(cid:84)(cid:74)(cid:78)(cid:81)(cid:77)(cid:90)(cid:1)(cid:87)(cid:66)(cid:77)(cid:86)(cid:70)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:78)(cid:80)(cid:79)(cid:70)(cid:90)(cid:15)(cid:15)(cid:15)
Dunelm Group plc Annual report 2007
Highlights
£355m
+6.1%
Sales up 12.5% to £354.7m
(2006: £315.2m)
Like-for-like sales
increase of 6.1%
£44.0m
Underlying operating profit
up 15.3% to £44.0m*
£40.8m
Statutory operating profit
•
•
Operational
•
•
•
82 stores at 30 June 2007 (70 OOT superstores)
Average superstore selling area of 28,000 sq ft
Around 20,000 lines in a superstore – broad and
deep ranges
New IT systems rolled out
Transition to new central warehouse completed
£41.0m
£37.8 m
Underlying profit before tax*
Statutory profit before tax
Financial
•
•
•
£355m turnover in FY 2006/07
Underlying operating margin 12.4%
Operating cash flow £34.7m after interest and tax
* Underlying profit is defined as profit before non-recurring items i.e. profit on sale of
former warehouse (£1.1m), costs in relation to warehouse relocation (£1.3m) and
IPO costs (£3.0m).
Dunelm is a fast growing specialist
out-of-town homewares retailer
providing a comprehensive range
of products to a wide customer
base, under the brand name
Dunelm Mill.
C O N T E N T S
I F C H I G H L I G H T S
1
2
4
6
7
10
13
16
17
18
19
2 0
2 1
2 2
2 6
4 2
4 8
51
C H A I R M A N ’ S S TAT E M E N T
C H I E F E X E C U T I V E ’ S R E V I E W
F I N A N C E D I R E C TO R ’ S R E V I E W
D I R E C TO R S
C O R P O R AT E G O V E R N A N C E R E P O R T
R E M U N E R AT I O N R E P O R T
D I R E C TO R S R E P O R T A N D B U S I N E S S R E V I E W
S TAT E M E N T O F D I R E C TO R S ’ R E S P O N S I B I L I T I E S
I N D E P E N D E N T AU D I TO R S ’ R E P O R T
C O N S O L I D AT E D I N C O M E S TAT E M E N T
C O N S O L I D AT E D B A L A N C E S H E E T
C O N S O L I D AT E D C A S H F L O W S TAT E M E N T
S TAT E M E N T O F C H A N G E S I N E Q U I T Y
AC C O U N T I N G P O L I C I E S
N OT E S TO T H E A N N UA L F I N A N C I A L S TAT E M E N T S
PA R E N T C O M PA N Y AC C O U N T S
N OT I C E O F A N N UA L G E N E R A L M E E T I N G
F O R M O F P R OX Y
I B C A D V I S E R S
Dunelm Group plc is a company incorporated and domiciled in England with registered
office Fosse Way, Syston, Leicestershire, LE7 1NF and registered number 4708277.
Chairman’s statement Geoff Cooper
(cid:52)(cid:74)(cid:78)(cid:81)(cid:77)(cid:90)(cid:1)(cid:87)(cid:66)(cid:77)(cid:86)(cid:70)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:78)(cid:80)(cid:79)(cid:70)(cid:90)(cid:152)
The choice and value
we offer our customers
across the board in
homewares is second
to none in the UK.
Finally, I would like to take this opportunity
to pay public tribute to the founders of
Dunelm, Bill and Jean Adderley. They
have laid the foundations for the long-term
prosperity of the Group not only by driving
its growth and development until relatively
recently, but equally importantly by having
the strength to stand back from the Group
and let others take it forward, both in
terms of management and ownership.
Of course, Bill and Jean remain major
shareholders and Bill is still an active
and challenging Non-Executive Director.
His son, Will, has already demonstrated
immense capability as Chief Executive of
the business and I am certain that he and
the rest of the senior team will continue to
push it forward to even greater success,
to the benefit of all shareholders.
GEOFF COOPER
CHAIRMAN
19 September 2007
This has been a momentous year in
Dunelm’s development which has
included the successful IPO last October.
At the same time, the business has
delivered record sales and profits. I believe
this is a real tribute both to the strength
of the Dunelm proposition and particularly
to the focus and determination of its
management team.
Within the strong all-round financial
performance set out in this Annual Report,
the like-for-like sales increase of 6.1%
deserves particular comment. This
performance demonstrates the continuing
appeal of the Dunelm proposition to a
wide range of customers. Dunelm’s
philosophy is ‘simply value for money’,
focused on giving all our customers a
great deal, whatever price point they are
looking to buy at. The choice and value
we offer our customers across the board
in homewares is second to none in
the UK.
The transition to becoming a publicly listed
company was eased by the Company’s
policy, adopted some five years ago,
of applying much of the rigour and
processes required when answerable to
public shareholders. However, one of the
few ways in which we have changed is to
bring the membership of our Board more
into line with the requirements of the
Combined Code. We have addressed this
through the appointment of Simon Emeny
as a Non-Executive Director and I am
delighted to welcome Simon to the Board.
He has an excellent track record of
achievement as Managing Director of the
major operating businesses within Fuller,
Smith and Turner P.L.C. and I am sure that
his experience and drive will be of great
benefit to us.
Dunelm Group plc Annual report 2007
1
Chief Executive’s review Will Adderley
(cid:52)(cid:74)(cid:78)(cid:81)(cid:77)(cid:90)(cid:1)(cid:71)(cid:80)(cid:68)(cid:86)(cid:84)(cid:70)(cid:69)
We are as passionate as
ever about giving ‘simply
value for money’ to all
our customers – a
combination of great
prices, unrivalled choice,
excellent quality, great
product availability and
friendly service.
TRADING
I am delighted to report continued
successful growth of the Group during
the last financial year. Our overall sales
increased by 12.5%, including growth
of 6.1% in like-for-like sales. This like-for-
like sales growth was particularly strong
in the final quarter, at 10.1%. Our growth
exceeded the wider retail market and will
almost certainly give us a further increase
in our market share within homewares.
The market environment was uncertain for
much of the year. Consumer demand held
up better than might have been expected
given the series of base rate increases
from mid-2006, and in our view the
homewares market experienced steady
but unspectacular growth. The intensity
of competition also increased during the
period, with the supermarkets continuing
to give additional space to homewares
along with other multiple retailers.
Nevertheless, I firmly believe that Dunelm
remains the leading multiple homewares
specialist in the UK, a position we intend
to hold onto by continuing to pursue the
four strategic priorities which we outlined
at the time of our flotation.
PRIORIT Y 1 – GROWING THE
STORE PORTFOLIO
We opened four new superstores in
the year, at Stevenage, Colchester, Perth
and Bradford. All have received strongly
positive customer reaction and all are
trading in line with our expectations. In
addition we relocated our Swansea
superstore to an adjacent, larger unit
and have seen a very strong increase
in trading as a result. Altogether the chain
of 68 superstores as at the year-end
provided over 1.9m square feet of
selling space.
It remains our firm intention to grow the
superstore portfolio as rapidly as we can,
without compromising our long-term
financial returns. We have opened
two further units since the year-end,
in Aberdeen and Shoreham. We are
contractually committed to four more units
which are due to open this financial year or
early next and we have numerous further
opportunities under negotiation. We
believe that the demand for retail space
has cooled over the past couple of years
and we are therefore optimistic that we will
be able to achieve a good number of
additions to our estate in the coming year,
on attractive terms.
Whilst expanding our superstore chain, we
have taken the opportunity to close three
high street stores. In all three cases there
is already a superstore serving the same
catchment area and the total space exited
is less than one average superstore. This
leaves us with 14 high street stores at
present and we will continue to look for
opportunities to relocate to superstores
in these towns.
PRIORIT Y 2 – DEVELOPING THE
CUSTOMER OFFER
We know that it is essential for us to
continue improving our retail proposition.
We are as passionate as ever about
giving ‘simply value for money’ to all
our customers – a combination of great
prices, unrivalled choice, excellent quality,
great product availability and friendly
service. We respect our competitors
and know that they will keep improving;
we know that we always have to get
better too if we want to keep satisfying
our customers.
2
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A good example of the way we operate
is our decision to cease selling beds.
This was a range we experimented with
but where we found we were unable to
outdo the established specialists in the
field. Accordingly we have made a rapid
but low-cost withdrawal, giving the space
released back to mainstream categories,
particularly bedding. The extra space has
allowed us to introduce an additional
range of plain-dye linen, and also to
showcase new designs from Dorma
which are exclusive to Dunelm. The result
has been a significant increase in bedding
sales and further reinforcement of our
position as the specialist in this area.
Looking ahead we see opportunities to
improve our product offering in several
categories and to provide even better
customer service through our friendly
staff. We look forward to giving our
customers an even more enjoyable
shopping experience as a result.
PRIORIT Y 3 – EXPLOITING OUR
INFRASTRUCTURE
The last financial year saw some important
milestones achieved in our infrastructure
development. First, the transition from
our Burton warehouse to a new facility
at Stoke was fully completed and this
now gives us a much larger central
warehousing capacity – approximately
four times as many pallet locations as
were previously available. With around
80% of merchandise still being supplied
direct to stores, we believe that the current
Stoke warehouse will be able to support
the central distribution requirement for
a chain of over 100 superstores and we
will continue to drive efficiency in the
warehouse operation to ensure this is
the case.
The second major achievement was the
roll-out of SAP stock management to all
of our stores. For the first time, this gives
us full visibility of all stock throughout the
chain and enables us to control stock
levels more tightly.
PRIORIT Y 4 – LONGER TERM GROWTH
We aim to develop a number of initiatives
to increase the potential for longer term
growth. Our webstore opened in early
2006 and now contains over 7,500
products – to which we are adding all the
time. Whilst this channel remains small
relative to the business as a whole, sales
are growing and we believe that we are
well positioned to benefit from any
significant migration of customer
purchasing to the internet.
OUTLOOK
In the early weeks of our new financial
year, we have continued to benefit from
relatively soft comparatives driven by last
year’s very hot summer together with the
climax of the football World Cup. For the
11 weeks to 15 September, total sales
growth has been 12.5% and like-for-like
growth has been 7.0%.
We are very pleased with these figures.
At the same time we are naturally cautious
about the outlook for the next few
months. Not only do we start to see more
challenging comparatives, but the state of
consumer demand remains uncertain. We
do not take continued strong growth for
granted, but I can assure all shareholders
that we will be working hard to ensure that
our offer remains as compelling for
customers as ever.
WILL ADDERLEY
CHIEF EXECUTIVE OFFICER
19 September 2007
Dunelm Group plc Annual report 2007
3
Finance Director’s review
(cid:52)(cid:74)(cid:78)(cid:81)(cid:77)(cid:90)(cid:1)(cid:69)(cid:70)(cid:77)(cid:74)(cid:87)(cid:70)(cid:83)(cid:74)(cid:79)(cid:72)
The Group’s profile of
strong cash generation
continued in the last
financial year. Net cash
generated from
operations, after interest
and tax, was £34.7m
(an increase of 44.0%).
UNDERLYING OPERATING RESULT
Sales in the financial year were £354.7m,
an increase of 12.5%. On our conservative
definition of like-for-like (i.e. including
only stores which traded throughout the
financial year in question and all of the
preceding financial year), the like-for-like
growth was 6.1%.
We continued to benefit from our
increased scale and buying power
as well as weakness of the US dollar,
allowing us to achieve a 0.4% point
increase in gross margin.
Operating costs remained well controlled,
with an overall 3.7% increase in costs in
like-for-like stores. However, as we have
explained previously, the non-store cost
base now includes a rent charge on
the new Stoke distribution centre and
amortisation of the new SAP software
and associated hardware. In the
previous financial year there was no rent
charge for the distribution centre and
only a part year amortisation charge for
SAP. The overall effect is an increase
in our non-store cost base of £2.1m
due to these items.
Operating profit on an underlying basis
(i.e. after charging the new costs
described above, but before non-recurring
items) was £44.0m, an increase of 15.3%.
•
NON-RECURRING ITEMS
In our definition of underlying operating
profit we exclude the following items
which we consider to be outside the
normal running of the business:
IPO costs – the Group bore
•
£3.0m of costs in relation to the IPO
in October 2006.
Warehouse transition – costs of £1.3m
arose during the year in respect of the
transfer of operations from the former
distribution centre at Burton to the new
facility at Stoke, including redundancy,
other closure costs and the incremental
cost of parallel running the two sites for
a period during the year.
Warehouse disposal – a gain of £1.1m
was realised on disposal of the Burton
freehold property.
•
4
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After including all of the above items, the
operating result for the year was a profit
of £40.8m, an increase of 7.0%.
EBITDA
Earnings before interest, tax, depreciation
and amortisation were £53.5m, excluding
non-recurring items. This has been
calculated as underlying operating
profit (£44.0m) plus depreciation and
amortisation (£9.5m) and represented
a 15.2% increase on the previous year.
The EBITDA margin achieved, at 15.1%
of sales, demonstrates the strength of
Dunelm’s business model.
FINANCIAL ITEMS AND PBT
In October 2006, immediately prior to
IPO, the Group assumed bank debt of
£50m in order to fund a special dividend.
Historically the Group has held a cash
surplus. Accordingly, there was a shift
from net interest receivable of £0.7m in the
prior year to net interest payable of £1.6m
in the latest financial year.
Additionally, the Group suffered foreign
exchange losses in respect of US dollar
holdings which amounted to £1.4m,
based on a year-end exchange rate of
$2.00.The equivalent net loss last year
was £0.8m, with a closing exchange
rate of $1.84. The Group has no further
forward exchange contracts outstanding
and the dollars held in cash will be utilised
to fund purchases of stocks over the
coming year. Going forward, it is our
intention to purchase foreign currency at
spot rates as and when required for actual
foreign currency payments.
After accounting for interest and foreign
exchange impacts, underlying profit before
tax for the year amounted to £41.0m, an
increase of 7.8%. Statutory PBT, after
non-recurring items, was £37.8m.
TA X, PAT AND EPS
The headline tax charge for the year
was 34.9% of statutory PBT. However,
the effective tax rate was impacted by
the IPO costs which are not deductible
for corporation tax purposes. It also
includes the impact of recalculating
deferred tax based on the new
corporation tax rate of 28%. Excluding
these factors, the effective tax rate for the
year was 31.8% of pre-tax profit.
Underlying EPS (excluding non-recurring
items) on a fully diluted basis shows a rise
of 5.3% to 13.7p. Our reported earnings
per share are 12.2p on a fully diluted
basis, 6.5% below last year.
IMPLEMENTATION OF IFRS
IFRS has been fully implemented by
Dunelm and the three year record shown
at the time of our IPO was on a consistent
IFRS basis. The major impact of this
change in accounting principles is that
lease incentives are spread over the life
of the lease rather than up to the first rent
review (as under UK GAAP).
We published details of the transition to
IFRS in our interim report last March. The
same analysis is included in this document
in Note 30 to the financial statements.
CAPITAL EXPENDITURE
The business has undertaken significant
capital expenditure in recent years,
including major investments in systems
and technology infrastructure and the
fit-out of the new distribution centre.
The major part of these investments was
already incurred by June 2006, so gross
capital expenditure in the most recent
financial year was reduced to £15.1m
(previously £25.4m). This included one
significant freehold store acquisition as
well as the fit-out costs for the other new
stores opened in the year.
WORKING CAPITAL
Stocks increased by £4.3m during the
financial year mainly as a result of new
store openings. Net working capital was
slightly reduced compared with the start
of the year.
CASH POSITION
The Group’s profile of strong cash
generation continued in the last financial
year. Net cash generated from operations,
after interest and tax, was £34.7m (an
increase of 44.0%) and net debt at the
year-end was £22.6m.
DIVIDEND
In addition to the special pre-IPO dividend
of 25p per share, an interim dividend of
0.8p was paid in April 2007. It is proposed
to pay a final dividend of 3.0p per share.
