DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
Growing with
purpose
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Growing with purpose
Dunelm is the UK’s market leader in homewares,
offering a distinctive and specialist product portfolio,
and friendly, convenient service, through a retail system
that combines physical stores and digital channels.
Our purpose
To help create the
joy of truly feeling
at home, now and
for generations
to come.
In last year’s annual report, I talked about our renewed
purpose and its relevance to the broader role we play in
the lives of our stakeholders. Our purpose influences
our Board and our colleagues in our decision-making.
It prompts us to question why we do what we do, and it
improves our recognition of how we help create the joy
of truly feeling at home for our stakeholders – our
customers, colleagues, store communities, suppliers,
shareholders and all other people we deal with.
As we continue to grow it is even more important that
we use our purpose to guide us to do the right thing.
Our plan is to become our customers’ 1st Choice for
Home, across all products, services and experiences
that we offer. Increasingly, we can demonstrate that we
are achieving this in a sustainable and responsible way,
now and for generations to come.
In this report we share examples of how our purpose has
been used to guide our strategic thinking and actions.
By growing with purpose, we believe we can better
counter the significant macroeconomic uncertainties
ahead and keep our stakeholders engaged and
committed as we head into our next phase of growth.”
Nick
Nick Wilkinson
Chief Executive Officer
In this year’s report
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Growing our
product offer
Page 8
Digitising
our business
Page 10
Feeling at home
wherever you work
Page 12
Building sustainability
into all that we do
Strategic report
Our business
Business model
Growing with purpose
Chairman’s statement
CEO’s review
Our markets and customers
Our strategy
Key performance indicators
CFO’s introduction
CFO’s review
Sustainability
Task Force on Climate-related
Financial Disclosures (TCFD)
68
Risks and risk management
Principal risks and uncertainties
70
Going concern, viability and S172(1) 80
statements
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32
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82
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Governance
Chairman’s letter
Directors and officers
Board leadership and
company purpose
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Section 172 Companies Act 2006
107
Division of responsibilities
110
Nominations Committee Report
120
Audit and Risk Committee Report
Remuneration Committee Report
130
Directors’ Remuneration Policy 2020 136
147
Implementation Report
163
Directors’ report
Non-Financial Information Statement 167
Statement of directors’
169
responsibilities
Financial statements
170
Independent auditors’ report
Consolidated Financial statements
176
Parent Company Financial statements 208
Other information
Advisers and contacts
217
Go online
corporate.dunelm.com
ANNUAL REPORT AND ACCOUNTS 2022 01
DUNELM GROUP PLC
Our business
Leading in a
fast-changing market
We are the UK’s #1 homewares retailer, with
a growing presence in the furniture market.
No.1
Market leader in UK
homewares market
177
stores, of which 153 with
in-store Pausa cafes
85%
of growth in last five years
from market share gains
HOUSEHOLD BRANDS
Over 50,000 products mainly
sold under the Dunelm brand or
exclusive brands, allowing us to
develop a wide range offering
great choice and value, with
style, quality and, increasingly,
sustainability credentials.
11,000+
colleagues working in stores, operations,
logistics, manufacturing and support centres
FY22 performance summary
TOTAL SALES
PROFIT BEFORE TAX
FREE CASH FLOW
£1,581.4m
FY21 £1,336.2m
£212.8m
FY21 £157.8m
£153.0m
FY21 £108.5m
SALES GROWTH
PROFIT BEFORE TAX GROWTH
GROSS MARGIN
+18.4%
FY21 +26.3%
+34.9%
FY21 +44.6%
51.2%
FY21 51.6%
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ANNUAL REPORT AND ACCOUNTS 2022
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What’s new in FY22?
3
new stores
in Beverley, Leeds
and Basildon
9
4
major store refits
Pausa cafes updated
with our new ‘kitchen
cafe’ styling
ADVERTISING CAMPAIGN
‘Dun Your Way’ is about giving our
customers the confidence to create
their homes, their way. Our FY22
advertising campaign shows how
our breadth and depth of range
makes Dunelm the perfect place to
shop and to bring joy to your home,
whatever your style, taste, colour
scheme or budget.
new furniture hub
opened and network
delivery hub relocated
new dedicated
ecommerce facility
fully operational
expanded home
decorating range
and launched
new gifting and
stationery products
ORDINARY DIVIDENDS
ACTIVE CUSTOMER GROWTH
40.0p
FY21 35.0p
DILUTED EARNINGS PER SHARE
83.6p
FY21 62.9p
+8.5%
FY21 +12.2%
HOMEWARES MARKET
SHARE GROWTH
+140bps
FY21 +130bps
FY22: 53 VERSUS 52 WEEKS
All financial and non-financial
information in this report relates
to our 53-week financial period
ended 2 July 2022, unless stated
otherwise.
In the CFO’s review on pages 27
to 31 we share 52-week financial
information to facilitate comparison
with our prior financial period,
52 weeks ended 26 June 2021.
Please note that whilst the 53 week
numbers have been audited, the
52 week numbers are unaudited.
ANNUAL REPORT AND ACCOUNTS 2022 03
DUNELM GROUP PLC
Business model
Creating value for all
Our ‘plan on a page’ focuses our business on delivering long-term
growth and creating value for our stakeholders.
Our plan is to become our customers' 1st Choice for Home
Our purpose
Our purpose guides all our business activities and decisions – and helps us to
understand why people want to shop with us, work for us, supply us and stay invested in us.
To help create the joy of truly feeling at home,
now and for generations to come.
Our ambitions
We have three long-term ambitions, linked to specific KPIs,
to ensure that we stay focused and measure our progress.
AMBITIOUS ABOUT
OUR BRAND
AMBITIOUS ABOUT
BEING A GOOD COMPANY
AMBITIOUS ABOUT
PROFITABLE GROWTH
Our shared values
Our shared values have evolved from our fundamental business principles developed more than a decade ago,
and reflect our attitudes and behaviours throughout Dunelm, and how these impact our ethics and culture.
ACT LIKE
OWNERS
KEEP LISTENING
& LEARNING
LONG-TERM
THINKING
STRONGER
TOGETHER
Strengthening our customer proposition for savvy home lovers
To become our customers’ 1st Choice for Home we are focused on delivering our proposition…
CHOICE & VALUE
Great value and quality for
every style, space
and budget
GOOD & CIRCULAR
Positive choices for
people and the
environment
FRIENDLY & EXPERT
Service that is
knowledgeable, non-
judgmental and warm
EASY & CONVENIENT
Easy to find, buy and fit
everything you need
for your home
…and our focus areas
Building capabilities & digitising in six focus areas
0
Sustainability
Our pathway to zero,
building sustainability
into all that we do and
making it easy for our
customers.
1
Product
development
Develop our market
leading product
offer, supported by
brilliant commercial
processes.
2
Customer
understanding
Deeply understand
attitudes and
behaviours to optimise
our acquisition and
retention.
3
Shopping
experience
Offer the best,
seamless online
and in-store digital
customer experience
in the market.
4
Data and
insight
Build foundational
capabilities in data
and accelerate
customer insight.
5
Post sales
experience
Provide personal,
high quality and
efficient delivery,
service and support.
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For more information see pages 22 to 23.
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ANNUAL REPORT AND ACCOUNTS 2022
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Investment proposition
Stakeholder value creation
We are well positioned in our market, with a clear
vision for purposeful and sustainable growth.
As we grow with purpose, we seek to create long-term
economic and social value for our stakeholders and
reduce our impact on the environment.
Brand purpose
A brand appealing
to a wide range of
customers; market
leader in a large
fragmented market,
with a challenger
brand mentality.
Product proposition
A distinctive and
specialist product
portfolio – offering
quality, value and style
– largely own brand and
sourced from long-term
committed suppliers.
Financial position
A highly cash-generative
business model with
agility to invest.
COLLEAGUES
Ongoing investment
in social and financial
wellbeing, communication
and career development.
Total retail system
A total retail system
that combines the
advantages of digital
and local shopping
experiences to better
serve UK homewares
shoppers, and benefits
from our convenient,
low-cost store portfolio.
Shared values
Shared values, strong
relationships and a
commitment to doing
the right thing for the
long term, for all our
stakeholders.
Future growth
A clear runway for
attracting more
customers and increasing
their frequency.
CUSTOMERS
Improved in-store and
digital customer services
and experience.
+8.5%
YoY increase in
active customers
STORE COMMUNITIES
Deepened local
engagement in our
store communities.
£632k
raised by
colleagues and
the Group for
UK charities and
Ukraine support
> 800
new colleague
roles created
SUPPLIERS
Continued to work closely
with suppliers and improve
ethical and environmental
auditing standards.
> 99%
of supplier invoices
paid within agreed
terms
SHAREHOLDERS
Paid interim dividend
of 14 pence, special
dividend of 37 pence and
recommended FY22 final
dividend of 26 pence.
£282.1m
total dividends
paid in the year
ENVIRONMENT
Further target setting and
actions taken to reduce
carbon intensity across
our operations and
supply chain.
19.6%
reduction in Scope 1
tCO2e/£1m Group
revenue compared
to FY19 baseline
ANNUAL REPORT AND ACCOUNTS 2022 05
DUNELM GROUP PLC
Growing with purpose
Growing our
product offer
We design products to help create
the joy of truly feeling at home.
For customers of all ages, lifestyles
and budgets.
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ANNUAL REPORT AND ACCOUNTS 2022
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Introducing our exciting product range
with the Natural History Museum
to promote wetlands, woodlands...
and dinosaurs.
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For more information see page 42.
Growing…
This year we continued to grow our product offer – we
launched over 450 new furniture lines, extended our
Fogarty beds and mattresses range, announced our
exciting collaboration with the Natural History Museum,
and strengthened our value proposition for customers, by
including more entry-price products and increasing special
buys. In FY22 we expanded our decorating and gifting ranges
and are improving capability in window treatments through
the acquisition of Sunflex, a leading supplier of tracks, poles
and blinds.
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For more information see pages 16 to 21.
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…with purpose
We are developing new products more sustainably –
introducing recycled content, inspiring customers to ‘care,
repair, renew and refresh’ and designing products to last
longer. We only work with product suppliers who meet our
high ethical standards. Take-back options are now available
for all our major product categories, and, through better
communication, our customers are finding it easier to make
more sustainable choices… now and for generations
to come.
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For more information see pages 42 to 48.
Good & Circular
We are making it easier for customers
to make more thoughtful choices. Our
‘washed bedding’ range is made
from 100% recycled cotton under
socially responsible working conditions
that are independently verified.
Stylish & Practical
We aim to marry on-trend styling with
value, practicality and longevity. Our
new wallpaper ranges are designed
to make a statement in any room at an
affordable price. They are also easy to
hang and keep clean.
Choice & Value
Every customer has a different
perception of what value means to
them, and we know our products must
be practical, attractive and affordable.
Our ‘good-better-best’ ranges (and
ongoing special buys) cater for all
budgets so we can help everyone to
have a home full of joy.
Colourful & Coordinated
Whether a day-to-day essential or
a planned one-off purchase, we aim to
provide a wide choice that is matched
by quality. Our new stationery range
includes faux leather, soft- and spiral-
bound notebooks in a range of colours
and designs with matching pencil cases,
lever arch files and sticky notes.
Creating value for...
…OUR CUSTOMERS
Products that delight our
home-loving customers, with
ranges that offer attractive
styling, great quality, good
value for money and an
increasing choice of
sustainable options.
…OUR SUPPLIERS
Increased collaboration
and engagement with our
committed suppliers to
create and secure long-term
business and exciting growth
opportunities.
ANNUAL REPORT AND ACCOUNTS 2022 07
DUNELM GROUP PLC
Growing with purpose
Digitising
our business
Our investment in digital capabilities
is helping to delight our customers,
improve colleague satisfaction and
streamline operations.
How?
A digital ecosystem
designed to:
• Provide inspiration
• Enhance customer
experience
• Ensure efficient
fulfilment
Online
Digital sales up
x5 in five years
In-store
Digital investment
driving in-store
sales
Operations
Improving operational efficiency
and fulfilment capacity
Growing…
We have transformed our business, moving from
a largely stores-based operation to giving our
customers a choice of ‘easy & convenient’, digital-
led shopping channels, alongside the ‘friendly
& expert’ experience of shopping in our brilliant
stores. Investment in digital capabilities continues
to drive incremental growth both online and in
store, with our multi-channel customers shopping
more frequently and spending more on average.
By making it easier and more convenient for
customers to access our products and services
we are confident of driving future growth.
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For more information see page 21.
…with purpose
Ongoing investment in our digital infrastructure
supports our long-term business growth. This year
we opened a dedicated ecommerce fulfilment
facility, a new furniture warehouse, and relocated
a home delivery network hub in Daventry and
have recruited colleagues with digital expertise
to bolster our teams. We are digitising processes
across the business and increasingly linking
up our business systems to improve customer
satisfaction, colleague engagement and
operational efficiencies.
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For more information see pages 16 to 21.
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33%
customers shopping
either online or
multi-channel in FY22
35%
of total sales are through
digital channels
2.5x
increase in digital sales
in FY22 compared to
pre-pandemic levels
Why?
Creating value for:
OUR
SHAREHOLDERS
Higher customer satisfaction
and increasing operational
efficiencies achieved through
our digital investment gives our
shareholders confidence in our
ambitious growth plans.
OUR
CUSTOMERS
Easy and convenient digital
services which complement our
brilliant stores, with seamless
cross-channel experiences,
improved product availability
and more delivery options.
ANNUAL REPORT AND ACCOUNTS 2022 09
DUNELM GROUP PLC
BETTER USER EXPERIENCE
Ongoing investment in our
customer website increases
browsing speeds and check-out
functionality, improving overall
user experience.
ONLINE TOOLS
Our handy tools help our
customers size up sofas
and furniture online from
the comfort of their homes
or on the move.
FRIENDLY & EXPERT
Additional ‘live’ information
on iPads helps our store hosts
serve customers even better,
by providing expert advice
and accessing our extended
product range.
QR CODES
QR codes for each product
can be scanned by
customers in store for extra
information, including stock
availability and additional
online exclusives.
CENTRAL WAREHOUSES
AND ECOMMERCE
FULFILMENT CENTRE
Added capacity to our
warehouses by opening
a dedicated furniture warehouse
to enhance our offering. Our
new ecommerce facility speeds
up fulfilment of online orders
and shortens delivery times.
BUILDING
MANAGEMENT
SYSTEMS
Centrally controlled
heating, cooling and
lighting functions lower
our environmental
impact and
operating costs.
Growing with purpose
Feeling at home
wherever
you work
We can only be our customers’
1st Choice for Home if our colleagues
are happy. No matter who they are
or where they work, we commit to
making our colleagues feel
welcome, engaged, safe and
fairly rewarded.
4
colleague network groups
(LGBTQ+, Disability &
Neurodiversity, Ethnicity &
Race, and Gender Equality)
> 900
colleagues trained (so far)
in inclusion and diversity
92%
of colleagues recommend
Dunelm as a place to work
10 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
Growing…
The adaptability and loyalty of our colleagues, who live our
shared values day in day out, helped us to grow at record
pace in some of the most challenging times for our business.
As we head into our next growth phase – aiming to be a
bigger, better business with more capability, resilience
and ambition – we will continue to make Dunelm a great
place to work, listening to our colleagues and giving them
opportunities to grow with us.
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…with purpose
To help create joy for our colleagues we need to know them
better and adapt to their ideas and needs, making them
feel engaged and valued. To support future growth, we are
investing in creating the best environment for them to thrive –
developing our leaders to be more inclusive and supportive,
rethinking how we manage talent and investing in colleague
training, financial health and wellbeing and consistent and
trustworthy pay.
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For more information see pages 52 to 58.
Shared values
Dunelm for all
To underpin future growth, we ran a
Group-wide project to bring our shared
values to life and to reinforce them
through a new behavioural framework.
Mental & financial health
Looking after the mental and financial
health of our colleagues has been a
priority for many years. We have taken
action to further support colleagues
and their families who we know will
be most affected by the increased
cost of living.
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For more information see page 56.
Creating value for...
…OUR COLLEAGUES
In our bi-annual colleague
engagement survey, we
received the best response
yet to the question ‘Would
you recommend Dunelm as
a place to work?’
Colleague feedback shapes how we
think about making Dunelm more
inclusive and diverse. We continue to
roll out our tailored training programme
and have changed our recruitment
process to reduce unconscious bias
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For more information see page 58.
Keep listening
and learning
Our leaders promote a culture of
continual feedback and colleague
ideas have led to change, including
new policies, more inclusive uniforms
and increased communications.
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For more information see page 54.
…OUR CUSTOMERS
We track how friendly our
customers rate their shopping
experience with us and provide
ongoing ‘friendly and helpful’
training for our colleagues.
…OUR STORE COMMUNITIES
We empower our colleagues
to engage proactively in their
communities, supporting
local initiatives and creating
stronger connections.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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Growing with purpose
Building
sustainability
into all that we do
We want to make a positive social
impact and reduce environmental
damage in our communities and
supply chains, by making it easier
for all our stakeholders to make
better choices.
Growing…
…with purpose
We are increasing our focus on being sustainable in
everything we do, recognising the importance of this
approach to reaching our long-term ambitions and realising
the opportunity to be a leader in this space. We have
made significant progress but have more to learn and do.
To support future growth we have increased our in-house
expertise in climate change, environmental science and
ethical sourcing and continue to support colleague initiatives,
such as diversity and inclusion, mental health and financial
wellbeing support, training and career opportunities.
We are engaging more widely and more passionately across
our business, making it easier for our customers, colleagues,
suppliers, communities and shareholders to understand what
we mean by sustainability and to make better sustainable
choices. To demonstrate our responsibility now and for
generations to come we have made public commitments
and backed these up with metrics and actions. These include,
for example, four ESG key performance indicators (KPIs)
linked to our Revolving Credit Facility and these and other
non-financial KPIs linked to Director remuneration.
i
For more information see pages 32 to 60.
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For more information see pages 24 to 25.
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Creating value for...
Ongoing focus to reduce greenhouse
gas emissions (all Scopes) and waste
and to improve energy efficiencies
and operational recycling.
Ongoing engagement with colleagues to focus
on fair pay, diversity and inclusion, mental and
financial wellbeing, expected behaviours and
what we mean by sustainability.
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Increased ESG
disclosure and
investor engagement,
backed by transparent
sustainability metrics
linked to remuneration
and loan facilities.
Environment
Colleagues
sing o u r e
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n g a g ement on s
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‘Good &
Circular’
Shareholders
M
a
k
i
n
g better sust a i n a
b l e c h oices
Greater focus on
building thriving
communities by
supporting local
businesses, groups
and individuals and
connecting them more
meaningfully to our
stores and colleagues.
Communities
Customers
Suppliers
Increased engagement
with our suppliers
on ethical sourcing
standards and use of
environmental materials,
including a strong focus
on product circularity.
Launch of ‘Conscious Choice’,
a guide to help customers
navigate our product
range from an ethical and
environmental perspective.
Expanded range of options to
promote responsible recycling,
with take-back services in
165 stores for over half of
our own brand ranges.
50%
target reduction of absolute
carbon emissions across
all Scopes by 2030
AA Rating
achieved in MSCI ESG
ratings assessment1
Bag and bring your clean and
undamaged home textiles here
and we’ll give them a second life
Visit Dunelm.com or ask in-store for details.
DUN4735/102712
4
ESG metrics linked to
our loan facility and Long-Term
Incentive Plan (LTIP)
1. The use by Dunelm of any MSCI ESG Research LLC or its affiliates (‘MSCI’) data, and the use of MSCI logos, trademarks, service marks or index names herein,
do not constitute a sponsorship, endorsement, recommendation, or promotion of Dunelm by MSCI. MSCI services and data are the property of MSCI or its
information providers, and are provided ‘as-is’ and without warranty. MSCI names and logos are trademarks or service marks of MSCI.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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Chairman’s statement
Continuing to deliver for
all our stakeholders
We remain confident that we can continue to deliver for
all our stakeholders and be the 1st Choice for Home.
Andy
Harrison
CHAIRMAN
I am very pleased to report an excellent
financial performance, with total sales
growth of 16.2%, delivering record
pre-tax profits of £209.0m, an increase
of 32.4% on the prior year1. More
importantly, these results demonstrate
the strength of our business model
and the broad appeal of our customer
proposition. These fundamental
strengths will hold us in good stead as
we trade into a much tougher consumer
environment. Historically, 85% of our
sales growth has come from market
share gains and we remain confident
that we can continue to win share. At
the heart of our success is the skill
and dedication of our over 11,000
colleagues. We are proud and grateful
for their work.
For the first time in two years, our stores
were open for the entirety of the year,
enabling customers to fully benefit
from our total retail system. We have
continued to invest in digitising our
business and improving our operational
capability, with the opening of a
dedicated ecommerce distribution
fulfilment facility and a new furniture
warehouse; all designed to improve our
customer service. We have increased
our customer numbers once again and
continued to win market share.
We have emerged from the Covid crisis
as a bigger and stronger business, well
positioned to face into the pressures
of the current inflationary environment
and cost of living challenges. Our
commitment to offering our customers
outstanding value remains as strong
as ever and we shall continue to
cater for all customers, no matter
how they adapt to this environment,
by providing options for every style,
space and budget.
1. 52-week basis. On a 53-week basis, total sales
were £1,581.4m (+18.4%), gross margin was
51.2% (-40bps) and PBT was £212.8m (+34.9%).
52-week results are unaudited.
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In accordance with our long-held
values, the Board is deeply mindful
that our decisions must always
balance the needs of our customers,
colleagues, communities, suppliers
and shareholders, as well as the
environment which we all share. I am
pleased that we have continued to
make progress in delivering for all these
stakeholders. In addition to our very
strong financial performance, we have
created more than 800 new roles and
raised more than £450k for our new
charity partner, Mind.
Sustainability remains a key focus for
the business and we have continued
to make good progress during the year.
We introduced a take-back scheme
for textiles during the year, which is
live in more than 90% of our stores,
with take-back now covering more
than 50% of own-brand products.
We have a number of partnerships in
place to support our Net Zero Pathway,
having joined the Aldersgate Group
during the year and continued our
collaborations with Textiles 2030 and
the British Retail Consortium. We also
recently launched 'Conscious Choice',
a fantastic collection of products
which helps our customers make more
thoughtful decisions through products
that last longer and are made from
more sustainable materials.
DIVIDENDS
The Board has proposed a final
ordinary dividend of 26 pence per
share, recognising our very strong
performance in the year and our
continued confidence in the business.
This takes the full-year ordinary
dividend to 40 pence per share, ahead
of the 35 pence per share paid in FY21,
with dividend cover of 2.1×, within the
range of our stated policy.
During the year our strong cash flow
allowed us to pay two special dividends:
65 pence per share in October 2021
and 37 pence per share in March
2022. Our net debt ended the year at
0.1×FY22 EBITDA, slightly below our
long-term targeted range of between
0.2× and 0.6×.
BOARD UPDATE
In April 2022 we were delighted to
announce the appointment of Karen
Witts as Chief Financial Officer (CFO).
Karen is an accomplished finance leader
who brings a wealth of experience from
her previous roles with high-profile
consumer-facing brands, which will
help us to deliver our ambitious growth
plans. Karen joined the Board on
9 June 2022 and succeeded Laura Carr,
who stepped down from the Board in
that month. We also welcomed Vijay
Talwar and Kelly Devine to the Board
as Non-Executive Directors during the
year, who bring a great deal of energy
and experience, particularly in digital
and data.
Finally, post year-end, we announced
the appointment of Alison Brittain to
the Board as a NED with effect from
7 September 2022, with the intention
that she will succeed me as Chair ahead
of the expiry of my nine-year term in
September 2023. Alison is a highly
experienced leader with a strong track-
record across a range of consumer-
facing companies, and with values
clearly aligned to our own. I am thrilled
that Dunelm has been able to attract a
Chair Designate of Alison’s calibre to
lead the Board through our next stage
of growth.
1ST CHOICE FOR HOME
Moving forward, we believe that
Dunelm’s fundamental strengths will
once again differentiate us at a time
when consumers have to consider their
purchase decisions even more carefully.
This plays to the strength of our product
range, our customer proposition
and our proven total retail system,
which combines the advantages of
both physical and digital retail. In
addition, our strong balance sheet
and underlying cash generation will
allow us to continue to invest in further
strengthening our business. We remain
confident that we can continue to
deliver for all our stakeholders and
be the 1st Choice for Home.
Andy Harrison
Chairman
14 September 2022
Key stakeholders
We can only grow with purpose by
knowing who our key stakeholders
are, building meaningful relationships
with them and using information
learned through engagement to
make decisions for the long-term
success of our business.
i
Further information is on pages 94
to 106 in our Governance report
and forms our S172 disclosure in
compliance with the Companies
Act 2016. Our S172 statement is
on page 81.
c.17 million2 customers,
shopping in store and online
177 store communities
within the local catchment
area of Dunelm stores
11,000+ colleagues
working in our stores
and operations
200+ stock suppliers
including our committed
suppliers
1,500+ shareholders,
including Adderley
family members, financial
institutions and private
investors (including
colleagues)
2. Estimated based on Barclays data.
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CEO’s review
Confident in a challenging
environment
Dunelm, at its heart, offers customers great choice and value.
In an extremely challenging environment, we think our unique and
market-leading offer is more relevant than ever before.
Nick
Wilkinson
CHIEF EXECUTIVE
OFFICER
INTRODUCTION
With stores being forced to close during
both FY20 and FY21, we were delighted
that we were able to keep our doors open
to our customers throughout FY22. It
is clear that customers are increasingly
enjoying the advantages of our total retail
system, which allows them to experience
the friendly service of our physical stores
in combination with the convenience of
our digital channels; this has contributed
to the delivery of record results this year.
FY22 presented new challenges, most
notably the impact of higher cost of
goods and inflationary pressures on
both businesses and the consumer.
Despite these challenges we have been
busy developing our proposition and
capabilities whilst continuing to drive
our sustainability agenda. We remain
focused on, and driven by, our shared
values, and, against a complex backdrop,
our ‘keep listening and learning’ value
is proving particularly relevant. Once
again, our incredible colleagues and
committed suppliers stepped up, learning
and adapting in order to deliver the best
possible outcomes for our customers.
I would like to sincerely thank each and
every one of them for their continued
resilience and contribution to another
very successful year.
We expect the current challenges to
persist at least throughout the year
ahead and are conscious that many of our
customers are fearful about the mounting
cost of living pressures. Our primary
focus at this time is to continue offering
outstanding value to our customers, whilst
recognising that individuals will adapt
to the environment in their own ways. As
ever, we continue to apply a relentless
focus on basic operational discipline
and attention to detail throughout the
business to ensure that every pound
counts. This has characterised Dunelm in
recent years, and is even more important
in light of the current challenges we face.
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FY22 REVIEW
Another strong performance
FY22 was another strong year for the
business. Total sales grew by 16.2%1,
and while the year-on-year growth
benefitted from the lockdown related
store closures last year, the growth of
41.1% compared to FY19 demonstrates
the pace at which the business has
developed through the pandemic
period. We were pleased with the
performance of our stores following
two years of disruption and our digital
channels also traded well, making up
35% of total sales over the year, up from
20% in FY19. More people shopped with
us than ever before; our active customer
base grew by 8.5%. Our strong sales
performance was supported by further
market share gains, with our share in the
homewares market growing by 140bps.
We delivered a strong gross margin
of 51.2%1, despite an additional sale
event in Q1, as customer participation
in event sales was low through most of
the year. We saw a higher participation
of event sales in Q4, especially during
our Summer Sale. Profit before tax grew
by 32.4%1, benefitting from the strong
sales growth, higher than expected
leverage of fixed store costs in the first
half, and ongoing tight operational grip.
We delivered a robust free cash flow of
£153.0m, which included the impact of
temporarily building our inventory levels.
This was a strategic decision we took
to maintain availability for customers
through ongoing supply chain instability
which was seen across the market.
On the back of this strong financial
performance, the Board has proposed a
final ordinary dividend of 26p, bringing
the total ordinary dividend in respect of
FY22 to 40p, an increase of 14.3%.
Delivering for all our stakeholders
We recognise that we have a diverse set
of stakeholders in our business, and in
FY22 we continued to take decisions to
balance the needs and expectations of
all of them.
Our colleagues are extremely important
to us and we were pleased to be able
to offer employment to over 800 new
Our shared values in action – developing our colleagues
STRONGER TOGETHER
KEEP LISTENING AND LEARNING
LONG-TERM THINKING
ACT LIKE OWNERS
Building a learning culture through
a community of colleagues with a
growth mindset, where colleagues
not only want to learn and apply
what they have learned, but also feel
compelled to share their knowledge
with others.
Being agile and adaptable. This
means developing and moving
our talent, embracing diversity
and thoughtfully investing in new
capabilities to take on the challenges
and opportunities ahead.
Anticipating the future by assessing
and planning for skills gaps, ensuring
our business is future ready. Helping
colleagues build new versions of
themselves so they can continue
to thrive in a rapidly changing
environment and we can build more
of our capability internally.
Through a clear talent proposition
and readily accessible tools,
enabling leadership accountability
and colleague ownership for their
personal growth and development.
colleagues in the year. We understand
the impact of the higher cost of living
on all of our colleagues, and so we
implemented a median pay increase
above 7% (greater than the equivalent
increase to the National Living Wage),
focussing proportionately higher pay
increases on our lower paid colleagues.
We want Dunelm to be an inclusive
workplace, and aspire to achieve a
colleague base reflective of society at
all levels, providing opportunity for all.
During the year we provided training
and set up network support groups
to increase awareness in inclusion and
diversity, particularly in the areas of
neurodiversity and ethnicity.
We also made progress on our
ambitions to support thriving, purpose-
driven communities around every
one of our stores. We now have more
than one million followers of our store
Facebook groups. We delivered 19,000
Christmas gifts to local care homes,
schools and women’s refuges. We
raised over £600k for charities in the
year from colleague fundraising activity,
including over £450k for the mental
health charity, Mind, during the first
year of our partnership.
We continue to focus on delivering
outstanding value for our customers.
We sell great products at great prices
and our customers feed back with
consistently high reviews on our
own-brand products. We believe that
our 'fast and friendly' store service is
already a differentiator for Dunelm, and
in order to improve our home delivery
service for customers, we opened a new
furniture distribution hub and a new
fulfilment operation in the year.
1. 52-week basis. On a 53-week basis, total sales were £1,581.4m (+18.4%), gross margin was 51.2% (-40bps) and PBT was £212.8m (+34.9%).
52-week results are unaudited.
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CEO’s review
Our business success also helps our
committed suppliers to grow their
businesses. We worked collaboratively
with them to minimise the disruption
to customers from the supply chain
challenges and on initiatives to
support the achievement of our
sustainability ambitions.
We shared our ambitious long-term
targets for sustainability in FY21. In
FY22, we achieved our in-year targets
for carbon emissions, plastic packaging
reduction and take-back – where we
introduced a textiles take-back scheme.
30% of our own branded cotton
products met our 'more responsibly
sourced cotton' standard. This was
below the ambitious target that we
set, but we are learning and educating
ourselves and our suppliers, and we
are confident that we will achieve our
longer term commitments. We also
recently launched a new label, called
'Conscious Choice', which showcases
our most sustainable products, allowing
customers to make more informed
buying decisions.
STRATEGIC UPDATE:
BECOMING OUR CUSTOMERS’
1ST CHOICE FOR HOME
Dunelm already enjoys broad-based
appeal and greater than 90% brand
awareness2. We are continuing to
grow that appeal, and the number of
active customers who shopped with
us increased by 8.5% in FY22. We saw
growth across all geographic regions in
the UK, with customers in London and
the South contributing 40% of our total
growth in customer numbers in FY223.
We have seen growth in customer
numbers across all income levels, with
a year-on-year increase of more than
10% in both the <£20k per annum and
>£100k per annum income groups3.
We have also increased the appeal
across all age ranges, with customers
aged between 16 and 24 growing
by 8.5% and those aged 65 and over
growing by 16.2%3.
Our plan is to become our customers’
1st Choice for Home. We want to
attract more customers to shop at
Dunelm for their home, and for all
customers to shop more frequently,
across more product categories. To
achieve this we are working hard to
deliver our purpose, ‘to help create
the joy of truly feeling at home, now
and for generations to come.’ In the
current climate, more than ever, we
are ambitious about striving to do this
brilliantly, and excited by the opportunity
to continue to learn and adapt.
Investing in digitising the business
Digitising the business is a broad
concept which refers to the
development of digital and data
capabilities which allow us to grow
our product offer (beyond the physical
limits of a store’s capacity); to reach
more consumers through digital
content and channels; and to give to our
customers the advantages of physical
stores with the ease and convenience
of online sales. We now have 177 stores,
all offering Click & Collect and tablet-
based selling of the broader Dunelm
range via colleague hosts. During the
year we expanded our digital fulfilment
capacity and capabilities, with a new
dedicated ecommerce facility and a
new furniture warehouse.
The strength of our total retail system
has been proven in recent years.
Our customers were able to benefit
from the convenience of our digital
channels during the pandemic and
more recently have returned to stores
to take advantage of our full physical
retail offering. Many of the customers
who shopped with us for the first time
online during the pandemic are now
shopping in store, or across both
channels, which contributed to an
increase in shopping frequency of 10%4.
We also know that our multi-channel
and multi-category customers shop on
average 5x more often and spend 7x5
more than customers shopping through
single channels and categories, further
demonstrating the advantages of our
model. In addition, the number of ‘most
valuable’ customers, defined as those
customers with higher spend across
multiple visits, grew by 16%6.
2. Prompted awareness three month rolling average to June 2022. Source: BrandVue.
3. Analysis of Dunelm customers FY21 to FY22. Source: Barclays.
4. Number of visits per retained customer in FY22. Retained customers defined as those who shopped with Dunelm in FY21 and FY22. Source: Barclays.
5. Internal analysis based on active customers for the 12 months to June 2022.
6.
Internal analysis of ‘most valuable’ customers based on number of visits and total expenditure.
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We are continuing to invest in digitising
the business in a thoughtful way, to
further enhance our product offer,
brand reach, and customer experience.
To maximise returns, we are being agile
in the way we deploy our digital teams,
balancing investment in growth areas
such as customer acquisition and in
foundational capabilities such as master
data management.
Strengthening the customer
proposition
We are constantly evolving and
improving our overall customer
proposition by continuing to strengthen
our offer across four key areas: choice
and value, good and circular, friendly
and expert, and easy and convenient.
Against the current macro-economic
backdrop and the resulting pressure
on household budgets, this is as
important as ever.
