Annual report
and accounts 2013
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About us
Carpetright plc is Europe’s leading
specialist floor covering retailer,
selling a wide range of carpets,
rugs, vinyls and laminates together
with associated accessories. We
have extended our product offering
to include beds in around half of
our stores.
The Group trades from 620 stores
organised and managed in two
geographical segments, the UK
and the Rest of Europe (comprising
the Netherlands, Belgium and the
Republic of Ireland).
Carpetright plc Annual report and accounts 2013
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Business review
Financial highlights
The Directors present their Annual Report to the shareholders together with the audited financial
statements for the financial year ended 27 April 2013. This report describes the results and activity
for the period, future plans, trends and factors affecting the development, position and performance
of the business.
Principal activities
We are Europe’s leading specialist floor covering retailer, selling a wide range of carpets, rugs, vinyls
and laminates together with associated accessories. We have extended our product offering to include
beds in around half of our stores.
We trade from 620 stores organised and managed in two geographical segments, the UK and the Rest
of Europe (comprising the Netherlands, Belgium and the Republic of Ireland).
We operate a cutting and distribution facility at Purfleet at which a significant proportion of
customers’ orders are cut-to measure and despatched to stores. These orders are generally delivered
and fitted using one of our recommended independent fitters. The majority of the remaining orders
are either purchased from stock in store, or ordered and delivered directly to customers’ homes by
the manufacturer.
Business review
Financial highlights
Group at a glance
Chairman’s statement
Chief Executive’s review
Business objective
and strategies
Financial review
Principal risks and
uncertainties
People
Corporate responsibility
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
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Financial highlights
Revenue
Underlying profit before tax1
Profit/(loss) before tax
Underlying earnings per share1
Basic earnings/(loss) per share
Dividend per share
52 weeks ended
27 April 2013
£457.6m
£9.7m
(£5.1m)
9.6p
(9.8p)
Nil
52 weeks ended
28 April 2012
£471.5m
£4.0m
£13.5m
4.5p
16.4p
Nil
Change
(2.9%)
142.5%
113.3%
1. Where this review makes reference to ‘Underlying’ these relate to profit/earnings before exceptional items.
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Business review continued
Group at a glance
Over
3,200
Colleagues
4
Countries
620
Stores
Store portfolio at 27 April 2013
UK
Standalone
Concessions
Total
Rest of Europe
Netherlands
Belgium
Republic of Ireland
Total
Group total
UK
478
Stores
Belgium
26
Stores
Republic
of Ireland
21
Stores
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
Sites
462
16
478
Sites
95
26
21
142
620
’000 Sq ft
4,124
29
4,153
’000 Sq ft
1,104
307
155
1,566
5,719
Netherlands
95
Stores
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Regional performance
UK
Revenue
Underlying operating profit
Trading space ’000 sq ft
Number of stores
Number of people
Rest of Europe
Revenue
Underlying operating profit
Trading space ’000 sq ft
Number of stores
Number of people
52 weeks ended
27 April 2013
52 weeks ended
28 April 2012
£381.6m £381.6m
£10.9m
£2.8m
4,153
478
2,663
4,270
490
2,718
£76.0m £89.9m
£0.5m
1,566
142
617
£5.2m
1,570
142
666
Revenue contribution: Group %
Profit contribution: Group %
People %
17%
4%
83%
19%
96%
Store portfolio: Regional % (sites)
Store portfolio: Regional % (sq ft)
23%
27%
77%
73%
UK
Rest of Europe
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Business review continued
Chairman’s statement
Lord Harris of Peckham
Chairman
“The backbone of the business and
the key to Carpetright’s future success
will be the quality of our service,
backed by the very best product
ranges at competitive prices.”
In my statement last year I noted that, while we expected economic
conditions to remain difficult for some time, we were encouraged
that we were beginning to see a positive impact from the self-help
actions we were taking. These two trends did indeed come to
characterise the year as a whole, with solid like-for-like sales growth
achieved in the UK being driven by self-help actions, in an overall
floor coverings market which we believe declined year on year. In
Europe, political and economic uncertainty continues to depress
consumer demand and this has impacted the Group particularly
hard in the Netherlands. Against this background it is therefore
encouraging to be able to report an improvement in underlying
Group profit and a further reduction in net debt.
Total revenue for the 52 weeks ended 27 April 2013 decreased by
2.9% to £457.6m (2012: £471.5m). Underlying profit before tax
increased by 142.5% to £9.7m (2012: £4.0m). After the impact of
exceptional items the loss before tax was £5.1m (2012: profit of
£13.5m) (further information on these items is contained in the
Financial Review). Underlying earnings per share increased to 9.6p
(2012: 4.5p) and basic loss per share was 9.8p (2012: earnings of
16.4p). During the period we have continued our focus on reducing
the Group’s net debt. It is therefore pleasing to announce that as at
27 April 2013 this has nearly halved to £10.2m (2012: £19.1m),
demonstrating the ability of the Group to continue to generate cash
even in these difficult times.
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
In my statement last year, I said we would look to restore payment
of a dividend when debt has been reduced, a sustained recovery is
evident and the financial results of the Group reflected this. Good
progress has been made on the debt and we believe our self-help
activities have momentum, although it is important to continue to
invest in these to improve the level of profitability. That said, the
economic environment continues to be uncertain and the Board
feel it is important to see a continued recovery before restoring the
dividend. The Board believes the difficult decision not to pay a
dividend is in the best interests of the business and the Board will
continue to review the dividend policy on a biannual basis.
In May 2012, Darren Shapland was appointed as Chief Executive
and he has made a huge contribution in his first year in this role.
Darren has established an Executive Committee to manage the
business on a day-to-day basis and I am working closely with them
to pass on the benefit of my knowledge and experience. As
anticipated, my active executive involvement will continue to
decrease over time as part of a progressive transfer to Darren
and the executive management team.
I would like to welcome Andrew Page who will be joining the Board,
as a Non-Executive Director, effective from 1 July 2013. I am sure
his experience and track record will enable him to make a valuable
contribution to the Board.
The backbone of the business and the key to Carpetright’s future
success will be the quality of our service, backed by the very best
product ranges at competitive prices. Each is key to guaranteeing
that our proposition continues to resonate with our customers.
The management team is striving to ensure that every colleague is
fully attuned to the need for continuous improvement in all of these
areas. I am sure that our colleagues in stores, distribution centres
and support offices will rise to the challenge, as it is their efforts that
really make the difference. Once again, on behalf of the Board, I
extend my thanks for their commitment this year.
Looking forward, we expect fragile consumer confidence will
continue to produce a weak floor coverings market. We are
concentrating on maintaining the momentum delivered by our
self-help actions taken during the year, whilst recognising within
our plans that economic conditions are likely to remain difficult
for some time.
Lord Harris of Peckham
Chairman
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Chief Executive’s review
Darren Shapland
Chief Executive
“The success of our self-help activities
in improving Group performance
during the period was particularly
encouraging, demonstrating that a
focus on factors within our control
can yield good results.
While we expect trading conditions
to remain challenging, we are
confident this combination of self-
help initiatives will underpin the
positive momentum of the Group.”
As the Chairman notes in his statement, the Group grew underlying
profits and generated cash during the year, with an encouraging
increase in UK retail store like-for-like sales and a significant
improvement in gross profit percentage year-on-year. In the Rest
of Europe, trading conditions in the Netherlands remained difficult
whilst progress has been made in the recovery plan for the Republic
of Ireland.
The improvement in the Group’s performance this year has been
driven, in large part, by the success of our programme of self-help
measures, a number of which were accelerated on conclusion of the
review completed immediately following my appointment as Chief
Executive in May 2012. The results from this package of initiatives
have been very encouraging and further potential exists in the
ongoing roll-out over the next two financial years.
The programme is concentrated on six elements, each of which is
discussed in more detail below:
1. Modernising the estate
2.
3.
4.
5.
6.
Adjusting the store portfolio
Enhancing our range of floor coverings and services
Optimising digital as part of a multi-channel offering
Developing our bed proposition
Delivering a step change in service
1. Modernising the estate
We are part way through a three year programme of refurbishing
the UK store estate, introducing an updated store design, with a
new, more contemporary feel, in which it is easier for customers
to shop. This has involved improving natural light, updating
signage, developing new layouts, replacing floor coverings and
upgrading in-store lighting.
We have focused on the 357 larger out-of-town stores of the estate,
those circa 8,000 sq ft and above, of which 244 are circa 10,000 sq ft,
including a bed department. This excludes 22 of our stores trading
under the Storey Carpets brand.
The typical spend per store is around £55k, with post-refurbishment
sales showing an increase of around 10% compared to the un-
invested estate, resulting in an average payback of about one year.
As some of these stores have now passed their first anniversary, it
has been encouraging to see they are continuing to show sales
growth above that of the un-invested estate.
Within this programme there were 57 smaller-scale refreshes of
newer stores which did not need a full refurbishment but required
some updating to align them to the latest look. These typically cost
around £20k per store.
To date, we have completed 186 modernisations, representing over
50% of this group of larger out-of-town stores, and the customer
response has been very positive. We aim to complete the
refurbishment of the remaining larger out-of-town stores over the
next two years.
At the same time as modernising the larger out-of-town locations
we have also been looking at our smaller format stores. We have 47
stores on high streets and a further 16 concessions sites, which tend
to be between 2,000-4,000 sq ft in size. We have trialled a ‘sample
only’ format in two stores, with a special ‘smooth flooring’ area and
extended ranges of roll stock samples, plus a dedicated area for
premium branded carpets within our range. While we are still
refining the proposition, the results have been strong enough to
support a plan to modernise the stores in this format.
Our last group of stores are the mid-size locations of around
4,000-8,000 sq ft, of which we have 36. Again we have trialled a new
format, with the focus on ‘sample only’ with a small takeaway range.
The results have been encouraging and we are looking to finalise
the elements of this mid-size format by October 2013.
Following the success of the UK plan, we have also commenced
a similar refurbishment programme in the Rest of Europe to adapt
to changing customer preferences. By the end of the year, we had
refurbished six stores with positive initial results. Although trading
conditions in this business remain challenging, we are planning a
further four store refurbishments in the first quarter of this financial
year, prior to assessing the potential for a further roll out.
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Business review continued
Chief Executive’s review continued
2. Adjusting the store portfolio
At the end of April 2013 we had 478 stores trading in the UK
and during the last 12 months we opened 11 stores and closed 23.
This net reduction is primarily the result of completing detailed
catchment analysis which identified a small number of overlaps,
where having more than one store in a town was not beneficial to
profit or cash flow. The new stores have been smaller than the estate
average. These are primarily high street stores located in the Greater
London area, where there is a high concentration of potential
customers who currently do not have easy access to a Carpetright
store. We have been encouraged by the early trading results and see
potential for a further 10-15 of these opportunities.
We continue to take a robust view at lease renewal, which provides
an opportunity to secure lower rental cost for future years. In the
period we achieved an average rent reduction of over 10% on the
current rent payable in respect of leases which were renewed and
exited seven poor performing stores. Within the next five years
20% of the estate has lease renewals scheduled.
In the Rest of Europe we had 142 stores trading as at the end
of April 2013. During the last 12 months we opened three stores
and closed three. We now have 13 stores operating a ‘sample only’
with a small takeaway range format, which has the benefit of lower
operating costs without negatively affecting customer choice.
This format allows us to reduce fixed occupancy costs by either
sub-letting or handing back space to the landlord, hence
increasing profit.
3. Enhancing our range of floor coverings
and services
In the current economic environment our customers are looking
harder than ever for value before making their purchase. Based on
our experience, we are adapting our ranges and promotional activity
to continue to offer the best prices across a broader flooring
selection, to strengthen our product authority as market leader and
maximise our market opportunity.
In the UK, in line with broadening our appeal to more affluent
customers, we introduced a selection of branded carpets at very
competitive prices, such as Brintons, Ulster and Westex, and sisal
and sea grass ranges to the majority of stores during the period. The
results have been encouraging, generating incremental sales.
Analysis indicates that more of our customers are choosing to have
their carpet fitted for them, rather than doing it themselves. As a
consequence, we are seeing a higher proportion of our ‘pay and take’
roll stock – which was traditionally taken home by the customer
from the store on the day of purchase – being fitted for the
customer. The trend has enabled us to introduce samples of these
products, enabling us to offer a wider selection, particularly in a
number of smaller stores.
A further area of opportunity is to develop our smooth flooring
selection in the UK, building on our extensive knowledge and
success in this market in continental Europe, where it has
traditionally made up a much greater proportion of the sales mix.
The roll out of our stocked laminate offering has continued and is
now in over 340 stores, alongside a laminate sample range available
in all stores. In addition, we introduced a competitive Luxury Vinyl
Tile (LVT) offer into 300 stores, with plans to extend this to over 440
Carpetright plc Annual report and accounts 2013
stores by the end of July 2013. Alongside this, we have introduced a
new range of engineered wood, which is also being rolled out over
the same time period. We continue to believe this category will
provide an area of growth, supported by the strength of our value
and service proposition.
In the Rest of Europe, we have adapted displays to broaden the
colour choice on our most popular roll stock ranges and introduced
LVT to all stores. In addition, we have introduced a distressed wood
collection along with sisal and sea grass, the latter two under the
branding of ‘Natural Collection’.
4. Optimising digital as part of a
multi-channel offering
Our customer research indicates that the nature of our product
means that the vast majority of customers prefer to visit a store to
make their purchase, to give them the opportunity to see and touch
their choice of floor covering. However, the internet is playing an
ever-increasing role in pre-purchase behaviour, becoming a vital
research tool for many customers and the rapid growth of smart
phone and tablet use also underlines the importance of having an
effective and integrated digital proposition.
We continued to develop and improve our online presence
during the period. By the end of the year, on a weekly basis we were
achieving an average of over 87,000 unique visitors to our website, a
21% increase on the same period last year and this has produced a
corresponding increase in appointment leads. Some of the increase
is attributable to an enhanced search engine optimisation
programme and increased investment in pay-per-click. The ability
to track attributable sales has given us encouragement to invest more
in this area this year. This initiative, alongside widening the range of
available samples, has helped to increase the volume of sample
requests by 70%. We have also continued to focus activity in
improving our conversion to sales ratio, through a call centre
manned by knowledgeable colleagues and by improved
follow-up at store level.
In the Rest of Europe, we are developing a process for appointment
leads and samples and improving the compatibility of our websites
on mobile devices. We expect to have this operational by the end of
the calendar year.
5. Developing our bed proposition
Beds provide an important complementary revenue stream, in
our UK business, to our core floor coverings offer and we believe
this category has significant further growth potential. We have
established a compelling offer with a typical in-store range of
between 25-35 beds available at market leading prices, backed up
by a good home delivery service. At the end of April 2013 the offer
‘Sleepright by Carpetright’ was trading from 271 stores (2012: 272
stores). The business delivered an increase in sales of 10.4% in the
year as a whole, with 5.6% in the first half and 15.2% in the second
half, giving an indication of the momentum being achieved. Beds
now represent 6.7% of total UK sales revenue (2012: 6.1%) and
10.8% of the sales mix in those stores where it is available. Our
biggest opportunity is now in building customer awareness that we
sell beds and, to support this, we are increasing our investment in
marketing activity focused on this area.
Carpetright plc Annual report and accounts 2013 By building on the lessons learnt in the UK we have looked to
replicate the bed proposition in the Netherlands, albeit adjusted
to reflect the needs of the local consumer. We have opened bed
departments in two stores as a trial and are rolling this out to four
more stores by the end of July. These will be evaluated by the end
of the calendar year.
6. Delivering a step change in service
In an environment where customers’ service expectations continue
to rise, we believe there is an opportunity to drive our customer
service standards higher and make them a real competitive
advantage. This view is supported by externally conducted market
research. Based on this research, during the year, we introduced
new point of sale and price tickets to improve the transparency of
our pricing. In addition, we invested in training to develop our
store colleagues to enable them to provide even better service to
our customers.
Mystery shopper visits provide a robust measure of our
performance, enabling recognition of the best stores and identifying
those where corrective action is needed when we have fallen short
of our expectations. Starting in late Summer 2012, we increased the
frequency of these visits with every store now getting at least one
visit every month. Simultaneously, all store colleagues received
training on selling and service standards and we have increased the
bonus and incentives for those who achieve the required standard.
As more customers place a premium on their time, we have seen a
growth in the number of customers who would like to make their
purchase decision in their own home. This trend underlines the
increasing importance of the role of the estimator in visiting
customers’ homes, providing a selected range of flooring and
measuring room(s). We are currently evaluating how we can
optimise this resource to provide a market leading service in this
area and, as a start, have commenced a programme of ‘mystery
shopper’ evaluation of our current performance and increased
our training in this area.
Our cutting and distribution centre at Purfleet provides a market
leading cut-to-measure service to our stores, together with short
lead times. This gives our store colleagues the ability to sell with the
confidence of meeting our customers’ expectation of fulfilling their
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order rapidly. Later this year, we are switching to a new transport
fleet, which will reduce our fuel consumption and enable us to
increase the proportion of products under centralised distribution.
The latter will free up time in store, to be invested in improving our
customer service.
In the majority of instances, the last contact point the customer
has with Carpetright is with the flooring fitter. In the UK, we
recommend the use of one of 1,284 fitters who have been
independently assessed and validated. To monitor the performance
of the fitter, customers are contacted after the fitting to seek
comments on their experience. This allows our store managers
to track individual performance and identify areas for improvement.
We are looking to improve the robustness of this process by
introducing automation in the capture of the customer comments.
We offer all our recommended fitters access to an independent
assessment and have broadened the numbers of disciplines to
support the expansion of our range into laminate and LVT.
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Outlook
Historically, trends in UK housing transactions and mortgage
approvals have been useful lead indicators of consumer demand in
our sector, bearing a positive correlation with floor covering sales.
Both of these indicators have recently shown some early signs of
improvement, although this is from a very low base and it remains
premature to call a wider recovery in the economy.
The success of our self-help activities in improving Group
performance during the period was particularly encouraging,
demonstrating that a focus on factors within our control can
yield good results.
While we expect trading conditions to remain challenging, we are
confident this combination of self-help initiatives will underpin the
positive momentum of the Group.
Darren Shapland
Chief Executive
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Business review continued
Business objectives and strategies
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:
Strategy
KPI
Definition
Modernising the estate
Introducing a new format with a more contemporary
feel in which it is easier for customers to shop.
Number of stores in
new format
The number of stores trading at the end of the
year in the new format.
Adjusting the portfolio
Managing our store base to exploit opportunities which
deliver better overall profitability.
Number of stores
The number of stores trading at the end of
the year.
Store space (’000 sq ft)
Store gross area, including both selling and
warehouse space (space occupied by sub tenants
is excluded).
Enhancing our range of floor coverings
and services
Ensuring we continually improve and develop our
flooring product ranges to provide consumers with a
market leading product choice which offers great value,
backed up by excellent customer service.
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 the financial year.
Stores closed during the year are excluded from
both years (calculated in local currency).
Gross Profit %
Gross profit as a percentage of net sales
(calculated in local currency).
Participation of sales
originated from online leads
Net sales completed online and those in stores
that are attributable to online leads.
Sales participation of beds
Net sales of beds as a proportion of total sales.
Costs as % of sales
Operating costs expressed as a percentage of net
sales (calculated in local currency).
Net debt
Value of net debt at year end.
Optimising digital as part of a
multi-channel offering
Extending the reach of Carpetright’s brand by
developing our online presence.
Developing our bed proposition
Developing a bed proposition as a complementary
revenue stream to our core floor coverings business,
offering consumers a wide choice at competitive prices.
Simplifying our processes and a focus on
cash management
To provide the flexibility to offer competitive prices and
improve our service, we have a programme of activity to
simplify and reduce the cost of processes, alongside a
focused approach to cash management.
Carpetright plc Annual report and accounts 2013
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Performance
Business
2013
2012
2011
2010
An extensive programme of refurbishment has resulted in 186
stores now trading in the new format.
UK
Initial stores modernised and format being refined.
We have opened 11 stores and closed 23.
We have opened three stores and closed three.
Europe
UK
Europe
186
32
n/a
6
n/a
478
490
142
142
n/a
539
140
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n/a
561
142
The reduction in stores numbers has resulted in a corresponding
decrease in square footage.
UK
4,153
4,270
4,514
4,626
Whilst store numbers are static, we have returned 4k sq ft of
surplus space to landlords.
