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Dunelm Group plc
Annual Report and Accounts 2014
WELCOME TO DUNELM
Dunelm is a leading specialist out-of-town
homewares retailer which provides a
comprehensive range of products to a
wide customer base, under the brand
name Dunelm.
New superstores opened
since 29 June 2013
• Ashford
• Ashton Under Lyne
• Basingstoke
• Cannock (relocation)
• Chester (relocation)
• Cramlington
• Croydon
• Doncaster (relocation)
• Keighley
• Liverpool Garston
• Northampton
• Paisley
• Rustington
Store locations
● Superstores as at 29 June 2013.
● Superstores opened since 29 June 2013.
OUR RESULTS
Financial Highlights
Revenue increase
7.8%
Operating margin
15.9%
Net cash generated from operations
£103.8m
Strategic report
2 Market overview
4 Business model
5 Strategy
6 Chairman’s statement
8 Chief Executive’s review
12 Finance Director’s review
14 Key performance indicators
16 Principal risks and uncertainties
20 Corporate social responsibility report
Governance
30 Directors and officers
32 Chairman’s letter
33 Corporate governance report
43 Letter from the Chair of the Audit and Risk
Committee
44 Audit and Risk Committee report
47 Letter from the Chair of the Remuneration
Committee
48 Remuneration report
69 Letter from the Chair of the Nominations
Committee
Revenue
£m
£730.2m
(2013: £677.2m)
603.7
538.5
492.8
Operating Profit
£m
£116.0m
(2013: £106.5m)
730.2
677.2
116.0
106.5
95.2
83.3
75.5
76.8
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
2010
2011
Profit before tax
£m
£116.0m
(2013: £108.1m)
70 Nominations Committee report
73 Directors’ report
Net cash from operations
76 Statement of Directors’ responsibilities
£m
Financial statements
£103.8m
77 Independent Auditors’ report
(2013: £100.4m)
81 Consolidated income statement
82 Consolidated statement of comprehensive
103.8
108.1
116.0
100.4
91.9
96.2
83.6
income
74.0
72.0
83 Consolidated statement of financial position
84 Consolidated statement of cash flows
85 Consolidated statement of changes in equity
86 Accounting policies
2010
2014
92 Notes to the annual financial statements
105 Parent Company statement of financial
2011
2012
2013
2014
2012
2013
Revenue
£m
£730.2m
(2013: £677.2m)
603.7
538.5
492.8
Operating Profit
£m
£116.0m
(2013: £106.5m)
Profit before tax
£m
£116.0m
(2013: £108.1m)
730.2
677.2
116.0
106.5
95.2
116.0
108.1
96.2
83.3
75.5
83.6
76.8
72.0
74.0
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Net cash from operations
£m
£103.8m
(2013: £100.4m)
100.4
103.8
91.9
position
106 Parent Company statement of cash flows
107 Parent Company statement of changes in
equity
108 Parent Company accounting policies
110 Notes to the Parent Company financial
statements
Company information
114 Advisers and contacts
115 Store listing
Dunelm Group plc Annual Report and Accounts 2014 1
Strategic reportGovernanceFinancials MARKET OVERVIEW
MARKET SIZE AND GROWTH
Market size (£bn)
Market size (£m inc VAT)
The UK Homewares market is estimated at
£10.9bn. It demonstrates a relative resilience in
tough times with somewhat muted growth as
the economy expands.
Market predictions looking ahead are for
modest growth.
10,884
10,898
10,782
10,720 10,734
2009
2010
2011
2012
2013
Source: Verdict Research
Market share
2009
2013 Change
Dunelm
4.6%
7.4% +2.8%
John Lewis
5.3%
7.3% +2.0%
Argos
Top 10
5.2%
4.9% -0.3%
41.1% 49.7% +8.6%
Customer Drivers
Source: Verdict Research
Price
Range
Convenience
Quality
Service
Layout
Other
Source: Verdict Research
MARKET SHARE
Dunelm has grown significantly within the
Homewares market and has achieved market
leadership in recent years.
The market continues to see consolidation
with major multiple retailers continuing to take
share from smaller independent operators.
CUSTOMER DRIVERS
Customer loyalty in the Homewares
market is driven primarily by range,
price and convenience.
Dunelm’s specialist customer proposition
allows us to differentiate in this sector by
providing industry leading choice, the
broadest price spectrum and the convenience
of a nationwide store portfolio together with
on-line shopping.
2 Dunelm Group plc Annual Report and Accounts 2014
Dunelm Group plc Annual Report and Accounts 2014 3
Strategic reportGovernanceFinancials BUSINESS MODEL
Dunelm is the UK’s No.1 Homewares retailer offering
over 20,000 quality products across 22 home
categories. The business operates from 137 ‘out-of-
town’ superstores, 7 high streets and provides further
‘multi-channel’ convenience through on-line, mobile,
catalogue, telephone ordering and reserve and
collect propositions.
Our aim is to continually develop and deliver an industry
leading specialist proposition by providing;
• The broadest range and choice
• Strong availability
• Multi-channel convenience
• Customer Service through knowledgeable and
helpful staff
• Exceptional value for money
DEVELOP ❯❯❯
Specialist proposition to
create market leading
range, choice and value
for our customers
SHIP ❯❯❯
Efficient, scalable and
flexible supply chain to
distribute products
wherever customers
require
SOURCE ❯❯❯
Expert and ethical sourcing
of quality products through
trusted UK and Worldwide
partners
SELL ❯❯❯
Nationwide store portfolio
plus on-line sales channel
OUR KEY STRENGTHS
Advantaged proposition we provide customers
with broad and deep ranges across all key homewares
categories, offering excellent value for money,
and supported by friendly and knowledgeable
customer service.
Scale as market leader with a focus on
homewares, we are able to leverage economies
of scale whilst continuing to build our expertise
in our chosen categories.
Property portfolio our superstore portfolio comprises
good quality trading locations at low average rents.
Supplier relationships we have a number of long-
established UK suppliers who are well placed to support
the growth and development of our ranges.
Financial strength with a highly cash generative
business model and conservative capital structure,
we are able to take a long-term view of both trading
and investment decisions.
4 Dunelm Group plc Annual Report and Accounts 2014
STRATEGY
The value, breadth of choice and expertise inherent in the
proposition are communicated to customers via the strapline
“There’s no place like Dunelm”.
Dunelm has four strategic pillars that deliver an unbeatable
customer proposition and underpin further profitable growth.
Dunelm aims to provide market leading choice and
complementary expertise at great value.
Dunelm’s customer proposition offers industry-leading choice
of quality products at keen prices, with high levels of availability
and supported by expert, friendly service. Core ranges include
many exclusive designs and premium brands such as Dorma,
supported by a frequently changing series of special buys.
The superstore format provides an average of 30,000 sq ft
of selling space with over 20,000 products across a broad
spectrum of categories, extending from the Group’s home
textiles heritage (bedding, curtains, cushions, quilts and pillows)
to a complete homewares offer including kitchenware and
dining, lighting, wall art, furniture and rugs.
1
Develop our specialist proposition
Dunelm’s competitive advantage stems from our success in
complementing strong product credentials (range, choice
and value) with excellent customer service and increased
brand awareness. The first pillar of our strategy is to ensure
we retain and build this advantage.
2
Develop the store portfolio
Our store opening programme is intended to exploit the
strength of our in-store proposition by making it accessible
to more customers. This will allow us to grow market share,
revenues and profit. We aim to grow the portfolio to 200
superstores over the medium term.
Current position
• 20,000 products across different Homewares categories
Current position
• 137 superstores stores trading providing 4.0 million sq ft
available with 30% of ranges refreshed annually
selling space
• ‘Customer First’ service ethos embedded across the
• 11 stores legally complete and expected to open in the
business
next 12 months
• Nationwide coverage of made-to-measure curtains and
blinds service, including free in-home consultations
• Consistently strong payback on new store openings
(significantly ahead of our 36 month target)
• Growing brand awareness through cross-media
• Refit programme maintains a contemporary retail chain
campaigns
3
Grow multi-channel
4
Develop and exploit our infrastructure
Recognising the trend for customers to interact with retailers
across multiple touch points, our aim is to drive growth by
providing a high quality experience in new channels (on-line
and contact centre) as well as in stores.
Investment in our business infrastructure across IT systems,
supply-chain facilities and people has been a key contributor
to Dunelm’s success. Our strategy is to continue to invest
ahead of our anticipated growth curve.
Current position
• 60% of Dunelm shopping journeys now include more than
one channel
• 6% of Company revenues now generated on-line
• Dedicated web fulfilment centre supporting 15,000 lines
available for next day home delivery with on-line only
range extensions in furniture and outdoor categories
• New website platform to be launched imminently,
enhancing customer experience and supporting
future growth
Current position
• Enterprise wide SAP system in place, upgraded in 2013
• New ‘Made to Measure’ system developed and deployed
to all stores to enhance bespoke curtains offer
• Central warehouse reconfigured to support increased
direct sourced product and store-efficient deliveries
• Investments in specialist central teams including Senior
Management, IT, Buying and Multi-channel
Dunelm Group plc Annual Report and Accounts 2014 5
Strategic reportGovernanceFinancials CHAIRMAN’S STATEMENT
Geoff Cooper
Chairman
Since the year end there have been some important changes to
our Board reflecting our on-going succession planning. We have
announced the departure of Nick Wharton, our Chief Executive
since 2010, and the resumption of the Chief Executive role by
Will Adderley, who has been our Executive Deputy Chairman
over the last few years. We also previously announced the
appointment of a new Non-Executive Director, Andy Harrison,
who joined the Board with effect from September. Andy is
currently Chief Executive of Whitbread plc and was formerly
Chief Executive of easyJet plc. He brings a wealth of experience
across a variety of consumer-facing sectors.
I would like to thank Nick for the excellent job he has done in
creating a strong operating platform for the business. Looking
ahead, the Board is confident that Will, with his unique skill set,
is the right person to lead the business through its next phase
of growth.
Across the Group, I am pleased to report another year of strong
progress. Our management team has continued to focus on
driving our well-established strategy for developing the business
and building the Group’s future, as well as keeping tight control
on day to day operations. As a result, Dunelm has again posted
good growth in revenue and profits in the latest financial year,
accompanied by further strong free cash flow, while also
investing for continuing growth in the years ahead.
Given the continuing strong business performance, the Board
is recommending a 30% increase in the final dividend to 15.0p
per share (2013: 11.5p), bringing the total Ordinary dividend for
the year to 20.0p (2013: 16.0p); this is in addition to a special
dividend of 25.0p per share (£50.7m) paid last October. We
remain committed to delivering appropriate cash returns to
shareholders through both our Ordinary dividend and, where
appropriate, additional returns of surplus cash.
Looking ahead, we will continue to invest in a range of exciting
development initiatives that will strengthen our brand and increase
the scale of our business through both new stores and multi-
channel operations. We remain confident in the Dunelm proposition
and look forward to further growth in the years ahead.
Geoff Cooper
Chairman
11 September 2014
6 Dunelm Group plc Annual Report and Accounts 2014
Dunelm Group plc Annual Report and Accounts 2014 7
Strategic reportGovernanceFinancials CHIEF EXECUTIVE’S REVIEW
Will Adderley
Chief Executive
Overview
The business has delivered a solid trading performance over the
last financial year as well as making further progress against our
operational and strategic objectives.
Strategic progress
We have continued to make good progress with the four
strategic pillars of our strategy.
Pillar 1 – develop our specialist proposition
We know from research that the primary criterion for customers
in selecting a homewares retailer is breadth of choice.
Furthermore, with colour, design and tactile aspects core
to many of our customers’ selections, most of homewares
purchases are made in store, where physical comparisons
can be made. Industry-leading product choice in our 137
superstores is therefore a key differentiator, with each store
offering over 20 categories of quality products spanning a broad
price spectrum and appealing to a wide variety of tastes.
We continue to build on this strength introducing a high
proportion of new products and designs across our ranges,
with 30% of our c.20,000 lines being refreshed annually. Over
the last year we have given particular focus to enhancing both
the product range and in-store representation of furniture in the
majority of our stores; and we have expanded our child-focused
proposition, including the creation of a dedicated ‘kids zone’ in
newer format stores.
We recognise that, in order for product choice to be meaningful,
it has to be allied to value for money at all price points.
We constantly monitor our prices against a wide range of
competitors and continue to have a very high level of confidence
in the value we offer. Our approach to pricing is consistent
across each product category. Our entry-level prices on basic
products compete with products offered by grocers and
discount multiples but at a higher quality, and our highest
quality products are comparable with the quality of products in
department stores and higher-end independent retailers but at
keener prices, with exceptional value through the middle of our
ranges. We also supplement our regular product ranges with a
flow of ‘special buy’ products which are constantly changing so
that our customers discover new merchandise each time they
visit a store.
Our strong product credentials of choice and value are
complemented by knowledgeable, friendly customer service
together with a high quality in-store experience and key
differentiating services.
We continue to strengthen our customer proposition through
increasing the market leading choice we offer in store, improving
the quality of customer service and introducing added value
services, such as Dunelm at Home. This development of our
customer offer will continue alongside our constant commitment
to delivering excellent value for money.
Our total revenue for the year increased by 7.8%. Within this,
like-for-like sales (calculated by comparing stores which have
traded throughout the last two financial years) grew by 2.1%,
despite a disappointing start to the year due to very hot weather
in July 2013. During the year we opened 12 new superstores,
including three relocations (resulting in the closure of two
existing superstores and two high street shops).
Our continued store expansion and positive like-for-like growth
has meant that during the past year we have consolidated
further our leadership of the UK homewares market, as reported
by Verdict Research. Verdict estimates our share of the market
to have increased from 6.8% in 2012 to 7.4% over the 2013
calendar year.
We also continue to progress initiatives to support the longer
term growth of the business. The key investments during
the year are discussed in greater detail below and include
the transition to a new multi-channel fulfilment operation,
our first national TV advertising, the upgrading of key points
of infrastructure and the roll-out of our ‘Dunelm at Home’
proposition. Whilst the scale of these planned investments
resulted in operating costs growing at a faster rate than sales
over the year, we were nevertheless able to deliver an operating
margin which was slightly stronger year on year at 15.9%,
reflecting continued benefit at the gross margin level from our
ongoing direct sourcing initiative.
Dunelm is a highly cash generative business with capital
expenditure fully funded from operating cash flows. Whilst
we retain a preference for capital flexibility, we have decided
to reflect our consistently strong generation of free cash flow
by reducing the level of dividend cover from 2.5x to 2.2x.
Combined with our earnings growth, this leads to a 25% year
on year increase in the level of the total Ordinary dividend for
the year. In addition we paid a special dividend totalling £50.7m
during the financial year, reflecting our approach of periodically
distributing surplus cash to shareholders.
8 Dunelm Group plc Annual Report and Accounts 2014
During the last financial year, we invested further across each
of these elements. Colleague labour hours released through
continuing to simplify or remove in-store tasks have been
re-allocated to customer service, and we have introduced the
second phase of our customer service development programme
– Customer First. The success of this approach is reflected in
the continued improvement in our customer service metrics and
excellent feedback from our customer satisfaction surveys.
Our Dunelm at Home service, through which customers can
select bespoke, made-to-measure curtains, other window
treatments and matching accessories via a free home design
consultation, was extended significantly during the year and is
now provided by the majority of our stores. This allows the vast
majority of customers nationwide to have access to the service.
We invest significantly in the training and development of our
home consultants to ensure high levels of customer satisfaction.
We also continue to invest in increasing awareness of the
Dunelm brand, launching a new logo and primary strapline
(“There’s no place like Dunelm”) last autumn. This evolution of
our brand positioning better communicates Dunelm’s range
authority across all homewares categories and our value,
convenience and service advantages. We invested in national
TV advertising for the first time in the spring, following a
successful regional pilot prior to last Christmas. This involved
an incremental investment of over £3m, at the same time as
increasing our commitment to catalogues, traditional press
advertising and digital marketing. We have seen unprompted
brand awareness increase steadily since we commenced
our TV advertising and we will continue testing it this autumn,
including through the sole sponsorship of ITV’s newly launched
Encore channel.
Pillar 2 – develop the store portfolio
The vast majority of our portfolio comprises out-of-town
superstores, with the average store footprint around 30,000
square feet of retail space. This investment in space enables
us to offer over 20,000 homewares products with the depth of
range, inspirational presentation and availability that customers
expect from a specialist retailer and which we consider to be a
key competitive advantage. In most cases we are also able to
provide a Pausa coffee shop, now present in over 100 stores,
giving an additional reason for customers to visit and increasing
their engagement and time in our stores.
In the last financial year we opened 12 new superstores (two
being superstore relocations and one being a high street
relocation) taking our superstore chain to 136 stores at the year
end, providing 4.0 million square feet of selling space in total.
One additional new store has been opened since the year-end
and 10 more stores are contractually committed and expected
to open in the current financial year. We remain confident in
further opportunities for us to increase our coverage nationwide,
retaining our view that our mature UK superstore portfolio will
consist of approximately 200 stores.
Our new stores continue to deliver strong returns on investment,
with the average discounted payback for stores opened in
the last three financial years expected to be approximately
24 months. We currently target the majority of our new store
openings to achieve discounted cash flow payback of a
maximum of 36 months, although we recognise that as our
portfolio becomes more mature our investment appraisals will
need to reflect greater cannibalisation of revenues from existing
stores. Going forward, we anticipate that up to a third of new
stores will be targeted to achieve payback in up to 48 months.
Our store refit programme continues, with approximately
£4.0m invested during the year to improve the overall shopping
environment, increase the number of inspirational displays and
rebalance category space including the introduction of new
ranges such as furniture. While the majority of this investment is
now focused on smaller scale refits, we completed major refits
in three stores during the financial year. As a result 38% of our
superstores are either new or have benefited from a major refit
over the past three years.
Pillar 3 – grow multi-channel
In common with trends elsewhere in UK retail, Dunelm
customers continue to embrace the convenience and value of
multi-channel shopping, with the majority of shopping journeys
now involving some element of on-line activity (browsing,
research or purchasing) through our website, www.dunelm.com.
A key development in our on-line proposition over the last year
has been the move to a new dedicated fulfilment operation
for deliveries to home, which has enabled us to increase
significantly the number of products available for home delivery,
shorten lead times for standard deliveries and offer next day
delivery as a premium service on 15,000 lines. The new facility,
operated on our behalf by a third party partner, became
operational in October 2013.
We have also expanded choice for customers by increasing
the range of products customers are able to buy from us
on-line, launching extended ranges of online-only furniture to
complement the ranges displayed and sold in stores.
With the above developments supported by increasing investment
in digital marketing, we have seen our multi-channel revenues
continue to grow strongly, representing 6% of revenues over the
full financial year and approximately 7% in the final quarter. We see
scope for this proportion to increase further.
At the same time, we are close to completing the upgrade of the
software platform which runs our customer website, involving
a capital investment of £7m, (of which £5.0m had been spent
as at the end of the financial year). This upgrade provides
further scalability, improves the customer journey and shopping
experience and paves the way for more frequent enhancements
to functionality going forward.
Dunelm Group plc Annual Report and Accounts 2014 9
Strategic reportGovernanceFinancials CHIEF EXECUTIVE’S REVIEW continued
Summary and outlook
Dunelm has delivered solid trading results in the last financial
year. We have again strengthened our specialist proposition,
improved customer service in store and increased the profile of
our brand. Each of these, together with our traditional product
strength, has enabled us to increase sales on a like-for-like basis
and to continue to gain market share. We have also made good
strategic progress, growing our business through new stores
and multi-channel, and strengthening our infrastructure. I would
like to thank everyone involved in the business their hard work
and commitment in achieving this.
On a personal note, I would like to thank Nick and the team for
all that they have achieved over the last few years, continuing
to build the business and further improving our operational
platform. I am very much looking forward to leading the
business in its next phase of growth.
Will Adderley
Chief Executive
11 September 2014
Pillar 4 – develop and exploit our infrastructure
Investment in our business infrastructure across IT systems,
distribution facilities and people is a key contributor to Dunelm’s
success and this continued in the past year.
In addition to the work on our new web platform, our IT team
has successfully completed a major upgrade to our enterprise
wide SAP system and has launched new improved in-store
systems for customers ordering made-to-measure curtains.
Technology is increasingly critical to delivering a high quality
customer experience, not only on-line but also in stores and
through our customer contact centre. Accordingly, we have
developed an extensive, multi-year programme of future
improvements and are investing heavily in our own internal IT
capability to enable this programme.
We have made further changes to our central warehouse
operations to allow more store-efficient deliveries and also to
support the increased volume of merchandise flowing through
our own supply chain, driven by store expansion and the
continuing move towards direct sourcing. However, our long
term planning suggests that our rate of growth will require us
to invest in enlarged central warehousing facilities in the
medium term, and we are currently developing detailed
plans for this project.
We also continue to increase the quality and quantity of
our central capabilities to deliver our future growth plans.
Specifically this includes adding additional resource in our
buying and supply functions to service the greater level of
inventory sourced directly. We have also further strengthened
our senior management team. Following the recruitment of a
new Chief Information Officer at the beginning of the financial
year, in January we appointed an experienced Commercial
Director, who has already helped us to develop further our
buying, supply, marketing and space management teams.
We will continue to build these teams in support of our
enlarged business.
10 Dunelm Group plc Annual Report and Accounts 2014
Dunelm Group plc Annual Report and Accounts 2014 11
Strategic reportGovernanceFinancials FINANCE DIRECTOR’S REVIEW
David Stead
Finance Director
The ‘2014’ accounting period refers to the 52 weeks ended 28
June 2014 and the comparative period ‘2013’ refers to the 52
weeks ended 29 June 2013.
Revenue
Group revenue for 2014 was £730.2m (2013: £677.2m), an
increase of 7.8%. This increase in revenue was achieved through
growth in like-for-like sales of 2.1% and contribution from net new
space amounting to 5.7%. Like-for-like sales performance was
positive in the second half (+5.3%), more than offsetting the first
half performance (-0.9%) which included the adverse impact of
the summer heat wave in July 2013.
The store expansion programme continued with 12 new
openings in the year (of which two were relocations of existing
superstores and one was a high street relocation). We expect
sales in the coming year to benefit from our on-going investment
in the customer proposition and marketing, together with the
increased store portfolio.
Gross Margin
Gross margin increased by 80 basis points to 49.5% (2013:
48.7%) reflecting in particular continued benefit from direct
sourcing initiatives. We will continue to pursue opportunities to
drive margin benefits from direct sourcing and from challenging
our UK based suppliers to achieve cost efficiencies, whilst
maintaining quality.
Operating Costs
Operating costs in 2014 grew by 9.9% compared with the prior
year. In addition to the expansion of the store portfolio, which
saw average selling space increase by 7.7% compared with 2013,
incremental investments of over £5.0m were made in a number
of key areas to support differentiation in our customer proposition
and to position the business for further growth. These included:
• Customer service – we have continued to roll out customer
service training to all store colleagues
• Multi-channel operations – we completed the transfer
of our in-house fulfilment operation for home delivery to an
outsource partner, incurring one-off transition costs
• Marketing – we launched our first national TV advertising
campaign, as well as increasing investment in other areas
such as catalogues and digital marketing, bringing marketing
spend to 1.7% of the sales for the year (2013:1.2%)
• Dunelm At Home – we rolled out this service to an additional
49 stores during the year, incurring one-off set-up costs
• Business infrastructure – we have continued to build
the capability and capacity of central teams to support our
expansion, particularly in the Commercial and IT functions
12 Dunelm Group plc Annual Report and Accounts 2014
Looking ahead, we intend to continue investing to grow and
strengthen the business. In addition to cost increases driven by
new stores we intend to increase marketing spend further, to
around 1.9% of sales; we will grow our capability and capacity
to pursue further direct sourcing initiatives; and we will invest in
other operational areas of the business as needed. In addition,
we anticipate that depreciation and amortisation charges
will increase by around 15% from their 2014 level of £21.3m,
as new capital projects (notably our new web platform) are
completed. As a result of all these factors, we anticipate that
operating costs will grow at a faster rate than sales over at
least the next financial year.
Operating Profit
Group operating profit for the financial year was £116.0m
(2013: £106.5m), an increase of £9.5m (8.9%). Notwithstanding
the investments outlined above, operating profit margin at
15.9% was slightly ahead of 2013 (15.7%).
EBITDA
Earnings before interest, tax, depreciation and amortisation were
£137.3m (2013: £127.1m). This has been calculated as operating
profit (£116.0m) plus depreciation and amortisation (£21.3m) and
represents an increase of 8.0% on the previous year. The EBITDA
margin achieved was 18.8% of sales (2013: 18.8%).
Financial Items
The Group generated a small net loss on financial items in 2014
(2013: £1.5m gain). This loss was made up of interest earned
on cash deposits of £0.4m (2013: £0.9m) offset by foreign
exchange differences arising on US dollar cash balances held
during the period. In 2014 the strengthening of sterling over the
year caused the Group to realise foreign exchange losses on
surplus dollar holdings amounting to £0.5m (2013: £0.6m gain).
As at 28 June 2014 the Group held $87.2m (2013: $45.9m) in
US dollar forward contracts representing approximately 78%
of the anticipated US dollar spend over the next financial year.
There were no surplus US dollar cash deposits.
PBT
After accounting for interest and foreign exchange
impacts, profit before tax for the year amounted to £116.0m
(2013: £108.1m), an increase of 7.3%.
Taxation
The tax charge for the year was 23.2% of profit before tax
compared with 24.6% in the prior year. This reflects the
reduction in the headline rate of corporation tax to 22.5%
(2013: 23.75%) as well as additional benefits from an increase
in the level of assets qualifying for capital allowances. We
expect the tax charge to continue to trend approximately 100
bps above the headline corporation tax rate going forward.
This difference is mainly due to depreciation charged on non-
qualifying capital expenditure.
PAT and EPS
Profit after tax was £89.1m (2013: £81.5m), an increase of 9.3%.
Basic earnings per share (EPS) for the year ended 28 June 2014
was 44.0p (2013: 40.2p), an increase of 9.5%. Fully diluted EPS
increased by 9.3% to 43.7p (2013: 40.0p).
Capital Expenditure & Working Capital
Gross capital expenditure in the financial year was £28.0m
compared with £26.4m in 2013. Significant investments
were made in order to support the continued growth and
development of the store portfolio with the addition of 12 new
superstores (49% of capital expenditure) and three major
refits. The remaining investment related mainly to IT activities,
including the upgrade of our core enterprise system (SAP) and
further investment in a new technology platform to underpin and
expand our multi-channel offer.
Investment in working capital increased by £9.3m (2013:
£3.4m) over the year, primarily as a result of additional stock to
support the expansion in the store estate as well as increased
direct sourcing.
Cash Resources
Dunelm continues to deliver strong cash returns. In 2014 the
Group generated £103.8m (2013: £100.4m) of net cash from
operating activities, an increase of 3.4%. Net cash resources
at the end of the year were £21.7m (2013: £44.7m) with daily
average cleared funds over the course of the financial year of
£48.3m (2013: £66.2m).
Our rate of cash conversion remains strong. Measured as the
ratio of net cash from operations to operating profit, conversion
was 89% (2013: 94%). Taking free cash flow as a proportion
of PBT, conversion was 66% (2013: 69%). For the purpose
of this calculation, free cash flow is defined as net cash from
operations less capital investment and certain ‘other items’ in
the cash flow statement.
Dividend
An interim dividend of 5.0p was paid in April 2014 (2013: 4.5p).
It is proposed to pay a final dividend of 15.0p per share (2013:
11.5p). The total dividend of 20.0p represents an increase of
25.0% over the previous year and moves the dividend cover
to 2.2x (2013: 2.5x). The Board considers that this reduction in
dividend cover is appropriate in view of the Group’s consistently
strong financial performance and cash generative nature. The
final dividend will be paid on 19 December 2014 to shareholders
on the register at the close of business on 28 November 2014.
Share Buy-back
During the year, the Group invested £15.4m to buy in shares to
hold in treasury in order to satisfy future exercises of options
granted under incentive plans and other share schemes. As at
the year-end, we held 936,498 shares in treasury, equivalent
to approximately 46% of options outstanding. Over time, we
expect to increase our holding in treasury to be equivalent to
approximately 60% of outstanding options.
Additional Returns to Shareholders
The Group’s policy is to maintain cash resources such that it
is able to invest in the four pillars of its strategy and in addition
to take advantage of investment opportunities as and when
they arise, for example freehold property acquisitions. The
Board also remains committed to returning excess capital
to shareholders from time to time where cash resources are
materially in excess of investment requirements.
During the year, the Group returned excess capital of £50.7m
(25.0p per share) to shareholders through a special dividend.
The Board will continue to assess the capital structure of the
business in light of anticipated trading performance, known
and anticipated investment plans and the level of cash
available and will look to distribute excess capital to
shareholders when appropriate.
Treasury Management
The Group Board has established an overall Treasury Policy,
day-to-day management of which is delegated to the Finance
Director. This policy ensures the following;
• Effective management of all clearing bank operations.
• Access to appropriate levels of funding and liquidity.
• Optimal investment of surplus cash within an approved risk/
return profile.
• Appropriate management of foreign exchange exposures
and cash flows.
The funding position of the Group is regularly reviewed by
the Board. As a result it has been agreed that access to
committed lines of external funding is not required in the short
term and that Dunelm will continue to maintain uncommitted
lines of funding with partner banks whilst trading with a positive
net cash position.
Key Performance Indicators
In addition to the traditional financial measures of sales and
profits, the Directors review business performance each month
using a range of other KPIs. These include measures shown on
page 14.
David Stead
Finance Director
11 September 2014
Dunelm Group plc Annual Report and Accounts 2014 13
Strategic reportGovernanceFinancials KEY PERFORMANCE
INDICATORS
Key – Link to strategy
1
2
3
4
Develop our specialist proposition
Expand the store portfolio
Grow multi-channel
Develop and exploit our infrastructure
SALES GROWTH – %
LIKE FOR LIKE SALES
GROWTH – %
MULTI-CHANNEL SALES
PARTICIPATION – %
12.1
12.2
3.1
9.3
7.8
2.1
1.7
6.1
4.1
2.5
1.8
2011
2012
2013
2014
1
32
-0.6
2011
1 3
2012
2013
2014
2011
2012
2013
2014
3
GROSS MARGIN CHANGE –
BASIS POINTS
120
80
40
30
OPERATING MARGIN – %
15.8
15.7
15.9
15.5
EARNINGS PER SHARE
(DILUTED) – %
43.7
40.0
35.1
29.3
2011
2012
2013
2014
2011
2012
2013
2014
2011
2012
2013
2014
1
32
4
1
32
4
1
32
4
DIVIDEND PER SHARE – p
EBITDA – £m
NEW STORE OPENINGS
16.0
14.0
11.5
20.0
137.3
127.1
113.2
97.4
14
14
12
10
2011
2012
2013
2014
2011
2012
2013
2014
2011
2012
2013
2014
1
32
4
1
32
4
2
14 Dunelm Group plc Annual Report and Accounts 2014
Dunelm Group plc Annual Report and Accounts 2014 15
Strategic reportGovernanceFinancials PRINCIPAL RISKS
AND UNCERTAINTIES
Key – Link to strategy
1
2
3
4
Develop our specialist proposition
Expand the store portfolio
Grow multi-channel
Develop and exploit our infrastructure
The Board has overall responsibility for risk management, internal control and business continuity and determines the nature and
extent of the risks it is willing to take.
