Davide Campari
Annual Report 2011

Europe’s leading  
floor coverings retailer

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Harris House
Purfleet Bypass
Purfleet, Essex RM19 1TT

Telephone +44 (0)1708 802000

www.carpetright.co.uk
www.carpetright.plc.uk

Annual report and accounts 2011

 
 
 
 
 
 
Carpetright plc is Europe’s leading 
specialist floor coverings retailer.  
Since the first store was opened  
in 1988 the business has followed  
a controlled store expansion 
programme developing both 
organically and through  
acquisition within the UK  
and other European countries. 
The Group trades from 679 stores 
across Europe and employs 3,266 
staff.  The Group is organised into 
two geographical regions, the UK  
& RoI (comprising the UK and the 
Republic of Ireland) and the Rest of 
Europe (comprising The Netherlands 
and Belgium). 

Overview 

Financial highlights 
Group at a glance 
Chairman’s statement 

1 
2 
4 

Directors’ report: Business review 

Principal activities 
Business objective and strategies 
Operational and financial review 
Group financial review 
Key performance indicators 
Principal risks and uncertainties 
Employees 
Corporate responsibility 

Directors’ report: Governance 

Board of Directors 
Corporate governance 
Audit Committee report 
Directors’ remuneration report 
Other information 
Statement of  
Directors’ responsibilities 

Financial statements 

Financial statements 
Notes to the accounts 
Group five year  
financial summary  
Independent Auditors’ report 
Calendar 
Advisers 

5 
5 
6 
9 
10 
11 
12 
13 

15 
16 
19 
20 
25 

27 

29 
33 

66 
67 
68 
68 

www.carpetright.plc.uk 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1

Overview 
Financial highlights 

Revenue 
Underlying1 profit before tax 
Profit before tax 
Underlying1 earnings per share 
Basic earnings per share 
Dividend per share 

52 weeks ending
30 April 2011 

£486.8m
£16.9m
£6.6m
18.0p
6.8p
8.0p

52 weeks ending 
1 May 2010 

£516.6m 
£28.2m 
£22.3m 
31.6p 
23.5p 
16.0p 

Change 

(5.8%)
(40.1%)
(70.4%)
(43.0%)
(71.1%)
(50.0%)

1.  Where this review makes reference to ‘Underlying’ this relates to profit/earnings before exceptional items. 

Revenue (£m)

Underlying profit before tax (£m)

Profit before tax (£m)

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Underlying earnings per share (p)

Basic earnings per share (p)

Dividend per share (p)

70

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70

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www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2

Group at a glance 
Strong market positions and geographic regions 

3,266 
People 

4 
Countries

679 
Sites 

Store portfolio at 30 April 2011 

Regional performance 

UK & RoI 
Standalone 
Concessions 
Total 

Rest of Europe  
The Netherlands  
Belgium 
Total 

Group total 

Sites 

517 
42 

559 

92 
28 

120 

679 

’000 sq ft 

4,561
98

4,659

1,078
335

1,413

6,072

UK & RoI 

Revenue 

Underlying operating profit 

Trading space sq ft (’000) 

Rest of Europe  

Revenue  

Underlying operating profit 

Trading space sq ft (’000) 

52 weeks ending

30 April 2011 

52 weeks ending

1 May 2010 

£404.5m £425.2m

£14.4m

4,659

£26.2m

4,808

£82.3m

£6.8m

1,413

£89.2m

£9.6m

1,398

RoI

20

Stores

Carpetright plc Annual report and accounts 2011

The 
Netherlands

92

Stores

UK

539

Stores

Belgium

28

Stores

 
 
 
 
 
 
 
 
 
Group at a glance 

Strong market positions and geographic regions 

Store portfolio at 30 April 2011 

3,266 

People 

4 

Countries

679 

Sites 

UK & RoI 

Standalone 

Concessions 

Total 

Rest of Europe  

The Netherlands  

Belgium 

Total 

Group total 

Sites 

517 

42 

559 

92 

28 

120 

679 

’000 sq ft 

4,561

98

4,659

1,078

335

1,413

6,072

Regional performance 

UK & RoI 
Revenue 
Underlying operating profit 
Trading space sq ft (’000) 

Rest of Europe  
Revenue  
Underlying operating profit 
Trading space sq ft (’000) 

52 weeks ending
30 April 2011 

52 weeks ending
1 May 2010 

£404.5m £425.2m
£26.2m
£14.4m
4,808
4,659

£82.3m
£6.8m
1,413

£89.2m
£9.6m
1,398

Revenue contribution: Group %

Profit contribution: Group %

16.9%

32.1%

83.1%

67.9%

Store portfolio: Regional % (sites)

Store portfolio: Regional % (sq ft)

17.7%

23.3%

82.3%

76.7%

UK & RoI 

Rest of Europe 

3

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www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4

Chairman’s statement 

underlying operating profits down 29.2% to £6.8m.  Against this 
background, we have taken a number of management actions to 
adapt the product proposition whilst retaining competitiveness  
in the market.  These have been completed alongside activities  
to address the cost base and to review the shape and size of our  
future store estate.  Further details of these initiatives and of the 
performance of our businesses can be found in the accompanying 
Operational and Financial Review. 

In June 2011, the Group completed a refinancing arrangement of its 
principal facilities, providing approximately £90m of debt capacity 
split between amortising term loans, a revolving credit facility and 
overdrafts in a mixture of Sterling and Euro currencies.  The term 
loans and revolving credit facilities mature in July 2015. 

Looking forward, I see no respite from the challenging environment 
over the next year.  That said, I remain confident the Group is well 
positioned to deliver future profitable sales growth once consumer 
demand improves. 

There have been a number of changes to the composition of the 
Board since the last Annual Report.  Christian Sollesse stepped down 
from the Board in early June 2011.  I would like to thank Christian 
for the contribution he has made to the Group over the past 16 years 
and wish him well for the future.  Geoff Brady and Simon Metcalf 
both retired as Non-Executive Directors during the year after three 
and seven years’ service respectively.  I would like to thank them for 
their valued contributions to the Group.  I was deeply saddened by 
Simon’s untimely death shortly after stepping down from the Board.  
He is greatly missed by his former Board colleagues and everyone 
who knew him at Carpetright. 

I was delighted to welcome Claire Balmforth, Andy Corden,  
Alan Dickinson and Sandra Turner to the Board. 

Claire and Andy are the Operations Directors for the UK and 
Europe respectively.  Claire’s role incorporates her previous 
responsibilities for our customer and people strategies, and she  
also brings substantial retail and management experience from  
other organisations.  Andy has been with the Group for 17 years.   
He moved to Europe as Sales Director in 2003, and has been 
responsible for our European operations since 2008. 

Alan and Sandra joined the Board in October 2010 as Non-
Executive Directors.  Alan spent more than 35 years in banking  
as a former Chief Executive of the Royal Bank of Scotland’s  
UK Corporate Banking business.  Sandra was part of the senior 
management team that made Tesco the outstanding retail success 
story of the last two decades, holding senior commercial and 
operational roles in the UK and Ireland.  Alan and Sandra have  
made an extremely valuable contribution to the Board since  
their appointment. 

Finally, I would like to thank all our employees for their continued 
commitment, contribution and loyalty throughout the year.  The 
role of all our staff, who consistently provide excellent customer 
service, remains critically important.  It is their efforts that really 
make the difference. 

Lord Harris of Peckham 
Chairman and Chief Executive 

In my statement last year I said I expected consumer demand to  
remain subdued in the coming year and this indeed proved to  
be the case.  As a result, the Group faced very challenging trading 
conditions in the year under review, with fragile consumer 
confidence producing a weak floor coverings market, leading  
to a reduction in sales volume and profitability. 

Total revenue for the 52 weeks ended 30 April 2011 decreased by 
5.8% to £486.8m (2010: £516.6m).  Underlying profit before tax 
decreased by 40.1% to £16.9m (2010: £28.2m).  After the impact  
of exceptional items, reported profit before tax decreased to £6.6m 
(2010: £22.3m).  Underlying earnings per share have fallen by 43.0% 
to 18.0p (2010: 31.6p) and basic earnings per share decreased to  
6.8p (2010: 23.5p). 

Whilst the Group has remained cash generative and profitable in 
these most challenging of market conditions, profits for the year 
reduced substantially and short term economic conditions remain 
uncertain.  Against this background, and being mindful of retaining 
financial flexibility to respond to potential opportunities, the Board 
feels it is prudent not to pay a final dividend for this financial year.  
Having previously paid an interim dividend of 8.0p per share the 
total dividend for the period will therefore be 8.0p per share, a 
decrease of 50% on the prior year.  The Board recognises the 
importance of dividends to shareholders and will seek to restore a 
higher level of dividend when a sustained recovery is evident and(cid:2)
reflected in the financial results of the Group.  At the same time, the 
Board expects to rebalance the dividend to a lower interim relative  
to the final, to(cid:2)reflect more accurately the balance of profits earned 
throughout the year.  The Board believe this is in the best interests  
of the business and will continue to review the dividend policy on  
a bi-annual basis(cid:3)(cid:2)

Our businesses in the UK and the Republic of Ireland have been 
operating in very difficult markets, with underlying operating  
profits down 45.0% to £14.4m.  This has been acute in the Republic 
of Ireland, where sales have fallen over 50% in the last four years.   
In the Rest of Europe, our businesses in The Netherlands and 
Belgium have been under similar economic pressures with 

Carpetright plc Annual report and accounts 2011

 
 
 
 
5

Directors’ report: Business review

The Directors present their Annual Report to the shareholders together with the 
audited financial statements for the financial year ended 30 April 2011.  This report, 
together with the Chairman’s Statement, describes the results and activity for the 
period, future plans, trends and factors affecting the development, position and 
performance of the business. 

Principal activities 
Carpetright plc is Europe’s leading specialist floor 
covering retailer, selling a wide range of carpets, 
rugs, vinyls and laminates together with associated 
accessories.  In addition, the product offering was 
extended to selling beds in the UK following the 
acquisition of Sleepright in December 2008. 

The Group trades from 679 stores organised and 
managed in two geographical segments.  These  
are the “UK & RoI” (comprising the UK and the 
Republic of Ireland) and the “Rest of Europe” 
(comprising The Netherlands and Belgium). 

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Business objective and strategies 
The primary financial objective of the Group is to 
deliver long term sustainable growth in earnings 
per share and cash flow.  We aim to achieve this 
through the following strategies: 

Primarily Focusing on Floor Coverings  
To ensure we continually improve and develop our product ranges  
to provide consumers with a market leading product choice which 
offers great value, backed up by excellent customer service. 

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Developing a Competitive Bed Proposition 
To grow the sales of beds and associated products, following  
the same principles of choice, value and service. 

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Managing our Store Portfolio 
To manage our store base to continually exploit opportunities  
which deliver better overall profitability. 

Expanding into European Countries 
To identify and pursue opportunities to grow Group profitability  
by extending the brand strengths across Europe. 

Reaching more Customers through Additional Channels 
To extend the reach of Carpetright’s brand by growing sales  
through the insurance replacement market and developing  
our online business. 

We aim to act responsibly towards all our 
stakeholders, including customers, suppliers, 
employees and the communities in which we 
operate.  Our annual Corporate Responsibility 
Report is available at www.carpetright.plc.uk,  
with a summary of our approach on pages 13  
and 14 of this report.

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6

Operational and financial review 

Financial Highlights 
A summary of the reported financial results for the year ended  
30 April 2011 is set out below:  

Revenue 
Underlying1 operating profit  
Net finance charges 
Underlying1 profit before tax 
Exceptional items 
Profit before tax 
Earnings per share (pence) 
– underlying1 
– basic 
Dividends per share (pence) 
Net debt 

 2011 
£m 
486.8 
21.2 
(4.3) 
16.9 
(10.3) 
6.6 

18.0 
6.8 
8.0 
(65.7) 

2010 
£m 
516.6 
34.1 
(5.9) 
28.2 
(5.9) 
22.3 

Change 
(5.8%)
(37.8%)
27.1%
(40.1%)

(70.4%)

31.6 
23.5 
16.0 
(71.3) 

(43.0%)
(71.1%)
(50.0%)
£5.6m

1.   Where this review makes reference to “Underlying” this relates to profit/earnings 

before exceptional items. 

Overview 
Total sales decreased by 5.8% to £486.8m, with all businesses showing 
a decline.  During the year, the Group opened 27 stores and closed 
51 which gave a net decrease of 24 stores and a total store base of 
679.  Total store space declined by 2.2% to 6.1 million square feet. 

Weak consumer demand in all geographic markets was a significant 
contributor to the decline in underlying operating profit to £21.2m, 
a decrease of 37.8% on the prior year.  Net finance charges were 
£1.6m lower at £4.3m, reflecting a lower average net debt.  These 
factors combined to generate an underlying profit before tax of 
£16.9m, a decrease of 40.1% on the prior year. 

Exceptional charges totalled £10.3m (2010: £5.9m) and were 
principally a combination of non-cash store impairment charges 
and onerous lease provisions. 

As a result, profit before tax decreased by 70.4% to £6.6m.  Basic 
earnings per share decreased by 71.1% to 6.8p reflecting the  
decrease in post tax earnings. 

Performance by Business 
For year to 30 April 2011 

Revenue 
UK & RoI 
Rest of Europe 
Revenue excluding Poland 
Poland3 
Total revenue 

Underlying operating profit1 
UK & RoI 
Rest of Europe 
Underlying profit excluding Poland
Poland3 
Total underlying operating profit 

Underlying operating profit % 
UK & RoI 
Rest of Europe 
Operating profit % excluding Poland 
Poland3 
Total underlying operating profit %

Total
£m 

404.5
82.3
486.8
–
486.8

14.4
6.8
21.2
–
21.2

3.6%
8.3%
4.4%
–
4.4%

Year on Year Movement 

Reported 

Local Currency 

Like-for-like2

(6.0%)
(4.8%)

(4.8%) 
(3.9%) 

(100.0%) 

(44.0%) 
(25.2%) 

(4.9%)
(7.7%)
(5.4%)
(100.0%)
(5.8%)

(45.0%)
(29.2%)
(40.8%)
100.0%
(37.8%)

(2.6ppts)
(2.5ppts)
(2.6ppts)
n/a
(2.2ppts)

1.  Underlying operating profit is operating profit, excluding exceptional items. 

2.  Like-for-like sales growth – calculated as this year’s net sales divided by last year’s net sales for all stores that are at least 12 months old at the beginning of our financial year.  
Stores closed during the year are excluded from both years.  No account is taken of changes to store size or the introduction of third party concessions.  Sales from insurance  
and housebuilders’ contracts are supplied through the stores and included in their figures. 

3.  We exited our retail operations in Poland during the 2009/10 financial year. 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7

UK & Republic of Ireland – Performance Review

The key financial results for the UK & RoI were: 

Revenue 
Like-for-like sales 
Gross profit 
Gross profit % 
Underlying operating profit 
Underlying operating profit % 

2011
£m 
404.5
(6.0%)
250.8
62.0%
14.4
3.6%

2010 
£m 
425.2 
3.1% 
263.7 
62.0% 
26.2 
6.2% 

Change 
(4.9%)

(4.9%)
Flat
(45.0%)
(2.6ppts)

In the UK & RoI, total revenue decreased year on year by 4.9% to £404.5m.  We opened 23 new stores adding 146k sq ft of selling space 
during the year.  Including the impact of 50 closures, this translated into a net space decline of 149k sq ft, a decrease of 3.1% since the start  
of the year. 

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The UK & RoI portfolio is now as follows: 

Standalone  
Concessions  
Total 

1 May 2010 
537
49
586

Store Numbers 

Openings 
17
6
23

Closures 
(37)
(13)
(50)

30 April 2011 

517   
42   
559   

Sq Ft (‘000) 

1 May 2010 
4,689
119
4,808

30 April 2011 
4,561
98
4,659

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In a challenging retail environment characterised by low consumer 
confidence and weak mortgage approval levels, sales were consistently 
below the previous year’s level throughout the year.  The decrease in 
UK sales has been predominantly in carpet, where the proportion of 
cut length business has continued to increase relative to the ‘pay and 
take’ roll stock.  Taking the year as a whole, the vinyl business has 
also declined, although in the final quarter this was at a lower rate, 
assisted by the introduction of new lines and product specific 
advertising, which better communicated the benefits of this type  
of floor covering.  Sales of laminate/wood categories continued  
to decline, although recent developments in the manufacturing 
process are now delivering an improved product.  We believe these 
categories could provide an area of growth in the coming year, 
supported by the strength of our value and service proposition. 

The fragile state of the economy in the Republic of Ireland continued 
to impact our business there.  An operational review was completed 
in the year, which resulted in the closure of 5 of our 25 stores.  In 
addition, we have secured lower operating costs through a series of 
negotiations with key stakeholders, including our staff.  Whilst we 
do not expect an early return to pre-recession trading levels, we 
remain committed to continuing to trade in this market and are 
adapting the offer to maximise the opportunities available. 

We believe much of Carpetright’s success can be attributed to our 
focus on offering the widest range of carpet at the keenest prices.  
This view is supported by externally conducted market research 
which indicated both strong recognition of the Carpetright brand 
and a strong association with being the ‘first choice’ for fitted carpet.  
We believe it is important to continue to enhance this reputation by 
the development and communication of our ‘value added’ services.  
As examples of activity being undertaken, we now ensure our 
recommended independent fitters vacuum rooms after the  
fitting has been completed; offer a service to move furniture  

within customers’ premises; and have arranged for the external 
assessment of 58 independent fitters within the last year to ensure 
they are appropriately qualified to carry out their role. 

The development and integration of the bed business continued 
throughout the year, with beds representing 5.1% of the year’s  
sales (2010: 3.4%).  At the year end, we had 238 bed departments  
in existing stores, opening 107 during the 12 month period.   
In addition to the opening programme, the focus has been on 
improving the product range, promotional offers and reducing 
delivery times. 

Since re-launching our transactional website, www.carpetright.co.uk, 
in the Autumn of 2009, we have continued to develop this channel 
as both a direct route for selling and also, more importantly, a 
method of accessing and converting potential customers.  The site 
offers the consumer the ability to order samples, book a consultation 
appointment and order products online.  The site now generates 
over 60,000 unique visitors each week, up considerably on the 
previous year.  We expect this traffic to continue to grow and  
are examining options to enhance the supporting call centre 
operation and increase online marketing. 

Historically, consumers conducted their pre-purchase research by 
physically visiting stores before making their final decision.  The 
development of the internet has resulted in a significant proportion 
of this research now being completed online.  The upshot of this 
change is that customers appear to be prepared to travel further  
to make a single physical store visit to complete their purchase.   
We believe that this trend is resulting in a fundamental shift in the 
required geographic density of our UK store estate.  While there 
remain some catchments where we are under-represented and in 
which we will continue to look for appropriate opportunities to 
secure a physical presence, it is clear that in other areas we can 

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8

Operational and financial review continued 

reduce store numbers without compromising our ability to serve 
customers effectively.  Taking both these facts into consideration, 
looking forward we expect to see an overall net reduction in the 
number of stores in the UK.  With leases on 94 stores in our estate 
due to expire in the next 5 years, we have ample opportunity  
to reshape the portfolio, reduce the size of store footprints  
and lower our ongoing rent roll. 

We continued to focus on gaining additional sales through the 
insurance replacement business.  This has proved a challenge in  
the current environment as domestic policy excesses have been 
increased and there has been a reduction in insurance renewal 
associated with the current economic conditions.  Feedback on the 
quality of our products and service remains very positive and we 
continue to look to secure more business through contracts with 
new insurance customers.  The volume of business through this 
channel is currently small relative to the Group’s total revenue, 
although we believe it offers an opportunity for profitable sales 
growth when market conditions improve. 

Gross profit decreased by 4.9% to £250.8m, representing a 
maintained gross profit margin of 62.0% (2010: 62.0%).  The 
increased sales participation of beds in the product mix accounted 
for a 0.3 percentage point decline, as this part of the business 
operates on a lower gross margin than floor coverings.  This was 
wholly offset by an improvement in the underlying floor covering 
margin of 0.3 percentage points, achieved through a combination  
of management of promotions, negotiation with suppliers and 
increased productivity in the Purfleet cutting facility. 

The total UK & RoI cost base decreased by 0.5% compared with  
the prior year to £236.4m.  In like-for-like stores, overall costs were 
down by 1.0% on the prior year.  Store payroll costs continue to  
be managed closely to the volume of sales and underlying rent  
in like-for-like stores increased marginally by 0.4% (2010: 2.2%), 
reflecting a weakening of the property market in the current 
economic climate.  Marketing costs reduced by £1.6m to  
£9.9m, as we focused expenditure on those activities which,  
on the basis of past experience, drive consumers to our stores. 

Underlying operating profit decreased by 45.0% to £14.4m. 

The Rest of Europe – Performance Review
The key financial results for the Rest of Europe were:  

Revenue 
Like-for-like sales 
Gross profit 
Gross profit % 
Underlying operating profit 
Underlying operating profit % 

2011
£m 
82.3
(4.8%)
47.2
57.4%
6.8
8.3%

2010
£m 
89.2
(1.0%)
51.6
57.8%
9.6
10.8%

Change 
(Reported) 
(7.7%) 

(8.5%) 
(0.4ppts) 
(29.2%) 
(2.5ppts) 

Change 
(Local currency)
(3.9%)

(4.5%)

(25.2%)

Gross profit margin decreased to 57.4% (2010: 57.8%), impacted by 
the mix effect of selling more laminate at a lower than average margin, 
partially offset by improved rebates and effective management of the 
promotional mix.  Reported operating costs decreased by 3.8%  
to £40.4m.  In local currency terms, costs increased by only 0.4% 
despite inherent inflationary pressures on employment and store 
occupancy costs and the increased costs of an expanding store 
portfolio.  This reflected the tight management control and  
focus on achieving efficiencies within the whole operation. 

The net result was an underlying operating profit of £6.8m,  
a decrease of 29.2%.  In local currency terms, the underlying  
profit decreased by 25.2%. 

In the Rest of Europe, total reported revenue decreased year on  
year by 7.7% to £82.3m impacted in part by an adverse movement in 
exchange rates.  Sales in local currency declined 3.9%.  The markets 
in both The Netherlands and Belgium were impacted by the current 
economic situation with consumers remaining cautious with their 
discretionary expenditure. 

We opened four new stores during the year and closed one store.  
This translated into a net increase of 15k sq ft of selling space,  
to a total of 1,413k sq ft in 120 stores (2010: 117).  Two of the new 
locations were ‘sample only’ stores, building on the successful trial 
opening of a similar store in the prior year.  This new smaller format 
is expected to provide an opportunity for future growth in the store 
estate.  Operationally we have continued to introduce new products, 
and adapted our promotional offer to consumer demand.  Our 
growth in laminate, a product area where we have had a low market 
share historically, has been encouraging.  This has been achieved 
through the introduction of a comprehensive range, with a 
competitive offer supported by our high service standards. 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
Group financial review 

9

Net Finance Costs and Taxation 
Net finance charges were £4.3m (2010: £5.9m) reflecting lower 
average net debt and a reduction in the margin rates on borrowing.  
The effective tax rate on profits is 30.4% (2010: 29.5%).  This 
increase arises from the disproportionate effect of permanently 
disallowable items on the reduced level of profit, which was partially 
offset by the credit arising from the impact of a change in tax rates. 

Exceptional Items 
The Group recorded a net charge of £10.3m (2010: £5.9m) in the year. 

Profit/(loss) on disposal of properties 
UK & RoI:   store impairment charge 
  onerous leases 

Poland:  

store impairment charge 
closure costs 

Over-provision from pre-opening  
cost of centralised warehouse  

(Charge)/Gain 
2011
£m 
0.5
(2.0)
(8.8)
–
–

–
(10.3)

2010
£m 
(0.7)
(1.4)
(1.4)
(1.8)
(1.7)

1.1
(5.9)

We have continued to trade our property portfolio, although market 
conditions continue to make this challenging.  A profit of £0.5m was 
achieved (2010: loss of £0.7m). 

As a result of the difficult retail environment we have reviewed the 
carrying value of the store assets in our balance sheet.  The tests used 
to value these assets include a number of assumptions relating to 
market growth and inflationary expectations.  These tests resulted  
in a net impairment of £2.0m (2010: £1.4m) in relation to 41 stores.  
In addition, there are 26 leased properties which had previously been 
used as retail stores where an onerous lease provision has been made 
on the basis of the difference between the expected cash inflows  
and outflows . 

Earnings per Share 
Basic earnings per share decreased by 71.1% to 6.8 pence, reflecting  
a similar decrease in post tax earnings.  Underlying earnings per 
share decreased to 18.0 pence. 

Dividend 
The Board has decided not to pay a final dividend (2010: 8.0 pence), 
bringing the full year dividend to 8.0 pence (2010: 16.0 pence), a 
50.0% decrease.  Dividend cover, based on basic earnings per share,  
is 0.9 times (2010: 1.5 times). 

Balance Sheet and Cash Flow 
The Group had net assets of £67.0m (2010: £71.2m) at the end of  
the year, a decrease of £4.2m since 1 May 2010.  The cash generative 
nature of the business remains one of the strengths of the Group, 
with free cash flow of £15.0m in the year (2010: £32.0m). 