In terms of choice and value, we offer
a broad product range of more than
50,000 SKUs across 30 sub-categories,
covering a large proportion of the UK
homewares markets, at price points
to appeal to all customers, whatever
their style or budget. We have seen
growth across the breadth of our
product categories, both in those
where we have higher market shares,
and newer areas, including furniture
and decorating. In all areas we have
worked hard to mitigate the impact
of cost inflation, re-designing and re-
sourcing products in collaboration with
our suppliers. We utilise a ‘good – better
– best’ hierarchy of price and quality
tiers in our core product ranges, and
are totally committed to offering great
value at all price points. An example of
this is our range of plain dye bedding,
where we offer 15 different price/
quality levels between the opening
price (‘good’) product and the highest
price (‘best’) product. In the second
half of FY22 we re-set our range of
plain dye bedding, with a lower price in
the ‘good’ tier, and a small number of
limited price increases across the best
and better tiers. Most prices remained
unchanged, but with new colours and
fabrics introduced. Across each of the
‘good’, ‘better’ and ‘best’ tiers we saw
strong growth in volume and sales.
The scope for continuous improvement
and innovation around choice and
value is limitless, gives us energy, and
leverages the skills, expertise and
experience of our colleagues and our
supplier partners. The same approach
is present in how we develop special
buys, impulse items and seasonal
ranges, which adapt to changing
customer needs and preferences, and
is an area of particular focus in the
current environment.
Focus on ‘Choice & Value’ – Dun Your Way
For the first time, we have included our
ambition to be more environmentally
and socially responsible into our
customer proposition, calling this
good and circular. We wish to offer our
customers the opportunity to make
informed choices, and have therefore
increased the number of products
which meet our ‘more responsibly
sourced’ standards. In addition to
The Edited Life, our lifestyle brand,
which incorporates a variety of more
sustainable materials and encourages
reduced consumption, we have also
recently launched ‘Conscious Choice’.
To be included in this selection of
sustainably-focused own-brand lines,
each product must be made from at
least 50% more sustainable materials
(by weight) compared to conventional
alternatives, and will typically also offer
an extended guarantee of between five
and 25 years, with the products having
been designed with durability in mind.
In addition to product development,
we also reduced the volume of plastic
packaging on our own-brand products,
and, in December 2021, expanded
an in-store textiles take-back scheme
nationwide. We now have customer
take-back options for more than half of
our own-brand product range, and have
seen significant customer uptake.
Our constant, detailed work to offer outstanding choice
and great value to delight our customers can be
demonstrated in our recent example below.
GOOD
New entry price
micro-fibre
fitted sheet
In Spring 2022, we repositioned our fitted sheet range, aiming to minimise price
increases for our customers and offer even more choice and value using 15 price
points across three quality tiers.
In our ‘good’ tier, by introducing a new microfibre fitted sheet, we were able to
lower our entry price point to £6. In our ‘better’ tier, we focused on using 100%
cotton, expanded our range to include 24 colour options and, through sourcing
efficiencies, held existing price points. In our ‘best’ tier we decided to make
a small increase to the price of our Dorma branded fitted sheets – our most
expensive products – having first checked that we still offered great value for
money for comparable quality products in our marketplace. Our focus on ‘choice
& value’ proved successful with volumes in all three tiers growing strongly in the
second half of FY22.
We know that our savvy customers seek value in different ways. By applying our
‘operational grip’, customer insight and product development expertise we will
continue to learn, adapt and strive to understand and reflect these differences
brilliantly to become our customers’ 1st Choice for Home.
BETTER
100% cotton fitted
sheet, in more than
20 colours
BEST
Highest quality
Dorma fitted sheet
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As a business with both digital channels
and local stores, we have numerous
ways to seamlessly offer our customers
both friendly and expert services.
We recently re-modelled some of our
larger stores to extend the furniture
department, showcasing more of our
home delivery range for our customers
to see and sample and to allow them
to ask for advice. We will learn whether
customers are willing to travel further
to visit these stores, but we have also
enabled the colleagues in these stores
to talk to customers and showcase
the product virtually through video
calls. Indeed, in recent years we have
worked to connect all of our stores
digitally with their local areas. This has
exceeded our expectations in many
ways, with a total of over one million
Facebook followers in the communities
we are building around our stores
to support local initiatives that help
people and the environment. This is
becoming a reinforcing model where
these communities foster word-of-
mouth awareness and advocacy, and
underpin our local marketing, lowering
the cost of reaching new customers and
encouraging more visits.
Easy and convenient is another part of
our customer proposition that benefits
from the combination of physical and
digital channels. Click & Collect is
one example of this, as is the ability
to research more complex products
either online or instore, depending
on personal preference. Our Made to
Measure curtains and blinds service is
benefitting from the work underway
to offer the same comprehensive
assortment through all channels, and
to allow customers to manage their
order seamlessly between their online
account and an in-store consultation.
As part of our commitment to
offer a more comprehensive range
in this category, in May 2022 we
acquired Sunflex, a leading supplier
of blinds, curtains and poles, for a
cash consideration of £20.8m. This
acquisition enhances our product
capability in window treatments
and brings design, quality and
fulfilment capability across a complex
product catalogue.
We have also invested in, and improved,
our home delivery capability, with
the opening of two new distribution
centres. A dedicated ecommerce
fulfilment facility in Stoke, in partnership
with GXO, to support our digital
growth ambitions through better
customer service, scale and efficiency,
has already enabled us to shorten
delivery times and extend order cut off
times for express delivery services. In
March 2022, we opened a dedicated
200,000 sq. ft. furniture distribution hub
in Daventry, to improve the availability
and speed of delivery of bulkier items,
as well as the productivity of the flows
into our home delivery network.
This ongoing work to strengthen our
customer proposition is benefitting
from the capabilities we continue
to build in areas such as product,
technology, digital & data engineering
and insight & analytics. None of this
would be possible without the strong
operational focus and desire we have to
make every pound count, which enables
us to offer outstanding value to our
customers, and at the same time invest
prudently in digitising the business.
SUMMARY AND OUTLOOK
Trading in the first ten weeks of the
financial year has remained robust.
The comparative period benefitted
from the delayed Summer Sale and
reopening of stores and associated
pent up consumer demand so, as
expected, sales have been below
the levels seen last year.
The operating and economic
environment is extremely challenging.
High inflation is expected to remain a
feature throughout the year to come,
and potentially beyond, causing the
pressures on household budgets to
increase. While consumer behaviour
is unpredictable, our primary focus is
to offer outstanding value. We continue
to listen, learn and adapt, which plays
to our strengths. We have a resilient,
relevant and advantaged business
model which is highly cash generative,
and we are confident in our ability to
continue to deliver for all stakeholders.
As we return to more normal patterns of
customer behaviour, we expect a gross
margin of c.50%, in line with our historic
average. We are managing input cost
inflation through our tight operational
grip, and despite the macro challenges,
we are on track to deliver FY23 results in
line with analysts’ expectations7.
Nick Wilkinson
Chief Executive Officer
14 September 2022
7. Company compiled consensus average of analysts’ expectations for FY23 PBT of £178m, with a range £130m to £193m.
20 DUNELM GROUP PLC
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Our markets and customers
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Market share growth with significant further headroom
Homewares market share FY228
10.2%
+1.4%pts
No. 1
Market leader in UK
homewares market
Furniture market
share FY228
1.9% +0.2%pts
1st Choice for Home: more customers, shopping more frequently
8.5% more customers shopping in FY22
Regions
All regions contributing9
• London/South accounting for
40% of growth
Income levels
All income levels contributing9
• Customers earning <£20k pa +10.4%
• Customers earning >£100k pa +11.4%
Age groups
All age groups contributing9
• Customers aged 16-24 +8.5%
• Customers aged >65 +16.2%
We pride ourselves on making every pound
count and being good housekeepers. We spend
wisely where it matters and minimise unnecessary
waste. This means we can provide outstanding
value products at every price point, supported by
colleagues who care and technology that makes
things seamless and efficient.
8. GlobalData UK homewares and furniture markets,
July 2021 to June 2022. Furniture excludes kitchen
and bathroom furniture.
9. Analysis of Dunelm customers FY21 to FY22.
Source: Barclays.
10. Internal analysis of ‘best’ customers based on
number of visits and total expenditure.
Source: Barclays.
11. Internal analysis based on active customers for the
12 months to June 2022. Source: Barclays.
Our ‘most valuable’
customers’ grew +16% in
the year, and are spending
+6% more10
Our multi-channel,
multi-category shoppers
shop 5x as often and
spend 7x as much as
single-channel/single-
category customers11
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Our strategy
Delivering sustained growth
Our focus areas are agreed by the Board and communicated across
the business, so we all know where to apply our skills and energy.
Our ambitions
Six focus areas
Ambitious about
our brand
Grow as the #1 destination for home,
with more savvy home lovers shopping
more frequently.
Ambitious about
being a good company
A great place to work – making a positive
social and environmental impact in all of
our communities.
Ambitious about
profitable growth
Focusing on quality of growth and long-
term value creation by using our resources
wisely and efficiently.
i
For more information see page 4.
0
Sustainability
Our pathway to net zero,
building sustainability into
all that we do and making
it easy for our customers.
1
2
3
4
5
Product
development
Develop our market-
leading product offer,
supported by brilliant
commercial processes.
Customer
understanding
Deeply understand
attitudes and behaviours
to optimise our acquisition
and retention.
Shopping
experience
Offer the best, seamless
online and in-store digital
customer experience
in the market.
Data and insight
Build foundational
capabilities in data
and accelerate
customer insight.
Post sales
experience
Provide personal, high
quality and efficient
delivery, service
and support.
i
For more information see pages 16 to 21.
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Progress in FY22
• Take-back scheme rolled out in 167 stores.
• Improvements in sustainability labelling, e.g. ‘Conscious
Choice’ label.
• Removing gas-fired boilers from our store estate.
• Various initiatives to reduce plastic packaging in own
brand products.
• Natural History Museum collaboration launched.
• Extended furniture and seasonal ranges.
• Launched and extended home decorating ranges.
• Detailed review of ranges and price architecture in response
to input cost pressure.
• Launched our commercial processes and systems
overhaul programme.
• Customer insight-led marketing activity, e.g. the ‘Dun Your
Way’ campaign.
• Introduced customer lifetime value bidding model to digital
marketing to acquire higher value customers.
• Communications to encourage re-purchase targeted at those
customers most likely to lapse.
• Upgraded Dunelm.com payment gateway to Adyen, paving
the way for seamless purchasing across channels.
• Continued to expand and invest in our store estate,
opening three new stores and major refitting of nine stores.
• Broadened the range of Made to Measure products
available to browse and shop online, as well as book
appointments for expert help.
• Building the Dunelm data platform, providing foundational
data for all focus areas.
• Developing customer data to support better customer
understanding.
1st Choice for Home
Strengthening our
customer proposition for
savvy home lovers
GOOD & CIRCULAR
Positive choices
for people and the
environment
CHOICE & VALUE
Great value and quality
for every style, space
and budget
FRIENDLY & EXPERT
Service that is
knowledgeable,
non-judgemental
and warm
• Developed our ecommerce fulfilment capability to shorten
lead times, improve customer service levels and the
efficiency of the operation.
• Increased our capacity to fulfil larger furniture items by
investing in our systems and distribution infrastructure,
including the opening of our new furniture-specific
distribution centre in Daventry.
EASY & CONVENIENT
Easy to find, buy and fit
everything you need for
your home
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Key performance indicators
The Board uses a range of financial and non-financial key performance indicators
(KPIs) to measure overall Group performance, the success of our strategic direction in
relation to our ambitions, and to determine senior management remuneration.
Ambitious about being a good company
Employee net promoter score (eNPS)
Year-on-year improvement %pts
+1.0%pts
+49
Reduction in Scope 1 carbon emission
intensity against FY19 base
Scope 1 tCO2e/£1m Group revenue
19.6% reduction
LTIP
Reduction in virgin plastic packaging
of own brand products (by weight
per £1 sales) against FY20 base
22.7% reduction
LTIP
6.3
-19.6%
5.1
+14
+9
+1
+1
2018
2019
2020
2021
2022
2019
2022
22.7%
2022
We measure our colleague engagement every
six months (usually in November and May) in our
colleague survey. Overall, employee NPS has
improved in the year, which is pleasing as this is
the fifth successive year of improvement.
Why this measure is important
This measure rates our colleagues’ experience
with us and the survey helps us understand
where we need to improve. It is also used as
a bonus measure for the Executive Board.
Scope
Historically and in FY22, we compared results
from the May survey each year. However, owing
to lockdowns and the postponement of the May
2020 survey, in FY20 we compared November
2019 to November 2018 surveys and in FY21
May 2021 versus November 2019 surveys.
We have achieved a 19.6% reduction in Scope 1
carbon emission intensity compared to our
baseline of FY19. This has significantly exceeded
our target of 8% in FY22 and puts us in a strong
position to achieve our 24% reduction target
by FY24 through our store decarbonisation
programme. However, emissions from our
Home Delivery Network have increased due
to increased sale volumes, and we are actively
looking at ways to reduce this.
Why this measure is important
This measure helps us to understand how
successful we are in reducing our impact on
the environment and achieving our long-term
carbon reduction targets.
Scope
This metric is for Scope 1 emissions only. Scope
2 emissions for FY22 are negligible due to the
purchase of renewable electricity. For further
details on all carbon emissions, please see
carbon reduction in the sustainability section.
Percentage of own brand products
for which we offer an easy-to-use
take-back service
Percentage of own brand cotton
products which meet our ‘More
Responsibly Sourced Cotton’ standard
61.3%
LTIP
61.3%
30.0%
LTIP
We have achieved a 22.7% reduction in virgin
plastic packaging in FY22 against our FY20
base. This reduction indicates a decrease in
the intensity metric, rather than an absolute
reduction in total virgin plastic by weight. There
are two elements to this: a reduction in the
amount of plastic we are using in our packaging
and also an increase in recycled content.
Why this measure is important
This measure helps us to understand how
successful we are in reducing our impact on the
environment by reducing the amount of virgin
plastic in our packaging.
Scope
This metric includes all plastic product
packaging for own brand products (primary
packaging) plus sales packaging (in store carrier
bags and web delivery packaging). Plastic
that has a recycled content greater than 30%
is classed as a removal of plastic. All plastic
packaging weights for the FY20 baseline and
for Q1 – Q3 for FY22 were assumed to be virgin
plastic. Recycled % was incorporated into the
calculation from Q4 FY22 following improved
availability of data.
2022
We have seen a very positive response in our
store communities to our take-back scheme,
which was further expanded by adding
textiles take-back in December 2021.
We have exceeded our target for the year.
Why this measure is important
This measure is important to us at it supports
our commitment to move towards a circular
economy and to reduce our impact on
the environment, supply chain and local
communities.
Scope
This metric covers own brand products sold
in our stores.
30.0%
2022
In FY22, 30.0% of our own brand cotton
products met our ‘More Responsibly Sourced
Cotton’ standard. Whilst this is below our FY22
target of 40%, it was the first year for many of our
suppliers to source more responsibly sourced
cotton for Dunelm, which meant that they had to
change sources or have their sources audited for
the first time.
Why this measure is important
This measure is important to us as there are both
ethical and environmental considerations with
cotton production, which our ‘More Responsibly
Sourced Cotton’ standard addresses.
Scope
This metric relates to own brand cotton
products.
24 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
REMUNERATION
MEASURES
Details of metrics used for FY22
bonus and LTIP outcomes can be
found on pages 148 to 152
in the Remuneration Report.
Further information on the
performance criteria that apply
to the FY23-25 LTIP award can be
found on page 161.
LTIP
BONUS
Ambitious about our brand
Unique active customer growth
% growth
+8.5%
Total revenue
£m and growth %
£1,581.4m
BONUS
12.2
8.3
8.5
3.8
9.9%
4.8%
(3.9)%
26.3%
18.4%
1,050.1 1,100.4 1,057.9
1,581.4
1,336.2
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Net promoter score (NPS)
Year-on-year improvement %pts
-4.2%pts
+1.8
+4.2
-4.2
Base
Year
2019
2020
2021
2022
2018
2019
2020
2021
2022
2019
2020
2021
2022
We saw an 8.5% increase in our number of active
customers as they returned to enjoying our full
retail offer, with broad growth seen across all
geographical regions, income levels and
age ranges.
The growth in revenue reflects a strong year
of trading, the additional Summer Sale event
in Q1, and the weaker comparative period in
FY21 when stores were only able to offer Click &
Collect services for around one third of the year.
Why this measure is important
We use this metric to measure the acceleration
of growth in our active customer base and
therefore our ability to reach new customers.
This measure combines our active store and
online customers.
Why this measure is important
We use total revenue as an indicator of
how relevant we are to our customers, as
it demonstrates how successful we are at
selling the right products through the most
convenient channels.
Scope
Unique active customers who have shopped
in the last 12 months, based on management
estimates using Barclays data. The definition for
this metric has been updated in FY22 and the
prior years restated on a consistent basis, as we
believe that this is a more accurate estimate.
Scope
FY22 reflects 53 weeks of trading whereas all
other years are 52 weeks.
In FY22, our overall score decreased by 4.2%pts
and was heavily influenced by external factors
including supply chain disruption, labour
shortages and ongoing Covid-related issues
at the beginning of the year. We have made
good progress on a number of propositional
improvements and are focusing on activities to
drive customer satisfaction in FY23.
Why this measure is important
The NPS metric is a common business tool that
measures how likely people would (or would
not) be to recommend a product, service or
company. At Dunelm we use this to measure how
our customers rate their full experience with us.
Scope
We measure customer NPS across the different
channels that our customers shop with us and
the metric above is a weighted average.
Ambitious about profitable growth
Profit before tax
£m and % sales
£212.8m
9.7% 11.4% 10.3% 11.8% 13.5%
BONUS
Free cash flow
£m
£153.0m
Diluted earnings per share
pence and growth %
83.6p
46.6%
LTIP
37.8%
32.9%
212.8
157.8
102.0
125.9
109.1
174.7
152.8
153.0
0.3%
83.6p
(14.0)%
62.9p
108.5
49.9p
42.9p
36.2p
51.0
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Profit before tax (PBT) in the period was £212.8m
(FY21: £157.8m), an increase of £55.0m year on
year, benefitting from a full year of trading with
all channels open. Operating leverage improved
in the year, with operating costs as a % sales
reducing from 39% in FY21 to 37% in FY22.
Why this measure is important
PBT measures overall financial performance
of the business, reflecting sales, gross margin
and cost control. It is also used as a key bonus
measure.
Scope
FY22 reflects 53 weeks of trading whereas all
other years are 52 weeks. Profit before tax for
FY18 is presented before exceptional costs.
We generated strong free cash flow in the year
of £153.0m despite a build in inventory and
capital investment in two new warehouses and
the acquisition of the Sunflex business.
Why this measure is important
Dunelm is highly cash generative. This measure
allows the Board to monitor cash flows to
support investment decisions for long-term
profitability, or to return surplus cash to
shareholders.
Scope
Free cash flow is defined as net cash generated
from operating activities less capex (net of
disposals) and business combinations, net
interest paid (including leases) and loan
transaction costs, and repayment of lease
liabilities. FY22 reflects 53 weeks of trading
whereas all other years are 52 weeks.
Diluted earnings per share increased to 83.6p
reflecting the significantly higher sales and
profit in the year.
Why this measure is important
Earnings per share is a key measure for
shareholders and one of the performance
criteria for senior management remuneration
including LTIPs.
Scope
FY22 reflects 53 weeks of trading whereas all
other years are 52 weeks.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
25
CFO’s introduction
Introduction to Karen Witts,
our new CFO
Karen joined the Group Board as CFO in June 2022.
She is a Chartered Accountant and has gained global retail
and consumer-facing business experience during her 30+ year
career. Karen talks below about her impressions of Dunelm.
Although I only joined Dunelm a few
months ago, I am learning what it means
to be part of the Dunelm family. I wanted
to join a company with a meaningful
purpose, a strong people culture, and
an energetic and passionate Executive
Board. I feel fortunate to have found
in Dunelm a business that meets
all these criteria – and is also a well-
known, well-loved brand that has great
opportunities to grow.
informally, and have done a good
job of rallying friends and family to
buy our fantastic products. I have
also visited our distribution centres in
Stoke to understand better how we
organise getting products to stores
and to customers’ homes. I have
been ‘listening and learning’ at every
opportunity and I am impressed by the
knowledge, expertise and enthusiasm
shown by Dunelm colleagues.
Since June, I have been getting to
know my colleagues at the Syston
Support Centre. I have visited stores
both formally (with the Board) and
Our Board and management teams are
absolutely committed to developing
Dunelm’s long-term future and growth
opportunities. And we are also acutely
Karen
Witts
CHIEF FINANCIAL
OFFICER
aware of the financial worries felt by
our customers and colleagues right
now. Having worked extensively in
large consumer-facing brands in the
retail, hospitality and support services
sectors, I can draw on experiences
gained through different economic
cycles. When faced with externally
driven pressures, businesses must focus
on what they can control. Dunelm is
agile and responsive to change. We
are focusing on our ‘operational grip’
so that our products and services stay
relevant and affordable. We must
continue to offer value and choice,
which means that we are always working
on efficiency and effectiveness, so we
can make every pound count for our
savvy customers, and our business.
Following this, you can read a review
of our FY22 financial performance.
Whilst I can take no credit for the
strong set of results, I am nevertheless
proud to be associated with them. As
we progress through FY23 I will work
with my colleagues to continue to drive
long-term shareholder value from our
business model. We have agreed a set
of financial and operational KPIs for
the year that is balanced and holistic.
I will be focused on ensuring that we
deliver across these, which includes
maintaining our strong track record
of cash conversion, as this allow us to
invest in developing existing and new
capabilities, and to deliver sustainable,
attractive shareholder returns.
In FY23, we will also continue to
strengthen important areas that
are not easily externally visible, like
internal controls, including cyber
security, and colleague development.
I am pleased that Dunelm is investing
considerable time and effort in ESG
topics, and I look forward to working
on further developing our future plans
in these areas. This year may be one
of continued macro and geopolitical
uncertainty, but I am confident that, at
Dunelm, we have the skills and tools to
emerge strongly from it.”
26 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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We delivered a very strong set of results in FY22: growth in sales,
market share and customer numbers; significant free cash flow
and the return of £282m to shareholders in dividends.
REVENUE
Total sales for the comparable 52-week period increased
by 16.2% to £1,553.1m1 (FY21: £1,336.2m). For the 53 weeks
to 2 July 2022, total sales increased by 18.4%. These growth
rates reflect a strong year of trading, the additional Summer
Sale event in Q1, and a weaker comparative period in FY21
when stores were only able to offer Click and Collect services
for around one third of the year. Digital sales made up 35%
of total sales, lower than FY21 (46%) due to the store closure
periods in the previous year.
Compared to FY19 (the last comparable period with all stores
open all year), and on a consistent 52-week basis, total sales
grew by 41.1% (FY19: £1,100.4m). Digital sales have grown
by 2.5x since FY19, when they made up 20% of total sales.
The growth rates we have delivered reflect the significant
improvements we have made to our product offer, the
broadening appeal of our brand, and the strength of our
total retail system, which offers customers a friendly and
convenient shopping experience across all channels.
We continue to see broad-based growth across our
categories. Our furniture categories have performed
particularly well, benefitting from improved availability and
new additions to our ranges, such as home office (where
we have increased the number of options by 60%). Our
seasonal ranges also performed strongly, with customers
responding well to our winter warm and garden furniture
lines in particular. We are also pleased with the performance
of our decorating ranges, and the new products we launched
in collaboration with the Natural History Museum.
Encouragingly, we have further increased our market share2.
In homewares, our market share increased by 140bps, and
we also gained share in the furniture market, from a small
base. Consistent with recent years, over 85% of our total
growth in the year was from market share gains. We remain
confident that the improvements we are making to our
customer proposition in the four key focus areas described
in the CEO review will continue to deliver market share gains
going forward.
GROSS MARGIN
We continued to work closely with our committed suppliers
to mitigate cost price pressures and minimise retail price
increases, whilst maintaining our commitment to offering
customers great value for money at all price points.
Gross margin of 51.2% (on both 52 and 53-week bases)
was strong, reflecting a continued lower participation of
event sales in the first half of the year. Gross margin was
40bps lower than the prior year primarily reflecting a return
to historic levels of participation in event lines during our
Summer Sale in Q4.
Looking ahead, we expect the participation in event lines
to be higher than the last two financial years and expect
FY23 gross margin to be closer to our long-term average
of around 50%.
Financial summary
Sales
Gross margin
Operating cost % sales
Profit before tax
Free cash flow3
Net cash4
Diluted earnings per share
Ordinary dividend5
Special dividend6
FY22
(52 weeks)
FY21
(52 weeks)
YoY
(52w vs 52w)
FY22
(53 weeks)
YoY
(53w vs 52w)
£1,553.1m £1,336.2m
51.6%
39.1%
51.2%
37.5%
£209.0m
FY22
(53 weeks)
£153.0m
(£23.8m)
84.5p
40.0p
37.0p
£157.8m
FY21
(52 weeks)
£108.5m
£128.6m
63.7p
35.0p
65.0p
+16.2%
(40) bps
(160) bps
£1,581.4m
51.2%
37.4%
+32.4%
£212.8m
+18.4%
(40) bps
(170) bps
+34.9%
YoY
+£44.5m
(£152.4m)
+32.7%
14.3%
(43.1%)
1. FY22 was a 53-week year. Unless otherwise stated, commentary relates to the comparable 52-week period. The 52-week results for FY22 are unaudited.
2. GlobalData UK homewares and furniture markets. Furniture excludes kitchen and bathroom furniture. Our homewares market share for FY21 has been restated
by GlobalDataUK to 8.8% (previously reported 9.1%).
3. Free cash flow is defined as net cash generated from operating activities less capex (net of disposals), net interest paid and loan transaction costs, interest on
lease liabilities and repayment of lease liabilities.
4. Excluding lease liabilities.
5. Ordinary dividends declared relating to the financial year.
6. FY21 special dividend of 65p declared with the FY21 financial results and paid in FY22. FY22 special dividend of 37p declared with the FY22 interim results and
paid in FY22.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
27
CFO’s review
OPERATING COSTS
Total operating costs were £581.8m1 (FY21: £522.5m),
representing an operating cost ratio of 37.5% (FY21: 39.1%).
On a 53-week basis, total operating costs were £591.7m, with
an operating cost ratio of 37.4%. The operating cost ratio
benefitted from the leverage effect of a full year with all stores
open, with this impact being particularly strong in H1.
PROFIT AND EARNINGS PER SHARE
Operating profit of £213.9m1 (53-week basis: £217.7m) was
28.5% higher than FY21 (FY21: £166.4m). This reflects a
full year of open stores, strong gross margin, and a tight
operational grip on costs. The acquisition and consolidation
of the Sunflex business towards the end of FY22 did not have
a material impact on earnings in the period.
The growth in sales increased operating costs by £12m,
including £7m from the decision to increase our stockholding
to protect availability. We expect these temporary costs
to continue through H1 FY23, and then to reduce as stock
levels return to more typical levels in H2. The impact of
the reintroduction of business rates and the repayment of
the JRS monies in FY21 led to a net increase in operating
costs of £10m in the year. Inflationary pressures, mainly on
wages, increased operating costs by £17m. We invested
£20m in building capabilities and capacity (particularly in
technology, data, digital and fulfilment). Our investment in
new ecommerce and furniture supply chain sites will improve
customer service. The 53rd week added a further £10m of
costs compared to FY21.
We will continue to invest in a thoughtful way for the
long-term, ensuring that our resources are deployed to
maximise returns. In recent years we have invested in
capability in areas such as digital, data and customer insight,
as well as supply chain capacity to support medium term
growth. We will leverage the benefit from these investments
as they mature and become more efficient, helping to offset
inflationary pressures. Our approach to operational grip
has never been more important, and we will continue to
relentlessly focus on making every pound count.
12 month rolling sales
Net finance costs of £4.8m1 (FY21: £8.6m) included interest on
IFRS 16 lease liabilities of £4.8m (FY21: £5.3m). On a 53-week
basis, net finance costs were £4.9m.
Profit before tax in the period was £209.0m1 (FY21: £157.8m),
an increase of £51.2m year on year. On a 53-week basis, profit
before tax was £212.8m.
Profit after tax of £168.2m1 (FY21: £128.9m) reflected an
effective tax rate of 19.5% (FY21: 18.3%). On a 53-week basis,
profit after tax was £171.2m. The effective tax rate was 50bps
higher than the UK headline rate, within our historic range,
but higher than FY21 which benefitted from the timing of R&D
claims. We expect the effective tax rate to continue to trend
c.50-80bps above the headline rate.
Basic earnings per share (EPS) for the period were 83.0 pence1
(FY21: 63.7 pence). Diluted earnings per share were 82.1
pence1 (FY21: 62.9 pence). On a 53-week basis, basic earnings
per share were 84.5 pence, with diluted earnings per share at
83.6 pence.
1.6
1.4
n
b
£
1.2
1.0
0.8
£960m
FY17
FY20-21 Pandemic years
£1.56bn
FY22
£1.10bn
FY19
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Jun-21
Dec-21
Jun-22
+8.5% active customers, +16.2% sales1 in last 12 months
1. FY22 was a 53-week year. Unless otherwise stated, commentary relates to the comparable 52-week period. The 52-week results for FY22 are unaudited.
28 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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FY22
(53 weeks)
£217.7m
£79.3m
(£14.8m)
£4.8m
(£35.2m)
£251.8m
(£41.7m)
(£2.1m)
(£4.8m)
(£50.2m)
FY21
(52 weeks)
£166.4m
£80.8m
(£35.0m)
£7.5m
(£35.5m)
£184.2m
(£15.7m)
(£0.7m)
(£5.3m)
(£54.0m)
£153.0m
£108.5m
(£23.8m)
£128.6m
(£282.1m)
(£24.3m)
CASH GENERATION AND NET CASH
In the period, the Group generated £153.0m of free cash flow (FY21: £108.5m).
Operating profit
Depreciation & amortisation7
Working capital outflow
Share-based payments expense
Tax paid
Net cash generated from operating activities
Capex and business combination8
Net interest and loan transaction costs
Interest on lease liabilities
Repayment of lease liabilities
Free cash flow
Net (debt)/cash
Memo: dividends paid
There was a working capital outflow of £14.8m in the period
(FY21: £35.0m) as we consciously built our inventory levels to
ensure we maintained good availability for customers, given
the risk of ongoing supply chain disruption which has been
seen across the market. Inventories at the end of the period
were £223.0m (FY21: £172.4m). Whilst we are comfortable
with this level of inventory for now, we do expect stock
holding to reduce during FY23.
Total capital investment was £41.7m (FY21: £15.7m). This
included £9.3m relating to the set-up of our new ecommerce
and furniture supply chain operations, and £11.5m spent on
the three new stores opened in the period, as well as refits of
nine existing stores and decarbonisation initiatives. On 3 May
2022 we acquired the trade and assets of Sunflex, a division
of Hunter Douglas (UK) Limited, for a cash consideration of
£20.8m, of which £17.7m had been paid at 2 July 2022. We
expect capital expenditure in FY23 to be c.£20-£30m.
Cash tax paid of £35.2m (FY21: £35.5m) included receipts in
relation to research and development claims made at the end
of FY21.
Repayments of lease liabilities of £50.2m (FY21: £54.0m)
were lower than the prior year as the comparative was
impacted by the agreed deferral of the June 2020 rent
payments into H1 FY21.
In the period, the Group spent £28.3m (FY21: nil) purchasing
shares to be held in treasury to satisfy future obligations
under its employee share schemes.
Including impairment and loss on disposal.
7.
8. Excluding interest on lease liabilities.
9. EBITDA excludes right of use asset depreciation.
10. Fixed charges are defined as interest costs plus right of use asset depreciation.
After total dividend payments in the period of £282.1m
(FY21: £24.3m), including special dividends of £207.0m,
the Group ended the year with a net debt position of
£23.8m (FY21: net cash £128.6m).
BANKING AGREEMENTS
In December 2021 the Group agreed a new £185m
sustainability-linked unsecured revolving credit facility (‘RCF’).
The facility has an initial term of four years, which may be
extended by a maximum of a further two years at Dunelm’s
request, subject to lender consent. The RCF incorporates four
sustainability-linked performance targets which align with our
ambitious sustainability plans, including our commitment to
pursue a Net Zero Pathway. In FY22, we achieved our targets
for plastic packaging, take-back and carbon reduction.
Despite an improvement in the sourcing of cotton, our FY22
target was not achieved. We continue to learn and educate
ourselves and our suppliers, and remain confident that we will
achieve our long-term targets. The terms of the RCF include
covenants in respect of leverage (net debt to be no greater
than 2.5×EBITDA9) and fixed charge cover (EBITDA9 to be
no less than 1.75×fixed charges10), both of which were met
comfortably as at 2 July 2022.
In addition, the Group maintains £10m of uncommitted
overdraft facilities and has an accordion option within the
RCF for a maximum facility of £75m.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
29
CFO’s review
CAPITAL AND DIVIDEND POLICIES
Our tax strategy
Net VAT collected
Payroll taxes including
National Insurance1
Corporation tax
Total tax contributions
FY22
£m
163.3
47.5
35.2
246.0
FY21
£m
83.3
39.0
35.5
157.8
Dunelm has registered for the UK’s new Plastic
Packaging Tax and has paid the tax and submitted its
first return for the period 1 April 2022 to 30 June 2022.
Dunelm is committed to full compliance with all
statutory obligations and full disclosure to tax
authorities.
The Group’s tax affairs are managed in a way that
is consistent with the Group’s commitment to high
standards of governance. The Board has established a
set of principles that form the basis of the management
philosophy and the tax policy of the Group. These
principles can be found in full in our Group Tax Strategy
which is published on our corporate website and
reviewed each year. Our Group Tax Strategy sets out
one shared vision within the Group of tax compliance
and one view of performance.
TAX STRATEGY AVAILABLE ON CORPORATE.DUNELM.COM
1. All Dunelm colleagues are based in the United Kingdom, except for
42 colleagues who work in our store in Jersey.
• Target average net debt between 0.2× and 0.6× the
last 12 months’ EBITDA (post IFRS 16 basis)
• Ordinary dividend cover of between 1.75× and 2.25×
earnings per share during the financial year to which
the dividend relates
• Return surplus cash if net debt consistently falls below
the minimum target of 0.2×EBITDA
CAPITAL AND DIVIDEND POLICIES
The Board policy on capital structure targets an average
net debt level (excluding lease obligations and short-term
fluctuations in working capital) of between 0.2× and 0.6×
of the last 12 months’ EBITDA (on a post IFRS 16 basis). The
Group’s dividend policy targets ordinary dividend cover
of between 1.75× and 2.25× earnings per share during the
financial year to which the dividend relates.
The Board will continue to consider returning surplus cash
to shareholders if average net debt, excluding lease liabilities,
over a period consistently falls below the minimum target of
0.2×EBITDA, subject to known and anticipated investment
plans at the time.
The Group’s full capital and dividend policies are available
on our website at www.corporate.dunelm.com.
DIVIDENDS
The Board has proposed a final ordinary dividend of 26 pence
per share, recognising our very strong performance in the
year and our confidence in the business. This takes the full
year ordinary dividend to 40 pence per share, ahead of the
35 pence per share paid in FY21, with dividend cover of 2.1×
on both a 52 and 53 week basis, within the range of our stated
policy. The final dividend will be paid on 5 December 2022
to shareholders on the register on 11 November 2022, subject
to it being approved by shareholders at the AGM. We paid
total dividends of £282m in the year, including special
dividends of £207m.
