 1,389 151,524

Goodwill represents amounts arising on the acquisition of subsidiaries, being the difference between the cost of the acquisition and the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. This will include the value of the workforce in place, the future marketability of the brand, represented by potential income streams not yet being exploited, and the synergies arising from the utilisation of the Group’s assets as a whole, over and above their individual value-generating capacity. All of the value of the goodwill has been attributed to the retail segment.

AMORTISATION CHARGEThe amortisation charge is recognised in the following line items in the income statement:

2016£000

2015£000

Depreciation and amortisation of trading assets 1,216 1,248

Amortisation of non-trading intangibles 2,400 2,395

3,616 3,643

Impairment testingThe Group’s management has reviewed the carrying value of goodwill for possible impairment based on the lowest level of cash generating units (“CGUs”) which comprise the lowest level at which goodwill is monitored. The Group has defined its CGU as Retail.

The process of impairment testing is intended to estimate the recoverable amount of an asset and recognise an impairment loss whenever the carrying amount of an asset exceeds the recoverable amount.

The Group conducts impairment testing on goodwill, brand and property, plant and equipment annually to determine whether there is any indication of impairment. The results of the Group’s impairment testing for the carrying value of goodwill indicated no impairment was required in the period. The historical amortisation of goodwill arose in 2009 when a review of conditions at the time suggested that the value of goodwill was impaired.

Management judges that as trade marks are being amortised on an annual basis and no triggers for impairment have been identified then an impairment of the carrying value of trade marks is not required in this period.

KEY ASSUMPTIONS

Income stream forecastsThe key revenue driver for the business will continue to be the development of the retail segment. The directors believe that there is significant capacity for growth through improving sales growth, relocating and refitting stores in successful markets, expanding the portfolio and continuing to strengthen its multi-channel offering. A perpetuity growth rate of 2% has been assumed.

COST GROWTH FORECASTS

Costs are assumed to grow at an assumed inflation rate in conjunction with a reasonable increase in costs to support the continued expansion.

DISCOUNT RATE

The Group’s weighted average cost of capital (WACC) has been used as a discount rate in the calculation, adjusted to arrive at a post-tax rate. The post-tax discount rate has been estimated at 10.6% (2015: 10.6%). The pre-tax discount rate has been estimated at 12.4% (2015: 12.4%).

Changes to these estimates and assumptions could materially impact the fair value estimates and as such, sensitivities around these are carried out.

SENSITIVITY

The key assumptions as noted above are net operating cash flows generated and the WACC used.

The present values of the future cash flows of the Retail CGUs are significant and are insensitive to any changes to potential changes to key assumptions.

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10. INVESTMENTS IN SUBSIDIARIES

Company 2016£000

2015£000

Investment as at 31 May 2015 283,849 56,790

Accumulated interest on loan notes — 1,990

Intergroup restructuring (see below) — 218,702

Additions during the year arising from share-based payments 311 6,367

Closing investment as at 28 May 2016 284,160 283,849

The overall carrying value of the Group has been reviewed. The underlying operating performance of the Group remains strong and forecasts show that external bank debt will continue to be repaid. As a result the valuation is considered to be appropriate.

As part of the Group debt refinancing in September 2014 the equity structure of the Group was reorganised. The Company transferred its investment in FatFace Group Borrowings Limited to FatFace Group Parent Limited, a new company established by the Company, in exchange for a consideration of £33,172,701.

This was settled by means of an additional share issue of 26,199,000 ordinary shares that were issued at a premium of £6,973,699. The Company also transferred intercompany receivable balances due from Fat Face World Borrowings Limited and loan notes due from Fat Face World Investments Limited to Fat Face Group Parent Limited in return for a consideration of £244,309,629, settled by an additional ordinary share issue.

At a Group level Fat Face Newco 2 Limited’s investment in Fat Face Holdings Limited was transferred to FatFace

Group Borrowings Limited (carried at £118,497,896) for £332,087,351. Following the refinancing and reorganisation Fat Face World Investments Limited, Fat Face World Borrowings Limited, Fat Face Fulham Limited, Fat Face Newco 1 Limited and Fat Face Newco 2 Limited were all placed into liquidation on 30th January 2015.

On 9 May 2014, the Company formed a new subsidiary FatFace Group Borrowings Limited by acquiring 100% of the share capital of £2. The Company then transferred its investment in FatFace Group Borrowings Limited by acquiring 100% of the share capital of £2. The Company then transferred its investment in Fat Face World Investments Limited (carried at £8,308,000) to this new subsidiary for £26,199,000, settled by means of an additional share issue from FatFace Group Borrowings to the Company, as part of the Group restructure.

FatFace Corporation was incorporated in Delaware in May 2015. In the prior period Fat Face Holdings Limited acquired 100% of the ordinary share capital of the entity for a consideration of £33. The entity is a trading company for activity within the USA.