Europe
1,566
1,570
1,558
1,580
Against a back drop of a challenging consumer environment,
self-help activities have delivered sales growth throughout
the year.
UK
The deterioration of customer confidence in the Netherlands has
had a significant impact, partially offset by the success of the
recovery plan in the Republic of Ireland.
Europe
2.2%
(0.2%)
(6.0%)
4.2%
(11.0%)
(1.2%)
(4.0%)
(6.2%)
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Good progress made on increasing gross profit through a
combination of better sourcing and promotional planning.
UK
61.5%
58.9%
62.2%
61.9%
Continued focus on better sourcing and promotional planning.
Europe
57.2%
57.0%
57.1%
58.5%
We have continued to develop and improve our online presence,
focusing activity on our conversion to sales ratio.
UK
5.2%
3.9%
2.1%
n/a
The development of the proposition has increased both sales and
mix participation.
UK
6.7%
6.1%
5.1%
3.5%
We have reduced our store cost base by 0.9% through
reduction in the number of stores and successful rent
negotiations. This was offset by an increase in advertising
supporting self-help activities.
Underlying costs decreased by 2.2% reflecting tight management
control and a focus on achieving efficiencies. This was partially
offset by the expected increased occupancy costs following the
sales and leaseback of four Belgian properties at the end of the
previous financial year.
UK
58.7%
58.2%
57.7%
55.0%
Europe
56.7%
52.5%
53.3%
51.6%
The cash generative nature of the business provided the funding
for the store modernisation programme and an overall reduction
in net debt.
Group
£10.2m
£19.1m
£65.7m
£71.3m
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www.carpetright.plc.ukBusiness reviewGovernanceFinancial statements
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Financial review
Neil Page
Group Finance Director
Highlights
A summary of the reported financial results for the year ended 27
April 2013 is set out below:
Revenue
Underlying operating profit1
Net finance charges
Underlying profit before tax1
Exceptional items
Profit/(loss) before tax
Earnings/(loss) per share (pence)
– underlying1
– basic
Dividends per share (pence)
Net debt
2013
£m
457.6
11.4
(1.7)
9.7
(14.8)
(5.1)
9.6
(9.8)
Nil
(10.2)
2012
£m
471.5
Change
(2.9%)
8.0 42.5%
(4.0) 57.5%
4.0 142.5%
9.5
13.5
4.5 113.3%
16.4
Nil
(19.1) £8.9m
1. Where this review makes reference to “Underlying” these relate to profit / earnings
before exceptional items.
Overview
Total sales decreased by 2.9% to £457.6m, with the UK business
being level and a decline in the Rest of Europe. During the year, the
Group opened 14 stores and closed 26 which gave a net decrease of
12 stores, with a total store base of 620. Total store space declined by
2.1% to 5.7 million square feet.
The challenging consumer environment in the UK is continuing to
impact the disposable incomes of our customers and subdued
mortgage approval volumes influence a lower level of activity within
our sector. Against this backdrop, our self-help actions continue to
deliver positive results. The key driver in the performance of the Rest
of Europe continues to be the deterioration of consumer confidence
in the Netherlands, where the floor coverings market remains weak.
Overall, Group underlying operating profit increased by 42.5% to
£11.4m. Underlying net finance charges were £2.3m lower at £1.7m, the
result of lower average net debt achieved, for the most part, through the
sale and leaseback of freehold properties in the latter part of the previous
financial year. These factors combined to generate an underlying profit
before tax of £9.7m, a 142.5% increase on the prior year.
Exceptional charges totalled £14.8m (2012: a surplus of £9.5m)
primarily from onerous lease provisions, net losses on the disposal of
property and non-cash impairment charges.
As a result, the loss before tax was £5.1m (2012: profit of £13.5m).
Basic loss per share was 9.8p reflecting the post tax loss (2012:
earnings of 16.4p).
The combination of cash flow from continued underlying
profitability and the level of net capital expenditure, enabled year-end
net debt to be reduced by £8.9m to £10.2m (2012: £19.1m). The cash
flow strength of the Group is highlighted by the fact that in the past
four years net debt has been reduced by over 89% from £97.1m as at
May 2009.
Performance by Business
For year to 27 April 2013
Revenue
UK
Rest of Europe
Total revenue
Underlying operating profit
UK
Rest of Europe
Total underlying operating profit
Underlying operating profit %
UK
Rest of Europe
Total underlying operating profit %
Total
£m
381.6
76.0
457.6
10.9
0.5
11.4
Year on Year Movement
Reported
Local Currency
Like-for-like1
Level
(15.5%)
(2.9%)
289.3%
(90.4%)
42.5%
(10.4%)
2.2%
(11.0%)
(90.5%)
2.2ppts
2.9%
(5.1ppts)
0.7%
2.5% 0.8%ppts
1. 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.
UK
Total UK revenue in the year was £381.6m, in line with the previous
sales, an increase of 2.6 percentage points. This improvement was
year. We opened 11 stores and closed 23 stores in the year, which
achieved in the floor covering margin through better sourcing and
translated into net space decline of 117,000 sq ft, a decrease of 2.7%.
promotional planning. The impact of the increase of bed sales at
Gross profit increased by 4.4% to £234.8m, representing 61.5% of
11
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a lower margin was offset by a corresponding decrease from our
wholesale business.
The total UK cost base increased by 0.9% compared with the prior
year to £223.9m (2012: £222.0m). Store payroll costs continue to be
managed closely to the volume of sales and increased by 0.2% to
£58.3m (2012: £57.6m). Store occupancy costs fell 0.9% to £126.4m
(2012: £127.5m) due to a net reduction in the number of stores,
successful rent negotiations and reduced depreciation, although this
was partially offset by utility and business rates inflation. The
underlying rent in like-for-like stores increased marginally by 0.3%
(2012: 0.2%), with the majority of rent reviews being settled at zero, a
reflection of the current economic climate. Marketing and central
support costs were up 5.7% at £39.2m (2012: £37.1m), primarily the
result of an increased investment in sales-driving advertising activity
supporting self-help initiatives and an increase in performance
related bonuses.
(2012: £2.8m).
2013
£m
381.6
2.2%
234.8
61.5%
(223.9)
10.9
2.9%
2012
£m
381.6
(0.2%)
224.8
58.9%
(222.0)
2.8
0.7%
Change
Level
4.4%
2.6ppts
(0.9%)
289.3%
2.2ppts
Store Numbers
Sq Ft (’000)
28 April 2012
Openings
Closures
27 April 2013
28 April 2012
27 April 2013
474
16
490
11
–
11
(23)
–
(23)
462
16
478
4,241
29
4,270
4,124
29
4,153
After taking into account the movement in the number of stores,
like-for-like sales for the year increased by 2.2% and can be
attributed to the following key factors:
i) The stores which have now been fully refurbished are reporting
sales increases around 10% above the underlying store base;
ii) The development of our bed business. This category now
makes up 6.7% of UK sales (2012: 6.1%);
iii) The introduction of an improved laminate range to
more stores;
iv) The increased use of digital media; and
v) A 54.4% decline in the wholesale businesses, which now
represents 1.5% of sales (2012: 3.3%). Whilst there remains
a market, the level of profitability available to Carpetright
has been significantly reduced by structural changes in the
insurance replacement market. This is likely to remain
a relatively small proportion of total sales for the
The progress made on the self-help initiatives was reflected in
the sales line with first half like-for-like sales up 0.8% and this
accelerated in the second half to 3.6%.
UK – Performance Review
The key financial results for the UK were:
Revenue
Like-for-like sales
Gross profit
Gross profit %
Costs
Underlying operating profit
Underlying operating profit %
The UK portfolio is now as follows:
Standalone
Concessions
Total
foreseeable future.
Underlying operating profit increased significantly to £10.9m
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
www.carpetright.plc.uk
UK
Total UK revenue in the year was £381.6m, in line with the previous
year. We opened 11 stores and closed 23 stores in the year, which
translated into net space decline of 117,000 sq ft, a decrease of 2.7%.
After taking into account the movement in the number of stores,
like-for-like sales for the year increased by 2.2% and can be
attributed to the following key factors:
i) The stores which have now been fully refurbished are reporting
sales increases around 10% above the underlying store base;
ii) The development of our bed business. This category now
makes up 6.7% of UK sales (2012: 6.1%);
iii) The introduction of an improved laminate range to
more stores;
iv) The increased use of digital media; and
v) A 54.4% decline in the wholesale businesses, which now
represents 1.5% of sales (2012: 3.3%). Whilst there remains
a market, the level of profitability available to Carpetright
has been significantly reduced by structural changes in the
insurance replacement market. This is likely to remain
a relatively small proportion of total sales for the
foreseeable future.
The progress made on the self-help initiatives was reflected in
the sales line with first half like-for-like sales up 0.8% and this
accelerated in the second half to 3.6%.
UK – Performance Review
The key financial results for the UK were:
Revenue
Like-for-like sales
Gross profit
Gross profit %
Costs
Underlying operating profit
Underlying operating profit %
The UK portfolio is now as follows:
Standalone
Concessions
Total
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Gross profit increased by 4.4% to £234.8m, representing 61.5% of
sales, an increase of 2.6 percentage points. This improvement was
achieved in the floor covering margin through better sourcing and
promotional planning. The impact of the increase of bed sales at
a lower margin was offset by a corresponding decrease from our
wholesale business.
The total UK cost base increased by 0.9% compared with the prior
year to £223.9m (2012: £222.0m). Store payroll costs continue to be
managed closely to the volume of sales and increased by 0.2% to
£58.3m (2012: £57.6m). Store occupancy costs fell 0.9% to £126.4m
(2012: £127.5m) due to a net reduction in the number of stores,
successful rent negotiations and reduced depreciation, although this
was partially offset by utility and business rates inflation. The
underlying rent in like-for-like stores increased marginally by 0.3%
(2012: 0.2%), with the majority of rent reviews being settled at zero, a
reflection of the current economic climate. Marketing and central
support costs were up 5.7% at £39.2m (2012: £37.1m), primarily the
result of an increased investment in sales-driving advertising activity
supporting self-help initiatives and an increase in performance
related bonuses.
Underlying operating profit increased significantly to £10.9m
(2012: £2.8m).
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2013
£m
381.6
2.2%
234.8
61.5%
(223.9)
10.9
2.9%
2012
£m
381.6
(0.2%)
224.8
58.9%
(222.0)
2.8
0.7%
Change
Level
4.4%
2.6ppts
(0.9%)
289.3%
2.2ppts
Store Numbers
Sq Ft (’000)
28 April 2012
474
16
490
Openings
11
–
11
Closures
(23)
–
(23)
27 April 2013
462
16
478
28 April 2012
4,241
29
4,270
27 April 2013
4,124
29
4,153
www.carpetright.plc.uk
www.carpetright.plc.ukBusiness reviewGovernanceFinancial statements
1212
Business review continued
Financial review continued
Rest of Europe
In the Netherlands, following the implementation of government
austerity measures which adversely affected consumer confidence,
the flooring market was weak. This resulted in an extremely
challenging year for our business. Belgium also faced a difficult
period with a similar package of austerity measures, although our
sales were not as severely impacted. Whilst in the Republic of
Ireland we achieved consistent sales growth throughout the year, as
our recovery plan continues to gain momentum.
The three businesses combined to produce a total sales decline
of 10.4% in local currency, with like-for-like sales decreasing by
11.0%. After exchange rate movements, total sales fell 15.5% in
reported revenue.
Gross profit percentage increased marginally to 57.2% (2012:
57.0%), but was not enough to offset the decline in sales, resulting in
a decline of gross profit to £43.5m (2012: £51.2m). In local currency
terms, this represented a 9.7% decline.
Reported operating costs decreased by 6.5% to £43.0m. In local
currency terms, costs decreased by 0.3%, which included an
additional £0.8m of occupancy costs following the sale and leaseback
disposal of four freehold properties in Belgium at the end of the last
financial year. The reduction in the remaining costs reflects tight
management control and a focus on achieving efficiencies.
The net result was an underlying operating profit of £0.5m (2012:
£5.2m). In local currency terms, the underlying profit decreased
by 90.5%.
Rest of Europe – Performance Review
The key financial results for the Rest of Europe were:
Revenue
Like-for-like sales
Gross profit
Gross profit %
Costs
Underlying operating profit
Underlying operating profit %
2013
£m
76.0
(11.0%)
43.5
57.2%
(43.0)
0.5
0.7%
2012
£m
89.9
(1.2%)
51.2
57.0%
(46.0)
5.2
5.8%
Change
(Reported)
(15.5%)
Change
(Local Currency)
(10.4%)
(15.0%)
0.2ppts
6.5%
(90.4%)
(5.1ppts)
(9.7%)
0.3%
(90.5%)
The Rest of Europe portfolio is now as follows:
Netherlands
Belgium
Republic of Ireland
Total
Store Numbers
Sq Ft (’000)
28 April 2012
94
28
20
142
Openings
1
1
1
3
Closures
–
(3)
–
(3)
27 April 2013
95
26
21
142
28 April 2012
1,094
329
147
1,570
27 April 2013
1,104
307
155
1,566
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
1313
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Dividend
Whilst recognising good progress has been made in reducing our
debt and there has been some encouragement in the increase of the
level of underlying profitability, the current economic environment
continues to be uncertain. As a result, the Board feels it is important
to see a continued recovery in Group performance before restoring the
dividend. The Board has therefore decided not to pay a final dividend
(2012: nil pence), resulting in no full year dividend (2012: nil pence).
Balance Sheet
The Group had net assets of £65.3m (2012: £70.7m) at the end of the
year, a decrease of £5.4m since 28 April 2012, reflecting the post tax
loss for the year.
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Freehold and long leasehold property
Other non current assets
Stock
Trade & other current assets
Creditors < 1 year
Creditors > 1 year
Net Debt
Pension Deficit
Net Assets
27 April 2013
£m
75.0
118.0
37.6
19.8
(103.2)
(66.6)
(10.2)
(5.1)
65.3
28 April 2012
£m
83.3
121.9
38.3
24.1
(110.2)
(63.3)
(19.1)
(4.3)
70.7
Net debt and cash flow
The cash generative nature of the business remains one of the
strengths of the Group, with operating cash flow of £17.4m in the
year (2012: £29.1m).
The increase in working capital in the year was attributable to the
decline in merchandise creditors in the Netherlands, a consequence
of the lower sales, the net amortisation of property lease incentives
and the reversal of a timing difference from the previous year related
to payment of UK VAT. The payment for provisions reflects the
cash outgoing for previous years’ exceptional items, predominantly
onerous leases in the UK and Republic of Ireland.
Cash Flow
Underlying operating profit
Depreciation and other non-cash items
Exceptional items
(Increase)/Decrease in stock
(Increase)/Decrease in working capital
Provisions paid
Operating cash flow
Net interest paid
Corporation tax paid
Net capital receipts/(expenditure)
Free cash flow
Other
Movement in net debt
Opening net debt
Closing net debt
2013
£m
11.4
14.6
–
1.0
(6.2)
(3.4)
17.4
(1.4)
(1.4)
(6.6)
8.0
0.9
8.9
(19.1)
(10.2)
2012
£m
8.0
14.8
(1.6)
(0.4)
13.3
(5.0)
29.1
(4.9)
(3.0)
22.8
44.0
2.6
46.6
(65.7)
(19.1)
www.carpetright.plc.uk
Net Finance Costs and Taxation
Underlying net finance charges were £1.7m (2012: £4.0m) reflecting
lower average net debt and a reduction in the margin rates on
borrowings. The effective tax rate on profits is 29.3% (2012: 18.7%).
This increase arises as a combination of non-recurring adjustments
in the prior year and the impact of a change in UK tax rates.
Exceptional Items
The Group recorded a net charge of £14.8m (2012: surplus of £9.5m)
in the year.
Profit/(loss) on disposal of properties
Onerous lease charge
Impairment charge – store assets
impairment charge – freehold property
Restructuring costs
Write off of unamortised refinancing fees
(Charge)/Gain
2013
£m
(1.2)
(8.1)
(0.3)
(5.2)
–
–
(14.8)
2012
£m
13.4
(0.3)
(1.0)
–
(2.1)
(0.5)
9.5
We continued to trade our property portfolio, although the
deterioration in the UK out-of-town retail property market has
made this more challenging. A net loss of £1.2m was made on
property disposals in the year (2012: profit of £13.4m).
During the period, a property portfolio review was completed. This
resulted in the closure of 11 stores previously trading under the
‘Storey Carpets’ brand. In all of these locations there is a
‘Carpetright’ store in close proximity. As expected, a proportion of
the sales have transferred to nearby stores with an annualised benefit
to profit to be around £1m. In addition, we have had leases for two
stores return under privity of contract following their current
occupier’s administration. As a result, along with three other
closures, the Group is making an onerous lease provision for the
estimated future outgoings of these stores of £5.4m. In April 2011,
we made onerous lease provisions for 20 UK stores, we have
disposed of eight of these, leaving 12, where in the light of the
deterioration of the out-of-town property market, the provision has
been reviewed and increased by £2.7m.
We have reviewed the carrying value of the store assets in our
balance sheet, consistent with the approach in previous years. The
model used to value these assets includes a number of assumptions
relating to market growth and inflationary expectations. These tests
have led to a net impairment charge of £0.3m (2012: £1.0m).
Historically, the Group has made net gains on disposal of freehold
properties and has a track record of overachievement against
valuations. Nevertheless, the weakening of the property market in
both the UK and the Netherlands, with more properties being
returned to landlords, has led us to review the carrying value of the
Group’s freehold properties. This has resulted in a non-cash
impairment charge of £5.2m.
Earnings per Share
Basic loss per share was 9.8 pence (2012: earnings of 16.4 pence),
reflecting the post tax loss. Underlying earnings per share increased
to 9.6 pence (2012: 4.5 pence).
www.carpetright.plc.ukBusiness reviewGovernanceFinancial statements
1414
Business review continued
Financial review continued
Net capital receipts/(expenditure) was an outflow of £6.6m (2012:
inflow of £22.8m). This can be broken down into the following
principal categories:
Current liquidity
At the year end the Group held cash balances of £7.9m (2012:
£9.6m) principally a combination of Sterling and Euros.
Gross bank borrowings at the balance sheet date were £15.5m (2012:
£26.0m) of which £1.6m is term based with the balance of £13.9m
being drawn down from overdraft and revolving credit facilities.
The Group had further undrawn, committed facilities of £46.7m at
the balance sheet date.
In June 2011, the Group completed a refinancing arrangement of its
principal facilities, 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. As at 27 April 2013, the facilities provided debt capacity
of around £63m. Arrangement fees and legal costs are amortised
over the period to June 2014, although paid in cash at the outset.
The facilities contain financial covenants which are tested on a
quarterly basis. The Group monitors actual and prospective
compliance with these on a regular basis.
Neil Page
Group Finance Director
Capital expenditure
Purchase of freehold properties
Proceeds from freehold property
disposals
Proceeds from leasehold property
disposals
Net capital receipts/(expenditure)
2013
£m
(9.6)
(1.6)
2012
£m
(6.9)
(3.7)
2.7
32.0
1.9
(6.6)
1.4
22.8
After the repayment of borrowings, net debt decreased by £8.9m to
£10.2m at the year end (2012: £19.1m).
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 £79.7m at the year-end
(2012: £86.6m), compared to a net book value of £73.6m recorded in
the financial statements (2012: £81.8m). The movement in the year
is predominantly the result of recognising weaker property markets.
Pensions
The IAS 19 valuation as at 27 April 2013 was a net deficit of £5.1m in
relation to defined benefit pension arrangements (2012: £4.3m).
The Carpetright scheme closed to future accrual on 30 April 2010.
Plan assets increased to £21.7m (2012: £18.3m) driven by higher
market values and additional Company contributions agreed with
the pension trustees following the triennial valuation in April 2011.
The present value of plan liabilities increased to £26.8m (2012:
£22.6m) driven principally by a reduction in the discount rate to
4.2% (2012: 4.6%).
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
Principal risks and uncertainties
1515
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Carpetright recognises that effective business management requires regular
review of business risks to identify, evaluate and prioritise them, to assign
management ownership and to ensure appropriate controls are in place to
provide mitigation.
The process for identification of business risks is described on page 24 of this report.
The risk factors addressed below are those which we believe could adversely affect 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
effect on the Group.
