www.dunelm-mill.com
Dunelm Group plc
Fosse Way
Syston
LE7 1NF
Tel: 0116 264 4356
Email: investorrelations@dunelm-mill.co.uk
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9
Annual report & accounts 2009
Dunelm Group plc
millDunelmmillDunelm
Contents
Business review
01 Highlights
02 Chairman’s statement
03 Chief Executive’s review
07 Finance Director’s review
10 Directors
Governance
12 Corporate governance report
15 Remuneration report
18
Directors’ report and business
review
Statement of Directors’
responsibilities
22
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.
Annual General Meeting
Notice of Annual General
53
Meeting
59 Form of proxy
Advisers
Financial statements
23
Independent Auditor’s report
24 Consolidated income statement
25 Consolidated balance sheet
Consolidated cash flow
26
statement
Consolidated statement of
changes in equity
27
28 Accounting policies
32
Notes to the annual financial
statements
44 Parent Company accounts
Corporate Brokers
and Financial Advisers
Legal Advisers
Auditors
Principal Bankers
Registrars
Superstores open at 28 June 2008
Superstores opened after 29 June 2008
Financial Public Relations
Business strategy: These are our key areas of focus
Growing the store portfolio
Developing the customer offer
We are ambitious to continue driving Dunelm’s growth by rolling
out the successful superstore format. Of the existing 85
superstores as of 15 September 2009, 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.
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.
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Midlands Corporate Banking
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London SE1 9BG
Tel: 020 7357 9477
Dunelm Group plc
01
Highlights
Annual report & accounts 2009
Revenue
Operating profit*†
2009
£423.8m
2008
£391.8m
2007
£354.7m
2006
£315.2m
2005
£282.5m
2005
£36.2m
2006
£38.2m
2007
£40.8m
Profit before tax*†
Net cash from operations
2009
£53.5m
2008
£49.1m
2005
£37.6m
2006
£38.0m
2007
£37.8m
Operational
Financial
2008
£45.0m
2007
£34.7m
2005
£30.1m 2006
£24.1m
2009
£52.6m
2008
£49.4m
2009
£67.4m
94 stores at 4 July 2009 (82 superstores)
6 new superstores opened in the year
Average superstore selling area
of 28,000 square feet
Around 20,000 lines in a superstore –
broad and deep ranges
Revenue increase 8.2% in FY 2008/09
Operating margin 12.4%
Operating cash flow £68m after
interest and tax
* 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
2006
property disposal. The combined effect of these was to reduce operating profit by
£38.2m
£3.2m and profit before tax by £3.0m.
2005
£36.2m
2007
£40.8m
2009
£52.6m
£51.6m1
2008
£49.4m
† The 2009 figures reflect a 53 week trading period, compared with 52 weeks in all
prior years.
2009
£423.8m
£417.1m1
2008
£391.8m
Exploiting our infrastructure
Growing Dunelm Direct
2007
£354.7m
2006
£315.2m
2005
£282.5m
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.
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.
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Dunelm Group plc
02
Chairman’s statement
Annual report & accounts 2009
The business celebrates its 30th year of
operations with another year of increase
in sales and profits. In addition, there was
strong positive cash generation and we
ended the year with significant cash
surplus. This strong performance has
enabled the Board to recommend a 9.1%
increase in the dividend, broadly in line
with the growth in earnings per share.
The Group remains in a very strong position
to continue our strategy of investing in
organic growth in the coming years.
Geoff Cooper
Chairman
15 September 2009
The last 12 months have been challenging
for all retailers. The number of business
failures has increased significantly, and has
included some well known names with
involvement in the homewares market.
Against this difficult background, Dunelm
has demonstrated great resilience as
customers have continued to buy into our
‘Simply Value For Money’ proposition.
We expect that the retail environment
will remain challenging for some time,
reflecting the depth of the background
difficulties in the UK economy. In this
scenario, consumers’ continual search
for better value, together with a trend
towards switching of expenditure into
home improvements, leaves us well
positioned to make further progress.
After the end of the financial year we
welcomed a new Non-Executive Director
to the Board, appointing Nick Wharton,
Finance Director of Halfords Group plc.
His wealth of experience and knowledge
of the retail sector will be a great asset
to the Board as we continue to pursue our
growth strategy.
Dunelm has
demonstrated
great resilience.
Focusing on
developing the
customer offer
20,000
Product lines available in
superstores
Dunelm Group plc
03
Chief Executive’s review
Annual report & accounts 2009
Trading
I am delighted to report continued
successful growth of the Group during the
last financial year. Our overall sales
increased by 8.2% over the financial year, or
6.3% on a comparable 52 week basis.
Like-for-like sales (calculated by comparing
stores which have traded throughout the
last two financial years) recovered from a
decline of 5.6% in the first half to end the
year just 0.5% down – significantly beating
the overall homewares market.
I firmly believe that Dunelm remains the
leading multiple homewares specialist in
the UK. We intend to maintain our success
by pursuing the four priorities which have
constituted our strategy since flotation.
Priority 1 – growing the store portfolio
We opened six new superstores in the year,
at Huddersfield, Newtownabbey,
Plymouth, Worcester, Workington and
Llanelli. We continue to receive very
favourable customer reaction to all of our
new openings and are pleased with trading
in all of these locations. Altogether the
chain of 82 superstores as at the year-end
provided 2.4m square feet of selling space.
We see an increasing number of
opportunities to grow the superstore
portfolio without compromising our
long-term financial returns. We have
opened three further stores since the
year-end in Norwich, Londonderry and
Broadstairs and we are contractually
committed to nine more units which are
due to open over the next twelve months.
We also have numerous further
opportunities under negotiation. With
little occupier demand for ‘big box’ retail
warehousing space, we believe that we are
well positioned to continue our store
roll-out programme over the next few
years whilst maintaining our disciplined
and demanding approach to return
on investment.
Whilst expanding our superstore chain
towards our medium-term target of at
least 150 superstores, we continue to look
for opportunities to relocate our older high
street shops. The superstore opening in
Worcester replaced our high street store
there, leaving us with 12 high street stores.
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 price,
choice, quality, product availability and
friendly service.
We have introduced a number of
developments in our offer over the past
We see an
increasing number
of opportunities
to grow the
superstore
portfolio without
compromising
our long-term
financial returns.
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Dunelm Group plc
04
Chief Executive’s review
continued
Annual report & accounts 2009
year. For example, we have launched an
arts & crafts section in a number of stores,
and have grouped together various existing
ranges to create a new laundry & cleaning
section. We now also offer add-on services
in many stores – for example, we deliver
products to customers’ homes and fit them
when required.
We have responded to the difficult
economic environment by increasing the
proportion of special buys available for
customers, and have introduced some
additional short-term product promotions
under the banner of ‘Miss It Miss Out’.
In our new and refitted stores, we now
include a dedicated Dorma area, following
our acquisition of rights to the Dorma brand
in July 2008 (Dorma is a high-end home
textiles brand with strong heritage in bed
linen particularly). We have successfully
retained Dorma’s royal warrants following
the acquisition, have refined the branding
and have developed an exciting new range
of Dorma bed linen designs exclusive to
Dunelm. We have also begun to apply the
Dorma name to other product categories
such as bathroom and table linen.
We have continued investing to improve
the shopping environment in our older
stores. We completed six refits in the
last financial year 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, with
payback anticipated in approximately 3–5
years. We have received a good response
to these refitted stores both from
customers and from our store teams.
Priority 3 – growing Dunelm Direct
Dunelm Direct is the name we give to our
multi-channel strategy. Sales from our
website (www.dunelm-mill.com) have
grown well over the last financial year. We
expect this to continue in the coming year
as we are about to relaunch the site on a
new technology platform which will
improve the shopping experience and give
us a much stronger technological base to
build upon.
Also on this new technology platform will
be a new website for Dorma (www.dorma.
co.uk) which will act as a showcase for the
Dorma brand, stocking all Dorma products,
whether Dunelm exclusive designs or
products distributed under licence by our
third party partner.
Whilst it is still early days for our Dunelm
Direct growth strategy we think the
investment we have made over the last
financial year will give us a strong and
scalable platform on which to build.
Priority 4 – exploiting our infrastructure
We continue to extract further benefits from
our past investment in IT systems, enabling
us to improve stock control and make
in-store processes more efficient. We are
also seeing improvements to our customer
offer directly supported by IT, for example
the forthcoming launch of a gift card.
We are taking steps to underpin our
medium term expansion plans by securing
additional leasehold space at our central
warehouse in Stoke, where we have an
option over 100,000 square feet of
warehousing to supplement the 250,000
square feet we currently occupy. We
anticipate moving operations into this
additional space during 2010. Our capital
expenditure to fit out new warehousing
space is not expected to exceed £2m.
As our business grows, we will also need
to expand our head office facility. We are
investigating the possible purchase of
freehold land in the neighbourhood of
our existing base in Syston, Leicester.
This is a long-term project and any new
building is unlikely to be ready for
occupation until 2011.
Outlook
For the first 10 weeks of our financial
year, to 12 September, total sales growth
has been 26.5% and like-for-like sales
have grown by 16.1%. Gross margin has
remained strong, with an increase of
180bps year-on-year.
We are very pleased with the start to
our new financial year. We are confident
Focused on
growing
Dunelm Direct
11,000+
Our webstore has been relaunched
with over 11,000 products
Dunelm Group plc
Annual report & accounts 2009
05
that our ‘Simply Value For Money’
proposition will continue to appeal to
customers in the current economic
climate. Our product ranges are suitable
for all budgets and tastes. Our business is
not significantly reliant on big-ticket
purchases – our average basket remains
below £30. In addition, the relatively weak
state of the commercial property market
gives us good opportunities to roll out
our offer to more locations. Having said
all this, we recognise that it will be very
challenging to maintain our recent trading
performance as like-for-like sales
comparatives start to strengthen, and
economic factors (including the planned
increase in VAT and anticipations of
public spending reductions and rising
unemployment) potentially subdue
consumer spending. Nonetheless, the
business is in excellent health, we are
confident of continuing to grow our
market share and we remain excited
about our growth prospects in the
medium term.
Will Adderley
Chief Executive
15 September 2009
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Dunelm Group plc
Annual report & accounts 2009
06
Focusing on
growing our
store portfolio
85
Superstores located
throughout the UK
Dunelm Group plc
07
Finance Director’s review
Annual report & accounts 2009
Our scale, buying
power and mix
of special buys
have continued
to deliver gross
margin growth
53 Weeks
Dunelm’s financial years are determined by
reference to ‘Mean Accounting Dates’ and
therefore every few years the Group reports
a 53 week financial period. The year ended
4 July 2009 was a 53 week year. Unless
otherwise stated, throughout the Finance
Director’s Review references to ‘the
financial year’ or to 2009 relate to the 53
weeks ended 4 July 2009 and for 2008, to
the 52 weeks ended 28 June 2008. The 53rd
week represented £6.7m of revenue and
£1.0m of operating profit.