Karen Witts
Chief Financial Officer
14 September 2022
30 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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ALTERNATIVE PERFORMANCE MEASURES (APMs)
APM
Unique active
customers growth
Total sales
Digital sales
Digital % total sales
Definition, purpose and reconciliation to statutory measure
12-month rolling growth in unique active customers who have shopped in the 12 months,
based on Barclays transactional data. Note that Barclays data represents approximately
20% of total Dunelm transactions. To measure whether we are continuing to grow our
active customer base – from both new customers and retention of existing customers.
Equivalent to revenue (from all channels). This is net of customer returns.
Digital sales include home delivery, Click & Collect (or Reserve & Collect before October
2019) and tablet-based sales in store.
Digital sales (as defined above) expressed as a percentage of revenue. This is not a measure
that we seek to maximise in itself, but we measure it to track our adaptability to changing
customer behaviours.
Gross margin %
Gross profit/revenue. Measures the profitability made on product sales prior to selling
& distribution costs and administrative expenses.
Operating costs to sales ratio
Operating costs/revenue. To measure the growth of costs relative to sales growth.
EBITDA
Effective tax rate
Earnings before interest, tax, depreciation, amortisation and impairment. Excludes right
of use asset depreciation. To measure compliance with bank covenants.
Taxation/profit before taxation. To measure how close we are to the UK corporation tax rate
and understand the reasons for any differences.
Capex (net of disposals)
Acquisition of intangible assets and acquisition of property, plant and equipment less
proceeds on disposal of property, plant and equipment and intangibles.
Free cash flow
Net cash/(debt)
Net cash generated from operating activities less capex (net of disposals) and business
combinations, net interest paid (including leases) and loan transaction costs and repayment
of lease liabilities. Measures the cash generated that is available for disbursement to
shareholders.
Cash and cash equivalents less total borrowings as shown in note 18 on page 200. Excludes
IFRS 16 lease liabilities.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
31
Sustainability
Building sustainability
into all that we do
I am pleased to share some excellent progress that we have made
in FY22 – from lifecycle material analysis underpinning carbon
data and our new textiles take-back services to sector-leading
colleague policies and increasing community, supplier and
shareholder engagement on sustainability.
given both time and resource to debate
and implement their ideas. I hope I have
also played my part in raising the profile
of sustainability across the business
by heading up the Pathway to Zero
Steering Group and sharing my passion
on this topic. We have also signalled our
commitment to our financial community
– linking sustainability metrics to long-
term Director remuneration and to our
Revolving Credit Facility.
IMPROVE–INNOVATE–ADVOCATE
We are absolutely committed to
improving and innovating in our own
operations and along our supply chains.
However, it has become increasingly
apparent that to meet our own net zero
goals – and those of the UK Government
– we must work with industry partners,
suppliers and others to speed up
the process. Our collaboration with
Textiles 2030 this year has considerably
improved our understanding of
environmental impacts in our textile
raw material sourcing, for example, and
we also joined the Aldersgate Group,
working with them to advocate for a
greener grid. We have continued to
work with the British Retail Consortium,
fully supporting their Climate Action
Roadmap.
A
D
V
O
CATE
I
N
N
OVATE
IMPROVE
OUR PATHWAY TO ZERO
EMISSIONS APPROACH
In last year’s Annual Report, I updated
you on the launch of our Pathway to
Zero strategy – a new way of organising
our activities across three areas (carbon
reduction, circular economy and
community). This strategy is designed
to accelerate progress by allocating
responsibility to Executive Board
members who are best placed to drive
the actions which will most effectively
reduce our carbon emissions and other
environmental impacts.
This activity sits alongside well-
established processes, which ensure
that our social and governance
responsibilities for colleagues, health
and safety, community, compliance and
reputational matters are embedded
into our day-to-day activities.
LONG-TERM THINKING
Sustainability can mean different
things to different people and we
continue to work hard to explain to
our key stakeholders – customers,
suppliers, colleagues, communities
and shareholders – how we think about
sustainability at Dunelm. I always
use our purpose as a starting point.
We need to think about the long
term – how we grow and develop our
business in a sustainable way ‘now and
for generations to come’. Operating
in a sustainable way also links to our
ambition to ‘be a good company’
and this covers, for example, the way
we treat and reward our colleagues
and how we aim to make a positive
social and environmental impact in
our communities. Acting responsibly
and sustainably is also a competitive
advantage – it underpins our brand
and customer proposition, allows us
to attract and retain customers and
colleagues, strengthens our supplier
partnerships and helps us to secure
long-term investment and funding.
INCREASED COMMITMENT
AND RESOURCE
In the past year, we have invested in
new colleagues, bringing sustainability
expertise into the business in areas such
as carbon reduction, ethical supply
chain and sustainable materials. We
have also ensured that colleagues on
our Pathway to Zero working groups are
32
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
LOOKING AFTER OUR
COLLEAGUES
We are committed to making our
colleagues feel welcome, engaged,
safe and fairly rewarded, wherever they
work in our business. The past year has
seen an increase in the level of violence
and abuse directed at shop workers
and contact centre teams by members
of the public. Senior management
receives a weekly report and we have
been shocked and concerned by the
number and severity of incidents.
We have invested in training and
protective measures to support our
colleagues, such as increased security
guarding and radio messaging systems,
and have supported the British Retail
Consortium’s campaign for tougher
policing and sanctions.
Looking after the mental and financial
health and wellbeing of our colleagues
has always been a top priority, as is
evidenced by examples shared in this
report. This year we know that the
cost of living squeeze will affect many
colleagues and their families. We
have purposely given our hourly-paid
colleagues a higher pay increase than
other colleagues this year, and have
increased the level of support for their
financial wellbeing, including a one-
on-one conversation with each of our
hourly-paid colleagues and easier and
wider access to education, third-party
support and our Colleague Support
Fund.
Alongside this, we continued to roll
out our diversity and inclusion training,
and our colleague network groups
made their mark in their first full year,
helping to shape new policies and
raise awareness by sharing ‘lived
experiences’.
We also reinforced the importance of
our shared values by embedding them
into a new behavioural framework
and we continued our drive to ‘grow
our own’ by better identifying and
developing colleague talent.
LISTENING AND LEARNING
I would like to thank all Dunelm
colleagues and partners for their
fantastic efforts in moving us forward
this year. We still have a long way to
go – we need to listen and learn, take
advice, revisit assumptions and invest
more; but most of all we have to keep
up the energy, enthusiasm and genuine
excitement that our colleagues have
for creating an increasingly circular
business that has a positive impact
on society.
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
Nick
Nick Wilkinson
Chief Executive Officer
How we organise ourselves on sustainability
Our overall approach to sustainability is championed by our CEO, who delegates responsibility to
Executive Board members, supported by our Head of Climate Change on our Pathway to Zero strategy
Our approach to managing sustainability is collaborative and iterative, recognising the
different levels of maturity of our existing structures and the overlapping nature of the topics.
Pathway to Zero strategy
Specific strategy and governance created to drive our approach to climate
change, with a focus on reducing carbon emissions and developing a circular
economy mindset
Colleague and Legal
Ongoing focus to care for our colleagues and
to keep our business and relationships safe,
implemented through established structures
and policies
Carbon reduction
Circular economy
Community
Colleagues
Doing the
right thing
Executive Board responsibilities for key stakeholder and sustainability focus areas,
supported by other members of Executive Board
CFO
Commercial
Director
Customer
Director
Stores and
People Director
Company
Secretary
• Carbon reduction
• Suppliers
• Customers
• Colleagues
• Anti-Bribery
• Operational waste
• Responsible sourcing
• Community
• CFO is also responsible
• Circular economy
• Take-back, repair
for tax and supplier
payments
and re-use
• Colleague/Supplier
Codes of Conduct
• Health and safety
• Privacy
Guided by our purpose and shared values
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
33
Sustainability
Sustainability metrics,
targets and progress
The sustainability metrics and targets that we
focus on most across the business.
i
See also Group KPIs page 24, TCFD Report from page 61
and Remuneration Committee Report from page 130.
All policies are available on corporate.dunelm.com.
Carbon reduction
Key
BONUS
Remuneration metric used for bonus
LTIP
Remuneration metric used for long-term
incentive plan
RCF
Revolving Credit Facility target
IN FY22 WE ENGAGED WITH THE FOLLOWING
ORGANISATIONS:
Copyright ©2022 Sustainalytics. All rights reserved. Such information and data
are proprietary of Sustainalytics and/or its third party suppliers (Third Party
Data) and are provided for informational purposes only. They do not constitute
an endorsement of any product or project, nor an investment advice and are not
warranted to be complete, timely, accurate or suitable for a particular purpose.
Their use is subject to conditions available at legal disclaimers.
The use by Dunelm of any MSCI ESG Research LLC or its affiliates (‘MSCI’) data,
and the use of MSCI logos, trademarks, service marks or index names herein,
do not constitute a sponsorship, endorsement, recommendation, or promotion
of Dunelm by MSCI. MSCI services and data are the property of MSCI or its
information providers, and are provided ‘as-is’ and without warranty. MSCI
names and logos are trademarks or service marks of MSCI.
34 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
Base year
Target
FY22
performance
Page
PATHWAY TO ZERO SCOPE 1
Scope 1 CO2e
FY19
Scope 1 CO2e/£m sales
FY19
LTIP
RCF
PATHWAY TO ZERO SCOPE 2
Continue to purchase
renewable electricity
Annual
PATHWAY TO ZERO SCOPE 3
Scope 3 CO2e
FY19
50%
reduction by
2030
24%
reduction by
FY24
100%
electricity
from
renewable
sources
50%
reduction by
2030
13.4%
increase
19.6%
reduction
38
38
99.7%
38
Ongoing
39
OPERATIONAL WASTE
% of operational
waste recycled
% of waste diverted
from landfill
Annual
80% in FY22
79.8%
41
Annual
98% in FY22
96.2%
41
Related commitments: British Retail Consortium’s Climate
Action Roadmap to achieve net zero by 2040; commitment
to work towards Textiles 2030’s targets as a Textiles 2030
signatory.
Related policies:
POLICY
• Plastics and packaging policy
• Environmental policy
INDEPENDENT ASSURANCE
We engaged Ernst & Young LLP to provide limited
assurance for FY22 over the key performance metrics
which are linked to our Revolving Credit Facility (RCF).
These are marked with green RCF flags on pages 34
and 35. The full assurance statement and the Basis of
Reporting documents that were applied in preparing
these metrics can be found online on our corporate
website: corporate.dunelm.com.
Circular economy
Community
Base year
Target
FY22
performance
Page
Base year
Target
FY22
performance
Page
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
N/A 50% by FY24
61.3%
48
COMMUNITY
Charitable funds
raised
COLLEAGUES
Colleague net
promoter score
(eNPS)
22.7%
reduction
45
BONUS
15.0%
45
Ongoing
—
Reportable accidents
under RIDDOR1
Number of targeted
colleagues
completing training
in anti-bribery, anti-
fraud and tax evasion
CUSTOMERS
FY20
—
—
—
Reduce by
7.5% by FY22
and by 20%
by FY24
30% by FY22
and by 50%
by FY25
100% by
FY25
80% by FY24
and 100%
by FY25
Annual
Year-on-year
increase
£52k
increase
Annual
Year-on-year
improvement
1%
improvement
Annual
Annual
Year-on-year
reduction
Reduction
of 9
At least 90%
of targeted
colleagues
82.3%
51
24
60
60
25
25
Net promoter score
(NPS)
Annual
Year-on-year
improvement
4.2%
reduction
30.0%
43
BONUS
Unique active
customer growth
Annual
Year-on-year
improvement
8.5%
improvement
—
50% by FY25
7.1% 43, 44
Related policies:
POLICY
• Health & Safety Policy Statement
• Dunelm Colleague Code of Conduct
• Whistleblowing policy
• Anti-corruption and anti-bribery policy
• Tax Strategy
• Code of Business Conduct
Annual
100%
90.1%
44
—
—
100%
97.9%
46
90%
73.9%
46
TAKE-BACK
% of own brand
products for which
we offer an easy-to-
use take-back service
LTIP
RCF
PLASTIC AND PACKAGING
Volume of own brand
plastic packaging
used/£m sales
LTIP
RCF
% of recycled content
used in own brand
plastic packaging
% of own brand
cardboard packaging
from sustainable
sources
RESPONSIBLE SOURCING
% of ‘More
Responsibly Sourced
Cotton’ in
own brand range
LTIP
RCF
% of ‘More
Responsibly Sourced
Timber’ in
own brand range
% of palm oil used
in Dunelm/Pausa
products that is
sustainably sourced
(RSPO)
% of Tier 1 factory
base for own brand
products with audits
not more than two
years old
% of low- or medium-
risk audits
Related policies:
POLICY
• Plastics and packaging policy
• Responsible cotton policy
• Responsible timber policy
• Responsible palm oil sourcing policy
• Responsible animal welfare policy
• Ethical Code of Conduct for suppliers and partners
• Slavery and Human Trafficking Statement and modern
slavery policy
• Whistleblowing policy
• Code of Business Conduct
1. Reporting of Injuries, Diseases and Dangerous Occurrences
Regulations 2013.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
35
Sustainability
Carbon reduction
Aligning our strategy to science-based best practice.
OUR APPROACH
A
D
V
I
O
N
N
CATE
OVATE
IMPROVE
IMPROVE
Understanding
and focusing
on activities in
our control
INNOVATE
Finding solutions
by doing things
differently
ADVOCATE
Asking for help
and working
collaboratively
i
For more information see pages 37 to 40.
Pathway to Zero indicative roadmap
SCOPE 1
Target: 50% reduction
by 2030
Company car fleet
Home Delivery
Network fleet
Natural gas, oil
and refrigerants
10-year gas-fired heating replacement programme
Driver training/monitoring
Hybrid/electric company cars by 2025
Transition to low-carbon fuel in HGVs by 2025
Collaboration with Sustainable Logistics Forum to move to low-emission fleet by 2030
SCOPE 2
Target: Already at net zero
Reviewing greener RE credentials
Colleague engagement to accelerate energy-saving
Installing PV panels
Renewable
electricity
Photovoltaic
opportunities
Collaboration with organisations such as Aldersgate Group to advocate for a greener grid
SCOPE 3
Target: 50% reduction
by 2030
The majority of our Scope 3
emissions come from the products
we sell. For more detailed analysis
see page 39.
Textiles (raw materials
and fibre production)
Hardlines (raw materials
and production)
Production
Food and drink
Product transport
Product use at home
Goods not for resale
Product end of life
Commuting and
business travel
Customer travel and
home parcel deliveries
• Improve data gathering and reporting to
understand gaps and opportunities.
• Work with suppliers to move to renewable energy
and use innovative low-impact materials.
• Scope 3 Roadmap to be further refined in FY23.
• Transition to low-carbon fuels in third-party
• Expand range of lower-carbon products and
engage customers.
logistics.
• Collaborate with industry and experts, such as
British Retail Consortium, Sustainable Logistics
Forum, Textiles 2030 and Aldersgate Group to
advocate for circularity and decarbonisation
across industry.
1
%
o
f
t
o
t
a
l
e
m
i
s
s
i
o
n
s
1
%
o
f
t
o
t
a
l
e
m
i
s
s
i
o
n
s
9
8
%
o
f
t
o
t
a
l
e
m
i
s
s
i
o
n
s
2019
2020
2022
2025
2030
2035
2040
FY19
baseline
All Scopes
50% reduction from FY19 baseline
Graphic is illustrative of current and anticipated activities and timeline and represents future direction of travel only.
Please refer to table on page 37 for carbon reduction figures to date.
36 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
OUR COMMITMENTS AND
METHODOLOGY
Our commitments
Our goal is to reduce absolute
greenhouse gas (GHG) emissions by
50% by 2030 against a FY19 base. Our
application for formal recognition of our
targets by SBTi will be submitted in the
new financial year. We support British
Retail Consortium’s Climate Action
Roadmap to achieve net zero by 2040.
Additionally, as a signatory to Textiles
2030, we have pledged to work towards
Textiles 2030’s measurable targets,
which include reducing the aggregate
greenhouse gas footprint of new textile
products by 50%, sufficient to limit
global warming to 1.5°C in line with the
Paris Agreement on climate change, and
achieving net zero by 2050 at the latest.
i
See page 44 for our commitment to
other Textiles 2030 targets.
Our initial work with Carbon Trust in
FY20 and FY21 enabled us to develop
baseline data for Scope 1, 2 and 3
emissions. We have updated and
refined this data but, as this work is
iterative, information provided in this
report may change as we refine our
data further and make it more accurate.
We have already developed a Group-
wide roadmap to deliver our
Scope 1 and Scope 2 targets. We know
the areas we need to focus on to reduce
our Scope 3 emissions and, as our data
improves, we will build out our Scope 3
roadmap in FY23. We are already taking
action to reduce emissions across all
three Scopes, as reported below, and
have adopted an ‘improve, innovate
and advocate’ approach as illustrated
in the graphic on page 36, recognising
that in some areas we are reliant on
industry collaboration and innovation to
achieve our goals.
Methodology and reporting
Our calculation methodology for
Scopes 1 and 2 has followed the GHG
protocol corporate standard and we
are improving our Scope 3 data quality
continually. More information on our
methodology for calculating emissions
is on our website: https://corporate.
dunelm.com/about-us/policies-and-
statements/.
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
Absolute GHG emissions
CO2e tonnes
FY19
Location-
based
FY20
Location-
based
FY21
FY22
Location-
based
Market-
based
Location-
based
Market-
based
6,967
7,108
8,633
8,633
7,902
7,902
10,861
1,430,410
8,757
N/A
7,854
N/A
268
N/A
8,015
21
1,799,231
1,799,231
Scope 1
(Direct
emissions)
Scope 2
(Indirect
emissions)
Scope 3
Turnover £m
1,110.4
1,057.9
1,366.2
1,366.2
1,553.1
1,553.1
Scope 1 GHG
intensity
per £1m
turnover
6.3
6.7
6.5
6.5
5.1
5.1
Note: Scope 1 and Scope 2 emissions are calculated following the GHG protocol corporate standard.
Market-based Scope 2 emissions reflect the purchase of REGO-qualifying electricity. Under Scope 3
emissions we use best available data to report material GHG contributors to our footprint, including: raw
materials; product manufacturing; third-party logistics; product use at home; and product end-of-life
emissions. Our FY19 model indicates that these contributing areas represent c.95% of our total Scope 3
emissions. Details of the methodology used to calculate our emissions are available on corporate.dunelm.
com at https://corporate.dunelm.com/about-us/policies-and-statements/. Our SECR disclosure can be
found on page 168. Turnover is on a 52-week basis.
First trial of LPG vehicles in August 2022
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
37
Sustainability
Carbon reduction continued
Scope 1 emissions
Scope 2 emissions
Company
car fleet
Home delivery
network fleet
Natural gas, oil
and refrigerants
UNDERSTANDING OUR SCOPE 1
EMISSIONS
Across all Scope 1 contributing
business areas, we have set
decarbonisation plans and annualised
internal targets to help us achieve our
2030 carbon reduction target.
Our model shows that emissions from
natural gas, oil and refrigerant gases
used in our stores and warehouses
accounted for over a third of our
Scope 1 (direct) emissions in FY19. We
have continued to replace gas-fired
heating with electric heating run on
purchased renewable energy. No gas
installations are fitted in new stores
and existing installations are removed
during store refurbishments and refits.
In addition, we are working with stores
to use existing gas-fired heating more
efficiently, prior to replacement. This
means that we were able to reduce
natural gas emissions this year by 29.8%
against the FY19 baseline. We are
reducing emissions from refrigeration
gases by replacing them with lower
emission gases.
Our model shows that the remainder
and largest part of our Scope 1
emissions comes from the vehicle
fleets that we run – our Home Delivery
Network (HDN), our company car
fleet and the van fleet used for our
made-to-measure service. In FY22,
we continued to train our HDN drivers
in best practice behaviours and used
data from telematics to promote
driving efficiency. We also focus on
optimising delivery routes and vehicle
fill efficiency. This helped us to reduce
our HDN CO2e emissions per delivery
in FY22 by 3% versus FY21. In FY22, we
set a logistics decarbonisation strategy
with the aim of moving away from
diesel HGVs to a lower-emission fleet
within five years, subject to available
technology, and we continue to test and
trial low-emissions fuel. In early 2022,
we joined the Sustainable Logistics
Forum, a group of logistics and retail
companies who share best practice,
respond to government consultations
and work collaboratively on projects
to advance sustainable logistics. Our
participation supports our collaboration
and advocacy strategy.
Since July 2021 our company car fleet
options have been electric or hybrid
only and we plan to phase out all
other cars by 2025. We have installed
16 electric vehicle chargers at our
support centre and our new furniture
hub at Daventry.
FY22 performance
• Overall, our Scope 1 CO2e
emissions increased by 13.4%
against the FY19 baseline, as
a result of our growth in sales
and home delivery; this equates
to a reduction of 19.6% per
£1m turnover.
FY23 focus
• Continue replacement of gas-
fuelled heating and invest in
low-emission vehicles in our
HGV fleet.
• Ongoing industry advocacy
to accelerate low-emissions
solutions and speed to market.
Renewable
electricity
Photovoltaic
opportunities
UNDERSTANDING OUR SCOPE 2
EMISSIONS
Our Scope 2 (indirect) emissions are
negligible under a market-based
approach, since we transitioned to
Renewable Energy Guarantees of Origin
(REGO) qualifying electricity sources
for the majority of sites in April 2019.
We will collaborate with Aldersgate
Group and other organisations to
advocate to improve the availability
of renewable energy.
Through our Building Management
System we can better manage and
monitor our use of energy for lighting,
heating and cooling. We continue to
engage colleagues across our business
to accelerate energy saving. Colleagues
from our Store Development team
review energy usage data twice
a week and visit stores regularly,
targeting those where usage appears
higher than it should be.
We have installed photovoltaic (PV)
panels at five of our freehold stores to
reduce our electricity usage and at year
end FY22, PV panels generated around
250 MWh, equating to around 1% of
our annual on-site renewable energy
consumption. PV panels for another four
stores are already ordered and we will
review further opportunities for FY23.
FY22 performance
• Continued to purchase
renewable energy and expanded
use of photovoltaic panels.
FY23 focus
• Increase use of photovoltaic
panels.
• Sign off roadmap for more
credible sourcing of renewable
energy strategy.
38 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
Scope 2 emissions
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
Scope 3 emissions
Scope 3 emissions FY19
% lifecycle stage
19%
27%
Textiles (raw
materials and
fibre production)
Hardlines (raw
materials and
production)
<1%
c.2%
Food and
drink
Product
transport
32%
14%
Textile product
manufacturing
Product
use at home
<1%
c.4%
Commuting and
business travel
Product
end of life
<1%
<2%
Customer travel
and home parcel
deliveries
Goods not
for resale
<2%
Other
Source: Dunelm FY19 figures from Carbon Trust
and Textile 2030 data.
In April 2021, we became the first
homewares retailer to join the industry
group Textiles 2030 and to commit to
their targets (see page 44). Members
of Textiles 2030 have made a voluntary
agreement to limit the impact that
textiles (particularly in the fashion
industry) have on climate change and
the environment. Through our joint
work, we have a better understanding
of the importance of using recycled
textiles to lower our carbon footprint
and our water usage, in particular for
polyester. We have set an internal
target to accelerate our migration from
conventional to recycled polyester
fibre; see case study on page 44.
Non-textile products (our model
indicates that these account for
approximately 27% of our carbon
footprint)
For our non-textile homewares and
furniture ranges we have started to
use life-cycle assessment (LCA) and
primary sourcing data to establish a
more accurate environmental footprint
baseline; see Responsible sourcing
(environmental), page 43. Preliminary
results will be available in FY23 and
will help inform our carbon reduction
strategy for non-textile materials (such
as timber, metal and glass) that are used
in our core non-textile product ranges.
Textiles raw material
tCO2e
1
7
8
,
0
5
3
0
0
9
,
1
2
3
0
6
9
,
7
6
2
2019
2021
2022 (estimate)
Data sourced from Textiles 2030 carbon footprint
tool for FY19 and FY21. FY22 is calculated using
FY21 data plus textiles sales increase between
FY21 and FY22. This is due to not having FY22
data available until March FY23.
FY19 Scope 3 carbon
emission hotspot analysis
%
Textile raw material and
fibre production
19
Hardlines raw material and production 27
Product transport
Textile product manufacturing
Product use at home
Product end of life
Goods not for resale
Other
c.2
32
14
c.4
c.2
c.2
Numbers do not add up 100% due to rounding.
Source: Dunelm
UNDERSTANDING OUR SCOPE 3
EMISSIONS
Our analysis of data collected in FY19
showed that over 95% of our total
CO2e emissions were attributed to
Scope 3 and, of these, the majority
are generated from the materials
and processing associated with our
products. Our original carbon footprint
for Scope 3 was built by Carbon Trust,
based largely on invoice purchase
data. Since then we have improved the
robustness of our data collection for
textile products through our work with
Textiles 2030 and have updated our
2019 footprint in the pie chart above, as
well as FY22 data, which is a mix of the
original model and more accurate data
normalised using business growth.
OUR APPROACH TO REDUCING
SCOPE 3 EMISSIONS
Materials
Textiles (our model indicates that these
account for approximately 19% of our
carbon footprint)
Of our own brand products,
approximately 50% by sales volumes
are textiles, and this is where we
continue to focus our greatest efforts.
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ANNUAL REPORT AND ACCOUNTS 2022
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Sustainability
Carbon reduction continued
Scope 3 emissions continued
Food and drink
Although sales from Pausa represent
less than 2% of our total revenue, our
Pausa cafes are an important part of our
business: they enhance our customer
and colleague experience and are
increasingly used to help stores engage
with their local communities; see
Communities page 51.
In FY22, we worked with Carbon
Trust to model the carbon footprint
of products that we sell in our Pausa
cafes and learnt that most emissions
are generated from our milk and coffee
products. This information has helped
to prioritise workstreams and next year
we intend to refine sourcing standards
and work with our suppliers to reduce
carbon emissions from their products.
Production/manufacturing
We understand from our collaboration
with Textiles 2030 and our FY19
hotspot analysis with Carbon Trust that
a significant proportion (at least 30%)
of Scope 3 emissions are generated in
the product manufacturing/processing
stage. We are currently collecting
the data and developing our supplier
engagement programme and will
report progress on this in FY23.
Product transport
We continue to collaborate with
our third-party logistics partners
and industry groups to support
the development of low-carbon
infrastructure and vehicles for our
outsourced transportation and
distribution. We worked closely with
our largest logistics suppliers in FY22
to gather carbon emission data relating
to the movement of our products to
inform a decarbonisation plan. Actions
to date include reviewing the use of
low-carbon fuel and agreeing to trial
LPG trailers, rationalising the number
of store deliveries and training staff on
efficient driving.
Commuting and business travel
Our model shows that commuting
and business travel is a relatively small
contributor to our Scope 3 footprint
(less than 1%). We will consider
developing a decarbonisation
plan in FY23.
Customer travel and home
parcel deliveries
Our model shows that emissions from
customer travel and home parcel
deliveries also account for a relatively
small part of our Scope 3 footprint (less
than 1%). We will be working with our
third-party parcel delivery partners to
develop a decarbonisation plan
in FY23.
Product use at home
Through our work with Textiles 2030
we understand that product use at
home is a large contributor to our
Scope 3 footprint (around 14%). For
our customers and colleagues, our
approach includes offering products
with greater longevity and giving more
information about how to care for and
repair products to prolong their life.
Product end of life
We trialled a textiles take-back scheme
in December 2021 and expanded this
to 167 stores. We now have customer
take-back options for 61.3% of our
own brand product range (see Circular
economy, page 48). During the first
six months, we took back an average
of around 10 tonnes of textiles each
week, avoiding at least 25 tonnes
of CO2e (assuming that all products
would otherwise have gone to landfill);
see calculation methodology on our
corporate website https://corporate.
dunelm.com/media/3148/scope-3-
reporting-methodology.pdf.
Other
For our ‘non-stock’ (non-product)
purchases we work on a priority and risk
basis. In FY23, we will request carbon
data and reduction plans from our
largest suppliers, and continue to track
progress. We have added sustainability
questions to our tender documentation
and these form part of the contract
award process. We have also added
a clause to our terms and conditions
which requires suppliers to work with
us to meet our sustainability targets,
as well as considering the impacts of
all large investments on our carbon
reduction plans.
FY22 performance
• Developed a better
understanding of areas of
Scope 3 to prioritise and target
our reduction efforts, such as
products.
FY23 focus
• Further work on using low-
impact materials in product
manufacture.
• Complete life-cycle
assessment data gathering
to inform decarbonisation for
other core product areas.
• Focus on supplier engagement
to achieve carbon reduction.
• Ongoing refinement of Scope
3 carbon reduction roadmap
and reporting.
• Working with logistics partners
to move to lower-carbon fuels
in fleet.
During the year we developed our own transparent and
understandable labelling to make it easier for customers to
identify products that have one or more sustainable attributes
under the ‘Conscious Choice’ logo – this was launched in
August 2022.
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Operational waste
management
Our priority is to minimise generated
waste, recycle where possible, and
send to landfill sites as a last resort.
FY22 PERFORMANCE
In FY22, we generated 15,048 tonnes
of waste, up 7.0% since the previous
year. Relative to our revenue growth this
equated to a year-on-year reduction
of 7.8% (9.7 tonnes per £1m revenue
in FY22 versus 10.5 tonnes per £1m
revenue in FY21). A breakdown of
waste generated by category can be
seen in the pie chart below. There was
no material year-on-year change in
the percentage breakdown of waste
generated by category. In FY22, we
recycled 79.8% of all operational waste
(FY21: 80%) against a target of 80% and
diverted 96.2% of all waste from landfill
(FY21: 96%), against a medium-term
target of 98%.
Breakdown of waste
generated by weight FY22
%
Non-recycled waste
Dry mixed recycling
20
24
Cardboard and paper 50
Plastic
Food waste
Store refit waste
Hazardous waste
Source: Dunelm
3
2
1
0
MAXIMISING EFFICIENCIES
The majority of our waste is generated
at store level and we work closely with
our waste management partner, Biffa,
to drive continuous improvement
in minimising and reprocessing this
waste stream. In FY22, we renewed a
three-year contract with Biffa and reset
performance parameters including, for
example, maximising the efficiency of
our waste collections, typically around
20,000 journeys per year. By monitoring
bin levels and changing collection
frequencies we aim to eliminate
unnecessary journeys, improve service
levels and reduce our carbon footprint.
We aim to transport waste to the most
local recycling plants (unless it makes
sense to send waste slightly further
afield to more efficient plants) and are
working with Biffa to identify longer-
term solutions, by changing waste
processes and investigating other waste
diversion routes.
RECYCLING
We have improved signage,
communication and processes in our
stores and sites to make it easier for
colleagues to segregate and recycle
waste, for example, by dry mix,
cardboard and paper, clear plastic,
wood, organic and hazardous. We
also repurpose old store shelving
equipment, which is resprayed and
reused in new stores and refits.
In September 2021, at our store
roadshows, we relaunched a
comprehensive recycling guide and
video for colleagues, complemented
by kits and posters for each store. Since
October 2021, we have incorporated
waste management metrics into our
health and safety store audits to raise
the profile further. Stores provide health
and safety and waste information every
month, alongside full annual audits,
and we are analysing this information
to identify further waste management
efficiencies – for example, by focusing
on anomalies and sharing best practice.
REPURPOSING RETURNS
We aim to sell any less-than-perfect
stock in stores at a discount to our
customers rather than returning it
to our warehouse to be disposed
of. If customers return ‘online only’
products, such as large furniture items
to our stores, we also aim to resell
these in store (often at a discount). We
continue to partner with Appliance
Tech who check any returned electrical
appliances so that we can resell them
safely. Through these initiatives we
reduce waste and save transport and
warehousing costs.
Operational waste recycled
%
75
76
78
80
80
2018 2019 2020 2021 2022
Diversion from landfill
%
95
96
97
96
96
2018 2019 2020 2021 2022
FOOD WASTE
We have 153 Pausa cafes in stores
and run four Pausa restaurants for our
colleagues. Our aim is for no food to
be thrown away and we are reducing
food waste in a number of ways.
Our centralised ordering system, for
example, gives us better stock visibility
and improves our management of
perishable items and wastage. We also
train colleagues to standardise serving
processes and in-store presentation,
and we factor in wastage during range
rationalisation. We discount or donate
perishable items nearing end of life and
are investigating ways to share food
with our local communities. Any food
waste generated is recycled.
FY22 performance
• 79.8% of operational waste
recycled against a target of 80%.
• 96.2% of waste diverted from
landfill against a target of 98%.
FY23 focus
• Continue to minimise waste
and maximise recycling.
• Expand waste champion
network and colleague
engagement.
• Identify closed-loop
opportunities with suppliers to
reduce/monetise waste.
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Sustainability
Circular economy
Taking the whole lifecycle of our products into consideration.
Product circularity
Our products have always been
designed with quality, choice and
value in mind; we now also consider
sustainability and circularity.
design processes, raising awareness
across our commercial teams,
bolstering internal expertise and
collaborating with suppliers and
industry partners, such as Textiles
2030 and Better Cotton.
MOVING TOWARDS PRODUCT
CIRCULARITY
Around 80% of c.50,000 own brand
products are designed in-house or
exclusively for us by external designers,
allowing us to influence and develop
more sustainable ranges, including
the materials we use, how they are
produced, and the options for our
products at end-of-life.
Full product circularity cannot be
achieved overnight. We will continue
to learn, test and scale up as we
engage with our key suppliers and
work with industry peers to improve
our understanding and develop
opportunities. In FY22, we launched our
exciting collaboration with the Natural
History Museum, which epitomises our
approach to product circularity.
Moving from a linear to a circular
model involves longer-term thinking
and, during the year, we embedded
circularity principles into our product
SUSTAINABLE COLLABORATION
Inspired by the Natural History
Museum (NHM) and the natural
world it celebrates, the NHM x
Dunelm homewares collection is
designed for longevity using, where
possible, responsibly sourced
materials and packaging that has a
‘second life’. Each product aims to
raise awareness of the importance
of protecting wildlife and habitats,
such as wetlands and woodlands,
to preserve fragile ecosystems. This
exclusive range has been designed
by Dunelm, working with NHM
experts, who share their specialist
knowledge. Only suppliers who
meet NHM’s and Dunelm’s highest-
rated ethical standards have been
selected to work on the project.
X
TAKE-BACK
• Customer take-back services available
• Products reused, repurposed, recycled
• Researching ‘closed loop’ opportunities
for textiles
Bag and bring your clean and
undamaged home textiles here
and we’ll give them a second life
PACKAGING TO KEEP
• Some NHM packaging
designed to colour in
and maybe even frame
Visit Dunelm.com or ask in-store for details.