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We use our risk management process to identify, monitor, evaluate and escalate such issues as they emerge, enabling management to take
appropriate action wherever possible in order to control them and also enabling the Board to keep risk management under review.
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. The strategies that
we are following to achieve this are set out on page 8 of this report. We face a number of strategic and operational risks which are set out
below, together with the controls and actions which mitigate the impact of those risks.
Risk Description
Mitigation
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Development and execution of a strategy:
The business requires a strategy that responds to the challenges
of the market place so as to position itself for long-term growth.
Economic uncertainty:
The economy is a major influence on consumer spending.
Trends in employment, inflation, taxation, consumer debt levels
and interest rates impact consumer expenditure in discretionary
areas. Changes in Government policies may also affect our
consumers’ ability to purchase our products and services.
Cost control:
In the event we are unable to control our costs the financial
results of the Group will be adversely affected.
Reputation:
The failure to properly mitigate and manage other risks may
manifest itself by damaging Carpetright’s reputation. This may
lead to a lack of confidence by consumers, thereby adversely
affecting the business.
The Board holds an annual strategy day and from this
business plans are developed to ensure targets are both set
and resourced appropriately.
Regular monitoring of performance against plan is carried out
to ensure targets are being achieved and that they remain relevant
to and focused on the Group strategy.
Throughout the year we have continued to monitor the
effectiveness of our pricing, promotional and marketing
strategies across our businesses, tailoring our consumer
offering where appropriate.
We have a budgetary and planning process which has been
developed to ensure that there is an appropriate budget for both
operational costs and capital expenditure. There is a system of
authorisation to prevent costs being incurred without appropriate
authorisation and being in excess of budget.
In addition we continually focus on our cost base to ensure that
we are able to manage our margins.
We have mitigation strategies in place to manage our other risks,
thereby reducing the chance of them arising. In the event that
there is a threat of reputational damage, there is a process in place
to deal with enquiries from the press, investors and others, as well
as social media.
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People:
Our profitability is dependent upon our ability to attract, retain
and motivate people across all levels of the business.
We invest in training to develop our colleagues to provide great
service to our customers. Our approach to remuneration aims to
ensure that high calibre executives are attracted and retained.
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www.carpetright.plc.ukBusiness reviewGovernanceFinancial statements
1616
Business review continued
Principal risks and uncertainties continued
Risk Description
Product and service quality:
Mitigation
The Carpetright name is a key asset of the business and as the
largest operator in its markets, expectations of the Group are
high. Failure to provide high quality products and services
could lead to a loss of trust and confidence, and damage the
Group’s reputation and brand. This could result in a decline in
the customer base and affect the ability to recruit good people.
IT systems, supply chain and business continuity:
Carpetright is dependent on the reliability and capability of key
information systems and technology. A major incident or
sustained performance problems with regard to store, logistics,
multi-channel or support office systems could constitute a
significant threat to the business, at least in the short term.
Compliance:
The Group risks incurring penalties or punitive damages
arising from failure to comply with legislative or regulatory
requirements across many areas.
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The protection of the Carpetright brand and position in its core
markets will be sustained by unique and extensive product and
service offerings in our stores. Colleague and fitter training is
delivered continually with fitters being independently assessed.
Business continuity plans have been documented and
arrangements made to mitigate significant risks arising. The
systems implemented within the UK and the Republic of Ireland
are mirrored in a separate location. Plans are in place to replicate
this in the remaining European businesses by the end of
September 2013.
The Group has developed clear policies on compliance and it is
the Group’s Legal Director’s responsibility to identify prospective
changes to laws and regulations and to bring these to the
attention of the relevant people.
Finance and Treasury:
The Group risks exposure to exchange rate, interest rate,
liquidity and credit risks having an adverse or unexpected
impact on results, funding requirements or purchasing ability.
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The Group frequently reviews its financial position to ensure
that its funding requirements are being met. Bank covenant
tests are regularly monitored. Rolling cash flow forecasts are
produced weekly.
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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 surveys, conferences,
management briefings, weekly briefings broadcast to stores and
offices, and other less formal communications. Additionally, all
annual results and interim management statements are made
available through the intranet. Directors and senior management
regularly visit stores and discuss matters of current interest and
concern with colleagues.
Share ownership
Colleagues have an opportunity to invest in the Company’s shares
and through two all-employee share schemes, namely an
All Employee Share Ownership Plan and a Savings Related Share
Option Scheme. Approximately 500 colleagues participate in
these schemes.
People
The Group employs over 3,200
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
matters of concern to be raised 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 individual 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 people the skills they need to carry out their jobs and
in due course to move up to new roles, enabling them to develop
their careers and ensuring that there is a pipeline of talent within
the Group.
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
1717
Corporate responsibility
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 colleagues and our customers, will
also help us to enhance shareholder returns. The Customer and
Corporate Responsibility Committee was created on 1 July 2012 and
oversees, amongst other matters, the Group’s CR activities. Martin
Harris is the Executive Director responsible for co-ordinating the
Group’s CR activities. Details of the number of meetings and
attendance are set out on page 22.
We have continued developing and improving policies to cover
the following:
Providing excellent service
Our aim is to provide an outstanding customer experience by selling
a comprehensive range of products at the keenest prices, supported
by dedicated store teams and, where required, by organising a high
quality estimating and fitting service.
One of the streams in our strategic plan is delivering a step change
in service delivery as we believe that this can help significantly
differentiate us from our competitors.
Post-sales calls to customers were introduced in the UK in winter
2011/12, allowing immediate feedback thereby ensuring that any
issues can be immediately addressed by the relevant store. We also
introduced this process in the Rest of Europe in March 2013.
In the Netherlands we introduced an online customer satisfaction
survey with a response rate of nearly 60% and were very encouraged
by the results, with the majority of our customers ranking us ‘good’
or ‘very good’ in all areas of service and over 97% of the respondents
saying they would recommend Carpetright.
In the UK we undertake a mystery shopping programme which
assesses the customer service and selling skills of our store
colleagues. Part of their overall remuneration is based upon their
success in achieving high customer service scores. During 2013/14
we will be rolling this out to our estimators.
We have identified that the estimating service is very important to
the overall customer experience. We are therefore increasing our
training to improve our estimating service, and this will remain a
focus for the company.
We do not employ our own fitters in the UK but instead have a
commercial arrangement to introduce those fitters in whose skills
we have confidence and recommend to our customers. 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. As at 27 April 2013 we would recommend 1,284
independent fitters who have been independently assessed by FITA.
We also ensure that fitters carry public liability insurance.
We will be developing our colleagues in 2013/14 in order to
underpin our provision of excellent service and our targets for this
are included in the ‘Developing committed people’ section below.
For the financial year 2013/14 our targets are:
• To achieve 100% post-sales calls in the UK;
• To improve our mystery shopper scores in the UK;
• To introduce fitters’ identity cards to Northern Ireland and
the Republic of Ireland;
• To introduce a quality assurance programme to ensure
that recommended fitters in the UK continue to meet the
required standards;
• To ensure all recommended fitters in the Netherlands and
Belgium meet or exceed the same standards as those in the
UK; and
• To introduce a fitters’ Code of Conduct in Belgium and
the Netherlands.
Developing committed people
As at 27 April 2013 we employed 3,280 colleagues in stores,
distribution centres and offices throughout the UK and the Rest of
Europe. Our aims are to ensure everyone has the appropriate skills
and knowledge; to offer our people a good range of benefits; and to
value and promote the diversity of our workforce.
In the UK over 2,500 man-days of training were undertaken, in
addition to on-line Health and Safety training. This training is
intended to develop our colleagues and enable them to provide
great service to our customers.
In Europe, we targeted our training towards our colleagues in stores,
focussing on product training to enable them to provide a great
service to our customers. Additionally eLearning training was rolled
out. Furthermore all store managers and assistant managers in the
Netherlands and Belgium have undergone management skills
training appropriate to their position.
Our colleagues in the Netherlands participate in a 10 mile run to
raise money for a children’s cancer charity which is aiming to build
a hospital in the Utrecht area, and in 2013 members of the Executive
Team will be joining them.
For the financial year 2013/14 our targets are:
• To deliver a training programme for every estimator and store
manager in the UK;
• To deliver product knowledge training to every store-based
colleague in the UK on beds, smooth floor coverings and carpets;
• To provide refresher training on measuring and planning to
every store-based colleague in the UK;
• To ensure every new colleague attends a structured
induction programme;
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www.carpetright.plc.uk
1818
Business review continued
Corporate responsibility continued
• To design and deliver eLearning packages on all products
for availability via the Company’s intranet;
• To test the core competencies of all store based colleagues in
the Netherlands and Belgium through an on-line platform to
prove competency levels and identify any specific training
requirements; and
• To introduce a management training programme for high
potential store managers in the Netherlands and Belgium
as preparation for more senior positions in the future.
Sourcing great products
We are committed to buying our products from suppliers who
operate responsibly. Our aims are to ensure suppliers are subject
to vetting for satisfactory ethics and procedures, to insist our
product suppliers sign up to the Carpetright Ethical and
Environmental Code of Conduct, and to ensure we act in a
responsible and ethical manner. This covers matters such as the
prohibition of the use of child and forced labour, freedom of
association and the provision of safe and hygienic working
conditions. In respect of the products, the Code of Conduct
prohibits the use of certain chemicals and includes a timber policy
to ensure all timber floor covering products are manufactured
from sustainable resources.
All floor covering and bed suppliers to our businesses both in the
UK and in the Rest of Europe have signed up to compliance with
our Code of Conduct.
Our product suppliers are, principally, based in Europe, which
means that less fuel is used in transporting the products than if
we sourced from further afield.
We now sell Luxury Vinyl Tiles which are made from 40%
recycled materials and which are, themselves, 100% recyclable.
Further, both sisal and sea-grass products are now available in
the majority of our stores.
For the financial year 2013/14 our targets are:
• To grow our sales of Luxury Vinyl Tiles;
• To introduce a carpet collection made partly from maize in the
Netherlands and Belgium; and
• To identify and source products from suppliers who use
techniques that reduce raw materials usage in the carpet
manufacturing process.
Creating a safe place to work and shop
We are committed to achieving high standards of health and safety
in all operational areas.
Quarterly Health and Safety Committee meetings take place in all
business units. We are pleased to report that there have not been
any fatalities again this year (2012: nil). There has been an increase
in the overall level of accidents in the UK to 116 (2012: 110).
Pleasingly, the number of serious accidents that are reportable to the
Health and Safety Executive decreased in the period to 11 (2012: 12),
and there were 3 (2012: 7) accidents in the Rest of Europe which
would have been reportable had they occurred in the UK.
Carpetright plc Annual report and accounts 2013
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. In Europe manual handling training was undertaken
by all colleagues in the Netherlands and Belgium.
The Health and Safety manual used in the UK is being translated
and revised for use in the Rest of Europe.
For the financial year 2013/14 our targets are:
• To deliver the remaining 225 Easylift devices and associated
training, thereby ensuring all stores in the UK and RoI that have
rollstock have an Easylift device;
• For our European business, to translate, revise and launch health
and safety procedures manual as documented in our UK manual;
• To assess an automated ‘roll-on’ device for easily rolling roll-stock
onto standard European roll-stock stands; and
• To implement a programme to replace all non-standard
roll-stock stands in the UK with standard stands as they are
easier to maintain.
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.
In the UK we make our own cardboard tubes on site, thereby
reducing the cost of delivery of what is, essentially, air in the centre
of the tubes. Where possible we re-use cardboard tubes. Sheet
polythene wrapping and cardboard tubes that are not re-used but
are delivered within the UK (excluding Northern Ireland) from our
main distribution centre are recycled. No waste produced from our
store support office, warehouse and distribution centre is sent to
landfill; general rubbish being compacted and incinerated to
produce energy. Currently other waste from stores is sent to landfill,
although we aim to address this in the forthcoming financial year.
In Belgium and the Netherlands sheet polythene wrapping around
our carpets is also collected and recycled.
We continue to consider whether there are opportunities to recycle
of end-of-use carpets. A mattress recycling service is offered to our
customers in the Netherlands.
We were able to reduce our water consumption in the UK
by approximately a third during the year, and nearly half
measured over the last two years, which has been achieved
through improved analysis of consumption data and
identification of any high-use locations.
We are trialling different forms of energy-efficient lighting and,
where a store undergoes a full refurbishment, it is the intention to
install such lighting at that location.
Carpetright plc Annual report and accounts 2013 19
19
Nearly 60% of the eligible property portfolio in the UK now
has Automatic Meter Reading (AMR) electricity meters, which
provide daily meter reading data and allows us to target any high-
consumption locations, understand why the usage is higher than
anticipated and manage our consumption appropriately. AMR
electricity meters were also installed in 92% of stores in the
Netherlands where installation is possible, although it is too early
to assess their success.
Approximately 72% of our eligible property portfolio in the UK
now has gas AMR meters, enabling us to monitor gas consumption
in a similar way to electricity consumption. This has enabled us to
identify stores that were, for example, leaving heating on overnight.
In the Netherlands 80% of stores of the eligible property portfolio
has had AMR meters installed.
For the financial year 2013/14 our targets are:
• To explore the potential to introduce movement sensitive lighting
to our main UK distribution and cutting warehouse;
• To install a further 108 gas AMR meters in the UK, completing
the roll-out to all eligible trading stores;
• To install a further 186 electricity AMR meters in the UK,
completing the roll-out to all eligible trading stores;
• To divert all waste generated by stores in the UK (excluding
Northern Ireland) from landfill to either recycling or incineration
to produce electricity;
• To provide a bed recycling service in the UK; and
• To introduce a new, more energy efficient, fleet of lorries.
Our key measures within CR are:
Key Initiative
Providing Great Service
Indicator
Complaints per £1m of sales in
the UK1
Complaints per €1m of sales in the
Rest of Europe
Developing Committed People Number of man-days training in
the UK2
Number of man-days training in the
Netherlands and Belgium
2013
5.8
Progress
2012
11.3 We attribute the reduction to the success of
post-sales calls to customers and greater focus
on customer satisfaction.
5.8
3.7 The figure for 2013 includes complaints
submitted via our website. It is not practicable
to restate the prior year.
– Comparative figures are not available for 2012.
– Comparative figures are not available for 2012.
2,500
376
Number of accidents in the UK
116
110 There is no common factor which we can
Creating a Safe Place to Work
and Shop
Respect for the Environment
Number of accidents in the
Rest of Europe
Number of reportable accidents
in the UK
Number of accidents in the Rest of
Europe which would have been
reportable if they occurred in the UK
Energy efficiency – kWh/sq m of sales
space in the UK3,4
Energy efficiency – kWh/sq m of sales
space in the Netherlands4,5
Energy efficiency – km/litre
of delivery fleet6
Recycling in tonnes6
168
3.45
2,402
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11
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attribute to the accidents that have occurred.
17 The number of accidents has reduced,
with the most significant decline in
serious accidents.
12 A reduction in reportable accidents in our
stores, but an increase in the principal
warehouse, with no common factor found.
7 The number of serious accidents declined
by over half.
255
207 The increase is principally due to a cold
winter and spring, necessitating increased
heating in stores.
– Comparative figures are not available for 2012.
3.52 Our fleet is ageing and we aim to replace it in
2013/14 with more fuel-efficient vehicles.
2,366 There has been an increase in stocked product
lines, which allows us to recycle packaging
which was not received previously.
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1. Excludes internet sales but includes the Republic of Ireland.
4. Based on estimated meter readings.
2. Number of actual man-days is in excess of this number.
5. Based on calendar year ending 31 December 2012.
3. Figures are for the UK store estate only. 2012 figure is actual, restated from
6. Figures are for UK and Republic of Ireland only.
estimated figure published in 2012.
www.carpetright.plc.uk
www.carpetright.plc.uk
2020
Governance
Board of Directors
Lord Harris of Peckham (70)
Chairman
Lord Harris is now in his 56th 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. He stepped down from the position of
Chief Executive of Carpetright in May 2012.
Darren Shapland (46)
Chief Executive
Darren took up his current role as Chief Executive in May 2012.
He was a Non-Executive Director of Carpetright between September
2011 and May 2012. He was previously an Executive Director of
J Sainsbury plc until July 2011 in the roles as its Chief Financial
Officer and its Group Development Director and was Chairman
of Sainsbury’s Bank plc until February 2013. He was the Group
Finance Director of Carpetright between 2002 and 2005, and prior
to that was the Finance Director of Superdrug Stores plc. Between
1988 and 2000 he held a number of financial and operational roles
at Arcadia plc (formerly The Burton Group). He is also a
Non-Executive Director of Ladbrokes plc where he chairs its
Audit Committee.
Neil Page (49)
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.
Martin Harris (44)
Group Development Director
Martin Harris took up his current role as Group Development
Director in May 2013 and is responsible for the development of all
aspects of Carpetright’s customer-facing activities, including store
development, marketing and the further evolution of the digital
channel marketing. Martin is also responsible for our Corporate
Responsibility programme. 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
Executive Director position of Buying Director in 2002. He was the
Group Commercial Director from 2003 until May 2013 with
responsibility for buying, logistics and marketing.
Baroness Noakes (64)
Deputy Chairman and Senior Independent Director
Baroness Noakes, a chartered accountant, joined the Board in
February 2001. She is a Non-Executive Director of Severn Trent plc,
the Royal Bank of Scotland Group plc and is 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 was appointed Deputy Chairman in
May 2012. She chairs the Nomination Committee.
Alan Dickinson (62)
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 Royal Bank of Scotland (RBS) Group and Chief
Executive of both RBS UK and the bank’s UK Corporate Banking
business. He is also Chairman of Brown Shipley and a Non-
Executive Director of the Nationwide Building Society, Frogmore
Property Company Limited and Willis Limited. He chairs the
Remuneration Committee.
Sandra Turner (60)
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 McBride plc,
Countrywide plc and Huhtamäki Oyj and was previously a Non-
Executive Director of Northern Foods plc. She chairs the Customer
and Corporate Responsibility Committee.
David Clifford (61)
Non-Executive Director
David Clifford, a chartered accountant, joined the Board in
December 2011. He was previously a senior partner with KPMG.
Throughout his career he held a variety of roles and led the
Consumer Markets Unit of KPMG for a period, advising a number
of retailers. He is a Trustee and the Treasurer of the Gurkha Welfare
Trust. He chairs the Audit Committee.
Andrew Page (54)
Non-Executive Director
Andrew will join the Board in July 2013. He is the Chief
Executive of The Restaurant Group plc. Prior to joining The
Restaurant Group plc, he held a number of senior positions in the
leisure and hospitality industry including Senior Vice President
with InterContinental Hotels and Finance Director of Hanover
International plc. Prior to that, Andrew spent six years as a
Corporate Financier with Kleinwort Benson, having trained and
qualified as a Chartered Accountant.
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013 Corporate governance
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 Corporate Governance Code published by the
Financial Reporting Council.
The structure of the Board and its Committees is set out below:
Carpetright plc Board of Directors
Audit
Committee
Nomination
Committee
Remuneration
Committee
Customer
and Corporate
Responsibility
Committee
The Board
Details of the number of meetings and Board attendance are
set out below:
Number of Full Board Meetings in the 2012/13
financial year:
Directors
Lord Harris
Chairman
Darren Shapland
Chief Executive
Neil Page
Group Finance Director
Martin Harris
Group Development Director
Baroness Noakes
Deputy Chairman and Senior
Independent Director
Alan Dickinson
Independent Non-Executive Director
Sandra Turner
Independent Non-Executive Director
David Clifford
Independent Non-Executive Director
Attendance
6
6
6
6
6
6
6
6
6
Maximum number
of Meetings the
Director could
have attended
6
6
6
6
6
6
6
6
2121
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The Board currently consists of the Chairman, three Executive and
four Non-Executive Directors, brief biographies of whom can be
found on page 20. Andrew Page will join the Board on 1 July 2013
as an additional independent Non-Executive Director. 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 23.
As at 27 April 2013 a quarter of the Board was female (two out
of eight) and one out of six members of the Executive Committee
was female.
All Directors will offer themselves for election or re-election at the
Annual General Meeting in accordance with the UK Corporate
Governance Code.
