Debenhams : Annual Report and Associated Documents

21 November 2016

Debenhams plc: Annual Report and Associated Documents

In compliance with LR 9.6.3, the following documents have been submitted to the National Storage Mechanism at: http://www.morningstar.co.uk/uk/NSM :-

1. Annual Report & Accounts 2016

2. Notice of Annual General Meeting to be held on 12 January 2017

3. Form of Proxy

In compliance with DTR 6.3.5(3) the above documents (excluding the Form of Proxy) are available on the Debenhams plc website, www.debenhamsplc.com. Copies may also be obtained direct from the Company Secretary at the Company's registered office, 10 Brock Street, Regent's Place, London NW1 3FG.

A condensed set of Debenhams plc financial statements and information on important events that have occurred during the year and their impact on the financial statements were included in the Company's preliminary announcement on 27 October 2016. That information, together with the below constitutes the requirements of DTR 6.3.5(2) (b).

Principle Risks and Uncertainties

Risk	Impact	Examples of mitigation	Change*
Economic Environment Continuing adverse economic conditions may have a material adverse effect on Debenhams' results	A decline in sales on discretionary purchases leading to a reduction in profit. Whilst the gap between inflation and wage growth has started to narrow, the consumer environment remains volatile and we remain cautious about the outlook. This is an increasing risk due to the level of economic uncertainty and volatility that followed the UK vote to leave the European Union and this is being monitored carefully.	The board conducts strategic business reviews which ensure that management is focused on key priorities and cost control. These reviews also focus on the four pillars of the Group's strategy to build a leading international, multi-channel brand and the operational effectiveness of the processes and systems which link the pillars of the strategy together. Debenhams' exposure to a weakening sterling has been mitigated by the Group's hedging strategy, which will allow it to manage the effect of this during 2017.	Increased
Currency & Hedging Currency fluctuations and hedging risks could materially adversely affect Debenhams' earnings and cash flow	Hinder ability to adjust rapidly to changing market conditions and impact earnings and cash flow. Affect available cash and liquidity and could have material effect on the business, results of operations and financial condition. This is an increasing risk due to the weakening of sterling, and the potential for further future volatility, following the UK decision to exit the European Union and is being monitored carefully.	Debenhams has a treasury policy in place which covers counterparty limits and hedging for interest rates, foreign exchange and energy. There is also an internal treasury function which is mandated by the board. Debenhams closely monitors all aspects of cash management to optimise balance sheet metrics. Effectiveness is measured regularly by management through a series of KPIs. Debenhams continues to develop its supplier base to mitigate the potential of cost price inflation without compromising the quality of its products. In addition, the sourcing division has been strengthened to include additional expertise which assists with sourcing decisions, production consolidation and lead time reduction, amongst other things. Please refer to the notes to the financial statements for more information on this risk.	Increased
Systems Availability & Cyber Security Failure in the stability, integrity or availability of information systems could adversely affect Debenhams' business operations and results	Risks associated with systems failure, external attack of systems, or data inaccuracy may significantly damage ability to manage information technology systems, such as our website or warehouse management systems, or could cause inappropriate decisions to be made using wrong, missing or ambiguous information. Inability to continue operations smoothly in the event of a major incident may have an adverse effect on inventory and profitability and divert financial and management resources from more beneficial uses. This is an increasing risk given the rising levels of cybercrime globally and the increasing reliance on information assets.	A robust systems infrastructure is required to support the delivery of our strategic objectives which are outlined on pages 9 to 17. As such, information systems developments are key enablers and critical for accelerating the pace of change necessary to compete effectively. To support the efficient and effective delivery of strategic and business critical projects, a business change roadmap has been developed and the governance framework has been enhanced, which includes a data security committee that focuses on areas such as data protection and payment card industry (PCI) compliance. A series of projects are also under way to strengthen business continuity to maintain and protect performance. A business continuity policy, describing roles and responsibilities across the Group, ensures that an effective framework is in place to enable the recovery and continuation of normal business operations as soon as possible in the event of any disruptive incidents. Key business systems are managed and monitored by specialist teams, and a disaster recovery site is in place where associated systems are tested to ensure that the requirements for invocation are fully understood.	Increased
Competition for Customers Debenhams' business could suffer if it is unable to predict accurately or fulfil customer preferences or demand through competitive, economic and profitable channels	Sales will be lower, market share will be reduced and the Company may be forced to rely on additional markdowns or promotional sales to dispose of excess or slow-moving inventory or may experience inventory shortfalls on popular merchandise. Channel shifts away from stores to online could lead to higher operational costs within the online channel and lower profitability, or even impairment, of store assets. The UK exiting the European Union may also have an impact through potential changes to foreign exchange rate volatility, trade agreements, duty rates and access to foreign markets, especially versus EU competitors.	Delivering a compelling customer proposition is at the heart of Debenhams' strategy, which is outlined on pages 9 to 17. In developing product and brand strategy, the Group takes into consideration market, trend and customer research to help it predict likely demand for its products and services. Debenhams continues to invest in its product and brand strategy to ensure that it remains competitive and to give customers a unique, differentiated and exclusive choice of brands, products and categories. An understanding of customers and their needs is developed by listening to their views, market intelligence and reviewing KPIs which ensures that pricing is competitive and promotional activity is appropriate. Debenhams' customer insight team provides valuable intelligence to keep the board alert to changes in customer priorities A number of specific actions are being taken to address the issues of the channel shift. These include: • Building a more competitive and economic multi-channel business to drive sales, increase the recovery of fulfilment costs and reduce the cost per unit of fulfilment. To this end, a range of competitive delivery options has been introduced • Driving a better return on UK store assets through the introduction of additional products, brands and services as well as ensuring that stores are fully configured for multi-channel shopping.	No Change