• Encourages reuse and
educates along the way
DUN4735/102712
Provide
take-back
services
(to close loop)
Improve
product
design
Moving towards
product circularity
Develop
end-of-life
solutions
Source
lower-impact
materials
Reduce
packaging
and improve
its recyclability
DIFFUSERS AND CANDLES
• Plant-based diffuser oil
• Glass vessels and packaging
designed to be reused
• Easily recyclable
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MARLOW MARSH ARMCHAIR
AND FOOTSTOOL
• Classic wingback silhouette
and tapered legs for
timeless look
• Filling made from 100%
recycled polyester
• Interchangeable legs to
extend life
• Made in the UK
KINGFISHER CUSHION
• Cover made from 100%
recycled polyester
• Filling made from 100%
recycled polyester
• Recyclable through Dunelm’s
textiles take-back service
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ENVIRONMENTAL
To achieve our targets to reduce
carbon emissions and water usage, we
need to change the materials used in
our products and the manufacturing
process throughout the whole
supply chain.
EXPANDING OUR EXPERTISE
In FY22, we expanded the in-house
skills of our Product Quality &
Sustainability team by recruiting two
environmental sourcing specialists.
This will help us to identify and improve
the environmental credentials of our
products more quickly, better educate
our suppliers and buying teams,
and tackle increasing stakeholder
demand for more transparent data that
underpins our commitments to carbon
and waste reduction, and to related
areas such as water and biodiversity.
SUPPLIER ENVIRONMENTAL
ASSESSMENT AND ENGAGEMENT
We have continued to work with Track
Record Global to map our supply chain
to identify potential environmental and
social risks in the sourcing of cotton,
timber, and palm oil; and to verify
claims for recycled materials.
We have engaged with our suppliers
through a series of seminars and
workshops, and by sharing resources.
Through this engagement we set out
our targets and our expectations of the
standards that we require our suppliers
to meet, so that they understand the
need to develop their expertise and
drive continuous improvement in their
own supply chains.
TEXTILES 2030 AND MATERIALS
IMPACT ASSESSMENT
We became the first homewares
retailer to sign up to Textiles 2030 in
FY21, committing to carbon, water and
circular textiles targets (see page 44).
We are working alongside c.100 other
UK companies/signatories to reach
these targets at an industry level.
This year we submitted our baseline
fibre tonnage for textiles products
in FY19 and FY21 and completed a
materials impact assessment to better
understand the GHG emissions, water
and waste impacts associated with
our products. Our work has helped
prioritise our actions, for example to
source more recycled polyester to help
reduce our carbon footprint, and to use
more sustainable cotton alternatives to
reduce our water footprint.
COTTON
Our published target is for 100% of the
cotton used in our own brand products
to meet our ‘More Responsibly Sourced’
standard by FY25. In FY22, we achieved
30.0%. To accelerate our progress,
in FY22 we joined Better Cotton, the
world’s largest cotton sustainability
programme, whose mission is ‘to help
cotton communities survive and thrive,
while protecting and restoring the
environment.’1 Through our association
with Better Cotton we are committed
to improving cotton farming practices
globally. Better Cotton is sourced via
a chain of custody model called mass
balance. This means that while cotton
produced under the programme may
not be directly traceable to a Dunelm
product, Better Cotton farmers benefit
from the demand for Better Cotton in
equivalent volumes to those we ‘source’.
Textiles used in our products
% of material/fibre in tonnes
Polyester
Cotton
Polypropylene and Polyurethane
Other
Source: Dunelm
58
26
7
9
NON-TEXTILES
Although we have completed a
high-level assessment, we are at an
early stage in developing a detailed
understanding of the environmental
footprint of our non-textile materials
such as timber, glass, ceramics, and
metals. We will do so using a practical
approach that makes use of peer-
reviewed industry data and proxies
in line with ISO 14044. This material
impact assessment will be based on life
cycle analysis (LCA) and will cover five
areas: global warming potential, water
quality impacts, water consumption,
fossil fuel depletion, and human
and environmental toxicity. We have
adopted a phased approach, initially
focusing on product categories with
the highest potential impact, allowing
us to test our methodologies and
set priorities.
FOOD AND DRINK
Dunelm is committed to using more
sustainably sourced raw materials
across our range of Pausa cafe
products. For example, tea, coffee and
cocoa in Pausa branded products must
be certified to a recognised responsible
sourcing programme that reduces
environmental degradation, such as the
loss of natural habitats, deforestation
and social risk in the area from which
they are sourced.
BIODIVERSITY, TIMBER
AND WATER
In FY22, we started to assess data
requirements to quantify our nature-
related dependencies, risks and
impacts to understand and address
these as part of our decision-making,
and to build our first biodiversity
strategy. We are at a very early stage in
this process and have begun to map the
habitats, baseline biodiversity integrity
and water-related risks of our main
timber and cotton sourcing regions, two
areas where our raw material impacts
are likely to be greatest.
1. Source: https://bettercotton.org
ANNUAL REPORT AND ACCOUNTS 2022 43
DUNELM GROUP PLC
Sustainability
Circular economy continued
Working with Textiles 2030
WORKING COLLABORATIVELY TO REDUCE THE ENVIRONMENTAL
IMPACT OF TEXTILES
Dunelm is one of the pioneering home textiles signatories on WRAP’s Textiles
2030 voluntary agreement, an expert-led initiative designed to limit the
impact textiles have on climate change in line with the Paris Agreement.
Source: WRAP Textiles 2030
TEXTILES 2030 MEASURABLE TARGETS
As a Textiles 2030 signatory we have adopted a ‘Target, Measure, Act’
approach to work towards key science-based targets by 2030. We aim to
reduce the aggregate carbon footprint of new products sold by 50% and
reduce the aggregate water footprint of new products sold by 30%, against
a 2019 baseline.
ROADMAP AMBITIONS FOR
CIRCULAR TEXTILES
Essential to achieving these targets and moving
towards a more circular economy for textiles is
designing for circularity, implementing circular
business models and closing the loop on materials. The Textiles 2030
Roadmap sets out a series of key milestones between now and 2030 to help
businesses on the agreement adopt these principles. More information is
available on WRAP’s website: https://wrap.org.uk
FY22 performance
• 30.0% of ‘More Responsibly
Sourced Cotton’ in own
brand range.
• 6.9% of ‘More Responsibly
Sourced Timber’ in own
brand range.
• 90.1% of palm oil used in
Dunelm/Pausa products that
is sustainably sourced (RSPO).
FY23 focus
• Increase usage of ‘More
Responsibly Sourced
Cotton’/Better Cotton and
recycled polyester.
• Improve data to better
understand carbon reduction
drivers for non-textile products.
• Carry out baseline assessment
of habitats, biodiversity integrity
and water risk of our main cotton
and timber sourcing regions to
develop biodiversity strategy.
REDUCING THE ENVIRONMENTAL IMPACT OF OUR TEXTILES
Through our collaboration with Textiles 2030 we have undertaken joint data
analysis and scenario modelling and improved our understanding of actions we
can take to reduce our environmental impact related to textiles. These include
switching to organic or recycled fibres, encouraging the use of renewable energy
in our supply chains, reducing chemical and water usage and extending product
life. Our updated analysis shows that a carbon emissions reduction of around 24%
could be made just by using recycled rather than conventional polyester fibre. We
are aiming to switch to using only recycled polyester in our 2023 spring/summer
collection and to set targets to increase the use of recycled polyester across the
rest of our business.
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HOME DELIVERY PRE-PACKING PRODUCT ASSESSMENT
Weight
Size and
shape of
product
Fragility
and value
REDUCING PACKAGING
We have continued to work on various
packaging initiatives around the
business to reduce overall packaging
consumption – from transit packaging
to packaging used for consumer-facing
products; examples include trialling
pre-stretched film (see below).
In FY22, we developed a detailed
packing manual and training video
(in multiple languages) for people
working at the third-party ecommerce
facility where the majority of our online
orders are handled, guiding them on
how to use the optimal packaging size
and type, based on the product, our
business, our customer experience and
the environment.
Choice of packaging
considerations:
Packaging cost, packing
speed, transport costs/
volume optimisation,
product protection, ease of
customer handling, volume
of waste to be recycled
by customer and overall
customer experience.
FY22 performance
• 22.7% reduction in volume of
own brand plastic packaging
used /£1m sales against a FY22
target of 7.5%.
• 15.0% of recycled content used
in own brand plastic packaging
against FY22 target of 30%.
FY23 focus
• Ongoing packaging reduction
and improvement initiatives
across the business.
• Further refinement of systems
and data collection for UK
Plastic Tax reporting and
preparing for Extended
Producer Responsibility for
Packaging tax reporting
(legislation expected to be
in force 2023-4).
• Strengthening dedicated
packaging and technology team.
Plastics and packaging
We cannot eliminate all packaging
but are committed to reducing its
environmental impact by using less
packaging, better packaging and
aiming for a fully closed packaging loop.
UK PLASTIC PACKAGING TAX
This new tax came into force in April
2022 and applies to plastic packaging
manufactured in, or imported into, the
UK that does not contain at least 30%
recycled content.
In July 2021, we updated our second
Sustainable Packaging Manual,
and in last year’s Annual Report we
shared examples of initiatives already
underway to increase recycled content
in our packaging for Dunelm branded
products. We were unable to meet
our target for 30% of recycled content
in our own brand packaging in FY22,
primarily due to lack of availability of
suitable alternatives and provision of
evidence by our suppliers. We aim to
improve performance in FY23.
The requirement to submit information
to the UK Government quarterly, with
documented evidence of recycled
content, represents a significant
workstream for our team. In FY22,
we updated our systems to capture
data relating to the new tax and
engaged extensively with our suppliers
to educate and support them. In
December 2021, we issued a Supplier
Packaging Reporting Requirements
Manual, which aligns our packaging
standards with the new tax and helps
guide all our suppliers through the new
data that they must provide.
At year end, over 80% of all suppliers
had confirmed their adherence to the
new data requirements and we aim
to introduce spot checks in FY23 to
validate data accuracy.
We trialled using thinner,
pre-stretched film to wrap
pallets in one warehouse and
removed 109 tonnes of plastic
and over 285 tonnes of carbon.
We are now rolling this out to
other sites.
ANNUAL REPORT AND ACCOUNTS 2022 45
DUNELM GROUP PLC
Sustainability
Circular economy continued
Responsible sourcing
ETHICAL
We require our suppliers to provide
safe and legal working conditions for
the people who work for them, and we
do not permit any form of exploitation.
APPROACH
Controls to identify and eradicate
modern slavery and any other form of
exploitation such as excessive working
hours, child labour and poor safety
standards through our product supply
chain are maintained through the audit
activity against our Ethical Code of
Conduct for suppliers and partners
(available on our corporate website). All
Dunelm suppliers sign up to this code,
which aligns to international labour
standards and includes an enhanced
section on modern day slavery.
We regularly audit the manufacturing
and UK warehousing facilities of all
suppliers of our own brand products for
compliance with this code. All Dunelm
Tier 1 suppliers must provide a low- to
medium-risk graded ethical audit (less
than two years old) and a valid building
and fire safety certificate. All new
suppliers have to be graded low- or
medium-risk to be onboarded.
PERFORMANCE
In FY22, we reported an increase in
the percentage of low- to medium-risk
graded ethical audits to 73.9% against
a target of 90%. Although the number
of high-risk audits fell, we decided to
increase the frequency of auditing for
any site with consecutive high-risk audit
results; in addition to online follow-ups,
we now re-audit these sites within one
year (instead of within two years).
We are still experiencing some
challenges in keeping audits in date
in regions that remain affected by
pandemic-related travel restrictions. In
FY22, 97.9% of our audits were in date
(FY21: 89%) against a target of 100%.
SUPPLY CHAIN TIERS
Tier 4
Fibre
processing
Tier 3
Fabric and
cotton
suppliers
Tier 2
Tier 1
sub-
contractor
Tier 1
Final product
factory
Tier 0
Office, retail,
distribution
centres
Tier 2 mapping process
We have developed a Tier 2 mapping
process, building on work that we
started last year. In April 2022, we
trialled this process with one of our
largest UK Tier 1 suppliers who has over
30 suppliers (our Tier 2 level) in four
different countries. We have focused
initially on managing and assessing
data returned from this exercise. Our
next step will be to use this data to
create a practical risk management
framework to identify and grade risks
based on industry, region and scale,
including how much value of the final
product is made in our Tier 2 sites.
ETHICAL CODE OF CONDUCT:
SUMMARY OF TOPICS COVERED
Child labour
Employment is freely chosen
Hours of work
Wages and benefits
Freedom of association
Discrimination
No harsh or inhumane treatment is allowed
Regular employment is provided
Health and safety
Environmental requirements
Agency labour
Audits
Supplier compliance
Sub-contractors
Whistleblowing
EXPANDING OUR ETHICAL AUDIT
PROGRAMME
Our anti-slavery and ethical audit
programme covers all Tier 1 own
brand suppliers, all warehouses that
hold stock of own brand product
and selected Tier 2 sites. We use
an independent third-party expert,
Verisio, to assess, grade and monitor
the social and ethical performance
of the supply chain for both product
and third-party service providers.
In FY21, we developed a bespoke
remote auditing service with Verisio
to facilitate the closure of specified
non-conformance issues; see page
47. We will always endeavour to work
with a supplier in a responsible way to
resolve issues before we stop placing
orders. However, if action is not taken
to address non-compliance within
an acceptable period, we will not
compromise our supply chain integrity.
During the year, we appointed
a dedicated Ethical Manager to
support our Head of Product Quality
& Sustainability to further develop
our ethical audit programme and
raise supplier awareness through
engagement. We have also broadened
our anti-slavery ethical assessment
programme for higher-risk UK-
based non-stock suppliers, such as
logistics service providers, cleaners
and recruitment agencies, and we
have introduced a programme of
unannounced spot checks for high-risk
suppliers in addition to our regular
audits. Renewing a physical auditing
presence (post-Covid) and continuing
with spot checks are an important way
of combatting poor ethical practices
and guarding against modern slavery
risk, and we aim to increase this activity
where we can.
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ENGAGING OUR SUPPLIERS
We continued to raise awareness of
the importance of anti-slavery and
ethical practices and the key role
our suppliers play in adopting these.
In March 2022, we organised an online
seminar for around 250 suppliers that
focused on anti-slavery and ethical
standards and current and future
audit information requirements. Our
aim was to reinforce our transparent
approach, including information
about our supplier scorecard (see
below), to explain the rationale behind
more stringent reporting and to
demonstrate commitment to ongoing
supplier engagement.
Supplier whistleblowing
We have in place a whistleblowing
helpline which is anonymous and
run by an independent third party.
We actively encourage people in our
supplier factories to report any issues
they may have, reinforcing that it is in
everybody’s interest to do so. We are
currently introducing a new supplier
whistleblowing platform to replace the
existing one and aim to launch this in
October 2022. Our new system will be
set up in multiple languages, and allow
concerns to be emailed and collated
via an online portal. We are promoting
this new service on posters in all Tier 1
factories (around 800 sites).
This is an important part of our
diligence process. For example,
following a concern raised about one
of our suppliers via our whistleblowing
helpline, we immediately launched an
investigation and made unannounced
visits; no slavery practices were
uncovered but we found other issues.
Although we engaged with the supplier
these were not resolved and further spot
checks led to us delisting some of
their factories.
Supplier scorecards
The anti-slavery and ethical
performance of our suppliers has a
bearing on legal and brand damage
risk exposure, investor decisions and
customer and colleague expectations,
and we consider individual supplier
performance when making commercial
sourcing decisions. Our ‘live’ supplier
scorecards inform our decision-making
and help our suppliers to see how
they can improve their performance,
for example, by renewing audits or
addressing non-conformance within
approved time frames. By increasing
the transparency of how we calculate
our overall supplier scores, we aim to
encourage suppliers to improve their
anti-slavery and ethical performance.
MODERN DAY SLAVERY TRAINING
As legally required, we update
our Slavery and Human Trafficking
Statement each year, and this is signed
by our CEO and available on our
corporate website. Modern day slavery
e-learning modules are compulsory
on induction and completed annually
by all Dunelm colleagues involved in
recruitment and people management,
and by those who work in high-risk
areas such as warehouses. Training
module completion is tracked via our
new learning and development portal,
Thrive, and we refresh training content
regularly. In FY22, 80.2% of targeted
colleagues received annual training.
FY22 performance
• 97.9% of Tier 1 factory base
for own brand products with
audits not more than two years
old against a target of 100%.
• 73.9% of low- or medium-risk
audits against a target of 90%.
FY23 focus
• Continue to reduce high-risk
graded factories through
improvement plans or
re-sourcing.
• Ongoing supplier engagement,
Tier 2 supply chain mapping
and risk assessments.
• Increase presence in UK
factories and spot checks;
overseas where permissible.
• Expand anti-slavery and ethical
assessment approach for
non-stock suppliers.
• Implement and promote
new dedicated supplier
whistleblowing portal.
REMOTE AUDITING SERVICE
In FY21, we developed a bespoke remote auditing service that allows the
closure of authorised non-conformances against the Dunelm Corrective
Action Plan to be carried out remotely in place of an on-site follow-up
audit. The purpose of this service is not to lower standards, but to reduce
barriers to achieving them through a more cost-effective and efficient
service. The remote service can only be used on one occasion;
if a repeat non-conformance is raised in subsequent audit
reports, a follow-up on-site audit will be required.
Step 1:
Step 2:
Step 3:
Ensure that all relevant
information will be
available to the auditor.
Ensure adequate root
cause analysis has been
previously provided or
available to the auditor.
Ensure adequate
technology is available
to facilitate the remote
Dunelm audit.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
47
Sustainability
Circular economy continued
Take-back services
We aim to make it as easy as possible
for our customers to dispose of
unwanted homewares items and
are working on a growing range of
take-back solutions across our major
product ranges.
PROGRESS AND PERFORMANCE
In FY22, we set ourselves a target to
offer a take-back option for over 50% of
our own brand products by sales value
by FY24. This is also a current target for
the Directors’ LTIP and our Revolving
Credit Facility. At year-end FY22,
customer take-back solutions were
in place for 61.3% of our own brand
products and a summary of these can
be found in the table below.
TACKLING TEXTILES
Although we had take-back facilities
in place in FY21 for products such as
electricals, batteries, furniture and
mattresses, a major initiative in FY22
was to find a take-back solution for
textiles – our largest product category
by revenue and volume. In October
2021, we piloted a textile take-back
facility in 18 stores in partnership with
an expert provider and rolled this out
to 166 stores in December 2021. At
year-end FY22, this was available in 167
stores, representing 94% of our store
estate. At present, there are 10 stores
where this textile take-back service is
not offered owing to space constraints.
We have been overwhelmed by our
customer response. There has been no
significant drop in volumes since we
launched the textile take-back service,
averaging collections of around 10
tonnes a week. We have promoted this
service via our dunelm.com website
and Facebook store community pages
and we have developed more in-store
promotional materials, including
dedicated textile drop-off bins.
Our take-back partner is a signatory to
Textiles 2030 (as are we) and ensures
that no textile will end up in landfill.
Where possible, products are reused;
otherwise they are shredded and
repurposed or used for energy-from-
waste. We segregate feather-filled
quilts and pillows and send these to one
of our product suppliers who cleanses
them and plans to reuse the feathers
in new products once the volumes are
high enough to do so.
FY22 performance
• 61.3% of own brand products
for which we offer an easy-to-
use take-back service against
a target of 50%.
FY23 focus
• More efficient textile
segregation and labelling to
facilitate reuse and develop
further circular economy
initiatives.
• More streamlined internal and
external communications of our
take-back options.
• Ongoing evaluation of solutions
for remaining product ranges.
EXPANDING TAKE-BACK SERVICES
Category
Examples of take-back
Progress and focus
Electrical
items and
batteries
All like-for-like electrical
items purchased with
us (legal requirement as
part of WEEE electricals
recycling scheme).
Textiles
Clean bed linen, duvets,
pillows and bedding
protection, throws and
blankets, bath towels
and mats, cushions and
covers, fabric bathmats
and shower curtains,
tablecloths, runners and
place mats, aprons and
tea towels, and curtains.
Homewares Good quality, pre-loved
items.
Furniture,
beds and
mattresses
Good quality furniture,
beds and unsoiled
mattresses with fire
safety label.
Any condition.
In partnership with
‘Recycle Your Electricals’
scheme, which we
actively promote in
store, online and via
local Facebook store
community pages.
Textiles take-back
scheme in 167 stores;
ongoing refinement with
partner as we evaluate
operational, logistical
and segregation
improvements.
252 tonnes collected
in FY22
Encourage customers
to donate to our Group
charity partner, Mind.
British Heart Foundation
(BHF) collects free (by
appointment).
£119k raised for BHF
in FY22
Collected by Clearabee
with fee (discounted
with proof of Dunelm
order).
Bag and bring your clean and
undamaged home textiles here
and we’ll give them a second life
Visit Dunelm.com or ask in-store for details.
DUN4735/102712
48 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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Sustainability
Community
Engaging with the people who support our business.
Customers
CREATING JOY FOR OUR
CUSTOMERS
We want to help find ways to make
everyday homelife better for our
customers, and our plan to become
our customers’ 1st Choice for Home is
firmly linked to our purpose (see page
4). In FY22, the Board renewed our
customer proposition, demonstrating
its ongoing commitment to putting our
customers at the heart of our business.
We have renewed our focus on the
value that we offer across all price
points (‘choice & value’) in the light of
current cost of living pressures in the
UK, seeking to minimise price increases
where possible, as well as adding
a new element (‘good & circular’)
to reflect our ambition to provide
products that make a positive impact
on society and the environment.
CUSTOMER SAFETY
We are responsible for making it as safe
as possible to shop with us – whether
in-store, in our Pausa cafes or online.
In our health and safety section on
pages 59 to 60, we explain how we
provide bespoke training to store
colleagues; our approach to managing
food safety and examples of improved
nutritional and allergen information
to better inform customers who eat
and drink in our cafes; how we respect
our customers’ (and colleagues’) data
privacy; and how we have improved the
security of online payments made by
our customers.
PRODUCT SAFETY AND
RESPONSIBLE MARKETING
We also have a responsibility to market
and sell safe products. Our product
safety standards are set out in our
Quality Manual which is shared with our
suppliers. These reflect The General
Product Safety Regulations 2005, as set
by the UK Government, other specific
product-related legislation and our own
requirements, for example on the use
of sharp items in the manufacturing
process to ensure that these do not
end up in the finished product. If we
decide to recall a product from sale
as it does not meet our standards,
we communicate this clearly in-store
and on our commercial website
dunelm.com. We get in touch with
customers directly, where we have their
contact details, and always provide
a full refund. We have a policy on
the use of price promotion claims to
ensure that these are always made
fairly and legally and, during the year,
we have introduced specific guidelines
on sustainability claims, and rolled
out training to our commercial and
marketing teams.
CUSTOMER ENGAGEMENT
We are continuing to build our
capabilities in customer insight so that
we can better serve our customers and
give them more reasons to shop more
frequently with us. We use a variety of
methods to engage our customers –
from feedback on our local Facebook
group pages to regular surveys and
our work with social media influencers.
We are also committed to engaging
our customers by supporting purpose-
driven communities around every one
of our stores (see page 50).
MORE SUSTAINABLE CHOICES
Our Community working group has an
objective to engage with customers
(and colleagues) to raise awareness
of our sustainability commitments,
products and services (such as our
take-back services), and to share tips
and life hacks, for example, on how to
repair and upcycle products to help
customers live more sustainably. Our
‘Conscious Choice’ launch in August
2022 represented a step forward in
how we communicate the sustainability
credentials of our products.
MEASURING PERFORMANCE
Our key metric related to customers is
net promoter score (NPS) – a Group KPI
and executive bonus metric; see page
25. In FY22, our overall score decreased
by 4.2%pts (FY21: +4.2%pts) and was
heavily influenced by external factors,
including supply chain disruption,
labour shortages and ongoing
Covid-related issues at the beginning
of the year. We have made good
progress on a number of propositional
improvements during the year which
we expect will deliver an improved
score in FY23. Nick, our CEO, talks more
about our customer proposition and
developments in his CEO’s review on
pages 16 to 20.
Strengthening our customer proposition for savvy home lovers
We pride ourselves on making every pound count and being good housekeepers. We spend wisely where it matters
and minimise unnecessary waste. This means we can provide unbeatable value products at every price point,
supported by colleagues who care and technology that makes things seamless and efficient.
CHOICE & VALUE
Great value and quality
for every style, space
and budget.
GOOD & CIRCULAR
Positive choices for people
and the environment.
FRIENDLY & EXPERT
Service that is
knowledgeable,
non-judgemental and warm.
EASY & CONVENIENT
Easy to find, buy and fit
everything you need for
your home.
ANNUAL REPORT AND ACCOUNTS 2022 49
DUNELM GROUP PLC
Sustainability
Community continued
Store communities
MEANINGFUL CONNECTIONS
In FY20, our colleagues set up
Facebook groups in their store
communities to help organise local
fundraising initiatives, to support
vulnerable individuals and to
understand local customer and
colleague sentiment during Covid-19
lockdowns. We saw the potential to
develop this initiative and have since
focused our efforts on making more
meaningful connections to support
thriving, purpose-driven communities
around every one of our stores. At
year end FY22, we had over 1 million
Facebook followers (FY21: over 700k).
RESPONDING TO THE
WAR IN UKRAINE
Dunelm was proud to be part of the
UK retail community’s response in
supporting people affected by the
war in Ukraine. Colleagues across our
stores, support centres, warehouses
and supply chains engaged with
charities to understand what support
was most needed and how best to
help. Our store community groups
co-ordinated local drop-off points for
essential items such as duvets, pillows
and toiletries and most of these actions
were store-led, building organically.
Within just a couple of weeks after the
invasion, over 105 pallets of duvets,
pillows, blankets and other essential
items were delivered to the Polish
border, via our take-back logistics
partner, for onward distribution to
Ukrainian people in affected regions.
We identified that around 300 Dunelm
colleagues and their families have
been directly affected by the war in
Ukraine. We sent £20k to the Red Cross
on behalf of these colleagues as a
‘personal donation’. We also offered a
10% discount for UK residents taking
part in Homes for Ukraine to help them
prepare their homes for refugees.
BENEFITTING OUR
COMMUNITIES
In addition to fundraising as a Group for
Mind, Scottish Association for Mental
Health and Inspire, we encourage stores
to support local events and charities
that are meaningful and
relevant, benefitting
schools, hospitals,
hospices and
animal shelters,
among others.
PROMOTING INNOVATION
AND AUTONOMY
We encourage stores to make their own
decisions and ‘act like owners’. Strong
ideas can and do grow organically across
the Group, promoting innovation, as
seen during the store-led initiatives
for Ukraine. We also support local
entrepreneurs and businesses by
providing space for pop-up shops
and events on our premises.
IMPROVING COLLEAGUE
ENGAGEMENT
Our colleagues are proud to support their
local communities via their stores and feel
more engaged and committed.
REDUCING ENVIRONMENTAL
AND BIODIVERSITY IMPACTS
Many community initiatives support our
commitment to reducing our impacts
on the environment: encouraging
the donation of unwanted goods,
recycling decorations and litter
picking, to name a few.
PROMOTING AND SHARING
OUR INITIATIVES
Our community work is so important to
our stores, the Dunelm brand and our
customer proposition that we measure
and share activities at each store via our
community leaderboard (nothing like
a bit of competition).
#Doingtherightthing
Thriving, purpose-
driven communities
BRINGING COMMUNITIES
TOGETHER
We have opened up our Pausa cafes as
community hubs – bringing together
people through social groups and giving
people a collective purpose, for example,
through our ‘Knit & Stitch’ groups.
CONNECTING OUR
COLLEAGUES
Our colleagues feel more connected to
other Dunelm stores and sites by working
on joint campaigns, such
as our ‘Miles for Mind’
baton relay to
support Mind.
CREATING COMPETITIVE
ADVANTAGE
We truly believe that what we are doing
in our communities is different, valued
and recognised, giving people an extra
reason to work for us and shop with us.
50 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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FY22 performance
• Increase in charitable funds
raised of £52k to £632k
(FY21: £580k).
FY23 focus
• Further initiatives to support
Mind, SAMH and Inspire.
• Colleague volunteering drive to
support more causes across our
communities.
• More in-store events to engage
our store communities with
Dunelm products and services.
PAUSA COMMUNITY HUBS
Last year we reported on how we
had opened up our Pausa cafes to
local community groups such as Scout
groups and book clubs. We are pleased
to report that the role of Pausa evolved
further in FY22. In February 2022, we
launched our ‘Knit & Stitch’ groups
and these have been very popular
(thanks, Tom Daley). Signed-up knitters
and crocheters are given a free cup
of tea, 20% off wool and inspiration
to set to work on knitting squares to
make blankets or ‘twiddle muffs’ for
people with dementia in our partner
care homes and hospitals. Through our
newsletters and store Facebook pages
we have received positive feedback and
evidence that our groups have helped
bring people together.
‘DELIVERING JOY’
Based on the success of our last
two ‘Delivering Joy’ campaigns
we are already planning to run
our third one in December 2022,
aiming to beat the 19,000 gifts
collected and distributed during the
festive period in FY22. Gifts donated by
customers are sent to people in local
care homes, schools and hospitals. We
also supported animal shelters and, at
our Support Centre in Leicester, gifts
donated by colleagues were collected
for Age UK who sent them to local
elderly people living alone.
VOLUNTEERING
Every Dunelm colleague is encouraged
to take up their annual paid day-off
to volunteer or provide support for a
charity. This was difficult to implement
in and out of lockdowns and we have
yet to regain full momentum. We aim
to promote and better monitor this
important aspect of local community
engagement in the year ahead.
Group and colleagues fundraising
and Group cash charity contributions
£k
580
638
580
632
491
2018 2019 2020 2021 2022
SUPPORTING OUR GROUP
CHARITY PARTNER
We rotate our chosen Group charity
partner every two years and ask our
colleagues to shortlist candidates via
an online survey as part of the pitch
process. In July 2021, our colleagues
voted to support Mind (in England and
Wales), Scottish Association for Mental
Health (SAMH) in Scotland and Inspire
in Northern Ireland. We also continue
to support local charitable causes such
as LOROS and the Rainbows Hospice
for Children and Young People and, in
FY22, made ad hoc donations to Age
UK, Women’s Aid, Good Guys and
Loughborough University.
By year-end FY22 we had raised
£457k through a variety of Group-
wide fundraising activities. The most
successful event was ‘Miles for Mind’ – a
baton relay which was very popular with
our colleagues who set up route maps
for people to run, walk or bus between
Dunelm stores. From March 2022 we
increased our Pausa donations to Mind,
SAMH and Inspire from 5p per cup of
tea sold to 5p from any hot drink.
‘SHOP SMALL, SUPPORT LOCAL’
In summer 2021, we contacted local
business and offered space on our
store premises to set up stalls in return
for a donation to Mind. During the
year around 1,500 businesses took
part, selling goods such as hand-made
jewellery, paintings and wax melts.
In December 2021, we set up local
Christmas markets in our Pausa cafes.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
51
Sustainability
Community continued
Colleagues
Our colleagues expect us to
treat them fairly, to be rewarded
appropriately for the work they
do, to be given opportunities to
develop and learn, and to be heard
and connected to the business.
They expect to feel at home in a safe
and inclusive working environment.
In this section, we report on the areas
we have focused on most in FY22 as
part of our overall People Strategy.
INCLUSIVE AND DIVERSE
COMMITMENT TO EQUALITY,
DIVERSITY AND INCLUSION
We want Dunelm to be an
inclusive place for all. We aspire
to achieving a colleague base
reflective of society at all levels,
providing opportunity for all,
regardless of background,
ethnicity, gender, sexual
orientation, disability or age.
POLICY
Our equality and diversity
policy is available on our corporate
website, corporate.dunelm.com.
Our Board diversity policy can be
found on page 119.
INCREASED FOCUS ON DIVERSITY AND INCLUSION IN FY22
Building on foundations laid last year, we increased our focus on diversity and
inclusion in FY22, recognising its importance to our colleagues’ overall health
and wellbeing. In FY23, through ongoing training and education, we will focus
on making it clearer to our colleagues that they have the power to talk in a trusting
and supportive environment.
Progress to date
Future focus
Informed and educated colleagues and
leaders on a range of diversity and
inclusion topics.
Support colleagues to move from learning
and being educated to putting findings
into action.
Set up four networks (see page 53), each
sponsored by an Executive Board member,
and a Diversity and Inclusion Steering Group.
Engage more colleagues in networks,
including network group ‘allies’, to make
them more visible and impactful.
Trialled census and gathered ethnicity data
for around 77% of all colleagues.
Refine data collection method and use it to
inform decisions, priorities and engagement.
Trained recruitment teams in inclusive
practices, including trial of graduate ‘no-CV’
recruitment process.
Use new behavioural framework to remove
bias in internal/external talent hiring.
KNOWING OUR COLLEAGUES
Age split
%
Ethnicity data
%
50+
41-50
31-40
21-30
Under 21
25
13
18
28
16
White British
83
White – Other
Asian British
Black
Multi-ethnic
Other
4
6
2
2
3
Note: This data covers 100% of all colleagues.
Note: This data covers 77% of all colleagues.
Gender breakdown, year-end FY22 versus year-end FY21
Number
Percentage
Female
Male
Total
Female
Male
FY22
FY21
Change
FY22
FY21
Change
4
5
10
3
5
9
1
—
1
7
5
6
4
13
15
1
1
-2
11
10
23
FY22
36%
FY21
Change
33%
3%
FY22
64%
FY21
Change
67%
-3%
50%
56%
-6%
50%
44%
6%
43%
37%
6%
57%
63%
-6%
6,153
6,673
-520
2,237
2,301
-64
8,390
73%
74%
-1%
27%
26%
All colleagues
7,410
7,564
-154
3,614
3,520
94
11,024
67%
68%
-1%
33%
32%
1. Excluding Executive Board members.
52
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
1%
1%
Group
Board
Executive
Board
Dunelm
Leadership
team1
Store
colleagues
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COLLEAGUE NETWORKS
Our first four colleague networks
were set up in July 2021 and have
been steadily evolving. Each network
is sponsored by an Executive Board
member, with a departmental sponsor
from the Dunelm Leadership Team.
Co-chairs are voted in by other
members and each network normally
meets virtually to encourage colleague
attendance from across the business.
Visions, goals and other information,
including a calendar of events and
invitations to sign up, are updated on
our Home Comforts intranet.
Members of our People team meet
monthly with the co-chairs, working
with them to help run meetings that
induce challenging debate and to
encourage people to talk about their
lived experiences. Our network groups
are proving to be a valuable source of
information with suggestions resulting
in change, as summarised in the
table opposite.