Operating result
Group revenues in the financial year were
£423.8m (2008: £391.8m), an increase of
8.2% (6.3% on a 52 week basis). Like-for-like
sales (calculated by comparing stores which
have traded throughout the last two
financial years) witnessed a decline of 0.5%
on a 52 week basis, although H2 like-for-like
sales at + 5.0% showed a strong recovery
from a H1 decline of 5.6%.
Our scale, buying power and mix of special
buys have continued to deliver gross margin
growth, achieving a 120 basis point
improvement to 45.8% in 2009 (2008:
44.6%). Taking into account all charges for
inventory write-downs, gross margin was
44.9% (2008: 43.1%) and we will report
gross margin on this basis in the future.
Operating costs remained tightly
controlled, with an overall 4.7% increase
in operating costs in like-for-like stores.
Property rents increased by 5.6% reflecting
an unusually high number of rent reviews
falling due in the period. Utility costs
increased by 29.9%, reflecting higher tariffs
in the first part of the year. Non-store costs
grew by £3.7m, including additional
logistics costs to support the increase in
special buy merchandise as well as further
investment in advertising and Head Office
support infrastructure.
Operating profit for the 53 weeks to 4 July
2009 was £52.6m. On a 52 week basis
operating profit was £51.6m, an increase of
£2.2m (4.5%) on the previous year’s £49.4m.
EBITDA
Earnings before interest, tax, depreciation
and amortisation were £63.2m. This
has been calculated as operating profit
(£52.6m) plus depreciation and
amortisation (£10.6m) and represented
a 7.3% increase on the previous year.
The EBITDA margin achieved was 14.9% of
sales (2008: 15.0%).
Financial items and PBT
The net interest charge for the year ended
4 July 2009 was £0.1m (2008: £0.3m). This
reduction is a direct result of the Group’s
strong cash generation enabling
elimination of the prior year net debt.
A foreign exchange gain of £1.0m arose in
the year in respect of US dollar holdings
within the Group. At the year end, the
Group held no forward contracts for the
purchase of foreign currency but did hold
$2.2m in cash.
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Dunelm Group plc
08
Finance Director’s review
continued
Annual report & accounts 2009
After accounting for interest and foreign
exchange impacts, profit before tax for the
year amounted to £53.5m (2008: £49.1m),
an increase of 8.9%.
Tax, PAT and EPS
The tax charge for the year was 29.7% of
PBT (2008: 31.5%), benefiting year-on-year
from the reduction in the headline rate of
corporation tax to 28.0%.
Basic EPS for the year ended 4 July 2009 was
18.8p (2008: 16.8p), an increase of 11.9%.
Fully diluted EPS increased by 12.0% to
18.6p (2008: 16.6p); this would have been
approximately 18.3p (10.2% increase) on a
52 week basis.
Capital expenditure
Gross capital expenditure in the financial
year was £25.9m, up from £18.0m last year.
The Group took advantage of market
conditions to acquire two freehold stores
at attractive yields as well as funding fit-out
costs for six new stores opened in the year
and six store refits. Rights to the Dorma
brand name were acquired during the
period at a cost of £5.0m.
Working capital
The Group reduced working capital in
the year by £14.8m. Investment in
inventories was £57.9m at the year end,
a reduction of £2.8m compared with
last year despite the addition of six new
stores – reflecting specific management
focus on this area. Trade and other payables
generated a positive cash movement of
£11.1m, although some of this benefit is
attributable to the 53 week accounting
period and is expected to reverse.
Cash position
The Group continues to generate
extremely strong cash flows. Net cash
from operations, after interest and tax,
amounted to £67.4m (2008: £45.0m) in
the last financial year. As at 4 July 2009 the
Group had net cash resources of £24.0m
(2008: net debt of £7.2m). Together
with committed undrawn revolving loan
facilities of £40.0m this puts us in an
excellent position to fund future growth.
Dividend
An interim dividend of 2.0p was paid in
April 2009 (2008: 2.0p). It is proposed to
pay a final dividend of 4.0p per share (2008:
3.5p). The total dividend of 6.0p represents
a 9.1% increase over last year.
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
FY09
FY08
–0.5%
+2.5%
+120bp
+60bp
6 8
Key risks
The Directors also consider key risks to
the business in the areas of strategic,
operational and financial risks.
Strategic risks
New entrants to and/or formats within the
homewares market could materially alter
the competitive environment. 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. We have the ability to flex our
offer in response to customer demand as
evidenced by the increased proportion of
‘special buy’ merchandise in the business.
Our focus on a low cost base also enables
us to maintain our ‘Simply Value For
Money’ proposition.
Like all businesses, we face the risk of
increased costs from compliance with new
laws and regulations. In addition, any
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
Focusing on exploiting
our infrastructure
2.4m sq. ft.
Total selling space
Dunelm Group plc
Annual report & accounts 2009
09
Financial risks
The Group has a committed bank facility
under a revolving loan agreement
with Lloyds Banking Group plc of £40m
expiring in September 2011. This facility,
together with existing cash resources,
is considered to provide sufficient
funding for the Group’s operations.
We do not consider our direct
exposure to interest rate fluctuations
to generate any significant downside
risk and we will be well placed to take
advantage of upside potential.
Surplus funds are placed on deposit
in a range of overnight and fixed
term facilities with counter parties
approved by the Board. The Group
actively manages counter party risk.
A credit rating of at least an ‘A’ is required.
David Stead
Finance Director
15 September 2009
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, in view
of the economic pressures on both retailers
and landlords we anticipate good availability
of space over 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 could constitute a
significant threat to the business, at least in
the short-term. Dunelm maintains a disaster
recovery plan 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,
active management of key supplier
relationships, high stock service levels 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. Additional
strengthening of the operating
management team over the past 12
months has given greater depth and
coverage in a number of areas.
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Dunelm Group plc
10
Directors
Annual report & accounts 2009
Bill Adderley
Founder and Life President
Bill Adderley 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.
Geoff Cooper
Non-Executive Chairman
Geoff Cooper, joined the Board 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.
Marion Sears
Senior Independent Non-Executive
Director
Marion Sears, joined the Board in July 2004.
Chairman of the Remuneration and
Nominations Committees and Member of
the Audit Committee. She is also a
Non-Executive Director of Zetar Plc.
Will Adderley
Chief Executive
Will Adderley, 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.
Focused on leadership
Dunelm Group plc
Annual report & accounts 2009
11
David Stead
Finance Director
David Stead, joined the Group in 2003.
Previously he spent 14 years at Boots where
he was Finance Director of Boots The
Chemists and Finance Director of Boots
Healthcare International.
Simon Emeny
Independent Non-Executive Director
Simon Emeny, joined the Board
in June 2007. 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.
Nick Wharton
Independent Non-Executive Director
Nick Wharton, joined the Board in August
2009. Member of the Remuneration and
Nominations Committees and will become
Chairman of the Audit Committee. Nick is
Finance Director of Halfords Group plc.
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Dunelm Group plc
12
Corporate governance report
Annual report & accounts 2009
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 2008.
The Board considers that Geoff Cooper was independent on
appointment, and that Marion Sears, Simon Emeny and Nick
Wharton 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, Group 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.
Going forward, the committee will be chaired by Nick Wharton.
The Board considers that Nick Wharton has recent and relevant
financial experience by virtue of his professional qualification and
his current role as Finance Director of Halfords Group plc.
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 Geoff Cooper
was absent from one Board 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.
•
•
•
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 was chaired during the year by Geoff
Cooper, the other members being 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 May 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.
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.
During the year the committee:
•
•
approved the interim results issued in February;
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.
•
•
•
The Chairman and the other Non-Executive Directors meet from
time to time without Executive Directors being present, and
regularly have individual meetings with other senior managers in
the business. 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.
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.
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, Simon
Emeny and Nick Wharton (appointed on 14 August 2009). David
Stead is an Executive Director.
The Senior Independent Director is Marion Sears.
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.
The Remuneration Committee is chaired by Marion Sears, the
other members are Geoff Cooper, Simon Emeny and with effect
from 14 August 2009, Nick Wharton. The Chief Executive normally
attends by invitation.
Dunelm Group plc
Annual report & accounts 2009
13
The committee has adopted terms of reference which are available
on the Group’s website or from the Company Secretary.
The committee’s responsibilities include:
•
recommending to the Board the specific pay and benefits
packages for the Executive Directors, including pensions and
any compensation payments;
recommending and monitoring the level and structure of pay
and benefits for senior management; and
implementing any awards made under share incentive schemes.
•
•
During the year the committee met three times with full
attendance and:
•
determined the pay reviews and incentive arrangements for
Executive Directors;
determined the annual bonus payable to Executive Directors
in respect of the year ending 28 June 2008; 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 15.
The Nominations Committee is chaired by Marion Sears, the
other members are Geoff Cooper, Simon Emeny and with effect
from 14 August 2009, Nick Wharton.
Powers of Directors
In accordance with the Companies Act 2006 and the Articles of
Association, the business of the Company is managed by the
Board, which may exercise all of the powers of the Company,
subject to the requirements of the Companies Acts, the
Memorandum and Articles of Association of the Company, and
any special resolution of the Company. As stated above, the Board
has adopted internal delegations of authority in accordance with
the Combined Code, and these set out matters which are
reserved to the Board or Committees and the powers and duties
of the Chairman and Chief Executive respectively.
At the Annual General Meetings of the Company in 2007 and 2008
the Board sought and was given authority to issue shares and to
buy back and reissue shares, subject to the limits imposed by law
and those set out in the text of the resolution. Similar resolutions
are being tabled at the 2009 Annual General Meeting. For further
details see pages 20 and 21 of the Directors’ Report and Business
Review, and the Notice of Annual General Meeting on pages 53
and 54.
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 committee has adopted terms of reference which are available
on the Group’s website or from the Company Secretary.
The Group purchases Directors’ and Officers’ Liability insurance
cover for its Directors.
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 Annual General Meeting).
During the year the committee met three times with
full attendance.
Appointment and removal of Directors
The Articles of Association of the Company provide that a Director
may be appointed by ordinary resolution of the Company’s
shareholders in general meeting, or by the Board so long as the
Director stands down and offers himself for election at the next
Annual General Meeting of the Company. The Articles also provide
that each Director must stand down and offer him or herself for
re-election by shareholders at the Annual General Meeting at least
every three years.