Business Strategy & Transformation A failure to deliver Debenhams' key strategic priorities may adversely affect its business	Could significantly delay or prevent the achievement of Debenhams' business plan and could have a material adverse effect on Debenhams' business, financial condition or results of operations. This is an increasing risk due to the volume and complexity of change being implemented, its importance to the business plan, and our reliance on third party specialist resource to support delivery, alongside the fact that this risk could be exacerbated still further by the potential loss of access to the freedom of movement of goods, services, people and capital following the UK decision to exit the European Union.	Debenhams has developed a business change roadmap which includes a number of projects that support the delivery of the key strategic priorities. These include investment in systems capability across areas such as buying and merchandising and supply chain to achieve greater alignment across all sales channels and geographies. Management supply detailed updates on progress within the transformational programme, which are closely reviewed by the board to ensure that management is focused on key priorities and cost control.	Increased
Supply Chain and Key Suppliers Any disruption or other adverse event influencing either the sustainability of the supply chain or Debenhams' relationship with any of its major suppliers, service providers, international partners, designers, or concessionaires	Any of the risks associated with doing business in international markets and/or importing merchandise from these regions could place pressure on margins and profitability or require the Group to divert financial and management resources from more beneficial uses. Typical impacts include: costs associated with the transfer of the operations from one provider to another or the potential of extra operational cost from a new provider; changes in exclusivity arrangements with designers or any decline in their popularity; or the loss of a number of important concession partners. The uncertainty around future trade agreements and duty rates following the UK decision to exit the European Union means this is an area of high management focus.	Debenhams fosters close and collaborative relationships with its suppliers. Both parties work towards the objective of optimising sustainable fulfilment and costs, which is measured regularly by management through KPIs. You can read more about how the Group builds relationships with our suppliers on pages 34 and 35. Debenhams continues to develop its supplier base to mitigate the potential of cost price inflation without compromising the quality of its products. In addition, the sourcing division has been strengthened to include additional expertise which assists with sourcing decisions, production consolidation and lead time reduction, amongst other things. In order to minimise the impact of any major supplier, designer or concessionaire relationship or performance issues, Debenhams' objectives are to: maintain close and collaborative relationships in order to ensure that strategies are aligned; to ensure that appropriate, unambiguous contracts are in place; ensure that all major suppliers, designers or concessionaires are financially robust; and to have contingency plans in place in the event of a failure.	No Change
Legal & Regulatory Any events that negatively impact the reputation of, or value associated with, Debenhams' brand could adversely affect its business	Unfavourable publicity concerning Debenhams may lead to a loss of stakeholder trust and confidence and could have a material adverse effect on Debenhams' ability to attract and retain third party brands, suppliers, designers, concessions and franchisees, and could consequently impact Debenhams' business, financial condition or profitability. The UK decision to exit the European Union is likely to result in changes to selected laws which could increase the likelihood of this risk manifesting, and this is being monitored closely.	Forums exist to focus on specific areas of legislation, and specific business policies and procedures are in place to ensure that roles and responsibilities are understood across the Group. For example, the Sustainability Committee focuses on areas such as ethical sourcing, legislative change and corporate responsibility matters; and the data security committee focuses on areas such as data protection and payment card industry (PCI) compliance. All suppliers are expected to adhere to Debenhams' own supplier code of conduct, which is underpinned by Debenhams' robust policy on compliance that includes a focus on social and ethical standards. Debenhams has specialist accounting, taxation, information systems and legal and secretariat teams in place to monitor changes to legislation and standards and this is further supported by membership of key industry bodies that enhance awareness.	No Change
Key Personnel ** Debenhams depends upon key management and other personnel and the departure of such management or personnel could adversely affect its business	Could significantly delay or prevent the achievement of Debenhams' business plan and could have a material adverse effect on Debenhams' business, financial condition or results of operations. The UK decision to exit the European Union could impact on the availability of talent in the job market and the eligibility for individuals to work in certain jurisdictions.	In order to attract and retain talent, both succession and personal development plans are in place throughout the Group. In addition, target-led, performance-related incentive schemes exist.	No Change

*Change in severity and/or likelihood of risk during course of 2015/16. Ranked based on overall risk to the

business

** These risks are not new but are now reported as principal risks following the annual review of their ranking

Directors' Responsibility Statement

The 2016 Annual Report contains the following statements regarding responsibility for the financial statements in compliance with DTR 4.1.12:

The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and gives shareholders the information needed to assess the Group's performance, business model and strategy.

Each of the directors, whose names and functions are detailed on pages 42 to 43 confirms that to the best of his/her knowledge:

· The Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group

· The strategic report contained in this report includes a fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties that it faces.

The Directors of Debenhams plc are listed in the 2016 Annual Report and on the Debenhams plc website, www.debenhamsplc.com.

For further information, please contact:-

Paul Eardley

Company Secretary, Tel: [phone]