DUNELM COLLEAGUE NETWORKS – INFLUENCE AND FOCUS IN FY22
DISABILITY &
NEURODIVERSITY
• Subtitles on videos and live transcripts
• ‘Quiet’ hours in stores
• Choice of printed materials (to avoid reading
from screens)
• Widening aisles so employees with wheelchairs
can carry stock
• Employing people on a one hour a week
contract to help build confidence
ETHNICITY & RACE
• Celebrated religious and cultural holidays such
as Ramadan and Holi to raise awareness of
different beliefs
• Launched multi-faith/wellbeing spaces in a
number of buildings
• Increasing diversity in recruitment through
training, in partnership with Unleashed
LGBTQ+
• Pronouns on email sign-offs and ID badges
• Rewriting parenthood and adoption policies
• Redesign of stationery
• LGBTQ+ History Month events
• Pride Month celebrations and parades
GENDER EQUALITY
• Pregnancy loss policy
• International Women’s Day Event and Women’s
History Month celebrations
• Working groups for parenthood and
menopause
• Men’s health week, raising awareness of men’s
mental health
> 900
Over 900 colleagues have
taken part in D&I training
– from the Group Board
through to line managers.
NEW UNIFORM
In FY22, our colleague network groups shared
their thoughts on how to improve colleague
uniforms which will be launched in FY23.
Ideas included: fewer buttons to make them
more disability-friendly; better quality fabric
that is more sustainable, and comfortable for
colleagues going through menopause; and
a choice of long and short sleeves that take
different religious practices into consideration.
Colleagues were then polled on uniform
choices via Home Comforts – over 3,500
colleagues voted and over 250 additional
comments were received.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
53
Sustainability
Community continued
Through the National
Colleague Voice, Nick,
myself, Group Board
members and our
National Colleague Voice
representatives, share and
discuss topics that matter
to our colleagues. We are
seeking to understand and
expand possibilities. These
conversations have genuinely
led to change in the business.”
Amanda Cox,
People & Stores Director
LISTEN AND LEARN
We continue to develop effective
two-way colleague communication
that is engaging and involving.
COLLEAGUE SURVEY
We undertake a twice-yearly colleague
survey from which we derive an eNPS
score, which is also considered in
determining bonus outcomes for our
Executive Directors. In FY22, our eNPS
increased by 1.0%pts versus FY21 (May
surveys) and we achieved our highest
eNPS score to date, with a participation
rate of 77%. This year, we also asked
a ‘yes/no’ version of the question
‘Would you recommend Dunelm as a
place to work?’ with 92% of participants
saying ‘yes’.
An action from a previous survey was to
support leaders in creating a culture of
continual feedback, helping colleagues
to feel included and to improve their
potential to perform. This was a focus
in FY22: our leadership team has been
given access to training and feedback
tools; ‘Nick’s Note’ (an email update
from our CEO) is sent every two weeks;
colleagues are encouraged to feed
back their views via our Home Comforts
intranet; and we continued to evolve
our Colleague Voice network.
COLLEAGUE REPRESENTATION
All colleagues are formally represented
through our Local, Regional and
National Colleague Voice structure
which is summarised in the box below.
This network has been operating in
its current format – with elections and
Board attendance – from 2019 and
we continue to evolve it to encourage
colleagues to feel more confident
in sharing views on behalf of their
colleagues at Group Board level.
More information is available in our
Governance Report on page 99,
including topics discussed at National
Colleague Voice meetings.
All colleagues, without distinction,
have the right to join or form trade
unions of their own choosing and to
bargain collectively (see Colleague
Code of Conduct). We have never
received a request to enter into such
an agreement.
HOME COMFORTS
We strive to create an open
environment in which all colleagues
are able to ask questions and share
their concerns and ideas. Through our
Home Comforts intranet, colleagues
can share how they feel and voice
what is on their mind. Questions are
considered and answered by senior
managers and information is used to
guide decision-making.
Local Colleague Voice (LCV)
Regional Colleague Voice (RCV)
National Colleague Voice (NCV)
Purpose
To represent opinions of
store and site colleagues.
Colleague
representatives
and meetings
Around 175 colleague
representatives from stores
and warehouses.
To represent collective
colleague views of each
region.
Typically, around 8 to
10 local representatives
who attend monthly RCV
meetings.
Engagement
with Dunelm
Leadership
Each representative works
closely with store coach or
site manager.
Meetings run by regional
store coaches.
To represent collective colleague views from across the
business and to share these at Group Board level.
17 colleagues (elected via our Home Comforts intranet
every two years) as follows: Stores (5), Customer
engagement centre (2), Manufacturing centre (2), Home
Delivery Network (1), Distribution centres (2),
Support centres (5).
Six NCV meetings held in FY22.
Direct contact with NEDs (Marion Sears, William Reeve)
and Executive Board members: Nick Wilkinson (CEO),
Amanda Cox (People & Stores Director); other members
of People team and invitees.
i More information about how we (including our Board) engage with our colleagues can be found on page 98.
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FAIR REWARD
How we think about pay in our business
Our colleagues expect us to pay and
incentivise them fairly. We apply
pay principles based on giving a
reward that is ‘fair, relevant and total’
throughout the organisation from
Board down, aiming for base pay to
be competitive and set at median;
see Remuneration Committee Report
from page 130.
PAY AND BENEFITS
All colleagues are paid at least National
Living Wage/Minimum Wage as set
by the UK Government. However, we
realise that colleagues paid closer
to these levels are being impacted
relatively more by the increasing cost
of living in 2022. In FY22, we took
the decision to invest in pay for those
colleagues whose ability to pay for
essential items is most affected. For
example, we moved the base pay of
our hourly-paid store colleagues to
the upper range of median, and in our
support centres we awarded a higher
percentage increase to colleagues at
the lowest grade; see page 103.
Benefits include pension, colleague
discount and a paid birthday day-off.
Via a third-party provider we offer
access to a range of discounts with
other retailers (including food retailers)
on holidays, travel and insurance,
helping colleagues to save money
on everyday items as well as treats;
see page 56.
All colleagues with minimum service
(usually one month) are eligible to
contribute to the annual Sharesave
scheme, which allows shares to be
bought after three years at a 20%
discount to the share price at the
start of the scheme.
Engaging on pay
We present pay gap metrics for all
colleagues to the Board and these are
used, together with feedback from
our gender pay analysis, to inform
decisions during pay reviews. Through
our National Colleague Voice (our
employee forum), colleagues discuss
fair reward and Board pay with Board
members annually and their viewpoints
are formally considered.
Fair reward
Ensure differences are
equitable and take levelled
approach to pay review.
Total reward
Communicate better the
benefits of ‘total’ reward
package, differentiating
beyond pay.
Relevant reward
Prioritise elements of
reward that matter most
to colleagues.
Gender pay equality
We are committed to ‘equal pay
for equal work’ as mandated by UK
legislation under the Equality Act 2010
which legally entitles men and women
to be paid at the same rate for like work,
work rated as equivalent, and work of
equal value.
Ethnicity pay gap
We do not currently analyse pay data by
ethnicity. However, this is something we
will consider as we continue to build a
more accurate profile of our colleague
diversity; see page 52.
Gender pay gap
We published our Gender Pay Gap
Report in April 2022 (based on April
2021 data), available on our corporate
website. As explained last year, our
reported data for 2020 was skewed
as the UK Government required us
to exclude employees on furlough
(for Dunelm, all store colleagues) and
employees on reduced pay (which,
for Dunelm, included several senior
colleagues). In our latest Gender Pay
Gap Report, as anticipated, we saw
an increase in our mean gap to 19.8%
(versus a reported gap of 4.9% and
a ‘normalised’ gap of 17.5% in April
2020). Our median gender pay gap
decreased from 5.1% on a ‘normalised’
basis (-6.4% reported) to 4.0%. The
existence of our gender pay gap, which
is a different measure to equal pay (see
below), reflects the fact that 58% of our
colleagues are women in hourly-paid
stores roles – a UK retail industry trend.
Our opportunity and focus is to achieve
gender balance across all levels of the
organisation.
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DOMESTIC ABUSE SUPPORT
In July 2021, we launched our initiative with
Retail Trust to combat domestic abuse. Since
then we have published a formal policy,
developed a guide for line managers and
trained over 450 colleagues in domestic abuse
awareness. Our policy assures that paid leave,
flexible working schedules and a support fund,
in the event of having to relocate, will be made
available to any affected colleague.
POLICY
corporate.dunelm.com
> 450
colleagues trained
> 60
Mental health and wellbeing
• Mental health first aiders trained to listen and
recommend specialist help.
• Health and wellbeing hub on colleague
intranet, which summarises all available help.
‘wellbeing buddies’
• Infoline with Mind, our Group charity partner
specialising in mental health.
• With Retail Trust, children’s mental health
counselling support for parents and guardians.
• Virtual GP service launched with Retail Trust
with 24/7 access to virtual consultations and
private prescription service.
• New pregnancy loss policy which includes
colleague support at work and paid time off.
This is a brilliant policy.
Unfortunately, I have been in
this position myself. Seemingly
small things like this make
a big difference when going
through pregnancy loss.
Good work Dunelm.”
> 90
colleagues benefitted
from our Colleague
Support Fund in FY22
Helping to improve
colleague mental,
physical and financial
health and
wellbeing
Financial wellness
Improving the financial wellness of
colleagues is high priority given the
ongoing pressure from the rising
cost of living.
Checking in with our colleagues
All of our hourly-paid colleagues have had a one-on-one
meeting with their manager so that any financial concerns
they have can be understood, and they can be directed to
sources of support if needed.
Discounts
We partner with a third party to provide access to
discounts with other retailers (including food retailers)
to help our colleagues save money.
Colleague Support Fund
Initially introduced during the pandemic, we have retained
this fund, and widened access to it, to support colleagues
with unexpected life events and hardship. Over 90
colleagues benefitted from the fund in FY22.
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Salary Finance
A third-party service providing an interest-free salary
advance to colleagues.
Employee Assistance Programme
Run by Retail Trust, this programme offers services,
including a free ‘virtual GP’ service, legal advice,
counselling and financial grants.
Financial education and tips
Through Retail Trust we also provide colleagues with
tools to help them budget, remortgage, manage debt
and give tips on where best to shop.
HOME OF TALENT
In September 2020, we launched a new
process, with the oversight of the Group
Board and Nominations Committee,
and the Talent Committee comprising
members of the Executive Board to
improve our talent management.
Alongside this, in FY22 our People
team undertook a Group-wide
project to ‘bring our shared values to
life’, to introduce and embed a new
behavioural framework and to develop
our leaders.
PROMOTING FROM WITHIN
We aim to fill all management roles
from within where possible. At the
end of FY22, 75% of positions in the
Dunelm Leadership Team and Heads
of Department and over 90% of store
leadership vacancies had been filled
internally. In recent years, we have
brought in external expertise in
new and specialised areas, such as
analytics, data/digital engineering
and sustainability.
We use our Enterprise Leadership
Development and Senior Manager
Development Programmes to
accelerate talent and succession plans
further down the business to support
our high-growth ambitions. Our new
‘Know–Grow–Flow’ campaign seeks to
untap hidden or unknown talent in the
business and promote internal moves.
To achieve this, we have set up new
‘career conversations’ which focus solely
on the motivations, aspirations and
capabilities of individual colleagues.
These are decoupled from ‘progress
conversations’ which are held more
frequently and focus on business and
personal objectives. By the end of FY23
we aim for everybody in the business to
have had a ‘career conversation’ which
will improve our internal knowledge.
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RETAINING OUR COLLEAGUES
In FY22, our overall unplanned labour
turnover increased. This was against
a backdrop of well documented
instability in the labour market, for
example, shortages of HGV drivers,
the increasing competition for talent
in general, increasing pressures on
financial, health and mental wellness
from the cost of living increase and the
impact of Brexit. We aim to improve
colleague retention by focusing on
colleague engagement and wellness,
our hybrid working proposition
for support colleagues and by
strengthening our talent pipeline.
Talent management: Know–Grow–Flow
Our behavioural framework project goes hand in hand with our focus
on talent management – Know–Grow–Flow.
For our colleagues, we aim to build self-awareness, give them opportunities
to learn and open their eyes to new roles in the business. For Dunelm, we
gain a better understanding of where talent is, or could be moved to, within
the business to support our long-term growth aspirations.
KNOW is
how well we know our colleagues’ aspirations
and where talent and skills are in our business,
helping us fulfil our succession and capability
needs. It is also how we help our colleagues
build their self-awareness.
GROW is
how we support our colleagues to grow
professionally and personally:
• Learning by doing
• Learning through relationships
• Formal learning
FLOW is
how readily we are able to move talent and
share skills across our business. Planning the
flow of talent across the organisation and
opening our doors to new talent, so that we
have the diversity and capability we need
for sustainable success.
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COLLEAGUE TRAINING
We know from our surveys that
colleagues are more engaged
when they feel personally connected
to the Dunelm business, and with
access to learning and development
opportunities. We continue to
undertake a mixture of training:
• Skills training to provide personal
development opportunities that meet
our long-term business needs.
• Compliance training to improve
our colleagues’ understanding
of responsibilities and expected
behaviours.
During the year we successfully
launched our colleague engagement
platform ‘Thrive’. Its main purpose is a
self-led training ground to encourage
a culture of learning. Our dedicated
learning and development team is
responsible for creating content and
campaigns and we have experienced
a high level of interaction through
‘likes’ and ‘shares’, which encourages
increased uptake of training. Since
August 2021, we have recorded over
10,000 ‘active’ colleagues out of a
total of just over 11,000 registered
on the Thrive platform, and have had
over 950k views and received over
10,300 comments. The most popular
programme on Thrive in FY22 was our
Know–Grow–Flow learning campaign,
which engaged nearly 6,900 colleagues.
MONITORING SUCCESS
We do not specifically measure our
return on investment in training.
Instead, we track three metrics internally
as an indication of success: colleague
engagement, colleague retention and
the percentage of home-grown talent
(percentage of internal promotions).
‘EARLY CAREERS’ PROGRAMMES
Our ‘early careers’ programmes
(including graduates, internships,
apprenticeships and placements)
focus on developing capabilities and
career opportunities important to our
long-term business growth.
Graduates
Our graduate programme has been
running since 2016. In FY22, we had 16
graduates in seven different schemes,
including commercial, technology and
finance, and a new scheme in data
and analytics. Historically our separate
‘fast track’ retail management scheme
targeted internal colleagues. In FY22,
we successfully opened this up to
external candidates and we aim to
merge our retail and non-retail schemes
to create a more cohesive cohort.
We have been working with an
external Equity, Diversity and Inclusion
consultancy to make our recruitment
process as inclusive as possible, From
January 2022, we have been trialling
a ‘no-CV’ interview process with our
Early Careers team that allows hiring
managers to focus more on behavioural
and culturally-based questions aligned
to our shared values. We have applied
‘lessons learned’ from the trial and are
rolling out the new recruitment process
to two other departments.
For our FY23 intake, we recruited our
most diverse group of graduates to date
and our highest number – 24. We also
launched a new sustainability graduate
scheme and drew a record number of
applicants. Our graduates benefit from
a structured programme with tailored
activities and formal rotations. They are
given opportunities to engage with our
Executive Board and Group Board, and
the whole programme is sponsored by
our Commercial Director.
Code First Girls
In FY22, we partnered
with Code First Girls,
whose mission is to
reduce the gender
diversity gap in tech
globally. Following the
successful completion
of a 13-week training
course provided by Code First Girls,
in June 2022 we welcomed 10 females
into our data engineering department.
This initiative is helping to break
misconceptions and increases the
supply of more balanced talent with an
increasingly important and in-demand
skillset.
Apprentices
We continue to run an apprenticeship
scheme and supported 117 colleagues
in FY22. This scheme is funded by the
UK Government and, in FY22, we used
around £300k of our ringfenced levy to
fund our scheme. We have identified
an opportunity to better promote the
strategic value of our apprenticeship
programmes across our business by
encouraging our business leaders
to engage more in apprenticeship
recruitment and training programmes.
Interns and placements
Internship opportunities at Dunelm
have been restructured into a formal,
paid, three-month summer placement
programme, open to undergraduates
and graduates. We currently have five
interns and aim to draw more talent into
the business, building on our first full-
time appointment made through this
relatively new programme. We currently
have eight people on placement.
INITIATIVES
Graduate
programmes
(new intake)
Retail programme
Support programmes (non-retail) including new
programmes in Sustainability, Performance Marketing
and Buying & Merchandising
Talent pipeline
(Targeted entry level
role recruitment)
Matching graduate applicants not appointed onto scheme
with entry level role opportunities, e.g. Sustainability,
Performance Marketing, Business Finance
Placements
Including new placements in Software Engineering,
Finance and Insight & Analytics
Internships
Finance, Design, and Quality and Sourcing teams
Social enterprise
Programmes
Code First Girls – recruiting more women into Tech by
providing coding courses to women and non-binary
people
No. of
colleagues
11
13
9
8
5
10
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Health and safety
We want to ensure the safety and
wellbeing of our customers, colleagues
and visitors. This is a Group-wide focus,
championed by our Board, and backed
by stringent policies and procedures.
POLICIES AND PROCEDURES
Our Group Board is responsible for the
creation and implementation of our
health and safety (H&S) procedures
and policy, which are available on our
corporate website. H&S is a standard
agenda item at every Board and
monthly Executive Board meeting,
supported by a monthly H&S audit
report and a formal annual presentation
from the Group’s Head of Health and
Safety, Risk and Insurance. We also hold
meetings for retail safety (quarterly),
logistics safety (twice a year) and Pausa
safety (six times a year), attended by the
Company Secretary.
MONITORING AND TRAINING
Our approach to H&S is supportive
rather than punitive; we do not, for
example, make unannounced H&S
spot checks. Instead, we train and
help colleagues across our business to
engage with our H&S processes and
team to improve overall performance.
We use a mix of regular self-audits,
additional regional store audits and
full annual H&S audits, including for
stores, warehouses/logistics centres,
our Home Delivery Network (HDN)
sites, manufacturing centres and
offices. We use a tablet-based solution,
i-Auditor, for store self-audits to
increase efficiency, enabling our H&S
team to track data and trends remotely
and to prioritise work and guidance for
individual stores and sites.
In FY22, we made a significant
investment in pallet racking to mitigate
identified risks in our warehouses, and
all HDN vehicles are now fitted with
rear-door sensors that activate an alarm
if doors are not closed properly. All
HDN vehicles and made-to-measure
fitter vans also now carry dashcams and
we monitor driving incidents and driver
behaviour, using insights to inform
training and improvement actions.
All new joiners undertake an H&S
awareness training course on induction,
and colleagues can access H&S training
updates via our online learning and
development platform. Additional
training is flexed by business function
and risk assessments. For example, in
FY22, we delivered a bespoke half-day
training course to store coaches and
key holders, reviewed and repeated
our age-restricted sales training in
response to a change in legislation, and
focused on manual handling and drug
and alcohol advice for our warehouse
colleagues. We received a bursary
of over £10k from our insurers and
used this to support in-house training,
including Institution of Occupational
Safety and Health courses for senior
management and National Examination
Board in Occupation Safety and
Health and fire safety qualifications
for other colleagues.
PERSONAL SECURITY
An ongoing priority is to support
the personal security of our store
colleagues to address the regrettable
increase in aggressive verbal, and
sometimes violent, public behaviour.
We have installed a radio assistance
system for colleagues and issued body-
worn cameras. In FY22, we provided
additional cameras for high-risk stores.
SUPPLIER H&S
H&S management responsibilities and
requirements in our supply chain are
set out in our Ethical Code of Conduct
for suppliers and partners (available on
our corporate website). Compliance
with this policy is monitored through
our ethical auditing programme and
ongoing due diligence (see page 46).
MENTAL HEALTH AND WELLBEING
We continue to place high importance
on the mental and financial wellbeing of
our colleagues (see on page 56).
FOOD SAFETY AND LABELLING
In our Pausa cafe and restaurants,
our policy is to provide safe food and
drink in a hygienic environment. Our
Food Safety Manual sets out our food
safety and hygiene requirements, and
our brand standards policy sets out
provenance and quality standards.
In recent years, we have improved
on-pack allergen and nutritional
information for our customers and to
meet the legislation which came into
force in 2021. Customers can access
this information through web-based
software displayed on in-store Pausa
tablets and on our commercial website.
Food safety involves safe practice
from start to finish in the food chain.
We have a cross-functional food safety
group run by the Head of Pausa and
attended by members of operations,
legal, H&S teams, and an expert third-
party food technologist. This group
oversees safety, compliance and the
implementation of new legislation. In
FY22, there were no reportable food
safety incidents or public recalls.
ONLINE SAFETY AND SECURITY
We continue to increase colleague
awareness of data security and
privacy. Colleagues are trained on
induction and have annual refreshers.
More detailed training is given to the
Dunelm Leadership Team and relevant
functional teams. Cyber and data
security is a standing Audit and Risk
Committee agenda item (see page
122). In the event of any significant
data breach, we would comply with
our obligations to notify impacted
individuals in a timely manner. In
FY22, we had no breaches which
we were required to notify to the
UK Information Commissioner’s Office
or to any individual.
The security of payments made by
customers online is a priority and we
have implemented a third-party anti-
fraud solution, 3D secure. We do not
hold customer credit card data. Our
privacy policy (available on dunelm.
com) explains to customers why
and how we use their data, how we
protect it and their rights, including
how to opt out of receiving marketing
communication. We have a similar
policy for our colleagues. Third parties
engaged to handle customer data are
assessed for good practices and care
of customer data. More information
on how we manage risks relating to
IT systems, data and cyber security is
on page 78.
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STEWARDSHIP
Our Head of Health and Safety, Risk and
Insurance is a member of the Health &
Safety Forum – a group of over 40 UK
retailers, whose aim is to reduce the risk
of harm to colleagues and customers in
the retail environment. He also sits on
the British Retail Consortium’s advisory
group to help shape government policy
in reducing verbal and physical abuse
towards retail workers.
FY22 performance
• In FY22, our reportable
accidents under RIDDOR1
reduced to 18 (FY21: 27).
FY23 focus
• Safety across fleets and
HDN operations, including
observing and improving
on-road driver behaviour.
• Implementing improved
safety standards at our new
Sunflex business.
• Ongoing focus on colleague
safety in stores and online,
including personal safety.
Number of reportable accidents
under RIDDOR¹
27
33
31
27
18
2018
2019
2020
2021
2022
1. Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations 2013 (RIDDOR).
Doing the right thing
Consistent with our shared values and
governance approach, we commit to
acting legally, fairly and honestly in our
business dealings and relationships.
COLLEAGUE CODE OF CONDUCT
We require our Board and all colleagues
to comply with our Colleague Code
of Conduct, based on internationally
recognised labour codes. Its principles
are embedded in our colleague terms
and conditions, policies and practices.
Our policies complement minimum
legal requirements to which we are
subject (e.g. written contracts of
employment, minimum pay rates, child
labour, equal pay, working hours, health
and safety, minimum paid holiday and
parental leave, anti-discrimination
and harassment, fair disciplinary
procedures, unfair dismissal and
redundancy). Except for one store in
Jersey, all our operations are in the UK.
Our full Colleague Code of Conduct
covers other human rights and labour
standards and is on our corporate
website.
WHISTLEBLOWING PROGRAMME
We encourage our colleagues to raise
concerns so these can be addressed
and every colleague should feel able
to speak to their line manager in the
first instance. We operate a policy of
non-retaliation and colleagues will
not be penalised, prejudiced nor
incur reprisals for raising concerns in
good faith. If a colleague or worker
wishes to report issues anonymously, a
reporting line is available online or by
telephone 24/7. This service is provided
by an independent third party and no
contact details are mandated. After
investigating the 44 reports received
during the year, no unlawful activity
was established.
ANTI-CORRUPTION, ANTI-BRIBERY
AND TAX EVASION
We have a zero-tolerance approach
to bribery, corruption, fraud and tax
evasion. Our policies apply across
all our operations and require our
suppliers to commit to apply the same
or equivalent policies. Business risks
associated with non-compliance,
together our detailed procedures
to comply with the Bribery Act 2011,
are set out in our anti-corruption and
anti-bribery policy, available on our
corporate website. Review of controls
is a standing Audit and Risk Committee
agenda item and we measure the level
of internal training every year.
In FY22, 82.3% (FY21: 77%) of eligible
colleagues (c.1,000 people) completed
initial or refresher training. Online
training is mandatory for colleagues
in our support and manufacturing
sites and customer contact centres.
Additionally, new starters in the Dunelm
Leadership Team, commercial and
procurement teams and selected
individuals in the finance team and
other departments who award
contracts receive personal training.
TAX STRATEGY
We are committed to comply with all
statutory obligations and disclosures
to tax authorities. We neither operate
in ‘tax havens’ nor use tax avoidance
schemes. In FY22, our total tax
contributions were £246.0m
(FY21: £157.8m). Further information
is in our Group Tax Strategy on our
corporate website and in the CFO’s
review on page 30.
SUPPLIER PAYMENTS
We aim to deal with our suppliers in an
open and honest way. We require all
suppliers to sign our standard terms
and conditions before commencing
trade, or otherwise enter into a bespoke
agreement. Our twice-yearly payment
information is summarised below. The
average time taken to pay suppliers in
FY22 was 45 days (FY21: 45 days), and
we consistently paid 99% of our invoices
within agreed terms (FY21: 99%).
Supplier payment statistics
Invoices paid within agreed terms
%
97%
98%
99%
99%
45
46
45
45
2019
2020
2021
2022
Average time taken to pay invoices (days)
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Task Force on Climate-related Financial Disclosures (TCFD)
In this section we make our disclosures under the Recommendations and
Recommended Disclosures of the Task Force on Climate-related Financial Disclosures
(TCFD), building on the voluntary progress report shared in last year’s Annual Report.
COMPLIANCE STATEMENT
In accordance with Listing Rule 9.8.6 R, we present our
FY22 TCFD consistency index and confirm that we have,
in this report, made climate-related financial disclosures
for the year ending 2 July 2022 which are consistent
with the TCFD Recommendations and Recommended
Disclosures, apart from the disclosure under the Metrics
and targets recommendation (b).
The reason for this inconsistency is that some of the
Scope 3 data disclosed is derived from a screening
exercise conducted by Carbon Trust in 2019 and has not
been updated. While this exercise followed the GHG
protocol guidance, it is three years old. We intend to review
our Scope 3 model and update our data this year, so that
we anticipate being able to disclose in a manner consistent
with the relevant TCFD recommendations in FY23.
In assessing compliance with Listing Rule 9.8.6 R, we
took into consideration the documents referred to in the
guidance notes to this Listing Rule, as well as considering, on
a voluntary basis, the updated guidance on Implementing
the Recommendations of the Task Force on Climate-related
Financial Disclosures published in October 2021.
In the table opposite, we include cross-references to
disclosures made elsewhere within this report and on
our corporate website where the information was too
lengthy to include in the report. The Board considers
that our climate-related reporting is fair, balanced, and
understandable.
TCFD CONSISTENCY INDEX
TCFD
elements
TCFD recommended
disclosures
Governance
(a) Board oversight
Strategy
(b) Management’s role
(a) Climate-related risks
and opportunities
(b) Impact on the
organisation’s
business, strategy and
financial planning
(c) Resilience of the
organisation’s strategy
Risk
management
(a) Risk identification and
assessment processes
(b) Risk management
process
Cross-reference
(page numbers)
62
62
65
36-40, 64, 66 and 94-106
64, 66
64
66
Metrics and
targets
(c) Integration into overall
66, 68-70 and 76
risk management
(a) Climate-related
metrics in line with
strategy and risk
management process
(b) Scope 1, 2 and 3 GHG
metrics and related
risks
(c) Climate-related targets
and performance
against targets
37, 67 and our
methodology on the
corporate website https://
corporate.dunelm.com/about-
us/policies-and-statements/
37, 67 and our
methodology on the
corporate website https://
corporate.dunelm.com/about-
us/policies-and-statements/
67
Summary overview of
progress in FY22
Agreed areas of
focus in FY23
• Climate change and sustainability topics discussed
regularly by the Board, including at its Strategy Day
in May 2022.
• First full year of operation of our Pathway to
Zero – Strategy and Governance.
• Refined our assessment of climate-related risks
and opportunities to include a methodology
for assessing and quantifying potential financial
impacts against three climate scenarios.
• Continue to refine our high-level risks and
opportunities assessment to include more robust
data, particularly on Scope 3 emissions, and use it to
develop our Pathway to Zero strategy.
• Build out our detailed Scope 3 emissions reduction
roadmap.
• Measure the impact of our risk mitigating actions
to test our assumptions about the resilience of our
business model.
• Two in-depth reviews of climate change risk by the
• Continue to integrate climate change considerations
Risk and Resilience Committee.
into our ‘business as usual’ activities.
• Developed a detailed ten-year roadmap for our
• Consider the feasibility of adopting an internal carbon
Scope 1 emissions reductions, including a logistics
decarbonisation strategy.
• Gained a better understanding of the emissions
generated by our textiles supply chain (c.50%
of products) and the key drivers of emissions
reduction.
• Increased expert resource dedicated to delivering
emissions reduction and other environmental
benefits.
price or budget.
• Increase stakeholder engagement, improve internal
and external communications.
• Continue to invest in resource and expertise to
support our Pathway to Zero strategy.
• Continue to engage more with our peers and
stakeholders to improve our understanding, share
ideas and progress, and advocate for change.
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ANNUAL REPORT AND ACCOUNTS 2022
61
Task Force on Climate-related Financial Disclosures (TCFD)
Governance
BOARD OVERSIGHT OF
CLIMATE-RELATED RISKS
AND OPPORTUNITIES
The Board takes responsibility for
our Pathway to Zero climate change
strategy. It considers our approach,
strategy, risk management and
performance in the following ways:
There are at least two Board
presentations per annum on Pathway
to Zero, as well as regular Board
agenda items on related topics – see
the table on page 106. In the past
three years, climate change and wider
sustainability topics have featured at
the annual strategy sessions. The Board
also reviews our climate-related risks
and opportunities through our risk
management framework (see page 69)
TCFD governance (see page 63) and as
described below on page 66.
An assessment of the environmental
impact of major strategic investments
(alongside other stakeholder
considerations) forms part of the
Board and management approval
process – see the case study on
page 104 as an example.
In addition, the Board receives a
monthly update from the Company
Secretary and, from FY23, will receive
quarterly updates on progress against
our climate-related KPIs. Our Board and
the Audit and Risk Committee formally
review our principal risks, one of which
is climate change and environment
risk – this is mandated to take place
twice a year. In FY22, the Audit and Risk
Committee also received a presentation
describing the outcome of the
quantified risk assessment conducted
by management with support from
external TCFD consultants, together
with a proposed approach to TCFD
disclosure.
Through these presentations, a number
of which have been given by external
experts, we have educated the Board
on the implications of climate change
for society and our business, and on
the regulatory and societal demands
on us. They have also guided us in
setting our wider sustainability strategy
and our long-term carbon emissions
reduction targets, and in monitoring
progress. In FY23, we will be refining
the initial financial quantification of our
risks and opportunities and our Scope
3 emissions tracking, and reviewing
our Scope 3 roadmap and supporting
activities, to improve how we monitor
progress against strategy and targets.
MANAGEMENT’S ROLE
The CEO, Nick Wilkinson, heads up
the climate-related activities of the
Group, and chairs the Pathway to Zero
Steering Group, which meets six times
a year. Its members include the three
Executive Board members who are
responsible for delivering the three
pillars of our strategy (see page 33), the
Company Secretary and the Head of
Climate Change. This steering group
oversees development and execution
of our strategy, with steering groups
and other cross functional meetings in
place with respect to each of the three
pillars. The Executive Board is updated
each month on climate-related activities
and from FY23 will receive quarterly
updates on our climate-related KPIs, but
as our climate-related activities become
embedded throughout the business in
practice all Executive Board members
will be required to execute a part of
our strategy. The Executive Board
also participates in the Group Board
Strategy presentations (see below
under Strategy).
The principal risks, one of which is
climate change and environment risk,
are reviewed by the Executive Board
prior to the Group Board review, and
by the Risk and Resilience Committee.
There were two in-depth reviews of
climate-related topics by the Risk and
Resilience Committee in the year.
Climate change considerations are
increasingly integrated into day-to-day
business activities: energy efficiency/
carbon impact is already included in all
new store and store refit proposals; our
product design is focused on increasing
the use of less carbon intensive
materials such as recycled cotton and
polyester and reducing packaging/
using more sustainable packaging;
our mandatory product supplier
questionnaire includes climate-related
matters (see Circular economy section
from page 42, including Responsible
sourcing (environmental) on page 43
and Plastics and packaging on page
45). We are also planning to introduce
low-carbon fuels into our HGV fleet.
We have increased the number of
dedicated climate-related roles in the
business, including a Head of Climate
Change and two environmental
sourcing specialists, as well as including
climate change-related accountabilities
as part of the roles of numerous other
colleagues. Senior management
and internal experts participate in
climate-related educational events
conducted by professional services
firms and provided by the British
Retail Consortium and the Aldersgate
Group, as well as sharing experience
with peers in these groups and as part
of our participation in Textiles 2030.
Internal experts have also provided
training to the wider commercial teams
and to our suppliers.
MOVING FORWARD
Our governance arrangements have
developed significantly over the past
year and are working effectively, and
we will continue to develop and evolve
these as we build our knowledge
and approach. As climate-related
considerations become more central
to our business, we expect them to
become ‘business as usual’ in our
strategy and financial planning.
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TCFD Governance
OUR BOARD
Responsible for Pathway to Zero climate change strategy. Regularly
considers approach, strategy, risk management and performance. Receives
monthly update from Company Secretary.
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REMUNERATION COMMITTEE
Reviews and approves Executive
Director and Executive Board
remuneration, including
climate-related targets in
performance pay.
AUDIT AND RISK COMMITTEE
Formally reviews principal
risks (including climate change
and environment risk) twice
a year, TCFD and climate
reporting; and process to verify
climate-related KPIs.
NOMINATIONS COMMITTEE
Sets specifications for new Board
roles and has oversight of Talent
Committee to ensure necessary
talent and skills are available to
deliver the strategy.
CHIEF EXECUTIVE OFFICER (CEO)
Heads up climate-related activities of the Group and chairs Pathway to Zero Steering Group which meets six times a year.
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Committee
Oversight and review of
risks, including climate
change and environment
risk. Chaired by CFO.
Pathway to Zero
Steering Group
Chaired by CEO and
three other members
of Executive Board,
Company Secretary and
Head of Climate Change.
Talent Committee
Ensures that we have the
correct capability in place;
increased the number of
climate change specialists
in year.
Executive Board
Five members (including
CEO, CFO and
Company Secretary)
on the Pathway to Zero
Steering Group. Three
of these members have
specific accountability
for delivering one of the
three climate change
pillars. Company
Secretary updates
monthly.
ANNUAL REPORT AND ACCOUNTS 2022 63
DUNELM GROUP PLC
Task Force on Climate-related Financial Disclosures (TCFD)
Strategy
Our purpose – To help create the joy
of truly feeling at home, now and for
generations to come – is deliberately
forward-looking, and designed to
encapsulate our objective to make a
positive impact on our communities
and the environment both now and in
the future. Sustainability is one of our
six strategic focus areas, and at our
Strategy Day in May 2022 we decided
to incorporate ‘good & circular’ into our
target customer proposition, alongside
‘choice & value’, ‘friendly & expert’ and
‘easy & convenient’.
Dunelm engaged external TCFD
consultants to support the identification
of potential physical and transition risks
and opportunities and to determine
their financial materiality.
