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www.dunelm-mill.com
Annual report
& accounts 2008
(cid:57)(cid:106)(cid:99)(cid:90)(cid:97)(cid:98)
mill
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.
01 Highlights
02 Chairman’s statement
04 Chief Executive’s review
06
Finance Director’s review
10 Directors and officers
12
14
18
23
Corporate governance report
Remuneration report
Directors’ report and business review
Statement of Directors’ responsibilities
24
26
27
28
29
Independent Auditors’ report
Consolidated income statement
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes
in equity
30 Accounting policies
34
46
Notes to the annual financial statements
Parent Company accounts
56
59
Notice of Annual General Meeting
Form of proxy
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www.dunelm-mill.com
Annual report
& accounts 2008
(cid:57)(cid:106)(cid:99)(cid:90)(cid:97)(cid:98)
mill
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.
01 Highlights
02 Chairman’s statement
04 Chief Executive’s review
06
Finance Director’s review
10 Directors and officers
12
14
18
23
Corporate governance report
Remuneration report
Directors’ report and business review
Statement of Directors’ responsibilities
24
26
27
28
29
Independent Auditors’ report
Consolidated income statement
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes
in equity
30 Accounting policies
34
46
Notes to the annual financial statements
Parent Company accounts
56
59
Notice of Annual General Meeting
Form of proxy
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Dunelm Group plc
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Our business
at a glance
Business
strategy
Dunelm’s specialist homewares offering
has powerful customer appeal and is
clearly differentiated from other retailers.
This has enabled the chain to expand
at a rapid rate. Today the major focus is
out-of-town retailing – and we now have
77 superstores located throughout the UK.
Total number of superstores*
77
Total selling space
2.2m sq. ft.
Product lines available in superstores
(Broad and deep ranges)
> 20,000
Number of employees
> 5,000
= Superstores open as at 30 June 2007
= Superstores opened since 1 July 2007
* As at 11 September 2008
These are our key
areas of focus
>
Growing the store portfolio
We are ambitious to continue driving Dunelm’s
growth by rolling out the successful superstore
format. Of the existing 77 superstores as of
11 September 2008, the majority are located
in the Midlands or the North West of England
and coverage of many parts of the UK is limited.
The opportunity for geographic expansion is
therefore very significant.
>
>
>
Developing the customer offer
We intend to continue to focus on homewares and
our ‘Simply value for money’ proposition – deep
ranges of quality products at keen prices, with
high availability and supported by friendly service.
We want to keep strengthening each element
of the offer.
Exploiting our infrastructure
We are in a strong position to exploit further our
increasing scale, as well as to benefit from the
significant infrastructure investments made in
recent years, particularly in IT systems.
Growing Dunelm Direct
We have had a transactional website since 2006.
We see significant opportunity to grow our overall
business by further developing direct channels in
conjunction with expanding our store base.
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
Landsbanki 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
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Tel: 0871 384 2030
Hogarth Partnership Limited
No. 1 London Bridge
London SE1 9BG
Tel: 020 7357 9477
Our business
at a glance
Business
strategy
Dunelm’s specialist homewares offering
has powerful customer appeal and is
clearly differentiated from other retailers.
This has enabled the chain to expand
at a rapid rate. Today the major focus is
out-of-town retailing – and we now have
77 superstores located throughout the UK.
Total number of superstores*
77
Total selling space
2.2m sq. ft.
Product lines available in superstores
(Broad and deep ranges)
> 20,000
Number of employees
> 5,000
= Superstores open as at 30 June 2007
= Superstores opened since 1 July 2007
* As at 11 September 2008
These are our key
areas of focus
>
Growing the store portfolio
We are ambitious to continue driving Dunelm’s
growth by rolling out the successful superstore
format. Of the existing 77 superstores as of
11 September 2008, the majority are located
in the Midlands or the North West of England
and coverage of many parts of the UK is limited.
The opportunity for geographic expansion is
therefore very significant.
>
>
>
Developing the customer offer
We intend to continue to focus on homewares and
our ‘Simply value for money’ proposition – deep
ranges of quality products at keen prices, with
high availability and supported by friendly service.
We want to keep strengthening each element
of the offer.
Exploiting our infrastructure
We are in a strong position to exploit further our
increasing scale, as well as to benefit from the
significant infrastructure investments made in
recent years, particularly in IT systems.
Growing Dunelm Direct
We have had a transactional website since 2006.
We see significant opportunity to grow our overall
business by further developing direct channels in
conjunction with expanding our store base.
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
Landsbanki 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
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Tel: 0871 384 2030
Hogarth Partnership Limited
No. 1 London Bridge
London SE1 9BG
Tel: 020 7357 9477
Highlights
Business review
£392m Revenue
2008
2007
2006
2005
£391.8m
£354.7m
£315.2m
£282.5m
£49.4m Operating profit*
2008
2007
2006
2005
£49.4m
£40.8m
£38.2m
£36.2m
£49.1m Profit before tax*
Operational
89 stores at 28 June 2008
(76 superstores)
8 new superstores opened in the year
Average superstore selling area
of 28,000 sq. ft.
Around 20,000 lines in a superstore –
broad and deep ranges
Expansion of webstore to offer in excess
of 9,000 lines
Financial
Revenue increase 10.5% in FY 2007/08
2008
2007
2006
2005
£49.1m
Operating margin 12.6%
Operating cash flow £45m after
interest and tax
£37.8m
£38.0m
£37.6m
£45.0m Net cash from operations
2008
2007
2006
2005
£45.0m
£34.7m
£24.1m
£30.1m
* The 2007 figures for operating profit and profit before tax included
non-recurring items in respect of IPO and warehouse relocation as
well as a non-recurring gain on a property disposal. The combined
effect of these was to reduce operating profit by £3.2m and profit
before tax by £3.0m.
Dunelm Group plc Annual report & accounts 2008
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Once again Dunelm has delivered record sales and profits,
despite the difficult conditions in which the business has had
to operate.
Tough trading conditions allow strong companies to
prosper at the expense of weaker competitors. I believe that
this will be the case for Dunelm. We continue to have great
faith in our ‘simply value for money’ proposition and we
expect customers to become increasingly aware of the
value we offer.
I am pleased to report that we have converted profits into
cash very successfully. As a result we have been able to
reduce net debt significantly during the period so that the
balance sheet is now substantially unleveraged. This means
we have the financial strength to face difficult times with
confidence, and the flexibility to take advantage of
opportunities as they arise – such as the acquisition
of the Dorma brand which we announced shortly after
the year-end, as well as the ongoing expansion of the
store portfolio.
The business has enjoyed a high level of stability in terms of
Board membership for a number of years. However, during
the year Bill Adderley has stepped down from his position as
Non-Executive Director after reaching his 60th birthday. I am
delighted we are able to recognise his role in establishing
Dunelm by confirming his honorary position of Founder
and Life President.
Geoff Cooper
Chairman
11 September 2008
02/03
Chairman’s
statement
Geoff Cooper Chairman
We continue to have great
faith in our ‘Simply value for
money’ proposition.
www.dunelm-mill.com
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Business review
Simply
value for
money...
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Dunelm Group plc Annual report & accounts 2008
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04/05
Chief Executive’s
review
Will Adderley Chief Executive
We remain as committed
as ever to growing the
superstore portfolio as
rapidly as we can towards
our medium term target of
150 superstores.
www.dunelm-mill.com
Trading
I am delighted to report continued successful growth of the
Group during the last financial year. Our overall sales
increased by 10.5%, including growth of 2.5% in like-for-like
sales (calculated by comparing stores which have traded
throughout the last two financial years).
The market environment became increasingly difficult during
the year.
I firmly believe that Dunelm remains the leading multiple
homewares specialist in the UK. This has been recognised in
surveys by Verdict, the specialist market research agency. In
December 2007, they reported that Dunelm is Britain’s third
favourite shop behind only John Lewis and Waitrose. More
recently, their research identified Dunelm as one of the four
retailers which engender the highest levels of customer
loyalty. We intend to maintain this success by pursuing the
four strategic priorities which we outlined two years ago at
the time of our flotation.
Priority 1 – growing the store portfolio
We opened eight new superstores in the year, at Aberdeen,
Shoreham, Peterborough, Dumfries, Eastbourne, Leeds,
Bournemouth and Sittingbourne. We continue to receive
strongly positive customer reaction to all of our new
openings and are pleased with trading in all of these
locations. Altogether the chain of 76 superstores as at the
year-end provided over 2.2m square feet of selling space.
We remain as committed as ever to growing the superstore
portfolio as rapidly as we can towards our medium-term
target of 150 superstores, without compromising our long-
term financial returns. We have opened a further store since
the year-end in Huddersfield and are contractually
committed to six more units which are due to open this
financial year or early next. We also have numerous further
opportunities under negotiation. With few out-of-town
retailers currently in the market for adding space, we believe
that we are well positioned to achieve a solid pipeline of
openings in the next few years.
Whilst expanding our superstore chain, we continue to
look for opportunities to relocate our older high street shops.
The superstore opening in Peterborough replaced our high
street shop there, leaving us with 13 high street stores; we will
be relocating our Worcester high street store early in 2009.
Priority 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.
One of the ways in which we are able to demonstrate the
quality of the ranges we offer is through branding. We
recently announced the acquisition of worldwide rights to
Dorma, the internationally recognised bedlinen brand, from
Dawson International for a consideration of £5m. We see this
as a great way to underline the quality of our merchandise,
as well as providing a strong point of difference compared
with other home textiles retailers.
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Business review
We have commenced a significant investment programme
to improve the shopping environment in our older stores. We
have completed three refits so far and intend to continue
our refit programme at the rate of 5–10 stores per year. To
date the cost has been approximately £0.5m per store.
Priority 3 – exploiting our infrastructure
Following the roll-out of SAP stock management to all of our
stores in the last twelve months we have had full visibility of all
stock throughout the chain. We have used this to develop a
chain-wide focus on the availability of key lines and we have
seen a noticeable improvement in availability as a result.
Looking ahead we will continue to exploit our enhanced
systems and information in various ways, for example in
the areas of range management and simplification of
in-store tasks.
Priority 4 – growing Dunelm Direct
Our webstore has been expanded to offer over 9,000
products. Whilst this channel remains small relative to the
business as a whole, sales are growing and we see an
important future here. We are therefore investing in a new
software platform for the on-line business which should be
implemented during the current financial year, and which will
offer a big improvement in the on-line shopping experience.
Outlook
In the early weeks of our new financial year, we have
continued to face difficult trading conditions. For the 10
weeks to 6 September, total sales growth has been 3.1% and
like-for-like sales have declined by 5.7%; last year’s equivalent
figures were +12.6% and +7.2% respectively. Gross margin has
remained strong, with an increase of 140 bps year on year
driven by higher levels of promotional product and earlier
introduction of new lines after our summer sale.
Against a very challenging market background, we are
satisfied with these figures and believe that we continue to
gain market share on a like-for-like basis. We naturally remain
cautious about the medium-term outlook, but the current
market conditions provide us with clear opportunities to
grow and strengthen our business relative to the competition.