Country ofincorporation

Class of shares held

Ownership2016

Ownership2015

Company

FatFace Group Parent Limited UK Ordinary 100% 100%

Group

Fat Face World Investments Limited (in liquidation) UK Ordinary 100% 100%

Fat Face World Borrowings Limited (in liquidation) UK Ordinary 100% 100%

Fat Face Fulham Limited (in liquidation) UK A Ordinary 100% 100%

B Ordinary 100% 100%

C Ordinary 100% 100%

D Ordinary 100% 100%

E Ordinary 100% 100%

Deferred 100% 100%

Fat Face Newco 1 Limited (in liquidation) UK Ordinary 100% 100%

Fat Face Newco 2 Limited (in liquidation) UK Ordinary 100% 100%

Preference 100% 100%

FatFace Group Parent Limited UK Ordinary 100% 100%

FatFace Group Borrowings Limited UK Ordinary 100% 100%

Fat Face Holdings Limited UK Ordinary 100% 100%

Ordinary A 100% 100%

Ordinary B 100% 100%

UK Founder 100% 100%

Fat Face Limited UK Ordinary 100% 100%

FatFace Corporation USA Ordinary 100% 100%

11. OTHER FINANCIAL ASSETS AND LIABILITIES

Held for hedging: Group2016

£000

Group2015

£000

Company2016

£000

Company2015

£000

Current

Fair value of exchange rate hedge 98 443 — —

Fair value of interest rate derivative — 25 — —

98 468 — —

The Group’s exposure to interest rate, liquidity, foreign currency and credit risks are disclosed in note 21. For details on valuation methodology adopted see note 21.

12. DEFERRED TAX ASSETS AND LIABILITIES: GROUPRecognised deferred tax assets and liabilitiesDeferred tax assets and liabilities are attributable to the following:

Assets2016

£000

Assets2015

£000

Liabilities2016

£000

Liabilities2015

£000

Property, plant and equipment (1,192) (2,105) — —

Intangible assets — — 17,388 19,795

Accruals (42) (205) — —

Financial liabilities — (32) 18 —

Tax losses (42) — — —

Tax (assets)/liabilities (1,276) (2,342) 17,406 19,795

Net off tax (assets) — — (1,276) (2,342)

Net tax liabilities — — 16,130 17,453

Movement in deferred tax during the period2 June

2014£000

Recognisedin income

£000

Recognisedin equity

£000

30 May 2015

£000

Property, plant and equipment (1,547) (558) — (2,105)

Intangible assets 20,249 (454) — 19,795

Accruals (208) 3 — (205)

Financial liabilities (62) — 30 (32)

18,432 (1,009) 30 17,453

31 May 2015

£000

Recognisedin income

£000

Recognisedin equity

£000

28 May2016

£000

Property, plant and equipment (2,105) 913 — (1,192)

Intangible assets 19,795 (2,407) — 17,388

Accruals (205) 163 — (42)

Financial liabilities (32) — 50 18

Tax losses — (42) — (42)

17,453 (1,373) 50 16,130

At the reporting date, the Group has an unrecognised deferred tax asset of £nil (2015: £nil) arising from losses. The Company has no deferred tax assets or liabilities.

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13. INVENTORIES

Group2016

£000

Group2015

£000

Company2016

£000

Company2015

£000

Finished goods and goods for resale 24,421 22,496 — —

Cost of inventories recognised as an expense 87,965 79,100 — —

All inventories are expected to be sold within 12 months.

Inventory provisions comprise amounts in respect of inventories expected to be sold at less than cost price, together with an estimate of inventory shrinkage. The value of inventories expected to be sold at less than cost price

is determined based on historic costs, current sales price, together with volumes held. The estimate of inventory shrinkage is calculated based on historic data of levels of inventory adjustments not recognised through the stock take process.

14. TRADE AND OTHER RECEIVABLES

Group2016

£000

Group2015

£000

Company2016

£000

Company2015

£000

Prepayments 3,034 3,483 82 79

Trade receivables 1,738 2,098 — —

4,772 5,581 82 79

As at 28 May 2016, £353,437 (2015: £543,285) of the trade receivables balance was overdue. In the month following the year end over half (2015: over half ) of the overdue balance was recovered. Receivables of £38,971 (2015: £15,691) have been provided against at the end of the period.

Of trade receivables, 97% (2015: 100%) are in respect of UK debtors. Trade receivables mostly arise from the Company’s sale or return and wholesale operations and landlord contributions. No collateral is held against the outstanding amounts and no other amounts are past due except as disclosed. The maximum credit risk from financial assets is £1,738,000 (2015: £1,547,000).

15. CASH AND CASH EQUIVALENTS

Group2016

£000

Group2015

£000

Company2016

£000

Company2015

£000

Cash and cash equivalents per statement of financial position and per cash flow statements

19,660 10,719 — —

16. OTHER INTEREST-BEARING LOANS AND BORROWINGS

Group2016

£000

Group2015

£000

Company2016

£000

Company2015

£000

Secured bank loans 164,449 172,069 — —

164,449 172,069 — —

16. OTHER INTEREST-BEARING LOANS AND BORROWINGS (CONTINUED)

Terms and debt repayment scheduleThis table provides information about the contractual terms of Group’s interest-bearing loans and borrowings, showing both the principal and carrying values, which are measured at amortised costs.