The time horizons we used for the
purposes of our assessment were
as follows:
• Short term: from 2022 to 2030.
• Medium term: from 2030 to 2040.
• Long term: from 2040 to 2050.
We chose these because the short
term includes the period covered by
our current greenhouse gas emissions
targets and our current five-year plan;
while the medium-term and long-
term horizons provide a longer-term
planning perspective relevant for our
current commitments. Beyond 2050
there are significant uncertainties, both
physical and transition. These three
scenarios were considered to capture
the range of uncertainties, including
scenarios in which physical and
transition risks dominate, to ensure
our plan is sufficiently resilient.
Collectively, we reviewed our existing
list of risks and opportunities and
identified additional risks and
opportunities based on a systematic
review, peer comparison and sector
review exercise. Each risk and
opportunity was then scored on the
basis of its potential impact, likelihood
and velocity to determine its relative
materiality, integrating stakeholder
insights and secondary data. The
top ranked risks and opportunities
were then subject to detailed
scenario analysis and financial
impact quantification.
WE ASSESSED OUR MAJOR CLIMATE-RELATED RISKS AND
OPPORTUNITIES AGAINST THREE CLIMATE SCENARIOS:
Net Zero 2050
Delayed transition
Business as Usual
Limits warming to 1.5oC
by 2100, stringent and
immediately introduced
climate policies and
emissions reductions
achieve net zero emissions
by 2050, broadly aligned
to RCP1.9 and RCP2.6.
Action taken to limit
emissions growth, but
Paris targets missed
resulting in greater than
2oC warming by 2050,
aligned to RCP4.5.
World takes no/limited
action, equivalent to a
3.5-4.5oC warming,
aligned to RCP8.5.
These risks and opportunities were then
quantified, using a number of internal
and external data sources, including
the IEA World Energy Model Net Zero
Strategy 2050, the IEA World Energy
Model Sustainable Development
Scenario, and various NGFS models,
and applying a number of assumptions.
The quantification focused on inherent
risks and did not take into account
any mitigating actions that we are
already taking.
The risk assessment found that,
generally, the overall risk and potential
financial impact of climate change on
Dunelm increases with time. The short
term is characterised by transition risks,
particularly under a ‘Net Zero 2050’
scenario, with physical risks dominating
beyond the 2040s. Based on this
assessment, we believe that there is
no immediate material financial risk or
threat to our business model. Further,
the areas of highest potential impact
are those which we are already taking
action to address through our Pathway
to Zero strategy.
THE RESILIENCE OF OUR
STRATEGY
We believe that our Pathway to Zero
strategy will provide resilience to our
significant climate change risks.
Under the ‘Net Zero 2050‘ scenario
(equivalent to 1.5°C warming), by
2030 we will have reduced our carbon
emissions by 50% in absolute terms
against a FY19 baseline and will be
able to offer our customers a range of
more sustainable products and services
as we progress our circular sourcing
model. This means that we will be
prepared for increased legislation and
taxation, as well as reducing the risk/
benefiting from the opportunity to gain
market share and meet the expectations
of our stakeholders.
Under a ‘Business as Usual’ scenario
(equivalent to 3.5-4.5°C warming),
the most significant risk is from the
increased cost or lack of availability
of raw materials, particularly cotton
and timber. We are working with our
suppliers and peers to understand the
risks and dependencies and to explore
mitigation and adaptation measures.
As we move away from the use of virgin
raw materials and towards recycled
materials and a more circular business
model our dependency on virgin raw
materials will reduce.
64 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
Key
Net Zero 2050
Delayed transition
Business as Usual
A summary of the material risks identified in our risk assessment is set out below, together with a summary of our strategic
response. Further details of our targets and activities are set out under Carbon reduction in our sustainability section on
pages 36 to 41.
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MATERIAL RISK
Impact of carbon
taxes on Dunelm
or suppliers
TCFD category
Transition risk
(Policy & Legal)
Description of
financial impact
Time period of
maximum impact
Scenario of
maximum impact
Strategic response
Short/medium
Lower profits due to
taxation on Dunelm,
or taxation on
suppliers passed on
in product cost
Transition risk
(Policy & Legal)
Lower profits due to
increased taxation
Short/medium
Physical risk
(Acute and
Chronic)
Increased costs/lower
profits due to supply
shortages and freight
disruption
Medium/long
Transition risk
(Market)
Increased costs/lower
profits
Medium/long
Extension of producer
responsibility:
increased cost of
existing regime and/
or extending to
additional product
categories such as
textiles
Physical risks impact
the availability of
raw materials such as
cotton and timber, or
impact manufacturing
sites and logistics in
countries from
which we source
our products
Changes to fuel
prices caused by
climate-related
market disruption or
increased taxation,
and increased cost of
transitioning to non-
fossil fuel-based fleet
Reputational damage
due to failure to act on
sustainability trends
Transition risk
(Reputation)
Lower sales/harder
to attract employees/
higher cost of capital
Medium/long
in medium term
long term
Focus on reducing our carbon
emissions and working with our
suppliers to reduce their carbon
emissions will reduce the impact
of potential carbon taxes.
We are taking action to reduce
packaging, increase its recycled
content and improve recyclability.
We are sourcing lower impact
materials, offering a textiles take-back
scheme, and moving towards a more
circular sourcing model.
These actions should mitigate the
impact of any additional taxes.
Our work with our suppliers and as part
of the Textiles 2030 group of retailers
will support action to mitigate these
risks, as well as our move to a more
circular sourcing model. We will also
continue to develop diverse sourcing
routes and work with suppliers to
build resilience.
We are moving towards a lower-carbon
fuel company car fleet by 2025 and
have a logistics decarbonisation
plan to move our HGVs progressively
towards low-carbon fuel from 2023,
subject to development of available
technology and infrastructure.
We have ambitious climate change
reduction targets and are moving
towards the use of low-impact
materials in our products and a
more circular sourcing model. See
also our response to the material
opportunity below.
MATERIAL OPPORTUNITY
TCFD category
Opportunity
(Market)
Increase market
share and lower
cost of capital by
demonstrating
leadership in
addressing climate
change and
sustainability
Description of financial
impact
Time period of
maximum impact
Scenario of
maximum impact
Strategic response
Higher sales and
lower cost of capital
Medium/long
We are increasing our communications
to customers, as well as continuing
to develop the communication of our
strategy and achievements to all our
stakeholders.
ANNUAL REPORT AND ACCOUNTS 2022 65
DUNELM GROUP PLC
Task Force on Climate-related Financial Disclosures (TCFD)
The principal risks are discussed
with our Executive Board, Risk and
Resilience Committee, Audit and
Risk Committee and Board as part of
the twice-yearly formal review. This
includes an assessment of the relevant
likelihood and impact of all of our risks.
The Risk and Resilience Committee also
conducts at least one in-depth review
of climate change topics each year.
The principal risks are also considered
by management in connection with
the assessment of the viability of
the business over the longer term
that is made in connection with the
Viability Statement in this report. More
information about our climate change
and environment risk can be found in
the Principal Risks and Uncertainties
section on page 76. An overview of
our risk management responsibilities
is set out on page 69 and explains in
more detail how responsibility for risk
management is allocated and how
that responsibility is discharged by
our Board, Audit and Risk Committee,
Executive Board and Risk and
Resilience Committee.
MOVING FORWARD
We will:
• Continue to evolve our assessment
and quantification of our
material climate-related risks and
opportunities and adapt our Pathway
to Zero strategy as required.
• Continue to conduct at least one
climate-related in-depth review each
year and ensure climate change is
discussed in all other deep dive risk
reviews where relevant, through the
Risk and Resilience Committee.
We have considered the potential
for the financial statements to be
impacted by climate change, with
a particular focus on medium- and
long-term non-current assets. Of the
assets on our balance sheet which
might be considered to be at risk from
climate change, the majority of our
plant, property and equipment are
warehouses, retail stores, plant and
machinery and shop fittings in the UK.
These assets have a useful remaining
life of less than seven years other than
the freehold on our Head Office and
a small number of freehold stores.
These assets are not considered to be
at risk of any material physical impacts
or transition risks arising from climate
change. There has been no material
impact on the financial reporting
judgements and estimates applied in
the preparation of the FY22 Annual
Report and Accounts. Please see further
information in our accounting policies,
from page 180.
MOVING FORWARD
We will:
• Continue to refine our high-level
risk and opportunities assessment
to include more robust data, and
also measure the impact of our
mitigating actions so as to test our
assumptions about the resilience
of our business model.
• Increase stakeholder engagement,
improve internal and external
communications.
• Invest in resource and expertise
to support this activity.
• Continue to engage more with
our suppliers and peers to improve
our understanding, share ideas and
progress, innovate and advocate
for change.
• Progress our work on adapting the
design of our products to increase
longevity and use resources and
packaging from more sustainable
sources, and to explore and offer
end of life options.
Risk management
MANAGING OUR
CLIMATE-RELATED RISKS
In FY21, we completed a detailed
climate change risk register with the
support of Carbon Trust. We refined this
with external TCFD consultants in FY22,
and quantified the most significant
risks by likelihood and potential impact
at a high level as described above.
This work included an assessment of
current and anticipated legislation and
regulatory requirements, governmental
commitments and trends in consumer
preferences. In June 2022, this
assessment was reviewed by the
Pathway to Zero Steering Group and
by the Audit and Risk Committee.
The study confirmed that directionally
we have correctly understood the
most significant potential risks and that
our strategy is addressing the correct
mitigating actions. Our Head of Climate
Change will maintain this register going
forward, adapting it as the risks and
our mitigations evolve and our data
becomes more accurate. Our Pathway
to Zero Steering Group will use the
register to inform our strategy, which
is then fed into the overall strategy
and financial planning process. Our
CEO, Head of Climate Change and
other leaders throughout the Group
will continue to work with expert
external advisers, the British Retail
Consortium, WRAP, the Aldersgate
Group and others to keep up to date
with regulatory and best practice
developments.
Climate change and environment risk
is classified as a principal risk in our
risk register, and the detailed climate
change risk register and quantification
feeds into this. A member of the
Executive Board takes responsibility
for each of the principal risks, which
includes ensuring that the register is
kept up to date in respect of regulatory
requirements and changes in risk profile
(including by reference to industry
briefings and participation in peer
organisations such as the Aldersgate
Group), and for developing and
implementing risk mitigations.
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Metrics and targets
MEASURING OUR
CLIMATE-RELATED RISKS
AND OPPORTUNITIES
We have chosen the metrics below
because they directly address our
material climate risks and opportunities,
and because they are where we can
make the biggest potential impact on
climate change. In setting our metrics
and targets, we have ensured that they
are in line with the Paris Agreement and
aligned to a 1.5°C pathway, and the UK’s
commitment in the Climate Change Act
2008 (2050 Target Amendment) Order
2019 and other relevant legislation; as
well as the British Retail Consortium’s
Climate Action Roadmap which we
support. The carbon and cotton
metrics are aligned to the Textiles
2030 voluntary agreement, which we
are party to. These topics are also
important to our colleagues, customers
and society.
MOVING FORWARD
We will:
• Continue to improve our data
quality and accuracy, particularly our
Scope 3 emissions, working with our
suppliers.
• Build out our detailed Scope 3
roadmap to meet our targets, gaining
a better understanding of the key
drivers of carbon reduction through
our supply chain.
Strategic target
Deadline
Progress at June 2022
Measures
Link to material climate risk
Reduce Scope 1 absolute carbon
emissions by 50% 3, 4
2030
13.4% increase
(2021: 23.9% increase)
Reduce absolute Scope 1 carbon
emissions by 50% against a FY19 baseline
• Carbon tax
• Fuel price
• Reputation
• Carbon tax
• Reputation
Purchase 100% renewable
electricity 4
Reduce tCO2e/£1m Group revenue
(Scope 1) in line with absolute
target 1, 2
Reduce Scope 3 absolute carbon
emissions by 50% 3, 4
2030
99.7%
(2021: not disclosed)
2030
19.6% reduction
(2021: not disclosed)
Purchase 100% renewable electricity
every year
Reduce Scope 1 and 2 carbon emissions
per £1m of Group sales against a FY19
baseline
• Carbon tax
• Fuel price
• Reputation
2030
In progress
(2021: not disclosed)
Reduce absolute Scope 3 carbon
emissions by 50% against a FY19 baseline
• Carbon tax
• Physical risk
• Producer responsibility
• Reputation
100% of own brand cotton more
responsibly sourced 1, 2, 3
2025
30.0%
(2021: not disclosed)
30% less virgin plastic packaging
of own brand products 1, 2
2025
-22.7%
(2021: not disclosed)
Percentage of own brand cotton products
which meet our ‘more responsibly
sourced’ standard, covering carbon
emissions and ethical standard
• Carbon tax
• Physical risk
• Producer responsibility
• Reputation
Reduction in plastic packing (by weight
per £ sales) of packaging on our own
brand products against FY20 baseline
• Carbon tax
• Producer responsibility
• Reputation
Easy to use take-back service in
place for 50% of our own brand
products 1, 2
2025
61.3%
(2021: not disclosed)
Percentage of our own brand products
for which we offer an easy-to-use take-
back service
• Carbon tax
• Producer responsibility
• Reputation
80% of operational waste to
be recycled
2023
79.8%
(2021: 80%)
Percentage of operational waste that is
recycled
• Carbon tax
• Reputation
Key:
1. Link to target in our management Long-Term Incentive Plan.
2. Target in our sustainability-linked Revolving Credit Facility.
3. Textiles 2030 target.
4. Dunelm Pathway to Zero target; see page 34.
Note:
Details of our Scope 1, 2 and 3 emissions are on page 37, and the methodology for our Scope 1, 2 and 3 emissions calculations can
be found on our corporate website at https://corporate.dunelm.com/about-us/policies-and-statements/
INDEPENDENT ASSURANCE
We engaged Ernst & Young LLP to provide limited
assurance for FY22 over the key performance metrics
which are linked to our Revolving Credit Facility. These
are marked with the number 2 in the table above. The
full assurance statement and the Basis of Reporting
documents that were applied in preparing these
metrics can be found online on our corporate website:
corporate.dunelm.com.
ANNUAL REPORT AND ACCOUNTS 2022 67
DUNELM GROUP PLC
Risks and risk management
Risk management
Risk management underpinned by culture and shared values.
OUR APPROACH
The Board as a whole takes
responsibility for the management of
risk throughout the business. There
is a formal process for identifying,
assessing, and reviewing risk, as
described opposite on page 69. In
addition, our Audit and Risk Committee
oversees the risk management process
as part of its activities.
PROCESSES UNDERPINNED
BY CULTURE AND SHARED
VALUES
We believe that risk is best
managed by a combination
of the following:
• Formal risk management
processes as described in
this report.
• The Board and senior
management leading by
example.
• Alignment through promoting
colleague shareholding in
Dunelm.
• Embedding our purpose,
culture, and shared values.
RISK MANAGEMENT FRAMEWORK
The Board confirms that:
• There is an ongoing process for
identifying, evaluating and managing
the principal risks faced by the Group,
including to identify emerging risks.
• 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.
• The principal risks are reviewed at
least twice a year by the Board.
• The systems accord with the
guidance to audit committees issued
by the Financial Reporting Council
dated April 2016.
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 financial reporting and, where appropriate,
reflects developments in the consolidated financial statements. The
external auditor also keeps the Audit and Risk Committee apprised 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 provides
robust and independent challenge to management where appropriate.
• The full-year financial statements are subject to external audit and the
half-year financial statements are reviewed by the external auditor.
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
Collective responsibility for internal
control
Control framework setting out
responsibilities
Formal list of matters reserved for decision
by the Board
Approval of key policies and procedures
Monitors performance
EXECUTIVE BOARD
Responsible for operating within the
control framework
Recommends changes to controls/
policies where needed
Reviews and monitors compliance with
policies and procedures
Monitors performance
AUDIT AND RISK COMMITTEE
Oversees effectiveness of internal control
process
Approves independent internal audit
programme
Receives reports from external auditor
Receives reports generated through the
internal audit programme
INTERNAL AUDITOR
Provides assurance to the Audit and Risk Committee through independent reviews of
agreed risk areas
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.
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.
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Overview of risk management responsibilities
The table below sets out how responsibility for risk management is allocated
and how that responsibility is discharged:
BOARD
Collectively responsible for managing risk
Sets the risk appetite for the Group.
Conducts formal reviews of principal risks
(including emerging risks) and the risk
KPIs at least twice a year – one of which is
in connection with consideration of the
viability statement (see pages 80 to 81).
Risk topics reviewed in depth through
regular timetabled presentations or papers.
Regular discussions of ‘What keeps us
awake at night?’.
Monitors KPIs which measure the
effectiveness of risk mitigations through
Board reports.
Ensures strategic investment in controls
and risk mitigation and manages risk
prioritisation.
Ensures Executive Directors have
responsibility for managing specific risks.
Assesses the coverage and adequacy
of independent assurance.
AUDIT AND RISK COMMITTEE
Oversees risk management process
Receives a formal review of the principal
risks, risk KPIs and the risk management
process twice yearly.
Reviews the Group risk appetite statement
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 pages 80 to 81).
Holds the relationship with the internal
auditor, approves the rolling internal audit
programme, and receives internal audit
reviews of selected risks.
Receives a report from the Risk and
Resilience Committee (executive level
committee) at each meeting on its activities.
Selects and proposes topics for ‘key risk’
reviews by the Board.
i
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EXECUTIVE BOARD
Collectively responsible for managing principal and operational risks
Members responsible for managing risk
within their areas of accountability.
Reviews risk topics through regular
timetabled presentations or papers.
Conducts formal reviews of principal risks
(including emerging risks) twice a year.
Monitors KPIs which measure the
effectiveness of risk mitigations.
Delegates line responsibility for managing
individual risks within their area of
accountability to individual Executive
Board members, and oversight of these
to the Risk and Resilience Committee.
RISK AND RESILIENCE COMMITTEE
Oversight of principal and operational risks
Oversight and review of the principal and
operational risk registers and the process
by which they are compiled.
Reviews the risk landscape, ranks the
principal risks, and identifies emerging risks.
Monthly review of the risk KPIs which
measure the effectiveness of the mitigations
for principal risks and requires explanation
from relevant management where the
indicator is outside the tolerance range.
Regular cross-functional ‘deep dive’ of
each of the principal risks and associated
operational risks.
Reports monthly to the Executive Board
and to the Audit and Risk Committee at
each meeting.
Conducts a formal review of the principal
risks (including emerging risks) twice a year
in advance of submission to the Executive
Board and the Group Board.
i
See page 126 for more information on the Risk and Resilience Committee’s activities during the year.
CHIEF FINANCIAL OFFICER
Ensures that risk management processes are adhered to
Chair of the Risk and Resilience Committee.
Presents the outcome of the risk review
to the Executive Board, the Audit and
Risk Committee and the Group Board
twice a year.
With the Company Secretary, ensures
that principal risk topics are scheduled for
regular review by the Executive Board and
the Group Board.
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DUNELM GROUP PLC
Risks and risk management
Principal risks and
uncertainties
PRINCIPAL RISKS AND
UNCERTAINTIES ASSESSMENT
The Board confirms that it has carried
out a robust assessment of the principal
risks facing the Group, including
emerging risks, and 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 on
pages 72 to 79.
CHANGES TO PRINCIPAL RISKS
IN THE YEAR
No new principal risks were identified
in the year, however there were four
risks where the potential impact had
increased over the year, with the
remaining risks having no change
in their overall impact. We have also
renamed one of our principal risks.
The first two risks where the potential
impact has increased are competition,
markets and customers and business
efficiency. Whilst the macroeconomic
outlook remains uncertain, we remain
confident in the resilience of our
business model and the ability of our
colleagues and suppliers to adapt to
change quickly. However, our ability to
deliver against our strategy and achieve
our growth ambitions in the short term
will likely be impacted by increased
inflationary pressures, which have been
compounded by geopolitical instability.
The potential impact on consumer
spending and possible competitive
pricing action puts increasing pressure
on demand for our customer offer and
on gross and net margins.
’Resilience’ was a new risk introduced
in FY20 to acknowledge the impact
of the Covid-19 pandemic as well as
to address low probability and high
impact black swan events. The title
has been updated to align more
closely with the description of the risk
and catastrophic business events is
considered to be more appropriate.
The third principal risk where the
potential impact has heightened is
supply chain disruption. The business
is facing significant supply chain
disruption due to the pressures of
inflation and ongoing Covid-19 related
supply chain issues. During the year
shipping container rates have risen
significantly and domestic UK labour
shortages continued, which has
increased the pressure on costs and
wages and in some situations impacted
the flow of goods.
The final principal risk where the
potential impact has increased in the
year is people and culture. Whilst
we remain confident in our culture
and employment proposition, the
consequences of the pandemic,
including skills shortages and wage
inflation, have contributed to a tight
labour market in both operational roles
and some key specialist areas.
Emerging risks
Risks continue to evolve and an awareness
of emerging risks is important in driving
effective strategic planning. Monitoring
and understanding the potential
implications of emerging risks allows
us to build a consideration of these into
our decision-making processes.
While no emerging principal risks were
identified in the year, either through our
Board and Audit and Risk Committee
or our Executive Board discussions,
our response to the war in Ukraine on
the opposite page is an example of
how our risk management processes
respond to new or heightened risks.
In addition, we have detailed how we
responded to supply chain disruption
risks in FY22 on page 73.
RISK APPETITE
The Board sets the risk appetite for the Group, taking into consideration
the expectations of its shareholders and other stakeholders. The clear
articulation of our risk appetite provides for an effective mechanism to inform
investment decisions, facilitate the discussion of risk, set parameters within
which objectives must be delivered, and support the awareness of risk by
our colleagues and partners. During the year the Board reviewed the Group
risk appetite and confirmed that it remained appropriate and addressed
uncertainties in the current economic environment.
The Group has a moderate to high risk appetite in pursuit of its purpose-led
strategy and a prudent appetite to financial risk. We have a very low appetite
for risks to our brand and reputation, which includes the health and safety
of our colleagues, customers, suppliers, and visitors to our premises, and
non-compliance with our policies and procedures.
We have a very low risk appetite for the misuse of information, cyber and data
security and risks that could affect the availability of technology to support
our systems, premises, and colleagues. Finally, we have a low appetite for the
risk of outsourcing key business processes, functionality, and services.
The full Group risk appetite statement is available from the corporate website at:
corporate.dunelm.com.
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AT A GLANCE PRINCIPAL RISKS AND UNCERTAINTIES FY22
Risk
Competition, market
and customers
Business efficiency
Supply chain disruption
People and culture
Impact compared
to FY21
Risk
Impact compared
to FY21
Principal risks and
uncertainties key
Climate change and
environment
Catastrophic business
events
IT systems, data
and cyber security
Regulatory and
compliance
Increasing
Decreasing
No change
Brand damage
Finance and treasury
HOW WE RESPONDED AND MANAGED OUR RISKS DURING THE WAR IN UKRAINE
CASE STUDY:
When Russia invaded Ukraine in February 2022, the Executive Board set up a cross-functional Working Group to co-
ordinate response activities, chaired by the Group Finance Director, and with the Company Secretary representing the
Executive Board. The Working Group assessed the impact of the crisis on our principal risks and ensured that required
actions were taken, as set out below:
Regulatory and
compliance
Assessed legal and governance requirements under the sanctions imposed by the UK Government and
briefed relevant internal teams. Linked into the British Retail Consortium to ensure we kept abreast of changes
and market practice.
IT systems, data, and
cyber security
Increased our cyber defences to address increased risk of attack from Russia. Also assessed any data flows to
understand any links to Russia, of which there were none, and cut off links to Russian IP addresses.
Finance and treasury
Reviewed payments to ensure no breach of the HM Treasury sanctions regime and controls were put in place to
monitor this regularly. Increased level of US$ forward cover to upper end of our policy given strengthening of
US dollar against sterling.
Supply chain
disruption/business
efficiency
Assessed our exposure to shortages/price increases in key materials, such as components for store fixtures,
as well as in all non-stock purchases, including energy, fuel, packaging and food and took mitigating action
where possible.
Brand damage
Assessed supply chain for Dunelm branded products to understand whether any are sourced from Russia
or Belarus (small amount of timber, which was resourced), or from sanctioned individuals.
People and culture
We identified colleagues who were potentially impacted and offered them support, including from the
Colleague Support Fund, and signposted other sources (e.g. MIND). We also supported community-led
aid donations through stores and centrally via our take-back partner.
Competition, markets
and customers
Issued customer communications via social media setting out our response to the crisis. Addressed the
impact on inflation and consumer confidence as part of the ongoing commercial response to the inflation
and cost of living crisis.
After making the initial assessment and taking immediate action, the Working Group met regularly to monitor developments
and provided updates to the Risk and Resilience Committee. As Dunelm does not have any sales or operations in either
country the direct impact was limited and in due course the individual Ukraine-related risks were then absorbed into the
ongoing process for managing principal and operational risks and the Working Group disbanded.
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Risks and risk management
Principal risks and uncertainties
continued
Risk
How we mitigate
Progress in FY22
Competition, market
and customers
Description
Failure to respond to changing
consumer needs e.g., the shift towards
online sales, personalisation, rental
versus ownership, sustainability and
customer experience, and to maintain a
competitive offer (range, quality, value
and ease of shopping) could impact
profitability and limit opportunities
for growth.
A downturn in the economy and
consumer spending, aggressive
competitor activity (especially with
cost price pressures) could impact
sales and profit.
Link to strategy:
All three ambitions
Performance indicator:
Market share
Sales, profit and cash
Executive responsibility:
Chief Executive Officer
Reports to:
N/A
Impact compared to FY21:
Business efficiency
Description
Profitability could be impacted
by failure to operate the business
efficiently or to manage margin
volatility.
Link to strategy:
Ambitious about profitable growth
Performance indicator:
Operating cost %
Executive responsibility:
Chief Financial Officer
Reports to:
Chief Executive Officer
Impact compared to FY21:
• Customer strategy in place, to
• Dunelm continues to lead the UK
continue to drive our multichannel
proposition, refined post Covid-19 to
accelerate growth levers.
• Focus on new product development,
particularly own brand, in both
existing and new categories, to
strengthen our offer. Continue
to make our products and their
packaging more sustainable.
• Investment in brand marketing,
digital engineering, data and insight
capability and services to raise
awareness of the Dunelm brand and
meet customer needs.
• Investment in supply chain capacity
and capability, doubling peak
volumes and reducing lead times.
• Monthly customer insight report
tracks performance against the
market, competitors and other key
indicators.
Board oversight:
• Reviewed annually in depth by
the Board at its strategy days
and individual topics considered
throughout the year.
• Costs are managed by the Board and
Executive Board through the budget
and forecasting process and monthly
performance reviews.
• Monthly steering groups in place to
review specific areas such as sourcing,
stock loss and returns.
• 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. Head of
Procurement and team in place to
provide specialist negotiation skill.
• Investment Committee reviews
non-stock expenditure over a certain
threshold.
Board oversight:
• Board receives monthly management
accounts and regular updates on
strategic focus areas.
• Long-term plans and budget
reviewed by the Board at least
annually.
homewares market with an increased
estimated share of 10.2% in 2022
(2021: 9.1%) (Source: GlobalData).
• Development of our strategy
includes a significant increase in our
sustainability programme, and an
enhanced customer experience.
• Improved insight on our customer
base by recruiting specialists in data
analytics and management, enabling
us to understand who they are and
how they shop with us.
• Improved the online customer
experience including smoother
checkout, better product information
management and quicker/named day
delivery.
• Reviewed all of our core ranges to
deliver value and choice across all of
our price points.
• Continued product innovation
in existing categories with
‘sustainability’ a key element and
strengthened seasonal campaigns
and promo buys to improve
affordability to our customers.
• Committed Supplier club reviewed
and successfully held a supplier
conference.
• Increased engagement via social
media and community involvement.
• Continued focus on cost discipline
through monthly Executive Board
performance review and robust
investment approval process. Cost
base reviewed and mitigating action
taken in the light of the changed
economic environment.
• In second year of three-year plan to
invest in core systems and processes
to provide capacity to support our
growth strategy.
• Productivity group focusing on
delivering productivity in stores,
more efficient stock processes, and
supply chain.
• Cost prices with product suppliers
renegotiated to minimise price
increases to customers and protect
margins.
• Procurement team being expanded
in FY23.
• Following successful tender and
negotiation of our international
freight management contract in FY22,
the transition to a new provider is
underway.
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Principal risks and uncertainties key
Increasing
No change
Decreasing
Risk
How we mitigate
Progress in FY22
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Supply chain
disruption
Description
Changes in global supply chain
capacity, labour shortages, ongoing
disruption from Covid-19 and
geopolitical instability may cause
interruption to the supply of stock
to our stores and fulfilment of online
orders which could impact sales.
Inflationary pressures linked to these
challenges could impact profitability.
Link to strategy:
Ambitious about our brand and
profitable growth
Performance indicator:
Service levels
Executive responsibility:
Customer Operations Director
Reports to:
Chief Executive Officer
Impact compared to FY21:
• Supply chain strategy in place to
ensure capacity is in line with long-
term financial plan.
• Detailed budgeting and forecasting
in place to match capacity to demand
which are reviewed weekly by a cross-
functional team where issues and
remedial actions are agreed.
• Business continuity plans in place for
Dunelm non-store facilities.
• Contracts in place with third-party
logistics partners.
• We seek to limit dependency on
individual suppliers by actively
managing key supplier relationships.
• Increased stock visibility providing
more insight of stock orders and
enabling more effective supply chain
capacity planning.
• Use of third-party labour suppliers to
add flexible capacity and operational
working hours increased to 24x7.
Board oversight:
• Business continuity is a standard
Audit and Risk Committee
agenda item.
• Covid-safe processes resumed across
all our sites to enable operations to
continue during Covid restrictions in
H1. This included a significant increase
in ‘Direct to Customer’ deliveries from
our suppliers.
• Established a new dedicated furniture
storage facility and appointed a new
third party to provide additional
ecommerce capacity at a new site to
meet customer demand.
• Flexible capacity in place with third
parties to support volumes and
manage supply chain volatility.
• Vendor system improvements made
to support higher logistic volumes.
• Continued to strengthen relationships
with key suppliers as well as creating
new relationships to build capacity.
• Established working groups to
develop a plan to achieve our 2030
sustainability targets which include
introducing lower-carbon fuelled
vehicles.
• Implemented initiatives to increase
the efficiency of supplier collections
and store deliveries e.g. by using
double deck trailers.
• Launched ‘stock in multiple locations’
project which duplicates stock at key
locations to reduce the number of
deliveries to customers who order
multiple items to improve customer
service and reduce fulfilment costs.
• Crisis simulation exercise on supply
chain resilience, the output of which
was reported to the Board.
HOW WE MANAGED SUPPLY CHAIN DISRUPTION RISKS IN FY22
In FY22, ongoing global supply chain disruption triggered
by the Covid pandemic increased pressure on international
freight capacity, leading to rising supply chain costs and
raw material shortages. These significantly impacted
our manufacturing partners and increased the risks to
our product availability and cost prices. In response, we
extended workstreams already in place post-pandemic:
• we expanded key product inventory levels to
ensure supply;
• purchased stock ahead of cost increases;
• used third-party service providers to create additional,
flexible storage capacity;
• changed our international freight management partner
and systems and processes to improve end-to-end
visibility of our supply chain; and
• worked even more closely with key domestic suppliers
to help them navigate ongoing operational challenges.
Although some product lines were impacted in FY22,
through our risk mitigation, we secured product flows
for all seasonally sensitive products and maintained
a high overall level of product availability. We are still
experiencing supply chain disruption and expect this
to continue in the medium term. We remain focused on
adapting our sourcing, product design and merchandising
strategy to reduce freight costs and improve supply
reliability; investing in supply chain flexibility; and further
developing our international freight management
capabilities and visibility.
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Risks and risk management
Principal risks and uncertainties
continued
Risk
How we mitigate
Progress in FY22
People and culture
Description
The success of the business could be
impacted if it fails to attract, retain and
motivate high-calibre colleagues.
Maintaining and evolving the culture of
our business (embodied in our shared
values) is essential to delivering our
strategy and ensuring the long-term
sustainability of our business.
Link to strategy:
Ambitious about being a good
company
Performance indicator:
Colleague engagement
Colleague turnover
Executive responsibility:
People and Stores Director
Reports to:
Chief Executive Officer
Impact compared to FY21:
• Corporate purpose in place, aligned to
our strategy, emphasising our shared
values
• The composition of the Executive
Board is regularly reviewed by the
Board to ensure that it is appropriate
to deliver the growth plans of the
business.
• Talent Committee established,
overseen by the Nominations
Committee and the Group Board.
• Formal talent management and
succession plans in place and external
and internal talent pools identified, to
build capability and capacity.
• Training and development, with
emphasis on ‘growing our own’ talent
– including behavioural framework and
development for all leaders.
• High-calibre individuals are retained
and developed through sponsored
talent management and development.
• The Group’s Remuneration Policy
detailed in this report 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.
• Capability increased through
resource investment in key areas,
notably in our digital and data teams.
• Increased Group Board focus
on Board and Executive Board
succession and talent management
and introduced framework to aid
better discussion.
• Increased investment in colleagues
on hourly pay and those at the lower
end of the pay scale.
• Reverted to simpler incentivisation
structure to aid understanding
and support better retention of
colleagues across the business.
• Our diversity and inclusion colleague
networks, which are sponsored
by an Executive Board member,
have made good progress in
establishing themselves and growing
membership.
• Board of Directors attended inclusion
and diversity awareness workshops,
with expert guest speakers on
diversity and inclusion subjects.
• Continued the work of the Store
Colleague Safety Group to oversee
colleague personal safety in stores.
• Bonus and share incentive plans in
• New health-related benefits
introduced including virtual GP
service for all colleagues and specific
awareness training on domestic
abuse for all line managers.
• Developed and embedded our
behavioural framework which is
based on our shared values.
• Increased focus on colleague
wellbeing, including an extension
of eligibility for our Colleague
Hardship Fund.
place to promote retention and share
ownership.
• Suite of policies designed to retain
and recruit colleagues.
• Regular communication and
engagement through National
Colleague Voice, Store Coach Voice
and similar forums.
• Half-yearly engagement surveys.
• Wellbeing buddies in place across the
business and half of store colleagues
trained as mental health first aiders
(with remainder planned for FY23).
• Inclusion and diversity programme
in place with supporting training and
colleague networks to support.
Board oversight:
• People plan, talent and succession
and culture reviewed at least annually
by the Board.
• Monthly CEO report covers ‘people’.
• KPIs for the Board to measure
culture in place, alongside colleague
dashboard of specific colleague-
related measures.
• Nominations Committee and
Remuneration Committee continued
oversight of people policies and
practice.
• Group Board engagement with
colleagues through site visits, and
NED attendance at annual seminar
and National Colleague Voice meetings.
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Principal risks and uncertainties key
Increasing
No change
Decreasing
Risk
How we mitigate
Progress in FY22
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Brand damage
Description
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
responsibly 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.