Will Adderley
Chief Executive
11 September 2008
Simply focused
Dunelm Group plc Annual report & accounts 2008
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06/07
Finance Director’s
review
David Stead Finance Director
Net debt at the year-end was
just £7.2m. This is an excellent
position from which to fund
future growth.
www.dunelm-mill.com
Operating result
Sales in the financial year were £391.8m, an increase of
10.5%. Like-for-like growth was 2.5%.
We continued to benefit from our increased scale and
buying power allowing us to achieve a 60 basis points
improvement in buying margin.
Operating costs remained well controlled, with an overall
0.2% reduction in costs in like-for-like stores. Non-store costs
grew by £2.1m, including additional investment in advertising
during the peak winter trading period.
During the year, we completed the roll-out of our new stock
system to all stores, giving us for the first time full visibility of all
stock in the business at an item level. On the basis of this
new information, various actions have been taken to clear
old and excess stocks. The total charge for stock write-downs
in the year was £5.9m.
Operating profit was £49.4m, an increase of 12.4% on an
underlying basis (i.e. after adjusting last year’s comparative
figure to add back non-recurring items, primarily IPO costs).
EBITDA
Earnings before interest, tax, depreciation and amortisation
were £58.9m. This has been calculated as operating profit
(£49.4m) plus depreciation and amortisation (£9.5m) and
represented a 10.1% increase on the previous year on an
underlying basis. The EBITDA margin achieved, at 15.0% of
sales, demonstrates the continuing strength of Dunelm’s
business model.
Financial items and PBT
The net interest charge for the year was £0.3m compared
with £3.0m in the prior year, reflecting the Group’s strong
cash generation.
In the year to June 2007, the Group suffered foreign
exchange losses in respect of US dollar holdings and forward
exchange contracts which amounted to £1.4m. We stated at
this time last year that we would no longer take out forward
exchange contracts and that we would reduce our US dollar
holdings. With this reduced exposure and a relatively
consistent exchange rate ($2.00 at last year-end, $1.99 this),
foreign exchange losses in the most recent financial year
amounted to £0.1m.
After accounting for interest and foreign exchange impacts,
profit before tax for the year amounted to £49.1m, an
increase of 19.8% on an underlying basis (29.9% on a
statutory basis).
Tax, PAT and EPS
The tax charge for the year was 31.5% of PBT.
Basic EPS on an underlying basis (i.e. excluding non-
recurring items from last year’s calculation) shows a rise
of 21.7% to 16.8p, with fully diluted EPS increasing 21.3% to
16.6p; these figures are respectively 36.6% and 36.1% above
last year’s statutory figures.
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Business review
Implementation of IFRS
IFRS was fully implemented at Group level prior to our IPO in
2006. In addition we have now incorporated IFRS into the
accounts of each member Company in the Group. The
impact of IFRS conversion on the Parent Company accounts
is shown on pages 54 to 55 of this report.
Factors affecting FY09
The current financial year will end on 4 July 2009, giving a
53 week period. We will present results for the year on both
a 52 week and 53 week basis.
Twenty four stores are scheduled to have a rent review in the
coming year.
Major IT systems investments will become fully amortised by
April 2009; the related amortisation charge of £2.0m per year
will cease at that date.
The recent investment of £5.0m to acquire the rights to the
Dorma brand will be amortised against profits over five years,
beginning with financial year 2009.
The headline rate of corporation tax will reduce by
1.5 percentage points.
Capital expenditure
Gross capital expenditure in the most recent financial year
was £18.0m, up from £15.1m last year. This included one
significant freehold store acquisition as well as the fit-out
costs for the other new stores opened in the year, and one
store refit.
Working capital
Stocks increased by just £0.1m during the financial year,
despite the new store openings. Net working capital was
reduced by £0.7m compared with the start of the year
(net working capital consisting of stocks; trade and other
receivables; and current liabilities (excluding interest and
current tax)).
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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 £45.0m (an increase of 29.4%) and
net debt at the year-end was just £7.2m. This is an excellent
position from which to fund future growth.
Dividend
Our policy is to pay dividends such that dividend cover is in
the range 2.5x to 3.0x.
An interim dividend of 2.0p was paid in April 2008. It is
proposed to pay a final dividend of 3.5p per share. The total
dividend of 5.5p gives dividend cover of 3.0x.
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
FY08
+2.5%
+60bp
8
FY07
+6.1%
+40bp
4
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 outlook for 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. For example, we have recently increased the
proportion of ‘special buy’ merchandise in the business.
08/09
Finance Director’s
review continued
www.dunelm-mill.com
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Dunelm Group plc Annual report & accounts 2008
Business review
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. However, with increasing pressures on retailers we
anticipate greater availability of space in the next few years.
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 and a high proportion of direct-to-store
deliveries mitigate 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 expiring in
September 2011, 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
28 June 2008, the total of committed bank facilities
exceeded net debt by £42.8m.
With net debt of £7.2m 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
11 September 2008
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Founder and life President
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Bill Adderley
Founder and Life President
Bill Adderly founded Dunelm along with his wife Jean
in 1979. He led the development of the business successfully
for many years, then took a non-executive role before retiring
in February 2008. He and Jean remain passionate Dunelm
supporters and major shareholders.
www.dunelm-mill.com
Governance
Directors
1.
2.
3.
4.
5.
1. Geoff Cooper
Non-Executive Chairman
3. Will Adderley
Chief Executive
Geoff Cooper, aged 54, 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.
2. Marion Sears
Senior Independent Non-Executive Director
Marion Sears, aged 45, 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 is a
member of PricewaterhouseCoopers Advisory Panel.
Will Adderley, aged 36, 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.
4. David Stead
Finance Director
David Stead, aged 50, 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..
5. Simon Emeny
Independent Non-Executive Director
Simon Emeny, aged 42, 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.
Dunelm Group plc Annual report & accounts 2008
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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.
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.
Throughout the financial year the Group has complied with
the Combined Code except that Geoff Cooper, Company
Chairman, is also Chairman of the Audit Committee. 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.
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 during the year except that Bill
Adderley was absent from two Board meetings prior to his
retirement and Simon Emeny was absent from one meeting.
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 Marion Sears and
Simon Emeny. David Stead is an Executive Director.
The Senior Independent Director is Marion Sears.
www.dunelm-mill.com
Directors are required to retire from the Board by rotation and
offer themselves for re-election at least every three years.
Board committees
The Audit Committee is chaired by Geoff Cooper, the other
members are Marion Sears and Simon Emeny. 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 with full attendance.
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.
>
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During the year the committee:
>
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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; and
reviewed the business continuity plans in place.
>
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>
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.
Governance
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.
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.
Risk management and internal control
Throughout the year and up to the date of approval of this
Annual Report there has been in place an established,
ongoing process for identifying, evaluating and managing
the significant risks faced by the Group which has been
regularly reviewed by the Audit Committee and the Board
and is in accordance with the Turnbull Guidance on Internal
Control for Directors on the Combined Code (revised
October 2005).
A register of strategic and operational risks is maintained
and reviewed quarterly by the Board, who also monitor the
status of agreed actions to mitigate key risks.
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.
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.
Investor relations
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.
All Directors will be available at the AGM to meet with
shareholders and answer their questions.
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The Remuneration Committee is chaired by Marion Sears,
the other members are Geoff Cooper and Simon Emeny.
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.
>
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During the year the committee met twice with full
attendance 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 14.
The Nominations Committee is chaired by Marion Sears,
the other members are Geoff Cooper and Simon Emeny.
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 with full
attendance.
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.
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.
Dunelm Group plc Annual report & accounts 2008
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Remuneration report
The Directors present their Remuneration Report for the
period ended 28 June 2008.
Two of these main elements are performance based, which
means that there is significant emphasis in the Group’s
executive remuneration policy on its performance.
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 24.
Non-audited information
Remuneration committee and advisers
During the year ended 28 June 2008, the Remuneration
Committee was made up of three members, Marion Sears,
Simon Emeny and Geoff Cooper. Marion Sears, who is the
Senior Independent Non-Executive Director, chairs the
committee and also acts as Secretary. 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.
Changes in policy during the year
There have been no changes to remuneration policy during
the year.
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:
>
>
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base annual salary including benefits;
annual bonus; and
Long-Term Incentive Plan.
The Remuneration Committee oversees two performance-
based plans: an annual bonus plan and a Long-Term
Incentive Plan (LTIP). 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.
Base salary 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 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 28 June 2008, EPS performance exceeded
budget and, taking into account Executive Directors’
performance against job objectives, the committee
awarded an annual bonus to Will Adderley of £118,950
and to David Stead of £79,950.
www.dunelm-mill.com
Governance
Long-Term Incentive Plan
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 of ordinary shares worth 120% of base salary
were made to Will Adderley and David Stead in March and
September 2007. These will vest to the extent that the
performance targets are met based on the Group’s results
for the years ending 30 June 2009 and 2010 respectively.
The Remuneration Committee has chosen growth in fully
diluted EPS as the performance target for the awards under
the LTIP. The committee believes that this measure is closely
aligned to the drivers of growth of the business, and that in
the long term, EPS performance will be reflected in
shareholder value. The committee will meet after the 3 year
plan period results are available to determine whether
performance conditions have been satisfied. In respect
of awards made to date, no ordinary shares 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.
As explained at IPO, the Remuneration Committee reviews
the LTIP targets annually. In the light of current economic
conditions, the Committee has chosen to amend the EPS
targets used in the 2008 LTIP which will vest in 2011. This is
because the UK retail market in which the Group is operating
has changed significantly and the Committee believes
that a corresponding change in LTIP hurdles is therefore
also appropriate.
The target set for maximum vesting of shares under the
2006 and 2007 LTIPs requires EPS growth of RPI + 20%
annually. The Committee believes this is one of the most
demanding targets in the UK market and will scale this back
to RPI + 12% for the 2008 LTIP. Nevertheless, it remains the
Committee’s intention that targets should remain
demanding when compared with competitors.
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 exercised the remaining 200,000 options in
March 2008. The Remuneration Committee does not intend
to make any further option grants to Executive Directors
under these schemes.
The Group operates 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 below.
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.
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
Marion Sears
Simon Emeny
Date of
contract
Unexpired
term
Notice
period
n/a 12 months
28.09.06
n/a 11 months
15.09.03
08.10.04 25 months 3 months
1 month
22.07.04 22 months
1 month
25.06.07 23 months
Dunelm Group plc Annual report & accounts 2008
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Remuneration report continued
Retirement plans
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 the 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 comparison 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.
Total shareholders (nos.) return
160
140
120
100
80
60
40
20
0
18.10.06
18.12.06
18.02.07
18.04.07
18.06.07
18.08.07
18.10.07
18.12.07
18.02.08
18.04.08
18.06.08
Dunelm
FTSE All Share General Retail Index
FTSE Small Cap Index
The shares traded in the range 127.25p to 215p during the year, and stood at 127.25p at 28 June 2008.
www.dunelm-mill.com
Governance
Audited information
Details of Directors’ remuneration
Details of individual Directors’ remuneration in respect of the year ended 28 June 2008 are as follows:
Executive Directors
Will Adderley
David Stead
Non-Executive Directors
Bill Adderley
Geoff Cooper
Marion Sears
Simon Emeny
Total
Base salary
or fees
£’000
Vehicle
allowance
£’000
Taxable
benefits
£’000
Contribution
to personal
pension
£’000
305
205
3
80
30
25
648
10
10
–
–
–
–
20
1
waived
waived
18
–
–
–
–
1
–
–
–
–
18
Annual
Bonus
£’000
119
80
–
–
–
–
199
2008
Total
£’000
435
313
3
80
30
25
886
2007
Total
£’000
388
304
3
75
25
–
795
Bill Adderley’s remuneration has been 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.