Directors may be removed by a special resolution of shareholders,
or by an ordinary resolution of which special notice has been given
in accordance with the Companies Act 2006. The Articles also
provide that the office of a Director shall be vacated if he is
prohibited by law from being a director, or is bankrupt; and that the
Board may resolve that his office be vacated if he is of unsound
mind or is absent from Board meetings without consent for six
months or more. A Director may also resign from the Board.
The Nominations Committee makes recommendations to the
Board on the appointment and removal of 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, IT developments
and on retail sector trends.
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.
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Dunelm Group plc
14
Corporate governance report
continued
Annual report & accounts 2009
Conflicts of interest
The Companies Act 2006 allows the Board of public companies to
authorise conflicts and potential conflicts of interest of individual
directors where the Articles of Association contain a provision to
that effect. At the 2008 Annual General Meeting, new Articles of
Association were adopted which give the Board this authority
subject to the following safeguards:
•
Directors who have an interest in matters under discussion at
a Board meeting must declare that interest and abstain
from voting.
Only directors who have no interest in the matter being
considered are able to approve a conflict of interest and, in
taking that decision and the Directors must act in a way they
consider, in good faith, would be most likely to promote the
success of the Company.
The Directors are able to impose limits or conditions when
giving authorisation if they feel this is appropriate.
•
•
Following the adoption of the Articles of Association, all Directors
were requested to disclose any actual or potential conflicts to the
Board and the following matters were considered and approved:
Will Adderley is a major shareholder and connected to other
•
major shareholders. Authorised on the basis that Mr Adderley
continues to abide by the terms of the relationship Agreement
entered into between himself, other major shareholders and the
Company on flotation of the Company in 2006.
Geoff Cooper is a director of Travis Perkins plc; and Nick
Wharton is a director of Halfords Group Plc, each of which
potentially competes with the Company for retail property.
Authorised on the basis that Mr Cooper is not involved in day to
day decisions in relation to the property portfolio in either
company; and Mr Wharton to absent himself from any meeting
of the Company in which property matters are to be discussed
and a conflict of interest might arise.
•
There were no other matters disclosed that were considered by
the Board to reasonably give rise to a conflict of interest.
Any conflicts considered by the Board and any authorisations
given are recorded in the Board minutes reviewed annually by
the Board.
Articles of Association
The Company’s Articles of Association may only be amended by a
special resolution of shareholders.
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 June 2008).
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.
The Board considers that its procedures to approve conflicts of
interest and potential conflicts of interest are operating effectively.
All Directors will be available at the Annual General Meeting to
meet with shareholders and answer their questions.
Significant shareholders
The Group’s significant shareholders are listed in the Directors’
report on page 19 voting rights are stated on page 18.
Dunelm Group plc
15
Remuneration report
Annual report & accounts 2009
The Directors present their Remuneration Report for the period
ended 4 July 2009.
Introduction
The Remuneration Committee has prepared this report in
accordance with the requirements of Section 420 Companies Act
2006 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 23.
Non-audited information
Remuneration committee and advisers
During the year ended 4 July 2009, 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:
•
•
•
base annual salary including benefits;
annual bonus; and
Long-Term Incentive Plan.
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.
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
4 July 2009, EPS performance exceeded budget and, taking into
account Executive Directors’ performance against job objectives,
the committee awarded an annual bonus to Will Adderley of
£150,000 and to David Stead of £100,000.
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 2008 and in September 2009.
These will vest to the extent that the performance targets are met
based on the Group’s results for the years ending 4 July 2009,
3 July 2010 and 2 July 2011 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 each 3 year plan period results are available to
determine whether performance conditions have been satisfied.
In respect of awards made for the performing periods 2009 and
2010, 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%. In respect of
awards made for the performance period to 2011, no ordinary
shares will vest if the compound annual growth in fully diluted EPS
is less than RPI +3.6% and all of the ordinary shares subject to an
award will vest if the compound annual growth in fully diluted EPS
reaches RPI +12.6%. The award will vest on a straight-line basis
between the respective two points. There will be no retesting.
Other share options
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
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Dunelm Group plc
16
Remuneration report
continued
Annual report & accounts 2009
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 and David Stead’s
service contract is 12 months from either party. 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
Nick Wharton
Date of
contract
Unexpired
term
Notice
period
28.09.06
15.09.03
08.10.04 13 months
22.07.04 10 months
25.06.07 11 months
2 years
10.08.09
11 months
n/a 12 months
n/a 12 months
3 months
1 month
1 month
1 month
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, the FTSE SmallCap Index and the FTSE 250.
The Remuneration Committee has chosen these 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.
180
160
140
120
100
80
60
40
20
0
18.10.2006 18.01.2007 18.04.2007 18.07.2007 18.10.2007 18.01.2008 18.04.2008 18.07.2008 18.10.2008 18.01.2009 18.04.2009
Dunelm
FTSE All Share General Retail Index
FTSE Small Cap Index
FTSE 250
The shares traded in the range 112.25p to 273.25p during the year, and stood at 216.25p at 4 July 2009.
Dunelm Group plc
Annual report & accounts 2009
17
Audited information
Details of Directors’ remuneration
Details of individual Directors’ remuneration in respect of the year ended 4 July 2009 are as follows:
Executive Directors
Will Adderley
David Stead
Non-Executive Directors
Geoff Cooper
Marion Sears
Simon Emeny
Total
Base salary
or fees
£’000
Vehicle
allowance
£’000
Taxable
benefits
£’000
Contribution
to personal
pension
£’000
320
220
84
32
26
682
10
10
–
–
–
20
1
waived
waived
18
–
–
–
1
–
–
–
18
Annual
bonus
£’000
150
100
–
–
–
250
2009
Total
£’000
481
348
84
32
26
971
2008
Total
£’000
435
313
80
30
25
883
Will Adderley waived pension contributions totalling £17,850 and David Stead 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
Date of
award
Share
options at
4 July 2009
End of
performance
period
Market Price
of Shares at
date of award
March 2007
Sept 2007
Sept 2008
March 2007
Sept 2007
Sept 2008
151,304
190,130
259,459
99,130
127,792
178,378
June 2009
June 2010
June 2011
June 2009
June 2010
June 2011
227p
193p
148p
227p
193p
148p
The Remuneration Committee has reviewed the Company’s EPS record over the three year performance period which ended on 4 July
2009. Reported EPS, adjusted to reflect the 53-week trading period in the last financial year, grew at a compound annual rate of 14.8%.
This is 12.4% above RPI over the same period. Accordingly, 62% of the March 2007 LTIP award will vest in March 2010, representing
93,809 shares in favour of Will Adderley and 61,461 shares in favour of David Stead.
The Directors’ beneficial interests in options granted under other schemes are as follows:
Shares
under
option
at 1 July
2008
6,114
6,176
Shares
under
option
at 4 July
2009
7,710
7,710
Type of
option
SAYE
SAYE
Granted
during
period
7,710
7,710
Exercised
during
period
–
–
Lapsed
during
period
(6,114)
(6,176)
Market
price
Exercise of shares
price per at date of
exercise
share
Vesting
date
Expiry
date
124p
124p
–
–
Jan 2012 June 2012
Jan 2012 June 2012
Director
Will Adderley
David Stead
Approval
This report was approved by the Board of Directors on 15 September 2009 and signed on its behalf by:
Marion Sears
Chairman of Remuneration Committee
15 September 2009
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Dunelm Group plc
18
Directors’ report and business review
Annual report & accounts 2009
The Directors present their report together with the audited
financial statements for the year ended 4 July 2009. Together with
certain information in the reports from the Chief Executive and the
Finance Director on pages 3 to 9 above which are incorporated
into this report by reference, this report satisfies the requirements
of the Companies Act 2006 to produce a Business Review.
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.
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.
Change of control
The Company is not party to any significant agreements which
take effect, alter or terminate solely on a change of control of the
Company following a takeover bid.
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 3 to 5.
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 arms 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 rights or other 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 LR11.7.R(4) of
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 £37.6m
(2008: £33.7m). The results are discussed in greater detail in the
Finance Director’s review on pages 7 to 9.
A final dividend of 4.0p per share (2008: 3.5p) is proposed in
respect of the year ended 4 July 2009 to add to an interim
dividend of 2.0p per share paid on 1 May 2009 (2008: 2.0p per
share). The final dividend will be paid on 11 December 2009 to
shareholders on the register at 27 November 2009.
Directors
Details of the Directors in office at the year end are set out on
page 10 and 11.
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
4 July 2009
1p ordinary
shares
At
29 June 2008
1p ordinary
shares
50,000,000 50,000,000
430,085
181,611
100,000
5,000
430,085
181,611
100,000
19,000
On 14 August 2009, Nick Wharton was appointed as a Director of
the Company.
the Listing Rules applies involving Jean Adderley, Bill Adderley
or Will Adderley or any of their associates as the related party;
There were no changes in the Directors’ shareholdings between
the year end and 15 September 2009.
(e) not carry on (other than through their holding of securities of
the Company) or have any financial interest (other than a
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 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.
Details of share options held by Directors at the year end are given
in the Remuneration Report.
Geoff Cooper and David Stead are retiring by rotation at the 2009
Annual General Meeting and will be offering themselves for
re-election. Nick Wharton is retiring in accordance with the Articles
of Association of the Company and is offering himself for election.
Biographical details of these Directors are set out on pages 10 and
11 and details of their service contracts are in the Remuneration
Report on page 15.
Dunelm Group plc
Annual report & accounts 2009
19
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 not changed during
the period.
At 4 July 2009 the Company held 837,135 shares in treasury. During
the period the Company purchased 127,000 ordinary shares into
treasury and 241,365 shares were transferred to employees on the
exercise of share options. Details of option exercises are set out in
note 11 to the Parent Company accounts on page 50.
The remaining shares in treasury are held by the Company for the
purpose of delivery to employees under employee share schemes.
Substantial shareholders
At 15 September 2009 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
83,670,000
50,000,000
Percentage
of share
capital
41.7
24.9
Powers of Directors
Specific powers of Directors in relation to shares and the
Company’s Articles of Association are referred to in the Corporate
Governance Report at page 12.
Corporate Social Responsibility
The Group recognises its duty to behave responsibly to all
stakeholders. The Board places particular emphasis on
maintaining good relationships with its customers, employees and
suppliers; on ethical sourcing; on environmental issues; and on
charitable contributions.
The Chief Executive reports regularly to the Board on all of
these issues.
Employees
Dunelm employs 5,414 staff engaged throughout the Group’s
stores, distribution and head office locations and in a range of
disciplines including Buying, Marketing, Warehousing, IT, Finance,
HR as well as many customer facing roles.
The Group is a growing business and offers competitive benefits
as well as personal and career enhancement opportunities. We
have recently launched our ‘Dunelm Directions’ programme to
support the development of talented staff and management. We
also offer further support for employees to obtain relevant
professional skills and qualifications.