Link to strategy:
Ambitious about our brand
Performance indicator:
Product recalls
Percentage of audits completed
within policy
Cotton and packaging KPIs
Executive responsibility:
Commercial Director
Reports to:
Chief Executive Officer
Impact compared to FY21:
• Further expanded the unannounced
audit programme across Tier 1 and
Tier 2 suppliers.
• Review of audit cycle and criteria – all
factories with a current grading of
high risk moved to a one-year cycle.
• Introduced remote follow-up
process to help suppliers close audit
non-conformances, and feasibility
assessment of remote audits
undertaken if lockdowns in China
continue.
• Developed an enhanced online
quality, ethical, sustainability and
packaging assessment for third-party
branded products.
• Updated supplier portal so that own
brand suppliers can access latest
policy, product specifications and
testing requirements.
• Engaged with suppliers through
seminars and workshops to progress
our work to reach sustainability
targets.
• On track to achieve plastic packaging
reduction targets.
• Internal targets set for introducing
more sustainable materials into our
products in SS23.
• Joined Better Cotton to fast track our
progress to reach our cotton target
and strengthen our sourcing policy.
• Further developed supply chain
assessment and verification
programme to include recycled
materials.
• Conscious Choice (signposting
our more sustainable products for
customers) labelling on products in
development for launch in FY23.
• We have a range of policies
specifying the quality of own brand
products and production processes
which suppliers must adhere to.
• Factories complete a profile
questionnaire to obtain a more
holistic risk 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
quality team.
• Product quality and performance
standards are monitored through
inhouse and third-party due
diligence checks.
• Food hygiene and allergen awareness
in our Pausa cafes is maintained
through the adoption of clear
operating guidelines and compulsory
colleague training. Compliance audits
are performed regularly. Monthly
food safety committee meetings take
place.
• All stock and food suppliers and
the majority of our other suppliers
are required to sign up to our Anti-
Bribery Policy and Ethical Code
of Conduct, which is in line with
international guidelines, and also
covers modern slavery.
• All Tier 1 and Tier 2 factories
supplying Dunelm with food products
are BRC and/or SALSA approved
to ensure that they have suitable
processes in place. Tier 1 suppliers
complete an ethical/safety risk
assessment.
• Code of Conduct sets out standards
for working conditions which all
factories supplying Dunelm branded
products must adhere to.
• Our ethical programme requires all
sites who manufacture a finished
product to be audited by our
specialist ethical partner to review
and grade audits and follow up on
corrective actions.
• Regular supplier conferences and
awareness training at which ethical
trading issues and modern slavery
awareness are raised.
Board oversight:
• Ethical trading/modern slavery/
product quality/responsible sourcing
reviewed at least annually in depth by
the Board.
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Risks and risk management
Principal risks and uncertainties
continued
Risk
How we mitigate
Progress in FY22
Climate change and
environment
Description
Failure to anticipate and address
the strategic, regulatory, and
reputational impact of climate change
and environmental matters, and
governmental, consumer and media
action in response to it.
Link to strategy:
Ambitious about being a good
company
Performance indicator:
Prosecution and other
regulatory action
Executive responsibility:
Chief Executive Officer
Reports to:
N/A
Impact compared to FY21:
• Sustainability – ‘Make sustainability
accessible to all’ is a key part of our
Corporate Purpose and is reflected in
our Focus Areas.
• Chief Executive oversees our
approach to sustainability
issues, including climate change.
Accountability for three working
groups (Carbon Reduction, Circular
Economy and Community) allocated
to Executive Board members.
• Pathway to Zero Steering Group
oversees progress against
environmental targets and climate
change work with external advisers
supporting on climate change.
• Targets in place to reduce emissions,
energy usage and waste to landfill,
and increase recycling in our own
operations. Roadmap developed for
key Scope 1 contributors (see page
36).
• Waste management contractor
appointed with contractual KPIs to
deliver waste minimisation, recycling
targets including audit and advice to
stores.
• Sustainability is part of the product
strategy and product selection
process. Policies in place for high-risk
product types and routes (cotton,
timber, palm oil and animal-derived
materials, e.g. leather, feathers and
down).
• Company Secretary and Head of
Climate Change keep abreast of
relevant regulatory, investor and
societal requirements to advise the
business as needed.
• Part of the collaborations such as
Textiles 2030, to advocate and
support the industry to reduce
environmental impacts, and BRC’s
Climate Action Roadmap, to make the
industry net zero by 2040.
Board oversight:
• Presentation at least twice a year is
part of our proposition and focus
area.
• Topic at the Board’s Strategy Days.
• Prepared our first full report in
accordance with the Task Force on
Climate-Related Financial Disclosures
{see pages 61 to 67)
• Announced ten-year Scope 3
reduction target.
• Entered into an ESG-linked Revolving
Credit Facility using four key ESG
KPIs.
• Long-term executive remuneration
includes ESG performance targets.
• New Head of Climate Change
appointed and specialist
sustainability roles added to product
sourcing team.
• Expansion of the textiles take-back
scheme to all stores and contract
signed with partner for another year.
• Mapped baseline emissions for our
textiles products and identified
priority focus areas.
• Joined Better Cotton to support
environmental improvement in cotton
production and set internal target for
use of recycled polyester.
• Developed solutions to improve and
simplify sustainability data gathering
and analysis.
• Sustainability in products training
developed and rolled out to buying
teams and product suppliers to help
drive changes in the product supply
chain towards a circular model.
• More sustainable and recycled
materials introduced into our product
ranges such as the Natural History
Museum range.
• Scope 1 carbon emissions modelled
to 2030 to assess progress to target.
• Decarbonisation working group
established for Home Delivery
Network (HDN), parcels and store
delivery.
• Pausa completed carbon
footprinting exercise to inform
its sustainability plan.
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Principal risks and uncertainties key
Increasing
No change
Decreasing
Risk
How we mitigate
Progress in FY22
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Catastrophic
business events
Description
Failure to withstand the impact of
an external event or combination of
events that severely disrupts markets
and causes significant damage to all or
a substantial part of the Group’s sales
or operations (e.g. pandemic).
Link to strategy:
All three ambitions
Performance indicator:
Sales, profit and cash
Market share
Executive responsibility:
Chief Executive Officer
Reports to:
N/A
Impact compared to FY21:
• Significant progress made against our
strategic focus areas, evolving into
longer-term objectives.
• Purpose, ambitions and shared
values bought to life and embedded
in colleague communications and
recruitment and appraisal process.
• Five-year strategic plan in place
setting ambitious but realistic growth
plans with renewed prioritisation and
focus on both investment in growth
activity and further improving our
systems and controls.
• The Group entered into a new £185m
sustainability-linked Revolving Credit
Facility.
• In the second year of implementing
internal controls improvement plan
and project to improve processes and
capability in the commercial function.
• Focus on value and affordability to
respond to potential recession.
• Post-covid disruption and ongoing
economic uncertainty continue to be
managed in line with our values by:
– Maintaining strong financial
discipline and operational grip with
clear prioritisation of investment
decisions and good cost control.
– Continuing to prioritise colleague
engagement and wellbeing
and relationships with all key
stakeholders.
– Continuing to work closely with
suppliers to implement alternative
fulfilment routes.
• Internal control and risk management
process in place to identify and
manage risks (including emerging
risks) that may impact the business.
• Conservative financial approach
– strong balance sheet, relatively
low levels of external debt, low-risk
property portfolio, ‘value for money’
mentality.
• Strong and united Board and
management team in place, strong
managers in key roles and committed
colleagues.
• Strong values – emphasising
’long-term thinking’ and ‘acting like
owners’ – which Board and senior
management are required to role
model, embedded in the business
through recruitment and appraisal,
and colleague communications.
• Strong relationships maintained
with key stakeholders (shareholders,
colleagues, customers, suppliers,
community).
• Family shareholding provides long-
term stability.
• Investment in Dunelm brand and
diversity of routes to market provide
flexibility if one channel cannot
operate.
• Business continuity plans in place and
kept up-to-date for sites, operations
and technology.
• Insurance cover in place to cover
key risks.
• Expert third-party advisers in place
(e.g. PR, corporate, banking, legal,
tech) to assist.
• Risk and Resilience Committee
established comprising cross-
functional members to discuss risk
and mitigation.
Board oversight:
• Audit and Risk Committee reviews
progress on internal control
improvement programme and
business continuity plans.
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ANNUAL REPORT AND ACCOUNTS 2022
77
Risks and risk management
Principal risks and uncertainties
continued
Risk
How we mitigate
Progress in FY22
IT systems, data and
cyber security
Description
Operations impacted by failure to
develop technology to support the
strategy, lack of systems availability
due to cyber attack or other failure,
and reputational damage/fines due to
loss of personal data.
Link to strategy:
All three ambitions
Performance indicator:
Number of major incidents
Reportable data breaches
Executive responsibility:
Chief Information Officer
Reports to:
Chief Executive Officer
Impact compared to FY21:
• Steering Group in place to oversee
the Group’s approach to IT security
and data protection.
• 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
projects, or bespoke iterative
development methodologies for
smaller-scale changes.
• A detailed IT development and
security roadmap is in place, aligned
to strategy.
• Use of cloud-based hosting
infrastructure which increases failover
options and improved resilience.
• Comprehensive third-party support in
place for relevant technologies.
• Business continuity in place for all
major systems and applications.
• Security incident response and crisis
management plans are in place.
• Business process, authorisation
controls and access to sensitive
transactions are kept under review.
• Point of sale end-to-end encryption
in place on our payment terminals
of which software is updated
continuously.
• Regular training and awareness
programmes are rolled out
throughout the business to keep
colleagues informed and to reduce
likelihood of an event occurring.
Board oversight:
• Cyber security is a standard
agenda item for the Audit and Risk
Committee.
• Major security incidents reported by
the Company Secretary.
• Further developed our IT security
governance with specific recruitment
to increase capability and resource.
• Continued improvements on securing
our networks for colleagues working
from home.
• Developed clear roadmap to deliver
step change in cyber security strategy
and risk management.
• Completion of exercise to
decommission old infrastructure
leading to significant drop in
vulnerabilities.
• Continued to implement the GDPR
risk treatment plan and have recruited
a dedicated GDPR specialist.
• Continued to implement security
improvements.
• Aligned to the ISO 27001 framework
to broaden our cyber security
perspective across the enterprise,
whilst retaining Cyber Essentials and
National Institute of Standards and
Technology (NIST).
• Recruited specialist resource across
various technology teams to improve
capabilities and resilience and
transformed organisational structure
to improve colleague engagement
and retention.
• Increased availability of IT support
staff out of hours.
• Internal audit review of IT general
controls and GDPR conducted.
• Implemented third party risk
management procedure to ensure
suppliers have robust security and
data controls.
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Principal risks and uncertainties key
Increasing
No change
Decreasing
Risk
How we mitigate
Progress in FY22
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Regulatory and
compliance
Description
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, or
competition law.
Link to strategy:
Ambitious about being a good
company
Performance indicator:
Prosecutions and other regulatory
action
Executive responsibility:
Company Secretary
Reports to:
Chief Financial Officer
Impact compared to FY21:
Finance and treasury
Description
Progress against business objectives
constrained by a lack of short-term
funding and long term capital.
Link to strategy:
All three ambitions
Performance indicator:
Operating cash conversion
Banking covenant compliance
Executive responsibility:
Chief Financial Officer
Reports to:
Chief Executive Officer
Impact compared to FY21:
• Policies and training in place in
respect of key compliance areas.
These are regularly reviewed
and updated.
• Operational management is
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.
• Whistleblowing procedure and
independently administered helpline
which enables colleagues to raise
concerns in confidence.
• Supplier terms and conditions
include provisions on compliance
with law and regulations and our
policies as standard.
Board oversight:
• Monthly Board report on health
and safety, GDPR compliance and
whistleblowing.
• 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.
• Dunelm works with a syndicate of
committed partner banks to ensure
appropriate funding is available.
• 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.
• The health and safety team continued
to play a leading part in our response
to the Covid-19 crisis. Through each
phase of the crisis we have developed
and implemented safe physical
measures and processes at our stores,
warehouses, vehicles, manufacturing
site and offices.
• Refreshed our Challenge 25 training
material and updated our age
restricted sales policy to comply
with new legislation. Continued
programme of test audits with pass
rates above industry average.
• Continued focus on compliance
training for all colleagues. New
learning and development system
launched to enable easier digital
access and better tracking and
reporting on compliance training.
• Continued to strengthen governance
of food safety in Pausa cafes
including refreshed hygiene and
allergen training, and guide available
on a newly created tablet-based
app in store.
• Continued focus of the store
colleague safety committee on
colleague safety in stores.
• Relevant policies and training
provided to new colleagues who
joined Dunelm following acquisition
of Sunflex.
• Introduced a food safety/allergen
app to make it easier for colleagues
to access up-to-date information.
• Replaced forklift trucks from stores
with installation of goods lifts.
• Entered into a new sustainability
linked four-year Revolving Credit
Facility of £185m with the option to
extend for two one-year periods.
• Successfully transitioned from LIBOR
to SONIA.
• Actions continued to improve
controls around stock and cash
management, plus stock purchasing
and forecasting.
• Strong focus remained on cashflow
with robust process created to
provide dynamic forward looking
cashflows on a weekly basis.
• Hedging coverage in the light
of currency volatility due to the war
in Ukraine.
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ANNUAL REPORT AND ACCOUNTS 2022
79
Risks and risk management
Going concern, viability and S172(1) statements
Going Concern and Viability Statement
At the time of approving the financial statements, the Board
of Directors is required to formally assess that the business
has adequate resources to continue in operational existence
for the foreseeable future and as such can continue to adopt
the ‘Going Concern’ basis of accounting. The Board is also
required to state that it ‘has a reasonable expectation that
the Group will continue in operation and meet its longer-
term liabilities as they fall due’ (the ‘Viability Statement’). To
support this statement, the Board has considered the Group’s
current financial position, its strategy, the market outlook
and its principal risks. As the Group run a five-year planning
process, the Board has reviewed viability over a five-year
period. The base case for this review is the five-year plan
presented to and approved by the Directors in May 2022.
The Group is operationally and financially strong and has a
long track record of consistently generating profits and cash,
which is expected to continue both in the short and long
term. In the financial years ending June 2020 and June 2021,
despite the impact of the pandemic and the enforced closure
of its stores for significant periods, the business continued to
generate high levels of cash before distributions.
MODELLING POTENTIAL DOWNSIDE SCENARIOS
In their consideration of going concern and the future viability
of the Group, the Directors have reviewed future profit
forecasts and cash projections, which are based on market
data and reflect their experience in managing the business,
including through the recent challenging Covid-impacted
years. During all of these years the business continued to
generate high levels of cash before distributions.
The ‘market downturn’ scenario assumes a change in
consumer spending away from homewares, due to
inflationary pressures, with FY23 showing no sales growth
on FY22 and 12% lower growth in FY24 than in the base
case scenario. In addition, a lower margin than base case is
assumed in FY23. This ‘market downturn’ scenario does not
include any mitigating cost reduction actions, which would
be taken if such a downturn occurred, and assumes the
continuation of dividend payments in line with our current
dividend policy. In this ‘market downturn’ scenario, the Group
would not breach any of its financial covenants and would not
require any additional sources of financing in any of the five
years under review.
The ‘deeper market downturn’ scenario assumes a 5% sales
decline in FY23 compared to FY22 and 12% lower growth in
FY24 than in the base case. A more severe margin erosion is
assumed in this scenario compared to the ‘market downturn’
scenario and margin erosion continues into FY24. Similar to
the ‘market downturn’ scenario, we have assumed no cost
mitigation actions are taken and the continuation of dividend
payments in line with our current dividend policy. As with the
‘market downturn’ scenario, the Group would not breach any
of its financial covenants and would not require any additional
sources of financing in this ‘deeper market downturn’ scenario
over any of the five years under review.
In addition, based on a review of the impact of climate change
(as discussed on page 185), climate change is not expected
to have a significant impact on the Group’s going concern
assessment or on the viability of the Group over the next
five years and therefore no incremental impact has been
modelled in either of the downturn scenarios.
REVERSE STRESS TESTING
To provide additional assurance around the Group’s viability,
two reverse stress tests have been modelled, similar to the
reverse stress testing carried out at the end of FY21. In both of
these reverse stress tests we have assumed that variable costs
would reduce as sales reduce, that we would be able to save
£20m per annum of current fixed costs and that we would
reduce the level of capital investment to £10m per annum
and suspend the payment of dividends. In the first reverse
stress test, we have modelled the sales decline required
to breach either of the current covenants in the existing
Revolving Credit Facility (RCF). A sales reduction of 30% from
Q2 FY23 and a reduction of 37% in FY24 from the base case
would be required for covenants to be breached by the end
of FY24. In the second reverse stress test scenario, we have
modelled the level of sales reduction required to breach the
RCF limit of £185m. This would require a reduction in sales of
55% per annum in both FY23 and FY24 from the base case to
effectively run out of funding by the end of FY24, assuming
reasonable mitigating actions have been implemented.
FINANCING
The Group’s banking agreements and associated covenants
are set out in the CFO’s Review and include a £185m
RCF (maturing in December 2025 but with two one-year
extensions, subject to lender consent, to take the facility out
to December 2027), an accordion option with a maximum
facility of £75m and a £10m uncommitted overdraft.
The Group ended the financial year with net debt of £23.8m.
The financial covenants are tested semi-annually in line with
our December Interim reporting and June year-end reporting.
These covenants are met with significant headroom. In
both downside scenarios explained on page 80, the Group
continues to forecast compliance with all financial covenants
throughout the going concern and viability period.
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ANNUAL REPORT AND ACCOUNTS 2022
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GOING CONCERN AND VIABILITY CONCLUSION
In both downside scenarios Dunelm has sufficient liquidity
to continue trading, including maintaining the payment of
dividends in line with its dividend policy and comfortably
meeting its financial covenants. The reverse stress modelling
has demonstrated that a prolonged sales reduction of 30%
from Q2 FY23 and 37% from FY24 is required to breach
covenants by the end of FY24, and a 55% sales reduction is
required to breach the RCF limit by the end of FY24, assuming
reasonable mitigating actions have been implemented. In
such an event, management would follow a similar course
of actions to those initially undertaken during the recent
Covid-19 pandemic.
The Board believes that the Group is well placed to manage
its financing and other significant risks satisfactorily and
that the Group will be able to operate within the level of its
facilities for at least the next five years. For this reason, the
Board also considers it appropriate for the Group to adopt the
going concern basis in preparing its financial statements.
S172(1) Companies Act 2006
Confirmation Statement
The Board of Directors confirms that during the year under
review, it has acted to promote the long-term success of
the Company for the benefit of shareholders, whilst having
due regard to the matters set out in section 172(1) (a) to (f)
of the Companies Act 2006. Full details are set out in the
Corporate Governance Report on pages 94 to 106, which are
incorporated into this Strategic Report by reference.
Strategic Report
This report was reviewed and signed by order of the Board
on 14 September 2022.
Nick Wilkinson
Chief Executive Officer
14 September 2022
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
81
Corporate governance report
Chairman’s letter
BOARD MEMBER UPDATE
There have been a number of changes to our Board since
I wrote to you last year. In April 2022 we announced the
appointment of Karen Witts as Chief Financial Officer (CFO).
Karen is an accomplished finance leader who brings a wealth
of experience from a number of roles with high-profile,
consumer-facing brands, and this will be hugely beneficial as
we work to achieve our ambitious growth plans. Karen joined
the Board on 9 June 2022 and succeeded Laura Carr, who
stepped down from the Board in that month.
As I mentioned last year, Vijay Talwar joined the Board as a
Non-Executive Director (NED) on 1 October 2021, and this
year we welcomed Kelly Devine to the Board as an additional
NED on 1 March 2022. I am pleased that both of our new
NEDs are bringing a more digital and data-led approach
to our Board discussions.
Finally, we announced the appointment of Alison Brittain to
the Board as a NED with effect from 7 September, with the
intention that she will succeed me as Chair early in 2023 when
I will retire from the Board. I am delighted that Dunelm has
been able to attract a Chair of Alison’s calibre, to lead the
Board in its next stage of growth.
Details of the background to the above appointments
can be found in the Nominations Committee Report on
pages 114 to 115.
TALENT, DIVERSITY AND SUCCESSION
In our 2020 Board review, we identified the need to increase
the focus of the Board and the business on senior leader
level succession and talent management as one of the key
capabilities needed to support our growth ambitions. We
are in the second year of the three-year talent and succession
plan, with the Nominations Committee having oversight
of this at Executive Board level, and the Board reviewing
progress across the whole business. We are now starting to
benefit from our more structured approach, with succession
plans in place for the members of the Executive Board,
our main leadership capability gaps filled, and increasing
numbers of internal promotions.
The Board continues to promote diversity and inclusion
actively across our colleague population. In FY22, we have
continued our tailored education programme to help us
better understand societal diversity and inclusion issues, and
how we can address these in the business by supporting our
colleagues. We review progress on our training and support
twice a year, and details of these activities can be found in the
Nominations Committee Report.
Our Board is over 40% female and meets UK governance
requirements on gender diversity. We now have British,
Indian and Swedish nationals on our Board and meet UK
governance best practice guidelines on ethnicity. However,
we appreciate that our current Board’s make-up reflects
neither our colleague nor customer ethnicity profile, nor that
of the UK population. We always work closely with recruitment
specialists to select candidates from as diverse a pool as
possible to enable us to recruit people with the best talent,
relevant experience and who adhere to our shared values.
Dear shareholder
PURPOSE, CULTURE AND SHARED VALUES
This financial year was marked by an uncertain and disrupted
external environment, including the ongoing public health
impact of Covid-19, a challenging labour market, continued
global supply chain disruption, inflationary pressures, a
cost of living increase for consumers and the war in Ukraine.
The Board and management focused on our strong shared
purpose, supported by our culture and shared values,
to take long-term decisions, manage capital prudently,
promote strong operational performance and maintain good
relationships with all our stakeholders. This has enabled
Dunelm to deliver a strong financial performance and deliver
value to all of our stakeholders. I would like to thank my Board
colleagues and the Executive Board for their commitment and
support over the year.
SUSTAINABILITY AND ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG)
Our Board has always believed that long-term, sustainable
growth and profitability can only be delivered by respecting
those who are impacted by our activities, and this is a
cornerstone of our shared values. As Boards are increasingly
measured by how they contribute to society, we continue to
focus on developing and maintaining strong relationships
with our customers, colleagues, suppliers and communities,
to ensure that workers who make our products are treated
correctly, and to seek to limit our impact on climate change and
the environment. In FY22, we set ourselves the challenging
target to halve our greenhouse gas emissions by 2030, and
we are increasingly embedding considerations of climate
change and environmental matters into our decision-making.
The Board is keen to continue to show leadership in this
matter, and to include our progress in how we judge our
performance, including executive pay. We have included
ESG measures in our annual bonus and, from FY22, in our
Long-Term Incentive Plan performance measures, as well
as in our new Revolving Credit Facility (RCF).
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ANNUAL REPORT AND ACCOUNTS 2022
GOVERNANCE AND REPORTING DEVELOPMENTS
We adopted the 2018 UK Corporate Governance Code
in FY20, and our subsequent reports have been received
positively by our investment community. In March
2022, we presented a corporate governance update to
shareholder representatives, which I attended together
with our Non-Executive Directors, the Deputy Chair and
our Company Secretary.
Each year we review and aim to lay the groundwork for
upcoming regulatory changes and important reporting
guidance. This year we considered the Financial Reporting
Council’s (FRC) review of corporate governance reporting
published in November 2021 and various FRC LAB
reports on climate change and TCFD reporting, taking on
recommendations where it makes pragmatic sense for us to
do so. During the year we engaged with various global ESG
ratings agencies, including a new index, and were pleased to
maintain or better our scores with the most prominent ones.
AGM
At our AGM this year, in line with our policy, all Directors 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. As our largest shareholder, Sir Will Adderley, reduced
his shareholding slightly in the year, we are required to seek a
Rule 9 waiver to allow us to buy back shares to fulfil colleague
share option entitlements. We hope that shareholders will
support this resolution, which is limited to this purpose only.
G
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I look forward to meeting shareholders at the AGM.
Yours sincerely,
Andy Harrison
Chairman
14 September 2022
Code compliance statement
This Corporate Governance Report explains how we have applied the Code’s Principles – supported by reporting on its
Provisions – as set out in the UK Corporate Governance Code published in July 2018 (the ‘Corporate Governance Code’),
which is available from the website of the Financial Reporting Council, www.frc.org.uk. These principles are applied to the
Company’s sole trading subsidiary through the Group’s governance, risk management and internal control structure.
The Board considers that it has complied with the Corporate Governance Code during the financial year by applying the
principles and reporting against the provisions in this Annual Report, except for the following:
PROVISION 38 – EXECUTIVE PENSIONS
As reported last year, Nick Wilkinson (CEO) and Laura Carr (CFO), who stepped down from the Board on 8 June 2022,
agreed to reduce their pension entitlement to align to the current workforce average of 3% which took effect from
1 August 2021. Therefore, for a very short period between 27 June 2021 and 31 July 2021 both executives’ pension
entitlement was 8% of base salary. Karen Witts joined the Board as CFO, on 9 June and her pension entitlement is 3%.
Further details can be found in the Remuneration Report on page 136.
This table provides an overview of where relevant content and information can be found in this Annual Report so
stakeholders can evaluate how Dunelm has applied the principles of the Corporate Governance Code.
HOW WE COMPLY WITH THE UK CORPORATE
GOVERNANCE CODE 2018
Composition, succession, and evaluation
Page(s)
Nominations Committee report
Board leadership and company purpose
Page(s)
Board succession planning
Promoting and preserving long term value
Purpose, values, strategy and culture
Section 172 statement
Board engagement with stakeholders
Managing director conflicts of interest
88
92
94
95
90
Workforce policies and practices
92 and 167
Division of responsibilities
Board structure and independence
Board responsibilities
Board biographies
Page(s)
107
108
84
Board evaluation
Audit, risk and internal control
Audit and Risk Committee report
External auditor and internal audit independence
and effectiveness
Fair, balanced and understandable
Risk management and internal control framework
Remuneration
Directors’ Remuneration Report
110
114
116
Page(s)
120
125
124
126
Page(s)
130
ANNUAL REPORT AND ACCOUNTS 2022 83
DUNELM GROUP PLC
Corporate governance report
Directors and officers
A breadth and depth of complementary skills and experiences
with diversity of age, gender, ethnicity and nationality.
Nick Wilkinson
Chief Executive Officer
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 is accountable
for delivery of strategic and
financial objectives; customer,
colleague and investor
engagement and sustainability
objectives. Chairs the Pathway
to Zero Steering Group.
Regularly attends meetings
of the National Colleague
Voice. 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.
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 and
relevant activities
Member of the British Retail
Consortium’s Climate Action
CEO Committee since inception
in November 2020.
Gender and ethnicity
Male, British
Karen Witts
Chief Financial Officer
Key strengths
An experienced Chief
Financial Officer with a strong
background in finance and
management, and with a wealth
of experience across global
retail and consumer-facing
businesses.
Dunelm role
Karen leads the Finance Team,
as well as taking responsibility
for risk and resilience and a
number of strategic and cross-
functional initiatives; and for
engagement with investors,
corporate advisers and finance
providers. Member of the
Executive Board, chairs the Risk
and Resilience Committee and a
member of the Pathway to Zero
Steering Group. Participates
in Audit and Risk Committee
meetings by invitation.
Joined Dunelm Board
June 2022
Previous experience
Chief Financial Officer of
Compass Group plc (2019 to
2021). CFO of Kingfisher Group
plc (2012 to 2019). Various
senior finance, strategic and
operational roles with Vodafone
Group plc (2010 to 2012),
and at BT Group plc (1999 to
2010). Qualified as a Chartered
Accountant with Ernst &
Whinney.
Other commitments and
relevant activities
Non-Executive Director of
Ipsen Pharma, SA
Gender and ethnicity
Female, British
N R
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Andy Harrison
Chairman
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
and attends meetings of the
National Colleague Voice by
rotation. Participates in investor
presentations and some
shareholder meetings.
Joined Dunelm Board
September 2014
Previous experience
Chief Executive of Whitbread
PLC (2010 to 2015). Chief
Executive of easyJet plc (2005
to 2010). Chief Executive of
RAC plc (1996 and 2005). Non-
Executive Director and Chair of
Audit Committee at EMAP plc
(2000 to 2008).
Other commitments and
relevant activities
Chair of the Board and the
Nomination Committee at
SEGRO plc.
Gender and ethnicity
Male, British
Sir Will Adderley
Deputy Chairman
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.
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 supplier
relationships, sustainability and
mentoring colleagues internally.
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 for an interim
period until 31 December 2015.
Previous experience
All parts of Dunelm’s business.
Other commitments and
relevant activities
WA Capital Limited and
The Stoneygate Trust, a
multipurpose charity with a
particular focus on medical
research and helping to support
equal educational opportunities
for economically disadvantaged
children and students.
Gender and ethnicity
Male, British
84 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
Committee memberships
A Audit and Risk Committee member
N Nominations Committee member
R Remuneration Committee member
D Designated NED for colleague matters
I Independent Director
Chair
G
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Alison Brittain
Independent
Non-Executive Director
and Chair Designate
Key strengths
Highly experienced business
leader who brings considerable
expertise as CEO and NED of
a range of consumer-facing
companies, and prior to this
has held senior roles in the
UK banking industry. Has
successfully scaled businesses in
the UK and internationally. Long-
standing plc experience and
shareholder understanding.
Dunelm role
As an Independent Non-
Executive Director, provides
strategic advice, monitors
management performance and
oversees risk management.
Will regularly visit the Dunelm
website, stores and non-store
sites to meet colleagues
and members of the senior
management team and attend
meetings of the National
Colleague Voice by rotation.
Will attend investor
presentations. Member of the
Remuneration and Nominations
Committees. Will succeed Andy
Harrison as Chair in 2023 when
he retires from the Board.
Joined Dunelm Board
September 2022
Previous experience
Group Director in the Retail
Division of Lloyds Banking
Group PLC (2011-2015) Board
Director at Santander UK PLC
(2007-2011) and Barclays PLC
(1987-2007). Non-Executive
Director of Marks and Spencer
Group plc (2014-2020).
Other commitments and
relevant activities
CEO of Whitbread PLC and
Senior Independent Director
at Experian plc.
Gender and ethnicity
Female, British
Ian Bull
Independent
Non-Executive Director
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 and
attends meetings of the National
Colleague Voice by rotation.
Attends investor presentations
and shareholder meetings. Chair
of the Audit and Risk Committee.
Joined Dunelm Board
July 2019
Previous experience
Chief Financial Officer of
Parkdean Resorts Group (2016
to 2018). Chief Financial Officer
of Ladbrokes plc (2011 to
2016). Group Finance Director
of Greene King plc (2006 to
2011). Early finance career at
Whitbread PLC, Walt Disney
Company and BT Group.
Former Non-Executive Director
of Paypoint Limited and Senior
Independent Director and Chair
of the Audit Committee at St.
Modwen Properties plc.
Other commitments and
relevant activities
Chair of Lookers plc, Senior
Independent Director at
Domino’s Pizza Group plc.
Member of Chapter Zero, the
Directors’ Climate Forum, and a
regular attendee of its events.
Gender and ethnicity
Male, British
William Reeve
Senior Independent
Non-Executive Director
Key strengths
An entrepreneur and technology
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 and engages with the
National Colleague Voice
by rotation and annually on
remuneration matters. Attends
investor presentations. Senior
Independent Director and 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 (Chair),
Paddy Power plc, Zoopla and
Chair of Nutmeg Saving and
Investments Limited.
Other commitments and
relevant activities
Chief Executive of Oh Goodlord
Limited.
Gender and ethnicity
Male, British
Kelly Devine
Independent
Non-Executive Director
Key strengths
An experienced business
leader having held multiple
executive roles in financial
services and payment firms.
Deep experience building
enterprise partnerships in
complex ecosystems to increase
market share. Passionate about
building extraordinary teams
and developing people.
Dunelm role
As an Independent 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 and attends
meetings of the National
Colleague Voice by rotation.
Attends investor presentations.
Member of the Audit and Risk,
Remuneration and Nominations
Committees.
Joined Dunelm Board
March 2022
Previous experience
SVP Head of Bank Partnerships
(2018-2020). Various roles at
Mastercard (2015-2018). Various
roles at American Express
(2005-2015). Member of PwC’s
Economics consultancy practice
(2003-2005).
Other commitments and
relevant activities
President of Mastercard UK
& Ireland. Board Member at
UK Finance.
Gender and ethnicity
Female, British
ANNUAL REPORT AND ACCOUNTS 2022 85
DUNELM GROUP PLC
Corporate governance report
Directors and officers continued
Committee memberships
A Audit and Risk Committee member
N Nominations Committee member
R Remuneration Committee member
D Designated NED for colleague matters
I Independent Director
Chair
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Peter Ruis
Independent Non-
Executive Director
Key strengths
A current CEO 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 and
attends meetings of the National
Colleague Voice by rotation.
Attends investor presentations.
Joined Dunelm Board
September 2015
Previous experience
Managing Director of URBN
Corporation (2018 to 2020),
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 and
relevant activities
CEO of Indigo Books &
Music Inc.
Gender and ethnicity
Male, British
Arja Taaveniku
Independent
Non-Executive Director
Key strengths
A former CEO with a breadth of
knowledge from international
home retail businesses, with
specific expertise in the strategic
and operational development
of customer propositions and
product value chains, alongside
environmental, social and
governance initiatives.
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 and
attends meetings of the National
Colleague Voice by rotation.
Attends investor presentations.
Joined Dunelm Board
February 2021
Previous experience
Member of Group Executive
of Kingfisher plc and CEO
of its subsidiary, Kingfisher
International Products Limited
(2015 to 2018). CEO of Ikano
Group S.A. (2012 to 2015).
Various leadership roles at IKEA
Group including Global Business
Area Director (1989 to 2012).
Until recently Non-Executive
Director at Nobia Group.
Other commitments and
relevant activities
Chair of the board at Svenska
Handelsfastigheter AB and of
Polarn O. Pyret. Non-Executive
Director at Handelsbanken
Group.
Gender and ethnicity
Female, Swedish
Marion Sears
Non-Independent
Non-Executive Director
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.
Designated Non-Executive
Director for colleague matters
and usually attends meetings of
the National Colleague Voice.
Joined Dunelm Board
July 2004. Marion was Senior
Independent Director and Chair
of the Remuneration Committee
from 2006 to 2015 and Chair of the
Nominations Committee until 2016.
Previous experience
Robert Fleming, JP Morgan
Investment Banking. Former
Chair of the Corporate
Responsibility Committee
at Persimmon plc.
Other commitments and
relevant activities
Non-Executive Director
and Chair of Remuneration
Committee at WHSmith plc,
and Keywords Studios plc, and
Senior Independent Director at
abrdn New Dawn Investment
Trust plc. Director of WA Capital
Limited. Member of Chapter
Zero, the Directors’ Climate
Forum, and a regular attendee
of its events.
Gender and ethnicity
Female, British
Vijay Talwar
Independent
Non-Executive Director
Key strengths
An experienced CEO who has
held multiple executive roles
across consumer products,
online and retail sectors.