A systematic approach to the continuous identification, assessment and effective management of risks provides assurance that both
strategic and operational objectives can be achieved.
Risk Management Framework
Our risk management framework promotes effective risk management across all areas of the Group and aims to ensure that the
business balances both risk and reward and makes sound judgements as to likelihood and impact.
Executive Directors and senior operational management are tasked with the on-going management of risk through four key stages;
• Identification
• Evaluation
• Mitigation
• Reporting & Monitoring
Periodic risk identification and assessment workshops and reviews are in place to determine the overall risk profile of the
organisation as well as specific, detailed risks inherent within individual areas. All risks identified are evaluated against ‘likelihood’
and ‘impact’ criteria to establish their potential severity, which enables us to produce a prioritised risk register. All risks are assigned
owners from the senior management team and the highest priority risks are reviewed regularly by the Executive Board to further
assess the extent and effectiveness of controls.
The Group Board gains assurance through twice yearly reviews, as well as by regular challenge to the executive team.
The principal risks and uncertainties facing the business are set out below, together with mitigation:
BRAND REPUTATION, PRODUCT AND SERVICE QUALITY 1 2 3
Description
The quality and safety of our stores,
infrastructure, products and services is
essential to the business. If we fail to
deliver acceptable quality and safety
standards there is a risk that individuals
could be harmed and that reputational
damage could lead to customers,
colleagues and other stakeholders losing
confidence in the brand.
Performance
Indicator:
Product
complaints
and recalls
Reportable
health and safety
incidents
Supplier audit
outcomes
Executive
responsibility:
Chief Executive
Progress in 2013/14
• Our policies and procedures have
been reviewed and updated.
• Our product recall procedure has
been reviewed.
• Supplier audits have been
completed for all key suppliers.
Mitigation
• We have a range of policies
specifying the quality of products
and production processes that are
signed up to by suppliers.
• We conduct regular audits on all
stock suppliers in line with ETI
guidelines. This also covers human
rights concerns.
• We operate a full test schedule for all
new products and on a sample basis
for on-going lines, overseen by our
specialist Technology team.
• Food hygiene is maintained through
the adoption of clear operating
guidelines contained in the Groups
‘Food Safety Manual’. Staff
certification, risk assessments,
equipment inspections and
compliance audits ensure
standards are maintained.
• We continue to invest in a refit
programme to ensure stores remain
contemporary and provide a high
quality shopping environment.
• All our operating locations are
subject to regular health and safety
compliance audits to ensure they
provide a safe and secure
environment.
16 Dunelm Group plc Annual Report and Accounts 2014
COMPETITION 1 2 3
Performance
Indicator:
Market share
Executive
responsibility:
Chief Executive
Description
The Group competes with a wide variety
of retailers both in-store and online and
across a broad price spectrum. Failure to
maintain a competitive offer in the
Homewares market on multiple fronts
(price, range, quality and service) could
materially impact returns and limit
opportunities for growth.
Mitigation
• The Board continually monitors
Group performance relative to the
Homewares market and against
specific competitors.
• Continuous brand tracking is used to
gauge customer perception and
experience.
• Investment in Brand Awareness
through TV, digital and traditional
press designed to differentiate on
range, choice and value.
• We have a strong focus on new
product development, both in
existing and new homewares
categories, to strengthen our
specialist proposition.
• We have invested significantly in the
front-end platform, fulfilment
infrastructure and people capabilities
to develop and enhance our
multi-channel customer offer.
Progress in 2013/14
• We are the UK’s leading homewares
retailer with a growing market share,
currently 7.4%.
• We have redirected the tasks of
our colleagues in-store towards
activities which enhance the
customer experience.
• We have a customer feedback
system which enables us to react
quickly to both positive and negative
feedback.
• Increased marketing expenditure
has helped raise awareness of
our brand.
• Our online sales now account for
6% of total sales (up from 4% in
2012/13).
REGULATORY ENVIRONMENT & COMPLIANCE 1 2 3 4
Performance
Indicator:
Prosecution and
other regulatory
action
Executive
responsibility:
Chief Executive
Description
The Group risks incurring penalties,
damages, claims and reputational
damage arising from failure to comply
with legislative or regulatory requirements
across many areas including but not
limited to, trading, health and safety,
employment law, data protection, Bribery
Act, advertising, human rights and the
environment.
Progress in 2013/14
• Training on the requirements of the
Bribery Act and Competition Law is
in place for all relevant colleagues
and policies are communicated to all
suppliers.
• Human Resources policies and
health and safety policies and
procedures are kept under constant
review. For further details please see
our Corporate Social Responsibility
report on pages 20 to 27.
Mitigation
• We operate a number of policies and
codes of practice outlining
mandatory requirements within the
business governing behaviours in all
key areas. These are regularly
reviewed and updated.
• Operational management are also
responsible for liaising with the
Company Secretary and external
advisers to ensure that potential
issues from new legislation are
identified and managed.
• We have a whistle-blowing
procedure and helpline which
enables colleagues to raise
concerns in confidence.
IT SYSTEMS, SENSITIVE DATA AND CYBER RISK 1 3 4
Performance
Indicator:
Number of major
IT incidents
Executive
responsibility:
Chief Executive
Description
We are dependent on the reliability and
capability of key information systems and
technology. A major incident (including a
cyber-attack), sustained performance
problems or failure to keep technology
up to date could constitute a significant
threat to the business, at least in the
short term.
Mitigation
• All business critical systems are
based on established, industry
leading package solutions, with full
support in place.
• We have a disaster recovery
strategy designed to ensure
continuity of trade.
Progress in 2013/14
• We have embarked upon a two year
plan of significant investment in the
depth and capability of our IT function.
• We completed the upgrade of our
main enterprise wide SAP system.
• We are nearing completion
of a £7m upgrade of our
multi-channel platform.
• Disaster recovery plans have been
reviewed for all key sites.
Dunelm Group plc Annual Report and Accounts 2014 17
Strategic reportFinancialsGovernance PRINCIPAL RISKS
AND UNCERTAINTIES continued
Key – Link to strategy
1
2
3
4
Develop our specialist proposition
Expand the store portfolio
Grow multi-channel
Develop and exploit our infrastructure
COMMODITY PRICES 1 4
Performance
Indicator:
Gross margin
Executive
responsibility:
Finance Director
Description
Significant cost price increases or high
levels of volatility in key areas such as
freight rates, raw materials, energy and
exchange rates have been a feature of
the British economy over recent years.
Failure to manage and control these
changes may lead to pressure on
margins and adversely impact
financial results.
Mitigation
• Dunelm uses its scale, buying power
and growth to secure supply of key
raw materials at competitive prices.
Progress in 2013/14
• 17.7% of our products are now
sourced directly from the Far East
(16.2% 2012/13).
• Increased direct sourcing of
• Foreign currency hedging has
products from the Far East has
mitigated cost increases.
• Freight rates, energy and currency
are bought forward to help mitigate
volatility and aid margin
management.
• Specialist procurement resource and
tight contract management continues
to identify and control costs.
been increased to provide a greater
level of certainty in commercial
decision making.
• Commodity price tracking is in
place for all key commodities and
regions to assist planning.
PORTFOLIO EXPANSION 2
Performance
Indicator:
Number of new
store openings
and pipeline
Executive
responsibility:
Chief Executive
Description
Availability of vacant or new retail space
in the right location is essential to deliver
our growth plans. Inability to secure or
develop the required retail trading space
to deliver our superstore format will limit
our pace of expansion or force us to
compromise our offer.
Mitigation
• Our Group Property Director
actively monitors availability of
retail space with the support of
professional advisers.
• Financial modelling helps us assess
the viability of potential sites.
• The Group’s strong cash generation
and debt-free status provide an
attractive covenant to landlords and
the flexibility to acquire freehold units
if appropriate.
Progress in 2013/14
• We have opened 12 new
superstores in the year.
• We have legally completed on 11
new stores due to open in 2014/15.
• Our strategy for the acquisition of
sites in key catchment areas remains
under regular review.
BUSINESS INTERRUPTION & INFRASTRUCTURE 1 3 4
Performance
Indicator:
n/a
Executive
responsibility:
Chief Executive
Description
The Group could suffer the loss of a
major facility with a consequent impact
on short-term trading or diversion of
focus from longer-term strategy and
planning. This could materially affect the
profitability of the business.
The Group could suffer the loss of a
major supply partner also impacting
short-term trading.
Mitigation
• Physical infrastructure – Head Office,
Workroom, Multi-channel and
Distribution Centre activities are
all Subject to Disaster recovery
plans and could all operate from
fall back facilities.
• Suppliers – The Group seeks to
mitigate this risk by limiting the
dependency on individual suppliers
and by actively managing key
supplier relationships. High stock
service levels and a high proportion
of direct-to-store deliveries further
mitigate supply chain risk.
Progress in 2013/14
• Desk-top simulations of disaster
scenarios affecting our Head
Office and Distribution Centre
have been completed.
• We have moved away from UK
supplies to direct sourcing from
factories in cases where supplier
capability issues were identified.
• Additional supply sources/routes
have been identified for key
product categories.
18 Dunelm Group plc Annual Report and Accounts 2014
FINANCE AND TREASURY 1 2 3 4
Performance
Indicator:
Available funds
Executive
responsibility:
Finance Director
Description
Lack of appropriate levels of cash
resources or exposure to significant
variations in interest rates or exchange
rates could have an impact on the
Group’s operations and growth plans.
Mitigation
• We have significant cash surpluses
and further uncommitted borrowing
facilities with partner banks to fund
growth plans.
Progress in 2013/14
• We returned £50.7m of cash to
shareholders in October 2013 by
way of a special dividend, in addition
to our Ordinary dividend.
• Cash flows are monitored weekly
• Net cash reserves at the end of the
against agreed budgets.
year were £21.7m.
• A Group Treasury Policy is in place
• All investment outlined In the
to govern cash management
strategies and to control foreign
exchange exposures.
2014/15 budget approved by the
Board will be financed through
operating cash flows.
Progress in 2013/14
• Two important new appointments to
the Executive Board were made
during the year: Chief Information
Officer and Commercial Director.
• Significant growth has been made
in key buying and business
supplier areas.
MANAGEMENT TEAM & KEY PERSONNEL 1 2 3 4
Performance
Indicator:
Colleague
retention
Executive
responsibility:
Chief Executive
Description
The success of Dunelm is dependent
upon the availability of talented senior
management. The business could
be vulnerable to the loss of individual
key managers.
Mitigation
• The composition of the Executive
team is kept under constant review
by the Board to ensure that it is
appropriate to deliver the growth
plans of the business.
• Succession plans and annual
appraisals are in place across
the Group.
• The Executive Board seeks
to develop high calibre
individuals through sponsored
talent management and
succession planning.
• The Group’s remuneration policy
detailed on page 49 is designed to
ensure that high calibre executives
are attracted and retained. Retention
of senior management is supported
by awards under the Long-Term
Incentive Plan and Company Share
Option Plan.
Will Adderley
Chief Executive
David Stead
Finance Director
11 September 2014
Dunelm Group plc Annual Report and Accounts 2014 19
Strategic reportFinancialsGovernance
CORPORATE SOCIAL
RESPONSIBILITY REPORT
Key – Link to strategy
1
2
3
4
Develop our specialist proposition
Expand the store portfolio
Grow multi-channel
Develop and exploit our infrastructure
How do we manage CSR?
Although we report on CSR separately, we do not treat it as a separate function; it is embedded in senior management role
accountabilities. The Board has overall responsibility for setting policies and monitoring performance.
The table below sets out how we manage CSR matters:
Board
Overall responsibility for CSR
Executive Board
Members have line responsibility for
managing specific CSR topics
• Approve policies
• Executive members have line
responsibility for managing specific
CSR topics
• Monitor progress through KPIs and
Board reports
• Annual presentations on health and
safety and human rights
• KPIs monitored by the Executive Board
Dialogue and Communication
• Customers: through customer care, weekly on-line surveys and social media
• Colleagues: in-house magazine and through Colleagues’ Council
• Suppliers: annual conference and meetings throughout the year
• Others: social media, corporate website
20 Dunelm Group plc Annual Report and Accounts 2014
CUSTOMERS
Executive responsibility:
Chief Executive
Why it matters
Our core strength as a business is the delivery of market leading choice
of products and services, at great value for money, backed up by friendly
and knowledgeable customer service. We can only deliver this by having
customer interests at the heart of our business.
1 2 3
Other achievements
• Rebrand of the business as ‘Dunelm’ with the strapline
“There’s no place like Dunelm”, supported by a TV
campaign to build greater customer awareness.
• We have significantly increased the range of furniture
available to order in-store or from our catalogue and
website, including a custom made upholstery offer.
• We have improved the ordering system for our made to
measure curtain and blinds service to improve accuracy,
quality and speed.
• Improved Autumn/Winter and Spring/Summer catalogues,
plus a spring mini-catalogue distributed.
Awards:
• UK’s second favourite homewares retailer according to the
2014 Verdict survey (third in previous year).
• Readers of House Beautiful magazine voted us the
Home Retailer of the year Gold Award for 2013 (third year
running). For the first time we also received the Best On-
line Retailer award.
• Café Pausa won the ‘Sammies’ sandwich bar retailer of
the year award, beating Costa, Pret A Manger and Greggs
amongst others.
2014/15 objectives:
• Reinforce our ‘Customer First’ ethos through further
colleague training.
• Major upgrade of our website and a new mobile app will
enhance the on-line customer experience.
• Further extend the range of products available for order
from our website and catalogue.
What do we do?
We aim to provide to our customers:
• Great products and services, that are safe, legally
compliant and competitively priced.
• Excellent service in store, on-line and through customer care.
• Stores that are safe and accessible.
• Fair and truthful marketing.
What have we achieved this year?
2013/14 objectives
Achievements
Enhance customer service
in-store through our targeted
service training programme
(‘Customer First’).
Extend on-line offer to include
a wider range of products for
home delivery.
Improve home delivery times
and speed of availability of
‘reserve and collect’ orders.
All store colleagues have
completed two phases of the
programme. As a result our
customer satisfaction measure
has improved across the
business.
Store support colleagues have
also participated in training
designed to create a customer
centric organisation.
Following the opening of
our new fulfilment facility in
October 2013 we have been
able to increase the number of
products available, including
a larger number of products
available exclusively on-line.
From October 2013 we have
been able to offer next day
delivery on 15,000 products
(previously 3,000), and to
increase the speed of our
standard home delivery service
from 5 working days to 3.
‘Reserve and collect’ service
is now available same day
if ordered before 12 noon;
previously the service was
next day.
Roll out ‘Dunelm at Home’
home consultation service
for made to measure curtains
and blinds.
This service was available in
45 stores from October 2013,
and a further 30 stores from
April 2014.
Dunelm Group plc Annual Report and Accounts 2014 21
Strategic reportGovernanceFinancials CORPORATE SOCIAL
RESPONSIBILITY REPORT continued
COLLEAGUES
Executive responsibility:
Finance Director
Why it matters
We employ over 8,000 colleagues across our stores and in our
distribution, manufacturing and store support centre locations.
Without their hard work and dedication we would be unable
to deliver great products and services to our customers and
successfully grow and develop our business.
1 2 3 4
What do we do?
We are a growing business and we need to be able to attract
and retain colleagues to help us deliver our development
plans. We offer a competitive remuneration and benefits
package at all levels, including our annual sharesave scheme
which is open to all colleagues.
We are an equal opportunities employer; our policy is to recruit,
develop, promote and retain skilled and motivated people
regardless of disability, race, religion or belief, sex, sexual
orientation, gender reassignment, marital status or age.
At the end of the financial period the breakdown of male and
female colleagues was as follows:
Group Board
Senior Managers
All colleagues
Male
Female
% Female
6
15
2,625
2
6
5,974
25%
29%
69%
We maintain regular communication with all colleagues, through
store manager ‘huddles’, our Dunelm Gazette magazine which
is published at least quarterly, and via the computer-based
‘Dunelm Academy’, to which all colleagues have access.
We operate a Colleagues’ Council, through which colleague
representatives can raise and discuss ideas and concerns with
senior management. These are fed back to the Executive Board
for consideration and action. In addition we run a colleague
engagement survey at least annually, the output of which also is
fed back to the Executive Board and actions agreed.
We offer a range of training and development opportunities to
colleagues at all levels of the business. These include:
• Nationally accredited modern apprenticeships and NVQs.
• Our graduate programme, which leads to an Institute of
Leadership and Management qualification.
• Support for colleagues studying for professional
qualifications, such as in finance, HR and IT.
• A range of workshops in key management skills, such as
leadership and communications.
2013/14 objectives
Achievements
Colleagues’ Council will
be re-launched.
Continue to improve
our colleague training
opportunities, through
structured programmes and
additional modules on the
Dunelm Academy.
Work with partners to
provide opportunities to
the unemployed.
This was re-launched across
the business with a set
timetable for local and area
meetings. Feedback and
suggestions are put forward
every six months to our
Executive Board.
Significant training programme
launched for all store based
colleagues and non-store
colleagues under the
‘Customer First’ initiative during
2013 with further modules
continuing to roll out. We
continue to invest in training
for all colleagues including
product knowledge, master
classes and management
development programmes.
We have continued to provide
work experience opportunities
for the long-term unemployed
this year and maintained
strong relationships with Job
Centre Plus. We continue to
offer enhanced support to job
applicants who have been
unemployed for six months
or more.
Other achievements
• We continue to work closely with local communities both
through and alongside our work with our national charities
and have introduced paid time off for colleagues to
participate in volunteering.
• From April 2014, all colleagues now receive a paid
‘Birthday day off’ as part of our engagement strategy.
• Successfully opened 12 new stores with fully recruited
• Interactive computer based product knowledge and other
teams during the year to June 2014.
training.
What have we achieved this year?
2013/14 objectives
Achievements
Continue to add talent to
the organisation through our
graduate programme.
Conduct an employee
engagement survey across
the Group.
We recruited 23 graduates in
September 2013.
Survey completed in
September 2013 and further
surveys planned for September
2014 and March 2015.
2014/15 objectives
• New careers website to be launched in the summer.
• Further graduate intake planned for September 2014.
• Continue to develop and rollout the ‘Customer First’
Programme to all areas of the business.
• Continue to develop and deliver learning and development
initiatives to meet the needs of the business.
• Respond to issues and opportunities identified from the
engagement survey taking place in September 2014 and
again in March 2015.
• Continue to recruit and train colleagues in line with our new
store opening programme.
22 Dunelm Group plc Annual Report and Accounts 2014
1324Key – Link to strategyDevelop our specialist propositionExpand the store portfolioGrow multi-channelDevelop and exploit our infrastructure HEALTH AND
SAFETY
Executive responsibility:
Chief Operating Officer
Why it matters
We have a duty of care to ensure the health and safety of customers,
colleagues, contractors and all other visitors to our premises. A poor
record can lead to prosecution, damages claims and loss of reputation.
1 2 3 4
What do we do?
The Board is ultimately responsible for the creation
and implementation of our health and safety policy and
procedures, which include an effective system of ‘upward’
and ‘downward’ communication, appropriate standards
for monitoring performance and for ensuring that sufficient
resources are available to support this activity.
What have we achieved this year?
2013/2014 Objectives
Achievements
Review and update Health and
Safety training DVDs.
Health and safety is a standard agenda item at every
Board meeting and the Board receives a monthly report and
a formal annual presentation from the Group’s Health and
Safety manager.
Develop an online accident
reporting system.
Although senior management take responsibility for the overall
implementation, maintenance and development of our safety
management system, every colleague has a responsibility for
the safety of themselves and other colleagues, customers
and visitors.
In our stores, each store manager is responsible for ensuring
the implementation of health and safety policy and procedures
in his or her store, supported by the area manager and the
Group Health and Safety Manager. Risk assessments are in
place and updated as required.
We have an in-house health and safety audit, which monitors
compliance to policy and procedures and is reviewed annually
to ensure that it meets best practice industry standards and
to address any specific risks identified. Our stores complete
an online self-audit monthly and area managers audit each
of their stores at least once a year. This is backed up by
our in-house operational audit team and followed up by the
Health and Safety Manager. Regular review meetings are held
between the Group’s Health and Safety Manager and senior
management from key operational functions.
We have a pro-active approach to safety, and colleagues are
encouraged to report all potential hazards and risks. We have
an on-going programme of education and training, including
DVDs and interactive computer based learning, and ensure
colleague Involvement through the Colleague Council.
The training DVDs have been
reviewed to ensure up to
date information regarding
new products and safe
merchandising throughout
the store.
Our on line reporting system
has been developed in house,
amongst the benefits of the
new system are; reduction of
administration costs, easier
to complete and analyse,
quicker customer contact and
improved service.
We have streamlined our
complaint/claim handling
procedures to ensure a quick
and effective resolution to
customer issues.
Development of new
claim handling procedures
in line with requirements of
legal reforms.
Other achievements
During July 2013, our insurers completed an external audit
for claims defensibility and rated our health and safety
management system highly.
We completed training of all store management teams in
‘Safe Merchandising’ which focuses on customer accident
prevention, and provided them with training materials to
support them when cascading on to their store colleagues.
By targeting high standards of compliance to Company
procedures and using positive reinforcement of success
achieved, we have been able to improve average compliance
audit scores to 93% for 2013/14 (89% for 2012/13).
We had an accident rate of 3.5 accidents for every 100,000
customer visits in 2013/14 (down from 3.9 in 2012/13), which
reflects our focus on ensuring that our accident analysis feeds
into our agreed objectives and actions for the year.
2014/15 objectives
• Further improve support to stores.
• Monitor standards and potential issues in stores
more closely.
• Provide additional support to non-store sites through
inspections, systems development and training.
Dunelm Group plc Annual Report and Accounts 2014 23
Strategic reportGovernanceFinancials CORPORATE SOCIAL
RESPONSIBILITY REPORT continued
SUPPLIERS AND
HUMAN RIGHTS
Executive responsibility:
Commercial Director
Why it matters
We do not manufacture our own products; therefore we need to maintain
relationships with suppliers and manufacturers worldwide who can
meet our high standards for design, innovation, quality and value. These
suppliers must also demonstrate that they operate in accordance with
recognised standards that uphold human rights.
1 3
What do we do?
Effectively managing human rights throughout our supply
chain is one of our key requirements, and management of
this area is built into our product procurement procedures.
Members of our in-house technology team have extensive
experience of working with factories to improve adherence
to quality and ethical standards. Monitoring and working
to improve human rights issues forms part of the factory
management role carried out by our Far East sourcing
partners on our behalf.
We work with our suppliers to ensure that our products are
produced in clean and safe environments, that workers are
treated with respect and earn a reasonable wage and that
suppliers work within the relevant local laws and regulations.
All manufacturers with whom we trade directly are required to
sign up to our ‘Code of Conduct’ based on the Ethical Trading
Initiative (‘ETI’) base code, this is available on our website
www.dunelm.com. No new factory source is taken on without
a satisfactory audit being in place, and audits are repeated at
least every two years.
Where non-conformances are discovered we have a formal
procedure for working with a supplier to help them achieve
compliance, usually within three months. Critical non-
conformances such as use of child labour, working against
choice or absence of valid Building or Fire Certificate are
escalated immediately, and supplies cease until the issue has
been resolved. Ultimately if progress is inadequate we will
cease to trade with the supplier.
We aim to treat all of our suppliers fairly and consistently.
We ask all of our suppliers to sign our standard terms and
conditions. All new suppliers are made aware of the basis of
trade with Dunelm and in particular our standard payment
terms in advance of commencing trade. The number of days’
purchases outstanding for payment at 28 June 2014 was 32
days (2013: 29 days).
What have we achieved this year?
2013/14 objectives
Achievements
Join SEDEX to gain
better visibility of supply
chain standards.
Set targets for key suppliers to
improve workplace conditions
beyond the minimum.
New sustainability standards to
be introduced – to encourage
better water usage, reduction
of harmful effluents, use
of recycled materials and
energy efficiency.
Procedure to be implemented
to ensure full traceability for
timber and paper products.
We are members and are
encouraging suppliers to use
the Sedex Members’ Ethical
Audits (SMETA) to allow
comparability across the
supply base.
We have extended coverage of
our auditing regime to c.1000
factories which supply to us
either directly or indirectly. Over
56% of these have ‘green’ or
‘amber’ audit status.
The volume of polystyrene
waste has been reduced,
by moving to more
environmentally friendly
materials and engineered
packaging solutions. SMETA
factory audits now include
a sustainability section, so
water usage, effluents etc
can be monitored and
processes improved.
We are working with a third
party to help validate and
maintain the traceability
information for timber
based materials.
Other achievements
We have improved our internal management of supply chain
human rights by creating our own database containing details
of factory audits and on-going work on corrective actions.
We have provided specialist training for our Technology team
and also built consideration of corrective action progress
into standard supplier monitoring procedures. Through our
Sedex membership and use of the SMETA standard audit
we are able to evaluate factories fairly and have used Sedex
resources to help educate our factories.
2014/15 objectives
• Improve communication with factories to develop their
understanding of our requirements.
• Increase the proportion of factories with ‘green’ or ‘amber’
audit status.
• Continue to develop our in-house expertise in relation to
human rights issues.
24 Dunelm Group plc Annual Report and Accounts 2014
1324Key – Link to strategyDevelop our specialist propositionExpand the store portfolioGrow multi-channelDevelop and exploit our infrastructure COMMUNITY
Executive responsibility:
Commercial Director
Why it matters
It is important for us to be responsible members of our community, to
maintain our reputation with customers, colleagues and the general
public.
What do we do?
We adopt a ‘charity of the year’, for which collections are
made in-store, specific fund-raising events are organised and
the Group makes its own donations. Each store has a ‘Charity
Champion’ and amounts raised by store are reported monthly,
with the top three recognised in the Dunelm Gazette.
We support colleagues who are raising money for charities
of their choice, often by matching the sums raised. From
2014, all colleagues are permitted a day’s paid leave for
charitable activities.
We do not make any political donations.
The Group pays corporation tax on its operations In the
United Kingdom and does not operate in any tax havens, or
use any tax avoidance schemes.
1 2 3 4
What have we achieved this year?
2013/14 objectives
Achievements
Support our Charity of the
Year, Barnardo’s whose
work includes reaching and
helping children who have
been sexually exploited,
young people leaving the care
system, children with a parent
in prison and families struggling
to cope.
Funds were raised through
a variety of ways, the annual
Friends and Family night, (a
themed fancy dress fundraising
evening in store), through sale
of key rings, bake sales, fancy
dress days, sample sales and
team fundraising events.
The total value of donations made by the Group in the year
ended 28 June 2014 was £206,000 (2013: £80,000). This
includes a donation of £129,000 in lieu of 2013 annual bonus
waived by Will Adderley. Total funds raised for charity by the
Group and colleagues was £352,000 (2013: £205,000).
2014/15 objectives
• During 2014/15 our charity of the year will be Barnardo’s.
• We will continue to support our colleagues in their
charitable fundraising efforts.
Dunelm Group plc Annual Report and Accounts 2014 25
Strategic reportGovernanceFinancials CORPORATE SOCIAL
RESPONSIBILITY REPORT continued
ENVIRONMENT
Executive responsibility:
Finance Director
Why it matters
Dunelm recognises that it has a responsibility to manage the impact of
its business on the environment both now and in the future. The Group
is committed to controlling and minimising the impact of its operations,
both directly and indirectly, in the key areas of waste management, energy
consumption Greenhouse Gas (GHG) emissions.
2 4
The Group has an ‘Environment Committee’ consisting
of senior managers representing key areas of the
business. This team is tasked with the development
and implementation of strategy as well as ongoing
monitoring of environmental performance.
Lastly we have launched a programme with HM Prison
Service to repair and re-use damaged furniture. If the stock
cannot be re-sold as ‘Grade A’ then it will used to support
prisoners integrating back into society or donated to HM
Prisons charity shop.
1. WASTE RECYCLING
2013/14 Achievements
What do we do?
Dunelm is committed to increasing the volume of waste which is
recycled whilst maintaining the status of ‘zero waste to landfill’.
Our ‘Recycle at Work’ initiative ensures that all superstores
and warehouses have the capability to segregate, grade and
process waste locally and that colleagues are engaged and
supported to deal appropriately with waste at source. We
have invested across the estate in balers, colour coded bins
and signage and conduct twice-yearly waste audits to ensure
on-going compliance and improvement.
2013/14 objectives
Achievements
Maintain strategy of zero waste
to landfill.
Dunelm has achieved ‘Zero
Waste to Landfill’ in 2013/14.
Increase the recycled element
of waste.
Recycled waste increased to
83% in 2013/14.
Reduce the level of polystyrene
in packaging by 50%.
Polystyrene has been reduced
in circa 10% of packaging to
date.
Waste recycled (all stores) – %
Our National Distribution Centre (‘NDC’) in Stoke recycles
all of our cardboard, plastics, paper, bottles, and cans.
Cardboard and plastic from this centre is subsequently sold
through our partnership with a packaging supplier to be
reprocessed into new packaging. In addition we segregate all
of our metal, wood and electrical items to be sold for recycling
and eventual re-use.
Investment in the NDC, combined with our drive in stores has
increased the level of recycled waste to 83% (2013: 82%)
100
80
60
40
20
0
82
83
90
76
68
Landfill
Waste to Energy
Recyled
10/11
11/12
12/13
13/14
Target
14/15
Any waste that is not recycled within the business is sent
offsite for further sortation, to extract other recyclable content,
with the remaining ‘general waste’ being incinerated in a
waste to energy plant with carbon capture technology.
2014/15 objectives
• Maintain ‘zero waste to landfill’.
• Increase the recycled element of waste to over 90%.
• Continue to reduce polystyrene content in packaging.
We have also focused on reducing supply-chain waste at
source. In 2014 we have increased investment in re-usable
totes. In addition we have eliminated the use of polystyrene
packaging in two key suppliers and ensure that all suppliers
package in clear LDPE (‘Low Density Polyethylene’), this
product having a much greater recyclable content.
26 Dunelm Group plc Annual Report and Accounts 2014
1324Key – Link to strategyDevelop our specialist propositionExpand the store portfolioGrow multi-channelDevelop and exploit our infrastructure 2. ENERGY USAGE
What do we do?
Dunelm targets energy reduction on a site-by-site basis. We
ensure that all sites are fitted with Automatic Meter Reading
(‘AMR’) smart meters to monitor and control consumption
of both electricity and gas. Data on energy consumption is
captured on a half-hourly basis allowing us to profile high
or unusual patterns, target specific sites and to monitor the
success of our energy reduction initiatives.
In addition stores are fitted with Building Management
Systems (‘BMS’) as standard. These BMS are hosted and
monitored by a specialist partner and are designed to help
optimise energy usage while maintaining an appropriate
trading environment for our customers and colleagues. At the
end of the year we had 130 stores (2013: 118) with BMS.
Key initiatives to reduce energy usage have included;
• Investment in two full LED stores in Basingstoke and
Doncaster
• Introduction of low energy and LED bulbs into all Lighting
Department displays
• Removal of in-shelf lighting in stores where appropriate
• Reduction in lux levels in stores during non-trading periods
• Reduction of night-time gas usage
Over the course of the year, despite these actions, we have
seen an increase in electricity usage of 1.1% in like-for-like
stores although this was impacted by the untypically hot
weather in July & August where consumption rose by 20%
year-on-year. Underlying electricity usage, excluding this initial
5-week period, showed a reduction of 0.6% year-on-year.