The Group is an equal opportunities employer. We are committed
to recruit, develop, promote and retain skilled and motivated
people regardless of disability, race, religion, gender, colour,
nationality, sex, sexual orientation, marital status 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.
Health and safety
Dunelm is responsible for the health and safety of our employees,
contractors, customers and any other visitors to our premises.
The Group recognises that a high standard of health and safety
management is fundamental to a successful business and has
created the post of Health and Safety Manager to safeguard these
high standards.
During the past year the number of reported accidents was 56
(2008: 49).
The Group has engaged with our risk management partners to
identify further areas where it can focus on improved health and
safety management. We employ a rigorous self-auditing
programme to enforce our policies and identify any weakness in
compliance and implementation.
Customers
The Group is committed to delivering consistently high standards
of customer service and satisfaction. We constantly strive to
provide high quality, safe products at a fair price supported by our
‘Simply Value For Money’ ethos.
Suppliers
Dunelm seeks to encourage contractors and suppliers to manage
the environmental impact of their activities and to support the
Group’s environmental policy.
The Group aims to ensure that it complies fully with relevant
legislation in all areas affecting its customers including marketing,
product quality, the environment and customer data.
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 a dedicated Customer Service team that deals with
customer contact whether it is by letter, e-mail, fax or phone and
supports the store teams in delivering a strong customer experience.
Weekly communications are sent to all stores highlighting areas of
good customer service and also areas where we can improve.
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 4 July 2009 was 33 days (2008: 27
days). This increase stems from the additional week’s liabilities in
the 53 weeks of 2009 against 52 weeks in 2008.
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Dunelm Group plc
20
Directors’ report and business review
continued
Annual report & accounts 2009
Environment
Dunelm recognises that the world in which we do business is
changing. We have a responsibility to ensure that our actions as a
business always have a consideration for the environment and that
we enable our customers to do the same when it comes to buying
our products for their home.
This year we have sourced some of our energy from ‘Green
Energy’ supplies such as combined heat and power sources
where CO2 emissions are 30% lower than the national average. We
have also opened all new stores with low energy lighting and look
at our route planning and vehicle fill levels in our transport fleet to
reduce emissions from transport.
Dunelm is therefore committed to achieving high standards of
environmental performance in all aspects of its business activities,
including complying with all relevant legislation.
This year we will look to re-lamp our Distribution Centre and will
survey our stores to identify facilities that can be targeted to
reduce energy.
The Group has an Environmental Committee chaired by Tim Slade
(Central Operations Director), comprising a number of senior
managers. This committee reviews the environmental impact of
business activities in all areas and sets targets for improvement.
These cover the following specific areas:
Dunelm will be one of 5,000 companies reporting under the new
Carbon Reduction Commitment (‘CRC’) legislation.
Our target for the forthcoming year is to reduce absolute CO2
levels year on year.
1. Increasing the proportion of waste which is recycled
All Dunelm operations are required to separate plastic and paper
materials for recycling. Collections are co-ordinated nationally.
We have a desire to minimise the consumption of raw materials
and promote the use of recycled materials or material from
sustainable sources.
Our target for the forthcoming year is to reduce the cube volume
of waste sent to landfill by 10%.
2. Reducing the level of product packaging
The Group is constantly working with suppliers to reduce the level of
packaging in its products. A trial has recently been launched to
introduce reusable delivery totes into our supply chain to eliminate the
need for external product packaging and improve vehicle fill levels.
In addition we have introduced eco-bags in prominent positions in
our stores to promote reusable customer packaging and reduce
the number of carrier bags consumed. The number of carrier bags
used during the Financial year declined by 16%, despite the
increase in business.
Our target for the forthcoming year is to reduce the number of
carrier bags used per store by a further 10%.
3. Reducing energy consumption across all locations
Dunelm is focused on minimising the consumption of energy
through detailed monitoring and targeting of investment
throughout the estate. We have invested in new electricity meters
at all stores to provide detailed, half-hourly consumption data to
help us challenge and reduce high usage. This programme will be
extended to gas meters in the forthcoming year.
Our target for the forthcoming year is to reduce electricity and gas
usage by 10% on a like-for-like basis.
4. Carbon Reduction (CO2 )
Dunelm’s energy carbon footprint for the period ended 4 July 2009
was 21,537 tonnes of CO2 (Company’s Independent energy
advisers). We are constantly looking at ways to reduce our
carbon footprint.
Charitable donations
The Group’s charity of the year in the last financial year was
Children’s Hospices UK. 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 4 July 2009 was £49,000 (2008: £46,000).
The Group made no donations to political parties in either
financial year.
Dunelm will continue to work towards improving the social,
environmental and economic issues within our direct or
indirect control.
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 considered the principal strategic, operational
and financial risks to the business in the context of the Group’s
expected future results and various scenarios have been modelled
to determine the likely impact on both profitability and cash flow.
As a consequence the Directors have formed a judgement at the
time of approving the financial statements that there is a
reasonable expectation that the Group had 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.
Dunelm Group plc
Annual report & accounts 2009
21
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 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.
notice. This resolution will allow the Company to continue to do
so, and will be effective until the next Annual General Meeting
when it is intended that a similar resolution will be proposed.
The Company will also need to meet the requirements for
electronic voting under the Regulations before it can call a
meeting on 14 days’ notice.
The Notice of Annual General Meeting is set out on pages 53
to 55.
Auditors
KPMG Audit Plc offer themselves for reappointment as auditors in
accordance with section 489 of the Companies Act 2006.
By order of the Board
David Stead
Company Secretary
15 September 2009
•
Annual General Meeting
The Annual General Meeting will be held on Thursday
12 November 2009 at 10.30 am at The Hilton Hotel, Leicester.
Special business at the Annual General Meeting will be:
Requesting authority pursuant to section 551 of the
•
Companies Act 2006, to issue shares to the value of one
third of the issued ordinary share capital of the Company.
The nominal amount of shares covered by this authority is
£666,514 (66,651,421 ordinary shares, 33.3% of the issued
share capital at 15 September 2009). At that date the Company
also held 837,135 ordinary shares in treasury, which represents
approximately 0.41% of the total ordinary share capital.
This authority will lapse at the 2010 Annual General Meeting
or, if earlier, on 29 December 2010. The Directors have no
present intention to exercise this authority except to issue
shares pursuant to the Group’s employee share schemes.
Requesting authority pursuant to section 561 of the Companies
Act 2006 to distribute ordinary shares to the value of £100,395
(10,039,570 ordinary shares), which constitutes 5% of the
Company’s issued share capital (excluding treasury shares)
at 15 September 2009, without offering them to existing
shareholders. This authority will lapse at the 2010 Annual
General Meeting or, if earlier, on 29 December 2010. 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 pursuant to section
701 of the Companies Act 2006 to buy up to 19,000,000,
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.
Authorising the Board to convene a general meeting other than
an Annual General Meeting on at least 14 days’ notice. The
Companies (Shareholders’ Rights) Regulations require that all
meetings other than an Annual General Meeting must be held
on at least 21 days’ notice unless shareholders agree to a
shorter period. Under the Companies Act 2006 and the
Company’s Articles of Association, the Company can call
meetings other than an Annual General Meeting on 14 days’
•
•
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Dunelm Group plc
22
Statement of Directors’ responsibilities
in respect of the Annual Report and the financial statements
Annual report & accounts 2009
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 on the same basis.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and
of their profit or loss for that period. 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.
•
•
•
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.
Responsibility Statement
We confirm that to the best of our knowledge:
(a) 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
(b) The management report includes a fair review of the
development and performance of the business and the
position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face.
By order of the Board
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company’s transaction and 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 2006. 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.
Geoff Cooper
Chairman
15 September 2009
Will Adderley
Chief Executive
Dunelm Group plc
23
Independent Auditor’s report to the
members of Dunelm Group plc
Annual report & accounts 2009
We have audited the financial statements of Dunelm Group plc for
the financial year ended 4 July 2009 set out on pages 24 to 27.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the EU and, as regards the
Parent Company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body,
in accordance with sections 495, 496 and 497 of the Companies
Act 2006. 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 auditors’ 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
As explained more fully in the Directors’ Responsibilities Statement
set out on page 22, the Directors are responsible for the
preparation of the financial statements and for being satisfied that
they give a true and fair view. Our responsibility is to audit the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s
(APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the APB’s website at
www.frc.org.uk/apb/scope/UKP.
Opinion on financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of
the Group’s and of the Parent Company’s affairs as at 4 July
2009 and of the Group’s profit for the financial year;
the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the EU;
the Parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the EU and
as applied in accordance with the provisions of the Companies
Act 2006; and
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the
IAS Regulation.
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion:
•
the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies
Act 2006;
the information given in the Directors’ Report for the financial
year for which the financial statements are prepared is
consistent with the financial statements; and
the information given in the corporate governance statement
pursuant to rules 7.2.5 and 7.2.6 in the Disclosure Rules and
Transparency Rules is consistent with the financial statements.
•
•
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
•
adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
the Parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law
are not made; or
a separate corporate governance statement is required but has
been omitted; or
we have not received all the information and explanations we
require for our audit.
•
•
•
•
Under the Listing Rules we are required to review:
•
the Directors’ statement, set out on page 20, in relation to going
concern; and
the part of the Corporate Governance Statement relating to the
Company’s compliance with the nine provisions of the June
2008 Combined Code specified for our review.
•
MJD Lane
(Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
Leicester
15 September 2009
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Dunelm Group plc
24
Consolidated income statement
For the 53 weeks ended 4 July 2009
Annual report & accounts 2009
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 of parent.
There were no gains or losses for the current or comparative periods other than those reported above.