Cash Flow 

Underlying operating profit 
Depreciation and other non-cash items 
Exceptional items 
Decrease in stock 
(Increase)/Decrease in working capital 
Operating cash flow
Net interest paid 
Corporation tax paid 
Net capital expenditure 
Free cash flow
Dividends paid 
Other  
Movement in net debt
Opening net debt
Closing net debt

2011
£m 
21.2
15.3
–
2.9
(7.3)
32.1
(4.9)
(2.7)
(9.5)
15.0
(10.8)
1.4
5.6
(71.3)
(65.7)

2010
£m 
34.1
18.6
(1.7)
1.5
5.8
58.3
(6.8)
(9.9)
(9.6)
32.0
(8.1)
1.9
25.8
(97.1)
(71.3)

The Group’s operating cash flow was positive at £32.1m (2010: £58.3m).  
The decrease was predominantly attributable to the reduction in 
underlying profitability.  Net capital expenditure was £9.5m  
(2010: £9.6m).  This can be broken down into the following 
principal categories: 

Capital expenditure
Freehold properties
Proceeds from property disposals 

2011
£m 
9.7
0.7
(0.9)
9.5

2010
£m 
10.1
–
(0.5)
9.6

After the repayment of borrowings and payment of dividend, net 
debt decreased by £5.6m to £65.7m at the year end (2010: £71.3m). 

Property 
The Group owns a significant property portfolio, most of  
which is used for trading purposes.  This portfolio is estimated  
by management to have a market value of £134.0m at the year  
end (2010: £139.5m), compared to a net book value of £112.3m 
recorded in the financial statements. 

www.carpetright.plc.uk

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10

Group financial review continued 

Pensions 
The IAS 19 valuation as at 30 April 2011 was a net deficit of £4.0m  
in relation to defined benefit pension arrangements (2010: £4.8m).  
The Carpetright scheme closed to future accrual on 30 April 2010.  
Plan assets increased to £17.4m (2010: £16.3m) driven by higher 
market values and additional Company contributions agreed with 
the pension trustees following the triennial valuation in April 2008.  
The present value of plan liabilities increased to £21.4m (2010: 
£21.1m) driven principally by a reduction in the discount rate to 
5.3% (2010: 5.5%). 

Current liquidity 
At the year end the Group held cash balances of £8.3m (2010: 
£8.3m) in a combination of Sterling, Euros and Polish Zlotys. 

Gross bank borrowings at the balance sheet date were £70.9m (2010: 
£75.5m) of which £61.9m is term based with the balance of £9.0m 
being drawn down from overdraft facilities.  The Group had further 
undrawn, committed facilities of £30.1m at the balance sheet date. 

In June 2011, the Group completed a refinancing arrangement of its 
principal facilities, providing approximately £90m of debt capacity 
split between amortising term loans, a revolving credit facility and 
overdrafts in a mixture of Sterling and Euro currencies.  The term 
loans and revolving credit facilities mature in July 2015.  Arrangement 
fees and legal costs will be amortised over the life of the facility, 
although paid in cash at the outset.  The facilities contain financial 
covenants which are believed to be appropriate in the current 
economic climate and tested on a quarterly basis.  The Group monitors 
actual and prospective compliance with these on a regular basis.   
The unamortised costs associated with the previous facilities, which 
amounted to £0.6m, will be written off in the 2011/12 financial year. 

Outlook 
The last year has seen a decline in profit performance, in challenging 
trading conditions.  Looking forward, over the next two years we 
expect the consumer environment to remain difficult and have 
adapted our plans accordingly.  We believe the Group is in a strong 
position to capitalise on a strong value offer supported by a superior 
service proposition, when consumer demand increases. 

Key performance indicators 
We monitor our performance by reference to a limited number of indicators.  The key ones are: 

Store numbers 

The number of stores trading at the end of the year. 

Store space sq ft (’000) 

Store gross area, including both selling and warehouse space.   
Space occupied by sublet tenants is excluded. 

Like-for-like sales 

Calculated as this year’s net sales divided by last year’s net sales  
for all stores that are at least 12 months old at the beginning of  
our financial year.  Stores closed during the year are excluded  
from both years.  No account is taken of changes to store size  
or the introduction of third party concessions.  Sales from  
insurance and housebuilders’ contracts are supplied through  
the stores and included in their figures. 

UK & RoI
Rest of Europe
UK & RoI
Rest of Europe

2011 
559 
120 
4,659 
1,413 

2010 
586 
117 
4,808 
1,398 

2009 
567
116
4,632
1,400

  UK & RoI 

Rest of Europe

(6.0%)  3.1%  (13.5%)
(4.8%) 
(1.0%)  2.7%

Gross profit % 

Gross profit as a percentage of net sales. 

Underlying operating 
profit (£m) 

Underlying operating 
profit % 
Net debt (£m) 

Operating profit, excluding exceptional items. 

Operating profit, excluding exceptional items, as a percentage  
of net sales. 

The Group’s overall net debt position at year end. 

UK & RoI
Rest of Europe
UK & RoI
Rest of Europe
UK & RoI
Rest of Europe

62.0%  62.0%  62.1%
57.4%  57.8%  57.7%
14.4 
15.6
26.2 
6.8 
8.7
9.6 
3.6% 
4.0%
6.2% 
8.3%  10.8%  10.2%
65.7 
97.1
71.3 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
 
 
Principal risks and uncertainties 

11

The Board has a policy of continuous identification and review of key business risks 
and oversees the development of processes to ensure that these risks are managed 
appropriately.  In the day to day operation of our businesses and the development of  
the Group, in both existing and new markets, we face risks and uncertainties, some  
of which are unique to the sector in which we operate.  The risk factors addressed  
below are those which we believe could adversely affect us, potentially impacting  
the operations, revenue, profit, cash flow or assets of the Group.  Additional risks and 
uncertainties currently unknown to us, or which we currently believe are immaterial, 
may also have an adverse affect on the Group. 

We use our risk management process to identify, monitor, evaluate and escalate  
such issues as they emerge, enabling the Board to take appropriate action wherever 
possible in order to control them. 

Economic and market conditions 
The economy is a major influence on consumer spending with 
trends in housing transactions, consumer confidence, mortgage 
approvals, consumer debt levels and interest rates impacting 
consumer demand for discretionary spending on the home.  
Uncertainty surrounding current economic conditions presents a 
difficult trading outlook across our sector.  We remain committed  
to the measures implemented to date, to ensure the Group is 
appropriately managed in this environment. 

Business strategy development and 
implementation 
If the Board adopts the wrong business strategy or does not 
implement its strategies effectively the business may suffer.  The 
Board needs to understand and properly manage strategic risk in 
order to deliver long term growth for the benefit of all Carpetright’s 
shareholders.  The Board holds an annual strategy review day and 
monitors agreed actions throughout the year. 

Employee risk 
Carpetright’s businesses depend on a high level of input from  
all levels of staff.  The employee risks are split between: 
(cid:2)(cid:2) Management Risk – The Group relies on key personnel including 
the Executive Directors, Senior Managers and Store Managers.  
Procedures are in place to identify and retain key personnel and 
the Board regularly reviews succession planning for senior roles. 

(cid:2)(cid:2) Customer Service Risk – Carpetright’s customers expect and 
receive a high level of customer service.  The Group employs 
3,266 staff, mostly based in stores, and recommends the services 
of over 2,000 independent carpet fitters.  The Group continues to 
ensure that all staff are properly recruited, trained and rewarded 
so that high levels of customer service are maintained. 

Entering new markets 
Expansion into additional European countries provides the 
opportunity for substantial long term growth and economic returns 
for shareholders.  This represents a good opportunity for the Group 
but exposes it to new cultural and regulatory risks.  Failure to identify, 
conduct appropriate due diligence and appropriately integrate 
acquisitions, particularly in new geographical markets, could have  
an adverse impact on the Group.  The Group only enters new 
markets where the Board believes the potential long term  
growth and returns outweigh the risks. 

Cost inflation 
The location of the principal carpet manufacturers in Europe means 
the Group is exposed to fluctuations in the value of the Euro.  The 
Group seeks to mitigate this risk by putting in place appropriate 
arrangements with manufacturers and proactively managing its 
selling prices to maintain margins. 

There are a number of significant cost pressures affecting all 
retailers.  Many of these costs are growing by more than the rate  
of inflation, putting continued pressure on operating margins.   
The strategy of introducing space for beds / concessions, moving  
to smaller stores and driving benefits from our supply chain and  
IT investments helps mitigate some of the risk. 

Supply chain and business continuity 
Carpetright’s revenues and cash flows are dependent on the 
continued operation of its cutting and distribution facilities.  
Business continuity plans have been documented and  
arrangements made to mitigate significant risks arising. 

www.carpetright.plc.uk

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12

Principal risks 
and uncertainties continued 

Employees 

IT systems  
Carpetright is dependent upon the continued availability and 
integrity of its computer systems.  The systems implemented  
within the UK & RoI are mirrored in a separate location as part  
of a systems business continuity plan.  By using the experience  
from the UK & RoI, similar system developments are planned  
for the European operation. 

Management of liquidity risk and financing 
Carpetright is dependent on debt financing facilities being available 
at a commercially viable rate.  We have introduced robust processes 
to ensure we effectively manage working capital and maintain 
ongoing measurement to ensure the Group can meet its financing 
requirements and is compliant with banking covenants. 

The Group’s Treasury policy is intended to ensure that there are 
adequate financial resources for the development and growth of  
the business whilst financing its operations at the lowest cost and 
minimising foreign exchange and interest rate risk.  The objective  
is to achieve this without operational disruption or recourse to 
complex financial instruments. 

The strategy and policies are approved by the Board.  The Group 
does not engage in speculative transactions.  The key financial risks 
relate to meeting debt repayments as they fall due, interest rate risk 
and limited foreign currency exposure. 

The Group’s term based borrowings are a direct result of the 
acquisition of businesses in the UK and Europe and the strategic 
investment in new systems and the warehouse and cutting facility.  
The borrowings are denominated in Sterling and Euros.  The Group 
anticipates that there will be sufficient Euro cash flow to pay both  
the interest on the Euro borrowings and the capital repayment 
amounts due over the life of the underlying loan. 

Any current account deposits generated from the strong operational 
cash flows of the Group are invested in the currency in which they 
are received unless there is a clear need for conversion.  During the 
year the Group invested these deposits in a combination of overnight 
and longer term investment graded accounts arranged via the 
Group’s principal bankers in the countries in which it trades. 

Legislative and regulatory risk 
Whilst Carpetright’s industry is not regulated, Carpetright is always 
mindful of its legal and regulatory obligations.  The Group’s Legal 
Director is responsible for identifying prospective changes to laws 
and regulations and for bringing those changes to the appropriate 
forum so that the emerging risk can be addressed.  Of particular  
note are risks relating to health and safety, competition law and price 
promotion.  In each case the Company has developed clear policies 
and guidelines and, where necessary, a compliance programme  
to mitigate the risks. 

The Group employs 3,266 people and is 
proud of being regarded as a responsible 
and respected employer. 

Equal opportunities 
The Board believes in creating throughout the Company a culture 
that is free from discrimination and harassment, and will not permit 
or tolerate discrimination in any form.  The Group operates a 
whistleblowing hotline through a third party provider enabling 
employees to raise matters of concern with the Company on a 
named or anonymous basis.  The Company gives full and fair 
consideration to applications for employment when these are 
received from disabled people.  Should an employee become 
disabled while working for the Company, efforts are made to 
continue their employment and retraining is provided, if necessary. 

Training and development 
Our training and development programmes are focused on giving 
our staff the skills they need to move up to new roles, enabling them 
to develop their careers and ensuring that there is a pipeline of talent 
within the Group. 

Employee engagement 
There are a number of communication channels in place to help 
people develop their knowledge of, and enhance their involvement 
with, the Group.  These channels include staff surveys, the Group’s 
annual conference, management briefings, weekly briefings from the 
Chairman and Chief Executive broadcast to stores and offices, and 
other less formal communications.  Additionally, all annual results 
and interim management statements are made available to employees 
through the intranet.  Directors and senior management regularly 
visit stores and discuss matters of current interest and concern  
with employees. 

Employee share ownership 
The Directors believe it is in the interests of both the Group and  
the employees for staff to have an opportunity to invest in the 
Company’s shares and operates two all-employee share schemes, 
namely an All Employee Share Ownership Plan and a Savings 
Related Share Option Scheme.  Approximately 580 employees 
participate in these schemes. 

Carpetright plc Annual report and accounts 2011

 
 
 
Corporate responsibility 

13

Our Corporate Responsibility (CR) policy is designed to meet the long-term expectations 
of our customers and other stakeholders and ensure the sustainable development of our 
business.  It is clear that protecting the environment and running our business ethically 
makes good commercial sense and, apart from improving the environment for both our 
staff and our customers, will also help us to enhance shareholder returns.  Neil Page 
reports to the Board on CR matters and co-ordinates the Group’s CR policies and 
activities.  He is supported by a team providing support and advice to develop the 
business’s policies and approach. 

We have continued developing and improving policies to cover  
the following: 

Providing great service 
Our aim is to provide outstanding customer service by selling a 
comprehensive range of flooring products at the keenest prices, 
supported by excellent store staff and, where required, by  
organising a high quality carpet fitting service. 

Our mobile fitter training pods enable us to offer all our 
recommended fitters access to the Flooring Industry Trade 
Association (FITA) assessment and additional training where 
required to meet FITA’s exacting standards.  We are now able  
to recommend 2,694 registered fitters who have attained FITA 
qualifications, 58 of whom have attained the FITA fitting qualification 
in the past 12 months.  Additionally, 54 registered fitters have 
successfully completed the vinyl fitting assessment.  We have also 
introduced subfloor preparation and door trimming assessment  
to the fitter training academy. 

We have introduced an Academy to train our new estimators,  
the first 28 of whom have now successfully passed through it. 

Developing committed people 
As at 30 April 2011 we employed 3,266 people in stores, depots  
and offices throughout the UK & RoI and Europe.  Our aims are to 
ensure everyone has the right skills and knowledge to do their jobs; 
to offer our people a good range of incentives and benefits and to 
value and promote the diversity of our workforce. 

are being introduced to the Rest of Europe.  We also have a timber 
policy to ensure all timber floor covering products are manufactured 
from sustainable resources. 

Creating a safe place to work and shop 
We are committed to achieving high standards of health and safety 
in all operational areas. 

A monthly health and safety bulletin is now issued to all stores,  
and quarterly Health and Safety Committee meetings have been 
introduced into Belgium and The Netherlands.  There has been a 
decrease in the overall level of accidents in the UK & RoI to 172 
(2010: 197), and a 50% reduction in cutting injuries, following  
the introduction of a new safety knife for cutting carpet and vinyl.  
Disappointingly, the number of reportable accidents increased  
in the period to 17 (2010: 15), and there were four accidents in the 
Rest of Europe which would have been reportable had they occurred 
in the UK. 

We remain committed to eliminating all heavy manual handling 
from our stores.  Wherever possible, each of our branches has a 
pedestrian operated boom truck to unload and move carpet and  
vinyl deliveries, and where it has not been possible to provide a  
truck we have arranged a series of nearby ‘buddy’ branches to accept 
deliveries.  We have also been involved in the design and development 
of a new lifting device to lift carpet onto roll stock stands.  Last year 
we anticipated having introduced 200 devices in the year, whereas 
only 120 were delivered during the year.  We are reviewing our 
targets for the coming year. 

We have continued to roll out our store manager training programme, 
with a further 48 managers completing the training this year, 
resulting in 189 managers, including senior retail management, 
having passed the course. 

Staff stability is important to us as a measure of employee loyalty  
and satisfaction and we track retention rates continually. 

Respect for the environment 
We are committed to taking steps to control and minimise any 
damage our operations may cause to the environment through 
manufacturing processes, transport, energy usage and packaging.   
In particular we are aware of the issue of climate change and we 
want to understand and minimise our carbon emissions.  

Sourcing great products 
We are committed to buying great products from suppliers who 
operate responsibly.  Our aims are to ensure suppliers are subject  
to vetting for satisfactory ethics and procedures; to insist our supply 
chain partners sign up to the Carpetright ‘Codes of Conduct’ and  
to ensure we act in a responsible and ethical manner. 

All suppliers to our UK & RoI businesses have signed up to 
compliance with our Ethical and Environmental policies, which  

In addition to the recycling of all cardboard tubes and sheet polythene 
wrapping reported last year, Harris House, our national Central 
Support Office, warehouse and cutting facility does not send any 
waste to landfill, with even general rubbish being compacted and 
incinerated to produce energy. 

We were able to reduce our water consumption in the year by over 
50,000m3, and aim to achieve further reductions in 2011/12. 

www.carpetright.plc.uk

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14

Corporate responsibility continued 

Our key measures within CR are: 

Issue 
Providing Great Service 
Developing Committed People 
Creating a Safe Place to Work  
& Shop 

Respect for the Environment 

1  All figures are for the UK and RoI only. 
.
2  Excludes internet sales. 
.
3  Based on estimated meter readings. 
.
4  Restated from previous year. 
.

Indicator1 
Complaints per £1m of sales2 
% of employees with > 3 year service
No. of accidents 

2011 
12.1
71%
172

  Progress 

2010 
13.1 7.6% fewer complaints 
62%4 9 ppt improvement in staff retention
197 A 12% decrease in the total number 

of accidents 

No. of reportable accidents 

17 

15 A disappointing increase, although 

Energy efficiency – kWh/sq m
of sales space 
Energy efficiency – km/litre 
of delivery fleet 
Recycling in tonnes 

this remains below the long term 
average of 28 p.a. 

239.33 

240.7 0.6% less gas/electricity used 

3.41

3.36 1.2% increase in efficiency  

1,951

2,131 8.4% less polythene sheet and 

cardboard recycled, primarily due  
to lower volumes of sales. 

  More detailed information, notably performance information and future targets, is available in our full CR Report, available to view at www.carpetright.plc.uk. 

Donations 
Charitable donations of £23,500 (2010 : £6,647) were made during the year.  £163,000 was also raised for Great Ormond Street Hospital.   
No political donations were made (2010 : £nil). 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
Directors’ report: Governance  
Board of Directors 

Lord Harris of Peckham (68) 
Chairman and Chief Executive 
Lord Harris is now in his 54th year in carpet retailing and is one of 
the best known names in the business.  He was Chairman and Chief 
Executive of Harris Queensway plc from 1964 until the company 
was taken over in 1988.  Lord Harris is a Non-Executive Director of 
Arsenal Holdings plc and Arsenal Football Club plc.  He was a Non-
Executive Director of Great Universal Stores plc for 18 years until 
July 2004 and was a Non-Executive Director of Matalan Plc for  
two years until January 2007. 

Martin Harris (42) 
Group Commercial Director 
Martin Harris took up his current role as Group Commercial 
Director in 2003 and is responsible for Marketing, Buying and 
Logistics, the latter being added in 2005.  Martin first joined 
Carpetright in 1991, previously having been an Executive Director  
of Harveys Furnishing Group Limited.  He became Marketing 
Director in 1997, resigning to become a Non-Executive Director  
in 1998 before returning to the full Executive Director position  
of Buying Director in 2002. 
Neil Page (48) 
Group Finance Director 
Neil Page joined Carpetright in July 2008 as Group Finance 
Director.  Neil began his career with British Rail and Marks and 
Spencer.  He joined Superdrug in 1991, holding a variety of finance 
and operational positions before taking up the role of Finance and 
IT Director for AS Watson (Health & Beauty) UK Ltd in July 2002.  
He is a Fellow of the Chartered Institute of Management Accountants. 
Claire Balmforth (43) 
Operations Director – UK 
Claire Balmforth joined Carpetright in 2006 as Group HR Director 
and was appointed to the board in May 2011, becoming responsible 
for the UK trading operations in June 2011.  She has worked in many 
retail businesses including Tesco and Boots.  She also has experience 
in the B2B sector with RAC plc and has held a variety of HR and 
general management /operational roles.  She has an MBA from 
Ashridge Business School. 

Andy Corden (47) 
Operations Director – Europe 
Andy Corden joined Carpetright in 1994, and has been responsible 
for the Company’s European operations since 2008 having previously 
been Sales Director since the Company’s expansion into Europe  
in 2002.  He was appointed to the board in June 2011 with 
responsibility for the European operations, which currently include 
The Netherlands, Belgium and the Republic of Ireland.  Andy has  
23 years of retail experience in the home furnishings market and  
has previous experience in both the grocery and DIY sectors. 

15

Baroness Noakes (62) 
Non-Executive Director 
Baroness Noakes, a chartered accountant, joined the Board in 2001.  
She is a Non-Executive Director of Severn Trent plc and a trustee of 
the Thomson-Reuters Founders Share Company.  Previously she 
was with KPMG for 30 years and was the Senior Non-Executive 
Director of the Bank of England and a Non-Executive Director of 
Hanson plc and ICI plc.  Baroness Noakes chairs the Audit and 
Nomination Committees and is the Senior Independent Director. 
Guy Weston (50) 
Non-Executive Director 
Guy Weston joined the Board in 2005.  Guy began his career as a 
management tutor and business analyst before entering the food  
and beverage industry, working for R Twining & Co., Jacksons of 
Piccadilly and The Ryvita Company.  Currently Guy is Chairman  
of Heal’s plc and Wittington Investments Ltd, a Director of the 
Thrombosis Research Institute and a Trustee of the Garfield Weston 
Foundation.  Guy Weston chairs the Remuneration Committee. 

Alan Dickinson (60) 
Non-Executive Director 
Alan Dickinson joined the Board in October 2010.  He spent more than 
35 years in banking and is a former Executive Committee member of 
the RBS Group and Chief Executive of both RBS UK and the bank’s  
UK Corporate Banking business.  He is also a Non-Executive Director 
of the Nationwide Building Society. 

Sandra Turner (58) 
Non-Executive Director 
Sandra Turner joined the Board in October 2010.  She spent 21 years 
at Tesco and was part of its senior management team, holding senior 
commercial and operational roles in the UK and Ireland.  From 2003 
to 2009 she was the Commercial Director of Tesco Ireland.  She is a 
Non-Executive Director of Huhtamäki Oyj and was previously a 
Non-Executive Director of Northern Foods plc.

www.carpetright.plc.uk

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16

Corporate  overnance 
g

The Group recognises the importance of high standards of corporate 
governance, and is committed to operating within an effective 
corporate governance framework through the operation of Board 
committees, internal procedures and Group policies.  This report, 
the Audit Committee Report and the Directors’ Remuneration 
Report, explain how the Company has applied the principles set out 
in the UK Financial Reporting Council’s 2008 Combined Code on 
Corporate Governance (the Combined Code).  The UK Corporate 
Governance Code will apply to the Group in respect of the 2011/12 
financial year. 

The Board  
The Board currently consists of five Executive and four Non-
Executive Directors, brief biographies of whom can be found on 
page 15.  There is a formal, rigorous and transparent procedure for 
the appointment of new Directors to the Board and this is described 
in the section concerning the Nomination Committee on page 17.   
A third of the Board currently comprises women. 

Under the Company’s Articles of Association every Director  
will submit himself or herself for re-election every third year, and  
every Director who has been appointed by the Board since the last 
Annual General Meeting will submit himself or herself for election.  
Additionally, under the Company’s Articles of Association and in 
accordance with the Combined Code, every Non-Executive Director 
who has served as a Director for nine years or more is subject to 
annual re-election as a Director.  All Directors will offer themselves 
for election or re-election at the Annual General Meeting in 
accordance with the UK Corporate Governance Code. 

The imbalance between Executive and Non-Executive Directors 
arose in May 2011 when Claire Balmforth was appointed to  
the Board.  A search is currently underway for an additional 
independent Non-Executive Director.  Except as set out, the  
Board believes that the current structure of the Board is of an 
appropriate size and structure to manage the Group in an  
effective and successful manner. 

The Non-Executive Directors of the Company play a key governance 
role and bring an extra dimension to the Board’s deliberations.  The 
Board has considered the independence of each Non-Executive 
Director against the criteria specified in the Combined Code and 
determined that each remains fully independent.  The Board in 
particular considered the independence of both Baroness Noakes  
and Alan Dickinson, both of whom are considered by the Board  
to be independent in character and judgment.  In reaching this 
determination the Board specifically considered the facts that 
Baroness Noakes has served as a Director of the Company for more 
than nine years from the date of her first election and Alan Dickinson 
was, within the last three years, a senior employee of the Royal Bank 
of Scotland, which is the Company’s principal banker. 

The position of Chairman is combined with the role of Chief Executive.  
The Board does not at present consider it necessary to separate the 
two roles.  The Chairman is one of the leading figures in the industry 

both in the UK and Europe and the Board believe that it is in 
shareholders’ interests that he should be seen to take the leading  
role in the Company’s affairs.  He also has extensive listed company 
experience at board level.  The Chairman was a member of the 
Nomination Committee during the year under review, and he 
attends the Remuneration and Audit Committee meetings by 
invitation.  The Board recognises that with a combined Chairman 
and Chief Executive the role of the Senior Independent Director 
(‘SID’) is of enhanced importance.  In particular, the SID plays a 
significant role in determining the Board agenda and Board appraisal 
process and in ensuring that any issues raised by the Non-Executive 
Directors are fully dealt with.  Baroness Noakes has been the SID 
since June 2004. 