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Until 14 May 2012 the roles of Chairman and Chief Executive were
both held by Lord Harris. He ceased to be Chief Executive when
Darren Shapland was appointed to that role. Lord Harris remains
as Chairman and for the financial year ended in April 2013 worked
four days per week in support of Darren Shapland in specific areas
of the business, notably property and buying. Since 1 June 2013,
reflecting the progress made in the last year, Lord Harris has
reduced his time commitment to three days per week. Following
the appointment of a Trading Director in May 2013, Lord Harris
will be working with the Trading Director so that his involvement
in the buying role can be transferred and it is anticipated that his
executive involvement in the Company’s property activities will
also significantly reduce in the near future. As a consequence
Lord Harris’s time commitment is expected to reduce further.
A formal statement on the division of responsibilities between the
Chairman and Chief Executive has been adopted by the Board and
this makes it clear that the Chief Executive has the responsibility and
accountability for running the business.
The Non-Executive Directors of the Company play a key
governance role and bring an extra dimension to the Board’s
deliberations. The Board considered the independence of each
Non-Executive Director against the criteria specified in the UK
Corporate Governance Code and has 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 fact that Baroness Noakes is a Non-Executive Director of the
Royal Bank of Scotland, the Company’s principal banker, and she
has served as a Director of the Company for more than nine years
from the date of her first election.
www.carpetright.plc.uk
www.carpetright.plc.ukBusiness reviewGovernanceFinancial statements
2222
Governance continued
Corporate governance continued
Baroness Noakes had intended to step down from the Board in 2012,
but at the request of the Board agreed to remain on the Board in
order to facilitate the transition of the Company to the new
management arrangements. She has been the Senior Independent
Director (SID) since 2004 and assumed the role of Deputy
Chairman in May 2012. She ceased to be Chairman of the Audit
Committee in July 2012 but continues to chair the Nomination
Committee and remains a member of all Board Committees. She
plays an active role in determining the agenda for the Board, the
Board appraisal process and in ensuring that any issues raised by the
Non-Executive Directors are dealt with. She also keeps under review
the division of responsibilities between the Chairman and Chief
Executive so that it works well in practice.
The Board views that it is appropriately balanced, comprising
the Chairman, three Executive Directors and five independent
Non-Executive Directors.
The Board believes that its current size and structure are appropriate
for managing the Group in an effective and successful manner.
A process of evaluation of the Board and its Audit, Nomination,
Remuneration and Customer and Corporate Responsibility
Committees has been undertaken. The exercise to evaluate the
performance of the Board was led by the Deputy Chairman, and
those of the Audit and Remuneration Committees were 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 meet, with no Executive Directors
present, at least once each year inter alia to review the performance
of the Chairman.
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
which sets out those matters requiring Board approval and
specifically reserved to it for decision.
Day-to-day management is delegated to the Chief Executive who
chairs an Executive Committee. Other members of the Executive
Committee are the Group Finance Director, Group Development
Director, the Operations Directors for each of the UK and the Rest
of Europe, the Trading Director and the Company Secretary.
Carpetright plc Annual report and accounts 2013
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.
Board committees
The Board has four 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 it is refreshed. The Company provides
the Committees with sufficient resources to undertake their duties.
The Company Secretary, or his nominee, 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 page 25.
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 26 to 35.
The Customer and Corporate Responsibility Committee
comprises the individuals set out in the table below which also
provides details of the number of meetings and attendance. The
Corporate Responsibility Report is set out on pages 17 to 19.
Number of Meetings in the 2012/13 financial year:
Members
Sandra Turner
Committee Chairman
Darren Shapland
Martin Harris
Baroness Noakes
David Clifford
Claire Balmforth
Operations Director – UK
Andy Corden
Operations Director – Europe
Attendance
3
3
3
3
3
3
3
3
Maximum number
of Meetings the
Director could
have attended
3
3
3
3
3
3
3
Carpetright plc Annual report and accounts 2013
The Nomination Committee is chaired by Baroness Noakes.
Details of its membership and attendance are set out below:
Number of Meetings in the 2012/13 financial year:
Members
Baroness Noakes
Committee Chairman
Lord Harris
Alan Dickinson
Attendance
4
4
4
4
Maximum number
of Meetings the
member could
have attended
4
4
4
The responsibilities of the Nomination Committee include:
• identifying and nominating candidates for the approval of the
Board. External search consultants are generally appointed to
assist in the search process;
• reviewing development needs of the Executive; and
• making recommendations to the Board on Board composition
and balance.
The Committee considers the diversity of the Board and the
skills and competencies of the existing Directors when drawing
up specifications for new appointments. It ensures that the
development needs of Executive Directors and other senior
managers are addressed appropriately. The Chief Executive
attends the Nomination Committee meetings at the invitation
of the Committee Chairman.
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 re-appointment.
An external search consultancy was engaged in relation to
the recruitment of Andrew Page as an additional independent
Non-Executive Director.
Continuing Professional Development
All Board members are updated on matters relevant to the Group,
including legal and regulatory developments, and members of Board
committees are updated on matters relevant to their committee
membership. In the year the Remuneration Committee received
updates on current best practice from New Bridge Street.
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The performance of individual Directors is considered as part of the
annual Board appraisal process. The individual development needs
of Executive Directors are overseen by the Nomination Committee,
which includes the Chairman. Non-Executive Directors have access
to professional development provided by external bodies. Their
continuing competence is considered by the Nomination
Committee as part of the annual process of recommending the
reappointment of Directors at the AGM.
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, 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.
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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.
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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. An Executive Risk Committee
(‘ERC’) comprising the Executive Directors and senior managers
exists to review key risk and control issues. The ERC met quarterly.
Several key processes exist within the Group to ensure a sound
system of internal control, which is described overleaf:
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Governance continued
Corporate governance continued
Identification of business risks
The Board is responsible for identifying the major business risks
faced by the Group, and determining a suitable response. The ERC
identifies and assesses risks to the Group’s medium-term strategy.
The ERC directs the risk management processes within both the
UK and the Rest of Europe to address each of the identified risks,
formulate a mitigation strategy and assess the likely impact of
such risk occurring. The ERC provides regular reports to the
Audit Committee.
During the financial year the UK Risk Management Committee
and the European Risk Management Committee met quarterly
and each comprised a small number of the senior management
team as regular members, who are able to call on the expertise of
other managers as required. The work formerly carried out by the
UK Risk Management Committee is being absorbed by the ERC and
the UK Risk Management Committee is being disbanded. The UK
Risk Management Committee and the ERC considered 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.
The principal risks and uncertainties affecting the business are set
out on pages 15 and 16.
Health and safety
Enforcing the health and safety policy is a high priority for
management and manuals are available to colleagues, supported by a
training programme for stores, distribution centres and offices. 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.
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 review by the Audit Committee prior to
approval by the Board.
Share capital
Details of the Company’s share capital and significant shareholders
can be found on pages 37 and 38.
Statement of Compliance
During the financial year ended 27 April 2013 the Company
complied with the provisions set out in the UK Corporate
Governance Code except as set out below.
The Company did not comply with provision A.2.1 of the UK
Corporate Governance Code for the entire period as the roles of
Chairman and Chief Executive were combined for a short period
at the start of the 2012/13 financial year, until mid-May 2012. The
roles were combined until such time as Darren Shapland was able
to start in his role as the Chief Executive.
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
Audit Committee report
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 on the Company’s
corporate website at www.carpetright.plc.uk.
The Audit Committee is chaired by David Clifford. The Board has
determined that Baroness Noakes and David Clifford have recent and
relevant financial experience. Details of membership and attendance
are set out below:
Number of Meetings in 2012/13 financial year:
Members
David Clifford
Committee Chairman
(from 1 July 2012)
Alan Dickinson
Baroness Noakes
(Committee Chairman until
1 July 2012)
Sandra Turner
(until 1 July 2012)
Attendance
4
4
4
1
4
Maximum number
of Meetings the
member
could have
attended
4
4
4
1
All members of the Audit Committee are independent Non-
Executive Directors. At the invitation of the Committee, the Chief
Executive, Group Finance Director, Director of Group 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 and pays particular attention to the financial
statements for the year, the annual results announcement and the
results for the half-year set out in the interim statement. Following
review, these are recommended to the Board for approval.
The Audit Committee reviews the consistency of and any changes to
the Group’s accounting policies, the application of appropriate
accounting standards, the methods used to account for significant or
unusual transactions and areas of significant judgment. During the
year the Audit Committee focused in particular on the judgments
made in making provision for the impairment of stores, freehold
properties and goodwill in the light of difficult trading conditions. In
addition, it examined carefully all the other items which are disclosed
as exceptional.
During the period ended 27 April 2013, other matters dealt with
by the Audit Committee were:
• reviewing the independence, objectivity and effectiveness of the
external auditors and, on the basis of that review, recommending
to the Board their re-appointment 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;
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• 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 the work of the ERC, 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;
• reviewing its terms of reference and effectiveness;
• carrying out detailed reviews into the controls in place relative to
various elements of risk; and
• reviewing the whistleblowing policy and relevant items
reported under that policy.
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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 Quality Review Team of the
Financial Reporting Council. On the basis of that review, the Audit
Committee makes a recommendation on 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 intends to retender the audit no later than
2020 in accordance with the UK Corporate Governance Code. 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 27 April 2013 are
disclosed in note 3 to the Financial Statements.
The Statement of Directors’ Responsibilities in relation to the
accounts is set out on page 39. The Statement by the Auditors on
their responsibilities in respect of the accounts is contained in their
report on page 76. The Chairman of the Audit Committee will be
available at the Annual General Meeting.
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Governance continued
Directors’ remuneration report
Directors’ remuneration report
This report is made by the Board on the recommendation of the
Remuneration Committee and has been prepared in accordance
with the UK Corporate Governance Code, relevant regulations and
the relevant parts of the Listing Rules of the UK Listing Authority.
The first part of the report provides details of the Remuneration
Committee and remuneration policy. The second part provides
details of the remuneration, pensions and share plan interests of the
Directors and former Directors who served as a Director of the
Company during the 52 weeks ended 27 April 2013.
Remuneration policy section
The Committee’s policy is to provide remuneration packages for the
Executive Directors which include an appropriate balance between
the fixed and variable elements of pay, and which reflect their
responsibilities relative to the size and nature of the business.
It is committed to ensuring the management teams are rewarded for
delivering the Company’s growth plans and long-term shareholder
value. The Committee aims to set levels of fixed pay that are
competitive within the markets within which it competes for talent
and short- and long-term incentive opportunities at levels that are
sufficient to motivate Executives to achieve the Company’s short-
and long-term goals without encouraging inappropriate behaviours.
The remuneration strategy ensures that a significant element of
Executives’ remuneration remains ‘at risk’.
In line with the Association of British Insurers’ Guidelines on
Responsible Investment Disclosure, the Committee will ensure
that the incentive structure for Executive Directors and senior
management will not raise environmental, social or governance
risks by inadvertently motivating irresponsible behaviour. More
generally, the Committee will ensure that the overall remuneration
policy does not encourage inappropriate operational risk-taking.
Components of remuneration
The main remuneration components for the Executive Directors
comprise basic salary, pensions, benefits and incentive plans, which
are set out below:
i) Basic salary
Basic salary for each Executive Director and other Senior
Executives is determined by the Committee, taking account of the
responsibilities, performance and experience of the individual. A
benchmarking exercise was carried out in the period in relation to
the Executive Directors and other Senior Executives. The
Remuneration Committee took account of market trends in
reviewing basic salaries. When reviewing the salaries of the
Executive Directors, the Committee also has regard to the impact on
the cost of pension provision and pay and conditions elsewhere in
the 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.
Dear Shareholder,
This is my first full year as Chairman of the Remuneration
Committee, and I am pleased to present the Directors’
Remuneration Report for 2012/13 on behalf of the Board.
During the year the key appointment was of Darren Shapland as
Chief Executive and the separation of the roles of Chairman and
Chief Executive. Following this appointment and as part of the
progressive handover of responsibilities, Lord Harris’s time
commitment reduced to four days per week, and this reduced
further to three days per week on 1 June 2013. As a result Lord
Harris’s remuneration has been reduced accordingly.
The metrics used in Carpetright’s 2012/13 annual bonus and 2009
long-term incentive (which became capable of vesting in
September 2012) are based on financial measures (underlying
profit before tax and growth in EPS respectively).
The 2012/13 annual bonus was affected by difficult economic
conditions which were off-set, in part, by self-help measures. This
resulted in payment at less than would have been paid for on-
target performance. Annual bonuses for Executive Directors who
served as Directors throughout the year will be approximately 29%
of salary. The Committee has also determined that the annual
incentive arrangements for Executive Directors for the 2013/14
financial year will be better aligned with the incentive
arrangements with their colleagues in the UK who have a
proportion of their bonuses linked to internal customer service
targets, measured through UK mystery shopper visits.
The financial performance in 2011/12 resulted in a
determination that none of the long-term incentive awards made
in 2009 would vest and all awards made therefore lapsed.
Although not finally determined, the results in the year under
review are unlikely to result in any of the long-term incentive
awards made in 2010 vesting.
A benchmarking exercise of Executive Directors’ salaries was
undertaken during the year which resulted in no pay increase
for any of the Executive Directors.
The Committee reviewed the Company’s long-term incentive
arrangements during the year. The Committee wants to reward
the senior executive team for delivering a recovery in the Group’s
performance as well as laying the foundations for long-term value
to shareholders. To that end the intention is to introduce a new
Performance Share Plan (‘PSP’) at this year’s Annual General
Meeting. The performance targets which are proposed will enable
senior executives to earn enhanced awards in return for meeting
targets linked to the new strategy. The Company has consulted its
major shareholders on the proposed new arrangement.
I will be available to answer any questions at the AGM in
September and very much hope that you will support the 2012/13
Directors’ Remuneration Report at our forthcoming meeting.
Alan Dickinson
Chairman of the Remuneration Committee
24 June 2013
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
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Executive Directors’ basic salaries have been reviewed and no
increase is to take place in 2013. The current salaries of the
Executive Directors are as follows:
Darren Shapland
Neil Page
Martin Harris
Current base salary
£450,000
£280,000
£280,000
The combined annual salary increase for all colleagues and
management was 1.3%.
ii) Pensions
Darren Shapland and Martin Harris 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 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’) or receive the allowance by way of a salary
supplement. Darren Shapland and Martin Harris each receive
their allowance as a salary supplement. Neil Page splits his
allowance between a contribution to the GPPP scheme and a
salary supplement.
iii) Benefits
The Executive Directors are eligible for car benefits, life assurance
and private medical cover.
iv) Annual incentives
Executive Directors are eligible to receive an annual performance
bonus which is a proportion of salary based on the achievement of
the annual budgeted underlying profit.
The maximum bonus opportunity for Executive Directors in
respect of the 2013/14 financial year is 100% (2012/13: 100%) of
basic salary, with 40% (2012/13: 30%) of salary payable for on-target
performance. 90% of the 2013/14 bonus will be dependent on
underlying profit before tax targets. The target at which minimum
bonus is payable has been set at a level in excess of the underlying
profit before tax achieved in 2012/13. The remaining 10% of the
bonus will be determined by reference to an internal customer
service targets, measured through UK mystery shopper visits. This
aligns the reward of the Executive directors with the rest of their
colleagues in the United Kingdom.
Where bonuses are paid, they are paid in cash and do not form
part of the Directors’ pensionable earnings. Subject to the discretion
of the Committee, bonuses may be clawed back where the financial
results have been materially misstated, where an error has been
made in assessing the size of the bonus or where the individual had
committed an act of gross misconduct in respect of the relevant
financial year.
v) 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 made in 2012 to Executive Directors (excluding Lord Harris
who declined his award) were made at 100% of salary.
Lord Harris has not been eligible to receive future awards since
ceasing to be Chief Executive. It is the Company’s policy that
awards under the LTIP will be satisfied using shares purchased in
the market or by new issue shares, provided that the use of new
issue shares will not breach the rules of the scheme.
At the time of Darren Shapland’s recruitment as Chief Executive,
the Committee undertook to introduce a revised long-term
incentive arrangement to focus Darren and the other members of
the senior executive team on delivering not only a recovery in Group
performance but also to drive long-term value for shareholders.
The intention was that this should enable senior executives to earn
enhanced awards in return for meeting targets linked to the new
strategy. The Company has consulted its major shareholders on
the proposed new arrangement, and a new Performance Share
Plan (‘PSP’) will be proposed for adoption at this year’s Annual
General Meeting.
Awards under the new plan will continue to consist of annual grants
of performance shares that vest three years after grant subject to the
extent that performance targets have been achieved. However, in
order to tie-in with the new strategy and the commitments made to
Darren Shapland at the time of his appointment award levels over
the first two years of the scheme’s operation, when the importance of
the implementation of the revised strategy is most critical, will be
increased before reverting to a lower normal level of award for
future years.
The scheme will reflect current market and best practice, while being
appropriately tailored to the Company’s specific circumstances.
Providing the scheme is approved by shareholders, annual awards of
performance shares may be made to Executive Directors and other
members of the Executive Committee with a market value of shares
at grant of 250% of salary for the first two years of the PSP’s
operation and a normal limit of 150% of salary is expected to apply
thereafter (i.e. from 2015). Lower percentages of salary would apply
to less senior roles, again with enhanced award levels in the first two
years. After the first two years, awards with a market value of up to
250% of salary could be made in exceptional circumstances under
the PSP. The current maximum in the 2004 LTIP is 300% of salary
but the Committee’s policy in recent years has been to make awards
up to a maximum of 100% of salary.
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Governance continued
Directors’ remuneration report continued
The Executive Directors’ service contracts became effective on the
following dates:
Darren Shapland
Martin Harris
Neil Page
Contract date
11 May 2012
27 January 2011
2 March 2009
Notice period
12 months
12 months
12 months
Outside appointments of the Chairman and
Executive Directors
Executive Directors retain remuneration from outside non-
executive directorships. During the year Lord Harris’s directors’
fees payable by Arsenal Holdings plc were waived and paid directly
by Arsenal to charity.
Darren Shapland received a fee at a rate of £150,000 per annum
in respect of his role as Chairman of Sainsburys Bank plc; his
commitment of one day per week ceased in February 2013.
Darren Shapland also receives a fee at a rate of £60,000 per annum
as a Non-Executive Director of Ladbrokes plc.
Shareholding guidelines
Share ownership guidelines exist to create greater alignment with
the interests of shareholders and to be consistent with one of the
objectives of the incentive framework. All Executive Directors
should build up a shareholding in the Company equal to their
annual basic salary and maintain it thereafter by the retention of
shares with a value equal to 50% on the net of taxes gain on their
vested long-term incentives subject always to their individual
circumstances. At the year end the holdings of Lord Harris and
Martin Harris were above this level. Neil Page held 10,029 shares
which, based on the year end share price of 635p, represented 23%
of his salary. Darren Shapland held 25,419 shares which, based on
the year end share price of 635p, represented 36% of his salary.
Awards will vest after a three year period to the extent performance
conditions have been achieved. Vesting of awards made under the
LTIP have been subject to performance targets set by reference to
the Company’s Earnings Per Share. The 2013 and 2014 awards
under the new PSP will also be subject to an earnings based
performance metric which will be cumulative underlying profit
before tax. In reaching this decision the Committee considered
other metrics such as relative and absolute Total Shareholder
Return but found there was insufficient correlation between the
performance of the business and the returns generated.
Consequently underlying profit before tax was selected as it is
considered by the Committee to be the metric most relevant to the
Company’s business. Performance against this target will be fully
disclosed in future annual reports. In future years, the Committee
would be able to set different targets provided that it reasonably
concludes that these are no less challenging in the circumstances
than the targets set for the initial awards.
The Committee decided to measure performance on a cumulative
basis in order to ensure consistent enhanced performance as well as,
given the current economic uncertainty, reducing the risk that a
change in economic conditions in a single year of the performance
period will unduly influence performance against the targets.
The proposed targets for the awards to be made in 2013 are that if
cumulative underlying profit before tax over the three-year
measurement period is £60m then 10% of the award will vest, if it is
£75m then 100% of the award will vest, and there would be vesting
on a straight line basis between the two points.
vi) 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.
