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Dunelm Group plc
Annual Report
and Accounts
for the period ended 29 June 2019
Stock code: DNLM
At Dunelm, we love homes and are just as
obsessed by the products that go in them.
We’re the UK’s No. 1 homewares retailer
offering our customers a wide range of
products to enhance every room in their
home. We focus on style, quality and value
and are always working hard to make our
customers’ lives a little easier.
Our purpose is to help everyone
create a home they love.
Investment proposition
01 Well positioned for growth
Our growth record has been strong with 40 consecutive years
of increased sales and we’re always looking out for ways to
sell more to our customers. We have a significant opportunity
to continue to grow in the UK as we become the customer’s
number one choice for homewares and furniture.
• Market leader in the UK homewares market with 8.7%
share*. Opportunity to consolidate leadership position in a
fragmented sector
• Opportunity to accelerate the growth of our online business
with an expanded range, and improved delivery options,
attracting new customers and evolving our model for
the future
• Significant growth potential in furniture where our share is
around 1% of the market
* GlobalData Retail research (September 2019).
02 Customer offer
We are always looking for ways to enhance our customer offer.
We want to be famous for style, as well as quality and value.
We’re always looking and listening to ensure we make our
customer experience as inspiring and easy as possible.
• We’re well known for offering great value and quality across
our broad product ranges. We will introduce more fashion
and style-led ranges, and leverage our own brands to drive
consideration and conversion across our categories
•
Investments in our multichannel capability means customers
can increasingly shop how and whenever they choose with
next day/day of choice home delivery or same day collection
in store
• Our great colleagues really make Dunelm different.
We’re proud to offer friendly and knowledgeable service to
our customers
We’re a multichannel retailer with 170 superstores, two high
street stores and our website, dunelm.com, featuring extended
ranges and delivery convenience (home delivery and reserve &
collect) via multi-device functionality and our own delivery fleet.
We are really proud of our business culture and we like to do
things our own way. We’re committed to our suppliers and
making Dunelm a great place to work for our colleagues.
03 Operating model
Our low cost operating model provides a solid platform for
continued growth. We’ve invested intelligently over the years
and remain agile enough to respond quickly to changes in
the marketplace.
• We’re not held back by an overpriced or oversized retail
estate. In fact, we know we can still open more stores in key
locations across the UK
• Our focus on cost and reducing waste ensures that we run
a lean business and allows us to reinvest for growth and
maintain great pricing for our customers
• We’ve grown up with many of our suppliers. Their skills
and experience complement our own. We are committed
to maintaining great relationships and working with our
suppliers to create a more efficient supply chain
04 Long term value creation
We make decisions for the long term. We always want to do the
right thing for our business and stakeholders.
• As a highly cash generative business with a conservative
capital structure, we have the ability to reinvest and/or
distribute our free cash flow each year
• As a large employer and a responsible business, we care
about our communities and environment too. We have
increased our charitable contributions, reduced emissions
and improved our waste management
• Our progressive distribution policy has increased dividend
per share each year since floating on the London Stock
Exchange in 2006
Read more online at: https://corporate.dunelm.com
IFC
corporate.dunelm.com Stock code: DNLM Highlights
Revenue £m
+4.8%
(2018: +9.9%)
822.7
880.9
955.6
Profit before tax* £m
+23.4%
(2018: -6.7%)
Dividend per share pence
+5.7%
(2018: +1.9%)
1,050.1
1,100.4
122.6
128.9
125.9
* Profit before tax is presented before exceptional costs.
109.3
102.0
21.5
25.1
26.0
26.5
28.0
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Operational highlights
• Focus on core Dunelm, with improved customer proposition
Financial highlights
• Total like-for-like (LFL‡) sales increased by 10.7% with strong
offering more choice, style and value
growth both in stores (7.7%) and online (35.1%)
• Continuing growth in brand awareness and consideration
helped drive an 8.5% increase in unique active customers*
• Ongoing development of digital capabilities with further
plans in progress to enhance the multichannel customer
experience
•
*
Increased homewares market share† by 0.6ppts
Unique active customer numbers reflects internal analysis based on Barclays data.
† GlobalData Retail research (September 2019).
• Profit before tax of £125.9m up 23.4% (vs FY18 underlying
profit before tax), reflecting higher sales, improved gross
margins (+160bps) and better operational grip
• Excellent cash flow generation: Free cash flow of £154.4m
(+£101.5m compared to FY18) and a significant reduction in
net debt to £25.3m (FY18: £124.0m)
• Final dividend of 20.5p brings the full year ordinary dividend
to 28.0p, growth of 5.7%
• Special dividend of 32.0p, bringing total shareholder
dividend for the year to 60.0p
‡
LFL stores are defined as those trading for at least one full financial year prior to
1 July 2018 without any significant change of space. LFL stores revenues include
reserve & collect sales, and home delivery sales in respect of orders placed via
in-store tablets.
Contents
Business Overview
Welcome
Highlights
At a Glance
Chairman’s Statement
Strategic Report
Our Marketplace
Our Business Model
Our Purpose & Strategy
Key Performance Indicators
Business Review
Financial Review
Risks and Risk Management
Principal Risks and Uncertainties
Sustainability
Governance
Directors and Officers
Chairman’s Letter
Corporate Governance Report
Letter from the Chair of the
Audit and Risk Committee
Audit and Risk Committee Report
Letter from the Chair of the
Remuneration Committee
Remuneration Report
Letter from the Chair of the
Nominations Committee
Nominations Committee Report
Directors’ Report
63
64
68
70
93
94
97
Statement of Directors’ Responsibilities
101
Financial Statements
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes
in Equity
Accounting Policies
104
110
110
111
112
113
114
IFC
1
2
4
8
10
12
14
15
20
24
26
33
48
52
53
Notes to the Consolidated Financial
Statements
121
Parent Company Statement of
137
Financial Position
Parent Company Statement of Cash Flows 137
Parent Company Statement of Changes
in Equity
Parent Company Accounting Policies
Notes to the Parent Company
Financial Statements
Company Information
Advisers and Contacts
Shareholder Notes
Store Listing
138
139
141
145
146
IBC
1
Dunelm Group plc Annual Report and Accounts for the period ended 29 June 2019BusinessOverview At a Glance
Sustainable long term value creation
About us
We’re the UK’s No. 1 homewares retailer offering our customers great products to enhance every room in their home.
We focus on style, quality and value and are always working hard to help our customers to create a home they love.
• 30,000 products in store
• Made to Measure curtains and blinds service including
• 55,000 products available online
• Full product range available to order in store
• Over four and a half million customers visit our stores and
website each week
home fitting
• Home delivery and reserve & collect service
Read more in our business model on
pages 10 and 11
Where we operate
2
We’re a UK multichannel retailer with national
coverage through our dunelm.com website and
store network.
• dunelm.com offering a range of delivery options
• 170 superstores and two high street stores
• Support centres in Leicester and London
• Two distribution centres in Stoke-on-Trent
• Contact centre in Radcliffe, Manchester
• Made to Measure manufacturing centre in
Leicester
• Five Dunelm Home Delivery Network sites (Stoke,
Barnsley, Northampton, Bristol and Dartford)
Key
Superstores as at 30 June 2018
New superstores
opened since 1 July 2018
SSC
Leicester and London support centres
Manufacturing
Stoke I & Ii distribution centres
Dunelm Home Delivery Network sites
SSC
SSC
Read about our marketplace on
pages 8 and 9
SSC
SSC
SSC
SSC
corporate.dunelm.com Stock code: DNLM Our brands
Our customer promises
We have three customer promises that
define our offer:
• Great choice and value
• Easy and inspiring to shop
• Convenient to buy and return
Read about our customer promises on
pages 12 and 13
Our business principles
We have a unique culture stemming from our entrepreneurial beginnings
and a set of business principles we live by.
Sell more
Be
committed
Do things
our own
way
Keep it
simple
Read about our business principles on
page 10
Our people
We aim to make Dunelm a great
place to work for our colleagues. We
are pleased to highlight the following
achievements:
• 14% increase in colleague
engagement between May 2018
and May 2019
• Recognised by Glassdoor
•
•
as being in the “top 50 best
companies to work for in the UK”
Launched a mental health
awareness programme, training
over 50 colleagues
as mental health first aiders
Introduced new schemes to
enable colleagues to buy
additional holiday and receive
advances on their monthly pay
Our focus on
sustainability
To deliver long term, sustainable
growth and strong financial
performance, we have to deliver
for all of our stakeholders:
• Our customers
• Our people
• Our environment
and climate change
• Our communities
• Our suppliers and
human rights
• Our shareholders
Read about our sustainability on
pages 33 to 45
• Developed the first ever retail
degree apprenticeship
Read our corporate governance
report on pages 53 to 62
How our revenue is spent
Revenue
£1,100.4m
Cost of sales £554.8m
Labour costs £171.6m
Other operating costs £247.1m
Financial items £1.0m
Corporation tax £24.6m
Dividends paid £54.6m
3
Dunelm Group plc Annual Report and Accounts for the period ended 29 June 2019BusinessOverview Chairman’s Statement
Andy Harrison
Chairman
“
We are delighted to celebrate our 40th anniversary
with a strong performance built on a renewed focus on
Dunelm’s Customer 1st values.
”
An anniversary to celebrate. Putting our customers first.
Dunelm was founded on a market stall in Leicester by Bill and Jean Adderley in
1979 and grew into a national network of superstores under the leadership of
their son, Will Adderley. We are delighted to celebrate our 40th anniversary with a
strong performance. This success has been built on a renewed focus on Dunelm’s
well-established Customer 1st values, offering great products and excellent value
for money, combined with friendly and knowledgeable service from colleagues
throughout our 172 stores. In addition, we are building powerful new digital
capabilities which are driving sales both online and in stores.
We have continued to invest in raising
customer awareness of Dunelm’s
outstanding offer, which has driven higher
customer numbers. Tighter operational
management has also allowed us to
convert strong sales into healthy profit
growth and substantially improved
cash flow. Of equal note, our customer
satisfaction and colleague satisfaction
scores improved significantly during
the year.
To defy the challenges in UK retail with
double digit growth in like-for-like sales
and a 23% growth in our pre-tax profit (vs
FY18 underlying) is very pleasing. I would
like to thank all of our Dunelm colleagues
for their hard work and commitment,
which is central to our success. We are
proud of Dunelm’s strong culture and the
commitment of all our team to delivering
a great experience for our customers.
Dividends
The Board has recommended an
increased final dividend of 20.5 pence
per share, bringing the total ordinary
dividend for the full year to 28.0 pence
per share, an increase of 5.7% on the
previous year. As a result of our strong
cash flow generation this year, which
substantially reduced our net debt
position, and in line with our policy,
the Board has also declared a special
dividend of 32.0 pence, to be paid in
October 2019, reflecting our commitment
to return surplus cash to our shareholders.
Board changes
Nick Wilkinson has completed his first
full year as Chief Executive and has
been central in leading our improved
performance, re-energising our core
skills, building new digital capabilities and
focusing on the Dunelm brand.
We welcomed Laura Carr to Dunelm
as CFO on 29 November 2018 and we
are already seeing the benefits of her
financial discipline and commercial
insight.
Liz Doherty has decided to retire from the
Board and will therefore not be seeking
re-election at the Annual General Meeting
in November. On behalf of my Board
colleagues and the entire Dunelm team,
I would like to thank Liz for her significant
contribution over the last six years. We
have benefited substantially from Liz’s
wisdom and the strength of her retail
and international business experience,
especially in her role as Chair of our Audit
and Risk Committee.
4
corporate.dunelm.com Stock code: DNLM In July 2019, we appointed Ian Bull as
a Non-Executive Director. Ian’s broad
experience as a CFO in a range of
consumer businesses is an excellent
addition to our Board. Ian brings a wealth
of experience and I am very pleased
to have him as part of our team. When
Liz retires from the Board in November,
Ian will take on the role of Chair of the
Audit and Risk Committee. Ian is also the
Senior Independent Director (SID) and
Audit Committee Chair at St Modwen
Properties plc and Audit Committee Chair
at Domino’s Pizza Group plc.
In September 2019 we also appointed
Paula Vennells as a Non-Executive
Director (NED). Paula has a strong track
record, having led the Post Office for
seven years which is a large, complex
consumer business. Paula is also a NED
at Wm Morrison Supermarkets plc, Chair
of the Imperial College NHS Healthcare
Trust and a NED of the Cabinet Office.
While the year ahead will be a challenging
one, with lots of economic uncertainty
and tougher comparatives, I am excited
by the significant opportunities ahead
for Dunelm and I am confident that it
is well placed to maintain its position
as the leading specialist multichannel
homewares retailer in the UK and to
continue to deliver sustainable growth.
Andy Harrison
Chairman
4 September 2019
Read about governance on
pages 46 to 101
“ I am excited about the
significant opportunities
ahead for the Dunelm
business to continue
to deliver sustainable
growth”
5
Dunelm Group plc Annual Report and Accounts for the period ended 29 June 2019BusinessOverview 02
Strategic
Report
Contents
Our Marketplace
Our Business Model
Our Purpose & Strategy
Key Performance Indicators
Business Review
Financial Review
Risks and Risk Management
Principal Risks and Uncertainties
Sustainability
8
10
12
14
15
20
24
26
33
6
corporate.dunelm.com Stock code: DNLM Strategic
Report
Our customer promises
Great Choice and Value Fantastic quality own label product
at a price that can’t be beaten.
7
Dunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Our Marketplace
We remain the UK homewares market leader
and are well positioned for further growth
Macroeconomic trends
The UK retail sector continues to experience high levels of
volatility and uncertainty as consumer confidence remains low
as we enter into Brexit. The market landscape is also rapidly
changing and many new retailers are entering the market as
we see traditional barriers to entry reduce. At the same time,
customer behaviours and expectations have changed, leading
to some of the well-established retailers exiting sections of the
homewares and furniture market.
At a time when the market has been challenging, consumers
have still been willing to invest in their homes, especially when
they find good quality products that are value for money and
come with a great shopping experience. Online shopping is
now becoming part of almost every shopping mission and
technological advances are providing the customer with sharper
images enabling them to view not only what the product looks
like, but also establish its quality.
However, with this political uncertainty and pressures like
increasing food inflation potentially leading to customers
spending more on essential resources and less on non-essential
resources, we remain cautious on the outlook for FY20.
How we are responding
At Dunelm, we have an offer that appeals to customers whether
they are moving house or choosing to stay in their current
home, and we believe this provides a significant opportunity
to continue to grow in the UK as we become the customers’
number one choice for homewares and furniture. We are clear
the market is becoming more multichannel and customers
will expect a combination of ordering and choosing products
online but to also visit stores to touch and feel the product, or
just to collect the item in a convenient and timely way. We are
responding well to these market conditions and are clear on the
opportunities this will present to Dunelm.
The homewares market*
Headlines
The UK homewares market is worth an estimated £13.5bn
per year.
Online penetration is growing fast and ahead of the market.
Growth is estimated to be 14.8% in 2019 (2018: 14.0%), and is
forecast to reach 17.2% by 2023. However, stores continue to
play a vital role in the growth of online shopping as customers
can search and browse and be inspired online but touch and
feel the products in store.
The homewares market is impacted by social media and
influencers are encouraging consumers to refresh their
homewares more often, meaning ranges are becoming more
fashion-led and lower ticket items are becoming important as
they can be replaced more frequently.
Market size
£bn
Homeware-market-size
Key growth drivers and inhibitors
% Growth
1.6%
1.9%
2.0%
Fashion and design-led ranges increase visit frequency
1.4%
1.2%
Online provides more choice and convenience
13.2
13.4
13.5
13.8
14.1
Technology enabling a better online shopping experience
Store space and new formats improve experience
Food price inflation leading to a reduction in non-essential
homewares spend
Economic uncertainty and price competition
Leisure favoured over retail
2017
2018
2019
2020
2021
ESTIMATE
FORECAST
FORECAST
8
corporate.dunelm.com Stock code: DNLM
The furniture market†
Headlines
The UK furniture market is estimated to be worth £11.4bn in
2019. The market has been impacted by economic uncertainty,
lower consumer confidence and the weaker housing market.
However, the online furniture market is expected to be one
of the fastest growing markets between 2019 and 2023 as
customers become increasingly more comfortable with big
tickets purchases (Global data). Online penetration is forecast to
grow to 22.4% by 2023.
Technology is supporting this growth journey by providing
customers with sharper, clear images on screen, videos and
angles that allow you to see the product quality up close.
Technology like augmented reality allows the customer to place
the product in their home using their mobile phone before
deciding to buy online.
Furniture retailers must do more to link their online and
store experience to enable customers to shop how and when
they want.
The market is expected to continue to consolidate and Dunelm
is well positioned to build on its multichannel offer to provide
the customer with a wide range of products in co-ordinated
collections at a great price.
Key growth drivers and inhibitors
Online growth: lower overheads, broader ranges,
keener prices, convenient deliveries
Technology enabling a better online shopping
experience
Growth in sales of bedroom furniture categories will be
driven by increasing well-being and health awareness
Growth in sales of living room furniture as space is
more constrained and innovative storage solutions are
needed
Economic uncertainty, inflation and price competition
* Homewares market data is based on GlobalData analysis.
Market size
£bn
Furniture-market-size
% Growth
(0.4)%
(0.7%)
1.7%
1.4%
0.9%
11.4
11.3
11.4
11.6
11.8
2017
2018
2019
2020
2021
ESTIMATE
FORECAST
FORECAST
Key differentiators:
• Product obsessed – focus on style, quality and value
• Everyone’s welcome in our home
• Multichannel convenience – shop when, how and
where you want
• Our people – friendly and knowledgeable service
† Furniture market data is based on GlobalData analysis.
9
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Our Business Model
Developing Dunelm. The Home of Homes
The resources we use
What we do
Our people
Our people are passionate about Dunelm and committed to
helping our customers create a home they love. Our deep
product knowledge and friendly service helps create and
enhance our leading customer proposition.
Our relationships
We have grown up with many of our committed suppliers,
and we also build open and trusted partnerships with new
suppliers and in the communities where we operate. The
strength of our relationships and the way we work together
allows us to continually improve Dunelm for our customers.
Our brand reputation
The Dunelm brand is known and trusted by millions of UK
consumers, for choice, value, quality and style. We’re working
hard to build awareness of Dunelm so that those customers
who don’t yet know us or shop with us, can access our leading
product ranges and friendly service.
Capital and infrastructure
We’re a prudently financed business and over the years, we
have invested in appropriate systems and capabilities that
provide a solid platform for growth. Our store network is
not oversized and the highly cash generative nature of our
business allows us to reinvest for growth, whilst maintaining
shareholder distributions.
Product
Provide a leading range of quality, great value products for
all customer groups.
• 30,000 products in store with around 30% of the range
being refreshed annually and frequent promotional buys
to create newness
• High levels of in-store availability to take home today
• 55,000 items available online for home delivery
Service
Support customers throughout their shopping journey
with friendly and knowledgeable colleagues in store, ready
to help.
•
Over 9,000 colleagues, including over 1,200
customer hosts
• High in-store Net Promoter Scores (NPS) highlight
customer satisfaction and provide feedback on how
to improve
• Dedicated customer service centre in Radcliffe,
Manchester available to support customers seven days
a week
Multichannel convenience
Gives options to customers on how they want to shop,
online or in store.
• Mobile and tablet friendly website allows on-the-go
browsing with clear pricing, product information and
customer reviews
• A conveniently located superstore estate allowing
customers to touch and feel products and seek expert
advice
• Multiple home delivery options and free or low cost
delivery charges
•
Inspiration and helpful product information and buying
guides online
Our culture and
business principles
Our business principles
underpin our culture
and encourage us to do
the right things with the
long term in mind
Read more online at:
https://corporate.dunelm.com
10
Sell more
Be
committed
Do things
our own
way
Keep it
simple
Merchandise
Supplier
relationships
Keep listening
and looking
Customer
focus
Motivate
our teams
Develop
our people
Be the
underdog
Long term
decisions
Waste
Environment
Keep our
cost structure
lean
corporate.dunelm.com Stock code: DNLM Creating long term sustainable value
Read about our strategy on
pages 12 and 13
Read about sustainability on
pages 33 to 45
For our customers
• Ever-increasing reasons to shop at Dunelm. With new
For our communities
• Company supported charity (Macmillan); funds raised
ranges, new departments, new products and new services
• Everyday low prices, two end-of-season clearance sale
through donations in store, colleague fundraising activity
and Company matching of funds raised
events per year
• All income from sale of single-use carrier bags donated
• An easy shopping experience, how and wherever customers
to charity
want to shop
• One day of paid leave per annum for every colleague for
•
Inspiration across channels to help everyone create a home
they love
charitable activities
• UK corporation tax paid on all the Company’s profits
Key FY19 achievement:
Key FY19 achievement:
Increased customer satisfaction scores
in all channels
£580,000
raised for charity by colleagues and the Group
For our people
• Stable employment in a growing business with opportunities
For our suppliers and human rights
• We deal with our suppliers in an open, fair, consistent and
to develop and progress, regardless of disability, race,
religion or belief, gender, sexual orientation, gender
reassignment, marital status or age
• A fair pay deal with pay rates above National Minimum/
National Living Wage levels, plus additional benefits
• Commitment to provide a safe workplace and promote
mental health and well-being
Key FY19 achievement:
Colleague engagement up by
14%
honest way, and pay on time
• External verification of ethical and human rights standards of
Tier 1 supply base for own brand products
• Modern slavery policy and risk-based auditing in place for
all suppliers
Key FY19 achievement:
Valid audit in place for
98%
of factory base for own brand products
For the environment and climate change
• Aim to maximise reuse and recycling in our operations,
For our shareholders
• Customer 1st strategy for continued growth and long term
target zero waste to landfill
value creation
• Plan in place to minimise use of single-use and non-
• Focus on cost control to maximise efficiency and return on
recyclable plastics
capital employed
• Commitment to reduce like-for-like energy usage and
• Strong free cash flow generation allowing invest/distribute
carbon emissions every year
decisions to be made
• Continually improving sourcing policies for materials
• A progressive dividend policy with growth in dividend per
such as cotton, timber and palm oil to reduce social and
environmental impacts
share each year since flotation
Key FY19 achievement:
Key FY19 achievement:
21.6%
reduction in CO2e relative to turnover
10-year TSR growth
598%
(source: Datastream)
11
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Our Purpose & Strategy
What we are setting out to do
Our brand purpose and business principles
Our purpose is to help everyone create a home they love. This means we want to appeal to all budgets and taste types and that we
encourage our customers to express their own personalities through their homes. Our purpose is at the heart of everything we do.
Our business principles have existed since the very beginning and shape our culture. There are 15 principles in total, and we try to
apply them to everything we do.
Our customer promises
In order to extend our focus on customer service to
all parts of the business and to be clear on how we
will deliver our purpose to our customers, we have
three customer promises that are central to our offer:
1. Great choice and value: fantastic quality own-
label product at a price that can’t be beaten;
2. Easy and inspiring to shop: an experience that
gives our customers ideas, and provides help
when they want it, both in store and online;
3. Convenient to buy and return: accessible to all,
whether delivered to your home or picked up in
store. Products that are easy to buy and simple
to return.
Some of these promises have been core to our
offer for a long time, but some have been added
more recently and are areas we are developing.
We believe that if we do all of these well, we will be
different and better than anyone else in the eyes of
the customer and fulfil our purpose to help everyone
create a home they love.
Our Customer 1st growth plan
As market leader, with only 8.7% share, we see significant opportunity for growth within the UK homewares market. One of our key
business principles is sell more. It is in our DNA and it’s how we think about the business.
Our sell more plan is simple:
Our sell more plan
Customer
1st
2
million new
customers
1
more shop
with us a year
1
more product
per basket
Last year we focused on reaching more customers with our
brand through the introduction of an integrated marketing
campaign. We will continue this focus and aim to attract two
million new customers.
On average, our customers shop with us between three and
four times per year. By better understanding their needs, we will
increase the frequency of their visits.
Our average basket is less than four items. With a wide range of
different product categories, we see the opportunity to increase
the number of items in the basket.
The combination of the above measures will drive profitable
and sustainable growth in the business. We have made progress
on reaching more customers in FY19, and are excited about
improving all three metrics going forward.
12
corporate.dunelm.com Stock code: DNLM Our foundations
Committed colleagues: Our people make Dunelm a special
place to work and shop and make us proud of the service
we give to our customers each day. The detailed product
knowledge provided by our customer-facing colleagues, mainly
in stores, is a key differentiator and is valued by our customers.
Customer insight and data: The more we understand about our
customers, the better the offer we can provide. We will enhance
our customer proposition to maximise value by using data and
insight to make optimal investment decisions.
Agile and scalable digital platform: We have been in catch-up
mode on our digital offering. The technology upon which the
new digital platform is built allows us to release continuous
improvements to our customer experience and operating
effectiveness. Our Digital teams have been set up to work in an
agile way to maximise the opportunity available through the
new technology.
Low cost store portfolio: Our 170 superstores provide a fantastic
opportunity for us to showcase our product ranges, provide
great service and inspire our customers as they browse. The store
experience is fundamental to our multichannel offer and we
continue to expect to expand our estate to around 200 stores,
opening between 3-5 new stores per year in the medium term.
Committed supplier partners: We have built deep and mutually
rewarding relationships with our core supplier base over the last
40 years. These suppliers are product specialists and allow us to
provide our customers with great value, choice and innovation.
Lean and efficient supply chain: The supply chain for our
traditional/historical stores fulfilment model is very efficient.
As we grow our home delivery business, in line with
customer expectations, we are focused on building a similarly
efficient home delivery model which includes both one and
two-man delivery.
Our purpose
Helping everyone create a home they love
Our customer promises
Great choice
and value
Easy and inspiring
to shop
Convenient to buy
and return
Our sell more plan
Customer
1st
2
million new
customers
1
more shop
with us a year
1
more product
per basket
Our foundations
Committed
colleagues
Customer
insight and
data
Agile and
scalable digital
platform
Low cost store
portfolio
Lean and
efficient
supply chain
Committed
supplier
partners
Sell more
Be committed Do things our own way Keep it simple
Our key business principles
13
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Key Performance Indicators
Key performance indicators (KPIs) are used by the Board and throughout Dunelm to monitor business performance.
The KPIs set out in this summary are those considered to be most relevant to understand the performance of Dunelm over time.
Total revenue
£m and growth %
Total LFL revenue
growth %
Profit before tax*
£m and % sales
12.7%
9.9%
7.1%
8.5%
822.7
880.9
1,050.1
955.6
4.8%
1,100.4
10.7
17.3% 17.5%
14.9%
13.4%
15.1%
122.6
128.9
125.9
109.3
102.0
5.8
2.5
4.2
2015
2016
2017
2018
2019
2015
2016
(0.5)
2017
2018
2019
2015
2016
2017
2018
2019
Commentary
Growth of 4.8% includes LFL growth of
10.7% driven by performance in stores
and online and reflects the closure of the
Worldstores websites in the first quarter.
Commentary
Strong LFL growth of +10.7% reflects
pleasing store performance (+7.7% store
LFL), supported by strong online home
delivery growth (+35.1%).
Why this measure is important
Sell more is a business principle and
continued sales growth is central to our
ambitious Customer 1st plan.
Why this measure is important
Our Customer 1st plan will drive future
sales growth. This measure allows us
to monitor the performance of our
existing store estate and high growth
online channel.
Commentary
Profit before tax has significantly
improved this year due to stronger sales
performance, improved gross margin
and tighter cost control, and despite
additional investment in marketing, wage
inflation and higher cost of incentive
schemes.
Why this measure is important
Profit before tax measures overall financial
performance of the business, reflecting
sales, gross margin and cost control.
* Profit before tax is presented before exceptional costs.
Free cash flow
£m†
Diluted earnings per share
pence and growth %
CO2 emissions
tCO2e /£1m Group revenue
7.1%
7.5%
37.8%
0.3%
154.4
46.8
(28.2%)
50.3
36.1
36.2
34.9
49.9
29.0
25.6
21.6
17.0
110.8
86.9
52.9
14.2
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Commentary
Free cash flow (defined as net cash from
operating activities less net cash used
in investing activities) has improved
significantly due to higher operating
profit, improved working capital and
more efficient capital investment.
Why this measure is important
Dunelm is highly cash generative. This
measure allows the Board to monitor cash
flows to support investment decisions for
the long term to support growth, or to
return surplus cash to shareholders.
† Free cash flow is presented after exceptional costs.
Commentary
Diluted earnings per share (EPS)
increased significantly to 49.9p
reflecting the improved sales and profit
performance through the year.
Why this measure is important
EPS is a key measure for shareholders and
one of the performance criteria for senior
management remuneration.
Commentary
A continued reduction in both absolute
emissions and emissions/revenue
highlights the progress made on a range
of environmental initiatives including LED
lighting, improved energy management
and lower emission vehicles.
Why this measure is important
We are committed to reducing our impact
on the environment. It also helps us
reduce waste and costs.
14
Read about our strategy on
pages 12 and 13
Read about sustainability on
pages 33 to 45
corporate.dunelm.com Stock code: DNLM Business Review
Nick Wilkinson
Chief Executive Officer
Total LFL sales growth
10.7%
(FY18: 4.2%)
Increase in unique
active customers
8.5%
(FY18: 5.1%)
“ As Dunelm celebrates its 40th anniversary, we are
pleased to have delivered a strong performance during
the year, with an improvement across all our customer,
operating and financial metrics.”
The performance of the business and the strategic progress we have made
in this, our 40th year, is very pleasing, as we continue to strive to offer
our customers great choice and value for money. Our purpose is to help
everyone create a home they love. With a focus on learning and continuous
improvement, my colleagues and I are committed to this purpose and are
excited about the next phase of growth.
Performance in FY19
We achieved strong revenue growth with
total like-for-like (LFL) revenue up 10.7%
on the year, and continuing Dunelm
revenue growth of 11.5% including the
effect of new store openings. Our internal
analysis shows that we are continuing
to win homewares market share. Our
multichannel progress is encouraging,
with dunelm.com revenue growth of
35.1% and growth in our LFL stores of
7.7%, supported by new tablet-based
selling tools which allow colleagues to
offer customers home delivery orders
across an extended product range.
Overall multichannel revenue, including
online home delivery revenue, reserve &
collect revenue and tablet-based revenue,
now represents 17.4% of the total for the
year, up from 13.5% last year.
Gross margin improved by 160bps,
reflecting improved sourcing, FX gains,
the elimination of Worldstores product
lines with lower margins, and better
end-of-season stock management.
As a result, profit before tax of £125.9m
was up from £102.0m (before exceptional
items) last year, generating free cash flow
of £154.4m, an increase of £101.5m on
last year.
Read about our marketplace on
pages 8 and 9
What we have done
Focus on Dunelm and
operational grip
We have significantly simplified our
business model by focusing on the core
Dunelm business. We closed both the
Kiddicare and Worldstores websites
during the first quarter and transferred
those product lines we wished to retain
to the dunelm.com website. This enabled
us to invest all of our energy back into
the Dunelm brand, concentrating on one
supply chain and one website. In so doing,
we significantly tightened our operational
and commercial grip on the business.
As part of this renewed focus, we
improved the customer offer in our stores.
Our product selection and sourcing has
been focused on offering more style
and better value to customers and we
reinvigorated our special buy product
programme, both in store and online,
with more frequently changing offers,
helping to provide greater inspiration
and newness to our customers. We
have also extended our furniture and
seasonal ranges to increase choice. The
management of end-of-season product
clearance was more rigorous, and our
stores benefited from a new calendar of
clearance activity and less discounted
product in stock, which, in turn, generated
more full-priced revenue. All of this has
resulted in improved trading intensities
across our portfolio.
15
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Business Review
continued
Discipline around cost control and
cash generation was also a key area of
focus. For example, we reduced stock
loss in our stores and supply chain and
made savings in store wages through
a restructuring of management teams.
These efficiencies mitigated inflationary
pressures and enabled investment for
the longer-term benefit of the business.
We continued to listen to our customers
and colleagues to learn how to improve
both satisfaction and engagement scores,
and joined the Top 50 UK companies,
as ranked on Glassdoor, the workforce
review website.
Introduced ‘Home of Homes’
campaign
One of the key opportunities we set
out to pursue this year was to build
greater brand awareness and reach
new customers. In the first quarter we
launched our ‘Home of Homes’ marketing
campaign across multiple media channels
including TV, radio and social media.
We supported this campaign with an
ad-funded TV programme on ITV called
“Back to Mine”, with the first series airing
during the Autumn and re-runs screened
in April. We also commenced a year-long
sponsorship of ITV’s flagship daytime
show “This Morning” in March 2019.
The show’s audience aligns well with our
target customer and feedback suggests
there is a clear brand fit and we have
improved key perception metrics.
We also made a step change in our
digital marketing by redirecting spend
previously incurred for the Worldstores
sites to dunelm.com. Our brand
awareness measure has increased by
3ppts as at June 2019. We have also seen
an increase in our unique active store and
online customers year-on-year (+7.3%
and 28.4% respectively). The acceleration
of growth in our customer base is
particularly encouraging given we only
opened one net new store at the end of
the financial year.
Seized more digital opportunities
In last year’s review I commented
that we were playing catch-up as a
multichannel retailer, having grown up
as a store-based business. We have
continued to address this at pace by
seizing digital opportunities which will
improve our offer. During the second
half, we increased our focus on online
ranging and trading across our product
categories. We increased the number of
customer hosts we have in our stores to
1,200 and provided training and support
to enable them to help customers shop
our extended ranges in store via tablets.
We also improved the speed of our
website whilst continuing to develop our
new digital platform. We will complete
the roll-out to customers in the new
financial year.
We continue to invest in our store
portfolio. We opened three new stores,
which included two relocations towards
the end of the year, and we undertook
ten store refits to maintain the integrity of
the estate.
“ I am very pleased with
our performance in
FY19 and am excited
about the potential to
grow the business as
we enhance and extend
our multichannel offer
and build on our market
leading position”
16
corporate.dunelm.com Stock code: DNLM Strategic
Report
Looking forward
Market outlook
The total homewares market has been
in modest growth for the last two years,
aided by the positive trends of real
wage growth and high employment.
However, we remain cautious about the
outlook for consumer confidence as a
result of continued political uncertainty
surrounding Brexit. In the run-up to
the 2016 referendum, we observed a
softening in the market ahead of the vote.
The latest proposed date for Brexit is
31 October 2019, which falls in the run-
up to our peak Winter season. For this
reason, we maintain a cautious outlook
for the FY20 year.
Notwithstanding these macroeconomic
factors, our broad range of products and
price points, coupled with a low average
item value, means that our offer appeals
to customers whether they are moving
house or choosing to stay in their current
home and refresh their homewares.
A changing homewares consumer
We are observing new behaviours in
the homewares market as shoppers
become more focused on digital content,
more resourceful online, and more
eager to find new ways to be ‘a smart
and savvy’ shopper. These behaviours
are not strongly correlated to age or
wealth segments. Indeed, technology
is increasingly being adopted by older
consumers, often influenced in their
homewares shopping by their children.
Social media is fuelling these habits, with
value being placed on how your home
looks, and how well you are managing it.
In the last three years we have seen a
noticeable reduction in the attitudinal
customer segment which we label as
‘classic and content’ towards a much
more digitally-focused consumer
segment, aged from 18 to 60, which
we refer to as ‘savvy home lovers’. More
consumers are able and willing to seek
out new sources for homewares products
and are using a broader portfolio of
retailers to fulfil their needs.
We believe that Dunelm is benefiting
from these trends. We are becoming
part of the portfolio of more homewares
consumers, across more categories. Put
simply, where once we may have been
the place where a customer bought
their quilts or curtains, we are now being
considered for a wider range of products.
One implication of this is that we need
to meet a wider range of customer
expectations: from buying ‘everyday
necessities’ (stuff that just needs to
get done, like a replacement school
lunchbox), to more ‘rewarding essentials’
(where comfort and quality matter more,
like towels or bedding), to decorative
enhancements, to items for room
refresh projects (like rugs, curtains and
occasional furniture) and onto bigger-
ticket ‘permanent’ purchases (like Made
to Measure curtains or a mattress).
Some of our traditional competitors are
retrenching, and new ones are emerging,
as different retailers react at different
speeds to changing consumer behaviour.
Ultimately, understanding and reacting to
these trends is the key to sustainable and
profitable growth over the long term.
Evolution of strategy
Since Dunelm was founded in 1979,
we have enjoyed two distinct phases of
growth. In the first, the business grew
from a market stall into a chain of high
street stores, selling a range of own
brand products. In the second phase the
business opened out-of-town superstores,
grew its range to 20,000 mainly own
brand products, and developed a
committed supplier base.
Looking forward, we are moving into in
a new phase of growth; one in which we
will grow as a brand and a ‘total retail’
system, with a comprehensive digital
offer which augments a strong physical
store experience. In this next stage of
our journey there is much that will be
different, but the purpose and the DNA of
the business will not change.
A year ago I described our Customer
1st plans for this next phase of growth.
12 months on, our purpose remains
unchanged: to help everyone create a
home they love. In order to extend this
customer focus deeper into all parts of
our business we have articulated three
customer promises to better define
the offer that we will provide to our
customers. These promises will shape
everything we do for our customers:
1. Great choice and value: fantastic
quality, own label product at a price
that can’t be beaten;
2. Easy and inspiring to shop: an
experience that gives our customers
ideas, and provides help when
they want it, across all the different
shopping missions in homewares;
3. Convenient to buy and return:
accessible to all, whether delivered to
your home or picked up in store.
The growth we have enjoyed this year
has been delivered by having an effective
plan to attract more customers to the
brand, to increase shopping frequency
by one visit a year, and to encourage
customers to put one more item in their
basket. These are medium-term goals
and based on the success of adding more
active customers to the brand after just
one year, we have increased our goal
here to add 2 million more. This simple
formula will drive significant growth, both
in stores and online.
17
Dunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Business Review
continued
What we will do next
In the next 12 months we are focused
on delivering material progress in four
specific areas of our Customer 1st plans,
whilst maintaining the core operational
disciplines which helped drive
performance improvement in FY19.
Extend product choice and value
We will continue to improve the quality,
style and value of our product range
across all our core categories to reinforce
our specialist position. We see significant
scope for continuous improvement
across all price bands and taste types.
We are rebalancing the proportion of
lines at opening ‘good’ price points
(for example, in our dinnerware and
glassware ranges). We are also targeting
a material increase in our online-only
ranges with plans underway to add a net
6,000 products to our online-only ranges
in FY20, many of which will be own
label products. Some of these online-
only products will be displayed in store
and will be available to order for home
delivery. Our furniture product offer is
also set to strengthen as we grow own-
brand options and extend colour choice
on some of our best-selling products
(e.g. printed fabrics for our occasional
chairs and painted versions of our living
room cabinetry collections). Promotional
product and special buy programmes
are to introduce new products with
limited runs, bringing newness and great
value for our customers. These initiatives
rely on a strong network of committed
suppliers and we will continue to focus on
developing our relationships with both
our existing and new suppliers.
Launch the new digital
platform and step up our digital
experience
We will launch our new digital commercial
platform in FY20. Whilst we are already
live on some of the new technologies,
this is a major milestone following two
years in which we have transformed our
technology capability, bringing in more
engineering talent and developing new
ways of working, to create a scalable suite
of retail services founded on the latest
cloud-native technology. The transition
to the new platform brings sales risks,
but our tests to date give us confidence
that users will experience material
improvements to site speed, search
effectiveness and checkout functionality
(e.g. the ability to transact a mixed basket
of items with different fulfilment options,
and the ability to pay for store-stocked
items for collection). Our development
roadmap post go-live will be ambitious:
to complete the ‘catch-up’ needed
on convenience and to drive tangible
Underpinning our growth and delivering
on our customer promises, we will
continue to strengthen the foundations
of our business model. Some are well
developed, such as a low cost store
portfolio, and committed colleagues
and suppliers. However, some of the
essential foundations for a modern digital
business require further investment and
development, such as customer insight
and the new digital platform.
Our business principles define our
culture. In a challenging retail world,
we have to be brave and do things our
own way. We like to see ourselves as
the underdog and believe that keeping
things as simple as we can is the key to
driving profitable growth.
In summary, we have solid fundamentals
and increasingly understand the new skills
and capabilities we need to prosper in a
new phase of growth. Our track record of
40 years of growth gives us confidence to
continue to evolve and succeed.
Read about our strategy on
pages 12 and 13
18
corporate.dunelm.com Stock code: DNLM Looking to the future, I am excited about
the potential to grow the business as we
enhance and extend our specialist and
multichannel offer, build on our market
leading position and fulfil our purpose to
help everyone create a home they love.
Nick Wilkinson
Chief Executive Officer
4 September 2019
Summary and outlook
We are pleased to have delivered a
strong performance during the year, with
an improvement across all our customer,
operating and financial metrics. In
particular, the strong like-for-like revenue
growth, both in stores and online,
demonstrates the progress we are making
with our multichannel proposition whilst
maintaining the breadth and depth of our
specialist customer offer in homewares.
These results reflect our focus on the
core Dunelm business and we see further
opportunities to develop our Customer
1st plans, not least through extending
our product choice and value, improving
our digital experience and bringing more
people to the brand.
Whilst recent trading performance has
continued to be strong, we remain
cautious about the full year outlook due to
ongoing Brexit uncertainty and specifically
the impact it may have on consumer
spending as we enter our peak period.
customer enhancements that improve
conversion, frequency and basket size.
We view digital development as driving
store sales as much as our online sales
and will continue to invest in developing
our offer across all channels.
Broaden and deepen our
customer base
We will continue our sponsorship of ITV’s
“This Morning” until March, building on
the increased awareness from exposing
a core audience to the Dunelm brand.
We will extend our ‘Home of Homes’
brand campaign with new family stories
from the Autumn, and we are also
sponsoring a second series of “Back
to Mine”, which is scheduled for the
Winter. The development of our brand
campaign in conjunction with more and
better targeted performance marketing
via PPC and social channels will
continue. Furthermore, we are collecting
insight into the drivers of shopping
frequency and will test whether there are
enhancements to our proposition that
could directly drive increased frequency
for different customer groups. At the
same time, we continue to extend our
geographic reach by opening new stores,
and expect to open 3-5 new stores
(including relocations) each year.