A process of evaluation of the Board and its Audit, Nomination  
and Remuneration Committees has been undertaken.  The exercise 
to evaluate the performance of the Board was led by the SID, and 
those of the Audit and Remuneration Committees was led by the 
chairmen of those committees.  The results of these assessments 
have been considered by the Board and confirmed the strength  
of leadership within the business and a sound governance 
framework.  Only minor changes to the way that the Board  
works were found necessary. 

The Non-Executive Directors generally meet privately with the 
Chairman and Chief Executive at least twice each year.  The Non-
Executive Directors meet, with no Executive Directors present, at 
least once each year inter alia to review the performance of the 
Chairman and Chief Executive. 

The full Board met seven times during the year.  Six meetings are 
scheduled for the current year. 

The Board is responsible for setting the Group’s objectives and 
policies, providing effective leadership and for approving the Group 
strategy, budgets, business plans and major capital expenditure.  It 
has responsibility for the management, direction and performance 
of the Group and is accountable to the Company’s shareholders  
for the proper conduct of its business.  The Board has a formal 
schedule of matters which sets out those matters requiring Board 
approval and specifically reserved to it for decision.  Day-to-day 
management is delegated to the Chairman and Chief Executive  
and the Executive Directors. 

Directors receive monthly trading results, commentary, briefing 
notes and reports for their consideration in advance of each Board 
meeting, including reports on the Group’s operations, to ensure that 
they remain briefed on the latest developments and are able to make 
fully informed decisions. 

All Directors have access to the advice and services of the Company 
Secretary and the Board has established a procedure whereby Directors 
may take independent professional advice at the Company’s expense.  
In addition, such advice may include training in order to enable them 
to discharge their roles and responsibilities as a Director.  All new 
Directors receive an induction tailored to their particular requirements. 

Carpetright plc Annual report and accounts 2011

 
 
 
 
Board committees 
The Board has three Committees, each of which has written terms  
of reference which are available on the Company’s corporate website 
(www.carpetright.plc.uk). 

The Board periodically reviews the membership of its Committees 
to ensure that Committee membership is refreshed.  The Company 
provides the Committees with sufficient resources to undertake their 
duties.  The Company Secretary acts as Secretary to each Committee. 

The role of the Audit Committee, its members and details of how  
it carried out its duties are set out in the Audit Committee report  
on page19. 

The role of the Remuneration Committee, its members and  
details of how it carried out its duties are set out in the Directors’ 
remuneration report on pages 20 to 24. 

The Nomination Committee is chaired by Baroness Noakes and its 
other members are Lord Harris and Guy Weston.  The Committee 
met three times during the year with full attendance. 

The role of the Nomination Committee is to identify and nominate 
candidates for the approval of the Board, to fill vacancies and make 
recommendations to the Board on Board composition and balance.  
External search consultants are generally appointed to assist in the 
search process.  The Committee considers the diversity of the Board, 
and the skills and competencies of the existing Directors when 
drawing up specifications for new appointments and ensures that 
the development needs of Executive Directors and other senior 
managers are addressed appropriately. 

The Committee also considers whether Directors due to retire at an 
Annual General Meeting should be recommended for re-appointment, 
and whether the appointment of Non-Executive Directors reaching 
the end of their three-year term should be renewed.  Committee 
members do not vote on their own reappointment. 

Risk Management and Internal Controls 
The Board has overall responsibility for the Group’s system of 
internal control and for reviewing its effectiveness.  In order to fulfil 
this responsibility and safeguard shareholder investment and the 
Company’s and the Group’s assets, the Directors have established an 
organisational framework with clear operational procedures, lines of 
responsibility and delegated authority which has operated throughout 
the year under review and up to the date of approval of the Annual 
Report and Financial Statements. 

The system of internal control is designed to identify, evaluate and 
manage significant risks associated with the achievement of the 
Group’s objectives.  Because of the limitations inherent in any 
system of internal control, this system is designed to meet the 
Group’s particular needs and the risks to which it is exposed  
rather than eliminate risk altogether.  Consequently it can only  
provide reasonable and not absolute assurance against material 
misstatement or loss. 

17

The Board has reviewed the Group’s systems of internal controls 
including financial, operational and compliance controls as well as 
risk management, and is satisfied that these accord with the guidance 
on internal controls set out in Internal Control: Revised Guidance 
for Directors on the Combined Code, issued by the Financial 
Reporting Council in October 2005. 

The day-to-day responsibility for managing risk and the maintenance 
of the Group’s system of internal control is collectively assumed by 
the Executive Directors.  The Board has established an Executive 
Directors’ Group (‘EDs Group’) comprising the Executive Directors 
and senior managers who review key risk and control issues.   
The EDs Group meets quarterly. 

Several key processes exist within the Group to ensure a sound 
system of internal control which is described below: 

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Identification of business risks 
The Board is responsible for identifying the major business risks 
faced by the Group, and determining a suitable response.  The EDs 
Group identifies and assesses risks to the Group’s medium-term 
strategy.  The EDs Group directs both the UK and European Risk 
Management Committees to address each of the identified risks, 
formulate a mitigation strategy and assess the likely impact of such 
risk occurring, and provides regular reports to the Audit Committee. 

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The UK Risk Management Committee and the European Risk 
Management Committee each comprise a small number of the 
senior management team as regular members, who are able to call 
on the expertise of other managers as required.  Each Committee, 
which meets at least quarterly, regularly reviews the risk management 
and control process within its territory and considers the response  
to the significant risks which have been identified by management 
and others and monitors the maintenance of a control environment 
directed towards the proper management of risk.  Both risk 
management committees report to the EDs Group. 

Additionally there are working groups covering Stock Management 
and Business Continuity and, in Europe, Health and Safety.  Where 
additional risks are identified, ad hoc working groups are created  
to address those risks.  These report to the UK Risk Management 
Committee or the European Risk Management Committee  
as appropriate. 

The principal risks and uncertainties affecting the business are set 
out on pages 11 and 12. 

Health and safety 
Enforcing the health and safety policy is a high priority for 
management and fully descriptive manuals are available to all staff, 
supported by a training programme for stores, distribution centres 
and the central support office.  Risk assessments are undertaken for 
all procedures and safe systems of work devised for all procedures 
involving physical risk.  Failure to adhere to safe systems of work  
or following unsafe working practices will be subject to review and,  
if necessary, disciplinary proceedings.  Health and safety issues are 
included as part of the internal audit review of all premises. 

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share capital 
Details of the Company’s share capital and significant shareholders 
can be found on page 26. 

Statement of Compliance 
During the period ended 30 April 2011 the Company complied with 
the provisions set out in section 1 of the Combined Code except as 
set out below. 

The Company did not comply with provision A.3.2 of the 
Combined Code for the entire period as for the period between 
September 2010 and October 2010 at least half the Board did not 
comprise Non-Executive Directors determined by the Board to be 
independent.  This imbalance was addressed upon the appointment 
of Alan Dickinson and Sandra Turner as Non-Executive Directors. 

The Company did not comply with provision A.2.1 of the 
Combined Code as the roles of Chairman and Chief Executive are 
combined, an explanation for which is set out above.  The Board 
does not at present consider it necessary to separate the two roles. 

18

Corporate governance continued 

Internal audit 
The internal audit function: 

•  undertakes its work, both on central functions and in the field, 

based on a risk assessment model; 

•  provides the Audit Committee and the Board with objective 
assurance on the control environment across the Group; and 

•  monitors adherence to the Group’s key policies and principles. 

Planning 
The Group’s planning process underpins the development of the 
annual budget.  The budget is reviewed and approved formally  
by the Board.  Actual performance is reported on a monthly basis  
and measured against the budget and the prior year and a detailed 
explanation of significant variances is provided. 

Control procedures 
The Group has control procedures designed to provide a complete 
and accurate record of financial transactions, to ensure correct 
accounting and to minimise the possible exposure to fraudulent 
transactions.  The Board believes that the measures taken, including 
physical controls, separation of duties and management reviews, 
provide suitable assurance.  Any issues raised by the Group’s auditors 
or the internal audit function are fully reviewed and considered. 

Management and specialists within the finance team are responsible 
for ensuring the appropriate maintenance of financial records and 
processes that ensure all financial information is relevant, reliable, in 
accordance with the applicable laws and regulations, and appropriate 
information is distributed both internally and externally in a  
timely manner. 

A review of the consolidation and financial statements is completed 
by management to ensure that the financial position and results of 
the Group are appropriately reflected.  The preliminary and interim 
results are subject to the review of the Audit Committee prior to 
approval by the Board. 

Carpetright plc Annual report and accounts 2011

 
 
Audit Committee report 

19

The Audit Committee is appointed by the Board from the Non-
Executive Directors of the Company.  The terms of reference are 
regularly reviewed by the Audit Committee and are then referred to 
the Board for approval.  These are available at www.carpetright.plc.uk. 

•  reviewing the work of the ED’s Group, which oversees the 
identification and management of the risks to the business, 
together with reports on the Group’s systems of internal  
control, and reporting the results of this review to the Board; 

The Audit Committee is chaired by Baroness Noakes, who has 
recent and relevant financial experience, and its other members are 
Guy Weston, Alan Dickinson and Sandra Turner, all of whom are 
independent Non-Executive Directors.  Geoff Brady and Simon 
Metcalf were also independent Non-Executive members of the 
Committee prior to their retirement from the Board.  The Committee 
met four times during the year with full attendance, other than Guy 
Weston who was unable to attend one meeting and Simon Metcalf 
who was unable to attend two meetings. 

At the invitation of the Committee, the Chairman and Chief Executive, 
the Group Finance Director, the Head of Internal Audit and 
representatives from the external auditors regularly attended meetings.  
Other Directors and senior managers also attend if required.  There 
were also regular private meetings with the external and internal 
auditors without management present. 

The Audit Committee has an agenda linked to events in the Group’s 
financial calendar.  During the period ended 30 April 2011, the 
Audit Committee discharged its responsibilities by: 

•  reviewing the Group’s draft annual results announcement  
and financial statements and the interim statement prior to  
Board approval and reviewing the external auditors’ detailed 
reports thereon; 

•  reviewing the consistency of and any changes to the Group’s 

accounting policies, the application of appropriate accounting 
standards and methods used to account for significant or  
unusual transactions; 

•  reviewing the independence, objectivity and effectiveness of the 
external auditors and, on the basis of that review, recommending  
to the Board their reappointment at the AGM; 

•  reviewing the Group’s Corporate Responsibility Report; 

•  approving the audit fees paid to the external auditors and reviewing 
the application of the policy on non-audit work performed by 
them together with the non-audit fees payable to them; 

•  reviewing the external auditors’ plan for the audit of the Group’s 
accounts, and approving the terms of engagement for the audit; 

•  reviewing the process for ensuring that senior management confirm 
that they have supplied the auditors with relevant audit information; 

•  reviewing the internal audit plan, monitoring the delivery of  

that plan during the year and reviewing the effectiveness of the 
internal audit function; 

•  reviewing its terms of reference and effectiveness; and 

•  reviewing the whistleblowing policy and relevant items  

reported under that policy. 

The Audit Committee and Board place great emphasis on  
the independence and objectivity of the Group’s auditors, 
PricewaterhouseCoopers LLP, when performing their role in the 
Group’s reporting to shareholders.  The external auditors report  
to the Audit Committee annually on their independence from  
the Company. 

The Audit Committee reviews the independence, objectivity and 
performance of the auditors annually, including the annual report on 
the auditors produced by the Audit Inspection Unit of the Financial 
Reporting Council.  On the basis of that review, the Audit Committee 
recommends the reappointment of the auditors to the Board. 

PricewaterhouseCoopers LLP have been auditors to the Company 
since 2005 when they were appointed following a competitive tender.  
The Company does not have a policy of tendering the external 
audit at specific intervals.  The auditors’ tenure runs from one 
AGM to the next and there are no contractual obligations that 
restrict the Committee’s choice of external auditors. 

The Board has also adopted a formal policy on the Company’s 
relationship with its auditor in respect of non-audit work.  The 
auditors may only provide such services provided that such advice 
does not conflict with their statutory responsibilities and ethical 
guidance.  The Audit Committee Chairman’s approval is required 
before the Company uses non-audit services that exceed financial 
limits set out by that policy.  Details of the auditors’ remuneration 
for audit work and non-audit fees for the period ended 30 April 2011 
are disclosed in note 3 to the Financial Statements. 

The Statement of Directors’ Responsibilities in relation to the accounts 
is set out on pages 27 to 28.  The Statement by the Auditors on their 
responsibilities in respect of the accounts is contained in their report 
on page 67. 

The Chairman of the Audit Committee will be available at the 
Annual General Meeting. 

www.carpetright.plc.uk

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20

Directors’ remuneration report 

This report is made by the Board on the recommendation of the 

Carpetright plc Annual report and accounts 2011

 
21

Group.  In particular, the Committee takes account of the level of 
salary increases awarded to other employees of the Group when 
deciding on increases for Executive Directors. 

Executive Directors’ basic salaries have been reviewed and, other 
than Claire Balmforth’s salary, which was increased to reflect her 
promotion to the Board and subsequent appointment as Operations 
Director – UK, no increase is to take place in 2011.  The current 
salaries of the Executive Directors are as follows: 

Lord Harris 
Martin Harris 
Neil Page 
Claire Balmforth 
Andy Corden 

Current base salary 
£482,000
£280,000
£280,000
£200,000
€310,592

The combined annual salary increase for all staff and management 
was 1%. 

ii) Annual incentives 
Executive Directors are eligible to receive an annual performance 
bonus.  The bonus is a proportion of salary based on the achievement 
of the annual budgeted profit.  The performance targets for 2010/11 
were set by reference to budgeted levels of underlying profit before 
tax.  As these targets were not achieved, no bonus will be paid in 
2011 (2010: 36.7%).  Where bonuses are paid, they are paid in cash 
and do not form part of the Directors’ pensionable earnings. 

The Committee reviewed levels of bonus opportunity for the 
Executive Directors for the 2011/12 financial year in light of the 
challenging trading environment and concluded that it would  
be appropriate to reduce the percentages of salary payable for 
maximum and on-target performance.  Accordingly, the maximum 
bonus opportunity for Executive Directors for the 2011/12 financial 
year is 100% (2010: 110%) of basic salary, with 20% (2010: 60%) of 
salary payable for on-target performance.  The performance target 
for the 2011/12 financial year has similarly been set by reference  
to budgeted levels of underlying profit before tax.  The Committee 
intends to review levels of bonus opportunity for the 2012/13 
financial year in light of trading conditions at that time. 

iii) Long-term incentives 
Executive Directors and other Senior Executives are eligible to 
participate in the Company’s Long Term Incentive Plan (the ‘LTIP’).  
Awards under the LTIP consist of conditional awards of shares that 
vest three years after grant to the extent that performance conditions 
have been met over a three year performance period.  Awards under 
the LTIP are capped at 300% of salary per annum; however, the 
Committee’s policy is to operate within a normal maximum of 100% 
of salary per annum for awards to Executive Directors.  The LTIP 
was not operated in 2007 or 2008 and, in order to address this 
absence, the 2009 award was made at 200% of salary.  Award levels 
reverted to 100% of salary for 2010, in line with the normal maximum. 

The LTIP awards made in 2009 and 2010 are not currently expected 
to vest. 

The Committee has determined that the 2011 award will again be 
subject to an EPS growth performance condition in the Company’s 
underlying EPS before exceptional items.  The Committee has 
determined that the EPS growth targets and vesting thresholds  
will be the same as those for the 2010 award.  None of the 2011 
awards vest if growth in EPS is less than 17.5% per annum over the 
three financial years measured from the financial year immediately 
preceding the year in which the award is granted.  For growth of 
17.5% per annum, 25% of the award vests and for growth of 35%  
per annum, all of the award vests.  For growth between these two 
points between 25% and 100% vests on a sliding scale. 

The Chairman and Chief Executive voluntarily declined an award 
under the plans for both 2009 and 2010 and has indicated he will  
do so again in 2011.  It is the Company’s current policy that awards 
under the LTIP will be satisfied using shares purchased in the market. 

iv) Pensions  
Martin Harris and Christian Sollesse are deferred members of the 
Carpetright plc Pension Plan, which is a defined benefit scheme  
and closed to future accrual from 30 April 2010.  Lord Harris 
receives a pension under the plan.  Executive Directors, other than 
Andy Corden, are offered an allowance of 20% of their base salary to  
fund their own pension provision.  The individual is able to choose 
whether this allowance is paid to the Company’s defined contribution 
Group Personal Pension Plan (‘GPPP’).  Martin Harris receives his 
allowance as a salary supplement.  Christian Sollesse has split his 
allowance between a contribution to the GPPP scheme and a salary 
supplement.  Neil Page received an allowance of 20% of his base 
salary which was paid in to the GPPP, but for 2011/12 will be splitting 
his allowance between a contribution to the GPPP scheme and  
a salary supplement.  Andy Corden receives payments of 4.5%  
of his Belgian salary into a pension scheme in Belgium. 

v) Benefits 
The Executive Directors are eligible for car benefits, life assurance 
and private medical cover.  Andy Corden also receives a housing 
allowance, holiday pay, a representation allowance and a benefit 
where he receives a thirteenth month of his Belgian salary every year. 

Shareholding guidelines 
The Committee has introduced share ownership guidelines to  
create greater alignment with the interests of shareholders and to  
be consistent with one of the objectives of the incentive framework.  
The Committee has proposed that all Executive Directors should 
build up a shareholding in the Company over a five-year period 
starting from 2010 or their date of appointment to the Board  
(if later) that is equal to their annual basic salary and maintain it 
thereafter.  At the year end the holdings of Lord Harris and Martin 
Harris were above this level.  Neil Page held 9,531 shares which, 
based on the year end share price of 693.5p, represented 24% of his 
salary.  At the year end Andy Corden, who was appointed to the 
Board in June 2011, held 2,486 shares (6% of his salary, based on an 
exchange rate of £1:€1.123) and Claire Balmforth, who was appointed 
to the Board in May 2011, did not hold any shares in the Company. 

www.carpetright.plc.uk

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22

Directors’ remuneration report continued 

Performance graph 
The graph below shows the value, at 30 April 2011 of £100 in Carpetright plc shares on 20 April 2006 compared with that of £100 invested in 
the FTSE 250 Index or the FTSE 350 General Retail Index, which the Directors believe to be the most suitable broad comparators.  The other 
points plotted are the values at intervening financial year-ends. 

Total shareholder return 

)
£
(

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29 April 2006

28 April 2007

3 May 2008

2 May 2009

1 May 2010

30 April 2011

Carpetright

FTSE 250 Index

FTSE 350 General Retailers

Source: Thomson-Reuters

Service contracts  
It is the Company’s policy to employ Executive Directors under contracts with an indefinite term subject to termination by notice given by 
either party, normally of 12 months.  If the Company terminates employment without giving full notice to the Director, the Company has 
the option to either: 

•  pay damages calculated by reference to common law principles, including an obligation on the Director to mitigate loss; or  

•  to make a payment in lieu of notice calculated by reference to basic salary and benefits only.  This payment would be reduced or terminated 

if alternative employment was secured during the notice period and there is a requirement to mitigate loss. 

The Executive Directors’ service contracts became effective on the following dates: 

Lord Harris 
Martin Harris 
Neil Page 
Claire Balmforth 
Andy Corden 
Christian Sollesse1 

Contract date 
20 November 2006 
27 January 2011 
2 March 2009 
3 May 2011 
30 August 2002 
20 November 2006 

Notice period 
12 months
12 months
12 months
12 months
12 months
12 months

1.  Christian Sollesse stepped down from the Board on 2 June 2011.  His unexpired notice at the date of this report is 11 months. 

External appointments  
Executive Directors retain remuneration from outside non-executive directorships.  During the year Lord Harris’s directors’ fees payable  
by Arsenal Holdings plc and Arsenal Football Club plc totalling £25,000 were donated to charity.  Martin Harris received £10,000 as a  
non-executive director of Harris Ventures Limited. 

Non-Executive Directors 
Non-Executive Directors do not have service contracts.  They are appointed for an initial three year period, subject to being re-elected by members. 

The Non-Executive Directors’ letters of appointment became effective on the following dates: 

Baroness Noakes 
Guy Weston 
Alan Dickinson 
Sandra Turner 
Geoff Brady (ceased to be a Director on 31 August 2010) 
Simon Metcalf (ceased to be a Director on 22 October 2010) 

Carpetright plc Annual report and accounts 2011

Date of re-appointment 
1 February 2011 
1 February 2011 

Unexpired term at the 
date of this report 
7 months
7 months
2 years 4 months
2 years 4 months

Appointment date 
1 February 2001
1 February 2005
22 October 2010
22 October 2010
1 March 2007
1 June 2004

 
 
 
 
 
 
 
 
 
 
 
23

The fees of the Non-Executive Directors are determined by the Board.  It is the Board’s policy to set these fees according to recommendations 
made by the Chairman and Chief Executive and the Group Finance Director.  Such recommendations are made with reference to external 
data on fee levels in similar businesses, having taken account of the responsibilities of individual Directors and their expected annual time 
commitment.  The Non-Executive Directors are not eligible for any of the Company’s variable pay arrangements. 

The fees of the Non-Executive Directors were last reviewed in June 2010.  As a result of this review the fees of the Non-Executive Directors 
were unchanged. 

The following section provides details of the remuneration, pension and share plan interests of the Directors for the 52 week period 
ended 30 April 2011 and has been audited. 

i) Directors’ emoluments 
The remuneration of the Directors for the year was as follows: 

Lord Harris 
Martin Harris 
Neil Page 
Christian Sollesse 
Baroness Noakes 
Guy Weston  
Alan Dickinson 
Sandra Turner 
Geoff Brady 
Simon Metcalf  
Total 2011 
Total 2010 

Notes 
1,2 
2,3 
2,4 
2,5 

6 
6 
7 
7 

2 

Salary/Fees 
£000 
482
280
280
280
51
36
19
19
12
20
1,479
1,440

Pension
supplement 
£000 
–
56
–
31
–
–
–
–
–
–
87
18

Contributions to 
Group Personal 
Pension Plan 
£000 
–
–
56
25
–
–
–
–
–
–
81
52

Bonus
£000 
–
–
–
–
–
–
–
–
–
–
–
513

Benefits  
£000 
40 
31 
29 
35 
– 
– 
– 
– 
– 
– 
135 
140 

Total 2011 
£000 
522
367
365
371
51
36
19
19
12
20
1,782

Total 2010 
£000 
721
380
479
419
51
36
–
–
36
41

2,163

1.  Highest paid Director. 
2.  The bonus figures for the prior year have been restated to reflect amounts actually paid. 
3.  Martin Harris received a pension salary supplement, following the closure of the defined benefit Carpetright plc Pension Plan on 30 April 2010. 
4.  The total for 2010 includes a cash bonus of £45,000 paid on the first anniversary of his appointment in lieu of bonus arrangements with his previous employer. 
5.  Christian Sollesse received a pension salary supplement and contributions to the GPPP, following the closure of the defined benefit Carpetright plc Pension Plan on 30 April 2010 
6.  Part year only, since October 2010. 
7.  For 2011, part year only, to date of retirement from the  oard. 
No emoluments were waived during the period. 

B

ii) Long term incentive plan 
The table below shows the conditional awards granted under this plan: 

Director 
Martin Harris 

Neil Page 

Christian Sollesse 

Granted/(lapsed)

Date of Grant   As at 1 May 2010 
59,480
–

18 Sept 2009 
16 Sept 2010 

 in the year  Vested in the year 
–
–

–
37,837

Outstanding at 30 
April 2011 
59,480
37,837

Share price at date 
of award (pence) 
853 
740 

First exercise date 
Sept 2012
Sept 2013

Last exercise date 
Mar 2013
Mar 2014

18 Sept 2009 
16 Sept 2010 

18 Sept 2009 
16 Sept 2010 

60,961
–

65,650
–

–
37,837

–
37,837

–
–

–
–

60,961
37,837

65,650
37,837

853 
740 

853 
740 

Sept 2012
Sept 2013

Sept 2012
Sept 2013

Mar 2013
Mar 2014

Mar 2013
Mar 2014

1.  None of the 2009 awards vest if growth in underlying Earnings per Share (‘EPS’) is less than 25% per annum over the three financial years measured from the financial year 

immediately preceding the year in which the award is granted.  For growth of 25% per annum, 30% of the award vests and for growth of 50% per annum, all of the award vests.   
For growth between these two points between 30% and 100% vests on a sliding scale. 

2.  None of the 2010 awards vest if growth in underlying EPS is less than 17.5% per annum over the three financial years measured from the financial year immediately preceding the 

year in which the award is granted.  For growth of 17.5% per annum, 25% of the award vests and for growth of 35% per annum, all of the award vests.  For growth between these two 
points between 25% and 100% vests on a sliding scale. 