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
2929
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Mix between fixed and variable pay elements
The chart below shows the mix between the fixed elements of remuneration, annual bonus and long-term incentives in different scenarios
2,500,000
2,000,000
1,500,000
1,000,000
)
£
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500,000
100%
52%
21%
27%
13%
20%
67%
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52%
21%
27%
13%
20%
67%
100%
52%
21%
27%
13%
20%
67%
100%
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Fixed only
Target
Stretch
Fixed only
Target
Stretch
Fixed only
Target
Stretch
Darren Shapland
Martin Harris
Neil Page
Fixed
Bonus
LTIP
Target performance for the LTIP is assumed to be threshold
In developing the scenarios, the following assumptions have been made:
Salary:
Pension:
Benefits:
Bonus:
LTIP:
The salary for the year ahead
20% of salary allowance based on the salary for the year ahead
The value given in the emoluments table this year
at stretch is 100% of salary and at target is 40% of salary
maximum is 250% of salary and at target assumes vesting of 25% of salary
Chairman and Non-Executive Directors
The Chairman and the Non-Executive Directors do not have service contracts. The Chairman has been appointed for an indefinite term and
the Non-Executive Directors are appointed for an initial three year period, subject to being re-elected by members annually.
The Chairman and Non-Executive Directors’ letters of appointment became effective on the following dates:
Lord Harris (Chairman)
Baroness Noakes
Alan Dickinson
Sandra Turner
David Clifford
Andrew Page
Appointment date
11 May 2012
1 February 2001
22 October 2010
22 October 2010
1 December 2011
1 July 2013
Date of re-appointment
1 February 2013
Unexpired term at the
date of this report
Indefinite
7 months
4 months
4 months
1 year 5 months
3 years
Notice period
3 months
1 month
1 month
1 month
1 month
1 month
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Directors’ remuneration report continued
The fees of the Chairman are determined by the Remuneration Committee. Non-Executive Directors’ fees are determined by the Executive
Directors. These fees are set 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 Chairman and the Non-Executive Directors are not eligible for any of
the Company’s variable pay arrangements. The Chairman is entitled to car benefits, life assurance and private medical cover. The Non-
Executive Directors receive no benefits.
The fees of the Non-Executive Directors were last reviewed in May 2012. The base fees for Non-Executive Directors are £39,000 p.a. The fees
of Baroness Noakes are £60,000 to take account of her role as Deputy Chairman, membership of all Board Committees, chairing the
Nomination Committee and her role as the Senior Independent Director. The fees for chairing each Committee are £5,000 per chair. The fees
for Lord Harris were reduced from £300,000 p.a. to £225,000 p.a. with effect from 1 June 2013 to reflect a reduction in time commitment from
four to three days per week.
Implementation Section
Performance graph
The graph below shows the value, at 27 April 2013, of £100 in Carpetright plc shares on 27 April 2008 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
180
150
120
90
60
30
)
£
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03 May 2008
02 May 2009
01 May 2010
30 April 2011
28 April 2012
27 April 2013
Carpetright
FTSE 250 Index
FTSE 350 General Retailers
Source: Thomson-Reuters
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
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Remuneration Committee
The Remuneration Committee is chaired by Alan Dickinson.
Details of its membership and attendance are set out below:
Number of Meetings in the 2012/13 financial year:
Members
Alan Dickinson
Committee Chairman
Baroness Noakes
Sandra Turner
David Clifford
(Until 1 July 2012)
Attendance
6
6
6
1
6
Maximum
number of
Meetings the
member could
have attended
6
6
6
1
At the invitation of the Committee, the Chairman, Chief Executive,
Group Finance Director, and the Director of Human Resources
regularly attend Committee meetings. The Committee considers
their views when reviewing the remuneration of the Executive
Directors and Senior Executives. They are not involved in decisions
concerning their own remuneration.
The responsibilities of the Committee include:
• determining and agreeing with the Board the broad
remuneration policy for the Chairman, Executive Directors
and Senior Executives;
• setting individual remuneration arrangements for the
Chairman and Executive Directors;
• recommending and monitoring the level and structure of
remuneration for those members of senior management with
in the scope of the Committee; and
The Committee is authorised by the Board to appoint external
advisers if it considers this beneficial. Over the course of the year,
the Committee was advised by New Bridge Street (a trading name
of Aon Hewitt Limited, part of Aon plc). The Committee’s advisers
attended two of the six Committee meetings. New Bridge Street,
which is a signatory to the Code of Conduct for Remuneration
Advisers, did not provide other services to the Company. Fees paid
by the Company to New Bridge Street during the year amounted to
£45k (2011/12: £33k). Other members of the Aon plc group of
companies provided insurance broking and advisory services to
the Company.
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Remuneration review
Since the publication of last year’s report on Directors’
remuneration, the Committee has:
• conducted a review of the remuneration arrangements of the
Executive Directors and Senior Executives;
• determined the bonus award for the 2012/13 financial year;
• approved the bonus structure for the 2013/14 financial year;
• determined the level of awards and performance condition under
the Company’s Long Term Incentive Plan for Directors and
Senior Executives;
• determined that a new Long Term Incentive Plan should be
proposed for adoption by shareholders at the Company’s Annual
General Meeting and consulted with its shareholders on the
introduction of the plan;
• approved increases in remuneration for a limited number of
Senior Executives;
• reviewed its own terms of reference; and
• conducted its annual evaluation of its own performance and that
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• approving the service agreements of each Executive Director,
of its advisers.
including termination arrangements.
The Committee’s terms of reference are available on the Company’s
corporate website (www.carpetright.plc.uk).
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Governance continued
Directors’ remuneration report continued
The following section provides details of the remuneration, pension and share plan interests of the Directors for the 52 week period
ended 27 April 2013 and has been audited.
i) Directors’ emoluments
No emoluments were waived during the period. The remuneration of the Directors for the year was as follows:
Notes
1,2,3
3
3
3,4,5
5
6
Contributions to
Pension Plan or
pensions
supplement
£000
87
56
56
12
44
–
–
–
–
–
–
255
185
Salary/Fees
£000
439
280
280
279
220
307
60
44
43
43
–
1,995
1,829
Payments
following
termination of
employment
£000
–
–
–
–
–
–
–
–
–
–
67
67
236
Recruitment
LTIP buyout
£000
345
–
–
–
–
–
–
–
–
–
–
345
–
Total 2013
£000
1,016
448
445
357
385
342
60
44
43
43
67
3,250
Benefits
£000
27
32
29
26
29
35
–
–
–
–
–
178
169
Bonus
£000
118
80
80
40
92
–
–
–
–
–
–
410
35
Total 2012
£000
23
367
365
367
265
522
51
39
36
15
404
2,454
Darren Shapland
Martin Harris
Neil Page
Andy Corden
Claire Balmforth
Lord Harris
Baroness Noakes
Alan Dickinson
Sandra Turner
David Clifford
Former Directors
Total 2013
Total 2012
1. Highest paid Director.
2. The Recruitment LTIP buyout was paid in respect of LTIPs that lapsed from previous employment as a result of joining the Company. The net proceeds were subscribed for shares
in the Company.
3. The bonus will be paid in July 2013, and relates to the financial year 2012/13.
4. Paid by subsidiary companies in Euros. The average exchange rate of €1.23:£1 has been used for the financial year 2012/13 and the average exchange rate of €1.16:£1 was used for the
financial year 2011/12.
5. Claire Balmforth and Andy Corden stepped down from the Board on 11 May 2012. They both remain senior executives on their previous contract terms. Their full annual
remuneration is disclosed.
6. The amounts received post-termination in the year relate to Christian Sollesse, whose final payment was made in June 2012. The payment includes amounts paid in lieu of salary
(£24k), Pension and pension supplement (£7k) holiday pay and other benefits (£36k). Payments were made monthly, subject to mitigation, and continued to June 2012.
ii) 2012/13 annual bonus
The Committee reviewed the levels of bonus opportunity for the Executive Directors for the 2012/13 financial year in the light of the challenging
trading environment and concluded that it would be appropriate to retain the percentage of salary payable for maximum at 100% of salary.
The performance targets for 2012/13 were set by reference to budgeted levels of underlying profit before tax. The targets for the UK and the
Group were partly achieved, but targets were not achieved for the Rest of Europe. The bonus for Andy Corden and Claire Balmforth, the
Operations Directors for the Rest of Europe and the UK respectively, both of whom stepped down from the Board in May 2012 but retain
their executive responsibilities, was based as to 50% on the Rest of Europe and UK performance respectively and 50% on Group performance.
The bonus for the other Directors was based exclusively on Group performance.
Consequently a bonus will be paid in 2013 (2012: nil) to the Executive Directors who served during the period. Where bonuses are paid, they
are paid in cash and do not form part of the Directors’ pensionable earnings. The Group targets for the 2012/13 financial year were set such
that no bonus would be paid unless the underlying profit before tax exceeded that achieved in the prior financial year by 50%. The Group
targets were as follows, with straight-line vesting between a Group underlying profit before tax of £6m and £20m:
Underlying profit before tax
Less than £6m
£6m
£20m
Proportion of maximum bonus
0%
10%
100%
The targets for the Rest of Europe and the UK are commercially sensitive and have not been disclosed.
As a result of the performance achieved in the year bonuses of between 14% and 42% of salary will be paid in 2013 (2012: nil) to the Executive
Directors who served during the period. These bonuses will be paid in cash and do not form part of the Directors’ pensionable earnings.
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
Director
Darren Shapland
Martin Harris
Neil Page
Claire Balmforth
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iii) Long term incentive plan
The table below shows the conditional share awards granted under this plan:
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Footnotes
1,3,6
4
Date of Grant
28 June 2012
20 Sept 2012
As at
28 April 2012
–
–
Granted/(lapsed)
in the year
92,573
67,822
Vested in
the year
–
–
Outstanding at
27 April 2013
92,573
67,822
Share price
at date of award
(pence)
486
664
Last
First
exercise date
exercise date
Sept 2014 Mar 2015
Sept 2015 Mar 2016
18 Sept 2009
16 Sept 2010
20 Sept 2011
20 Sept 2012
18 Sept 2009
16 Sept 2010
20 Sept 2011
20 Sept 2012
18 Sept 2009
16 Sept 2010
20 Sept 2011
20 Sept 2012
2,6
3,6
4
2,6
3,6
4
2,6
3,6
4
59,480
37,837
57,601
–
60,961
37,837
57,601
–
14,067
15,202
41,143
–
26,696
59,957
–
(59,480)
–
–
42,200
(60,961)
–
–
42,200
(14,067)
–
–
33,157
–
–
40,644
–
–
–
–
–
–
–
–
–
–
–
–
–
37,837
57,601
42,200
–
37,837
57,601
42,200
–
15,202
41,143
33,157
26,696
59,957
40,644
853
740
486
664
853
740
486
664
853
740
486
664
740
486
664
Sept 2012 Mar 2013
Sept 2013 Mar 2014
Sept 2014 Mar 2015
Sept 2015 Mar 2016
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Sept 2013 Mar 2014
Sept 2014 Mar 2015
Sept 2015 Mar 2016
Sept 2012 Mar 2013
Sept 2013 Mar 2014
Sept 2014 Mar 2015
Sept 2015 Mar 2016
Sept 2013 Mar 2014
Sept 2014 Mar 2015
Sept 2015 Mar 2016
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Andy Corden
2,5,6
3,6
4
16 Sept 2010
20 Sept 2011
20 Sept 2012
1. This award was made under rule 9.4.2 of the Listing Rules. The share price used was the same share price as was used for the awards made in September 2011 and the terms are
identical to those of the 2011 awards.
2. The 2010 awards are measured by reference to a percentage growth in underlying EPS. This translates to none of the 2010 awards vest if underlying EPS is less than 51.3p in the
financial year 2012/13. If underlying EPS is 51.3 then 25% of the award vests and if EPS is 77.7p all of the award vests. For growth between these two points between 25% and 100%
vests on a sliding scale.
3. The 2011 awards are measured by reference to a percentage growth in underlying EPS. This translates to none of the 2011 awards vest if underlying EPS is less than 21.1p in the
financial year 2013/14. If underlying EPS is 21.1p then 25% of the award vests and if EPS is 24.0p all of the award vests. For growth between these two points between 25% and 100%
vests on a sliding scale.
4. None of the 2012 awards vest if underlying EPS is less than 21.1p in the financial year 2014/15. If underlying EPS is 21.1p then 25% of the award vests and if EPS is 24.0p all of the
award vests. For growth between these two points between 25% and 100% vests on a sliding scale.
5. Andy Corden’s award in 2010 was made on a phantom basis such that a payment will be made based upon the market value of a share, rather than receiving shares.
6. Neither the 2010 conditional award nor the 2011 conditional award is currently expected to vest.
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Directors’ remuneration report continued
iv) Sharesave options
At the end of the year, the Directors’ SAYE share options were as follows:
Lord Harris
Darren Shapland
Martin Harris
Neil Page
Claire Balmforth
Claire Balmforth
Claire Balmforth
As at
28 April 2012
5,491
–
5,491
5,491
568
1,063
–
Granted
during year
–
1,654
–
–
–
–
165
Exercised
during year
–
–
–
–
–
–
–
Lapsed
during year
–
–
–
–
–
–
–
As at
27 April 2013
5,491
1,654
5,491
5,491
568
1,063
165
Exercise
price pence
295.0
544.0
295.0
295.0
633.5
423.0
544.0
First
exercise date
Apr 2014
Apr 2016
Apr 2014
Apr 2014
Apr 2014
Apr 2015
Apr 2016
Last
exercise date
Oct 2014
Oct 2016
Oct 2014
Oct 2014
Oct 2014
Oct 2015
Oct 2016
1. The market price of Carpetright shares was 635 pence on 27 April 2013 (28 April 2012: 604 pence). During the period ended 27 April 2013, the shares of Carpetright plc traded
between a low of 585 pence and a high of 728.5 pence.
v) All Employee Share Ownership Plan (AESOP)
Carpetright operates an AESOP under which team members may contribute up to £125 per month from pre-tax salary to purchase
Carpetright shares. Lord Harris, Martin Harris, Neil Page and Claire Balmforth participate in the AESOP, contributing £125 per month.
vi) 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 Darren Shapland are deferred members of the plan.
Details of pensions earned by the Directors who are members of the Plan are shown below:
Accrued Pension
Transfer Value
Pension
accrued at
27 April 2013
£000 pa
31.0
17.8
6.6
Increase in
accrued pension
during the year
£000 pa
0.9
0.4
0.1
Increase in pension
during the year net of
inflation1
£000
–
–
–
Cost to the Plan of
the increase in
pension in
excess of
contributions
£000
–
–
–
As at
27 April 2013
£000
649
367
156
As at
28 April 2012
£000
615
328
133
Change in transfer
value net of
Directors’
contributions2
£000
34
39
23
Lord Harris3
Martin Harris
Darren Shapland4
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. Darren Shapland’s pension rights arise as a result of his previous employment as Group Finance Director of the Company.
Carpetright plc Annual report and accounts 2013
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3535
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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.
At last year’s Annual General Meeting held on 6 September 2012, the Directors’ remuneration report received the following votes
from shareholders:
To approve the Remuneration Report
% votes cast
For (including
discretionary votes)
43,280,411
99.7%
Against
120,236
0.3%
Total votes cast (for
and against excluding
votes withheld) Votes withheld1
1,612
43,400,647
–
100%
Total votes cast (including
withheld votes)
43,402,259
–
1. A vote that is withheld does not constitute a vote in law and has not therefore been included in the totals above.
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By order of the Board:
Alan Dickinson
Chairman of the Remuneration Committee
24 June 2013
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Other information
Directors’ interests
The beneficial interests of those persons who were Directors as at 27 April 2013 and their immediate families in the ordinary shares of the
Company are set out below.
Lord Harris
Martin Harris
Darren Shapland
Neil Page
Baroness Noakes
David Clifford
Alan Dickinson
Sandra Turner
27 April 2013
12,377,481
4,102,682
25,419
10,029
32,225
5,000
–
–
28 April 2012
12,608,393
3,939,954
–
9,802
32,225
–
–
–
In addition, Lord Harris has a non-beneficial interest in 229,514 shares (2012: 196,414). 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 27 April 2013 and the date of this report 40 shares have been purchased for each of Lord Harris and Neil Page, and 39 shares have
been purchased for Martin Harris under the Company’s AESOP. 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.
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.
Edinburgh Retail LLP
Greenock Retail Ltd
Harris Ventures Ltd
Hull Unit Trust
Lease and concession
agreement payments made
Supplies of goods/services
payments received
Supplies of goods/services
payments made
2013
£000
143
253
62
193
2012
£000
267
226
62
387
2013
£000
–
–
–
–
2012
£000
–
–
2
–
2013
£000
–
–
3
–
2012
£000
–
–
29
–
As at 27 April 2013 the Group owed related parties £nil (2012: £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
2012/13 financial year. The Company has also purchased and maintained Directors’ and Officers’ liability insurance throughout the 2012/13
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 55 days (2012: 56 days).
Carpetright plc Annual report and accounts 2013
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3737
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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. Details of balance at the
financial year end can be found at note 23 to the consolidated financial statements; 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.
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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.
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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 70 to 72.
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Governance continued
Other information continued
Substantial shareholdings
As at 24 June 2013, 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
UBS
A H Palmer and E A O’Keeffe as joint trustees1
Total number
of shares held
10,865,418
9,397,513
6,614,414
4,693,658
4,051,465
2,363,263
2,158,232
Percentage
of shares held
16.1%
13.9%
9.8%
7.0%
6.0%
3.5%
3.2%
1. Of these shares, 793,000 are held on behalf of Martin Harris and so are also included in his reported holding on page 36.
Donations
Charitable donations of £253 (2012: £175,000) were made during the year. No political donations were made (2012: £nil).
Investor relations
There is a formal investor relations programme based around the results presentations and interim management statements. All of the Non-
Executive Directors are available to attend meetings should shareholders so request. The Chairman and Executive Directors feed back any
investor comments to the Board. All Directors normally attend the Annual General Meeting and are available to answer any questions that
shareholders may raise.
All shareholders will have at least 20 working days’ notice of the Annual General Meeting. As required by the Code the Board will, at the 2013
Annual General Meeting, announce the proxy votes in favour of and against each resolution following a vote by a show of hands, and the votes
cast will be posted on the corporate website.
Authority to purchase own shares
At the 2012 Annual General Meeting shareholders gave the Company renewed authority to purchase a maximum of 6,754,651 shares of one
penny each. This resolution remains valid until the date of this year’s Annual General Meeting. As at 27 April 2013, the Directors had not
used this authority. The Company’s present intention is to cancel any shares acquired under such authority, unless purchased to satisfy
outstanding awards under employee share incentive plans. A resolution seeking renewal of the authority will be proposed at this year’s
Annual General Meeting.
Annual General Meeting
The 2013 Annual General Meeting of the Company will be held on 5 September 2013 at Harris House, Purfleet Bypass, Purfleet, Essex
RM19 1TT at 12.00 noon. A full description of the business to be conducted at the meeting is set out in the separate Notice of Annual
General Meeting.
Carpetright plc Annual report and accounts 2013
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Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial statements in
accordance with applicable laws and regulations.
UK company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared
the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and the
Group and of the profit or loss of the Company and Group for that period.
In preparing those financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
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• state that the financial statements comply with IFRSs as adopted by the European Union; and
• prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group will continue in business,
in which case there should be supporting assumptions or qualifications as necessary.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position
of the Company and the Group and to enable them to ensure that the financial statements and the Directors’ Remuneration Report comply
with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information on the Company’s websites.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.
Going concern
The Directors confirm that, after reviewing expenditure commitments, expected cash flows and borrowing facilities, they have a reasonable
expectation that the Company and the Group have adequate resources to continue in operational existence for the next financial year and the
foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements. Further details of the
Group’s liquidity are given in the financial review on page 14.
Disclosure of information to auditors
Each of the Directors of the Company has confirmed that, as far as they are aware, there is no relevant audit information of which the auditors
are unaware and that each Director has taken all steps to make themselves aware of any relevant audit information and to establish that the
Company’s auditors are aware of that information.