Gas usage has decreased by 16.6% year-on-year, partly as a
result of the mild winter, but also as a result of our success in
reducing seasonal night time usage.
What have we achieved this year?
2013/14 objectives
Achievements
To reduce electricity usage by
5% in LFL stores.
Electricity consumption
increased by 1.1%.
To reduce gas usage by 10%
in LFL stores.
Gas usage has reduced
16.6%.
To fully trial LED lighting
technologies in new stores.
Full LED Investments have
been made in Basingstoke and
Doncaster.
Y-O-Y Reduction in electricity consumption
(LFL stores) – %
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
6.3
3.2
5.0
-1.2
-1.1
09/10
10/11
11/12
12/13
Target
13/14
2014/15 objectives
• Reduce electricity by 5% in LFL stores.
• Reduce gas usage by 10% in LFL stores.
• Roll-out full LED in new stores.
Dunelm Group plc Annual Report and Accounts 2014 27
Strategic reportGovernanceFinancials CORPORATE SOCIAL
RESPONSIBILITY REPORT continued
3. GREENHOUSE GAS EMISSIONS (GHG)
What do we do
The Group continues to source electricity from ‘Green Energy’
supplies such as combined heat and power sources where
CO2 emissions are 30% lower than the national average.
The methodology used to calculate our emissions is based on
the UK Government’s GHG Conversion Factors for Company
Reporting 2013. CO2e emissions were as follows:
As part of our carbon reduction work we have invested in
photovotaic technology on the roof of our Leeds store. This
array is targeted to generate over 85,000 KWhr’s of electricity
and replace energy sourced through the national grid.
Tonnes of CO2e
Purchase of Energy
Cars on Company Business
Total
2014
2013
28,504
650
26,747
500
29,154
27,247
Intensity Measure – tCO2e per £1m
Group Revenue
39.93
40.24
Dunelm uses ‘Tonnes of CO2e per £m of turnover’ as its
intensity measure reflecting the link between growth, activity
and performance.
What have we achieved this year?
2013/14 objectives
Achievements
Reduce relative CO2 emissions
per £1m turnover year on year.
tCO2e have reduced 0.8%
year-on-year.
Trial electricity generation from
solar panels.
Solar array installed at Leeds.
2014/15 objectives
• Reduce tCO2e emissions year on year.
• Invest in an additional photovoltaic solar scheme.
We continue to reduce the emissions generated by our
company car fleet by increasing and encouraging the use of
fuel efficient vehicles in all schemes. Average emissions were
112 CO2 g/km (2013: 114 CO2 g/km).
The Group works with a specialist partner to consult
on our energy buying strategy, investments in energy
saving technology and to further focus on reducing
our carbon emissions.
Dunelm participates in the Environment Agency’s Carbon
Reduction Commitment (‘CRC’) scheme and have, in addition,
achieved accreditation with the Carbon Trust Standard (‘CTS’)
recognising our success and commitment to reducing our
carbon footprint.
Carbon Dioxide Equivalent (CO2e) emissions data is reported
using the GHG Protocol Corporate Standard (Scope 1 &
Scope 2) and applies to our organisational boundary as
defined by the ‘operational control’ approach.
Will Adderley
Chief Executive
11 September 2014
28 Dunelm Group plc Annual Report and Accounts 2014
Dunelm Group plc Annual Report and Accounts 2014 29
Strategic reportGovernanceFinancials DIRECTORS AND
OFFICERS
A
B
C
Audit and Risk Committee member
Nominations Committee member
Remuneration Committee member
Geoff Cooper B C
Non-Executive Chairman
Key strengths: A former CEO with extensive
experience in international general management,
the retail sector, finance and IT. Long-standing plc
experience and shareholder understanding.
Dunelm role: Chairs the Board. Member of the
Remuneration and Nominations Committees and
attends Audit and Risk Committee meetings
by invitation.
Regularly visits stores to meet store colleagues
and members of the senior management team.
Leads investor presentations and attends
shareholder meetings.
Joined Dunelm Board: November 2004.
Previous Experience: Qualified accountant.
Formerly a Director of Gateway (subsequently
Somerfield plc). Then Finance Director and
subsequently Deputy Chief Executive of Alliance
UniChem plc. Chief Executive of Travis Perkins plc
between 2005 and 2013.
Other Commitments: Non-Executive Chairman of
Bourne Leisure Holdings Limited and Card Factory plc;
Non-Executive Director of Informa plc.
Will Adderley B
Chief Executive
Key strengths: Has worked in, and is familiar with,
all parts of the Group. Specific strengths in buying
and trading with strong and long-standing supplier
relationships. Has been instrumental in growing the
Group to its current size having developed the out-of-
town format in the late 1990s.
Dunelm role: Leads the Group and chairs the
Executive Board. In addition to his board role, provides
liaison with the Remuneration Committee for reward
below Board level. Member of the Nominations
Committee and attends Audit & Risk Committee
meetings by invitation. A major shareholder.
Joined Dunelm Board: 1992, and has worked for
Dunelm for his whole career. He took over the day-
to-day running of the Group from his father in 1996.
Remained as Chief Executive through the Group’s
IPO in 2006. Became Deputy Chairman in
February 2011 and was reappointed Chief Executive
in September 2014.
Previous Experience: All parts of Dunelm’s business.
Other Commitments: None.
David Stead
Finance Director
Key strengths: Finance background and extensive plc
experience. Understanding of investor community and
company secretarial matters. An experienced strategic
and financial perspective across all Group functions.
Dunelm role: Leads the finance and HR departments,
as well as taking responsibility for a number of cross-
functional initiatives. Participates in Audit and Risk
Committee meetings by invitation and sits on the
Executive Board.
Simon Emeny A B C
Non-Executive Director*
Key strengths: A current CEO with extensive general
management experience in a retail model, customer
service and hospitality expertise. Long-standing plc
experience and shareholder understanding.
Dunelm role: Regularly visits stores to meet
store colleagues and members of the senior
management team. Attends investor presentations
and shareholder meetings.
Marion Sears A B C
Non-Executive Senior Independent Director *
Chair of Nominations and Remuneration Committees.*
Key strengths: Extensive City, investor and banking
experience including mergers and acquisitions.
Customer focused and strategic. Long-standing plc
experience and shareholder understanding.
Dunelm role: Regularly visits stores to meet store
colleagues and members of the senior management
team. Together with the Chairman, takes specific
responsibility for co-ordinating the Board’s corporate
governance duties and for liaising with shareholders
Joined Dunelm Board: September 2003.
Previous Experience: Qualified accountant. Formerly
14 years at Boots where he was Finance Director of
Boots The Chemists and Finance Director of Boots
Healthcare International.
Other Commitments: Non-Executive Director of
Card Factory plc.
Joined Dunelm Board: June 2007.
Previous Experience: Sales and marketing,
customer service and general management in the
brewing and hospitality sector.
Other Commitments: Chief Executive of Fuller Smith
and Turner plc.
on corporate governance matters. Attends investor
presentations and shareholder meetings.
Joined Dunelm Board: July 2004.
Previous Experience: Robert Fleming, JP Morgan
Investment Banking.
Other Commitments: Non-Executive Director of
Persimmon plc, Fidelity European Values plc and
Octopus AIM VCT plc.
30 Dunelm Group plc Annual Report and Accounts 2014
Matt Davies A B C
Non-Executive Director
Chair of Audit and Risk Committee*.
Key strengths: A current Chief Executive with
extensive general management experience in retail with
focus on HR, marketing, trading and customer service.
A successful track record of building a branded out-
of-town retail group nationwide in the UK with a strong
service offer. Experience of the private equity industry
and business model.
Dunelm role: Regularly visits stores to meet store
colleagues and members of the senior management
team. Attends investor presentations and shareholder
meetings. Chairs the Audit and Risk Committee.
Joined Dunelm Board: February 2012.
Previous Experience: Qualified accountant.
Chief Executive of Pets at Home.
Other Commitments: Chief Executive of
Halfords Group plc.
Liz Doherty A B C
Non-Executive Director*
Key strengths: A former Finance Director with
extensive operational experience in international
consumer and retail businesses, specifically with
brands, marketing and online. Long-standing plc
experience and shareholder understanding.
Dunelm role: Regularly visits stores to meet
store colleagues and members of the senior
management team. Attends investor presentations
and shareholder meetings.
Andy Harrison A B C
Non-Executive Director
Key strengths: A current CEO with considerable
experience of leading large consumer facing
organisations with a strong service offer.
Long-standing plc experience and shareholder
understanding.
Dunelm role: Regularly visits stores to meet
store colleagues and members of the senior
management team. Attends investor presentations
and shareholder meetings.
Dawn Durrant
Company Secretary
Key strengths: Extensive plc company secretarial
and legal experience including corporate governance,
legal and regulatory compliance, mergers and
acquisitions, company and commercial, retail and
consumer law.
Dunelm role: Responsible for governance, legal and
regulatory matters.
Joined Dunelm Board: May 2013.
Previous Experience: Qualified accountant. Finance
Director of Reckitt Benckiser plc, Brambles Limited
(Australia) and Group International Finance Director of
Tesco plc.
Other Commitments: Non-Executive Director of
Nokia Corporation and Delhaize Group.
Joined Dunelm Board: September 2014.
Previous Experience: Chief Executive of easyJet
plc from 2005 to 2010. Chief Executive of RAC plc
between 1996 and 2005. Non-Executive Director
and chair of Audit Committee at EMAP plc from
2000 to 2008.
Other Commitments: Chief Executive Officer of
Whitbread PLC.
Joined Dunelm: November 2011.
Previous Experience: Qualified as a solicitor at Allen
& Overy. Company Secretary of Geest plc.
Other Commitments: None.
Bill Adderley Founder and Life President
Together with his wife Jean, founded the business in 1979.
Although no longer on the Board or actively involved in
management, Bill and Jean remain major shareholders.
Nick Wharton was a Director and Chief Executive of the Group during
the financial period and up until 10 September 2014.
* Note that with effect from 12 September 2014 the above responsibilities change. Please see the section headed ‘Change of
Non-Executive Director Responsibilities’ on page 35.
Dunelm Group plc Annual Report and Accounts 2014 31
Strategic reportGovernanceFinancials CORPORATE GOVERNANCE
CHAIRMAN’S LETTER
Geoff Cooper
Chairman
Dear Shareholder
Governance continues to be a focus of governments, shareholders and regulators, and as usual we have monitored developments
and adapted accordingly.
We continue to believe that sound governance is an essential requirement for long-term, sustainable growth and we apply
regulatory guidelines in a pragmatic way that adds value to your Board and your Company.
Board succession has continued to be an area of focus for us and our work in this area has led to the re-appointment since the
year end of Will Adderley as Chief Executive of the Group.
Also since the year end we have appointed a new Non-Executive Director, Andy Harrison. Andy’s perspective and understanding
of consumer behaviour and the challenges of leading high quality, world class organisations will add considerably to development
of strategy.
We have also given particular consideration to the question of director independence as our Senior Independent Director, Marion
Sears, has now served more than nine years on the Board. The Corporate Governance Code, and from May 2014 the Listing
Rules, require the Board to consider the independence of all Non-Executive Directors annually, which we did at our meeting in
September 2014. We concluded that all Non-Executive Directors continue to exhibit the required independence, and to add value
to the Board.
We have also announced some changes to the responsibilities of the Non-Executive Directors, which are outlined in this report.
I would like to thank Marion for her work as Senior Independent Director and Chair of the Nominations and Remuneration
Committees; I have served on a number of public company boards, and I would count Marion as one of the most hard working,
diligent and responsible committee chairs to be found anywhere. I also thank Matt Davies for chairing the Audit and Risk
Committee for the past two and a half years, as he assumes the role of Chair of the Remuneration Committee in Marion’s place.
The work of the Audit and Risk Committee has been at the forefront of governance developments this year, with requirements
for auditor rotation continuing to evolve, and responsibilities widening to include a review of whether the annual report is “fair,
balanced and understandable”. As mentioned in our 2013 annual report, this year we tendered the external audit, inviting a
number of parties including a firm outside the ‘big four’. In January 2014 we appointed PricewaterhouseCoopers in place of
KPMG, who I would like to thank for their work over past years. We have also adopted a formal audit tender policy.
In January we held our third Corporate Governance presentation, attended by a number of our major institutional shareholders
and their representative bodies. We had an open discussion of a number of topics that are important to our shareholders and
ourselves, including succession, remuneration, corporate responsibility and auditor rotation.
At our AGM this year as usual all Directors will be seeking reappointment. In accordance with the new Listing Rules, each of the Non-
Executive Directors will, in addition, be subject to a vote of shareholders independent of the Adderley family. We will again be seeking
authority to buy back shares to satisfy employee share option entitlements and seeking a waiver under the Takeover Code.
I look forward to meeting shareholders at the AGM.
Yours sincerely
Geoff Cooper
Chairman
11 September 2014
32 Dunelm Group plc Annual Report and Accounts 2014
CORPORATE GOVERNANCE
REPORT
Overview
Our approach to governance can be summarised as follows:
• We believe that good governance leads to stronger value creation and lower risks for shareholders.
• We support corporate governance guidelines and seek to apply them in a way that is meaningful to our business and
consistent with our culture and values.
• If we decide that the interests of the Company and its shareholders can be better served by doing things in a different way, we
will explain the reasons why.
• We believe that the Board’s governance role includes instilling and maintaining a culture of honesty, integrity and transparency
throughout the business, through our policies, communications and by the way in which we act.
2013/14 Summary
Principal activities
• Full compliance with the Corporate Governance Code during the period.
• New auditors appointed following competitive tender.
• Corporate Governance presentation to investors held in January 2014.
• Board evaluation conducted.
• All Directors submitted for reappointment at the AGM; NEDs to be subject to an additional independent vote.
• Rule 9 waiver approved to enable share buybacks; further approval sought at this year’s AGM.
Since the year end:
• Will Adderley reappointed as Chief Executive from 11 September 2014.
• Andy Harrison appointed to the Board as Non-Executive Director on 1 September 2014.
• Change of Non-Executive Director responsibilities from September 2014.
For more information please see the copy of the presentations that we made to our major institutional investors and shareholder
representatives in January 2012 , 2013 and 2014, available in the ‘Reports and Presentations’ section of our corporate website.
Code compliance
This report explains how we have applied the principles of good governance and code of best practice set out in the Corporate
Governance Code published in September 2012 (the ‘Corporate Governance Code’).
At the end of the financial year, the Board considers that it is fully compliant with the Corporate Governance Code.
Dunelm Group plc Annual Report and Accounts 2014 33
Strategic reportGovernanceFinancials CORPORATE GOVERNANCE
REPORT continued
Board role and composition
The role of the Board is to set the strategy that will secure the continued growth of the Group over the long term in the interests of
its shareholders, whilst preserving and enhancing our culture. In doing so we take account of our responsibilities to colleagues,
customers, the community in which we operate and the interests of our other stakeholders.
Within this context, the Board has overall responsibility for controlling the Group, making decisions relating to the Group’s strategic
direction and measuring progress towards strategic goals.
Board balance and committee membership is fully compliant with the requirements of the Corporate Governance Code.
The names and roles of each of the Directors during the period are set out in the table below. Andy Harrison was appointed to the
Board on 1 September 2014.
Board Structure at date of this report
Geoff Cooper
Chair
Executives
Will Adderley
Chief Executive*
David Stead
Finance Director
Independent
Non–Executives
Marion Sears
SID, Chair of Nominations and
Remuneration Committees
Matt Davies
Chair of Audit and Risk Committee
Simon Emeny Liz Doherty Andy Harrison
* Nick Wharton was Chief Executive during the financial period and up until 10 September 2014.
Independence of Non-Executive Directors
The Board considers that Geoff Cooper was independent on appointment and that Marion Sears, Simon Emeny, Matt Davies,
Liz Doherty and Andy Harrison are independent. Two directors, Geoff Cooper and Marion Sears, have served nine years on the
Board during the 2013/14 financial year (seven years since flotation of the Company).
As required by the Corporate Governance Code and the Listing Rules of the United Kingdom Listing Authority, in September 2014
the Board considered whether all Non-Executive Directors continue to exhibit independence of character and judgement, and
confirmed that they do.
However the Board is aware that certain investor representatives and proxy advisers apply their own criteria for independence,
and automatically treat Non-Executive Directors as non-independent once they have nine years’ service, regardless of the Board’s
determination. Notwithstanding Marion Sears’ tenure, the Board retains the required balance of Executive and Independent Non-
Executive Directors that is required by the Code. Nevertheless, as we announced on 17 July 2014, some changes will be made to
the responsibilities of our Non-Executive Directors with effect from 12 September 2014, and these are outlined below.
As noted in the report of the Nominations Committee, Board refreshment is a continued area of focus and the tenure of all
Directors is being considered as we manage succession over the next few years. Our policy on Board diversity is explained in the
Nominations report.
34 Dunelm Group plc Annual Report and Accounts 2014
Change of Non-Executive Director responsibilities
To address the concerns of certain investor bodies and proxy agencies who do not regard Marion Sears as independent in view of
her tenure, Marion will retire from her positions as Senior Independent Director and Chair of the Remuneration Committee, and the
following changes will take effect from 12 September 2014:
Senior Independent Director
Audit and Risk Committee Chair
Remuneration Committee Chair
Nominations Committee Chair
Current
Marion Sears
Matt Davies
Marion Sears
Marion Sears
With effect from
12 September
2014
Simon Emeny
Liz Doherty
Matt Davies
Marion Sears
Marion Sears will remain as a member of the Audit and Risk and Remuneration Committees and will continue to chair the
Nominations Committee for a further period, in order to ensure continuity of approach during the next stage of Board succession.
It is anticipated that the chair of the Nominations Committee will pass to a new chairman of the Board following chairman
succession in the future.
The revised Board structure is shown below:
Revised Board Structure from 12 September 2014
Geoff Cooper
Chair
Executives
Will Adderley
Chief Executive
David Stead
Finance Director
Independent
Non–Executives
Simon Emeny
Senior Independent Director
Matt Davies
Chair of Remuneration Committee
Liz Doherty
Chair of Audit and Risk Committee
Marion Sears
Chair of Nominations Committee
Andy Harrison
Non-Executive Director
Executive Director responsibilites
The Board has adopted written statements setting out the respective responsibilities of the Chairman and the Chief Executive;
these are available on the Group’s website or from the Company Secretary. In general terms, the Chairman is responsible for
running the Board and the Chief Executive is responsible for running the Group’s business.
Dunelm Group plc Annual Report and Accounts 2014 35
Strategic reportGovernanceFinancials CORPORATE GOVERNANCE
REPORT continued
Board attendance
The Board held eight meetings in the course of the year, one of which was dedicated to a formal review of strategy. Attendance at
meetings was as follows:
Director
Role
Geoff Cooper
Marion Sears
Will Adderley
Simon Emeny
Nick Wharton
David Stead
Matt Davies
Liz Doherty
Andy Harrison
Non-Executive Chairman
Senior Independent Director and Chair of Remuneration and Nominations Committees
Executive Deputy Chairman2
Independent Non-Executive Director
Chief Executive2
Finance Director
Independent Non-Executive Director and Chair of Audit and Risk Committee
Independent Non-Executive Director
Independent Non-Executive Director1
Meetings
attended:
8
8
8
8
8
8
8
8
0
1 Andy Harrison was appointed after the end of the financial year.
2 Nick Wharton was Chief Executive during the period and until 10 September 2014. Will Adderley was Executive Deputy Chairman during the period and became Chief Executive
on 11 September 2014.
Board activities
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 significant Group-wide policies.
At each meeting, the Chief Executive and the Finance Director report on operational performance (including health and safety)
and the Finance Director reports on financial performance. There is a rolling agenda of other operational, strategic and risk topics
which is regularly refreshed to reflect the most up to date strategy and ‘live’ issues in the business. The principal topics discussed
by the Board in 2013/14 were:
Strategic
• Strategy
• Board independence, composition and diversity
• Board and senior management succession
• Budget
• Dividend policy and return of cash to shareholders
• Logistics strategy
Operational
• Competitor activity
• Multi-channel development
• Brand awareness
• ‘Customer First’ training programme
• Customer survey and mystery shop
• Colleague engagement survey
• Range development
• Direct sourcing
Risk
• Risk review
• Health and safety
• Bribery Act
• Ethical sourcing
• IT security and cyber security
• Treasury policy
• Competition Law
• Data Protection
Assurance
• Corporate Governance presentation
• Investor meetings
• Investor feedback via advisers
• AGM voting and feedback
Following our Board evaluation in 2014, we measured the time spent on strategy, governance and operational performance at
each meeting. Over the year, the majority of our time was spent on strategy, followed by governance and operational performance,
which the Board considers to be appropriate.
Minutes of all Board and Committee meetings are taken by the Company Secretary and committee secretary respectively and
circulated for approval. Any unresolved concerns raised by a Director are recorded in the minutes.
36 Dunelm Group plc Annual Report and Accounts 2014
Non-Executive Director Meetings
The Chairman and the other Non-Executive Directors met twice during the year without Executive Directors being present and
regularly have informal individual meetings with the Executive Directors and other senior managers in the business, usually at a
store location. In addition the Non-Executive Directors met without the Chairman present as part of the Board effectiveness review
process, which includes a formal review of the Chairman’s performance.
Board committees
The Board has appointed three committees, an Audit and Risk Committee, a Nominations Committee and a Remuneration
Committee. The terms of reference of each of these committees can be found on the Group’s website and are available from the
Company Secretary.
Details of the membership of the committees and of their activities during the past financial year can be found in the reports from
the Chair of each of the committees on pages 43 to 72.
Training and induction
Upon joining the Board, any new Director is offered a comprehensive and tailored induction programme with visits to key sites and
meetings with senior managers and other colleagues. This might include, for example, access to recent Board and Committee
papers, including strategy documentation; meetings with each of the Executive Directors and the Company Secretary and other
members of senior management; store visits.
As part of the annual Board evaluation, any additional training or development needs are addressed by the Chairman with each
Director. Please see the Directors’ biographies on pages 30 and 31 for details of the specific skills and experience of each
Director.
Throughout the year all Directors have visited stores both informally and together with members of the senior management team.
Feedback is given at the following Board meeting. One Board meeting was also held near a store (Lincoln) and was followed by a
store tour.
The Company Secretary reports to the Board at each meeting on new legal, regulatory and governance developments that affect
the Group and actions are agreed where needed. Directors attend seminars and tutorials provided by independent organisations
which cover the whole range of governance topics.
Evaluation
Each of the Directors receives a formal evaluation of their performance during the year.
The Board and Committees are also formally evaluated as a whole.
In 2013 we held an externally co-ordinated evaluation by Condign Board Consulting Limited. Actions implemented during the
period, as a result of our 2013 evaluation, included:
• Continued focus on Board succession planning, progress considered at each Board meeting;
• Risk appetite considered;
• Board agenda structure was revised to distinguish between strategic, operational and governance items to help ensure that an
appropriate balance is struck between them;
• Contacts between NEDs and between NEDs and Executive Directors/Executive Board members, timetabled formally;
• The agenda planner was formally reviewed by the whole Board.
In 2014 we held an internal review led by the Chairman.
The evaluation confirmed that:
• The Board is operating effectively and is closely aligned to the culture of the business;
• Board members are appropriately qualified and experienced for their roles as Directors, and take steps to remain well informed
about the Group’s activities and operations;
• In board discussions, an appropriate balance is being achieved between governance, strategic and operational matters;
• NED succession planning is still an important area of focus; and
• The increased level of contact occurring over the recent period between directors outside formal board activities has
contributed significantly to discussions about strategic topics, including succession.
Agreed actions planned as a result of the evaluation include:
• The Board succession plan will remain a regular Board agenda item (alongside formal Nominations Committee meetings).
Dunelm Group plc Annual Report and Accounts 2014 37
Strategic reportGovernanceFinancials CORPORATE GOVERNANCE
REPORT continued
Investor relations and understanding shareholder views
We formalised our Investor Relations Strategy in 2013 and it is available on our corporate website. The main elements are:
Event
Results presentation
Twice a year
Company attendees
Presented by Chief Executive and Finance Director
Attended by other Directors
Meetings with institutional investors (‘roadshow’)
Twice a year
Chief Executive and Finance Director
Chairman and Non–Executive Directors attend a selection of meetings
Adderley family dinner
Once a year
AGM
Once a year
All Directors and Company Secretary
All Directors and Company Secretary
Corporate governance presentation
Usually once a year
Chairman, Non–Executive Directors and
Will Adderley
Analyst and shareholder presentation at store
Every two or three years
Chief Executive and Finance Director
Other senior managers
The Chief Executive and the Finance Director report back to the Board after the investor roadshows. The Group’s brokers also
provide a written feedback report after the full and half year results announcements and investor roadshows to inform the Board
about investor views.
The Corporate Governance presentation was hosted by Geoff Cooper, the Chairman and the other Non-Executive Directors
in January 2014, with Will Adderley representing the Adderley family shareholding. 14 institutional investors and investor
representatives attended. The presentation covered our approach to corporate governance, Board succession, risk, audit,
remuneration, corporate social responsibility, changes since last year and live issues. We find this a useful way to communicate
and exchange views, and it has been well received by attendees.
Our corporate website contains useful shareholder information, copies of presentations and policies in relation to governance and
corporate social responsibility. Please see http://dunelm.production.investis.com.
All Directors will be available at the Annual General Meeting to meet with shareholders and answer their questions.
Rule 9 waiver
We will be requesting authority to buy back up to 5 million shares (2.5% of our share capital) at the AGM. As our Chief Executive,
Will Adderley, has a beneficial interest in 30.7% of our share capital, in order to exercise this right we have to ask shareholders to
approve a waiver of Rule 9 of the Takeover Code, which would otherwise require him to make an offer to buy all of the shares in
the Company. We understand that a number of shareholders have concerns about Rule 9 waivers in general, as they can lead to
major shareholders gaining ‘creeping control’; as a result they automatically vote against the resolution.
We would like to reassure shareholders that:
• Shares bought back by the Company would be held in treasury and used only to satisfy share option entitlements, and not
cancelled.
• From 2012, Will Adderley no longer participates in the Long Term Incentive Plan and therefore his shareholding will not increase
through that mechanism after the vesting in November 2014.
• Since flotation of the Company in 2006, the Adderley family has reduced its holding (from 67% to 55% currently).
• There has been a Relationship Agreement in place since flotation which provides safeguards to other shareholders – for details
please see the Directors’ Report on page 73.
We therefore request that shareholders take into account our specific circumstances when making their voting decision in relation
to the waiver resolution and we hope that shareholder will support the Board’s recommendation.
Significant shareholders
The Group’s significant shareholders are listed in the Directors’ report on page 74 and voting rights are stated on page 73.
38 Dunelm Group plc Annual Report and Accounts 2014
Conflicts of interest
The Companies Act 2006 allows the Board of a public company to authorise conflicts and potential conflicts of interest of
individual Directors where the Articles of Association contain a provision to that effect. The Company’s Articles of Association 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 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.
All Directors are required to disclose any actual or potential conflicts to the Board and the following existing conflicts have been
considered and approved:
• Will Adderley is a major shareholder and connected to other major shareholders. Authorised on the basis that Will 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.
• Until 6 March 2014, Geoff Cooper was a Director of Travis Perkins plc which potentially competes with the Company for retail
property. Authorised on the basis that Geoff was not involved in day to day decisions in relation to the property portfolio in
either Company.
• On 14 November 2013, Nick Wharton was appointed a Director of Mothercare plc which potentially competes with the
Company for retail property. Authorised on the basis that Nick is not involved in day to day decisions in relation to the property
portfolio in Mothercare plc.
There were no other matters disclosed that are considered by the Board to give rise to a potential conflict of interest.
Any conflicts are considered by the Board and any authorisations given are recorded in the Board minutes and reviewed annually
by the Board.
The Board considers that its procedures to approve conflicts of interest and potential conflicts of interest are operating effectively.
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 him or herself 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. The Board has decided to adopt
the requirement of the Corporate Governance Code, that all Directors should stand down and offer themselves for re-election at
each Annual General Meeting.
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 or her office be vacated if he or she 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.
In accordance with the Corporate Governance Code, all Directors will retire from the Board and offer themselves for re-election at
the Annual General Meeting. Non-Executive Directors will also be subject to a separate vote by shareholders independent of the
Adderley family as required by the Listing Rules of the United Kingdom Listing Authority.
Dunelm Group plc Annual Report and Accounts 2014 39
Strategic reportGovernanceFinancials CORPORATE GOVERNANCE
REPORT continued
Powers of Directors
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 Act, the 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 Code and these set out matters
which are reserved to the Board or committees and the powers and duties of the Chairman and the Chief Executive respectively.
At the Annual General Meetings of the Company from 2007 onwards, the Board has sought and been given authority to issue
shares and to buy back and reissue shares. Similar resolutions are being tabled at the 2014 Annual General Meeting, together with
a waiver of any obligation of Will Adderley under the City Code on Takeovers and Mergers to make an offer for all of the shares
of the Company if the authority to buy back shares is used. Any shares bought back would be held in treasury for reissue to
employees who exercise options under one of the Group’s share incentive schemes. For further details see the Notice of Annual
General Meeting which accompanies this report.
Advice and insurance
All Directors have access to the advice and services of the Company Secretary. In addition Directors may seek legal advice at the
Group’s cost if they consider it necessary in connection with their duties.
The Group purchases Directors’ and Officers’ Liability insurance cover for its Directors.
Articles of Association
The Company’s Articles of Association may only be amended by a special resolution of shareholders.
Governance and risk
Risk is a ‘whole Board’ matter for Dunelm. Given the size of our Board and the relative lack of complexity in our business we do
not have a separate Risk Committee, our Audit and Risk Committee oversees risk as part of its activities.
We believe that risk is best managed by a combination of the following:
• Formal risk management processes as described in this report.
• The Board and senior management leading by example.
• Alignment through shareholding.
• Embedding our culture and ethics.
Throughout the year and up to the date of approval of this Annual Report there has been in place an established, on-going
process for identifying, evaluating and managing the significant risks faced by the Group. The process has been reviewed by the
Audit and Risk Committee and the Board and is in accordance with the Turnbull Guidance on Internal Control for Directors.
The diagram below sets out how responsibility for risk management is allocated.
Board
Collective responsibility
for managing risk
• Formal consideration of risk appetite
• Formal risk review twice annually
• Consideration of ‘what keeps us awake at night’
• Standard agenda items
• Regular timetabled presentations
• Regular ‘Deep Dive’ reviews
• Monitor KPIs through Board reports
• Executive members have line responsibility for managing specific risks
Audit and Risk
Committee
Executive Board
Oversees risk
management process
• Formal risk review twice annually
• Selects topics for ‘Deep Dive’ reviews
Members have line
responsibility for
managing specific
risk areas
• Periodic review of risk register
• Regular consideration of ‘what keeps us awake at night’ and mitigating
actions
• Participate in annual risk review process
40 Dunelm Group plc Annual Report and Accounts 2014
• Risk management is a collective Board responsibility. The Board as a whole sets the “risk appetite”, in the context of which
major decisions are taken, including our approach to risk management.
• Risks are reviewed formally twice a year and separately management consider the main risks that ‘keep us awake at night’.
Important risk topics are covered in-depth either by regular timetabled presentations (e.g. health and safety), by ‘Deep Dive’
discussions (e.g. competition law, cyber security), or regularly as a standard agenda item (e.g. competitor activity).