3.  Neither the 2009 conditional award nor the 2010 conditional award is currently expected to vest. 

www.carpetright.plc.uk

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24

Directors’ remuneration report continued 

iii) Sharesave options 
At the end of the year, the Directors’ SAYE share options were as follows: 

Lord Harris 
Martin Harris 
Neil Page 
Christian Sollesse1 

As at  
1 May 2010 
5,491 
5,491 
5,491 
5,491 

Granted 
during year 
–
–
–
–

Lapsed 
during year 
–
–
–
–

As at 
30 April 2011 
5,491
5,491
5,491
5,491

Exercise price  
pence 
295 
295 
295 
295 

First  
exercise date 
Apr 2014 
Apr 2014 
Apr 2014 
Apr 2014 

Last 
exercise date 
Oct 2014
Oct 2014
Oct 2014
Oct 2014

1.  An option of 5,491 shares was also granted to Mrs Caroline Sollesse, an employee of the Company. 

2.  The market price of Carpetright shares was 693.5 pence on 30 April 2011 (1 May 2010: 868 pence).  During the period ended 30 April 2011, the shares of Carpetright plc traded 

between a low of 631 pence and a high of 842.5 pence. 

iv) All Employee Share Ownership Plan (AESOP) 
Carpetright operates an AESOP under which staff may contribute up to £125 per month from pre-tax salary to purchase Carpetright shares.  
All of the Executive Directors, other than Claire Balmforth and Andy Corden, participate in the AESOP, contributing £125 per month.  Claire 
Balmforth will be joining the AESOP with effect from July 2011.  Andy Corden is not eligible to join the AESOP as he is resident in Belgium. 

v) Directors’ Pensions Benefits  
Only the Executive Directors’ basic salaries are pensionable.  On 30 April 2010 the defined benefit Carpetright plc Pension Plan closed to  
future accrual.  Martin Harris and Christian Sollesse are deferred members of the plan. 

Details of pensions earned by the Executive Directors who are members of the Plan are shown below: 

Accrued Pension 

Transfer Value 

Pension  
accrued at  
30 April 2011 

Increase in  
accrued pension  
during the year  

Increase in pension 
during the year net of 
inflation1

Cost to the Plan of the 
increase in pension in 
excess of contributions 

As at 
30 April 2011 

As at  
1 May 2010  

Change in transfer value 
net of Directors’ 
contributions 2

£000 pa 
28 
17 
35 

£000 pa 
– 
– 
1 

£000 
–
–
–

£000 
–
–
–

£000 
516
215
636

£000 
524 
203 
594 

£000 
(8)
12
42

Lord Harris3 
Martin Harris 
Christian Sollesse 

1.  The cost to the Plan of the increase represents the incremental value to the Director of his service during the period, calculated on service to 30 April 2010.  It is based on the increase 

in accrued pension net of inflation after deducting the Director’s contribution. 

2.  The total change in value includes the effects of fluctuations in the transfer value due to factors beyond the control of the Company and the Directors, such as stock market 

movements.  It is calculated after deducting Directors’ contributions. 

3.  Lord Harris has been in receipt of pension since September 2007. 

4.  During the period a former executive director, John Kitching, received an augmentation to his pension benefits of £386 pa. 

Shareholder Approval 
A resolution to approve the Remuneration Report is being proposed at the Annual General Meeting.  The Chairman of the Remuneration 
Committee will be available at the Annual General Meeting. 

By order of the Board: 

Guy Weston 
Chairman of the Remuneration Committee 
5ee 
8r‡
27 J(cid:2)

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
9
 
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Other information 

25

Directors’ interests 
The beneficial interests of those persons who were Directors as at 30 April 2011 and their immediate families in the ordinary shares of the 
Company are set out below. 

Lord Harris 
Martin Harris 
Neil Page 
Christian Sollesse 
Baroness Noakes 
Guy Weston 
Alan Dickinson 
Sandra Turner 

30 April 2011 
12,568,122
3,939,683
9,531
42,886
32,225
12,000
–
–

1 May 2010 
12,567,874
3,964,447
9.318
42,396
32,225
12,000
–
–

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In addition, Lord Harris has a non-beneficial interest in 196,414 shares (2010: 229,514).  139,000 of these shares are included within Martin 
Harris’s beneficial interests.  The Executive Directors have an indirect interest in 27,869 shares held in trust to satisfy awards made under the 
LTIP.  Save as disclosed in this section, none of the Directors has any non-beneficial interests in the shares of the Company. 

Between 30 April 2011 and the date of this report 36 shares have been purchased for each of Lord Harris, Neil Page and Christian Sollesse, and 
35 shares have been purchased for Martin Harris under the Company’s AESOP.  In addition, 35 shares were purchased for Mrs Sollesse under 
the AESOP and these form part of Christian Sollesse’s beneficial holding.  There have been no other changes to the above shareholdings. 

Save as disclosed herein, no Director had a material interest in any contract or arrangement with the Company during the year, other than 
through their respective service contracts. 

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Details of transactions during the period with companies of which Lord Harris and/or Martin Harris is a Director and/or in which Lord Harris 
holds a material interest are noted below.  All of these transactions are on normal commercial terms. 

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Clacton Property Investments Ltd 
Edinburgh Retail LLP 
Glenrothes Retail LLP 
Greenock Retail Ltd 
Harris Ventures Ltd 
Hull Unit Trust 
Islandview Properties Ltd 
Neath Retail LLP 
Wick Retail Ltd 

 Lease and concession  
agreement payments made  

Lease and concession  
agreement payments received 

Supplies of goods/services  
payments made 

2011
£000 
17
269
28
225
62
357
–
2
30

2010
£000 
233
441
187
225
199
354
248
150
54

2011
£000 
–
–
–
–
–
–
–
–
–

2010 
£000 
– 
– 
– 
– 
375 
– 
– 
– 
– 

2011
£000 
–
–
–
–
33
–
–
–
–

2010
£000 
–
–
–
–
59
–
–
–
–

As at 30 April 2011 the Group owed related parties £11k (2010: £nil). 

Directors’ indemnity arrangements 
The Company has provided qualifying third-party indemnities for the benefit of each Director and former Director who held office during the 
2010/11 financial year.  The Company has also purchased and maintained Directors’ and Officers’ liability insurance throughout the 2010/11 
financial year. 

Creditors’ payment policy 
While the Group does not follow any formal code or standard on payment practice, it agrees terms and conditions for its business transactions 
when orders for goods and services are placed, and includes the relevant terms in contracts where appropriate.  These arrangements are adhered to 
when making payments subject to the terms and conditions being met by suppliers.  The number of trade creditor days outstanding at the 
period end for the Company was 52 days (2010: 57 days). 

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26

Other information continued 

Significant agreements – change of control 
There are a number of agreements that take effect, alter or terminate upon a change of control of the Company following a takeover bid,  
such as bank loan agreements and employee share plans.  None of these are deemed to be significant in terms of their potential impact on  
the business of the Group as a whole except for: 

•  a term loan and revolving facilities agreement dated 19 March 2008, as amended and restated most recently on 27 June 2011, for term  

loans of €14m and £22m and a revolving credit facility of £45m, which provides that on a change of control all lenders’ commitments are 
cancelled and all outstanding loans, together with accrued interest, will become immediately due and payable; 

•  a €5m term loan agreement dated 4 July 2005, subject to an addendum roll over agreement dated 6 June 2008, which provides that  

if there is a substantial change in ownership the bank is entitled to accelerate repayment of the loan; and 

•  under the Company’s all-employee and discretionary share schemes, a change of control of the Company would normally be a vesting 

event, facilitating the exercise or transfer of awards, subject to any relevant performance conditions being satisfied. 

The Company does not have agreements with any Director or officer that would provide compensation for loss of office or employment resulting 
from a takeover, except that provisions in the Company’s share plans may cause options and awards granted under such plans to vest on a takeover. 

There is no information that the Company would be required to disclose about persons with whom it has contractual or other arrangements 
which are essential to the business of the Company. 

Share capital 
Details of the Company’s issued share capital can be found in note 24 to the consolidated financial statements.  All of the Company’s issued 
ordinary shares are fully paid up and rank equally in all respects. 

The rights and obligations attaching to the Company’s ordinary shares, in addition to those conferred on their holders by law, are contained in 
the Company’s Articles of Association, copies of which can be obtained from Companies House in the UK or by writing to the Company Secretary.  
The holders of ordinary shares are entitled to receive the Company’s report and accounts, to attend and speak at general meetings of the Company, 
to appoint proxies and to exercise voting rights. 

There are no restrictions on the transfer of ordinary shares or on the exercise of voting rights attached to them, except (i) where the Company 
has exercised its right to suspend their voting rights or to prohibit their transfer following the omission of their holder or any person interested 
in them to provide the Company with information requested by it in accordance with Part 22 of the Companies Act 2006 or (ii) where their 
holder is precluded from exercising voting rights by the FSA’s Listing Rules or the City Code on Takeovers and Mergers. 

The Company is not aware of any agreements between shareholders that might result in the restriction of transfer or voting rights in relation 
to the shares held by such shareholders. 

Shares acquired through Carpetright’s employee share schemes rank equally with all other ordinary shares in issue and have no special rights.  
The Trustee of the Company’s Employee Benefit Trust (‘EBT’) has waived its rights to dividends on shares held by the EBT and does not 
exercise its right to vote in respect of such shares.  Shares held in trust on behalf of participants in the All Employee Share Ownership Plan are 
voted by the Trustee as directed by the participants.  Details of share-based payments, including information regarding the shares held by the 
EBT, can be found in notes 24 and 25 to the financial statements on pages 60 and 61. 

Substantial shareholdings 
As at 27 June 2011, the Company has been notified of the following substantial shareholdings, other than those of the Directors, in the issued 
share capital of the Company: 

Franklin Templeton Institutional, LLC 
The Olayan Group 
Harris Associates Inc 
Cascade Investments LLP 
Artisan Partners LP  
A H Palmer and E A O’Keeffe as joint trustees1 

1.  Of these shares, 793,000 are held on behalf of Martin Harris and so are also included in his reported holding on page 25. 

Total number  
of shares held 
10,753,942 
10,099,000 
6,734,429  
4,040,857 
3,480,472 
2,623,000 

Percentage 
of shares held 
16.0%
15.0%
10.0%
6.0%
5.2%
3.9%

Carpetright plc Annual report and accounts 2011

 
 
28

Other information continued 

Responsibility Statement 
We confirm that to the best of our knowledge: 

•  the 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 or loss of the Company and the undertakings included in the consolidation taken as a whole; and 

•  the business review, which is incorporated into the Directors’ report, includes a fair review of the development and performance of the 

business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description 
of the principal risks and uncertainties that they face. 

This Director’s Report, including the Statement of Directors’ responsibilities, has been approved by the Board. 

By order of the Board  

Lord Harris  
Chairman and Chief Executive 
27 June 2011 

Carpetright plc Annual report and accounts 2011

 
 
Financial statements  
Consolidated income statement 

for 52 weeks ended 30 April 2011 

 Revenue 
 Cost of sales 
 Gross profit 
 Other operating income 
 Administration expenses 
 Operating profit  
 Underlying operating profit 
 Exceptional items 
 Finance costs 
 Finance income 
 Profit before tax 
 Tax 
 Profit for the financial period attributable to equity shareholders of the Company

 Basic earnings per share (pence)
 Diluted earnings per share (pence) 

All material items in the income statement arise from continuing operations. 

Notes 
2 

2 

2,3 
2 
2,5 
6 
6 

7 

9 
9 

29

Group 
52 weeks to 
30 April 2011
£m 
486.8 
(188.8)
298.0 
3.9 
(291.0)
10.9 
21.2 
(10.3)
(5.4)
1.1
6.6 
(2.0)
4.6 

Group
 52 weeks to 
1 May 2010
£m 
516.6 
(200.6)
316.0 
2.4 
(290.2)
28.2 
34.1 
(5.9)
(6.8)
0.9 
22.3 
(6.5)
15.8 

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6.8 
6.9 

23.5
23.5

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Consolidated statement of comprehensive income  

for 52 weeks ended 30 April 2011 

Profit for the financial period

Actuarial gain/(loss) on defined benefit pension scheme
Exchange gain/(loss) in respect of hedged equity investments
Tax on components of other comprehensive income

Other comprehensive income for the period 

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Group 
52 weeks to 
30 April 2011
£m 
4.6 
0.4 
2.4 
(0.4)
2.4 

Group
 52 weeks to 
1 May 2010
£m 
15.8 
(3.0)
(1.7)
0.6 
(4.1)

Notes 

22 

7 

Total comprehensive income for the period attributable to equity shareholders of the Company

7.0

11.7

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
30  

Consolidated statement of changes in equity  

for 52 weeks ended 30 April 2011 

Group 

At 2 May 2009 
Total comprehensive income for the financial period 
Purchase of own shares by Employee Benefit Trust 
Transfer of Treasury shares to participants
Share based payments and related tax 
Dividends paid to Group shareholders 
At 1 May 2010 
Total comprehensive income for the financial period 
Purchase of own shares by Employee Benefit Trust 
Share based payments and related tax 
Dividends paid to Group shareholders 
At 30 April 2011 

Company 

At 2 May 2009 
Profit for the financial period 

Actuarial loss on defined benefit pension scheme 
Exchange gain in respect of hedged equity investments 
Tax on components of other comprehensive income 

Other comprehensive income for the period 
Total comprehensive income for the financial period 
Purchase of own shares by Employee Benefit Trust 
Transfer of Treasury shares to participants
Share based payments and related tax 
Dividends paid to Group shareholders 
At 1 May 2010 
Profit/(loss) for the financial period 

Actuarial gain on defined benefit pension scheme 
Exchange gain in respect of hedged equity investments 
Tax on components of other comprehensive income 

Other comprehensive income for the period 
Total comprehensive income for the financial period 
Purchase of own shares by Employee BenefitTrust 
Share based payments and related tax 
Dividends paid to Group shareholders 
At 30 April 2011 

Share capital
£m 
0.7 
–
–
–
–
–
0.7 
–
–
–
–
0.7 

Share capital
£m 
0.7 
–
–
–
–
–
–
–
–
–
–
0.7 
–
–
–
–
–
–
–
–
–
0.7 

Share 
premium
£m 
15.4 
–
–
–
–
–
15.4 
–
–
–
–
15.4 

Share 
premium
£m 
15.4 
–
–
–
–
–
–
–
–
–
–
15.4 
–
–
–
–
–
–
–
–
–
15.4 

Treasury 
shares
£m 
(0.1)
–
(0.2)
0.1 
–
–
(0.2)
–
(0.1)
–
–
(0.3)

Capital 
redemption 
reserve 
 £m 
0.1 
–
–
–
–
–
0.1 
–
–
–
–
0.1 

Translation 
reserve  
£m 
11.9  
(1.7) 
–  
–  
–  
–  
10.2  
2.4  
–  
–  
–  
12.6  

Treasury 
shares
£m 
(0.1)
–
–
–
–
–
–
(0.2)
0.1 
–
–
(0.2)
–
–
–
–
–
–
(0.1)
–
–
(0.3)

Capital 
redemption 
reserve 
 £m 
0.1 
–
–
–
–
–
–
–
–
–
–
0.1 
–
–
–
–
–
–
–
–
–
0.1 

Translation 
reserve  
£m 
(2.6) 
–  
–  
0.3  
–  
0.3  
0.3  
–  
–  
–  
–  
(2.3) 
–  
–  
0.3  
–  
0.3  
0.3  
–  
–  
–  
(2.0) 

Hedging 
reserve 
 £m 
(2.3) 
1.1  
–  
–  
–  
–  
(1.2) 
1.1  
–  
–  
–  
(0.1) 

Hedging 
reserve 
 £m 
(2.3) 
1.1  
–  
–  
–  
–  
1.1  
–  
–  
–  
–  
(1.2) 
1.1  
–  
–  
–  
–  
1.1  
–  
–  
–  
(0.1) 

Retained 
earnings 
 £m 
41.5  
12.3  
–  
(0.1)
0.6  
(8.1)
46.2  
3.5  
–  
(0.3)
(10.8)
38.6  

Retained 
earnings 
 £m 
38.4  
0.8  
(3.0)
–  
0.6  
(2.4)
(1.6)
–  
(0.1)
0.6  
(8.1)
29.2  
(2.3)
0.4  
–  
(0.4)
– 
(2.3)
–  
(0.3)
(10.8)
15.8  

Total 
£m 
67.2 
11.7 
(0.2)
–
0.6 
(8.1)
71.2 
7.0 
(0.1)
(0.3)
(10.8)
67.0

Total 
£m 
49.6 
1.9 
(3.0)
0.3 
0.6 
(2.1)
(0.2)
(0.2)
–
0.6 
(8.1)
41.7 
(1.2)
0.4 
0.3
(0.4)
0.3
(0.9)
(0.1)
(0.3)
(10.8)
29.6

The notes on pages 33 to 65 form an integral part of the financial statements. 

Carpetright plc Annual report and accounts 2011

 
 
 
31

Consolidated balance sheets 

as at 30 April 2011 

Group  
2011  
£m 

Group  
2010  
£m 

Company 
2011 
£m 

Notes 

Assets 
Non-current assets 
Intangible assets 
Property, plant and equipment
Investment property 
Investment in subsidiary undertakings 
Deferred tax assets 
Trade and other receivables 
Total non-current assets 

Current assets  
Inventories 
Trade and other receivables 
Cash and cash equivalents 
Total current assets 

Total assets  

Liabilities 
Current liabilities 
Trade and other payables 
Obligations under finance leases
Borrowings and overdrafts 
Current tax liabilities 
Total current liabilities 

Non-current liabilities 
Trade and other payables 
Obligations under finance leases
Borrowings 
Derivative financial instruments
Provisions for liabilities and charges 
Deferred tax liabilities 
Retirement benefit obligations 
Total non-current liabilities 
Total liabilities 
Net assets 

Equity 
Share capital 
Share premium  
Treasury shares 
Other reserves 
Total equity attributable to equity shareholders of the Company

The notes on pages 33 to 65 form an integral part of the financial statements. 

10
11
12
13
21
15

14
15
16

17
18
19

17
18
19
23
20
21
22

24
24
24

Company 
2010 
(restated)
£m 

37.1 
97.8 
7.7 
15.4 
–
51.2 
209.2 

32.4 
31.1 
3.6 
67.1 

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65.8  
147.4  
26.1  
– 
2.9  
1.1  
243.3  

38.7  
32.8  
8.3  
79.8  

67.2  
149.5  
26.1  
–  
2.9  
1.4  
247.1  

41.3  
38.1  
8.3  
87.7  

35.1 
96.3 
7.7 
16.8 
–
46.9 
202.8 

30.5 
26.9 
4.7 
62.1 

323.1  

334.8  

264.9 

276.3 

(105.3) 
(0.1) 
(21.3) 
(2.1) 
(128.8) 

(35.4) 
(2.9) 
(49.6) 
(0.1) 
(9.1) 
(26.2) 
(4.0) 
(127.3) 
(256.1) 
67.0  

0.7  
15.4  
(0.3) 
51.2  
67.0  

(114.2) 
(0.1) 
(22.2) 
(5.6) 
(142.1) 

(34.2) 
(2.9) 
(53.3) 
(1.1) 
(1.8) 
(23.4) 
(4.8) 
(121.5) 
(263.6) 
71.2  

0.7  
15.4  
(0.2) 
55.3  
71.2  

(89.0)
(0.1)
(16.8)
(1.2)
(107.1)

(51.4)
(1.9)
(45.1)
(0.1)
(9.1)
(16.6)
(4.0)
(128.2)
(235.3)
29.6 

0.7 
15.4 
(0.3)
13.8 
29.6 

(95.8)
(0.1)
(17.9)
(4.7)
(118.5)

(43.9)
(1.9)
(49.0)
(1.1)
(1.8)
(13.6)
(4.8)
(116.1)
(234.6)
41.7 

0.7 
15.4 
(0.2)
25.8 
41.7 

These financial statements from pages 29 to 65 were approved by the Board of Directors on 27 June 2011 and were signed on its behalf by: 

Lord Harris of Peckham 
Directors 

Neil Page 

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32  

Consolidated statements of cash flow  

for 52 weeks ended 30 April 2011 

Cash flows from operating activities 
Profit before tax 
Adjusted for: 
Depreciation and amortisation 
(Profit)/loss on property disposals 
Exceptional non-cash items 
Other non-cash items 
Net finance costs 
Operating cash flows before movements in working capital 
(Increase)/decrease in inventories 
(Increase)/decrease in trade and other receivables 
Increase/(decrease) in trade and other payables 
Cash generated by operations 
Interest paid 
Corporation taxes paid 
Net cash generated from operating activities 

Cash flows from investing activities 
Purchases of intangible assets 
Purchases of property, plant and equipment and investment property
Proceeds on disposal of property, plant and equipment and investment property
Interest received 
Net cash used in investing activities 

Cash flows from financing activities 
Purchase of Treasury shares by Employee Benefit Trust 
Repayment of borrowings  
New loans advanced 
Intercompany loans 
Repayment of obligations under finance leases 
Dividends paid to Group shareholders 
Net cash used in financing activities 

Net increase/(decrease) in cash and cash equivalents in the period
Cash and cash equivalents at the beginning of the period 
Exchange differences 
Cash and cash equivalents at the end of the period 

The notes on pages 33 to 65 form an integral part of the financial statements. 

Group
52 weeks to 
30 April 2011 
£m 

Group 
52 weeks to  
1 May 2010  
£m 

Company 
52 weeks to  
30 April 2011 
£m 

Company
52 weeks to
 1 May 2010 
£m 

Notes 

6.6 

22.3  

(0.8) 

6.0 

2,3

6

24
29
29

8

29

16,29

15.5 
(0.5)
10.8
(0.2)
4.3 
36.5 
2.9 
5.9 
(13.2)
32.1 
(5.0)
(2.7)
24.4 

(0.5)
(9.9)
0.9 
0.1 
(9.4)

(0.1)
(13.2)
12.5
–
–
(10.8)
(11.6)

3.4 
(5.0)
0.9 
(0.7)

19.1  
0.7  
3.5  
(0.5) 
5.9  
51.0  
1.5  
(3.8) 
9.6  
58.3  
(7.0) 
(9.9) 
41.4  

(1.1) 
(9.0) 
0.5  
0.2  
(9.4) 

(0.2) 
(43.6) 
2.7  
–  
(0.9) 
(8.1) 
(50.1) 

(18.1) 
13.0  
0.1  
(5.0) 

12.1  
(0.5) 
10.7  
(0.3) 
4.3  
25.5  
2.0  
9.4  
(11.4) 
25.5  
(4.6) 
(0.8) 
20.1  

(0.5) 
(8.4) 
0.9  
0.2  
(7.8) 

(0.1) 
(13.2) 
12.5  
5.3  
–  
(10.8) 
(6.3) 

6.0  
(5.4) 
(0.4) 
0.2  

15.3 
0.7 
12.7 
(0.5)
5.6 
39.8 
(0.8)
(4.8)
11.9 
46.1 
(6.5)
(7.5)
32.1 

(1.1)
(7.4)
0.5 
–
(8.0)

(0.2)
(35.5)
–
5.1 
(0.9)
(8.1)
(39.6)

(15.5)
10.5 
(0.4)
(5.4)

For the purposes of the cash flow statement, cash and cash equivalents are reported net of overdrafts repayable on demand.  Overdrafts are 
excluded from the definition of cash and cash equivalents disclosed in the balance sheet. 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the accounts 

33

1 Principal accounting policies 
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have 
been consistently applied to all the years presented unless otherwise stated. 

Basis of preparation 
The financial statements of the Group are made up to the Saturday nearest to 30 April.  The financial year for 2011 represents the 52 weeks 
ended 30 April 2011.  The comparative financial year for 2010 was 52 weeks ended 1 May 2010. 

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and International 
Financial Reporting Interpretations Committee (IFRIC) interpretations endorsed by the European Union, together with those parts of the 
Companies Act 2006 applicable to companies reporting under IFRSs. 

The consolidated financial statements have been prepared on the historical cost basis except for derivative financial instruments, pension 
assets and liabilities and share based payments which are measured at fair value. 

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Basis of consolidation 
The consolidated financial statements include the Company and its subsidiary undertakings.  The acquisition of subsidiaries is accounted for 
using the purchase method.  The results of subsidiaries acquired or disposed of in the period are included in the consolidated income 
statement from the effective date of acquisition or up to the effective date of disposal respectively. 

Inter-company transactions, balances and unrealised gains or losses on transactions between Group companies are eliminated.  Accounting 
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. 

Changes to accounting standards 
The following new standards and amendments to standards, which are mandatory for the first time in the financial year beginning 2 May 2010, 
are relevant for the Group but have not had any impact in the current financial year: 

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IFRS 3 (revised) 
IAS 27 (revised) 
IAS 38 (amendment) 
IFRS 5 (amendment) 
IAS 36 (amendment) 
IFRS 2 (amendments) 
IAS 32 (amendment) 

Business combinations
Consolidated and separate financial statements 
Intangible assets
Non-current assets held for sale and discontinued operations 
Impairment of assets
Group cash-settled share based payment transactions 
Classification of rights issues

The following IFRIC interpretations, which are mandatory for the first time in the financial year beginning 2 May 2010, are either not 
currently relevant or material for the Group: 

IFRIC 16, ‘Hedges of net investment in a foreign operation’ 
IFRIC 17, ‘Distribution of non-cash assets to owners’ 
IFRIC 18, ‘Transfer of assets from customers’ 

Where applicable comparative amounts have been restated to conform with current presentation. 

Prior year adjustment 
In 2009/10 the Company accounted for the transfer of businesses from subsidiary undertakings.  The balance of investment in subsidiaries  
in excess of the net asset value remaining in the subsidiary should have been transferred to goodwill within the Company.  The 2009/10 
Company balance sheet has been restated to include the transfer of £21.0m from investment in subsidiaries to goodwill. 