KEY PERFORMANCE INDICATORS
In addition to the traditional accounting
measures of sales and profits, the
directors review business performance
each month using a range of other KPIs.
These include:
Like-for-like sales
growth
Change in
gross margin
Number of new
store openings
2006/07
2005/06
+6.1%
–4.8%
+40bp
+100bp
4
5
KEY RISKS
The directors also consider key risks to
the business in the areas of strategic,
operational and financial risks.
STRATEGIC RISKS
Competition in the homewares market
has strengthened in recent years. Further
new entrants and/or new formats are
anticipated. We will continue to monitor
competitor activity and to modify our
proposition if necessary.
The rate of consumer expenditure growth
is uncertain and a prolonged downturn
could have a significant effect on our
business, as well as on many other
retailers. We mitigate this risk by retaining
the ability to react quickly to changes
in customer demand and to adjust our
offer accordingly.
Like all businesses, we face the risk of
increased costs from compliance with
new laws and regulations. In addition,
changes to property regulation could have
a particular impact on our opportunities
for opening new stores. At present we are
not aware of any significant forthcoming
changes in the regulatory environment.
Our growth plans rely heavily on our being
able to gain access to additional trading
locations. If for any reason the supply of
vacant retail warehouse space declines
significantly, we will be forced to accept
a lower pace of expansion.
OPERATIONAL RISKS
As with most major retailers, the business
is heavily reliant on information systems
and technology. A major IT incident
would constitute a significant threat to
the business, at least in the short term.
We have a disaster recovery plan in place
to provide business continuity in the event
of such an occurrence.
Similarly, the business could suffer
disruption in the event of a major incident
within the supply chain, e.g. loss of our
central warehouse or a major supplier.
However, our use of a wide supply base
mitigates this risk.
Dunelm has a number of staff members
in specialist positions whose expertise is
important to operations and who could
not easily be replaced.
FINANCIAL RISKS
The Group has a committed bank facility
under a revolving loan agreement with
Lloyds TSB Bank plc of £50m, and an
uncommitted overdraft facility of £3m
with Barclays Bank Plc. These facilities
are considered to provide sufficient funding
for the Group’s operations. As at 30 June
2007, the total of committed bank facilities
exceeded net debt by £27.4m.
With net debt of £22.6m at the year-end
and on a declining trend, we do not
consider our direct exposure to interest
rate fluctuations to be significant.
Surplus funds are placed on deposit with
counter parties approved by the Board.
A credit rating of at least AAA is required.
DAVID STEAD
FINANCE DIRECTOR
19 September 2007
Dunelm Group plc Annual report 2007
5
Directors
GEOFF COOPER
NON-EXECUTIVE CHAIRMAN
Geoff Cooper, aged 53, joined the
Group in November 2004. Chairman
of the Audit Committee and Member
of the Remuneration and Nominations
Committees. He is currently Chief
Executive of Travis Perkins plc, and
is a former Director of Gateway (now
Somerfield plc) and has also been Finance
Director and then Deputy Chief Executive
of Alliance UniChem plc.
BILL ADDERLEY
FOUNDER AND
NON-EXECUTIVE DIRECTOR
Bill Adderley, aged 59, together with his
wife Jean, founded the business in 1979.
Bill led the development of the business
for many years until moving to a non-
executive role in 2002. Bill intends to
remain as a Non-Executive Director
until he reaches the age of 60 in 2008.
MARION SEARS
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR
Marion Sears, aged 44, joined the Group in
July 2004. Chairman of the Remuneration
and Nominations Committees and
Member of the Audit Committee. She is
Non-Executive Director of Zetar plc and
Prelude Trust plc and is a member of
PricewaterhouseCoopers Advisory Panel.
WILL ADDERLEY
CHIEF EXECUTIVE
Will Adderley, aged 35, joined the business
in 1992. He has worked in and is familiar
with all major areas of the business and
took over the day-to-day running of the
Group from his father in 1996.
DAVID STEAD
FINANCE DIRECTOR
David Stead, aged 49, joined the Group
in 2003. Previously he spent 14 years at
Boots where he was Finance Director of
Boots The Chemists and Finance Director
of Boots Healthcare International.
SIMON EMENY
INDEPENDENT NON-EXECUTIVE
DIRECTOR
Simon Emeny, aged 41, joined the Group
in June 2007. He is a member of the
Audit, Remuneration and Nominations
Committees. Simon is an Executive
Director of Fuller Smith and Turner P.L.C.
where he is responsible for the Fuller’s
Inns division.
6
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Corporate Governance report
The Board is committed to high standards of corporate
governance. This report explains how the Group has applied the
principles of good governance and code of best practice set out
in the Combined Code dated 2006, since the Group was floated
on the London Stock Exchange on 24 October 2006.
Throughout the period from flotation to the end of the financial
year the Group has complied with the Combined Code except
as follows:
•
Until the appointment of Simon Emeny, the Board comprised
two Executive Directors and three Non-Executive Directors,
however only one of these (Marion Sears) was independent
within the meaning of the Combined Code. With the
appointment of Simon Emeny there is now an equal number
of Executive and independent Non-Executive Directors.
Prior to the appointment of Simon Emeny, Board committees
did not have the required number of independent Non-
Executive Directors.
The selection process leading to the appointment of Simon
Emery did not make use of external consultants, as the Board
did not believe that the cost would be justified. The Board
conducted a wide-ranging review of potentially suitable
candidates and, as a whole, participated in each step of
the search and selection process.
Geoff Cooper, Company Chairman, is also Chairman of the
Audit Commitee. Given the balance of other independent
Non-Executive Directors who sit on the committee this is
not considered to result in the Chairman exercising undue
influence over the committee.
There has not been in place until recently a formal written
process for reviewing and managing risk in the business.
The Board has considered catastrophe risk and businesss
continuity plans have been developed. A formal review
process is now also under development.
•
•
•
•
There is a schedule of matters reserved to the Board for decision
or approval, which is available on the Group’s website or from the
Company Secretary. Examples of such matters include Group
strategy and budget, Group capital structure, approval of financial
results and report and accounts, significant capital or contractual
commitments, maintaining internal control and risk management,
and approval of Group-wide policies.
At each meeting, the Chief Executive reports on operational
performance (including health and safety) and the Finance
Director reports on financial performance. Other matters are
discussed by the Board as required, supported by a briefing
paper where a decision is to be made by the Board.
Minutes of all Board and Committee meetings are taken by the
Company Secretary and committee secretaries respectively
and circulated for approval. Any unresolved concerns raised
by a Director are recorded in the minutes.
The Chairman and the other Non-Executive Directors meet
from time to time without Executive Directors being present.
In addition the Non-Executive Directors have the opportunity
to meet at least once a year without the Chairman present as
part of the appraisal process.
DIRECTORS
The Non-Executive Chairman is Geoff Cooper and the Chief
Executive is Will Adderley. The Board has adopted a written
statement setting out their respective responsibilities. In general
terms, the Chairman is responsible for running the Board and the
Chief Executive is responsible for running the Group’s business.
The other Non-Executive Directors are Bill Adderley, Marion
Sears and Simon Emeny. David Stead is an Executive Director.
THE BOARD
The Board has overall responsibility for controlling the Group,
making decisions relating to the Group’s strategic direction and
measuring progress towards strategic goals.
The Board has 10 scheduled meetings per annum, including
one strategy meeting. There was full attendance at all Board
and Committee meetings subsequent to flotation except that
Bill Adderley was absent from two Board meetings.
The Senior Independent Director is Marion Sears.
The Board considers that Geoff Cooper was independent on
appointment, and that Marion Sears and Simon Emeny are
independent. Overall the Board considers that there is a good
balance of Executive and Non-Executive Directors.
Directors are required to retire from the Board by rotation and
offer themselves for re-election at least every three years.
Dunelm Group plc Annual report 2007
7
Corporate Governance report continued
The Remuneration Committee is chaired by Marion Sears, the
other members are Geoff Cooper and Simon Emeny (since his
appointment). The Chief Executive normally attends by invitation.
The committee has adopted terms of reference which are
available on the Group’s website or from the Company Secretary.
The committee’s responsibilities include:
•
recommending to the Board the specific pay and benefits
packages for the Executive Directors, including pensions
and any compensation payments;
recommending and monitoring the level and structure of
pay and benefits for senior management; and
implementing any awards made under share
incentive schemes.
•
•
During the year the committee met twice and:
•
determined the pay reviews and incentive arrangements for
Executive Directors; and
approved conditional share awards to be made to Executive
Directors under the Group’s Long-term Incentive Plan.
•
Further details of the committee’s activities are set out in the
Remuneration Report on page 10.
The Nominations Committee is chaired by Marion Sears,
the other members are Geoff Cooper and Simon Emeny
(since his appointment).
The committee has adopted terms of reference which are
available on the Group’s website or from the Company Secretary.
The committee’s responsibilities include:
•
•
•
reviewing the composition and balance of the Board;
Board succession planning; and
making recommendations on appointments to the Board
(including reappointments at AGM).
During the year the committee met three times. It led the
search for an additional independent Non-Executive Director,
culminating in the appointment of Simon Emeny.
ADVICE AND INSURANCE
All Directors have access to the advice and services of the
Company Secretary. In addition Directors may seek legal advice
at the Group’s cost if they consider it necessary in connection
with their duties.
The Group purchases Directors’ and Officers’ Liability insurance
cover for its Directors.
BOARD COMMITTEES
The Audit Committee is chaired by Geoff Cooper, the other
members are Marion Sears and Simon Emeny (from the time
of his appointment). The Board considers that Geoff Cooper
has recent and relevant financial experience by virtue of his
professional qualification and his current executive role with
Travis Perkins plc.
The committee has adopted terms of reference which are
available on the Group’s website or from the Company Secretary.
The committee is scheduled to meet at least three times a year,
to coincide with key dates in the Group’s financial reporting and
audit cycle. During the period under review it met in September,
February and April. The Finance Director usually attends
meetings by invitation, along with a representative from the
external auditors.
The principal responsibilities of the committee are to:
•
monitor the integrity of the Group’s financial statements and
public announcements relating to financial performance;
oversee the external audit process, including the appointment
of the auditors, their objectiveness and independence and the
scope and effectiveness of the audit;
monitor the effectiveness of internal controls and consider
annually the need for an internal audit function; and
review the process for identifying and managing risk
throughout the Group.
•
•
•
During the year the committee:
•
•
approved the interim results issued in March;
decided that an internal audit function was not required in
view of the adequacy of financial controls in place;
confirmed the Group’s policy for use of the auditors for non-
audit advice;
verified the independence of the auditors, and approved the
scope of the audit plan and the audit fee;
reviewed the business continuity plans in place; and
tasked the executive management to develop a formal risk
management process.
•
•
•
•
The committee met privately with the auditors in the course of
each meeting during the period.
The committee has approved a policy which allows employees
to raise legitimate concerns in confidence without fear
of discrimination.
The committee has also approved a policy that the auditors
should only be used for non-audit work if they offer demonstrably
better capability than alternative providers and there is no
potential conflict with the independence of the audit.
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TRAINING
Upon joining the Board, any new Director is offered a
comprehensive induction programme with visits to key sites
and meetings with senior managers and other staff members.
Throughout the year all Directors have maintained a regular series
of visits to stores and meetings with members of the senior
management team. The Board has also received presentations
from independent advisers on financial policy and on retail
sector trends.
The Board is ultimately responsible for the Group’s system of
internal control and for reviewing its effectiveness. However such
a system is designed to manage rather than eliminate the risk
of failure to achieve business objectives and can provide only
reasonable, and not absolute, assurance against material loss
and misstatement.
The Group maintains a well established control framework
comprising clear structures and accountabilities, well understood
policies and procedures and budgeting and review processes.
EVALUATION
The Chairman appraises the performance of the Chief Executive
with regard to personal objectives agreed at the start of each
financial year. The Chief Executive similarly appraises the
performance of the Finance Director.
Each store manager has clear responsibilities and operates within
defined policies and procedures covering such areas as financial
targets, human resources management, customer service, health
and safety etc. The Executive Directors monitor compliance with
these policies and procedures in the course of regular reviews.
There is a well established process for evaluating the
performance of the Chairman, the other Non-Executive Directors,
the Board Committees and the Board as a whole. This takes the
form of a Board meeting convened solely for the purpose of such
review. During the course of this meeting there is the opportunity
for the Chairman or other individual Directors to be asked to leave
the discussion whilst their performance is assessed.
INVESTOR REL ATIONS
There is a formal investor relations programme based around
results presentations and trading statements. In addition analyst/
shareholder visits are arranged. All of the Non-Executive
Directors are available to attend meetings at shareholder request.
The Chairman and Executive Directors feed back any investor
comments to the Board.
RISK MANAGEMENT AND INTERNAL CONTROL
A formal process for reviewing and managing risk in the business
has recently been developed. Prior to this, the Board has
considered catastrophe risk and businesss continuity plans have
been developed.
All Directors will be available at the AGM to meet with
shareholders and answer their questions.
Dunelm Group plc Annual report 2007
9
Remuneration report
The Directors present their Remuneration Report for the period
ended 30 June 2007.
INTRODUCTION
The Remuneration Committee has prepared this report in
accordance with the requirements of Schedule 7A to the
Companies Act 1985, and the Listing Rules. The report and
the Group’s remuneration policy comply with the Combined
Code. An ordinary resolution to approve the report through a
shareholder vote will be proposed at the Annual General Meeting.
The disclosures that the Group’s auditors are required to audit
within the Remuneration Report are contained in the section
headed ‘Audited Information’. The auditors’ opinion is included
in their report on page 17.
NON-AUDITED INFORMATION
REMUNERATION COMMIT TEE AND ADVISERS
During the year ended 30 June 2007, the Remuneration
Committee was made up of two members, Marion Sears and
Geoff Cooper. Marion Sears, who is the Senior Independent
Non-Executive Director, chairs the committee and also acts as
Secretary. Simon Emeny, a new independent Non-Executive
Director appointed to the Board on 25 June 2007, also joined
the Remuneration Committee from that date. The committee
determines the Executive Directors’ annual remuneration
packages and provides guidance on the remuneration packages
of members of senior management. No Director determines their
own pay.
The Remuneration Committee engaged Deloitte & Touche LLP to
assist with the preparation of the scheme rules for the Long-Term
Incentive Plan. Deloitte has not received a fee for any other
service from the Group during the year.
CHANGES IN POLICY DURING THE YEAR
There have been no changes to remuneration policy since the
IPO in October 2006. Accordingly, the remuneration structure
described in the IPO prospectus remains in place.
During the year, the Remuneration Committee introduced two
performance-based plans: an annual bonus plan and a long-term
incentive plan (the LTIP). Before the Company’s IPO, performance
pay was not a substantial element of the remuneration policy.
In accordance with governance guidelines and the requirements
of the Combined Code, the Remuneration Committee
implemented these two performance based plans to align the
interests of investors and senior management. The annual bonus
plan is short term and cash based. The LTIP is long-term
and share based.
EXECUTIVE REMUNERATION POLICY
The Remuneration Committee’s policy is to provide an executive
remuneration structure that will attract, motivate and retain the
high quality individuals who are essential for the successful
development of the business over the long term. Executive
remuneration aims to ensure that the Executive Directors are
fairly rewarded for their success measured by the Group’s
performance and are incentivised to enhance value for
shareholders on a continuing and long-term basis.
There are three main elements of the remuneration package for
Executive Directors:
•
•
•
Base annual salary including benefits.
Annual bonus.
Long-Term Incentive Plan.
Two of these main elements are new and performance based,
which means that there is now significant emphasis in the
Group’s executive remuneration policy on its performance.