• The Audit and Risk Committee is responsible for overseeing the risk management framework. Risks are reviewed by the
Committee formally twice a year. Risk topics selected by the Audit and Risk Committee are considered ‘in-depth’ at Board
meetings, supported by a paper prepared by the relevant executive. In the period topics covered included Competition Law
compliance, Data Protection, cyber security and food safety.
• A register of major strategic and operational risks is maintained. Each risk is documented, together with the mitigating factors
and controls in place to manage it. Risks are assessed in terms of impact and likelihood and the highest priority risks are
identified for specific focus. A member of the Executive Board is allocated responsibility for management of each risk.
• The Executive Board reviews the risk register periodically throughout the year. It is presented twice per annum to the Audit and
Risk Committee and key risks and mitigating actions are taken on to the Board agenda for monitoring as appropriate.
Internal control and internal audit
The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. The diagram below
summarises the Group’s system.
Board
• Collective
responsibility for
internal control
• Formal list of matters
reserved for decision
by the Board
• Control framework
setting out
responsibilities
• Approval of key
policies and
procedures
• Monitors performance
Audit and Risk
Committee
• Oversees
effectiveness of
internal control
Executive
Board
Internal Audit
Programme
Operational
Audit Team
• Responsible for
• Reviews specific
operating within the
control framework
matters selected by
the Audit and Risk
Committee
• Reviews compliance
with certain internal
procedures in stores
and at other locations
• Receives reports from
• Reviews and
external auditors
• Approves internal
audit programme
• Receives reports
generated through
the internal audit
programme
monitors compliance
with policies and
procedures
• Recommends
changes to controls/
policies where needed
• Monitors performance
The system of internal control comprises:
• A list of matters specifically reserved for Board approval, for example significant capital expenditure.
• A well-established control framework comprising clear structures and accountabilities for colleagues, well understood policies
and procedures and budgeting and review processes.
• Each Head of Department and 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.
• The Executive Directors and Executive Board monitor compliance with these policies and procedures in the course of regular
reviews.
• In addition there is a rolling programme of review of store compliance by the operational audit team.
The Audit and Risk Committee has oversight of the system of internal controls and of the internal audit programme (see below)
and receives the report of the external auditor following the annual statutory audit.
The Audit and Risk Committee considers that a permanent internal audit function is not required in view of the adequacy of internal
and risk management controls and reporting in place, the relatively low level of complexity in the business and the close involvement of
the Executive Directors in the operation of the business. There is however a programme of internal audit activities carried out either by
external or internal teams, reporting to the Audit and Risk Committee. The topics reviewed in 2013/14 were readiness for greenhouse
gas reporting, business continuity planning, payment controls and certain aspects of compliance with pensions auto-enrolment
regulations. The Committee confirmed in February 2014 that this method of internal audit remains satisfactory.
Dunelm Group plc Annual Report and Accounts 2014 41
Strategic reportGovernanceFinancials CORPORATE GOVERNANCE
REPORT continued
Please note that internal control systems such as this are 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 or accounting
misstatement.
The Board confirms that where any significant failures or weaknesses have been identified from the risk management review or the
internal control procedures, actions have been taken to remedy these.
Bribery Act 2010
Following the coming into force of the Bribery Act in July 2011, we have reviewed the procedures in place to ensure that we are
able to comply with its requirements. Actions taken include:
• Anti-corruption and anti-bribery policy implemented.
• The policy on acceptance of gifts and other privileges has been updated and a formal procedure has been implemented for
signing off and logging hospitality.
• Executive Board members and Heads of Department have received training and also signed a declaration of compliance,
which is an annual process.
• All members of the Buying, Merchandising and Quality departments are required to attend a Bribery Act training session.
• Standard terms and conditions for suppliers include a Bribery Act clause.
• The Whistleblowing Policy refers specifically to the Bribery Act.
This report was reviewed and approved by the Board on 11 September 2014.
Geoff Cooper
Chairman
11 September 2014
42 Dunelm Group plc Annual Report and Accounts 2014
LETTER FROM THE CHAIR OF THE AUDIT
AND RISK COMMITTEE
Matt Davies
Chair of the Audit and Risk Committee
Dear Shareholder,
This is our first report under the revised Corporate Governance Code and I hope that the additional disclosures will give a
greater Insight into how the Audit and Risk Committee carries out its responsibilities. In accordance with the new requirements,
we have also confirmed to the Board that we consider the annual report and accounts as a whole to be “fair, balanced and
understandable”.
As KPMG had been the Group’s auditors since 2003, we carried out a competitive tender for our external audit during the year,
which included a ‘non big four’ firm. PricewaterhouseCoopers offered the best combination of quality and price, and in January
2014 we appointed that firm as auditors for the 2013/14 accounts in place of KPMG. I would like to thank KPMG for the work they
have conducted during their ten year tenure.
In accordance with best practice, we intend to tender the external audit every 5 years going forward.
2013/14 was the first year of our formalised internal audit programme. Reports were received by the Committee on readiness
for Greenhouse Gas reporting, business continuity planning, payment controls and compliance with pensions auto-enrolment
regulations. Further information is provided in the report.
Shareholders will note that we did not pay any advisory fees to our auditor PwC in the financial year.
Following the change of Board responsibilities noted in the Corporate Governance Report, this is my last report as Chair of the
Audit and Risk Committee, and I welcome Liz Doherty as the incoming Chair.
I look forward to meeting shareholders at the AGM.
Yours sincerely,
Matt Davies
Chair of the Audit and Risk Committee
11 September 2014
Dunelm Group plc Annual Report and Accounts 2014 43
Strategic reportGovernanceFinancials AUDIT AND RISK
COMMITTEE REPORT
2013/14 Summary
Principal activities
• Tender of statutory audit led to appointment of
PricewaterhouseCoopers in January 2014
• Policy to tender statutory audit at least every five years
• Formal risk appetite statement adopted
• First reports received from the formalised internal
audit programme
This report provides details of the role of the Audit and Risk Committee and the work it has undertaken during the year.
The purpose of the Committee is to oversee the integrity of the Group’s financial statements and public announcements relating to financial
performance, to oversee the audit process, monitor the effectiveness of financial controls and the process for identifying and managing risk
throughout the Group. The full terms of reference for the Committee can be found via the Group’s website, www.dunelm.com.
The Committee has approved a policy which allows employees to raise legitimate concerns in confidence without fear of
discrimination, including access to an independent whistleblowing helpline. A copy of our policy is available on our corporate
website. During the year we have agreed that the Committee will receive a report annually detailing the calls made to the helpline.
The following Directors served on the Committee during the year:
Member
Matt Davies (Chair)
Marion Sears
Simon Emeny
Liz Doherty
Andy Harrison1
1 Andy Harrison joined the Board after the financial year end.
The Company Secretary acts as secretary to the Committee.
Period from:
8 February 2012
18 January 2005
25 June 2007
1 May 2013
1 September 2014
To:
To date
To date
To date
To date
To date
The Finance Director and the Chairman of the Board usually attend meetings by invitation, along with a representative from the
external auditors.
The Board considers that I have recent and relevant financial experience by virtue of my professional qualification and my
executive role as Chief Executive of Halfords Group plc.
Committee activities in 2013/14
Two meetings were held in the year and members’ attendance was as shown in the table below.
Member
Matt Davies
Marion Sears
Simon Emeny
Liz Doherty
Andy Harrison
1 Andy Harrison joined the Board after the financial year end.
During the year the activities of the Committee included:
Meetings attended:
2
2
2
2
01
Routine items
• Approval of the full year results issued in September 2013 and the half year results issued in February 2014.
• Review of the process for identifying and managing risk within the business in September 2013, including a review of the risk
register, and a mid year update of these in February 2014.
• Verification of the independence of the auditor and approval of the scope of the audit plan and the audit fee.
• Review and confirmation of the Group’s policy for use of the auditors for non-audit work (see below).
• Review of fraud and Bribery Act controls and cyber security are standing agenda items for each meeting.
• Receipt of internal audit reports.
44 Dunelm Group plc Annual Report and Accounts 2014
Specific topics
• Following a tender of the statutory audit, a new firm was appointed for the 2013/14 audit (see below).
• A policy on future tender of the audit was agreed (see below).
• The schedule of risk topics to be considered in-depth at Board meetings was updated; in the period these included cyber
security, disaster planning, Competition Law compliance and Data Protection Act compliance.
• We reviewed a formal statement of our risk appetite.
Significant areas of judgement
Within its terms of reference, the Committee monitors the integrity of the annual and half-year results and interim management
statements, including a review of the significant financial reporting issues and judgements contained in them.
At its meeting in September 2014, the Committee reviewed a comprehensive paper prepared by the Finance Director, which
analysed the Group’s results for the financial year; highlighted matters arising in the preparation of the Group financial statements;
and provided forecasts to support the Directors’ going concern statement. The Committee also considered a paper prepared by
the external auditors, which included significant reporting and accounting matters.
The major accounting issue discussed by the Committee concerned the Group’s approach to writing down the value of obsolete
inventory. The Committee noted the basis of calculation, which was in accordance with the Group’s accounting policy, and
concluded that the overall inventory valuation included in the Group’s financial statements was fair and reasonable.
The Committee confirmed that it was satisfied that the judgements made by management are reasonable and that appropriate
disclosures have been made in the accounts. The Committee also confirmed to the Board that it considered the annual report and
accounts as a whole to be “fair, balanced and understandable”.
External auditor
As mentioned in last year’s report, the Committee decided to tender the statutory audit for 2013/4 as KPMG had been the Group’s
auditor since 2003. A formal tender process was conducted, including KPMG and a ‘non big four’ firm. The tender was led by
myself, with support from David Stead, the Finance Director, and other members of his team.
PricewaterhouseCoopers offered the best combination of quality and price and as a result the Committee recommended that they
be appointed, which the Board accepted. As a result KPMG resigned and PricewaterhouseCoopers were appointed by the Board
in January 2014. As part of the appointment process, the Committee considered the independence and objectivity of the new
auditors and concluded that the safeguards in place are satisfactory.
One of the primary responsibilities of the Audit and Risk Committee is to assess the effectiveness of the external audit process
and make recommendations to the Board in relation to the appointment, re-appointment and removal of the external auditors. The
committee took a number of factors into account in its assessment including but not limited to:
• The quality and scope of the planning of the audit. In February 2014, the external auditors presented their strategy for 2013/14
to the Committee. The Committee reviewed and agreed with the external auditor’s assessment of risks. The Committee also
reviewed the audit approach and the approach to assessing materiality for the Group.
• The quality of reports provided to the Committee and the Board and the quality of advice given;
• The level of understanding demonstrated of the Group’s businesses and the retail sector;
• The objectivity of the external auditors’ views on the controls around the Group and the robustness of challenge and findings
on areas which required management judgment;
• The key messages highlighted in the Public Report on the 2012/13 inspection of PricewaterhouseCoopers by the FRC’s Audit
Quality Review Team (AQRT) and the findings highlighted for audit committees in the AQRT’s Annual Report for 2012/13.
The fee paid to PricewaterhouseCoopers for the statutory audit of the Group and Company financial statements and the audit of
Group subsidiaries pursuant to legislation was £69,900. A breakdown of fees paid to both PricewaterhouseCoopers and KPMG
during the financial year is set out on page 46.
PricewaterhouseCoopers have conducted the statutory audit for 2013/14 and they attended the Committee meetings in February
and September 2014. The Committee had the opportunity to meet privately with them during the period.
Resolutions to reappoint PricewaterhouseCoopers as auditor and to authorise the Directors to agree their remuneration will be put
to shareholders at the AGM.
Use of auditors for non-audit work
The Committee is aware that the use of audit firms for non-audit work is a sensitive issue for investors and corporate governance
analysts, as it could potentially give rise to a conflict of interest.
Dunelm Group plc Annual Report and Accounts 2014 45
Strategic reportGovernanceFinancials AUDIT AND RISK
COMMITTEE REPORT continued
Our policy is simple – we will only use auditors for non-audit work if:
• they offer demonstrably better capability or lower cost than alternative providers; and
• there is no potential conflict with the independence of the audit.
We have a relatively flat management structure and all work commissioned by our auditor is required to be sanctioned by the
Finance Director, who consults with the Committee Chair if the fee involved is significant or if there are any issues regarding
independence. Therefore we do not consider that any more complex guidelines are needed.
We decided to retain the services of KPMG for tax advice following the appointment of PricewaterhouseCoopers as auditor. As
much of the advisory work that we outsource is tax related, this is expected to result in a reduction in the level of advisory fees
paid to our statutory auditor.
No fees were paid to PricewaterhouseCoopers for non-audit work during the year. However, in connection with our internal audit
programme, we asked them to conduct a review of compliance with pension auto-enrolment obligations. Whilst this assignment
was agreed prior to the appointment of PricewaterhouseCoopers as auditors, the work was not carried out until after the year end.
The fee relating to this is £17,500.
KPMG resigned as auditor in January 2014 and did not audit either the half year or full year financial statements. No fees were paid
to KPMG during the financial period for audit work, and fees for non-audit work (principally tax advice and tax related projects)
were £97,833.
Auditor rotation
The regulatory requirements on mandatory audit tendering and rotation are continuing to evolve and the Committee will monitor
developments in this area. However we have decided to adopt a policy that we will tender the statutory audit at least every five
years going forward. This means that the next tender will be for the 2018/19 audit at the latest. We will also invite at least one firm
outside the ‘big four’ to participate in the tender process.
Internal audit
The Committee initiated a formalised internal audit programme in 2013 in view of the continuing growth of the Group’s business
In terms of both scale and complexity. Prior to that it had considered that an internal audit function was not required in view of the
adequacy of financial controls in place and the relatively low level of complexity in the business.
The internal audit programme is conducted either by an internal team that is independent of the activity under review, or by an
external party, decided on a case by case basis. In either case, the review is conducted on behalf of the Committee and will report
back to them.
Topics reviewed in the year are set out below:
Review topic
Reviewed by
Ability to comply with mandatory carbon reporting requirements
External auditors (KPMG) as part of the 2012/13 audit
Adequacy of disaster planning and business continuity plans and
procedures
Specialist external business continuity consultants
Payment controls
External advisors (KPMG)
Compliance with pensions auto-enrolment regulations
External advisors (PwC)
Reports were discussed by the Committee and the Board and a number of actions agreed to improve controls.
The Committee also discussed and agreed that this approach to internal audit remains satisfactory.
Change of responsibilities
As noted in the Corporate Governance Report, as Marion Sears will be retiring as Chair of the Remuneration Committee on 12
September 2014, I have agreed to chair that committee. Liz Doherty will take my place as Chair of the Audit and Risk Committee.
This report was reviewed and approved by the Committee on 11 September 2014.
Matt Davies
Chair of the Audit and Risk Committee
11 September 2014
46 Dunelm Group plc Annual Report and Accounts 2014
LETTER FROM THE CHAIR OF
THE REMUNERATION COMMITTEE
Marion Sears
Chair of the Remuneration Committee
Dear Shareholder,
We have not made any changes to the structure of executive remuneration in recent years and we aim to maintain the same
structure for the foreseeable future. Although we have appointed a new Chief Executive since the year end, the Remuneration
Policy which is being put to a shareholder vote this year under the new rules is the same as shareholders have voted on
in previous years. Other than for Will Adderley, who is a significant shareholder, the majority of the executive remuneration
opportunity continues to be performance-based.
During the year base salary for all Directors increased by 2%, the same percentage as for all colleagues. The market has been
challenging, we have invested strongly in the business and reported EPS was marginally behind budget. Accordingly the bonus
award to executives is 22.5% of base salary. By contrast, the 2011-2014 LTIP produced a CAGR in EPS of 14.3%. This was a
strong performance, being 11.4% in excess of RPI over the period and, as a result, 77.5% of the conditional shares awarded in
2011 will vest in November.
Looking forward we have not changed the performance conditions for either the bonus or the LTIP although, as introduced last
year, we now use non-financial KPIs to inform our judgement on the annual bonus award. We are not disclosing the details of
these KPIs as the formula, based on EPS, prevails this year, and there is no formulaic link.
Since the year end Nick Wharton has stepped down as Chief Executive and Will Adderley has been appointed to this position.
Nick has created significant shareholder value during his tenure and is a good leaver. His severance remuneration reflects this but
also conforms to our Policy which becomes binding this year. Will Adderley has been appointed as Chief Executive on a median
base salary with a bonus opportunity of 100%. However he will not participate in the LTIP scheme as Chief Executive given his
significant shareholding.
I hope shareholders appreciate the efforts made to ‘keep things simple’ in all areas of Dunelm, including remuneration. A similar
structure is mirrored below the Board and the Committee provides oversight on senior managements’ bonus and LTIP awards, as
well as shareholding requirements.
I have chaired the Remuneration Committee since 2004 when we began preparing for IPO and, having served 10 years since
appointment, I am happy to hand the responsibility to Matt Davies who I know will continue to keep things appropriate, simple and
fair for all stakeholders.
Yours sincerely,
Marion Sears
Chair of the Remuneration Committee
11 September 2014
Dunelm Group plc Annual Report and Accounts 2014 47
Strategic reportGovernanceFinancials REMUNERATION REPORT
How our remuneration is aligned to strategy
The principles behind, and the reasons for, the overall remuneration structure that we have adopted for our Executive Directors
are directly related to our long term strategic goal of delivering shareholder value through the profitable growth of a quality
business.
Since the flotation of the Company our executive remuneration has been structured specifically:
• To pay fairly and appropriately for an individual’s role and responsibilities;
• To reward strong performance;
• To be focused on long term value creation;
• To align executives strongly with shareholders through share ownership.
A substantial proportion of the Executive Directors’ potential remuneration is variable and performance-related in order to
encourage and reward superior business performance and shareholder return. Discretion is allowed in certain circumstances to
ensure rewards are appropriate and overall levels of pay are analysed carefully each year.
This is consistent with delivery of the objectives set out in our corporate strategy, which are all long term in nature; namely the
growth and development of our specialist product offer, our stores portfolio, our multi-channel capability and our infrastructure.
Our approach is also in keeping with the family origin of the business, and is important to the Adderley family who remain our
majority shareholders.
It is our intention to maintain a simple and transparent remuneration structure which executives and shareholders alike can
easily understand.
Introduction
This Directors’ Remuneration Report is divided into three sections: the Letter from the Chair of the Remuneration
Committee, set out on page 47; the Policy Report and the Annual Report on Implementation, which follow.
The Policy Report sets out the Directors’ remuneration policy, which will be put to shareholders for approval at the Annual
General Meeting in November 2014 for the first time. Subject to shareholder approval, the policy will be effective as of 11
November 2014. The shareholder vote on the policy report will be binding, and if not passed the Policy Report must be amended
and put to a further vote at a specially convened General Meeting.
Once the Policy Report has been approved, no payment may be paid to a Director or past Director unless it is consistent with the
approved policy unless shareholder approval is sought. The exception to this is if the payment is made pursuant to a contractual
obligation that was in force at 27 June 2012 ( when the new Regulations came into force).
The Policy Report which we are putting forward for approval is consistent with the policy which applied during the 2013/14
financial year.
The Annual Report on Implementation sets out how the policy has been applied during the financial year being reported
on and how it will be applied in the coming year. This report will also be put to shareholders for approval at the Annual General
Meeting in November 2014, although the vote on the implementation report is advisory. If this vote were not passed, the Company
would consult with shareholders and would be obliged to put the Policy Report back to shareholders for approval at the Annual
General Meeting of the Company in 2015.
This report complies with the provisions of the Companies Act 2006 and Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment) Regulations 2013, as well as the UK Corporate Governance Code and the
UKLA Listing Rules.
48 Dunelm Group plc Annual Report and Accounts 2014
The Policy Report
Directors’ remuneration policy 2014
The policy set out below will take binding effect from the date of its approval by shareholders at the 2014 Annual General Meeting.
It will remain in force for three years, with approval being sought for renewal of the policy at the latest at the 2017 AGM.
The information contained in this report is unaudited unless specifically stated as being audited.
Future policy table
The following table sets out the structure of remuneration for Directors of the Company.
Executive Directors
Base salary
Purpose and link to
strategic objectives
Operation
Maximum opportunity
Fixed remuneration for the role.
To attract and retain the high-calibre talent necessary to develop and deliver the business strategy.
Reflects the size and scope of the Executive Director’s responsibilities.
Normally paid monthly.
Base level set in the context of:
• Pay for similar roles in companies of similar size and complexity in the relevant market.
• Size, scale and complexity of the role.
Should comprise a minority of potential remuneration, with base salary normally set at a median or
below, except where the director is also a significant shareholder.
Reviewed annually, with percentage increases in line with the Company-wide review unless other
circumstances apply, such as:
• A significant change in the size, scale or complexity of the role or of the Company’s business
• Development and performance in role (for example on a new appointment base salary might be
initially set at a lower level with the intention of increasing over time).
The Committee does not consider it to be appropriate to set a maximum base salary that may be
paid to an Executive Director within the terms of this policy.
Performance metrics
None, although performance of the individual is considered at the annual salary review.
No recovery provisions apply to base salary.
Retirement benefits
Purpose and link to
strategic objectives
Operation
To provide a competitive post-retirement benefit.
To attract and retain the high-calibre talent necessary to develop and deliver the business strategy.
Contribution equivalent to a percentage of base salary made to a defined contribution plan.
Delivered as a cash allowance.
Maximum opportunity
Median rate for companies of a similar size and complexity. No element other than base salary
is pensionable.
Performance metrics
None.
No recovery provisions apply to retirement benefits.
Dunelm Group plc Annual Report and Accounts 2014 49
Strategic reportGovernanceFinancials REMUNERATION REPORT continued
Benefits
Purpose and link to
strategic objectives
To provide a competitive benefits package.
To attract and retain the high-calibre talent necessary to develop and deliver the business strategy.
Operation
Maximum opportunity
A range of benefits are provided, which may include car or car allowance; private health insurance
for the individual and their family; permanent health cover; life assurance; mobile phone; use of a
car and driver in connection with the role; colleague discount.
Additional benefits, such as relocation expenses, housing allowance and school fees may also be
provided in certain circumstances if considered reasonable and appropriate by the Committee.
For non-UK executives (none at present) the Committee may consider additional allowances in
accordance with standard practice.
Current benefits provided are described in the Annual Report on Implementation on pages 60 to 68.
The Committee reserves the right to provide such benefits as it considers necessary to support the
strategy of the Company.
The Committee does not consider it to be appropriate to set a maximum cost to the Company of
benefits to be paid.
Performance metrics
None.
No recovery provisions apply to benefits.
Annual bonus
Purpose and link to
strategic objectives
Operation
Maximum opportunity
Performance metrics
Rewards and incentivises delivery of annual financial, strategic and personal targets.
Paid in cash, after the results for the financial year have been audited, subject to performance
targets having been met.
Maximum opportunity – 100% of base salary per annum.
For on target performance – 40% of base salary.
For threshold performance – 5% of base salary.
Stretching performance targets are set each year. Performance targets for the Executive Directors
are typically based on financial and strategic objectives set by the Remuneration Committee
annually.
Financial objectives include, but are not limited to, budgeted EPS for the financial year taking into
account market consensus and individual broker expectations.
The strategic objectives will vary depending on the specific business priorities in a particular year
Typically, the majority of the annual bonus for Executives is subject to financial objectives
Once targets have been applied, the Committee may apply judgement to amend the bonus
payment up or down in the light of performance against personal job objectives, delivery of strategic
KPIs and share price performance, although there is no formulaic link. The maximum opportunity
including any amendment is 100% of base salary.
Subject to recovery provisions (malus) at the discretion of the Committee if there has been a
misstatement of results for the year in respect of which the bonus is paid, if there has been an error
in calculating performance or in the case of gross misconduct.
For bonus payable in respect of financial year 2014/15 onwards, the Remuneration Committee also
has the discretion to claw back the bonus up to three years after payment in these circumstances;
and in cases of fraud the Committee can apply malus and claw back for an unlimited period of time.
50 Dunelm Group plc Annual Report and Accounts 2014
Long Term Incentive Plan
Purpose and link to
strategic objectives
Operation
Maximum opportunity
Performance metrics
Shareholding targets
Purpose and link to
strategic objectives
Operation
Supports delivery of strategy by targeting EPS growth, which the Committee believes to be closely
aligned to the drivers of growth In the business over the long term.
Rewards strong financial performance and sustained increase in shareholder value over the long term.
Aligns with shareholder interests through the delivery of shares.
Conditional awards are made annually (which can take the form of a conditional award, nil-cost
option or nominal value option), with vesting subject to performance over three financial years.
Shares earned after applying the performance criteria are subject to an additional two year holding
period. For further details please see below. During this two year period dividend entitlement
(including, at the discretion of the Remuneration Committee, any special dividend) will also accrue
and be paid at the end of that period.
Maximum face value of shares at award date is 150% of base salary.
Maximum opportunity – shares worth 150% of base salary at award date.
Threshold performance – 25% of the award.
Straight-line vesting between the above points.
Growth in fully diluted EPS over the three year performance period compared with growth in the
index of retail prices (RPI) over the same period.
The Remuneration Committee considers the target annually taking into account market consensus
and individual broker expectations.
For information, the target applicable to outstanding awards at the date of this report is:
• No part of the award will vest until fully diluted EPS growth exceeds RPI growth by 3%.
• 25% of the award vests at RPI growth plus 3%.
• 100% of the award vests at RPI growth plus 15%.
• Between those figures the award will vest on a straight line basis.
Awards are subject to recovery provisions (malus) at the discretion of the Committee if there has
been a misstatement of results for the performance period to which the award relates, if there has
been an error in calculating performance or in the case of gross misconduct.
In respect of awards made from 2014, the Remuneration Committee also has the discretion to claw
back vested awards for up to three years from vesting in these circumstances; and in cases of fraud
the Committee can apply malus and claw back for an unlimited period of time.
Aligns with shareholder interests through shareholding.
Executive Directors are required to build a beneficial holding of shares equal to 100% of salary after
3 years and 200% of salary after 5 years from appointment.
Shares that have been earned under the LTIP after the relevant three year performance period and
are expected to vest at the end of the two year holding period ( taking account of any that would be
sold to cover tax and national insurance liability) will be treated as if they are beneficially owned for
the purpose of this test.
An Executive Director would be expected to retain any shares that vest under the LTIP (after sale of
shares to cover tax and national insurance liability on exercise) until this requirement is met.
Given that the maximum award at date of grant is 150% of salary and a Director would be required
to sell 47% of shares earned after applying performance criteria to cover his or her tax and national
insurance liability, this holding requirement is likely to require a personal investment in shares as well
as vesting of shares under the LTIP.
Failure to adhere to the requirement would be taken into account by the Remuneration Committee
when considering whether to issue further awards under the LTIP.
Maximum opportunity
Not applicable.
Performance metrics
Not applicable.
Dunelm Group plc Annual Report and Accounts 2014 51
Strategic reportGovernanceFinancials REMUNERATION REPORT continued
All Employee Share Plan (Sharesave)
Purpose and link to
strategic objectives
Operation
Promotes share ownership by all eligible colleagues (including Executive Directors).
All UK employees with a minimum service requirement are eligible to join the UK tax approved
Dunelm Group Savings Related Share Option Plan (the Sharesave). Monthly savings are made over
a period of three years linked to the grant of an option over Dunelm shares at a discount of up to
20% of the market price (or such other amount as permitted by law) at date of invitation to join the
scheme.
Invitations are normally issued annually at the discretion of the Remuneration Committee, which
also has discretion to set the minimum service requirement, maximum discount, maximum monthly
savings and any other limits (such as scaling back) within the terms of the scheme rules.
Maximum opportunity
Maximum participation limits are set by the UK tax authorities. Currently the maximum limit is
savings of £500 per month (having increased from £250 per month in April 2014).
Performance metrics
None.
Share Option Plan
Purpose and link to
strategic objectives
Operation
Maximum opportunity
Performance metrics
Promotes share ownership by all eligible colleagues.
Note that although Executive Directors are eligible to receive options under the rules of
this scheme, our policy is that this scheme is for below-Board colleagues and that the
Executive Directors should not participate.
Options are granted to senior employees, usually annually, at the discretion of the Remuneration
Committee. The option price is the market price of Dunelm shares on the business day preceding
the date of grant.
Options may be exercised after three years from grant provided that performance criteria over a
three year financial period have been met.
No individual limits apply to individuals who are not Executive Directors. Current practice is to grant
awards over shares with a market value of between 50% and 75% of salary.
Our policy is that Executive Directors should not receive options under this scheme as well as the
LTIP in any year.
(For information, the scheme rules provide that the maximum opportunity for Executive Directors
options is 150% of base salary at grant date, although the Remuneration Committee may grant
awards up to a value of 200% of salary).
The Remuneration Committee may select a performance condition that applies to the grant of
options.
The condition applied by the Remuneration Committee is that growth in fully diluted EPS over the
three year performance period is 5% or more.
Subject to recovery provisions (malus) at the discretion of the Committee if there has been a
misstatement of results for the performance period to which the award relates, if there has been an
error in calculating performance or in the case of gross misconduct.
52 Dunelm Group plc Annual Report and Accounts 2014
Non-Executive Directors
Fees
Purpose and link to
strategic objectives
To attract and retain a high calibre Chairman and Non-Executive Directors by offering competitive
fee levels.
Operation
Fees for the Chairman and Non-Executive Directors are set by the Board. No Director participates
in any decision relating to his or her own remuneration.
The Chairman is paid an all-inclusive fee for all Board responsibilities.
The Non-Executive Directors receive a basic fee, with supplemental fees for additional Board
responsibilities.
The level of fee reflects the size and complexity of the role and the time commitment.
Fees are reviewed annually and increased in line with the Company-wide increase. In addition there
will be a periodic review against market rates and taking into account time commitment and any
change in size, scale or complexity of the business.
Flexibility is retained to increase fee levels in certain circumstances, for example, if required to
recruit a new Chairman or Non-Executive Director of the appropriate calibre.
With the exception of colleague discount, no benefits are paid to the Chairman or the Non-
Executive Directors, and they do not participate in any incentive scheme.
Maximum opportunity
Maximum fees to be paid by way of fees to the Non-Executive Directors are set in the Company’s
Articles of Association.
Fees paid to each Director are disclosed in the Annual Report on Implementation.
Performance metrics
None.
The Committee reserves the right to make any remuneration payments and payments for loss of office notwithstanding that they
are not in line with the policy set out above, where the terms of the payment were agreed (i) before the policy came into effect or
(ii) at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment
was not in consideration for the individual becoming a Director of the Company. For these purposes “payments” includes the
Committee satisfying awards of variable remuneration, in relation to an award over shares, the terms of payment are “agreed” at
the time the award is granted.
The Committee may also make minor changes to this policy, which do not have a material advantage to Directors, to aid its
operation or implementation without seeking shareholder approval but taking into account the interests of shareholders.
Dunelm Group plc Annual Report and Accounts 2014 53
Strategic reportGovernanceFinancials REMUNERATION REPORT continued
Performance measures and how targets are set
The Remuneration Committee selects performance measures that it believes are:
• Aligned with the Group’s strategic goals.
• Unambiguous and easy to calculate.
• Transparent to Directors and shareholders.
The financial performance measure applicable to both the annual cash bonus and the LTIP is based on growth in earnings per
share (‘EPS’) over the performance period.