Exchange differences 
The consolidated financial statements are presented in pounds sterling, which is the Company’s functional and presentational currency.  
Transactions in foreign currencies, which are those other than the functional currency of an entity, are recorded at the opening rate for the month 
in which the transaction occurs which is used as a reasonable approximation to the rate at the transaction date.  Monetary assets and liabilities 
denominated in foreign currency are translated at the rates ruling at the balance sheet date.  Resulting exchange gains or losses are recognised in  
the income statement for the period except where they are part of a net foreign investment hedge when they are recognised in equity. 

On consolidation the assets and liabilities of the Group’s foreign operations are translated at the rate of exchange ruling at the balance sheet 
date.  Income and expenses of foreign operations are translated at the average rate during the period.  Differences on translation are recognised 
as a separate component of equity.  On disposal of a foreign operation the cumulative exchange differences for that operation are recognised  
in the income statement as part of the profit or loss on disposal. 

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of that operation  
and are translated at the rate ruling at the balance sheet date. 

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34  

Notes to the accounts continued  

1 Principal accounting policies continued 
Segment reporting 
Segmental information is presented using a ‘management approach’ on the same basis as that used for internal reporting to the Chief Operating 
Decision Maker.  The Chief Operating Decision Maker, who is responsible for resource allocation and assessing performance of the operating 
segments, has been identified as the Board of Directors. 

Revenue 
Revenue is measured at the fair value of the consideration received or receivable for the provision of goods and services to customers outside 
the Group net of returns, sales allowances and value added and other sales based taxes.  Revenue from goods and services is recognised at the 
point the Group fulfils its commercial obligations to the customer, the revenue and costs in respect of the transaction can be measured reliably 
and collectability is reasonably assured. 

Share based payments 
The Group issues equity-settled share based payments to certain employees.  The fair value of the employee services received in exchange  
for the grant of options is recognised as an expense and is calculated using Black-Scholes and Monte Carlo models.  The value of the charge  
is adjusted to reflect expected and actual levels of options vesting.  The total amount to be expensed over the vesting period is determined by 
reference to the fair value of the options granted, excluding the impact of any service and performance conditions that are included in the 
assumptions about the number of options which are expected to become exercisable. 

At each balance sheet date, the Group revises its estimates of the number of options which are expected to become exercisable.  It recognises the 
impact of the revision of original estimates, if any, in the income statement and a corresponding adjustment to equity over the vesting period. 

Impairment 
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment.  Assets 
that are subject to amortisation are reviewed for indications of impairment at each balance sheet date.  If there is an indication of impairment 
the recoverable amount of either the asset or the cash-generating unit to which it belongs is estimated.  Cash-generating units are used where 
an individual asset does not generate cash flows which are independent of other assets.  The recoverable amount of a non-financial asset is  
the higher of its fair value less costs to sell and its value in use.  Value in use is the present value of the future cash flows expected to be derived 
from the asset or cash-generating unit. 

An impairment loss is recognised in the income statement whenever the carrying amount of an asset or cash-generating unit exceeds its 
recoverable amount. 

Non-financial assets other than goodwill that suffer an impairment are reviewed for possible reversal of impairment at each reporting date. 

Other operating income 
Rental income earned on investment property is recognised, in other operating income, in accordance with the substance of the relevant  
rental agreements. 

Profits or losses on the disposal of property, plant and equipment represent the difference between the net proceeds and the net carrying  
value at the date of sale.  Disposals are accounted for when there has been an unconditional exchange of contracts except where payment  
or completion is expected to occur significantly after exchange. 

Exceptional items 
Profits/losses on property disposals and non-recurring transactions which are material by virtue of their size or incidence such as major 
reorganisation costs and impairments are disclosed as exceptional items. 

Carpetright plc Annual report and accounts 2011

 
35

Tax 
Current tax liabilities are measured at the amount expected to be paid, based on tax rates and laws that are enacted or substantively enacted  
at the balance sheet date in the countries where the Company’s subsidiaries operate and generate taxable income. 

Deferred tax expected to be payable or recoverable on differences at the balance sheet date between the tax bases of assets and liabilities and 
their carrying amounts for financial reporting purposes is accounted for using the balance sheet liability method.  Deferred tax liabilities are 
generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable 
profits will be available against which deductible temporary differences can be utilised. 

Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in  
a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.   
Deferred tax is calculated at the rates of tax that are expected to apply when the asset or liability is settled, based on tax rates that have  
been enacted or substantively enacted by the balance sheet date, and is not discounted. 

Tax is charged or credited directly to equity if it relates to items that are credited or charged to equity; it is otherwise recognised in the  
income statement. 

Dividends 
Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period in which the 
dividends are approved by the Company’s shareholders or, in the case of interim dividends, paid. 

Goodwill 
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired 
entity.  Goodwill is not amortised, but is reviewed for impairment at least annually.  Any impairment is recognised immediately in the income 
statement and is not subsequently reversed.  On disposal of a subsidiary the attributable amount of goodwill is included in the determination  
of the profit or loss on disposal. 

Other intangible assets 
Purchased brand names and other intangible assets are capitalised at cost.  Acquired software licences and software development costs  
are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. 

Amortisation of intangible assets is calculated to write off the cost of the asset, on a straight line basis, over its expected useful life.  The  
expected useful lives generally applicable are: 

Brands  
Computer software   

20 years 
5 to 10 years 

Property, plant and equipment 
Property, plant and equipment is shown at cost less accumulated depreciation and any provisions for impairment in value. 

Depreciation is provided to write down the cost of property, plant and equipment, on a straight line basis, to their estimated residual values  
over their estimated useful lives.  Freehold land is not depreciated.  The estimated useful lives and residual values of assets are reviewed annually. 

The estimated useful lives by asset category that are generally applicable are: 

Freehold and long leasehold buildings 
Short leasehold buildings 
Fixtures and fittings 
Computers 
Motor vehicles 
Other plant and machinery 

50 years
The shorter of the period of the lease and the estimated useful life 
7 to 15 years
5 to 7 years
4 years
7 to 10 years

Borrowing costs 
Gross interest costs incurred on the financing of major projects are capitalised until the time that the assets are available for use.  Unless  
a specific borrowing is taken out to finance the asset, interest is capitalised using the weighted average interest rate of all non specific 
borrowings.  Where a specific borrowing is taken out to finance the asset interest is capitalised at the rate applicable to that borrowing. 

www.carpetright.plc.uk

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36  

Notes to the accounts continued  

1 Principal accounting policies continued 
Investment property 
Property that is held to earn rental income and for capital appreciation is separately disclosed as investment property.  Investment property  
is carried at depreciated historical cost.  Depreciation rates and useful lives of investment property are the same as those for property, plant  
and equipment. 

Leasing commitments 
Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards of ownership to the Group.   
All other leases are classified as operating leases. 

Assets used by the Group which have been funded through finance leases are capitalised in fixed assets and the resulting lease obligations are 
included in creditors.  The assets are depreciated over the shorter of their useful lives and the period of the lease.  The interest element of the 
rental obligations is charged to the income statement over the period of the lease and represents a constant proportion of the balance of capital 
repayments outstanding. 

Rentals payable under operating leases are charged to income on a straight line basis over the period of the lease.  Premiums payable, rent free 
periods and contributions receivable on entering an operating lease are released to income on a straight line basis over the lease term. 

Investment in subsidiaries 
The Company’s investment in subsidiary undertakings is recognised at cost and is accounted for net of impairment losses.  Income from 
investments is recognised in the income statement to the extent that post-acquisition profits are received.  Distributions of pre-acquisition 
profits reduce the cost of the investment. 

Inventories 
Inventories are valued at the lower of weighted average cost and net realisable value.  Net realisable value is based on estimated selling prices 
less further costs to be incurred to disposal.  Provisions are made for obsolescence, mark down and shrinkage based on actual losses, ageing  
of inventories and sales trends. 

Rebates receivable from suppliers 
Volume related rebates receivable from suppliers are credited to the carrying value of the inventory to which they relate.  Where a rebate 
agreement with a supplier covers more than one year, the rebates are recognised in the period in which they are earned. 

Trade receivables and payables 
Trade receivables and payables are initially recognised at fair value and subsequently adjusted to the amount receivable or payable.  Receivables 
are stated net of a provision for impairment. 

Cash and cash equivalents 
Cash and cash equivalents comprise cash in hand, cash at bank, deposits repayable on demand and highly liquid investments.  For the 
purposes of the cash flow statement, cash and cash equivalents also includes bank overdrafts which are shown within borrowings and 
overdrafts in current liabilities on the balance sheet. 

Bank loans and overdrafts 
Bank loans and overdrafts are initially recognised at fair value less directly attributable transaction costs.  Interest bearing loans are 
subsequently measured at amortised cost using the effective interest rate model. 

Provisions 
A provision is recognised where the Group has a legal or constructive obligation as a result of a past event and it is probable that an outflow  
of economic benefits will be required to settle the obligation.  Provisions are calculated on a discounted basis when appropriate. 

Carpetright plc Annual report and accounts 2011

 
37

Retirement benefit obligation 
The Group operates defined benefit and defined contribution schemes and also participates in a multi-employer pension scheme in respect  
of its employees in The Netherlands.  The assets and liabilities of all schemes are held separately from those of the Group.  The Group is  
unable to identify its share of the assets and liabilities of the multi-employer scheme and, therefore, accounts for this scheme as a defined 
contribution scheme. 

The cost of providing benefits under the defined benefit schemes is determined using the projected unit method, with actuarial valuations 
being carried out at each balance sheet date.  The net retirement benefit obligation recognised in the balance sheet represents the present  
value of the defined benefit obligation less the fair value of the scheme assets at the balance sheet date. 

Actuarial gains and losses are recognised in full, directly in equity in the period in which they occur and are presented in other comprehensive income. 

Other income and expenses associated with the defined benefit scheme are recognised in the income statement. 

The pension cost of defined contribution schemes is charged in the income statement as incurred. 

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Financial instruments 
Derivative financial instruments 
Derivative financial instruments (“derivatives”) are used to manage risks arising from changes in foreign currency exchange rates and changes 
in interest rates.  In accordance with its Treasury policy, the Group does not enter into derivatives for speculative purposes. 

Derivatives are stated at their fair value.  The fair value of interest rate contracts is the estimated amount that the Group would receive or pay  
to terminate them at the balance sheet date, taking into account prevailing interest rates. 

Changes in the fair value of derivatives which do not qualify for hedge accounting are recognised in the income statement as they arise. 

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Hedge accounting 
Changes in the fair value of derivatives that are designated and effective as hedges of future cash flows are recognised directly in other 
comprehensive income and any ineffective portion is recognised immediately in the income statement.  When the asset or liability for the 
hedged transaction is recognised in the balance sheet, the associated gain or loss on the hedging instrument previously recognised in other 
comprehensive income is included in the carrying amount of the hedged asset or liability.  Gains or losses realised on cash flow hedges are  
then recognised in the income statement in the same period as the hedged item. 

Where the Group hedges net investments in foreign entities through currency borrowings the gains or losses on the retranslation of the 
borrowings are recognised in equity. 

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge 
accounting.  At that time, any cumulative gain or loss on the hedging instrument previously recognised in equity is retained in equity until  
the hedged transaction occurs.  If the hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity  
is then transferred to the income statement. 

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
38  

Notes to the accounts continued  

1 Principal accounting policies continued 
Critical estimates and judgements 
The preparation of consolidated financial statements under IFRSs requires the Group to make estimates and assumptions that affect the 
application of policies and reported amounts.  Estimates and judgements are continually evaluated and are based on historical experience  
and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  Actual results may differ 
from these estimates.  The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount  
of assets and liabilities within the next financial year are discussed below: 

Impairment of goodwill 
The Group is required to test whether goodwill has suffered any impairment.  The recoverable amounts of cash-generating units have been 
determined based on value in use calculations.  The use of this method requires the estimation of future cash flows expected to arise from  
the continuing operation of the cash-generating unit and the choice of a suitable discount rate in order to calculate the present value.   
Actual outcomes could vary significantly from these estimates. 

Impairment of assets 
Property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not 
be recoverable.  When a review for impairment is conducted, the recoverable amount of an asset or cash-generating unit is determined based 
on value in use calculations prepared on the basis of management’s assumptions and estimates. 

Retirement benefits 
The present value of the defined benefit liabilities recognised in the balance sheet is dependent on the interest rates of high quality corporate 
bonds.  The net financing charge is dependent on both the interest rates of high quality corporate bonds and the assumed investment returns 
on scheme assets.  Other key assumptions for pension obligations, including mortality rates, are based in part on current market conditions. 

New standards and interpretations 
New standards and interpretations of existing standards that are not yet effective and have not been early adopted  
by the Group 
At 30 April 2011 the following new standard which is expected to be relevant to the Group was issued but is not yet effective. 

•  IFRS 9, ‘Financial instruments’ (effective for periods beginning on or after 1 January 2013).  The standard introduces new requirements for 
classifying and measuring financial instruments.  This is still subject to endorsement by the European Union, but is currently expected to be 
applied to the Group’s 2013/14 financial statements. 

Carpetright plc Annual report and accounts 2011

 
39

2  Segmental analysis 
The operating segments have been determined based on reports reviewed by the Board that are used to make strategic decisions.  Following  
the closure of the Polish operation in 2010 the management structure for Europe changed.  The Netherlands and Belgium were managed as a 
combined business by a single management team who had no other responsibilities.  Information is presented to the Board of Carpetright plc 
(the Chief Operating Decision Maker) on a combined basis.  As a result it is considered that the combined business forms a single reportable 
operating segment under IFRS 8.  The comparative segmental information has been restated to the new basis. 

The reportable operating segments derive their revenue primarily from the retail of floor coverings and beds.  Central costs are incurred 
principally in the UK and are immaterial.  As such these costs are included within the UK & RoI segment.  Sales between segments are  
carried out at arm’s length. 

The segment information provided to the Board for the reportable segments for the 52 weeks ended 30 April 2011 is as follows: 

52 weeks to 30 April 2011 

52 weeks to 1 May 2010 

Gross revenue  
Inter-segment revenue 
Revenues from external customers 
Gross profit 
Underlying operating profit 
Exceptional items 
Operating profit 
Finance income 
Intercompany interest 
Finance costs 
Profit before tax 
Tax 
Profit for the financial period

Segment assets: 
Segment assets 
Inter-segment balances 
Balance sheet total assets  
Segment liabilities: 
Segment liabilities 
Inter-segment balances 
Balance sheet total liabilities 

Other segmental items: 
Depreciation and amortisation
Additions to non-current assets

UK & RoI
£m 
408.3
(3.8)
404.5
250.8
14.4
(10.3)
4.1
1.1
(0.3)
(5.3)
(0.4)
(0.5)
(0.9)

225.4
–
225.4

(233.4)
11.5
(221.9)

Europe
£m 
82.3
–
82.3
47.2
6.8
–
6.8
–
0.3
(0.1)
7.0
(1.5)
5.5

109.2
(11.5)
97.7

(34.2)
–
(34.2)

Group
£m 
490.6
(3.8)
486.8
298.0
21.2
(10.3)
10.9
1.1
–
(5.4)
6.6
(2.0)
4.6

334.6
(11.5)
323.1

(267.6)
11.5
(256.1)

UK & RoI 
£m 
428.8 
(3.6) 
425.2 
263.7 
26.2 
(2.4) 
23.8 
0.9 
– 
(6.6) 
18.1 
(4.3) 
13.8 

244.3 
(11.4) 
232.9 

(232.9) 
5.2 
(227.7) 

Europe 
£m 
89.2 
– 
89.2 
51.6 
9.6 
– 
9.6 
– 
0.1 
(0.2) 
9.5 
(2.2) 
7.3 

105.3 
(5.3) 
100.0 

(37.9) 
2.4 
(35.5) 

Poland
£m 
2.2
–
2.2
0.7
(1.7)
(3.5)
(5.2)
–
(0.1)
–
(5.3)
–
(5.3)

2.7
(0.8)
1.9

(10.3)
9.9
(0.4)

Group
£m 
520.2
(3.6)
516.6
316.0
34.1
(5.9)
28.2
0.9
–
(6.8)
22.3
(6.5)
15.8

352.3
(17.5)
334.8

(281.1)
17.5
(263.6)

12.5
11.7

3.0
1.4

15.5
13.1

15.5 
6.5 

3.4 
1.6 

0.2
–

19.1
8.1

Carpetright plc is domiciled in the UK.  The Group’s revenue from external customers in the UK is £396.6m (2010 : £416.5m) and the total 
revenue from external customers from other countries is £90.2m (2010 : £100.1m).  The total of non-current assets (other than financial 
instruments and deferred tax assets) located in the UK is £161.6m (2010 : £175.8m) and the total of those located in other countries is  
£90.3m (2010 : £89.0m). 

Carpetright’s trade has historically shown no distinct pattern of seasonality with trade cycles more closely following economic indicators such 
as consumer confidence and mortgage approvals. 

www.carpetright.plc.uk

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40  

Notes to the accounts continued  

3  Operating profit, analysis of costs by nature 
Operating profit is stated after charging/(crediting):  

Rental income earned on investment property  
Cost of inventories recognised as an expense in cost of sales 
Operating lease rentals 

Minimum lease payments in respect of land and buildings 
Minimum lease payments in respect of plant and machinery
Sublease rental income 

Auditors’ remuneration 

Fees payable to the Company’s auditors for the audit of the Company’s annual financial statements

Staff costs 
Impairment of fixed assets 

Charged in administration expenses 

Amortisation of intangible assets 

Charged in administration expenses 

Depreciation of property, plant and equipment 

Owned assets 
  Charged in cost of sales 
  Charged in administration expenses
Under finance leases 
  Charged in cost of sales 
  Charged in administration expenses

Depreciation of investment property 

Charged in administration expenses 

Notes 

4 

5 

10 

11 
11 

11 

12 

4  Staff costs 
The average number of persons (full-time equivalents) employed by the Group (including Directors) was as follows: 

Stores 
Central support office and warehouse 

The aggregate employment costs of employees and Directors were as follows: 

Wages and salaries (including short term employee benefits) 
Social security costs 
Post-employment benefits  

Defined benefit 
Defined contribution 

Share based payments 

Group 
2011 
Number 
2,889
395
3,284

Group 
2011 
£m 
90.9
9.3

–
2.2
(0.3)
102.1

Group  
2010  
Number 
3,115 
379 
3,494 

Group  
2010  
£m 
94.7 
9.6 

(0.2) 
2.0 
0.5 
106.6 

Note 

22

25 

Group  
2011 
£m 
(2.4) 
166.1 

93.6 
1.7 
(2.9) 

0.3 
102.1 

2.0 

2.4 

0.1 
12.5 

– 
0.1 

0.4 

Company  
2011  
Number 
2,367 
344 
2,711 

Company  
2011  
£m 
73.0 
7.0 

– 
1.0 
(0.3) 
80.7 

Group 
2010 
£m 
(2.6)
175.6

93.0
1.7
(4.0)

0.3
106.6

3.2

3.6

–
14.4

0.7
0.1

0.3

Company 
2010 
Number 
2,532
329
2,861

Company 
2010 
£m 
75.2
7.2

(0.2)
0.8
0.5
83.5

Wages and salaries include short term employee benefits as defined in IAS 19, with the exception of costs associated with the Group’s pension 
schemes.  Post-employment benefits include costs associated with the Group’s pension schemes with the exception of net interest costs and the 
actuarial gain on the defined benefit pension scheme and are included in administration expenses.  Share based payments comprise the cost of 
awards in respect of employee share schemes in accordance with IFRS 2.  These costs are explained in note 25. 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
41

Group 
2011 
£m 
3.9
0.4
0.3
(0.2)
4.4

Group 
2010 
£m 
3.9
0.5
0.3
0.5
5.2

The employment costs of key management1 were as follows: 

Salaries (including short term employee benefits) 
Social security costs 
Post employment benefits 
Share based payments 

1.  Key management comprises Group Directors and those senior officers of the Group responsible for planning, directing or controlling Group activities.   

During the year the Executive Directors realised no gains (2010: £0.2m) on the vesting of awards made under the Long Term Incentive Plan.  
Details of any gains, share options and other Directors’ remuneration are disclosed in the Directors’ remuneration report on pages 20 to 24. 

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5  Exceptional items 

Profits/(loss) on property disposals 
UK & RoI impairment of property, plant and equipment
Onerous lease provision 
Poland: 

Impairment of property, plant and equipment 
Closure costs 

Over provision for pre-opening costs of the central warehouse facility

Notes 

10, 11 
20 

11 

Group 
2011 
£m 
0.5 
(2.0)
(8.8)

–
–
–
(10.3)

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Group 
2010 
£m 
(0.7)
(1.4)
(1.4)

(1.8)
(1.7)
1.1 
(5.9)

The onerous lease provision relates to 26 properties in the UK & RoI that are not trading and are either empty or leased at below the passing 
rent.  The provision covers the period until full cost recovery is expected. 

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6  Net finance costs 

Finance costs  

Interest on borrowings and overdrafts 
Fees amortisation 
Gains on hedging instruments
Interest on obligations under finance leases 
Interest on pension scheme obligations 
Other interest payable 

Finance income 

Expected return on pension scheme assets 

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Notes 

22 

22 

Group 
2011 
£m 

(4.5)
(0.5)
1.0
(0.2)
(1.1)
(0.1)
(5.4)

1.1 
1.1

Group 
2010 
£m 

(6.0)
(0.5)
1.1
(0.2)
(1.0)
(0.2)
(6.8)

0.9
0.9

Net finance costs 

(4.3)

(5.9)

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42  

Notes to the accounts continued  

7  Tax 

(i) Analysis of the charge in the period 

UK current tax 
Overseas current tax 
Total current tax 
UK deferred tax 
Overseas deferred tax 
Total deferred tax 
Total tax charge in the income statement

Group  
2011  
£m 
2.0 
1.5 
3.5 
(1.4) 
(0.1) 
(1.5) 
2.0 

Group 
2010 
£m 
4.4
1.6
6.0
(0.1)
0.6
0.5
6.5

The income statement has been credited with tax of £1.7m (2010: £0.4m) in respect of exceptional items and £1.1m in respect of exceptional 
tax arising from the impact of the change in tax rates on deferred tax. 

(ii) Reconciliation of profit before tax to total tax  

Profit before tax 
Tax charge at UK Corporation Tax rate of 28% (2010: 28%) 
Adjusted for the effects of: 

Overseas tax rates 
Adjustment for the impact of changes in tax rates on deferred tax
Non-qualifying depreciation 
Other permanent differences 
Adjustments in respect of prior periods
Total tax charge in the income statement

Group  
2011  
£m 
6.6 
1.8 

(0.2) 
(1.1) 
0.6 
0.6 
0.3 
2.0 

Group 
2010 
£m 
22.3
6.2

(0.3)
–
0.9
0.3
(0.6)
6.5

The weighted average annual effective tax rate for the period is 30.4% (2010: 29.5%).  The increase arises primarily from one-off charges in the 
year not subject to tax and the disproportionate effect of permanently disallowable items on the reduced level of profit, offset by the credit 
arising from the impact of the change in tax rates on deferred tax. 

(iii) Tax on items taken directly to or transferred from equity 

Deferred tax on actuarial gains, recognised in other comprehensive income
Deferred tax on share based payments 
Total tax recognised in equity 

Group  
2011  
£m 
0.4 
– 
0.4 

Group 
2010 
£m 
0.6
0.1
0.7

The March 2011 Budget Statement announced that the Corporation tax rate would reduce from 28% to 26% from 1 April 2011.  This change 
was substantively enacted on 29 March 2011 and has been incorporated into the financial statements.  Further reductions to the main rate are 
proposed to reduce the rate by 1% per annum to 23% by 1 April 2014.  The changes had not been substantively enacted at the balance sheet 
date and, therefore, are not included in these financial statements.  The proposed reductions of the main rate of corporation tax by 1% per  
year to 23% by 1 April 2014 are expected to be enacted separately each year and would have the effect of reducing the deferred tax liability 
provided at 30 April 2011.  The Directors do not anticipate that these changes will materially change the deferred tax position presented in 
these financial statements. 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
43

8  Dividends 

Group and Company 
Prior year final dividend paid  
Current year interim dividend paid  

2011 
Pence per 
 share 
8.0  
8.0  
16.0  

2011 
£m 
5.4  
5.4  
10.8  

2010
Pence per 
share 
4.0 
8.0 
12.0 

2010
£m 
2.7 
5.4 
8.1 

The Directors decided that no final dividend will be paid (2010: 8.0 pence per share: £5.4m). 

This leaves the 2011 interim and final dividend payments at 8.0 pence per share amounting to £5.4m (2010: 16.0 pence; £10.8m). 

9  Earnings per share 
Basic earnings per share is calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of ordinary 
shares in issue during the period, excluding those held by the Group’s Employee benefit Trust (see note 25) which are treated as cancelled. 

In order to compute diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of 
all potentially dilutive ordinary shares.  Those share options granted to employees and Executive Directors, where the exercise price is less than 
the average market price of the Company’s ordinary shares during the period, represent potentially dilutive ordinary shares. 