BASE SAL ARY AND BENEFITS
Prior to the beginning of each financial year the Remuneration
Committee sets the base salaries of Executive Directors. The
committee examines the salaries of directors in a comparator
group of public companies with similar market capitalisation. It
also reviews published research and surveys, and considers the
wage increases across the Group as a whole. The committee
aims to set salaries at around the median level provided by similar
companies. In addition to base salary, the Executive Directors are
entitled to benefits comprising a car allowance, a contribution to
a personal pension, private medical insurance and life insurance.
ANNUAL BONUS
The Group now operates a discretionary cash bonus plan. Any
bonus amounts determined to be payable are paid annually after
the year-end results are finalised. The Remuneration Committee
has established bonus objectives that are principally financial
but also include personal objectives for the year relevant to each
Director. The maximum bonus payable is 60% of base salary.
24% of base salary is paid for achieving on-target EPS, subject
to satisfactory performance against personal objectives. For the
year ended 30 June 2007, EPS performance exceeded budget
and, taking into account Executive Directors’ performance
against job objectives, the committee awarded an annual bonus
to Will Adderley of £87,000 and to David Stead of £85,500.
LONG-TERM INCENTIVE PL AN
Participants in the LTIP are awarded nominal cost options at
the start of the performance period. At the end of the three-year
performance period, the awards will vest to the extent that the
applicable performance targets are met. Grants will be made
annually under the LTIP. Awards cannot be granted under the
LTIP over ordinary shares in excess of 5% of the issued ordinary
share capital in any rolling 10 year period. Awards over ordinary
shares worth 120% of base salary were made to Will Adderley
and David Stead on 22 March 2007. These will vest to the extent
that the performance targets are met based on the Group’s
results for the year ending 30 June 2009.
The Remuneration Committee has chosen growth in fully diluted
earnings per share (EPS) as the performance target for the initial
awards under the LTIP. The committee believes that this measure
is closely aligned to the drivers of growth of the business, and its
growth will correspond to an increase in share price which is a
key measure of long-term value for shareholders. The committee
will meet after the three-year plan period results are available to
determine whether performance conditions have been satisfied.
No ordinary shares subject to an award will vest if the compound
annual growth in fully diluted EPS is less than RPI + 5% and all of
the ordinary shares subject to an award will vest if the compound
annual growth in fully diluted EPS reaches RPI + 20%. The award
will vest on a straight-line basis between those two points. There
will be no retesting.
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OTHER SHARE OPTIONS
In 2003 and 2004 David Stead was granted options over a total
of 600,000 shares under the Approved and Executive share
option schemes. In December 2006 David exercised 400,000
options including all those held under the Approved scheme.
He continues to hold 200,000 options under the Executive
scheme. The Remuneration Committee does not intend to
make any further option grants to Executive Directors under
these schemes.
Following IPO, the Group introduced an all-employee
SAYE scheme in which Executive Directors are also
entitled to participate.
NON-EXECUTIVE REMUNERATION POLICY
Non-Executive Directors’ remuneration is determined by the
Board as a whole. The Non-Executive Directors do not receive
bonuses or participate in any incentive plans. They are paid
annual fees but do not receive additional fees for time spent
on a committee of the Board. All Non-Executives have letters
of appointment, detailed in the table opposite.
SERVICE CONTRACTS
It is the Group’s policy that service contracts for Executive
Directors have no fixed term, that the notice period for termination
is not greater than 12 months and that payments on termination
are restricted to a maximum of the value of salary for the
notice period.
The notice period to terminate Will Adderley’s service contract
is 12 months from either party. The notice period to terminate
David Stead’s service contract is six months from either party,
with the notice period increasing by one month for each year
of employment in excess of one year, up to a maximum of
12 months notice (which will be reached in September 2009).
In accordance with the Group’s policy, payments on termination
are restricted to the value of salary for the notice period.
DUNELM SHARE PRICE PERFORMANCE SINCE FLOTATION
The Non-Executive Directors have letters of appointment for an
initial period of three years with a provision for termination of one
month’s notice from either party, or three months’ notice from
either party in the case of Geoff Cooper, the Chairman.
Will Adderley
David Stead
Geoff Cooper
Bill Adderley
Marion Sears
Simon Emeny
DATE OF
CONTRACT
UNEXPIRED
TERM
NOTICE
PERIOD
28.09.06
15.09.03
08.10.04 37 months
02.10.06 24 months
22.07.04 34 months
25.06.07 35 months
n/a 12 months
n/a 10 months
3 months
1 month
1 month
1 month
RETIREMENT PL ANS
The Remuneration Committee has decided not to use final salary
pension plans as a way of remunerating its Executive Directors.
Instead the Group contributes to Executive Directors’ personal
pension plans. The Remuneration Committee believes this is an
efficient way to assist Executives to prepare for retirement. When
determining the mixture of fixed and performance based pay,
the Remuneration Committee takes account of contributions
to pension plans.
PERFORMANCE GRAPH
The graph below shows the Group’s performance since flotation,
measured by total shareholder return, compared with the
FTSE General Retail Index and FTSE SmallCap Index. The
Remuneration Committee has chosen these two indices for
comparisator because they provide a range of comparator
companies which have similar market capitalisation, which are
in the same sector and which face similar market and economic
challenges in the long term.
150
140
130
120
110
100
90
Oct 06
Dunelm shareholder return
FTSE General Retail Index
FTSE SmallCap Index
The shares traded in the range 169.5p to 235.5p during the year, and stood at 196p at 30 June 2007.
114.69
112.32
98.54
Jun 07
Dunelm Group plc Annual report 2007
11
Remuneration report continued
AUDITED INFORMATION
DETAILS OF DIRECTORS’ REMUNERATION
Details of individual Directors’ remuneration received during the year ended 30 June 2007 are as follows:
Executive Directors
Will Adderley
David Stead
Non-Executive Directors
Bill Adderley
Geoff Cooper
Marion Sears
Total
BASE
SALARY
OR FEES
£’000
VEHICLE
ALLOWANCE
£’000
TAXABLE
BENEFITS
£’000
CONTRIBUTION
TO PERSONAL
PENSION
£’000
ANNUAL
BONUS
£’000
2007
TOTAL
£’000
290
190
3
75
25
583
10
10
–
–
–
20
1
waived
waived
18
–
–
–
1
–
–
–
18
87
86
–
–
–
173
388
304
3
75
25
795
2006
TOTAL
£’000
309
313
0
70
20
712
Bill Adderley received no fees prior to flotation. From October 2006 he receives a gross annual fee of £5,000 which is donated to
charity at his direction by the Group.
Will Adderley has waived pension contributions totalling £17,850 and David Stead has waived other taxable benefits totalling
approximately £1,000.
Simon Emeny was appointed to the Board on 25 June 2007. His gross annual fee is £25,000 payable with effect from 1 July 2007.
DIRECTORS’ INTERESTS IN SHARE OPTIONS
The Directors’ beneficial interests in options granted under the long-term incentive scheme are as follows:
DIRECTOR
Will Adderley
David Stead
SHARE
OPTIONS
AT 1 JULY
2006
–
–
SHARE
OPTIONS
AT 1 JULY
2007
151,304
99,130
END OF
AWARDS PERFORMANCE
PERIOD
GRANTED
NUMBER
OF OPTIONS
AWARDED
MARKET PRICE
OF SHARES
AT DATE OF
CONDITIONS
RELATING TO
AWARD PERFORMANCE
LTIP 30 June 2009
LTIP 30 June 2009
151,304
99,130
227p
227p
EPS
EPS
The Directors’ beneficial interests in options granted under other schemes are as follows:
DIRECTOR
Will Adderley
David Stead
Geoff Cooper
Marion Sears
TYPE OF
OPTION
GSOP
Executive
SAYE
GSOP
Executive
Executive
SAYE
Executive
Executive
SHARES
UNDER
OPTION
SHARES
UNDER
OPTION
AT 1 JULY AT 30 JUNE
2007
2006
GRANTED
DURING
PERIOD
EXERCISED
DURING
PERIOD
LAPSED
DURING
PERIOD
MARKET
PRICE
EXERCISE OF SHARES
AT DATE OF
PRICE PER
EXERCISE
SHARE
VESTING
DATE
EXPIRY
DATE
–
–
–
69,200
330,800
200,000
–
152,200
65,200
–
–
–
–
–
200,000
6,176
–
–
–
–
–
–
–
–
6,176
–
–
–
–
–
69,200
330,800
–
–
152,200
65,200
–
–
–
–
–
–
–
–
–
–
–
–
43p
43p
46p
153p
46p
46p
–
–
–
223p
223p
–
–
–
–
–
–
–
–
–
–
– Sep 2007 Sep 2014
– Jan 2010 Jun 2010
–
–
–
–
192p
192p
Gains made on exercise of options during the year were: David Stead: £710,076; Geoff Cooper: £222,212; Marion Sears: £95,192.
APPROVAL
This report was approved by the Board of Directors on 19 September 2007 and signed on its behalf by:
MARION SEARS
CHAIRMAN OF REMUNERATION COMMIT TEE
19 September 2007
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Directors’ report and business review
The Directors present their report together with the audited financial statements for the year ended 30 June 2007. Together with
certain information in the reports from the Chief Executive and the Finance Director on pages 2 to 5 above which are incorporated into
this report by reference, this report satisfies the requirements of the Companies Act 1985 to produce a Business Review.
The purpose of this Business Review is to provide to shareholders a review of the Group’s business over the period, and to describe
the principal risks and uncertainties facing the Group.
PRINCIPAL ACTIVIT Y
The principal activity of the Group is that of a specialist UK homewares retailer selling to customers through stores and over
the internet.
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
A review of the business and future developments of the Group is given in the Chief Executive’s Review on pages 2 to 3.
RESULTS AND DIVIDENDS
The consolidated profit for the year after taxation was £24.6m (2006: £26.2m). The results are discussed in greater detail in the
Finance Director’s review on pages 4 and 5.
A final dividend of 3.0p per share (2006: nil) is proposed in respect of the year ended 30 June 2007 to add to interim dividends of 25p
per share paid on 5 October 2006 and 0.8p per share paid on 25 April 2007 (2006: 3.7p per share). The final dividend will be paid on
30 November to shareholders on the register at 16 November
DIRECTORS
Details of the Directors in office at the year end are set out on page 6. They include Simon Emeny who was appointed to the Board as
a Non-Executive Director on 25 June 2007.
The Directors serving at the year-end and their interests in the shares of the Company were:
W Adderley
WL Adderley
D Stead
G Cooper
M Sears
S Emeny
AT 30 JUNE 2007
1P ORDINARY
SHARES
AT 1 JULY 2006
ORDINARY
£1 SHARES*
83,670,000
50,000,000
230,085
181,611
100,000
5,000
1,750,000
250,000
–
–
–
–
* The nominal value of ordinary shares was £1 each as at 1 July 2006. These were subdivided into ordinary shares of 1p each on 2 October 2006.
The comparative table shown here includes ordinary shares as if they had always been in 1p denominations.
W Adderley’s shareholding includes 8,670,000 shares held by his wife (75,000,000 (assuming 1p shares) at 1 July 2006).
There were no changes in the Directors’ shareholdings between the year end and 19 September 2007.
Details of share options held by Directors at the year-end are given in the Remuneration Report.
Geoff Cooper and Bill Adderley are retiring by rotation at the 2007 Annual General Meeting and will be offering themselves for re-
election. Simon Emeny, who was appointed by the Board during the year, will be resigning at the Annual General Meeting and will be
offering himself for election. Biographical details of these Directors are set out on page 6 and details of their service contracts are in
the Remuneration Report on page 11.
SHARE CAPITAL AND SUBSTANTIAL SHAREHOLDERS
The Company has only one class of shares, ordinary shares of 1p each. The ordinary shares of £1 each were sub-divided into
ordinary shares of 1p each on 2 October 2006. Outstanding share options were adjusted accordingly.
The issued share capital of the Company has increased during the year due to the exercise of share options by the Directors.
Details are set out in the Remuneration Report on page 12.
Dunelm Group plc Annual report 2007
13
Directors’ report and business review continued
At 11 September 2007 the following had notified the Company of
a disclosable interest in 3% or more of the nominal value of the
Company’s ordinary shares.
W Adderley
WL Adderley
AXA S.A.
Aegon UK PLC
ORDINARY PERCENTAGE OF
SHARE CAPITAL
SHARES
83,670,000
50,000,000
10,109,872
7,959,536
41.7
24.9
5.0
4.0
EMPLOYEE INVOLVEMENT
The Group is an equal opportunities employer. It recognises
the social and statutory duties to employ disabled persons
and pursues a policy of providing, wherever possible, the same
employment opportunities to all persons regardless of disability,
race, religion, gender, colour, nationality, sex, sexual orientation
or age.
The Group places considerable value on the involvement of
its employees and continues its practice of consulting with
employees on matters likely to affect their interests, through
its partners’ council.
Information on matters of concern to employees is also given
through bulletins, reports and an in-house newsletter.
DISABLED EMPLOYEES
The Group recognises its obligations towards disabled people
and endeavours to provide employment where possible having
regard to the physical demands of the Group’s operations and
the abilities of the disabled persons. In the event of employees
becoming disabled, every effort is made to retrain them in order
that their employment with the Group may continue. It is the
policy of the Group that training, career development and
promotion opportunities should be available to all employees
and this is reflected in its Equal Opportunities Policy.
PAYMENT POLICY AND AVERAGE PAYMENT PERIOD
Whilst it does not follow any published code or standard,
the Group’s and Company’s policy concerning the payment
of suppliers is to agree terms of payment at the start of business
with each supplier or to ensure the supplier is made aware of
the Group’s standard payment terms. The number of days’
purchases outstanding for payment at 30 June 2007 was
26 days (2006: 26 days).
CORPORATE SOCIAL RESPONSIBILIT Y
The Group recognises its duty to behave responsibly to
all stakeholders. The Board places particular emphasis
on the health and safety of customers and employees;
on ethical sourcing; on environmental issues; and on
charitable contributions.
The Chief Executive is required to report to the Board monthly on
health and safety matters. All serious accidents (i.e. those which
are reportable under legislation) are investigated and corrective
action taken, e.g. additional training, where necessary. The
Group’s Health and Safety Officer also plays a key role in
ensuring that stores and other business premises remain safe
places of work for staff, and safe places for customers to visit.
The Group has a firm policy on ethical sourcing which all
suppliers are required to sign up to. Independent audits of
suppliers’ facilities, particularly in the Far East are carried
out on a regular basis.
The Group has an Environmental Committee, chaired by the
Chief Executive and including a number of senior managers,
which reviews the environmental impact of business activities
and sets targets for improvement. These cover the following
specific areas:
•
•
•
•
•
Increasing the proportion of waste which is recycled.
Reducing the plastic element of product packaging.
Reducing fuel consumption per carton delivered to stores.
Reducing the volume of carrier bags used.
Reducing energy consumption across all locations.
The Group’s charity of the year in the last financial year was
The Guide Dogs for the Blind Association. Collections are made
in stores for the nominated charity throughout the financial year,
specific fund-raising events are organised and the Group makes
its own donations. The total value of donations made by the
Group in the year ended 30 June 2007 was £32,000 (2006:
£59,000). The Group made no donations to political parties
in either financial year.
TREASURY AND RISK MANAGEMENT
The Group’s approach to treasury and financial risk management
is explained in the Finance Director’s Review.
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GOING CONCERN
The Directors have made appropriate enquiries and formed a
judgement at the time of approving the financial statements that
there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. For this reason the Directors continue to adopt the going
concern basis in preparing the financial statements.
DISCLOSURE OF INFORMATION TO AUDITORS
The Directors who held office at the date of approval of this
Directors’ report confirm that, so far as they are each aware,
there is no relevant audit information of which the Group’s
auditors are unaware; and each Director has taken all the steps
that they ought to have taken as a Director to make themselves
aware of any relevant audit information and to establish that the
Group’s auditors are aware of that information.