Build capabilities for the next
phase of growth
As we progress with our Customer 1st
strategy in a fast-moving digital world,
there are new skills we are acquiring and
need to develop further. In particular, we
will build on the transformations made
in our Technology and Product teams
in FY19 and are developing deeper
capabilities in data and insight, to provide
benefits across the business. As we look
to build further capabilities across our
workforce, our focus on making Dunelm
a great place to work will accelerate,
with a significant commitment to raising
awareness of mental health issues. We are
talking about topics that many feel are still
taboo, and are learning how to best offer
support and advice. All line managers will
be trained in mental health awareness by
the end of FY20.
19
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Financial Review
Laura Carr
Chief Financial Officer
“ Strong revenue growth, improved margin and focus
on cost control has delivered a significant increase in
both free cash flow and shareholder value.”
52 weeks to 29 June 2019
Revenue
(£m)
883.8
140.2
1,024.0
72.9
YoY
Growth
(£m)
+62.9
+36.4
+99.3
+13.4
YoY
Growth
(%)
+7.7%
+35.1%
+10.7%
—
1,096.9
+112.7
+11.5%
3.5
1,100.4
-62.4
+50.3
—
+4.8%
LFL Stores
LFL Online (dunelm.com)
Total LFL
Non-LFL Stores
Total Dunelm
Non-LFL Online – Worldstores
Total Group
1.
LFL Stores – stores trading for at least one full financial year prior to 1 July 2018 without any significant change of space. LFL stores revenues include reserve & collect sales,
and home delivery sales in respect of orders placed via in-store tablets.
2.
LFL Online – dunelm.com (excludes reserve & collect sales, and home delivery sales in respect of orders placed via in-store tablets).
3. Non-LFL Stores – new stores (including relocations) opened in the current or previous financial year, and existing stores with significant change of space in the current or
previous financial year.
4. Non-LFL Online – Worldstores.co.uk, Kiddicare.com and Achica.com (these websites are now closed).
Revenue
Group revenue for FY19 was £1,100.4m
(FY18: £1,050.1m), an increase of 4.8%.
Total like-for-like (LFL) revenue growth
was 10.7%, reflecting strong growth in
both LFL stores (7.7%) and dunelm.com
(35.1%). Growth was driven by higher
footfall in stores and traffic in online,
and reflected the following:
•
Improvements across all categories
with furniture and seasonal
demonstrating significant increases
• Transfer of profitable products from
the Worldstores business to
dunelm.com
• Benefit from tablet-based selling in
stores, including more web-exclusive
ranges (c. 2ppts contribution to store
sales growth)
•
Investment in raising brand awareness
though an integrated marketing
campaign
• Favourable weather in the second
half of the year, particularly in the
fourth quarter
Non-LFL revenue reflected continued
growth in the store portfolio, with three new
openings in the year (of which two were
relocations). We ended the year with 170
superstores with two stores in high street
locations. We anticipate between 3-5 new
openings in FY20, with one new superstore
opened (a relocation) with one other legally
committed as at the date of this report.
As expected, sales attributable to the
Worldstores businesses were minimal as
the remaining websites were closed in the
first quarter of FY19.
Gross margin
Gross margin increased by 160 basis
points to 49.6% (FY18: 48.0%). Core
Dunelm gross margin improved by
100bps as a result of better sourcing
decisions and improved cost price
negotiation, including the benefit of
FX. More focused product lifecycle
management resulted in lower end of
season clearance during the year.
Furthermore, as a result of the closure
of the Worldstores businesses in the
first quarter, the full year margin rate
benefited by approximately 60bps from
the removal of these margin dilutive sales.
20
corporate.dunelm.com Stock code: DNLM Strategic
Report
As at 29 June 2019, the Group held
$190.5m (FY18: $164.0m) in US dollar
forward contracts, of which $126.5m were
due to mature within the next 12 months
(FY18: $121.5m), representing 70% of the
anticipated US dollar spend over the next
financial year. US dollar cash deposits
amounted to $6.1m (FY18: $7.3m).
Profit before tax
After accounting for interest and foreign
exchange impacts, profit before tax for the
financial year amounted to £125.9m (FY18:
£102.0m before exceptional items), an
increase of 23.4%. Profit before tax in FY18
after exceptional items was £93.1m.
“ The business continues to
be highly cash generative.
The Board has declared
a special dividend of
32.0 pence per share to
return surplus cash to
shareholders”
Taxation
The tax charge for the year was 19.5%
of profit before tax compared to 21.3%
in the prior year. The reduction in the
effective rate of tax reflects both a prior
year adjustment in relation to R&D
incentives claimed and the unusually
high level of disallowable asset write-
offs, largely relating to the acquired
Worldstores brands, in FY18.
Going forward, the effective tax rate is
expected to trend approximately 100 bps
above the headline rate of corporation
tax, principally due to depreciation
charged on non-qualifying capital
expenditure.
Diluted EPS
49.9p
(2018: 36.2p
after exceptional costs)
Ordinary dividend
per share
28.0p
(2018: 26.5p)
21
Operating costs
Operating costs in FY19 of £418.7m
increased in line with sales, representing
an operating cost to sales ratio of 38.0%
(FY18: 38.0% before exceptional costs).
Some of the savings from the closure
of the Worldstores businesses, such as
digital marketing costs, were reinvested
in the growth of dunelm.com. Focus
on operational grip and productivity
initiatives such as reducing stock loss
and streamlining store management
structures have offset inflationary
pressures, such as National Living Wage.
Increased investment in brand marketing
and technology have been made to drive
long term sustainable growth.
Total costs increased by £19.8m compared
to the prior year (before exceptional costs).
This increase included the write-off of the
Fogarty brand (£3.8m) when the licensee
went into administration, approximately
£10m of higher colleague and
management incentive costs and c.£6m
higher technology costs which included
increased amortisation and depreciation.
Operating profit
Group operating profit for the financial
year was £126.9m (FY18: £104.7m before
exceptional costs), equating to 11.5% of
sales (FY18: 10.0%).
EBITDA
Earnings before interest, tax, depreciation
and amortisation were £166.3m (FY18:
£139.6m before exceptional items).
This represents a 19.1% increase on the
previous financial year. The EBITDA margin
achieved was 15.1% (FY18: 13.3%).
Financial items
The Group incurred a net financial
expense of £1.0m in FY19 (FY18:
£2.7m). Interest and amortisation of
costs arising from the Group’s Revolving
Credit Facility amounted to £1.9m (FY18:
£2.2m). Interest earned on cash deposits
was £0.3m (FY18: £nil) and net foreign
exchange differences on the translation of
dollar-denominated assets and liabilities
amounted to a further £0.6m income
(FY18: expense of £0.5m).
Dunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Financial Review
continued
Profit after tax and
earnings per share
Profit after tax was £101.3m
(FY18: £73.3m).
Basic earnings per share (EPS) for the year
ended 29 June 2019 was 50.2p (FY18:
36.3p). Diluted EPS increased to 49.9p
(FY18: 36.2p) reflecting growth of 37.8%.
Operating cash flow
In FY19 the Group generated £174.0m
(FY18: £98.5m) of net cash from
operating activities, an increase of 77%.
Net working capital reduced by £26.5m
compared to the prior year end (FY18:
£20.3m increase). Small increases in stock
and receivables were more than offset
by a £31.2m increase in payables. The
increase reflects higher levels of stock
intake, a larger VAT creditor due to the
strong sales performance in the final
quarter and higher incentive accruals
due to the improved overall financial
performance. We expect approximately
£10-15m of this working capital inflow to
reverse in FY20 as we pay the higher year-
end trade and VAT creditors and reduce
our accruals for incentives.
Capital expenditure
Gross capital expenditure in the financial
year was £25.5m compared with £44.0m
in FY18, mainly reflecting the lower
number of new store openings during
the year. We opened three new stores
(£3.9m) and invested £7.8m in refits. The
work to build our technology ecosystem
and infrastructure continues with £12.0m
being spent on IT programmes including
the new website platform as well as major
upgrades to our store till system and
network.
We expect to open between 3-5 new
stores in FY20 (including relocations).
Our refit programme will continue as
we maintain the integrity of the store
estate. Following the launch of the new
digital platform in FY20, the Digital
Development teams will be focussed on
continuously improving the customer
experience and therefore it will be
more difficult to attribute these costs to
identifiable future economic benefits.
Therefore, we anticipate a higher level
of these digital costs will be expensed
through the P&L rather than capitalised.
The capital spend on technology
programmes is therefore likely to be
lower by around £5-7m in FY20, while
the total cash spend remains similar. In
total, we anticipate capital investment,
including one potential freehold
acquisition, of approximately £30m in
FY20.
Free cash flow (FCF)
We measure FCF as net cash from
operating activities less net cash used in
investing activities. FCF was £154.4m in
the year (FY18: £52.9m), reflecting the
improved operating cash flow and lower
capital expenditure year-on-year.
Banking agreements
and net debt
The Group has in place a £165m
syndicated Revolving Credit Facility
(RCF), with an optional £75m accordion
facility which matures in March 2023.
The terms of the RCF are consistent with
normal practice. They include covenants
in respect of leverage (net debt to be
no greater than 2.5× EBITDA before
exceptional items) and fixed charge cover
(EBITDA before exceptional items to be
no less than 1.75× fixed charges), both of
which were met comfortably as at 29 June
2019 and are forecast to be met going
forward. In addition, the Group maintains
£20m of uncommitted overdraft facilities
with two syndicate partner banks.
Net debt at 29 June 2019 was £25.3m
(0.15× historical EBITDA) compared
with £124.0m in FY18 (0.89× historical
EBITDA before exceptional items).
Weekly average net debt in FY19 was
£50.8m (FY18: £112.4m).
Capital and dividend
policy
The Board targets an average net debt
(excluding lease obligations and short-
term fluctuations in working capital)
of between 0.25× and 0.75× historical
EBITDA. This policy provides the flexibility
to continue investing in the Group’s
growth strategy and to take advantage
of investment opportunities as and when
they arise, for example freehold property
acquisitions.
The Board targets ordinary dividend
cover (by which we mean the Group’s
earnings per share in a given financial
year divided by the total ordinary
dividends declared in respect of that
year) of between 1.75× and 2.25×.
The Board will consider special
distributions if average net debt over a
period consistently falls below the lower
limit of the target range (0.25× EBITDA),
subject to known and anticipated
investment plans at the time.
The Group’s full capital and dividend
policy is available on our website at
https://corporate.dunelm.com.
Dividends paid
and proposed
An interim dividend of 7.5p per share
was paid in April 2019 (FY18: 7.0p).
It is proposed to pay a final dividend of
22
corporate.dunelm.com Stock code: DNLM 20.5p per share (FY18: 19.5p). The total
ordinary dividend of 28.0p represents an
increase of 5.7% over the previous year,
giving a dividend cover of 1.8× (FY18:
1.5× before exceptional items). This cover
level is within our policy as described
above. In line with our policy, and as a
result of the strong cash flow and low net
debt position at the end of the year, the
Board has declared a special dividend
of 32.0p. The final ordinary dividend will
be paid, subject to shareholder approval,
on 22 November 2019 to shareholders
on the register at the close of business
1 November 2019. The special dividend
will be paid on 11 October 2019 to
shareholders on the register at the close
of business on 20 September 2019.
Share buy-backs
The Group’s policy is to purchase shares in
the market from time to time to satisfy the
future exercise of options granted under
incentive plans and other share schemes.
During FY19 no shares were purchased
(FY18: nil). At the year end, 867,642 shares
were held in treasury (FY18: 914,635),
equivalent to approximately 26% of
options outstanding.
Tax policy
The Group maintains a straightforward
and transparent tax policy. The aim is to
comply with all relevant tax legislation
and pay all taxes due, in full and on time.
While actively managing its tax affairs, the
Group will only engage in tax planning
where this is aligned with commercial and
economic activity and does not lead to an
abusive result. We would normally expect
our corporation tax charge to be higher
than the statutory tax rate, as noted
above. HMRC has recently reconfirmed
the Group’s low-risk tax status. Further
details of the Group’s tax policy are
available on our website, https://
corporate.dunelm.com.
decline in the value of sterling against
the US dollar. The impact of significant
macroeconomic disruption to demand
in the homewares market is difficult to
predict and therefore we remain cautious.
New accounting
standards
The Group will adopt IFRS 16 for the
first time in its financial statements
for the period ending 27 June 2020.
Dunelm has chosen to adopt IFRS 16
on a modified retrospective basis and
will first report under IFRS 16 in its
interim results in February 2020. The
implementation of IFRS 16 has no impact
on cash flows generated and will not
impact management’s decisions on how
the business is run. It does, however,
have an impact on the assets, liabilities
and income statement of the Group. The
presentation of the Cash Flow Statement
will also change, with an increase in net
cash flows generated from operating
activities being offset by an increase in
net cash flows used in financing activities.
This significant change in accounting
is expected to reduce Group profit
before tax by approximately £3m and
increase EBITDA by approximately £50m.
Furthermore, as EBITDA will increase
due to an accounting change with no
cash impact, going forward our target
net debt to historical EBITDA range will
be between 0.2× and 0.6×. In order to
familiarise readers of the accounts with
the likely impact of transitioning to IFRS
16 on the Group financial statements, a
proforma unaudited reconciliation for
FY19 is shown in the accounting policies
to the financial statements on page 120.
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.
Laura Carr
Chief Financial Officer
4 September 2019
During the year, total tax contributions
paid to HMRC in the form of corporation
tax, property taxes, PAYE and NIC and
VAT were £157.4m (FY18: £142.3m).
Treasury management
The Group Board has established an
overall treasury policy, day-to-day
management of which is delegated to the
Chief Financial Officer. The policy aims to
ensure the following:
• Effective management of all clearing
bank operations
• Access to appropriate levels of
funding and liquidity
• Effective monitoring and
management of all banking covenants
• Optimal investment of surplus cash
within an approved risk/return profile
• Appropriate management of foreign
exchange exposures and cash flows
Brexit
Over the past 18 months, Dunelm has
been working to identify and mitigate any
operational or financial risks arising from
the expected exit from the EU, which is
now anticipated on 31 October 2019. A
working group, reporting to the Board,
was set up to identify and address these
risks and monitor the latest political
developments.
The business imports less than 1% of
its goods from EU countries; however,
we identified some risk arising from
potential disruption at ‘deep-sea’ ports
in the period following an exit, especially
in the scenario of a ‘no deal’. During
the year, we took some actions to
mitigate these risks, such as purchasing
incremental stock of some best-selling
lines and securing additional supply chain
capacity. However, the latest anticipated
date for Brexit is just ahead of our peak
trading season and therefore, whilst we
see no need for stockpiling product,
we have chosen to accelerate some of
our seasonal product flows to ensure
they have been received ahead of the
proposed exit date.
Approximately 3% of our employees are
EU nationals and we are ensuring that
they are kept up-to-date with the latest
information from the UK Government.
They will also be receiving our support
to obtain ‘settled status’ if and when
needed.
Like other retailers, we remain exposed
to any impact Brexit may have on
currency and more importantly consumer
confidence and the markets we operate
in. We are hedged against a sudden
23
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Risks and Risk Management
Whilst we have formal processes for identifying,
assessing and reviewing risk as described below, the
Board as a whole takes responsibility for management
of risk throughout the business.
We believe that risk is best managed by a combination of the
following:
• Formal risk management processes as described in this
report
Risk management framework
The Board confirms that:
• There is an ongoing process for identifying, evaluating and
managing the principal risks faced by the Group;
• The systems have been in place for the year under review
and up to the date of approval of the Annual Report and
financial statements;
• They are regularly reviewed by the Board; and
• The Board and senior management leading by example
• Alignment through promoting colleague shareholding in
• The systems accord with the guidance to Audit Committees
issued by the Financial Reporting Council dated April 2016.
Dunelm
• Embedding our culture and values
Given the size of our Board and the relative lack of complexity in
our business, we do not have a separate Board Risk Committee;
our Audit and Risk Committee oversees the risk management
process as part of its activities.
The table below sets out how responsibility for risk management is allocated and how that responsibility is discharged:
Board
Audit and Risk Committee
Executive Board
Company Secretary
Collective responsibility for
managing risk
Oversees risk management
process
• Receives report on risk
management process
twice annually
• Conducts formal reviews
of the risk management
process twice a year – one
of which is in connection
with consideration of the
viability statement (see
further below)
• Allocates resources for
independent internal
audit reviews of selected
risks
• Selects and proposes
topics for ‘key risk’
reviews by the Board
• Conducts formal reviews
of principal risks twice
a year – one of which
is in connection with
consideration of the
viability statement (see
further below)
• Risk topics reviewed in
depth through regular
timetabled presentations
or papers
• Regular discussions of
“what keeps us awake at
night”
• Monitors KPIs through
Board reports
• Assesses the coverage
and adequacy of
independent assurance
• Ensures Executive
Directors have line
responsibility for
managing specific risks
Reviews principal risks
Members have responsibility
for managing risk within their
area of accountability
• Conducts formal reviews
of principal risks twice a
year
• Reviews risk topics
through regular
timetabled presentations
or papers
• Monitors KPIs through
Executive Board reports
• Delegates line
responsibility for
managing risk within their
area of accountability
to individual Executive
Board members, and
reviews these formally
twice a year
Ensures that the above
process is adhered to
• Conducts individual risk
reviews with Executives
• Maintains the risk
registers
• Presents the outcome
of the risk review to the
Executive Board, the
Audit and Risk Committee
and the Group Board
twice a year
• Ensures that principal
risk topics are scheduled
for regular review by the
Executive Board and the
Group Board
24
corporate.dunelm.com Stock code: DNLM Internal control and internal audit
The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. The table below summarises
the Group’s system:
Board
Audit and Risk
Committee
Executive
Board
Internal Audit
Programme
• Collective
• Oversees
responsibility for
internal control
• Formal list of
effectiveness of
internal control
process
matters reserved
for decision by the
Board
• Receives reports
from external
auditor
• Control framework
• Approves
setting out
responsibilities
• Approval of key
policies and
procedures
• Monitors
performance
independent
internal audit
programme
• Receives reports
generated through
the internal audit
programme
• Responsible
for operating
within the control
framework
• Reviews and
monitors
compliance with
policies and
procedures
• Recommends
changes to
controls/policies
where needed
• Monitors
performance
• Provides assurance
to the Audit and
Risk Committee
through
independent
reviews of agreed
risk areas
Operational
Audit Team
• Reviews
compliance with
certain key internal
procedures in
stores and at other
locations
The Audit and Risk Committee has oversight of the system
of internal controls and of the internal audit programme and
receives the report of the external auditor following the annual
statutory audit. For further details please see the Audit and Risk
Committee Report.
It should be noted 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.
Process for preparing consolidated
financial statements
The Group has established internal control and risk
management systems in relation to the process for preparing
consolidated financial statements. The key features of these
systems are:
• Management regularly monitors and considers
developments in accounting regulations and best practice
in finance reporting and, where appropriate, reflects
developments in the consolidated financial statements.
The external auditor also keeps the Audit and Risk
Committee appraised of these developments;
• The Audit and Risk Committee and the Board review the
draft consolidated financial statements. The Audit and Risk
Committee receives reports from management and the
external auditor on significant judgements, changes in
accounting policies, changes in accounting estimates and
other pertinent matters relating to the consolidated financial
statements; and
• The full year financial statements are subject to external
audit and the half year financial statements are reviewed by
the external auditor.
25
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Principal Risks and Uncertainties
The Board confirms that it has carried out a robust assessment of the principal risks facing the Group, including
those that would threaten its business model, future performance, solvency or liquidity. The Board’s assessment
of the principal risks and uncertainties facing the Group and the mitigation in place is set out below.
Changes to the principal risks in the year
In June 2019, the Audit and Risk Committee and the Board carried out an in depth review of the principal risks, and made the
following changes:
•
In view of the increasingly multichannel nature of the Group’s business, and the fact that the mitigating factors are broadly the
same, the risk of ‘Failure to deliver maximum value from our online business’ has been combined with the ‘Competition, market
and customers’ risk;
• The ‘Portfolio expansion’ risk has been moved to the Operational Risk register, reflecting the fact that opening new stores is no
longer the principal source of the Group’s future growth;
•
‘Climate change’ has been added as a new and emerging risk, reflecting the increased urgency and focus on this by
government, international bodies, investors, customers, colleagues and the media;
• The ‘Brand damage’ risk has been expanded to include a greater focus on sustainable sourcing for the same reasons; and
• The ‘Brand damage’ risk also now includes a greater focus on management of allergens in our Pausa cafes, following heightened
government and public concern.
Risk
Description
How we mitigate
Progress in 2018/19
Failure to respond to
changing consumer
needs, particularly the
shift towards online
sales, and to maintain
a competitive offer on
multiple fronts (range,
quality, value and ease
of shopping) could
impact profitability and
limit opportunities for
growth.
A downturn in consumer
spending could impact
sales and productivity.
Competition,
market and
customers
Link to Customer
1st strategy:
Our customer promises
Performance indicator:
Market share
Executive responsibility:
Customer and
Digital Director
Reports to:
Chief Executive Officer
Impact compared
to 2017/18:
No change
• Focus on Customer 1st rather
than channel to align strategy
and operational focus to
customer demand
• Customer insight research
gauges relative customer
perception and experience
• Dunelm continues to lead
the UK homewares market
with an increased estimated
share of 8.7% in 2019 (8.1%
in 2018)
• Continued development of
our Customer 1st plan
• Focus on new product
•
development, particularly own
brand, in both existing and new
categories, to strengthen our
offer
• Comparative performance within
the homewares market tracked
monthly across all main product
categories
•
Investment in brand marketing,
development of our website and
store design to raise awareness
of Dunelm and communicate our
credentials on product, range,
value and ease of shopping
Board oversight:
Reviewed annually in depth by
the Board at its Strategy Day and
through subsequent presentations.
Increased brand
awareness through step
up in investment in brand
marketing, including
sponsorship of “Back To
Mine” and “This Morning”
• Continued product
innovation in existing
categories and
strengthened seasonal
campaigns and promo buys
to increase ‘newness’ and
promote our value
• Revised product strategy
agreed; to significantly
increase our range and
focus on exclusive brands
•
•
Improved online product
range, introduced customer
hosts and tablet-based sales
rolled out in store
Improved our website
and focused our digital
marketing activity
Read about our marketplace on
pages 8 and 9
Read about our sustainability on
pages 33 to 45
26
corporate.dunelm.com Stock code: DNLM Risk
Description
How we mitigate
Progress in 2018/19
Brand damage
Link to Customer
1st strategy:
Our customer promises
Committed supplier
partners
Performance indicator:
Product recalls
Percentage of audits
completed within policy
Executive responsibility:
Product Director
Reports to:
Chief Executive Officer
Impact compared
to 2017/18:
Increasing
Our customers expect
us to deliver products
that are safe, compliant
with legal and regulatory
requirements, and fit for
purpose. Increasingly,
customers also want
to know that products
have been sustainably
sourced and that their
environmental impact is
minimised.
We must also ensure
that our suppliers
share and uphold our
approach to business
ethics, human rights
(including safety and
modern slavery) and the
environment.
Failure to do so could
result in harm to
individuals with the
potential for customers,
colleagues and other
stakeholders to lose
confidence in the
Dunelm brand.
People and culture
Link to Customer
1st strategy:
Committed colleagues
Performance indicator:
Colleague engagement
Executive responsibility:
People and Stores
Director
Reports to:
Chief Executive Officer
Impact compared
to 2017/18:
Decreasing
The success of the
business could be
impacted if it fails
to attract, retain and
motivate high calibre
colleagues.
Maintaining the
culture of our business
embodied in our
‘business principles’ is
essential to deliver our
strategy and ensure the
long term sustainability
of our business.
• Specialist partner appointed
to review and grade ethical
audits and follow up on
corrective actions. Supplier
audits extended to UK
warehouse facilities used
by suppliers and Pausa
suppliers
• Food safety and allergen
compliance strengthened
following a thorough
review conducted with the
support of a specialist food
technologist
• Packaging specialist
recruited to help develop
our plan to minimise
unnecessary packaging and
phase out single-use plastics
where feasible
• Appointed third party to
verify compliance with
legality of timber sourcing
through our branded
product supply chain
• Sustainable cotton sourcing
plan developed
• Modern slavery awareness
programme continued
For further information please
see the Sustainability Report.
• Purpose and customer
promises embedded
throughout the business
through the Customer 1st
plan
• Organisational design work
completed to align resource
to growth areas and
promote productive ways of
working
• Enhanced Group Board
engagement with
colleagues through NED
attendance at National
Voice Forum in November
and April, and Board
presentation in November
• Mental health awareness
initiative launched, and
started programme to train
mental health first aiders
• We have a range of policies
specifying the quality of own
brand products and production
processes which suppliers must
adhere to
• Factory profile questionnaire
introduced, to obtain a more
holistic assessment
• We operate a full test schedule
for all new own label products
and on a sample basis for
ongoing lines, overseen by our
Specialist Product Technology
team
• Food hygiene and allergen
awareness is maintained through
the adoption of clear operating
guidelines and compulsory
colleague training. Compliance
audits are performed regularly
• All stock and food suppliers
and the majority of our other
suppliers are required to sign up
to our Anti-Bribery and Ethical
Code of Conduct which is in line
with international guidelines, and
also covers modern slavery
• We conduct periodic audits
on all suppliers of own brand
products against our Code of
Conduct
Board oversight:
Ethical trading/modern slavery/
sustainable sourcing reviewed
annually in depth by the Board.
• The composition of the Executive
team is regularly reviewed 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
• High calibre individuals are
retained and developed through
sponsored talent management
and development
• Business principles in place to
describe our values and business
culture
• The Group’s remuneration policy
detailed on pages 71 to 75 is
designed to ensure that high
calibre executives are attracted
and retained. Lock-in of senior
management is supported by
awards under the Long Term
Incentive Plan
Board oversight:
People plan and culture reviewed at
least annually by the Board.
27
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Principal Risks and Uncertainties
continued
Risk
Description
How we mitigate
Progress in 2018/19
Failure to anticipate
and address the
strategic, regulatory
and reputational impact
of climate change and
governmental action in
response to it.
Climate change
and environment
Link to Customer
1st strategy:
Our customer promises
Lean and efficient supply
chain
Performance indicator:
Prosecution and other
regulatory action
Executive responsibility:
Company Secretary
Reports to:
Chief Financial Officer
Impact compared
to 2017/18:
New/emerging principal
risk
• Sustainability Committee, chaired
by the Company Secretary,
oversees our approach to
sustainability issues, including
climate change
• Sustainability Manager
accountable for ensuring
that the Group complies with
environmental legislation and
reporting and monitoring new
legislation and best practice
• Targets in place to reduce
emissions, energy usage and
waste to landfill, and increase
recycling
• Energy brokers advise on energy
saving strategy
•
Waste management contractor
KPIs to deliver waste
minimisation and recycling
targets
• Sustainability Committee
relaunched – remit and
membership widened
• Environmental and
sustainability targets set –
including waste, energy,
HGV fleet emissions
• Decision taken to source
100% green energy
• New colleague engagement
programme rolled out
• Targets being developed
to reduce packaging and
packaging waste
• Strategic climate change
risk assessment being
developed
28
corporate.dunelm.com Stock code: DNLM Risk
Description
How we mitigate
Progress in 2018/19
Fines, damages claims
and reputational
damage could be
incurred if we fail
to comply with
legislative or regulatory
requirements including
consumer law, health
and safety, employment
law, GDPR and data
protection, Bribery Act,
competition law.
Regulatory and
compliance
Link to Customer
1st strategy:
Our customer promises
Committed colleagues
Performance indicator:
Prosecution and other
regulatory action
Executive responsibility:
Company Secretary
Reports to:
Chief Financial Officer
Impact compared
to 2017/18:
No change
Brexit could impact sales
and margin due to a
downturn in consumer
demand, increase costs
due to the fall in the
value of sterling against
the US dollar, or cause
supply chain issues,
supplier failure and
labour shortages.
Brexit
Link to Customer
1st strategy:
Our customer promises
Lean and efficient supply
chain
Performance indicator:
Sales and profit
Executive responsibility:
Chief Financial Officer
Impact compared
to 2017/18:
Increasing
• Policies and training in place in
•
respect of key compliance areas.
These are regularly reviewed and
updated
• Operational management are
responsible for liaising with
the Company Secretary and
external advisers to ensure that
new legislation is identified and
relevant action taken
• Dedicated Group health and
safety function to oversee this
aspect of compliance
• 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
• We have a whistleblowing
procedure and independently
administered helpline which
enables colleagues to raise
concerns in confidence
Board oversight:
Monthly Board report on health and
safety.
Health and safety reviewed in depth
by the Board at least annually.
GDPR and Bribery Act are standing
Audit and Risk Committee agenda
items.
Non-compliances reported by the
Company Secretary by exception.
Installed security locks
on single bladed knives
and reinforced colleague
awareness and ‘Think
25’ training, including
repeat training for all store
colleagues, to prevent sale
to customers who are aged
below 18, and instigated a
third party programme of
test audits
• Video training and pocket
guidelines rolled out in
stores to help colleagues
deal with violent customers
and conflict situations
• Reduced accident rates in
our home delivery fleet by
39%
• Strengthened health and
safety governance through
the creation of functional
steering groups to drive
health and safety actions
• Developed policy on use of
independent contractors in
advance of the April 2020
deadline, which will impose
an obligation on Dunelm
to assess whether workers
are genuine contractors or
employees, and to pay any
tax/NI due
• Continued to embed new
policies and processes
implemented to comply with
the General Data Protection
Regulation
• Brexit risk assessment completed
to identify potential areas of
risk, and a number of mitigating
actions identified
•
Increased the percentage of
anticipated FY19 and FY20
dollar purchases which have
foreign currency hedging
in place
• Steering group meets monthly to
review developments, standing
monthly agenda item for the
Executive Board
• Continue to reduce use of
agency labour in the Dunelm
Home Delivery Network and
in Dunelm DCs, and logistics
partners encouraged to do
likewise
Board oversight:
Twice yearly review of principal risks.
Monthly updates through CFO
report.
•
Limited stock build in place
prior to 31 October 2019
• Assessed number of
colleagues who are EU
nationals. Agreed to assist
in registration for obtaining
‘settled status’
• HDN driver pay increased in
line with market
• Reviewed supplier capability
to maintain data flows from
EU in respect of key IT
systems
• Prepared operational plan
to manage fall in value of
sterling
29
Read about our marketplace on
pages 8 and 9
Read about our sustainability on
pages 33 and 45
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Principal Risks and Uncertainties
continued
Risk
Description
How we mitigate
Progress in 2018/19
Operations impacted
by failure to develop
technology to support
the strategy, lack of
availability due to
cyber attack or other
failure, and reputational
damage/fines due to
loss of personal data.
•
Information security steering
group in place to oversee the
Group’s approach to IT security
and data protection
•
IT security function in place,
reporting to the ISSG
• Formal IT governance processes
in place to cover all aspects of IT
management
• Changes to IT services are
managed through a combination
of formal programmes for large
and complex programmes, or
bespoke iterative development
methodologies for smaller scale
changes
•
Increased investment in IT
security resource agreed
• Continue to implement the
GDPR risk treatment plan
• New structure and ways
of working leading to
improved colleague
engagement and retention,
improved systems
knowledge and ownership,
and more rapid and agile
development of systems
• Network re-architecture
project implemented to
allow better control, visibility
and security
• A detailed IT development and
security roadmap is in place,
aligned to strategy
• Continuity plans in place for
all major systems and with
regular testing programme
• We have a disaster recovery
strategy designed to ensure
continuity of trade
• Comprehensive third party
support in place for relevant
technologies
• Authorisation controls and
access to sensitive transactions
are kept under review
Board oversight:
Cyber security is a standard
agenda item for the Audit and Risk
Committee.
Major security incidents reported by
the Company Secretary.
Sales/profitability and
customer satisfaction
could be impacted by
supply chain disruption
or loss of access to key
support locations.
•
Supply chain strategy in place
to ensure capacity is in line with
long term financial plan
• New five-year logistics
capacity plan being
developed
• Business continuity plans in place
for Dunelm non-store facilities
• Business continuity plans
reviewed
•
Continue to strengthen
relationships with key
suppliers
• Contracts in place with third
party logistics partners
• We seek to limit dependency
on individual suppliers by
actively managing key supplier
relationships
Board oversight:
Business continuity is a standard
Audit and Risk Committee agenda
item.
IT systems, data
and cyber security
Link to Customer
1st strategy:
Our customer promises
Customer data and
insight
Agile and scalable
digital platform
Lean and efficient supply
chain
Performance indicator:
Number of major
incidents
Executive responsibility:
Chief Information Officer
Reports to:
Chief Executive Officer
Impact compared
to 2017/18:
No change
Supply chain
disruption
Link to Customer
1st strategy:
Our customer promises
Lean and efficient supply
chain
Performance indicator:
Service levels in respect
of store fulfilment
Executive responsibility:
Chief Executive Officer
Reports to:
Chief Executive Officer
Impact compared
to 2017/18:
No change
30
corporate.dunelm.com Stock code: DNLM Risk
Description
How we mitigate
Progress in 2018/19
• Renewed focus on
cost discipline through
monthly Executive Board
performance review
• Refit programme refocused
to deliver better return on
capital
• Working groups in place to
manage product lifecycle,
stock and returns
• New investment and
contract approval process
implemented
• Store management teams
restructured to reduce costs
• Significant improvement in
year end net debt position
of £25.3m (0.15× EBITDA)
(FY18: £124.0m) due to
increased profitability and
focus on cost and cash
management
• Foreign currency hedges
are in place covering
approximately 75% of
expected purchases in FY20
Business efficiency
Link to Customer
1st strategy:
Our customer promises
Lean and efficient supply
chain
Performance indicator:
Operating cost %
Executive responsibility:
Chief Financial Officer
Reports to:
Chief Executive Officer
Impact compared
to 2017/18:
Improved
Profitability could be
impacted by failure to
operate the business
efficiently or to manage
cost price volatility.
• Costs are managed by the Board
and Executive Board through the
budget and forecasting process
and monthly management
accounts reviews
• Dunelm’s scale, growth and
increased buying power allows it
to secure supply of key services
and raw materials at competitive
prices. Commodity price tracking
covers all key materials
• Major non-stock purchase
contracts regularly tendered
Board oversight:
Board receives monthly management
accounts.
Long term plans and budget
reviewed by the Board at least
annually.
Finance and
treasury
Growth constrained by
lack of access to capital/
financial resource.
• The Group has a £165m, five-
year Revolving Credit Facility in
place until March 2023
• Further, uncommitted borrowing
facilities have been agreed for
possible short term working
capital requirements
• Dunelm works with a syndicate
of long term, committed partner
banks
• A Group treasury policy is in
place to govern levels of debt,
cash management strategies
and to control foreign exchange
exposures
• Hedging is in place for foreign
exchange, and freight and
energy prices are agreed in
advance, to help mitigate
volatility and aid margin
management
Board oversight:
Board receives monthly treasury
report.
Link to Customer
1st strategy:
Our customer promises
Lean and efficient supply
chain
Performance indicator:
Operating cash
conversion
Banking covenant
compliance
Executive responsibility:
Chief Financial Officer
Reports to:
Chief Executive Officer
Impact compared
to 2017/18:
Decreased
Read about our strategy on
pages 12 and 13
31
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Principal Risks and Uncertainties
continued
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. In their consideration of going concern, the Directors
have reviewed the Group’s future cash forecasts and profit
projections, which are based on market data and past
experience. The Directors are of the opinion that the Group’s
forecasts and projections, which take into account reasonably
possible changes in trading performance, show that the Group
is able to operate within its current facilities and comply with its
banking covenants for the foreseeable future.
As a consequence, the Directors believe that the Group is
well placed to manage its business risks successfully. Having
reassessed the principal risks, the Directors consider it
appropriate to adopt the going concern basis of accounting
in preparing the financial information. 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 on pages 8 to
19. The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the Financial
Review on pages 20 to 23. In addition, note 18 to the Annual
Report and 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.
Viability statement
In accordance with provision C.2.2 of the 2016 Corporate
Governance Code, in addition to the going concern statement,
the Directors have also assessed the prospects of the Group
over a longer period.
The Directors confirm that the Group has considerable financial
strength, and therefore they have a reasonable expectation that
the Group will continue in operation and meet its liabilities as
they fall due for the next five years, ending June 2024.
A period of five years has been chosen as this is the timeframe
currently adopted by the Board as its strategic and financial
planning horizon, and the business is largely dependent on
UK consumer confidence and discretionary spending which is
difficult to project beyond this period.
The five-year plan considers the Group’s earnings growth
potential, its cash flows, financing options and key financial
ratios, taking into account the economic outlook and principal
risks and mitigating factors affecting the Group.
This assessment of viability has been made with reference to the
Group’s current position and future prospects, its strategy,
the market outlook and its principal risks and the mitigation in
place to manage them. These were reviewed by the Directors at
the August 2019 Board meeting alongside the latest five-year
plan, which took into account, among other things, the latest
market outlook.
The Board considers that the uncertainties around the UK’s exit
from the European Union give rise to the most significant risks in
the near future. Consumer confidence may decline, a fall in the
value of sterling against the US dollar could result in increases
to the cost base and disruption at ports could impact the supply
chain. Price increases would partially alleviate the cost pressure
but could be offset by declines in volume. It therefore considers
that the likely impact of any of the principal risks materialising
would be a reduction in the level of sales growth and possibly a
weakening in gross margin.
As a result, a number of sensitivities against the five-year plan
have been modelled and reviewed by the Audit and Risk
Committee as part of the assessment made to support this
statement, together with the actions which could be taken
to mitigate these scenarios. Additionally, the strength of the
Group’s balance sheet and the low level of net debt was also
taken into account.
The sensitivities modelled included a reduction in sales,
reductions in gross margin and additional inflationary cost
pressures. Even in the event of the combined downside
scenarios the Group continues to generate sufficient profits
and cash over the five-year time horizon. Discretionary action
could be taken to mitigate the impacts of these scenarios within
the ordinary course of business, including the reduction of
discretionary spend and reducing capital expenditure.
32
corporate.dunelm.com Stock code: DNLM Sustainability
How we operate
Our aim has always been to create a business that delivers long
term, sustainable growth and strong financial performance.
How we embed sustainability in
our business
Increasingly, government, regulators and shareholders are
demanding that companies like Dunelm play a leading
part in addressing the challenges of climate change and
social well-being. We believe that we can only deliver these
objectives if we respect our customers, colleagues, suppliers,
the environment and our local, national and international
community. This is embodied in our business principles, which
set out how the Group, the Board and all of our colleagues are
expected to behave.
A big step forward in our progress
this year
Sustainability has been part of how we do business for many
years, but we have step changed our focus on climate change
and sustainability issues over the past year.
During the year, the Company Secretary assumed the role of
Chair of our Sustainability Committee, which is attended by
colleagues from relevant business areas, and regularly reports to
the Executive Board and the Group Board on our sustainability
activities. Our focus this year has been on prioritising the issues
that are most relevant to Dunelm, identifying where we need to
do more, and setting ourselves targets. These are described in
the pages which follow. We will be reporting progress against
our targets going forward.
We have launched a programme to re-engage our colleagues,
many of whom have proved to be enthusiastic supporters.
We are also starting to talk to our customers about our activities
and plans.
Next steps – developing our strategy for
sustainability and climate change
We are determined to continue and build on our work, and
this report describes many of our activities. We are building
sustainability into our five-year strategic plan, and are developing
our long term sustainability strategy, as it becomes increasingly
important to our customers and our colleagues. We have also
started to look at what the impact of climate change and the
move to a low carbon economy will mean for our business, and
this analysis will be developed over the coming year.
UN Sustainable Development Goals
The 17 Sustainable Development Goals, created by the
United Nations in 2015, set out a broad range of goals that are
designed to improve health and education, reduce inequality,
and spur economic growth – while tackling climate change
and working to preserve our oceans and forests. Companies
worldwide have a role to play in achieving these objectives, and
we have aligned our reporting on the following pages to the
goals which we consider can deliver the greatest impact.
Sustainability Committee
• Keeps up to date with legislative and best practice
sustainability developments
• Develops strategic objectives, policy, targets and
initiatives for recommendation to the Executive Board
and Board
• Monitors progress against sustainability targets
• Chaired by the Company Secretary, who reports to the
Executive Board and the Board on progress
Board
• Approves the sustainability strategy and supporting
policies
• Overall responsibility for our sustainability performance
• Oversight of the business principles
• Monitors progress through KPIs and Board reports
• Annual presentations on sustainability topics
Executive Board
• Approves the sustainability strategy and supporting
policies for approval by the Board
• Role models for the business principles
• Members have line responsibility for managing specific
sustainability topics
• Approves policies prior to submission to the Board
• Regular Executive Board meeting agenda items
• Monitors progress through KPIs, Board reports and
customer and colleague feedback
Colleagues
• Appraised by reference to our business principles
• Provide feedback of customer and colleague suggestions
via our engagement survey, Yammer (in-house
communication tool) and National Voice Forum
How we engage on sustainability issues
• Customers: through our dunelm.com website, customer
engagement centre and social media
• Colleagues: monthly ‘huddles’, National Voice Forum,
Yammer, ‘always on’ engagement survey
• Suppliers: quality policies, annual conference and
meetings throughout the year
•
Investors: Annual Report, corporate website, biannual
corporate governance presentation, via the Company
Secretary
• Others: social media, corporate website
33
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Sustainability:
Customers
Executive responsibility:
Customer and Digital Director
Link to our Customer 1st strategy:
• Our customer promises
Link to business principles:
Sell
more
Be
committed
Link to principal risks:
Competition, market
and customers
Our purpose is to
help everyone create
a home they love.
We welcome all customers,
whatever their age, taste or budget,
and offer them the widest range of
products for their homes, whenever
and however they want to shop.