At 30 May 2015 Currency

Nominal interest rateCash paid

Year of final maturity

Face value (Group)

£000

Carrying amount(Group)

£000

Facevalue

(Company)£000

Carrying amount

(Company)£000

Facility B £ LIBOR+5.50% 2020 140,000 133,835 — —

Facility D £ LIBOR+5.50% 2021 40,000 38,234 — —

Revolving facility £ LIBOR+4.25% 2019 — — — —

180,000 172,069 — —

At 28 May 2016 Currency

Nominal interest rateCash paid

Year of final maturity

Face value (Group)

£000

Carrying amount(Group)

£000

Facevalue

(Company)£000

Carrying amount

(Company)£000

Facility B £ LIBOR+5.50% 2020 130,000 125,694 — —

Facility D £ LIBOR+5.50% 2021 40,000 38,755 — —

Revolving facility £ LIBOR+4.25% 2019 — — — —

170,000 164,449 — —

On 25th September 2014 the Group entered into a new banking facility consisting of the following:

• A Term B loan of £140 million maturing on 25 September 2020;

• A Term D loan of £40 million maturing on 25 March 2021;

• A revolving credit facility of £30 million with a maturity date of 25 September 2019; and

• A Net Leverage covenant.

The proceeds from the new banking facility together with cash generated from operating activities were utilised to repay the Group’s previous banking facility, related party loan notes and shareholder loan notes. The Group also redeemed 12,455,777 preference shares, 564,698,916 C1A shares and 2,785,997 A shares and 9,821,429 B shares.

Upon completion of the new banking facility, the Group assessed these changes as extinguishment of the old debt and the issue of new debt. £4,700,000 of costs associated with the issue of the debt facilities were capitalised and are being amortised over the life of the associated debt. Of the total debt costs capitalised £2,400,000 (2015: £1,700,000) was amortised in the financial year ending 28th May 2016.

The Company incurred no costs associated with the establishment of new debt facilities during the period (2015: nil).

The Group’s banking facilities are subject to an EBITDA9 net leverage covenant typical for borrowings of this nature. The covenant was met for both years. The Group has entered into a security document which comprises fixed and floating charges over the Group’s assets, together with assignments (by way of security) of insurance policies, specified bank accounts and certain specified contracts.

All Group term facilities and borrowings are denominated in sterling. All term facilities and borrowings are carried at face value net of unamortised costs.

Net debt is the total amount of cash and cash equivalents less interest-bearing loans and borrowings and finance lease liabilities of which there are none. Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows only.

2016£000

2015£000

Cash and cash equivalents 19,660 10,719

Interest-bearing loans and borrowings (164,449) (172,069)

Net debt (144,789) (161,350)

9. EBITDA as defined in the Senior Facilities Agreement as earnings before

interest, tax, depreciation and amortisation.

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18. EMPLOYEE BENEFITS (CONTINUED)

Cash settled share awardsPart of the value in the JSOP below the predetermined threshold has been allocated out to fund what has been determined to be cash settled share-based payments. A further cash settled share-based payment exists which will be paid ahead of proceeds to equity holders of the Group. The fair value of these awards are measured at the date of grant to the employee and allocated over a vesting period to the anticipated exit date.

As these awards are deemed to be cash-settled their fair value will be reviewed on an annual basis with

a corresponding liability being recognised. The share-based payment charge in the year for these awards is £396,400 (2015: £278,500).

Intrinsically valuedOf the C2 ordinary share awards that are outstanding, the tranche of shares that were granted during 2009/10 were intrinsically valued. At that point in time the directors of the Group considered that the fair value could not be estimated reliably. In accordance with IFRS2 the Group adopted the intrinsic value methodology for these shares, whereby the intrinsic value of the share-based payment is re-measured at each

reporting date, with changes recognised in profit or loss until the instrument is settled. While, since the date of award certain of these awards have lapsed as a result of individuals leaving the business and subsequently been reissued as new awards, at May 2016, 39,524,071 awards remain subject to the intrinsic valuation methodology. The directors consider the equivalent annual charge based on the value of these awards to be £651,000 (2015: £985,000) resulting in a credit being recognised to true-up the accumulated reduction in valuation as at 28 May 2016.

Grant date Number of instrumentsoutstanding

2016

Charged to income

2016£000

Number of instruments outstanding

2015

Charged to income

2015 £000

Award of ‘B’ ordinary shares granted 27,500,000 — 27,500,000 —

Award of ‘C1A’ ordinary shares granted 38,137,904 110 38,137,904 2,934

Award of ‘C2’ ordinary shares granted 62,273,306 (369) 64,335,668 3,167

Award of ‘C2’ JSOP ordinary shares granted 15,369,299 30 17,725,732 2

Total award of equity settled share-based payments (229) 6,103

Award of cash settled share-based payments N/a 396 N/a 264

Total expense recognised for the year 167 6,367

17. TRADE AND OTHER PAYABLES

Group2016

£000

Group2015

£000

Company2016

£000

Company2015

£000

Current

Amounts due to Group companies — — 5,050 2,386

Trade payables 19,354 13,418 — —

Non-trade payables and accrued expenses 15,505 16,729 684 535

Interest payable 1,708 176 — —

36,567 30,323 5,734 2,921

Non-current

Accrued expenses 16,020 22,690 12,694 19,489

Deferred lease incentives 9,081 6,606 — —

25,101 29,296 12,694 19,489

All Group payables are payable on demand. Current trade payables, non-trade payables and accrued expenses that are classified as current are expected to be paid within 12 months. The decrease in non-current accrued expenses from 30 May 2015 to 28 May 2016 is mainly as a result of a decrease in the exit fee accrual; refer to note 21 for further information.