DISCL AIMER
This Directors’ Report and Business Review and the Financial
Statements contain certain forward-looking statements with
respect to the financial condition, results, operations and
business of Dunelm Group plc. These statements and forecasts
involve risk and uncertainty because they relate to events, and
depend upon circumstances, that will occur in the future. There
are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied
by these forward-looking statements and forecasts. Nothing in
this Directors’ Report and Business Review or in these Financial
Statements should be construed as a profit forecast.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held on Monday 5 November
2007 at 3.00pm at The Hilton Hotel, Leicester. Special business
at the Annual General Meeting will be:
•
Requesting authority to issue shares to the value of the lesser
of the unissued ordinary share capital of the Company, and
one third of the issued ordinary share capital of the Company.
At 19 September 2007 the unissued ordinary share capital
covered by this authority constituted 66,872,466 ordinary
shares, 33.3% of the issued share capital. This authority will
lapse at the 2008 Annual General Meeting. The Directors have
no present intention to exercise this authority except to issue
shares pursuant to the Group’s employee share schemes.
•
•
•
Requesting authority to distribute ordinary shares to the value
of £100,308 (10,030,870 ordinary shares), which constitutes
5% of the Company’s issued share capital at 30 June 2007,
without offering them to existing shareholders. This authority
will lapse at the 2008 Annual General Meeting.
Requesting that the Directors be authorised to buy up to
20,000,000 (approximately 10%) of ordinary shares in the
Company. The Directors will only exercise this authority
if it enhances earnings per share and is in the interests of
shareholders generally. Shares purchased may be cancelled
or held in treasury. If held in treasury and used to satisfy share
options, the NAPF’s (National Association of Pension Funds)
guidelines would be complied with.
Requesting that the Company be permitted to supply all
documents or information to shareholders by making them
available on a website. If this resolution is passed, we will write
to shareholders individually asking for their preference, and
if they agree to this form of communication or do not reply
within 28 days they will receive communications by this
method going forward. Shareholders who wish to continue
to receive communications in hard copy or who change
their mind will be able to do so at no cost. These new
arrangements are expected to be more environmentally
friendly, save costs and improve communications with
shareholders, without prejudicing those shareholders
who wish to continue to receive hard copy documents.
The Notice of the Annual General Meeting is set out on
pages 48 and 49.
AUDITORS
KPMG Audit Plc offer themselves for reappointment as auditors
in accordance with section 385 of the Companies Act 1985.
BY ORDER OF THE BOARD
DAVID STEAD
COMPANY SECRETARY
19 September 2007
Dunelm Group plc Annual report 2007
15
Statement of Directors’ responsibilities
in respect of the financial statements
The Directors are responsible for preparing the Annual Report
and the Group and parent company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent
company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with IFRSs as adopted by the European Union (EU)
and applicable law and have elected to prepare the parent
company financial statements in accordance with UK Accounting
Standards and applicable law (UK Generally Accepted
Accounting Practice).
The Group financial statements are required by law and IFRSs as
adopted by the EU to present fairly the financial position and the
performance of the Group; the Companies Act 1985 provides
in relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true and
fair view are references to their achieving a fair presentation.
The parent company financial statements are required by
law to give a true and fair view of the state of affairs of the
parent company.
The Directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the parent company and enable them to
ensure that its financial statements comply with the Companies
Act 1985. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors’ Report, Directors’
Remuneration Report and Corporate Governance Statement
that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
In preparing each of the Group and parent company financial
statements, the Directors are required to:
•
select suitable accounting policies and then apply
them consistently;
make judgements and estimates that are reasonable
and prudent;
for the group financial statements, state whether they
have been prepared in accordance with IFRSs as adopted
by the EU;
for the parent company financial statements, state whether
applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained
in the parent company financial statements; and
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
parent company will continue in business.
•
•
•
•
16
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Independent Auditors’ report to the members of
Dunelm Group plc
We have audited the Group and parent company financial
statements (the ‘financial statements’) of Dunelm Group plc
for the 52 week period ended 30 June 2007 which comprise
Consolidated Income Statement, the Consolidated and Parent
Company Balance Sheets, the Consolidated Cash Flow, the
Group Statement of Changes in Equity and the related notes.
These financial statements have been prepared under the
accounting policies set out therein. We have also audited the
information in the Directors’ Remuneration Report that is
described as having been audited.
This report is made solely to the Company’s members, as a
body, in accordance with section 235 of the Companies Act
1985. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and
the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS
AND AUDITORS
The Directors’ responsibilities for preparing the Annual Report
and the Group financial statements in accordance with applicable
law and International Financial Reporting Standards (IFRSs)
as adopted by the European Union (EU), and for preparing
the parent company financial statements and the Directors’
Remuneration Report in accordance with applicable law
and UK Accounting Standards (UK Generally Accepted
Accounting Practice) are set out in the Statement of Directors’
Responsibilities on page 16.
Our responsibility is to audit the financial statements and the
part of the Directors’ Remuneration Report to be audited in
accordance with relevant legal and regulatory requirements
and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial
statements give a true and fair view and whether the financial
statements and the part of the Directors’ Remuneration Report
to be audited have been properly prepared in accordance with
the Companies Act 1985 and, as regards the Group financial
statements, Article 4 of the IAS Regulation. We also report
to you whether in our opinion the information given in the
Directors’ Report is consistent with the financial statements. The
information given in the Directors’ Report includes that specific
information presented in the Chairman’s Statement, the Chief
Executive’s Review and the Finance Director’s Review that is
cross referred from the Business Review section of the Directors’
Report. In addition we report to you if, in our opinion, the
Company has not kept proper accounting records, if we have not
received all the information and explanations we require for our
audit, or if information specified by law regarding Directors’
remuneration and other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects
the Company’s compliance with the nine provisions of the 2003
Combined Code specified for our review by the Listing Rules of
the Financial Services Authority, and we report if it does not. We
are not required to consider whether the Board’s statements on
internal control cover all risks and controls, or form an opinion on
the effectiveness of the Group’s corporate governance
procedures or its risk and control procedures.
We read the other information contained in the Annual Report
and consider whether it is consistent with the audited financial
statements. We consider the implications for our report if we
become aware of any apparent misstatements or material
inconsistencies with the financial statements. Our responsibilities
do not extend to any other information.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the
financial statements and the part of the Directors’ Remuneration
Report to be audited. It also includes an assessment of the
significant estimates and judgements made by the Directors
in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the Group’s and
Company’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary
in order to provide us with sufficient evidence to give reasonable
assurance that the financial statements and the part of the
Directors’ Remuneration Report to be audited are free from
material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the financial
statements and the part of the Directors’ Remuneration Report to
be audited.
OPINION
In our opinion:
•
the Group financial statements give a true and fair view, in
accordance with IFRSs as adopted by the EU, of the state of
the Group’s affairs as at 30 June 2007 and of its profit for the
52 weeks then ended;
the Group financial statements have been properly prepared
in accordance with the Companies Act 1985 and Article 4 of
the IAS Regulation;
the parent company financial statements give a true and fair
view, in accordance with UK Generally Accepted Accounting
Practice, of the state of the parent company’s affairs as at
30 June 2007;
the parent company financial statements and the part of the
Directors’ Remuneration Report to be audited have been
properly prepared in accordance with the Companies Act
1985; and
the information given in the Directors’ Report is consistent
with the financial statements.
•
•
•
•
KPMG AUDIT PLC
CHARTERED ACCOUNTANTS
Registered Auditor
Leicester
LE1 6LP
19 September 2007
Dunelm Group plc Annual report 2007
17
Consolidated income statement
For the 52 weeks ended 30 June 2007
Revenue
Cost of sales
Gross profit
Administrative expenses ongoing
Administrative expenses non-recurring
Total administrative expenses
Operating profit
Analysed as:
Operating profit before non-recurring items
Non-recurring items
Financial income
Financial expenses
Profit before taxation
Taxation
Profit for the period
Earnings per ordinary share – basic
Earnings per ordinary share – diluted
Dividend proposed per ordinary share
Dividend paid per ordinary share
All activities relate to continuing operations. All profit is attributable to equity shareholders.
There were no gains or losses for the current or comparative periods other than those reported above.
NOTE
1
2007
£’000
2006
£’000
354,721
(297,481)
315,187
(264,599)
57,240
50,588
(13,247)
(3,178)
(16,425)
(12,438)
–
(12,438)
40,815
38,150
43,993
(3,178)
503
(3,492)
38,150
–
983
(1,094)
37,826
38,039
(13,198)
(11,839)
24,628
26,200
12.3p
12.2p
3.0p
25.8p
13.1p
13.0p
–
3.7p
3
3
5
5
6
8
8
7
7
18
www.dunelm-mill.com
Consolidated balance sheet
As at 30 June 2007
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets held-for-sale
Total current assets
Total assets
Current liabilities
Trade and other payables
Liability for current tax
Interest-bearing loans and borrowings
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share premium
Retained earnings
Total equity attributable to equity holders of the parent
NOTE
9
10
12
13
14
15
16
17
18
17
20
30 JUNE
2007
£’000
3,668
67,064
3,276
74,008
60,657
8,996
17,368
–
87,021
1 JULY
2006
£’000
3,665
61,490
2,272
67,427
56,345
10,024
2,964
5,998
75,331
161,029
142,758
(51,464)
(6,310)
(21)
–
(57,795)
(40,000)
(40,000)
(47,271)
(6,213)
(150)
(58)
(53,692)
–
–
(97,795)
(53,692)
63,234
89,066
2,006
267
60,961
63,234
2,000
–
87,066
89,066
The financial statements on pages 18 to 41 were approved by the Board of Directors on 19 September 2007 and were signed on its
behalf by:
WILL ADDERLEY
CHIEF EXECUTIVE
Dunelm Group plc Annual report 2007
19
Consolidated cash flow statement
For the 52 weeks ended 30 June 2007
Cash flows from operating activities
Interest paid
Interest received
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash utilised in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Net funds raised from bank loan
Repayment of finance lease liability
Dividends paid
Net cash flows utilised in financing activities
Net increase/(decrease) in cash and cash equivalents
Foreign exchange revaluations
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
NOTE
22
30 JUNE
2007
£’000
49,300
(1,536)
451
(13,468)
34,747
7,200
(14,130)
(996)
(7,926)
273
40,000
(150)
(51,605)
(11,482)
1 JULY
2006
£’000
35,118
(57)
983
(11,910)
24,134
1
(21,256)
(4,176)
(25,431)
–
–
(392)
(7,400)
(7,792)
15,339
(9,089)
(956)
2,964
17,347
–
12,053
2,964
15, 23
20
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Statement of changes in equity
For the 52 weeks ended 30 June 2007
As at 3 July 2005
Total recognised income and expense
Share based payments
Dividends
As at 1 July 2006
As at 2 July 2006
Total recognised income and expense
Issue of share capital
Share based payments
Deferred tax on share based payments
Corporation tax on share options exercised
Dividends
As at 30 June 2007
ISSUED
SHARE
CAPITAL
£’000
2,000
–
–
–
2,000
ISSUED
SHARE
CAPITAL
£’000
2,000
–
6
–
–
–
–
2,006
SHARE
PREMIUM
£’000
RETAINED
EARNINGS
£’000
–
–
–
–
–
68,235
26,200
31
(7,400)
87,066
SHARE
PREMIUM
£’000
RETAINED
EARNINGS
£’000
–
–
267
–
–
–
–
267
87,066
24,628
–
234
327
311
(51,605)
60,961
TOTAL
EQUITY
£’000
70,235
26,200
31
(7,400)
89,066
TOTAL
EQUITY
£’000
89,066
24,628
273
234
327
311
(51,605)
63,234
Dunelm Group plc Annual report 2007
21
Accounting policies
BASIS OF PREPARATION
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the ‘Group’).
The parent company financial statements present information about the Company as a separate entity and not about its group.
The Group financial statements have been prepared and approved by the Directors in accordance with International Financial
Reporting Standards as adopted by the EU (‘Adopted IFRSs’). The Company has elected to prepare its parent company financial
statements in accordance with UK GAAP; these are presented on pages 42 and 43.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
Group financial statements and in preparing an opening IFRS balance sheet at 1 July 2006 for the purposes of the transition to
Adopted IFRSs.
Dunelm Group plc (‘the Company’) and its subsidiary companies have previously prepared consolidated financial statements in
accordance with UK Generally Accepted Accounting Practice (‘UK GAAP’). Following admission to the London Stock Exchange,
in common with all companies listed on European Union (EU) regulated markets, the Group is now required to prepare its financial
statements in accordance with International Financial Reporting Standards as adopted by the EU (‘Adopted IFRS’).
The Group has adopted IFRS 1 from 3 July 2005 (the Group’s date of transition to IFRS). IFRS 1 ‘First Time adoption of IFRS’
establishes the transitional requirements for the preparation of financial information in accordance with IFRS for the first time. The
general principle is to establish accounting policies under IFRS then to apply these retrospectively at the date of transition to determine
the opening balance sheet. IFRS 1 permits a number of first time adoption exemptions, none of which are relevant to the Group.
The annual financial statements are prepared under the historical cost convention. In addition assets classified as held-for-sale
are valued at the lower of net book value and fair value less costs to sell. The financial statements are prepared in pounds sterling,
rounded to the nearest thousand.
USE OF ESTIMATES AND JUDGEMENTS
The presentation of the annual financial statements requires the Directors to make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods affected.
The Directors consider that there are no areas of judgement or uses of estimates which need to be highlighted.
BASIS OF CONSOLIDATION
SUBSIDIARIES
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern
the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights
that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases.
TRANSACTIONS ELIMINATED ON CONSOLIDATION
Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated
in preparing the consolidated financial statements.
REVENUE
Revenue represents the proceeds from sales of goods and related services. It excludes sales between Group companies and is after
deducting returns, discounts given and VAT. For the majority of sales, revenue is recognised at the point of sale with the exception
of make-up charges for custom made products, where revenue is recognised at the point that the goods are collected, and gift
vouchers, where revenue is recognised when the vouchers are redeemed.
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded at the prevailing rate at the date of the transaction. 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.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments comprise forward contracts for foreign currencies. They are recognised at fair value. The gain or loss
on re-measurement to fair value is recognised immediately in the income statement.
Where a derivative financial instrument is used to hedge economically the foreign exchange exposure of a recognised monetary asset
or liability, no hedge accounting is applied.
22
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INTANGIBLE ASSETS
These comprise software development and implementation costs and are stated at cost less amortisation which is charged
on a straight-line basis over three years.
PROPERT Y, PL ANT AND EQUIPMENT
OWNED ASSETS
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items
of property, plant and equipment.
LEASED ASSETS
Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance
leases. Lease payments are accounted for as described below.
DEPRECIATION
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item
of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:
•
•
•
•
•
•
•
3 years
50 years
4 years
4 years
5 years
5 years
over the period of the lease
computer equipment
freehold buildings
fixtures and fittings
motor vehicles
office equipment
plant and machinery
leasehold improvements
The residual value of an asset, if significant, is reassessed annually.
CURRENT ASSETS
TRADE AND OTHER RECEIVABLES
Trade and other receivables are initially recognised at fair value and then carried at amortised cost net of impairment provisions.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost is derived using the average cost method and includes
expenditure incurred in acquiring the inventories and bringing them into the business. Net realisable value is the estimated selling
price less cost to sell in the ordinary course of business.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the
statement of cash flows.
ASSETS CL ASSIFIED AS HELD-FOR-SALE
A non-current asset is classified as held-for-sale if its carrying amount will be recovered principally through sale rather than through
continuing use, it is available for immediate sale and sale is highly probable within one year.
Assets held-for-sale are valued at the lower of net book value and fair value net of costs to sell.
BORROWINGS AND BORROWING COSTS
All loans and borrowings are recognised at fair value. Borrowing costs are recognised as an expense in the financial period in which
they are incurred.
Borrowings are classed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
12 months from the balance sheet date.
IMPAIRMENT
The carrying amounts of the Group’s assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date
to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
The recoverable amount is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time-value of money
and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds the recoverable
amount. Impairment losses are recognised in the income statement.