The Remuneration Committee considered the use of EPS as a performance measure carefully when the Company was floated
in 2006 and has discussed it with shareholders regularly. It was recently discussed at the Corporate Governance presentation
in January 2014. EPS is believed to be closely aligned to the drivers of growth for the business and in the long term, EPS
performance is expected to be reflected in shareholder value. As discussed with institutional shareholders at the most recent
Corporate Governance presentation in January 2014, EPS is a more suitable performance measure for Dunelm than for many
other companies and it is therefore considered appropriate to use it as a single measure, supplemented by discretion reflecting
non-financial performance measures as described below. The use of EPS as a primary measure for Dunelm is considered
appropriate because of the absence of leverage in the business and because the capital expenditure controls exercised by
the Board are sufficiently rigorous to avoid EPS accretion by means of ineffective investment of capital. Should this change the
Committee would review whether an additional financial underpin would be appropriate.
Cash bonus
Both financial and non-financial performance measures apply to the annual cash bonus. Each Director’s bonus is therefore linked
to both personal performance and Group strategy and performance. There is a two step process: application of financial targets,
followed by a consideration of performance against KPIs and personal non-financial job objectives linked to delivery of the strategy
and share price performance. This may lead to an adjustment (up or down) to result in a payment that the Committee considers to
be fair.
The financial target is set by the Committee each year, based on delivery of budget EPS for the financial year. Market consensus
and individual broker expectations are taken into account when setting the Budget. The Committee reserves the right to adjust
the financial performance target or change the performance condition if justified by the circumstances, for example if there was a
major capital transaction.
Following application of the financial performance target, the Committee may exercise its judgement to adjust the bonus payment
up or down in the light of performance against personal, non-financial job objectives linked to delivery of the strategy, set at the
commencement of the year and assessed by the Remuneration Committee. In addition to personal job objectives, the Committee
refers to certain strategic KPIs and share price performance to inform its judgement, although there will not be a formulaic link.
The maximum cash bonus that could be paid, including any exercise of judgement, is 100% of basic salary. Any adjustment and
the reason for it would be disclosed.
LTIP
The EPS target for the LTIP is based on growth in EPS compared to the increase in the Index of Retail Prices (RPI) over the
performance period. The targets that apply to awards that are outstanding are set out in the table above.
The number of shares comprised in an award or the performance target which applies may be adjusted by the Remuneration
Committee in accordance with the plan rules if justified by the circumstances, for example if there were a major capital transaction.
Any amendment and the reason for it would be fully disclosed. A copy of the plan rules is available from the Company Secretary
on request.
LTIP awards made to Executive Directors prior to approval of this policy may vest on their original terms.
54 Dunelm Group plc Annual Report and Accounts 2014
Illustrative performance scenarios
The following graphs set out what each of the Executive Directors could earn in the first financial year to which the policy applies
(2014-15) under the following scenarios:
Will Adderley
David Stead
864
26%
74%
640
100%
1,200
47%
53%
)
0
0
0
’
£
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
1200
1050
900
750
600
450
300
150
0
)
0
0
0
’
£
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
1200
1000
800
600
400
200
0
1,003
41%
27%
32%
528
19%
21%
60%
315
100%
Minimum
In line
with
expectations
Maximum
Minimum
Maximum
In line
with
expectations
■ Annual bonus
■ Fixed pay
■ LTIP
■ Annual bonus
■ Fixed pay
The following assumptions have been made in respect of the above scenarios:
• Minimum (performance below threshold) – Fixed pay (comprising base salary, benefit and pension) only with no vesting
under the cash bonus or LTIP (see table below)
Will Adderley
David Stead
Base
(Last known
salary)
£’000
560
275
Benefits
(As in single
figure table
page 61)
£’000
Pension
(10% of last
known salary)
£’000
24
12
56
28
Total fixed
£’000
640
315
• In line with expectations – Fixed pay plus a cash bonus at on target performance of 40% and vesting of 25% of shares
under the LTIP
• Maximum performance – Fixed pay plus 100% of cash bonus and 100% of shares vesting under the LTIP (150% of base).
It should be noted that the numbers above are likely to be different to the actual pay that is earned by the Executive Directors
during the year. Actual pay will reflect company and personal performance over the relevant performance period. Also we are
required to show the value of the LTIP award that is expected to be made in the year based on face value at the date of grant
without making any assumptions for share price growth.
Please note that as in the past two years, Will Adderley has waived his entitlement to receive an LTIP award.
Recovery
There is provision for recovery of variable pay, as highlighted in the policy table.
At the discretion of the Remuneration Committee, recovery (malus) may be made against any unpaid cash bonus or unvested LTIP
options (this includes awards during the two year deferral period following the end of the three year performance period) in the
following circumstances:
• performance to which a bonus or LTIP award relates proves to have been misstated; or
• there has been a miscalculation in the extent to which performance conditions have been met in respect of previous awards
made to the individual that have vested and been exercised; or
• there has been gross misconduct on the part of the individual.
From 2014 claw back may be operated at the discretion of the Remuneration Committee against all variable awards made after
1 July 2014 in the above circumstances, for up to three years from payment or vesting as appropriate; and in cases of fraud the
Committee can apply malus and claw back for an unlimited period of time.
Salary, pension and benefits and Sharesave options are not subject to recovery.
Dunelm Group plc Annual Report and Accounts 2014 55
Strategic reportGovernanceFinancials
REMUNERATION REPORT continued
Service contracts and loss of office payments
All of the Executive Directors have service contracts. The notice period for termination is 12 months from either party. If the
Company terminates the employment of the Executive Director it would honour its contractual commitment. Any payment of
salary on termination is contractually restricted to a maximum of the value of salary plus benefits for the notice period. If
termination was with immediate effect, a payment in lieu of notice may be made. The Remuneration Committee may apply
mitigation in respect of any termination payment.
The Remuneration Committee has discretion to make a payment in respect of annual cash bonus, provided that it is pro-rated
to service.
The limited circumstances in which unexercised LTIP awards might be exercised following termination of an Executive Director’s
service contract are set out below. If the Remuneration Committee exercises its discretion to allow exercise of an unvested LTIP
award, it may make a cash payment in lieu of the anticipated value of the award, calculated at the date of the payment (taking into
account pro rating of the award and the extent to which performance criteria may apply, as appropriate).
Non-Executive Directors have letters of appointment. The term is 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.
Letters are renewed for up to two additional three year terms, and then renewed annually. The letter of appointment will terminate
without compensation if the Director is not reappointed at the AGM.
The Directors’ service contracts and letters of appointment are available for inspection by shareholders at the Company’s
registered office.
Exercise of LTIP and Sharesave options following termination of employment
LTIP
If a participant leaves the employment of the Group, the following provisions apply to options granted under the LTIP:
• Options that have vested but have not yet been exercised may be exercised within 6 months of cessation of employment (12
months in the case of death).
• Except in the case of dismissal for gross misconduct, options which have not yet vested, but where the performance period
has elapsed (for example if cessation of employment occurs during the deferral period applicable to LTIP options granted from
2013 onwards), may be exercised within 6 months of the relevant vesting date (or 12 months in the case of death), to the extent
that the performance condition has been met. The Remuneration Committee has discretion to allow earlier exercise but would
only use this in exceptional circumstances (such as death or ill health retirement), or at its discretion for a good leaver.
• If the participant leaves the Group before an option has vested and before the performance period has elapsed, the option will
usually lapse. Except in the case of dismissal for gross misconduct, the Remuneration Committee has a discretion to allow the
exercise of options to which the performance period has not elapsed at the date of cessation of employment, within 6 months
of the relevant vesting date (or 12 months in the case of death). The Remuneration Committee also has discretion to allow
earlier exercise. The Remuneration Committee would only use this discretion in exceptional circumstances (such as death or ill
health retirement), or at its discretion for a good leaver.
• If early exercise is permitted, the Remuneration Committee may apply an adjustment to take into account the amount of time
that has elapsed through the performance period and the extent to which any performance criteria have been met.
In all cases, unexercised LTIP awards would be subject to recovery (malus) in the circumstances described above. In respect of
LTIP awards made after 1 July 2014, claw back may also apply to vested awards.
Sharesave
If a participant leaves the Group, options granted under the Sharesave will normally lapse, but may be exercised within 6 months
(or 12 months in the case of death) from the cessation of employment due to death, injury, disability, retirement, or redundancy, or
the employing company leaving the Group.
Executive Share Option Plan
Executive Directors do not participate in the Executive Share Option Plan, therefore the details below are given for
information only.
If a participant leaves the Group, options will normally lapse.
If the participant dies, an unvested option will vest, unless the Remuneration Committee determines otherwise. The Committee
may adjust the number of options that vest to take account of the amount of time that has elapsed through the performance
period and the extent to which the performance condition has been met.
56 Dunelm Group plc Annual Report and Accounts 2014
If a participant ceases to be employed by the Group by reason of ill-health, injury, disability, retirement, sale of the entity that
employs him out of the Group or for any other reason at the Remuneration Committee’s discretion (except for gross misconduct),
a participant’s unvested option will usually continue until the normal vesting date unless the Remuneration Committee determines
that the option will vest as soon as reasonably practicable following the date on which the participant ceases to be employed by
the Group. It may then be exercised within 6 months of the vesting date.
Change of control and other corporate events
LTIP
The following provisions apply to awards made under the Long Term Incentive Plan in accordance with the Plan rules if there is a
change of control or winding up of the Company:
• Any vested but unexercised options may be exercised.
• Any options in respect of which the performance period has elapsed and to which the performance condition has been applied
will vest and may be exercised.
• Any options in respect of which the performance period has not elapsed may be exercised at the discretion of the
Remuneration Committee, subject to any adjustment to take into account the amount of time that has elapsed through the
performance period and the extent to which any performance criteria have been met.
The Executive Director may agree that his awards are ‘rolled over’ into shares of the acquiring company as an alternative.
If the Company has been or will be affected by any demerger, dividend in specie, super dividend or other transaction which will
adversely affect the current or future value of any awards under the LTIP, the Plan rules allow the Remuneration Committee,
acting fairly and reasonably, to determine the extent to which any awards should vest and the period within which Options may be
exercised.
A copy of the Plan rules is available from the Company Secretary on request.
Sharesave
Sharesave options may be exercised within 6 months following a change of control or winding up of the Company, using savings
in his or her account at the date of exercise. The participant may agree that his or her awards are ‘rolled over’ into shares of the
acquiring company as an alternative
If the Company has been or will be affected by a capitalisation, rights issue, subdivision, reduction, consolidation or other variation
in respect of which HMRC will allow the variation of options, the Plan rules allow the Remuneration Committee, with the consent of
HMRC, to vary the number and / or nominal value of shares covered by an option or the option price to be varied proportionately.
A copy of the Plan rules is available from the Company Secretary on request.
Executive Share Option Plan
Executive Directors do not participate in the Executive Share Option Plan, therefore the details below are given for
information only.
In the event of a change of control of the Company, options will vest to the extent that any performance condition has been
satisfied at the date of change of control, and, unless the Remuneration Committee determines otherwise, taking into account the
period of time which has elapsed between the grant date and the relevant event. Alternatively, the Remuneration Committee may
permit or, in the case of an internal reorganisation, require options to be exchanged for equivalent options which relate to shares in
another company.
If other corporate events occur such as a demerger, delisting or other event which, in the opinion of the Remuneration Committee
may affect the current or future value of shares, the Remuneration Committee may determine whether options will vest. Vesting
will be subject to the satisfaction of any performance condition and, unless the Remuneration Committee determines otherwise,
pro-rating to reflect the period from the grant date to the date of the relevant event.
In the event of a variation of the Company’s share capital or, other than in the case of an option granted under the part of the plan
approved by HM Revenue & Customs, a demerger, delisting, special dividend, rights issue or other similar event, which may, in the
Remuneration Committee’s opinion, affect the current or future value of shares, the number of shares subject to an option and the
exercise price and/or any performance condition attached to options, may be adjusted. HM Revenue & Customs approval will be
required for adjustment of an option granted under the part of the plan approved by HM Revenue & Customs.
A copy of the Plan rules is available from the Company Secretary on request.
Dunelm Group plc Annual Report and Accounts 2014 57
Strategic reportGovernanceFinancials REMUNERATION REPORT continued
Executive pay and the pay of other colleagues
Pay for all colleagues throughout the Group is set at a level that is fair for the role and responsibilities of the individual, and is
designed to attract and retain high calibre talent that is needed to deliver the Group’s strategy, without paying too much.
The remuneration of Executive Directors is more heavily weighted towards variable pay than other colleagues, so that a greater
part of their pay is linked to successful delivery of strategy and aligned with shareholders. They are also subject to shareholding
targets. The remuneration of colleagues below the Board reflects the seniority of the role, market practice and the ability of the
individual to influence Company performance.
All eligible colleagues are encouraged to participate in the Sharesave scheme, which enables them to become shareholders at a
discounted rate. Participation is usually offered annually at the maximum price discount permitted (currently 20%), at the discretion
of the Remuneration Committee.
In setting the policy for the Executive Directors’ remuneration, the Committee takes note of the overall approach to remuneration
in the Group. The base salary of Executive Directors may be increased annually in line with the Company-wide award unless other
circumstances apply, as set out in the policy table.
The Committee does not formally consult with colleagues in relation to executive pay. However colleagues have the opportunity
to raise any concerns via the Head of Human Resources through the Colleagues Council, or anonymously through engagement
surveys. Recent engagement surveys have not identified executive pay to be a concern to colleagues.
Shareholder views
The Board is committed to on-going engagement with shareholders in respect of all governance matters, including executive
remuneration. The Non-Executive Directors hold a Corporate Governance Day, usually annual, hosted by the Chairman and the
other Non-Executive Directors, to which all major shareholders are invited. This enables both parties to discuss governance topics,
including remuneration, informally. In addition, the Chairman and Non-Executive Directors usually attend results presentations and
a selection of shareholder meetings.
Formal feedback on shareholder views is given to the Board twice per annum by the Company’s brokers and financial public
relations advisers. The AGM reports issued by the Association of British Insurers (ABI), ISS and Pensions Investment Research
Council (PIRC) are also considered by the Board.
All Directors usually attend the Annual General Meeting, and the Chairman and the Chair of the Remuneration Committee may be
contacted via the Company Secretary during the year.
If any significant change to policy were proposed, the Committee would consult with major shareholders in advance.
Approach to recruitment remuneration
The Company’s remuneration policy was set at the time of its flotation in 2006, and has changed very little since then. During the
period only one new Executive Director appointment has been made. The Committee recognises that some flexibility may be
required if a new Executive Director were to be appointed during the life of this policy.
The Remuneration Committee will apply the following principles when agreeing a remuneration package for a new Director
(whether an external candidate or an internal promotion):
• The package must be sufficient to attract and retain the high calibre talent necessary to develop and deliver the Company’s
strategy.
• No more should be paid than is necessary.
• Remuneration should be in line with the policy set out above, however the Committee reserves the discretion to make
appropriate remuneration decisions outside the standard policy to meet the individual needs of the recruitment provided the
Committee believes the relevant decisions are in the best interests of the Company.
• These circumstances might include:
– Where an interim appointment is made on a short term basis, including where the Chairman or another Non-Executive
Director has to assume an executive position.
– Employment commences at a time in the year when it is inappropriate to provide a bonus or share incentive award as there
is insufficient time to assess performance; the quantum for the subsequent year might be increased proportionately instead.
– An executive is recruited from a business or location that offered benefits that the Committee considers it appropriate to ‘buy
out’ but cannot do so under the specific terms of the regulations, or which the Committee considers it appropriate to offer.
58 Dunelm Group plc Annual Report and Accounts 2014
Examples of remuneration decisions that the Committee may decide are set out below:
• It may be appropriate to offer a lower salary initially, with a series of increases to reach the desired salary over a period of time,
subject to performance.
• A longer notice period of up to a maximum of 24 months might be offered, reducing by one month for every month served until
the policy position is reached.
• The Committee may also alter the performance criteria applicable to the initial annual bonus or LTIP award so that they are
more applicable to the circumstances of the recruitment.
• An internal candidate would be able to retain any outstanding variable pay awarded in respect of their previous role that pays
out in accordance with its terms of grant.
The Committee does not intend to use any discretion in this section to make a non-performance related incentive payment (for
example a ‘golden hello’).
Appropriate costs and support will be provided if the recruitment requires the relocation of the individual.
The maximum level of variable pay that could be awarded to a new Executive Director in the first year of employment, excluding
any buyout arrangements and awards in the first year of employment as set out above would normally be in line with the policy
table set out above.
In addition, on hiring an external candidate the Committee may make arrangements to buy out remuneration that the individual
has forfeited on leaving a previous employer. The Committee will generally seek to structure buyout awards and payments on a
comparable basis to remuneration arrangements forfeited. These awards or payments are excluded from the maximum level of
variable pay referred to above; however, the Committee’s intention is that the value awarded or paid would be no higher than the
expected value of the forfeited arrangements.
In order to implement the arrangements described above, the Committee may rely on exemption 9.4.2 of the Listing Rules, which
allows for the grant of awards to facilitate, in exceptional circumstances, the recruitment of a Director.
The Committee would explain the rationale for the remuneration package in the next annual report of the Company.
On the appointment of a new Chairman or Non-Executive Director, the fees will be set taking into account the experience and
calibre of the individual and pay for similar roles in companies of similar size and complexity in the relevant market. No share
incentives or performance related incentives would be offered.
Dunelm Group plc Annual Report and Accounts 2014 59
Strategic reportGovernanceFinancials REMUNERATION REPORT continued
Annual report on implementation
Directors’ remuneration – report on implementation 2014
This section of the report sets out how the Directors’ Remuneration Policy has been applied in the financial year being reported
on, and how it will be applied in the coming year. Although the policy was not in effect for 2013/14, the remuneration described
below is consistent with it.
Committee membership and meetings
The following Directors served on the Remuneration Committee during the year:
Table 1 – Committee membership
Member
Marion Sears (Chair)
Geoff Cooper
Simon Emeny
Matt Davies
Liz Doherty
Andy Harrison
Period from:
18 January 2005
18 January 2005
25 June 2007
8 February 2012
1 May 2013
1 September 2014
To:
To date
To date
To date
To date
To date
To date
Marion Sears acts as Secretary to the Committee.
Two meetings were held in the year and members’ attendance was as shown in the table below.
Table 2 – Attendance at Committee meetings
Member
Marion Sears (Chair)
Geoff Cooper
Simon Emeny
Matt Davies
Liz Doherty
Andy Harrison1
Meetings attended:
2
2
2
2
2
0
1 Andy Harrison joined the Board after the financial year end.
No Director is ever present when his or her own remuneration is discussed.
Advisers
The Committee has an informal relationship with Deloitte. This firm provides general advice in relation to executive remuneration
on an ad hoc basis. Deloitte is a member of the Remuneration Consultants’ Group and as such voluntarily operates under code
of conduct in relation to executive remuneration consulting in the UK. The Committee is satisfied that the advice that they have
received from Deloitte in the year has been objective and independent.
During the period Deloitte provided advice in relation to rule changes to the Long Term Incentive Plan and the Executive Share
Option Plan. Total fees paid to Deloitte in the year were £9,910.
60 Dunelm Group plc Annual Report and Accounts 2014
Single figure for total remuneration (audited information)
The following table sets out total remuneration for Directors for the year ended 28 June 2014:
Table 3 – Directors’ remuneration – single figure table
Salary / fees2
£’000
Benefits3
£’000
Bonus4
£’000
LTIP awards5
£000
Pension6
£’000
Total
£’000
Director
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Executive
Nick Wharton
Will Adderley
David Stead
Non-Executive
Geoff Cooper
Marion Sears
Simon Emeny
Matt Davies
Liz Doherty
Andy Harrison1
Total
416
265
269
120
50
40
45
40
-
408
265
264
100
40
30
30
7
-
45
24
12
-
-
-
-
-
-
13
13
12
-
-
-
-
-
-
94
60
61
-
-
-
-
-
-
396
-
256
997
661
645
434
567
475
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
42
27
27
-
-
-
-
-
-
41
-
26
1,594
1,037
1,014
1,292
845
1,033
-
-
-
-
-
-
120
50
40
45
40
-
100
40
30
30
7
-
1,245
1,144
81
38
215
652
2,303
1,476
96
67
3,940
3,377
1 Appointed to the Board on 1 September 2014.
2 Base salaries for Executive Directors were increased by 2% on 1 July 2013, in line with the Company-wide award. Following the
first review since 2010, fees for Non-Executive Directors were increased on 1 July 2013 as follows: Chairman from £100,000
to £120,000; base Non-Executive Director fee from £30,000 to £40,000; supplement for Senior Independent Director and
Committee Chair £5,000. Going forward it is intended that fees will rise in line with the Company-wide award.
3 Benefits include the cost to the Company of a car allowance and private health insurance for the individual and their family
(health insurance waived by David Stead). The 2013/14 value also includes the taxable benefit in respect of the car and chauffeur
provided to Nick Wharton and Will Adderley in connection with their roles.
4 Annual bonus is the amount earned in respect of the financial year 2013/14. Details of how this was calculated are set out below.
5 LTIP award number for 2014 is the value of the LTIP award whose three year performance period ends on the last day of the
financial period being reported (2013/14). Details of how this value was calculated are set out in the note to table 5 below.
The comparable figure for 2012/13 is the actual value of the 2010 LTIP awards which vested in favour of Nick Wharton, Will
Adderley and David Stead on 1 December 2013 based on the mid market price on 29 November 2013, of 900.0p. The
comparable figure in the 2012/13 annual report was based on the number of shares in the 2010 LTIP awards due to vest in favour
of Nick Wharton, Will Adderley and David Stead on 1 December 2013 calculated using the average share price over the three
months preceding the end of the performance period on 29 June 2013, which was 866.45p. Note that the LTIP award vesting in
favour of Nick Wharton in 2013/14 is his first full year LTIP award since joining the Group. The award vesting in 2012/13 was pro
rated to his service in 2009/10.
6 Pension is a fixed sum (10% of base salary) contributed to a personal pension on behalf of the individual, or a salary supplement
of the same amount.
Annual bonus
Executive Directors were awarded an annual performance-related cash bonus for 2013/14 with a maximum potential payment
of 100% of salary. For Nick Wharton and David Stead, the performance criterion was earnings per share against budget; the
Committee may then apply judgement to increase or decrease the amount payable taking into account performance against
personal non-financial objectives relevant to each Director, linked to delivery of strategy. For Will Adderley, 50% of the annual
bonus is calculated according to the financial target and 50% is awarded for performance on strategic projects which are an
important focus of his time. For further details please see the policy report on page 49.
For the year ended 28 June 2014, budget EPS was 44.8p. The financial target set was that no bonus would be paid until EPS
reached 42.5p, and at 47.0 p maximum bonus would be paid. Between those sums, bonus would be payable calculated on a
straight line basis. Market consensus for 2013/14 EPS at the date the target was set was 44.2p. Reported EPS of 43.7p has
therefore given rise to a bonus payable of 22.5% of base salary.
After due consideration of performance against personal job objectives and strategic KPIs the Committee resolved not to adjust
the bonus as calculated by the EPS bonus formula. The Committee has not disclosed the personal job objectives and strategic
KPIs referred to above, as they are confidential, and also they are used to inform the Committee’s judgement as whether the
bonus payable is fair, with no formulaic link.
Dunelm Group plc Annual Report and Accounts 2014 61
Strategic reportGovernanceFinancials REMUNERATION REPORT continued
Table 4 – Annual bonus in respect of 2013-14 performance
Nick Wharton
Will Adderley
David Stead
Bonus
awarded
£
93,636
59,625
60,593
Percentage
of maximum
award
22.5
22.5
22.5
LTIP – awards vesting in respect of performance in 2013/14
Awards are made under the LTIP annually to Executive Directors of up to 150% of basic salary, with a three year performance
period. The performance target is based on growth in fully diluted EPS over the performance period. For further information please
see the policy report above.
Over the three-year performance period which ended on 28 June 2014, reported fully diluted EPS grew at a compound annual
rate of 14.3 %. This is 11.4 % above the compound annual growth in RPI over the same period. Accordingly, 77.5 % of the
November 2011 LTIP award will vest in November 2014 as follows:
Table 5 – LTIP awards vesting in respect of performance in 2013-14
Nick Wharton
Will Adderley
David Stead
Shares
vesting
107,888
71,476
69,804
Percentage
of maximum
award
77.5
77.5
77.5
The 2011 LTIP awards which vest in favour of Nick Wharton, Will Adderley and David Stead as described above are included in the
single number for total remuneration for 2013/14 set out in table 3. Their value has been calculated using the average share price
over the three months preceding the end of the performance period on 28 June 2014, which was 924.13p.
62 Dunelm Group plc Annual Report and Accounts 2014
LTIP awards made to Directors during 2013/14
LTIP awards were made to Executive Directors on 7 October 2013 as set out below:
Table 6 – LTIP awards made to Directors during 2013/14
Name
Award
Number of shares
David Stead Nil cost
46,087
option under
LTIP
Face value at
date of award
(percentage of
salary)
£403,950
(150%)
Vesting date
(vesting deferred
for 2 years
following end
of performance
period)
Performance
period
July 2013 to
June 2016
7 October
2018
% vesting
at threshold
performance
25%
Performance condition
Growth in fully diluted
EPS over the three year
performance period
compared with growth in
the index of retail prices
(RPI) over the same period.
No part of the award will
vest until EPS growth
exceeds RPI growth by 3%.
25% of the award vests at
RPI growth plus 3%. 100%
of the award vests at RPI
plus 15%. Between those
figures the award will vest
on a straight line basis.
Subject to a two year
deferral period following
the end of the performance
period.
Nick
Wharton
71,220
Nil cost
option under
LTIP
£624,240
(150%)
As above
July 2013 to
June 2016
7 October
2018
25%
Payments to past Directors and for loss of office (audited)
There have been no payments to past Directors during the year. No payments to Directors for loss of office have been made
during the year.
Nick Wharton resigned from the Board on 10 September 2014. Details of his severance terms are still to be finalised at the date
of this report and will be posted on the Company’s website once agreed in final form. The Remuneration Committee has resolved
that termination payments will cover contractual entitlements and conform to the policy set out in this report.
Statement of Directors’ share interests (audited)
Executive Directors are subject to a shareholding target which requires them to build a beneficial holding of Dunelm shares with a
value of 1x salary after 3 years and 2x salary after 5 years (measured based on share price at the financial year end). All Executive
Directors comply with this requirement.
The following tables show the interests of the Directors in shares of the Company at 28 June 2014 as follows:
• Shares held beneficially
• Interests in nil cost options under the LTIP
• Interests in options under the Savings Related Share Option Scheme
Dunelm Group plc Annual Report and Accounts 2014 63
Strategic reportGovernanceFinancials REMUNERATION REPORT continued
Table 7 – Directors’ beneficial shareholdings (audited)
Will Adderley
David Stead
Geoff Cooper
Marion Sears
Nick Wharton
Simon Emeny
Matt Davies
Liz Doherty
Andy Harrison
At 28 June 2014
1p Ordinary Shares
At 29 June 2013
1p Ordinary Shares
61,890,303
695,135
181,611
101,313
65,077
26,400
4,500
2,500
0
61,827,347
667,181
181,611
101,313
39,500
26,400
4,500
0
0
There were no changes in Directors’ beneficial holdings between the financial year end and the date of this report.
Table 8 – Directors’ interests in options under the LTIP at the period end (audited)
Director
Nick Wharton
Will Adderley
David Stead
Date
of award
Dec 2010
Nov 2011
Nov 2012
Oct 2013
Nov 2011
Nov 2011
Nov 2012
Oct 2013
Nature
of award
One–off joining award
2011/14 LTIP
2012/15 LTIP
2013/16 LTIP
2011/14 LTIP
2011/14 LTIP
2012/15 LTIP
2013/16 LTIP
Share options
at 28 June
2014
End of
performance
period
Market price
of shares at
date of award
198,807
139,211
95,401
71,220
92,227
90,070
61,730
46,087
Dec 2015
June 2014
June 2015
June 2016
June 2013
June 2014
June 2015
June 2016
503p
431p
642p
876.5p
431p
431p
642p
876.5p
None of the Non-Executive Directors have options under the LTIP.
All of the above were nil cost options, and (except as stated below) are subject to the performance condition noted in the policy table.
Vesting of the awards made in October 2013 is subject to a two year deferral. At the end of the three year performance period,
shares earned after applying the performance criteria are subject to an additional two year holding period. During this two year
period dividend entitlement (including any special dividends) will accrue and be paid at the end of that period.
Table 9 – Directors’ options under Sharesave at the period end
Shares
under
option at
28 June
2014
2,493
2,493
Shares
under
option at
29 June
2013
2,493
2,493
Granted
during
period
Exercised
during
period
Lapsed
during
period
Exercise
price
per share
Market
price
of shares
at date of
exercise
Vesting
date
Expiry
date
-
-
-
-
-
-
361p
361p
-
-
Jan 2015
Jan 2015
Jun 2015
Jun 2015
Nick Wharton
David Stead
None of the other Directors have options under the Sharesave.
Share options and dilution
The Remuneration Committee considers the provisions of the Association of British Insurers’ Guidelines on Executive
Remuneration when determining the number of shares over which share scheme incentive awards may be made. At the date of
this report, since flotation of the Group in 2006 options have been granted over 1.7% of the Company’s issued share capital. The
Group does not hold any shares in an employee benefit trust.
64 Dunelm Group plc Annual Report and Accounts 2014
Service contracts
In accordance with the Group’s policy, the service contracts of the Executive Directors have no fixed term, the notice period for
termination is 12 months from either party and payments on termination are restricted to a maximum of the value of base salary
and benefits for the notice period. The Remuneration Committee may apply mitigation in respect of any termination payment.
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.
Table 10 – Directors’ service contracts
Will Adderley
David Stead
Geoff Cooper
Marion Sears
Simon Emeny
Matt Davies
Liz Doherty
Andy Harrison
Date of contract
Unexpired term
Notice period
28 September 2006
15 September 2003
8 October 2004
22 July 2004
25 June 2007
8 February 2012
1 May 2013
17 July 2014
n/a
n/a
1 month
10 months
21 months
7 months
19 months
35 months
12 months
12 months
3 months
1 month
1 month
1 month
1 month
1 month
Since Geoff Cooper and Marion Sears have now served nine years on the Board (seven of which are post flotation of the
Company in 2006) their contracts are renewed for one year terms going forward (with the notice period referred to above).
Relative TSR performance
The graph below shows the Group’s performance over five years, measured by total shareholder return, compared with the FTSE
General Retail 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.
Table 11 – Total shareholder return performance graph (rebased to 29 June 2008 = 100)
Dunelm
FTSE 250
FTSE All Share
General Retailers
1200
1000
800
600
400
200
0
J
u
n
2
0
0
9
N
o
v
2
0
0
9
A
p
r
2
0
1
0
S
e
p
2
0
1
0
F
e
b
2
0
1
1
J
u
l
2
0
1
1
D
e
c
2
0
1
1
M
a
y
2
0
1
2
O
c
t
2
0
1
2
M
a
r
2
0
1
3
A
u
g
2
0
1
3
J
a
n
2
0
1
4
J
u
n
2
0
1
4
The shares traded in the range 811.5p to 1047p during the year and stood at 862.5p at 28 June 2014.