18. EMPLOYEE BENEFITS

DEFINED CONTRIBUTION PLANS

The Group operates a defined contribution pension plan. The total expense relating to this plan in the current year was £370,000 (2015: £326,000). The total owed to the plan at the end of the year was £59,000 (2015: £112,000). The total owed by the plan at the year end was £7,632 (2015: £4,452).

SHARE-BASED PAYMENTS

Certain senior management of Fat Face Limited are invited to become shareholders in the ultimate parent. ‘B’ ‘C1A’ and ‘C2’ ordinary shares are offered at a price reflecting the performance and future prospects of the business.

A Joint Share Ownership Plan (JSOP) exists whereby certain senior management employees (“the Participants”) are awarded the right to purchase a designated number of ‘C2’ ordinary shares within the scheme. This will give the Participants access to a share in the future value of each ‘C2’ ordinary share within the scheme above a predetermined threshold.

The Articles of Association of the Company (‘the Articles’) define ‘Good Leavers’ and ‘Bad Leavers’ ,

where a ‘Bad Leaver’ is an employee-shareholder leaving the business because of voluntary resignation or termination in circumstances justifying summary dismissal. All other employee-shareholders leaving the business are ‘Good Leavers’. On leaving the business, the Articles require that a Bad Leaver surrenders their ‘B’, ‘C1A’ and ‘C2’ ordinary shares and JSOP rights at the lower of fair value and the cost for which the shares were acquired.

On leaving the business, the Articles require that a Good Leaver sells their ‘B’, ‘C1A’ and ‘C2’ ordinary shares and JSOP rights as directed by the majority investors at a value between cost and fair value calculated by reference to length of service. It is expected that the shares will be surrendered to other employee-shareholders in the business.

Equity settled share awardsWithin the consolidated financial statements, the fair value of shares acquired is recognised as an employee expense (a share-based payment) with a corresponding increase in equity. The fair value of share grants is measured at the date of grant to the employee.

The fair value of the shares is measured based on an estimate of the market value of the business, taking into account the terms and conditions upon which the shares were granted. The market value of the business is principally derived from discounted cash flow techniques, which are based on management’s latest projections, growth rates and discount rates as applied to the calculated free cash flows. The resulting fair value is then allocated over a vesting period during which the employee became unconditionally entitled to the value of the shares or over a vesting period to the anticipated exit date (whichever is considered to be earlier).

The value of the JSOP award is based on the same methodology, but has excluded any value in the share up to the predetermined threshold.

The share-based payment charge in the year for the equity settled awards is £1,126,000 (2015: £3,326,000).

As a result of the share redemption in the prior year, the share-based payment charge on the 564,698,916 C1A’s that were redeemed was accelerated in accordance with IFRS2.

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20. CAPITAL AND RESERVES

In thousands of shares Preferredordinary

sharesC1A

sharesC1B

sharesC2

sharesOrdinary

shares Total

Total shares paid up at 31 May 2014 15,138 602,837 602,837 106,382 100,000 1,427,194

Share redemption (12,456) (564,699) — — (12,607) (589,762)

Total shares paid up at 30 May 2015 2,682 38,138 602,837 106,382 87,393 837,432

Total shares paid up at 28th May 2016 2,682 38,138 602,837 106,382 87,393 837,432

2016 Authorised, allotted, called

up and fully paid£000

2015 Authorised, allotted, called

up and fully paid£000

Share capital

A Ordinary shares of £0.01 each 697 697

B Ordinary shares of £0.01 each 177 177

Preferred ordinary shares of £0.01 each 27 27

C1A shares of £0.000001 each — —

C1B shares of £0.000046 each 27 27

C2 shares of £0.000047 each 5 5

933 933

The holders of A and B ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at General Meetings.

The holders of C1B shares are not entitled to receive dividends but are entitled to one vote per share at General Meetings.

The holders of C1A and C2 shares are not entitled to receive dividends or to vote at General Meetings.

As part of the refinancing exercise in September 2014 12,455,777 Preferred ordinary shares, 564,698,916 C1A shares, 2,785,997 A shares and 9,821,429 B shares were redeemed. The redemption resulted in the portion of the share premium that related to the Preferred ordinary shares that were redeemed being eliminated.

CAPITAL CONTRIBUTION RESERVE

The capital contribution reserve first arose in March 2010 when the redeemable preference shares were reclassified as deferred shares with no dividend rights and curtailed rights on capital distribution. Accordingly the principal waived on these shares together with the dividend accumulated to March 2010 was reclassified as a capital contribution. Following the completion of the capital reduction in the prior year this has now been cancelled (as mentioned above).

CASH FLOW HEDGING RESERVE

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred – see note 21.