Dunelm Group plc Annual report 2007
23
Accounting policies continued
PROVISIONS
A provision is recognised in the balance sheet when the Group has a current 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. A provision for onerous contracts is
recognised when the expected benefit to be derived by the Group from a contract is lower than the unavoidable costs of meeting its
obligations under the contract.
EXPENSES
PROPERT Y LEASES
Lease incentives received are recognised in the income statement evenly over the shorter of the full term of the lease and the first
break clause that is controlled by the Group.
Where leases for land and buildings provide for fixed rent review dates and amounts, the Group accounts for such reviews by
recognising, on a straight-line basis, the total implicit minimum lease payments over the non-cancellable period of the lease term.
FINANCE LEASES
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance
charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining
balance of the liability.
FINANCING INCOME/EXPENSE
Financing income/expense comprises interest payable on borrowings calculated using the effective interest rate method, interest
receivable on funds invested, foreign exchange gains and losses, and gains and losses on forward exchange contracts.
RETIREMENT BENEFITS
The Group operates a defined contribution pension plan using a third-party provider. Obligations for the contributions to this plan
are recognised as an expense in the income statement as incurred.
SHARE-BASED PAYMENT TRANSACTIONS
The Group operates an employee share save scheme open to all employees with over six months’ service, enabling them to save
money which may be used after three years to acquire shares in the Company at a predetermined price.
The Group also operates other share option schemes enabling certain employees to acquire shares of the Company.
The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. Fair value is
measured at grant date and spread over the period during which the employees become unconditionally entitled to the options.
Fair value is measured using the binomial model, taking into account the terms and conditions applicable to the options.
IFRIC 8 ‘Scope of IFRS 2’ became mandatory on 1 May 2006 and has been adopted in the Group’s 2007 financial statements.
The standard addresses accounting for share based payment transactions in which some or all of the goods or services received
cannot be specifically identified. Its application has not had a significant impact on the Group accounts.
IFRIC 11 ‘Group and Treasury Share Transactions’ is effective for periods commencing on or after 1 March 2007. This standard has
been early adopted in the Group accounts, however its application has not had a significant effect on the Group accounts as it deals
with accounting for share-based payments at the subsidiary level.
DIVIDENDS
Dividends are recognised as a liability in the period in which they are approved such that the Company is obligated to pay
the dividend.
24
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TA X ATION
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax represents the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the balance sheet date, together with any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
ADOPTED IFRIC AND IFRIC NOT YET APPLIED
The following adopted IFRSs and International Financial Reporting Interpretations Committee (‘IFRIC’) were available for early
application but have not been applied by the Group in these financial statements:
IFRS 7 ‘Financial Instruments: Disclosure’ is applicable for years commencing on or after 1 January 2007. The application of IFRS 7
in 2007 would not have affected the Balance Sheet or Income Statements as the standard is concerned only with disclosures.
The Group plans to adopt IFRS 7 in 2008.
IFRIC 10 ‘Interim Financial Reporting and Impairment’ prohibits the reversal of an impairment loss recognised in a previous interim
period in respect of goodwill, an investment in an equity instrument or a financial asset carried at cost. IFRIC 10 will become
mandatory for the Group’s 2008 financial statements, and will apply to goodwill, investments in equity instruments and financial assets
carried at cost prospectively from the date that the Group first applied the measurement criteria of IAS 36 and IAS 39 respectively
(i.e. 1 July 2006). The adoption is not expected to have any impact on the consolidated financial statements.
Dunelm Group plc Annual report 2007
25
Notes to the annual financial statements
1 SEGMENTAL REPORTING
The Group has only one class of business, retail of homewares, and operates entirely in the UK market.
2 OPERATING PROFIT
Operating profit is stated after charging/(crediting) the following items:
Inventories
Cost of inventories included in cost of sales
Write down of inventories
Amortisation of intangible assets
Depreciation of property, plant and equipment
Owned
Leased
Operating lease rentals
Land and buildings
Plant and machinery
Loss/(profit) on disposal of properties
The analysis of auditors’ remuneration is as follows:
Fees payable to the Company’s auditors for the audit of the parent and consolidated annual accounts
Fees payable to the Company’s auditors and their associates for other services to the Group
– the audit of the Company’s subsidiaries pursuant to legislation
– tax compliance
– other tax services
– corporate finance transaction services
– all other services
2007
£’000
2006
£’000
198,537
2,228
177,798
954
1,742
511
7,543
243
7,615
182
16,785
1,061
15,947
927
(1,130)
3
2007
£’000
17
58
15
16
416
18
2006
£’000
2
57
13
27
–
15
26
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3 ADMINISTRATIVE EXPENSES
Ongoing
Non-recurring
IPO
Warehouse transition
Profit on sale of former warehouse
2007
£’000
2006
£’000
13,247
12,438
2,997
1,297
(1,116)
–
–
–
16,425
12,438
Administrative expenses relate to central support functions and do not include any selling or distribution expenses.
Non-recurring expenses have been specifically identified because of their non-recurring nature within the business.
The Group believes that this categorisation aids the understanding of the underlying results of the business.
4 EMPLOYEE NUMBERS AND COSTS
The average number of people employed by the Group (including Directors) was:
2007
NUMBER
OF HEADS
2007
FULL TIME
EQUIVALENTS
2006
NUMBER
OF HEADS
2006
FULL TIME
EQUIVALENTS
Selling
Distribution
Administration
4,808
213
142
5,163
3,198
206
139
3,543
4,781
120
115
5,016
The aggregate remuneration of all employees including Directors comprises:
Wages and salaries including bonuses and termination benefits
Social security costs
Share-based payment expense (note 21)
Defined contribution pension costs
2007
£’000
42,323
2,766
234
114
45,437
Details of Directors’ remuneration, share options, long-term incentive schemes and pension entitlements are disclosed in the
Directors’ Remuneration Report on pages 10 to 12.
5 FINANCIAL INCOME AND EXPENSE
Finance income
Interest on bank deposits
Realised foreign exchange gains
Finance expenses
Bank borrowings and overdraft
Foreign exchange losses
Net finance expense
2007
£’000
503
–
503
(2,113)
(1,379)
(3,492)
(2,989)
3,174
120
112
3,406
2006
£’000
37,941
2,202
31
74
40,248
2006
£’000
791
192
983
(57)
(1,037)
(1,094)
(111)
Dunelm Group plc Annual report 2007
27
Notes to the annual financial statements continued
6 TA X ATION
Current taxation
UK corporation tax charge for the period
Adjustments in respect of prior periods
Deferred taxation
Origination of timing differences
Adjustment in respect of prior periods
Tax rate differential
Total taxation expense in the income statement
The tax charge is reconciled with the standard rate of UK corporation tax as follows:
Profit before tax
UK corporation tax at standard rate of 30% (2006: 30%)
Factors affecting the charge in the period:
Non-deductible expenses
Ineligible depreciation
Lease incentive deductions
Adjustments to tax charge in respect of prior years
Profit on disposal in excess of capital gain
Tax rate differential
2007
£’000
2006
£’000
12,957
918
13,875
12,306
(75)
12,231
26
(914)
211
(677)
(345)
(47)
–
(392)
13,198
11,839
2007
£’000
2006
£’000
37,826
38,039
11,348
11,412
953
845
(184)
4
21
211
35
821
(307)
(122)
–
–
13,198
11,839
The taxation charge for the period as a percentage of profit before tax is 34.9%. This is affected by the IPO costs, which are non-
deductible for corporation tax purposes; and by the recalculation of the deferred tax asset to reflect the future corporation tax rate
of 28%. Excluding these factors, the effective tax rate would have been 31.8% for the year.
7 DIVIDENDS
All dividends relate to the 1p ordinary shares.
Interim for the period ended 30 June 2007 – paid 25p
Interim for the period ended 30 June 2007 – paid 0.8p
Interim for the period ended 1 July 2006 – paid 3.7p
2007
£’000
(50,000)
(1,605)
–
(51,605)
2006
£’000
–
–
(7,400)
(7,400)
The Directors are proposing a final dividend of 3.0p per ordinary share for the period ended 30 June 2007 which equates to
£6.0 million. The dividend will be paid on 30 November 2007 to shareholders on the register at the close of business on
16 November 2007.
28
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8 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit for the period attributable to equity shareholders by the weighted average
number of ordinary shares in issue during the period.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. These represent share options granted to employees where the exercise price is less than the
average market price of the Company’s ordinary shares during the period.
Weighted average numbers of shares:
Weighted average number of shares in issue during the period
Impact of share options
Number of shares for diluted earnings per share
52 WEEKS
ENDED
30 JUNE
2007
£’000
200,363
2,324
202,687
52 WEEKS
ENDED
1 JULY
2006
£’000
200,000
1,508
201,508
In addition to standard earnings per share, an underlying earnings per share calculation is provided below which excludes non-
recurring costs and income (net of tax). The earnings used for the standard and underlying calculations, together with the resultant
earnings per share, are shown below:
Profit for the period
Non-recurring items (net of tax)
Profit for the period excluding non-recurring items
Basic earnings per share – standard
Basic earnings per share – underlying
Fully diluted earnings per share – standard
Fully diluted earnings per share – underlying
9 INTANGIBLE ASSETS
Cost
At 2 July 2006
Additions
Transfers from tangible fixed assets
At 30 June 2007
Amortisation
At 2 July 2006
Charge for financial period
At 30 June 2007
Net book value
At 2 July 2006
At 30 June 2007
52 WEEKS
ENDED
30 JUNE
2007
£’000
24,628
3,109
52 WEEKS
ENDED
1 JULY
2006
£’000
26,200
–
27,737
26,200
12.3p
13.8p
12.2p
13.7p
13.1p
13.1p
13.0p
13.0p
SOFTWARE
DEVELOPMENT
AND LICENCES
£’000
4,176
996
749
5,921
511
1,742
2,253
3,665
3,668
Dunelm Group plc Annual report 2007
29
Notes to the annual financial statements continued
9 INTANGIBLE ASSETS CONTINUED
All additions were acquired and do not include any internal development costs.
Cost
At 3 July 2005
Additions
At 1 July 2006
Amortisation
At 3 July 2005
Charge for financial period
At 1 July 2006
Net book value
At 3 July 2005
At 1 July 2006
10 PROPERT Y, PL ANT AND EQUIPMENT
Cost
At 2 July 2006
Additions
Transfers to intangible assets
Disposals
At 30 June 2007
Depreciation
At 2 July 2006
Charge for financial period
On disposals
At 30 June 2007
Net book value
At 2 July 2006
At 30 June 2007
Cost
At 3 July 2005
Additions
Transfers to assets held for re-sale
Disposals
At 1 July 2006
Depreciation
At 3 July 2005
Charge for financial period
Transfers to assets held for re-sale
On disposals
At 1 July 2006
Net book value
At 3 July 2005
At 1 July 2006
30
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SOFTWARE
DEVELOPMENT
AND LICENCES
£’000
–
4,176
4,176
–
511
511
–
3,665
TOTAL
£’000
82,712
14,130
(749)
(187)
95,906
21,222
7,786
(166)
28,842
LAND AND
BUILDINGS
£’000
LEASEHOLD
IMPROVEMENTS
£’000
PLANT AND
MACHINERY
£’000
MOTOR
VEHICLES
£’000
FIXTURES
AND FITTINGS
£’000
29,421
7,082
–
–
36,503
1,170
483
19
1,672
28,188
4,846
11
(10)
33,035
4,804
2,307
(10)
7,101
28,251
34,831
23,384
25,934
24,939
10,780
(6,298)
–
29,421
1,184
386
(400)
–
1,170
21,737
6,464
–
(13)
28,188
2,899
1,905
–
–
4,804
23,755
28,251
18,838
23,384
52
35
–
–
87
13
16
–
29
39
58
49
3
–
–
52
–
13
–
–
13
49
39
281
–
–
(160)
121
281
–
(160)
121
24,770
2,167
(760)
(17)
26,160
14,954
4,980
(15)
19,919
–
–
9,816
6,241
61,490
67,064
447
–
–
(166)
281
418
27
–
(164)
281
21,249
4,004
(483)
–
24,770
9,870
5,466
(382)
–
14,954
68,421
21,251
(6,781)
(179)
82,712
14,371
7,797
(782)
(164)
21,222
29
–
11,379
9,816
54,050
61,490
10 PROPERT Y, PL ANT AND EQUIPMENT CONTINUED
Included in the total net book value of fixtures and fittings is £nil (2006: £236,000) in respect of assets held under hire purchase
contracts. Depreciation for the year on these assets was £236,000 (2006: £174,000).
Included in the net book value of motor vehicles is £nil (2006: £7,000) in respect of assets held under hire purchase contracts.
Depreciation for the year on these assets was £7,000 (2006: £8,000).
11 ASSETS HELD FOR SALE
Assets held for sale
2007
£’000
–
2006
£’000
5,998
The Group’s former distribution centre at Burton on Trent was reclassified to assets held for re-sale at 1 July 2006 because it was
being actively marketed at that time. The sale of the property completed during the year ended 30 June 2007 and realised a gain
of £1,116,000.
12 DEFERRED TA X
Deferred tax is calculated in full on temporary differences under the liability method using a taxation rate of 28% (2006: 30%).
Deferred taxation assets and liabilities are attributable to the following:
ASSETS
LIABILITIES
NET
Property, plant and equipment
Other timing differences
Share based payments
2007
£’000
–
3,441
382
3,823
2006
£’000
–
2,815
–
2,815
2007
£’000
(547)
–
–
(547)
2006
£’000
(543)
–
–
(543)
The movement in the net deferred tax balance is as follows:
Asset at 2 July 2006/3 July 2005
Income statement credit
Recognised directly in reserves
Asset at 30 June 2007/1 July 2006
2007
£’000
(547)
3,441
382
3,276
2007
£’000
2,272
677
327
3,276
2006
£’000
(543)
2,815
–
2,272
2006
£’000
1,879
393
–
2,272
A number of changes to the UK corporation tax system have been enacted in the Finance Act 2007 and the effect is to reduce the
deferred tax asset recognised as at 30 June 2007 by £234,000. The decrease in deferred tax is due to the reduction in the standard
corporation tax rate from 30% to 28% from 1 April 2008.
13 INVENTORIES
Goods for resale
14 TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments and accrued income
2007
£’000
2006
£’000
60,657
56,345
2007
£’000
169
2,232
6,595
8,996
2006
£’000
68
2,564
7,392
10,024
Dunelm Group plc Annual report 2007
31
Notes to the annual financial statements continued
15 CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Cash and cash equivalents include the following for the purpose of the cash flow statement:
Cash at bank and in hand
Bank overdraft
16 TRADE AND OTHER PAYABLES
Trade payables
Accruals and deferred income
Other taxation and social security
Foreign currency derivatives
Other creditors
17 INTEREST BEARING LOANS AND BORROWINGS
Bank overdraft
Finance lease liabilities
Bank loan
2007
£’000
17,347
17,368
(21)
17,347
2007
£’000
22,354
22,510
6,468
–
132
51,464
2007
£’000
21
–
40,000
40,021
2006
£’000
2,964
2,964
–
2,964
2006
£’000
24,352
20,068
1,895
862
94
47,271
2006
£’000
–
150
–
150
The Group has a £3m bank overdraft facility which is repayable on demand.
On 26 September 2006 the Group entered into a £50m revolving credit facility which is repayable in full on 26 September 2010.
The facility is sub-divided into two elements: a £40m facility and a £10m facility. The £40m facility was fully drawn down as at
30 June 2007 whilst the £10m facility was not utilised at that date.
Interest is payable on the £40m at the rate of LIBOR plus 0.35% and on the £10m at a rate of LIBOR plus 0.45%.
The facility is guaranteed by the parent company and its subsidiaries.