Directors’ interests in share options
The Directors’ beneficial interests in options granted under the Long-Term Incentive Plan, all of which will vest only if EPS
performance conditions are met, are as follows:
Director
Will Adderley
David Stead
Share options
Date of
award at 28 June 2008
End of
performance
period
Market Price
of Shares at
date of award
March 2007
Sept 2007
March 2007
Sept 2007
151,304
190,130
99,130
127,792
June 2009
June 2010
June 2009
June 2010
227p
193p
227p
193p
The Directors’ beneficial interests in options granted under other schemes are as follows:
Director
Will Adderley
David Stead
Type of
option
SAYE
Shares
under
option
Shares
under
option
at 1 July at 28 June
2008
2007
Granted
during
period
Exercised
during
period
Lapsed
during
period
Market
price
of shares
price per at date of
exercise
Exercise
share
Vesting
date
Expiry
date
–
6,114
6,114
–
Executive 200,000
6,176
SAYE
–
6,176
– 200,000
–
–
–
–
–
157p
46p
153p
– Jan 2011 June 2011
156p
–
–
– Jan 2010 June 2010
The gain made on exercise of options during the year by David Stead was £220,500.
Approval
This report was approved by the Board of Directors on 11 September 2008 and signed on its behalf by:
Marion Sears
Chairman of Remuneration Committee
11 September 2008
Dunelm Group plc Annual report & accounts 2008
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Directors’ report and business review
The Directors present their report together with the audited
financial statements for the year ended 28 June 2008.
Together with certain information in the reports from the
Chief Executive and the Finance Director on pages 4 to 9
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 activity
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 4
to 5 and the Finance Director’s Review on pages 6 to 9.
Shareholder and voting rights
All members who hold ordinary shares are entitled to attend
and vote at the Annual General Meeting. On a show of
hands at a general meeting every member present in
person shall have one vote and on a poll, every member
present in person or by proxy shall have one vote for every
ordinary share held.
On 2 October 2006, Jean Adderley , Bill Adderley and Will
Adderley (all shareholders) entered into a Relationship
Agreement with the Company, pursuant to which each of
Jean Adderley, Bill Adderley and Will Adderley undertook to
the Company that, for so long as, individually or together,
they are entitled to exercise, or to control the exercise of, 30
per cent or more of the rights to vote at general meetings of
the Company or they are able to control the appointment of
Directors who are able to exercise a majority of votes at
Board meetings of the Company, they will:
(a) conduct all transactions and relationships with any
member of the Group on arm’s length terms and on a
normal commercial basis;
(b) not take any action which precludes or inhibits any
member of the Group from carrying on its business
independently of Jean and Bill Adderley and their
associates (as defined in the Listing Rules);
(c) not exercise any of their voting or other rights and powers
to procure any amendment to the Articles of Association
of the Company which would be inconsistent
with or undermine any of the provisions of the
Relationship Agreement;
(d) abstain from voting on any resolution to which LR
11.1.7R(4) of the Listing Rules applies involving Jean
Adderley, Bill Adderley or Will Adderley or any of their
associates as the related party;
(e) not carry on (other than through their holding of
securities of the Company) or have any financial interest
(other than any financial interest in securities which are
held for investment purposes only) in any person who
carries on a business as a homewares retailer, to the
extent that it would be inconsistent with or undermine
any of the provisions of the Relationship Agreement; and
(f) only enter into, amend or terminate any transaction,
agreement or relationship between themselves
or any of their associates and any member of the
Group with the approval of a majority of the
independent Non-Executive Directors.
There are no restrictions on the transfer of ordinary shares in
the Company other than certain restrictions imposed by
laws and regulations (such as insider trading and marketing
requirements relating to close periods) and requirements of
the Listing Rules whereby Directors and certain employees
of the Company require Board approval to deal in the
Company’s securities.
Change of control
The Company is not party to any significant agreements
which take effect, alter or terminate solely upon a change of
control of the Company following a takeover bid.
There are no agreements between the Company and its
Directors or employees providing for additional
compensation for loss of office or employment (whether
through resignation, redundancy or otherwise) that occurs
because of a takeover bid.
Results and dividends
The consolidated profit for the year after taxation was £33.7m
(2007: £24.6m). The results are discussed in greater detail in
the Finance Director’s review on pages 6 to 9.
A final dividend of 3.5p per share (2007: 3.0p) is proposed in
respect of the year ended 28 June 2008 to add to an interim
dividend of 2.0p per share paid on 23 April 2008 (2007: 0.8p
per share reflecting post flotation period only). The final
dividend will be paid on 5 December 2008 to shareholders
on the register at 21 November 2008.
Directors
Details of the Directors in office at the year end are set out on
page 11. Bill Adderley resigned from the Board with effect
from 29 February 2008.
www.dunelm-mill.com
Governance
Directors serving at the year end and their interests in the
shares of the Company were:
WL Adderley
D Stead
G Cooper
M Sears
S Emeny
At 28 June
2008
1p ordinary
shares
At 30 June
2007
1p Ordinary
shares
50,000,000 50,000,000
230,085
181,611
100,000
5,000
430,085
181,611
100,000
5,000
There were no changes in the Directors’ shareholdings
between the year end and 11 September 2008.
Details of share options held by Directors at the year end are
given in the Remuneration Report.
Will Adderley and Marion Sears are retiring by rotation at the
2008 Annual General Meeting and will be offering
themselves for re- election. Biographical details of these
Directors are set out on page 11 and details of their service
contracts are in the Remuneration Report on page 15.
Share capital and treasury shares
The Company has only one class of shares, ordinary shares
of 1p each.
The issued share capital of the Company has increased
during the period due to the exercise of share options by
employees. Details are set out in the Remuneration Report
on page 15 and in notes 18 and 20 to the financial
statements.
During the period the Company purchased 1,195,000
ordinary shares and held them in treasury. 243,500 shares
were transferred to Directors and employees on the exercise
of share options. The remaining shares are held by the
Company for the purpose of delivery to employees under
employee share schemes. At 28 June 2008 the Company
held 951,500 shares in treasury.
Substantial shareholders
At 11 September 2008 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
Ordinary
shares
Percentage
of share
capital
83,670,000
50,000,000
41.7
24.9
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 28 June 2008
was 27 days (2007: 26 days).
Corporate social responsibility
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 at each Board
meeting 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.
Dunelm Group plc Annual report & accounts 2008
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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, comprising
a number of senior managers, which reviews the
environmental impact of business activities and sets targets
for improvement. These cover the following specific areas:
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increasing the proportion of waste which is recycled;
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reducing the plastic element of product packaging;
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reducing fuel consumption per carton delivered to stores;
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reducing the volume of carrier bags used; and
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reducing energy consumption across all locations.
During the year good progress was made in all of the above
areas, ahead of our internal target of a 10% improvement on
all measures.
The Group’s charity of the year in the last financial year was
Kids Kidney Research. 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 28 June 2008 was £46,000 (2007:
£32,000). 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.
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.
Disclaimer
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
www.dunelm-mill.com
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 Thursday
6 November 2008 at 10.30 am at The Hilton Hotel, Leicester.
Special business at the Annual General Meeting will be:
>
requesting authority, pursuant to article 6 of the
Company’s Articles of Association, 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. The nominal amount of
shares covered by this authority is £665,466 (66,546,686
ordinary shares), 33.3% of the issued share capital at
11 September 2008. At that date the Company also
held 951,000 ordinary shares in treasury, which
represents approximately 0.48% of the total ordinary
share capital. This authority will lapse at the 2009 Annual
General Meeting or, if earlier, on 29 December 2009.
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
(excluding treasury shares) at 11 September 2008, without
offering them to existing shareholders. This authority will
lapse at the 2009 Annual General Meeting or, if earlier, on
29 December 2009. The Directors do not intend to issue
more than 7.5% of the issued share capital of the
Company for cash on a non pre-emptive basis in any
rolling three year period without prior consultation with the
Investment Committees of the Association of British
Insurers and the National Association of Pension Funds;
requesting that the Directors be authorised to buy up to
19,000,000 shares, approximately 10% of issued ordinary
share capital (excluding treasury shares) in the Company,
less the number of shares held in treasury at the date of
this report. 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; and
adopting new Articles of Association. Details of the
proposals are set out below.
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Proposed changes to the Articles of Association
The proposed new articles (New Articles) update the
Company’s current Articles of Association (Current
Governance
Articles) primarily to take account of changes in English
Company law brought about by certain provisions of the
Companies Act 2006 (CA 2006) that are in force by or on
1 October 2008.
The principal changes introduced in the New Articles are set
out below. Other changes, which are of a minor, technical
or clarifying nature have not been noted.
Articles which duplicate statutory provisions
Provisions in the Current Articles which replicate provisions
contained in the CA 2006 are in the main amended to bring
them into line with the CA 2006.
Extraordinary resolutions
The Current Articles contain a provision that, where for any
purpose an ordinary resolution is required, a special or
extraordinary resolution is also effective and that, where an
extraordinary resolution is required, a special resolution is also
effective. This provision is being amended as the concept of
extraordinary resolutions has not been retained under the
CA 2006.
Convening and notice of general meetings
It is proposed that the provisions in the Current Articles
dealing with the convening of general meetings and the
length of notice required to convene general meetings be
amended to conform to the new provisions in the CA 2006.
In particular, a general meeting (other than an Annual
General Meeting) to consider a special resolution can be
convened on 14 days’ notice whereas previously 21 days’
notice was required.
Quorum at a general meeting
The CA 2006 provides that in general terms the quorum for a
general meeting be calculated by reference to the numbers
of ‘qualifying persons’ who are present at the meeting,
which includes an individual who is a member of the
Company, a person authorised under section 323 of the CA
2006 to act as the representative of a corporation, and a
person appointed as proxy of a member. As before, it is
proposed that the quorum for a general meeting will be two
but, in line with the CA 2006, the New Articles make clear
that there will be no double counting for qualifying persons
who are representatives of the same corporation or proxies
of the same member.
Proxies
Under the CA 2006, proxies are entitled to speak at general
meetings and to vote on a show of hands. The CA 2006
allows multiple proxies to be appointed provided that each
proxy is appointed to exercise the rights attached to a
different share or shares held by the shareholder. The New
Articles reflect these new rules.
Vacation of office of Director
The New Articles tighten up the circumstances in which a
Director must vacate office where the Director has become
physically or mentally ill. The changes apply a test of whether
in the opinion of a medical practitioner the Director is
rendered incapable by his illness of acting as a Director for
more than three months or is personally prevented from
exercising any powers or rights by a court order.
Directors’ interests
The CA 2006 sets out Directors’ general duties. The provisions
largely codify the pre-existing law, but with some changes.