Our policies
• We will always look out for ways to
make homes (and shopping for them)
better for our customers. We want
every customer to create a home they
love. To do this we offer:
− Well designed, brilliant quality,
own label products at the best
possible prices
− The widest possible range
of products, offering choice,
newness, seasonality and
desirable brands
− Easy access to our products,
however customers choose to
shop (in store, home delivery,
delivery to store, assisted selling
in store)
− Stores which customers want
to visit – inspiring, conveniently
located, safe and accessible
− Website that is inspiring and
easy to navigate, with convenient
delivery and collection options
− Friendly and knowledgeable
colleagues, in store, in our
contact centre and delivering our
products
− Products which meet our
customers’ expectations for
safety and ethical and sustainable
sourcing
34
2018/19 achievements
• We reached more customers and raised
awareness of our offering through ongoing
communications and sponsorship such as
ITV’s “This Morning”
• We invested in customer hosts, store
colleagues who are focused on helping
every customer find just what they need
• We equipped our store colleagues with chip
and pin enabled tablets, making our entire
online portfolio accessible for ordering in-
store for home delivery
• We increased our online exclusive product
range to offer customers even more choice
• We offered our biggest ever Christmas
range of homewares and gifting
• We improved product availability for
customers
UN Sustainable
Development Goals
− Marketing which is always fair
and truthful, and responsible
use of our customers’
personal data
− Communication campaigns
to remind customers we are
here to help with inspiring
imagery and helpful content
Measuring our impact
• Active customer base grew by
8.5%* in the year
What’s next for 2019/20
• We will continue to develop our
store formats to make them more
attractive and inspiring for our
customers
• We will continue to drive brand
awareness and impact, reaching
more people and focusing on
always delivering our brand
‘purpose’
• We will grow our social media
following to inspire even more
customers with our great range and
style
• We will continue to improve our
product range, design and value
• We will provide more convenient
delivery options for customers who
order from us online
• Delivery of our new digital platform
will enable us to continually develop
and improve customer experience
Our targets
• Grow active customer base by
2 million between FY19 and FY23
* Unique active customers who have shopped in the
last 12 months, based on management estimates
using Barclays data.
corporate.dunelm.com Stock code: DNLM Sustainability:
Sustainable Products
Executive responsibility:
Product Director
Link to our Customer 1st strategy:
• Great choice and value
Link to business principles:
Sell
more
Do things
our own
way
Keep it
simple
Link to principal risks:
Brand damage; regulatory and
compliance; climate change
We are committed to
making positive changes
which will reduce the
impact of our products
on the environment.
Measuring our impact
• Updated our policies and set
targets
What’s next for 2019/20
• Develop an annual environmental
assessment for all sites
manufacturing own brand
product
Sustainability forms a key part of
our product sourcing strategy and
development pipeline.
• Release our Sustainable
Packaging Manual to all own
brand suppliers
Our policies
Sustainable sourcing: All suppliers sign
our Code of Conduct, which requires
them to minimise waste and dispose of
it in accordance with legal requirements,
reduce packaging to optimise usage/
best fit and improve the recycled content
of their products and packaging; and to
commit to a strategy of carbon reduction.
Suppliers of our own brand products
are also required to comply with the
following policies:
Preferred textile fibre policy: Covering
the welfare and environmental standards
that apply to textile farming and
production, particularly cotton – we are
targeting all of the cotton in our own
brand products to be sustainably sourced
by 2025.
Timber policy: The timber used in all
products and marketing materials must
be legally sourced, and we are targeting
50% of our products to be sustainably
sourced by 2025.
Animal welfare policy: Based on the
Farm Animal Welfare Committee’s
Five Freedoms, with materials-specific
requirements, for example covering fur,
animal hair, leather, sheepskin and wool.
Palm oil: All Dunelm and Pausa own
brand products which contain palm
oil to be 100% sustainably sourced by the
end of FY20.
Our policies are available on
https://corporate.dunelm.com
• Start implementing our
packaging action plan – to focus
on our highest use product
categories
• Review alternatives to sale of
plastic water bottles in Pausa
cafes
•
Increase the percentage of
sustainably sourced cotton in our
product ranges
• Begin roll-out of On Pack Recycling
Labelling (OPRL) to communicate
best disposal/recycling route of all
packaging types to help customers
• Review feasibility of providing ‘take
back’ schemes for some of our
products, providing a ‘closed loop’
Our targets
• 30% of all plastic packaging of own
brand products to be from recycled
content by 2022
• All own brand cotton products to be
from sustainably sourced cotton by
2025
• All Dunelm and Pausa own brand
products which contain Palm oil to be
100% sustainably sourced by the end
of FY20
• 100% of all timber to be from legally
harvested sources by FY20, and 50%
of all timber used in Dunelm own
brand products to be sourced from
certified sources by FY25
2018/19 achievements
•
•
Engaged a sustainable packaging
consultant to help us formulate a strategy
to reduce the primary and secondary
packaging used throughout our supply
chain, with a particular emphasis on
single-use plastic
Removed small single-use customer plastic
bags from store and provided recyclable
alternatives made from 100% recycled
content
• Appointed Track Record Global, a supply
chain traceability specialist to work with our
own brand furniture suppliers to verify that
all timber is legally sourced
•
Removed straws and plastic disposable
cutlery and introduced de-compostable
take-away food and drink containers at all
Pausa cafes
• Distributed reusable cups to colleagues,
saving thousands of paper cups each week
• All tea and coffee sold in our Pausa cafes is
from a certified Rainforest Alliance source
UN Sustainable
Development Goals
35
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Sustainability:
Suppliers and Human Rights
2018/19 achievements
• We have appointed Verisio Ltd, an ethical
auditing and modern slavery specialist, to
manage and risk assess all audits
• We have updated our policy to accept
a broader range of audits from globally
approved audit bodies, all of which support
the ETI base code
•
Suppliers have signed our Quality Manual
which sets out our policy and consequences
for non-compliance
• We have fully mapped our Tier 1 suppliers
and have a valid audit against 98% of our
own brand product manufacturing sites
• Our audit programme has been extended
to UK warehouses that stock Dunelm brand
product and our Pausa café suppliers
• We have launched an online portal for
suppliers to upload evidence to show
continuous improvement with their sites and
close off corrective actions. This is actively
managed and verified by Verisio
•
Training has been provided to UK suppliers
of own brand products, to raise awareness
of modern slavery and how to improve
procedures to reduce the risk within the
supplier’s supply chain
• We have completed an ethical audit of our
own manufacturing site
• We have developed an in-house modern
slavery desktop audit which is being rolled
out to our distribution and manufacturing
sites and those of our key UK partners
UN Sustainable
Development Goals
All suppliers of Dunelm branded
products must have a satisfactory
audit in place which is no more than
two years old, and a valid building
and fire safety certificate. Supplier
branded products are not subject
to audits but suppliers sign our
Code of Conduct (or equivalent)
and an assessment is made of their
standards and capability.
Our in-house Quality and Sourcing
team has extensive experience of
working with factories to improve
quality, compliance and ethical
standards. Our sourcing partners
monitor standards and work to
improve them on our behalf. Where
non-compliance is discovered we
work with a supplier to help them
achieve compliance, usually within six
months. Critical non-conformances
such as use of child labour, working
against choice/slavery or absence
of valid building certificates are
escalated immediately.
Modern slavery – We have assessed
our own facilities and supply base
(products and services) for modern
slavery risk and have required the
major providers to sign our Code of
Conduct. Our audits of suppliers of
our Dunelm branded products also
covers modern slavery. Our statement
made pursuant to the Modern Slavery
Act 2015, which contains further
information, is available at
https://corporate.dunelm.com.
Executive responsibility:
Product Director
Link to our Customer 1st strategy:
• Our customer promises
• Committed supplier partners
Link to business principles:
Sell
more
Be
committed
Do things
our own
way
Keep it
simple
Link to principal risks:
Brand damage; regulatory and compliance;
climate change
We do not manufacture
the vast majority of
the products that we
sell, so we need to
maintain relationships
with suppliers and
manufacturers worldwide
who can meet our high
standards.
They must demonstrate that
they operate in accordance with
recognised standards that uphold
human rights and safety, prohibit
modern slavery and promote
sustainable sourcing.
Our policies
Fair and consistent – One of our business
principles is to deal with suppliers in an
open and honest way. We require all of
our suppliers to sign our standard terms
and conditions in advance of commencing
trade, and we have signed up to the
Prompt Payment Code. The number of
days’ purchases outstanding for payment
at 29 June 2019 was 44 days (2018: 31
days), and we consistently pay over 90% of
our invoices within agreed terms.
Human rights – Effective management of
human rights throughout our supply chain
is built into our product procurement
procedures. All product suppliers are
asked to sign our Code of Conduct,
based on the Ethical Trading Initiative
(ETI) base code, with a strengthened
section on slavery. This requires that
suppliers provide a clean and safe work
environment, workers must be treated
with respect and earn a reasonable wage,
and relevant local laws and regulations
must be met. Our policy is available at
https://corporate.dunelm.com.
36
corporate.dunelm.com Stock code: DNLM Measuring our impact
• Percentage of Tier 1 suppliers
mapped: 100%
• Percentage of factory base for own
brand products with audit no more
than two years old: 98%
• Percentage of green or amber audits:
77%
What’s next for 2019/20
• Continue to work through corrective
actions plans with factory base,
towards target of 90% audits to be
green or amber by FY21
• Complete modern slavery assessment
for UK sites holding Dunelm brand
product including Pausa
• Carry out surveillance audits on
Dunelm sites in higher risk regions
• Map Tier 2 sites for Dunelm own
brand product
• Develop a risk-based programme
for assessing third party branded
suppliers
• All Dunelm support and distribution
sites to complete a modern slavery
audit and managers training
programme
Our targets
• 100% of factory base for own brand
products with audit no more than two
years old by FY20
• 90% green or amber audits by FY21
Read about our strategy on
pages 12 and 13
37
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Sustainability:
People
Executive responsibility:
People and Stores Director
Link to our Customer 1st strategy:
• Committed colleagues
Link to business principles:
Be
committed
Do things
our own
way
Link to principal risks:
People and culture
We believe that a great
place to work is a
great place to shop.
We can only deliver great products
and services to our customers
through the hard work and
commitment of our colleagues.
We employ over 9,000 colleagues
across our business: in stores; our
distribution and manufacturing
operations; our customer
engagement centre in Radcliffe; and
our support centres in Leicester and
London.
Our policies
We aim to provide fair employment to all
colleagues, regardless of disability, race,
religion or belief, sex, sexual orientation,
gender reassignment, marital status or
age. In the past year we have continued
our ‘Empowering Female Leaders’
programme to promote greater gender
diversity in our management population,
as well as other events, for example
we held a ‘Women in Tech’ event, and
introduced a flexible holiday entitlement.
Further details are in our equality and
diversity policy, which is available at
https://corporate.dunelm.com.
At the end of June 2019, the breakdown
of male and female colleagues was as
follows:
Group Board
Executive Board
Dunelm Leadership Team
(including Executive Board members)
All other colleagues
We recognise the benefits of a
diverse workforce, and during the
year we have started to measure
diversity throughout our colleague
population to identify gaps, and look
at ways in which we can promote
diversity beyond gender.
‘Develop our people’ is one of
our business principles – investing
in training and development
opportunities helps us retain talent
in the business – 92% of all store
management vacancies in the year
were filled internally and over 30,000
e-learning modules completed
across the business.
All new colleagues receive our ‘Little
Book of House Rules’ explaining
our business principles, which are
used in recruitment and appraisals,
and embedded into our colleague
communications.
Some of the ways we bring our
business principles to life include:
•
‘Housewarming’ induction for
new starters, to introduce them to
us, our products and our way of
doing things
• Communication through
regular ‘huddles’ (informal team
briefings); a weekly topical
email; Intouch and Yammer intranet
communications and an annual
strategy communication event. We
have added to this a company-wide
‘new year celebration’ which marks
the start of the financial year
Male
Female
% Female
5
3
14
3,107
3
5
6
6,462
38%
63%
30%
68%
38
2018/19 achievements
• Held a company-wide engagement survey
(in addition to the ‘always on’ survey),
using this to better inform the way we
communicate with and engage colleagues
throughout their career. After increasing by
over 30% between July 2017 and May 2018,
our engagement score improved by a further
14% between May 2018 and May 2019
•
•
•
•
Recognised by Glassdoor as being in the
“top 50 best companies to work for in the
UK”
Launched a mental health awareness
programme, training over 50 colleagues
as mental health first aiders, and training
management colleagues to recognise and
deal with mental health issues in their teams
Started a ‘pay advance’ facility for our
colleagues, allowing them to access early up
to 50% of the pay they have earned during
the period. This gives our colleagues an
alternative to pay day loans
Introduced a ‘flexible time off’ scheme,
allowing all colleagues to take unpaid leave
in addition to their paid holiday allowance
• Working with Marion Sears as our
‘Designated Non-Executive Director’ for
employee engagement – our National Voice
colleagues have been developing as a
consultative body
• Developed the first ever retail degree
apprenticeship, which over 20 of our
colleagues are beginning in September
2019
UN Sustainable
Development Goals
corporate.dunelm.com Stock code: DNLM • Regular colleague council meetings
(rebranded as National Voice)
attended by senior management,
enabling colleagues to raise and
discuss issues. The National Voice
meet with Marion Sears as our
‘designated Non-Executive Director’
for employee matters
• Our ‘always on’ colleague feedback
mechanism allows us to act on issues
quickly. A number of key concerns
affecting colleagues have been
identified and addressed throughout
this year
Measuring our impact
•
Increase in colleague engagement
score: 14% (2018 increase: 30%)
What’s next for 2019/20
•
Launch and embed a new leadership
behaviours framework, through a
Leadership Development Programme
with our Senior Leaders
• Continue to develop our focus on
supporting colleague well-being and
mental health, including launching
a well-being platform (provided
by Retail Trust) to all colleagues, to
provide access to useful advice and
content to promote well-being
• Continue the progress made
through the ‘everyone’s welcome’
project which is to promote diversity,
regardless of disability, race, religion
or belief, sex, sexual orientation,
gender reassignment, marital status
or age, background or circumstances
• Developing the capability in the
business around data and insight
Our targets
•
Improve colleague engagement score
by end of FY20
Read about our strategy on
pages 12 and 13
39
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Sustainability:
Health and Safety
Executive responsibility:
Company Secretary
Link to our Customer 1st strategy:
• Committed colleagues
Link to business principles
Be
committed
Keep it
simple
Link to principal risks:
Regulatory and compliance;
people and culture
We want to ensure the
safety and well-being
of our customers, our
colleagues and all our
visitors.
We have a Group Health and Safety
Manager who ensures that the
appropriate policies and procedures
are in place, and regularly reports to
the Group Board and the Executive
Board.
Our policies
The Board is 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 ensuring that sufficient
resources are available to support this
activity. A copy of our full policy is at
https://corporate.dunelm.com.
Health and safety is a standard agenda
item at every Board and Executive Board
meeting, supported by a monthly report
and a formal annual presentation from
the Group’s Health and Safety Manager
covering accident/risk analysis, review
of previous objectives and agreement of
new objectives for the next year.
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. At our Stoke distribution
centres we have a dedicated
Health and Safety Manager. Risk
assessments are in place at all
Company sites 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 and
distribution centres 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
Health and Safety team who report
to the Group Health and Safety Manager.
Regular review meetings are held
between the Group’s Health and Safety
Manager and senior management from
operational functions.
We have a proactive approach to safety,
and colleagues are encouraged to report
all potential hazards and risks. We have
an ongoing programme of education and
training, including DVDs and interactive
computer-based learning, and we ensure
colleague involvement through the
National Voice.
2018/19 achievements
•
•
•
Installed new security locks on single knife
products in store, refreshed our ‘Think 25’
training material and introduced third party
store testing programme
Took steps to improve colleague safety in
store, through training, safety leaflet and
provision of personal alarms
Implemented a campaign to improve safety
in our Pausa cafes, including improving how
we provide allergy information to customers
• Continued to reduce the risk to colleagues
of using fork lift trucks in store by removing
a total of 58 trucks and investing in delivery
trucks with tail lifts
•
Reduced vehicle accident rates in our home
delivery fleet by 39%
• Updated colleague drivers policies and
implemented a new third party licence
checking service to monitor/check driver
and car MOT/insurance details
•
Strengthened governance through creation
of functional steering groups to drive health
and safety actions
Measuring our impact
• Number of reportable accidents
under the Reporting of Injuries,
Diseases and Dangerous Occurrences
Regulations 2013 (RIDDORs) remains
in line with last year’s performance
UN Sustainable
Development Goals
40
corporate.dunelm.com Stock code: DNLM
What’s next for 2019/20
• Continue the focus on controls
around the sale of knives and on
colleague safety in store
• Roll out simplified process
for completing safety check
documentation on an iPad, to save
time and make tracking easier
• Continue focus on Pausa safety
• Continue programme to remove fork
lift trucks from stores
• Deliver a half-day health and safety
training course for new managers and
store premises keyholders to all stores
Our targets
• Reduce RIDDOR reportable accidents
year-on-year
UN Sustainable
Development Goals
Read about our strategy on
pages 12 and 13
41
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Sustainability:
Climate Change and Environment
Executive responsibility:
Company Secretary
Link to our Customer 1st strategy:
Lean and efficient supply chain
•
Link to business principles:
Be
committed
Do things
our own
way
Keep it
simple
Link to principal risks:
Brand damage; climate change
We are committed to
minimising the impact
of our business on the
environment.
Our operational focus areas are
recycling and waste management,
energy consumption and carbon
(CO2) emissions.
Recycling & waste
management
Our policies
• Our approach to recycling and
waste more generally is to adopt
the following prioritisation: Reduce,
Reuse, Rework, Recycle
• To minimise general non-recyclable
waste across the business and reduce
use of landfill and other adverse
environmental impacts
• To be fully compliant with all relevant
waste legislation
All stores have cardboard balers and
colour-coded bins to segregate waste
for recycling. Training programmes and
communication to increase colleague
awareness and compliance are
undertaken frequently.
Our distribution centres in Stoke recover
and process our product packaging from
our DC and store operations (cardboard
and polypropylene) for recycling.
We have dry mixed recycling collections
from our sites for paper, plastic bottles
and cans which is then sorted and
recycled offsite. We also recycle wooden
pallets and metal fixtures. All electrical
waste is recycled through a WEEE
compliant scheme.
Food waste from our cafes and any
remaining waste that is not sorted
for recycling within the business
is sent offsite for further sorting,
and wherever possible we aim to
generate energy from waste.
‘Less than perfect stock’ is offered to
our customers who are looking for a
bargain. We also work with over 100
charity partners nationwide to donate
quilts and pillows that cannot be sold
to customers.
Measuring our impact
Last year Dunelm recycled 76%
(2018: 75%) of waste. Total Company
landfill diversion increased again to
96% (2018: 95%) and we continue to
achieve 100% landfill diversion from
our distribution centres in Stoke.
What’s next for 2019/20
• Continue to improve recycling
performance aiming towards
100% landfill diversion over the
medium term
•
Improve compliance in stores and
in our Stoke distribution centres by
continuing our in-store training and
communications campaigns.
Energy use
Our policies
Our policy objective is to reduce energy
usage year-on-year.
Dunelm manages energy usage and
energy reduction initiatives on a site-
by-site basis. ‘Smart’ meters are fitted to
electricity and gas supplies and energy
consumption is measured frequently with
analytics tools available to help identify
issues and opportunities to reduce usage.
Building Management Systems (BMS),
designed to optimise energy use, are
fitted as standard across our estate.
2018/19 achievements
Recycling & waste management
•
Landfill diversion rate has increased to 96%
• Conducted waste audits throughout the
store network, providing valuable education
and awareness to colleagues and store
managers
Energy use
• Continued the programme of installing
LED lighting, taking the total number of our
locations with LED lighting to 169 out of
182 sites (93% of the estate)
Introduced systemised cut-offs of energy via
Building Management Systems to reduce
accidental usage
Reduced like-for-like energy consumption
by 8.2%
•
•
Greenhouse gas emissions (CO2e)
• We have reduced CO2 emissions by 21.6%
year-on-year relative to turnover
•
Since 1 April 2019 all of our electricity is
from renewable sources
Energy consumption is monitored by
our Energy Manager in conjunction
with a specialist energy partner. We
target underperforming sites alongside
the implementation of various energy
reduction initiatives to maximise
energy efficiency, while maintaining a
comfortable trading environment for our
customers and colleagues.
UN Sustainable
Development Goals
42
corporate.dunelm.com Stock code: DNLM
What’s next for 2019/20
• Reduce like-for-like energy
consumption by at least 5%
• Raise awareness of good energy
management across the business
through internal communications
• Test new technology that will further
improve our energy performance
by remotely detecting wasted or
excessive energy usage
Greenhouse gas
emissions (CO2e)
Our policies
Our policy objective is to reduce CO2
emissions relative to turnover year-on-
year.
We work with specialist partners to
consult on our energy-buying strategy,
investments in energy-saving technology
and to further focus on reducing our
carbon emissions.
We invest in photovoltaic systems (solar
power) wherever viable across our estate.
We now have these in five of our stores
(Leeds, Dunstable, Bristol, Cambridge
and Darlington). These systems replace
energy sourced through the national
grid with local renewable energy. We
continue to monitor performance of these
installations to inform future investment
decisions as we assess additional sites for
solar power generation.
Since 1 April all of our electricity is from
renewable sources.
Our company car fleet is graded on
emissions and we encourage the use of
fuel efficient vehicles in all schemes.
Average emissions in 2019 were 110 CO2
g/km (2018: 108 CO2 g/km).
Read about our strategy on
pages 12 and 13
What’s next for 2019/20
• Continue to reduce CO2 emissions
relative to turnover year-on-year
• Target a 2% year-on-year reduction in
emissions from our company car fleet,
and to increase mileage per gallon
achieved across our home delivery
fleet
•
Introduce charging points for electric
vehicles in our car parks at support
centres and assess certain stores for
suitability
• Continue to review and assess our
company car fleet to introduce more
zero and low emissions options for
colleagues
Measuring our impact
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.
The methodology used to calculate
our emissions is based on the UK
Government’s GHG Conversion Factors
for Company Reporting 2013.
Dunelm uses ‘Tonnes of CO2e per £1m
of turnover’ as its intensity measure,
reflecting the link between growth,
activity and performance.
CO2 emissions
tCO2e /£1m Group revenue
34.9
29.0
25.6
21.6
17.0
2015
2016
2017
2018
2019
Our targets
• Reduce LFL electricity consumption
by 5% in FY20
• Achieve 100% diversion from landfill
for all operational waste with 80% to
be recycled by FY21
• Reduce car fleet emissions by 2% p.a.
to FY25
•
Increase MPG by 2% p.a. for vehicles
in our Dunelm home delivery fleet by
FY21
43
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Sustainability:
Community
Executive responsibility:
Customer and Digital Director
Link to our Customer 1st strategy:
• Our customer promises
• Committed colleagues
Link to business principles:
Be
committed
Do things
our own
way
Link to principal risks:
Competition, market and
customers; people and culture
We aspire to be
responsible members of
our community; it also
matters to our shareholders,
customers and colleagues.
Our policies
We are proud to support Macmillan
Cancer Support as our ‘charity of the
year’. Collections are made in store,
specific fundraising events are organised
both by individuals and business areas
and the Group makes its own donations.
Each store has a ‘Charity Champion’ and
amounts raised by store are reported
monthly, with regular updates to show the
best performing appearing quarterly in
the Dunelm Post, our internal newsletter.
We also support colleagues who are
raising money for charities of their
choice, by matching the sums raised by a
donation to Macmillan Cancer Support.
All colleagues are entitled to, and are
encouraged to take, an extra day’s paid
leave to undertake charitable activities,
either individually or as a team.
We donate funds raised from English and
Scottish carrier bag sales to Macmillan
Cancer Support, and from Welsh carrier
bag sales to GroundWork, a charitable
organisation which brings people and the
environment together with practical local
action to build stronger communities.
They aim to create more green spaces,
and get people back into work through
creating green jobs.
Measuring our impact
• The total value of cash charitable
donations made by the Group in
the period ended 29 June 2019
was £175,000 (2018: £102,009)
• Total funds raised for charity by
the Group and colleagues was
£580,000 (2018: £490,717). Of
this, £308,000 has been raised
for Macmillan Cancer Support
since January
What’s next for 2019/20
• Our Charity Committee will
continue to focus on driving
colleague and customer
engagement with our charitable
activities to ensure we are giving
back as much as possible
• Continue to support Macmillan
Cancer Support as our charity
partner
•
Increase our Company matched
funding
• Encourage colleagues to take
their charity day
• Encourage stores to raise money and
have a Charity Store of The Year
• Continue to support local causes
and communities where possible to
ensure we help the local areas we
serve around all of our locations
Our targets
• Exceed last year’s funds raised by at
least 10%
2018/19 achievements
•
•
In January we appointed Macmillan Cancer
Support as our new charity partner and we
will support them for two years
The Charity Committee has focused
on driving colleague and customer
engagement with a number of charitable
activities to ensure we are giving back as
much as possible
• We have encouraged colleagues to
apply for matched funding when they are
supporting their own charities which we
donate to Macmillan
• We have made it easier for colleagues to
donate to charity through Payroll Giving
• Colleagues have proactively organised
a number of bigger events to support
Macmillan, ranging from golf days and
charity balls to people shaving their heads
and raffles
• More than 100 colleagues took part in a
Macmillan Mighty Hike, to further raise
funds for the charity
• We have supported a number of local
causes and communities to ensure we help
the local areas we serve around our entire
estate
UN Sustainable
Development Goals
44
corporate.dunelm.com Stock code: DNLM Sustainability:
Bribery, Fraud and Tax Evasion
Executive responsibility:
Company Secretary
Link to our Customer 1st strategy:
• Committed colleagues
• Committed supplier partners
Link to business principles:
Be
committed
Do things
our own
way
Link to principal risks:
Regulatory and compliance
We are committed to
acting legally, fairly and
honestly in all of our
business dealings and
relationships.
Our policies
Dunelm takes a zero tolerance approach
to bribery, corruption, fraud and tax
evasion.
The Group pays corporation tax on its
operations in the United Kingdom and
Jersey and does not operate in any
tax havens, or use any tax avoidance
schemes.
Our anti-corruption and anti-bribery
policy and our Tax Strategy are available
on our website https://corporate.dunelm.
com.
The main areas of potential risk in
Dunelm’s organisation are:
• A colleague accepting a bribe or
some other personal advantage in
return for awarding a contract
• A supplier acting on Dunelm’s behalf
offering or accepting a bribe or other
personal advantage
• A Dunelm colleague facilitating tax
evasion by a third party, for example
by making an ‘off book’ payment to
enable a third party to avoid tax
Read about our strategy on
pages 12 and 13
The procedures in place to ensure
compliance with the Bribery Act 2011 and
other relevant legislation are set
out below:
• Anti-corruption and anti-bribery
policy implemented – which also
covers fraud and tax evasion
• Formal procedure implemented for
signing off and logging gifts and
hospitality accepted by colleagues
• Executive Board members, senior
colleagues, all members of the
Commercial team and any individuals
with authority to place significant
contract orders have received anti-
bribery training and complete an
annual refresher
• All senior colleagues sign a
declaration of compliance and
conflicts of interest statement annually
• Standard terms and conditions for
suppliers include a Bribery Act and
tax evasion clause
• Specific training has been carried out
for suppliers and agents in high-risk
territories
• All payments to third parties must
be supported by a valid invoice and
segregated duties are in place in the
Finance team; commercial checks
made on all new suppliers; policy on
engagement of contractors under
review
2018/19 achievements
• Additional training provided to Finance and
Logistics teams
•
•
Externally hosted whistleblowing helpline
implemented and awareness raised through
colleague communications
Policy and process for engaging self-
employed contractors updated to include
analysis of tax risk
• Higher risk vendors identified at contract
stage, and risk assessed by the Procurement
team
• Our whistleblowing policy refers
specifically to the Bribery Act, fraud
and tax evasion and an externally
hosted independent helpline is
in place
• Standing agenda item for the Audit
and Risk Committee
Measuring our impact
• % of internal training completed –
90%
Our targets
• 100% of internal training completed
This report was reviewed and signed by
order of the Board on 4 September 2019.
Nick Wilkinson
Chief Executive Officer
UN Sustainable
Development Goals
45
StrategicReportDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 03
Governance
Contents
Directors and Officers
Chairman’s Letter
Corporate Governance Report
Letter from the Chair of the
Audit and Risk Committee
Audit and Risk Committee Report
Letter from the Chair of the
Remuneration Committee
Remuneration Report
Letter from the Chair of the
Nominations Committee
Nominations Committee Report
Directors’ Report
48
52
53
63
64
68
70
93
94
97
Statement of Directors’ Responsibilities 101
46
corporate.dunelm.com Stock code: DNLM Governance
Our customer promises
Easy and Inspiring to shop
An experience that gives our
customers ideas, and provides
help when they want it, both in
store and online.
47
Dunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Directors and Officers
Joined Dunelm Board: September 2014.
Previous experience: Chief Executive of
Whitbread plc from 2010 to 2016. 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: None.
Key strengths: A former CEO with
considerable experience of leading
large consumer-facing organisations
with a strong service offer. Long-
standing plc experience and shareholder
understanding.
Dunelm role: Chairs the Board, which
is responsible for Group strategy,
performance, risk oversight and good
governance. Chairs the Nominations
Committee. Regularly visits the Dunelm
website, stores and non-store sites to
meet colleagues and members of the
senior management team. Participates
in investor presentations and some
shareholder meetings.
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: Director and major
shareholder, who spends his time on
strategic activities which protect and
enhance shareholder value and preserve
the Group’s culture and values. Member
of the Nominations Committee.
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. Resumed his
role as Deputy Chairman in January 2016.
Retains an executive role to support the
business in matters agreed with the CEO,
as required. Current focus is on buying,
merchandising and mentoring colleagues
internally.
Previous experience: All parts of Dunelm’s
business.
Other commitments: WA Capital Limited.
Joined Dunelm Board: February 2018.
Previous experience: Chief Executive
of Evans Cycles (2011 to 2016); Chief
Executive of Maxeda DIY (2007 to 2010);
Group Buying Director and MD of Currys at
Dixons Retail Group (1999 to 2006). Early
career at Unilever and McKinsey & Co.
Other commitments: None.
Key strengths: An experienced CEO,
with proven business leadership in
multichannel retail businesses operating
across a number of consumer brands and
geographies.
Dunelm role: Leads the Group and
chairs the Executive Board. Proposes the
strategy to be approved by the Board,
and accountable for delivery of strategic
and financial objectives. In addition to
his Board responsibilities, liaises with the
Remuneration Committee in respect of
below Board remuneration, and attends
Audit and Risk Committee meetings by
invitation.
Andy Harrison
Chairman
N
R
Will Adderley
Deputy Chairman
N
Nick Wilkinson
Chief Executive Officer
48
corporate.dunelm.com Stock code: DNLM Committee Memberships
A Audit and Risk Committee member
N Nominations Committee member
R Remuneration Committee member
Key strengths: Has held CFO and senior
finance roles in a number of multichannel
retail and consumer facing organisations,
operating in the UK and internationally.
Understanding of investor community.
Strategic and financial perspective across
a number of Group functions.
Dunelm role: Laura leads the
Finance department, as well as taking
responsibility for a number of strategic
and cross-functional initiatives. Member
of the Executive Board. Participates in
Audit and Risk Committee meetings by
invitation.
Joined Dunelm Board: November 2018.
Previous experience: Group Financial
Controller of Compass Group plc
(2017 to 2018). CFO of Indigo Books
& Music Inc (Canada) (2014 to 2017).
Various Finance roles at Japan Tobacco
International (2004 to 2013). Qualified
as a Chartered Accountant with
PricewaterhouseCoopers.
Other commitments: None.
Laura Carr
Chief Financial Officer
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: As a Non-Executive
Director, provides strategic advice,
monitors management performance and
oversees risk management. Regularly
visits the Dunelm website, stores and
non-store sites to meet store colleagues
and members of the senior management
team. Attends investor presentations
and shareholder meetings. Senior
Independent Director and Chair of the
Audit and Risk Committee.
Joined Dunelm Board: May 2013.
Previous experience: Fellow of the
Chartered Institute of Management
Accountants (FCMA). Finance Director
of Reckitt Benckiser plc (2011 to 2013),
Brambles Limited (Australia) (2007 to
2009) and Group International Finance
Director of Tesco plc from 2003 to 2007.
Other commitments: Non-Executive
Director of Corbion NV and Novartis
International AG. Member of the
Supervisory Board of Koninklijke Philips
N.V.
Key strengths: An entrepreneur and
investor with deep digital experience.
Dunelm role: As a Non-Executive
Director, provides strategic advice,
monitors management performance and
oversees risk management. Regularly
visits the Dunelm website, stores and
non-store sites to meet colleagues and
members of the senior management
team. Attends investor presentations
and shareholder meetings. Chair of the
Remuneration Committee.
Joined Dunelm Board: July 2015.
Previous experience: Co-founder
of three internet-related businesses:
Fletcher Research, LOVEFiLM.com, and
Secret Escapes. Non-Executive Director
of numerous others including Graze.com,
Paddy Power plc and Zoopla.
Other commitments: Chief Executive of
Oh Goodlord Limited, Chair of Nutmeg
Saving and Investment Limited.
49
Liz Doherty
Non-Executive Director
A
N
R
Senior Independent Director
Chair of the Audit and Risk Committee
William Reeve
Non-Executive Director
A
N
R
Chair of the Remuneration Committee
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Directors and Officers
continued
Joined Dunelm Board: September 2015.
Previous experience: Chief Executive of
Jigsaw (2013 to 2018). Senior positions
at John Lewis Partnership (2005 to 2013),
Levi Strauss (2001 to 2004) and Ted Baker
(1997 to 2001).
Other commitments: Managing Director
of URBN Corporation.
Key strengths: A current Managing
Director with deep experience in retail
and brands, working for both large and
more entrepreneurial organisations, with
a particular expertise in marketing and
product.
Dunelm role: As a Non-Executive
Director, provides strategic advice,
monitors management performance and
oversees risk management. Regularly
visits the Dunelm website, stores and
non-store sites to meet colleagues and
members of the senior management
team. Attends investor presentations and
shareholder meetings.
Key strengths: An experienced finance
and strategy specialist. Fellow of the
Chartered Institute of Management
Accountants with over 20 years’ business
and financial experience with leading
consumer-facing businesses. Long-
standing plc experience and shareholder
understanding.
Dunelm role: As a Non-Executive
Director, provides strategic advice,
monitors management performance and
oversees risk management. Regularly
visits the Dunelm website, stores and
non-store sites to meet colleagues and
members of the senior management
team. Attends investor presentations and
shareholder meetings.
Joined Dunelm Board: July 2019.
Previous experience: Chief Financial
Officer of Parkdean Resorts Group (2016
to 2018). Chief Financial Officer and main
Board Director at Ladbrokes plc (2011
to 2016) and Group Finance Director of
Greene King plc (2006 to 2011). Early
finance career at Whitbread plc, Buena
Vista Home Entertainment (Walt Disney
Company) and BT Group. Former Non-
Executive Director of Paypoint Ltd.
Other commitments: Senior
Independent Director and Chair of
the Audit Committee of St. Modwen
Properties plc, and Non-Executive
Director and Chair of the Audit
Committee at Domino’s Pizza Group plc.
Key strengths: A former CEO, with
experience of leading digital consumer
businesses, with strengths in brands,
marketing and online. Long-standing
plc experience and shareholder
understanding.
Dunelm role: As a Non-Executive
Director, provides strategic advice,
monitors management performance and
oversees risk management. Regularly
visits the Dunelm website, stores and
non-store sites to meet store colleagues
and members of the senior management
team. Attends investor presentations and
shareholder meetings.
Joined Dunelm Board: September 2019.
Previous experience: CEO of the Post
Office between 2012 and 2019 (Sales
& Network Director 2007 to 2009, COO
from 2009 to 2012). Commercial Director
of Whitbread plc 2004 to 2006 (Strategy
and Marketing Director, Restaurants
2001 to 2004). Marketing & eCommerce
Director of Argos 1998 to 2001. Early
career roles at Unilever, L’Oreal, Dixons
and Sears.
Other commitments: Chair of the
Imperial College Healthcare NHS Trust,
Non-Executive Director of Wm Morrison
Supermarkets plc, Non-Executive Director
of the Cabinet Office.
Peter Ruis
Non-Executive Director
A
N
R
Ian Bull
Non-Executive Director
A
N
R
Paula Vennells, CBE
Non-Executive Director
A
N
R
50
corporate.dunelm.com Stock code: DNLM Committee Memberships
A Audit and Risk Committee member
N Nominations Committee member
R Remuneration Committee member
Marion Sears
Non-Executive Director
N
Designated Non-Executive Director for
colleague matters
Dawn Durrant
Company Secretary
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: As a Non-Executive
Director, provides strategic advice,
monitors management performance and
oversees risk management. Regularly
visits the Dunelm website, stores and
non-store sites to meet store colleagues
and members of the senior management
team. Now non-independent, as
defined by tenure, but asked to remain
on the Board by the Board members
and Adderley family. Attends investor
presentations and shareholder meetings.
Designated Non-Executive Director for
colleague matters.
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
and sustainability. Member of the
Executive Board.
Joined Dunelm Board: July 2004.
Marion was Senior Independent Director
and Chair of Remuneration Committee
2006 to 2015 and Chair of Nominations
Committee until 2016.
Previous experience: Robert Fleming,
JP Morgan Investment Banking.
Other commitments: Non-Executive
Director of Persimmon plc, Fidelity
European Values plc, Aberdeen New
Dawn Investment Trust plc and Director of
WA Capital Limited.
Joined Dunelm: November 2011.
Previous experience: Qualified as a
solicitor at Allen & Overy (1988 to 1994).
Company Secretary of Geest plc between
1994 and 2005.
Other commitments: None.
Bill, together with his wife Jean, founded
the business in 1979. Although no
longer on the Board or actively involved
in management, Jean remains a major
shareholder, and both Bill and Jean
frequently visit stores and shop on
dunelm.com.
Bill Adderley
Founder and Life President
Notes:
Liz Doherty intends to retire from the Board at the AGM on 19 November 2019. Ian Bull will succeed her as Chair of the Audit and
Risk Committee. An announcement on her successor as Senior Independent Director will be made in due course.
Rachel Osborne was appointed to the Board on 1 April 2018 as a Non-Executive Director, and stepped down on 29 August 2018 to
take up an executive role on the board of a competitor.
David Stead, Dunelm’s former Chief Financial Officer (September 2003 to December 2015) provided interim CFO support between
April and November 2018, although he was not appointed to the Board over this short period.
51
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Chairman’s Letter
Stakeholders
An important part of our Board role is
to ensure that we are listening to our
stakeholders – we must always be open
to feedback that will help our business
improve. We have reviewed our approach
to stakeholder engagement during the
year, and have made some changes, as
set out in the report.
Board effectiveness
This year, as in 2018, we held an internal
Board review, based around a number of
questions aimed at improving the Board’s
effectiveness. We believe that our Board
is a strong team of Executives and Non-
Executives who are working well together.
As always there is scope to further
improve our effectiveness and we agreed
a number of actions, details of which are
set out in the Corporate Governance
Report. We will hold an external review
in 2020.
AGM
At our AGM this year, as usual, all
Directors (with the exception of Liz
Doherty) will be seeking reappointment.
In addition, in accordance with the
Listing Rules, each of the Non-Executive
Directors will also be subject to a vote
of shareholders independent of the
Adderley family.
I look forward to meeting shareholders at
the AGM.
Yours sincerely,
Andy Harrison
Chairman
4 September 2019
Liz Doherty intends to retire from the
Board at the AGM in November, due
to the increasing time required for her
other commitments. Liz has served on
the Board for seven years, has chaired
the Audit and Risk Committee since
September 2015, and been Senior
Independent Director since November
2017. Liz has made a big contribution to
Dunelm and I would like to thank her for
her wise guidance and the capable way
in which she has chaired the Audit and
Risk Committee. Ian Bull will succeed Liz
as Chair of the Audit and Risk Committee.
Her successor as Senior Independent
Director will be announced in due course.
Throughout these changes to our Board,
we have maintained a core team of Will
Adderley, Liz Doherty, William Reeve,
Peter Ruis, Marion Sears and myself, all
of whom have served at least three years
on the Board. The Non-Executive Team
have ably steered Dunelm through the
new executive director appointments
and made important contributions to
key aspects of our strategy. I thank all my
colleagues for their continued support
and commitment, and the time given to
help with the appointment and induction
of my newer colleagues.
Purpose and culture
Dunelm has always been driven by
strong business values and a deeply
rooted desire to play a positive role in
the communities that we serve. We are
well aware that it is more important than
ever that all businesses demonstrate a
positive impact on society. As the Financial
Reporting Council and others have
stated, the starting point is to have a clear
purpose, supported by strong corporate
values. Last year we restated our purpose,
‘to help everyone create a home that they
love’; interlinked with our Customer 1st
strategy and our business principles.
Our principles encompass a commitment
to take long term decisions and to treat
all customers, colleagues, suppliers
and communities with respect as the
key stakeholders and partners in our
business. Our Board and the leaders in
our business are accountable for role
modelling these principles, and we
take care to ensure that we recruit and
appraise individuals against them.
Dear Shareholder
Our Board
Nick Wilkinson has completed his first
full year as our Chief Executive Officer.
The benefits of his leadership are evident
in our strategic progress and improved
financial performance. Laura Carr joined
as CFO in November 2018, and has
settled in well. These appointments,
together with the strength of our broader
Executive Team augur well for our future.
We were delighted to announce the
appointment of Ian Bull in July. Ian is
an experienced business and financial
leader, with over 20 years’ experience
in a range of leading consumer-facing
businesses. He is currently the Senior
Independent Director and Chair of
the Audit Committee of St. Modwen
Properties plc, and Non-Executive
Director and Chair of the Audit
Committee at Domino’s Pizza Group plc.