INTEREST RATE RISK PROFILE OF FINANCIAL ASSETS AND LIABILITIES
The interest rate profile of the Group’s financial liabilities as at the period end was:
2007
2007
TOTAL FLOATING RATE
£’000
£’000
2007
FIXED RATE
£’000
EFFECTIVE
INTEREST RATE
%
2006
TOTAL
£’000
2006
FLOATING RATE
£’000
2006
FIXED RATE
£’000
EFFECTIVE
INTEREST RATE
%
Revolving bank loan 40,000
21
Overdraft
–
Finance lease liabilities
40,021
–
21
–
21
40,000
–
–
40,000
5.86
6.04
–
5.86
–
–
150
150
–
–
–
–
–
–
150
150
–
–
10.17
10.17
All liabilities are denominated in sterling.
The floating rate on the overdraft is linked to Bank of England Base Rate and the Group believes that an increase in the rate of 1%
would not have had a material impact on profit before tax for the period.
The fixed rate of interest on the bank loan varies between 5.70% and 6.31% because the rate is linked to LIBOR plus a margin of
0.35% and tranches of the loan were drawn down at different times therefore fixed to different LIBOR rates.
32
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17 INTEREST BEARING LOANS AND BORROWINGS CONTINUED
Financial assets consist of £17,368,000 (2006: £2,964,000) cash at bank; any interest earned is at normal commercial rates.
The finance lease liability existing at 1 July 2006 was all due within one year. The Group considers there to be no material differences
between the fair value of the finance leases and their carrying value.
18 PROVISIONS
The provision of £58,000 brought forward at 2 July 2006 related to one onerous lease held by Dunelm (Soft Furnishings) Limited.
The provision was fully utilised during the year and the lease expired in June 2007.
19 FINANCIAL INSTRUMENTS AND RISK
INTEREST RATE RISK
The Group’s bank borrowings incur variable interest rate charges linked to LIBOR. The Directors do not consider that future changes
in interest rates are likely to cause a material direct impact on profitability, as explained in the Finance Director’s Report on page 5.
FOREIGN CURRENCY RISK
The Group is exposed to foreign currency risk on purchases denominated in US dollars. These amounted to approximately 7% of the
total purchases in the year ended 30 June 2007.
In previous years the Group has protected itself from future foreign exchange fluctuations through a combination of forward currency
contracts and holding actual dollar balances. As at 30 June 2007 the Group had no outstanding foreign currency contracts but held
dollar balances of $22 million, expected to cover the majority of dollar purchases in the next financial year. For the future it is the
Group’s intention to purchase foreign currency at spot rates as and when required for actual foreign currency payments.
EMBEDDED DERIVATIVES
The Group has four property leases under which rent reviews are subject to a cap.
FAIR VALUES
Most financial assets and liabilities are included in the balance sheet at their fair value. Generally this is equivalent to the carrying value
although the fair value of forward exchange contracts held at 1 July 2006 was assessed based on listed market prices.
Finance lease liabilities are included in the balance sheet at carrying amount. The Group considers there to be no material differences
between the fair value of the finance leases and their carrying value.
Cash and borrowings are carried at amortised cost. There is no material difference between fair value and amortised cost.
20 SHARE CAPITAL
In issue at the start of the period
Issued during the period in respect of share option schemes
In issue at the end of the period
NUMBER OF ORDINARY SHARES OF 1P EACH (2006: £1)
2007
2006
200,000,000
617,400
200,617,400
2,000,000
–
2,000,000
Proceeds received in relation to shares issued during the period were £273,404 (2006: £nil).
Ordinary shares of 1p each (2006: £1):
Authorised
Allotted, called up and fully paid
2007
NUMBER OF
SHARES
2007
£’000
2006
NUMBER OF
SHARES
500,000,000
200,617,400
5,000
2,006
5,000,000
2,000,000
2006
£’000
5,000
2,000
On 2 October 2006 the Company’s share capital was sub-divided from 2,000,000 £1 ordinary shares in issue to 200,000,000 1p
ordinary shares. Outstanding share options were adjusted correspondingly.
The holders of the ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share.
For the purpose of the annual financial statements, all calculations of earnings per share and all dividends are expressed as if the new
share denomination had always been in place.
Dunelm Group plc Annual report 2007
33
Notes to the annual financial statements continued
21 SHARE BASED PAYMENTS
As at 30 June 2007, the Group operated three share award plans:
a Dunelm Group Share Option Plan (‘GSOP’)
b Dunelm Group Savings Related Share Option Plan (‘Sharesave’)
c Long-Term Incentive Plan (‘LTIP’)
There were no exercisable options as at 30 June 2007.
a DUNELM GROUP SHARE OPTION PL AN
The GSOP was established in December 2003. Options have a vesting period of three years from date of grant and a maximum life
of ten years. All options granted prior to IPO have an exercise price equal to the market value as agreed with HMRC at date of grant;
there have been no further grants since IPO. There are no performance conditions but there is a requirement that the Group’s shares
be traded on a public exchange at date of exercise, and the awards are also subject to continued employment with the Group.
The fair value of services received in return for share options granted is measured by reference to the fair value of the options,
assessed using a binomial model. The fair value per option granted and the assumptions used in the calculations are as follows:
Fair value at measurement date
Share price
Exercise price
Expected volatility (weighted average volatility used in modelling – based on historical volatility
of comparable quoted companies)
Option life (weighted average life used in modelling)
Expected dividends
Risk-free interest rate
The number and weighted average exercise price of options under the GSOP is as follows:
AUGUST
2006
7.00p
n/a
62.10p
35.0%
3 years
8.7%
4.8%
SEPTEMBER
2005
6.25p
n/a
57.00p
35.0%
3 years
8.7%
4.8%
Outstanding at beginning of year
Granted during year
Forfeited during year
Exercised during year
Outstanding at end of year
WEIGHTED
NUMBER OF
AVERAGE
EXERCISE SHARES UNDER
OPTION
2007
PRICE
2007
WEIGHTED
NUMBER OF
AVERAGE
EXERCISE SHARES UNDER
OPTION
2006
PRICE
2006
46.13
62.10
57.00
44.28
49.81
1,507,700
225,400
(87,700)
(617,400)
1,028,000
45.24
57.00
57.00
–
46.13
1,393,700
359,600
(245,600)
–
1,507,700
b DUNELM GROUP SAVINGS REL ATED SHARE OPTION PL AN
The Sharesave scheme was established at the time of IPO and is open to all staff with eligible length of service. One grant has been
made under the scheme, in November 2006. Options may be exercised under the scheme on completion of the three year savings
contract. There is provision for early exercise in certain circumstances such as death, disability, redundancy and retirement.
The fair value per option granted and the assumptions used in the calculations are as follows:
Fair value at measurement date
NOVEMBER
2006
69.06p
Share price
Exercise price
Expected volatility (weighted average volatility used in modelling – based on historical volatility of comparable quoted companies)
Option life (weighted average life used in modelling)
Expected dividends
Risk-free interest rate
202.00p
153.00p
30.0%
3.5 years
2.5%
4.8%
The total number of options outstanding under the Sharesave at 30 June 2007 was 1,045,846.
34
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21 SHARE BASED PAYMENTS CONTINUED
c LONG-TERM INCENTIVE PL AN
The LTIP was approved by the Board prior to IPO enabling the Group to award shares to particular individuals, normally in the form of
nominal cost options and subject to performance conditions. The LTIP is administered by the Remuneration Committee. One grant
has been made to date, to the Executive Directors only, and is exercisable in September 2009 depending on the level of growth in
Group EPS relative to RPI.
The fair value of services received in return for share options granted is measured by reference to the fair value of the options.
This has been calculated as follows:
Share price at date of grant
Discount factor, based on dividend yield of 3.0% to vesting date
Fair value of option
229.00p
0.913
209.00p
The total number of options outstanding under the LTIP at 30 June 2007 was 250,434.
The total expense recognised in the income statement arising from share-based payments is as follows:
Group Share Option Plan
Sharesave
LTIP
Total
22 CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjusted for:
Net financing costs
Operating profit
Depreciation and amortisation
Loss/(profit) on disposal of property, plant and equipment
Operating cash flows before movements in working capital
(Increase) in inventories
(Increase)/decrease in debtors
Increase in creditors
Net movement in working capital
(Decrease) in provisions
Share based payments expense
Foreign exchange losses
Cash flows from operating activities
2007
£’000
28
136
70
234
2006
£’000
31
–
–
31
2007
£’000
2006
£’000
37,826
38,039
2,989
40,815
9,529
(1,130)
111
38,150
8,325
3
49,214
46,478
(4,312)
1,028
4,480
1,196
(58)
234
(1,286)
(11,224)
(2,636)
2,523
(11,337)
(54)
31
–
49,300
35,118
Dunelm Group plc Annual report 2007
35
Notes to the annual financial statements continued
23 ANALYSIS OF MOVEMENT IN NET DEBT
IAS 7 ‘Cash Flow Statements’ does not require the disclosure of a net debt reconciliation. The Group has shown this reconciliation
to assist in the interpretation of the financial statements. Net debt is defined as cash at bank less loan and overdraft balances.
Cash at bank and in hand
Bank overdrafts
Debt due within one year
Debt due after one year
Net debt
AT 2 JULY
2006
£’000
2,964
–
2,964
(150)
–
CASH FLOW
£’000
14,404
(21)
14,383
150
(40,000)
2,814
(25,467)
OTHER
NON CASH
CHANGES
£’000
–
–
–
–
–
–
AT 30 JUNE
2007
£’000
17,368
(21)
17,347
–
(40,000)
(22,653)
24 COMMITMENTS
As at 30 June 2007 the Group had entered into capital contracts amounting to £7.2 million. The equivalent figure as at 1 July 2006
was £1.4 million.
The future minimum lease payments under non-cancellable operating leases were as follows:
Within one year
In the second to fifth year inclusive
After five years
2007
MOTOR
VEHICLES
£’000
216
78
–
294
2007
LAND AND
BUILDINGS
£’000
18,799
71,092
107,966
197,857
2007
PLANT AND
MACHINERY
£’000
2006
MOTOR
VEHICLES
£’000
216
454
–
670
260
294
–
554
2006
LAND AND
BUILDINGS
£’000
17,423
65,861
114,184
197,468
2006
PLANT AND
MACHINERY
£’000
82
195
1
278
The Group has 72 operating leases in respect of properties. These leases run for periods of up to 21 years, with an option to renew
leases on expiry. Lease payments are typically reviewed every five years.
The Group also leases a number of vehicles, shop fittings and items of computer hardware under operating leases. These vary
in length.
25 CONTINGENT LIABILITIES
The Group had no contingent liabilities at either period end date.
26 REL ATED PARTIES
The Group has a related party relationship with its subsidiaries and with its Directors and executive officers.
Directors of the Company and their immediate relatives control 66.9% of the voting shares of the Company.
IDENTIT Y OF REL ATED PARTIES
The Group has related party relationships with its subsidiaries and with its Directors. Transactions between the Company
and its subsidiaries, which are related parties, have been eliminated on consolidation for the Group.
KEY MANAGEMENT PERSONNEL
The key management personnel of the Group comprise members of the Board of Directors and the executive team.
Disclosures relating to the Group Board are set out in the Remuneration Report on pages 10 to 12. The remuneration of the
key management personnel (executive team excluding Group Directors) of the Group is set out below:
Salaries and other short term benefits
Post employment benefits
Share based payments
36
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2007
£’000
801
11
16
828
2006
£’000
584
12
8
604
26 REL ATED PARTIES CONTINUED
From time to time the Group makes purchases on behalf of Bill Adderley and sells cars to him that the Group no longer requires.
These amounts are billed based on normal market rates for such supplies and payable under normal payment terms. No balances
remained unsettled at either period end. The aggregate value of these transactions is as below:
Inventory purchases
2007
£’000
13
2006
£’000
6
All cars sold to Bill Adderley during the period were fully depreciated; proceeds of £3,000 were received.
From time to time directors of the Group, or their related entities, may purchase goods from the Group. These purchases are on the
same terms and conditions as those entered into by other Group employees or customers and are trivial or domestic in nature.
All transactions were at arm’s length.
27 SHARES IN SUBSIDIARIES
The Company’s principal operating subsidiaries are:
Dunelm (Soft Furnishings) Limited
Dunelm Estates Limited
Both companies are registered and incorporated in the UK and are 100% owned and controlled by Dunelm Group plc.
28 ULTIMATE CONTROLLING PART Y
The Directors consider that the Adderley family is the ultimate controlling party of Dunelm Group plc by virtue of their
combined shareholding.
29 SUBSEQUENT EVENTS
There are no material post balance sheet events.
30 EXPL ANATION OF TRANSITION TO IFRS
INTRODUCTION
This is the first year that the Group has presented its financial statements under IFRS.
The accounting policies set out on pages 22 to 25 have been applied in preparing the financial statements for the year ended
30 June 2007, the comparative information presented in these financial statements for the year ended 1 July 2006 and in the
preparation of the opening balance sheet at 3 July 2005 (the transition date).
In preparing its opening balance sheet, the Group has adjusted amounts previously reported in financial statements prepared in
accordance with UK GAAP. An explanation of how the transition from UK GAAP to IFRS has affected the Group’s financial position,
financial performance and cash flows is set out in the following tables and notes.
In summary the impact of adopting IFRS on the accounts for the year ended 30 June 2007 is as follows:
IMPACT ON INCOME STATEMENT
UK GAAP profit before taxation
Lease incentives: change in the period over which the benefit is recognised
Fair value of derivatives in relation to foreign exchange contracts
IFRS profit before tax
Taxation
IFRS profit after tax
IMPACT ON NET ASSETS
UK GAAP net assets
Lease incentives: change in the period over which the benefit is recognised
Deferred tax
IFRS net assets
£’000
37,788
(824)
862
37,826
(13,198)
24,628
£’000
70,017
(9,414)
2,631
63,234
Dunelm Group plc Annual report 2007
37
Notes to the annual financial statements continued
30 EXPL ANATION OF TRANSITION TO IFRS CONTINUED
EXPL ANATIONS OF SIGNIFICANT DIFFERENCES BETWEEN UK GA AP AND IFRS WHICH AFFECT THE GROUP
The most significant changes in the Group’s accounting policies and presentation as a result of the adoption of IFRS are set
out below:
a LEASES (IAS 17)
Under UK GAAP, operating lease incentives (principally premiums received and rent free periods) were recognised in the profit and
loss account over the period to the first rent review. In accordance with IAS 17, lease incentives are now recognised in the income
statement over the shorter of the full term of the lease and the first break clause that is controlled by the Company. As a result there
will be a reduction in reported profits and an increase in liabilities (deferred income).
Where leases for land and buildings provide for fixed rent review dates and amounts, the Group accounts for such reviews by
recognising, on a straight-line basis, the total implicit minimum lease payments over the non-cancellable period of the lease term.
b SHARE-BASED PAYMENTS (IFRS 2)
Under IFRS 2, the charge recognised in the income statement for share options, long-term incentive plans and other share-based
payments will be based on the ‘fair value’ of the awards, calculated using an option pricing model. This contrasts to UK GAAP, where
the charge recognised was based on the ‘intrinsic value’ of awards, being the difference between the market value of the shares at the
date of the award and the option exercise price. Since this was typically nil the UK GAAP charge was nil.
The Group has applied the fair value model to all grants of equity instruments that had not vested as at 3 July 2005.