Under the CA 2006, a Director must avoid a situation where
he has, or can have, a direct or indirect interest that conflicts,
or possibly may conflict with the Company’s interests. The
requirement is very broad and could apply, for example, if a
Director becomes a Director of another Company or a
trustee of another organisation. The CA 2006 allows Directors
of public Companies to authorise conflicts and potential
conflicts where the Articles of Association contain a provision
to this effect. The CA 2006 also allows the Articles of
Association to contain other provisions for dealing with
Directors’ conflicts of interest to avoid a breach of duty. The
New Articles give the Directors authority to approve such
situations and to include other provisions to allow conflicts of
interest to be dealt with in a similar way to the current
position.
The CA 2006 and the New Articles contain safeguards which
will apply when Directors decide whether to authorise a
conflict or potential conflict. These include, first, only
independent Directors (i.e. those who have no interest in the
matter being considered) will be able to take the relevant
decision, and second, in taking the decision the Directors
must act in a way they consider, in good faith, will be most
likely to promote the Company’s success. The Directors will
be able to impose limits or conditions when giving
authorisation or subsequently if they think this is appropriate.
The New Articles include provisions relating to confidential
information, attendance at Board meetings and availability
of Board papers to protect a Director from being in breach of
duty if a conflict of interest or potential conflict of interest
arises. These provisions will only apply where the position
giving rise to the potential conflict has previously been
authorised by the Directors.
One of the Company’s Directors, Will Adderley, is also a
major shareholder of the Company and connected to other
major shareholders. Subject to approval of the New Articles
by shareholders, the independent Directors intend to
authorise this conflict provided that Will Adderley continues
to abide by the Relationship Agreement between himself,
other major shareholders and the Company which was
entered into on flotation of the Company.
Dunelm Group plc Annual report & accounts 2008
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taken to clarify that, subject to the applicable legislation, the
Company may grant indemnities to Directors of associated
companies.
Copies of the New Articles and the Relationship Agreement
will be available for inspection:
>
during normal business hours at the Company’s
registered office and at the offices of Allen & Overy LLP,
One Bishops Square, London, E1 6AD, from the date of
this circular until the close of the AGM; and
at the AGM for at least 15 minutes before and during
the meeting.
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The Notice of the Annual General Meeting is set out on
pages 56 to 58.
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
11 September 2008
It is the Board’s intention to report annually on the
Company’s procedures for ensuring that the Board’s powers
of authorisation of conflicts are operated effectively and that
the procedures have been followed.
Electronic and web communications
A resolution was passed at the Company’s AGM in 2007
enabling the Company to take advantage of provisions in
the CA 2006 to communicate with members by electronic
and/or website communications. The relevant provisions are
incorporated into the New Articles. So far the Company has
not implemented this. If it decides to do so, each member
must be asked individually to agree that the Company may
send or supply documents or information to him by means
of a website, and the Company must either have received a
positive response or have received no response within the
period of 28 days beginning with the date on which the
request was sent. The Company will notify the member
(either in writing, or by other permitted means) when a
relevant document or information is placed on a website
and a member can always request a hard copy version of
the document or information.
Directors’ indemnities
The CA 2006 has widened the powers of a company to
indemnify Directors. A company can now indemnify a
Director of a company that is a trustee of an occupational
pension scheme against liability incurred in connection with
the Company’s activities as trustee of that scheme. This is
reflected in the New Articles. The opportunity is also being
www.dunelm-mill.com
Governance
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 also in accordance with IFRSs as adopted by
the EU.
The Group and Parent Company 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 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;
state whether they have been prepared in accordance
with IFRSs as adopted by the EU; and
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
and the Parent Company will continue in business.
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The Directors confirm that to the best of their knowledge:
>
the financial statements, prepared in accordance with
the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
the report of the Directors includes a fair review of the
development and performance of the business and the
position of the Company and the undertakings included
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.
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Dunelm Group plc Annual report & accounts 2008
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Independent Auditors’ report to the
members of Dunelm Group plc
We have audited the Group and Parent Company financial
statements (‘financial statements’) of Dunelm Group plc for
the 52 week period ended 28 June 2008 which comprise
a Consolidated Income Statement, the Consolidated and
Parent Company Balance Sheets, the Consolidated and
Parent Company Cash Flow, the Consolidated and Parent
Company 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,
Directors Remuneration Report and the Group and Parent
Company financial statements in accordance with
applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union (EU),
are set out in the Statement of Directors’ Responsibilities on
page 23.
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 2006 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.
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Financial statements
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Opinion
In our opinion:
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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 28 June 2008 and of its profit for
the year then ended;
the Parent Company financial statements give a true and
fair view, in accordance with IFRSs as adopted by the EU as
applied in accordance with the provisions of the
Companies Act 1985, of the state of the Parent Company’s
affairs as at 28 June 2008;
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; and
the information given in the Directors’ Report is consistent
with the financial statements.
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KPMG Audit Plc
Chartered Accountants
Registered Auditor
Leicester LE1 6LP
11 September 2008
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Consolidated income statement
For the 52 weeks ended 28 June 2008
Revenue
Cost of sales
Gross profit
Operating costs
Operating profit
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
2008
£’000
2007
£’000
391,795
354,721
(217,018)
(198,537)
174,777
156,184
(125,346)
(115,369)
49,431
40,815
1,075
(1,365)
503
(3,492)
49,141
37,826
3
2
5
5
6
(15,470)
(13,198)
33,671
24,628
8
8
7
7
16.8p
16.6p
3.5p
2.0p
12.3p
12.2p
3.0p
25.8p
www.dunelm-mill.com
Consolidated balance sheet
As at 28 June 2008
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
Total current assets
Total assets
Current liabilities
Trade and other payables
Liability for current tax
Interest-bearing loans and borrowings
Total current liabilities
Non-current liabilities
Deferred tax liability
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
Financial statements
Note
9
10
11
12
13
14
15
16
11
16
18
28 June
2008
£’000
2,097
77,157
–
79,254
60,710
11,636
2,853
75,199
30 June
2007
£’000
3,668
67,064
3,276
74,008
60,657
8,996
17,368
87,021
154,453
161,029
(54,570)
(3,840)
(20)
(58,430)
(51,464)
(6,310)
(21)
(57,795)
(634)
(10,000)
(10,634)
–
(40,000)
(40,000)
(69,064)
(97,795)
85,389
63,234
2,008
345
83,036
2,006
267
60,961
85,389
63,234
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The financial statements on pages 26 to 45 were approved by the Board of Directors on 11 September 2008 and were signed
on its behalf by:
Will Adderley
Chief Executive
Dunelm Group plc Annual report & accounts 2008
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Consolidated cash flow statement
For the 52 weeks ended 28 June 2008
Profit before tax
Adjusted for:
Net financing costs
Operating profit
Depreciation and amortisation
(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
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
Purchase of treasury shares
Proceeds from issue of treasury shares
Net funds raised from bank loan
Repayment of 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
Note
2008
£’000
2007
£’000
49,141
37,826
290
49,431
9,457
(278)
2,989
40,815
9,529
(1,130)
58,610
49,214
(53)
(2,640)
3,460
767
–
286
(49)
(4,312)
1,028
4,480
1,196
(58)
234
(1,286)
59,614
49,300
(1,642)
1,075
(14,093)
44,954
303
(17,466)
(538)
(17,701)
80
(1,900)
112
–
(30,000)
–
(10,020)
(1,536)
451
(13,468)
34,747
7,200
(14,130)
(996)
(7,926)
273
–
–
40,000
–
(150)
(51,605)
(41,728)
(11,482)
(14,475)
15,339
(39)
17,347
(956)
2,964
Cash and cash equivalents at the end of the period
14, 21
2,833
17,347
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Consolidated statement of changes in equity
For the 52 weeks ended 28 June 2008
Financial statements
As at 2 July 2006
Profit for the financial year
Issue of share capital
Share based payments
Deferred tax on share based payments
Current corporation tax on share options exercised
Dividends
As at 30 June 2007
As at 1 July 2007
Profit for the financial year
Issue of share capital
Purchase of treasury shares
Treasury shares reissued in respect of share option schemes
Share based payments
Deferred tax on share based payments
Current corporation tax on share options exercised
Dividends
Issued
share
capital
£’000
2,000
–
6
–
–
–
–
2,006
Issued
share
capital
£’000
2,006
–
2
–
–
–
–
–
–
Share
premium
£’000
–
–
267
–
–
–
–
267
Share
premium
£’000
267
–
78
–
–
–
–
–
–
Retained
earnings
£’000
87,066
24,628
–
234
327
311
(51,605)
Total
equity
£’000
89,066
24,628
273
234
327
311
(51,605)
60,961
63,234
Retained
earnings
£’000
60,961
33,671
–
(1,900)
112
286
(230)
156
(10,020)
Total
equity
£’000
63,234
33,671
80
(1,900)
112
286
(230)
156
(10,020)
As at 28 June 2008
2,008
345
83,036
85,389
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Dunelm Group plc Annual report & accounts 2008
Job:
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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 prepared it’s Parent Company
statements under IFRS and these are presented on pages 46 to 55.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in
these Group financial statements.
The annual financial statements are prepared under the historical cost convention. 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 key estimates and judgements used in the financial statements are as follows:
Inventory Provisions
The Group provides against the carrying value of inventories held, based upon average losses incurred to clear old and
discounted lines.
Dilapidations
The Group provides for the full estimated costs of any dilapidations on stores with a lease renewal date falling due within
three years of the balance sheet date.
Taxation
There are transactions whose ultimate tax treatment is uncertain. The Group makes provision for anticipated tax issues based
on the likelihood of whether additional taxes may arise. The Group recognises deferred tax assets and liabilities based on
estimates of future taxable income and recoverability. If these estimates do not materialise or change, or there are changes
in tax rates or to the period over which losses might be recognised, then the value of the deferred tax assets or liability will
need to be revised in a future period.
.
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
www.dunelm-mill.com
Financial statements
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.
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.
Property, plant 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.
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 costs incurred in bringing the inventories to their present location and condition. 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.
Bank Borrowings and borrowing costs
Interest–bearing bank loans and overdrafts are recorded at the proceeds received.
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.
Dunelm Group plc Annual report & accounts 2008
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Accounting policies continued
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.
Share capital
Where the Company purchases its own equity share capital (treasury shares) the consideration paid, including any directly
attributable incremental costs is deducted from equity attributable to the Company’s equity holders until the shares are
cancelled or reissued. Where such shares are subsequently sold or reissued, any consideration received net of any directly
attributable incremental transactions costs and the related income tax effects, is included in equity attributable to the
Company’s equity holders.
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 realised 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
Property leases
Lease incentives received are realised in the income statement evenly over the full term of the lease.
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.
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.
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Financial statements
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.
Taxation
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 recognised. Deferred tax assets are reduced to the extent that it is no longer probable that the
related tax benefit will be recognised.
New accounting standards
The Group has adopted the disclosure requirements of IFRS 7 Financial instruments: disclosures and the related amendment
to IAS 1 Presentation of Financial Statements: Capital Disclosures in the current year. Full comparative figures are presented.