We were also pleased that Paula Vennells
has agreed to join the Board. Paula is
an experienced business leader, with
deep consumer and retail experience.
Most recently she successfully led the
Post Office, a large and complex retail
consumer business, through a period
of great change. She is also Chair of
Imperial College Healthcare NHS Trust, a
Non-Executive Director of Wm Morrison
Supermarkets plc, and a Non-Executive
Director of the Cabinet Office.
52
corporate.dunelm.com Stock code: DNLM Corporate Governance Report
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 April 2016 (the ‘Corporate
Governance Code’), which is available from the website of the
Financial Reporting Council, www.frc.org.uk.
The Board considers that it has fully complied with the
Corporate Governance Code during the financial year
covered by this Annual Report, except that during the period
from 29 November 2018 to 10 July 2019 we only had three
independent Non-Executive Directors on our Board, to balance
the four Executive/Non-independent Directors. This is due to the
resignation of one of our independent Non-Executive Directors,
Rachel Osborne, following her appointment to an executive
role with a competitor. Whilst we immediately commenced the
search for a replacement, the process has taken longer than we
had hoped, due to the care and diligence that we apply to any
Board appointment. The Board will be in balance for the next
financial year following the appointment of Ian Bull in July 2019,
and Paula Vennells in September 2019.
We share the Government’s view that good governance helps
companies to take better decisions, for their own long term
benefit and that of the UK economy overall. Our approach,
which has not changed since the flotation of the Company in
2006, is summarised below:
• We believe that good governance leads to stronger value
creation and lower risks for shareholders
•
It is the Board’s responsibility to instil and maintain a culture
of openness, integrity and transparency throughout the
business, through our policies, communications and by the
way in which we act
• We support corporate governance guidelines and 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
For more information please see the copies of the
presentations that we made to our major institutional
investors and shareholder representatives, available in the
‘Reports and Presentations’ section of our website,
https://corporate.dunelm.com.
Corporate Governance Code 2018
The Board has considered the provisions of the Corporate
Governance Code published in July 2018, against which we will
be reporting next year, and we support its aim to encourage
boards to focus on their purpose and culture, and to respond to
society’s demand that they consider the needs and expectations
of all of their stakeholders.
We have already incorporated many of its new requirements
into our activities, including:
• Affirmed our corporate purpose, and how strategy is aligned
to this
• Considered how the Board will monitor culture, and
adopted a culture scorecard
• Marion Sears appointed as ‘Designated Director’ for
colleague purposes. Reviewed how we engage with our
stakeholders, and scheduled annual meeting with the
colleague National Voice Forum
• Discussed our approach to ensuring diversity at the Board
and through the business
• Formally considered “emerging risks” through our risk
review process
Further details are set out in this report.
Board role and composition
Strategy
• Set the strategy to secure the continued growth of the Group
over the long term in the interests of our shareholders,
taking account of our responsibilities to colleagues,
customers, the communities in which we operate and the
interests of our other stakeholders
• Ensure that resources are in place to deliver the strategy
Governance
•
Instil and maintain a culture of openness, integrity and
transparency
• Ensure that financial and other controls and processes for
risk management are in place and working effectively
• Set an effective remuneration policy
• Maintain good relationships with shareholders and all of
our stakeholders
Performance
• Review progress towards strategic and operational goals
and the performance of management
• Ensure that Board balance and committee membership
are appropriate and effective, and fully compliant with the
requirements of the Corporate Governance Code
Read about our directors and officers on
pages 48 to 51
53
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Corporate Governance Report
continued
The Board structure at the date of this report is shown below:
Chairman – Andy Harrison
Executives/Non-Independents
Independent Non-Executives
Will Adderley Deputy Chairman
Nick Wilkinson Chief Executive Officer
Laura Carr Chief Financial Officer
Marion Sears Non-Executive Director
Liz Doherty Senior Independent Director
William Reeve Non-Executive Director
Peter Ruis Non-Executive Director
Ian Bull Non-Executive Director
Paula Vennells Non-Executive Director
Note: Liz Doherty intends to retire at the AGM on 19 November 2019. Ian Bull will succeed her as Chair of the Audit and Risk Committee. Her successor as Senior Independent
Director will be announced in due course.
Board responsibilities
The Board has adopted written statements setting out the respective responsibilities of the Chairman, the Deputy Chairman and the
Chief Executive Officer; these are available on the Group’s website or from the Company Secretary. A summary of the names and
responsibilities of the Directors is set out below:
Chairman
Andy Harrison is responsible for:
• The leadership, effectiveness and governance of the Board
• Ensuring that the Directors receive accurate, timely and clear
•
Setting the agenda, style and tone of Board discussions
with a particular focus on strategic matters
• Ensuring each Non-Executive Director makes an effective
contribution to the Board
information
• Chairing the Nominations Committee
Deputy Chairman
Will Adderley is responsible for:
• Maintaining a close dialogue with the Chairman and the CEO
• Assisting the CEO in strategic and operational activities
• Contributing to the development of the Group’s culture and
values by promoting and visibly demonstrating the Company’s
long established business principles
as requested
•
Supporting and deputising for the Chairman as required
• Member of the Nominations Committee
Senior Independent Non-Executive Director
Liz Doherty is responsible for:
• Acting as a ‘sounding board’ for the Chairman and an
• Making herself available to shareholders, particularly if they have
intermediary for the other Directors
concerns that the normal channels have failed to resolve, or for
which such contact would be inappropriate
•
Leading the Non-Executive Directors in their annual assessment of
the Chairman’s performance
• Chairing the Audit and Risk Committee
Chief Executive Officer
Nick Wilkinson is responsible for:
• Proposing the strategic objectives of the Group for approval by
•
the Board, and delivering the strategic and financial objectives in
line with the agreed strategy
Leading the Executive Board and senior management in
managing the operational requirements of the business
• Providing clear and visible leadership in business conduct
• Effective and ongoing communication with shareholders
Chief Financial Officer
Laura Carr is responsible for:
• Working with the CEO to develop and implement the
• Ensuring proper financial controls and risk management of the
Group’s strategic objectives
Group and compliance with associated regulation
• The financial delivery and performance of the Group
•
Investor relations activities, and communications with investors
• Ensuring that the Group remains appropriately funded to pursue
the strategic objectives
Liz Doherty, William Reeve, Peter Ruis, Ian Bull, Paula Vennells and Marion Sears are responsible for:
Non-Executive Directors
• Constructive contribution and challenge to the
• Oversight of financial and other controls and processes for risk
development of strategy
management
• Monitoring operational and financial performance and scrutiny of
• William Reeve chairs the Remuneration Committee
management performance in the delivery of strategic objectives
• With the exception of Andy Harrison and Marion Sears, all Non-
Executive Directors chair or sit on all Board Committees
Company Secretary
Dawn Durrant is responsible for:
•
Supporting the Chairman and the Non-Executive Directors with
their responsibilities
•
Facilitating individual induction programmes for Directors
and assisting with their development as required
• Advising on regulatory compliance and corporate
• Communications with shareholders and organisation of
governance
the AGM
• Overseeing the sustainability activities of the Group
54
corporate.dunelm.com Stock code: DNLM Independence of Non-Executive
Directors
As required by the Corporate Governance Code and the Listing
Rules of the United Kingdom Listing Authority, the Board
considers annually whether all independent Non-Executive
Directors continue to exhibit independence of character and
judgement prior to putting them forward for reappointment
at the AGM. This was last considered in August 2019 and we
confirmed that Andy Harrison was independent on appointment
and that Liz Doherty, William Reeve, Peter Ruis, Ian Bull and Paula
Vennells are independent.
The Board has treated Marion Sears as a ‘non-independent’
Director since September 2015 in view of her tenure of more
than nine years on the Board, and her subsequent appointment
as a Director of WA Capital Limited in March 2016. WA Capital
Limited is a private limited company established by Will
Adderley (the Deputy Chairman, and major shareholder) to
act as a long term holding company for his beneficial interest
in the Company and various other investments. The Dunelm
Board has determined that this appointment does not affect
her judgement as a Director of Dunelm, and that any potential
conflict of interest has been cleared on the basis that WA
Capital Limited and Will Adderley are parties to a Relationship
Agreement (referred to below in the section headed ‘Conflicts of
interest’) which regulates their conduct.
Marion will put herself forward for reappointment at the AGM by
shareholders independent of the Adderley family as well as a full
shareholder vote.
As noted in the report of the Nominations Committee, Board
refreshment is a continued area of focus and we consider
the tenure of all Directors as part of our succession planning.
Our policy on Board diversity is explained in the Nominations
Committee report.
Change of Non-Executive Director
responsibilities
There were no changes to the responsibilities of the Non-
Executive Directors in the year.
When Liz Doherty retires from the Board at this year’s AGM in
November, Ian Bull will succeed her as Chair of the Audit and
Risk Committee. Her successor as Senior Independent Director
will be announced in due course.
Board activities in the year
Board attendance
The Board held 11 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
Will Adderley*
Laura Carr
Liz Doherty
Andy Harrison
Rachel Osborne
Peter Ruis
William Reeve
Marion Sears
Nick Wilkinson
Meetings
attended
10/11
9/9
11/11
11/11
1/1
11/11
11/11
11/11
11/11
* Will Adderley was unable to attend one Board meeting in the year due to a pre-
existing commitment on that day, however, he received papers and communicated
his views in advance to Andy Harrison, Chairman. Ian Bull and Paula Vennells were
appointed after the year end and so are not included in this table.
Board meetings
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 Annual Report and financial statements,
significant capital or contractual commitments, maintaining
internal control and risk management and approval of significant
Group-wide policies.
At each meeting, the Chief Executive Officer reports on
operational performance (including health and safety) and
the Chief Financial Officer 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 areas of
focus discussed by the Board in 2018/19 are set out on the
next page.
Read about our directors and officers on
pages 48 and 51
55
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Corporate Governance Report
continued
Areas of focus
Strategy
• Group strategy, including our purpose, goals
• Furniture strategy
and business plans
• Budget and future financial plan
• Structural changes in the retail sector
• Marketing strategy
• Tax strategy
•
Impact of Brexit
Governance and risk
• Board succession
• Supplier presentation
• Board independence, composition
• Gender pay statement
and diversity
•
Investor feedback via advisers
• AGM voting and feedback
• Corporate governance reform
• Stakeholder engagement
• National Voice Forum presentation
• Culture
• Health and safety
• Ethical sourcing and modern slavery
• Cyber security
• The General Data Protection Regulation
Operational
• Customer insight
• People strategy, colleague engagement and
• Replatform project
• Format development
• Product strategy
succession planning
• Supply chain strategy
• Stock management
We measure the time spent on strategy, governance and
operational performance at each meeting. Over the year, the
biggest part 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 circulated for approval. Any unresolved
concerns raised by a Director are recorded in the minutes.
Non-Executive Director meetings
There is scheduled ‘Non-Executive Only’ time at the end of each
Board meeting, attended by the Chairman and the Non-Executive
Directors. This is a useful way of exchanging views and dealing
with any concerns or questions. In addition to this, the Chairman
and the other Non-Executive Directors regularly have informal,
individual meetings with the Executive Directors and other senior
managers in the business, usually at a store location.
Board committees
The Board has 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.
Induction and training
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.
Laura Carr joined the Board as Chief Financial Officer in
November 2018. Prior to this she met with all members of the
Board and the Executive Board, and received a briefing from the
Company Secretary on the duties of a public company director.
She also had access to past Board papers and other relevant
documentation, and met with the audit partner and company
brokers. On joining the Group, she completed a comprehensive
induction programme, visiting stores, all non-store sites, and
meeting all of the senior management. She also participated
in the interim results presentation and ‘roadshows’, and held
further meetings with advisers.
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 provided by independent organisations which
cover a wide range of governance topics.
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 48 to 51 for details of the specific skills and experience
of each Director.
Evaluation
Each of the Directors receives a formal evaluation of their
performance during the year. The Senior Independent Director
appraises the Chairman, and the Chairman appraises all of the
other Directors individually. In addition, the performance of the
Board and Committees are formally evaluated as a whole.
Read about our strategy on
pages 12 to 13
Read about our sustainability on
pages 33 to 45
56
corporate.dunelm.com Stock code: DNLM 2018 Board evaluation
The recommendations arising from the 2018 internal Board review conducted by the Chairman, and actions implemented in
response are set out below:
Recommendation
Action taken
Nominations Committee and Board to review the Board
succession plan in the light of recent Board changes, likely NED
rotations and the ongoing strategic plans for the business
Formal review held at the Committee meeting in September
2018, and considered again as part of the 2019 Board
evaluation
People Director to be requested to provide more visibility
of diversity throughout the business to enable the Board to
consider how to measure and promote this
Regular Board updates from the Chairman on NED search
process
Diversity data being developed
Board dinner discussion held in October 2018, to consider
how the Board can obtain input from a more diverse range
of sources
Presentations from recent graduates and Chair of an Academy
Trust invited to speak to the Board
Further review of Board packs to give greater focus and remove
unnecessary detail
Packs reviewed and finance, customer, health and safety and
investor reports shortened and refocused
2019 Board evaluation
The Board last held an external evaluation in 2017. In 2019 the
Chairman led an internal evaluation, based on a discussion with
each Board member focused on the following topics:
1. What skills/experiences are needed when making future
Non-Executive Director appointments?
2. How can the Board maximise the contribution of each of the
Directors?
3. Are there any other ways in which the Board can become
more effective?
The Chairman circulated the Financial Reporting Council’s
Guidance on Board Effectiveness dated July 2018 to stimulate
thinking. The Chairman collated views and these were discussed
by the Board. Broadly there was satisfaction with the way that
the Board is performing, and there was consistency in the areas
which need to be fine-tuned to improve our effectiveness. The
following actions were agreed:
• Focus Board strategy discussions more on a smaller number
of topics where the NEDs can add the most value, and allow
more time for each
• Spend more time on competitor analysis
•
Increase the amount of time NEDs spend in the business/
with below Board executives, one fewer Board meeting
• Aim to increase the digital/data-led expertise on the Board
and in the business
• Evolve our KPIs to focus more on our customer, and to
reflect the multichannel nature of our business
• Review succession plans for below Board Executives
These actions will be progressed during the year and we will
report back on them in next year’s report.
An external Board evaluation will be held in 2020.
‘Colleague dashboard’ developed to bring together a range
of people/culture KPIs, which is presented twice a year
How the Board oversees culture
Overview - Dunelm has an open and straightforward culture,
with a focus on doing the right thing, and taking decisions for
the long term. This reflects the values instilled by the Adderley
family, who founded our business 40 years ago and are still
our major shareholders. The Board has always been careful to
ensure that we protect and retain this culture as the business
grows and becomes more complex.
Purpose and business principles - The Board has defined the
Group’s ‘purpose’, namely “to help everyone create a home
they love”. This is supported by three customer promises, and
underpinned by our business principles, which define how
we will act towards others. Members of the Board and the
leadership team are expected to act as role models for our
business principles, and all colleagues are appraised against
them. Further details of this are set out in the Strategic Report.
Code of business conduct - Alongside our business principles
we have a Code of Business Conduct, available on our
website https://corporate.dunelm.com, which sets out the
specific standards of conduct that our Board and colleagues
are expected to meet. We have a separate anti-bribery and
anti-corruption policy, and senior colleagues and colleagues
who have the ability to influence purchasing decisions receive
training on induction and annual refresher training.
Colleagues - We aim to inspire, engage and develop all of
our colleagues to reach their full potential, without any form or
discrimination. The Board engages directly with our colleagues
in a number of ways as set out below. By hearing, respecting and
responding to our colleagues, we inspire them to deliver the
best experience to our customers and deliver our strategy.
Suppliers - We also expect our suppliers to adhere to our
standards of conduct; all suppliers are asked to sign our anti-
bribery and anti-corruption policy (or commit to an equivalent
policy), and to sign our Code of Conduct which commits them
to appropriate ethical and human rights standards (including
anti-slavery).
57
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Corporate Governance Report
continued
How the Board engages with our
stakeholders
One of our business principles is to ‘keep listening and looking’,
no matter how big and successful we get. As a Board we must
always be open to feedback from our customers, our colleagues,
and anyone affected by our activities. Over a Board dinner in
October, we took time to consider how we engage with our
stakeholders, and as a result we included some additional items
on our rolling agenda this year:
• One of our largest and long-standing suppliers met with
us in January, and gave their views on the benefits and
challenges of being a Dunelm supplier. As a result we have
identified a number of ways in which we can work together
more successfully
• Engagement with our colleagues, as described to the right
• We invited the Chief Executive of a large Academy
Trust to meet with us in July, to help us understand the
challenges faced by young people, our potential customers
and colleagues, many of whom are growing up in a
disadvantaged household
‘People and culture’ is one of our ‘principal risks’, which are
considered formally by the Executive Board and the Board twice
a year.
Monitoring - Board members monitor adherence to the culture
in a number of other ways, including by visiting Group locations
and interacting with colleagues as part of their Board duties. The
Board also regularly reviews a number of ‘culture’ indicators,
such as colleague and customer satisfaction scores, accident
statistics, internal audit reports, whistleblowing data, and
regulatory enforcement. We review a set of culture KPIs by the
Board annually, most recently in August 2019.
s172 Companies Act 2006
As a Board we have always taken decisions for the long term,
and collectively and individually our aim is always to uphold the
highest standards of conduct. Similarly, we understand that our
business can only grow and prosper over the long term if we
understand and respect the views and needs of our customers,
colleagues and the communities in which we operate, as well as
our suppliers, the environment and the shareholders to whom
we are accountable. This is reflected in our business principles,
and our Sustainability report sets out more detail on how we
manage our relationships with them.
The Company Secretary sets out the text of s172 Companies
Act 2006 on every Board agenda by way of a reminder. We
ensure that its requirements are met and the interests of our
stakeholder groups are considered through a combination of
the following:
• Standing agenda points and papers presented at each
Board meeting: for example, the Chief Executive Officer
presents a Customer report, a Health and Safety report and
an update on People matters at each meeting
• A rolling agenda of matters to be considered by the Board
through the year, which includes a two-day strategy review,
which considers the purpose and strategy to be followed by
the Group, supported by a budget for the following year and
a medium term (five-year) financial plan; agenda items for
the following year are set based on the decisions and next
steps agreed at these meetings
• Regularly scheduled Board presentations and reports: for
example, investor feedback twice a year from our brokers
and corporate PR advisors; an update on People matters
and a “Colleague Dashboard” twice a year; an annual
presentation on health and safety, annual updates on ethical
trading, modern slavery and climate change/sustainability
• Formal consideration of any of these factors which are
relevant to any major decisions taken by the Board through
the year
• Review of many of these topics through the risk
management process and other standard Audit and Risk
Committee and Remuneration Committee agenda items, as
described later in this report
• Engagement with our stakeholders, as described to the right
58
corporate.dunelm.com Stock code: DNLM What matters to
this group
• Product range, price and
quality
• Convenience and
accessibility
• Customer service
• Fair marketing
• Product safety
• Responsible use of personal
data
• Environment
• Ethics and sustainability
• Fair employment
• Fair pay and benefits
• Gender pay
• Diversity and inclusion
• Training, development and
career opportunities
• Health and safety
• Responsible use of personal
data
• Environment
• Ethics and sustainability
Summary of how the Board engages with our stakeholders
Stakeholder
group
Customers
How we engage
Why we engage
• Customer insight report in
Management and Board
packs, which includes
customer satisfaction scores
• Customer KPIs reported in
Management and Board
packs
• CEO/Deputy Chairman reply
personally to a number of
high level customer contacts
• Management and Directors
visit stores regularly
Our purpose is to help our
customers create a home they
love.
We welcome all customers,
whatever their age, taste or
budget, and offer them the
widest range of products for their
homes, whenever and however
they want to shop.
We believe that to be a great
place to shop, Dunelm also
needs to be a great place to
work – we can only deliver great
products and services to our
customers through the hard
work and commitment of our
colleagues.
Colleagues
• Designated Non-
Executive Director has
Board responsibility for
championing the interests of
colleagues
• Regional and National Voice
Forums in place, feedback
goes to the Executive Board
and is acted upon
• NED attends two National
Voice Forum meetings a year
and feeds back to the Board
• Annual Board discussion
with National Voice Forum
representatives
•
‘Always on’ engagement
mechanism, and full
engagement survey twice a
year
• Colleague KPIs in
management and board
packs
• Annual conference for store
managers and senior support
colleagues, attended by
Chairman, Chief Executive
Officer, Chief Financial Officer
and Company Secretary
• Executive Board and
Directors visit stores and
other sites regularly
• Weekly and monthly
‘huddles’ held
•
Independent whistleblowing
helpline
Read about our sustainability on
pages 33 to 45
59
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Corporate Governance Report
continued
Stakeholder
group
How we engage
Why we engage
Suppliers
• Annual supplier conference
held, attended by the
Chairman and Executive
management
• Supplier presentation to the
Group Board
• Key suppliers attend the
annual colleague conference
• Chief Executive Officer and
Deputy Chairman meet
regularly with key suppliers
• Annual Board presentation
on ethical trading/modern
slavery
• Supplier payment terms
reported to the Board and
published
We do not manufacture the
vast majority of the products
that we sell; therefore we need
to maintain relationships with
suppliers and manufacturers
worldwide who can meet our
high standards.
Suppliers must demonstrate
that they operate in accordance
with recognised standards that
uphold human rights and safety,
prohibit modern slavery and
promote sustainable sourcing.
Environment
• Company Secretary chairs
the Sustainability Committee,
which considers matters
relating to the environment,
community and other topics
• Annual Report to the Board
We are committed to minimising
the impact of our business
operations on the environment.
It is also important to our
colleagues, customers and
shareholders.
What matters to
this group
• Fair trading and payment
terms
• Anti-bribery
• Ethics and slavery
• Environment and sustainable
sourcing
• Operational improvement
• Energy usage
• Recycling
• Waste management
• Minimising waste, packaging
materials and single-use
plastics
• Sustainable sourcing (cotton,
timber)
• Emissions from company
vehicles
We aspire to be responsible
members of our community as
it reflects our principle to do the
right thing. It is also important to
our colleagues, customers and
shareholders.
• Charitable donations
• Employment opportunities
• Volunteering
• Environmental impact
• Fair tax
Continued access to capital
is important for our business.
We work to ensure that
our shareholders and their
representatives have a good
understanding of our strategy
business model, opportunity
and culture.
•
Long term value creation
• Growth opportunity
• Financial stability
• Culture
• Transparency
• Ethics and sustainability
Community
Shareholders
and potential
shareholders
• Charity Committee in place
to spearhead charitable and
community activity, reports to
the Executive Board and the
Board
• A representative of the
company-sponsored charity
attends the annual Company
conference
• Charitable activity reported in
colleague communications
• Annual Report and Accounts
• Corporate website
• AGM
• Results announcements and
presentation
• Shareholder and analyst
meetings with management,
followed up by feedback
from brokers and financial PR
consultants
• Capital Markets presentation
• Regular Corporate
Governance presentation
• Engagement via the
Company Secretary
Read about our sustainability on
pages 33 to 45
60
corporate.dunelm.com Stock code: DNLM Other governance matters
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 matters 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
• Marion Sears is a Director of WA Capital Limited, a private
limited company established by Will Adderley to act as a
long term holding company for his beneficial interest in the
Company and various other investments. Authorised on the
basis that WA Capital Limited is party to the Relationship
Agreement referred to above
Any actual or potential conflicts are considered by the Board
and any authorisations given are recorded in the Board minutes
and reviewed annually by the Board.
Conflicts that have been disclosed are reviewed annually by
the Board.
The Board considers that its procedures to approve conflicts
of interest and potential conflicts of interest are operating
effectively.
Engaging with our colleagues
We have asked Marion Sears to be our ‘Designated Non-
Executive Director’ to engage with our colleagues. Marion
attended the National Voice Forum meetings in September
and April, and fed back to the Board afterwards. In addition,
in November, National Voice Forum members were invited to
the AGM, and met with the Board afterwards. The Chairman
and other Board members answered a number of questions
posed by the Forum, and also asked Forum members to
suggest ways that we can improve our business for the benefit
of our customers. We will repeat this meeting in November
2019. In April we used the National Voice Forum to engage
with colleagues on remuneration, describing our policies and
approach, and asked for feedback. Further detail is in the
Implementation Report section of the Remuneration Report.
We also asked our graduate intake to meet the Board in July,
to help us to understand how millennials make their decisions
on where and how to buy homewares, and where they want
to work. We found this to be a useful and refreshing way of
learning how our younger customers and potential colleagues
see us, and will invite our graduates to the Board regularly.
We have an open culture and Non-Executive Directors are
free to make direct contact with senior management and store
teams. Throughout the year all Directors have visited stores
and other Company locations, both informally and together
with members of the senior management team. The Chairman
attends the annual seminar, attended by store managers and key
support colleagues. We have an ‘always on’ colleague feedback
system, and management review this and respond. We also
have a twice yearly engagement survey, the results of which
are fed back to managers, the Executive Board, and the People
Director covers this as part of her regular presentations to the
Board. During the year we have also developed a ‘colleague
scorecard’ bringing together key colleague measures, including
engagement, retention and gender pay. This is reviewed by the
Board at least twice a year.
Investor relations and understanding
shareholder views
The Chief Executive Officer and the Chief Financial Officer
report back to the Board after the investor roadshows. The
Group’s brokers and financial PR advisers also provide a
written feedback report after the full and half year results
announcements and investor roadshows to inform the Board
about investor views, and in addition Non-Executive Directors
attend a selection of investor presentations.
In January 2018, we held one of our regular Corporate
Governance meetings, attended by the Chairman, Will Adderley,
the Non-Executive Directors and Company Secretary, to which
our major institutional shareholders were invited. This gives the
corporate governance representatives of our shareholders an
opportunity to discuss with us a range of governance topics.
Matters discussed included Board composition, the work of the
Audit and Risk Committee, remuneration, risk, cyber security,
human rights and the environment. We are planning to hold
another meeting in January 2020.
Our corporate website contains useful shareholder information,
copies of presentations and policies in relation to governance
and sustainability. Please see https://corporate.dunelm.com.
All Directors will be available at the Annual General Meeting to
meet with shareholders and answer their questions.
61
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Corporate Governance Report
continued
The Board has reviewed whether our policy to purchase shares
in the market to satisfy share option entitlements (as opposed
to issuing shares) is still appropriate; we believe that it is in the
interests of our shareholder base as a whole as it avoids dilution
of shareholdings, and it is supported by the majority of our
institutional shareholders. I would like to reassure shareholders
again that shares bought back by the Company will be held in
treasury and used only to satisfy share option entitlements, and
not cancelled. The Company did not purchase any of its own
shares during the financial year.
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 expense if they consider it necessary in
connection with their duties.
The Group purchases Directors’ and Officers’ liability insurance
cover for its Directors.
Significant shareholders
The Group’s significant shareholders are listed in the Directors’
Report on page 98 and voting rights are stated on page 97.
Articles of Association
The Company’s Articles of Association may only be amended by
a special resolution of shareholders.
Governance and risk
Details of the Group’s risk management framework, systems
and controls and internal control framework are set out in the
Strategic Report on pages 26 to 32.
This report was reviewed and approved by the Board on
4 September 2019.
Andy Harrison
Chairman
4 September 2019
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 they are prohibited by law from being a Director,
or is declared 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 (apart from Liz Doherty)
will 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.
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, the Deputy Chairman and the Chief
Executive Officer respectively.
Share buyback and Rule 9 waiver
Since the time of flotation of the Company, the members of
the Adderley family, including Bill Adderley and Will Adderley,
have been considered to be acting in concert (‘a Concert Party’)
for the purposes of Rule 9 of the City Code on Takeovers and
Mergers (the ‘City Code’). In December 2018, Bill Adderley
transferred the majority of his shareholding to Will Adderley.
Following this transfer, Will Adderley controls 46% of the issued
share capital of the Company, and the Concert Party controls
51% (the Concert Party holding did not change as a result of
the above-referenced transfer). The Takeover Panel consented
to the above-referenced transfers and confirmed that (i) there
was no obligation on Will Adderley to make a general offer to all
shareholders of the Company to acquire their Ordinary Shares
in the Company pursuant to Rule 9 of the City Code; and (ii)
for so long as the members of the Concert Party continue to
be treated as acting in concert, the Company may exercise any
authority to make market purchases of its own shares which has
been approved by shareholders, without seeking a separate
shareholder waiver of any resulting obligation to make a general
offer under Rule 9 of the City Code and no obligation to make a
general offer under Rule 9 of the City Code will result.
62
corporate.dunelm.com Stock code: DNLM Letter from the Chair of the
Audit and Risk Committee
The Committee also reviewed and
approved a change to the IT capitalisation
threshold, and the plans in place to
implement the new accounting standard,
IFRS 16 ‘Leases’.
We paid our auditors
PricewaterhouseCoopers LLP non-audit
fees of £20,000 in the financial year in
respect of the half year results review (a
service now classified as ‘non-audit‘). This
compares to the audit fee of £160,000.
Looking forward, there are developments
in corporate reporting coming into effect
within the next two years, and the new
Corporate Governance Code, which
we will review and make any changes
required.
This will be my last report as Audit and
Risk Committee Chair, as I will be retiring
from the Board at the AGM. I will be ably
succeeded by Ian Bull.
I look forward to meeting shareholders at
the AGM, when I will be happy to take any
questions on this report.
Yours faithfully,
Liz Doherty
Chair of the Audit
and Risk Committee
4 September 2019
As part of the standard audit partner
rotation process, Mark Smith of
PricewaterhouseCoopers LLP stepped
down as audit partner, and was replaced,
with the Committee’s approval, by Mark
Skedgel. I would like to thank Mark
Smith for his service, and welcome
Mark Skedgel, who has overseen the
FY19 audit. The transition has been well
managed.
Internal audit activity in the year included
reviews of our leavers process, controls
over payment of customer compensation,
compliance with expenses policy,
payment controls and a follow-up to last
year’s report on supplier conformance to
stock routines. As usual, the Committee
has reviewed the process by which the
register of principal risks is compiled,
including how ‘emerging’ risks are
identified. The Board held a dinner
discussion of “what keeps us awake at
night” and the results were fed into this
process. A number of improvements were
made to the process and the register
as a result of the Committee’s review in
February, and a follow-up review in June.
The Committee has continued its
oversight of the controls in place to
address cyber risks and comply with
the requirements of the General Data
Protection Regulation (GDPR). Continued
progress has been made in both of
these areas over the year, and it remains
a standing agenda item for Committee
meetings. In June 2019, the Chief
Information Officer presented his plan
to increase the resource and capability
of the Information Security function. The
plan includes an external certification
of the Group’s position against the
Government’s ‘Ten Steps to Cyber
Security’ standard. The Committee
was satisfied that the plans are an
appropriate response to the increased
cyber security risk.
Dear Shareholder
In the last year, Laura Carr joined the
Board as CFO. The transition has been
smooth, and Laura has successfully
established herself both as a trusted
member of the Board and Executive
team, and as head of the Finance
function. I would like to thank David
Stead, Dunelm’s CFO between 2006 and
2015 for stepping in on an interim basis
between April and November 2018.
As I reported last year, Rachel Osborne
resigned her position as a Non-Executive
Director in August when she assumed
the CFO role with a competitor; it has
taken us longer than we had hoped to
find a replacement, but I am delighted to
welcome Ian Bull to the Committee. His
financial expertise in particular will be of
great assistance to the Committee going
forward. I am also pleased to welcome
Paula Vennells, who joins the Board today.
63
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Audit and Risk Committee Report
Summary of principal activities
• Reviews of the following:
•
Internal Audit/Compliance
− Annual financial statements for FY18 and interim
− Internal audit reviews of the leavers process,
results for FY19
− Since the year end, approval of the full year annual
financial statements for FY19
− Internal controls and the process for the
identification and mitigation of principal risks
− IT capitalisation threshold
− Plan to implement the requirements of IFRS 16
• External auditor
− Annual reviews of policy on rotation of external
auditor and use of auditors for non-audit work
− Approval of the new statutory audit partner for the
FY19 audit onwards
This report provides details of the role of the Audit and Risk
Committee and the work it has undertaken during the year
and at its meeting in August 2019 when this Annual Report
and financial statements were approved.
Principal duties
The principal duties of the Committee are to:
• Oversee the integrity of the Group’s financial statements and
public announcements relating to financial performance
• Hold the relationship with the external auditor, agree the
audit fee and oversee the external audit process
• Establish formal and transparent arrangements for
considering how the Company should apply the corporate
reporting, risk management and internal control principles
• Oversee the internal audit process
• Monitor the effectiveness of financial controls and the
process for identifying and managing risk throughout the
Group
• Monitor the financial reporting process and submit
recommendations
• Monitor the statutory audit of the Annual Report and
financial statements
• Review and monitor the external auditor’s independence
and the provision of additional services
The full terms of reference for the Committee can be found on
the Group’s website, https://corporate.dunelm.com. These terms
were last reviewed by the Committee in June 2019.
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 https://corporate.dunelm.com. During the
year, the Committee received reports detailing the calls made to
the helpline.
customer compensation controls, payment controls,
compliance with expenses policy, and a follow up of
the 2017 review of supplier compliance with stock
routines
− Review of new structure of the Information Security
function, to address the ever increasing external
cyber security threat and GDPR compliance
Committee membership
The following Directors served on the Committee during the year:
Name
From:
To:
Liz Doherty (Chair)
1 May 2013
To date
William Reeve
1 July 2015
To date
Peter Ruis
10 September
2015
To date
Rachel Osborne1
1 April 2018
28 August 2018
1 Rachel Osborne stepped down from the Board and the Committee on 29 August
2018. Ian Bull and Paula Vennells were both appointed to the Board and the
Committee after the year end.
The Company Secretary acts as secretary to the Committee.
The Chief Executive Officer, Chief Financial Officer and the
Chairman of the Board usually attend meetings by invitation,
along with a representative from the external auditor. Other
Directors attend by invitation as required.
The Board considers that I have recent and relevant financial
experience to chair the Committee, by virtue of my professional
qualification and my previous executive roles, including as Chief
Financial Officer of Reckitt Benckiser Group plc. Members of the
Committee can also demonstrate a breadth of experience across
the retail and consumer goods sector through their current and
previous roles – please see the Directors’ biographies on pages
48 to 51 for full details.
64
corporate.dunelm.com Stock code: DNLM Committee activities in 2018/19
Three meetings were held in the year and members’ attendance
was as shown in the table below:
Name
Liz Doherty
William Reeve
Peter Ruis
Rachel Osborne
Meetings
attended
3/3
3/3
3/3
0/0
The Committee also met in August 2019.
The activities of the Committee included:
Routine items
• Approval of the full year results issued in September 2018
and the half year results issued in February 2019
• Review of the process for identifying and managing risk and
a full review of the principal risks and how they are managed
in September 2018, a mid-year review in February 2019, and
a further ‘deep dive’ review in June 2019
• Verification of the independence of the auditor, approval of
the scope of the audit plan and the audit fee, and review of
the auditor’s audit findings
• Review of fraud and Bribery Act controls and cyber security,
which are standing agenda items for each meeting
• Receipt of internal audit reports (see below)
• Approval of the annual Audit and Risk Committee Report
• Review of whether the FY18 and FY19 Annual Reports are
‘fair, balanced and understandable’
• Annual review of committee terms of reference, Tax Strategy,
policy on use of auditors for non-audit services, and auditor
rotation policy
• Formal review of auditor performance
• Formal review of committee effectiveness
Specific topics
• Update on the steps being taken to implement the
requirements of IFRS 16 ‘Leases’
• Review of IT capitalisation threshold
• Review of the plans to restructure and increase the resource
of the Information Security team
•
Internal audit reviews of the leavers process, customer
compensation controls, payment controls, compliance with
expenses policy and a follow up of last year’s review of
supplier compliance with stock routines
Committee effectiveness
At its meeting in June 2019, the Committee carried out a review
of its own effectiveness, using a checklist prepared by one of the
major accounting firms. The conclusion was that the Committee
is functioning well, broadly in accordance with regulatory
and ‘best practice’ requirements, and provides appropriate
assurance to the Board.
Significant areas of judgement
Within its terms of reference, the Committee monitors the
integrity of the annual and interim reports, including a review
of the significant financial reporting issues and judgements
contained in them.
At its meetings in September 2018 and August 2019, the
Committee reviewed a comprehensive paper prepared by the
Chief Financial Officer, which analysed the Group’s results for
the financial year; highlighted matters arising in the preparation
of the Group financial statements; and provided information to
support the Directors’ viability and going concern statements.
The Committee also considered a paper prepared by the
external auditor, which included significant reporting and
accounting matters.
The major accounting issues discussed by the Committee in
August 2019 in relation to the FY19 Annual Report and Accounts
were as follows:
Provisions for inventory
The Committee considered the approach taken by management
and assessed available evidence. Particular attention was
given to reviewing the provision for obsolete, slow-moving
or discontinued inventories including the utilisation of
provisions reported in prior periods. The Committee noted
that management have refined the calculation to be more
mechanical and less judgemental. The Committee concluded
that the values recorded in the financial statements are
appropriate.
Lease liabilities
The Committee considered the approach taken by management
to the disclosure requirements under IFRS 16, which will be
adopted in FY20 for the first time. Particular attention was given
to reviewing the discount rates proposed by management in
calculating the lease liabilities. The Committee concluded that
the disclosures in the financial statements are appropriate.
Capitalisation of intangible IT costs
The Committee considered the approach taken by management
in identifying the capitalisation criteria required for capitalising
internally generated software, and concluded that the approach
taken and the values reported in the financial statements are
appropriate.
Fair, balanced and understandable
At the request of the Board, the Committee also considered
whether the Annual Report and financial statements as a whole
are ‘fair, balanced and understandable’. Factors taken into
account included:
• Does the narrative of the Business Review and Financial
Review fairly reflect the performance of the Group over the
period reported on?
• Are the narrative sections consistent with each other, and
with the financial statements?
•
Is the connection between strategy and remuneration clearly
described?
• Can readers easily identify key events that happened during
the year?
Committee members received the draft Annual Report in advance
and had the opportunity to make comments in advance of the
formal meeting at which the report was tabled for approval.
65
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Audit and Risk Committee Report
continued
Following its review, the Committee confirmed to the Board
that in its view the FY19 Annual Report was fair, balanced and
understandable.
External auditor
The report and financial statements were audited by
PricewaterhouseCoopers LLP, following the firm’s appointment
as statutory auditor in January 2014. The audit partner from the
FY19 audit onwards is Mark Skedgel.
PricewaterhouseCoopers LLP attended the Committee meetings
in September 2018, February, June and August 2019. The
Committee also met privately with them during the September
and August meetings, and as Chair of the Committee I had
dialogue with the audit partner on a number of occasions.
Audit effectiveness
It is the responsibility of the Audit and Risk Committee to assess
the effectiveness of the external audit process.
The Chief Financial Officer and her team presented their review
of the FY18 audit in February 2019. This covered a number of
aspects including:
• The quality of reports provided to the Committee and the
Board and the quality of advice given
• The level of understanding demonstrated by the audit team
of the Group’s businesses and the retail sector
• The objectivity of the external auditor’s views on the controls
around the Group and the robustness of challenge and
findings on areas which required management judgement
• The findings from the FRC’s annual inspection of auditors
published in May 2018
The conclusion was that the audit had been effective and that no
significant issues had been highlighted; this was endorsed by
the Committee.
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.
Following the issue of the EU Audit Directive in June 2016, we
reviewed our policy on the use of auditors for non-audit work
in September 2016. The full policy is available on our website,
https://corporate.dunelm.com, but in summary from FY17:
• Fees for non-audit services provided by the statutory auditor
in any year may not exceed 70% of the average fees for the
Group statutory audit in the three previous years
• The auditor is prohibited from providing certain non-audit
services, including: almost all tax work; internal audit;
corporate finance; involvement in management activities,
including working capital and cash management and the
provision of financial information
• The external auditor may not be engaged to provide any
non-audit services without the agreement of the Audit and
Risk Committee Chair
During the period we paid PricewaterhouseCoopers LLP
£180,000, of which £20,000 was for their review of the interim
financial statements (considered to be a non-audit service). No
other non-audit services were provided by the external auditor.
Fees paid to PricewaterhouseCoopers LLP for audit work were
£160,000.
Auditor rotation
Our auditor rotation policy is that we will tender the audit at
least every 10 years; we will change auditor at least every 20
years; and we will invite at least one firm outside the ‘Big Four’
to participate. This is in line with the current EU Audit Directive.
The latest date for the next tender will therefore be for the
FY24 audit. A competitive tender is in the best interests of
shareholders.
Auditor appointment for FY19
It is the Committee’s responsibility to make recommendations
to the Board in relation to the appointment, reappointment and
removal of the external auditor, and to agree the audit fee.
I can confirm that the Company has complied with The Statutory
Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 during the financial year.
In February 2019, the external auditor presented their strategy
for the 2018/19 audit to the Committee. The Committee
reviewed and agreed with the external auditor’s assessment
of risk. The Committee also reviewed and agreed the audit
approach and the approach to assessing materiality for the
Group.
The fee proposed by PricewaterhouseCoopers LLP for the
statutory audit of the Group and Company financial statements
and the audit of Group subsidiaries pursuant to legislation was
£160,000.
Taking into account the review of the FY18 audit and
the proposed plan and fee, the Committee agreed that
PricewaterhouseCoopers LLP be reappointed as auditor for
the FY19 audit for the fee proposed. Resolutions to reappoint
PricewaterhouseCoopers LLP as auditor and to authorise the
Directors to agree their remuneration will be put to shareholders
at the AGM.
Risk management
The Committee is responsible for assessing the scope and
effectiveness of the systems established by management to
identify, assess, manage and monitor financial and non-financial
risks, and to consider the level of assurance.
The Committee carried out a formal risk review in September
2018 and February 2019, as well as a review of the whole risk
register in June 2019. It also noted that individual principal risk
topics are reviewed by the Board through the rolling agenda.