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19. PROVISIONS

Onerous lease Provision £000

Dilapidation Provision £000

Total£000

Balance at 1 June 2014 2,841 219 3,060

Provision utilised during the year (1,069) (109) (1,178)

Provision released during the year (1,227) (109) (1,336)

Provisions created during the year 95 74 169

Balance at 30 May 2015 640 75 715

Balance at 31 May 2015

Provision utilised during the year (462) (20) (482)

Provision released during the year (333) (49) (382)

Provisions created during the year 362 65 427

Balance at 28 May 2016 207 71 278

2016

Current 207 71 278

Non-current — — —

2015

Current 582 54 636

Non-current 58 21 79

Where the Group will no longer trade from a leased property, either due to the lease expiring or as a result of other considerations, a review is carried out to determine whether an onerous lease or a dilapidation provision is required.

An onerous lease provision equalling the cost of a lease is made where the lease is not sublet. In instances where the lease is sublet, the onerous lease provision equals the cost of the lease less income from the sublease. Where negotiations on a sublease are on-going, management’s best estimate is used to determine what the anticipated cost to the business will be. This is discounted to its present value using the Group’s post-tax weighted average cost of capital.

A dilapidations provision is made to cover the cost of returning properties to the condition required by the lease

upon exit from the lease. A dilapidations provision is based on management’s assessment of the store relocation programme and the current state of properties in the Group’s portfolio.

Onerous lease and dilapidation provisions are reviewed on a lease by lease basis.

The Group has benefitted from an improved commercial property market in the year. A number of previously provided for properties were either successfully sublet or surrendered. Provisions released in the year relate to either properties disposed of under more beneficial terms than previously expected, or properties that were previously marketed for exit but management have subsequently decided to continue trading under the current lease until expiry.


21. FINANCIAL INSTRUMENTS

21(A) FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair value hierarchyThe Group analyses financial instruments carried at a fair value by valuation method. The different levels have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. directly from prices); and

• Level 3: inputs for assets or liabilities that are not based on observable market data (unobservable inputs).

Investments in equity securitiesInvestments in subsidiary companies are carried at acquisition cost and reviewed for impairment. There has been no impairment for 2016, or 2015 as discussed in note 10.

Trade and other receivablesTrade and other receivables are carried at recoverable amount, less provisions for any amounts where recovery is doubtful. All trade and other receivables are expected to be short term and therefore no discounting of value is appropriate. The fair value of trade and other receivables approximate to the carrying values.

Trade and other payablesTrade and other payables are carried at the face value payable. All trade and other payables are expected to be short term and therefore no discounting of future cash flows is appropriate. The fair value of trade and other payables approximate to the carrying values.

Cash and cash equivalentsThe fair value of cash and cash equivalents is estimated at its carrying amount.

Interest-bearing loans and borrowingsFair value which, after initial recognition is determined for disclosure purposes only, is calculated based on the range of values at which debt is being traded at in the secondary market if available, or based on the present value of discounted cash flows associated with the investment.

If the interest-bearing borrowings were carried at fair value then they would be classified as level 3.

Accrued expensesThe fair value of the exit fee accrual is measured based on an estimate of the market value of the business at the anticipated exit date which is based on management’s latest projections, growth rates and discount rates.

If the exit fee accrual were carried at fair value then it would be classified as level 3.

Derivative financial instrumentsThe fair value of forward foreign exchange contracts is estimated by reference to the difference between the contractual forward price and the current forward price for the residual maturity of the contract. The contracts are classified as Level 2 instruments.

The fair value of the interest rate cap is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date. The cap is a level 2 fair value instrument in terms of the fair value hierarchy.

The fair values for each class in financial assets and financial liabilities together with their carrying amounts shown in the statement of financial position are as follows:

21. FINANCIAL INSTRUMENTS (CONTINUED)

21(B) CREDIT RISK

GroupCredit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions and from the Group’s receivables from customers.

The Group seeks to ensure that the banks used for the financing of the loan facilities and hedging purposes have an acceptable credit rating by independent credit rating agencies.

The Group’s operations are principally retail and so the exposure to credit risk from receivables is minimal. The Group periodically reviews its receivables and makes appropriate provisions where recovery is deemed to be doubtful.

The allowance account for trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the trade receivables directly.

CompanyThe Company has no material credit risk.

21(C) LIQUIDITY RISK

Group

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s banking facilities include revolving credit facilities totalling £30.0m. Of this facility £11.0m has been utilised in part for letters of credit, guarantees, documents in trust and supplier financing. Any unutilised balances are available to be utilised and drawn as cash facilities for the Group to fund the day-to-day overdrafts as and when required. No cash facilities had been drawn at year end.

The Group has had unutilised and undrawn banking facilities of £15.0m as at 28 May 2016 (as at 31 May 2015: £20.0m). The Group retains ample

headroom in its available working capital.

The directors believe that the Group will be able to continue to meet its need for liquidity from these facilities. The Group monitors its working capital daily, forecasts its cash flow on a daily basis for approximately three months ahead and monthly for a year ahead, and monitors monthly its exposure to banking covenants in order to ensure that there are no unforeseen liquidity problems.