For equity-settled share-based payments, the fair value determined at the date of grant is expensed through the income statement on
a straight-line basis over the vesting period, based on the Group’s estimate of the number of shares that will eventually vest. Fair value
is measured by use of a binomial model.
c CASH FLOW STATEMENTS (IAS 7)
Under Adopted IFRS, cash flows are classified by three types of activity; operating, investing and financing. Cash includes cash
equivalents but this has not had an impact on the Group’s reported results. These headings are different to those used under UK
GAAP and there are therefore reclassifications within the cash flow statement.
d FINANCIAL INSTRUMENTS, RECOGNITION AND MEASUREMENT (IAS 39)
Under Adopted IFRS foreign exchange forward contracts are recognised at their initial fair value and subsequently re-measured to fair
value at future balance sheet dates. Changes in fair value are taken to the income statement in the period in which they arise. This
differs to UK GAAP where no values were attributed to the contracts. Therefore under Adopted IFRS where an asset is recognised,
profit will be increased and where a liability is recognised profit will be reduced.
e INCOME TA X (IAS 12)
IAS 12 takes a balance sheet approach to deferred tax whereby deferred tax is recognised in the balance sheet by applying the
appropriate tax rate to the temporary differences arising between the carrying value of assets and liabilities and their tax base. This
contrasts to UK GAAP (FRS 19), which considers timing differences arising in the profit and loss account. Adjustments made to the
financial statements on the transition to Adopted IFRS typically result in related adjustments to deferred tax, particularly with regard
to lease incentives.
In accordance with IAS 12, deferred tax assets and liabilities have been netted off within the balance sheet.
f FOREIGN EXCHANGE DISCLOSURES
Presentation adjustments have been made for foreign exchange gains and losses which were previously recognised in cost of sales
under UK GAAP but which may be classified as financial income/expenses under Adopted IFRS.
38
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30 EXPL ANATION OF TRANSITION TO IFRS CONTINUED
RECONCILIATION BETWEEN UK GA AP AND IFRS FIGURES
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 1 JULY 2006
AS PREVIOUSLY
REPORTED
UNDER
UK GAAP
£’000
FIXED
RENT
REVIEWS
£’000
PROPERTY
LEASE
INCENTIVES
£’000
FORWARD
EXCHANGE
CONTRACTS
£’000
SHARE
BASED
PAYMENTS
£’000
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating profit
Financial income
Financial expenses
Profit before tax
Taxation
Profit for the period
315,187
(263,543)
51,644
(12,407)
–
39,237
790
(57)
39,970
(12,411)
27,559
–
(170)
(170)
–
–
(170)
–
–
(170)
51
(119)
(694)
(694)
–
–
(694)
–
–
(694)
209
(485)
–
–
–
–
–
–
(174)
(862)
(1,036)
312
(724)
–
–
–
(31)
–
(31)
–
–
(31)
–
(31)
OTHER
£’000
–
(192)
(192)
–
–
(192)
192
–
–
–
–
IFRS
£’000
315,187
(264,599)
50,588
(12,438)
–
38,150
808
(919)
38,039
(11,839)
26,200
Dunelm Group plc Annual report 2007
39
Notes to the annual financial statements continued
30 EXPL ANATION OF TRANSITION TO IFRS CONTINUED
RECONCILIATION BETWEEN UK GA AP AND IFRS FIGURES
CONSOLIDATED BAL ANCE SHEET
AS AT 1 JULY 2006
AS PREVIOUSLY
REPORTED
UNDER
UK GAAP
£’000
FIXED
RENT
REVIEWS
£’000
PROPERTY
LEASE
INCENTIVES
£’000
FORWARD
EXCHANGE
CONTRACTS
£’000
SHARE
BASED
PAYMENTS
£’000
OTHER
£’000
IFRS
£’000
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax – net
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets held-for-sale
Total current assets
3,665
61,490
–
65,155
56,345
10,024
2,964
5,998
75,331
–
–
199
199
–
–
–
–
–
–
–
2,378
2,378
–
–
–
–
–
–
–
259
259
–
–
–
–
–
Total assets
140,486
199
2,378
259
Current liabilities
Interest bearing loans
and borrowings
Liability for current tax
Trade and other payables
Provisions
Total current liabilities
(150)
(6,213)
(37,822)
(58)
(44,243)
Non-current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Total non-current liabilities
–
(543)
(543)
–
–
(662)
–
(662)
–
–
–
–
–
(7,925)
–
(7,925)
–
–
–
–
–
(862)
–
(862)
–
–
–
Total liabilities
(44,786)
(662)
(7,925)
(862)
Net assets
95,700
(463)
(5,547)
(603)
Equity
Issued capital
Retained earnings
Total equity attributable to
equity holders of the parent
2,000
93,700
–
(463)
–
(5,547)
–
(603)
95,700
(463)
(5,547)
(603)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(564)
(564)
–
–
–
–
–
3,665
61,490
2,272
67,427
56,345
10,024
2,964
5,998
75,331
(564)
142,758
–
–
–
–
–
–
543
543
(150)
(6,213)
(47,271)
(58)
(53,692)
–
–
–
543
(53,692)
(21)
89,066
–
(21)
2,000
87,066
(21)
89,066
40
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30 EXPL ANATION OF TRANSITION TO IFRS CONTINUED
RECONCILIATION BETWEEN UK GA AP AND IFRS FIGURES
CONSOLIDATED BAL ANCE SHEET
AS AT 3 JULY 2005
AS PREVIOUSLY
REPORTED
UNDER
UK GAAP
£’000
FIXED
RENT
REVIEWS
£’000
PROPERTY
LEASE
INCENTIVES
£’000
FORWARD
EXCHANGE
CONTRACTS
£’000
SHARE
BASED
PAYMENTS
£’000
OTHER
£’000
IFRS
£’000
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax – net
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets held-for-sale
Total current assets
–
54,050
–
54,050
45,121
7,388
12,053
–
64,562
–
–
148
148
–
–
–
–
–
–
–
2,171
2,171
–
–
–
–
–
Total assets
118,612
148
2,171
Current liabilities
Interest bearing loans
and borrowings
Liability for income tax
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Interest bearing loans
and borrowings
Deferred tax liabilities
Total non-current liabilities
(469)
(5,889)
(36,130)
(144)
(42,632)
(73)
(366)
(439)
–
–
(492)
–
(492)
–
–
–
–
–
(7,234)
–
(7,234)
–
–
–
Total liabilities
(43,071)
(492)
(7,234)
–
–
(53)
(53)
–
175
–
–
175
122
–
–
–
–
–
–
–
–
–
Net assets
75,541
(344)
(5,063)
122
Equity
Issued capital
Retained earnings
2,000
73,541
–
(344)
–
(5,063)
Total equity attributable to
equity holders of the parent
75,541
(344)
(5,063)
–
122
122
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(387)
(387)
–
–
–
–
–
–
54,050
1,879
55,929
45,121
7,563
12,053
–
64,737
(387)
120,666
–
–
–
–
–
–
366
366
(469)
(5,889)
(43,856)
(144)
(50,358)
(73)
–
(73)
366
(50,431)
(21)
70,235
–
(21)
2,000
68,235
(21)
70,235
Dunelm Group plc Annual report 2007
41
Parent company accounts under UK GAAP
Balance Sheet
As at 30 June 2007
Fixed assets
Investment in subsidiary
Current assets
Deferred tax
Debtors
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
NOTE
4
5
6
7
2007
£’000
2,163
2,163
23
85,800
85,823
(713)
85,110
87,273
RESTATED
2006
£’000
2,008
2,008
12
78,906
78,918
(526)
78,392
80,400
Creditors: amounts falling due after more than one year
8
(40,000)
–
Net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Non distributable reserves
Equity shareholders’ funds
47,273
80,400
9,10
9,10
10
10
10
2,006
267
44,837
163
47,273
2,000
–
78,392
8
80,400
The financial statements on pages 42 to 47 were approved by the Board of Directors on 19 September 2007 and were signed on its
behalf by:
DAVID STEAD
DIRECTOR
19 September 2007
42
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Accounting policies – parent company accounts
BASIS OF PREPARATION
The Company has elected to prepare its financial statements under UK GAAP.
The accounts of the Company are prepared under the historical cost convention, in accordance with the Companies Act 1985,
applicable accounting standards and specifically in accordance with the accounting policies set out below.
A consolidated cash flow statement has been included in the Dunelm Group plc consolidated accounts. The Company has therefore
taken advantage of the exemption under FRS 1 ‘Cash Flow Statements’ not to produce a cash flow.
CHANGES IN ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing with items which are considered to be material in relation
to the Company’s financial statements, except as noted below.
In these financial statements the new standard FRS 20 ‘Share-based Payments’ has been adopted for the first time.
The accounting policy under this new standard is set out below together with an indication of the effect of its adoption.
The corresponding amounts in these financial statements have been restated in accordance with the new policy.
The effect of adopting this policy is to reduce the 2007 operating profits by £79,000 (2006: £23,000) and to reduce the taxation charge
by £11,000 (2006: £12,000) thus reducing 2007 profit after tax by £68,000 (2006: £11,000). The impact on the balance sheet is to
increase the net assets at 30 June 2007 by £11,000 (2006: £12,000).
UITF 41 ‘Scope of FRS 20 Share Based Payments’ became mandatory on 1 May 2006 and has been adopted in the Company’s 2007
financial statements. The standard addresses accounting for share based payment transactions in which some or all of the goods or
services received cannot be specifically identified. As the Company has granted options over its own shares to employees of its
subsidiaries, and the subsidiaries receive employee services with no consideration payable, the Company has recognised an increase
in cost of investment equal to the value of the share based payment expense arising in the accounts of its subsidiaries. The impact on
the balance sheet of adopting this policy was to increase net assets by £155,000 in 2007 (2006: £8,000).
UITF 44 ‘Group and Treasury Share Transactions’ is effective for periods commencing on or after 1 March 2007. It deals with
accounting for share based payments at the subsidiary level. This standard has been adopted early in the Company financial
statements and requires the subsidiary to account for the transactions as equity settled as the parent is granting the shares to
the employees of the subsidiary. The impact on the balance sheet of adopting this policy was nil.
INVESTMENTS
Investments in subsidiary undertakings are stated at the cost of the investment.
EQUIT Y DIVIDENDS
Equity dividends are recognised in the Company’s financial statements in the period in which the dividends are approved by the
shareholders. Interim equity dividends are recognised in the period in which they are paid.
SHARE BASED PAYMENTS
The Company issues equity settled share-based payments to certain employees and directors.
As permitted by FRS 20 the Company has applied the requirements of this standard to all share-based payment awards granted after
7 November 2002.
Equity settled share-based payments are measured at fair value at the date of grant. The fair value determined at the date of grant of
the equity share-based payment (calculated using the binomial model) is expensed over the period from the date when it is first known
that an award will be made until the date when that award first vests, with a corresponding increase recorded in equity.
TA X ATION
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax represents the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the balance sheet date, together with any adjustment to tax payable in respect of previous years.
Deferred taxation has been recognised as a liability or asset if transactions have occurred at the balance sheet date that give rise
to an obligation to pay more tax in the future, or a right to pay less tax in the future.
An asset is not recognised to the extent that the transfer of economic benefit in the future is not certain. Deferred tax has not
been discounted.
Dunelm Group plc Annual report 2007
43
Notes to the parent company accounts
1 PROFIT AND LOSS ACCOUNT
The Company made a profit before dividends payable of £17,970,000 (2006: £40,914,000). The Directors have taken advantage of the
exemption available under section 230 Companies Act 1985 and have not presented a profit and loss account for the Company alone.
2 EMPLOYEE COSTS
The Company has no employees other than the two Directors. Full details of the Directors’ remuneration and interest are set out in the
Directors’ Remuneration Report on pages 10 to 12.
3 DIVIDENDS
Equity – 1p ordinary
Interim for the period ended 30 June 2007 – paid 25p
Interim for the period ended 30 June 2007 – paid 0.8p
Final for the period ended 1 July 2006 – paid 3.7p
2007
£’000
(50,000)
(1,605)
–
(51,605)
2006
£’000
–
–
(7,400)
(7,400)
The Directors are proposing a final dividend of 3.0p per ordinary share for the period ended 30 June 2007 which equates to
£6.0m. The dividend will be paid on 30 November 2007 based on shareholders on the register at the close of business on
16 November 2007.
4 INVESTMENTS
Shares in subsidiary undertakings.
At 2 July 2006 – as previously reported
Share based payments
As at 2 July 2006 – restated
Share based payments
As at 30 June 2007
£’000
2,000
8
2,008
155
2,163
The increase in investments has arisen due to the adoption of UITF 41 ‘Scope of FRS 20 Share Based Payments’ which requires that
a parent company recognises an increase in the cost of its investment in a subsidiary which has issued share options in the parent
company’s shares, to its employees. The corresponding entry is taken to non-distributable reserves.
PRINCIPAL SUBSIDIARIES
The following are the principal subsidiaries as at the end of the year:
SUBSIDIARY
Dunelm (Soft Furnishings) Limited
Dunelm Estates Limited
PROPORTION OF
ORDINARY
SHARES HELD
100%
100%
Both of the above subsidiaries are registered and operate in England and Wales.
NATURE OF
BUSINESS
Retailer of soft furnishings
Property holding company
44
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5 DEFERRED TA X ASSETS
As at 3 July 2005
Income statement credit
As at 1 July 2006
Income statement credit
As at 30 June 2007
OTHER TEMPORARY
DIFFERENCES
£’000
–
12
12
11
23
Deferred tax assets are recognised for other temporary differences to the extent that the realisation of the related tax benefit through
future taxable profits is probable.
A number of changes to the UK corporation tax system have been enacted in the Finance Act 2007 and the effect is to reduce the
deferred tax asset recognised as at 30 June 2007 by £1,000. The decrease in deferred tax is due to the reduction in corporation tax
rate from 30% to 28% from 1 April 2008.
6 DEBTORS
Amounts owed by subsidiary undertakings
Prepayments and accrued income
7 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Corporation tax
Accruals and deferred income
Bank overdraft
8 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Bank loans
2007
£’000
85,771
29
85,800
2006
£’000
78,501
405
78,906
2007
£’000
10
682
21
713
2007
£’000
40,000
2006
£’000
391
135
–
526
2006
£’000
–
On 26 September 2006 the Group entered into a £50m revolving credit facility which is repayable in full on 26 September 2010.
The facility is sub divided into two elements: a £40m facility and a £10m facility.
Interest is payable on the £40m facility at the rate of LIBOR plus 0.35% and on the £10m facility at a rate of LIBOR plus 0.45%.
The facility is guaranteed by the parent company and its subsidiaries.
9 SHARE CAPITAL
In issue at the start of the period
Issued during the period in respect of share options
In issue at the end of the period
NUMBER OF ORDINARY SHARES OF 1P EACH (2006: £1)
2007
2006
200,000,000
617,400
200,617,400
2,000,000
–
2,000,000
Proceeds received in relation to shares issued during the period were £273,404 (2006: £nil).
Dunelm Group plc Annual report 2007
45
Notes to the parent company accounts continued
Ordinary shares of 1p each (2006: £1)
Authorised
Allotted, called up and fully paid
2007
NUMBER
OF SHARES
2007
£’000
2006
NUMBER
OF SHARES
500,000,000
200,617,400
5,000
2,006
5,000,000
2,000,000
2006
£’000
5,000
2,000
On 2 October 2006 the Company’s share capital was sub-divided from 2,000,000 £1 ordinary shares in issue to 200,000,000
1p ordinary shares. Outstanding share options were adjusted correspondingly.
The holders of the ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share.
For the purpose of the annual financial statements, all calculations of earnings per share and all dividends are expressed as if the new
share denomination had always been in place.
10 MOVEMENT IN EQUIT Y SHAREHOLDERS’ FUNDS
As at 3 July 2005
Profit for the period
Share based payments
Dividends
As at 1 July 2006 – restated
As at 2 July 2006 – restated
Profit for the period
Issue of new share capital
Share based payments
Dividends
As at 30 June 2007
NON
DISTRIBUTABLE
£’000
–
–
8
–
8
NON
DISTRIBUTABLE
£’000
8
–
–
155
–
163
SHARE
CAPITAL
£’000
2,000
–
–
–
2,000
SHARE
CAPITAL
£’000
2,000
–
6
–
–
2,006
SHARE
PREMIUM
£’000
–
–
–
–
–
SHARE
PREMIUM
£’000
–
–
267
–
–
267
RETAINED
EARNINGS
£’000
44,855
40,914
23
(7,400)
78,392
RETAINED
EARNINGS
£’000
78,392
17,971
–
79
(51,605)
44,837
TOTAL
£’000
46,855
40,914
31
(7,400)
80,400
TOTAL
£’000
80,400
17,971
273
234
(51,605)
47,273
The non distributable reserve has arisen due to the adoption of UITF 41 ‘Scope of FRS 20 Share Based Payments’ which requires that
a parent company recognises an increase in the cost of its investment in a subsidiary which has issued share options in the parent
company’s shares, to its employees. The corresponding entry is taken to non distributable reserves.