During the year, at the Committee’s request, further work has
been conducted by management to refine the way in which the
risks are described, and to align the Internal Audit programme
more closely with the Risk Register.
Read about our risks on
pages 26 to 32
66
corporate.dunelm.com Stock code: DNLM Internal control framework
In 2015 the Committee adopted a formal internal control
framework, covering the following areas: business ethics
including anti-bribery controls; accountabilities; people
management, including succession planning; development and
alignment of incentives; risk management processes; internal
financial control; crisis management; monitoring and reporting.
Details of internal and external assurance are included. The
framework and the controls in place are reviewed annually.
In view of the time that has elapsed since the framework was
first put in place, and the increased size and complexity of the
business, the Chief Financial Officer has agreed to review the
controls framework and recommend any areas that need to be
strengthened.
Viability statement and risk
management
In August 2019, the Committee reviewed the viability statement
given by the Board in this report and the process in place to
support the assurance given and confirmed that it is appropriate
and in compliance with regulatory requirements. This review
took into account the principal risks facing the Group and
the process by which they are managed by the Board and
management.
Internal audit
There is an Internal audit function which conducts a programme
of audits conducted either using Internal audit resource 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
reports back to them. Topics for internal audit are selected by
the Committee with reference to the Risk Register, any control
observations made by the external auditor, and any requests
made by members of the Executive Board.
Reviews completed in the year are set out below:
Leavers process
Customer compensation controls
Payment controls
Supplier compliance with stock routines
(follow-up)
Payment controls review
Compliance with expenses policy
Reviewed by
Internal Audit
Internal Audit
Internal Audit
Internal Audit
Internal Audit
Internal Audit
Reports were discussed by the Committee and the Board
and a number of recommendations agreed by management.
The Committee monitored progress against actions agreed
following these reports, as well as the reports received in the
2017/18 financial year from internal audit/external assurance
providers. The majority of these have been completed in the
agreed timescale.
Cyber security and data protection/
GDPR
Information security remains one of the most important risk
areas and it is a standing Committee agenda item, as well as
being one of the Board’s principal risks, as outlined in the ‘Risks
and Uncertainties’ section of this Annual Report. The coming
into force of the General Data Protection Regulation in May 2018
has raised the profile and importance of managing personal
data safely and lawfully, and has increased the severity of the
consequences of a personal data breach. The Committee had
oversight of the plan in place to secure compliance, and data
protection is now considered alongside cyber security in general
at every meeting.
The Committee noted that continued progress has been
made over the year to strengthen controls over cyber and data
security. A number of practices and systems considered ‘high
risk’ have been changed as part of the GDPR implementation
plan, and training has been rolled out across the business to
increase awareness. A risk mitigation plan is in place to make
further improvements during FY20. In addition, a number of
legacy Worldstores systems were integrated during the year, to
further enhance security and integrity.
In June 2019, the Chief Information Officer presented his plan
to increase the resource and capability of the Information
Security function, in response to the continuing external threat
and the need to reinforce controls to secure GDPR compliance.
In addition, as part of the replatform project we are moving our
IT platform and supporting systems from a solution based on
third party software to a bespoke solution, and therefore we
need to ensure that we build in appropriate security. The new
plan includes an external certification of the Group’s position
against the Government’s ‘Ten Steps to Cyber Security’ standard.
The Committee was satisfied that the plans are an appropriate
response to the increased cyber security risk.
IFRS 16 ‘Leases’
The Group will be adopting IFRS 16 for the FY20 year end,
and has made its first disclosures in this report. At each
meeting during the year, the Committee considered a report
by management, summarising the approach being taken, the
impact on external and internal reporting, and the implications
for bank covenants and measurement of performance under
remuneration schemes.
Approved by the Board on 4 September 2019.
Liz Doherty
Chair of the Audit and Risk Committee
67
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Letter from the Chair of the
Remuneration Committee
Executive Director
shareholding
It is part of our remuneration strategy that
our Executives should build alignment
with shareholders through shareholding.
We require that Executives make a
personal investment in shares when
they join the Company. Thereafter they
must invest two thirds of all bonus and
share incentives earned (after payment
of tax and NI) in Dunelm shares, all of
which must be held for the duration
of employment, and at least 50% for a
further two years. We also ask Executives
to build a holding of 1× salary after
three years and 2× salary after five
years. I am pleased that Nick and Laura
have respectively built shareholdings
equivalent to 193% of salary (after 19
months) and 91% of salary (after nine
months).
Pension
In the past year, our Remuneration
Committee has been listening to the
calls from government, regulators and
shareholders for boards to show restraint,
and to be able to demonstrate fairness
in how Executive Directors are paid.
Dunelm’s policy has always been to
pay its Executives fairly for the role, and
for the majority of pay to be variable
and performance-linked. We have also
designed a simple policy that is easy for
the Executives and our shareholders to
understand.
Since 2017, our policy has provided for
a maximum pension entitlement of 15%
of base salary. In 2018 we decided to
reduce this to 10% for newly appointed
Executives, which is the entitlement of
Nick and Laura, both of whom joined
in 2018. In June this year, we took the
decision to reduce this further for newly
appointed Executives – the maximum
that we will now apply is 5% of base
salary, which is the entitlement of the vast
majority of our management population.
This will, subject to agreement by
shareholders, be enshrined in our policy
on renewal.
Gender pay
Our Board now comprises four women
and six men, and our Executive Board
has five women to three men. However,
the gender pay gap report which we
published in April showed a widening of
the gap on both the median and mean
measures. This widening was caused
primarily by an increase in the size of our
Technology (IT) team; these colleagues
are relatively highly paid, and this function
is historically predominantly male. We are
continuing to take a long term approach
to addressing the barriers that prevent
women from reaching senior, higher paid
roles (holding an 'Empowering Female
Leaders', a 'Women in Tech' event,
introducing a flexible holiday entitlement
for example). We are also looking at how
we can address any diversity 'gaps', to
ensure that we are recruiting from the
widest possible pool of talent.
Governance reform
Although we are not obliged to adopt
the requirements of the 2018 Corporate
Governance Code until the next financial
year, we have decided to implement
some of its provisions in advance:
• The Committee already had oversight
of the remuneration of the Executive
Board (which includes the Company
Secretary). Remuneration of this
group (including pay increases,
and bonus and share incentive plan
awards and outcomes) is now formally
approved by the Committee
• When discussing base pay increases
and bonus awards for the Executive
Directors and the Executive Board, we
have also taken into account awards
to be made throughout the Company.
We now also formally consider
whether variable pay outcomes are
reasonable in the light of Company
performance
Dear Shareholder
Overview
Financial performance in the past year
has been strong. We have also grown
our customer base substantially, and
improved our customer and colleague
satisfaction scores. This is reflected in
our share price, which rose significantly
during the year. This, together with very
strong performance against personal
and strategic objectives, gave rise to a
bonus award to our Executive Directors
of 98% of potential opportunity for Nick
Wilkinson, CEO, and 100% for Laura
Carr, our new CFO. The Committee
considers that this is a fair, reasonable
and appropriate outcome, in the context
of Dunelm’s overall performance,
stakeholder engagement and
shareholder return in the year.
We are also pleased that colleagues
throughout the business, who are
entitled to receive a bonus payment
and performed strongly, earned a
similar percentage of their maximum
entitlement. Amidst challenging times for
our sector, the talent and commitment of
our people are enabling us to win versus
our competitors. We are proud of them
and proud to be able to reward them
appropriately.
68
corporate.dunelm.com Stock code: DNLM •
In last year’s report, I described how
we had widened the circumstances
in which variable pay can be subject
to malus and claw back; and how
we had decided to reduce pension
entitlement of newly appointed
Executive Directors to 10% of base
salary. As stated above, we have
now decided to align the pension
of entitlement of newly appointed
Executives to our management
colleagues
• We appointed Marion Sears as our
'Designated NED' for colleague
purposes. As described elsewhere in
the Annual Report, Marion and the
Board now engage formally with the
National Voice Forum, and we used
this forum to explain the structure and
rationale for executive pay, and to
seek feedback
Other provisions, and the publication of
a CEO pay ratio, will be adopted in the
FY20 financial year.
Policy renewal
This is the final year of operation of
our 2017 remuneration policy. We will
take developments in governance, best
practice and shareholder preferences into
account as we formulate the policy for
discussion with our major shareholders,
before putting it forward for approval at
our AGM in 2020. As ever, we welcome
our shareholders’ thoughts and
suggestions in advance of this process so
we can proceed with as much support as
possible.
I look forward to meeting shareholders at
the AGM.
Yours faithfully,
William Reeve
Chair of the Remuneration
Committee
4 September 2019
69
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Remuneration Report
How our remuneration policy is linked to our strategy
Group strategy
Deliver shareholder value through long term, sustainable, profitable growth
Remuneration strategy
Remuneration structure
Pay fairly for an individual’s role and responsibilities
Base pay and benefits at median or below
Reward strong performance
Annual bonus at median
Focus on long term value creation
Long Term Incentive Plan at upper quartile
Align executives with shareholders through share ownership
Two thirds of variable pay retained in shares for duration of
employment and half of these for a further two years
Introduction
This Directors’ Remuneration Report is divided into three
sections: the Letter from the Chair of the Remuneration
Committee, set out on pages 68 to 69; the Policy Report; and
the Annual Report on Implementation.
The Policy Report sets out the 2017 remuneration policy
which has been in force since 21 November 2017, when it was
approved by shareholders at the AGM with a vote of 99.47% in
favour of it. No changes to our policy are being put forward this
year.
The Annual Report on Implementation sets out how the
policies approved in November 2014, 2015 and 2017 have
been applied during the financial year being reported on and
how policy will be applied in the coming year. This report will be
put to shareholders for approval at the Annual General Meeting
in November 2019, although the vote on the implementation
report is advisory.
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) Regulations
2013 (as amended), as well as the UK Corporate Governance
Code and the UKLA Listing Rules.
Our binding remuneration policy was last updated in 2017, and
approved by shareholders at the AGM on 21 November 2017
with 99.47% of votes in favour of it.
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
The majority 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 the creation of long term, sustainable
growth in shareholder value through delivery of the objectives
set out in our corporate purpose and supporting strategy, which
are all long term in nature; namely to help our customers create
a home they love, through offering products that are famous
for style, value and quality; and an easy and inspiring shopping
experience. 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 for the benefit of all parties.
Read about our sustainability on
pages 33 to 45
70
corporate.dunelm.com Stock code: DNLM The policy report
Directors’ remuneration policy 2017
The policy set out below (the '2017 policy') is the policy approved by shareholders at the AGM on 21 November 2017, and applied
from that date.
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
• 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
Operation
• 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
− Scale and complexity of the role
• Should comprise a minority of potential remuneration
Maximum
opportunity
• 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 monetary limit on the maximum base
salary that may be paid to an Executive Director within the terms of this policy
• None, although performance of the individual is considered at the annual salary review
• No recovery provisions apply to base salary
• To provide a competitive post-retirement benefit
• To attract and retain the high calibre talent necessary to develop and deliver the business strategy
Performance
metrics
Retirement benefits
Purpose and link to
strategic objectives
Operation
• Contribution equivalent to a percentage of base salary made to a defined contribution plan or paid as
a cash allowance
Maximum
opportunity
Performance
metrics
• Up to 15% of base salary (for Executive Directors appointed from November 2017 onwards. For
Executive Directors appointed prior to that, the maximum is 20% of base salary). No element other
than base salary is pensionable.
Note that the contractual pension entitlement of the current Executives is 10% of base salary. The Committee has agreed in June 2019
that the pension entitlement for any newly appointed Executives will not exceed the entitlement of management colleagues, which is
currently 5%. This will be incorporated into our next binding policy
• None
• No recovery provisions apply to retirement benefits
71
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Remuneration Report
continued
Benefits
Purpose and link to
strategic objectives
Operation
• To provide a competitive benefits package
• To attract and retain the high calibre talent necessary to develop and deliver the business strategy
• 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
Maximum
opportunity
• Current benefits provided are described in the Implementation Report on page 80.
• 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
Performance
metrics
benefits to be paid
• None
• No recovery provisions apply to benefits
Annual bonus – awards to be made to Executive Directors other than Will Adderley, who has requested that he not be
considered for annual bonus
Purpose and link to
strategic objectives
• Rewards and incentivises delivery of annual financial, strategic and personal targets
Operation
• Paid in cash, after the results for the financial year have been audited, subject to performance targets
having been met
• Two-thirds of bonus earned must be invested in Dunelm shares after tax and National Insurance
obligations have been met
Maximum
opportunity
• Maximum opportunity – 125% of base salary per annum
• For on-target performance – 40% of maximum opportunity
• For threshold performance – 5% of maximum opportunity
Performance
metrics
• 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 PBT 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
• Awards are 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, or if there has been an
error in calculating performance, or in the case of gross misconduct
• The Remuneration Committee also has the discretion to claw back the bonus up to three years after
payment in the above circumstances, and in cases of fraud, the Committee can apply malus and claw
back for an unlimited period of time
• Please note that in 2018 the Committee decided to widen the circumstances in which malus and
clawback may apply to awards made from 2018 onwards – further details are set out below
72
corporate.dunelm.com Stock code: DNLM Long Term Incentive Plan – awards to be made to Executive Directors other than Will Adderley, who has requested that
he not be considered for LTIP awards
Purpose and link to
strategic objectives
• 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, the majority of which (after payment
of tax liabilities) are retained
Operation
• 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
Maximum
opportunity
Performance
metrics
• Two-thirds of all shares vesting must be retained by the Executive (after sale of shares to meet tax and
National Insurance obligations)
• For awards to be made in respect of the FY18–FY20 performance period, the maximum annual
award is 110,000 shares for the Chief Executive Officer and 60,000 shares for the Chief Financial
Officer, subject in either case to such adjustment as the Committee determines to take account of any
variation in the Company’s share capital
• For awards to be made in respect of the FY19–FY21 performance period and awards to be made in
future years, the maximum annual award for Executive Directors is shares with a value up to 200% of
salary, calculated by reference to the market price of Dunelm shares on the date preceding the date
of grant
• For threshold performance: 10% of the award will vest
• For maximum performance: 100% of the award will vest
• Straight-line vesting between the threshold and maximum levels will apply for performance between
threshold and maximum points
• Dividend accruals may be made in respect of special dividends paid during the performance period
applicable to an award and up to the vesting date. Payment would only be made in respect of shares
vesting after applying performance criteria. This will apply to all awards vesting after the 2017 policy
comes into effect
• Growth in 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 targets applicable to awards to be made are:
• No part of the award will vest until compound annual EPS growth exceeds RPI growth by 3%
• For awards to be made in respect of the FY18–FY20 performance period, 10% of the award vests
at compound annual EPS growth in excess of RPI plus 3%. 100% of the award vests at compound
annual EPS growth in excess of RPI plus 15%
• For awards to be made in respect of the FY19–FY21 performance period, and for awards made
in future years, 10% of the award vests at compound annual EPS growth in excess of RPI plus 3%.
100% of the award vests at compound annual EPS growth in excess of RPI plus 12%
• 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, or if there has been
an error in calculating performance or in the case of gross misconduct
• 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
• Please note that in 2018 the Committee decided to widen the circumstances in which malus and
clawback may apply to awards made from 2018 onwards – further details are set out below
Read about our sustainability on
pages 33 to 45
73
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Remuneration Report
continued
Lifetime lock-in and personal shareholding targets
Purpose and link to
strategic objectives
• Aligns with shareholder interests through shareholding and promotes long term thinking
Operation
• Executive Directors are required to build a beneficial holding of shares equal to 100% of salary after
three years and 200% of salary after five years from appointment
• A personal investment in Dunelm shares should be made on appointment as an Executive Director
(subject to closed periods)
• Two-thirds of amounts earned under the annual bonus and the LTIP (after payment of tax and National
Insurance) must be retained in Dunelm shares
• These shares must be held during employment and at least 50% of them retained for at least two
years after employment ends
• The Remuneration Committee retains the right to waive this requirement in exceptional
circumstances, such as death, divorce, ill health or severe financial hardship
Maximum
opportunity
Performance
metrics
• Not applicable
• Not applicable
All employee share plan (Sharesave)
Purpose and link to
strategic objectives
• Promotes share ownership by all eligible colleagues (including Executive Directors)
Operation
• 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
the date of invitation to join the plan
•
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 participation limits are set by the UK tax authorities. Currently the maximum limit is savings
of £500 per month
• None
• To attract and retain a high calibre Chairman and Non-Executive Directors by offering competitive fee
levels
Maximum
opportunity
Performance
metrics
Non-Executive Directors
Fees
Purpose and link to
strategic objectives
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 fees to be paid by way of fees to the Non-Executive Directors are set out in the Company’s
Articles of Association
• Fees paid to each Director are disclosed in the Annual Report on Implementation
Maximum
opportunity
Performance
metrics
• None
74
corporate.dunelm.com Stock code: DNLM LTIP
The EPS target for the LTIP is based on growth in diluted EPS
compared to the increase in the Index of Retail Prices (RPI) over
each performance period. The targets that apply to awards are
set out in the policy table on page 73.
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.
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. 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 for the LTIP. The use of EPS as a primary
measure for Dunelm’s LTIP is considered appropriate because of
the low level 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.
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.
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, 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, and
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.
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
Annual bonus
For the financial year 2018/19, 80% of the annual bonus is
linked to PBT and 20% to personal and strategic objectives.
Each Director’s annual bonus is therefore linked primarily to
delivery of Group financial performance, but also to personal
performance and contribution to the strategic progress of the
Group. The PBT target is set by the Remuneration Committee
each year, taking into account market consensus and broker
expectations. Personal and strategic objectives are set at the
commencement of the year and assessed by the Remuneration
Committee.
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.
For future years, the Committee will determine the financial
measures and the weighting of financial and non-financial
measures based on specific business priorities in a particular year.
75
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Remuneration Report
continued
Illustrative performance scenarios
The following graphs set out what Will Adderley, Nick Wilkinson and Laura Carr, the Executive Directors in office at the date of this
report, could earn in the financial year 2019/20 under the following scenarios:
Nick Wilkinson
Will Adderley
Laura Carr
£2,446k
45%
28%
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)
0
0
0
£
(
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t
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)
0
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£
(
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i
t
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e
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£654k
£1,581k
41%
17%
100%
42%
27%
£21k
£21k
£21k
'
)
0
0
0
£
(
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i
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t
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£1,462k
40%
31%
29%
£950k
36%
19%
45%
£422k
100%
Minimum
In line with
expectations
Maximum
Minimum
In line with
expectations
Maximum
Minimum
In line with
expectations
Maximum
n LTIP n Annual bonus n Fixed pay
The following assumptions have been made in respect of the
scenarios above:
Minimum (performance below threshold) – Fixed pay
(comprising base salary, benefits and pension) only with no
vesting under the annual cash bonus or LTIP (see table below).
Base
(last known
salary)
£’000
Benefits
(as in single
figure table)
£’000
Pension
(10% of
last known
salary)
£’000
Will Adderley
Nick Wilkinson
Laura Carr
—
551
365
21
48
20
—
551
371
1
10% of salary reflecting pension provision for 2019/20.
In line with expectations – Fixed pay plus annual cash bonus
at on-target performance of 40% of maximum opportunity (i.e.
50% of salary) and vesting of 59% of the award of shares under
the LTIP.
Maximum performance – Fixed pay plus 100% of maximum
annual bonus opportunity (i.e. 125% of salary) and 100% of
shares vesting under the LTIP.
Please note that two-thirds of performance pay earned by Nick
Wilkinson and Laura Carr (after payment of tax and National
Insurance liability) must be invested in Dunelm shares pursuant
to the ‘Lifetime Lock-in’.
Will Adderley has requested that his annual salary be maintained
at £1 per annum, and he has asked not to be considered for an
LTIP award.
It should be noted that the illustrative performance number
is likely to be different to the actual pay that is earned by Nick
Wilkinson and Laura Carr during the year:
• Actual pay will reflect company and personal performance
over the relevant performance period
• We are required to show the value of the LTIP awards that
are expected to be made in the year, not those which will
actually vest. This valuation is based on the expected face
value at the date of grant without making any assumptions
for share price growth, and assuming that the award vests
in full at the end of the three-year performance period. The
value of the LTIP award to be made is based on the grant to
Nick Wilkinson of an award over shares to the value of 200%
of salary, and to Laura Carr of an award over shares to the
value of 160% of salary
• No adjustment is made for payment of special dividend
equivalents as the level of these cannot be determined at
the date of this report
Recovery
There is provision for recovery of variable pay, as highlighted in
the policy table.
For bonus and LTIP awards made prior to September 2018, at
the discretion of the Remuneration Committee, recovery (malus)
may be made against any unpaid cash bonus or unvested LTIP
options 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.
Clawback may be operated at the discretion of the
Remuneration Committee against all variable awards 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.
76
corporate.dunelm.com Stock code: DNLM
In respect of bonus and LTIP awards made from September
2018 onwards, the Remuneration Committee has discretion
to apply malus and claw back as stated above in the following
circumstances:
• A material misstatement of any Group company’s financial
results;
• A material error in assessing a performance condition
applicable to the award or in the information or assumptions
on which the award was granted or vests;
• A material failure of risk management in any Group company
or a relevant business unit;
• Serious reputational damage to any Group company or a
relevant business unit;
• Serious misconduct or material error on the part of the
Participant;
• A material corporate failure as determined by the Board; or
• Any other circumstances which the Committee in its
discretion considers to be similar in their nature or effect to
those set out above.
•
Salary, pension, benefits and Sharesave options are not subject
to recovery.
Service contracts and loss of office
payments
All of the Executive Directors have service contracts. The notice
period for termination for Will Adderley is 12 months from either
party, and for Nick Wilkinson and Laura Carr is six 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 bonus, provided that it is prorated 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 prorating 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 on one month’s notice from either party, or three
months’ notice from either party in the case of Andy Harrison,
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 six 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, may be exercised within six 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
the discretion to allow the exercise of options for which the
performance period has not elapsed at the date of cessation
of employment, within six 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 relevant circumstances. In respect of
LTIP awards made after 1 July 2014, clawback 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 six
months from the cessation of employment due to injury, disability,
retirement, or redundancy (or 12 months in the case of death), or
the employing company leaving the Group or, provided that the
option has been held for at least three years, cessation for any
other reason (apart from dismissal by the Company).
77
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Remuneration Report
continued
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 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 any demerger,
dividend in specie, special 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 six months following
a change of control or winding up of the Company, using
savings in the participant’s 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, special
dividend 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 pay and the pay of other
colleagues
The principles set out on the remuneration strategy on page 70
are applied consistently to pay throughout the Group.
Pay for all colleagues 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 required
to retain two-thirds of post-tax performance pay in Dunelm
shares to be held for the duration of employment and beyond,
and are subject to higher personal 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 plan, 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. In previous years, the Committee
had formal oversight of the remuneration of Executive Board
members. In anticipation of the implementation of the 2018
Corporate Governance Code:
• Since June 2018 the Committee has formally approved the
remuneration of the Company Secretary and all members of
the Executive Board
• Since November 2018, in at least one of her twice
yearly Board updates, the People Director has provided
information about workforce policies and practices
• Since November 2018, the Board has received a 'Colleague
Dashboard' twice a year, which contains a number of
colleague measures, including gender and age split,
gender pay, reward, Sharesave participation, colleague
engagement, voluntary turnover and internal promotion.
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.
Details of how we engage with our colleagues on pay are set out
in the Implementation Report below.
Shareholder views
The Board is committed to ongoing engagement with
shareholders in respect of all governance matters, including
executive remuneration.
In addition to this, the Company holds a Corporate Governance
Day, usually every two years, hosted by the Chairman, the
Deputy Chairman and the other Non-Executive Directors, to
which all major shareholders are invited. This enables both
parties to discuss governance topics informally, including
remuneration. In addition, the Chairman and Non-Executive
Directors usually attend results presentations and a selection
of shareholder meetings. The last Corporate Governance Day
was in January 2018, and a copy of the presentation is on our
website https://corporate.dunelm.com.
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 Investment
Association (IA), the Pension and Lifetime Savings Association,
ISS and Pensions Investment Research Council (PIRC) are also
considered by the Board.
Read about our sustainability on
pages 33 to 45
78
corporate.dunelm.com Stock code: DNLM • 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
• 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, would normally be in line
with the policy table set out on pages 71 to 74. The Committee
would explain the rationale for the remuneration package in the
next Annual Report of the Company.
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 in the policy tables; 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, the
Committee may rely on the exemption in Listing Rule 9.4.2,
which allows for the grant of share or share option awards to
facilitate, in unusual circumstances, the recruitment of a Director.
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’).
On the appointment of a new Chairman the fee 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 market. All other Non-Executive Directors receive the
same base and Committee chair fees, which are set at median
or below. No share incentives or performance-related incentives
would be offered.
Details of the remuneration offered to Laura Carr who was
appointed in April 2018, and joined the Board on 29 November
2018, are set out in the Implementation Report.
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.
Shareholders were consulted prior to putting forward both the
2015 policy and the 2017 policy for approval.
Approach to recruitment remuneration
The Remuneration Committee will apply the principles set
out below 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
• Notwithstanding the approved policy, which has a
maximum pension entitlement of 15% of base salary, the
maximum pension entitlement (or cash allowance) for an
Executive Director appointed after June 2019 will be the
management entitlement of other colleagues throughout
the Company (currently 5% of base salary). For Executive
Directors appointed from 1 January 2018 – which includes
Nick Wilkinson and Laura Carr – the Committee had already
decided to apply a maximum of 10% of base salary
• Remuneration should be in line with the policy approved
by shareholders 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
Circumstances in which the Committee might apply this
discretion 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
• Where 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
Examples of remuneration decisions that the Committee may
make 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
79
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Remuneration Report
continued
Implementation report
This section of the report sets out how the Directors’ remuneration policy which was approved by shareholders on 21 November
2017 has been applied in the financial year being reported on.
Committee membership and meetings
The following Directors served on the Remuneration Committee during the year:
Table 1 – Committee membership
Member
William Reeve (Chair)
Liz Doherty
Andy Harrison
Peter Ruis
Rachel Osborne1
Period from:
1 July 2015
1 May 2013
1 September 2014
10 September 2015
To:
To date
To date
To date
To date
1 April 2018
28 August 2018
1 Rachel Osborne stepped down from the Board and the Committee on 29 August 2018. Ian Bull and Paula Vennells were appointed to the Board and the Committee after the
year end.
The Company Secretary acts as secretary to the Committee.
Three meetings were held in the year and members’ attendance was as shown in the table below:
Table 2 – Attendance at Committee meetings
Member
William Reeve (Chair)
Liz Doherty
Andy Harrison
Peter Ruis
Rachel Osborne
Meetings attended:
3/3
3/3
3/3
3/3
1/1
No Director ever participates when his or her own remuneration is discussed.
Advisers
The Committee uses Deloitte for 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 a 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.
Total fees paid to Deloitte for remuneration-related work in the year were £5,800 (2018: £8,150).
Deloitte were also engaged to provide non-remuneration-related consultancy services and were paid £117,500 in the year (2018: nil).
The Chief Executive Officer attends Committee meetings by invitation to make recommendations as to the remuneration payable to
below Board Executives. The People Director attends all meetings by invitation to advise on remuneration-related issues and provide
details of the remuneration applied throughout the Group so that a consistent approach can be adopted.
80
corporate.dunelm.com Stock code: DNLM Single figure for total remuneration (audited information)
The following table sets out total remuneration for Directors for the period ended 29 June 2019:
Table 3 – Directors’ remuneration – single figure table-
Salary/fees6
£’000
Benefits3
£’000
Bonus4,7
£’000
LTIP awards2
£’000
Pension5
£’000
Total
£’000
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Director
Executive
Nick Wilkinson
Laura Carr1
Will Adderley
John Browett1,2
Keith Down1,2
Non-Executive
541
216
—
_
_
221
—
—
347
327
Andy Harrison
212
208
Marion Sears
Liz Doherty1
William Reeve1
Peter Ruis
Rachel Osborne1
Simon Emeny1
51
68
61
51
8
—
50
64
56
50
12
26
108
312
21
_
_
—
—
—
—
—
—
—
28
—
21
13
20
—
—
—
—
—
—
—
662
270
—
—
—
—
—
—
—
—
—
—
37
—
—
_
—
—
—
—
—
—
—
—
—
—
—
_
_
—
—
—
—
—
—
—
—
—
—
—
—
172
—
—
—
—
—
—
—
54
22
—
_
_
—
—
—
—
—
—
—
22
1,365
308
—
—
69
49
—
—
—
—
—
—
—
820
21
_
_
—
21
429
568
212
208
51
68
61
51
8
—
50
64
56
50
12
26
172
76
140
2,657
1,792
Total
1,208
1,361
441
82
932
37
¹ John Browett stepped down from the Board on 29 August 2017, Simon Emeny retired on 21 November 2017, Keith Down stepped down from the Board on 24 May 2018.
Nick Wilkinson was appointed on 1 February 2018. Laura Carr joined on 29 November 2018. Rachel Osborne joined the Board on 1 April 2018 and stepped down on 29
August 2018. Liz Doherty was appointed the Senior Independent Director and William Reeve was appointed Chair of the Remuneration Committee on 22 November 2017.
Basic salary/fee, SID fees and Committee Chair fees for Simon Emeny, Rachel Osborne, Liz Doherty and William Reeve, and salary, pension and benefits for John Browett, Keith
Down, Nick Wilkinson and Laura Carr are prorated over the relevant year. The total figure for John Browett includes £322,120 in respect of salary and benefits paid for his six-
month notice period.
² As John Browett and Keith Down stepped down during 2018 neither of them qualified for bonus in respect of FY18 and all LTIP and Sharesave options have lapsed. The sum
for 2018 LTIP paid to Keith Down relates to the second tranche of his Joining Award over 26,488 shares which was exercised on 19 September 2017. The closing mid market
share price of Dunelm shares on vesting date (15 September 2017) was 650p.
³ Benefits include the cost to the Company of a car allowance and private health insurance for the individual and their family. Nick Wilkinson is also entitled to an allowance of
5% of his annual salary towards the cost of travel from home to Leicester; and a relocation allowance of £50,000, partially in the form of Dunelm store credit, plus a contribution
of £1,500 per month towards the cost of temporary accommodation for the first 12 months of employment. Laura Carr was entitled to a relocation allowance of £50,000
and also received a payment of £250,000 when she commenced employment, in partial compensation for remuneration foregone when she left her former employer to join
Dunelm. Further details are set out below.
4 Annual bonus is the amount earned in respect of performance in the relevant year. Details of how this, the FY19 bonus was calculated, are set out below.
5 Pension was 20% of salary for John Browett, 15% of base salary for Keith Down, and is 10% of salary for Nick Wilkinson and Laura Carr. Will Adderley waived his entitlement to
pension from 1 July 2015.
6 From 1 July 2019, Nick Wilkinson’s base salary was increased by 2%, in line with the company-wide award for monthly paid colleagues. Laura Carr was not eligible for an
increase in base salary. Will Adderley’s base salary is held at £1 per annum. The fee for the Chairman and the base fee for the other Non-Executive Directors, the SID fee and
the Committee fees were also increased by 2%.
7 Nick Wilkinson and Laura Carr were each awarded an annual performance-related cash bonus for FY19 with a maximum potential payment of 125% of salary. Laura Carr’s
bonus was prorated from the date of her appointment of 29 November 2018. The performance conditions which applied to the bonus were those set in September 2018.
The performance condition was linked to PBT versus budget (80%), and performance against personal and strategic objectives (20%). Although not exercised this year, the
Committee has the ability to apply judgement to increase or decrease the amount payable by application of the formula, although no more than the maximum potential
opportunity would be paid. Will Adderley has asked that he not be considered for a bonus award.
81
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Remuneration Report
continued
Annual bonus
Each of Nick Wilkinson and Laura Carr were entitled to receive an annual bonus of up to 125% of base salary during the year, subject
to satisfaction of the performance targets set out below. Laura’s bonus was prorated from the commencement of her employment on
29 November 2018. Will Adderley asked not to be considered for annual bonus.
Financial target – 80% of bonus opportunity
For the period ended 29 June 2019, budget PBT was £114.0m. The financial target set was such that no bonus would be paid
until PBT reached £108.3m and maximum bonus would be paid at £122.6m. Between those numbers, bonus would be payable
calculated on a straight-line basis. Market consensus for 2018/19 PBT at the date the target was set in early September 2018 was
£112.4m.
PBT for 2018/19 was £125.9m. There was full payment in respect of this PBT element of the bonus of £540,600 for Nick Wilkinson
(2018: nil) and £215,682 for Laura Carr (2018: nil), Laura Carr’s bonus being prorated from the date of joining the Group on
29 November 2018.
Strategic and personal objectives – 20% of bonus opportunity
Assessment was made by reference to personal performance of both Nick Wilkinson and Laura Carr.
In the case of Nick, assessment was also made of progress against the strategic objectives set out below, and a number of specific
quantifiable measures. The assessment was made by reference to performance across the objectives as a whole, with no specific
weighting. Performance against these objectives was assessed as follows:
Objective
Performance
Grow Dunelm’s active customer base by
1 million by the end of FY23
Performance significantly exceeded expectations – active customer base grew by
8.5% (+7.3% stores and 28.4% online) in the year, which is over half way to the
original five-year target. We have now increased the FY23 target to 2 million.
Increase shopping frequency by 1× per
annum by the end of FY23
Frequency improved in the year, on track to meet the target by FY23, with some
specific initiatives planned for FY20.
Open four new stores (two relocations) and
eight refits, hitting financial targets
Complete online integration project
(including Click and Collect) on time
One new store opening delayed by the landlord – we anticipate that this store
will now open in FY20. Cost efficiencies delivered on the planned refits to reduce
capital spend and improve cash position over the year. Overall financial targets were
achieved.
Full roll-out delayed to Autumn 2019, to ensure the quality of the solution being
delivered and that the business was ready to implement a smooth transition.
Performance of the existing site over the year has been strong, and further mitigating
steps were taken to ensure that the delay has not adversely impacted budgeted
financial performance.
Improve customer engagement score
Achieved – increased customer satisfaction across all of our channels, with particular
progress on deliveries by our own two-man home delivery fleet.
Improve colleague engagement score
Achieved – our colleague NPS improved by 14%, on top of a 30% increase over the
previous year. We have also made good progress on a number of our other internal
colleague measures, as well as being recognised by Glassdoor as being in the “top
50 best companies to work for in the UK”.
Hit full year budgeted free cash flow figure
(£105m)
Significantly exceeded target – free cash flow was £154.4m at year end. This
represents a year-on-year improvement of £101.5m, or 192%.
Hit full year budgeted central cost figures
Target exceeded – central wages cost 3.5% of sales versus target of 3.7% and other
costs 0.9% of sales, below target of 1.3%.
Note that the figures for customer numbers, frequency, colleague and customer engagement have been withheld as they are
commercially sensitive, and the Committee considers that disclosure would be harmful to the Company.
The Committee carefully considered the above performance. It was noted that there has been significant overachievement of the
key colleague and customer measures which are important to the delivery of the Company’s strategy over the long term, whilst cost
and cash control measures have been strictly maintained. The lead indicators for strategic development, being new active customers
and customer engagement, were above expectation. At the same time an improvement in the colleague engagement score was
achieved. These results provide a strong basis for sustainable strategic development and shareholder value creation. However,
notwithstanding our strong strategic and financial performance, a delay to the online integration programme meant that the
Committee was unable to award Nick the maximum bonus. Taking all of the above into account, it was determined that performance
had greatly exceeded expectations, and therefore 90% (2018: 67%) of this element of his bonus had been earned, giving rise to a
payment of £121,635 to Nick Wilkinson (2018: £36,879).
82
corporate.dunelm.com Stock code: DNLM As Laura Carr joined part way through the year, this element of the bonus was assessed by reference to overall performance, and a
specific set of personal objectives as set out below:
Objective
Performance
Build key external relationships
Strong relationships built with brokers, financial PR advisers and key shareholders.
Good working relationship with auditors. Good feedback received from all advisers.
Effective delivery of interim results
presentation and quarterly trading updates
Interim results and updates well received. Analysts and shareholder feedback
conducted by brokers and financial PR advisers commented positively on the quality
of the management presentation.
Embed monthly financial reviews
Monthly financial review process now firmly embedded, with increased
accountability by Executive Board members for financial performance in their
functional areas. Greater focus on stock and working capital management has
delivered strong improvements in the year. Productivity working group re-
invigorated for the new financial year.
Effective delivery of the FY20 budget and
financial plan
The budget and financial planning process has been conducted well, and reporting
has been clear. Laura has recruited an experienced Finance Director and has
restructured her team to focus on the needs of the business going forward.
The Committee considered Laura’s performance across these measures as a whole, as well as the quality of her contribution at Board
and Audit and Risk Committee meetings. Further, she has built strong internal relationships and put in place plans to strengthen
the quality and performance of the Finance team. In a part-year, and without continuity from her predecessor, taking all of the
above into account, it was determined that Laura has had a strong start and her performance has significantly exceeded the Board’s
expectations and therefore 100% (2018: N/A) of this element of her bonus had been earned, giving rise to a payment of £53,920 to
Laura Carr (prorated from the date of joining the Group on 29 November 2018 (2018: N/A)).
The Committee considered whether these bonus outturns were fair, reasonable and appropriate in the context of Dunelm’s overall
performance, stakeholder engagement and shareholder return over the year. It concluded that it would not exercise discretion to
amend the bonus awards to Nick Wilkinson and Laura Carr for any reason.
Total bonus earned is set out in the table below:
Table 4 – Annual bonus earned in respect of 2018/19 performance
Nick Wilkinson
Laura Carr
Will Adderley (waived entitlement)
Bonus
awarded
£
Percentage
of maximum
award
£662,235
£269,602
—
97.9%
100%
N/A
LTIP – awards earned in respect of performance in 2017–19
No awards under the LTIP are due to vest to Nick Wilkinson or Laura Carr in respect of 2017-19 performance and Will Adderley
waived his entitlement to receive an LTIP award in 2016.
Over the three-year performance period which ended on 29 June 2019, reported diluted EPS declined at a compound annual rate
of -0.3%. This is 3.5% below the compound annual growth in RPI over the same period. Accordingly, all LTIP awards due to vest in
2019 to colleagues below the Board will lapse as the financial performance criteria have not been met.
Table 5 – LTIP awards earned in respect of performance in 2017–19
None awarded to current Executive Directors
Percentage
of
maximum
award
Shares
vesting
0
0%
83
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Remuneration Report
continued
LTIP awards made to Directors during 2018/19
LTIP awards were made on 17 October 2018 to Nick Wilkinson, and on 30 November 2018 to Laura Carr as set out below:
Table 6 – LTIP awards made to Directors during 2018/19
Number
of shares
Face value
at date of
award
180,802
£1,081,1961
Name
Award
Nick
Wilkinson
Nil cost
option
under
LTIP
Performance
period
Vesting
date
% vesting
at
threshold
performance
July 2018 to
June 2021
17 October
2021
10%
Performance condition
Growth in 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 compound annual EPS
growth exceeds RPI growth
by 3%.
10% of the award vests when
compound annual growth in EPS
exceeds RPI growth by 3%.
100% of the award vests when
compound annual growth in EPS
exceeds RPI by 12%. Between
those figures the award will vest
on a straight-line basis.
Two-thirds of shares vesting
(after payment of tax and
National Insurance) must
be held for the duration of
employment, and 50% of these
retained for two years following
termination of employment.
Laura Carr Nil cost
option
under
LTIP
105,893
£584,0002
As for Nick Wilkinson
July 2018 to
June 2021
10%
30
November
2021
1
2
Based on the closing share price on 16 October 2018 of 598.0p per share.
Based on the closing share price on 29 November 2018 of 551.5p per share.
Joining arrangements
Last year we stated that, although Laura Carr was offered a remuneration package that is in line with that of her predecessor, except
that her pension entitlement (10% of base salary) is lower than that of the previous CFO (15%), in order to secure her services we
needed to agree certain joining arrangements. At the time of issue of the Annual Report these had not been finalised.
Laura was financially disadvantaged by leaving her previous role after a relatively short tenure to join Dunelm. We also asked
her to relocate her family to Leicestershire. We therefore agreed that we would partially compensate her for costs incurred and
remuneration foregone.
The joining compensation comprised relocation expenses of £50,000; and a cash payment of £250,000 when she joined the
Company. Laura was required to vest the net amount of the cash payment (after deduction of tax and National Insurance) in Dunelm
shares. She purchased 25,000 shares at 552.5p per share on 30 November 2018. These shares are subject to the 'Lifetime Lock-in'
described in the remuneration policy, which requires her to hold the shares for the duration of her employment, and at least 50%
must be held for at least two years after she leaves the Company.
84
corporate.dunelm.com Stock code: DNLM The payment of £250,000 was to compensate her for loss of cash bonus, the value of deferred shares otherwise due to vest
unconditionally in November 2018, and a portion of in-flight LTIP awards forfeited, taking into account the time that had elapsed
through the performance period and extent to which the conditions were likely to be met. The Committee determined that the cash
compensation of £250,000 awarded was at least on a 'like-for-like' basis to remuneration foregone, both in terms of quantum (as
outlined above) and timing: cash and shares vesting in 2018 from her previous employer which could have been sold immediately,
as well as the expected value of shares due to vest in 2019/20 that could also have been sold on vesting, have been exchanged for
cash that was required to be invested in Dunelm shares to be held at least for the duration of employment, and 50% for a further two
years. It is also fully in line with our remuneration policy. The compensation was carefully considered after taking advice from Deloitte
and looking at Laura’s remuneration package as a whole, and taking into account the need to secure a permanent candidate of her
calibre.
The maximum amount of Laura’s joining compensation is less than that put in place for her predecessor, Keith Down, in 2015. If
Laura voluntarily leaves the business or is lawfully dismissed within two years of commencing her employment with the Company,
she will be liable to repay this joining compensation.
Payments to past Directors and for loss of office (audited)
David Stead
David Stead retired from the Board on 31 December 2015. David received his salary, benefits and pension allowance as usual until
his leaving date of 31 December 2015, at the rate set out in the Annual Report for 2014/15.