Responsibility Statement
Each of the Directors whose names and details are set out on page 20 of this report confirms that to the best of their 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
Jeremy Sampson
Company Secretary and Legal Director
24 June 2013
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Financial statements
Consolidated income statement
for 52 weeks ended 27 April 2013
Revenue
Cost of sales
Gross profit
Administration expenses
Other operating income
Operating profit/(loss)
Finance costs
Finance income
Profit/(loss) before tax
Tax
Profit/(loss) for the financial period attributable
to equity shareholders of the Company
Basic earnings/(losses) per share (pence)
Diluted earnings/(losses) per share (pence)
Notes
2
2
2,3
5,6
6
7
9
9
Group 52 weeks to 27 April 2013
Exceptional
Before
items
exceptional
(Note 5)
items
£m
£m
–
457.6
–
(179.3)
278.3
(269.2)
2.3
11.4
(2.7)
1.0
9.7
(3.2)
(13.6)
(1.2)
(14.8)
–
–
(14.8)
1.7
Total
£m
457.6
(179.3)
278.3
(282.8)
1.1
(3.4)
(2.7)
1.0
(5.1)
(1.5)
Group 52 weeks to 28 April 2012
Exceptional
Before
items
exceptional
(Note 5)
items
£m
£m
–
471.5
–
(195.5)
276.0
(270.2)
2.2
8.0
(5.1)
1.1
4.0
(1.0)
(3.4)
13.4
10.0
(0.5)
–
9.5
(1.5)
Total
£m
471.5
(195.5)
276.0
(273.6)
15.6
18.0
(5.6)
1.1
13.5
(2.5)
6.5
9.6
(13.1)
(6.6)
(19.4)
(9.8)
(9.8)
3.0
4.5
8.0
11.0
11.9
16.4
16.4
All material items in the income statement arise from continuing operations.
Consolidated statement of comprehensive income
for 52 weeks ended 27 April 2013
Profit/(loss) for the financial period
Actuarial 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/(expense) for the period
Total comprehensive income/(expense) for the period attributable to equity shareholders
of the Company
Notes
22
7
Group
52 weeks to
27 April 2013
£m
(6.6)
Group
52 weeks to
28 April 2012
£m
11.0
(1.6)
1.9
0.1
0.4
(0.9)
(7.5)
–
(8.4)
(6.2)
2.6
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
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Statements of changes in equity
for 52 weeks ended 27 April 2013
Group
At 1 May 2011
Total comprehensive income/(expense) for the financial period
Issue of new shares
Share based payments and related tax
At 28 April 2012
Total comprehensive income/(expense) for the financial period
Issue of new shares
Share based payments and related tax
At 27 April 2013
Company
At 1 May 2011
Total comprehensive income/(expense) for the financial period
Issue of new shares
Share based payments and related tax
At 28 April 2012
Total comprehensive income/(expense) for the financial period
Issue of new shares
Share based payments and related tax
At 27 April 2013
Share
capital
£m
0.7
–
–
–
0.7
–
–
–
0.7
Share
capital
£m
0.7
–
–
–
0.7
–
–
–
0.7
Share
premium
£m
15.4
–
0.9
–
16.3
–
0.3
–
16.6
Share
premium
£m
15.4
–
0.9
–
16.3
–
0.3
–
16.6
Treasury
shares
£m
(0.3)
–
–
–
(0.3)
–
–
–
(0.3)
Capital
redemption
reserve
£m
0.1
–
–
–
0.1
–
–
–
0.1
Translation
reserve
£m
12.6
(7.5)
–
–
5.1
1.9
–
–
7.0
Treasury
shares
£m
(0.3)
–
–
–
(0.3)
–
–
–
(0.3)
Capital
redemption
reserve
£m
0.1
–
–
–
0.1
–
–
–
0.1
Translation
reserve
£m
(2.0)
1.8
–
–
(0.2)
(0.2)
–
–
(0.4)
Hedging
reserve
£m
(0.1)
0.1
–
–
–
–
–
–
–
Hedging
reserve
£m
(0.1)
0.1
–
–
–
–
–
–
–
Retained
earnings
£m
38.6
10.0
–
0.2
48.8
(8.1)
–
0.5
41.2
Retained
earnings
£m
15.8
18.7
–
0.2
34.7
(9.3)
–
0.5
25.9
Total
£m
67.0
2.6
0.9
0.2
70.7
(6.2)
0.3
0.5
65.3
Total
£m
29.6
20.6
0.9
0.2
51.3
(9.5)
0.3
0.5
42.6
The notes on pages 44 to 74 form an integral part of the financial statements.
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Balance sheets
as at 27 April 2013
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
Current tax assets
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
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 44 to 74 form an integral part of the financial statements.
Group
2013
£m
Group
2012
£m
Company
2013
£m
Company
2012
£m
Notes
10
11
12
13
21
15
14
15
16
60.8
108.6
20.2
–
2.6
0.8
193.0
37.6
19.8
–
7.9
65.3
61.4
119.6
20.7
–
2.6
0.9
205.2
38.3
24.1
–
9.6
72.0
31.4
70.4
7.4
16.1
–
48.3
173.6
30.4
14.0
–
6.4
50.8
32.7
80.1
7.4
16.8
–
49.2
186.2
30.8
18.4
0.4
6.1
55.7
2
258.3
277.2
224.4
241.9
17
18
19
17
18
19
20
21
22
2
24
24
24
(102.9)
(0.1)
(12.2)
(0.3)
(115.5)
(31.6)
(2.5)
(3.3)
(11.1)
(23.9)
(5.1)
(77.5)
(193.0)
65.3
0.7
16.6
(0.3)
48.3
65.3
(109.2)
(0.1)
(9.5)
(1.0)
(119.8)
(33.8)
(2.6)
(16.5)
(6.4)
(23.1)
(4.3)
(86.7)
(206.5)
70.7
0.7
16.3
(0.3)
54.0
70.7
(90.8)
(0.1)
(8.0)
(0.3)
(99.2)
(43.5)
(1.4)
(3.3)
(11.1)
(18.2)
(5.1)
(82.6)
(181.8)
42.6
0.7
16.6
(0.3)
25.6
42.6
(93.2)
(0.1)
(5.4)
–
(98.7)
(46.2)
(1.5)
(16.5)
(6.0)
(17.4)
(4.3)
(91.9)
(190.6)
51.3
0.7
16.3
(0.3)
34.6
51.3
These financial statements from pages 40 to 74 were approved by the Board of Directors on 24 June 2013 and were signed on its behalf by:
Darren Shapland
Directors
Neil Page
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
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Statements of cash flow
for 52 weeks ended 27 April 2013
Cash flows from operating activities
Profit/(loss) before tax
Adjusted for:
Depreciation and amortisation
(Profit)/loss on property disposals
(Profit)/loss on property subsidiary disposal
Dividend received from subsidiaries
Exceptional non-cash items
Share-based compensation charge
Net finance costs
Operating cash flows before movements in working capital
(Increase)/decrease in inventories
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Provisions paid
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
Proceeds on property subsidiary disposal
Interest received
Net cash generated from/(used) in investing activities
Cash flows from financing activities
Issue of new shares
Repayment of borrowings
Intercompany loans
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 44 to 74 form an integral part of the financial statements.
Group
52 weeks to
27 April 2013
£m
Restated
Group
52 weeks to
28 April 2012
£m
Company
52 weeks to
27 April 2013
£m
Restated
Company
52 weeks to
28 April 2012
£m
(5.1)
13.5
(6.4)
20.3
14.1
1.2
–
–
13.6
0.5
1.7
26.0
1.0
3.5
(9.7)
(3.4)
17.4
(1.4)
(1.4)
14.6
(0.6)
(10.6)
4.6
–
–
(6.6)
0.3
(13.9)
–
(13.6)
(5.6)
1.5
–
(4.1)
14.6
(4.6)
(8.8)
–
2.3
0.2
4.0
21.2
(0.4)
7.9
5.4
(5.0)
29.1
(4.9)
(3.0)
21.2
(0.1)
(12.0)
22.1
12.8
–
22.8
0.9
(42.9)
–
(42.0)
2.0
(0.7)
0.2
1.5
11.5
1.1
–
–
12.3
0.5
1.5
20.5
0.4
3.6
(5.7)
(3.0)
15.8
(1.5)
(0.3)
14.0
(0.5)
(8.8)
4.6
–
0.3
(4.4)
0.3
(13.9)
–
(13.6)
(4.0)
2.1
0.5
(1.4)
11.8
(4.8)
–
(22.9)
1.9
0.2
4.5
11.0
(0.4)
22.1
3.9
(4.4)
32.2
(5.3)
(1.4)
25.5
(0.1)
(10.7)
21.3
–
–
10.5
0.9
(38.7)
4.4
(33.4)
2.6
0.2
(0.7)
2.1
Notes
2,3
6
29
29
16,29
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.
To provide greater transparency the movement in trade and other payables has been analysed further to disclose cash movements in
provisions. The change in presentation has been applied retrospectively and has no effect on the net cash generated from operating
activities in respect of prior years.
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4444
Notes to the accounts
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.
General information
Carpetright plc (‘the Company’) and its subsidiaries (together, ‘the Group’) are retailers of floor coverings and beds. The Company is listed
on the London Stock Exchange and incorporated in England and Wales and domiciled in the United Kingdom. The address of its registered
office is Harris House, Purfleet Bypass, Purfleet, Essex, RM19 1TT.
The nature of the Group’s operations and its principal activities are set out in the Business Review on pages 1 to 17.
Basis of preparation
The financial statements of the Group are drawn up to within seven days of the accounting record date being 30 April of each year.
The financial year for 2013 represents the 52 weeks ended 27 April 2013. The comparative financial year for 2012 was 52 weeks ended
28 April 2012.
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 IFRS.
The consolidated financial statements have been prepared on the historical cost basis except for pension assets and liabilities and share based
payments which are measured at fair value. The principal accounting policies set out below have been consistently applied to all periods
presented unless otherwise stated.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present its profit and loss account.
The loss for the Company for the period was £7.8m (2012: profit of £19.7m).
New and amended accounting standards
The following new standards and amendments to standards, which are mandatory for the first time in the financial year beginning
29 April 2012, are relevant for the Group but have not had a material impact in the current financial year:
• IFRS 7 (revised) ‘Financial instruments: disclosures’ – disclosure on transfer of financial assets.
• IAS 12 ‘Income taxes’ – accounting for investment properties.
• IAS 32 ‘Financial instruments: presentation’.
At 27 April 2013 the following new standards and interpretations and amendments to existing standards which are expected to be relevant
to the Group and have an immaterial impact on the financial statements, were issued but not yet effective:
• IFRS 7 (amendment) ‘Financial instruments’ – disclosures on offsetting (effective from 1 January 2013).
• IFRS 9 (reissued) ‘Financial instruments’ (effective for periods beginning on or after 1 January 2015). The standard sets out how an entity
should classify and measure financial assets, as well as the derecognition of financial instruments. The Group will apply IFRS 9 when it
becomes effective and is endorsed by the EU.
• IFRS 10 ‘Consolidated financial statements’ (effective for periods beginning on or after 1 January 2013).
• IFRS 12 ‘Disclosures of interest in other entities’ (effective for periods beginning on or after 1 January 2013).
• IFRS 13 ‘Fair value measurement’ (effective for periods beginning on or after 1 January 2013).
• IAS 1 (amendment) ‘Presentation of financial statements’ (effective for periods beginning on or after 1 July 2012). The amendment changes
the presentation of the Statement of other comprehensive income.
• IAS 19 (revised) ‘Employee benefits’ (effective for periods beginning on or after 1 January 2013). This changes the recognition and
measurement of defined benefit expense as well as the disclosures.
• IAS 27 (revised) ‘Consolidated and separate financial statements’ (effective for periods beginning on or after 1 January 2013).
• IAS 28 (revised) ‘Investment in associates’ (effective for periods beginning on or after 1 January 2013).
• IAS 32 (amendment) ‘Financial instruments: presentation’ (effective for periods beginning on or after 1 January 2014).
• The ‘2011 Improvement project’ (effective from 1 January 2013). The EU has not yet endorsed these changes.
IFRS 10, IFRS 12, IAS 27 (revised) and IAS 28 (revised) are effective for EU entities for periods beginning on or after 1 January 2014.
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
4545
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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.
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.
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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.
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 Executive Committee.
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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.
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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 model. 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.
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4646
Notes to the accounts continued
1. Principal accounting policies continued
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, onerous leases and impairments are disclosed as exceptional items.
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; otherwise, it is 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
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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
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Borrowing costs
Gross interest costs incurred on the financing of major projects are capitalised until the time that they 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.
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 property, plant and equipment and the resulting
lease obligations are included in payables. 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 charged or credited 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.
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4848
Notes to the accounts continued
1. Principal accounting policies continued
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 and 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.
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 credit 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.
Financial instruments
Hedge accounting
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.
Critical estimates and judgements
The preparation of consolidated financial statements under IFRS 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 is 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.
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
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2. Segmental analysis
The reportable operating segments derive their revenue primarily from the retailing of floor coverings and beds. Central costs of the Group
are incurred principally in the UK and are immaterial. As such these costs are included within the UK segment. Sales between segments are
carried out at arm’s length.
The segment information provided to the Executive Committee for the reportable segments for the 52 weeks ended 27 April 2013 is as follows:
52 weeks to 27 April 2013
52 weeks to 28 April 2012
Gross revenue
Inter-segment revenue
Revenues from external customers
Gross profit
Underlying operating profit
Exceptional items
Operating profit/(loss)
Finance income
Intercompany interest
Finance costs
Profit/(loss) before tax
Tax
Profit/(loss) 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
£m
385.7
(4.1)
381.6
234.8
10.9
(14.3)
(3.4)
1.0
(0.1)
(2.7)
(5.2)
(1.1)
(6.3)
204.3
(24.1)
180.2
(188.6)
21.2
(167.4)
Europe
£m
76.0
–
76.0
43.5
0.5
(0.5)
–
–
0.1
–
0.1
(0.4)
(0.3)
99.3
(21.2)
78.1
(49.7)
24.1
(25.6)
Group
£m
461.7
(4.1)
457.6
278.3
11.4
(14.8)
(3.4)
1.0
–
(2.7)
(5.1)
(1.5)
(6.6)
303.6
(45.3)
258.3
(238.3)
45.3
(193.0)
UK
£m
387.1
(5.5)
381.6
224.8
2.8
10.5
13.3
1.1
(0.7)
(5.2)
8.5
(1.6)
6.9
217.7
(20.2)
197.5
(197.3)
20.8
(176.5)
11.7
8.7
2.4
1.6
14.1
10.3
12.0
7.3
Europe
£m
89.9
–
89.9
51.2
5.2
(0.5)
4.7
–
0.7
(0.4)
5.0
(0.9)
4.1
100.6
(20.9)
79.7
(50.3)
20.3
(30.0)
2.6
1.4
Group
£m
477.0
(5.5)
471.5
276.0
8.0
10.0
18.0
1.1
–
(5.6)
13.5
(2.5)
11.0
318.3
(41.1)
277.2
(247.6)
41.1
(206.5)
14.6
8.7
Carpetright plc is domiciled in the UK. The Group’s revenue from external customers in the UK is £381.6m (2012: £381.6m) and the total
revenue from external customers from other countries is £76.0m (2012: £89.9m). The total of non-current assets (other than financial
instruments and deferred tax assets) located in the UK is £154.6m (2012: £162.9m) and the total of those located in other countries is
£81.1m (2012: £74.4m).
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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5050
Notes to the accounts continued
3. Operating profit/(loss), analysis of costs by nature
Operating profit/(loss) 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
Auditor’s remuneration – for the audit of the Company’s annual financial statements
Staff costs
Impairment of non-current assets
Amortisation of intangible assets
Depreciation of property, plant and equipment:
Owned assets
Under finance leases
Depreciation of investment property
Group
2013
£m
(1.9)
158.6
90.0
1.6
(1.8)
0.2
98.7
5.5
1.9
11.8
0.1
0.3
Group
2012
£m
(2.1)
171.1
91.5
1.7
(2.4)
0.2
98.0
1.0
2.5
11.7
0.1
0.3
Notes
4
5
10
11
11
12
4. Staff costs
The average number of persons (full-time equivalents) employed by the Group (including Directors) was as follows:
Stores
Store support office and distribution centre
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 contribution
Share based payments
Group
2013
Number
2,674
387
3,061
Group
2013
£m
86.5
9.6
2.1
0.5
98.7
Group
2012
Number
2,689
386
3,075
Group
2012
£m
86.3
9.1
2.4
0.2
98.0
Company
2013
Number
2,184
335
2,519
Company
2013
£m
70.6
6.7
0.9
0.5
78.7
Company
2012
Number
2,175
332
2,507
Company
2012
£m
67.9
6.7
1.0
0.2
75.8
Notes
22
25
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/(loss) on the defined benefit pension schemes) 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.
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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.
Group
2013
£m
4.6
0.6
0.4
0.3
5.9
Group
2012
£m
3.3
0.5
0.4
0.1
4.3
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During the year the Executive Directors realised no gains (2012: no gains) on the vesting of Long Term Incentive Plans. Details of these plans,
share options and other Directors’ remuneration are disclosed in the Directors’ remuneration report on pages 26 to 35.
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5. Exceptional items
Property profits/(losses):
UK and the Netherlands
Sale of Belgian property subsidiary
Onerous lease provisions
Impairment charge:
Store assets
Freehold properties
Store support office restructuring
Write off of unamortised refinancing fees
Exceptional items before tax
Notes
20
11
11,12
Group
2013
£m
(1.2)
–
(8.1)
(0.3)
(5.2)
–
–
(14.8)
Group
2012
£m
4.6
8.8
(0.3)
(1.0)
–
(2.1)
(0.5)
9.5
In accordance with IAS 36 assets are reviewed for impairment whenever changes in circumstances indicate that the carrying value may not be
recoverable. The impairment provision relates to properties in the UK and the Netherlands.
The onerous lease provision relates to properties in the UK and the Republic of Ireland that are not trading and are either empty or leased
at below the passing rent.
Further details of these exceptional items are disclosed in the Chief Executive’s review on pages 5 to 7.
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
Net finance costs
Group
2013
£m
Group
2012
£m
Notes
22
22
(1.1)
(0.5)
–
(0.1)
(1.0)
–
(2.7)
1.0
1.0
(3.2)
(0.5)
0.1
(0.1)
(1.1)
(0.3)
(5.1)
1.1
1.1
(1.7)
(4.0)
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5252
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
Notes
21
Group
2013
£m
0.5
0.2
0.7
0.6
0.2
0.8
1.5
Group
2012
£m
0.9
1.1
2.0
0.7
(0.2)
0.5
2.5
The tax charge for the year includes a credit of £0.9m in respect of exceptional items (2012: charge of £3.1m). In addition, the impact of the
change in tax rates on deferred tax liability has resulted in an exceptional tax credit of £0.8m (2012: £1.6m credit).
(ii) Reconciliation of profit/(loss) before tax to total tax
Profit/(loss) before tax
Tax charge/(credit) at UK Corporation Tax rate of 24% (2012: 26%)
Adjusted for the effects of:
Overseas tax rates
Fall in UK tax rates
Non-qualifying depreciation
Other permanent differences
Losses recognised
Gains not subject to tax
Capital gains
Adjustments in respect of prior periods
Total tax charge in the income statement
Group
2013
£m
(5.1)
(1.2)
–
(0.8)
0.6
1.1
–
–
1.8
–
1.5
Group
2012
£m
13.5
3.5
(0.2)
(1.6)
0.6
0.9
(0.6)
(1.1)
1.7
(0.7)
2.5
The weighted average annual effective tax rate for the period is 29.3% (2012: 18.7%). The increase arises from a combination of non-recurring
items in the prior year and the impact of changes in the UK tax rate.
(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
2013
£m
(0.1)
0.1
–
Group
2012
£m
–
–
–
The Finance Act 2012 included legislation to reduce the main rate of corporation tax from 26% to 24% from 1 April 2012 and to 23% from
1 April 2013. The reduction from 24% to 23% was substantively enacted at the balance sheet date and has therefore been reflected in these
Group financial statements.
In addition to the changes in the corporation tax disclosed above, it was announced in the December 2012 Budget Statement that the rate
would be reduced from 23% to 21% from 1 April 2014 and in the March 2013 Budget Statement it was announced that the rate would be
further reduced to 20% from 1 April 2015. These further rate reductions had not been substantively enacted at the balance sheet date and
are therefore not reflected in these Group financial statements.
The proposed reductions of the main rate of corporation tax to 21% and 20% by 1 April 2014 and 1 April 2015, respectively, are expected
to be enacted separately each year. The combined effect would be to reduce the net deferred tax liability provided at 27 April 2013 by £2.4m.