Dunelm Group plc Annual Report and Accounts 2014 65
Strategic reportGovernanceFinancials
REMUNERATION REPORT continued
Table 12 – Historic CEO pay
The table below sets out the prescribed remuneration data for each of the individuals undertaking the role of Chief Executive
during each of the last five financial years
FY13/14
FY12/13
FY11/12
FY10/11
FY10/11
FY09/10
Nick Wharton2
Nick Wharton
Nick Wharton
Nick Wharton1
Will Adderley1
Will Adderley
CEO Single
figure of total
remuneration
£’000
Annual bonus
payment against
maximum
opportunity
%
Long-term incentive
vesting rates
against maximum
opportunity
%
1,594
1,292
853
429
1,413
1,366
22.5%
97.0%
100.0%
6.0%
4.0%
100.0%
77.5%
86.7%
n/a
n/a
100.0%
100.0%
1 Will Adderley was CEO until he was succeeded by Nick Wharton on 1 February 2011. The data for each Director for 2010/11 is pro rated by time of service as Chief Executive.
2 Nick Wharton’s first LTIP award vested and was exercised in December 2013.
Change in remuneration of Chief Executive compared to Group employees
The table below sets out the increase in total remuneration of the Chief Executive and that of our other colleagues
Table 13 – Relative change in CEO pay
Chief Executive
All colleagues (per capita)
Change in
base salary
2012/13 to
2013/14
+2.0%
+2.4%
Change
in benefits
2012/13 to
2013/141
+246%
+17%
% of total
bonus
earned
2013/14
22.5%
24.9%
% of total
bonus
earned
2012/13
97.0%
66.6%
% change
in bonus
earned
2013/14
-76%
-57%
% change
in bonus
earned
2012/13
+1%
+60%
1 The 2013/14 value includes the additional taxable benefit in respect of the car and chauffeur provided to Nick Wharton in connection with his role. If this amount were excluded,
the percentage change in benefits for 2012/13 to 2013/14 would be 0%.
Table 14 – Relative spend on pay
The chart below shows the all employee pay cost and returns to shareholders by way of dividends (including special dividend) and
share buyback for 2012/13 and 2013/14.
2013/14
£’000
2012/13
£’000
increase
%
Total spend on pay
Ordinary dividend to shareholders
Distributions to shareholders via share buy back
Special distributions to shareholders
93,027
33,411
6,852
50,708
87,178
29,386
-
65,842
6.7%
13.7%
n/a
-23.0%
This information is based on the following:
• Total spend on pay – total employee costs from note 4 on page 93, including salaries and wages, social security costs, pension
and share based payments.
• Dividends taken from note 7 on page 94.
• Share buyback taken from consolidated statement of changes in equity on page 85.
Executive Director external Board appointments
Executive Directors are permitted to hold one external appointment as a Non-Executive Director or similar advisory or consultative
role, subject to the Board being satisfied that there is no conflict of interest and that the position will not impact negatively on the
executive’s commitment to their Dunelm role. The Board may allow the executive to retain any remuneration received in respect of
the appointment.
Nick Wharton was appointed as a Non-Executive Director of Mothercare plc on 14 November 2013. He retains his Director fee
(£30,192 in 2013/14).
David Stead was appointed as a Non-Executive Director of Card Factory plc on 12 May 2014, prior to its admission to the London
Stock Exchange on 20 May 2014. He retains his Director fee (£11,250 in 2013/14).
Will Adderley does not hold any external PLC Board appointments.
66 Dunelm Group plc Annual Report and Accounts 2014
Senior executive remuneration
The Remuneration Committee provides oversight and guidance on the remuneration structure for below Board senior executives.
The package for new appointments is formally presented to the Committee for approval. In conducting its assessment of senior
executive remuneration the committee pays particular regard to whether any individual is incentivised to take risks inappropriate to
their role and responsibilities.
Members of the senior management team are eligible for awards under either the LTIP or the Executive Share Option Plan (market
priced options).
They are also subject to shareholding targets as follows:
Executives receiving LTIP Options
Executives receiving market priced options
1 x base salary to be acquired over 5 years
0.5 x base salary to be acquired over time
Statement of implementation of policy in the 2014/15 financial year
Base salary, benefits and pension
Base salary and benefits for each of the Executive Directors for 2014/15 are set out in the table below:
Table 15 – Base salary, benefits and pension for 2014/15
Base
salary
Increase
year on year
Benefits
Increase
year on year Pension
Increase
year on year
Will Adderley
£265,000
until date of
appointment as
Chief Executive
£560,000 from
11 September
2014
Base salary
as Executive
Deputy Chairman
unchanged
(increase waived
by Will)
Car allowance; use of a car
and chauffeur in connection
with his role; private health
insurance for the individual
and their family; permanent
health cover; life assurance;
mobile phone
David Stead
£274,690
+2%
Car allowance; private health
insurance for the individual
and their family; permanent
health cover; life assurance;
mobile phone
Increased
from 11
September
2014 due to
change of role
£27,000
until date of
appointment
as Chief
Executive
Unchanged as
a % of salary
£56,000 from
11 September
2014
Unchanged
£28,000
+2%
Basic salary increase and the corresponding increase in pension contribution or supplement with effect from 1 July 2014 are in
line with the Group-wide award of 2%.
Annual bonus
Each Executive Director has been awarded a bonus opportunity of 100% of basic salary, subject to a financial condition based on
achievement of a target EPS for the financial year, taking into account market consensus and individual broker expectations. Non-
financial personal objectives and targets linked to delivery of strategy will also be taken into account by the Committee alongside
share price performance; the result based on financial performance may be adjusted in the light of these, although there is no
formulaic link. The actual targets have not been disclosed at this time as they are commercially sensitive and they are not formal
targets. The EPS budget targets will be disclosed in next year’s remuneration report.
LTIP
An award is expected to be made to David Stead in October 2014, equivalent to 150% of basic salary, based on the closing share
price on the dealing day preceding the grant. The terms of the award and the performance condition will be as set out in the
policy report, the performance period being July 2014 to June 2017 inclusive. The awards will vest in the normal course, subject to
continued employment until the third anniversary of the grant date and to the extent that performance conditions have been met,
in October 2019, following a two year deferral at the end of the performance period.
As in the past two years, Will Adderley has waived his entitlement to receive an LTIP award.
Dunelm Group plc Annual Report and Accounts 2014 67
Strategic reportGovernanceFinancials REMUNERATION REPORT continued
Sharesave
An invitation will be issued in October 2014 to all eligible employees, to receive sharesave options at a 20% discount to the closing
market price of Dunelm Group shares on the dealing day preceding the issue of the invitation. The maximum monthly savings will
be raised to £500 per month from £250 per month in line with the statutory increase. Executive Directors are eligible to apply for
Sharesave options.
Non-Executive Director fees for 2014/15
Fees to be paid to Non-Executive Directors are as set out in the table below:
Table 16 – Non-Executive Director Fees
Director
Geoff Cooper
Position
Chairman
Base Fee
£122,400
Committee
Fee
Nil
Increase
year
on year
2.00%
Comment
Marion Sears
Nominations Committee chair
£40,800
£6,100
-6.10% Committee chair fees reduce from
12 September 2014
Matt Davies
Remuneration Committee chair
£40,800
£5,100
2.00%
Simon Emeny
Senior Independent Director
£40,800
£4,100
12.13%
Liz Doherty
Audit and Risk Committee chair
£40,800
£4,100
12.13%
Andy Harrison Non-Executive Director
£34,000
Nil
n/a
SID fee from
12 September 2014
Committee chair fee from
12 September 2014
Base fee £40,800; pro-rated from
appointment on 1 September
Fee increases with effect from 1 July 2014 are in line with the Group-wide award of 2%.
Statement of shareholder voting
At the Annual General Meeting on 12 November 2013, the total number of shares in issue with voting rights (excluding treasury
shares) was 202,781,698. The resolution to approve the Directors’ Remuneration Report and to approve the new Executive Share
Option Plan received the following votes from shareholders:
Table 17 – Voting on remuneration related resolutions at the 2013 AGM
Resolution
% of votes
Votes for
cast Votes against
Approve Remuneration Report
186,874,938
Approve Executive Share Option Plan
183,396,479
99.7
99.2
480,666
1,404,481
% of votes
cast
0.3
0.8
Votes
withheld
5,246
2,558,990
% voting
rights
withheld
0
1.4
Change Of Responsibilities
As noted in the Corporate Governance Report, I will be retiring as Chair of the Remuneration Committee on 12 September 2014.
Matt Davies will take my place as Chair of the Remuneration Committee.
Approved by the Board of Dunelm Group plc on 11 September 2014 and signed on its behalf by
Marion Sears
Chair of the Remuneration Committee
11 September 2014
68 Dunelm Group plc Annual Report and Accounts 2014
LETTER FROM THE CHAIR OF
THE NOMINATIONS COMMITTEE
Marion Sears
Chair of Nominations Committee
Dear Shareholder,
We have continued to focus on Board composition and refreshment during the year with the aim of creating the right diversity of
skills and mix of tenure.
With regard to Non Executives, in 2012 and 2013 we appointed Matt Davies and Liz Doherty respectively to the Board and in 2014
we have appointed Andy Harrison to the Board. This means that we now have the majority of NEDs in the first term of their tenure
and the Board benefits from fresh insights, skills and experience arising from this new mix. In every recruitment process significant
work and effort has gone into networking with a large number of contacts in order to ensure we have met a range of potential
candidates. We are always looking for ‘better’ and we take our time to find individuals who fit Dunelm’s culture and can bring an
additional perspective.
With regard to Executives, the Nominations Committee has focused for some time now on the future executive needs for the next
chapter of Dunelm’s growth. As a result of this we conducted a search for a new Chief Executive who would have the skills for this
next phase and we interviewed a number of external candidates. Ultimately we concluded that Will Adderley is the best person to
lead Dunelm in this next phase and we look forward to building on our position as the UK’s leading homewares retailer under his
direction. We congratulate Nick Wharton for the shareholder value he has created over the last four years.
We are fully compliant in terms of Board balance between Executives and Independent Directors. We think continually about the
future needs of the business and about how the Board can help to preserve our culture throughout the organisation, whilst at the
same time ensuring the calibre of Board necessary to support our ambitions for growth.
Looking forward, we will continue to work on Board composition and Chairman succession, with the aim of achieving smooth
succession of Directors over the next few years.
Yours sincerely,
Marion Sears
Chair of the Nominations Committee
11 September 2014
Dunelm Group plc Annual Report and Accounts 2014 69
Strategic reportGovernanceFinancials NOMINATIONS
COMMITTEE REPORT
2013/14 Summary
Principal activities
• Non-Executive Director search
• Update of Board succession plan
• Board evaluation by the Chairman of the Board
• Chief Executive role assessment and search
Since the year end:
• Appointment of Will Adderley as Chief Executive
• Resignation of Nick Wharton as Chief Executive
• Appointment of Andy Harrison as Non-Executive Director
This report provides details of the role of the Nominations Committee and the work it has undertaken during the year.
The purpose of the Committee is to assist the Board by keeping the composition of the Board under review and conducting a
rigorous and transparent process when new appointments to the Board are made. The full terms of reference for the Committee
can be found on the Company’s website.
The following Directors served on the Committee during the year:
Member
Marion Sears (Chair)
Geoff Cooper
Simon Emeny
Will Adderley
Matt Davies
Liz Doherty
Andy Harrison
Period from:
18 January 2005
18 January 2005
25 June 2007
17 February 2011
8 February 2012
1 May 2013
1 September 2014
To:
To date
To date
To date
To date
To date
To date
To date
The NED search process, and succession planning as part of this, was discussed by the whole Board at every Board meeting
with an update paper provided by myself. In addition there were six formal Committee meetings held in the year and members’
attendance was as shown in the table below. I also act as Secretary to the Committee.
Member
Marion Sears (Chair)
Geoff Cooper
Simon Emeny
Will Adderley
Matt Davies
Liz Doherty
Andy Harrison1
Meetings attended:
6
6
6
6
6
6
0
1 Andy Harrison joined the Board after the financial year end.
General succession planning
The Committee keeps under review the balance of skills on the Board as a whole and the knowledge, experience, length of
service and performance of the Directors. On at least an annual basis each Director’s intentions are discussed with regard to
serving on the Board and their succession is considered in the context of the shape of the overall Board and the corporate
governance guidance on Non-Executive Director tenure. This transparency amongst a small and collegiate Board allows for an
open discussion about succession for each individual, both for short-term emergency purposes as well as longer-term plans.
While all Board appointment processes and succession discussions are led by the Nominations Committee these are viewed as
important whole-Board topics and no appointment will be made to the Board without agreement of all Directors.
70 Dunelm Group plc Annual Report and Accounts 2014
Committee activities in 2013/14
NED search
Focus has continued on Board succession and the need to refresh membership over the coming years. The Committee has
continued to lead the search for a new Non-Executive Director.
Following our annual review of the skills and balance on the Board, the tenure of our Non-Executive Directors and our likely needs
in the context of our strategy going forward, we drew up a role and person specification for which the main requirements were:
• Relevant experience in retail or similar business, including multi-channel.
• Strategic vision.
• Familiarity with the current challenges of operating management, including multi-channel and international.
• Understanding of branding and marketing.
• Cultural fit.
In accordance with our policy, we also had regard to the requirement to achieve a diversity of characters, backgrounds and
experiences amongst Board members and we met an approximately equal number of male and female candidates.
In a different approach to our last appointment, with this search we used a recruitment consultancy to assist us. We engaged
Russell Reynolds to map senior retail talent in the industry internationally in order to help us search widely. We also maintained
contacts with a variety of intermediaries and discussed our process with our advisers and our shareholders at the Corporate
Governance presentation in January. Therefore we continued to apply the requirements of best practice for ‘open advertising’ by
talking to a large number of contacts who know Dunelm and who understand our culture and ambitions.
0n 17 July 2014 we were pleased to announce the appointment of Andy Harrison as an additional Non-Executive Director, with
effect from 1 September 2014. Andy was identified by Russell Reynolds in our mapping exercise. Dunelm has no other relationship
with Russell Reynolds.
Andy is currently Chief Executive of Whitbread plc; prior to that he was Chief Executive of EasyJet plc and RAC plc His skills and
experience are an excellent fit with our specification; and having met all Board members at least once during the appointment
process we are sure that he will work well with the Board and provide new challenge and perspective.
Chief Executive search
During the year the Committee reviewed the skills needed for the leadership of Dunelm in the next chapter of its growth. It
concluded that, as planned at the time of his appointment, Nick Wharton has introduced processes and operational focus which
have created a robust infrastructure and he has built a high quality operational management team. This is the base needed to
enable continuing business growth over the medium term. However the Committee concluded that this is the appropriate moment
to hand over to a different leader with fresh perspectives.
The main requirements in the candidate brief for a new Chief Executive were:
• Cultural fit.
• Experienced retailer.
• Strategic background.
• Visionary and passionate.
• Demonstrable track record of leadership.
We used CT Partners to conduct a search and we interviewed a shortlist comprising a number of strong candidates including
an approximately equal number of men and women. The Committee was unanimous in its determination and ambition to find
the highest quality individual to lead Dunelm. Ultimately the Committee concluded that Will Adderley is the best person to lead
the Group. He is an outstanding retailer who knows Dunelm, and the world of homewares, better than anyone else. He is excited
about this new stage for developing the business and will strengthen the senior leadership team further to support his plans.
Although Will Adderley is a member of the Nominations Committee he did not participate in the discussions or decision relating to
the final candidate selection. The Chairman of the Board and I led the Committee meeting, from which Will Adderley was absent,
to discuss Will’s suitability for the role. The Committee was unanimous in concluding that Will Adderley should be appointed Chief
Executive and we are confident that his long term perspective and focus on growth will reward all stakeholders.
Dunelm Group plc Annual Report and Accounts 2014 71
Strategic reportGovernanceFinancials NOMINATIONS
COMMITTEE REPORT continued
Board succession
As stated last year, we have a formal plan for how Board membership should develop over the coming years. This is a long-range
plan and we will continue to take actions to implement this.
Skills balance and Directors’ performance evaluation
The Nominations Committee reviews Board composition and the balance of skills provided by the Directors in a whole Board session
each year, in the light of the most recent strategy discussions. This has also been addressed in our Board evaluation which is
described in the Corporate Governance Report. The outcome of this has been incorporated into our Board succession plan.
In addition to the external Board evaluation, the performance of all of the Directors has been assessed individually. The Chairman
of the Board led a process of collecting feedback on each Director’s performance and provided them with a one-to-one evaluation
and discussion of training needs. As Senior Independent Director I collected feedback about the Chairman and provided him with
an evaluation of his performance.
Diversity
In 2011 we set out the Board’s policy on diversity which we believe remains appropriate for Dunelm. It can be summarised as follows:
• Whilst confirming that our overriding concern is to ensure the Board comprises outstanding individuals who can lead the
Group, we also believe the Group’s best interests are served by ensuring that these individuals represent a range of skills,
experiences, backgrounds and perspectives, including gender.
• Accordingly, it is our policy that the Board should always be of mixed gender.
• Quotas are not appropriate as a target for female representation on company Boards, since they are likely to lead to
compromised decisions on Board membership, quality and size.
• We will seek to ensure that specific effort is made to bring forward female candidates for Board appointments.
• We will monitor the Group’s approach to people development to ensure that it continues to enable talented individuals, both
male and female, to enjoy career progression activities within Dunelm.
Details of the gender balance within the Group are set out in the Corporate Social Responsibility report on page 22. The
Committee is pleased that whilst as one might expect as a retailer the majority of colleagues are female, there is also good
representation at Board and senior management level (25% and 29% respectively).
Tenure and re-election of Directors
In accordance with the UK Corporate Governance Code, all Directors will seek re-election at the 2014 AGM, and as now required
by the Listing Rules the Non-Executives will be subject to an additional vote by shareholders independent of the Adderley family.
Given that Geoff Cooper and I have been Board members since 2004, we have each served ten years on the Board, seven of
these following the Company’s flotation in 2006. In accordance with best practice, in 2014, our contracts were renewed for a
one year term, subject to earlier termination by notice and reappointment at the AGM. Simon Emeny has entered a third term as
Non-Executive Director which takes his tenure to 2016, and Matt Davies, Liz Doherty and Andy Harrison all remain within their first
term. Our main priority during this succession phase is to balance the changes with a period of time in between each appointment
and departure and, at the same time, achieve a continuous refreshment of skill and experience.
This report was reviewed and approved by the Board on 11 September 2014.
Marion Sears
Chair of the Nominations Committee
11 September 2014
72 Dunelm Group plc Annual Report and Accounts 2014
DIRECTORS’ REPORT
The Directors present their report together with the audited financial statements for the year ended 28 June 2014.
Where reference is made to other sections of the Annual Report and Accounts, these sections are incorporated into this report
by reference.
Strategic report
The Group’s Strategic Report is set out on pages 2 to 28. This contains an indication of likely future developments in the business
of the Company and the Group.
Results and dividends
The consolidated profit for the year after taxation was £89.1m (2013: 81.5m). The results are discussed in greater detail in the
Finance Director’s review on pages 12 to 13.
A final dividend of 15.0 per share (2013: 11.5p) is proposed in respect of the year ended 28 June 2014 to add to an interim
dividend of 5.0p per share paid on 11 April 2013 (2013: 4.5p). The final dividend will be paid on 19 December 2014 to shareholders
on the register at 28 November 2014.
Special dividend
On 11 October 2013, 25.0p per Ordinary Share was returned to shareholders by way of a Special Dividend.
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% 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:
• conduct all transactions and relationships with any member of the Group on arms length terms and on a normal commercial
basis;
• 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);
• 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;
• abstain from voting on any resolution to which LR11.7.R(4) of the Listing Rules applies involving Jean Adderley, Bill Adderley or
Will Adderley or any of their associates as the related party;
• 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
• 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.
WA Capital Limited and Nadine Adderley, to whom Will Adderley has transferred shares by way of a gift, have subsequently
become party to this agreement.
In July 2014, the Relationship Agreement was amended so as to comply with Listing Rule LR 9.2.2A(2)(a), which came into effect
on 16 May 2014. The following additional undertakings were given by the parties:
• No action will be taken that would have the effect of preventing the Company from complying with its obligations under the
Listing Rules; and
• No resolution will be proposed, or procured to be proposed, which Is intended to, or appears to be intended to circumvent the
proper application of the Listing Rules.
In addition, a resolution will be proposed at the Annual General Meeting in 2014 to amend the Articles of Association of the
Company so that it allows the election and re-election of Independent Directors to be conducted in accordance with the election
provisions set out in LR9.2.2ER and LR9.2.2FR. This means that the election or re-election of each Independent Director at the
Annual General Meeting will be subject to an additional resolution upon which parties controlling 30% or more of the voting shares
of the Company are not eligible to vote.
Dunelm Group plc Annual Report and Accounts 2014 73
Strategic reportGovernanceFinancials DIRECTORS’ REPORT continued
The Company confirms that it has complied with its obligations under the Relationship Agreement during the financial period
under review, and that so far as it is aware all other parties to that agreement have complied with it.
The Company confirms that there are no contracts of significance between any member of the Group and any of the parties to the
Relationship Agreement, with the exception of Will Adderley’s service agreement as a Director of the Company, the terms of which
are outlined in the Remuneration Report.
There are no restrictions on the transfer of Ordinary Shares in the Company other than certain restrictions imposed by laws and
regulations (such as insider trading and marketing requirements relating to close periods) and requirements of the Listing Rules
whereby Directors and certain employees of the Company require Board approval to deal in the Company’s securities.
Change of control
The Company is not party to any significant agreements which take effect, alter or terminate solely on a change of control of the
Company following a takeover bid.
There are no agreements between the Company and its Directors or employees providing for additional compensation for loss of
office or employment (whether through resignation, redundancy or otherwise) that occurs because of a takeover bid.
Share capital and treasury shares
The Company has only one class of shares, Ordinary Shares of 1p each.
The issued Ordinary Share capital of the Company has increased by 3,743 Ordinary Shares during the period due to the exercise
of share options. Details of option exercises by Directors are set out above.
At 28 June 2014 the Company held 936,498 Ordinary Shares in treasury (2013: nil).
During the period the Company purchased 1,706,154 Ordinary Shares into treasury, and transferred 769,656 to employees who
exercised options under a share incentive scheme.
4,731 Ordinary Shares have been moved out of treasury since the period end to employees who exercised options under a share
incentive scheme.
Substantial shareholders
At 11 September 2014 the following had notified the Company of a disclosable interest in 3% or more of the nominal value of the
Company’s Ordinary Shares:
Will Adderley
Bill Adderley
Kames Capital
Ordinary
Shares
61,890,303
48,070,000
7,514,493
Percentage
of
share capital
30.6
23.7
3.72
Will Adderley is also deemed to hold a legal interest in 1,167,250 Ordinary Shares held by The Stoneygate Trust (formerly known as
The Leicester Foundation) and 172,750 Ordinary Shares held by the Paddocks Discretionary Trust, by virtue of the fact that he is a
trustee of those trusts.
Directors
The Directors of the Company and their biographies are set out on pages 30 to 31. Details of changes to the Board during the
period are set out in the Corporate Governance Report on page 33.
Powers of Directors
Specific powers of the Directors in relation to shares and the Company’s Articles of Association are referred to in the Corporate
Governance report on page 40.
Employee information
Information relating to employees of the Group is set out in the Corporate Social Responsibility report on page 22.
Share incentive schemes in which employees participate are described in the Remuneration Report on pages 51 and 52.
74 Dunelm Group plc Annual Report and Accounts 2014
Greenhouse gas emissions
The Corporate Social Responsibility report on page 28 sets out the greenhouse gas emissions disclosures required by the
Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.
Treasury and risk management
The Group’s approach to treasury and financial risk management is explained in the Principal Risks and Uncertainties section
on page 19.
Going concern
The Directors have made appropriate enquiries and formed a judgement at the time of approving the financial statements that
there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable
future. For this reason the Directors continue to adopt the going concern basis in preparing the financial statements.
Auditor
On 14 January 2014, PricewaterhouseCoopers LLP were appointed auditor to the Group following the resignation of KPMG LLP,
who were unsuccessful in the audit tender.
In accordance with section 489 of the Companies Act 2006 and the recommendation of the Audit and Risk Committee, a
resolution is to be proposed at the AGM for the appointment of PricewaterhouseCoopers LLP as auditors of the Group.
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.
Annual General Meeting
The Annual General Meeting will be held at 9.30am on Tuesday 11 November 2014 at the offices of MHP Communications,
60 Great Portland Street, London W1W 7RT. A formal notice of meeting, explanatory circular and a form of proxy will accompany
this report and accounts.
This report was reviewed and approved by the Board on 11 September 2014.
Dawn Durrant
Company Secretary
11 September 2014
Dunelm Group plc Annual Report and Accounts 2014 75
Strategic reportGovernanceFinancials STATEMENT OF
DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have
prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. 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 the Company and of the profit or loss of
the Group for that period. In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures
disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable
them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006
and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the
assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess a company’s performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Corporate Governance Report, confirm that, to the best of their
knowledge:
• the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of the Group; and
• the strategy report contained includes a fair review of the development and performance of the business and the position of the
Group, together with a description of the principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Directors’ Report is approved, it is confirmed that:
a. so far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and
b. he/she has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any
relevant audit information and to establish that the Company’s auditors are aware of that information.
Will Adderley
Chief Executive
David Stead
Finance Director
11 September 2014
76 Dunelm Group plc Annual Report and Accounts 2014
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF DUNELM GROUP PLC
Report on the financial statements
Our opinion
In our opinion:
• the financial statements, defined below, give a true and fair view of the state of the Group’s and of the Parent Company’s affairs
as at 28 June 2014 and of the Group’s profit and the Group’s and the Parent Company’s cash flows for the period then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act
2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS Regulation.
This opinion is to be read in the context of what we say in the remainder of this report.
What we have audited
The Group financial statements and Parent Company financial statements (the “financial statements”), which are prepared by
Dunelm Group plc, comprise:
• the consolidated and Parent Company statements of financial position as at 28 June 2014;
• the consolidated income statement and consolidated statement of comprehensive income for the period then ended;
• the consolidated and Parent Company statements of cash flows for the period then ended;
• the consolidated and Parent Company statements of changes in equity for the period then ended;
• the accounting policies; and
• the notes to the financial statements, which include other explanatory information.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the
European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
Certain disclosures required by the financial reporting framework have been presented elsewhere in the Annual report and
accounts (the ‘Annual Report’), rather than in the notes to the financial statements. These are cross-referenced from the financial
statements and are identified as audited.
What an audit of financial statements involves
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’). An audit
involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been
consistently applied and adequately disclosed;
• the reasonableness of significant accounting estimates made by the Directors; and
• the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with
the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our report.
Overview of our audit approach
Materiality
We set certain thresholds for materiality. These helped us to determine the nature, timing and extent of our audit procedures and
to evaluate the effect of misstatements, both individually and on the financial statements as a whole.
We based our materiality on profit before tax. We have applied this benchmark, a generally accepted auditing practice, in the
absence of indicators that an alternative benchmark would be appropriate. We determined materiality for the Group financial
statements as a whole to be £5.8 million. This represents approximately 5% of profit before tax.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £0.2
million as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Dunelm Group plc Annual Report and Accounts 2014 77
FinancialsGovernanceStrategic report INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF DUNELM GROUP PLC continued
Report on the financial statements
Overview of the scope of the audit
The Group is structured with one segment. The Group financial statements are a consolidation of five legal entities within this
segment, comprising the Group’s operating business and centralised functions.
In establishing the overall approach to the Group audit, we identified two reporting units: Dunelm (Soft Furnishings) Limited and
Dunelm Group plc Parent Company, which, in our view, required an audit of their complete financial information either due to size
or risk characteristics.
In addition, we also conducted the statutory audits of the remaining three non-significant reporting units such that the audit work
was complete prior to finalisation of the audit of the Group financial statements.
The audits of these five reporting units, together with the additional procedures performed at the Group level, including
consolidation, gave us the evidence we needed for our opinion on the Group financial statements as a whole. This resulted in audit
coverage of 100% of Group profit before tax.
Areas of particular audit focus
In preparing the financial statements, the Directors made a number of subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We primarily
focused our work in these areas by assessing the Directors’ judgements against available evidence, forming our own judgements,
and evaluating the disclosures in the financial statements.
In our audit, we tested and examined information, using sampling and other auditing techniques, to the extent we considered
necessary to provide a reasonable basis for us to draw conclusions. We obtained audit evidence through testing the effectiveness
of controls, substantive procedures or a combination of both.
We considered the following areas to be those that required particular focus in the current year. This is not a complete list of all
risks or areas of focus identified by our audit. We discussed these areas of focus with the Audit and Risk Committee. Their report
on those matters that they considered to be significant issues in relation to the financial statements is set out on page 45.
Area of focus
How the scope of our audit addressed the area of focus
Inventory provisions
Inventory represents a significant asset on the Group’s balance
sheet and is carried at the lower of cost and net realisable value.
We focused on this area as judgement is required when
assessing the need for and the value of obsolescence provisions.
Fraud in revenue recognition
ISAs (UK & Ireland) presume there is a risk of fraud in revenue
recognition because of the pressure management may feel to
achieve the planned results. Revenue is the key driver for the
business and as such represents a financial statement line item
that is susceptible to fraud or manipulation. Our main area of
focus in considering the fraud risk in revenue recognition was
whether transactions had occurred that entitled revenue to be
recognised.
Risk of management override of internal controls
ISAs (UK & Ireland) require that we consider this.
In testing the inventory provisions we focused on historic loss
experience to assess the provisions for loss, theft or damage of
inventory.
We assessed the net realisable value and obsolescence
provisions against the historic rate of provisioning and actual
recoveries achieved on clearances during the year.
We tested the accuracy of the provision calculation and we
evaluated updates to the provision calculation for the impact of
changes in product mix, sales discount and clearance routes.
We assessed the design and operating effectiveness of
controls over revenue systems.
We tested key revenue and cash reconciliations and tested
material manual journals to address the risk of management
manipulation of revenue.
Data analysis techniques were used for store and internet
revenue streams to reconcile recorded revenue to cash
received and to identify non-standard revenue transactions
which were then tested by checking to supporting
documentation.
We assessed the overall control environment of the Group,
including the arrangements for staff to ‘whistle-blow’
inappropriate actions, and interviewed senior management
and the Group’s operational audit function. We examined the
significant accounting estimates and judgements relevant to
the financial statements for evidence of bias by the Directors
that may represent a risk of material misstatement due to fraud.
We also tested journal entries posted during the year to identify
unusual or irregular items.
78 Dunelm Group plc Annual Report and Accounts 2014
Going concern
Under the Listing Rules we are required to review the Directors’ statement, set out on page 75, in relation to going concern. We
have nothing to report having performed our review.
As noted in the Directors’ statement, the Directors have concluded that it is appropriate to prepare the financial statements using
the going concern basis of accounting. The going concern basis presumes that the Group and Parent Company have adequate
resources to remain in operation, and that the Directors intend them to do so, for at least one year from the date the financial
statements were signed. As part of our audit we have concluded that the Directors’ use of the going concern basis is appropriate.
However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s
and Parent Company’s ability to continue as a going concern.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion:
• the information given in the Strategic Report and the Directors’ report for the financial period for which the financial statements
are prepared is consistent with the financial statements;
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006; and
• the information given in the Corporate Governance Statement set out on pages 40 to 42 with respect to internal control and risk
management systems and about share capital structures is consistent with the financial statements.