Basic earnings per share 
Effect of dilutive share options 
Diluted earnings per share 

 52 weeks ended 30 April 2011 

 52 weeks ended 1 May 2010 

Earnings 
£m 
4.6 
0.1 
4.7 

Weighted average 
number of shares 
Millions 
67.2 
0.4 
67.6 

Earnings  
per share 
Pence 
6.8  
0.1  
6.9  

Earnings  
£m 
15.8  
0.1  
15.9  

Weighted average 
number of shares 
Millions 
67.2 
0.4 
67.6 

Reconciliation of earnings per share excluding post tax profit on exceptional items: 

Basic earnings per share 
Adjusted for the effect of exceptional items: 

Exceptional items 
Tax thereon 
Exceptional tax benefit from tax rate change 

Underlying earnings per share

 52 weeks ended 30 April 2011 

52 weeks ended 1 May 2010 

Earnings 
£m 
4.6

Weighted average 
number of shares 
Millions 
67.2

Earnings  
per share 
Pence 
6.8  

Earnings  
£m 
15.8 

Weighted average 
number of shares 
Millions 
67.2

10.3 
(1.7)
(1.1)
12.1

15.3 
(2.5) 
(1.6) 
18.0  

5.9 
(0.5) 
– 
21.2 

67.2

67.2

Earnings 
per share 
Pence 
23.5 
–
23.5 

Earnings 
per share 
Pence 
23.5 

8.7 
(0.6)
–
31.6 

The Directors have presented an additional measure of earnings per share based on underlying earnings.  This is in accordance with the practice 
adopted by most major retailers.  Underlying earnings is defined as profit excluding exceptional items and related tax.   

www.carpetright.plc.uk

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44  

Notes to the accounts continued  

10 Intangible assets 
Group 

Cost: 
At 2 May 2009 
Exchange differences 
Additions 
Disposals 
At 1 May 2010 
Exchange differences 
Additions 
At 30 April 2011 

Accumulated amortisation and impairment: 
At 2 May 2009 
Exchange differences 
Amortisation  
At 1 May 2010 
Impairment 
Amortisation  
At 30 April 2011 

Net book value: 
At 30 April 2011 
At 1 May 2010 

Goodwill 
£m 

Computer 
software  
£m 

Brands  
£m 

55.4 
(0.7)
–
–
54.7 
0.6 
–
55.3 

0.5 
–
–
0.5 
–
–
0.5 

54.8 
54.2 

23.5  
–  
0.3  
(0.1) 
23.7  
–  
0.5  
24.2  

7.2  
(0.1) 
3.6  
10.7  
0.1  
2.4  
13.2  

11.0  
13.0  

0.1  
–  
– 
–  
0.1  
–  
–  
0.1  

0.1  
–  
–  
0.1  
– 
– 
0.1  

– 
– 

Total 
£m 

79.0 
(0.7)
0.3 
(0.1)
78.5 
0.6 
0.5 
79.6 

7.8 
(0.1)
3.6 
11.3 
0.1 
2.4 
13.8 

65.8 
67.2 

The Company revised the expected lives of store software assets from the beginning of the year.  The reduction in the amortisation recognised 
in administration expenses for the current and future years is £1.2m. 

Goodwill is not amortised.  Instead it is subject to an impairment review at each reporting date or more frequently if there is an indication  
that it may be impaired.  Other intangibles are amortised and also tested for impairment when there is an indication that the asset may be 
impaired.  Goodwill impairment, intangible amortisation and impairment and reversals thereof are recognised in full in administration 
expenses in the income statement during the period in which they are identified.  Goodwill is allocated to the cash generating units to  
which it relates. 

Group goodwill comprises purchased goodwill in respect of the following business acquisitions: 

Subsidiary 
Carpetland BV 
Mays Holdings Ltd 
Storey Carpets Ltd 
Melford Commercial Properties Ltd 
Ben de Graaff 
Sleepright UK Ltd 
Total goodwill 

Acquisition date 
2002
June 2005
May 2007
March 2008
July 2008
December 2008

2011 
£m 
20.0  
4.7 
15.3 
6.9 
5.0 
2.9 
54.8 

2010
£m 
19.5
4.7
15.3
6.9
4.9
2.9
54.2

Goodwill is impaired if the carrying amount exceeds the recoverable amount.  The recoverable amount is the higher of fair value less  
costs to sell and the value in use.  In the absence of a recent market transaction the recoverable amount is determined from value in use  
calculations.  These calculations are based on 10 year profit projections, the same period used by the Group for appraising the potential of 
business acquisitions, adjusted for non-cash items, planned working capital movements, capital expenditure and the expected value of the 
business at the end of the period.  The cash flow projections for the initial three year period are based on financial budgets and plans approved 
by the Board.  The key drivers are like-for-like sales growth, gross margin percentage and anticipated cost inflation.  Cash flows beyond the 
plan period are extrapolated at a constant growth rate of 2.5% (2010: 2.5%).  The growth rate is in line with long term growth rates of the 
countries in which the Group operates.  The pre-tax discount rate applied to cash flow projections is 8.0% (2010: 8.3%) and is based on the 
Group’s weighted average cost of capital adjusted to reflect the risks of the businesses acquired.  Based on these calculations goodwill is not 
impaired.  An increase of 1% in the discount rate would not change the outcome of these calculations.  An increase of 3% in the discount rate 
would be required before any material impairment of goodwill would be indicated. 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
 
 
 
45

Goodwill  
£m 

Computer 
software  
£m 

Brands 
£m 

–  
3.1  
3.1  
21.0 
24.1 
– 
24.1  

– 
– 
– 
– 
– 
– 
– 

24.1  
24.1  

23.4  
0.3  
23.7  
– 
23.7 
0.5  
24.2  

7.2  
(0.1) 
3.6  
10.7  
0.1  
2.4  
13.2  

11.0  
13.0  

0.1 
–
0.1 
–
0.1
–
0.1 

0.1 
–
–
0.1 
–
–
0.1 

–
–

Total 
£m 

23.5 
3.4 
26.9 
21.0
47.9
0.5 
48.4 

7.3 
(0.1)
3.6 
10.8 
0.1 
2.4 
13.3 

35.1 
37.1 

Company 

Cost: 
At 2 May 2009 
Additions 
At 1 May 2010 
Prior year adjustment for goodwill on transfer of subsidiary businesses
At 1 May 2010 restated 
Additions 
At 30 April 2011 

Accumulated amortisation and impairment: 
At 2 May 2009 
Exchange differences 
Amortisation  
At 1 May 2010 
Impairment 
Amortisation  
At 30 April 2011 

Net book value: 
At 30 April 2011 
At 1 May 2010 restated 

Company goodwill comprises purchased goodwill arising on the transfer of businesses from subsidiaries to the parent company in respect  
of Mays Carpets Ltd – £4.7m; Storey Carpets Ltd – £15.7m; Carpetworld (Manchester) Ltd – £0.8m and Sleepright UK Ltd – £2.9m. 

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www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46  

Notes to the accounts continued  

11 Property, plant and equipment  
Group 

Cost: 
At 2 May 2009 
Exchange differences 
Additions 
Transfer between asset class 
Transfer to investment property 
Disposals 
At 1 May 2010 
Exchange differences 
Additions 
Transfer between asset class 
Disposals 
At 30 April 2011 

Accumulated depreciation and impairment:
At 2 May 2009 
Exchange differences 
Impairment 
Depreciation  
Transfer to investment property 
Disposals 
At 1 May 2010 
Exchange differences 
Impairment 
Depreciation  
Disposals 
At 30 April 2011 

Net book value: 
At 30 April 2011 
At 1 May 2010 

Freehold land 
and buildings 
£m 

Long leasehold 
land and 
buildings 
£m 

Short leasehold 
buildings 
£m 

Fixtures  
and fittings  
£m 

Plant and 
machinery  
£m 

77.1 
(0.9)
–
(0.9)
(2.5)
–
72.8 
0.9 
4.4 
–
–
78.1 

5.4 
(0.1)
0.7 
1.2 
(0.8)
–
6.4 
0.1 
–
1.1 
–
7.6 

17.3 
–
0.4 
0.9 
–
–
18.6 
–
0.1 
–
–
18.7 

2.1 
(0.1)
–
0.5 
–
–
2.5 
–
0.1 
0.4 
–
3.0 

70.5 
66.4 

15.7 
16.1 

20.3 
(0.1)
0.6 
–
–
(0.8)
20.0 
0.1 
0.3 
–
(0.6)
19.8 

8.3 
–
0.8 
1.0 
–
(0.6)
9.5 
0.1 
0.5 
0.8 
(0.5)
10.4 

9.4 
10.5 

92.7  
(0.4) 
6.3  
– 
(0.2) 
(4.1) 
94.3  
0.5  
6.6  
(0.1) 
(4.3) 
97.0  

41.3  
(0.3) 
1.6  
7.9  
(0.1) 
(2.6) 
47.8  
0.4  
1.2  
7.6  
(3.4) 
53.6  

43.4  
46.5  

Total 
£m 

251.1 
(2.2)
7.8 
–
(2.7)
(6.1)
247.9 
2.2 
12.6 
–
(5.3)
257.4 

86.4 
(1.1)
3.2 
15.2 
(0.9)
(4.4)
98.4 
1.3 
1.9
12.7 
(4.3)
110.0 

43.7  
(0.8) 
0.5  
– 
– 
(1.2) 
42.2  
0.7  
1.2  
0.1  
(0.4) 
43.8  

29.3  
(0.6) 
0.1  
4.6  
– 
(1.2) 
32.2  
0.7  
0.1  
2.8  
(0.4) 
35.4  

8.4  
10.0  

147.4 
149.5 

The impairment of property, plant and equipment relates to a net movement on 41 loss making stores in UK & RoI. 

The Company revised the expected lives of store computer assets from the beginning of the year.  The reduction in the depreciation recognised 
in administration expenses for the current and future years is £0.7m 

Assets held under finance leases have the following net book value: 

Cost 
Accumulated depreciation and impairment 
Net book value 

The assets held under finance leases comprise buildings.   

Group 
2011
£m 
9.5 
(2.0)
7.5 

Group  
2010  
£m 
9.5  
(1.9) 
7.6  

Company  
2011  
£m 
2.8  
(1.5) 
1.3  

Company 
2010 
£m 
2.8 
(1.4)
1.4 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
47

Company 

Cost: 
At 2 May 2009 
Exchange differences 
Additions 
Transfer to investment property
Disposals 
At 1 May 2010 
Exchange differences 
Additions 
Disposals 
At 30 April 2011 

Accumulated depreciation and impairment: 
At 2 May 2009 
Exchange differences 
Impairment 
Depreciation  
Disposals 
At 1 May 2010 
Exchange differences 
Impairment 
Depreciation  
Disposals 
At 30 April 2011 

Net book value: 
At 30 April 2011 
At 1 May 2010 

Freehold land 
and buildings 
£m 

Long leasehold 
land and 
buildings 
£m 

Short leasehold 
buildings  
£m 

Fixtures  
and fittings  
£m 

Plant and 
machinery 
£m 

30.5 
(0.1)
–
(0.3)
–
30.1 
–
4.4 
–
34.5 

1.2 
–
–
0.3 
–
1.5 
–
–
0.3 
–
1.8 

32.7 
28.6 

10.8 
–
0.4 
–
–
11.2 
–
–
–
11.2 

1.7 
–
–
0.2 
–
1.9 
–
0.1 
0.2 
–
2.2 

9.0 
9.3 

20.2  
(0.1) 
0.6  
– 
(0.7) 
20.0  
0.1  
0.3  
(0.6) 
19.8  

8.3  
– 
0.7  
1.0  
(0.5) 
9.5  
0.1  
0.5  
0.8  
(0.5) 
10.4  

9.4  
10.5  

79.2  
(0.2) 
5.4  
– 
(1.6) 
82.8  
0.1  
6.4  
(4.2) 
85.1  

31.8  
(0.2) 
0.6  
7.3  
(1.0) 
38.5  
0.1  
1.2  
7.0  
(3.3) 
43.5  

41.6  
44.3  

17.5 
(0.1)
–
–
(0.5)
16.9 
–
0.1 
(0.2)
16.8 

9.4 
(0.1)
0.1 
2.9 
(0.5)
11.8 
0.1 
0.1 
1.4 
(0.2)
13.2 

3.6 
5.1 

Total 
£m 

158.2 
(0.5)
6.4 
(0.3)
(2.8)
161.0 
0.2 
11.2 
(5.0)
167.4 

52.4 
(0.3)
1.4 
11.7 
(2.0)
63.2 
0.3 
1.9
9.7 
(4.0)
71.1 

96.3 
97.8 

www.carpetright.plc.uk

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48  

Notes to the accounts continued  

12 Investment property 
While investment property has not been independently valued the Directors consider that the value of such properties for the Group is 
approximately £38m (2010: approximately £32m) and for the Company it is not significantly different from the book value in either year.  
Operating expenses attributable to investment properties are incurred directly by tenants under tenant-repairing leases. 

Notes 

Group  
£m 

Company
£m 

11 

11 

27.3  
(0.6) 
2.7  
29.4  
0.5  
(1.0) 
28.9  

2.0  
0.1  
0.9  
0.3  
3.3  
0.1  
0.4  
(1.0) 
2.8  

26.1  
26.1  

7.9 
(0.1)
0.3 
8.1 
–
–
8.1 

0.4 
–
–
–
0.4 
–
–
–
0.4 

7.7 
7.7 

Cost: 
At 2 May 2009 
Exchange differences 
Transfer from property, plant and equipment 
At 1 May 2010 
Exchange differences 
Disposals 
At 30 April 2011 

Accumulated depreciation and impairment:
At 2 May 2009 
Exchange differences 
Transfer from property, plant and equipment 
Depreciation  
At 1 May 2010 
Exchange differences 
Depreciation  
Disposals 
At 30 April 2011 

Net book value: 
At 30 April 2011 
At 1 May 2010 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
49

13 Investment in subsidiary undertakings 
The Directors consider that to give full particulars of all subsidiary undertakings would lead to a statement of excessive length.  The following 
information relates to those subsidiary undertakings whose results or financial position, in the opinion of the Directors, principally affect the 
financial statements of the Group.  All of the Group’s subsidiary undertakings are included in the consolidated accounts. 

Carpetright of London Limited
Melford Commercial Properties Limited 
Carpetright (Torquay) Limited
Pluto Sp. Z.o.o. 
Carpetland NV 
Infradis Real Estate NV 
Carpetland BV 
Fontainebleau Vastgoed BV 

Company 

Country of  
incorporation  
and operation 

Principal  
activity 
Great Britain  Holding 
Great Britain  Property 
Great Britain  Property 
Poland  Property 
Belgium 
Retail 
Belgium  Property 
The Netherlands 
Retail 
The Netherlands  Property 

Percentage of 
ordinary shares 
held indirectly 

Percentage of 
ordinary shares 
held directly 
100%
100%
100%
100%

Cost: 
At the beginning of the period 
Prior year adjustment for goodwill on transfer of subsidiary businesses
Additions 
Impairment of investment in Carpetright Poland Sp. Z.o.o.
At the end of the period 

Notes 

10 

2011
£m 

15.4
–
1.4 
–
16.8

The additional investment represents the capital injection into Pluto Sp. Z.o.o. which holds the remaining investment property in Poland. 

100%
100%
100%
100%

2010
restated
£m 

39.1 
(21.0)
–
(2.7)
15.4

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14 Inventories 
Group and Company inventories are held in the form of finished goods for resale.  Write downs of stock values to net realisable value during 
the current and comparative periods are immaterial.   

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15 Trade and other receivables 

Non-current 
Receivables from subsidiaries 
Prepayments and accrued income 

Current 
Trade receivables 
Less: provision for impairment

Other receivables 
Prepayments and accrued income 

Total trade and other receivables 

Group  
2011  
£m 

–  
1.1  
1.1  

8.5  
(0.6) 
7.9  
7.3  
17.6  
32.8  
33.9  

Group  
2010  
£m 

Company 
2011 
£m 

Company 
2010 
£m 

– 
1.4  
1.4  

8.1  
(0.6) 
7.5  
6.4  
24.2  
38.1  
39.5 

45.8 
1.1 
46.9 

4.4 
(0.4)
4.0 
7.3 
15.6 
26.9 
73.8

49.8 
1.4 
51.2 

3.2 
(0.4)
2.8 
6.1 
22.2 
31.1 
82.3

The Directors consider that the carrying amounts of trade and other receivables approximate to their fair values.   

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50  

Notes to the accounts continued  

15 Trade and other receivables continued 
Provision for impairment 

At the beginning of the period 
Decrease in the provision in the period 
At the end of the period 

Group 
2011 
£m 
(0.6)
–
(0.6)

The table below shows the financial assets included in trade and other receivables at the balance sheet date: 

Major insurance companies 
Property rent debtors 
Other debtors 
Retail customers 
Trade and other receivables 

Group 
2011 
£m 
4.1 
2.2 
1.1 
7.8 
15.2 

Group  
2010  
£m 
(0.8) 
0.2  
(0.6) 

Group  
2010  
£m 
3.3  
1.6  
1.5  
7.5  
13.9  

Company  
2011  
£m 
(0.4) 
– 
(0.4) 

Company  
2011  
£m 
4.1  
2.2  
1.0  
4.0  
11.3  

Company 
2010 
£m 
(0.6)
0.2 
(0.4)

Company 
2010 
£m 
3.3 
1.6 
1.1 
2.9 
8.9 

Balances from retail customers are considered to have little credit risk as they are primarily settled by cash or major credit card and must be 
settled prior to the goods being collected from/delivered by the store. 

The age profile of balances other than those with retail customers is set out below: 

Neither past due nor impaired 
30 to 60 days 
60 to 90 days 
Over 90 days 
Non-retail trade and other receivables 

16 Cash and cash equivalents 

Cash at bank and in hand 
Cash and cash equivalents on the balance sheets 
Bank overdrafts 
Cash and cash equivalents in the cash flow statements 

17 Trade and other payables 

Current 
Trade payables 
Other taxes and social security 
Accruals and deferred income 

Non-current 
Accruals and deferred income 
Payable to subsidiaries 

Total trade and other payables 

Notes 

19

Group 
2011 
£m 
4.7
1.7
0.1
0.9
7.4 

Group 
2011 
£m 
8.3
8.3
(9.0)
(0.7)

Group 
2011 
£m 

55.3
13.3
36.7
105.3

35.4
–
35.4
140.7

Group  
2010  
£m 
5.6  
0.3  
–  
0.5  
6.4  

Company  
2011  
£m 
4.7  
1.6  
0.1  
0.9  
7.3  

Group  
2010  
£m 
8.3 
8.3 
(13.3) 
(5.0) 

Company  
2011  
£m 
4.7 
4.7 
(4.5) 
0.2 

Company 
2010 
£m 
5.3 
0.3 
–
0.5 
6.1

Company 
2010 
£m 
3.6
3.6
(9.0)
(5.4)

Group  
2010  
£m 

Company  
2011  
£m 

Company 
2010 
£m 

62.8 
13.2 
38.2 
114.2 

34.2 
– 
34.2 
148.4 

45.6 
10.6 
32.8 
89.0 

35.4 
16.0 
51.4 
140.4 

52.6
10.1
33.1
95.8

34.2
9.7
43.9
139.7

Trade payables comprise amounts outstanding for trade purchases and ongoing costs.  The Directors consider that the carrying amounts of 
trade and other payables approximate to their fair values.   

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
 
 
 
51

18 Obligations under finance leases 

Minimum lease payments 

Present value of minimum lease payments 

Amounts payable within one year 
Amounts payable between one and five years 
Amounts payable after five years

Less: future finance charges 
Present value of obligations under  
finance leases 
Current 
Non-current  

Group 
2011
£m 
0.3
1.2
5.6
7.1
(4.1)

3.0
0.1
2.9

Group 
2010
£m 
0.3
1.2
6.0
7.5
(4.5)

3.0
0.1
2.9

Company 
2011
£m 
0.2
0.9
2.1
3.2
(1.2)

2.0
0.1
1.9

Company 
2010
£m 
0.2
1.0
2.3
3.5
(1.5)

2.0
0.1
1.9

Group  
2011 
£m 
0.1 
0.4 
2.5 
3.0 

Group  
2010 
£m 
0.1 
0.3 
2.6 
3.0 

Company 
2011
£m 
0.1
0.4
1.5
2.0

Company 
2010
£m 
0.1
0.3
1.6
2.0

The Group leases certain properties under finance leases.  The average lease term is 19 years (2010: 20 years).  Minimum lease payments are 
discounted at the rate inherent in the leases.  Interest rates are fixed at the contract date.  All leases are on a fixed repayment basis and no 
arrangements have been entered into for contingent rental payments.   

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19 Borrowings and overdrafts  

Current 
Unsecured overdraft 
Borrowings: 
Secured 

Borrowings and overdrafts 
Non-current 
Borrowings: 
Secured 
Borrowings 

Group  
2011  
£m 

9.0 

12.3 
21.3 

49.6 
49.6 
70.9 

Secured borrowings are denominated in Sterling and Euros and are secured on certain of the Group’s assets. 

The effective interest rates at the year end are as follows: 

Overdrafts 
Borrowings 

The maturity profile of borrowings and overdrafts are as follows: 

Amounts payable within one year 
Amounts payable between one and two years 
Amounts payable between two and five years 

Group  
2011  
% 
3.5 
4.0 

Group  
2011  
£m 
21.3 
45.1 
4.5 
70.9 

The maturity analysis is grouped by when the debt is contracted to mature rather than by repricing dates.   

Group  
2010  
£m 

13.3 

8.9 
22.2 

53.3 
53.3 
75.5 

Group  
2010  
% 
3.4 
3.8 

Group  
2010  
£m 
22.2 
12.2 
41.1 
75.5 

Company 
2011 
£m 

Company 
2010 
£m 

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4.5

12.3
16.8

45.1
45.1
61.9

9.0

8.9
17.9

49.0
49.0
66.9

Company 
2011 
% 
4.0
4.2

Company 
2010 
% 
3.9
3.9

Company 
2011 
£m 
16.8
45.1
–
61.9

Company 
2010 
£m 
17.9
12.2
36.8
66.9

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
52  

Notes to the accounts continued  

20 Provisions for liabilities and charges 

Group and Company 
At the beginning of the period 
Added during the period 
Utilised during the period 
At the end of the period 

Onerous lease provisions are expected to be used over periods of up to 5 years.   

21 Deferred tax assets and liabilities 

Deferred tax asset 
Deferred tax liabilities 
Net deferred tax liabilities 

Notes 

5

Onerous lease 
provisions  
£m 
1.7 
8.8 
(1.4) 
9.1 

Reorganisation 
provisions  
£m 
0.1 
– 
(0.1) 
– 

Total 
provisions 
£m 
1.8
8.8
(1.5)
9.1

Group
2011 
£m 
(2.9)
26.2
23.3

Group  
2010 
£m 
(2.9) 
23.4 
20.5 

Company  
2011 
£m 
– 
16.6 
16.6 

Company 
2010
£m 
–
13.6
13.6

Deferred tax assets and liabilities are offset against each other where there is a legally enforceable right to offset. 

The movement in deferred tax assets and liabilities recognised by the Group during the current and prior period is: 

Group 

At 2 May 2009 
Exchange differences 
Charge/(credit) to the income statement 
Credit to other comprehensive income 
Tax credit to equity 
Transferred to current tax 
At 1 May 2010  
Exchange differences 
Charge/(credit) to the income statement 
Charge to other comprehensive income 
Transferred to current tax 
At 30 April 2011 

Accelerated tax 
depreciation 
9.4 
(0.1) 
0.1 
– 
– 
– 
9.4 
0.1 
(1.0) 
– 
– 
8.5 

Fair value 
adjustments 
4.6
(0.2)
–
–
–
–
4.4
0.1
(0.1)
–
–
4.4

Short term 
timing 
differences 
(0.1)
–
(0.1)
–
–
–
(0.2)
(0.1)
(0.5)
–
–
(0.8)

Rollover 
15.7
–
0.1
–
–
(3.9)
11.9
–
(0.3)
–
3.9
15.5

Tax 
losses 
(4.2)
0.1
0.6
–
–
–
(3.5)
(0.1)
0.4
–
–
(3.2)

Share based 
payments 
(0.1) 
– 
– 
– 
(0.1) 
– 
(0.2) 
– 
– 
– 
– 
(0.2) 

Retirement 
benefit 
obligations 
(0.7) 
– 
– 
(0.6) 
– 
– 
(1.3) 
– 
– 
0.4 
– 
(0.9) 

Total 
24.6
(0.2)
0.7
(0.6)
(0.1)
(3.9)
20.5
–
(1.5)
0.4
3.9
23.3

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
53

Company 

At 2 May 2009 
Charge/(credit) to the income statement 
Credit to other comprehensive income 
Tax credit to equity 
Transferred to current tax 
At 1 May 2010 
Charge/(credit) to the income statement 
Charge to other comprehensive income 
Transferred to current tax 
At 30 April 2011 

Accelerated tax 
depreciation 
6.4
(0.6)
–
–
–
5.8
(0.9)
–
–
4.9

Fair value 
adjustments 
–
–
–
–
–
–
–
–
–
–

Short term 
timing 
differences 
(0.5)
(0.2)
–
–
–
(0.7)
(0.3)
–
–
(1.0)

Rollover 
13.8
0.5
–
–
(3.9)
10.4
(0.2)
–
3.9
14.1

Tax  
losses 
(0.6) 
0.2 
– 
– 
– 
(0.4) 
0.1 
– 
– 
(0.3) 

Share based 
payments 
(0.1) 
– 
– 
(0.1) 
– 
(0.2) 
– 
– 
– 
(0.2) 

Retirement 
benefit 
obligations 
(0.7)
–
(0.6)
–
–
(1.3)
–
0.4
–
(0.9)

Total 
18.3
(0.1)
(0.6)
(0.1)
(3.9)
13.6
(1.3)
0.4
3.9
16.6

At the reporting date, the Group had unused tax losses of £8.9m (2010: £8.8m) which can be carried forward indefinitely and are available for 
offset against future profits.  A deferred tax asset of £2.9m (2010: £2.9m) has been recognised in respect of these losses.  The Group has brought 
forward tax losses of £2.7m for which no deferred tax asset has been recognised. 