53 weeks
2009
£’000
52 weeks
2008
£’000
Note
1
423,783
391,795
(229,701)
(217,018)
194,082
174,777
(141,487)
(125,346)
52,595
49,431
1,563
(667)
1,075
(1,365)
53,491
49,141
3
2
5
5
6
(15,870)
(15,470)
37,621
33,671
8
8
7
7
18.8p
18.6p
16.8p
16.6p
4.0p
2.0p
3.5p
2.0p
Dunelm Group plc
25
Consolidated balance sheet
As at 4 July 2009
Annual report & accounts 2009
Non-current assets
Intangible assets
Property, plant and equipment
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
Note
9
10
12
13
14
15
16
11
16
4 July
2009
£’000
5,843
88,771
94,614
57,895
10,739
24,016
92,650
28 June
2008
£’000
2,097
77,157
79,254
60,710
11,636
2,853
75,199
187,264
154,453
(65,550)
(8,797)
(18)
(74,365)
(54,570)
(3,840)
(20)
(58,430)
(127)
–
(127)
(634)
(10,000)
(10,634)
(74,492)
(69,064)
112,772
85,389
18
2,008
345
110,419
2,008
345
83,036
Total equity attributable to equity holders of the Parent
112,772
85,389
The financial statements on pages 24 to 43 were approved by the Board of Directors on 15 September 2009 and were signed on its
behalf by:
Will Adderley
Chief Executive
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Dunelm Group plc
26
Consolidated cash flow statement
For the 53 weeks ended 4 July 2009
Annual report & accounts 2009
Profit before taxation
Adjustment for Net financing costs
Operating profit
Depreciation and amortisation
Loss/(profit) on disposal of property, plant and equipment
Operating cash flows before movements in working capital
Decrease/(increase) in inventories
Decrease/(increase) in debtors
Increase in creditors
Net movement in working capital
Share-based payments expense
Foreign exchange gains/(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
Repayment of bank loan
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
53 weeks
2009
£’000
53,491
(896)
52,595
10,555
26
52 weeks
2008
£’000
49,141
290
49,431
9,457
(278)
63,176
58,610
2,815
897
11,132
14,844
599
323
(53)
(2,640)
3,460
767
286
(49)
78,942
59,614
(821)
523
(11,200)
(1,642)
1,075
(14,093)
67,444
44,954
1
(19,647)
(6,295)
(25,941)
–
(186)
124
(10,000)
(10,993)
(21,055)
303
(17,466)
(538)
(17,701)
80
(1,900)
112
(30,000)
(10,020)
(41,728)
20,448
(14,475)
717
2,833
(39)
17,347
Cash and cash equivalents at the end of the period
14, 21
23,998
2,833
Dunelm Group plc
27
Consolidated statement of changes in equity
For the 53 weeks ended 4 July 2009
Annual report & accounts 2009
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
2,006
Share
premium
£’000
267
–
2
–
–
–
–
–
–
–
78
–
–
–
–
–
–
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
Profit for the financial year
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
37,621
(186)
123
599
139
80
(10,993)
37,621
(186)
123
599
139
80
(10,993)
As at 4 July 2009
2,008
345
110,419
112,772
2008 financial year was 52 weeks.
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Dunelm Group plc
28
Accounting policies
Annual report & accounts 2009
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 Adopted IFRSs
as applied in accordance with the provisions of the Companies Act 2006 and these are presented on pages 44 to 52.
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.
The Group has considerable financial resources together with long standing relationships with a number of key suppliers and an
established reputation in the retail sector across different geographic areas. As a consequence, the Directors believe that the Group is
well placed to manage its business risks successfully despite the current economic outlook. After making enquiries, the Directors have a
reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and financial statements.
Further information regarding the Group’s business activities, together with the factors likely to affect its future development, performance
and position is set out in the Business Review on pages 18 to 21. The financial position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the Finance Director’s review on pages 7 to 9. In addition note 17 to the financial statements includes
the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; and its exposures to
credit risk and liquidity risk.
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 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.
Dunelm Group plc
Annual report & accounts 2009
29
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 trademarks and are stated at cost less amortisation (see below).
Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful life of the asset. These are as follows:
•
•
software development
trademarks
3 years
5 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:
•
•
•
•
•
•
•
computer equipment
freehold buildings
fixtures and fittings
motor vehicles
office equipment
plant and machinery
leasehold improvements over the period of the lease
3 years
50 years
4 years
4 years
5 years
4 years
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.
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.
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Dunelm Group plc
30
Accounting policies
continued
Annual report & accounts 2009
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.
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.
At each balance sheet date the Group revises its estimates of the number of share incentives that are expected to vest and amends the
charge accordingly.
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.
Dunelm Group plc
Annual report & accounts 2009
31
Adopted IFRS and IFRIC not yet applied
In the current year the Group adopted:
IFRS 2
Amended IFRS 2 – Share-Based Payment: Vesting Conditions and Cancellations
This did not have any significant impact on the financial statements of the Group or Company.
At the date of approval of these financial statements, the following standards, amendments and interpretations were in place but
not yet effective:
IFRS 3
IFRS 8
IAS 1
IAS 23
IAS 27
IAS 32
IAS 39/IFRS 7
Revised IFRS 3 – Business Combinations
Operating Segments
Revised IAS 1 – Presentation of Financial Statements
Revised IAS 23 – Borrowing costs
Revised IAS 27 – Consolidated and Separate Financial Statements
Revised IAS 32 – Financial Instruments: Presentation
Revised IAS 39 – Financial Instrument: Recognition & Measurement and
IFRIC 13
Customer Loyalty Programmes
IFRS 7 – Reclassification of Financial Instruments
The above will be adopted in the Group and Company’s financial statements when they become effective. Revised IFRS 3 will require the
recognition of subsequent changes in the fair value of contingent consideration in the income statement rather than against goodwill, and
transaction costs will be required to be recognised immediately in the income statement. IFRS 8 requires segment information to be
based on the same basis as information reported to management for decision making purposes. Revised IAS 23 requires borrowing
costs attributable to the acquisition or construction of certain assets to be capitalised.
When adopted none of the above standards or amendments are expected to have any significant impact on the financial statements of
the Group or Company.
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Dunelm Group plc
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Notes to the annual financial statements
Annual report & accounts 2009
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
Operating lease rentals
Land and buildings
Plant and machinery
Loss/(profit) on disposal of property, plant and equipment and intangible assets
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
– all other services
3 Operating costs
Selling and Distribution
Administrative
Loss/(profit) on disposal of property, plant and equipment and intangible assets
4 Employee numbers and costs
The average number of people employed by the Group (including Directors) was:
2009
£’000
2008
£’000
229,701
2,758
217,018
5,867
2,550
2,134
8,005
7,323
21,683
1,151
19,140
937
26
(278)
2009
£’000
2008
£’000
15
52
29
8 9
–
15
67
29
34
2009
£’000
121,860
19,601
26
141,487
2008
£’000
108,051
17,573
(278)
125,346
Selling
Distribution
Administration
2009
Number
of heads
2009
Full time
equivalents
5,003
250
161
5,414
3,302
240
158
3,700
2008
Number
of heads
4,875
217
144
5,236
2008
Full time
equivalents
3,254
210
142
3,606
Dunelm Group plc
Annual report & accounts 2009
33
4 Employee numbers and costs continued
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
2009
£’000
52,696
3,429
599
206
56,930
2008
£’000
47,775
3,187
286
172
51,420
Details of Directors’ remuneration, share options, long-term incentive schemes and pension entitlements are disclosed in the Directors’
Remuneration Report on pages 15 to 17.
5 Financial income and expense
Finance income
Interest on bank deposits
Foreign exchange gains
Finance expenses
Interest on bank borrowings and overdraft
Foreign exchange losses
Net finance income/(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 28.0% (2008: 29.5%)
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 29.7% (2008: 31.5%).
2009
£’000
523
1,040 –
1,563
(667)
–
(667)
896
2008
£’000
1,075
1,075
(1,278)
(87)
(1,365)
(290)
2009
£’000
2008
£’000
16,143
94
16,237
(332)
(35)
–
(367)
12,045
(255)
11,790
3,293
554
(167)
3,680
15,870
15,470
2009
£’000
53,491
14,977
2008
£’000
49,141
14,496
7
947
(125)
59
5
–
128
918
(128)
299
(76)
(167)
15,870
15,470
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Dunelm Group plc
34
Notes to the annual financial statements
continued
Annual report & accounts 2009
7 Dividends
All dividends relate to the 1p ordinary shares.
Final for the period ended 30 June 2007 – paid 3.0p
Interim for the period ended 28 June 2008 – paid 2.0p
Final for the period ended 28 June 2008 – paid 3.5p
Interim for the period ended 4 July 2009 – paid 2.0p
2008
£’000
(6,024)
(3,996)
2009
£’000
–
–
(6,994) –
(3,999) –
(10,993)
(10,020)
The Directors are proposing a final dividend of 4.0p per ordinary share for the period ended 4 July 2009 which equates to £8.0m.
The dividend will be paid on 11 December 2009 to shareholders on the register at the close of business on 27 November 2009.
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
53 weeks
ended
4 July
2009
’000
199,874
2,559
202,433
52 weeks
ended
28 June
2008
‘000
200,446
2,180
202,626
Dunelm Group plc
Annual report & accounts 2009
35
9 Intangible assets
Cost
At 30 June 2007
Additions
Disposals
Transfers from property, plant and equipment
At 28 June 2008
Additions
Disposals
Transfers from property, plant and equipment
At 4 July 2009
Amortisation
At 30 June 2007
Charge for the financial period
Disposals
Transfers from property, plant and equipment
At 28 June 2008
Charge for the financial period
Disposals
At 4 July 2009
Net book value
At 4 July 2009
At 28 June 2008
At 30 June 2007
Software
development
and licences
£’000
Rights to
Dorma
brand
£’000
5,921
538
(208)
362
6,613
1,237
(153)
41
7,738
2,253
2,134
(208)
337
4,516
1,627
(135)
6,008
1,730
2,097
3,668
–
–
–
–
–
5,036
–
–
5,036
–
–
–
–
–
923
–
923
4,113
–
–
Total
£’000
5,921
538
(208)
362
6,613
6,273
(153)
41
12,774
2,253
2,134
(208)
337
4,516
2,550
(135)
6,931
5,843
2,097
3,668
All additions were acquired and do not include any internal development costs.
Transfers relate to assets which were classified initially as fixtures and fittings and leasehold improvements.
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Dunelm Group plc
36
Notes to the annual financial statements
continued
Annual report & accounts 2009
10 Property, plant and equipment
Cost
At 30 June 2007
Additions
Transfers to intangible assets
Disposals
At 28 June 2008
Additions
Transfers to intangible assets
Disposals
At 4 July 2009
Depreciation
At 30 June 2007
Charge for financial period
Transfers to intangible assets
On disposals
At 28 June 2008
Charge for financial period
On disposals
At 4 July 2009
Net book value
At 4 July 2009
At 28 June 2008
At 30 June 2007
Land and
buildings
£’000
Leasehold
improvements
£’000
Plant and
machinery
£’000
Motor
vehicles
£’000
Fixtures
and fittings
£’000
36,503
5,410
5
(149)
41,769
6,969
–
–
48,738
1,672
552
–
(170)
2,054
661
–
2,715
33,035
7,601
(5)
(385)
40,246
7,179
(10)
(7)
47,408
7,101
3,125
–
(355)
9,871
3,405
(4)
13,272
46,023
39,715
34,831
34,136
30,375
25,934
87
15
–
–
102
93
–
–
195
29
23
–
–
52
44
–
96
99
50
58
121
–
–
(22)
99
–
–
(13)
86
121
–
–
(22)
99
–
(13)
86
–
–
–
26,160
4,440
(362)
(1,146)
29,092
5,428
(31)
(151)
34,338
19,919
3,623
(337)
(1,130)
22,075
3,895
(145)
25,825
8,513
7,017
6,241
Total
£’000
95,906
17,466
(362)
(1,702)
111,308
19,669
(41)
(171)
130,765
28,842
7,323
(337)
(1,677)
34,151
8,005
(162)
41,994
88,771
77,157
67,064
11 Deferred tax
Deferred tax is provided in full on temporary differences under the liability method using a taxation rate of 28% (2008: 28%).