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8. Dividends
The Directors decided that no final dividend will be paid (2012: No final dividend paid). This results in no dividend in the year to
27 April 2013 (2012: No dividend paid).
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 Equity Trust (Jersey) Limited (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.
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Basic earnings/(losses) per share
Effect of dilutive share options
Diluted earnings/(losses) per share
52 weeks to 27 April 2013
52 weeks to 28 April 2012
Weighted
average
number of
shares
Millions
67.5
0.3
67.8
Earnings
£m
(6.6)
–
(6.6)
Earnings
per share
Pence
(9.8)
–
(9.8)
Earnings
£m
11.0
–
11.0
Weighted
average
number of
shares
Millions
67.2
0.3
67.5
Reconciliation of earnings per share excluding post tax profit on exceptional items
Basic earnings/(losses) per share
Adjusted for the effect of exceptional items:
Exceptional items
Tax thereon
Exceptional tax benefit from tax rate change
Underlying earnings/(losses) per share
52 weeks to 27 April 2013
52 weeks to 28 April 2012
Weighted
average
number of
shares
Millions
67.5
–
–
–
67.5
Earnings
£m
(6.6)
14.8
(0.9)
(0.8)
6.5
Earnings
per share
Pence
(9.8)
Earnings
£m
11.0
21.9
(1.3)
(1.2)
9.6
(9.5)
3.1
(1.6)
3.0
Weighted
average
number of
shares
Millions
67.2
–
–
–
67.2
Earnings
per share
Pence
16.4
–
16.4
Earnings
per share
Pence
16.4
(14.1)
4.6
(2.4)
4.5
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.
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5454
Notes to the accounts continued
10. Intangible assets
Group
Cost:
At 1 May 2011
Exchange differences
Additions
Disposals
At 28 April 2012
Exchange differences
Additions
At 27 April 2013
Accumulated amortisation and impairment:
At 1 May 2011
Amortisation
Disposals
At 28 April 2012
Exchange differences
Amortisation
At 27 April 2013
Net book value:
At 27 April 2013
At 28 April 2012
Goodwill
£m
Computer
software
£m
Brands
£m
55.3
(2.0)
–
–
53.3
0.6
–
53.9
0.5
–
–
0.5
–
–
0.5
53.4
52.8
24.2
–
0.1
(0.1)
24.2
–
0.6
24.8
13.2
2.5
(0.1)
15.6
(0.1)
1.9
17.4
7.4
8.6
0.1
–
–
–
0.1
–
–
0.1
0.1
–
–
0.1
–
–
0.1
–
–
Total
£m
79.6
(2.0)
0.1
(0.1)
77.6
0.6
0.6
78.8
13.8
2.5
(0.1)
16.2
(0.1)
1.9
18.0
60.8
61.4
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.
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
October 2002
June 2005
May 2007
March 2008
July 2008
December 2008
2013
£m
19.0
4.7
15.3
6.9
4.6
2.9
53.4
2012
£m
18.4
4.7
15.3
6.9
4.6
2.9
52.8
The movement in the value of goodwill in the year is solely a result of movement in exchange rates.
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
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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 of the goodwill held by the Group 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 and capital expenditure.
The cash flow projections for the initial five 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 five year plan period are extrapolated
at a constant growth rate of 2.5% (2012: 2.5%) and a terminal value is included at five times year 10 EBITDA. 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 7.7%
(2012: 8.0%) 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 lead to an impairment of goodwill.
Company
Cost:
At 1 May 2011
Additions
Disposals
At 28 April 2012
Additions
At 27 April 2013
Accumulated amortisation and impairment:
At 1 May 2011
Amortisation
Disposals
At 28 April 2012
Amortisation
At 27 April 2013
Net book value:
At 27 April 2013
At 28 April 2012
Goodwill
£m
Computer
software
£m
Brands
£m
24.1
–
–
24.1
–
24.1
–
–
–
–
–
–
24.2
0.1
(0.1)
24.2
0.6
24.8
13.2
2.5
(0.1)
15.6
1.9
17.5
24.1
24.1
7.3
8.6
0.1
–
–
0.1
–
0.1
0.1
–
–
0.1
–
0.1
–
–
Total
£m
48.4
0.1
(0.1)
48.4
0.6
49.0
13.3
2.5
(0.1)
15.7
1.9
17.6
31.4
32.7
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.
The impairment review of Company goodwill is the same as that of the Group and does not lead to an impairment.
www.carpetright.plc.uk
www.carpetright.plc.ukBusiness reviewGovernanceFinancial statements
5656
Notes to the accounts continued
11. Property, plant and equipment
Group
Cost:
At 1 May 2011
Exchange differences
Additions
Disposals
At 28 April 2012
Exchange differences
Additions
Disposals
At 27 April 2013
Accumulated depreciation and impairment:
At 1 May 2011
Exchange differences
Impairment
Depreciation
Disposals
At 28 April 2012
Exchange differences
Impairment
Depreciation
Disposals
At 27 April 2013
Net book value:
At 27 April 2013
At 28 April 2012
Freehold land
and buildings
£m
Long leasehold
land and
buildings
£m
Short leasehold
buildings
£m
Fixtures
and fittings
£m
Plant and
machinery
£m
18.7
(0.1)
–
(1.2)
17.4
–
–
–
17.4
3.0
–
–
0.3
(0.2)
3.1
0.1
1.2
0.5
–
4.9
19.8
(0.2)
0.1
(1.0)
18.7
0.1
0.4
(0.3)
18.9
10.4
(0.1)
0.2
0.8
(0.8)
10.5
–
–
0.9
(0.2)
11.2
97.0
(1.2)
7.3
(11.6)
91.5
0.4
6.0
(2.7)
95.2
53.6
(1.4)
0.8
7.4
(10.8)
49.6
0.6
0.3
7.5
(2.2)
55.8
43.8
(2.3)
1.2
(3.1)
39.6
0.9
1.7
(0.5)
41.7
35.4
(1.9)
–
2.2
(3.0)
32.7
0.5
–
2.2
(0.4)
35.0
Total
£m
257.4
(6.4)
8.6
(38.1)
221.5
2.2
9.7
(7.7)
225.7
110.0
(3.8)
1.0
11.8
(17.1)
101.9
1.2
5.0
11.9
(2.9)
117.1
12.5
14.3
7.7
8.2
39.4
41.9
6.7
6.9
108.6
119.6
78.1
(2.6)
–
(21.2)
54.3
0.8
1.6
(4.2)
52.5
7.6
(0.4)
–
1.1
(2.3)
6.0
–
3.5
0.8
(0.1)
10.2
42.3
48.3
In accordance with IAS 36 assets are reviewed for impairment whenever changes in circumstances indicate that the carrying value may not be
recoverable (see note 5).
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
2013
£m
9.1
(2.2)
6.9
Group
2012
£m
9.3
(2.0)
7.3
Company
2013
£m
2.3
(1.4)
0.9
Company
2012
£m
2.5
(1.5)
1.0
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
Company
Cost:
At 1 May 2011
Exchange differences
Additions
Disposals
At 28 April 2012
Exchange differences
Additions
Disposals
At 27 April 2013
Accumulated depreciation and impairment:
At 1 May 2011
Exchange differences
Impairment
Depreciation
Disposals
At 28 April 2012
Exchange differences
Impairment
Depreciation
Disposals
At 27 April 2013
Net book value:
At 27 April 2013
At 28 April 2012
5757
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n
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Total
£m
167.4
(0.4)
7.4
(28.5)
145.9
0.2
8.1
(7.1)
147.1
71.1
(0.5)
1.0
9.3
(15.1)
65.8
0.2
3.5
9.6
(2.4)
76.7
Freehold land
and buildings
£m
Long leasehold
land and
buildings
£m
Short leasehold
buildings
£m
Fixtures
and fittings
£m
Plant and
machinery
£m
19.8
(0.2)
0.1
(1.0)
18.7
0.1
0.4
(0.3)
18.9
10.4
(0.1)
0.2
0.8
(0.8)
10.5
0.1
–
0.9
(0.1)
11.4
85.1
(0.2)
7.0
(11.4)
80.5
0.1
5.9
(2.2)
84.3
43.5
(0.4)
0.8
6.9
(10.7)
40.1
0.1
0.3
7.1
(1.8)
45.8
16.8
–
0.3
(3.0)
14.1
–
0.2
(0.4)
13.9
13.2
–
–
1.1
(2.9)
11.4
–
–
1.1
(0.4)
12.1
34.5
–
–
(11.9)
22.6
–
1.6
(4.2)
20.0
1.8
–
–
0.3
(0.5)
1.6
–
2.4
0.2
(0.1)
4.1
15.9
21.0
11.2
–
–
(1.2)
10.0
–
–
–
10.0
2.2
–
–
0.2
(0.2)
2.2
–
0.8
0.3
–
3.3
6.7
7.8
7.5
8.2
38.5
40.4
1.8
2.7
70.4
80.1
www.carpetright.plc.uk
www.carpetright.plc.ukBusiness reviewGovernanceFinancial statements
5858
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 and for
the Company is not significantly different to the book value in either year. Operating expenses attributable to investment properties are
incurred directly by tenants under tenant-repairing leases.
Cost:
At 1 May 2011
Exchange differences
Disposals
At 28 April 2012
Exchange differences
At 27 April 2013
Accumulated depreciation and impairment:
At 1 May 2011
Exchange differences
Depreciation
Disposals
At 28 April 2012
Exchange differences
Impairment
Depreciation
At 27 April 2013
Net book value:
At 27 April 2013
At 28 April 2012
Group
£m
Company
£m
28.9
(1.7)
(4.9)
22.3
0.5
22.8
2.8
(0.2)
0.3
(1.3)
1.6
0.2
0.5
0.3
2.6
20.2
20.7
8.1
–
(0.3)
7.8
–
7.8
0.4
–
–
–
0.4
–
–
–
0.4
7.4
7.4
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 Directors
have taken advantage of Section 410 of the Companies Act 2006 by providing information only in relation to subsidiary undertakings whose
results or financial position, in the opinion of the Directors, principally affect the financial statements. A full list of all subsidiary undertakings
will be annexed to the next Annual Return of Carpetright plc to be filed at Companies House. 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
Carpetland BV
Fontainebleau Vastgoed BV
Company
Cost:
At the beginning of the period
Impairment of investment in Pluto Sp. Z.o.o.
At the end of the period
Carpetright plc Annual report and accounts 2013
Country of
incorporation
and operation
Principal
activity
England and Wales Holding
Property
England and Wales
Property
England and Wales
Property
Poland
Retail
Belgium
Retail
Netherlands
Property
Netherlands
Percentage of
ordinary shares
held indirectly
by Company
Percentage of
ordinary shares
held directly by
Company
100%
100%
100%
100%
100%
100%
100%
2012
£m
16.8
–
16.8
2013
£m
16.8
(0.7)
16.1
Carpetright plc Annual report and accounts 2013
5959
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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 year amounted to a charge of £1.0m (2012: credit of £0.3m).
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
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Group
2013
£m
Group
2012
£m
Company
2013
£m
Company
2012
£m
–
0.8
0.8
5.4
(0.4)
5.0
2.7
12.1
19.8
20.6
–
0.9
0.9
5.9
(0.6)
5.3
3.6
15.2
24.1
25.0
47.5
0.8
48.3
1.6
(0.4)
1.2
2.2
10.6
14.0
62.3
48.3
0.9
49.2
1.9
(0.4)
1.5
3.7
13.2
18.4
67.6
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The Directors consider that the carrying amounts of trade and other receivables approximate to their fair values.
Provision for impairment
At the beginning of the period
Receivables written off against the provision in the period
At the end of the period
Group
2013
£m
(0.6)
0.2
(0.4)
The table below shows the financial assets included in trade and other receivables at the balance sheet date:
Major insurance companies
Property rent receivables
Other receivables
Retail customers
Trade and other receivables
Group
2013
£m
1.4
1.1
0.2
5.0
7.7
Group
2012
£m
(0.6)
–
(0.6)
Group
2012
£m
1.6
1.7
0.3
5.3
8.9
Company
2013
£m
(0.4)
–
(0.4)
Company
2013
£m
0.8
1.2
0.2
1.2
3.4
Company
2012
£m
(0.4)
–
(0.4)
Company
2012
£m
1.6
1.7
0.4
1.5
5.2
Balances from retail customers principally relate to products awaiting collection, but 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
Group
2013
£m
1.4
0.3
–
1.0
2.7
Group
2012
£m
1.5
0.8
–
1.3
3.6
Company
2013
£m
0.9
0.3
–
1.0
2.2
Company
2012
£m
1.6
0.8
–
1.3
3.7
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6060
Notes to the accounts continued
16. Cash and cash equivalents
Cash at bank and in hand
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
2013
£m
7.9
(12.0)
(4.1)
Group
2013
£m
55.9
13.3
33.7
102.9
31.6
–
31.6
134.5
Group
2012
£m
9.6
(8.1)
1.5
Company
2013
£m
6.4
(7.8)
(1.4)
Company
2012
£m
6.1
(4.0)
2.1
Group
2012
£m
Company
2013
£m
Company
2012
£m
58.5
14.8
35.9
109.2
33.8
–
33.8
143.0
48.3
10.8
31.7
90.8
31.6
11.9
43.5
134.3
48.1
12.2
32.9
93.2
33.8
12.4
46.2
139.4
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.
Current accruals and deferred income include accruals for the contractual rent uplifts of £10.6m (2012: £10.4m) in the Group and
the Company.
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
2013
£m
0.3
1.2
4.8
6.3
(3.7)
2.6
0.1
2.5
Group
2012
£m
0.3
Company
2013
£m
0.2
Company
2012
£m
0.2
1.2
5.1
6.6
(3.9)
2.7
0.1
2.6
0.8
1.4
2.4
(0.9)
1.5
0.1
1.4
0.8
1.6
2.6
(1.0)
1.6
0.1
1.5
Group
2013
£m
0.1
0.5
2.0
2.6
Group
2012
£m
0.1
0.4
2.2
2.7
Company
2013
£m
0.1
Company
2012
£m
0.1
0.4
1.0
1.5
0.4
1.1
1.6
The Group leases certain properties under finance leases. The average lease term is 18 years (2012: 19 years) for properties. 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.
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
6161
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19. Borrowings
Current
Bank overdraft
Bank loans
Non-current
Bank loans
Group
2013
£m
Group
2012
£m
Company
2013
£m
Company
2012
£m
12.0
0.2
12.2
3.3
15.5
8.1
1.4
9.5
16.5
26.0
7.8
0.2
8.0
3.3
11.3
4.0
1.4
5.4
16.5
21.9
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c
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All bank loans are denominated in Sterling and Euros of which £11.3m (2012: £21.9m) are secured on certain Group assets.
The effective interest rates at the year end are as follows:
Overdrafts
Borrowings
The maturity profiles of borrowings are as follows:
Amounts payable within one year
Amounts payable between one and two years
Amounts payable between two and five years
Group
2013
%
2.7
3.0
Group
2013
£m
12.2
0.3
3.0
15.5
Group
2012
%
3.3
3.9
Group
2012
£m
9.5
1.4
15.1
26.0
Company
2013
%
3.0
3.0
Company
2013
£m
8.0
0.3
3.0
11.3
Company
2012
%
4.3
3.9
Company
2012
£m
5.4
1.4
15.1
21.9
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The maturity analysis is grouped by when the debt is contracted to mature rather than by re-pricing dates.
20. Provisions for liabilities and charges
s
t
a
t
e
m
e
n
t
s
Group and Company
At the beginning of the period
Added during the period
Utilised during the period
At the end of the period
Group
2013
£m
Reorganisation
provisions
£m
0.5
–
(0.5)
–
Onerous lease
provisions
£m
5.9
8.1
(2.9)
11.1
Total
provisions
£m
6.4
8.1
(3.4)
11.1
Onerous lease
provisions
£m
5.9
8.1
(2.9)
11.1
Company
2013
£m
Reorganisation
provisions
£m
0.1
–
(0.1)
–
Total
provisions
£m
6.0
8.1
(3.0)
11.1
Onerous lease provisions are expected to be used over periods of up to five years and relate to properties in the UK and the Republic of Ireland
that are not trading and are either empty or leased at below the passing rent.
www.carpetright.plc.uk
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6262
Notes to the accounts continued
21. Deferred tax assets and liabilities
Deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities
Group
2013
£m
(2.6)
23.9
21.3
Group
2012
£m
(2.6)
23.1
20.5
Company
2013
£m
–
18.2
18.2
Company
2012
£m
–
17.4
17.4
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 1 May 2011
Exchange differences
Charge/(credit) to the income statement
Disposal of property subsidiary
At 28 April 2012
Exchange differences
Charge/(credit) to the income statement
Charge/(credit) to other comprehensive income
Tax charge/(credit) to equity
At 27 April 2013
Company
At 1 May 2011
Charge/(credit) to the income statement
At 28 April 2012
Charge/(credit) to the income statement
Charge/(credit) to other comprehensive income
Tax charge/(credit) to equity
At 27 April 2013
Accelerated tax
depreciation
8.5
(0.3)
(0.7)
(0.6)
6.9
0.1
(0.2)
–
–
6.8
Fair value
adjustments
4.4
(0.3)
(0.5)
(2.1)
1.5
–
–
–
–
1.5
Accelerated tax
depreciation
4.9
(0.6)
4.3
(0.5)
–
–
3.8
Fair value
adjustments
–
–
–
–
–
–
–
Short term
timing
differences
(0.8)
(0.1)
–
(0.1)
(1.0)
–
–
–
–
(1.0)
Short term
timing
differences
(1.0)
(0.3)
(1.3)
0.1
–
–
(1.2)
Rollover
15.5
–
2.2
–
17.7
–
0.9
–
–
18.6
Rollover
14.1
2.2
16.3
1.1
–
–
17.4
Tax
losses
(3.2)
0.2
(0.5)
–
(3.5)
(0.1)
0.1
–
–
(3.5)
Tax
losses
(0.3)
(0.5)
(0.8)
0.1
–
–
(0.7)
Share based
payments
(0.2)
–
–
–
(0.2)
–
–
–
0.1
(0.1)
Share based
payments
(0.2)
–
(0.2)
–
–
0.1
(0.1)
Retirement
benefit
obligations
(0.9)
–
–
–
(0.9)
–
–
(0.1)
–
(1.0)
Retirement
benefit
obligations
(0.9)
–
(0.9)
–
(0.1)
–
(1.0)
Total
23.3
(0.5)
0.5
(2.8)
20.5
–
0.8
(0.1)
0.1
21.3
Total
16.6
0.8
17.4
0.8
(0.1)
0.1
18.2
At the reporting date, the Group had unused tax losses of £11.8m (2012: £12.2m) which can be carried forward indefinitely and are available
for offset against future profits. A deferred tax asset of £3.5m (2012: £3.5m) has been recognised in respect of these losses.
Deferred tax assets of £3.3m (2012: £3.4m) were available for offset against deferred tax liabilities of £27.2m (2012: £26.5m) hence the Group’s
deferred tax liabilities as at 27 April 2013 are £23.9m (2012: £23.1m).
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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 22 (i) (a) and the first two defined
contribution schemes referred to in 22 (ii) are accounted for by the Company.
(i) Defined benefit schemes
(a) UK defined benefit schemes
The Company operated 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 a fund management company. Contributions are determined
by a qualified actuary using the projected unit method. The most recent actuarial review was at 6 April 2011 when the actuarial value of the
assets represented 77% 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 £0.6m was paid in the year (2012: £0.6m).
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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 2011 when the actuarial value of the assets represented 90% of the benefits accrued to members. A deficit reduction plan has been
agreed with the Trustees under which £0.2m was paid in the year (2012: £0.1m).
The assets and liabilities of the schemes were valued on an IAS 19 basis at 27 April 2013 by a qualified actuary. The numbers set out below
are the aggregate of the two schemes.