Deferred tax assets of £2.5m (2010: £2.7m) were available for offset against deferred tax liabilities of £28.7m (2010: £26.1m) hence the Group’s 
deferred tax liabilities as at 30 April 2011 are £26.2m (2010: £23.4m). 

22 Retirement benefit obligations 
The Group operates a variety of pension schemes, principally in the UK, The Netherlands and Belgium.  They comprise defined benefit 
schemes where benefits are based on employees’ length of service and average final salary, and defined contribution schemes where the 
employer company pays a set contribution to the scheme.  The UK defined benefit schemes referred to in note 22 (i) (a) and the first two 
defined contribution schemes referred to in note 22 (ii) are accounted for by the Company. 

(i) Defined benefit schemes 
(a) UK defined benefit schemes 
The Company operates a funded defined benefit pension scheme providing benefits based on final pensionable pay for its employees and has 
assumed the liability for the scheme previously operated by Storey Carpets Ltd (Storeys).  The Company scheme was closed to defined benefit 
service accrual on 30 April 2010 and has been closed to new members since 31 March 2006.  The scheme previously operated by Storeys is also 
closed to new members and has no active members.  The assets of the schemes are held separately from those of the Company.  The assets of 
the Company scheme are invested in a Managed Fund operated by an independent investment manager.  Contributions are determined by a 
qualified actuary using the projected unit method.  The most recent actuarial review was at 6 April 2008 when the actuarial value of the assets 
represented 79% of the benefits accrued to members after allowing for expected future increases in earnings.  A deficit reduction plan has been 
agreed with the Trustees under which £0.4m was paid in the year (2010: £0.3m). 

The assets of the Storeys scheme are held in independently managed funds.  The most recent actuarial review of the Storeys scheme was at  
1 March 2008 when the actuarial value of the assets represented 84% of the benefits accrued to members. 

www.carpetright.plc.uk

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54  

Notes to the accounts continued  

22 Retirement benefit obligations continued 
The assets and liabilities of the schemes were valued on an IAS 19 basis at 30 April 2011 by a qualified actuary.  The numbers set out below are 
the aggregate of the two schemes. 

1) Key assumptions used: 

Expected rate of salary increases 
RPI inflation linked pension escalation 
CPI inflation linked pension escalation (Carpetright scheme) 
Discount rate 
Deferred pension revaluation 
Expected return on scheme assets 

2011  
% 
n/a  
3.2  
3.7  
5.3  
3.0  
6.2  

2010 
% 
n/a
3.3 
n/a
5.5 
3.6 
6.5 

The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale 
covered, may not necessarily be borne out in practice.  The assumptions used for future life expectancy of members of the scheme are derived 
from industry data and standard tables.  Specifically the S1NMA table (2010: S1NMA table) with medium cohort improvement has been used 
for male pensioners and the S1NFA table (2010: S1NFA table) with medium cohort improvement for female pensioners projected by year  
of birth. 

The most significant assumptions are the expected return on scheme assets, salary increases and the discount rate, of which the most sensitive 
assumption is the discount rate.  If this assumption increased or decreased by 0.1% the defined benefit obligation would change by £0.2m 
(2010: £0.2m). 

2) The amount included in the balance sheet arising from the Group’s and Company’s obligations in respect of the defined benefit scheme is  
as follows: 

Present value of pension scheme obligations 
Fair value of pension scheme assets 
Retirement benefit obligations recognised in the balance sheet

3) The amounts recognised in the income statement in respect of the defined benefit pension scheme are as follows: 

Current service cost recognised in administrative expenses 
Curtailment gain recognised in administrative expenses 
Interest cost on pension scheme obligations recognised in interest payable
Expected return on pension scheme assets recognised in interest receivable
Total recognised in the income statement

2011  
£m 
21.4  
(17.4) 
4.0  

2011  
£m 
–  
–  
1.1  
(1.1) 
–  

2010 
£m 
21.1 
(16.3)
4.8 

2010 
£m 
0.3 
(0.5)
1.0 
(0.9)
(0.1)

Notes 
4 
4 
6 
6 

Carpetright plc Annual report and accounts 2011

 
 
  
 
  
 
 
 
 
 
 
4) Reconciliation of movement in net pension deficit: 

Opening balance 
Total recognised in the income statement 
Less contributions 
Actuarial gain/(loss) recognised in equity 
Closing balance 

5) The amounts recognised directly in equity in respect of the defined benefit pension scheme are as follows: 

Actuarial gain on plan assets 
Experience adjustment on liabilities 
Change in assumptions underlying present value of liabilities
Total 
Cumulative total 

6) Movements in the pension scheme obligation are as follows:  

Opening balance 
Current service cost  
Curtailment gain 
Interest on pension scheme obligation 
Actuarial gain recognised in equity 
Benefits paid 
Employee contributions 
Closing balance 

7) Movements in the fair value of the pension scheme assets are as follows:  

Opening balance 
Expected return on pension scheme assets 
Actuarial gain recognised in equity 
Actual return on assets 
Employer contributions  
Employee contributions  
Benefits paid 
Closing balance 

1.1  
0.4  

2011  
£m 
16.3  

1.5  
0.4  
–  
(0.8) 
17.4  

55

2011 
£m 
(4.8)
–
0.4 
0.4 
(4.0)

2011 
£m 
0.4 
–
–
0.4 
(2.6)

2011 
£m 
21.1 
–
–
1.1 
–
(0.8)
–
21.4 

0.9 
2.8 

2010 
£m 
(2.4)
0.1 
0.5 
(3.0)
(4.8)

2010 
£m 
2.8 
–
(5.8)
(3.0)
(3.0)

2010 
£m 
14.7 
0.3 
(0.5)
1.0 
5.8 
(0.4)
0.2 
21.1 

2010 
£m 
12.3 

3.7 
0.5 
0.2 
(0.4)
16.3 

www.carpetright.plc.uk

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56  

Notes to the accounts continued  

22 Retirement benefit obligations continued 
8) The assets in the pension scheme and the expected rates of return are: 

Equities 
Bonds 
Property 
Cash 
Annuities 
Fair value of pension  
scheme assets 
Present value of pension 
scheme obligations 
Retirement benefit obligations 
Related deferred tax asset 

2011 

2010 

2009 

Long term 
expected rate  
of return  
%  
7.0  
4.7  
7.0  
4.0  
5.3  

Category of 
asset as a 
proportion 
of total 
% 
57.5 
15.5 
–
1.7 
25.3 

Long term 
expected rate 
of return 
% 
7.4 
5.0 
7.4 
4.4 
5.5 

£m  
10.0  
2.7  
–  
0.3  
4.4  

Category of 
asset as a 
proportion 
of total 
% 
56.4 
14.1 
0.6 
1.9
27.0 

Long term 
expected rate  
of return  
%  
7.1  
5.5  
n/a 
0.5  
6.8  

£m 
9.2 
2.3 
0.1 
0.3 
4.4 

Category of 
asset as a 
proportion 
of total 
% 
56.9 
17.1 
–
0.8 
25.2 

£m  
7.0  
2.1  
– 
0.1  
3.1  

17.4  

100.0 

16.3 

100.0 

12.3  

100.0 

(21.4) 
(4.0) 
0.9  
(3.1) 

(21.1)
(4.8)
1.3 
(3.5)

(14.7) 
(2.4) 
0.7  
(1.7) 

The long term return on equities is assumed to be 3.3% in excess of inflation (2010: 3.8%).  The rate of return on bonds is assumed to be in line 
with the yield on AA-rated corporate bonds. 

9) History of experience gains and losses: 

Fair value of scheme assets 
Present value of defined benefit obligations
Liability recognised in the balance sheet 
Experience adjustments on pension scheme obligations 
Percentage of pension scheme obligation (%) 
Experience adjustments on pension scheme assets 
Percentage of pension scheme assets (%) 

2011 
£m 
17.4 
(21.4)
(4.0)
–
–
0.4 
2.3%

2010 
£m 
16.3 
(21.1)
(4.8)
–
–
2.8 
17.2%

2009  
£m 
12.3  
(14.7) 
(2.4) 
(0.8) 
(5.4%) 
(3.7) 
(30.1%) 

2008  
£m 
14.8  
(16.1) 
(1.3) 
(0.2) 
(1.2%) 
(1.5) 
(10.1%) 

2007 
£m 
8.5 
(10.3)
(1.8)
(0.1)
(1.0%)
(0.4)
(4.7%)

Employer contributions of £0.6m are expected to be paid into these pension schemes during the financial year 2011/12. 

(b) Multi-employer scheme 
The Group’s Dutch subsidiary participates in a multi-employer run industry pension scheme which has arrangements similar to those of  
a defined benefit scheme.  It is not possible to identify the Group’s share of the underlying assets and liabilities of the scheme, and therefore  
in accordance with IAS19, the Group has taken the exemption for multi-employer pension schemes not to disclose pension scheme assets  
and liabilities.  Accordingly, although this scheme is a defined benefit scheme it is treated as a defined contribution scheme recognising  
the contributions payable in each period in the income statement.  Under the terms of the scheme, the scheme deficit is recovered through 
increased contributions from participating members.  At the period end the Group was unable to obtain a valuation of the industry scheme’s 
full surplus or deficit.  Contributions charged to the income statement amounted to £1.1m (2010: £1.1m).   

(ii) Defined contribution schemes 
The Company launched a Group Personal Pension Plan (“GPP Plan”) in April 2006.  Contributions made by employees are matched by the 
Company to an upper limit.  The assets of the scheme are held separately from those of the Company and are invested by an independent 
investment manager.  Contributions for the period amounted to £1.0m (2010: £0.8m). 

In addition, the Group operates defined contribution pension schemes for subsidiary companies in Belgium and The Netherlands.  The Group 
makes contributions into the schemes, the assets of which are held separately from those of the Group and are invested by local insurance 
companies.  The contributions by the Group into individual company schemes for the period were a net charge of £nil (2010: £nil) and 
contributions to industry collective schemes were £0.1m (2010: £0.1m).   

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
 
 
 
57

23 Financial instruments 
(i) Financial risk management objectives and policies 

Risk management 
The Group’s principal financial instruments comprise derivatives, borrowings and bank overdrafts, cash and cash equivalents.  These financial 
instruments are used to manage funding and liquidity requirements.  Other financial instruments which arise directly from the Group’s 
operations include trade receivables and payables. 

Exposure to credit, liquidity, foreign currency exchange and interest rate risks arise in the normal course of the Group’s business operations 
and these risks are managed in accordance with the Group’s treasury risk management strategy, which is also discussed in the Business Review 
in the section Management of liquidity risk and financing on page 12. 

(a) Credit risk 
The Group does not have significant concentrations of credit risk as exposure is spread over a number of counterparties and customers. 

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The Group is exposed to a small amount of credit risk that is primarily attributable to its trade and other receivables, the majority of which 
relates to retail customers (see note 15).  Retail customers are required to settle outstanding balances in cash or using a major credit card prior 
to goods being collected from/delivered by the store. 

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with a minimum AA credit 
rating.  The maximum amount of credit risk is represented by the carrying amounts of financial assets. 

(b) Liquidity risk 
The Group finances its operations from a mix of retained profits and bank borrowings achieved through term loans, revolving credit 
agreements and overdraft facilities.  Daily cash balances are forecast and surplus cash is placed on treasury deposit with the Group’s bankers  
at commercial rates.  All counterparties have minimum AA credit ratings. 

The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments, including interest: 

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Group 
At 30 April 2011 
Interest bearing loans and borrowings, including derivatives
Finance leases 
Trade and other payables 

At 1 May 2010 
Interest bearing loans and borrowings, including derivatives
Finance leases 
Trade and other payables 

Company 
At 30 April 2011 
Interest bearing loans and borrowings, including derivatives
Finance leases 
Trade and other payables 

At 1 May 2010 
Interest bearing loans and borrowings, including derivatives
Finance leases 
Trade and other payables 

Less than
1 year
£m 

Between 
1 and 2 years 
£m 

Between 
2 and 5 years 
£m 

Over
5 years
£m 

Total 
£m 

23.4
0.3
82.4
106.1

25.5
0.3
92.4
118.2

18.7
0.2
87.0
105.9

21.0
0.2
89.0
110.2

45.6 
0.3 
– 
45.9 

14.2 
0.3 
– 
14.5 

45.5 
0.2 
– 
45.7 

14.1 
0.2 
– 
14.3 

4.5 
0.9 
– 
5.4 

41.4 
0.9 
– 
42.3 

– 
0.7 
– 
0.7 

36.9 
0.8 
– 
37.7 

–
5.6
–
5.6

–
6.0
–
6.0

–
2.0
–
2.0

–
2.3
–
2.3

73.5
7.1
82.4
163.0

81.1
7.5
92.4
181.0

64.2
3.1
87.0
154.3

72.0
3.5
89.0
164.5

Committed overdraft facilities are renewable annually and amounts undrawn were £5.5m and €0.5m (2010: £2.4m and €1.0m).  The Company 
has committed facilities to July 2015.  These facilities comprise a £22.0m amortising term loan, a €14.0m amortising term loan and a £45.0m 
revolving credit facility.  Repayments on the term loans cannot be redrawn.  There are a number of covenants which commit the Group to 
maintaining certain rates of leverage and fixed charge cover.  The Company is, and is expected to remain, in compliance with these covenants.  
At 30 April 2011 the revolving credit facility, under the previous facility, had an undrawn amount of £22.5m (2010: £35.0m). 

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
58  

Notes to the accounts continued  

23 Financial instruments continued 
(c) Foreign exchange risk 
Outside the UK the Group operates in The Republic of Ireland, The Netherlands and Belgium.  Revenues and expenses of these operations  
are denominated in Euros.  The Group mitigates currency risk in respect of the net investment in European operations by designating Euro-
denominated borrowings as hedging instruments of Euro-denominated investments in foreign operations. 

If the closing Sterling-Euro rate had been 0.01 points lower in the period the exchange difference reported in the statement of comprehensive 
income would have been £0.6m higher (2010: £0.6m higher).  At 30 April 2011 if Sterling had weakened/strengthened by 10% against the Euro 
profit after tax for the year would have been £0.7m higher/lower as a result of the translation of the Euro-denominated businesses. 

Financial assets and liabilities and foreign operations are translated at the following rates of exchange: 

Average rate 
Closing rate 

Euro
2011 
1.18
1.12

Euro 
2010 
1.13 
1.15 

Zloty 
2011 
4.70 
4.42 

Zloty
2010 
4.71
4.50

(d) Interest rate risk 
The Group has various borrowings bearing interest at a margin over LIBOR or EURIBOR rates.  Group policy is to manage interest rate risk  
by purchasing interest rate swap agreements to partially hedge the term loans.  The remainder is liable to interest at prevailing interest rates. 

In accordance with IFRS 7, the Group has undertaken sensitivity analysis on its financial instruments which are affected by changes in interest 
rates.  This analysis has been prepared on the basis of a constant amount of net debt, a constant ratio of fixed to floating interest rates, and on 
the basis of hedging instruments in place at 30 April 2011 and 1 May 2010 respectively.  Consequently analysis relates to the situation at those 
dates and is not representative of the years then ended.  The following assumptions were made: 

•  balance sheet sensitivity to interest rates applies only to derivative financial instruments, as the carrying value of debt and deposits does not 

change as interest rates move 

•  gains or losses are recognised in equity or the income statement in line with the accounting policies set out in note 1 

•  cash flow hedges were effective 

Based on the Group’s net debt position at the year end a 1% change in interest rates would affect the Group’s profit before tax by 
approximately £0.6m (2010: £0.3m). 

The interest rate profile of the financial assets and liabilities of the Group, after the impact of interest rate swaps, is as follows: 

Weighted 
average 
effective 
interest rate 
% 
0.1  
1.2  
–  

2.6  
4.0  
–  

2011 

Fixed rate 
£m 
–
–
–
–
(3.1)
(6.3)
–
(9.4)

Floating  
rate 
£m 
4.5  
3.6  
0.2  
8.3 
(48.5) 
(16.1) 
–  
(64.6) 

Weighted 
average 
effective 
interest rate
% 
0.3 
1.2 
–

3.2 
3.3 
–

Interest
 free
£m 
10.8 
4.7 
0.1 
15.6
(69.0)
(13.4)
–
(82.4)

Total
£m 
15.3
8.3
0.3
23.9
(120.6)
(35.8)
–
(156.4)

2010 

Fixed 
rat 
 £m 
–  
–  
–  
– 
(34.1) 
(14.5) 
–  
(48.6) 

Floating
rate
£m 
3.6 
4.6 
0.1 
8.3
(26.3)
(4.7)
–
(31.0)

Interest  
free 
£m 
8.9  
4.7  
–  
13.6 
(78.0) 
(14.0) 
(0.4) 
(92.4) 

Total
£m 
12.5
9.3
0.1
21.9
(138.4)
(33.2)
(0.4)
(172.0)

Sterling 
Euro 
Zloty 
Total financial assets 
Sterling 
Euro 
Zloty 
Total financial liabilities 

Capital management 
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern and retain financial flexibility in order 
to continue to provide returns for shareholders and benefits for other stakeholders.  The Group considers capital to be equity and net debt.  
Net debt is disclosed in note 29. 

The Group manages its capital by: continued focus on free cash flow generation; setting the level of capital expenditure and dividend in the 
context of the current year and forecast free cash flow; and monitoring the level of the Group’s financial and leasehold debt in the context of 
Group performance. 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
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59

(ii) Fair value of financial assets and liabilities 
Financial assets and liabilities are classified in accordance with IAS 39.  Financial instruments have not been reclassified or derecognised in  
the period.  There are no financial assets which have been pledged or held as collateral.  None of the Group’s loans is impaired.  In addition the 
Group does not have any financial assets or liabilities measured at fair value through the income statement other than derivatives.  There are  
no available-for-sale financial assets.   

The fair values of financial assets and liabilities, together with their carrying amounts are: 

Group 
2011 

Group 
2010 

Company 
2011 

Company 
2010 

Nominal value 
£m 

Carrying and 
fair value
 £m 

Nominal value 
£m 

Carrying and 
fair value 
£m 

Nominal value  
£m 

Carrying value 
and fair value 
£m 

Nominal value 
£m 

Carrying value 
and fair value
£m 

At cost: 
  Cash and cash equivalents 
Loans and receivables at amortised cost: 
  Trade and other receivables
Total financial assets 

Financial liabilities at amortised cost: 
  Borrowings and overdrafts 
  Finance lease obligations 
Financial liabilities at cost: 
  Trade and other payables 
Derivative financial instruments used for 
hedging: 

Interest rate swaps 
Total financial liabilities 

Net financial liabilities 

–

–
–

–
–

–

6.3
6.3

6.3

8.3

15.6
23.9

(70.9)
(3.0)

(82.4)

–

–
–

–
–

–

8.3

13.6
21.9

(75.5)
(3.0)

(92.4)

(0.1)
(156.4)

42.7
42.7

(1.1)
(172.0)

(132.5)

42.7

(150.1)

–  

–  
–  

–  
–  

–  

6.3 
6.3 

6.3 

4.7 

56.4 
61.1 

(61.9) 
(2.0) 

(87.0) 

–

–
–

–
–

–

3.6

58.8
62.4

(66.9)
(2.0)

(89.0)

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(0.1) 
(151.0) 

42.7
42.7

(1.1)
(159.0)

(89.9) 

42.7

(96.6)

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Determination of fair values 
The fair values of derivatives are estimated using future cash flows discounted at risk-adjusted discount rates based on market yield curves.   
As the market yield curves are observable the fair values fall into level 2 of the three tier hierarchy.  The carrying values of all other financial 
assets and liabilities are deemed to reflect fair value. 

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(iii) Derivative financial instruments 
The Group has various Euro and Sterling-denominated borrowings which bear interest at floating rates.  Interest on the Sterling borrowing is 
charged at LIBOR plus a margin.  The Euro-denominated borrowings bear interest at the prevailing EURIBOR rate plus a margin.  Interest 
rate swaps fix a portion of the floating interest charge on term debt at fixed rates of interest ranging from 3.52% to 4.34% (2010: 3.52% to 
5.25%).  The maturity profiles of the interest rate swaps are set to terminate prior to the underlying hedged borrowings. 

Derivative financial instruments are not purchased for speculative purposes. 

Non-current liabilities 
Interest rate swaps – cash flow hedges 

Group 
2011 
£m 
(0.1) 

Group 
2010 
£m 
(1.1) 

Company
2011
£m 
(0.1)

Company
2010
£m 
(1.1)

www.carpetright.plc.uk

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
60  

Notes to the accounts continued  

23 Financial instruments continued  
(iv) Hedge accounting 
(a) Cash flow hedges  
Interest rate swaps denominated in Euros have been executed to hedge the Group’s exposure to changes in floating interest rates.   
Hedge documentation is put in place at inception of all hedging relationships.  Effectiveness tests are performed at each reporting date.   

Interest rate swaps are measured at fair value under IAS 39.  Changes in fair value are posted to other comprehensive income in respect of the 
portion of the hedges which satisfy the criteria to be effective hedges.  Charges or credits relating to the portion which does not satisfy these 
criteria are recognised directly in the income statement.   

(b) Net investment hedges 
Euro-denominated borrowings are designated as hedging instruments of Euro-denominated net assets of the Group’s foreign operations  
in order to protect the Group from currency risk in respect of the Group’s Euro-denominated foreign operations.  Borrowing balances are 
carried at amortised cost which approximates fair value since borrowings bear interest at the prevailing floating rate.  The carrying value of 
borrowings amounted to €13.9m (2010: €22.3m). 

24 Share capital  

Group and Company 
At 2 May 2009 
Purchase of own shares by Employee Benefit Trust 
Transfer of Treasury shares to participants
At 1 May 2010 
Purchase of own shares by Employee Benefit Trust 
At 30 April 2011 

Number of 
allotted, called 
up and fully paid 
ordinary shares 
Millions 
67.2 
–
–
67.2
–
67.2

Share capital
£m 
0.7 
–
–
0.7
–
0.7

Share premium 
£m 
15.4  
–  
–  
15.4 
–  
15.4 

Treasury shares 
£m 
(0.1) 
(0.2) 
0.1  
(0.2) 
(0.1) 
(0.3) 

Total
£m 
16.0 
(0.2)
0.1 
15.9
(0.1)
15.8

The Group’s LTIP was established to grant contingent rights to shares.  Such grants are made on recommendation by the Group’s 
Remuneration Committee.  Shares are purchased by a Trust and held until they are used to satisfy the LTIP awards.  As required by IAS 32 
grants of such shares are classified as Treasury shares and accordingly are deducted from total equity attributable to equity holders of the 
parent.  The assets, liabilities, income and costs of the LTIP and Trust are included in both the Company and the consolidated financial 
statements.  During the period the Trust purchased 10,000 ordinary shares for £0.1m (2010 – 16,500 shares for £0.2m).  At the year end  
the Trust held 27,869 (2010: 17,869) ordinary shares of 1p each with a market value of £0.2m (2010: £0.2m).   

The Group also operates a share option scheme under which shares are issued to satisfy share options upon exercise. 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
Notes to the accounts continued  

23 Financial instruments continued  

(iv) Hedge accounting 

(a) Cash flow hedges  

Interest rate swaps denominated in Euros have been executed to hedge the Group’s exposure to changes in floating interest rates.   

Hedge documentation is put in place at inception of all hedging relationships.  Effectiveness tests are performed at each reporting date.   

Interest rate swaps are measured at fair value under IAS 39.  Changes in fair value are posted to other comprehensive income in respect of the 

portion of the hedges which satisfy the criteria to be effective hedges.  Charges or credits relating to the portion which does not satisfy these 

criteria are recognised directly in the income statement.   

(b) Net investment hedges 

Euro-denominated borrowings are designated as hedging instruments of Euro-denominated net assets of the Group’s foreign operations  

in order to protect the Group from currency risk in respect of the Group’s Euro-denominated foreign operations.  Borrowing balances are 

carried at amortised cost which approximates fair value since borrowings bear interest at the prevailing floating rate.  The carrying value of 

borrowings amounted to €13.9m (2010: €22.3m). 