Deferred taxation assets and liabilities are attributable to the following:
Property, plant and equipment
Other temporary differences
Share-based payments
The movement in the net deferred tax balance is as follows:
Assets
Liabilities
Net
2009
£’000
–
–
558
558
2008
£’000
–
–
182
182
2009
£’000
(634)
(51)
–
(685)
2008
£’000
(813)
(3)
–
(816)
2009
£’000
(634)
(51)
558
(127)
2008
£’000
(813)
(3)
182
(634)
Property, plant and equipment
Employee benefits
Lease incentives
Short-term temporary differences
Property, plant and equipment
Employee benefits
Short-term temporary differences
Balance at
1 July 2007
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
Balance at
28 June 2008
£’000
(547)
382
2,636
805
3,276
(266)
30
(2,636)
(808)
(3,680)
–
(230)
–
–
(230)
(813)
182
–
(3)
(634)
Balance at
29 June 2008
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
Balance at
4 July 2009
£’000
(813)
182
(3)
(634)
179
236
(48)
367
–
140
–
140
(634)
558
(51)
(127)
Dunelm Group plc
Annual report & accounts 2009
37
12 Inventories
Goods for resale
13 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
2009
£’000
2008
£’000
57,895
60,710
2009
£’000
463
1,113
9,163
2008
£’000
144
1,813
9,679
10,739
11,636
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
16 Interest bearing loans and borrowings
Bank overdraft
Bank loan
2009
£’000
23,998
24,016
(18)
23,998
2009
£’000
28,850
31,462
3,971
1,267
65,550
2009
£’000
18
–
18
2008
£’000
2,833
2,853
(20)
2,833
2008
£’000
22,894
26,429
4,351
896
54,570
2008
£’000
20
10,000
10,020
On 26 September 2006 the Group entered into a £50m revolving credit facility, repayable in full on 26 September 2011 and sub-divided
into two elements: a £40m facility and a £10m facility. The £10m facility was cancelled on 26 May 2009. The £40m facility was not utilised
at the balance sheet date.
Interest is payable on funds utilised under the £40m facility at the rate of LIBOR plus 0.35%. LIBOR is fixed for a given loan at the date of
draw down.
The facility is guaranteed by the Parent Company and its subsidiaries.
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Dunelm Group plc
38
Notes to the annual financial statements
continued
Annual report & accounts 2009
16 Interest bearing loans and borrowings continued
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:
Revolving bank loan
Overdraft
2009
Total
£’000
2009
Floating rate
£’000
2009
Fixed rate
£’000
Effective
interest
rate %
2008
Total
£’000
2008
Floating rate
£’000
–
18
18
–
18
18
–
–
–
–
2.00
2.00
10,000
20
10,020
–
20
20
2008
Fixed rate
£’000
10,000
–
10,000
Effective
interest
rate %
6.31
6.00
6.31
All liabilities are denominated in sterling.
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 4 July 2009 consisted of £24,016,000 (2008: £2,853,000) 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 cash flow forecasts. The Group’s available facilities
can be found in note 16.
Group policy is that surplus funds are placed on deposit with counterparties approved by the Board, with a minimum of ‘A’ credit rating.
Subsequent to the year end the Group has capped credit limits with approved counterparties at £20m.
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 10% of the
total purchases in the year ended 4 July 2009. The outstanding US dollar liabilities at the year end were $400,000 (2008: $870,000).
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 4 July 2009 the Group held US dollar balances of $2.2m (2008: $7.0m), 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.
Dunelm Group plc
Annual report & accounts 2009
39
17 Financial risk management continued
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 Board. The Group does not have a defined share buy-back plan.
The following table is a comparison by category of the carrying amounts and fair values of the Group’s financial assets and liabilities at
4 July 2009 and 29 June 2008.
2009
Carrying value
£’000
2009
2008
Fair value Carrying value
£’000
£’000
Cash and cash equivalents
Trade receivables
Total financial assets
Trade payables
Long-term borrowings
Total financial liabilities
Net financial liabilities
23,998
463
23,998
463
2,833
144
24,461
(28,850)
–
(28,850)
(4,389)
24,461
(28,850)
–
(28,850)
(4,389)
2,997
(22,894)
(10,000)
(32,894)
(29,897)
The fair value on trade receivables and trade payables are approximate to the carrying value.
The currency profile of the Group’s net debt is as follows:
Sterling
US dollar
As at 4 July 2009, the analysis of trade receivables that were past due but not impaired is as follows:
2009
£’000
22,669
1,329
23,998
4 July 2009
28 June 2008
18 Share capital
Neither
past due nor
impaired
£’000
43
36
Total
£’000
463
144
Less than
30 days
£’000
407
85
31–60
days
£’000
7
3
61–90
days
£’000
4
20
2008
Fair value
£’000
2,833
144
2,997
(22,894)
(10,000)
(32,894)
(29,897)
2008
£’000
(688)
3,521
2,833
More
than 90
days
£’000
2
–
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
Proceeds received in relation to shares issued during the period were £nil (2008: £80,000).
Number of ordinary
shares of 1p each
2009
2008
200,791,400
–
200,617,400
174,000
200,791,400
200,791,400
Ordinary shares of 1p each:
Authorised
Allotted, called up and fully paid
2009
number
of shares
2009
£’000
2008
number
of shares
500,000,000
200,791,400
5,000
500,000,000
2,008
200,791,400
2008
£’000
5,000
2,008
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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Dunelm Group plc
40
Notes to the annual financial statements
continued
Annual report & accounts 2009
19 Treasury shares
Outstanding at beginning of year
Purchased during year
Reissued during the period in respect of share option schemes
Outstanding at end of year
2009
number
of shares
951,500
127,000
(241,365)
837,135
2009
£’000
1,522
186
(407)
1,301
2008
number
of shares
–
1,195,000
(243,500)
951,500
2008
£’000
–
1,900
(378)
1,522
The Company acquired 127,000 of its own shares through purchases on the London Stock Exchange (2008: 1,195,000). 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 £186,210 (2008: £1,905,481). The consideration has been deducted from retained earnings within
shareholders equity.
The Company reissued 241,365 (2008: 243,500) treasury shares for a total consideration of £124,453 (2008: £112,010).
The Company has the right to reissue the remaining treasury shares at a later date.
20 Share-based payments
As at 4 July 2009, 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 245,935 exercisable options in total under these schemes as at 4 July 2009.
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; 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:
September
2005
grant
December
2004
grant
September
2004
grant
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
June
2008
grant
65.6p
220.5p
137.0p
35%
3 years
8.7%
4.8%
August
2006
grant
7.0p
n/a
62.1p
35%
3 years
8.7%
4.8%
The number and weighted average exercise price of options under the GSOP is as follows:
6.3p
n/a
57.0p
35%
3 years
8.7%
4.8%
Outstanding at beginning of year
Granted during year
Retrospective adjustment to prior year
Exercised during year
Outstanding at end of year
Weighted
average
exercise
price
2009
52.4p
137.0p
46.0p
56.1p
60.5p
Number
of shares
under option
2009
610,500
36,496
21,700
(241,365)
427,331
6.0p
n/a
46.0p
35%
3 years
8.7%
4.8%
Weighted
average
exercise
price
2008
49.8p
–
–
46.0p
52.4p
6.2p
n/a
46.0p
35%
3 years
8.7%
4.8%
Number
of shares
under option
2008
1,028,000
–
–
(417,500)
610,500
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 2008. Options may be exercised under the scheme on completion of the three year savings contract
and must be exercised within six months from that date. There is provision for early exercise in certain circumstances such as death,
disability, redundancy and retirement.
Dunelm Group plc
Annual report & accounts 2009
41
20 Share-based payments continued
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
2008
47.0p
125.0p
124.5p
October
2007
70.0p
November
2006
69.0p
212.0p
157.0p
202.0p
153.0p
58%
3.5 years
2.5%
3.0%
48%
30%
3.5 years
2.5%
4.8%
36%
30%
3.5 years
2.5%
4.8%
8%
The number and weighted average exercise price of options outstanding under the Sharesave at 4 July 2009 is as follows:
Outstanding at beginning of year
Granted during year
Forfeited during year
Outstanding at end of year
Weighted
average
exercise
price
2009
154.0p
124.5p
151.4p
142.9p
Number
of shares
under option
2009
1,001,273
362,125
(495,426)
867,972
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
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. Two grants were made in the year, to the Executive Directors and
senior management. The Executive Directors’ grant in September 2008 is exercisable in September 2011 and the senior management
grant in July 2008 is exercisable in July 2010. The grant to the Executive Directors is dependent on the level of growth in Group EPS
relative to RPI. The grant to senior management is dependent on continuing employment within the Group. The maximum life of options
under the LTIP is 10 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
September
2008
September
2007
149.0p
0.889
132.5p
196.0p
0.913
178.9p
March
2007
229.0p
0.913
209.0p
The number and weighted average exercise price of options under the LTIP at 4 July 2009 is as follows:
Outstanding at beginning of year
Granted during year
Forfeited during year
Outstanding at end of year
Weighted
average
exercise
price
2009
–
–
–
–
Number
of shares
under option
2009
568,356
713,554
(18,339)
1,263,571
Weighted
average
exercise
price
2008
–
–
–
–
Number
of shares
under option
2008
250,434
317,922
–
568,356
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 2011, 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 2009) and the cost will be spread over the period from
29 June 2008 to 30 September 2011.
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Dunelm Group plc
42
Notes to the annual financial statements
continued
Annual report & accounts 2009
20 Share-based payments continued
The total expense recognised in the income statement arising from share-based payments is as follows:
GSOP
Sharesave
LTIP – Executive Directors
LTIP – Senior Managers
2009
£’000
6
128
266
199
599
2008
£’000
14
17
164
91
286
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
At 4 July
2009
£’000
24,016
(18)
23,998
Cash flow
£’000
21,163
2
21,165
At 28 June
2008
£’000
2,853
(20)
2,833
–
10,000
(10,000)
Net (debt)/cash
23,998
31,165
(7,167)
22 Commitments
As at 4 July 2009 the Group had entered into capital contracts amounting to £2.0m. The equivalent figure as at 28 June 2008 was £2.3m.