The adoption of these standards has not led to any changes in the Group’s accounting policies.
Adopted IFRS 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 8 Operating Segments is effective for the Group’s financial statements from the year ending June 2010 and requires a
management approach to segmental information presentation. The adoption is not expected to have any impact on the
Balance Sheet or Income Statement as the standard is concerned only with disclosures.
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Dunelm Group plc Annual report & accounts 2008
Job:
11165_DUN_AR08_bck_AW
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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
(Profit) on disposal of property, plant and equipment
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
3 Operating costs
Selling and Distribution
Administrative
(Profit) on disposal of property, plant and equipment
4 Employee numbers and costs
The average number of people employed by the Group (including Directors) was:
2008
£’000
2007
£’000
217,018
5,867
198,537
2,228
2,134
1,742
7,323
–
7,543
243
19,140
937
16,785
1,061
(278)
(1,130)
2008
£’000
15
67
29
9
–
34
2007
£’000
17
58
15
16
416
18
2008
£’000
108,051
17,573
(278)
2007
£’000
98,944
17,555
(1,130)
125,346
115,369
2008
Number
of heads
2008
Full time
equivalents
2007
Number
of heads
2007
Full time
equivalents
4,875
217
144
5,236
3,254
210
142
3,606
4,637
207
127
4,971
3,069
198
125
3,392
Selling
Distribution
Administration
www.dunelm-mill.com
Financial statements
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 20)
Defined contribution pension costs
2008
£’000
47,775
3,187
286
172
51,420
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 14 to 17.
5 Financial income and expense
Finance income
Interest on bank deposits
Finance expenses
Interest on bank borrowings and overdraft
Foreign exchange losses
Net finance expense
6 Taxation
Current taxation
UK corporation tax charge for the period
Adjustments in respect of prior periods
Deferred taxation
Origination of temporary 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 29.5% (2007: 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
The taxation charge for the period as a percentage of profit before tax is 31.5%.
Dunelm Group plc Annual report & accounts 2008
2008
£’000
1,075
(1,278)
(87)
(1,365)
(290)
2008
£’000
12,045
(255)
11,790
3,293
554
(167)
3,680
15,470
2008
£’000
49,141
14,496
128
918
(128)
299
(76)
(167)
2007
£’000
503
(2,113)
(1,379)
(3,492)
(2,989)
2007
£’000
12,957
918
13,875
26
(914)
211
(677)
13,198
2007
£’000
37,826
11,348
953
845
(184)
4
21
211
15,470
13,198
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Notes to the annual financial statements continued
7 Dividends
All dividends relate to the 1p ordinary shares.
Interim for the period ended 30 June 2007 – paid 25.0p
Interim for the period ended 30 June 2007 – paid 0.8p
Final for the period ended 30 June 2007 – paid 3.0p
Interim for the period ended 28 June 2008 – paid 2.0p
2008
£’000
2007
£’000
–
–
(6,024)
(3,996)
(10,020)
(50,000)
(1,605)
–
–
(51,605)
The Directors are proposing a final dividend of 3.5p per ordinary share for the period ended 28 June 2008 which equates
to £7.0m. The dividend will be paid on 5 December 2008 to shareholders on the register at the close of business on
21 November 2008.
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
28 June
2008
’000
200,446
2,180
202,626
52 weeks
ended
30 June
2007
‘000
200,363
2,324
202,687
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
The interest rate risk profile of the Company’s financial assets and liabilities is set out in note 16 of the Group financial statements.
www.dunelm-mill.com
52 weeks
ended
28 June
2008
£‘000
33,671
–
52 weeks
ended
30 June
2007
£‘000
24,628
3,109
33,671
27,737
16.8p
16.8p
16.6p
16.6p
12.3p
13.8p
12.2p
13.7p
Financial statements
Software
development
and licences
£’000
4,176
996
749
5,921
538
(208)
362
6,613
511
1,742
2,253
2,134
(208)
337
4,516
2,097
3,668
3,665
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9 Intangible assets
Cost
At 2 July 2006
Additions
Transfers from property, plant and equipment
At 30 June 2007
Additions
Disposals
Transfers from property, plant and equipment
At 28 June 2008
Amortisation
At 2 July 2006
Charge for the financial period
At 30 June 2007
Charge for the financial period
Disposals
Transfers from property, plant and equipment
At 28 June 2008
Net book value
At 28 June 2008
At 30 June 2007
At 2 July 2006
All additions were acquired and do not include any internal development costs.
Transfers relate to assets which were classified initially as fixtures and fittings.
Dunelm Group plc Annual report & accounts 2008
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10 Property, plant and equipment
Land and
buildings
£’000
Leasehold
improvements
£’000
Plant and
machinery
£’000
Motor
vehicles
£’000
Fixtures
and fittings
£’000
Cost
At 2 July 2006
Additions
Transfers to intangible assets
Disposals
At 30 June 2007
Additions
Transfers to intangible assets
Disposals
At 28 June 2008
Depreciation
At 2 July 2006
Charge for financial period
On disposals
At 30 June 2007
Charge for financial period
Transfers to intangible assets
On disposals
At 28 June 2008
Net book value
At 28 June 2008
At 30 June 2007
At 2 July 2006
29,421
7,082
–
–
36,503
5,410
5
(149)
41,769
1,170
483
19
1,672
552
–
(170)
2,054
28,188
4,846
11
(10)
33,035
7,601
(5)
(385)
52
35
–
–
87
15
–
–
40,246
102
4,804
2,307
(10)
7,101
3,125
–
(355)
9,871
13
16
–
29
23
–
–
52
50
58
39
39,715
34,831
28,251
30,375
25,934
23,384
Total
£’000
82,712
14,130
(749)
(187)
95,906
17,466
(362)
(1,702)
24,770
2,167
(760)
(17)
26,160
4,440
(362)
(1,146)
29,092
111,308
14,954
4,980
(15)
19,919
3,623
(337)
(1,130)
21,222
7,786
(166)
28,842
7,323
(337)
(1,677)
22,075
34,151
7,017
6,241
9,816
77,157
67,064
61,490
281
–
–
(160)
121
–
–
(22)
99
281
–
(160)
121
–
–
(22)
99
–
–
–
11 Deferred tax
Deferred tax is provided in full on temporary differences under the liability method using a taxation rate of 28% (2007: 28%).
Deferred taxation assets and liabilities are attributable to the following:
Property, plant and equipment
Other temporary differences
Share based payments
Assets
liabilities
net
2008
£’000
–
–
182
182
2007
£’000
–
3,441
382
3,823
2008
£’000
(813)
(3)
–
(816)
2007
£’000
(547)
–
–
(547)
2008
£’000
(813)
(3)
182
(634)
2007
£’000
(547)
3,441
382
3,276
www.dunelm-mill.com
Financial statements
Balance at
2 July 2006
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
Balance at
30 June 2007
£’000
(543)
–
2,577
238
2,272
(4)
55
59
567
677
–
327
–
–
327
(547)
382
2,636
805
3,276
Balance at
1 July 2007
£’000
(547)
382
2,636
805
3,276
Recognised
in income
£’000
(266)
30
(2,636)
(808)
(3,680)
Recognised
in equity
£’000
Balance at
28 June 2008
£’000
–
(230)
–
–
(230)
(813)
182
–
(3)
(634)
2008
£’000
2007
£’000
60,710
60,657
2008
£’000
144
1,813
9,679
11,636
2007
£’000
169
2,232
6,595
8,996
The movement in the net deferred tax balance is as follows:
Property, plant and equipment
Employee benefits
Lease incentives
Short term temporary differences
Property, plant and equipment
Employee benefits
Lease incentives
Short term temporary differences
12 Inventories
Goods for resale
13 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
All amounts fall due within one year. All trade receivables are current. No interest is charged on trade receivables, whilst these
remain current.
14 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
15 Trade and other payables
Trade payables
Accruals and deferred income
Other taxation and social security
Other creditors
Dunelm Group plc Annual report & accounts 2008
2008
£’000
2007
£’000
2,833
17,347
2,853
(20)
2,833
17,368
(21)
17,347
2008
£’000
22,894
26,429
4,351
896
54,570
2007
£’000
22,354
22,510
6,468
132
51,464
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Notes to the annual financial statements continued
16 Interest bearing loans and borrowings
Bank overdraft
Bank loan
2008
£’000
20
10,000
10,020
2007
£’000
21
40,000
40,021
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
2011. The facility is sub-divided into two elements: a £40m facility and a £10m facility. £10m of the £40m facility was drawn
down as at 28 June 2008 whilst the £10m facility was not utilised at that date.
Interest is payable on funds utilised under the £40m facility at the rate of LIBOR plus 0.35% and on funds utilised under the
£10m facility at a rate of LIBOR plus 0.45%. LIBOR is fixed for a given loan at the date of draw down.
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:
2008
total
£’000
2008
floating rate
£’000
Revolving bank loan 10,000
20
Overdraft
10,020
–
20
20
All liabilities are denominated in sterling.
2008
fixed rate
£’000
10,000
–
10,000
Effective
interest
rate %
6.31
6.00
6.31
2007
total
£’000
40,000
21
40,021
2007
floating rate
£’000
–
21
21
2007
fixed rate
£’000
40,000
–
40,000
Effective
interest rate
%
5.86
6.04
5.86
The floating rate on the overdraft is linked to Barclays Bank 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
Financial assets at 28 June consisted of £2,853,000 (2007: £17,368,000) cash at bank; interest earned is at normal
commercial rates.
17 Financial risk management
The Board of Directors has overall responsibility for the oversight of the Group’s risk management framework. A formal process
for reviewing and managing risk in the business has been developed. A register of strategic and operational risks is
maintained and reviewed quarterly by the Board, who also monitor the status of agreed actions to mitigate key risks.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the Group’s receivables from customers. The Group only deals with
creditworthy counterparties, and uses publicly available financial information to rate its customers.
As the principal business of the Group is retail related, trade receivables consist of a relatively small number of customers,
which tend to be charity or local authority based. The carrying amount of financial assets recorded in the financial
statements represents the Group’s maximum exposure to credit risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach
to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and extreme circumstances. The Group manages this risk by continuously monitoring cashflow
forecasts. The Group’s available facilities can be found in note 16.
www.dunelm-mill.com
Financial statements
Group policy is that surplus funds are placed on deposit with counterparties approved by the Board, with a minimum of AAA
credit rating.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the
Group’s income.
Interest rate risk
The Group’s bank borrowings incur variable interest rate charges linked to LIBOR and Barclays Bank Base Rate. The Directors
do not consider that future changes in interest rates are likely to cause a material direct impact on profitability. The Group’s
exposure to interest rates on financial assets and liabilities are detailed in note 16.
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 28 June 2008. The outstanding US dollar liabilities at the year end were $870,000
(2007: $231,000).
The Group manages its exposure to exchange rate fluctuations by purchasing US dollars on the ‘spot’ market at levels
required to meet medium term purchases. As at 28 June 2008 the Group held US dollar balances of $7.0m (2007: $22.1m), in
order to protect itself against short term fluctuations in the US dollar rate. This was expected to cover purchases in US dollars
for approximately two months.