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1) Key assumptions used:
RPI inflation
Discount rate
Deferred pension revaluation
Expected return on scheme assets
2013
%
3.4
4.2
2.8
4.4
2012
%
2.8
4.6
2.2
5.2
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 dates and standard tables. Specifically the S1NMA table (2012: S1NMA table) with medium cohort improvement has been
used for male pensioners and the S1NFA table (2012: 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 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 £0.4m (2012: £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 schemes’ obligations
Fair value of pension schemes’ assets
Retirement benefit obligations recognised in the balance sheet
2013
£m
(26.8)
21.7
(5.1)
2012
£m
(22.6)
18.3
(4.3)
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Notes to the accounts continued
22. Retirement benefit obligations continued
3) The amounts recognised in the income statement in respect of the defined benefit pension schemes are as follows:
Interest cost on pension schemes’ obligations recognised in interest payable
Expected return on pension schemes’ assets recognised in interest receivable
Total recognised in the income statement
4) Reconciliation of movement in net pension deficit:
Notes
6
6
Opening balance
Less contributions
Actuarial loss recognised in equity
Closing balance
5) The amounts recognised directly in equity in respect of the defined benefit pension schemes are as follows:
Actuarial gain/(loss) on plan assets
Experience adjustment on liabilities
Change in assumptions underlying present value of liabilities
Total
Cumulative total
6) Movements in the pension schemes’ obligations are as follows:
Opening balance
Interest on pension schemes’ obligations
Actuarial loss recognised in equity
Benefits paid
Closing balance
7) Movements in the fair value of the pension schemes’ assets are as follows:
Opening balance
Expected return on pension schemes’ assets
Actuarial gain/(loss) recognised in equity
Actual return on assets
Employer contributions
Benefits paid
Closing balance
1.0
2.0
2013
£m
18.3
3.0
0.8
(0.4)
21.7
2013
£m
1.0
(1.0)
–
2013
£m
(4.3)
0.8
(1.6)
(5.1)
2013
£m
2.0
–
(3.6)
(1.6)
(5.1)
2013
£m
22.6
1.0
3.6
(0.4)
26.8
1.1
(0.2)
2012
£m
1.1
(1.1)
–
2012
£m
(4.0)
0.6
(0.9)
(4.3)
2012
£m
(0.2)
0.5
(1.2)
(0.9)
(3.5)
2012
£m
21.4
1.1
0.7
(0.6)
22.6
2012
£m
17.4
0.9
0.6
(0.6)
18.3
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8) The assets in the pension scheme and the expected rates of return are:
Equities
Bonds
Property
Cash
Annuities
Fair value of pension
schemes’ assets
Present value of pension
schemes’ obligations
Retirement benefit obligations
Related deferred tax asset
2013
2012
2011
Long term
expected rate
of return
%
5.2
3.4
5.2
2.7
4.2
Category of
asset as a
proportion
of total
%
46.3
26.9
0.9
0.5
25.4
Long term
expected rate
of return
%
6.0
3.7
6.0
2.7
4.6
£m
10.1
5.8
0.2
0.1
5.5
Category of
asset as a
proportion
of total
%
53.3
16.5
1.1
1.1
28.0
Long term
expected rate
of return
%
7.0
4.7
7.0
4.0
5.3
£m
9.7
3.0
0.2
0.2
5.2
Category of
asset as a
proportion
of total
%
57.5
15.5
–
1.7
25.3
£m
10.0
2.7
–
0.3
4.4
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21.7
100.0
18.3
100.0
17.4
100.0
(26.8)
(5.1)
1.0
(4.1)
(22.6)
(4.3)
1.0
(3.3)
(21.4)
(4.0)
0.9
(3.1)
The long-term return on equities is assumed to be 1.6% in excess of inflation (2012: 2.6%). The rate of return on bonds is assumed to be in line
with the yield on AA-rated corporate bonds.
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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 (%)
2013
£m
21.7
(26.8)
(5.1)
–
–
2.0
9.2%
2012
£m
18.3
(22.6)
(4.3)
0.5
(2.2%)
(0.2)
(1.1%)
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%)
Employer contributions of £0.9m are expected to be paid into these pension schemes during the financial year 2013/14.
(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 IAS 19, 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 (2012: £1.3m).
(ii) Defined contribution schemes
The Company launched a Group Personal Pension 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 Scottish Life. Contributions
for the period amounted to £0.9m (2012: £1.0m).
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 (2012: £nil) and
contributions to industry collective schemes were £0.1m (2012: £0.1m).
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Notes to the accounts continued
23. Financial instruments
(i) Financial risk management objectives and policies
Risk management
The Group’s principal financial instruments comprise borrowings and 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 each of these risks is managed in accordance with the Group’s treasury risk management strategy, which is also discussed in the Business
Review in the section Current liquidity.
(a) Credit risk
The Group does not have significant concentrations of credit risk as exposure is spread over a number of counterparties and customers.
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 customer products held ready for collection (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 is limited because the counterparties are banks with a minimum A- 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 A- credit ratings.
Carpetright plc Annual report and accounts 2013
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The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments,
including interest:
Group
At 27 April 2013
Interest bearing loans and borrowings
Finance leases
Trade and other payables
At 28 April 2012
Interest bearing loans and borrowings
Finance leases
Trade and other payables
Company
At 27 April 2013
Interest bearing loans and borrowings
Finance leases
Trade and other payables
At 28 April 2012
Interest bearing loans and borrowings
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
12.5
0.3
80.7
93.5
2.1
0.3
85.0
87.4
8.3
0.2
84.8
93.3
2.1
0.2
86.6
88.9
0.6
0.3
–
0.9
1.6
0.3
–
1.9
0.6
0.2
–
0.8
1.6
0.2
–
1.8
3.2
0.9
–
4.1
15.9
0.9
–
16.8
3.2
0.6
–
3.8
15.9
0.6
–
16.5
–
4.8
–
4.8
–
5.1
–
5.1
–
1.4
–
1.4
–
1.6
–
1.6
Total
£m
16.3
6.3
80.7
103.3
19.6
6.6
85.0
111.2
12.1
2.4
84.8
99.3
19.6
2.6
86.6
108.8
Committed overdraft facilities are renewable annually and amounts undrawn were £2.2m and €nil (2012: £6.0m and €0.9m). The Company
has committed facilities to July 2015. These facilities comprise 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 Group has and is expected to remain in compliance with these covenants. At 27 April 2013 the Euro
amortising term loan was €1.8m and the revolving credit facility had an undrawn amount of £42.5m (2012: £32.5m).
(c) Foreign exchange risk
Outside the UK the Group operates in the Republic of Ireland, the Netherlands, Belgium and has an investment property in Poland. Revenues
and expenses of these operations are denominated in Euros or Zlotys. The Group’s investment in Poland is not sufficiently material to require
the risk to be hedged. 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 lower (2012: £0.7m lower). At 27 April 2013 if Sterling had weakened/strengthened by 10% against the Euro,
profit after tax for the year would have been £0.1m 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
2013
1.23
1.19
Euro
2012
1.16
1.23
Zloty
2013
5.12
4.93
Zloty
2012
4.90
5.12
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6868
Notes to the accounts continued
23. Financial instruments continued
(d) Interest rate risk
The Group has various borrowings bearing interest at a margin over LIBOR or EURIBOR 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 and a constant ratio of fixed to floating interest rates as at
27 April 2013 and 28 April 2012 respectively. Consequently analysis relates to the situation at those dates and is not representative of the years
then ended.
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 £0.1m (2012: £0.3m).
The interest rate profile of the financial assets and liabilities of the Group is as follows:
2013
2012
Weighted
average
effective
interest rate
%
–
0.4
–
1.0
0.8
Floating
rate
£m
3.9
3.7
0.3
7.9
(9.8)
(5.7)
(15.5)
Fixed
rate
£m
–
–
–
–
(2.4)
(0.2)
(2.6)
Interest
free
£m
3.1
4.5
–
7.6
(70.8)
(9.9)
(80.7)
Weighted
average
effective
interest rate
%
0.2
1.2
–
1.0
2.2
Total
£m
7.0
8.2
0.3
15.5
(83.0)
(15.8)
(98.8)
Floating
rate
£m
6.1
3.2
0.3
9.6
(15.4)
(10.6)
(26.0)
Fixed
rate
£m
–
–
–
–
(2.7)
–
(2.7)
Interest
free
£m
4.8
4.6
–
9.4
(72.2)
(12.8)
(85.0)
Total
£m
10.9
7.8
0.3
19.0
(90.3)
(23.4)
(113.7)
Sterling
Euro
Zloty
Total financial assets
Sterling
Euro
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 2013
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6969
(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. There are no available-for-sale
financial assets.
The fair values of financial assets and liabilities, together with their carrying amounts are:
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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
Total financial liabilities
Net financial liabilities
Group
Company
2013
Fair value
£m
2012
Fair value
£m
2013
Fair value
£m
2012
Fair value
£m
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7.9
7.6
15.5
(15.5)
(2.6)
(80.7)
(98.8)
9.6
9.4
19.0
(26.0)
(2.7)
(85.0)
(113.7)
6.4
50.6
57.0
(11.3)
(1.5)
(84.8)
(97.6)
6.1
53.1
59.2
(21.9)
(1.6)
(86.6)
(110.1)
(83.3)
(94.7)
(40.6)
(50.9)
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Determination of fair values
The carrying values of all other financial assets and liabilities are deemed to reflect fair value.
(iv) Hedge accounting
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 €1.8m (2012: €6.7m).
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Notes to the accounts continued
24. Share capital
Group and Company
At 1 May 2011
Issue of new shares
At 28 April 2012
Issue of new shares
At 27 April 2013
Number
of allotted,
called up and
fully paid
ordinary shares
Millions
67.2
0.3
67.5
–
67.5
Share capital
£m
0.7
–
0.7
–
0.7
Share premium
£m
15.4
0.9
16.3
0.3
16.6
Treasury shares
£m
(0.3)
–
(0.3)
–
(0.3)
Total
£m
15.8
0.9
16.7
0.3
17.0
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 did not purchase any ordinary shares (2012: nil shares purchased). At the year end the Trust
held 27,869 (2012: 27,869) ordinary shares of 1p each with a market value of £0.2m (2012: £0.2m).
The Group also operates a share option scheme under which shares are issued to satisfy share options upon exercise.
25. Share based payments
Included within administration expenses is a charge of £0.5m (2012: £0.2m) 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
26 to 35. 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 327,224 shares were awarded (2012: 360,778). The amount recognised in the income statement
in respect of all LTIP awards is a charge of £0.3m (2012: £0.1m). The fair values of the awards, where there is no market condition, are valued
using a Black-Scholes option pricing model. The Group’s LTIP Trust is administered by the Equity Trust (Jersey) Limited and it waives its
right to dividends on the shares held.
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7171
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Reconciliation of movements in the periods ended 27 April 2013
Outstanding at 1 May 2011
Granted
Forfeited
Outstanding at 28 April 2012
Granted
Forfeited
Outstanding at 27 April 2013
Exercisable at 27 April 2013
Exercisable at 28 April 2012
LTIP 2012
LTIP 2011
LTIP 2010
Share
awards
’000s
–
–
–
–
327.3
(13.0)
314.3
–
–
Fair
value
£m
–
–
–
–
2.1
(0.1)
2.0
–
–
Share
awards
’000s
–
360.7
(27.8)
332.9
92.6
(20.5)
405.0
–
–
Fair
value
£m
–
1.6
(0.1)
1.5
0.4
(0.1)
1.8
–
–
Share
awards
’000s
214.0
–
(57.2)
156.8
–
(8.9)
147.9
–
–
Fair
value
£m
1.4
–
(0.4)
1.0
–
(0.1)
0.9
–
–
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The valuation assumptions used in the application of the Black-Scholes models 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 (%)
LTIP 2012
award
641
664
1.0
35.9
3.0
1.1
0.4
LTIP 2011
award
459
486
1.0
39.7
3.0
1.8
0.8
LTIP 2010
award
675
740
1.0
44.6
3.0
3.0
2.0
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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.
(ii) Savings Related Share Option Scheme (“SAYE”)
Three and five year SAYE schemes were introduced in 2004. Employees and Executive Directors 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 £0.2m (2012: £0.1m).
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7272
Notes to the accounts continued
25. Share based payments continued
Reconciliation of movements in the periods ended 27 April 2013
SAYE 2013
3 yr
Number
of options
’000s
5 yr
Number
of options
’000s
SAYE 2012
3 yr
Number of
options
’000s
5 yr
Number of
options
’000s
SAYE 2011
3 yr
Number of
options
’000s
5 yr
Number of
options
’000s
SAYE 2010
3 yr
Number of
options
’000s
5 yr
Number of
options
’000s
SAYE 2009
3 yr
Number of
options
’000s
5 yr
Number of
options
’000s
SAYE 2008
3 yr
Number of
options
’000s
5 yr
Number of
options
’000s
SAYE 2007 SAYE 2006
5 yr
Number of
options
’000s
5 yr
Number of
options
’000s
Outstanding at
1 May 2011
Granted
Forfeited
Vested
Outstanding at
28 April 2012
Granted
Forfeited
Vested
Outstanding at
27 April 2013
Exercisable at
27 April 2013
Exercisable at
28 April 2012
–
–
–
–
–
–
–
–
–
101.0
(1.3)
–
–
17.0
–
–
–
266.0
(3.4)
–
262.6
–
(47.8)
–
–
42.8
–
–
42.8
–
(6.7)
–
94.1
–
(49.3)
–
44.8
–
(9.7)
–
30.0
–
(14.1)
–
15.9
–
(2.9)
–
25.0
–
(9.5)
–
15.5
–
(3.2)
–
20.7
–
(14.6)
–
325.8
–
(13.8)
(283.4)
285.1
–
(36.2)
(3.2)
13.2
–
(8.0)
(5.2)
6.1
–
(1.8)
–
28.6
–
–
(28.6)
245.7
–
(12.8)
(7.6)
99.7
17.0
214.8
36.1
35.1
13.0
12.3
4.3
–
225.3
–
–
–
–
–
–
–
–
–
–
–
–
12.3
–
–
–
–
28.6
–
–
22.6
–
(6.0)
–
16.6
–
(4.1)
–
12.5
12.5
4.0
–
(0.4)
–
3.6
–
(3.6)
–
–
–
–
3.6
6.8
–
(6.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 2013
3 yr
5 yr
SAYE 2012
3 yr
5 yr
SAYE 2011
3 yr
5 yr
SAYE 2010
3 yr
5 yr
SAYE 2009
3 yr
5 yr
SAYE 2008
3 yr
5 yr
248
339
179
231
264
298
333
331
95
81
148
132
679
544
34.7
3.1
–
2.9
679
544
39.1
5.1
–
4.9
529
423
40.0
3.1
2.3
2.9
529
423
44.1
5.1
2.3
2.9
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
40
50
40
50
40
50
40
50
40
50
40
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 2013
Carpetright plc Annual report and accounts 2013
7373
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26. Capital and other financial commitments
Capital commitments at 27 April 2013 relates to the acquisition of property, plant and equipment and intangible assets, and are:
Authorised and contracted
Group
2013
£m
2.1
Group
2012
£m
2.5
Company
2013
£m
1.7
Company
2012
£m
1.8
Capital commitments include £1.4m (2012: £2.4m) in the Group and £1m (2012: £1.7m) in the Company, for which a provision has been
made in the accounts.
27. Operating lease commitments
At 27 April 2013 the future minimum lease payments in respect of land and buildings and other assets under operating leases are:
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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
2013
Land and
buildings
£m
88.6
315.8
410.6
815.0
2013
Land and
buildings
£m
80.0
293.5
395.0
768.5
Other
£m
1.0
2.4
1.3
4.7
Other
£m
0.9
2.2
1.2
4.3
2012
Land and
buildings
£m
88.0
319.0
467.5
874.5
2012
Land and
buildings
£m
80.4
299.5
456.3
836.2
Other
£m
1.1
1.3
0.5
2.9
Other
£m
1.0
1.2
0.5
2.7
Operating lease payments are negotiated for an average of 6.7 years (2012: 6.5 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 £7.1m (2012: £9.8m).
28. Contingent liabilities
The Group has no material contingent liabilities at 27 April 2013.
The Company’s contingent liabilities derive from guarantees for subsidiaries which are disclosed in note 30.
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7474
Notes to the accounts continued
29. Movement in cash and net debt
Current assets
Cash and cash equivalents
Bank overdrafts
Current liabilities
Borrowings and overdrafts
Obligations under finance leases
Non-current liabilities
Borrowings
Obligations under finance leases
Total net debt
Reconciliation of movements in the periods ended 27 April 2013
Net increase/(decrease) in cash and cash equivalents
Net decrease in borrowings
Other non cash movements
Group
2013
£m
7.9
(12.0)
(4.1)
(0.2)
(0.1)
(0.3)
(3.3)
(2.5)
(5.8)
(10.2)
Group
2013
£m
(5.6)
13.9
0.6
8.9
Group
2012
£m
Company
2013
£m
Company
2012
£m
9.6
(8.1)
1.5
(1.4)
(0.1)
(1.5)
(16.5)
(2.6)
(19.1)
(19.1)
Group
2012
£m
2.0
42.9
1.7
46.6
6.4
(7.8)
(1.4)
(0.2)
(0.1)
(0.3)
(3.3)
(1.4)
(4.7)
(6.4)
6.1
(4.0)
2.1
(1.4)
(0.1)
(1.5)
(16.5)
(1.5)
18.0
(17.4)
Company
2013
£m
(4.0)
13.9
1.1
11.0
Company
2012
£m
2.6
38.7
0.6
41.9
30. Related parties
Group
Related party transactions with the Directors are disclosed in the Directors’ Report on page 36.
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 £0.3m in 2013 (2012: £0.2m).
Company
The following table provides the total amount of transactions and year end balances with related parties for the relevant financial year.
Subsidiary undertakings
2012/13
2011/12
Sales of goods
£m
Amounts due
from related
parties
£m
Amounts due
to related
parties
£m
2.6
3.8
47.5
48.3
11.9
12.4
The Company guaranteed bank and other borrowings of subsidiary undertakings amounting to £4.1m (2012: £4.1m).
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
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Group five year financial summary
Summarised income statements:
Revenue
Gross profit
Operating profit/(loss)
Underlying operating profit
Net finance costs
Underlying profit before tax
Exceptional items
Profit/(loss) before tax
Tax
Profit/(loss) 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/(losses) per share (pence)
Dividends per share (pence)
2013
£m
2012
£m
2011
£m
2010
£m
2009
£m
457.6
278.3
(3.4)
11.4
(1.7)
9.7
(14.8)
(5.1)
(1.5)
(6.6)
193.0
65.3
(10.2)
620
5,719
60.8%
2.5%
(0.7%)
9.6p
(9.8p)
–
471.5
276.0
18.0
8.0
(4.0)
4.0
9.5
13.5
(2.5)
11.0
205.2
70.7
(19.1)
632
5,840
58.5%
1.7%
3.8%
4.5p
16.4p
–
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
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7676
Independent auditors’ report to the members
of Carpetright plc
We have audited the financial statements of Carpetright plc for
the 52 week period ended 27 April 2013 which comprise the
Consolidated income statement, the Consolidated statement of
comprehensive income, the Group and Company Statements of
changes in equity, the Group and Company Balance sheets, the
Group and Company statements of cash flow 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 on page 39, 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 39, in relation to
going concern;
• the part of the Corporate Governance Statement relating to
the Company’s compliance with the nine provisions of the
UK Corporate Governance 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 27 April 2013
and of the Group’s loss 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
24 June 2013
Carpetright plc Annual report and accounts 2013
Carpetright plc Annual report and accounts 2013
Calendar
2013
Q1 interim management statement
Annual General Meeting
First-half trading update
First-half ends
Interim results announcement
2014
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
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5 September
15 October
26 October
10 December
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22 April
26 April
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Stockbrokers
Deutsche Bank AG
1 Great Winchester Street
London
EC2N 2DB
Peel Hunt
111 Old Broad Street
London
EC2N 1PH
Independent Auditors
PricewaterhouseCoopers LLP
Chartered Accountants and
Statutory Auditors
1 Embankment Place
London
WC2N 6RH
Bankers
National Westminster Bank plc
Tooting Branch
30 Tooting High Street
London
SW17 0RG
Registrars
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS99 6ZY
Company Secretary and
Registered Office
Jeremy Sampson
Carpetright plc
Harris House
Purfleet Bypass
Purfleet
Essex
RM19 1TT
Telephone: 01708 802000
This Report is printed on Core Uncoated.
It is produced at a mill that is certified
with ISO 14001 and EMAS environmental
management standards. The paper is also
Totally Chlorine Free and FSC® Certified.
The inks used are all vegetable oil based.
Printed at Principal Colour Ltd, ISO 14001
and FSC® certified.
Designed and produced by Black Sun plc
www.blacksunplc.com
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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