The future minimum lease payments under non-cancellable operating leases were as follows:
Within one year
In the second to fifth year inclusive
After five years
2009
Motor
vehicles
£’000
368
398
–
766
2009
Land and
buildings
£’000
20,852
76,915
103,199
200,966
2009
Plant and
machinery
£’000
280
578
–
858
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
The Group has 82 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.
Dunelm Group plc
Annual report & accounts 2009
43
24 Related parties continued
Disclosures relating to remuneration of Directors are set out in the Remuneration Report on pages 15 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
2009
£’000
637
13
45
695
2008
£’000
831
12
43
886
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 was £1,000 (2008: £3,000).
All vehicles sold to Bill Adderley during the period were fully depreciated.
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
There are no material post balance sheet events.
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Dunelm Group plc
44
Parent Company accounts balance sheet
As at 4 July 2009
Annual report & accounts 2009
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
2009
£’000
2,616
202
2,818
2008
£’000
2,283
43
2,326
64,107
64,107
64,413
64,413
66,925
66,739
(591)
(278)
(18)
(887)
(879)
89
(20)
(810)
–
–
(10,000)
(10,000)
(887)
(10,810)
66,038
55,929
10
2,008
346
616
63,068
66,038
2,008
346
283
53,292
55,929
The financial statements on pages 44 to 52 were approved by the Board of Directors on 15 September 2009 and were signed on its
behalf by:
David Stead
Director
15 September 2009
Dunelm Group plc
45
Parent Company accounts cash flow statement
For the 53 weeks ended 4 July 2009
Annual report & accounts 2009
Profit before tax
Adjusted for:
Net financing costs
Operating profit
Operating cash flows before movements in working capital
Decrease in debtors
(Decrease)/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
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
Repayment of bank loan
Dividends received
Dividends paid
Net cash flows utilised in financing activities
Net increase 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
53 weeks
2009
£’000
20,773
52 weeks
2008
£’000
19,920
(2,550)
18,223
(1,826)
18,094
306
(134)
172
(20,000)
266
(1,339)
(870)
3,266
–
21,387
197
21,584
(20,097)
166
19,747
(1,249)
3,075
58
1,057
21,631
–
(186)
124
(10,000)
20,000
(10,993)
81
(1,900)
112
(30,000)
20,097
(10,020)
(1,055)
(21,630)
2 1
(20)
(18)
(21)
(20)
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Dunelm Group plc
46
Parent Company accounts statement of changes in equity
For the 53 weeks ended 4 July 2009
Annual report & accounts 2009
As at 30 June 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
2,006
Share
premium
£’000
267
–
2
–
–
–
–
–
–
–
79
–
–
–
–
–
–
Non
distributable
£’000
163
–
–
–
–
120
–
–
–
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
Profit for the period
Purchase of treasury shares
Treasury shares reissued in respect of share option schemes
Share-based payments
Deferred tax on share-based payments
Dividends
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
333
–
–
20,545
(186)
123
266
21
(10,993)
20,545
(186)
123
599
21
(10,993)
As at 4 July 2009
2,008
346
616
63,068
66,038
The non-distributable reserve’s purpose is to reflect movements in share-based payments in respect of awards given by the Parent
Company to employees of subsidiaries.
2008 financial year was 52 weeks.
Dunelm Group plc
47
Accounting policies – Parent Company accounts
Annual report & accounts 2009
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’) and as applied in accordance with the provisions of the Companies Act 2006.
The accounts of the Company are prepared under the historical cost convention, in accordance with the Companies Act 2006, applicable
accounting standards and specifically in accordance with the accounting policies set out below.
After making enquiries, the Directors have a reasonable expectation that the Company have adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial
statements.
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.
Where a Group Company enters into financial guarantee contracts to guarantee the indebtedness of other Group Companies within
the Group, the Company considers these to be insurance arrangements for them as such. In this respect, the Company treats the
guarantee contract as a contingent liability until such time as it becomes probable the Company will be required to make a payment
under the guarantee.
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.
At each balance sheet date the Company revises its estimates of the number of share incentives expected to vest. Any impact of this
revision is recognised as an adjustment to equity with a corresponding adjustment to investments.
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.
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Dunelm Group plc
48
Notes to the Parent Company accounts
Annual report & accounts 2009
Income statement
1
The Company made a profit after tax of £20,544,000 (2008: £20,036,000). The Directors have taken advantage of the exemption
available under section 408 Companies Act 2006 and have not presented an income statement for the Company alone.
The Company is not required to give details of the fees paid to its auditors in accordance with the Companies (Disclosure of Auditor
Remuneration) Regulations 2005.
2 Employee costs
The Company has no employees other than the two Executive Directors. Full details of the Directors’ remuneration and interest are set
out in the Directors’ Remuneration Report on pages 15 to 17, and share-based payments details in note 12 on pages 50 to 51.
3 Dividends
All dividends relate to the 1p ordinary shares.
Final for the period ended 30 June 2007 – paid 3.0p
Interim for the period ended 28 June 2008 – paid 2.0p
Final for the period ended 28 June 2008 – paid 3.5p
Interim for the period ended 4 July 2009 – paid 2.0p
2008
£’000
(6,024)
(3,996)
2009
£’000
–
–
(6,994) –
(3,999) –
(10,993)
(10,020)
The Directors are proposing a final dividend of 4.0p per ordinary share for the period ended 4 July 2009 which equates to £8.0m.
The dividend will be paid on 11 December 2009 to shareholders on the register at the close of business on 27 November 2009.
Investments
4
Shares in subsidiary undertakings.
As at 30 June 2007
Share-Based Payments
As at 28 June 2008
Share-Based Payments
As at 4 July 2009
£’000
2,163
120
2,283
333
2,616
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
Nature
of business
100% Retailer of soft furnishings
100% 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 30 June 2007
Reserves debit
Income statement credit
As at 28 June 2008
Reserves credit
Income statement credit
As at 4 July 2009
Other
temporary
differences
£’000
98
(76)
21
43
21
138
202
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.
Dunelm Group plc
Annual report & accounts 2009
49
6 Trade and other receivables
Amounts owed by subsidiary undertakings
Prepayments and accrued income
Other taxation and social security
2009
£’000
64,071
30
6
64,107
2008
£’000
64,365
30
18
64,413
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
Other creditors
8
Interest bearing loans and borrowings
Bank loans
Bank overdraft
2009
£’000
14
557
20
591
2009
£’000
–
18
18
2008
£’000
15
864
–
879
2008
£’000
10,000
20
10,020
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. The £10m facility was cancelled on 26 May 2009. The £40m
facility was not utilised at the balance sheet date.
Interest is payable on the £40m facility at the rate of LIBOR plus 0.35%.
The facility is guaranteed by the Company and its subsidiaries.
9 Financial risk management
Capital management
The following table is a comparison by category of the carrying amounts and fair values of the Company’s financial assets and liabilities at
4 July 2009 and 29 June 2008.
Subsidiary loans
Total financial assets
Short-term borrowings
Trade payables
Long-term borrowings
Total financial liabilities
Net financial liabilities
2009
Carrying value
£’000
2009
2008
Fair value Carrying value
£’000
£’000
64,071
64,071
64,365
2008
Fair value
£’000
64,365
64,071
64,071
64,365
64,365
(18)
(14)
–
(32)
(18)
(14)
–
(20)
(15)
(10,000)
(20)
(15)
(10,000)
(32)
(10,035)
(10,035)
64,039
64,039
54,330
54,330
The fair value on subsidiary loans and trade payables are approximate to the carrying value.
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Dunelm Group plc
50
Notes to the Parent Company accounts
continued
Annual report & accounts 2009
9 Financial risk management continued
The currency profile of the Company’s net debt is as follows:
Sterling
10 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
Proceeds received in relation to shares issued during the period were £nil (2008: £80,000).
2009
£m
(18)
(18)
2008
£m
(20)
(20)
Number of ordinary
shares of 1p each
2009
2008
200,791,400
–
200,617,400
174,000
200,791,400
200,791,400
Ordinary shares of 1p each
Authorised
Allotted, called up and fully paid
2009
Number
of shares
2009
£’000
2008
Number
of shares
500,000,000
200,791,400
5,000
500,000,000
2,008
200,791,400
The holders of the ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share.
11 Treasury shares
Outstanding at beginning of year
Purchased during year
Reissued during the period in respect of share option schemes
Outstanding at end of year
2009
Number
of shares
951,500
127,000
(241,365)
837,135
2009
£’000
1,522
186
(407)
1,301
2008
Number
of shares
–
1,195,000
(243,500)
951,500
2008
£’000
5,000
2,008
2008
£’000
–
1,900
(378)
1,522
The Company acquired 127,000 of its own shares through purchases on the London Stock Exchange (2008: 1,195,000). 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 £186,210 (2008: £1,905,481). The consideration has been deducted from retained earnings within
shareholders equity.
The Company reissued 241,365 (2008: 243,500) treasury shares for a total consideration of £124,453 (2008: £112,010).
The Company has the right to reissue the remaining treasury shares at a later date.
12 Share-based payments
As at 4 July 2009, 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 4 July 2009.
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.
Dunelm Group plc
Annual report & accounts 2009
51
12 Share-based payments continued
The fair value of services received in return for share options granted is measured by reference to the fair value of the options, assessed
using a binomial model. The fair value per option granted and the assumptions used in the calculations are as follows:
Fair value at measurement date
Share price
Exercise price
Expected volatility (weighted average volatility used in modelling
– based on historical volatility of comparable quoted companies)
Option life (weighted average life used in modelling)
Expected dividends
Risk-free interest rate
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
6.0p
6.2p
n/a
57.0p
35%
3 years
8.7%
4.8%
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
Weighted
average
exercise
price
2009
Number
of shares
under option
2009
–
–
–
–
–
–
Weighted
average
exercise
price
2008
46.0p
46.0p
–
Number
of shares
under option
2008
200,000
(200,000)
–
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 10 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 4 July 2009 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
2009
Number
of shares
under option
2009
Weighted
average
exercise
price
2008
–
–
–
568,356
437,837
1,006,193
–
–
–
Number
of shares
under option
2008
250,434
317,922
568,356
The total expense recognised in the income statement arising from share-based payments is as follows:
GSOP
LTIP
2009
£’000
– 1
266
266
2008
£’000
165
166
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Dunelm Group plc
52
Notes to the Parent Company accounts
continued
Annual report & accounts 2009
13 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.
14 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
2009
£’000
(56,759)
33,199
20,000
3,266
2008
£’000
(47,267)
2,693
20,096
3,072
Dunelm Group plc
53
Notice of Annual General Meeting
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
Annual report & accounts 2009
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 12
November 2009 at 10:30 am 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 4 July 2009 together with the Directors’ Report, and the Auditors’
Report on those accounts be received and adopted.