In the event of a significant adverse movement in the US dollar exchange rate, the Group would seek to minimise the impact
on profitability by changing the selling price of goods.
Fair values
The fair value of the Group’s financial assets and liabilities is not materially different from their carrying value.
Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business.
From time to time the Group purchases its own shares on the market; the timing of these purchases depends on market
prices. Primarily the shares are intended to be used for issuing shares under the Group’s share option programme. Buy and
sell decisions are made on a specific transaction basis by the Risk Management Committee; the Group does not have a
defined share buy-back plan.
18 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
2007
2008
200,617,400 200,000,000
617,400
174,000
200,791,400
200,617,400
Proceeds received in relation to shares issued during the period were £80,000 (2007: £273,404).
Ordinary shares of 1p each:
Authorised
Allotted, called up and fully paid
2008
number
of shares
2008
£’000
2007
number
of shares
500,000,000
5,000 500,000,000
200,791,400
2,008
200,617,400
2007
£’000
5,000
2,006
The holders of the ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share.
Dunelm Group plc Annual report & accounts 2008
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Notes to the annual financial statements continued
19 Treasury shares
Purchased during year
Reissued during the period in respect of share option schemes
Outstanding at end of year
2008
number
of shares
1,195,000
(243,500)
951,500
2008
£’000
1,900
(378)
1,522
2007
number
of shares
–
–
–
2007
£’000
–
–
–
The Company acquired 1,195,000 of its own shares through purchases on the London Stock Exchange over a period from
27 November 2007 to 20 March 2008. These shares are held by the Company for the purpose of delivery to employees under
employee share schemes. The total amount including fees paid to acquire the shares was £1,905,481. The consideration has
been deducted from retained earnings within shareholders equity.
The Company reissued 243,500 treasury shares for a total consideration of £112,010 on 7 March 2008 and 11 June 2008.
The Company has the right to reissue the remaining treasury shares at a later date.
20 Share based payments
As at 28 June 2008, 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 358,800 exercisable options in total under these schemes as at 28 June 2008.
a) Dunelm Group Share Option Plan
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; all subsequent grants have had an exercise price equal to market price at date of grant. 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
August
2006
grant
7.0p
n/a
62.1p
35%
3 years
8.7%
4.8%
September
2005
grant
December
2004
grant
September
2004
grant
6.3p
n/a
57.0p
35%
3 years
8.7%
4.8%
6.0p
6.2p
n/a
46.0p
35%
3 years
8.7%
4.8%
n/a
46.0p
35%
3 years
8.7%
4.8%
www.dunelm-mill.com
Financial statements
The number and weighted average exercise price of options under the GSOP is as follows:
Outstanding at beginning of year
Granted during year
Forfeited during year
Exercised during year
Outstanding at end of year
Weighted
average
exercise
price
2008
49.8p
–
–
46.0p
52.4p
Number
of shares
under option
2008
1,028,000
–
–
(417,500)
610,500
Weighted
average
exercise
price
2007
46.1p
62.1p
57.0p
44.3p
49.8p
Number
of shares
under option
2007
1,507,700
225,400
(87,700)
(617,400)
1,028,000
b) Dunelm Group savings related share option plan
The Sharesave scheme was established in 2006 and is open to all staff with eligible length of service. One grant was made
under the scheme during the year, in October 2007. Options may be exercised under the scheme on completion of the
three year savings contract and must be exercised within 6 months from that date. 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
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
Forfeiture rate
October
2007
70.0p
212.0p
157.0p
30%
3.5 years
2.5%
4.8%
60%
November
2006
69.0p
202.0p
153.0p
30%
3.5 years
2.5%
4.8%
50%
The forfeiture rate assumption has been increased significantly compared to 2007 due to the fall in the Group’s share price
which has occurred.
The number and weighted average exercise price of options outstanding under the Sharesave at 28 June 2008 is as follows:
Outstanding at beginning of year
Granted during year
Forfeited during year
Outstanding at end of year
Weighted
average
exercise
price
2008
153.0p
157.0p
153.0p
154.0p
Number
of shares
under option
2008
1,045,846
219,979
(264,552)
1,001,273
Weighted
average
exercise
price
2007
–
153.0p
153.0p
153.0p
Number
of shares
under option
2007
–
1,169,448
(123,602)
1,045,846
c) Long–term Incentive Plan
The LTIP was approved by the Board in 2006 enabling the Group to award shares to particular individuals, normally in the
form of nominal cost options. The LTIP is administered by the Remuneration Committee. One grant was made in the year, to
the Executive Directors only, and is exercisable in September 2010 depending on the level of growth in Group EPS relative to
RPI. The maximum life of options under the LTIP is ten years from the date of grant.
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
Dunelm Group plc Annual report & accounts 2008
September
2007
196.0p
0.913
178.9p
March
2007
229.0p
0.913
209.0p
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Notes to the annual financial statements continued
20 Share based payments
The number and weighted average exercise price of options under the LTIP at 28 June 2008 is as follows:
Outstanding at beginning of year
Granted during year
Outstanding at end of year
Weighted
average
exercise
price
2008
–
–
–
Number
of shares
under option
2008
250,434
317,922
568,356
Weighted
average
exercise
price
2007
–
–
–
Number
of shares
under option
2007
–
250,434
250,434
In addition, bonuses earned during the year by a number of senior managers will be paid in the form of nil cost share
options, exercisable in September 2010, provided the individuals remain in employment with the Group at that date. The
value of these options has been estimated on the basis of the assumed share price at the date of grant (September 2008)
and the cost will be spread over the period from 1 July 2007 to 30 September 2010.
The total expense recognised in the income statement arising from share–based payments is as follows:
GSOP
Sharesave
LTIP – Executive Directors
LTIP – Senior Managers share match
Total
2008
£’000
14
17
164
91
286
2007
£’000
28
136
70
–
234
21 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 after one year
Net debt
At 1 July
2007
£’000
17,368
(21)
17,347
Cash flow
£’000
(14,515)
1
(14,514)
(40,000)
30,000
(22,653)
15,486
Other
non cash
changes
£’000
–
–
–
–
–
At 28 June
2008
£’000
2,853
(20)
2,833
(10,000)
(7,167)
22 Commitments
As at 28 June 2008 the Group had entered into capital contracts amounting to £2.3 million. The equivalent figure as at
30 June 2007 was £7.2m.
The future minimum lease payments under non–cancellable operating leases were as follows:
2008
Motor
vehicles
£’000
443
226
–
669
2008
Land and
buildings
£’000
20,928
77,861
108,924
207,713
2008
Plant and
machinery
£’000
249
540
–
789
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
216
454
–
670
Within one year
In the second to fifth year inclusive
After five years
www.dunelm-mill.com
Financial statements
The Group has 77 operating leases in respect of properties. These leases run for periods of up to 20 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.
23 Contingent liabilities
The Group had no contingent liabilities at either period end date.
24 Related parties
Identity of related 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.
Directors of the Company and their immediate relatives control 66.8% of the voting shares of the Company.
Disclosures relating to remuneration of Directors are set out in the Remuneration Report on pages 14 to 17. The remuneration
of the key management personnel (executive team excluding Directors) of the Group is set out below:
Salaries and other short term benefits
Post employment benefits
Share based payments
2008
£’000
831
12
43
886
2007
£’000
801
11
16
828
From time to time the Group makes purchases on behalf of a major shareholder, Bill Adderley, and sells vehicles 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
Vehicle purchases – proceeds received
All vehicles sold to Bill Adderley during the period were fully depreciated.
2008
£’000
–
3
2007
£’000
13
3
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.
25 Ultimate controlling party
The Directors consider that the Adderley family is the ultimate controlling party of Dunelm Group plc by virtue of their
combined shareholding.
26 Subsequent events
On 29 July 2008 Dunelm acquired for a consideration of £5.0m, ownership of the Dorma brand and trademarks on a
worldwide basis, an extensive design library, and the Dorma domain name (www.dorma.co.uk).
Dunelm Group plc Annual report & accounts 2008
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Parent Company accounts
Balance sheet
As at 28 June 2008
Non-current assets
Investment in subsidiaries
Deferred tax asset
Total non-current assets
Current assets
Trade and other receivables
Total current assets
Total assets
Current liabilities
Trade and other payables
Liability for current tax
Interest bearing loans and borrowings
Total current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Total non-current liabilities
Total Liabilities
Net assets
Capital and reserves
Issued capital
Share premium
Non distributable reserves
Retained earnings
Equity shareholders’ funds
Note
4
5
6
7
8
8
9
2008
£’000
2,283
43
2,326
2007
£’000
2,163
98
2,261
64,413
64,413
85,800
85,800
66,739
88,061
(879)
89
(20)
(810)
(682)
(10)
(21)
(713)
(10,000)
(10,000)
(40,000)
(40,000)
(10,810)
(40,713)
55,929
47,348
2,008
346
283
53,292
55,929
2,006
267
163
44,912
47,348
The financial statements on pages 46 to 55 were approved by the Board of Directors on 11 September 2008 and were signed
on its behalf by:
David Stead
Director
11 September 2008
www.dunelm-mill.com
Parent Company accounts
Cash flow statement
For the 52 weeks ended 28 June 2008
Profit before tax
Adjusted for:
Net financing costs
Operating profit
Operating cash flows before movements in working capital
Decrease /(increase) in debtors
Increase in creditors
Net movement in working capital
Investment income
Share based payments expense
Cash flows from operating activities
Interest paid
Interest received
Tax received/(paid)
Net cash generated from operating activities
Cash flows from financing activities
Proceeds from issue of share capital
Purchase of treasury shares
Proceeds from issue of treasury shares
Funds raised from bank loan
Repayment of bank loan
Dividends received
Dividends paid
Net cash flows utilised in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Dunelm Group plc Annual report & accounts 2008
Financial statements
2008
£’000
19,920
(1,826)
18,094
21,387
197
21,584
(20,097)
166
19,747
(1,249)
3,075
58
21,631
81
(1,900)
112
–
(30,000)
20,097
(10,020)
(21,630)
1
(21)
(20)
2007
£’000
17,967
(1,994)
15,973
(6,894)
547
(6,347)
(20,000)
79
(10,295)
(1,797)
3,791
(388)
(8,689)
273
–
–
40,000
–
20,000
(51,605)
8,668
(21)
–
(21)
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Parent Company accounts
Statement of changes in equity
For the 52 weeks ended 28 June 2008
As at 2 July 2006
Profit for the period
Issue of new share capital
Share based payments
Deferred tax on share based payments
Dividends
As at 30 June 2007
As at 1 July 2007
Profit for the period
Issue of new share capital
Purchase of treasury shares
Treasury shares reissued in respect of share option schemes
Share based payments
Deferred tax on share based payments
Corporation tax on share options exercised
Dividends
Issued share
capital
£’000
2,000
–
6
–
–
–
2,006
Issued share
capital
£’000
2,006
–
2
–
–
–
–
–
–
Share
premium
£’000
Non
distributable
£’000
–
–
267
–
–
–
267
Share
premium
£’000
267
–
79
–
–
–
–
–
–
8
–
–
155
–
–
163
Non
distributable
£’000
163
–
–
–
–
120
–
–
–
Retained
earnings
£’000
78,431
17,980
–
79
27
(51,605)
Total
£’000
80,439
17,980
273
234
27
(51,605)
44,912
47,348
Retained
earnings
£’000
44,912
20,036
–
(1,900)
112
166
(76)
62
(10,020)
Total
£’000
47,348
20,036
81
(1,900)
112
286
(76)
62
(10,020)
As at 28 June 2008
2,008
346
283
53,292
55,929
The non distributable reserve’s purpose is to reflect all movements in share based payments.
www.dunelm-mill.com
Accounting policies – Parent Company accounts
Financial statements
Basis of preparation
The Company 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 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.