Other matters on which we are required to report by exception
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• 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.
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration
specified by law are not made. We have no exceptions to report arising from this responsibility.
Corporate governance statement
Under the Companies Act 2006 we are required to report to you if, in our opinion, a corporate governance statement has not been
prepared by the Parent Company. We have no exceptions to report arising from this responsibility.
Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the Parent
Company’s compliance with nine provisions of the UK Corporate Governance Code (‘the Code’). We have nothing to report having
performed our review.
On page 76 of the Annual Report, as required by the Code Provision C.1.1, the Directors state that they consider the Annual
Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess
the Group’s and Parent Company’s performance, business model and strategy.
On page 45, as required by C.3.8 of the Code, the Audit and Risk Committee has set out the significant issues that it considered
in relation to the financial statements, and how they were addressed. Under ISAs (UK & Ireland) we are required to report to you if,
in our opinion:
• the statement given by the Directors is materially inconsistent with our knowledge of the Group and Parent Company acquired
in the course of performing our audit; or
• the section of the Annual Report describing the work of the Audit and Risk Committee does not appropriately address matters
communicated by us to the Audit and Risk Committee.
We have no exceptions to report arising from this responsibility.
Dunelm Group plc Annual Report and Accounts 2014 79
FinancialsGovernanceStrategic report INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF DUNELM GROUP PLC continued
Report on the financial statements
Other information in the Annual Report
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion, information in the Annual Report is:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group and Parent Company
acquired in the course of performing our audit; or
• is otherwise misleading.
We have no exceptions to report arising from this responsibility.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the Directors
As explained more fully in the Statement of Directors’ responsibilities set out on page 76, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK &
Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Mark Smith (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
11 September 2014
80 Dunelm Group plc Annual Report and Accounts 2014
CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended 28 June 2014
Revenue
Cost of sales
Gross profit
Operating costs
Operating profit
Financial income
Financial expenses
Profit before taxation
Taxation
Note
2014
£’000
2013
£’000
1 730,152 677,192
(368,851)
(347,448)
361,301 329,744
3
(245,273)
(223,206)
2 116,028 106,538
5
5
436
(478)
1,518
(1)
115,986 108,055
6
(26,914)
(26,601)
Profit for the period attributable to owners of the Parent
89,072
81,454
Earnings per Ordinary Share – basic
Earnings per Ordinary Share – diluted
8
8
44.0p
43.7p
40.2p
40.0p
Dunelm Group plc Annual Report and Accounts 2014 81
Strategic reportGovernanceFinancials
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
For the 52 weeks ended 28 June 2014
Profit for the period
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss:
Effective portion of movement in fair value of cash flow hedges
Deferred tax on hedging movements
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
2014
£’000
2013
£’000
89,072
81,454
(3,286)
668
443
(102)
(2,618)
341
86,454
81,795
82 Dunelm Group plc Annual Report and Accounts 2014
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 28 June 2014
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Financial instruments
Total current assets
Total assets
Current liabilities
Trade and other payables
Liability for current tax
Financial instruments
Total current liabilities
Non-current liabilities
Trade and other payables
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share premium
Capital redemption reserve
Hedging reserve
Retained earnings
Total equity attributable to equity holders of the Parent
28 June
2014
£’000
Note
29 June
2013
restated
(note 15)
£’000
9
9,260
4,262
10 152,866 151,060
11
3,783
1,460
165,909 156,782
12 115,528
92,940
13
14
17
19,479
18,344
21,740
44,740
-
387
156,747 156,411
322,656 313,193
15
(76,016)
(64,349)
(13,461)
(13,393)
17
(2,898)
-
(92,375)
(77,742)
15
(40,544)
(37,757)
(40,544)
(37,757)
(132,919) (115,499)
189,737 197,694
18
2,028
1,624
2,028
1,612
43,157
43,157
(2,319)
299
145,247 150,598
189,737 197,694
The financial statements on pages 81 to 104 were approved by the Board of Directors on 11 September 2014 and were signed on
its behalf by:
Will Adderley
Chief Executive
Dunelm Group plc Annual Report and Accounts 2014 83
Strategic reportGovernanceFinancials
CONSOLIDATED STATEMENT
OF CASH FLOWS
For the 52 weeks ended 28 June 2014
Profit before taxation
Adjustment for net financing costs
Operating profit
Depreciation and amortisation
Impairment losses on non-current assets
Loss on disposal of non-current assets
Operating cash flows before movements in working capital
Increase in inventories
Increase in receivables
Increase in payables
Net movement in working capital
Share-based payments expense
Foreign exchange gains
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
Proceeds from issue of treasury shares
Purchase of treasury shares
Return of capital to shareholders
Dividends paid
Net cash flows utilised in financing activities
Net decrease in cash and cash equivalents
Foreign exchange revaluations
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
84 Dunelm Group plc Annual Report and Accounts 2014
Note
2014
£’000
2013
£’000
115,986 108,055
42
(1,517)
116,028 106,538
20,257
20,358
25
942
166
76
137,252 127,138
(22,588)
(1,160)
14,448
(6,719)
(1,321)
4,664
(9,300)
(3,376)
2,470
2,045
95
451
130,517 126,258
-
461
(1)
937
(27,144)
(26,795)
103,834 100,399
35
10
(20,760)
(23,382)
(7,303)
(3,000)
(28,028)
(26,372)
12
589
1,278
(15,404)
-
-
2
10
2
12
13
15
20
10
10
9
18
19
19
-
(65,841)
7
(84,119)
(29,386)
(98,233)
(94,638)
(22,427)
(20,611)
(573)
161
44,740
65,190
14
21,740
44,740
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the 52 weeks ended 28 June 2014
As at 30 June 2012
Profit for the period
Movement in fair value of cash flow hedges
Deferred tax on hedging movements
Total comprehensive income for the period
Issue of share capital
Share-based payments
Deferred tax on share-based payments
Current corporation tax on share options exercised
Dividends
Return of Capital to Shareholders
Total transactions with owners, recorded directly in equity
As at 29 June 2013
Profit for the period
Movement in fair value of cash flow hedges
Deferred tax on hedging movements
Total comprehensive income for the period
Issue of share capital
Purchase of treasury shares
Issue of treasury shares
Share-based payments
Deferred tax on share-based payments
Current corporation tax on share options exercised
Dividends
Total transactions with owners, recorded directly in equity
Issued share
capital
£’000
Share
Premium
£’000
Note
Capital
redemption
reserve
£’000
Hedging
reserve
£’000
Retained
earnings
£’000
Total equity
£’000
2,023
1,025
43,155
(42) 160,865 207,026
17
18
20
6
6
7
17
18
19
19
20
11
6
7
-
-
-
-
5
-
-
-
-
-
5
-
-
-
-
587
-
-
-
-
-
587
-
-
-
-
2
-
-
-
-
-
2
-
81,454
81,454
443
(102)
-
-
443
(102)
341
81,454
81,795
-
-
-
-
-
-
-
(6)
2,045
1,006
461
588
2,045
1,006
461
(29,386)
(29,386)
(65,841)
(65,841)
(91,721)
(91,127)
2,028
1,612
43,157
299 150,598 197,694
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12
-
-
-
-
-
-
12
-
-
-
-
-
-
-
-
-
-
-
-
-
89,072
89,072
(3,286)
668
-
-
(3,286)
668
(2,618)
89,072
86,454
-
-
-
-
-
-
-
-
-
12
(15,404)
(15,404)
1,278
2,470
286
1,278
2,470
286
1,066
1,066
(84,119)
(84,119)
(94,423)
(94,411)
As at 28 June 2014
2,028
1,624
43,157
(2,319) 145,247 189,737
Dunelm Group plc Annual Report and Accounts 2014 85
Strategic reportGovernanceFinancials
ACCOUNTING POLICIES
Basis of preparation
The Group financial statements consolidate those of Dunelm Group plc (‘the Company’) and its subsidiaries (together referred to
as the ‘Group’). The Company financial statements on pages 105 to 113 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’) and in accordance with the provisions of the Companies Act 2006
and these are presented on pages 81 to 104.
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 except for financial assets and financial liabilities,
which have been stated at fair value. The financial statements are prepared in pounds sterling, rounded to the nearest thousand.
Going concern
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 the UK. As a consequence, the Directors believe that the Group is well placed
to manage its business risks successfully. 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 Strategic Report and Business Review on pages 2 to 28. The financial position of the
Group, its cash flows, liquidity position and borrowing facilities are described in the Finance Director’s review on pages 12 to 13.
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 in conformity with IFRS as adopted by the EU 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 on-going 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 the inventories held where it is anticipated that net realisable value (NRV) will be
below costs. NRV is calculated on the basis of current selling price and expected future price reductions. Future price reductions
in turn are assumed to be in line with the Groups standard approach to clearing discontinued and slow-moving inventory; and are
applied to such proportion of inventory as deemed appropriate given the level of cover in relation to recent sales history, on a line
by line basis.
86 Dunelm Group plc Annual Report and Accounts 2014
Equity-settled share-based payments
Certain employees and Directors of the Group receive equity-settled remuneration in the form of equity-settled share-based
payment transactions, whereby employees render services in exchange for shares or rights over shares. The cost of equity-settled
transactions with employees is measured by reference to the fair value, determined using the Black-Scholes valuation model, at
the date at which an option is granted. The inputs into the model for which estimate or judgement is used are volatility, dividend
yield and risk free interest rate. Volatility is measured at the standard deviation of share returns based on the daily share price over
a period of time prior to the grant date. The dividend yield used for each option is the prior year’s yield. This is calculated using
the prior years’ dividends, excluding special dividends, divided by the year end closing share price. The five year UK gilts yield
on the day of the grant is taken as the risk free interest rate. The cost of equity-settled transactions is recognised, together with a
corresponding increase in equity, over the period in which the non-market vesting conditions are expected to be fulfilled, ending
on the relevant vesting date. The cumulative expense recognised for equity-settled transactions at each reporting date until the
vesting date is adjusted to reflect the Directors’ best available estimate of the number of equity instruments that will ultimately vest
based upon non-market conditions.
It is not considered likely that any change in assumptions with respect to inventory or share-based payments would have a
material impact on the financial statements.
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. Consistent accounting policies have been adopted across the Group.
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. Revenue is recognised at the point of sale with the exception of custom made
products, where revenue is recognised at the point that the goods are collected, and gift vouchers, where revenue is recognised
when the vouchers are redeemed.
Foreign currencies
Transactions in foreign currencies are recorded at the prevailing rate at the date of the transaction. Monetary assets and liabilities
denominated in foreign currency are translated at the rates ruling at the balance sheet date. Resulting exchange gains or losses
are recognised in the income statement for the period.
Intangible assets
These comprise software development and implementation costs and trademarks and are stated at cost less accumulated
amortisation (see below). Costs incurred in developing the Group’s own brands are expensed as incurred.
Separately acquired trademarks are shown at historical cost. Trademarks have a finite useful life and are carried at cost less
accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks over their
estimated useful lives.
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific
software. These costs are amortised over their estimated useful lives.
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development
costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group
are recognised as intangible assets when the following criteria are met:
• it is technically feasible to complete the software product so that it will be available for use;
• management intends to complete the software product and use or sell it;
• there is an ability to use or sell the software product;
• it can be demonstrated how the software product will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development and to use or sell the software product are
available; and
• the expenditure attributable to the software product during its development can be reliably measured.
Dunelm Group plc Annual Report and Accounts 2014 87
Strategic reportGovernanceFinancials
ACCOUNTING POLICIES continued
Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs
previously recognised as an expense are not recognised as an asset in a subsequent period
Computer software development costs recognised as assets are amortised over their estimated useful lives.
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 and licences
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. Cost
includes the original purchased price of the asset and the costs attributable to bringing the asset to its working conditions for
intended use.
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
3 years
50 years
4 years
4 years
5 years
4 years
over the period of the lease
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount.
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. Provisions are made for obsolete, slow-moving or discontinued stock.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. In the consolidated balance sheet, bank overdrafts are
shown within borrowings in current liabilities and 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 their fair value net of transaction costs incurred and are subsequently
carried at amortised cost.
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.
88 Dunelm Group plc Annual Report and Accounts 2014
Derivative financial instruments
Derivative financial instruments used are forward exchange contracts and are measured at fair value. The fair values are
determined by reference to the market prices available from the market on which the instruments involved are traded.
Certain derivative financial instruments are designated as hedges in line with the Group’s treasury policy. Cash flow hedges
are instruments that hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a
recognised asset or a liability or a highly probable forecasted transaction.
For cash flow hedges that proportion of the gain or loss on the hedging instrument that is determined to be an effective hedge, as
defined by IAS 39 ‘Financial Instruments: Recognition and Measurement’, is recognised in equity, directly in the hedge reserve with
any ineffective portion recognised in the income statement. Such hedges are tested, both at inception to ensure they are expected to
be effective and periodically throughout their duration to assess continuing effectiveness. When the forecast transaction results in the
recognition of a non-financial asset or liability, the associated gains or losses previously recognised in equity are included in the initial
measurement of the asset or liability. For all other cash flow hedges, the gains or losses that are recognised in equity are transferred
to the income statement in the same period in which the hedge cash flows affect the income statement.
Any gains or losses arising from changes in fair value derivative financial instruments not designated as hedges are recognised in
the income statement.
Impairment
The carrying amounts of the Group’s assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date
to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
The recoverable amount is the greater of net selling price and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time-value
of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable
amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds the recoverable
amount. Impairment losses are recognised in the income statement.
Share capital
Where the Company purchases its own equity share capital (treasury shares) the consideration paid, including any directly
attributable incremental costs is deducted from equity attributable to the Company’s equity holders until the shares are cancelled
or reissued. Where such shares are subsequently sold or reissued, any consideration received net of any directly attributable
incremental transactions costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.
Provisions
A provision is recognised in the balance sheet when the Group has a current legal or constructive obligation as a result of a past
event and it is probable that an outflow of economic benefits will be required to settle the obligation. A provision for onerous
contracts, including property leases, is recognised when the expected benefit to be derived by the Group from a contract is lower
than the unavoidable costs of meeting its obligations under the contract.
A dilapidations provision is recognised when there is an expectation of future obligations relating to the maintenance of leasehold
properties arising from events such as lease renewals or terminations.
Expenses
Property leases
Lease incentives received are recognised 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 financial statements 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 and foreign exchange gains and losses.
Dunelm Group plc Annual Report and Accounts 2014 89
Strategic reportGovernanceFinancials ACCOUNTING POLICIES continued
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 a number of equity-settled, share-based compensation plans, under which the entity receives services from
employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to
the fair value of the options granted:
• including any market performance conditions; (for example, an entity’s share price);
• excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth
targets and remaining an employee of the entity over a specified time period); and
• including the impact of any non-vesting conditions (for example, the requirement for employees to save).
Non-market performance and service conditions are included in assumptions about the number of options that are expected to
vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions
are to be satisfied.
In addition, in some circumstances employees may provide services in advance of the grant date and therefore the grant date fair
value is estimated for the purposes of recognising the expense during the period between service commencement period and
grant date.
At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on
the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement,
with a corresponding adjustment to equity.
When the options are exercised, the company either issues new shares, or uses treasury shares purchased for this purpose. For
issued new share, the proceeds received net of any directly attributable transaction costs are credited to share capital (nominal
value) and share premium.
The social security contributions payable in connection with the grant of the share options is considered an integral part of the
grant itself, and the charge will be treated as a cash-settled transaction.
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. Interim dividends are recorded when paid.
Taxation
Tax on the profit or loss for the period 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 period, using tax rates enacted or substantively
enacted at the balance sheet date, together with any adjustment to tax payable in respect of previous periods.
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.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
90 Dunelm Group plc Annual Report and Accounts 2014
New Standards and interpretations
The following standards have been adopted by the Group for the first time:
Amendment to IAS 1, ‘Financial statement presentation’ regarding other comprehensive income. The main change resulting from
these amendments is a requirement for the Group to combine items presented in ‘other comprehensive income’ on the basis of
whether they potentially could subsequently be reclassified to the income statement.
IFRS 10, ‘Consolidated financial statements’ builds on the existing principles by identifying the concept of control as the
determining factor in whether an entity should be included within the consolidated financial statements of the Parent Company.
The standard provides additional guidance to assist in the determination of control where this is difficult to assess. This standard
has not impacted the Group financial statements.
IFRS 13, ‘Fair value measurement’ aims to improve consistency and reduce complexity by providing a precise definition of fair
value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which
are largely aligned between IFRS and US GAAP, do not extend to the use of fair value accounting but provide guidance on how it
should be applied where its use is already required or permitted by other standards within IFRSs.
At the date of approval of these financial statements, the following relevant standards were endorsed by the EU, but not yet
adopted by the Group:
IFRS 9, ‘Financial instruments’ addresses the classification, measurement and recognition of financial assets and financial
liabilities. This standard is effective for accounting periods commencing on or after 1 January 2015 and therefore the Group has
not commenced its evaluation of the impact on the Financial Statements.
The above will be adopted in the Group financial statements when they become effective. When adopted, none of the above
standards or amendments are expected to have any significant impact on the financial statements of the Group.
Dunelm Group plc Annual Report and Accounts 2014 91
Strategic reportGovernanceFinancials NOTES TO THE ANNUAL
FINANCIAL STATEMENTS
For the 52 weeks ended 28 June 2014
1 Segmental reporting
The Group has one reportable segment, retail of homewares in the UK.
The Chief Operating Decision Maker is the Executive Board of Directors of Dunelm Group plc. Internal management reports are
reviewed by them on a monthly basis. Performance of the segment is assessed based on a number of financial and non-financial
KPI’s as well as on profit before taxation.
Management believe that these measures are the most relevant in evaluating the performance of the segment and for making
resource allocation decisions.
All material operations of the reportable segment are carried out in the UK. The Group’s revenue is driven by the consolidation of
individual small value transactions and as a result Group revenue is not reliant on a major customer or Group of customers.
2 Operating profit
Operating profit is stated after charging the following items:
Cost of inventories included in cost of sales
Amortisation of intangible assets
Depreciation of owned property, plant and equipment
Impairment losses on non-current assets
Operating lease rentals
Loss on disposal of property, plant and equipment and intangible assets
Net foreign exchange revaluation losses/(gains)
2014
£’000
2013
£’000
365,746 347,170
1,798
2,125
18,459
18,233
25
166
33,980
32,044
942
573
76
(161)
The cost of inventories stated above includes the benefit of a net reduction in the provision for obsolete inventory of £1,953,000
(2013: £666,000). The reducing level of provisions reflects consistently improved realisation of cash on discontinued merchandise.
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
– audit of the Company’s subsidiaries pursuant to legislation
– tax compliance
– other tax services
2014
£’000
16
54
-
-
2013
£’000
19
58
30
125
Total audit fees amounted to £70,000, fees for non-audit services amounted to nil. All 2013 auditors’ remuneration was for the
previous auditor.
3 Operating costs
Selling and distribution
Administrative expenses
Loss on disposal of property, plant and equipment and intangible assets
2014
£’000
2013
£’000
201,435 184,092
42,896
39,038
942
76
245,273 223,206
92 Dunelm Group plc Annual Report and Accounts 2014
4 Employee numbers and costs
The average monthly number of people employed by the Group (including Directors) was:
Selling
Distribution
Administration
* prior year comparatives have been aligned to the current year method of reporting
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
2014
2014
2013*
2013*
Number
of heads
Full time
equivalents
Number
of heads
Full time
equivalents
7,558
4,258
7,187
4,132
307
305
302
299
286
257
282
250
8,170
4,859
7,730
4,664
2014
£’000
2013
£’000
94,442
87,534
6,607
2,470
1,300
5,501
2,045
375
104,819
95,455
Details of Directors’ remuneration, share options, long-term incentive schemes and pension entitlements are disclosed in the
Remuneration Report on pages 48 to 68.
5 Financial income and expense
Finance income
Interest on bank deposits
Foreign exchange gains (net)
Other Interest received
Finance expenses
Interest on bank borrowings and overdraft
Foreign exchange losses (net)
Net finance income
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
Impact of change in tax rate
Total tax expense
2014
£’000
2013
£’000
425
-
11
906
612
-
436
1,518
-
(478)
(478)
(1)
-
(1)
(42)
1,517
2014
£’000
2013
£’000
28,435
27,715
(152)
(261)
28,283
27,454
(1,386)
(1,027)
(463)
480
(1,369)
165
9
(853)
26,914
26,601
Dunelm Group plc Annual Report and Accounts 2014 93
Strategic reportGovernanceFinancials
NOTES TO THE ANNUAL
FINANCIAL STATEMENTS continued
For the 52 weeks ended 28 June 2014
6 Taxation continued
The tax charge is reconciled with the standard rate of UK corporation tax as follows:
Profit before taxation
UK corporation tax at standard rate of 22.5% (2013: 23.75%)
Factors affecting the charge in the period:
Non-deductible expenses
Loss on disposal of non-qualifying assets
Adjustments to tax charge in respect of prior periods
Effect of standard rate of corporation tax change
Tax charge
2014
£’000
2013
£’000
115,986 108,055
26,097
25,663
740
212
(615)
480
1,039
(14)
(96)
9
26,914
26,601
The taxation charge for the period as a percentage of profit before tax is 23.2% (2013: 24.6%).
A reduction in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) was substantively enacted on 2 July 2013, and a
further reduction to 20% (effective from 1 April 2015) was substantively enacted on the same day. This will reduce the Company’s future
current tax charge accordingly.
7 Dividends
All dividends relate to the 1p Ordinary Shares.
Final for the period ended 30 June 2012
Interim for the period ended 29 June 2013
– paid 10.0p
– paid 4.5p
Special dividend for the period ended 29 June 2013
– paid 25.0p
Final for the period ended 29 June 2013
Interim for the period ended 28 June 2014
– paid 11.5p
– paid 5.0p
2014
£’000
2013
£’000
-
-
(20,259)
(9,127)
(50,708)
(23,287)
(10,124)
-
-
-
(84,119)
(29,386)
The Directors are proposing a final dividend of 15p per Ordinary Share for the period ended 28 June 2014 which equates
to £30.4m. The dividend will be paid on 19 December 2014 to shareholders on the register at the close of business on
28 November 2014.
8 Earnings per share
Basic earnings per share is calculated by dividing the profit for the period attributable to equity holders of the company by the
weighted average number of Ordinary Shares in issue during the period excluding ordinary shares purchased by the company and
held as treasury shares (note 19).
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
Profit for the period
Earnings per Ordinary Share – basic
Earnings per Ordinary Share – diluted
94 Dunelm Group plc Annual Report and Accounts 2014
52 weeks
ended 28
June 2014
’000
52 weeks
ended 29
June 2013
’000
202,554 202,598
1,474
1,291
204,028 203,889
£’000
£’000
89,072
81,454
44.0p
43.7p
40.2p
40.0p
9 Intangible assets
Cost
At 30 June 2012
Additions
Transfers from property, plant and equipment
Disposals
At 29 June 2013
Additions
Disposals
At 28 June 2014
Accumulated amortisation
At 30 June 2012
Charge for the financial period
Disposals
At 29 June 2013
Charge for the financial period
Disposals
At 28 June 2014
Net book value
At 30 June 2012
At 29 June 2013
At 28 June 2014
Software
development
and licences
£’000
Rights to
Dorma
brand
£’000
Total
£’000
5,902
3,001
148
-
9,051
7,303
(2,323)
5,040
10,942
-
-
-
3,001
148
-
5,040
14,091
-
-
7,303
(2,323)
14,031
5,040
19,071
3,760
1,115
-
4,875
1,713
(1,816)
3,944
1,010
-
4,954
85
-
7,704
2,125
-
9,829
1,798
(1,816)
4,772
5,039
9,811
2,142
4,176
9,259
1,096
86
1
3,238
4,262
9,260
All additions were acquired and do not include any internal development costs.
Transfers relate to assets under construction which were classified initially as fixtures and fittings and leasehold improvements.
There was no related depreciation to be transferred.
All amortisation is included within operating costs in the income statement.
Dunelm Group plc Annual Report and Accounts 2014 95
Strategic reportGovernanceFinancials
NOTES TO THE ANNUAL
FINANCIAL STATEMENTS continued
For the 52 weeks ended 28 June 2014
10 Property, plant and equipment
Cost
At 30 June 2012
Additions
Transfers to intangible assets and reclassifications
Disposals
At 29 June 2013
Additions
Disposals
At 28 June 2014
Accumulated depreciation
At 30 June 2012
Charge for the financial period
Disposals
Impairment
At 29 June 2013
Charge for the financial period
Disposals
Impairment
At 28 June 2014
Net book value
At 30 June 2012
At 29 June 2013
At 28 June 2014
Land and
buildings
£’000
Leasehold
improvements
£’000
Plant and
machinery
£’000
Motor
vehicles
£’000
Fixtures and
fittings
£’000
Total
£’000
79,033
81,466
2,318
19
48,169 211,005
719
11,237
546
49
-
52
(167)
-
(4)
-
-
10,880
23,382
(249)
(148)
(19)
(1,017)
(1,207)
79,801
92,588
2,860
209
10,465
-
(1,140)
799
(35)
80,010 101,913
3,624
-
-
-
-
57,783 233,032
9,287
20,760
(938)
(2,113)
66,132 251,679
6,080
27,464
1,355
7,147
-
148
(96)
-
870
606
(2)
2
7,583
34,515
1,476
1,349
6,629
-
51
(740)
-
759
(25)
(10)
8,983
40,404
2,200
72,953
54,002
72,218
58,073
1,448
1,384
71,027
61,509
1,424
19
30,259
64,692
-
9,125
18,233
(19)
(1,002)
(1,119)
-
-
-
-
-
-
-
-
-
16
166
38,398
81,972
9,722
18,459
(878)
(16)
(1,643)
25
47,226
98,813
17,910 146,313
19,385 151,060
18,906 152,866
All depreciation expense and impairment charge has been included within operating costs in the income statement.
11 Deferred tax
Deferred tax is provided in full on temporary differences under the liability method using a taxation rate of 20% (2013: 23%).
Deferred taxation assets and liabilities are attributable to the following:
Property, plant and equipment
Share-based payments
Other temporary differences
Deferred tax to be recovered after more than 12 months
Deferred tax to be recovered within 12 months
96 Dunelm Group plc Annual Report and Accounts 2014
Assets
Liabilities
Net
2014
£’000
421
2013
£’000
-
2,704
2,207
658
-
3,783
2,207
2014
£’000
-
-
-
-
2013
£’000
(603)
2014
£’000
421
2013
£’000
(603)
-
2,704
2,207
(144)
(747)
658
(144)
3,783
1,460
Assets
Liabilities
Net
2014
£’000
1,585
2,198
2013
£’000
1,111
1,096
3,783
2,207
2014
£’000
-
-
-
2013
£’000
(834)
87
(747)
2014
£’000
1,585
2,198
2013
£’000
277
1,183
3,783
1,460
11 Deferred tax continued
The movement in the net deferred tax balance is as follows:
Property, plant and equipment
Share-based payments
Other temporary differences
Property, plant and equipment
Share-based payments
Other temporary differences
12 Inventories
Goods for resale
13 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
Balance at
30 June
2012
£’000
(1,331)
1,104
(70)
(297)
Balance at
29 June
2013
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
Balance at
29 June
2013
£’000
728
97
28
853
-
(603)
1,006
2,207
(102)
(144)
904
1,460
Recognised
in income
£’000
Recognised
in equity
£’000
(603)
1,024
2,207
(144)
211
134
1,460
1,369
-
286
668
954
Balance at
28 June
2014
£’000
421
2,704
658
3,783
2014
£’000
2013
£’000
115,528
92,940
2014
£’000
950
2013
£’000
351
3,626
3,579
14,903
14,414
19,479
18,344
2014
£’000
2013
£’000
21,740
44,740
All non-current trade receivables are due within one year from the end of the reporting period.
14 Cash and cash equivalents
Cash at bank and in hand
Included in the cash and cash equivalents is £nil (2013: £19.7m) of short term deposits, accessible at notice periods not exceeding
three months.
The Group banks with institutions that have a credit rating of ‘A’ and above.
Dunelm Group plc Annual Report and Accounts 2014 97
Strategic reportGovernanceFinancials
NOTES TO THE ANNUAL
FINANCIAL STATEMENTS continued
For the 52 weeks ended 28 June 2014
15 Trade and other payables
Current
Trade payables
Accruals and deferred income
Taxation and social security
Other payables
Total current trade and other payables
Non-current
Accruals and deferred income
Total non-current trade and other payables
Total trade and other payables
The maturity analysis of non-current accruals and deferred income is as follows:
One to two years
Two to five years
After five years
2014
£’000
2013
restated
£’000
39,817
30,249
22,958
23,292
11,075
2,166
8,510
2,298
76,016
64,349
40,544
37,757
40,544
37,757
116,560 102,106
2014
£’000
2013
£’000
4,424
4,070
13,644
12,144
22,476
21,543
40,544
37,757
During the period the Directors have reassessed the liabilities of the Group and have determined that £40.5m (£37.8m at 29 June
2013) should be classified as non-current. These amounts represent deferred income in respect of lease incentives received, and
will be released to the income statement after more than one year.
16 Interest bearing loans and borrowings
The Group has no committed borrowing facilities because of its strong cash position. It has an uncommitted overdraft facility of £10m.
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 is in place.
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 deposits with banks and financial institutions as well as foreign
exchange hedging agreements with its banking counterparties. The Group only deals with creditworthy counterparties and uses
publicly available financial information to rate its counterparties.
Group policy is that surplus funds are placed on deposit with counterparties approved by the Board, with a minimum of ‘A’ credit
rating. Credit limits with approved counterparties are limited to £25m for any individual party.
The Group maximum exposure to credit risk is represented by payments In advance of goods to overseas suppliers. At the period
end these amounted to $7,310,000 (2013: $6,234,000).
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.
All of the Group’s derivative financial liabilities are due to settle within 18 months of the balance sheet date.
98 Dunelm Group plc Annual Report and Accounts 2014
17 Financial risk management continued
Interest rate risk
The Group’s bank borrowings, if any, incur variable interest rate charges. 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 is detailed in note 16.
Foreign currency risk
All of the Group’s revenues are in sterling. Purchases of promotional goods are generally in US dollars. Purchase of regular range
goods are generally in sterling, although some lines are now being imported directly and paid for in US dollars. The Group cover
exchange rate exposure on expected promotional product purchases up to a maximum of 100% of forecast purchases over a four
month horizon. Exchange rate exposure is covered on expected regular range purchases up to a maximum of 50% of forecast
purchases over a 12 month horizon. The Group uses various means to cover the above currency exposures; hold excess funds in
US dollars, take out forward contracts for the purchase of US dollars, enter into forward rate options.
The Group is exposed to foreign currency risk on purchases denominated in US dollars. These amounted to approximately 16% of
the total stock purchases in the period ended 28 June 2014. The outstanding US dollar liabilities at the period end were $150,000
(2013: $525,000)
During the period the Group entered into exchange rate swaps for $88.8m to sell sterling and buy US dollars. These swaps are
accounted for as cash flow hedges. During the period the net mark to market loss on foreign currency hedging instruments
taken to equity was £3.3m (2013: £0.4m profit). At the balance sheet date the Group had 13 swap contracts outstanding with an
aggregate maximum value of $87.2m.
In the event of a significant adverse movement in the US dollar exchange rate, the Group could seek to minimise the impact on
profitability by changing the selling price of goods.