11 SHARE BASED PAYMENTS
As at 30 June 2007, the Company operated two share award plans:
a Dunelm Group Share Option Plan (‘GSOP’)
b Long-Term Incentive Plan (‘LTIP’)
There were no exercisable options as at 30 June 2007.
a DUNELM GROUP SHARE OPTION PL AN
The GSOP was established in December 2003. Options have a vesting period of three years from date of grant and a maximum life of
10 years. All options granted prior to IPO have an exercise price equal to the market value as agreed with HMRC at date of grant; there
have been no further grants since IPO. There are no performance conditions but there is a requirement that the Group’s shares be
traded on a public exchange at date of exercise, and the awards are also subject to continued employment with the Group.
46
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11 SHARE BASED PAYMENTS CONTINUED
The fair value of services received in return for share options granted is measured by reference to the fair value of the options,
assessed using a binomial model. The fair value per option granted and the assumptions used in the calculations are as follows:
Fair value at measurement date
Share price
Exercise price
Expected volatility (weighted average volatility used in modelling – based on historical volatility of comparable
quoted companies)
Option life (weighted average life used in modelling)
Expected dividends
Risk-free interest rate
The number and weighted average exercise price of options under the GSOP is as follows:
AUGUST
2006
7.00p
n/a
62.10p
35.0%
3 years
8.7%
4.8%
SEPTEMBER
2005
6.25p
n/a
57.00p
35.0%
3 years
8.7%
4.8%
Outstanding at beginning of year
Granted during year
Forfeited during year
Exercised during year
Outstanding at end of year
WEIGHTED
NUMBER OF
AVERAGE
EXERCISE SHARES UNDER
OPTION
2007
PRICE
2007
WEIGHTED
AVERAGE
NUMBER OF
EXERCISE SHARES UNDER
OPTION
2006
PRICE
2006
44.70
–
–
44.28
46.00
817,400
–
–
(617,400)
200,000
44.70
–
–
–
44.70
817,400
–
–
–
817,400
b LONG-TERM INCENTIVE PL AN
The LTIP was approved by the Board prior to IPO enabling the Company to award shares to particular individuals, normally in the form
of nominal cost options and subject to performance conditions. The LTIP is administered by the Remuneration Committee. One grant
has been made to date, to the Executive Directors only, and is exercisable in September 2009 depending on the level of growth in
Group EPS relative to RPI.
The fair value of services received in return for share options granted is measured by reference to the fair value of the options. This has
been calculated as follows:
Share price at date of grant
Discount factor, based on dividend yield of 3.0% to vesting date
Fair value of option
The total number of options outstanding under the LTIP at 30 June 2007 was 250,434.
The total expense recognised in the income statement arising from share-based payments is as follows:
Group Share Option Plan
LTIP
Total
229.00p
0.913
209.00p
2007
£’000
9
70
79
2006
£’000
23
–
23
12 CONTINGENT LIABILIT Y
The Company and certain subsidiaries have given joint and several guarentees in connection with all bank facilities provided by the
Group’s principal bankers.
The Group’s banking facilities are subject to a netting facility whereby credit balances may be offset against indebtedness of other
Group companies.
13 REL ATED PART Y DISCLOSURE
Under FRS 8 ‘Related Party Disclosures’ the Company is exempt from disclosing related party transactions with entities over which it
has 90% or more control.
Dunelm Group plc Annual report 2007
47
Notice of Annual General Meeting
Notice is hereby given that an Annual General Meeting of the Company will be held at The Hilton Hotel, Leicester on Monday
5 November 2007 at 3.00pm at which the following matters will be dealt with:
ORDINARY BUSINESS
To consider and if thought fit pass the following resolutions as ordinary resolutions:
1. That the Company’s annual accounts for the financial year ended 30 June 2007 together with the Directors’ Report, and the
Auditors’ Report on those accounts be received and adopted.
2. That Geoff Cooper, who is retiring by rotation in accordance with the Articles of Association of the Company, and being eligible,
is offering himself for re-election, be re-appointed as a Non-Executive Director of the Company.
3. That Bill Adderley, who is retiring by rotation in accordance with the Articles of Association of the Company, and being eligible,
is offering himself for re-election, be re-appointed as a Non-Executive Director of the Company.
4. That Simon Emeny, who is retiring in accordance with the Articles of Association of the Company, and being eligible, is offering
himself for election, be and is hereby appointed as a Non-Executive Director of the Company.
5. To declare a final dividend on the ordinary shares of 3p per share in respect of the year ended 30 June 2007.
6. That KPMG Audit Plc be re-appointed as auditors to the Company and that the Directors be authorised to determine the
auditors’ remuneration.
7. That the Directors’ Remuneration Report be approved.
SPECIAL BUSINESS
To consider and if thought fit pass the following resolutions of which the resolution number 8 will be proposed as an ordinary
resolution and the resolutions numbered 9, 10 and 11 will be proposed as a special resolution:
8. That:
(a) the Directors shall have unconditional authority to allot, grant options over, offer or otherwise deal with or dispose of any relevant
securities (as defined in section 80(2) of the Companies Act 1985 (the ‘Act’)) of the Company up to an aggregate nominal amount
of £668,724 to such persons at such times and generally on such terms and conditions as the Directors may determine;
(b) this authority shall expire at the conclusion of the Annual General Meeting of the Company in 2008 unless previously renewed,
varied or revoked, although the Directors may exercise this authority after this date in respect of an offer or agreement made
while the authority was in force; and
(c) this authority replaces all previous authorities made under Section 80 of the Act, without prejudice to any allotment of securities
made pursuant to them.
9. That subject to the passing of ordinary resolution 8 above, the Directors be authorised pursuant to Section 95 of the Companies
Act 1985 to allot equity securities (as defined in Section 94(2) to 94(3A) of the Companies Act 1985) wholly for cash pursuant to the
authority conferred by the previous resolution as if Section 89(1) of the Companies Act 1985 did not apply to the allotment,
provided that this power shall be limited to the allotment of equity securities:
(a) where securities have been offered to holders of ordinary shares in the capital of the Company in proportion (as nearly as may
be) to their existing holdings of ordinary shares subject to any exclusions or other arrangements that the Directors consider
necessary or expedient to deal with:
(i) fractional entitlements; and
(ii) legal or practical problems under the law of, or the requirement of any recognised regulatory body or stock exchange in,
any territory;
(b) pursuant to acceptance of any scrip dividend offer; and
(c) otherwise than pursuant to paragraphs (a) and (b) above for cash up to an aggregate nominal amount of £100,000.
This authority will expire at the conclusion of the Annual General Meeting of the Company in 2008, although the Directors may
exercise this authority after this date in respect of an offer or agreement made while the authority was in force.
This authority applies in relation to a sale of shares which is an allotment of equity securities by virtue of section 94(3A) of the Act as
if in the first paragraph of this resolution the words ‘pursuant to the authority conferred by the previous resolution’ were omitted.
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10.
That, in accordance with article 11 of the Company’s Articles of Association, the Company be generally and unconditionally
authorised to make market purchases (within the meaning of section 163(3) of the Companies Act 1985) of ordinary shares of
1p each in the capital of the Company (‘ordinary shares’) provided that:
(a) the maximum aggregate number of ordinary shares authorised to be purchased is the lesser of 20,000,000, being
approximately 10% of issued ordinary share capital at 30 June 2007, and 10% of the Company’s issued ordinary share capital
at the date of passing of this resolution;
(b) the maximum price (not including expenses) which may be paid for each ordinary share is an amount equal to 105% of the
average of the middle market quotations for an ordinary share, as derived from the London Stock Exchange Daily Official List,
for the five business days immediately before the day on which the purchase is made; and
(c) the minimum price which may be paid for each ordinary share is 1p per share.
This authority shall, unless previously varied, revoked or renewed, expire at the conclusion of the next Annual General Meeting
of the Company, except in relation to a purchase of ordinary shares the contract for which was concluded before such time and
which will or may be executed wholly or partly after such time.
11. That the Company may send or supply any document that is required or authorised to be sent or supplied to a member or
any other person by a provision of the Companies Acts (as defined in section 2 of the Companies Act 2006 (‘the 2006 Act’)),
or pursuant to the Company’s Articles of Association or any other rules or regulations to which the Company may be subject,
by making it available on a website, and the provisions of Schedule 5 to the 2006 Act shall apply whether or not any document
or information is required or authorised to be sent by the 2006 Act and this resolution shall supersede any provision in the
Company’s Articles of Association to the extent that it is inconsistent with this resolution.
By Order of the Board
DAVID STEAD
COMPANY SECRETARY
Fosse Way
Syston
Leicester
LE7 1NF
19 September 2007
Notes
1. The holders of the ordinary shares are entitled to attend and to speak at the Annual General Meeting and at any adjournment and to vote on all
of the resolutions to be proposed at the meeting.
2. A member is entitled to attend and vote at the meeting (or at any adjournment) on any resolution and is entitled to appoint a proxy or proxies
to attend and, on a poll, vote instead of him. A proxy need not be a member of the Company.
3. The ‘vote withheld’ option is to enable shareholders to abstain on any particular resolution. This is not a vote in law and will not be counted in the
votes ‘for’ or ‘against’ any resolution.
4. To be valid, a duly completed Form of Proxy must be sent by post, together with the power of attorney or other authority (if any) under which it is
signed (or a notarially certified copy), to Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6ZX so as to arrive not later than
48 working hours before the time fixed for the meeting or adjourned meeting or (in the case of a poll taken otherwise than at or on the same day
as the meeting or adjourned meeting) for the taking of the poll at which it is to be used. A white Form of Proxy is enclosed. Completion and return
of a Form of Proxy will not preclude a member from attending and voting in person at the meeting.
5. Pursuant to Regulation 34 of the Uncertificated Securities Regulations 1995 or regulation 20 and schedule 4 of the Uncertificated Securities
Regulations 2001, the time by which a person must be entered on the register of members of the Company in order to have the right to attend or
vote at the meeting is 48 hours before the time fixed for the meeting. Changes to entries on the register of members after that time will be
disregarded in determining the rights of any person to attend or vote at the meeting.
6. Copies of the Directors’ service agreements with the Company and the register of Directors’ interests will be available for inspection during normal
business hours on each business day at the registered office of the Company from the date of this notice until the date of the meeting and also at
the place of the meeting for 15 minutes prior to and during the meeting.
7. To appoint a proxy or to give or amend an instruction to a previously appointed proxy via the CREST system, the CREST message must be
received by the issuer’s agent (ID 7RA01) by 48 working hours before the time fixed for the Annual General Meeting. For this purpose, the time
of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the
issuer’s agent is able to retrieve the message. After this time any change of instructions to a proxy appointed through CREST should be
communicated to the proxy by other means.
CREST Personal Members or other CREST sponsored members and those CREST Members who have appointed voting service provider(s)
should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST.
For further information on CREST procedures, limitations and system timings, please refer to the CREST Manual. We may treat as invalid a proxy
appointment sent by CREST in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
Dunelm Group plc Annual report 2007
49
Notes
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Form of proxy – Dunelm Group plc
I/We
(FULL NAME(S) IN BLOCK CAPITALS)
of
(ADDRESS IN BLOCK CAPITALS)
being member(s) of the above named Company, hereby appoint the Chairman of the meeting
as my/our proxy to vote for me/us
or failing him
and on my/our behalf at the Annual General Meeting of the Company to be held at The Hilton Hotel, Leicester on Monday 5 November
2007 at 3.00 pm.
Please indicate with an ‘X’ in the space below how you wish your vote to be cast. If the form is returned without any indication
as to how the proxy shall vote on any particular matter the proxy will vote as he or she thinks fit or abstains from voting at his
or her discretion.
Vote
Withheld
Against
Signature
Date
2007
For
ORDINARY BUSINESS
1.
To receive and approve the Directors’ Report and the audited accounts for the
period ended 30 June 2007 and the report of the auditors
2. To re-elect Geoff Cooper as a Director
3. To re-elect Bill Adderley as a Director
4. To elect Simon Emeny as a Director
5. To declare a dividend on the ordinary shares of 3p per share
6.
To re-appoint KPMG Audit Plc as auditors of the Company
and to authorise the Directors to fix their remuneration
7. To approve the Directors’ Remuneration report
SPECIAL BUSINESS
8.
To authorise the Company to renew its authority pursuant to section 80
of the Companies Act 1985 in accordance with Resolution 8 in the
Notice of Annual General Meeting
9.
Subject to passing Resolution 8 to grant authority to the Company to allot shares
pursuant to section 95 of the Companies Act 1985
10. To authorise the purchase of ordinary shares in the Company up to a maximum
of 10% of issued ordinary share capital in accordance with Resolution 10
in the Notice of Annual General Meeting
11. To enable website communication with shareholders to be the default position
Notes
1. If you wish to appoint some other person or persons please insert his/her/their name(s) and address(es), initial the insertion and strike out the words ‘the
Chairman of the meeting’.
2. Unless otherwise instructed above, the proxy will exercise his or her discretion both as to how he or she votes and as to whether or not he or she abstains
from voting on any resolutions proposed at the meeting.
3. The ‘vote withheld’ option is to enable you to abstain on any particular resolution. This is not a vote in law and will not be counted in the votes ‘for’ and
‘against’ a particular resolution.
3. The proxy covers all shares held by a Member unless the Member indicates otherwise on this form. If more than one proxy is appointed, the number of shares
covered by each proxy must be stated.
4. To be valid this form duly signed, together with the power of attorney or other authority (if any) under which it is signed (or a notarially certified copy of such
power or authority) must be deposited at the offices of the registrars no later than 48 hours before the time for holding the meeting.
5. In the case of a corporation this form must be under its Common Seal or otherwise executed in accordance with Section 36A Companies Act 1985 as
amended or it must be signed by an officer or attorney duly authorised in writing.
6. Any alterations to this form must be initialled.
7. In the case of joint holders only one need sign but the names of all joint holders must be stated. The vote of the senior holder who tenders a vote shall be
accepted to the exclusion of the votes of the other joint holders. For this purpose seniority shall be determined by the order in which names stand in the
register of members.
8. Shares held in uncertificated form (i.e. in CREST) may be voted through the CREST Proxy Voting Service in accordance with the procedures set out in the
CREST manual.
✂
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BUSINESS REPLY SERVICE
Licence No. SEA 10855
Do not affix Postage Stamps if posting in
Gt. Britain, Channel Islands, or Northern Ireland.
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BN99 6ZX
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Advisers
Corporate Brokers
and Financial Advisers
Legal Advisers
Auditors
Principal Bankers
Registrars
Financial Public Relations
UBS Investment Bank
1 Finsbury Avenue
London EC2M 2PP
Tel: 020 7567 8000
Landsbank Securities (UK) Ltd
Beaufort House
15 St. Botolph Street
London EC3A 7QR
Tel: 020 7426 9000
Allen & Overy LLP
One Bishops Square
London E1 6AO
Tel: 020 3088 0000
KPMG Audit Plc
1 Waterloo Way
Leicester LE1 6LP
Tel: 0116 256 6000
Barclays Bank plc
Midlands Corporate Banking
PO Box 333
15 Colmore Row
Birmingham B3 2WN
Tel: 0845 755 5555
Lloyds TSB Registrars
The Causeway
Worthing
West Sussex
BN99 6DA
Tel: 0870 600 3970
Hogarth Partnership Limited
No. 1 London Bridge
London
SE1 9BG
Tel: 020 7357 9477
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