Changes in accounting policies
The Company has adopted IFRS 1 from 2 July 2006. 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 Company.
Investments
Investments in subsidiary undertakings are stated at the adjusted cost of the investment, IFRIC 8 ‘Scope of IFRS 2 share based
payments’ requires the Parent Company to recognise 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.
Bank borrowings and borrowing costs
Interest–bearing bank loans and overdrafts are recorded at the proceeds received.
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.
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.
Share capital
Where the Company purchases its own equity share capital (treasury shares) the consideration paid, including any directly
attributable incremental costs is deducted from equity attributable to the Company’s equity holders until the shares are
cancelled or reissued. Where such shares are subsequently sold or reissued, any consideration received net of any directly
attributable incremental transactions costs and the related income tax effects, is included in equity attributable to the
Company’s equity holders.
Share based payments
The Company operates two share options schemes details of which are set out in note 11
The fair value of options granted is realised 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.
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.
Taxation
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 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 recognised. Deferred tax assets are reduced to the extent that it is no longer probable that the
related tax benefit will be recognised.
Dunelm Group plc Annual report & accounts 2008
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Notes to the Parent Company accounts
Income statement
1
The Company made a profit after tax of £20,036,000 (2007: £17,980,000). The Directors have taken advantage of the exemption
available under section 230 Companies Act 1985 and have not presented an income statement 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 14 to 17, and share based payments details in note 11 on pages 52 to 53.
3 Dividends
Equity – 1p ordinary
Interim for the period ended 30 June 2007 – paid 25.0p
Interim for the period ended 30 June 2007 – paid 0.8p
Final for the period ended 30 June 2007 – paid 3.0p
Interim for the period ended 28 July 2008 – paid 2.0p
2008
£’000
2007
£’000
–
–
(6,024)
(3,996)
(10,020)
(50,000)
(1,605)
–
–
(51,605)
The Directors are proposing a final dividend of 3.5p per ordinary share for the period ended 28 June 2008 which equates
to £7.0m. The dividend will be paid on 5 December 2008 to shareholders on the register at the close of business on
21 November 2008.
Investments
4
Shares in subsidiary undertakings.
As at 2 July 2006
Share Based Payments
As at 30 June 2007
Share Based Payments
As at 28 June 2008
£’000
2,008
155
2,163
120
2,283
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%
Nature
of business
Retailer of soft furnishings
Property holding Company
Both of the above subsidiaries and the Parent Company are registered and operate in England and Wales.
5 Deferred tax assets
As at 1 July 2006
Reserves credit
Income statement credit
As at 30 June 2007
Reserves debit
Income statement credit
As at 28 June 2008
Other
temporary
differences
£’000
51
27
20
98
(76)
21
43
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.
www.dunelm-mill.com
6 Trade and other receivables
Amounts owed by subsidiary undertakings
Prepayments and accrued income
Other taxation and social security
Financial statements
2008
£’000
64,365
30
18
64,413
2007
£’000
85,771
29
–
85,800
Amounts owed by subsidiary undertakings are immediately repayable. Interest is charged monthly on all intercompany
balances at an annual rate of 5.25%.
7 Trade and other payables
Trade payables
Accruals and deferred income
8
Interest bearing loans and borrowings
Bank loans
Bank overdraft
Total
2008
£’000
15
864
879
2008
£’000
10,000
20
10,020
2007
£’000
–
682
682
2007
£’000
40,000
21
40,021
On 26 September 2006 the Company entered into a £50m revolving credit facility which is repayable in full on
26 September 2011. 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 Company and its subsidiaries.
Where a Group Company enters into financial guarantee contracts to guarantee the indebtedness of other Group
Companies within the Group, the Group considers these to be insurance arrangements for them as such. In this respect,
the Group treats the guarantee contract as a contingent liability until such time as it becomes probable the Group will be
required to make a payment under the guarantee.
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
2007
2008
200,617,400 200,000,000
617,400
200,617,400
174,000
200,791,400
Proceeds received in relation to shares issued during the period were £80,000 (2007: £273,404).
Ordinary shares of 1p each
Authorised
Allotted, called up and fully paid
2008
Number
of shares
2008
£’000
2007
Number
of shares
500,000,000
5,000 500,000,000
200,791,400
2,008
200,617,400
2007
£’000
5,000
2,006
The holders of the ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share.
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Notes to the Parent Company accounts continued
10 Treasury shares
Purchased during year
Reissued during the period in respect of share option schemes
Outstanding at end of year
2008
£’000
1,900
(378)
1,522
2008
Number
of shares
1,195,000
(243,500)
951,500
2007
£’000
–
–
–
2007
Number
of shares
–
–
–
The Company acquired 1,195,000 of its own shares through purchases on the London Stock Exchange over a period from
27 November 2007 to 20 March 2008. These shares are held by the Company for the purpose of delivery to employees
under employee share schemes. The total amount including fees paid to acquire the shares was £1,905,481. The consideration
has been deducted from retained earnings within shareholders equity. The Company reissued 243,500 treasury shares for a
total consideration of £112,010 on 7 March 2008 and 11 June 2008.
The Company has the right to reissue the remaining treasury shares at a later date.
11 Share based payments
As at 28 June 2008, 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 28 June 2008.
a) Dunelm Group Share Option Plan
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.
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
August
2006
grant
7.0p
n/a
62.1p
35%
3 years
8.7%
4.8%
September
2005
grant
December
2004
grant
September
2004
grant
6.3p
n/a
57.0p
35%
3 years
8.7%
4.8%
6.0p
6.2p
n/a
46.0p
35%
3 years
8.7%
4.8%
n/a
46.0p
35%
3 years
8.7%
4.8%
The number and weighted average exercise price of options under the GSOP is as follows:
Outstanding at beginning of year
Exercised during year
Outstanding at end of year
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Weighted
average
exercise
price
2008
46.0p
46.0p
–
Number
of shares
under option
2008
200,000
(200,000)
–
Weighted
average
exercise
price
2007
44.7p
44.2p
46.0p
Number
of shares
under option
2007
817,400
(617,400)
200,000
Financial statements
b) Long-term Incentive Plan
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. The LTIP is administered by the Remuneration Committee. One grant has been made in the
year, to the Executive Directors only, and is exercisable in September 2010 depending on the level of growth in Group EPS
relative to RPI. The maximum life of options under LTIP is ten years from the date of grant.
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 number and weighted average exercise price of options under the LTIP at 28 June 2008 is:
September
2007
196.0p
0.913
178.9p
March
2007
229.0p
0.913
209.0p
Outstanding at beginning of year
Granted during year
Outstanding at end of year
Weighted
average
exercise
price
2008
–
–
–
Number
of shares
under option
2008
250,434
317,922
568,356
Weighted
average
exercise
price
2007
–
–
–
Number
of shares
under option
2007
–
250,434
250,434
The total expense recognised in the income statement arising from share-based payments is as follows:
GSOP
LTIP
Total
2008
£’000
1
165
166
2007
£’000
9
70
79
12 Contingent liability
The Company and certain subsidiaries have given joint and several guarantees 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 Related party disclosure
The amount due to the Company from subsidiary undertakings is set out in note 6. Transactions between the Company and
its subsidiaries were as follows:
Cash paid to group undertakings
Cash received from group undertakings
Dividends received
Net interest receivable
2008
£’000
(47,267)
2,693
20,096
3,072
2007
£’000
(17,005)
484
20,000
3,791
Dunelm Group plc Annual report & accounts 2008
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Notes to the Parent Company accounts continued
14 Explanation of transition to IFRS
This is the first year that the Company has presented its financial statements under IFRS.
The accounting policies set out on page 49 have been applied in preparing the financial statements for the year ended
28 June 2008, the comparative information presented in these financial statements for the year ended 30 June 2007 and
in the preparation of the opening balance sheet at 2 July 2006 (the transition date).
In preparing its opening balance sheet, the Company has adjusted amounts previously reported in financial statements
prepared in accordance with UK GAAP.
The most significant changes in the Company’s accounting policies and presentation as a result of the adoption of IFRS are
set out below:
a) 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 ‘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
values 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 Company has applied the fair value model to all grants of equity instruments that had not vested as at 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.
b) Cash flow statements (IAS 7)
Under IAS 7 the Company is required to prepare a cash flow statement. This contrasts to UK GAAP which provided an
exemption from the requirement to provide a cash flow statement.
c) Income tax (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.
www.dunelm-mill.com
Financial statements
In summary the impact of adopting IFRS on the financial statements previously reported under UK GAAP is set out below:
Profit for the period in 2007 increased by £9,000 from £17,971,000 to £17,980,000 due to the impact of deferred tax on share
based payments.
Parent Company Balance Sheet
Non-current assets
Investment in subsidiary
Deferred tax asset
Total non-current assets
Current assets
Deferred tax
Trade and other receivables
Total current assets
As at 2 July
2006 previously
reported under
UK GAAP
£’000
Share
based
payments
£’000
As at 30 June
2007 previously
reported under
UK GAAP
£’000
As at 2 July
2006 IFRS
£’000
Share
based
payments
£’000
As at 30 June
2007 IFRS
£’000
2,008
–
2,008
12
78,906
78,918
–
51
51
(12)
–
(12)
2,008
51
2,059
–
78,906
78,906
2,163
–
2,163
23
85,800
85,823
–
98
98
(23)
–
(23)
2,163
98
2,261
–
85,800
85,800
Total assets
80,926
39
80,965
87,986
75
88,061
Current liabilities
Trade and other payables
Liability for current tax
Interest bearing loans and borrowings
Total current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves
Issued capital
Share premium
Non distributable reserves
Retained earnings
(135)
(391)
–
(526)
–
–
(526)
–
–
–
–
–
–
–
(135)
(391)
–
(526)
(682)
(10)
(21)
(713)
–
–
(40,000)
(40,000)
(526)
(40,713)
–
–
–
–
–
–
–
(682)
(10)
(21)
(713)
(40,000)
(40,000)
(40,713)
80,400
39
80,439
47,273
75
47,348
2,000
–
8
78,392
–
–
–
39
2,000
–
8
78,431
2,006
267
163
44,837
–
–
–
75
75
2,006
267
163
44,912
47,348
Equity shareholders’ funds
80,400
39
80,439
47,273
Dunelm Group plc Annual report & accounts 2008
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Notice of Annual General Meeting
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of the proposals referred to in the document or as to the action you should
take, you should seek your own advice from a stockbroker, solicitor, accountant or other professional adviser.
If you have sold or otherwise transferred all of your shares, please pass this document together with the
accompanying documents to the purchaser or transferee, or to the person who arranged the sale or transfer, so that
they can pass them to the person who now holds the shares.