At 31 December 2015, David had three outstanding awards under the LTIP:
Table 7 – David Stead’s LTIP awards at his retirement date (31 December 2015):
Award
date
Performance
period
Normal
vesting date
7 October 2013
FY14–FY16
7 October 2018*
9 October 2014
FY15–FY17
9 October 2019*
15 October 2015
FY16–FY18
15 October 2020*
No. of shares
49,216
53,922
44,592
* Includes two-year holding period following the end of the three-year performance period.
No. of shares
prorated to
31 December
2015
No. of shares to
vest after applying
performance
condition
40,976
27,035
7,350
18,029
Nil
Nil
The Remuneration Committee determined that as a ‘good leaver’ with 12 years’ service during a time of substantial growth in
shareholder value, David may exercise the above awards, subject to time prorating, and after applying the applicable performance
criteria over the full performance period. The maximum possible vesting, if performance conditions were fully met, is set out in the
table above (column headed 'No. of shares prorated to 31 December 2015'). The awards may be exercised within six months of the
normal vesting date specified above.
The above arrangements are fully in line with the remuneration policy approved at the AGM in November 2015. The LTIP award
made to David Stead in October 2015 was disclosed in the 2015 and 2016 remuneration reports which were approved by
shareholders. The Remuneration Committee’s decision reflects the service provided by David over the financial years covered by the
applicable performance periods and has been prorated according to that service over those periods.
No further payments have been or are being made to David Stead in respect of loss of office or the termination of his employment.
David Stead exercised the nil cost LTIP options granted on 7 October 2013 over 18,029 shares on 12 October 2018. The closing
share price on that date was 578.5p per share.
Having retired on 31 December 2015, on 16 April 2018, at the request of the Board, David Stead entered into a new short term
service contract with the Company to provide interim support on a part-time basis pending Laura Carr joining the Company as CFO
in November 2018. Since Laura joined the Group he has continued to provide consultancy services on approximately one day per
month. David was not appointed as a Director of Dunelm Group plc or any other Group company. Details of payments made to
David in the year can be found in note 26 to the financial statements.
85
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Remuneration Report
continued
Statement of Directors’ share interests
Executive Directors are subject to a shareholding target which requires them to build a beneficial holding of Dunelm shares with a
value of 1× salary after three years and 2× salary after five years (measured by reference to share price at the financial year end). In
addition, they are required to make a personal investment in Dunelm shares on appointment (subject to Company closed periods);
and to invest two-thirds of any annual bonus paid and LTIP awards earned (after payment of tax and National Insurance liability on
exercise) in Dunelm shares.
Will Adderley complies with this requirement at the financial year end.
Nick Wilkinson was appointed on 1 February 2018 and Laura Carr was appointed on 29 November 2018. At the date of this report,
they have beneficial shareholdings equal to 193.4% and 90.7% of salary respectively (based on closing share price at the year end -
please see below for detail).
Table 8 and Table 9 show the interests of the Directors in shares of the Company at 29 June 2019.
Table 8 – Directors’ beneficial shareholdings (audited)
Will Adderley
Andy Harrison
Marion Sears
Nick Wilkinson
Laura Carr
William Reeve
Liz Doherty
Peter Ruis
At 29 June
2019
1p Ordinary
Shares
At 30 June
2018
1p Ordinary
Shares
Percentage
of salary
(where
applicable)*
Shareholding target
(where applicable)
90,231,779
54,161,779
416,480
416,480
105,000
105,000
87,731
38,855
149%
1× salary by February 2021
2× salary by February 2023
63% 1× salary by November 2021
2× salary by November 2023
25,000
—
12,500
2,500
—
12,500
2,500
—
* Based on the closing share price of 920p at 28 June 2019 and base salary at 1 July 2019.
Between the financial year end and the date of this report Directors have purchased shares as follows:
Director
Ian Bull (appointed 10 July 2019)
Nick Wilkinson
Laura Carr
Date of
purchase
11 July 2019
17 July 2019
17 July 2019
No. purchased
Total beneficial
holding following
purchase
Percentage of
salary (where
applicable)*
4,000
26,021
11,000
4,000
113,752
36,000
N/A
193.4%
90.7%
* Based on the closing share price of 920p at 28 June 2019 and base salary as at 1 July 2019.
Table 9 – Directors’ interests in options at the period end (audited)
Director
Will Adderley
Nick Wilkinson
Date of
award
—
Nature of
award
Share
options at
29 June
2019
End of
performance
period
Option
price
Market price
of shares at
date of award
—
Nil
—
February 2018
2018–20 LTIP
110,000
June 2020
October 2018
2019–21 LTIP
180,802
June 2021
2019-21
Sharesave
3,757
December
2021
—
Nil
Nil
479.0p
Nil
—
584.0p
598.0p
598.0p
551.5p
Laura Carr
November 2018
2019–21 LTIP
105,893
June 2021
The LTIP awards above granted to Nick Wilkinson and Laura Carr are subject to the performance conditions noted in the policy table
in the remuneration policy above.
86
corporate.dunelm.com Stock code: DNLM Share options and dilution
The Remuneration Committee considers the provisions of the Investment Association’s 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, over the
last 10-year period options have been granted over 2.8% of the Company’s issued share capital (adjusted for share issuance and
cancellation). The Group does not hold any shares in an employee benefit trust.
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 for Will Adderley, and six months for Nick Wilkinson and Laura Carr. Service contracts
for the Executives include a non-compete arrangement. 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 Andy Harrison, the Chairman.
Table 10 – Directors’ service contracts
Will Adderley
Nick Wilkinson
Laura Carr
Marion Sears
Liz Doherty
Andy Harrison
William Reeve
Peter Ruis
Ian Bull
Paula Vennells
Start date
under contract
Unexpired
term
Notice
period
28 September 2006
1 February 2018
29 November 2018
N/A
N/A
N/A
22 July 2004
10 months
1 May 2013
31 months
12 months
6 months
6 months
1 month
1 month
1 September 2014
12 months
3 months
1 July 2015
21 months
10 September 2015
24 months
10 July 2019
35 months
4 September 2019
36 months
1 month
1 month
1 month
1 month
Since Marion Sears has now served 15 years on the Board (13 of which are post flotation of the Company in 2006), her contract is
renewed for one-year terms (rather than three), with the notice period referred to above.
Relative TSR performance
The graph below shows the Group’s performance over ten years, measured by total shareholder return, compared with the FTSE
350 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 2 July 2009 = 100)
The shares traded in the range of 468.5p to 981.0p during the year and stood at 920.0p at 29 June 2019
Dunelm
FTSE 250
FTSE 350
Retail
)
l
m
e
n
u
D
o
t
d
e
s
a
b
e
r
(
e
c
i
r
p
e
r
a
h
S
700
600
500
400
300
200
100
0
June 09
June 10
June 11
June 12
June 13
June 14
June 15
June 16
June 17
June 18
June 19
598.2%
242.1%
48.4%
87
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Remuneration Report
continued
Table 12 – Historic Chief Executive Officer pay
The table below sets out the prescribed remuneration data for each of the individuals undertaking the role of Chief Executive Officer
during each of the last ten financial years:
FY18/19
FY17/18
FY17/18
FY16/17
FY15/16
FY15/16
FY14/15
FY14/15
FY13/14
FY12/13
FY11/12
FY10/11
FY10/11
FY09/10
Nick Wilkinson
Nick Wilkinson5
John Browett5
John Browett
John Browett1
Will Adderley1
Will Adderley2
Nick Wharton2
Nick Wharton3
Nick Wharton
Nick Wharton
Nick Wharton4
Will Adderley4
Will Adderley
CEO Single
figure of total
remuneration
£’000
Annual bonus payment
against maximum
opportunity
%
Long term incentive
vesting rates against
maximum
opportunity
%
1,365
308
429
722
489
10
507
110
1,509
1,292
853
429
1,413
1,366
97.9%
13.3%
N/A
14.0%
57.7%
N/A
5%
N/A
22.5%
97.0%
100.0%
6.0%
4.0%
100.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
77.5%
86.7%
N/A
N/A
100.0%
100.0%
1 Will Adderley was succeeded by John Browett as Chief Executive Officer on 1 January 2016. The data for each Director for 2015/16 is prorated by time of service as Chief
Executive Officer. Will Adderley’s base salary was reduced to £1 on 1 July 2015.
2 Will Adderley was reappointed Chief Executive Officer on 11 September 2014, following the resignation of Nick Wharton on 10 September 2014. The data for each
Director for 2014/15 is prorated by time of service as Chief Executive Officer.
3
Nick Wharton’s first LTIP award vested and was exercised in December 2013. No LTIP awards have vested to John Browett since his appointment.
4 Will Adderley was Chief Executive Officer until he was succeeded by Nick Wharton on 1 February 2011. The data for each Director for 2010/11 is prorated by time of
service as Chief Executive Officer.
5
John Browett left the Group on 29 August 2017. He was succeeded by Nick Wilkinson on 1 February 2018. The total figure for John Browett includes £322,120 in respect of
salary and benefits paid for his six-month notice period. The data for each Director for 2017/18 is prorated by time of service as Chief Executive Officer.
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 Chief Executive Officer pay
Change in
base salary
2018
to 2019
Change in
benefits
2018
to 2019
Bonus
earned
as % of salary
2019
Bonus
earned
as % of salary
2018
% change in
bonus
earned
2018 to 2019
% change in
bonus
earned
2017 to 2018
Chief Executive Officer2
All colleagues (per capita)
(4.8%)
163.4%
3.6%
22.9%
122.4%
18.7%
6.5%
6.0%1
1,689.2%
318.6%
(58.6%)
101.9%
1
2
Bonus percentage has been calculated in relation to only those employees receiving a bonus in the period as this is considered a more appropriate comparator group.
John Browett left the Group on 29 August 2017. Nick Wilkinson was appointed on 1 February 2018. 2018 Chief Executive Officer figures used in the above calculation
include both John Browett and Nick Wilkinson and are as per the Single Figure Table in the 2018 Annual Report. These therefore include £322,120 in respect of John
Browett’s salary and benefits paid for his six-month notice period. The large increase in bonus earned by the Chief Executive Officer year-on-year is due to the 2018 bonus
figures being prorated for Nick Wilkinson’s length of service. 2019 Chief Executive Office salary includes one-off benefits for Nick Wilkinson.
88
corporate.dunelm.com Stock code: DNLM Table 14 – Relative spend on pay
The table below shows the all employee pay cost and returns to shareholders by way of dividends (including special dividends) and
share buyback for 2018/19 and 2017/18:
Total spend on pay
Ordinary dividend to shareholders
Distributions to shareholders via treasury share purchases
Special distributions to shareholders
Total distributions to shareholders
This information is based on the following:
2018/19
£’m
143.0
54.6
—
—
2017/18
£’m
139.8
53.4
—
—
% increase
2.3%
2.2%
N/A
N/A
54.6
53.4
• Total spend on pay – total employee costs excluding car allowances and bonuses from note 6 on page 122
• Dividends taken from note 9 on page 124
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.
Will Adderley and Laura Carr do not hold any external plc board appointments. Will Adderley is a Director of WA Capital Limited.
Nick Wilkinson was a trustee of Age UK during the period, but retired from this position in May 2019. This role is unremunerated.
Senior Executive remuneration
The Remuneration Committee approved the remuneration of the Company Secretary and Executive Board members. The package
for new appointments is formally presented to the Committee for approval. In conducting its assessment of Executive Board
remuneration, the Committee pays particular regard to whether any individual is incentivised to take risks inappropriate to their role
and responsibilities.
Members of the Executive Board and senior management team are eligible for awards under the LTIP.
All members of senior management who receive share awards are also subject to shareholding targets, in order to improve their
alignment with shareholders, as follows:
Executive Board and certain other senior Executives
1× base salary to be acquired over time
Other Executives
0.5× base salary to be acquired over time
89
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Remuneration Report
continued
Gender pay disclosures
At the end of March, Dunelm published its second gender pay report. We are committed to paying men and women equally
for roles of the same size and scale. We are proud that 67% of our colleagues are female. However, in common with many other
retailers, 75% of our colleagues are employed in our retail operations, and these roles tend to be lower paid. As a result, we have a
gap in the pay between genders (our mean gap is 19.4% and our median gap is 8.1%), very much in line with our peers in the UK
retail sector.
This year the gap widened slightly, in part as we recruited several new highly paid roles into our Technology team. Technology
is historically a male-dominated function, with only 15% of Technology roles in the UK filled by women – our Technology team is
currently 20% female. However we have seen progress in our balance of males and females in the workforce and a shift towards
female representation on our senior leadership team: 30% of our senior leadership roles are held by women, and four of our ten
Board members, and five of our eight Executive Board members are female.
We don’t believe short term fixes will fundamentally address the gender pay gap — our plans are focused on taking long term,
sustainable actions. This year these included continuing our Empowering Female Leaders programme, holding a 'Women in Tech'
event, and introducing the ability for colleagues of both sexes to take unpaid leave in addition to their holiday entitlement so that
they can manage family commitments alongside work.
Engaging with our colleagues on pay
In a new process introduced in the financial year, Marion Sears, the Non-Executive Director who has been designated to consider
colleague views, attended two National Voice Forum meetings, and at one of these gave a presentation about remuneration.
Our approach to remuneration throughout the Group, and the key elements of our remuneration policy specifically for Executive
Directors, were discussed, and colleagues were invited to comment or ask questions. No concerns were expressed, and there
was a general discussion about how to make potential bonus pay more understandable and motivating. Colleagues were also
reminded that they may raise any questions or make comments about executive pay via the People Director, directly with Marion, or
anonymously through our engagement survey.
Statement of implementation of policy in the 2019/20 financial year
Base salary and benefits for each of the Executive Directors for 2019/20 are set out in the table below:
Table 15 – Base salary, benefits and pension for 2019/20
Base
salary
Increase to
base salary
year-on-year
£551,412
2%
Nick
Wilkinson
Laura Carr
£365,000
N/A
Increase to
benefits
year-on-year
Increase to
pension
year-on-year
Pension
Benefits
Car allowance; travel allowance of
5% of salary; private health insurance for
the individual and their family;
permanent health cover; life assurance;
mobile phone; colleague discount;
relocation expenses
Car allowance; private health insurance
for the individual and their family;
permanent health cover; life assurance;
mobile phone; colleague discount;
relocation expenses
N/A
£55,141
2%
N/A
£36,500
N/A
Will Adderley
£1
Nil
As for Laura Carr above
Nil
Nil
N/A
Basic salary increase for Nick Wilkinson is in line with the company-wide award for monthly paid colleagues of 2%. Laura Carr was
not eligible for an increase in base salary in 2019.
Will Adderley has asked that he not be considered for a pay increase.
90
corporate.dunelm.com Stock code: DNLM Annual bonus
Nick Wilkinson and Laura Carr have each been awarded a bonus opportunity of up to 125% of base salary. The performance
conditions attached to the bonus are:
• 80% linked to achievement of budget PBT;
• 20% linked to achievement of strategic and personal targets, aligned to the Group strategy.
The budget PBT is set taking into account market consensus and broker expectations. The actual financial and strategic targets have
not been disclosed at this time as they are commercially sensitive. The targets and an assessment of the extent to which they have
been achieved will be disclosed in next year’s Remuneration Report.
Nick Wilkinson and Laura Carr have committed that two-thirds of the bonus earned (after payment of income tax and National
Insurance) will be invested in Dunelm shares, to be held for the duration of employment, with 50% of these shares to be retained for
two years following cessation of employment.
Will Adderley has asked that he not be considered for a bonus award.
LTIP
In line with our policy, an award is expected to be made to Nick Wilkinson and Laura Carr in October 2019 under the Long Term
Incentive Plan over shares to the value of 200% and 160% of salary respectively.
The award will vest, subject to continued employment, on the third anniversary of the grant date, to the extent that performance
conditions have been met. Two-thirds of vested shares (after sale to cover tax and National Insurance liability on exercise) must be
retained for the duration of employment, and 50% of these must be retained for two years following cessation of employment.
Will Adderley has asked that he not be considered for an LTIP award.
Sharesave
An invitation will be issued in October 2019 to all eligible employees, to apply for options to be granted under the Sharesave
scheme 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 £500 per month. Executive Directors employed at the eligibility date may apply for
Sharesave options, subject to the plan rules.
Non-Executive Director fees for 2019/20
Fees to be paid to Non-Executive Directors are as set out in the table below:
Table 16 – Non-Executive Director Fees
Position
Base fee
Committee/
SID fee
Increase in
base fee
year-on-year
Increase in
Committee
fee
year- on-year
Comment
Andy Harrison
Chairman
£216,487
Nil
Liz Doherty
Audit and Risk Committee Chair
£51,957
£10,404
Senior Independent Director
£6,496
William Reeve
Non-Executive Director
£51,957
£10,404
Peter Ruis
Non-Executive Director
£51,957
Marion Sears
Non-Executive Director
£51,957
Ian Bull
Non-Executive Director
£51,957
Paula Vennells
Non-Executive Director
£51,957
Nil
Nil
Nil
Nil
2%
2%
2%
2%
2%
2%
N/A
N/A
N/A
2%
2%
N/A
N/A
N/A
N/A
N/A
Appointed on
10 July 2019
Appointed on
4 September 2019
Fees above are for the full year and reflect Board responsibilities at the date of this report.
Base fee, Senior Independent Director (SID) fee and Committee Chair fee increases with effect from 1 July 2019 were in line with the
company-wide increase of 2%.
91
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Remuneration Report
continued
Statement of shareholder voting
At the Annual General Meeting on 29 November 2018, the total number of shares in issue with voting rights (excluding treasury
shares) was 201,937,325. Details of voting on remuneration-related resolutions are set out below:
Table 17 – Voting on remuneration-related resolutions at the 2018 AGM
Resolution
Votes for
% of
votes cast
Votes
against
% of
votes cast
Votes
withheld % withheld
Approve Annual Remuneration Report 180,952,492
99.47%
958,872
0.53%
697,013
0.38%
In summary, we believe our remuneration policy and practices are in good shape, steadily improving, and playing their part in
strengthening the Company over the long term.
Approved by the Board on 4 September 2019.
William Reeve
Chair of the Remuneration Committee
4 September 2019
92
corporate.dunelm.com Stock code: DNLM Letter from the Chair of the
Nominations Committee
Board effectiveness
In 2016 and 2017 we had an externally
facilitated Board review. As in 2018, this
year we conducted an internal review
based on a number of questions aimed at
improving the Board’s effectiveness. We
concluded that we are a broadly effective
team of Executives and Non-Executives
working well together. There is always
room for improvement and we agreed a
number of actions, details of which are set
out in the Corporate Governance Report.
We will hold an external review in 2020.
I look forward to meeting shareholders at
the AGM.
Yours faithfully,
Andy Harrison
Chair of the Nominations
Committee
4 September 2019
We were delighted that Ian Bull joined
the Board in July, and to welcome
Paula Vennells to the Board today. I
have referred to their background and
experience in my Board Chairman’s letter
and later in this report. I am confident that
they will both make a strong contribution
to our Board Team. Ian will succeed Liz
Doherty as Chair of the Audit and Risk
Committee when she retires from the
Board at the AGM in November.
Culture and diversity
The Committee has continued to monitor
external developments, including the
increasing emphasis on diversity and
culture which is set out in the 2018
Corporate Governance Code and
supporting guidance. Preservation of our
deep-rooted culture has always been
a priority, which stems from the values
instilled by the Adderley family who
founded the business. We are actively
monitoring the culture of the business,
and more detail is in this report.
Diversity of thought is essential to both
good quality decision-making and
innovative thinking. Even more so in our
increasingly international business world
and multicultural communities. Four
members of our Board are female, and a
majority of our Executive Board members
are women. Of course, diversity goes
wider than gender, and this year we have
reviewed how we might increase diversity
at the Board and below. Details are in
this report.
Dear Shareholder
Board Succession
We have a proactive board succession
philosophy, to ensure that the
composition of our Board enables us to
deliver our ambition of being the leading
multichannel retailer in homewares. We
are a small and collegiate Board, and
take care to ensure that all new members
of our Board are a complementary fit in
terms of experience, skills and culture.
Last year, the focus of the Committee was
on the recruitment of our new Executive
Team. This year, we have been refreshing
our Non-Executive Team.
93
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Nominations Committee Report
Summary of principal activities
• Appointment of Ian Bull as an Independent Non-Executive
Director, to succeed Liz Doherty as Chair of the Audit and
Risk Committee in November
• Appointment of Paula Vennells as Independent Non-
Executive Director
•
Laura Carr joined the Board as Chief Financial Officer in
November 2018
• Review of the Group’s approach to diversity
• Board now 40% female (45% including the Company
Secretary)
This report provides details of the role of the Nominations
Committee and the work it has undertaken during the year.
Principal duties
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 against objective criteria,
and with due regard for the benefits of diversity of the Board,
when new appointments to the Board are made. The full terms
of reference for the Committee can be found on the Company’s
website, https://corporate.dunelm.com.
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
has been or will be made to the Board without agreement of
all Directors.
Committee membership
The following Directors served on the Committee during the year:
Member
Period from:
Andy Harrison (Chair)
1 September 2014
Will Adderley
17 February 2011
Liz Doherty
William Reeve
1 May 2013
1 July 2015
Peter Ruis
10 September 2015
Marion Sears
18 January 2005
To:
To date
To date
To date
To date
To date
To date
Rachel Osborne1
1 April 2018
28 August 2018
1
Rachel Osborne stepped down from the Board and the Committee on
29 August 2018. Ian Bull and Paula Vennells were appointed to the Board and
the Committee after the year end.
There was one Committee meeting in the year and members’
attendance was as shown in the table below. The Company
Secretary acts as secretary to the Committee.
No Director attended that part of a meeting during which his or
her own position was discussed.
Member
Andy Harrison (Chair)
Will Adderley
Liz Doherty
William Reeve
Peter Ruis
Rachel Osborne
Marion Sears
Meetings
attended:
1/1
1/1
1/1
1/1
1/1
0/0
1/1
Committee activities in 2018/19
Board changes in 2018/19
During the year, the Committee has led the search for two
new Non-Executive Directors. The first was to replace Rachel
Osborne, who stepped down from the Board to take up a
position as the Chief Financial Officer of a competitor. We were
delighted to announce the appointment of Ian Bull to replace
her. Ian is an experienced finance and strategy specialist, with
over 20 years’ business and financial experience with a range of
leading consumer-facing businesses. This includes senior roles
as Group Finance Director of Greene King plc, Chief Financial
Officer at Ladbrokes plc, and latterly Chief Financial Officer
of Parkdean Resorts Group. His early finance career included
Whitbread plc and BT Group. He is a Fellow of the Chartered
Institute of Management Accountants.
Ian is currently the Senior Independent Director and Chair
of the Audit Committee of St. Modwen Properties plc, and
Non-Executive Director and Chair of the Audit Committee at
Domino’s Pizza Group plc. He was formerly a Non-Executive
Director of Paypoint Ltd.
Ian joined the Board on 10 July 2019, and will succeed Liz
Doherty as Chair of the Audit and Risk Committee when she
retires from the Board in November 2019.
As mentioned above, Liz Doherty will retire from the Board at
the AGM in November, due to the increasing time required for
her other commitments. Liz has served on the Board for seven
years, and has been Chair of the Audit and Risk Committee
since September 2015, and Senior Independent Director since
November 2017. An announcement on who will succeed Liz as
Senior Independent Director will be made in due course.
We are also pleased to announce the appointment of Paula
Vennells as a Non-Executive Director today. Paula is an
experienced business leader, with deep consumer and retail
experience. As CEO of the Post Office between 2012 and 2019,
she led the separation from the Royal Mail and delivered a major
turnaround of the business, including a dramatic restructuring
of the portfolio and investment in new online services. Prior
to joining the Post Office in 2007, she was Group Commercial
Director of Whitbread. Her career began with Unilever and
L’Oreal, and she also held senior positions in sales and
marketing, commercial and supply chain with a number of major
retailers including Dixons and Argos.
94
corporate.dunelm.com Stock code: DNLM Paula is Chair of Imperial College Healthcare NHS Trust, a Non-
Executive Director of Wm Morrison Supermarkets plc, and a
Non-Executive Director of the Cabinet Office.
the environment, investors, and regulators. Our approach is
also reflected in our Code of Business Conduct, our anti-bribery
policy, our ethical policy and our Tax Strategy.
We adopted a similar search process for the appointment of
both Directors: the Nominations Committee drew up a detailed
role and person specification. An independent external search
consultant (MWM Consulting) was appointed to conduct the
process, and as is usual, we asked for an equal number of
male and female candidates to feature on the 'long list'. We
also advertised each vacancy on the Nurole platform, to open
the search to a potentially wider and more diverse range of
applicants. Candidates met initially with the Chairman and at
least one other Board member, and finalists met with other
Board members. Extensive references were taken. Whilst
the process was led by the Committee, who made the final
recommendation, any Board appointment is regarded as a
'whole Board' issue, and no appointment is made without
unanimous Board support.
Board succession planning
For a number of years we have had a formal, long range plan
for how Board membership should develop. As usual, we
aim to balance continuity with regular refreshment of skill
and experience and the corporate governance guidance on
Chairman and Non-Executive Director tenure.
As part of our Board evaluation process, we review the balance
of skills on the Board as a whole, taking account of the future
needs of the business, and the knowledge, experience, length
of service and performance of the Directors. In accordance with
our policy, we also had regard to the requirement to achieve a
diversity of characters, backgrounds and experiences amongst
Board members.
We have a short-term/contingency plan for the Chief Executive
Officer and CFO positions, together with an experienced and
capable Executive Board, who are able to continue to run
the business for a short period of time in the absence of a
permanent CEO or CFO.
Board evaluation
The Board held a scheduled external evaluation in 2016, and a
follow up by the same provider in 2017. This year, as in 2018,
I led an internal evaluation, based on a discussion with each
Board member focused on a number of relevant topics, followed
by a Board discussion of the output from this.
The results of the evaluation are described in the Corporate
Governance Report.
We will hold an external evaluation in 2020.
Our purpose, culture and values
Our purpose is – 'helping everyone create a home they
love' – articulated more simply to our customers as 'home of
homes'. This purpose drives our Customer 1st strategy, which is
described elsewhere in our report.
Our purpose is underpinned by our business principles, which
were formulated by Will Adderley, our Deputy Chairman, and
which encapsulate the values of the Company’s founders,
the Adderley family. These set out how all colleagues in the
Company are expected to act. Key themes running through
our principles are to 'take long term decisions' and 'do the
right thing'; these drive our decisions, and how we behave
towards our customers, colleagues, suppliers, the community,
All colleagues learn about our purpose and business principles
on induction, they form part of our communications, and
colleagues are appraised against them. Our Board and senior
leadership team are expected to role model the business
principles.
The Board regularly monitors the culture of the business in a
number of ways:
• Through interaction with Executives, members of the
leadership team, and other colleagues in Board meetings
and on visits to stores and other Company locations
• Through regular Board agenda items and supporting
papers, covering 'culture indicators' such as risk
management, internal audit reports and follow-up
actions, customer engagement, health and safety,
colleague engagement and retention, Glassdoor scores,
whistleblowing, regulatory breaches
• We review a colleague scorecard at least twice a year,
looking at a range of colleague indicators
• We engage formally with the colleague representative
body, the National Voice Forum, as well as informally
through site visits
• We engage with other stakeholders, as described in the
Corporate Governance Report
• We review a set of 'culture KPIs' once a year alongside our
risk register
Diversity
In October 2018, we reviewed how we might improve diversity
at Board level and throughout the business. The Board agreed
that diversity of input is a good thing and helps to produce
better decision-making, especially in a more diverse UK and
increasingly international business world. We already have on
our Board and our Executive Board a diversity of gender, skills,
experience, personality and cognitive approach. However, our
leadership population does not currently reflect the broader
gender and ethnic mix of our colleagues and our customers.
This suggests that the business may be missing a talent
opportunity.
The Board agreed a number of actions to start to develop
greater diversity throughout the Company. These include:
• Requesting that candidates from a more diverse range of
backgrounds be brought forward for any Board vacancy,
and openly advertising vacancies on a specialist Board
recruitment website where any approved candidate may
apply and present their credentials
• Starting to measure ethnic diversity throughout the business
and considering what steps we might take to encourage
this, in particular, how we might secure the best talent in the
wider leadership team
•
Inviting external input to Board meetings from our
stakeholders – for example a regular supplier presentation,
and a meeting with the Principal of a Foundation Trust
• Engagement with our colleague National Voice Forum, as
described above
Read about our sustainability on
pages 33 to 45
95
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Nomination Committee Report
continued
We also reviewed the diversity policy which has been in place
since 2011, and confirmed that it is still appropriate. It is set
out below:
• Our overriding concern is to ensure the Board comprises
outstanding individuals who can lead the Group, and
we believe the Group’s best interests are served by
ensuring that these individuals represent a range of skills,
experiences, backgrounds and perspectives, including
gender. Naturally it is our policy that the Board should
always be of mixed gender
• We support the objective of promoting diversity on our
Board and throughout the Group. Quotas are a blunt
instrument but they do bring focus, as well as the risk of
compromised decisions on Board membership, quality and
size, particularly with a small and collegiate Board
• We shall continue 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, regardless of gender and background, to enjoy
career progression within Dunelm
Tenure and re-election of Directors
The tenure of the Non-Executive Directors is set out below:
Appointment
Current term
(years)
Andy Harrison
September 2014
Marion Sears
Liz Doherty
William Reeve
Peter Ruis
Ian Bull
July 2004
May 2013
July 2015
September 2015
July 2019
Paula Vennells
September 2019
5
15
6
4
4
0
0
* As mentioned above, Liz Doherty will be retiring from the Board at the AGM on 19 November 2019.
Next renewal
Additional Board role
September 2020
Chairman
July 2020
N/A*
SID, Audit and Risk
July 2021
Remuneration
September 2021
July 2022
September 2022
Marion Sears has served 15 years on the Board. Marion is now
considered by the Board to be ‘non-independent’ in view of
her tenure.
In accordance with the UK Corporate Governance Code, all
Directors (apart from Liz Doherty), will seek re-election at the
2019 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.
Executives below Board
The Committee has for some years had both formal and
informal oversight of the Executive team below Board. Dunelm
Board members have regular contact with these Executives,
both through formal Board presentations, attendance of the
Executive Board at the annual Strategy Days, and in regular
visits to stores and other Company sites, when a Non-Executive
Director meets a member of the Executive Board or Leadership
team on a less formal basis. Each Non-Executive Director also
mentors one of the members of the Executive Board.
The Board receives an annual presentation from the People
Director which covers succession planning for the Executive
Board. Although these activities are not formally conducted
as part of the work of the Nominations Committee, we see
this as a useful way of preserving our culture and an important
aspect of our oversight of the Executive team development and
succession process.
Approved by the Board on 4 September 2019.
Andy Harrison
Chair of the Nominations Committee
4 September 2019
96
corporate.dunelm.com Stock code: DNLM Directors’ Report
The Directors present their report together with the audited
financial statements for the period ended 29 June 2019.
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 6 to 45. 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 £101.3m
(2018: £73.3m). The results are discussed in greater detail in the
Financial Review on pages 20 to 23.
A special dividend of 32.0p per share (2018: nil) will be paid
on 11 October 2019 to shareholders on the register at
20 September 2019.
A final ordinary dividend of 20.5p per share (2018: 19.5p) is
proposed in respect of the period ended 29 June 2019, to add
to an interim ordinary dividend of 7.5p per share paid on
12 April 2019 (2018: 7.0p). The final dividend will be paid on
22 November 2019 to shareholders on the register at
1 November 2019.
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 arm’s 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
• 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 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
• 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, the Articles of Association of the Company provide
that the election and re-election of independent Directors must
be conducted in accordance with the election provisions set out
in LR 9.2.2ER and LR 9.2.2FR. This means that the election or
re-election of each independent Director at the Annual General
Meeting will be subject to an additional separate resolution
upon which parties controlling 30% or more of the voting shares
of the Company are not eligible to vote.
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 closed 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.
97
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Directors’ Report
continued
UK Listing Authority Listing Rules (LR)
– compliance with LR 9.8.4C
The majority of the disclosures required under LR 9.8.4 are not
applicable to Dunelm. The table below sets out the location of
those requirements that are applicable:
Applicable sub-paragraph within LR 9.8.4 Disclosure provided
(14) A statement made by the Board
that the Company has entered into an
agreement under LR 9.2.2A, that the
Company has, and as far as it is aware,
the other parties to the agreement have,
complied with the agreement.
See section headed
‘Shareholder and
voting rights’.
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.
Details of the rights of employees to exercise options on
a change of control of the Company are set out in the
remuneration policy section of this report.
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 not
changed during the period.
At 29 June 2019, the Company held 867,642 Ordinary Shares in
treasury (2018: 914,635).
During the period the Company did not purchase any
Ordinary Shares into treasury. 46,993 shares were transferred
to employees who exercised options under a share incentive
scheme or Directors under the LTIP scheme. Details of option
exercises by Directors are set out in the Remuneration Report.
Since the financial year end, 12,694 Ordinary Shares have been
moved out of treasury to employees who exercised options
under a share incentive scheme.
Substantial shareholders
At 29 June 2019 the following had notified the Company of a
disclosable interest in 3% or more of the nominal value of the
Company’s Ordinary Shares:
Ordinary
Shares
Percentage of
share capital
Will Adderley
Jean Adderley
90,231,779
12,000,000
Standard Life Aberdeen plc
10,274,359
Royal London Asset
Management Limited
9,907,809
44.68
5.94
5.09
4.91
Will Adderley is also deemed to hold a legal interest in 967,250
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.
There have been no other changes in the holdings of substantial
shareholders between the period end date and 4 September
2019.
Directors
Details of the Directors of the Company who served on the
Board during the year, and the biographies of those on the
Board at the date of this report are set out on pages 48 to 51.
Details of changes to the Board during the period are set out on
page 51.
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 62.
Employee information
Information relating to employees of the Group, including our
approach to disabled persons, is set out in the 'People' section
of the Sustainability report on pages 38 to 39.
Share incentive schemes in which employees participate are
described in the Remuneration Report on pages 70 to 92.
Donations
The Group does not make any political donations.
98
corporate.dunelm.com Stock code: DNLM Greenhouse gas emissions
The Sustainability report on page 43 sets out the greenhouse gas emissions disclosures required by the Companies Act 2006
(Strategic Report and Directors’ Report) Regulations 2013.
Non-financial information statement 2019
The following sets out how we have complied with the Non-Financial Reporting Requirements set out in sections 414CA and 414CB
of the Companies Act 2006. Where these provisions do not form part of the Strategic Report, they are deemed to be incorporated
into it by cross reference for the purposes of compliance with these sections.
Reporting requirement
Some of our relevant policies
(see https://corporate.dunelm.com)
Environmental matters
Animal welfare Policy
Timber Policy
Where to read about our impact, including the
principal risks relating to these matters in this
report and KPIs
'Climate change and environment' section of
Sustainability report
'Climate change and environment' Principal Risk in the
Principal Risks and Uncertainties
S172 Companies Act statement — Environment
Employees
Equality and Diversity Policy
Chairman’s Letter
Health and Safety Policy
Business Review
Colleague Privacy Policy
'People' section of Sustainability report
Human rights
Ethical Code of Conduct
Modern Slavery Statement
'People and culture' Principal Risk in the Principal Risks
and Uncertainties
Corporate Governance Report
S172 Companies Act statement – colleagues
Corporate Governance Report
Remuneration Report
'Suppliers and Human Rights' section of Sustainability
Report
'Brand damage' Principal Risk in the Principal Risks and
Uncertainties
S172 Companies Act statement - Suppliers
Social matters
Our Purpose
'Our Purpose and Strategy' section of Strategic Report
Ethical Code of Conduct
Chairman’s Letter
Modern Slavery Statement
Business Review
Tax Strategy
Anti-bribery and corruption Ethical Code of Conduct
Anti-Corruption and Anti-Bribery Policy
Whistleblowing Policy
Business model
Read about our sustainability on
pages 33 to 45
'Customers' and 'Community' section of Sustainability
report
'People and Culture' Principal Risk in the Principal Risks
and Uncertainties
Corporate Governance Report
S172 Companies Act statement – Customers and
Suppliers
'Bribery, fraud and tax evasion' section of Sustainability
report
'Brand damage' Principal Risk in the Risk and Risk
Management Report
'Our Business Model' section of Strategic Report
99
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Directors’ Report
continued
Treasury and risk management
The Group’s approach to treasury and financial risk
management, including its use of hedging instruments, is
explained in the Principal Risks and Uncertainties section on
page 31 and note 18 to the annual financial statements.
Independent Auditors
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 reappointment
of PricewaterhouseCoopers LLP as auditor of the Group.
Disclaimer
This Directors’ Report, Strategic Report 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 Strategic Report or in these
financial statements should be construed as a profit forecast.
Annual General Meeting
The Annual General Meeting will be held at 11.30am on Tuesday
19 November 2019 at the Dunelm Store Support Centre,
Watermead Business Park, Syston, Leicester, LE7 1AD. A formal
notice of meeting, explanatory circular and a form of proxy will
accompany this Annual Report and financial statements.
This report was reviewed and signed by order of the Board on
4 September 2019.
Dawn Durrant
Company Secretary
100
corporate.dunelm.com Stock code: DNLM Statement of Directors’ Responsibilities
Directors’ confirmations
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
the Group and Parent Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and functions are listed in
Corporate Governance Report confirm that, to the best of their
knowledge:
•
•
•
the Parent Company financial statements, which have
been prepared in accordance with IFRSs as adopted by
the European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the Company;
the Group financial statements, which have been prepared
in accordance with IFRSs as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit of the Group; and
the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Group and Parent Company, 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:
•
•
so far as the Director is aware, there is no relevant audit
information of which the Group and Parent Company’s
auditors are unaware; and
they have taken all the steps that they ought to have taken as
a Director in order to make themselves aware of any relevant
audit information and to establish that the Group and Parent
Company’s auditors are aware of that information
Nick Wilkinson
Chief Executive Officer
4 September 2019
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial
statements for each financial 52-week period. Under that law
the Directors have prepared the Group financial statements in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union 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 Parent Company and
of the profit or loss of the Group and Parent Company for that
period. In preparing the financial statements, the Directors are
required to:
•
•
select suitable accounting policies and then apply them
consistently;
state whether applicable IFRSs as adopted by the European
Union have been followed for the Group financial
statements and IFRSs as adopted by the European Union
have been followed for the Company financial statements,
subject to any material departures disclosed and explained
in the financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Parent Company will continue in business
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Parent Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and
Parent Company 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.
The Directors are also responsible for safeguarding the assets
of the Group and Parent Company 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 Parent Company’s website. Legislation in the
United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
101
GovernanceDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 04
Financials
Contents
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
104
110
110
111
Consolidated Statement of Cash Flows 112
Consolidated Statement of
Changes in Equity
Accounting Policies
Notes to the Consolidated Financial
Statements
Parent Company Statement of
Financial Position
Parent Company Statement of
Cash Flows
Parent Company Statement of
Changes in Equity
Parent Company Accounting Policies
Notes to the Parent Company
Financial Statements
113
114
121
137
137
138
139
141
102
corporate.dunelm.com Stock code: DNLM Financials
Our customer promises
Convenient to buy and return
Accessible to all, whether
delivered to your home or picked
up in store. Products that are easy
to buy and simple to return.
103
Dunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Independent Auditors’ Report
to the members of Dunelm Group plc
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the group in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements.
To the best of our knowledge and belief, we declare that non-
audit services prohibited by the FRC’s Ethical Standard were not
provided to the group or the parent company.
Other than those disclosed in the Audit and Risk Committee
Report, we have provided no non-audit services to the group or
the parent company in the period from 1 July 2018 to 29 June
2019.
Report on the audit of the
financial statements
Opinion
In our opinion, Dunelm Group plc’s group financial statements
and parent company financial statements (the “financial
statements”):
• give a true and fair view of the state of the group’s and of
the parent company’s affairs as at 29 June 2019 and of the
group’s profit and the group’s and the parent company’s
cash flows for the 52 week period (the “period”) then ended;
• have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs) as
adopted by the European Union and, as regards the parent
company’s financial statements, as applied in accordance
with the provisions of the Companies Act 2006; and
• 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.
We have audited the financial statements, included within
the Annual Report and Accounts (the “Annual Report”), which
comprise: the consolidated statement of financial position and
the parent company statement of financial position as at 29 June
2019; the consolidated income statement and consolidated
statement of comprehensive income, the consolidated
statement of cash flows and the parent company statement of
cash flows, the consolidated statement of changes in equity and
the parent company statement of changes in equity for the 52
week period then ended; the accounting policies; and the notes
to the financial statements.
Our opinion is consistent with our reporting to the Audit
Committee.
Our audit approach
Overview
• Overall group materiality: £6.3 million (2018: £5.1 million), based on 5% of profit before tax
Materiality
(2018: 5% of profit before taxation after adjusting for exceptional items).
• Overall parent company materiality: £3.7 million (2018: £1.2 million), based on 1% of total assets
(2018: 0.5% of total assets).
Audit scope
• The group is structured with one segment which comprises a consolidation of six legal entities.
Key
audit
matters
• We conducted an audit of the complete financial information of these six legal entities, together
with additional procedures performed, including over the group consolidation.
•
Inventory provisions.
• Capitalisation of intangible costs in relation to IT.
• Disclosure of the impact of IFRS 16.
104
corporate.dunelm.com Stock code: DNLM The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made
subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.
Capability of the audit in detecting irregularities,
including fraud
Based on our understanding of the group and industry, we
identified that the principal risks of non-compliance with
laws and regulations related to unethical and prohibited
business practices and we considered the extent to which
non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations
that have a direct impact on the preparation of the financial
statements such as the Companies Act 2006, the Listing Rules
and UK Tax legislation. We evaluated management’s incentives
and opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and
determined that the principal risks were related to posting
inappropriate journal entries to increase revenue or reduce
expenditure, and management bias in accounting estimates.