At the period end, the Group had letters of credit in issue which were not yet payable as at 28 May 2016 of £0.1m (2015: £0.5m). These were all expected to fall due within one year and are not included in the statement of financial position liabilities figure. A number of suppliers were moved from letters of credit in the year to alternative financing arrangements.

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Group

Carryingamount

2016£000

Fair value2016

£000

Carryingamount

2015£000

Fair value2015

£000

Assets

Other financial assets 98 98 443 443

Trade and other receivables 1,738 1,738 2,098 2,098

Cash and cash equivalents 19,660 19,660 10,719 10,719

21,496 21,496 13,260 13,260

Liabilities

Other financial liabilities — — — —

Interest-bearing loans and borrowings (164,449) (167,535) (172,069) (175,831)

Trade and other payables (36,567) (36,567) (30,323) (30,323)

(201,016) (204,102) (202,392) (206,154)

There have been no transfers between levels in either period.

CompanyOther than the exit fee accrual and intercompany balances the Company holds no material balances of this nature.



Liquidity Risk – Group

2015 at reporting date

Carryingamount

£000

Contractualcash flows

£000

1 yearor less£000

1 to<2 years

£000

2 to<5 years

£000

5 years and over

£000

Non-derivative financial liabilities

Secured bank loans 172,069 241,008 10,910 20,000 33,788 176,310

Trade and other payables 30,323 30,323 30,323 — — —

Accrued expenses 19,489 19,489 — — 19,489 —

Derivative financial assets

Interest rate cap used for hedging (25) (25) — — (25) —

221,856 290,795 41,233 20,000 53,252 176,310


Carryingamount

£000


£000

1 yearor less£000

1 to<2 years

£000

2 to<5 years

£000

5 years and over

£000


Secured bank loans 164,449 218,988 11,998 10,123 196,867 —

Trade and other payables 36,567 36,567 36,567 — — —

Accrued expenses 13,806 13,806 — 13,806 — —

214,822 269,361 48,565 23,929 196,867 —

COMPANY

The Company has no third party debt and therefore no material liquidity risk. Long term liabilities consisting of accrued expenses are not expected to be funded out of the company’s working capital and will only fall payable upon an exit event:

Liquidity Risk – Company


Carryingamount

£000


£000

1 yearor less£000

1 to<2 years

£000

2 to<5 years

£000

5 years and over

£000


Trade and other payables 535 535 535 — — —

Accrued expenses 19,489 19,489 — — 19,489 —

20,024 20,024 535 — 19,489 —


Carryingamount

£000


£000

1 yearor less

£000

1 to<2 years

£000

2 to<5 years

£000

5 years and over

£000


Trade and other payables 684 684 684 — — —

Accrued expenses 12,694 12,694 — 12,694 — —

13,378 13,378 684 12,694 — —


21(D) MARKET RISK

Market Risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, commodity prices and equity prices will affect the Group’s income or the value of its holdings of financial instruments.

GroupThe Group uses interest rate and forward foreign exchange hedges to manage its exposure to changes in these market values as discussed above.

Aside from changes that are reflected in those variables, the Group has only

limited exposure to changes in raw material prices since these represent a relatively small part of the business’s costs. UK labour costs tend to follow UK inflation rates and can therefore be reflected in selling prices and overseas labour costs to be relatively inflexible to the extent that they are passed on to UK distributors.

FatFace monitors its pricing proposition against major competitors.

CompanyThe Company has a liability to pay an exit fee to Bridgepoint Capital

(Nominees) Limited, (the rights to the fee were acquired in the prior year by Bridgepoint Capital (Nominees Limited) from the previous owners) on the sale or flotation of the Group. This fee will be based on the equity value of the business at that time after the satisfaction of all preferential claims.

The directors have determined that the fair value of this fee measured through the income statement is currently £12,033,846 (2015: £19,225,773). This is re-measured on an annual basis.

MARKET RISK – FOREIGN CURRENCY RISK

GroupThe Group imports finished goods from overseas, some of which are settled in US dollars. In accordance with the Group’s Treasury Policy, the Group manages the risk of foreign exchange fluctuations through foreign exchange forward contracts and options.

The total purchases in USD for each season is estimated in advance. The Group takes a contract allowing the purchase of that quantity of dollars between a range of dates at a fixed dollar rate. As US dollar payments are made, dollars are called down from those contracts to cover the exposure. Although at the time of purchase, fixed orders have not been placed for product, the expected payment profile can be predicted with a high degree of accuracy.

Due to the variability of exchange rates, the Group takes a succession of smaller dollar contracts to benefit from day-to-day fluctuations in rates. These have been combined with upper and lower triggers in order to ensure that the Group’s exchange risk is still controlled.

Fair value is determined by obtaining a market price valuation from the relevant broker.

As at 28 May 2016, the Group had fixed forward cover contracts in place in respect of $14.6m expiring by April 2017 with a fair value gain of £98,000 The Group also had a number of hedging options in place as at 28 May 2016. As at 30 May 2015, The Group had fixed forward cover contracts in place in respect of $23m expiring by February 2016 with a fair value gain of £443,000.