Notice is hereby given that an Annual General Meeting of the Company will be held at The Hilton Hotel, Leicester on
Thursday 6 November 2008 at 10.30am 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 28 June 2008 together with the Directors’ Report, and
the Auditors’ Report on those accounts be received and adopted.
2. That Will Adderley, who is retiring in accordance with the Articles of Association of the Company, and being eligible, is
offering himself for re-election, be re-appointed as an Executive Director of the Company.
3. That Marion Sears, who is retiring in accordance with the Articles of Association of the Company, and being eligible, is
offering herself for re-election, be re-appointed as a Non-Executive Director of the Company.
4. To declare a final dividend on the ordinary shares of 3.5p per share in respect of the year ended 28 June 2008.
5. That KPMG Audit Plc be re-appointed as auditors to the Company and that the Directors be authorised to determine the
auditors’ remuneration.
6. That the Directors’ Remuneration Report be approved.
Special business
To consider and if thought fit pass the following resolutions of which the resolution number 7 will be proposed as an ordinary
resolution and the resolutions numbered 8, 9 and 10 will be proposed as a special resolution:
7. That:
(a)
(b)
(c)
8. That:
(a)
(b)
(c)
in accordance with article 6 of the Company’s Articles of Association, the Directors be authorised to allot relevant
securities up to a maximum nominal amount of £665,466;
this authority shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of
this resolution, or, if earlier, on 29 December 2009; and
all previous unutilised authorities under section 80 of the Companies Act 1985 shall cease to have effect (save to the
extent that the same are exercisable pursuant to section 80(7) of the Companies Act 1985 by reason of any offer or
agreement made prior to the date of this resolution which would or might require relevant securities to be allotted on
or after that date).
in accordance with article 7 of the Company’s Articles of Association, the Directors be given power to allot equity
securities for cash;
the powers under paragraph (a) above (other than in connection with article 7(a)(i) of the Company’s Articles of
Association) shall be limited to the allotment of equity securities having a nominal amount not exceeding in
aggregate £100,000;
this authority shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of
this resolution or, if earlier, on 29 December 2009; and
(d) all previous unutilised authorities under section 95 of the Companies Act shall cease to have effect.
www.dunelm-mill.com
Annual General Meeting
9.
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 19,000,000, being
approximately 10% of issued ordinary share capital at 28 June 2008 (excluding treasury shares), and 10% of the
Company’s issued ordinary share capital at the date of passing of this resolution (excluding treasury shares);
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 the amount stipulated in the Buy-Back and Stabilisation Regulation 2003; and
the minimum price (not including expenses) which may be paid for each ordinary share is 1p per share.
(b)
(c)
This authority shall, unless previously varied, revoked or renewed, expire at the conclusion of the next Annual General
Meeting of the Company or , if earlier, on 29 December 2009, 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.
10. That the Articles of Association produced to the meeting and signed by the Chairman for the purposes of identification
be approved and adopted as the Articles of Association of the Company in substitution for and to the exclusion of the
Current Articles of Association of the Company.
The Directors consider that all the resolutions put to the meeting are in the best interests of the Company and its shareholders
as a whole. Your Board will be voting in favour of them and unanimously recommends that you do so as well.
By Order of the Board
Signature
Date 3 October 2008
David Stead
Company Secretary
Fosse Way
Syston
Leicester
LE7 1NF
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.
3.
4.
5.
6.
A member is entitled to appoint a proxy to exercise all or any of his/her rights to attend, speak and vote instead of him/her. A proxy need not be a member
of the Company. A member may appoint more than one proxy to exercise rights attached to different shares. A member may not appoint more than one
proxy to exercise rights attached to any one share.
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.
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 Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6ZX so as to arrive not later than 48 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 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.
To change your proxy instructions please submit a new proxy appointment in accordance with the instructions above. The appointment received last
before the cut-off time and date specified above will take precedence.
A person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a ‘Nominated
Person’) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have
someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to
exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.
The statement of the rights of members in relation to the appointment of proxies in paragraphs 2, 4 and 5 does not apply to a Nominated Person. The
Dunelm Group plc Annual report & accounts 2008
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Notice of Annual General Meeting continued
rights described in these paragraphs can only be exercised by registered members of the Company.
7.
8.
9.
Nominated Persons are reminded that they should contact the registered holder of their shares (and not the Company) on matters relating to their
investments in the Company.
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
6pm on the day which is two days before the time fixed for the meeting or the adjourned 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.
Copies of the Executive Directors’ service agreements with the Company, the Non-Executive Directors’ terms of appointment 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.
Copies of the proposed new articles of association will be available for inspection: (a) during normal business hours at the Company’s registered office
and at the offices of Allen & Overy LLP, One Bishops Square, London, E1 6AD, from the date of this circular until the close of the Annual General Meeting;
and (b) at the Annual General Meeting for at least 15 minutes before and during the meeting. A summary of the principal changes introduced in the
proposed new articles is set out in the Directors’ Report above.
10. 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 7RA19) 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.
11. You may not use any electronic address provided either in this notice of Annual General Meeting or any related documents to communicate with the
Company for any purpose other than those expressly stated.
12. As at 11 September 2008 the Company’s issued share capital consists of 199,839,900 ordinary shares carrying one vote each (excluding treasury shares).
Therefore, the total voting rights in the Company as at 11 September 2008 are 199,839,900.
13. In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the meeting so that (a) if a corporate
shareholder has appointed the Chairman of the meeting as its corporate representative with instructions to vote on a poll in accordance with the
directions of all of the other corporate representatives for that shareholder at the meeting, then on a poll those corporate representatives will give voting
directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate representative in accordance with those directions: and (b) if
more than one corporate representative for the same shareholder attends the meeting but the corporate shareholder has not appointed the Chairman
of the meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who
attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative.
Corporate shareholders are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate
representatives (http://www.icsa.org.uk/) for further details of this procedure. The guidance includes a sample form of representation letter if the Chairman
is being appointed as described in (a) above
www.dunelm-mill.com
✂
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
...................................................................................................................................... or failing him the Chairman of the meeting as my/our proxy to
exercise all or any of my/our rights to attend, speak and vote for me/us and on my/our behalf at the Annual General Meeting of the
Company to be held at The Hilton Hotel, Leicester on Thursday 6 November 2008 at 10.30 am and at any adjournment of the meeting.
This proxy is in respect of all the shares registered in my name unless I/We have indicated a smaller number of shares in the box below
Please tick here if this proxy appointment is one of multiple appointments being made
For the appointment of more than one proxy please refer to Explanatory Note 2.
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. On any other
business arising at the meeting (including any motion to amend a resolution not to adjourn the meeting) the proxy will act at his or her
discretion.
Signature ................................................................... Date ..................................... 2008
Ordinary business
1.
To receive and approve the Directors’ Report and the audited accounts for
the period ended 28 June 2008 and the report of the auditors
Vote
For
Withheld Against
2. To re-elect Will Adderley as a Director
3. To re-elect Marion Sears as a Director
4. To declare a dividend on the ordinary shares of 3.5p per share
5. To re-appoint KPMG Audit Plc as auditors of the Company and to
authorise the Directors to fix their remuneration
6. To approve the Directors’ Remuneration report
Special business
7. To authorise the Directors to allot relevant securities
8. To authorise the Directors to allot equity securities for cash
9. To authorise the Company to purchase its own ordinary shares
10. To adopt new Articles of Association
Notes
1.
Every holder has the right to appoint some other person(s) of their choice, who need not be a shareholder as his/her proxy to exercise all or any of his/her rights, to
attend, speak and vote on their behalf at the meeting. If you wish to appoint a person other than the Chairman, please insert the name of your chosen proxy holder in
the space provided. If the proxy is being appointed in relation to less than your full voting entitlement, please enter in the box above the number of shares in relation to
which they are authorised to act as your proxy. If left blank your proxy will be deemed to be authorised in respect of your full voting entitlement (or if this proxy form has
been issued in respect of a designated account for a shareholder, the full voting entitlement for that designated account).
To appoint more than one proxy, you may photocopy this form. Please indicate in the box above the number of shares in relation to which they are authorised to act as
your proxy. Please also indicate by ticking the box provided that the proxy instruction is one of multiple instructions being given. All forms must be signed and should be
returned together in the same envelope.
Unless otherwise instructed above, the proxy will exercise his/her discretion both as to how he/she votes and as to whether or not he/she abstains from voting on any
resolutions proposed at the meeting.
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.
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.
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.
Any alterations to this form must be initialled.
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.
For details of how to change your proxy instructions or revoke your proxy appointment please see the notice of meeting. If you submit more than one valid proxy
appointment, the appointment received last before the latest time for receipt of proxies will take precedence.
2.
3.
4.
5.
6.
7.
8.
9.
10. 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.
11. You may not use any electronic address provided in this proxy form to communicate with the Company for any purposes other than those expressly stated.
✂
Second fold
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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Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6ZX
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✂
Our business
at a glance
Business
strategy
Dunelm’s specialist homewares offering
has powerful customer appeal and is
clearly differentiated from other retailers.
This has enabled the chain to expand
at a rapid rate. Today the major focus is
out-of-town retailing – and we now have
77 superstores located throughout the UK.
Total number of superstores*
77
Total selling space
2.2m sq. ft.
Product lines available in superstores
(Broad and deep ranges)
> 20,000
Number of employees
> 5,000
= Superstores open as at 30 June 2007
= Superstores opened since 1 July 2007
* As at 11 September 2008
These are our key
areas of focus
>
Growing the store portfolio
We are ambitious to continue driving Dunelm’s
growth by rolling out the successful superstore
format. Of the existing 77 superstores as of
11 September 2008, the majority are located
in the Midlands or the North West of England
and coverage of many parts of the UK is limited.
The opportunity for geographic expansion is
therefore very significant.
>
>
>
Developing the customer offer
We intend to continue to focus on homewares and
our ‘Simply value for money’ proposition – deep
ranges of quality products at keen prices, with
high availability and supported by friendly service.
We want to keep strengthening each element
of the offer.
Exploiting our infrastructure
We are in a strong position to exploit further our
increasing scale, as well as to benefit from the
significant infrastructure investments made in
recent years, particularly in IT systems.
Growing Dunelm Direct
We have had a transactional website since 2006.
We see significant opportunity to grow our overall
business by further developing direct channels in
conjunction with expanding our store base.
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
Landsbanki 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
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Tel: 0871 384 2030
Hogarth Partnership Limited
No. 1 London Bridge
London SE1 9BG
Tel: 020 7357 9477
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www.dunelm-mill.com
Annual report
& accounts 2008
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mill
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.
01 Highlights
02 Chairman’s statement
04 Chief Executive’s review
06
Finance Director’s review
10 Directors and officers
12
14
18
23
Corporate governance report
Remuneration report
Directors’ report and business review
Statement of Directors’ responsibilities
24
26
27
28
29
Independent Auditors’ report
Consolidated income statement
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes
in equity
30 Accounting policies
34
46
Notes to the annual financial statements
Parent Company accounts
56
59
Notice of Annual General Meeting
Form of proxy
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Dunelm Group plc
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