Sensitivity analysis
The Group’s principal foreign currency exposure is to the US dollar.
The Directors believe that an increase or decrease of 10% in the US dollar to sterling exchange rates would not have a material
effect on the Consolidated Statement of Comprehensive Income.
The US dollar period end exchange rate applied in the above analysis is 1.7016 (2013: 1.5239). Strengthening and weakening of
sterling may not produce symmetrical results depending on the proportion and nature of foreign exchange derivatives.
Fair values
The fair value of the Group’s financial assets and liabilities is not materially different from their carrying value. The fair value of
foreign currency contracts are sums required by the counterparties to cancel the contracts at the end of the period.
Fair value hierarchy
Financial instruments carried at fair value are required to be measured by reference to the following levels:
• Level 1: quoted prices in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
All financial instruments carried at fair value have been measured by a Level 2 valuation method.
Losses on cash flow hedges net of deferred tax impact during the period amounted to £2,898,000 (2013: gain £387,000).
Capital management
The Company considers that its capital is equity.
The Board’s objective with respect to capital management is to ensure the Group continues as a going concern in order to
optimise returns to shareholders. The Board’s policy is to retain a strong capital base so as to maintain investor, creditor and
market confidence and to sustain future development. The Board regularly monitors the level of capital in the Group to ensure that
this can be achieved.
From time to time the Group purchases its own shares on the market. The shares are intended to be used for issuing shares
under the Group’s share option programmes. The Board has authorised a share purchase programme designed to ensure that all
options expected to vest under share option schemes can be fulfilled out of treasury shares.
Dunelm Group plc Annual Report and Accounts 2014 99
Strategic reportGovernanceFinancials NOTES TO THE ANNUAL
FINANCIAL STATEMENTS continued
For the 52 weeks ended 28 June 2014
17 Financial risk management continued
Financial liabilities/(assets)
The following tables show a comparison by category of the carrying amounts and fair values of the Group’s financial assets and
liabilities at 28 June 2014 and 29 June 2013.
Cash and cash equivalents
Trade receivables
Forward exchange contracts – current
Total financial assets
Trade payables
Forward exchange contracts – current
Total financial liabilities
Net financial assets
2014
Carrying
value
£’000
2014
Fair
value
£’000
2013
Carrying
value
£’000
2013
Fair
value
£’000
21,740
21,740
44,740
44,740
962
-
962
-
351
387
351
387
22,702
22,702
45,478
45,478
(39,817)
(39,817)
(30,249)
(30,249)
(2,898)
(2,898)
-
-
(42,715)
(42,715)
(30,249)
(30,249)
(20,013)
(20,013)
15,229
15,229
The fair value of trade receivables and trade payables are approximate to their carrying value.
Other
financial
liabilities at
amortised
costs
£’000
Derivatives
used for
hedging
£’000
-
-
-
-
(39,817)
-
-
-
-
-
Total
£’000
21,740
962
-
22,702
(39,817)
-
(2,898)
(2,898)
(39,817)
(2,898)
(42,715)
Loans and
receivables
£’000
21,740
962
-
22,702
-
-
-
22,702
(39,817)
(2,898)
(20,013)
Other
financial
liabilities at
amortised
costs
£’000
-
-
-
-
Loans and
receivables
£’000
44,740
365
-
45,105
-
-
-
(30,249)
-
(30,249)
Derivatives
used for
hedging
£’000
-
-
387
Total
£’000
44,740
365
387
387
45,492
-
-
-
(30,249)
-
(30,249)
45,105
(30,249)
387
15,243
Cash and cash equivalents
Trade receivables
Forward exchange contracts – current
Total financial assets
Trade payables
Forward exchange contracts – current
Total financial liabilities
As at 28 June 2014
Cash and cash equivalents
Trade receivables
Forward exchange contracts – current
Total financial assets
Trade payables
Forward exchange contracts – current
Total financial liabilities
As at 29 June 2013
100 Dunelm Group plc Annual Report and Accounts 2014
17 Financial risk management continued
The currency profile of the Group’s cash and cash equivalents is as follows:
Sterling
US dollar
Euro
2014
£’000
2013
£’000
21,572
41,321
34
134
3,137
282
21,740
44,740
As at 28 June 2014, the analysis of trade receivables that were past due but not impaired is as follows:
29 June 2013
28 June 2014
Neither past
due nor
impaired
£’000
Less than 30
days
£’000
31-60 days
£’000
61-90 days
£’000
More than 90
days
£’000
57
889
47
47
52
8
3
3
206
15
Total
£’000
365
962
As at 28 June 2014, the analysis of trade payables that were past due is as follows:
29 June 2013
28 June 2014
18 Share capital
In issue at the start of the period
Issued during the period in respect of share option schemes
In issue at the end of the period
Neither past
due nor
impaired
£’000
Less than 30
days
£’000
Total
£’000
31-60 days
£’000
61-90 days
£’000
More than 90
days
£’000
30,249
28,512
39,817
37,973
725
977
195
679
133
117
684
71
Number of Ordinary Shares
of 1p each
2014
Number of Ordinary Shares
of 1p each
2013
202,830,188
202,255,248
3,743
574,940
202,833,931
202,830,188
Proceeds received in relation to shares issued during the period were £12,000 (2013: £589,000).
Ordinary Shares of 1p each:
Authorised
Allotted, called up and fully paid
19 Treasury shares
Outstanding at the beginning of the period
Purchased during the period
Reissued during the period in respect of share option schemes
Outstanding at the end of the period
2014
Number of shares
2014
£’000
2013
Number of shares
2013
£’000
500,000,000
202,833,931
5,000 500,000,000
2,028 202,830,188
5,000
2,028
2014
Number of shares
2014
£’000
2013
Number of shares
2013
£’000
-
-
(1,706,154)
(15,404)
769,656
(936,498)
6,781
(8,623)
-
-
-
-
-
-
-
-
The Group acquired 1,706,154 of its own shares through purchases on the London Stock Exchange (2013: nil). These shares
are held by the Group for the purpose of delivery to employees under the employee share schemes. The total amount, including
fees, paid to acquire the shares was £15,404,000 (2013: nil). The consideration has been deducted from retained earnings within
shareholders equity. The proceeds from the issue of treasury shares included in the consolidated statement of cash flows of
£1,278,000 is the amount employees contributed.
The Group re-issued 769,656 (2013: nil) treasury shares during the period for a total value of £6,781,000 (2013: nil).
The Group has the right to re-issue the remaining treasury shares at a later date.
Dunelm Group plc Annual Report and Accounts 2014 101
Strategic reportGovernanceFinancials
NOTES TO THE ANNUAL
FINANCIAL STATEMENTS continued
For the 52 weeks ended 28 June 2014
20 Share-based payments
As at 28 June 2014, 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 2,844 exercisable options in total under these schemes as at 28 June 2014 (2013: nil).
The fair value of options granted during the period was determined using the Black-Scholes valuation model. The significant inputs into
the model are detailed below. The volatility is measured at the standard deviation of share returns based on the daily share price over
the twenty days prior to the grant date.
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 grants have an exercise price equal to market price at date of grant. These grants are dependent on the level of growth in
the Group’s EPS relative to RPI as well as continuing employment with the Group.
The fair value per option granted and the assumptions used in the calculations are as follows:
Exercise price
Volatility
Dividend yield
Option life
Risk-free interest rate
Fair value at measurement date
October
2013
November
2012
876.5p
641.5p
40%
4.0%
29%
2.5%
3 years
3 years
1.4%
0.8%
253.9p
151.7p
The number and weighted average exercise price of options under the GSOP at 28 June 2014 were as follows:
Outstanding at beginning of the period
Granted during the period
Exercised during the period
Lapsed during the period
Outstanding at end of the period
Weighted
average
exercise price
2014
Number of
shares under
option
2014
Weighted
average
exercise price
2013
Number of
shares under
option
2013
497.3p
153,565
420.0p
100,000
876.5p
115,377
641.5p
53,565
420.0p (100,000)
741.2p
(29,042)
-
-
-
-
814.6p
139,900
497.3p
153,565
The weighted average share price at the time of exercise was 848.1p
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. Grants are made under the
scheme annually. Options may be exercised under the scheme within six months of the completion of each three year savings contract.
There is provision for early exercise in certain circumstances such as death, disability, redundancy and retirement.
The fair value per option granted and the assumptions used in the calculations are as follows:
Share price at date of grant
Exercise price
Volatility
Dividend yield
Option life
Risk-free interest rate
Fair value at measurement date
102 Dunelm Group plc Annual Report and Accounts 2014
January
2014
900.0p
702.0p
38%
4.0%
November
2012
674.5p
545.0p
32%
2.5%
November
2011
503.5p
361.0p
31%
2.5%
November
2010
497.5p
337.0p
43%
2.5%
3 years 3.5 years 3.5 years 3.5 years
1.6%
0.8%
1.1%
1.7%
263.0p
158.8p
160.2p
192.8p
20 Share-based payments continued
The number and weighted average exercise price of options outstanding under the Sharesave at 28 June 2014 was as follows:
Outstanding at beginning of the period
Granted during the period
Exercised during the period
Lapsed during the period
Outstanding at end of the period
Weighted
average
exercise price
2014
Number of
shares under
option
2014
Weighted
average
exercise price
2013
Number of
shares under
option
2013
413.0p 778,585
321.5p 820,753
702.0p 322,740
545.0p 272,662
337.1p (258,175)
254.6p (231,548)
510.0p
(85,487)
384.1p
(83,282)
551.0p 757,663
413.0p 778,585
The weighted average share price at the time of exercise was 923.3p.
c) Long-Term Incentive Plan
The LTIP was approved by the Board in 2006 enabling the Group to award shares to particular individuals, normally in the form
of nominal cost options. The LTIP is administered by the Remuneration Committee. One grant was made in the period, to the
Executive Directors and senior management. These grants are exercisable in November 2016, dependent on the level of growth
in Group EPS relative to RPI, as well as continuing employment. The maximum life of options under the LTIP is 10 years from the
date of grant. Full details of this plan are included in the Remuneration Report on page 51.
The fair value per option granted and the assumptions used in the calculations are as follows:
Share price at date of grant
Volatility
Dividend yield
Option life
Risk-free interest rate
Discount factor, based on dividend yield to vesting date
Fair value of option
October
2013
November
2012
November
2011
October
2011
October
2011
December
2010
876.5p
641.5p
431.0p
499.0p
451.0p
500.0p
40.00% 29.23% 36.14% 43.54% 43.89% 40.00%
4.0%
2.5%
2.5%
2.5%
2.5%
2.5%
3 years
3 years
3 years
3 years
3 years
5 years
1.35%
0.670
0.84%
0.779
1.08%
0.928
1.08%
0.927
1.08%
0.905
1.70%
0.881
587.4p
499.5p
399.8p
462.9p
408.3p
440.6p
The number and weighted average exercise price of options under the LTIP at 28 June 2014 was as follows:
Outstanding at beginning of the period
Granted during the period
Exercised during the period
Lapsed during the period
Outstanding at end of the period
Weighted
average
exercise price
2014
-
-
-
-
-
Number of
shares under
option
2014
1,384,186
252,953
(415,224)
(22,583)
1,199,332
Weighted
average
exercise price
2013
-
-
-
-
-
Number of
shares under
option
2013
1,427,268
300,905
(343,392)
(595)
1,384,186
The weighted average share price at the time of exercise was 886.9p.
d) Impact on income statement
The total expense recognised in the income statement arising from share-based payments is as follows:
GSOP
Sharesave
LTIP
2014
£’000
96
488
2013
£’000
63
342
1,886
1,640
2,470
2,045
Dunelm Group plc Annual Report and Accounts 2014 103
Strategic reportGovernanceFinancials
NOTES TO THE ANNUAL
FINANCIAL STATEMENTS continued
For the 52 weeks ended 28 June 2014
21 Commitments
As at 28 June 2014 the Group had entered into capital contracts amounting to £2.5m (2013 £0.5m).
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
2014
Motor
vehicles
£’000
2014
Land and
buildings
£’000
2014
Plant and
machinery
£’000
2013
Motor
vehicles
£’000
2013
Land and
buildings
£’000
2013
Plant and
machinery
£’000
769
37,643
1,439 140,422
- 173,495
1,014
3,181
720
895
35,761
496
2,354 131,337
2,158
- 175,052
964
2,208 351,560
4,915
3,249 342,150
3,618
The Group has 122 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.
22 Contingent liabilities
The Group had no contingent liabilities at either period end date.
23 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 Board.
Directors of the Company and their close relatives control 55.7% (2013: 55.3%) of the voting shares of the Company.
Disclosures relating to remuneration of Directors are set out in the Remuneration Report on pages 48 to 68. The remuneration of
the key management personnel is set out below:
Short-term benefits
Post-employment benefits
Share-based payments
2014
£’000
2013*
£’000
3,294
3,163
88
104
1,305
1,247
4,687
4,514
* prior year comparatives have been aligned to the current year definition of key management personnel
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 and values involved are trivial.
24 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.
25 Subsequent events
As described in the strategic and governance sections of this annual report, management of the business changed with effect
from 11 September 2014 when Nick Wharton resigned as Chief Executive and was replaced by Will Adderley.
104 Dunelm Group plc Annual Report and Accounts 2014
PARENT COMPANY STATEMENT
OF FINANCIAL POSITION
As at 28 June 2014
Non-current assets
Investment in subsidiaries
Deferred tax asset
Total non-current assets
Current assets
Trade and other receivables
Current tax asset
Total current assets
Total assets
Current liabilities
Trade and other payables
Current tax liability
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share premium
Non-distributable reserves
Capital redemption reserve
Retained earnings
Total equity attributable to equity holders of the Parent
Note
2014
£’000
2013
£’000
4
5
49,899
48,466
1,553
1,165
51,452
49,631
6 149,314 146,201
-
806
149,314 147,007
200,766 196,638
7
(1,531)
(2,685)
(190)
-
(1,721)
(2,685)
(1,721)
(2,685)
199,045 193,953
10
2,028
1,624
4,347
2,028
1,612
3,311
43,157
43,157
147,889 143,845
199,045 193,953
The financial statements on pages 105 to 113 were approved by the Board of Directors on 11 September 2014 and were signed
on its behalf by:
David Stead
Director
Company number 4708277
Dunelm Group plc Annual Report and Accounts 2014 105
Strategic reportGovernanceFinancials
PARENT COMPANY STATEMENT
OF CASH FLOWS
For the 52 weeks ended 28 June 2014
Profit before taxation
Adjustment for net financing costs
Operating cash flows before movements in working capital
(Increase)/decrease in receivables
(Decrease)/increase in payables
Net movement in working capital
Investment income
Share-based payments expense
Cash flows from operating activities
Dividend received
Net cash generated from operating activities
Cash flows from financing activities
Interest received
Proceeds from issue of share capital
Proceeds from issue of treasury shares
Purchase of treasury shares
Return of Capital to Shareholders
Dividends paid
Net cash flows utilised in financing activities
Net (decrease)/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
Note
2014
£’000
2013
£’000
100,657
70,739
(4,737)
(6,189)
95,920
64,550
(2,307)
22,748
(1,153)
73
(3,460)
22,821
(100,000)
(70,000)
1,036
1,079
6
7
4
12
(6,504)
18,450
14 100,000
70,000
93,496
88,450
4,737
6,189
12
589
1,278
(15,404)
-
-
10
11
11
-
(65,842)
3
(84,119)
(29,386)
(93,496)
(88,450)
-
-
-
-
-
-
106 Dunelm Group plc Annual Report and Accounts 2014
PARENT COMPANY STATEMENT
OF CHANGES IN EQUITY
For the 52 weeks ended 28 June 2014
As at 30 June 2012
Profit for the period
Total comprehensive income for the period
Issue of share capital
Share-based payments
Deferred tax on share-based payments
Current corporation tax on share options exercised
Dividends
Return of Capital to Shareholders
Total transactions with owners, recorded directly in equity
As at 29 June 2013
Profit for the period
Total comprehensive income for the period
Issue of share capital
Purchase of treasury shares
Issue of treasury shares
Share-based payments
Deferred tax on share-based payments
Current corporation tax on share options exercised
Dividends
Total transactions with owners, recorded directly in equity
Issued
share
capital
£’000
Share
Premium
£’000
Capital
redemption
reserve
£’000
Non-
distributable
reserve
£’000
Note
Retained
earnings
£’000
Total
equity
£’000
2,023
1,025
43,155
2,345 166,816 215,364
-
-
5
-
-
-
-
-
5
-
-
587
-
-
-
-
-
587
-
-
2
-
-
-
-
-
2
-
-
-
70,549
70,549
70,549
70,549
(6)
588
966
1,079
2,045
-
-
-
-
430
205
430
205
(29,386)
(29,386)
(65,842)
(65,842)
966
(93,520)
(91,960)
2,028
1,612
43,157
3,311 143,845 193,953
-
-
-
-
-
-
-
-
-
-
-
-
12
-
-
-
-
-
-
12
-
-
-
-
-
-
-
-
-
-
- 100,369 100,369
- 100,369 100,369
-
-
-
1,036
-
-
-
-
12
(15,404)
(15,404)
1,278
1,434
330
156
1,278
2,470
330
156
(84,119)
(84,119)
1,036
(96,325)
(95,277)
10
12
5
3
10
11
11
12
5
3
As at 28 June 2014
2,028
1,624
43,157
4,347 147,889 199,045
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.
Dunelm Group plc Annual Report and Accounts 2014 107
Strategic reportGovernanceFinancials
PARENT COMPANY
ACCOUNTING POLICIES
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 has 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, IFRS 2 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.
Current assets
Trade and other receivables are initially recognised at fair value and then carried at amortised cost net of impairment provisions.
Bank borrowings and borrowing costs
Interest-bearing bank loans and overdrafts, if any, are recorded at their fair value.
Borrowing costs are recognised as an expense in the financial period in which they are incurred.
Borrowings are classed as current liabilities unless the Company 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 Company’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 transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.
Share-based payments
The Company operates one equity-settled, share-based compensation plan, under which the entity receives services from
employees as consideration for equity instruments (options) of the Company. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to
the fair value of the options granted:
• including any market performance conditions; (for example, an entity’s share price);
• excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth
targets and remaining an employee of the entity over a specified time period); and
• including the impact of any non-vesting conditions (for example, the requirement for employees to save).
Non-market performance and service conditions are included in assumptions about the number of options that are expected to
vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions
are to be satisfied.
In addition, in some circumstances employees may provide services in advance of the grant date and therefore the grant date fair
value is estimated for the purposes of recognising the expense during the period between service commencement period and
grant date.
108 Dunelm Group plc Annual Report and Accounts 2014
At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on
the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement,
with a corresponding adjustment to equity.
When the options are exercised, the company either issues new shares, or uses treasury shares purchased for this purpose. For
issued new share, the proceeds received net of any directly attributable transaction costs are credited to share capital (nominal
value) and share premium.
The social security contributions payable in connection with the grant of the share options is considered an integral part of the
grant itself, and the charge will be treated as a cash-settled transaction.
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 period 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 period, using tax rates enacted or substantively
enacted at the balance sheet date, together with any adjustment to tax payable in respect of previous periods.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
asset can be recognised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will
be recognised.
New Standards and interpretations
The following standards have been adopted by the Company for the first time:
Amendment to IAS 1, ‘Financial statement presentation’ regarding other comprehensive income. The main change resulting from
these amendments is a requirement for the Company to combine items presented in ‘other comprehensive income’ on the basis
of whether they potentially could subsequently be reclassified to the income statement.
IFRS 13, ‘Fair value measurement’ aims to improve consistency and reduce complexity by providing a precise definition of fair
value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which
are largely aligned between IFRS and US GAAP, do not extend to the use of fair value accounting but provide guidance on how it
should be applied where its use is already required or permitted by other standards within IFRSs.
At the date of approval of these financial statements, the following relevant standards were endorsed by the EU, but not yet
adopted by the Company:
IFRS 9, ‘Financial instruments’ addresses the classification, measurement and recognition of financial assets and financial
liabilities. This standard is effective for accounting periods commencing on or after 1 January 2015 and therefore the Company
has not commenced its evaluation of the impact on the Financial Statements.
The above will be adopted in the Company financial statements when they become effective. When adopted, none of the above
standards or amendments are expected to have any significant impact on the financial statements of the Company.
Dunelm Group plc Annual Report and Accounts 2014 109
Strategic reportGovernanceFinancials NOTES TO THE PARENT COMPANY
FINANCIAL STATEMENTS
For the 52 weeks ended 28 June 2014
1 Income statement
The Company made a profit after tax of £100,369,000 (2013: £70,549,000). 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 three Executive Directors. Full details of the Directors’ remuneration and interests
are set out in the Remuneration Report on pages 48 to 68. Share-based payments details are given in note 12 on page 112.
3 Dividends
All dividends relate to the 1p Ordinary Shares.
Final for the period ended 30 June 2012
Interim for the period ended 29 June 2013
– paid 10.0p
– paid 4.5p
Special dividend for the period ended 29 June 2013
– paid 25.0p
Final for the period ended 29 June 2013
Interim for the period ended 28 June 2014
– paid 11.5p
– paid 5.0p
2014
£’000
2013
£’000
-
-
(20,259)
(9,127)
(50,708)
(23,287)
(10,124)
-
-
-
(84,119)
(29,386)
The Directors are proposing a final dividend of 15p per Ordinary Share for the period ended 28 June 2014 which equates
to £30.4m. The dividend will be paid on 19 December 2014 to shareholders on the register at the close of business on
28 November 2014.
4 Investments
Shares in subsidiary undertakings.
As at 30 June 2012
Share-based payments
As at 29 June 2013
Share-based payments
As at 28 June 2014
The following were subsidiaries as at 28 June 2014:
Subsidiary
Dunelm (Soft Furnishings) Ltd
Dunelm Estates Limited
Dunelm Limited
Ensco 735 Limited*
Zoncolan Limited*
* Share Capital held by subsidising undertakings
£’000
47,500
966
48,466
1,433
49,899
Nature of
business
Retailer of soft furnishings
Property holding company
Dormant
Property holding company
Property holding company
Proportion
of Ordinary
Shares held
100%
100%
100%
100%
100%
All of the above subsidiaries and the Parent Company are registered and operate in England and Wales.
110 Dunelm Group plc Annual Report and Accounts 2014
5 Deferred tax assets
Employee benefits
The movement in deferred tax assets is as follows:
Employee benefits
Employee benefits
Assets
2014
£’000
2013
£’000
1,553
1,165
Balance at
30 June
2012
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
Balance at
29 June
2013
£’000
611
124
430
1,165
Balance at 29
June 2013
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
Balance at 28
June 2014
£’000
1,165
58
330
1,553
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.
6 Trade and other receivables
Amounts owed by subsidiary undertakings
Prepayments and accrued income
2014
£’000
2013
£’000
149,296 146,174
18
27
149,314 146,201
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 taxation and social security
Other payables
2014
£’000
10
904
597
20
2013
£’000
72
2,469
124
20
1,531
2,685
8 Interest bearing loans and borrowings
The Company has no committed borrowing facilities because of its strong cash position. It has an uncommitted overdraft facility
of £10m.
9 Financial risk management
Capital management
The Board’s objective with respect to capital management is to ensure the Company continues as a going concern in order to
optimise returns to shareholders. The Board’s policy is to retain a strong capital base so as to maintain investor, creditor and
market confidence and to sustain future development. The Board regularly monitors the level of capital in the Group to ensure that
this can be achieved.
Dunelm Group plc Annual Report and Accounts 2014 111
Strategic reportGovernanceFinancials
NOTES TO THE PARENT COMPANY
FINANCIAL STATEMENTS continued
For the 52 weeks ended 28 June 2014
10 Share capital
In issue at the start of the period
Issued during the period in respect of share option schemes
In issue at the end of the period
Number of
Ordinary Shares
of 1p
each
2014
Number of
Ordinary Shares
of 1p
each
2013
202,830,188 202,255,248
3,743
574,940
202,833,931 202,830,188
Proceeds received in relation to shares issued during the period were £12,000 (2013: £589,000).
Ordinary shares of 1p each:
Authorised
Allotted, called up and fully paid
2014
Number of
shares
2014
£’000
2013
Number of
shares
500,000,000
202,833,931
5,000 500,000,000
2,028 202,830,188
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 the beginning of the period
Purchased during the period
Reissued during the period in respect of share option schemes
Outstanding at the end of the period
2014
Number of
shares
-
2014
£’000
-
(1,706,154)
(15,404)
769,656
(936,498)
6,781
(8,623)
2013
Number of
shares
-
-
-
-
2013
£’000
5,000
2,028
2013
£’000
-
-
-
-
The Company acquired 1,706,154 of its own shares through purchases on the London Stock Exchange (2013: nil). These shares
are held by the Company for the purpose of delivery to employees under the employee share schemes. The total amount,
including fees, paid to acquire the shares was £15,404,000 (2013: nil). The consideration has been deducted from the retain
earnings within shareholders equity.
The Company re-issued 769,656 (2013: nil) treasury shares during the period for a total value of £6,781,000 (2013: nil).
The Company has the right to re-issue the remaining treasury shares at a later date.
12 Share-based payments
As at 28 June 2014, the Company operated one share award plan:
Long-Term Incentive Plan (‘LTIP’)
There were no exercisable options under this scheme as at 28 June 2014 (2013: nil).
Long-Term Incentive Plan
The LTIP was approved by the Board in 2006 enabling the Group to award shares to particular individuals, normally in the form
of nominal cost options. The LTIP is administered by the Remuneration Committee. One grant was made in the period, to the
Executive Directors and senior management. These grants are exercisable in November 2016, dependent on the level of growth
in Group EPS relative to RPI, as well as continuing employment. The maximum life of options under the LTIP is 10 years from the
date of grant. Full details of this plan are included in the Remuneration Report on page 51.
The fair value of options granted during the period was determined using the Black-Scholes valuation model. The significant inputs
into the model are detailed below. The volatility is measured at the standard deviation of share returns based on the daily share
price over the twenty days prior to the grant date.
112 Dunelm Group plc Annual Report and Accounts 2014
12 Share-based payments continued
The fair value per option granted and the assumptions used in the calculations are as follows:
Share price at date of grant
Volatility
Dividend yield
Option life
Risk-free interest rate
Discount factor, based on dividend yield to vesting date
Fair value of option
October
2013
November
2012
November
2011
December
2010
876.5p
641.5p
431.0p
500.0p
40.00% 29.23% 36.14% 40.00%
4.0%
2.5%
2.5%
2.5%
3 years
3 years
3 years
5 years
1.35%
0.670
0.84%
0.779
1.08%
0.928
1.70%
0.881
587.4p
499.5p
399.8p
440.6p
The number and weighted average exercise price of options under the LTIP at 28 June 2014 is:
Outstanding at beginning of the period
Granted during the period
Exercised during the period
Lapsed during the period
Outstanding at end of the period
Weighted
average
exercise
price
2014
Number of
shares
under
option
2014
Weighted
average
exercise
price
2013
Number of
shares
under
option
2013
- 866,561
- 117,307
-
-
(163,962)
(25,153)
- 794,753
- 918,594
- 157,131
-
-
(209,164)
-
- 866,561
The total expense recognised in the income statement arising from share-based payments is as follows:
LTIP
2014
£’000
2013
£’000
1,036
1,079
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
Key management personnel
All employees of the Company are key management personnel.
2014
£’000
3,167
2013
£’000
827
(104,782)
(99,755)
100,000
70,000
4,737
6,189
Directors of the Company and their close relatives control 55.7% (2013: 55.3%) of the voting shares of the Company.
Disclosures relating to remuneration of Directors are set out in the Remuneration Report on pages 48 to 68.
Dunelm Group plc Annual Report and Accounts 2014 113
Strategic reportGovernanceFinancials
ADVISERS AND CONTACTS
Corporate Brokers and Financial Advisers
Legal Advisers
Auditor
Principal Bankers
Registrars
Financial Public Relations
Registered Office
Investor Relations
UBS Investment Bank
1 Finsbury Avenue
London EC2M 2PP
Tel: 020 7567 8000
Oriel Securities Limited
150 Cheapside
London EC2V 6ET
Tel: 020 7710 7600
Allen & Overy LLP
One Bishops Square
London E1 6AO
Tel: 020 3088 0000
PricewaterhouseCoopers LLP
Cornwall Court
19 Cornwall Street
Birmingham B3 2DT
Tel: 0121 265 5000
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 20301
MHP Communications
60 Great Portland Street
London W1W 7RT
Tel: 020 3128 8100
Store Support Centre
Watermead Business Park
Syston
Leicestershire LE7 1AD
Company Registration No: 4708277
investorrelations@dunelm.com
Tel: 0116 264 4356
1 Calls to this number are charged at 8p per minute plus network extras or, if dialling internationally, on +44 (0) 121 415 7047.
The helpline is open Monday to Friday 8.30am to 5.30pm, excluding bank holidays
114 Dunelm Group plc Annual Report and Accounts 2014
STORE LISTING
Superstores
Aberdeen
Ashford
Ashton Under Lyne
Ballymena
Banbury
Bangor
Barnsley
Barnstaple
Barrow In Furness
Basingstoke
Bedford
Belfast
Birmingham
Blackpool
Bolton
Bournemouth
Bradford
Bridgend
Broadstairs
Burton
Bury St Edmunds
Cambridge
Cannock
Canterbury
Cardiff
Carlisle
Cheltenham
Chester
Chesterfield
Clydebank
Colchester
Coleraine
Coventry
Cramlington
Crewe
High Street
Boston (2 stores)
Coalville
Online
www.dunelm.com
Sheffield
Shoreham
Shrewsbury Sundorne
Sittingbourne
Southport
St Albans
St Helens
Stafford
Stevenage
Stockport
Stockton
Sunderland
Swansea
Swindon
Taunton
Telford
Thurmaston
Thurrock
Torquay
Trafford
Truro
Uddingston
Walsall
Warrington
Wellingborough
Weston-Super-Mare
Wisbech
Wolverhampton
Worcester
Workington
Wrexham
York
Croydon
Dartford
Derby
Doncaster
Dumfries
Dundee
Dunstable
Eastbourne
Edinburgh
Enfield
Erdington
Exeter
Falkirk
Fareham
Fenton
Gloucester
Grantham
Greenford
Grimsby
Halifax
Harrow
Hartlepool
Hastings
Kilmarnock
Kirkcaldy
Lancaster
Leeds
Lincoln
Liverpool Garston
Liverpool Sefton
Llanelli
Londonderry
Maidstone
Mansfield
Milton Keynes
Newbury
Newport
Newtownabbey
Northampton
Norwich
Nottingham
Nuneaton
Oldbury
Oxford
Paisley
Perth
Hemel Hempstead
Peterborough
Hereford
Huddersfield
Hull
Huntingdon
Ilkeston
Inverness
Ipswich
Isle Of Wight
Keighley
Kettering
Kidderminster
Hillsborough
Hinckley
Plymouth
Preston
Radcliffe
Reading
Rochdale
Romford
Rotherham
Rugby
Rustington
Scarborough
Scunthorpe
Loughborough
Newcastle-Under-Lyme
Dunelm Group plc Annual Report and Accounts 2014 115
Strategic reportGovernanceFinancials NOTES
116 Dunelm Group plc Annual Report and Accounts 2014
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2
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1
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Tel: 0116 264 4356
Email: investorrelations@dunelm.com
www.dunelm.com