The Group Engagement team audits the whole group, therefore
this risk assessment and procedures performed was consistent
throughout the whole group. Audit procedures performed by
the Group Engagement team included:
• Discussions with management, including consideration of
known or suspected instances of non-compliance with laws
and regulation and fraud;
• Challenging assumptions and judgements made by
management in their significant accounting estimates
and judgements, in particular in relation to the inventory
provision (see related key audit matter below);
•
Identifying and testing journal entries, in particular any
journal entries posted with unusual account combinations or
posted by senior management.
There are inherent limitations in the audit procedures described
above and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely we would become aware of
it. Also, the risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through
collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit
of the financial statements of the current period and include the
most significant assessed risks of material misstatement (whether
or not due to fraud) identified by the auditors, including those
which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of
the Engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed
in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. This is not a complete list of
all risks identified by our audit.
Key audit matter
Inventory provisions
Group
Refer to page 65 (Audit Committee Report), page 114 (Use of
estimates and judgements) and page 127 (notes).
Inventory represents a significant asset on the group’s balance
sheet and is carried at the lower of cost and net realisable
value (“NRV”). The group’s accounting policy is to determine
a provision based upon the historic negative margin of the
type of inventory, by ageing category, which is calculated
by analysing the historic sales price compared to the cost
of inventory, and applying a percentage provision to each
line of inventory.
How our audit addressed the key audit matter
We tested the inputs to the provision calculation, including
the classification of inventory and sales data for each of the
ageing categories from the Buying department, which is
segregated from the Finance department, and found them to
be consistent.
We tested the average cost of inventory by agreeing the inputs
to source documentation and testing freight and duty costs.
We reviewed inventory write-offs in the financial period to
ensure they are not inconsistent with the key assumptions used
in the inventory provision model at the year end.
We tested the integrity of the provision model to ensure that
it was using the underlying data correctly and calculating
provision amounts accurately. We found that the provision
rates were consistent with the evidence obtained, based on
past activity, and appropriately applied.
105
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Independent Auditors’ Report
to the members of Dunelm Group PLC
continued
Key audit matter
How our audit addressed the key audit matter
Capitalisation of intangible costs in relation to IT
Group
Refer to page 65 (Audit Committee Report), page 114 (Use of
estimates and judgements) and page 125 (notes).
During the year ended 29 June 2019, there were numerous
internal IT projects which were capitalised, including the
development of a new online platform.
The intangible IT spend relates to the capitalisation of external
contractors costs and internal labour costs performing work on
key IT projects.
We agreed a sample of capitalised IT costs to source
documentation. We assessed whether the costs capitalised
relating to IT met the criteria set within IAS 38 ‘Intangible
assets’ noting no exceptions.
We have assessed whether IT projects are sustainable and will
be used within the business. We have challenged management
on the viability of projects in development to ensure they will
continue to completion noting no exceptions.
We have tested disposals in the year to ensure that former
assets have been removed where a platform is now unused
noting no exceptions.
Disclosure of the impact of IFRS 16
Group
Refer to page 65 (Audit Committee Report), page 114 (Use of
estimates and judgements) and page 120 (notes).
The Group is applying IFRS 16 from 30 June 2019 so the
expected impact on the financial statements is required to
be disclosed this year in line with IAS 8. The Group has used
a spreadsheet model to calculate these numbers. In addition
judgements have been taken by the Group, including the
discount rate to be applied.
We have obtained and inspected a sample of inputs into
management’s model and agreed these data points back
to the underlying lease agreements. We have recalculated
the accounting entries for a sample of leases and confirmed
management’s model is performing this calculation accurately.
We have tested the completeness of management’s model
with reference to the lease commitments note in the financial
statements and our knowledge of contracts containing lease
agreements in the Dunelm business.
We have assessed the methodology applied to calculate the
discount rate using an incremental borrowing rate specific
to the Group in line with IFRS 16. We have considered the
discount rate and other assumptions to be appropriate,
including ensuring all the leases meet the definition of a lease
under IFRS 16 and that the expected lease term is accurate.
We have reviewed the workings for calculating the
dilapidations provision and agree with the methodology
applied.
We have reviewed the disclosures in the financial statements
and are satisfied that they are consistent with the evidence
obtained and compliant with IAS 8.
We determined that there were no key audit matters applicable to the parent company to communicate in our report.
106
corporate.dunelm.com Stock code: DNLM How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
group and the parent company, the accounting processes and
controls, and the industry in which they operate.
The group is structured with one segment. The group financial
statements are a consolidation of six 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 one legal entity: Dunelm (Soft Furnishings) Limited,
which, in our view, required an audit of its complete financial
information due to its financial significance to the group.
In addition, we also conducted the statutory audits of the five
non-significant legal entities such that the audit work was
complete prior to finalisation of the audit of the group financial
statements, thereby providing further evidence in support of our
group opinion.
The audits of these six legal entities, together with the additional
procedures performed at the group level, including over the
group consolidation, gave us the evidence we needed for our
opinion on the group financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us
to determine the scope of our audit and the nature, timing
and extent of our audit procedures on the individual financial
statement line items and disclosures and in evaluating the effect
of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£6.3 million (2018: £5.1 million).
£3.7 million (2018: £1.2 million).
Group financial statements
Parent company financial statements
How we determined it
5% of profit before tax (2018: 5% of profit before
taxation after adjusting for exceptional items).
1% of total assets (2018: 0.5% of total assets).
Rationale for
benchmark applied
We have applied this benchmark, a generally
accepted auditing practice, as we believe this
is the key measure used by the shareholders in
evaluating the performance of the group.
We have applied this benchmark, a generally
accepted auditing practice, as we believe this
is the key measure used by the shareholders
in evaluating the performance of the parent
company.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The
range of materiality allocated across components was between £5.9 million and £0.05 million. Certain components were audited to
a statutory audit materiality that was also less than our overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.25 million
(Group audit) (2018: £0.25 million) and £0.25 million (Parent company audit) (2018: £0.25 million) as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add
or draw attention to in respect of the directors’ statement in the
financial statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting
in preparing the financial statements and the directors’
identification of any material uncertainties to the group’s and
the parent company’s ability to continue as a going concern
over a period of at least twelve months from the date of
approval of the financial statements.
We have nothing material to add or to draw attention to.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the group’s
and parent company’s ability to continue as a going concern.
For example, the terms on which the United Kingdom may
withdraw from the European Union are not clear, and it is
difficult to evaluate all of the potential implications on the
group’s trade, customers, suppliers and the wider economy.
We are required to report if the directors’ statement relating
to Going Concern in accordance with Listing Rule 9.8.6R(3)
is materially inconsistent with our knowledge obtained in the
audit.
We have nothing to report.
107
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Independent Auditors’ Report
to the members of Dunelm Group PLC
continued
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Corporate Governance
Report (on pages 53 to 62) with respect to the parent company’s
corporate governance code and practices and about its
administrative, management and supervisory bodies and their
committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the DTR.
(CA06)
We have nothing to report arising from our responsibility
to report if a corporate governance statement has not been
prepared by the parent company. (CA06)
The directors’ assessment of the prospects of the group and of
the principal risks that would threaten the solvency or liquidity
of the group
We have nothing material to add or draw attention to regarding:
• The directors’ confirmation on page 26 of the Annual
Report that they have carried out a robust assessment of the
principal risks facing the group, including those that would
threaten its business model, future performance, solvency or
liquidity.
• The disclosures in the Annual Report that describe those
risks and explain how they are being managed or mitigated.
• The directors’ explanation on page 32 of the Annual
Report as to how they have assessed the prospects of the
group, over what period they have done so and why they
consider that period to be appropriate, and their statement
as to whether they have a reasonable expectation that the
group will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We have nothing to report having performed a review of
the directors’ statement that they have carried out a robust
assessment of the principal risks facing the group and statement
in relation to the longer-term viability of the group. Our review
was substantially less in scope than an audit and only consisted
of making inquiries and considering the directors’ process
supporting their statements; checking that the statements are
in alignment with the relevant provisions of the UK Corporate
Governance Code (the “Code”); and considering whether the
statements are consistent with the knowledge and understanding
of the group and parent company and their environment
obtained in the course of the audit. (Listing Rules)
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the
other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do
not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or
material misstatement, we are required to perform procedures
to conclude whether there is a material misstatement of the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report based on these responsibilities.
With respect to the Strategic Report, Directors’ Report and
Corporate Governance Report, we also considered whether the
disclosures required by the UK Companies Act 2006 have been
included.
Based on the responsibilities described above and our work
undertaken in the course of the audit, the Companies Act 2006
(CA06), ISAs (UK) and the Listing Rules of the Financial Conduct
Authority (FCA) require us also to report certain opinions and
matters as described below (required by ISAs (UK) unless
otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course
of the audit, the information given in the Strategic Report
and Directors’ Report for the period ended 29 June 2019 is
consistent with the financial statements and has been prepared
in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the group and
parent company and their environment obtained in the course
of the audit, we did not identify any material misstatements in
the Strategic Report and Directors’ Report. (CA06)
Corporate Governance Statement
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Corporate Governance
Report (on pages 53 to 62) about internal controls and risk
management systems in relation to financial reporting processes
and about share capital structures in compliance with rules
7.2.5 and 7.2.6 of the Disclosure Guidance and Transparency
Rules sourcebook of the FCA (“DTR”) is consistent with the
financial statements and has been prepared in accordance with
applicable legal requirements. (CA06)
In light of the knowledge and understanding of the group and
parent company and their environment obtained in the course
of the audit, we did not identify any material misstatements in
this information. (CA06)
108
corporate.dunelm.com Stock code: DNLM Use of this report
This report, including the opinions, has been prepared for and
only for the parent 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.
Other required reporting
Companies Act 2006 exception reporting
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
•
•
certain disclosures of directors’ remuneration specified by
law are not made; 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.
Appointment
Following the recommendation of the audit committee, we
were appointed by the directors on 14 January 2014 to audit
the financial statements for the year ended 28 June 2014 and
subsequent financial periods. The period of total uninterrupted
engagement is 6 years, covering the years ended 28 June 2014
to 29 June 2019.
Mark Skedgel (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
4 September 2019
Other Code Provisions
We have nothing to report in respect of our responsibility to
report when:
• The statement given by the directors, on page 101, that
they consider the Annual Report taken as a whole to be fair,
balanced and understandable, and provides the information
necessary for the members to assess the group’s and parent
company’s position and performance, business model and
strategy is materially inconsistent with our knowledge of
the group and parent company obtained in the course of
performing our audit.
• The section of the Annual Report on pages 64 and 65
describing the work of the Audit Committee does not
appropriately address matters communicated by us to the
Audit Committee.
• The directors’ statement relating to the parent company’s
compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified,
under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006. (CA06)
Responsibilities for the financial statements and
the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’
Responsibilities, the directors are responsible for the preparation
of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing as applicable,
matters related to going concern and using the going
concern basis of accounting unless the directors either intend
to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditors’ report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken
on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors’ report.
109
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Consolidated Income Statement
For the 52 weeks ended 29 June 2019
Revenue
Cost of sales
Gross profit
Operating costs
Operating profit
Financial income
Financial expenses
Profit before taxation
Taxation
Profit for the period
Earnings per Ordinary Share - basic
Earnings per Ordinary Share - diluted
2018
52 weeks
£’m
Exceptional
items
–
–
–
(8.9)
(8.9)
–
–
(8.9)
1.2
(7.7)
2019
52 weeks
£’m
2018
52 weeks
£’m
Underlying
1,100.4
1,050.1
(554.8)
545.6
(418.7)
126.9
0.9
(1.9)
125.9
(24.6)
101.3
50.2p
49.9p
(546.5)
503.6
(398.9)
104.7
–
(2.7)
102.0
(21.0)
81.0
40.1p
40.0p
Note
1
4
5
7
7
8
10
10
2018
52 weeks
£’m
Reported
1,050.1
(546.5)
503.6
(407.8)
95.8
–
(2.7)
93.1
(19.8)
73.3
36.3p
36.2p
Consolidated Statement of
Comprehensive Income
For the 52 weeks ended 29 June 2019
Profit for the period (reported)
Other comprehensive income/(expense):
Items that may be subsequently reclassified to profit or loss:
Movement in fair value of cash flow hedges
Transfers of cash flow hedges to inventory
Deferred tax on hedging movements
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
2019
52 weeks
£’m
2018
52 weeks
£’m
101.3
73.3
6.6
(3.9)
(0.5)
2.2
103.5
1.6
2.6
(0.7)
3.5
76.8
110
corporate.dunelm.com Stock code: DNLM
Consolidated Statement of
Financial Position
As at 29 June 2019
Non–current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Derivative financial instruments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Liability for current tax
Derivative financial instruments
Total current liabilities
Non-current liabilities
Bank loans
Trade and other payables
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share premium account
Capital redemption reserve
Hedging reserve
Retained earnings
Total equity attributable to equity holders of the Parent
29 June
2019
£’m
30 June
2018
£’m
Note
11
12
13
18
14
15
18
16
17
18
19
17
13
20
21
27.3
180.6
0.8
1.0
28.6
198.6
–
1.4
209.7
228.6
157.7
154.7
25.6
5.1
19.0
207.4
417.1
(136.3)
(13.5)
–
23.9
2.8
15.0
196.4
425.0
(101.8)
(7.8)
(0.7)
(149.8)
(110.3)
(44.3)
(35.5)
–
(1.7)
(81.5)
(231.3)
185.8
2.0
1.6
43.2
5.0
134.0
185.8
(139.0)
(38.3)
(1.0)
(1.7)
(180.0)
(290.3)
134.7
2.0
1.6
43.2
2.8
85.1
134.7
The financial statements on pages 110 to 136 were approved by the Board of Directors on 4 September 2019 and were signed on its
behalf by:
Laura Carr
Chief Financial Officer
111
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Consolidated Statement of Cash Flows
For the 52 weeks ended 29 June 2019
Note
2019
52 weeks
£’m
125.9
2018
52 weeks
£’m
93.1
8.9
2.7
104.7
33.5
1.4
139.6
8.6
2.5
(31.4)
(20.3)
0.3
–
(18.9)
100.7
(2.2)
98.5
–
1.0
126.9
32.7
6.7
166.3
(3.0)
(1.7)
31.2
26.5
1.4
0.3
(20.5)
174.0
–
174.0
(13.0)
(12.1)
–
5.4
(12.0)
(19.6)
0.2
25.0
(120.0)
(1.6)
–
(54.6)
(151.0)
3.4
0.6
15.0
19.0
0.6
–
(34.1)
(45.6)
1.3
10.0
(10.0)
(1.9)
(0.8)
(53.4)
(54.8)
(1.9)
(0.5)
17.4
15.0
Profit before taxation
Adjustment for exceptional operating costs
Adjustment for net financing costs
Operating profit before exceptional operating costs
Depreciation and amortisation
Loss on disposal and impairment of non-current assets before exceptional items
Operating cash flows before exceptional operating costs and movements in working capital
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in payables
Net movement in working capital before exceptional operating costs
Share based payments expense
Interest received
Tax paid
Net cash generated from operating activities before exceptional operating costs
Cash flows in respect of exceptional operating costs
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of intangible assets
Proceeds on exceptional disposal of property, plant and equipment and intangible assets
Proceeds on disposal of property, plant and equipment and intangibles
Acquisition of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of treasury shares
Drawdowns on Revolving Credit Facility
Repayments of Revolving Credit Facility
Interest paid
Loan transaction costs
Ordinary dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Foreign exchange revaluations
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
112
3
7
5
5
6
7
22
19
19
7
9
7
16
16
corporate.dunelm.com Stock code: DNLM
Consolidated Statement of
Changes in Equity
For the 52 weeks ended 29 June 2019
As at 1 July 2017
Profit for the period
Fair value gains of cash flow hedges
Loss on cash flow hedges transferred to
inventory
Deferred tax on hedging movements
Total comprehensive income for the period
Proceeds from issue of treasury shares
Share based payments
Deferred tax on share based payments
Current tax on share options exercised
Ordinary dividends paid
Total transactions with owners, recorded
directly in equity
As at 30 June 2018
Profit for the period
Fair value gains of cash flow hedges
Gain on cash flow hedges transferred to
inventory
Deferred tax on hedging movements
Total comprehensive income for the period
Proceeds from issue of Treasury shares
Share based payments
Deferred tax on share based payments
Current tax on share options exercised
Ordinary dividends paid
Total transactions with owners, recorded
directly in equity
Note
Issued
share
capital
£’m
Share
premium
account
£’m
Capital
redemption
reserve
£’m
2.0
1.6
43.2
18
18
13
22
23
13
9
18
18
13
22
23
13
9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.0
1.6
43.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
equity
attributable
to equity
holders of
the Parent
£’m
Hedging
reserve
£’m
Retained
earnings
£’m
(0.7)
–
1.6
2.6
(0.7)
3.5
–
–
–
–
–
–
2.8
–
6.6
(3.9)
(0.5)
2.2
–
–
–
–
–
–
64.0
73.3
–
–
–
73.3
1.3
0.3
(0.3)
(0.1)
110.1
73.3
1.6
2.6
(0.7)
76.8
1.3
0.3
(0.3)
(0.1)
(53.4)
(53.4)
(52.2)
85.1
101.3
–
–
–
(52.2)
134.7
101.3
6.6
(3.9)
(0.5)
101.3
103.5
0.2
1.4
0.7
(0.1)
(54.6)
(52.4)
As at 29 June 2019
2.0
1.6
43.2
5.0
134.0
0.2
1.4
0.7
(0.1)
(54.6)
(52.4)
185.8
113
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Accounting Policies
For the 52 weeks ended 29 June 2019
General information
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
137 to 144 present information about the Company as a
separate entity and not about its Group.
Dunelm Group plc and its subsidiaries are incorporated and
domiciled in the UK. Dunelm Group plc is a listed public
company, limited by shares and the Company registration
number is 04708277. The registered office is Watermead
Business Park, Syston, Leicestershire, England, LE7 1AD.
The primary business activity of the Group is the sale of
homewares in the UK through a network of stores and websites.
Basis of preparation
The Group financial statements have been prepared and
approved by the Directors in accordance with International
Financial Reporting Standards ‘IFRS’ and IFRS Interpretations
Committee ‘IFRS IC’ interpretations as adopted by the European
Union and the Companies Act 2006 applicable to companies
reporting under IFRS and these are presented on pages
110 to 136.
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 (including derivative financial instruments and
share based payments), which have been stated at fair value. The
financial statements are prepared in pounds sterling, rounded to
the nearest 0.1 million.
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. In their consideration of going concern, the Directors
have reviewed the Group’s future cash forecasts and profit
projections, which are based on market data and past
experience. The Directors are of the opinion that the Group’s
forecasts and projections, which take into account reasonably
possible changes in trading performance, show that the Group
is able to operate within its current facilities and comply with its
banking covenants for the foreseeable future.
As a consequence, the Directors believe that the Group is
well placed to manage its business risks successfully. Having
reassessed the principal risks, the Directors consider it
appropriate to adopt the going concern basis of accounting in
preparing the financial information.
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 on
pages 6 to 45. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the
Financial Review on pages 20 to 23. In addition, note 18 to the
Annual Report and Accounts 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
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised and in any future
periods affected.
The key estimates and judgements used in the financial
statements are as follows:
Estimate: 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 cost. NRV is calculated as the expected selling
price. Future price reductions are assumed to be in line
with historic margin analysis on a line-by-line basis, and are
applied to the inventory population as deemed appropriate
given the level of cover in relation to recent sales history and
discontinuation status. A 1% change in historic margins of each
stock discontinuation category would lead to a change in the
provision of £1.5m (14.4%).
Estimate: Lease liabilities
On transition to IFRS 16 from 30 June 2019 the Group will
recognise a lease liability as outlined on page 120. The lease
liability will be calculated by discounting the future lease
payments. Lease payments shall be discounted using the
incremental borrowing rate (IBR). This rate will be calculated
based on the Revolving Credit Facility rate adjusted for a factor
based on the lease term.
Judgement: Intangible IT capitalisation
Certain costs incurred in the developmental phase of internally
generated software are capitalised as intangible assets once a
number of qualifying criteria have been met. Management has
made judgements and assumptions when assessing whether a
project meets these criteria, and on measuring the costs and the
economic life attributed to such projects.
Judgement: Exceptional items
The Group exercises its judgement in the classification of certain
items as exceptional and outside of the Group’s underlying
results. The determination of whether an item should be
separately disclosed as an exceptional item requires judgement
on its materiality, nature and incidence, as well as whether it
provides clarity on the Group’s underlying trading performance.
In exercising this judgement, the Group takes appropriate
regard of IAS 1 ‘Presentation of financial statements’ as well
as guidance issued by the Financial Reporting Council on the
reporting of exceptional items and alternative performance
measures. The overall goal of the Group’s financial statements
is to present the Group’s underlying performance without
distortion from one-off or non-trading events regardless of
whether they are favourable or unfavourable to the underlying
result. Further details of the individual exceptional items, and the
reasons for their disclosure treatment, are set out in note 3.
114
corporate.dunelm.com Stock code: DNLM Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Company. 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
Intra-group balances, and any unrealised gains and losses or
income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.
Consistent accounting policies have been adopted across the
Group.
Revenue
Revenue is generated from the sale of homewares and
related goods and services through the Group’s stores and
websites, excluding sales between Group companies and is
after deducting returns, any discounts given and VAT. Revenue
is recognised when the Group has satisfied its performance
obligations to its customers and the customer has obtained
control of the goods and services being transferred. These
conditions are met, predominantly, at the point of sale.
The exceptions to this are for: custom-made products, where
revenue is recognised at the point that the goods are collected;
gift vouchers, where revenue is recognised when the vouchers
are redeemed; and web sales, where revenue is recognised at
the point of delivery. Revenue is settled in cash at the point of
sale for all revenue channels.
The Group holds a sales return provision in the Consolidated
Statement of Financial Position to provide for expected levels of
returns on sales made before year end. The Group recognises
the expected value of revenue relating to returns within sales.
Exceptional items
Exceptional items are disclosed separately in the financial
statements where it is necessary to do so to provide further
understanding of the financial performance of the Group. They
are items that are material either because of their size or their
non-recurring nature and are presented within the line items to
which they best relate.
Expenses
Property leases
Lease incentives received in respect of operating leases 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 account 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.
Financial income and expenses
Financial income and expenses comprise interest payable on
borrowings calculated using the effective interest method,
interest receivable on funds invested and related foreign
exchange gains and losses.
Retirement benefits
The Group operates a defined contribution pension plan using
a third party provider. Obligations for the contributions to this
plan are recognised as an expense in the income statement as
incurred.
Share based payments
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 condition (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 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 options are exercised, the Company either issues new
shares, or uses treasury shares purchased for this purpose. For
new issued shares, the proceeds received net of any directly
attributable transaction costs are credited to share capital
(nominal value) and the share premium account.
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.
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 in financial income and expenses,
except when deferred in other comprehensive income as
qualifying cash flow hedges.
115
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Accounting Policies
For the 52 weeks ended 29 June 2019
continued
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. Deferred
tax is determined using tax rates (and laws) that have been
enacted or substantively enacted at the balance sheet date and
are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled.
• 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.
Other development expenditures that do not meet these criteria
are recognised as an expense as incurred.
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:
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.
Software development and licences
3 to 5 years
Rights to brands and customer lists
5 to 15 years
Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at historical
cost less accumulated depreciation and impairment losses (see
below). Cost includes the original purchased price of the asset
and the costs attributable to bringing the asset to its working
condition 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 to write down the cost to its
estimated residual value. Land is not depreciated. The estimated
useful lives are as follows:
Freehold buildings
50 years
Leasehold improvements over the remaining period of the lease
Refit improvements
Plant and machinery
7 years
4 years
Fixtures and fittings
3 to 5 years
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.
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 they 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.
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.
Intangible assets
Intangible assets comprise software development, licences,
rights to brands and customer lists and are stated at cost less
accumulated amortisation and impairment (see below). Costs
incurred in developing the Group’s own brands are expensed as
incurred.
Separately acquired brands and customer lists are shown at
historical cost. Software, brands and customer lists acquired
in a business combination are recognised at fair value at the
acquisition date. These assets are deemed to 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 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;
116
corporate.dunelm.com Stock code: DNLM Derivative financial instruments
Derivative financial instruments used are forward foreign
exchange contracts. These 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. These are
instruments that hedge exposure to variability in cash flows
that is either attributable to a particular risk associated with
a highly probable forecasted transaction.
For cash flow hedges the Company has adopted IFRS 9 for the
first time in the current year which replaces IAS 39. The Group’s
new accounting policy has been outlined on pages 118 to 119.
Any gains or losses arising from changes in fair value derivative
financial instruments not designated as hedges are recognised
in the income statement.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the balance sheet when there is a legally
enforceable right to offset the recognised amounts and there is
an intention to settle on a net basis or realise the asset and settle
the liability simultaneously. The legally enforceable right must
not be contingent on future events and must be enforceable
in the normal course of business and in the event of default,
insolvency or bankruptcy of the Company or the counterparty.
Trade and other receivables
Trade and other receivables are initially recognised at fair value
and then carried at amortised cost using the effective interest
method, 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 and for stock losses.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances including
credit card receipts and deposits. All cash equivalents have an
original maturity of three months or less.
Trade and other payables
Trade and other payables are recognised initially at their fair
value and subsequently measured at amortised cost using the
effective interest method.
Bank borrowings and borrowing costs
Interest-bearing bank loans are initially recorded at their fair
value and subsequently held at amortised cost. Transaction costs
incurred are amortised over the term of the loan.
Borrowings are classed as current liabilities unless the Group
has an unconditional right to defer settlement of the liability for
at least 12 months from the balance sheet date.
Impairment
The carrying amounts of the Group’s assets are reviewed
annually 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 fair value less costs
of disposal, 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 assets grouped at the lowest levels for
which there are largely independent cash flows, i.e. 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 transaction 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, it is probable that an outflow of economic benefits will
be required to settle the obligation, and the amount has been
reliably measured. 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.
Operating leases
The Group leases certain property, plant and equipment and
motor vehicles. Where a significant portion of the risks and
rewards of ownership are retained by the lessor, these leases are
classified as operating leases.
Rentals payable under operating leases are charged to the
income statement on a straight-line basis over the period of the
lease.
117
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Accounting Policies
For the 52 weeks ended 29 June 2019
continued
IFRS 15 ‘Revenue from contracts with customers’
The Group has adopted IFRS 15 ‘Revenue from contracts with customers’ for the first time in the current financial year. The standard
applies a five-step approach to the timing of revenue recognition.
The Group’s revenues are mainly from individual products which are sold directly to customers via our stores or website. The
standard establishes a principle-based approach for revenue recognition that we recognise revenue to reflect the transfer of control
of goods and services, measured as the amount to which the Group expects to be entitled in exchange for those goods or services.
The standard has been applied using the modified retrospective approach without adjusting prior periods. The Group has
considered the following in assessing the impact of the new standard:
Principal versus agent consideration
(a)
The Group has two types of products which are stocked and non-stocked products. Management has established that the Group
acts as a principal for both types of products and thus should recognise revenue in the gross amount of consideration to which it
expects to be entitled. The Group already recognised revenue on a gross basis including delivery charges, therefore the Group’s
revenue recognition is unchanged in this regard.
(b) Gift cards
The Group issues gift cards and credit notes to customers. IFRS 15 requires an entity to recognise gift cards and credit notes (non-
refundable prepayments) as a liability. However, customers may choose not to redeem their gift cards and credit notes, therefore not
exercising all their contractual rights. Management has estimated the value of gift cards which it expects not to be redeemed based on
prior history of gift card redemption and has recognised this amount in the financial statements at the date of transition. This adjustment
does not have a material impact on the financial statements and therefore a reconciliation of the relevant values has not been provided.
Sales return provision
(c)
The Group holds a sales return provision in the Consolidated Statement of Financial Position to provide for expected levels
of returns. Under IFRS 15 the expected value of revenue relating to returns will continue to be recognised within sales provisions.
However, the expected value of cost of sales relating to the returned items will be included within inventories instead of sales
provision. This adjustment does not have a material impact on the financial statements and therefore a reconciliation of the relevant
values has not been provided.
(d) Disclosure of disaggregated revenue
IFRS 15 requires the disaggregation of revenue from contracts with customers into categories that depict how the nature,
amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Management has considered how
information about the entity’s revenue has been presented for other purposes such as internal management accounts and investor
presentations. For the purposes of these, revenue is disaggregated between stores and online (please refer to the Financial Review
on page 20). However, for the purposes of the financial statements management has concluded that since customers access the
Group’s products across multiple channels and often their journey involves more than one channel, disaggregation of revenue
would not be appropriate.
IFRS 9 ‘Financial instruments’
The Group has adopted IFRS 9 ‘Financial Instruments’ for the first time in the current financial year. IFRS 9 replaces IAS 39 which
relates to the recognition, classification, measurement and impairment of financial assets and liabilities and hedge accounting.
Impact of adoption
The adoption of IFRS 9 had no material impact on the Group’s retained earnings at 1 July 2018 or the financial statements at
29 June 2019.
Classification of financial assets
IFRS 9 contains two principal classification categories for financial assets: measured at amortised cost or measured at fair value (through
profit or loss or through other comprehensive income). The classification of financial assets under IFRS 9 is generally based on the
business model in which a financial asset is managed and its contractual cash flow characteristics. Under IFRS 9, investments in equity
instruments that do not have a quoted price in an active market for an identical instrument are now measured at fair value rather than at
cost.
On 1 July 2018 the Group reassessed the classification and measurement of financial assets of the business and has classified its
financial instruments into the appropriate IFRS 9 categories.
Financial Assets
Classification (IAS 39)
Classification (IFRS 9)
Derivative financial instruments
Held for trading (Designated in hedge
relationships)
Fair value through profit/loss (Designated in
hedge relationships)
Trade and other receivables
Loans and receivables
Cash and cash equivalents
Loans and receivables
Amortised cost
Amortised cost
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity
instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of
initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). The Group
reclassifies debt investments when and only when its business model for managing those assets changes.
118
corporate.dunelm.com Stock code: DNLM Recognition and derecognition
Regular way purchases and sales of financial assets are
recognised on trade-date, the date on which the Group commits
to purchase or sell the asset. Financial assets are derecognised
when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at fair value
through profit or loss (FVPL), transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at FVPL are expensed in profit or
loss.
Financial assets with embedded derivatives are considered in
their entirety when determining whether their cash flows are
solely payment of principal and interest.
Subsequent measurement of debt instruments depends on the
Group’s business model for managing the asset and the cash
flow characteristics of the asset. There are two measurement
categories into which the Group classifies its debt instruments:
• Amortised cost: Assets that are held for collection of
contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at
amortised cost. Interest income from these financial assets
is included in finance income using the effective interest
rate method. Any gain or loss arising on derecognition is
recognised directly in profit or loss and presented in other
gains/(losses) together with foreign exchange gains and
losses.
• FVPL: All other financial assets that do not meet the criteria
for amortised cost are measured at FVPL, unless the Group
has made an irrevocable election at the time of initial
recognition to account for the equity investment at fair value
through other comprehensive income (FVOCI). A gain or
loss on a debt investment that is subsequently measured
at FVPL is recognised in profit or loss in the period in which
it arises.
Impairment
From 1 July 2018, the Group assesses on a forward-looking basis
the expected credit losses associated with its debt instruments
carried at amortised cost. The impairment methodology applied
depends on whether there has been a significant increase in
credit risk.
For trade receivables, the Group applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to
be recognised from initial recognition of the receivables. See
note 18 for further details.
Hedge accounting
IFRS 9 requires the Group to ensure that hedge accounting
relationships are aligned with risk management objectives and
strategy and to apply a forward-looking approach to assessing
hedge effectiveness.
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges is
recognised in the cash flow hedge reserve within equity. The
gain or loss relating to the ineffective portion is recognised
immediately in profit or loss, within operating costs.
When option contracts are used to hedge forecast transactions,
the Group designates only the intrinsic value of the options as
the hedging instrument. Until 30 June 2018, the Group classified
foreign currency options as held-for-trading derivatives and
accounted for them at FVPL.
Gains or losses relating to the effective portion of the change
in intrinsic value of the options and time value of options are
recognised in the cash flow hedge reserve within equity.
When forward contracts are used to hedge forecast transactions,
the Group designates the full change in fair value of the
forward contract (including forward points) as the hedging
instrument. The gains or losses relating to the effective portion
of the change in fair value of the entire forward contract are
recognised in the cash flow hedge reserve within equity.
Amounts accumulated in equity are reclassified in the periods
when the hedged item affects profit or loss. Where the hedged
item subsequently results in the recognition of a non-financial
asset (such as inventory), both the deferred hedging gains and
losses and the deferred time value of the option contracts or
deferred forward points, if any, are included within the initial cost
of the asset. The deferred amounts are ultimately recognised
in profit or loss as the hedged item affects profit or loss (for
example, through cost of sales).
When a hedging instrument expires, or is sold or terminated,
or when a hedge no longer meets the criteria for hedge
accounting, any cumulative deferred gain or loss and deferred
costs of hedging in equity at that time remains in equity until the
forecast transaction occurs, resulting in the recognition of a non-
financial asset such as inventory. When the forecast transaction
is no longer expected to occur, the cumulative gain or loss and
deferred costs of hedging that were reported in equity are
immediately reclassified to profit or loss.
119
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Accounting Policies
For the 52 weeks ended 29 June 2019
continued
New standards and interpretations
IFRS 16, ‘Leases’, will be effective for annual periods beginning
on or after 1 January 2019.
The Group will adopt IFRS 16 for the first time in its financial
statements for the period beginning on 30 June 2019.
The standard will have a material impact on the financial
statements of the Group due to the large number of property
leases it holds as well as leases relating to machinery and
vehicles.
The implementation of IFRS 16 has no impact on cash flows
generated and will not impact management’s decisions. It does,
however, have an impact on the assets, liabilities and income
statement of the Group. The presentation of the Cash Flow
Statement will also change, with an increase in net cash flows
generated from operating activities being offset by an increase
in net cash flows used in financing activities.
IFRS 16 will give rise to a lease liability and right-of-use asset
upon transition. The lease liability will be equal to the value of
the remaining lease payments, discounted at the incremental
borrowing rate. The Group intends to apply the retrospective
modified approach on transition and will not restate the
comparative information. Under this approach, the right-of-use
asset will equal the lease liability for all leases, adjusted by any
lease prepayments and deferred income relating to landlord
incentives at the date of transition (IFRS 16 para C8b(ii)).
As a result, there will be no impact on retained earnings.
In adopting this approach, the Group intends to use the
following practical expedients and options as offered by
the standard:
Proforma Income Statement
• Application of the standard only to leases previously
identified under IAS 17
• No recognition of leases where the lease term is less than
12 months – the Group has chosen to apply this expedient
to non-property leases only
• No recognition of low value leases – the Group has chosen
to apply this expedient to non-property leases where the
total lease cost is under £5,000. This expedient has not
however been applied to cars
• Application of a single discount rate to all leases with similar
characteristics
• On transition, no recognition of initial direct costs incurred in
entering the lease within the value of the right-of-use asset
The lease liability will be calculated by discounting the future
lease payments. Lease payments shall be discounted using the
incremental borrowing rate (IBR). This rate will be calculated
based on the Revolving Credit Facility rate adjusted for a factor
based on the lease term.
The first results that will be published on an IFRS 16 basis will
be in FY20, where we expect IFRS 16 to reduce Group profit
before tax by c.£3m. On transition, a lease liability of c.£330m
will be recognised on the balance sheet. A right-of-use asset of
c.£290m will also be recognised, being equal to the value of
the lease liability less the value of accrued rent incentives at the
transition date. As a result, there will be no impact on net assets.
In order to familiarise readers of the accounts with the likely
impact of transitioning to IFRS 16 on the Group financial
statements, we show a proforma unaudited reconciliation for
FY19 for illustrative purposes.
2019
52 weeks
£’m
Exclude rent
£’m
Estimated
Include
depreciation
£’m
Estimated
Include
financing
cost
£’m
Estimated
1,100
546
(419)
127
1
(2)
126
–
–
51
51
–
–
51
–
–
(47)
(47)
–
–
(47)
–
–
–
–
–
(7)
(7)
Post IFRS 16
£’m
Estimated
1,100
546
(415)
131
1
(9)
123
Revenue
Gross profit
Operating costs
Operating profit
Financial income
Financial expenses
Profit before taxation
120
corporate.dunelm.com Stock code: DNLM
Notes to the Consolidated
Financial Statements
For the 52 weeks ended 29 June 2019
1 Segmental reporting
The Group has one reportable segment, in accordance with IFRS 8, ‘Operating Segments’, which is the retail of homewares in the UK.
Customers access the Group’s offer across multiple channels and often their journey involves more than one channel. Therefore,
internal reporting focuses on the Group as a whole and does not identify individual segments.
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 KPIs
as well as on profit before taxation. The list of our financial and non-financial KPIs can be found on page 14.
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 Acquisitions and disposals
In the prior year, the trade and assets of Achica, a subsidiary undertaking, were sold to BrandAlley UK Limited, a London-based flash
sales business for a total consideration of £0.6m. The transaction included the sale of trademarks and customer lists and resulted in
an overall loss on disposal of £0.3m.
3 Exceptional items
In the prior year, we treated as exceptional those non-recurring items which relate to the acquisition, integration and/or disposal of
the Worldstores businesses.
Exceptional operating costs
Retention and redundancy payments
Loss on disposal, asset write-offs, impairments and accelerated amortisation
Other integration costs
4 Operating costs before exceptional items
Selling and distribution costs
Administrative expenses
2019
52 weeks
£’m
2018
52 weeks
£’m
–
–
–
–
1.2
5.8
1.9
8.9
2019
52 weeks
£’m
2018
52 weeks
£’m
350.2
68.5
418.7
345.9
53.0
398.9
For details on exceptional items please refer to note 3. The increase in administrative expenses is mainly due to higher colleague
incentive costs, increased investment in technology and a £3.8m impairment charge against the Fogarty brand.
5 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
Loss on disposal and impairment of property, plant and
equipment and intangible assets
Operating lease rentals
2019
52 weeks
£’m
2018
52 weeks
£’m
Underlying
2018
52 weeks
£’m
Exceptional
items
2018
52 weeks
£’m
Reported
548.3
6.7
26.0
6.7
51.6
539.2
7.3
26.2
1.4
51.1
–
1.1
–
2.9
–
539.2
8.4
26.2
4.3
51.1
121
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Notes to the Consolidated
Financial Statements continued
For the 52 weeks ended 29 June 2019
5 Operating profit continued
For details on exceptional items please refer to note 3.
The cost of inventories included in cost of sales includes the favourable impact of a net reduction in the provision for obsolete
inventory of £1.4m (2018: £2.6m increase).
The analysis of the auditor’s remuneration is as follows:
Fees payable to the Company’s auditors for the audit of the Parent and consolidated annual financial
statements
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
- other services (See Audit and Risk Committee Report on page 66 for further information)
6 Employee numbers and costs
The average monthly number of people employed by the Group (including Directors) was:
2019
52 weeks
£’m
2018
52 weeks
£’m
18
142
20
18
102
15
Selling
Distribution
Administration
2019
52 weeks
Number
of heads
2019
52 weeks
Full time
equivalents
2018
52 weeks
Number
of heads
2018
52 weeks
Full time
equivalents
8,262
5,106
8,353
5,172
736
655
719
645
706
698
689
690
9,653
6,470
9,757
6,551
The aggregate remuneration of all employees including Directors comprises:
Wages and salaries including termination benefits
Social security costs
Share based payment expense (note 23)
Pension costs - defined contribution plans
2019
52 weeks
£’m
2018
52 weeks
£’m
156.7
10.3
1.4
3.2
143.5
10.0
0.3
2.4
171.6
156.2
Details of Directors’ remuneration, share options, long term incentive schemes and pension entitlements are disclosed in the
Remuneration Report on pages 70 to 92.
122
corporate.dunelm.com Stock code: DNLM
7 Financial income and expenses
Financial income
Interest on bank deposits
Net foreign exchange gains
Financial expenses
Interest on bank borrowings
Amortisation of issue costs of bank loans
Net foreign exchange losses
Net financial expense
8 Taxation
Current taxation
UK corporation tax charge for the period
Adjustments in respect of prior periods
Deferred taxation
Origination of temporary differences
Adjustments in respect of prior periods
Total tax expense
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 19% (2018: 19%)
Factors affecting the charge in the period:
Non-deductible expenses
Profit on disposal of non-qualifying assets
Adjustments in respect of prior periods
Utilisation of previously unrecognised tax losses
Tax charge
2019
52 weeks
£’m
2018
52 weeks
£’m
0.3
0.6
0.9
(1.6)
(0.3)
–
(1.9)
(1.0)
–
–
–
(1.9)
(0.3)
(0.5)
(2.7)
(2.7)
2019
52 weeks
£’m
2018
52 weeks
£’m
26.6
(0.4)
26.2
(1.1)
(0.5)
(1.6)
24.6
19.8
(0.3)
19.5
(0.4)
0.7
0.3
19.8
2019
52 weeks
£’m
2018
52 weeks
£’m
125.9
23.9
1.8
(0.2)
(0.9)
–
24.6
93.1
17.7
1.4
0.4
0.4
(0.1)
19.8
The taxation charge for the period as a percentage of profit before tax is 19.5% (2018: 21.3%).
The UK Government substantively enacted reductions in future tax rates by 2% from 19% to 17% from 1 April 2020. The deferred tax
asset is therefore measured at 17%.