24 Share capital  

Group and Company 

At 2 May 2009 

Purchase of own shares by Employee Benefit Trust 

Transfer of Treasury shares to participants

Purchase of own shares by Employee Benefit Trust 

At 1 May 2010 

At 30 April 2011 

Number of 

allotted, called 

up and fully paid 

ordinary shares 

Millions 

67.2 

–

–

–

67.2

67.2

Share capital

Share premium 

Treasury shares 

£m 

0.7 

–

–

–

0.7

0.7

£m 

15.4  

–  

–  

–  

15.4 

15.4 

£m 

(0.1) 

(0.2) 

0.1  

(0.2) 

(0.1) 

(0.3) 

Total

£m 

16.0 

(0.2)

0.1 

15.9

(0.1)

15.8

The Group’s LTIP was established to grant contingent rights to shares.  Such grants are made on recommendation by the Group’s 

Remuneration Committee.  Shares are purchased by a Trust and held until they are used to satisfy the LTIP awards.  As required by IAS 32 

grants of such shares are classified as Treasury shares and accordingly are deducted from total equity attributable to equity holders of the 

parent.  The assets, liabilities, income and costs of the LTIP and Trust are included in both the Company and the consolidated financial 

statements.  During the period the Trust purchased 10,000 ordinary shares for £0.1m (2010 – 16,500 shares for £0.2m).  At the year end  

the Trust held 27,869 (2010: 17,869) ordinary shares of 1p each with a market value of £0.2m (2010: £0.2m).   

The Group also operates a share option scheme under which shares are issued to satisfy share options upon exercise. 

61

25 Share based payments 
Included within administrative expenses is a credit of £0.3m (2010: charge of £0.5m) in respect of equity-settled share based payments. 

The Group’s employee share schemes are described below and additional detail is disclosed in the Directors’ remuneration report on pages 20 
to 24.  Scheme participants are either Directors of the Company or employees of the Group.  The costs associated with the schemes are 
accounted for in the Company’s accounts. 

(i) LTIP 
Under this scheme participants may receive annual awards in the form of contingent entitlements to Company shares.  These entitlements  
are equity-settled through the purchase of existing shares by the administering Trust.  The shares vest three years after award if participants 
remain with the Group during the vesting period and the Group meets targeted levels of performance. The performance conditions are  
fully described in the Directors’ remuneration report in the section titled Long Term Incentive Plan. 

During the period contingent entitlements to 214,022 shares were awarded (LTIP 2009: 227,608).  The amount recognised in the income 
statement in respect of all LTIP awards is a credit of £0.4m (2010: charge of £0.4m).  The fair values of the 2006 awards were determined  
using a Monte Carlo simulation model which takes account of the performance conditions.  The fair value per share is based on the expected 
number of shares that will vest.  Subsequent awards, where there is no market condition, are valued using a Black-Scholes option pricing 
model.  The Group’s Employee Benefit Trust is administered by the Equity Trust (Guernsey) Limited and it waves its right to dividends on the 
shares held. 

Reconciliation of movements in the periods ended 30 April 2011 

LTIP 2010 

LTIP 2009 

LTIP 2006 

Outstanding at 2 May 2009 
Granted 
Forfeited 
Vested  
Expired 
Outstanding at 1 May 2010 
Granted 
Forfeited 
Vested  
Expired 
Outstanding at 30 April 2011 

Exercisable at 30 April 2011 
Exercisable at 1 May 2010 

Number of
options
’000s 
–
–
–
–
–
–
214.0 
–
–
–
214.0

–
–

Fair
value
 £m 
–
–
–
–
–
–
1.4 
–
–
–
1.4

–
–

Number of 
options 
’000s 
– 
227.6 
– 
– 
– 
227.6 
–  
–  
–  
–  
227.6 

–  
– 

Fair 
value 
£m 
– 
1.8 
– 
– 
– 
1.8 
–  
–  
–  
–  
1.8 

–  
– 

Number of
options
’000s 
101.8
–
(17.8)
(22.2)
(61.8)
–
–
–
–
–
–

–
–

Fair
value
£m 
0.3
–
–
(0.1)
(0.2)
–
–
–
–
–
–

–
–

The valuation assumptions used in the application of the Monte Carlo and Black-Scholes models applied to the relevant schemes above are  
as follows: 

Valuation assumptions 
Fair value per share 
Share price at grant (pence) 
Exercise price (pence) 
Expected volatility (%)1 
Vesting period (years) 
Dividend yield (%) 
Risk free interest rate (%) 

LTIP 2010 
award 
675 
740 
1.0 
44.6 
3.0 
3.0 
2.0 

LTIP 2009 
award 
776
853
1.0
46.3
3.0
3.1
2.0

LTIP 2006 
award 
773
1,177
1.0
23.0
3.0
4.2
4.9

1.  Expected volatility is based on historical volatility over the three year period preceding the date of grant.  The risk free interest rate is the yield on zero-coupon UK government bonds 

at the date of grant of the respective awards over a term consistent with the vesting period. 

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62  

Notes to the accounts continued  

25 Share based payments continued 
(ii) Savings Related Share Option Scheme (“SAYE”) 
Three and five year SAYE schemes were introduced in 2004.  UK based employees are invited to subscribe for options over shares in the Company 
at a 20% discount.  The options are ordinarily exercisable within six months from the third or fifth anniversary of the grant date.  The entitlement  
to share options is equity-settled.  Funds for the purchase of Company shares are built up through the contribution of a maximum of £250 per 
month from salary.  Share options were valued using a Black-Scholes option pricing model.  The cost charged to the income statement in 
respect of this scheme is £0.1m (2010: £0.1m). 

Reconciliation of movements in the periods ended 30 April 2011 

SAYE 2011 

SAYE 2010 

SAYE 2009 

SAYE 2008 

SAYE 2007 

SAYE 2006 

SAYE 2005 

3 yr  

5 yr 

3 yr  

5 yr 

3 yr 

5 yr 

3 yr 

5 yr 

3 yr 

5 yr 

3 yr 

5 yr 

5 yr 

Number of 
options 
’000s 

Number of 
options 
’000s 

Number of 
options 
’000s 

Number of 
options 
’000s 

Number of 
options 
’000s 

Number of 
options 
’000s 

Number of 
options 
’000s 

Number of 
options 
’000s 

Number of 
options 
’000s 

Number of 
options 
’000s 

Number of 
options 
’000s 

Number of 
options 
’000s 

Number of 
options 
’000s 

Outstanding at  
2 May 2009 
Granted 
Forfeited 
Vested 
Outstanding at  
1 May 2010 
Granted 
Forfeited 
Vested 
Outstanding at  
30 April 2011 

Exercisable at  
30 April 2011 
Exercisable at  
1 May 2010 

– 
– 
– 
– 

–
–
–
–

– 
97.5  
(3.4) 
–  

–
30.0 
–
–

– 
37.6 
(1.1) 
– 

36.5 
–  
(11.5) 
–  

– 
29.4 
(0.4)
– 

29.0 
–  
(8.3)
–  

397.8
–
(33.3)
–

364.5
–
(36.3)
(2.4)

329.1
–
(18.7)
–

310.4
–
(25.3)
–

31.7
–
(8.1)
–

23.6
–
(2.4)
(8.0)

28.8
–
(3.6)
–

25.2
–
(2.6)
–

8.2
–
(2.0)
–

6.2
–
(6.2)
–

8.1 
– 
(2.4) 
– 

5.7 
–  
(1.7) 
–  

94.1 

30.0

25.0 

20.7 

325.8

285.1

13.2

22.6

–

4.0 

–  

– 

–

–

–  

– 

–  

– 

–

–

–

–

13.2 

–

–

–

–

6.2

–  

– 

10.9 
– 
(10.9) 
– 

– 
–  
–  
–  

– 

–  

– 

8.6
–
(0.9)
–

7.7
–
(0.9)
–

6.8

6.8 

42.3
–
(3.4)
–

38.9
–
(38.9)
–

–

–

–

38.9

The valuation assumptions used in the application of the Black-Scholes model applied to the relevant schemes above are as follows: 

Valuation assumptions 
Fair value per  
share (pence) 
Share price at  
grant (pence) 
Exercise price (pence) 
Expected volatility (%)1 
Vesting period (years) 
Dividend yield (%) 
Risk free interest rate (%) 
Possibility of  
ceasing employment 
before vesting (%) 

SAYE 2011 

SAYE 2010 

SAYE 2009 

SAYE 2008 

SAYE 2007 

SAYE 2006 

SAYE 2005 

3 yr  

5 yr 

3 yr  

5 yr 

3 yr 

5 yr 

3 yr 

5 yr 

3 yr 

5 yr 

3 yr 

5 yr 

5 yr 

264 

298

333 

331 

95

81

148

132

322

352 

256 

265

295

792 
634 
41.6 
3.1 
2.3 
1.6 

792
634
39.9
5.1
2.3
2.4

941 
753 
47.4 
3.1 
3.1 
3.1 

941 
753 
38.7 
5.1 
3.1 
3.1 

474
295
42.4
3.1
6.8
2.2

474
295
35.2
5.1
6.8
2.6

723
618
33.6
3.1
7.2
4.1

723
618
29.7
5.1
7.2
4.1

1,237
1,040
19.9
3.1
3.8
5.5

1,237 
1,040 
21.6 
5.1 
3.8 
5.3 

1,072 
840 
22.7 
3.1 
4.4 
4.4 

1,072
840
22.9
5.1
4.4
4.3

1,126
901
23.6
5.1
3.9
4.6

40 

50

40 

50 

40

50

40

50

40

50 

40 

50

50

1.  Expected volatility is based on historical volatility over the three or five year period respectively preceding the date of grant.  The risk free interest rate is the yield on zero-coupon UK 

government bonds at the date of grant of the respective awards over a term consistent with the vesting period. 

(iii) All Employee Share Ownership Plan (“AESOP”) 
Under this scheme staff are invited to contribute up to £125 per month from pre-tax salary to purchase Company shares.  The Group does not 
incur a share based payment charge in respect of this scheme since the Company shares are acquired at market value and are not subject to an 
accumulation period. 

Carpetright plc Annual report and accounts 2011

26 Capital and other financial commitments 

Capital commitments at 30 April 2011 for which no provision has been made in the accounts relate to the acquisition of tangible and 

At 30 April 2011 the future minimum lease payments in respect of land and buildings and other assets under operating leases are: 

intangible assets, and are: 

Authorised and contracted  

27 Operating lease commitments 

Group 

Operating leases payable: 

Amounts payable within one year 

Amounts payable between one and five years 

Amounts payable after five years 

Company 

Operating leases payable: 

Amounts payable within one year 

Amounts payable between one and five years 

Amounts payable after five years 

Group 

2011 

 £m 

5.2 

Group 

Company

Company

2010 

£m 

1.8 

2011

£m 

4.9

2010

£m 

1.4

2011 

Land and 

buildings 

£m 

86.9 

310.9 

459.2 

857.0 

2011 

Land and 

buildings 

£m 

78.9 

296.2 

456.0 

831.1 

2010 

Land and

buildings

 £m 

91.6

334.5

548.6

974.7

2010 

Land and

buildings

 £m 

84.3

320.5

545.5

950.3

Other 

£m 

1.5 

1.9 

0.2 

3.6 

Other 

£m 

1.2 

1.6 

0.2 

3.0 

Other 

£m 

1.6

2.2

–

3.8

Other 

£m 

1.3

1.7

–

3.0

Operating lease payments are negotiated for an average of 7 years (2010: 10 years).  The Group enters into sublease agreements in respect of 

some of its operating leases for stores.  At the reporting date the Group had contracted with tenants for future minimum operating sublease 

receipts amounting to £11.5m (2010: £13.9m).   

28 Contingent liabilities 

The Group has no material contingent liabilities at 30 April 2011. 

The Company’s contingent liabilities derive from guarantees for subsidiaries which are disclosed in note 30. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
63

26 Capital and other financial commitments 
Capital commitments at 30 April 2011 for which no provision has been made in the accounts relate to the acquisition of tangible and 
intangible assets, and are: 

Authorised and contracted  

Group 
2011 
 £m 
5.2 

Group 
2010 
£m 
1.8 

Company
2011
£m 
4.9

Company
2010
£m 
1.4

27 Operating lease commitments 
At 30 April 2011 the future minimum lease payments in respect of land and buildings and other assets under operating leases are: 

Group 

Operating leases payable: 

Amounts payable within one year 
Amounts payable between one and five years 
Amounts payable after five years 

Company 

Operating leases payable: 

Amounts payable within one year 
Amounts payable between one and five years 
Amounts payable after five years 

2011 

Land and 
buildings 
£m 

86.9 
310.9 
459.2 
857.0 

2011 

Land and 
buildings 
£m 

78.9 
296.2 
456.0 
831.1 

2010 

Land and
buildings
 £m 

91.6
334.5
548.6
974.7

2010 

Land and
buildings
 £m 

84.3
320.5
545.5
950.3

Other 
£m 

1.5 
1.9 
0.2 
3.6 

Other 
£m 

1.2 
1.6 
0.2 
3.0 

Other 
£m 

1.6
2.2
–
3.8

Other 
£m 

1.3
1.7
–
3.0

Operating lease payments are negotiated for an average of 7 years (2010: 10 years).  The Group enters into sublease agreements in respect of 
some of its operating leases for stores.  At the reporting date the Group had contracted with tenants for future minimum operating sublease 
receipts amounting to £11.5m (2010: £13.9m).   

28 Contingent liabilities 
The Group has no material contingent liabilities at 30 April 2011. 

The Company’s contingent liabilities derive from guarantees for subsidiaries which are disclosed in note 30. 

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64  

Notes to the accounts continued  

29 Movement in cash and net debt  
Group 

Cash and cash equivalents in the balance sheet 
Bank overdrafts 
Cash and cash equivalents in the cash flow statement 
Borrowings 
  Current borrowings 
  Non-current borrowings 

Obligations under finance leases 
  Current obligations under finance leases 
  Non-current obligations under finance leases 

Derivative financial instruments 
Net debt 

Cash and cash equivalents in the balance sheet 
Bank overdrafts 
Cash and cash equivalents in the cash flow statement 
Borrowings 
  Current borrowings 
  Non-current borrowings 

Obligations under finance leases 
  Current obligations under finance leases 
  Non-current obligations under finance leases 

Derivative financial instruments 
Net debt 

Company 

Cash and cash equivalents in the balance sheet 
Bank overdrafts 
Cash and cash equivalents in the cash flow statement 
Borrowings 
  Current borrowings 
  Non-current borrowings 

Obligations under finance leases 
  Current obligations under finance leases 
  Non-current obligations under finance leases 

Derivative financial instruments 
Net debt 

Carpetright plc Annual report and accounts 2011

2010 

Total
£m 
8.3
(13.3)
(5.0)

(8.9)
(53.3)
(62.2)

(0.1)
(2.9)
(3.0)
(1.1)
(71.3)

2009 

Total
£m 
17.4 
(4.4)
13.0

(12.7)
(91.2)
(103.9)

(0.9)
(3.0)
(3.9)
(2.3)
(97.1)

2010 

Total
£m 
3.6 
(9.0)
(5.4)

(8.9)
(49.0)
(57.9)

(0.1)
(1.9)
(2.0)
(1.1)
(66.4)

Cash
flow
£m 

Exchange 
differences 
£m 

Revaluation 
£m 

3.4

0.9 

0.7

(0.4) 

– 

– 

–
–
4.1

–  
–  
0.5  

–  
1.0  
1.0  

 Cash
flow
£m 

Exchange 
differences 
£m 

Revaluation 
£m 

(18.1)

0.1 

– 

40.9 

0.8  

–  

0.9 
–
23.7

–  
–  
0.9 

–  
1.2  
1.2 

Cash
flow
£m 

Exchange 
differences 
£m 

Revaluation 
£m 

6.0 

(0.4) 

–  

0.7

(0.2) 

– 

–
–
6.7 

–  
–  
(0.6) 

–  
1.0  
1.0  

2011 

Total
£m 
8.3
(9.0)
(0.7)

(12.3)
(49.6)
(61.9)

(0.1)
(2.9)
(3.0)
(0.1)
(65.7)

2010 

Total
£m 
8.3
(13.3)
(5.0)

(8.9)
(53.3)
(62.2)

(0.1)
(2.9)
(3.0)
(1.1)
(71.3)

2011 

Total
£m 
4.7 
(4.5)
0.2 

(12.3)
(45.1)
(57.4)

(0.1)
(1.9)
(2.0)
(0.1)
(59.3)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
65

Company 

Cash and cash equivalents in the balance sheet 
Bank overdrafts 
Cash and cash equivalents in the cash flow statement
Borrowings 
  Current borrowings 
  Non-current borrowings 

Obligations under finance leases
  Current obligations under finance leases 
  Non-current obligations under finance leases 

Derivative financial instruments
Net debt 

2009 

Total
£m 
10.5 
–
10.5 

(5.5)
(88.5)
(94.0)

(0.9)
(2.0)
(2.9)
(2.3)
(88.7)

Cash 
flow 
£m 

Exchange 
differences 
£m 

Revaluation
£m 

(15.5) 

(0.4) 

35.5 

0.6 

0.9 
–  
20.9  

– 
–  
0.2  

–

–

–
1.2
1.2 

2010 

Total
£m 
3.6
(9.0)
(5.4)

(8.9)
(49.0)
(57.9)

(0.1)
(1.9)
(2.0)
(1.1)
(66.4)

30 Related parties 
Group 
Related party transactions with the Directors are disclosed in the Directors’ Report on page 25. 

Share based payment transactions which include transactions with key management are disclosed in notes 4 and 25. 

Contributions to pension schemes are disclosed in note 22.  Costs incurred by the Group to administer pension schemes amounted to less 
than £0.1m in both 2010 and 2011. 

Company 
The following table provides the total amount of transactions and year end balances with related parties for the relevant financial year. 

Subsidiary undertakings 
2010/11 
2009/10 

Sales of goods 
£m 

Amounts due 
from related 
parties £m 

Amounts due to 
related parties 
£m 

3.8 
3.6 

45.8
49.8

16.0
9.7

The Company guaranteed bank and other borrowings of subsidiary undertakings amounting to £8.9m (2010: £8.6m) 

31 Events after the balance sheet date 
In June 2011, the Group completed a refinancing of its principal facilities, providing approximately £90m of debt capacity split between 
amortising term loans, a revolving credit facility and overdrafts in a mixture of Sterling and Euro currencies.  The term of the term loans  
and the revolving credit facility are to July 2015. 

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2011
£m 

2010
£m 

2009 
£m 

2008 
£m 

2007
£m 

486.8
298.0
10.9
21.2
(4.3)
16.9
(10.3)
6.6
(2.0)
4.6

243.3
67.0
(65.7)

679
6,072
61.2%
4.4%
2.2%
18.0p
6.8p
8.0p

516.6
316.0
28.2
34.1
(5.9)
28.2
(5.9)
22.3
(6.5)
15.8

247.1
71.2
(71.3)

703
6,206
61.2%
6.6%
5.5%
31.6p
23.5p
16.0p

482.8 
295.8 
22.3 
22.8 
(5.6) 
17.2 
(0.5) 
16.7 
(4.9) 
11.8 

265.8 
67.2 
(97.1) 

695 
6,155 
61.3% 
4.7% 
4.6% 
18.2p 
17.6p 
8.0p 

521.5 
323.1 
60.8 
63.4 
(1.3) 
62.1 
(2.6) 
59.5 
(16.7) 
42.8 

254.2 
74.3 
(57.5) 

675 
5,816 
62.0% 
12.2% 
11.7% 
63.5p 
63.2p 
52.0p 

475.9
290.8
68.8
59.5
(1.8)
57.7
9.3
67.0
(20.7)
46.3

184.9
68.0
(6.9)

621
5,397
61.1%
12.5%
14.5%
58.3p
68.2p
50.0p

66  

Group five year financial summary 

Summarised income statements: 
Revenue 
Gross profit 
Operating profit 
Underlying operating profit 
Net finance costs 
Underlying profit before tax 
Exceptional items 
Profit before tax 
Tax on ordinary activities 
Profit for the financial period 
Extracts from balance sheets: 
Non-current assets 
Net assets 
Net debt 
Ratios and statistics: 
Number of stores at period end 
Total space (sq ft – gross) ‘000 
Gross margin (%) 
Underlying operating margin (%) 
Operating margin (%) 
Underlying earnings per share (pence) 
Basic earnings per share (pence) 
Dividends per share (pence) 

Carpetright plc Annual report and accounts 2011

 
 
 
 
 
 
 
 
 
 
67

Independent auditors’ report to the members of Carpetright plc 

We have audited the financial statements of Carpetright plc for  
the 52 week period ended 30 April 2011 which comprise the Group 
Income Statement, the Group Statement of Comprehensive Income, 
the Group and Company Statements of Changes in Equity, the Group 
and Company Balance Sheets, the Group and Company Cash Flow 
Statements and the related notes.  The financial reporting 
framework that has been applied in their preparation is applicable 
law and International Financial Reporting Standards (IFRSs) as 
adopted by the European Union and, as regards the Parent 
Company financial statements, as applied in accordance with the 
provisions of the Companies Act 2006. 

Respective responsibilities of directors  
and auditors  
As explained more fully in the Statement of Directors’ Responsibilities, 
the Directors are responsible for the preparation of the financial 
statements and for being satisfied that they give a true and fair view.  
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.   

This report, including the opinions, has been prepared for and only 
for the Company’s members as a body in accordance with Chapter 3 
of Part 16 of the Companies Act 2006 and for no other purpose.   
We do not, in giving these opinions, accept or assume responsibility 
for any other purpose or to any other person to whom this report is 
shown or into whose hands it may come save where expressly agreed 
by our prior consent in writing. 

Scope of the audit of the financial statements  
An audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give reasonable 
assurance that the financial statements are free from material 
misstatement, whether caused by fraud or error.  This includes an 
assessment of: whether the accounting policies are appropriate to 
 the Group’s and the Parent Company’s circumstances and have been 
consistently applied and adequately disclosed; the reasonableness  
of significant accounting estimates made by the Directors; and  
the overall presentation of the financial statements.  In addition,  
we read all the financial and non-financial information in the  
annual report to identify material inconsistencies with the audited 
financial statements.  If we become aware of any apparent material 
misstatements or inconsistencies we consider the implications  
for our report. 

Opinion on financial statements  
In our opinion:  

•  the Parent Company financial statements have been properly 

prepared in accordance with IFRSs as adopted by the European 
Union 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 and, as regards the 
Group financial statements, Article 4 of the lAS Regulation.   

Opinion on other matters prescribed by the 
Companies Act 2006  
In our opinion:  

•  the part of the Directors’ Remuneration Report to be audited has 
been properly prepared in accordance with the Companies Act 
2006; and 

•  the information given in the Directors’ Report for the financial 

year for which the financial statements are prepared is consistent 
with the financial statements. 

Matters on which we are required to report  
by exception  
We have nothing to report in respect of the following:  

Under the Companies Act 2006 we are required 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 and the part of  
the Directors’ Remuneration Report to be audited 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. 

Under the Listing Rules we are required to review:  

•  the Directors’ statement, set out on page 27, in relation to  

going concern; 

•  the parts of the Corporate Governance Statement relating to the 

Company’s compliance with the nine provisions of the June 2008 
Combined Code specified for our review; and 

•  certain elements of the report to shareholders by the Board on 

Directors’ remuneration. 

•  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 30 April 2011 
and of the Group’s profit and the Group’s and Parent Company’s 
cash flows for the year then ended; 

•  the Group financial statements have been properly prepared in 
accordance with IFRSs as adopted by the European Union;  

John Ellis (Senior Statutory Auditor) 
for and on behalf of PricewaterhouseCoopers LLP 
Chartered Accountants and Statutory Auditors 
London 
27 June 2011 

www.carpetright.plc.uk

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68  

Calendar 

2011 
Q1 interim management statement 
Annual General Meeting 
First-half trading update 
First-half ends 
Interim results announcement 

2012 
Q3 interim management statement 
Second-half trading update 
Year ends 

Advisers 

Financial advisers 
Deutsche Bank AG 
1 Great Winchester Street 
London 
EC2N 2DB 

Solicitors 
Travers Smith LLP 
10 Snow Hill 
London 
EC1A 2AL 

Andrew Jackson 
Essex House 
Manor Street 
Hull 
East Yorkshire 
England 
HU1 1XH 

Carpetright plc Annual report and accounts 2011

2 August
8 September
25 October
29 October
13 December

31 January
24 April
28 April

Registrars 
Computershare Investor Services plc 
The Pavilions 
Bridgwater Road 
Bristol 
BS99 6ZY 

Company Secretary and 
Registered Office 
Mr Jeremy Sampson 
Carpetright plc 
Harris House 
Purfleet Bypass 
Purfleet 
Essex 
RM19 1TT 
Telephone: 01708 802000 

Stockbrokers 
Deutsche Bank AG 
1 Great Winchester Street 
London 
EC2N 2DB 

Peel Hunt 
111 Old Broad Street 
London 
EC2N 1PH 

Auditors 
PricewaterhouseCoopers LLP 
1 Embankment Place 
London 
WC2N 6RH 

Bankers 
National Westminster Bank plc 
Tooting Branch 
30 Tooting High Street 
London 
SW17 0RG 

 
 
 
 
 
Europe’s leading  
floor coverings retailer

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Harris House
Purfleet Bypass
Purfleet, Essex RM19 1TT

Telephone +44 (0)1708 802000

www.carpetright.co.uk
www.carpetright.plc.uk

Annual report and accounts 2011