Management have tested the effectiveness of these hedging relationships and concluded that they meet the requirement for hedge accounting. The effect of the hedged exchange rate is released to the profit and loss account as the purchases are made. No further impact to cash flow is expected. Some goods are purchased denominated in euros. However, since the Group also has sales operations in the euro-zone, further hedging is not required.

The Group’s exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments, except for derivatives which are based on notional amounts.

At 28 May 2016 Sterling£000

Euro£000

US Dollar£000

Other£000

Total£000

Cash and cash equivalents 16,596 716 2,348 — 19,660

Short term receivables 1,678 — 60 — 1,738

Secured bank loans (164,449) — — — (164,449)

Trade payables (15,375) (711) (3,268) — (19,354)

Forward foreign exchange contracts (9,923) — 10,021 — 98

Statement of financial position exposure 5 9,161 —

Estimated forecast sales* 5,039 2,639 —

Estimated forecast purchases* (9,097) (36,480) (120)

Net exposure (4,053) (24,680) (120)

* Next twelve months; approximates to two trading seasons.

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21(D) MARKET RISK (CONTINUED)

Sensitivity analysisIn managing its foreign currency risk the Group aims to reduce the impact of short-term fluctuations on the Company and Group‘s earnings. The impact of a movement of $0.01 in USD exchange rates in the 2016/17 financial year on the Group is estimated to be £232,000 (2015: £237,000). Over the longer-term, however, permanent changes in foreign exchange rates would have an impact on consolidated earnings. This impact would be mitigated by many factors both internal and external, making it impossible to estimate the final size of that impact reliably.

CompanyThe Company has no income or purchases that is denominated in foreign currency and therefore has no foreign currency risk.

MARKET RISK – INTEREST RATE RISK

GroupAt the 28 May 2016 the interest rate profile of the Group’s interest-bearing financial instruments was as described in note 16.

Following the 2015 refinancing exercise in order to manage the risk of interest rate fluctuations, the Group entered into an interest rate cap in 2015. This covers 71% (2015: 67%) of the Group’s interest-bearing facilities as at 28 May 2016.

The Group assesses effectiveness for hedging purposes of the interest rate cap at inception and at each reporting date. The settlement dates for the interest rate cap coincide with the expected maturity dates for the Group’s term debt interest (substantially every month). This basis is used for measuring interest rates for both the interest rate cap and the

term debt, and the principal amounts of the interest rate cap and the hedged portion of the term debt match. It is considered that both the past and future changes in cash flows of the interest rate cap will offset the cash flows associated with the interest rate risk over the hedged portion of the Group’s term debt, and consequently the hedge is effective. The current rate caps LIBOR at 2%, increasing to 3% after 31 May 2016, and remaining at this rate through to the maturity date of the cap.

Fair value is determined by obtaining a market price valuation from the relevant broker.

Principal Value

Capped LIBOR

Fair Value

£120,000,000 2% £nil

The contract has been tested and proved to be effective and therefore meets the requirements for hedge accounting. The effect of the hedged interest rate is released to the profit and loss account as interest costs are incurred. Cash flow is affected on each settlement date.

Sensitivity analysisA change of 100 basis points in interest rates applied to the Group’s unhedged borrowings as at the 28 May 2016 would increase or decrease profit or loss for a full year by £0.5m (30 May 2015: £0.6m). The Group’s interest rate hedge is expected to be fully effective, and therefore there should be no additional impact on equity.

CompanyThe directors do not believe that the Company suffers a material interest rate risk.

While the Company is funded by floating rate debt from a fellow Group company, interest rate hedging is undertaken by members of the Group.

21(E) CAPITAL MANAGEMENT

The Group’s objectives when managing capital are to facilitate the on-going trade and expansion of the Group and to safeguard its ability to continue as a going concern in order to provide returns for shareholders, and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

The directors look to optimise the debt and equity balance and to maintain headroom on financial covenants. Management have continued to measure and monitor covenant compliance throughout the period and the Group has complied with the requirements set.

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. There were no changes in the Group’s approach to capital management during the year.

The funding requirements of the Group are met by the utilisation of external loans and borrowings together with available cash, as detailed in note 16.

22. OPERATING LEASESGroupNon-cancellable operating lease rentals are payable as follows:

Land and building

leases 2016£000

Other leases

2016£000

Land and building

leases 2015£000

Other leases

2015£000

Less than one year 24,053 74 22,348 85

Between one and five years 77,214 109 71,199 91

More than five years 53,696 — 46,344 —

154,963 183 139,891 176

The Group leases store and warehouse locations under operating leases. The Group also has operating leases in respect of its vehicles and some items of plant and equipment. The leases are of varied length with the longest lease running until 2038, with many leases having options to extend at the end of the lease term.

Leases of land and buildings are typically subject to rent reviews at specified intervals and provide for the lessee to pay all insurance, maintenance and repair costs.

Certain rental expense is determined on the basis of revenue achieved in specific retail locations and is accrued for on that basis. The table above

does not include estimates of such contingent rental payments.

The Group sublets properties under operating leases. The operating lease rent receivable in the next 12 months is £151,019 (2015: £93,289).

CompanyThe Company has no operating leases.

23. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

GROUP AND COMPANY

Capital commitmentsAt 28 May 2016, the Group had entered into contracts to open new stores and develop the Group’s IT infrastructure, which will require

estimated capital expenditure of £1,636,200 (30 May 2015: £1,400,800).

In early June 2016, the Group committed to the fit out of a new Distribution Centre at Dunsbury Hill

Farm near its current Head Office location.

The Company had no capital commitments at either 28 May 2016 or 30 May 2015.

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24. RELATED PARTIESDirectors of the Company control, or have held in trust on their behalf, as at 28 May 2016: 6.1% (30 May 2015: 6.2%) votes over shares of FatFace Group Limited.

The Group and Company have related party relationships with shareholders & key management. All dealings with related parties are conducted on an arm’s length basis.

Credits/Purchases£000

Amounts owed to related party£000

30 May 2015

Bridgepoint Capital (Nominees) Limited 8,341 (19,226)

Bridgepoint Advisers Limited 100 (42)

Employee Benefit Trust 22 (500)

8,463 (19,768)

Credits/Purchases £000

Amounts owed to related party£000

28 May 2016

Bridgepoint Capital (Nominees) Limited (7,192) (12,034)

Bridgepoint Advisers Limited 58 —

Employee Benefit Trust (12) —

(7,146) (12,034)

Bridgepoint Capital (Nominees) Limited acquired the right to the exit fee from the previous debt syndicate during the prior year (and holds it as nominee for the Bridgepoint Europe III partnerships, which are the beneficial owners).

Bridgepoint Advisers Limited manages the ultimate controlling party of Group; Bridgepoint Europe III Fund. The Group incurred an annual management charge of £58,000 (2015: £100,000) to Bridgepoint Advisers Limited.

The Employee Benefit Trust is operated as an independent trust, separately from the management structure of the FatFace Group of companies and Bridgepoint. The purchases incurred relate to administration of the trust.

Key management personnel are considered to be the current senior management of the Group. The emoluments of these individuals during the period were as follows:

2016£000

2015£000

Wages and salaries 1,658 3,399

Company contributions to defined contribution pension plans 60 57

Share-based payments (117) 5,365

1,601 8,821

Key management personnel of the Company are considered to be the directors (see note 5).

25. NEW STANDARDS AND INTERPRETATIONSThe following standards and interpretations, issued by the International Accounting Standards Board or the International Financial Reporting Interpretations Committee, have been adopted by the Group with no significant impact on its consolidated financial statements:

• IAS 19 (Amendment) “Defined benefit plans”;

• IFRS 2 Share-based Payments

• IFRS 3 Business Combinations

• IFRS 8 Operating Segments

• IFRS 13 Fair Value Measurement

• IAS 16 Property, Plant & Equipment and IAS 38 Intangible Assets

• IAS 24 Related Party Disclosures

The IASB has issued the following standards, amendments to standards and interpretations that will be effective for the Group as from 28 May 2016 or after. EU endorsed IFRS and interpretations with effective dates after 28 May 2016 relevant to the Group will be implemented in the financial year when the standards become effective. The Group does not expect any significant impact on its consolidated financial statements from these amendments.

• IFRS 11 (Amendment) Joint arrangement

• IAS 16 (Amendment) Property, plant and equipment

• IAS 38 (Amendment) Intangible assets

• IAS 27 Separate financial statements on the equity method

• IFRS 7 Financial Instruments: Disclosures

• IAS 19 Employee Benefits – discount rate in a regional market sharing the same currency

• IAS 1 (Amendment) Presentation of financial statements

• IAS 12 Recognition of deferred tax assets for unrealised losses

• IAS 7 (Amendment) Evaluation of changes in liabilities arising from financing activities

During 2014 the IASB issued IFRS 15 ‘Revenue from contracts with customers’, which will become effective from the 1 January 2018. The Group’s revenue is generated by high volumes of low value transactions, thereby requiring limited judgement on accounting for revenue compared to other industry sectors. The Group considers that the implementation of this new standard will not have any significant impact on the consolidated financial statements.

In January 2016 the IASB issued IFRS 16 ‘Leases’, which will become effective from the 2019 accounting period. It is anticipated that this will require many of the Group’s leases to be accounted for ‘on balance sheet’ and will result in significant changes to the presentation of the Group’s consolidated financial statements.

26. EVENTS AFTER THE REPORTING PERIOD

Following the UK’s decision to leave the EU in June 2016 and the subsequent devaluation of sterling, the Board took the decision to review its medium to long term liquidity requirements. As a result, on 27th January 2017 the Group completed a covenant reset in relation to its external financing agreement changing the future Net Leverage covenants. As part of the agreement, the Group will use its available cash resource to prepay a further £15m of the Term B facility.

27. ULTIMATE PARENT COMPANY AND PARENT COMPANY OF LARGER GROUP

The Company is the ultimate parent company of the FatFace Group of Companies incorporated in England. The ultimate controlling party is the Bridgepoint Europe III Fund managed by Bridgepoint Advisers Limited which holds 77% of votes over shares of FatFace Group Limited, the Company and controls syndicated holdings of a further 12%.

No other financial statements include the results of the Company.


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