123
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Notes to the Consolidated
Financial Statements continued
For the 52 weeks ended 29 June 2019
9 Dividends
The dividends set out in the table below relate to the 1 pence Ordinary Shares:
Final for the period ended 1 July 2017
Interim for the period ended 30 June 2018
Final for the period ended 30 June 2018
Interim for the period ended 29 June 2019
- paid 19.5 pence
- paid 7.0 pence
- paid 19.5 pence
- paid 7.5 pence
2019
52 weeks
£’m
82018
52 weeks
£’m
–
–
39.4
15.2
54.6
39.3
14.1
–
–
53.4
The Directors are proposing a final dividend of 20.5 pence per Ordinary Share for the period ended 29 June 2019 which equates
to £41.4m. The dividend will be paid, subject to shareholder approval, on 22 November 2019 to shareholders on the register at the
close of business on 1 November 2019. The Directors have declared a special dividend of 32.0 pence per Ordinary Share for the
period ended 29 June 2019 which equates to £64.6m. The dividend will be paid on 11 October 2019 to shareholders on the register
at close of business on 20 September 2019.
10 Earnings per Ordinary 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 22).
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
Profit for the period before exceptional costs
Earnings per Ordinary Share - basic
Earnings per Ordinary Share - basic before exceptional costs
Earnings per Ordinary Share - diluted
Earnings per Ordinary Share - diluted before exceptional costs
2019
52 weeks
’000
2018
52 weeks
’000
201,936
201,801
1,040
936
202,976
202,737
2019
52 weeks
£’m
2018
52 weeks
£’m
101.3
101.3
50.2p
50.2p
49.9p
49.9p
73.3
81.0
36.3p
40.1p
36.2p
40.0p
124
corporate.dunelm.com Stock code: DNLM
11 Intangible assets
Cost
At 1 July 2017
Additions
Disposals
At 30 June 2018
Additions
Disposals
At 29 June 2019
Accumulated amortisation
At 1 July 2017
Charge for the financial period
Impairment
Disposals
At 30 June 2018
Charge for the financial period
Impairment
Disposals
At 29 June 2019
Net book value
At 1 July 2017
At 30 June 2018
At 29 June 2019
Software
development
and licences
£’m
Rights to
brands and
customer lists
£’m
41.5
13.2
(10.6)
44.1
12.5
(6.8)
49.8
20.0
8.1
0.5
(9.0)
19.6
6.4
–
(3.5)
22.5
21.5
24.5
27.3
11.6
–
(0.6)
11.0
–
–
11.0
5.6
0.3
1.2
(0.2)
6.9
0.3
3.8
–
11.0
6.0
4.1
–
Total
£’m
53.1
13.2
(11.2)
55.1
12.5
(6.8)
60.8
25.6
8.4
1.7
(9.2)
26.5
6.7
3.8
(3.5)
33.5
27.5
28.6
27.3
All amortisation is included within operating costs in the income statement.
Within software development and licences, £2.3m (2018: £3.9m) of additions relates to internally generated assets.
Within rights to brands and customer lists the impairment of £3.8m (2018: nil) relates to the Fogarty brand.
125
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Notes to the Consolidated
Financial Statements continued
For the 52 weeks ended 29 June 2019
12 Property, plant and equipment
Cost
At 1 July 2017
Additions
Disposals
At 30 June 2018
Additions
Disposals
At 29 June 2019
Accumulated depreciation
At 1 July 2017
Charge for the financial period
Disposals
At 30 June 2018
Charge for the financial period
Disposals
At 29 June 2019
Net book value
At 1 July 2017
At 30 June 2018
At 29 June 2019
Land and
buildings
£’m
Leasehold
improvements
£’m
Refit
improvements
£’m
Plant and
machinery
£’m
Fixtures and
fittings
£’m
96.3
2.1
–
98.4
–
(6.3)
92.1
12.8
1.7
–
14.5
1.7
(2.0)
14.2
83.5
83.9
77.9
145.1
10.4
(1.8)
153.7
5.9
(0.7)
158.9
62.3
11.1
(1.0)
72.4
11.4
(0.4)
83.4
82.8
81.3
75.5
4.3
2.5
–
6.8
0.6
–
7.4
0.2
0.9
–
1.1
1.0
–
2.1
4.1
5.7
5.3
5.0
0.3
(0.1)
5.2
0.6
–
5.8
3.9
0.4
–
4.3
0.4
–
4.7
1.1
0.9
1.1
93.8
15.5
(2.3)
107.0
5.9
(0.9)
112.0
70.1
12.1
(2.0)
80.2
11.5
(0.5)
91.2
23.7
26.8
20.8
Total
£’m
344.5
30.8
(4.2)
371.1
13.0
(7.9)
376.2
149.3
26.2
(3.0)
172.5
26.0
(2.9)
195.6
195.2
198.6
180.6
All depreciation and impairment charges have been included within operating costs in the income statement.
13 Deferred tax assets/(liabilities)
Deferred tax is provided in full on temporary differences under the liability method using a taxation rate of 17% (2018: 17%).
Deferred taxation assets are attributable to the following:
Property, plant and equipment
Share based payments
Hedging
Deferred tax recoverable/(payable)
after more than 12 months
Deferred tax recoverable/(payable)
within 12 months
Assets
Liabilities
Net assets/(liabilities)
2019
£’m
1.6
0.3
–
1.9
2018
£’m
0.2
–
–
0.2
2019
£’m
–
–
(1.1)
(1.1)
2018
£’m
–
(0.6)
(0.6)
(1.2)
2019
£’m
1.6
0.3
(1.1)
0.8
2018
£’m
0.2
(0.6)
(0.6)
(1.0)
Assets
Liabilities
Net assets/(liabilities)
2019
£’m
2018
£’m
2019
£’m
2018
£’m
2019
£’m
2018
£’m
1.1
0.8
1.9
0.2
–
0.2
–
(1.1)
(1.1)
(0.6)
(0.6)
(1.2)
1.1
(0.3)
0.8
(0.4)
(0.6)
(1.0)
126
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13 Deferred tax assets/(liabilities) continued
The movement in the net deferred tax balance is as follows:
Property, plant and equipment
Share based payments
Hedging
Property, plant and equipment
Share based payments
Hedging
14 Inventories
Goods for resale
Goods for resale includes an NRV provision of £11.4m (2018: £12.8m).
15 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
Balance at
1 July
2017
£’m
Recognised
in income
£’m
Recognised
in equity
£’m
Balance at
30 June
2018
£’m
0.4
(0.2)
0.1
0.3
(0.2)
(0.1)
–
(0.3)
–
(0.3)
(0.7)
(1.0)
0.2
(0.6)
(0.6)
(1.0)
Balance at
30 June
2018
£’m
Recognised
in income
£’m
Recognised
in equity
£’m
Balance at
29 June
2019
£’m
0.2
(0.6)
(0.6)
(1.0)
1.4
0.2
–
1.6
–
0.7
(0.5)
0.2
1.6
0.3
(1.1)
0.8
2019
£’m
157.7
2018
£’m
154.7
2019
£’m
1.3
5.6
18.7
25.6
2018
£’m
0.3
4.3
19.3
23.9
All trade receivables are due within one year from the end of the reporting period.
A total of £14.6m of prepayments and accrued income are property-related (2018: £14.7m).
No impairment was incurred on trade and other receivables during the year and the expected credit loss provision held at period
end is nil (2018: nil). Materially, no amounts are overdue (2018: nil).
16 Cash and cash equivalents
Cash at bank and in hand
2019
£’m
19.0
2018
£’m
15.0
The Group deposits funds only with institutions that have a credit rating of ‘A’ and above and the term is less than three months.
127
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Notes to the Consolidated
Financial Statements continued
For the 52 weeks ended 29 June 2019
17 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
2019
£’m
2018
£’m
62.6
56.0
17.3
0.4
51.1
36.6
13.8
0.3
136.3
101.8
35.5
35.5
171.8
38.3
38.3
140.1
Current accruals and deferred income include lease incentives of £6.5m (2018: £5.6m), capital accruals of £3.2m (2018: £2.7m) and
a returns provision of £2.2m (2018: £2.0m). Contract liabilities of £2.2m (2018: £2.8m) for gift cards and credit notes is included
within accruals and deferred income.
The maturity analysis of non-current accruals and deferred income, all of which relate to lease incentives, is as follows:
One to two years
Two to five years
After five years
18 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.
There are no changes to exposures to risk and how they arise
and the Group objectives, policies and procedures for managing
the risk and methods used to measure the risk from the previous
period.
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,
and as such, credit risk is considered to be low.
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’s maximum exposure to credit risk is represented
by the carrying amount of financial assets. No collateral is held
(2018: none). At the period end the maximum exposure is
detailed in the table below:
2019
£’m
6.1
15.4
14.0
35.5
2019
£’m
19.0
6.9
0.3
5.1
31.3
1.0
32.3
2018
£’m
5.8
15.6
16.9
38.3
2018
£’m
15.0
4.6
0.2
2.8
22.6
1.4
24.0
Current
Cash and cash equivalents
Trade and other receivables
Prepayments and accrued
income (excluding prepayments)
Derivative financial instruments
Total current financial assets
Non-current
Derivative financial instruments
Total financial assets
Trade and other receivables include rebates due back from
suppliers. The rebates are recovered through deductions from
future payments to suppliers and therefore management is
confident of the recoverability of these balances.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade and other receivables and accrued
income. To measure the expected credit losses, trade and other
receivables and accrued income have been grouped based on
shared credit risk characteristics and the days past due. There is
limited exposure to ECLs due to the way the Group operates.
128
corporate.dunelm.com Stock code: DNLM
18 Financial risk management continued
The Group will write off, either partially or in full, the gross
carrying amount of a financial asset when there is no realistic
prospect of recovery. This is usually the case when it is
determined that the debtor does not have the assets or sources
of income that could generate sufficient cash flows to repay the
amounts subject to the write-off. However, the Group may still
choose to pursue enforcement in order to recover the amounts
due.
On that basis, the loss allowance as at 30 June 2018 and 29 June
2019 was determined to be nil for trade and other receivables,
accrued income and cash and cash equivalents.
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. Further details of the Group’s available facilities can be
found in note 19.
All cash flows on financial liabilities for 2019 and 2018 are
contractually due within one year.
Total borrowings of £45m (2018: £140m) reflect the level of
facility drawdown at the period end on the Group’s Revolving
Credit Facilities.
Interest rate risk
The Group’s bank borrowings incur variable interest rate
charges. The Group’s policy aims to manage the interest cost of
the Group within the constraints of its financial covenants. The
Group will continue to monitor movements in the interest rate
swap market.
At the period end, if Libor interest rates had been 10 basis
points higher with all other variables held constant, post-tax
profit would have been £0.2m lower (2018: £0.1m lower) as a
result of higher interest expense on floating rate borrowings.
Foreign currency risk
All of the Company’s revenues are in sterling. The majority
of purchases are also in pounds sterling, but some goods
purchased direct from overseas suppliers are paid for in US
dollars, accounting for just over 20% of stock purchases in the
period ended 29 June 2019.
The Company uses various means to cover its exposure to US
dollars: holding US dollar cash balances and taking out forward
foreign exchange contracts for the purchase of US dollars.
All the Company’s foreign exchange transactions are designed
to satisfy US dollar denominated liabilities. The maximum level
of hedging coverage which will be undertaken is 100% of
anticipated expenditure on a three month horizon, stepping
down to 75% on a four to 12 month horizon and 50% on a 13 to
18 month horizon. Coverage beyond 18 months is minimal.
Cash flow hedges are in place to manage foreign exchange rate
risk arising from forecast purchases denominated in US dollars.
At the balance sheet date, the fair value of US dollar foreign
exchange forward contracts held in cash flow hedges was £6.1m
asset (2018: £3.5m asset) which relates to a commitment to
purchase $190.5m (2018: $164.0m) for a fixed sterling amount.
A fair value gain of £6.6m (2018: £1.6m) was recognised in other
comprehensive income and no ineffectiveness (2018: nil) was
noted on cash flow hedges during the period. In the period, a
gain of £3.9m (2018: £2.6m loss) was recycled from the cash
flow hedge reserve to inventory to offset foreign exchange
movements on purchases. The remaining hedge reserve
balance will be recycled to the income statement to offset future
purchases occurring after the balance sheet date, the majority of
which expire in the next 12 months.
The outstanding US dollar liabilities at the period end were
$1.1m (2018: $0.3m).
In the event of a significant adverse movement in the US dollar
exchange rate, the Company could seek to minimise the
impact on profitability by changing the selling price of goods,
renegotiating terms with suppliers or sourcing from alternative
markets.
At the period end if GBP had strengthened by 10% against
USD with all other variables held constant, post-tax profit would
have been £0.1m higher (2018: £0.4m higher) as a result of
foreign exchange gains on translation of USD denominated
trade payables compensated by foreign exchange losses
on translation of USD cash and cash equivalents. Other
components of equity would have been £13.6m lower (2018:
£9.0m lower) as a result of a decrease in fair value of derivatives
designated as cash flow hedges.
Conversely, if GBP had weakened by 10% against USD with
all other variables held constant, post-tax profit for the year
would have been £0.3m lower (2018: £0.5m lower) and other
components of equity would have been £16.7m higher (2018:
£11.0m higher).
The US dollar period end exchange rate applied in the above
analysis is 1.2690 (2018: 1.3152).
Capital management
The Company considers equity plus debt as the capital.
There are no externally imposed capital requirements on the
Company.
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.
129
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Notes to the Consolidated
Financial Statements continued
For the 52 weeks ended 29 June 2019
18 Financial risk management continued
During the prior period, the Group amended and extended its syndicated Revolving Credit Facility (RCF). The RCF was increased
to £165m and extended until 2023. The optional accordion facility of £75m remains in place. The terms of the RCF are unchanged
and are consistent with normal practice and include covenants in respect of leverage (net debt to be no greater than 2.5× EBITDA
before exceptional items) and fixed charge cover (EBITDA before exceptional items to be no less than 1.75× fixed charges), both of
which were met comfortably as at 29 June 2019. In addition, the Group maintains £20m of uncommitted overdraft facilities with two
syndicate partner banks.
The gearing ratio and banking covenants were as follows:
Total borrowings (note 19)
Less: unamortised debt issue costs (note 19)
Less: cash and cash equivalents (note 16)
Net debt
Total equity
Total capital
Gearing ratio
Operating profit
Add: Depreciation and amortisation (note 5)
Add: Loss on disposal and impairment of non-current assets before exceptional items (note 5)
EBITDA before exceptional items
Net debt: EBITDA before exceptional items ratio
EBITDA before exceptional items
Rent
EBITDAR before exceptional items
Net interest (note 7)
Rent
Fixed charges
Fixed charge cover
2019
£’m
45.0
(0.7)
(19.0)
25.3
185.8
211.1
12%
126.9
32.7
6.7
166.3
0.15
166.3
48.0
214.3
1.0
48.0
49.0
4.4
2018
£’m
140.0
(1.0)
(15.0)
124.0
134.7
258.7
48%
104.7
33.5
1.4
139.6
0.89
139.6
47.4
187.0
2.7
47.4
50.1
3.7
130
corporate.dunelm.com Stock code: DNLM
18 Financial risk management continued
Derivatives: Hedge ineffectiveness
Hedge effectiveness is determined at the inception of the hedge
relationship, and through periodic prospective effectiveness
assessments to ensure that an economic relationship exists
between the hedged item and hedging instrument.
For hedges of foreign currency purchases, the Group enters
into hedge relationships where the critical terms of the hedging
instrument match exactly with the terms of the hedged item.
The Group therefore performs a qualitative assessment of
effectiveness. If changes in circumstances affect the terms of the
hedged item such that the critical terms no longer match exactly
with the critical terms of the hedging instrument, the Group uses
the hypothetical derivative method to assess effectiveness.
In hedges of foreign currency purchases, ineffectiveness may
arise if the timing of the forecast transaction changes from what
was originally estimated, or if there are changes in the credit risk
of the Group or the derivative counterparty.
Market risk
The Group uses a combination of foreign currency options
and foreign currency forwards to hedge its exposure to foreign
currency risk. Under the Group’s policy the critical terms of the
forwards and options must align with the hedged items.
The Group only designates the spot component of foreign
currency forwards in hedge relationships. The spot component
is determined with reference to relevant spot market exchange
rates. The differential between the contracted forward rate and
the spot market exchange rate is defined as the forward points.
It is discounted, where material.
The intrinsic value of foreign currency options is determined
with reference to the relevant spot market exchange rate.
The differential between the contracted strike rate and the
discounted spot market exchange rate is defined as the time
value. It is discounted, where material.
The changes in the forward element of the foreign currency
forwards and the time value of the options that relate to hedged
items are deferred in the costs of hedging reserve.
Effects of hedge accounting on the financial position and
performance
Foreign currency forwards
Carrying amount of asset
Notional amount
Maturity date
Hedge ratio
Change in value of hedged
item used to determine
hedge effectiveness
Change in the value of
hedging instruments
Weighted average hedged
rate for the year (including
forward points)
2019
£’m
6.1
142.3
2018
£’m
3.4
119.7
July 2019 -
June 2021
July 2018 -
June 2020
1:1
1:1
£(6.6)m
£(1.6)m
£6.6m
£1.6m
US$ 0.7459:£1 US$ 0.7298:£1
Fair values
The fair value of the Group’s financial assets and liabilities are
equal to their carrying value. The fair value of foreign currency
contracts are amounts 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 derivative financial instruments carried at fair value have
been measured by a Level 2 valuation method, based on
observable market data.
131
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Notes to the Consolidated
Financial Statements continued
For the 52 weeks ended 29 June 2019
18 Financial risk management continued
Financial assets/(liabilities)
The carrying value of all financial assets and financial liabilities was materially equal to their fair value.
Other
financial
liabilities at
amortised
costs
£’m
Derivatives
used for
hedging
£’m
Loans and
receivables
£’m
15.0
4.6
0.2
–
19.8
–
–
–
–
–
19.8
–
–
–
–
–
(51.4)
(26.2)
(139.0)
–
(216.6)
(216.6)
–
–
–
4.2
4.2
–
–
–
(0.7)
(0.7)
3.5
Financial
assets at
amortised
cost
£’m
Financial
liabilities at
amortised
cost
£’m
Derivatives
used for
hedging
£’m
19.0
6.9
0.3
–
26.2
–
–
–
–
26.2
–
–
–
–
–
(63.0)
(42.3)
(44.3)
(149.6)
(149.6)
–
–
–
6.1
6.1
–
–
–
–
6.1
2019
£’m
14.1
4.5
0.4
19.0
Total
£’m
15.0
4.6
0.2
4.2
24.0
(51.4)
(26.2)
(139.0)
(0.7)
(217.3)
(193.3)
Total
£’m
19.0
6.9
0.3
6.1
32.3
(63.0)
(42.3)
(44.3)
(149.6)
(117.3)
2018
£’m
8.8
5.9
0.3
15.0
At 30 June 2018
Cash and cash equivalents
Trade and other receivables
Prepayments and accrued income (excluding prepayments)
Derivative financial instruments
Total financial assets
Trade and other payables
Accruals and deferred income (excluding deferred income)
Bank borrowings
Derivative financial instruments
Total financial liabilities
Net financial assets/(liabilities)
At 29 June 2019
Cash and cash equivalents
Trade and other receivables
Prepayments and accrued income (excluding prepayments)
Derivative financial instruments
Total financial assets
Trade and other payables
Accruals and deferred income (excluding deferred income)
Bank borrowings
Total financial liabilities
Net financial assets/(liabilities)
The currency profile of the Group’s cash and cash equivalents is as follows:
Sterling
US dollar
Euro
132
corporate.dunelm.com Stock code: DNLM
19 Bank loans
Total borrowings
Less: unamortised debt issue costs
2019
£’m
45.0
(0.7)
44.3
2018
£’m
140.0
(1.0)
139.0
Borrowings relate to the Group’s syndicated Revolving Credit Facility (RCF), as described in note 18. The carrying amount of bank
borrowings is equal to fair value. The Group also has an accordion option with a maximum facility of £75m, as well as an overdraft
facility of £20m.
The below analysis shows the reconciliation of net debt:
Net debt at 30 June 2018 and 1 July 2017
Net increase/(decrease) in cash and cash equivalents (excluding foreign exchange revaluations)
Effect of foreign exchange
Repayments of Revolving Credit Facility
Drawdowns on Revolving Credit Facility
Loan transaction costs
Change in net debt resulting from cash flows
Amortisation of debt issue costs
Movement in net debt
Net debt represented by:
Cash and cash equivalents (note 16)
Non-current borrowings (note 19)
Net debt including unamortised debt issue costs
Unamortised debt issue costs
Net debt at 29 June 2019 and 30 June 2018
2019
£’m
2018
£’m
(124.0)
(122.1)
3.4
0.6
120.0
(25.0)
–
99.0
(0.3)
98.7
19.0
(45.0)
(26.0)
0.7
(25.3)
(1.9)
(0.5)
10.0
(10.0)
0.8
(1.6)
(0.3)
(1.9)
15.0
(140.0)
(125.0)
1.0
(124.0)
133
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Notes to the Consolidated
Financial Statements continued
For the 52 weeks ended 29 June 2019
20 Provisions
Balance at
30 June 2018
£’m
Utilised in the
period
£’m
Created in the
period
£’m
Released in
the period
£’m
Balance at
29 June 2019
£’m
Property-related
(1.7)
0.6
(1.1)
0.5
(1.7)
Property-related provisions consist of costs associated with vacant property and dilapidations. Dilapidations are based on the
Directors’ best estimate of the Group’s future liabilities.
21 Issued share capital
In issue at the start of the period
In issue at the end of the period
Ordinary Shares of 1p each:
Authorised
Allotted, called up and fully paid
2019
Number of
Ordinary
Shares of 1p
each
2018
Number of
Ordinary
Shares of 1p
each
202,833,931 202,833,931
202,833,931 202,833,931
2019
Number of
shares
2019
£’m
2018
Number of
shares
500,000,000
202,833,931
5.0
2.0
500,000,000
202,833,931
2018
£’m
5.0
2.0
2018
£’m
10.3
(2.1)
8.2
Proceeds received in relation to shares issued during the period were £nil (2018: £nil).
22 Treasury shares
Outstanding at the beginning of the period
Reissued during the period in respect of share option schemes
Outstanding at the end of the period
2019
Number of
shares
914,635
(46,993)
867,642
2019
£’m
8.2
(0.4)
7.8
2018
Number of
shares
1,150,642
(236,007)
914,635
The Group acquired no shares through purchases on the London Stock Exchange during the period (2018: nil).
The Group reissued 46,993 (2018: 236,007) treasury shares during the period for a total value of £0.4m (2018: £2.1m).
Proceeds from the issue of treasury shares included in the Consolidated Statement of Cash Flows and Consolidated Statement of
Changes in Equity of £0.2m (2018: £1.3m) is the amount employees contributed.
The Group has the right to reissue the remaining treasury shares at a later date.
134
corporate.dunelm.com Stock code: DNLM
23 Share based payments
The total expense recognised in the Consolidated Income Statement and Consolidated Statement of Changes in Equity arising from
share based payments is as follows:
Sharesave
LTIP
2019
52 weeks
£’m
2018
52 weeks
£’m
0.3
1.1
1.4
0.1
0.2
0.3
The charge for the Dunelm Group Share Option Plan (GSOP) and Restricted Stock Award schemes are below the rounding ceiling.
As at 29 June 2019, the Group operated four share award plans:
a. Dunelm Group Share Option Plan (GSOP)
These options are granted to particular individuals and are dependent on the level of growth in the Group’s EPS relative to RPI as
well as continuing employment with the Group.
b. Dunelm Group Savings Related Share Option Plan (Sharesave)
These options are 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.
c. Long Term Incentive Plan (LTIP)
These options are granted to particular individuals and are dependent on the level of growth in Group EPS relative to RPI, as well as
continuing employment.
d. Restricted Stock Award
These options are granted to particular individuals and are dependent on continuing employment and fulfilment of a performance
condition.
As the numbers of share options granted or outstanding and the related charge to the Group income statement are not significant,
no further disclosures are included in these financial statements.
24 Commitments
As at 29 June 2019, the Group had entered into capital contracts for new stores and refits amounting to £5.5m (2018: £5.7m) and
£2.3m (2018: £1.9m) for intangible assets.
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
2019
Motor
vehicles
£’m
2019
Land and
buildings
£’m
2019
Plant and
machinery
£’m
1.1
1.7
–
2.8
52.0
173.9
134.4
360.3
2.4
2.7
1.0
6.1
2019
Total
£’m
55.5
178.3
135.4
369.2
2018
Motor
vehicles
£’m
2018
Land and
buildings
£’m
2018
Plant and
machinery
£’m
0.9
1.1
–
2.0
52.9
178.3
159.1
390.3
2.4
4.9
0.4
7.7
2018
Total
£’m
56.2
184.3
159.5
400.0
As at 29 June 2019 the Group has 167 (2018: 167) 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 and items of computer hardware under operating leases. These vary in length.
135
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Notes to the Consolidated
Financial Statements continued
For the 52 weeks ended 29 June 2019
25 Contingent liabilities
The Group had no contingent liabilities at the period end date (2018: none).
26 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. A list of subsidiaries can be found in
note 4 to the Parent Company financial statements.
Key management personnel
The key management personnel of the Group comprise members of the Board of Directors, the Executive Board and David Stead,
the Group’s interim Chief Financial Officer until 28 November 2018.
Directors of the Company and their close relatives control 51.5% (2018: 51.5%) of the voting shares of the Company.
Disclosures relating to remuneration of Directors are set out in the Remuneration Report on pages 70 to 92. The remuneration of the
key management personnel, excluding David Stead, is set out below:
Short term employee benefits
Post-employment benefits
Share based payments
David Stead’s remuneration is set out below:
Short term employee benefits
Post-employment benefits
2019
52 weeks
£’m
2018
52 weeks
£’m
2.5
0.2
0.9
3.6
5.7
0.3
0.1
6.1
2019
52 weeks
£’000
2018
52 weeks
£’000
49.5
5.8
55.3
48.9
3.1
52.0
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.
27 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.
28 Subsequent events
There are no reportable subsequent events for Dunelm Group plc.
136
corporate.dunelm.com Stock code: DNLM
Parent Company Statement
of Financial Position
As at 29 June 2019
Non–current assets
Investment in subsidiaries
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Total current assets
Total assets
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share premium account
Non-distributable reserves
Capital redemption reserve
Retained earnings
Total equity attributable to equity holders of the Parent
The Company made a profit after tax of £102.6m (2018: £43.1m).
29 June
2019
£’m
30 June
2018
£’m
Note
4
5
6
7
11
53.6
0.2
53.8
317.9
317.9
371.7
(87.9)
(87.9)
(87.9)
283.8
2.0
1.6
8.4
43.2
228.6
283.8
52.5
0.1
52.6
181.6
181.6
234.2
–
–
–
234.2
2.0
1.6
7.3
43.2
180.1
234.2
The financial statements on pages 137 to 144 were approved by the Board of Directors on 4 September 2019 and were signed on
its behalf by:
Laura Carr
Director
Company number 04708277
Parent Company Statement
of Cash Flows
For the 52 weeks ended 29 June 2019
There were no cash movements during the period for the Company as any cash transactions were executed by other members
of the Dunelm Group plc Group on behalf of the Company. As a result, no statement of cash flows has been presented in these
financial statements.
137
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Parent Company Statement
of Changes in Equity
For the 52 weeks ended 29 June 2019
Issued
share
capital
£’m
Share
premium
account
£’m
Non-
distributable
reserves
£’m
Capital
redemption
reserve
£’m
Retained
earnings
£’m
Note
2.0
1.6
7.0
43.2
189.1
As at 1 June 2017
Profit for the period
Total comprehensive income
for the period
Issue of treasury shares
Share based payments
Dividends
Total transactions with owners,
recorded directly in equity
As at 30 June 2018
Profit for the period
Total comprehensive income
for the period
Proceeds from issue of treasury shares
Share based payments
Dividends
Total transactions with owners, recorded
directly in equity
–
–
–
–
–
–
–
–
–
–
–
–
2.0
1.6
–
–
–
–
–
–
–
–
–
–
–
–
12
3
13
3
Total equity
attributable
to equity
holders of
the Parent
£’m
242.9
43.1
43.1
43.1
43.1
1.3
–
1.3
0.3
(53.4)
(53.4)
(52.1)
180.1
102.6
(51.8)
234.2
102.6
102.6
102.6
0.2
0.3
0.2
1.4
(54.6)
(54.6)
–
–
–
0.3
–
0.3
7.3
–
–
–
1.1
–
1.1
8.4
–
–
–
–
–
–
43.2
–
–
–
–
–
–
As at 29 June 2019
2.0
1.6
(54.1)
43.2
228.6
(53.0)
283.8
The non-distributable reserves’ purpose is to reflect movements in share based payments in respect of awards given by the Parent
Company to employees of subsidiaries.
138
corporate.dunelm.com Stock code: DNLM
Parent Company Accounting Policies
For the 52 weeks ended 29 June 2019
General information
Dunelm Group plc is incorporated and domiciled in the UK.
Dunelm Group plc is a listed public company, limited by
shares and the Company registration number is 04708277.
The registered office is Watermead Business Park, Syston,
Leicestershire, England, LE7 1AD.
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 financial statements 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.
Going concern
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.
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).
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 shares, 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.
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. Deferred
tax is determined using tax rates (and laws) that have been
enacted or substantively enacted at the balance sheet date and
are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled.
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 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 they 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.
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.
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.
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.
139
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Parent Company Accounting Policies
For the 52 weeks ended 29 June 2019
Financial assets
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities
greater than 12 months after the end of the reporting period
where they are classified as non-current assets. The Group’s
loans and receivables comprise trade and other receivables
(note 6).
Trade and other receivables
Trade and other receivables are initially recognised at fair value
and then carried at amortised cost, net of impairment provisions.
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.
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.
IFRS 15 ‘Revenue from contracts
with customers’
The Company has adopted IFRS 15 ‘Revenue from contracts
with customers’ for the first time in the current financial year.
This standard does not have a material impact on the financial
statements of the Company.
IFRS 9 ‘Financial instruments’
The Company has adopted IFRS 9 ‘Financial instruments’ for
the first time in the current financial year. This standard does
not have a material impact on the financial statements of the
Company.
New standards and interpretations
IFRS 16 ‘Leases’, will be effective from the period beginning
30 June 2019 onwards. This is not expected to have a material
impact on the Company Statement of Financial Position and
Income Statement.
140
corporate.dunelm.com Stock code: DNLM Notes to the Parent Company
Financial Statements
For the 52 weeks ended 29 June 2019
1 Income statement
The Company made a profit after tax of £102.6m (2018: £43.1m). The Directors have taken advantage of the exemption available
under section 408 of the 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 auditor in accordance with the Companies (Disclosure of Auditors’
Remuneration) Regulations 2005.
2 Employee costs
The Company has no employees other than the three Executive Directors and the Non-Executive Directors. Full details of the
Directors’ remuneration and interests are set out in the Remuneration Report on pages 70 to 92. Share based payments details are
given in note 13 on page 144.
The Parent Company does not receive any recharge in respect of Directors’ remuneration.
3 Dividends and special distributions to shareholders
The dividends set out in the table below relate to the 1 pence Ordinary Shares:
Final for the period ended 1 July 2017
Interim for the period ended 30 June 2018
Final for the period ended 30 June 2018
Interim for the period ended 29 June 2019
– paid 19.5 pence
– paid 7.0 pence
– paid 19.5 pence
– paid 7.5 pence
2019
52 weeks
£’m
2018
52 weeks
£’m
–
–
39.4
15.2
54.6
39.3
14.1
–
–
53.4
The Directors are proposing a final dividend of 20.5 pence per Ordinary Share for the period ended 29 June 2019 which equates
to £41.4m. The dividend will be paid, subject to shareholder approval, on 22 November 2019 to shareholders on the register at the
close of business on 1 November 2019. The Directors have declared a special dividend of 32.0 pence per Ordinary Share for the
period ended 29 June 2019 which equates to £64.6m. The dividend will be paid on 11 October 2019 to shareholders on the register
at close of business on 20 September 2019.
4 Investments
Shares in subsidiary undertakings:
As at 1 July 2017
Share based payments
As at 30 June 2018
Share based payments
As at 29 June 2019
£’m
52.2
0.3
52.5
1.1
53.6
The following were subsidiaries as at 29 June 2019 and 30 June 2018:
Subsidiary
Dunelm Limited
Dunelm (Soft Furnishings) Limited*
Dunelm Estates Limited*
Zoncolan Limited*
Fogarty Holdings Limited*
Globe Online Limited*
Achica Brand Management Limited (Registered in Cyprus)*
* Share capital held by subsidiary undertaking.
Proportion
of Ordinary
Shares held
100%
100%
100%
100%
100%
100%
100%
Nature of business
Holding company
Retailer of soft furnishings
Non-trading company
Non-trading company
Non-trading company
Dormant
Intellectual property holding company
141
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Notes to the Parent Company
Financial Statements continued
For the 52 weeks ended 30 June 2019
4 Investments continued
Dunelm Group plc, the Parent Company and its subsidiaries (excluding Achica Brand Management Limited) are incorporated and
domiciled in the UK. The registered office is Watermead Business Park, Syston, Leicestershire, England, LE7 1AD.
Achica Brand Management Limited was incorporated in Cyprus on 27 June 2011 as a private limited liability company under the
provisions of the Cyprus Companies Law, Cap. 113. Its registered office is at 28 Oktovriou, 261, View Point Tower, 3035, Limassol,
Cyprus.
5 Deferred tax assets
Employee benefits
The movement in deferred tax assets is as follows:
Assets
2019
£’m
0.2
2018
£’m
0.1
Balance at
1 July 2017
£’m
Recognised in
income
£’m
Recognised in
equity
£’m
Balance at
30 June 2018
£’m
Employee benefits
0.1
–
–
0.1
Employee benefits
0.1
0.1
–
0.2
Balance at
30 June 2018
£’m
Recognised in
income
£’m
Recognised in
equity
£’m
Balance at
29 June 2019
£’m
6 Trade and other receivables
Amounts owed by Group undertakings
2019
£’m
317.9
2018
£’m
181.6
Amounts owed by subsidiary undertakings are immediately repayable. Interest is charged monthly on all intercompany balances at
an annual rate of 2%.
These amounts pose no liquidity or credit risk as they are owed by other Group undertakings and are expected to be settled by
Group transactions.
The following table shows the gross balances offset in the table above:
Gross balance with Group undertakings
Gross balance offset with Group undertakings
7 Trade and other payables
Amounts owed to Group undertakings
Other taxation and social security
2019
£’m
317.9
–
317.9
2019
£’m
(87.7)
(0.2)
(87.9)
2018
£’m
209.4
(27.8)
181.6
2018
£’m
–
–
–
Amounts owed to subsidiary undertakings are immediately repayable. Interest is charged monthly on all intercompany balances at
an annual rate of 2%.
142
corporate.dunelm.com Stock code: DNLM
8 Taxation
Current taxation
UK corporation tax charge for the period
Deferred taxation
Origination of temporary differences
Total tax expense
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 19% (2018: 19%)
Factors affecting the charge in the period:
Income not subject to tax
Group relief
Tax charge
2019
52 weeks
£’m
2018
52 weeks
£’m
–
–
(0.1)
(0.1)
–
–
–
–
2019
52 weeks
£’m
2018
52 weeks
£’m
102.6
19.5
(19.5)
(0.1)
(0.1)
43.1
8.2
(8.0)
(0.2)
–
The UK Government substantively enacted reductions in future tax rates by 2% to 17% from 1 April 2020.
9 Interest bearing loans and borrowings
The Company has no committed borrowing facilities as any cash transactions are executed by other members of the Dunelm Group
on behalf of the Company.
10 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.
11 Issued share capital
In issue at the start of the period
In issue at the end of the period
Number of
Ordinary
Shares of 1p
each
2019
Number of
Ordinary
Shares of 1p
each
2018
202,833,931 202,833,931
202,833,931 202,833,931
Number of
B Shares of
0.001p each
2019
Number of
B Shares of
0.001p each
2018
–
–
–
–
Proceeds received in relation to shares issued during the period were £nil (2018: £nil).
Ordinary shares of 1p each:
Authorised
Allotted, called up and fully paid
2019
Number of
shares
2019
£’m
2018
Number of
shares
500,000,000
202,833,931
5.0
2.0
500,000,000
202,833,931
2018
£’m
5.0
2.0
The holders of the Ordinary Shares are entitled to receive dividends as declared and are entitled to one vote per share.
143
FinancialsDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019
Notes to the Parent Company
Financial Statements continued
For the 52 weeks ended 30 June 2019
12 Treasury shares
2019
Number of
shares
2019
£’m
2018
Number of
shares
Outstanding at the beginning of the period
914,635
8.2
1,150,642
Purchased during the period
Reissued during the period in respect of share option schemes
Outstanding at the end of the period
–
(46,993)
867,642
–
(0.4)
7.8
–
(236,007)
914,635
The Group acquired no shares through purchases on the London Stock Exchange during the period (2018: nil).
The Group reissued 46,993 (2018: 236,007) treasury shares during the period for a total value of £0.4m (2018: £2.1m).
2018
£’m
10.3
–
(2.1)
8.2
Proceeds from the issue of treasury shares included in the Statement of Cash Flows and Statement of Changes in Equity of £0.2m
(2018: £1.3m) is the amount employees contributed.
The Group has the right to reissue the remaining treasury shares at a later date.
13 Share based payments
The total expense recognised in the income statement arising from share based payments is as follows:
LTIP
As at 29 June 2019, the Company operated one share award plan:
2019
£’m
0.3
2018
£’m
–
Long Term Incentive Plan (LTIP) - These options are granted to particular individuals and are dependent on the level of growth in
Group EPS relative to RPI, as well as continuing employment.
As the numbers of share options granted or outstanding and the related charge to the Company income statement are not
significant, no further disclosures are included in these financial statements.
14 Contingent liability
The Company had no contingent liabilities at the period end date (2018: none).
15 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:
Dividends received
Amounts due to Group undertakings
Net interest receivable
2019
£’m
102.5
(87.7)
4.1
2018
£’m
42.0
–
3.9
Key management personnel
All employees of the Company are key management personnel including David Stead, the Group’s interim Chief Financial Officer
until 28 November 2018.
Directors of the Company and their close relatives control 51.5% (2018: 51.5%) of the voting shares of the Company.
Disclosures relating to the remuneration of Directors are set out in the Remuneration Report on pages 70 to 92. Disclosures relating
to the remuneration of David Stead are set out in note 26 in the Group’s financial statements.
16 Subsequent events
There are no reportable subsequent events for Dunelm Group plc.
144
corporate.dunelm.com Stock code: DNLM
Advisers and Contacts
Corporate Brokers
and Financial Advisers
Legal Advisers
Independent Auditor
Principal Bankers
Registrars
Financial
Public Relations
Registered Office
Investor Relations
UBS Investment Bank
1 Finsbury Avenue
London EC2M 2PP
Tel: 020 7567 8000
Stifel Nicolaus Europe 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: 0345 755 5555
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Tel: 0371 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
corporate.dunelm.com
Tel: 0116 264 4439
Email: investorrelations@dunelm.com
¹ If dialling internationally, call +44 121 415 7047. The helpline is open Monday to Friday 8.30 am to 5.30 pm, excluding bank holidays.
145
CompanyInformationDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 Shareholder Notes
146
corporate.dunelm.com Stock code: DNLM Store Listing
Superstores
London
Barnet
Beckton
Catford
Colliers Wood
Croydon
Dartford
Enfield
Greenford
Harrow
Romford
Staples Corner
High Street
Boston (2 stores)
Online
dunelm.com
Superstores
Aberdeen
Altrincham
Ashford
Aylesbury
Ballymena
Banbury
Bangor
Barnsley
Barnstaple
Barrow-in-Furness
Basingstoke
Bedford
Belfast
Birmingham
Birmingham
Highgate Middleway
Birmingham Erdington
Blackburn
Blackpool
Bolton
Bournemouth
Bradford
Bridgend
Bristol Brislington
Broadstairs
Bromborough
Burton
Bury St Edmunds
Cambridge
Cannock
Canterbury
Cardiff
Carlisle
Carmarthen
Chelmsford
Cheltenham
Chester
Chesterfield
Chichester
Colchester
Coleraine
Coventry
Cramlington
Crewe
Darlington
Derby
Doncaster
Dumfries
Dundee
Dunstable
Eastbourne
Edinburgh Straiton
Exeter
Falkirk
Fareham
Farnborough
Glasgow Clydebank
Glasgow Paisley
Glasgow Uddingston
Gloucester
Grantham
Grimsby
Halifax
Harlow
Hartlepool
Hastings
Hemel Hempstead
Hereford
High Wycombe
Horsham
Huddersfield
Hull
Huntingdon
Ilkeston
Inverness
Ipswich
Jersey
Keighley
Kettering
Kidderminster
Kilmarnock
Kirkcaldy
Lancaster
Leeds
Leicester Thurmaston
Lincoln
Liverpool Garston
Liverpool Sefton
Livingstone
Llanelli
Londonderry
Loughborough
Lowestoft
Maidstone
Manchester
Ashton-under-Lyne
Manchester Radcliffe
Manchester Trafford
Mansfield
Milton Keynes
Newbury
Newport
Newport Isle of Wight
Newtownabbey
North Shields
Northampton
Norwich
Nottingham
Nuneaton
Oldbury
Oxford
Perth
Peterborough
Plymouth
Pontypridd
Preston
Reading
Redditch
Rochdale
Rotherham
Rugby
Rustington
Salisbury
Scarborough
Scunthorpe
Sheffield Kilner Way
Sheffield Woodseats
Shoreham
Shrewsbury Sundorne
Sittingbourne
Slough
Solihull
Southampton
Southport
St Albans
St Helens
Stafford
Stevenage
Stockport
Stockton-on-Tees
Stoke-on-Trent Fenton
Sunderland
Swansea
Swindon
Taunton
Telford
Thurrock
Torquay
Truro
Wakefield
Walsall
Warrington
Wellingborough
West London Greenford
West London Harrow
Weston-super-Mare
Wisbech
Wolverhampton
Worcester
Workington
Wrexham
Yeovil
York
IBC
CompanyInformationDunelm Group plc Annual Report and Accounts for the period ended 29 June 2019 corporate.dunelm.com
Tel: 0116 264 4439
Email: investorrelations@dunelm.com
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