2. That Geoff Cooper, who is retiring in accordance with the Articles of Association of the Company, and being eligible, is offering
himself for re-election, be reappointed as a Non-Executive Director of the Company.
3. That David Stead who is retiring in accordance with the Articles of Association of the Company, and being eligible, is offering himself
for re-election, be reappointed as an Executive Director of the Company.
4. That Nick Wharton, who is retiring in accordance with the Articles of Association of the Company, and being eligible, is offering
himself for election, be appointed as a Non-Executive Director of the Company.
5. To declare a final dividend on the ordinary shares of 4.0p per share in respect of the year ended 4 July 2009.
6. That KPMG Audit Plc be reappointed as auditors to the Company and that the Directors be authorised to determine the
auditors’ remuneration.
7. That the Directors’ Remuneration Report be approved.
Special business
To consider and if thought fit pass the following resolutions of which the resolution number 8 will be proposed as an ordinary resolution
and the resolutions numbered 9, 10 and 11 will be proposed as a special resolution:
8. That:
(a) in accordance with section 551 of the Companies Act 2006, the Directors be authorised to allot ordinary shares in the Company
or grant rights to subscribe for ordinary shares or to convert any securities into shares in the Company up to a maximum nominal
amount of £665,466 to such persons and on such terms as the Directors may determine; and
(b) 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 2010 unless previously renewed, varied or revoked although the Directors may exercise
this authority after this date in respect of an offer or agreement made while this authority was in force; and
(c) 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).
9. That:
(a) Subject to the passing of resolution 8 above, and in accordance with section 570 of the Companies Act 2006, the Directors be
given power to allot equity securities for cash or by way of a sale of treasury shares pursuant to the previous resolution as if
section 561(1) Companies Act 2006 does not apply to the allotment;
(b) the powers under paragraph (a) shall be limited to the allotment of equity securities:
(i) where securities have been offered to holders of ordinary shares in the capital of the Company in proportion (as nearly as may
be) to their existing holdings of ordinary shares subject to any exclusions or other arrangements that the Directors consider
necessary or expedient to deal with fractional entitlements and legal or practical problems under the law of, or the
requirements of any recognised regulatory body or stock exchange in any territory; and
(ii) having a nominal amount not exceeding in aggregate £100,000;
(c) 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 2010 although the Directors may exercise this authority after this date in respect of an offer or
agreement made while this authority was in force; and
(d) all previous unutilised authorities under section 95 of the Companies Act shall cease to have effect.
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Dunelm Group plc
54
Notice of Annual General Meeting
continued
Annual report & accounts 2009
10. That, in accordance with section 701 of the Companies Act 2006, the Company be generally and unconditionally authorised to make
market purchases (within the meaning of that section 701) 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 the issued ordinary share capital at 4 July 2009 (excluding treasury shares), and 10% of the Company’s issued ordinary
share capital at the date of passing of this resolution (excluding treasury shares);
(b) the maximum price (not including expenses) which may be paid for each ordinary share is an amount equal to 105% of the
average of the middle market quotations for an ordinary share, as derived from the London Stock Exchange Daily Official List, for
the five business days immediately before the day on which the purchase is made and the amount stipulated in the Buy-Back and
Stabilisation Regulation 2003; and
(c) the minimum price (not including expenses) which may be paid for each ordinary share is 1p per share.
This authority shall, unless previously varied, revoked or renewed, expire at the conclusion of the next Annual General Meeting of the
Company or, if earlier, on 29 December 2010, except in relation to a purchase of ordinary shares the contract for which was
concluded before such time and which will or may be executed wholly or partly after such time.
11. That a general meeting of the Company other than the Annual General Meeting may be called on not less than 14 clear days’ notice.
Biographies of the Directors who are standing for appointment are set out on page 10 and further explanation in relation to the resolutions
proposed as Special Business are set out in the Directors’ Report on page 20.
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
and are most likely to promote the success 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
David Stead
Company Secretary
Fosse Way
Syston
Leicester
LE7 1NF
9 October 2009
Dunelm Group plc
Annual report & accounts 2009
55
Notes
1. Information regarding the meeting, including the information required by section 311A of the Companies Act 2006, is available from the Investor Information section of our
corporate website http://production.investis.com/dnlm/investorinfo/agm/
2. Pursuant to section 319A of the Companies Act 2006, the Company must cause to be answered at the Annual General Meeting any question relating to the business being
dealt with at the meeting which is put by a member attending the meeting, except in certain circumstances, including if it is undesirable in the interests of the Company or the
good order of the meeting that the question be answered or if to do so would involve the disclosure of confidential information.
3. A member is entitled to appoint a proxy to exercise all or any of his rights to attend, speak and vote instead of him, using the form in this report. Only the procedures set out in
these notes and the note to the proxy form can be used to appoint a proxy. 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. If you wish your proxy to speak on
your behalf at the meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them.
4. 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.
5. 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.
Completion and return of a Form of Proxy will not preclude a member from attending and voting in person at the meeting.
6. 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.
7. 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 3, 5 and 6 does not apply to a Nominated Person. The rights described in
these paragraphs can only be exercised by registered members of the Company.
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.
8. 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 6 pm on the day which
is two days (excluding any non-working 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.
9. 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 RA19) 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 at www.euroclear.com/CREST. 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.
10. 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.
11. 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.
12. As at 15 September 2009 the Company’s issued share capital (excluding treasury shares) consists of 19,954,265 ordinary shares carrying one vote each. Therefore, the total
voting rights in the Company as at 15 September 2009 are 19,954,265.
13. Pursuant to Chapter 5 of Part 16 of the Companies Act 2006 (sections 527 to 531), where requested by either:
a member or members having a right to vote at the meeting and holding at least 5% of total voting rights of the Company; or
at least 100 members have a right to vote at the meeting and holding, on average, at least £100 of paid up share capital,
•
•
the Company must publish on its website, a statement setting out any matter that such members propose to raise at the meeting relating to the audit of the Company’s
accounts (including the Auditor’s Report and the conduct of the audit) that are to be laid before the meeting.
Where the Company is required to publish such a statement on its website:
•
•
•
it may not require the members making the request to pay any expenses incurred by the Company in complying with the request;
it must forward the statement to the Company’s auditors no later than the time the statement is made available on the Company’s website; and
the statement may be dealt with as part of the business of the meeting.
A member wishing to request publication of such a statement on the Company’s website must send the request to the Company using one of the following methods:
•
•
•
in hard copy form to David Stead, Company Secretary at the Company’s registered office;
by e-mail to david.stead@dunelm-mill.co.uk and be confirmed in writing to the registered office address; or
by fax to 0116 2644490 marked for the attention of David Stead and confirmed in writing to the registered office address.
Whichever form of communication is chosen, the request must:
•
•
either set out the statement in full or, if supporting a statement sent by another member, clearly identify the statement which is being supported; and
be received by the Company at least one week before the meeting.
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Dunelm Group plc
56
Notes
Annual report & accounts 2009
Dunelm Group plc
57
Notes
Annual report & accounts 2009
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Dunelm Group plc
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Notes
Annual report & accounts 2009
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 12 November 2009 at 10.30 am and at any adjournment of the meeting.
This proxy is in respect of all of 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 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 or to adjourn the meeting) the proxy will act at his
or her discretion.
For
Vote
Withheld
Against
Signature .....................................................Date ...............................2009
Ordinary business
1. To receive and approve the Directors’ Report and the audited accounts for
the period ended 4 July 2009 and the report of the auditors
2. To re-elect Geoff Cooper as a Director
3. To re-elect David Stead as a Director
4. To elect Nick Wharton as a Director
5. To declare a dividend on the ordinary shares of 4.0p per share
6. To reappoint KPMG Audit Plc as auditors of the Company and to authorise
the Directors to fix their remuneration
7. To approve the Directors’ Remuneration Report
Special business
8. To authorise the Directors to allot relevant securities
9. To authorise the Directors to allot equity securities for cash
10. To authorise the Company to purchase its own ordinary shares
11 To hold general meetings on 14 days’ notice.
Notes
1. Every holder has the right to appoint some other person(s) of their choice, who need not be a shareholder as his proxy to exercise all or any of his 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 and address 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 next to the proxy holder’s name 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).
2. To appoint more than one proxy, (an) additional proxy form(s) may be obtained by contacting the Registrars helpline on 0871 384 2030 or you may photocopy this form.
Please indicate in the box next to the proxy holder’s name the number of shares in relation to which they are authorised to act as your proxy. Please also indicate by ticking
the box provided if the proxy instruction is one of multiple instructions being given. All forms must be signed and should be returned together in the same envelope.
3. Unless otherwise instructed above, the proxy will exercise his or her discretion both as to how he or she votes and as to whether or not he or she abstains from voting on any
resolutions proposed at the meeting.
4. 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.
5. 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
6.
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.
7. Any alterations to this form must be initialled.
8.
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.
9. 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.
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.
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Second fold
BUSINESS REPLY SERVICE
Licence No. SEA 10855
Do not affix Postage Stamps if posting in
Gt. Britain, Channel Islands, or Northern Ireland.
2
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Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6ZX
Third fold and tuck in
Contents
Business review
01 Highlights
02 Chairman’s statement
03 Chief Executive’s review
07 Finance Director’s review
10 Directors
Governance
12 Corporate governance report
15 Remuneration report
18
Directors’ report and business
review
Statement of Directors’
responsibilities
22
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.
Annual General Meeting
Notice of Annual General
53
Meeting
59 Form of proxy
Advisers
Financial statements
23
Independent Auditor’s report
24 Consolidated income statement
25 Consolidated balance sheet
Consolidated cash flow
26
statement
Consolidated statement of
changes in equity
27
28 Accounting policies
32
Notes to the annual financial
statements
44 Parent Company accounts
Corporate Brokers
and Financial Advisers
Legal Advisers
Auditors
Principal Bankers
Registrars
Superstores open at 28 June 2008
Superstores opened after 29 June 2008
Financial Public Relations
Business strategy: These are our key areas of focus
Growing the store portfolio
Developing the customer offer
We are ambitious to continue driving Dunelm’s growth by rolling
out the successful superstore format. Of the existing 85
superstores as of 15 September 2009, 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.
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.
UBS Investment Bank
1 Finsbury Avenue
London EC2M 2PP
Tel: 020 7567 8000
Oriel Securities Limited
125 Wood Street
London EC2V 7AN
Tel: 020 7710 7600
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
www.dunelm-mill.com
Dunelm Group plc
Fosse Way
Syston
LE7 1NF
Tel: 0116 264 4356
Email: investorrelations@dunelm-mill.co.uk
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Annual report & accounts 2009
Dunelm Group plc
millDunelmmillDunelm