Proven business leadership in
driving multichannel digital
transformation through
progressive strategies, with
expertise in a global enterprise
operating in 90+ countries.
Customer focused and strategic.
Dunelm role
As an Independent 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. Member of
the Audit and Risk, Remuneration
and Nominations Committees.
Joined Dunelm Board
October 2021
Previous experience
Various leadership roles at
Foot Locker including CEO of
Footlocker EMEA (2019 to 2022)
and President of Digital at Foot
Locker (2016 to 2019). President
of Gifts/Special Occasions at
Sears Holdings (2014 to 2016).
President of International,
Chief Executive Officer, Chief
Financial Officer at Blue Nile
(2010 to 2014). Chief Executive
Officer at William J Clinton
Foundation India (2008 to 2010).
Chief Operating Officer for
EMEA at Nike (2002 to 2008).
Director of ContextLogic Inc
(Feb 2022 to Sep 2022).
Other commitments and
relevant activities
Board member at Federation of
the European Sporting Goods
Industry. Board of Advisors at
Vouched.id.
Gender and ethnicity
Male, Indian
86 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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BOARD ANALYSIS
Length of tenure
years
5
2
By gender
%
42
<1 year
1-3 years
4-5 years
>5 years
4
1
Male
Female
58
By independence*
%
36
Independent
Non-independent
64
* Numbers exclude Chairman who was independent on appointment.
Bill Adderley
Founder and Life President
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 online at dunelm.com.
Dawn Durrant
Company Secretary
Key strengths
Extensive plc company secretarial
and legal experience including
corporate governance, legal and
regulatory compliance, mergers
and acquisitions, company
and commercial, retail and
consumer law.
Dunelm role
Responsible for governance,
legal and regulatory matters, and
led the Group’s sustainability
activities until the CEO assumed
responsibility for this in July
2021. Member of the Pathway
to Zero Steering Group and the
Risk and Resilience Committee.
Member of the Executive Board
and engages with investors and
the National Colleague Voice on
sustainability.
Joined Dunelm Board
November 2011
Previous experience
Qualified as a solicitor at Allen &
Overy (1988 to 1994). Company
Secretary of Geest plc (1994
to 2005).
Other commitments and
relevant activities
Member of Chapter Zero, the
Directors’ Climate Forum, and a
regular attendee of its events.
Gender and ethnicity
Female, British
Notes:
Vijay Talwar joined the Board on 1 October 2021.
Kelly Devine joined the Board on 1 March 2022.
Laura Carr was CFO during the period and stepped
down from the Board on 8 June 2022.
Karen Witts joined the Board on 9 June 2022.
Alison Brittain joined the Board on 7 September 2022.
ANNUAL REPORT AND ACCOUNTS 2022 87
DUNELM GROUP PLC
Corporate governance report
Board leadership
and company purpose
A down-to-earth approach to governance
DOING THINGS PROPERLY
We believe that good governance –
in our words ‘doing things properly’
– leads to stronger value creation, the
building of greater understanding
and trust of our business, lowering
risks and creating opportunities for
all stakeholders.
PRAGMATIC APPLICATION
We are pragmatic in our approach
and apply corporate governance
guidelines in a way that is beneficial
to our business, and our stakeholders,
consistent with our culture and true to
our shared values.
SETTING THE TONE FROM
THE TOP
It is the Board’s responsibility to instil
and maintain a culture of openness,
integrity and transparency throughout
the business, through our policies
and communications, and by the way
in which the Board, and therefore
Dunelm, acts.
COMPLY OR EXPLAIN
If we decide that the interests of the
Group can be better served by doing
things in a different way – without
compromising our purpose, culture
or shared values – we will explain our
reasons why in a thoughtful, compelling
way, including how we have mitigated
any impacts of not following the
Corporate Governance Code.
ALWAYS AIMING TO COMPLY
We always intend to comply with
the prevailing principles of good
governance and codes of best practice
honestly, simply, transparently, and
with clarity and integrity.
CONSIDERED
DECISION-MAKING
Our Board members believe it is more
important to focus on what is right for
Dunelm than be in the spotlight; we are
prepared to live with our decisions for
the long term, and we care about and
listen to our stakeholders.
We have always believed that good governance helps companies make better decisions for the benefit of all stakeholders,
including the communities in which they operate, and for the economy, environment, and society as a whole. This is
reflected in our purpose and shared values which are referred to throughout this report. We fully support the Corporate
Governance Code, which sets out good practice that boards should adopt to be effective, accountable, transparent and
focused on success over the longer term; and which encourages boards to focus on their purpose and culture, and to
respond demonstrably to society’s demand that they consider the needs and expectations of their stakeholders.
Our governance approach, summarised above, has not changed fundamentally since the flotation of the Company in
2006. We do, however, review emerging guidance and best practice regularly to ensure we follow not just words and
processes but the spirit of what is being asked of today’s UK plc.
PROMOTING AND PRESERVING
LONG-TERM VALUE
Our Board members continue to work
effectively together and are committed
to promoting the long-term success
of the Company, generating value
for all stakeholders, including the
wider contribution to the economy
and society. The Board believes that
good governance supports Dunelm’s
purpose, shared values and strategy,
and is satisfied that these elements and
Dunelm’s culture are aligned.
Strategic elements are reviewed every
year by the Board and brought together
on our ‘plan on a page’ which we use for
internal and external communication.
i
For more information on ‘our plan on a page’
see page 4.
CORPORATE GOVERNANCE UPDATE FY22
Our Corporate Governance meeting,
normally held every two years, took
place in March 2022. This gives the
corporate governance representatives
of our shareholders an opportunity to
discuss a range of governance topics
with the Chairman, Deputy Chairman,
Non‑Executive Directors and the Company
Secretary. We opened with a short
presentation which covered our purpose, strategy, shared values and culture; our
corporate governance approach; how we are engaging with stakeholders; Board
composition and succession planning; the work of the Audit and Risk Committee,
Remuneration Committee, and Nominations Committee; and an overview of
our sustainability focus areas and progress. This was followed by a wide-ranging
discussion of topics including Board composition and succession, executive pay,
colleague engagement and wellbeing, and climate change. Attendees told us that
they were pleased to be given the opportunity to meet and exchange views with
Dunelm’s non-executive Board members – which other companies who they follow
do not provide – and they confirmed that the ideal frequency for these meetings is
once every two years.
A copy of the Corporate Governance presentation from March 2022, together
with presentations from previous years, can be found on our corporate website:
corporate.dunelm.com.
88 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
Our governance framework
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The Board as a whole is responsible for:
PURPOSE, VALUES,
AND STRATEGY
GOVERNANCE
PERFORMANCE
Setting and role modelling our
corporate purpose and shared values.
Instilling and maintaining a culture of
openness, integrity and transparency.
Setting the strategy to deliver our
purpose and 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.
Ensuring that resources are in place
to deliver the strategy.
Oversight of succession planning and
talent management.
Ensuring that financial and other controls
and processes for risk management are
in place and working effectively.
Setting an effective remuneration policy.
Ensuring that a process for assessing
stakeholder balance is embedded in key
decision-making and maintaining good
relationships with shareholders and all
our stakeholders.
Reviewing progress towards strategic
and operational goals and the
performance of management.
Ensuring that Board balance
and committee membership are
appropriate and effective, and fully
compliant with the requirements of
the Corporate Governance Code.
Board and management committee structure
OUR BOARD
i
For Directors' biographies see page 84 and Board activities page 91.
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NOMINATIONS COMMITTEE
AUDIT AND RISK COMMITTEE
REMUNERATION COMMITTEE
i
Nominations Committee Report
see page 110.
i
Audit and Risk Committee Report
see page 120.
i
Remuneration Committee Report
see page 130.
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CHIEF EXECUTIVE OFFICER (CEO)
Responsible for running the business and setting and executing the Group strategy.
Executive Board
Supports CEO, to
develop and deliver
strategy, monitor
performance,
review budget and
operational plans.
Risk and Resilience
Committee
Oversight and review
of principal and
operational risks.
Chaired by the CFO.
Pathway to Zero
Steering Group
Manages and tracks
progress of initiatives
to address the impact
of climate change on
our business.
Talent Committee
Oversight and
development of
succession planning
pipeline at all levels.
i
Biographies available
on corporate.duneIm.com.
i
For more information
see page 126.
i
For more information
see page 32.
i
For more information
see page 57.
ANNUAL REPORT AND ACCOUNTS 2022 89
DUNELM GROUP PLC
Corporate governance report
Board leadership and company purpose
continued
NON-EXECUTIVE DIRECTOR MEETINGS
There is a scheduled ‘Non-Executive Director only’ meeting
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.
MANAGING CONFLICTS OF INTERESTS
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 also takes action to ensure that the influence
of third parties does not compromise or override the
independent judgement of the Board. Should Directors
have any concerns about the operation of the Board or
Dunelm management that cannot be resolved, these
can be recorded in Board minutes. If, upon resignation,
any Non-Executive Director had concerns of this nature,
they may provide a written statement to the Chair for
circulation.
The Board considers that its procedures to approve
conflicts of interest and potential conflicts of interest,
and to provide a communications channel for any
unresolved concerns, are in place and operating
effectively.
i
For more information see page 166 in the
Directors’ report.
BOARD COMMITTEES
The Board has three committees: a Nominations Committee,
an Audit and Risk Committee and a Remuneration Committee.
The terms of reference of each of these committees can be
found on the Group’s website and are available from the
Company Secretary.
Details of the membership of the Committees and of their
activities during the past financial year can be found in the
reports from the Chair of each of the Committees on pages
110, 120 and 130.
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
Accounts, significant capital or contractual commitments,
maintaining internal control and risk management and
approval of significant Group-wide policies.
At each meeting, the Chief Executive Officer reports on
strategic progress and operational performance (including
customers, colleagues and health and safety), and the Chief
Financial Officer reports on financial performance. There is
a rolling agenda of other operational, strategic, sustainability
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
FY22 are set out on the opposite page.
BOARD ATTENDANCE
The Board held nine 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
Andy Harrison (Chairman)
Sir Will Adderley (Deputy Chairman)
Nick Wilkinson (CEO)
Karen Witts1 (CFO)
Ian Bull2
Kelly Devine
William Reeve
Peter Ruis
Marion Sears
Arja Taaveniku2
Vijay Talwar
Alison Brittain3
Meetings
attended
9/9
9/9
9/9
0/0
8/9
3/3
9/9
9/9
9/9
8/9
7/7
0/0
1.
2.
Karen Witts joined the Board on 9 June 2022. There were no meetings of
the Board between that date and the period end. Laura Carr, who stepped
down from the Board as CFO on 8 June 2022, attended all Board meetings
held in the year.
Ian Bull and Arja Taaveniku missed one meeting due to a prior commitment.
When unable to attend a meeting, a Director receives papers and feeds
back comments in advance to Andy Harrison, the Board Chair.
3. Alison Brittain joined the Board on 7 September 2022, after the year end.
90 DUNELM GROUP PLC
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HOW THE BOARD SPENT ITS TIME
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. While we do not split out time spent discussing sustainability topics as they fall into all three categories, we have
listed them separately in the table below to demonstrate the clear shift in focus over recent years.
Minutes of all Board and Committee meetings are taken by the Company Secretary and circulated for comments and approval.
Any unresolved concerns raised by a Director are recorded in the minutes.
At each meeting the Board receives an update on customers, people, health and safety, regulatory breaches (if any), policy
breaches (if any), reports to the whistleblowing helpline and a sustainability update including quarterly KPIs.
Topics of Board focus during the year
Purpose and
strategy
Governance
and risk
Operational
• Purpose, ambitions and strategy
• Climate change and sustainability
• Culture and values
• Capital structure and dividend policy
• Budget and future financial plan
• Annual approval of Tax Strategy
• Competitor reviews
• Board succession
• Approved annual Gender Pay Gap Report
• Board independence, composition and diversity
• Diversity and inclusion
• Investor feedback via advisers
• Health and safety
• AGM voting and feedback
• Ethical sourcing and modern slavery
• Cyber security and data protection
• Stakeholder engagement
• Corporate governance and audit reform
• Feedback from National Colleague Voice
• Review of half-year and year-end principal risks, including climate change and environment, regulatory, reputational
and people risks
• Approved annual statement under the Modern Slavery Act
• Colleague reward and fair pay
• Talent, succession and capability
• Technology strategy
• Data and insight
• Plan to grow and deepen customer base
• Brilliant stores
• Digital shopping experience
• Supply chain strategy
• Customer operations and post-sale service
• Product strategy
• People update from the Stores and People Director, which included consideration of reward, training and
development, and diversity data (age, gender, ethnicity)
Sustainability
• Approved Scope 3 greenhouse gas emissions target
• Two external presentations on Business Strategies to Regenerate Nature, Society and the Economy and Human
Connections in a Digital World
• Approved Sustainability section, Risks and Uncertainties and TCFD disclosure
• Reviewed feedback from National Colleague Voice on sustainability
• Approved sustainability-linked Revolving Credit Facility
• Two presentations on neurodiversity and physical disability
• Annual health and safety and waste management presentation
• Product strategy – including approach to sourcing of more sustainable products and circularity
• Updated climate change risk assessment
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
91
Corporate governance report
Board leadership and company purpose
continued
Codes of conduct
Alongside our shared values we have a Code of Business
Conduct and Colleague Code of Conduct, available on our
corporate website: corporate.dunelm.com, which sets out
the specific standards of conduct, including human rights
standards, that our Board and colleagues are expected to
meet. We have a separate Anti-Corruption and Anti-Bribery
Policy, and senior colleagues and colleagues who have the
ability to influence purchasing decisions receive training
on induction and annual refresher training. Other relevant
policies include our Privacy Policy and our Equality and
Diversity Policy.
Suppliers
We also expect our suppliers to adhere to our standards
of conduct; all suppliers are required to adopt our Anti-
Corruption and Anti-Bribery Policy (or commit to an
equivalent policy), and to sign our Ethical Code of Conduct for
Suppliers and Partners which commits them to appropriate
ethical and human rights standards (including anti-slavery)
and to minimise their impact on the environment. Adherence
is monitored closely by the Executive Board and Board.
BRINGING OUR SHARED VALUES TO LIFE
ACT LIKE
OWNERS
KEEP LISTENING
AND LEARNING
LONG-TERM
THINKING
STRONGER
TOGETHER
Our shared values have evolved over time from the
business principles formulated by Sir Will Adderley,
our Deputy Chairman, over a decade ago, and continue
to encapsulate the values of the Company’s founders,
the Adderley family. We have been pleased that the
evolution of our shared values has never required
wholesale alterations – an indication of their strength
and importance to the business. In FY22, given the
speed at which our business is growing, our People
Team undertook a project to bring our shared values
to life, and to make these values and their associated
behaviours and leadership styles easier to understand
and communicate.
HOW THE BOARD OVERSEES OUR CULTURE
Overview
Dunelm has an open and straightforward culture, with a focus
on doing things properly and taking decisions for the long
term. This reflects the shared values instilled by the Adderley
family, who founded our business over 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
Our purpose, which we rearticulated and adopted in FY21, is
‘To help create the joy of truly feeling at home, now and for
generations to come’. Our purpose explains why we do what
we do (i.e., why we exist within the UK homewares market,
our long-lasting/sustainable approach and what we seek to
achieve). On the inside front cover our CEO, Nick, reiterates
how our purpose is being used increasingly within the
business to drive everything that we do and, on pages 6 to 13,
we explain how purpose-led decisions and actions strengthen
our business to support growth. Our ‘plan on a page’ on page
4 shows how our purpose, proposition, strategic focus areas
and shared values interlink and are communicated to internal
and external stakeholders. Our purpose also sits at the heart of
our sustainability reporting (pages 32 to 67).
Shared values
Our shared values underpin our purpose and describe how
all colleagues in the Company are expected to act towards
others and influence our culture. Our Board and senior
leadership team role model our shared values and at our
Board’s strategy days, our five-year plan and the strategic
elements which will deliver the objectives described in it,
were debated and challenged in the context of our purpose
and shared values. Our shared values are also reflected in
our Code of Business Conduct, our Anti-Corruption and
Anti-Bribery Policy, our Ethical Code of Conduct for Supplier
and Partners, our Colleague Code of Conduct and other
policies such as our Tax Strategy. They are also an important
expression of how we look after our colleagues – from
employee representation through our National Colleague
Voice (NCV) (see page 54) to further initiatives in health and
wellbeing, and diversity and inclusion (see pages 52 to 56).
All colleagues learn about our purpose and shared values on
induction; we recruit with them in mind, they form part of our
communications, and colleagues are assessed against them.
Colleagues, people and culture
We aim to inspire, engage and develop all of our colleagues
to reach their full potential, without any form of discrimination.
The Board engages directly with our colleagues in a number
of ways as set out below on page 98. By training, listening
to, respecting and responding to our colleagues, we inspire
them to deliver the best experience to our customers and
deliver our strategy. People and culture is one of our principal
risks considered formally by the Executive Board and Board
of Directors twice a year. For more information on our people
and culture risk see page 74.
92
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
G
O
V
E
R
N
A
N
C
E
HOW THE BOARD MONITORS OUR CULTURE
The Board regularly monitors the culture of the business in
a number of ways:
• Interacting with members of the Executive Board, members
of the Dunelm Leadership Team, and other colleagues in
Board meetings and with colleagues on visits to stores and
other Company locations. Colleagues can (and do!) speak
openly to all Board and Executive Board members and are
encouraged to feed back ideas of how we can do better.
• 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 and regulatory breaches.
• Reviewing a set of ‘culture’ KPIs once a year alongside our
risk register. These are set out below:
Customer
NPS, brand perception metrics
Colleague
eNPS, labour turnover, gender pay gap
Product
Ethical audits completed, ethical audit scores,
ethical policy breaches, product recalls
Safety
RIDDORs
Compliance
Prosecutions, reportable data breaches,
Bribery Act training completed, whistleblowing
reports
• As an overall proxy for measuring ‘culture’ we use our
colleague engagement (eNPS) – a Group KPI, which is also
a remuneration measure (annual bonus) for our CEO and
CFO and all members of the Executive Board.
• Reviewing our ‘Colleague Dashboard’ at least twice a
year, looking at a range of colleague indicators, including
engagement, retention, absence, gender pay, diversity,
workforce composition and demographics. These inform
Board and Committee decisions on talent management,
share incentives and executive pay, and form part of the
assessment of the performance of the Executive Directors.
• Engaging formally with National Colleague Voice
representatives and via our designed NED for colleague
matters. Our Chief Executive, Nick Wilkinson, and at least
one of our Non-Executive Directors (by rotation) engages
formally at meetings every two months with our colleague
representative body, the National Colleague Voice. Marion
Sears, as designated NED for colleague matters, provides a
direct, regular and formal route of contact with colleagues.
Each meeting includes a ‘Big Topic’ where members are
encouraged to feed back views and ideas, and Marion
reports back to the Board after each meeting. Further
details are set out on page 99.
• Engaging with other stakeholders, as described in
the s172 Companies Act section of this Corporate
Governance Report.
During the year, and at the formal reviews in September
2021 and September 2022, the Board was satisfied that
the policy, practices and behaviour of the Board and
Dunelm colleagues aligned with the Company’s purpose,
values and strategy and that no correction was required
by management.
ANNUAL REPORT AND ACCOUNTS 2022 93
DUNELM GROUP PLC
Corporate governance report
Section 172 Companies Act 2006
SUMMARY: KEEPING SECTION 172 HIGH ON THE AGENDA
We ensure that the requirements of s172(1) Companies Act 2006 are met
and the interests of our stakeholder groups are considered, challenged and
debated through a combination of the following practical approaches:
• The Board sets the Group’s purpose, ambitions and strategy and carries
out an annual strategy review which assesses the long-term sustainable
success of the Group and our impact on key stakeholders. Agenda items for
the following year are set based on the decisions and next steps agreed at
these meetings.
• The Board’s risk management procedures identify the principal risks facing
the Group, and the mitigations in place to manage the impact of these risks.
Many of these relate specifically to our stakeholder groups.
• The Company Secretary sets out the text of section 172(1) Companies Act
2006 on every Board agenda by way of a reminder, and reflects relevant
factors considered against each agenda item in the minutes.
• Standing agenda items and papers are presented at each Board meeting as
detailed on page 106: for example, the CEO presents a customer report, a
health and safety report and an update on people matters at each meeting;
the Company Secretary reports on sustainability matters in each meeting.
• There are regularly scheduled in-depth Board presentations and reports:
for example, investor feedback twice a year from our brokers and corporate
PR advisers; an update on people matters and a ‘Colleague Dashboard’
twice a year; an annual presentation on health and safety; and annual
updates on ethical trading, modern slavery and climate change and
sustainability.
• There is a formal review of many of these topics through standard Audit and
Risk Committee and Remuneration Committee agenda items, as described
later in this report.
• Where a particular matter or decision requires a balance of stakeholder
interests, a summary of the relevant factors is set out by stakeholder in the
supporting papers that are submitted to the Board and are minuted.
• Board members regularly attend seminars organised by external parties
which provide updates on investor and governance concerns, including
climate change and sustainability. The Company Secretary also regularly
attends these events, and circulates a summary of relevant issues and
presentations/papers with Board papers.
• This year, to improve the Board’s awareness of issues relating to diversity
and inclusion, the Board attended two training events hosted by Dunelm’s
partner, Unleashed.
• The Board regularly reviews the KPIs which it receives in relation to each
stakeholder group and requests additional information when relevant.
OUR APPROACH TO S172
REPORTING
Each of our Directors is mindful of
their duties under section 172 (s172)
to run the Company for the long-term
benefit of its shareholders and, in
doing so, to consider the interests of
its key stakeholders during its decision‑
making, and the impact of any of its
decisions on stakeholder relationships,
on the Company’s reputation for high
standards of business conduct, and on
the environment.
Although we have taken the matters
set out in s172 into consideration for
many years, the Code requires us to
provide specific information about
how the Group and the Directors have
considered them, with recent guidance
encouraging greater insight into the
outcome of stakeholder engagement
rather than the process itself.
The matters encompassed in s172 touch
on everything we do, and, in reality,
most of the day-to-day decision-making
and stakeholder engagement is carried
out at the business level by members of
our Executive Board, and the Dunelm
Leadership Team. However, more
material matters require the attention
of the Board and wider discussion,
and we describe on pages 95 to 102
and through case studies on pages
103 to 105 how these are considered
and challenged through formal Board
processes, how the Board engages
with stakeholders and how it oversees
how the business does so. We include
cross references to other sections of
this report where more information and
examples can be found.
The Non-Financial Information
Statement on page 167 should be
used to identify information relevant to
s172 factors, as should the numerous
operational actions and outcomes
described in our Sustainability section
on pages 32 to 67, resulting from
significant engagement with various
stakeholder groups.
94 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
About our stakeholders
G
O
V
E
R
N
A
N
C
E
Our actions and decisions are highly
likely to impact our key stakeholders
(and vice versa); we cannot follow our
purpose, live up to our ambitions nor
deliver our strategy without them.
The importance that we place on
each key stakeholder group in
relation to our longer-term thinking
can be demonstrated through our
three Group ambitions, as set out in
the table to the right on this page.
Our ambitions are aspirational, will
still be relevant in the medium to
long term and each one is supported
by Group KPIs (see pages 24 and 25)
which indicate the effectiveness of
our engagement. Our Directors are
regularly informed about our key
stakeholders and their interests, and
engage with them formally and on an
ad hoc basis.
Key stakeholders
HOW KEY STAKEHOLDERS ARE RELEVANT TO OUR AMBITIONS
Our brand
AMBITIOUS ABOUT
Being a good
company
Profitable growth
RELEVANCE TO KEY STAKEHOLDER GROUPS
Customers
Store communities
Shareholders
Suppliers
Colleagues
Colleagues
Suppliers
Shareholders
OTHER STAKEHOLDERS
In addition to the Group’s key stakeholders we have
others with whom our Board and/or senior management
interact regularly.
We have a trusted team of professional advisers (for example,
brokers, financial PR, accountancy firms and recruitment,
environment and sustainability advisers); through our
Revolving Credit Facility we have relationships with a number
of banks; the majority of our stores are leasehold premises,
and so we have relationships with many landlords; and we
have a number of supplier partners who provide services to us
in logistics, technology and construction/store development.
We also have relationships with regulators, including
Leicestershire and Charnwood County Councils with whom
we have a Primary Authority relationship and other bodies
such as the Health and Safety Executive, Trading Standards
and Environmental Health Officers. We also engage with
national, regional and local media, and social media
influencers, and many of our senior colleagues represent
Dunelm on industry bodies and working groups, such as
Textiles 2030, Better Cotton and the British Retail Consortium.
Our approach to all our stakeholders is to seek to build
long-term relationships based on fairness and respect, and
to meet our contractual obligations, consistent with our Code
of Business Conduct and our shared values.
i
Further information about how we manage our stakeholder
relationships at the operational level can be found in our
Sustainability section, from page 32.
STAKEHOLDER INFORMATION
Taking on board recommendations from the Financial
Reporting Council (FRC) and other guidance, on the
following pages, for each key stakeholder group, we
provide information on:
• Why we engage with them.
• What each stakeholder group cares about; matters that we
know are important to our key stakeholders as a result of
our various engagement methods.
• Who has key responsibility for stakeholder engagement
(operational level).
• Core operational stakeholder engagement channels
(operational level), indicating where stakeholders have
access to independent reporting mechanisms.
• How and when our Board members have opportunities to
engage directly.
• How our Board is informed/keeps oversight, including how
important stakeholder feedback is presented to the Board
for debate and discussion.
• How we measure the effectiveness of our engagement
(through key measures routinely monitored by the Board).
Performance against some of these measures is detailed
on pages 24 to 25. Sustainability metrics are presented on
pages 34 to 35, with commentary on pages 36 to 60. For
some measures, performance is not published owing to
commercial sensitivity, or simply owing to the recent adoption
of the measure in question.
ANNUAL REPORT AND ACCOUNTS 2022 95
DUNELM GROUP PLC
Corporate governance report
Section 172 Companies Act 2006 continued
Customers
WHY WE ENGAGE
Our plan is to become our customers’ 1st Choice for Home
by delivering the best products, services and experiences
for them. Engagement improves our customer insight and
influences our focus areas and capital allocation. Recent
investment in customer data and insight means we can
respond more quickly and accurately to develop relevant
product ranges and services, drive brand awareness and
grow our customer base and customer loyalty.
i
For more information see page 49.
WHAT OUR CUSTOMERS CARE ABOUT
• Products that are great value, with choice, style, quality
and sustainability.
• Convenient and accessible shopping options.
• Safe shopping services (in-store and home delivery).
• Safe products to buy and to eat (in our cafes).
• Responsive customer service.
• Friendly, knowledgeable colleagues.
• Fair marketing practices.
• Responsible use of personal data.
• Ethical and sustainable brand they can trust.
HOW WE ENGAGE AND HOW WE MEASURE OUR EFFECTIVENESS
Key management
responsibility
Core operational
engagement channels
How our Board
engages directly
How our Board is informed/
keeps oversight
Measures routinely
reviewed by the Board
CUSTOMER
DIRECTOR –
MEMBER OF
THE EXECUTIVE
BOARD
Customer focus groups/
panels; ‘How did we do?’
questionnaire*.
Formal annual store visits
and ad hoc visits to stores
as customers.
Customer hotline*
available seven days
a week;
Customer engagement
centre*/individual store
managers.
CEO/Deputy Chairman
reply personally to
customers.
Every Board meeting:
• Unique active customers
• Customer insight report,
including customer
satisfaction scores and
other customer KPIs.
growth #
• Total revenue #
• Net promoter score #
• Perfect order scores
• Safety score
• CO2 emissions #
• Reportable accidents under
RIDDOR
• Customer quality and value
perception
• Number of reportable data
breaches (if any)
• Regulatory breaches/
reputational issues (if any)
Measures in bold are reviewed
at every Board meeting; others
at least once a year.
# denotes Group KPI
(pages 24-25)
* Denotes independent feedback channel.
96 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
G
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N
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Store communities
WHY WE ENGAGE
By understanding local community needs and concerns we
build awareness and trust, help evolve our customer offer,
strengthen our reputation, and provide another reason to
shop with us. We learned the importance of having a ‘voice’
in our communities and how much our customers and
colleagues benefited from being involved in meaningful
local initiatives, by having a direct line of communication
to their stores.
WHAT OUR STORE COMMUNITIES CARE ABOUT
• Meaningful charitable donations and local initiatives.
• Local employment and volunteering opportunities.
• Diverse and inclusive approach that mirrors their
community.
• A business they are proud to have in their
neighbourhood.
• Ethics and sustainability.
• Fair tax policy.
i
For more information see page 50.
HOW WE ENGAGE AND HOW WE MEASURE OUR EFFECTIVENESS
Key management
responsibility
Core operational
engagement channels
How our Board
engages directly
How our Board is informed/
keeps oversight
Measures routinely
reviewed by the Board
STORES
AND PEOPLE
DIRECTOR –
MEMBER OF
THE EXECUTIVE
BOARD
Daily interaction with
local store communities
via individual store
Facebook groups*
(organised by locally
appointed Community
champions).
Group charity
representative invited to
attend annual colleague
conference (see
‘Colleagues’ on page 52).
* Denotes independent feedback channel.
—
CEO reports to Board
on Group-wide activities
(such as ‘Delivering Joy’
initiative to provide gifts
via local charities).
• CO2 emissions #
• Community KPIs (including
charitable and community
activities)
• Diversity data
CEO/Deputy Chairman
reply personally to
customers.
# denotes Group KPI (pages
24-25)
ANNUAL REPORT AND ACCOUNTS 2022 97
DUNELM GROUP PLC
Corporate governance report
Section 172 Companies Act 2006 continued
Colleagues
WHY WE ENGAGE
Being a great place to work and to shop go hand in hand.
We engage with our colleagues to understand how best to
retain, motivate and reward them, how to respond to the
needs of a diverse colleague community, how to look after
their wellbeing, and how to make better decisions for our
customers, store communities and long-term growth.
WHAT OUR COLLEAGUES CARE ABOUT
• Fair, non-discriminatory employment conditions,
pay and benefits.
• Training, development and career opportunities.
• A safe place to work.
• Diversity and inclusion.
• Responsible use of personal data.
• A business that listens and takes action in response.
• A business they trust and are proud to work for.
i
For more information see page 52.
HOW WE ENGAGE AND HOW WE MEASURE OUR EFFECTIVENESS
Key management
responsibility
Core operational
engagement channels
How our Board
engages directly
How our Board is informed/
keeps oversight
Measures routinely
reviewed by the Board
STORES
AND PEOPLE
DIRECTOR –
MEMBER OF
THE EXECUTIVE
BOARD
Twice-yearly colleague
engagement survey*,
followed up by targeted
pulse survey, if needed.
All colleagues
represented through
our National Colleague
Voice* (NCV) with
meetings (online and bi-
monthly for most of FY22).
See pages 54 and 99 for
further details.
Annual conference
for store managers
and senior support
colleagues.
Two-way ‘always on’ Home
Comforts intranet is main
platform for all-colleague
communications,
including CEO updates.
Colleagues can add
comments/questions*
which are answered by
our People Team.
Formal annual store visits
and ad hoc visits to stores
as customers.
CEO, elected NCV
colleagues and
designated Non-
Executive Director for
colleague matters (Marion
Sears) attends; NEDs by
rotation.
Deputy Chairman, CEO,
CFO and Company
Secretary attend annual
conference.
Weekly CEO
communication for
all colleagues. Board
members can view ‘live’
colleague comments/
questions on intranet.
Weekly/monthly
colleague ‘huddles’
(at every store); led by
departmental head for
other business areas.
24/7 independent
whistleblowing hotline*.
—
—
* Denotes independent feedback channel.
Every Board meeting:
• Colleague net promoter
• Colleague matters via
CEO report
• Matters discussed
circulated after each
NCV meeting
score# (updated twice a year
following full survey)
• CO2 emissions#
• Reportable accidents under
RIDDOR
• Whistleblowing hotline
• Bribery Act training
issues analysed by
Company Secretary
and reported monthly
to Board
compliance
• Gender pay gap disclosure,
internal promotions (% home-
grown talent)
Twice a year:
• Colleague turnover
• Colleague engagement
• Reportable data breaches
survey results
(if any)
• Colleague scorecard
• Colleague engagement
results
survey results
• Colleague dashboard results
• NCV meeting feedback
• Whistleblowing reports*
Measures in bold are reviewed
at every Board meeting; others
at least once a year.
# denotes Group KPI (pages
24-25)
98 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
G
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COLLEAGUE ENGAGEMENT IN MORE DETAIL
The Dunelm Board has always sought honest, direct feedback
from our colleagues to help inform and improve the business.
We have formal and informal colleague engagement and
feedback channels, which reflect our ‘listening’ culture and
give our colleagues many opportunities to let us know what
they think. We encourage colleagues to engage personally
with the business wherever feasible; an independent,
confidential whistleblowing helpline is always available,
but we aim for this to be used as a last resort. The vast
majority of our colleagues deal with our customers and local
communities every day and provide valuable insight into our
business, and we value their opinions.
We have a hybrid approach to how we communicate with
our colleagues. Regular Group-wide communications are
shared via our Home Comforts intranet with additional
target-specific updates sent by email. Regular operational
updates by our CEO, Nick Wilkinson, include quarterly results
and are complemented by genuine two-way communication
blog/chat-style discussions to provide support across the
‘Dunelm family’. In the year under review these included fun
activities and competitions alongside business and strategy
developments such as opening our warehouse in Daventry,
our approach to supporting and helping those affected by the
invasion of Ukraine, community activities, wellbeing, mental
health, domestic abuse and personal finance. Our inclusion
and diversity colleague networks (see page 53) also provided
insightful and thought provoking updates throughout the
year on inclusion and diversity matters via Home Comforts,
together with informative and fun events organised online
and in-person to encourage colleague participation and
engagement on this topic.
During FY22 we held six National Colleague Voice (NCV)
meetings. Each was attended by Nick Wilkinson, supported
by the People Team. Marion Sears, who is our designated
Non-Executive Director (NED) for colleague matters, attended
most meetings and other NEDs often joined, together with
Executive Board members who led discussions around
specialist topics. In April 2022, as in previous years, William
Reeve, our Senior Independent Director and Remuneration
Committee Chair, attended to lead colleague engagement
on remuneration. During this session, we discussed our
approach to Fair Reward at all colleague levels, explained
CEO and CFO compensation and asked for feedback. A
description of this engagement and feedback received is
included in the Remuneration Report on page 159.
NCV members represent different colleague groups, with
a good range of age, ethnicity, location, length of service
and level of seniority. Our standard format for each meeting
is to have three main parts: an update from Nick on the
performance of the business, a ‘What’s on your mind?’ item
where members feed back comments and concerns, and
one ‘Big Topic’ where we communicate and seek feedback
on important matters. These topics and NED attendees are
set out in the table below. The aim is to stimulate discussion
and feedback rather than simply have presentations from
management and, following the training received by NCV
members in 2021, meetings have become increasingly useful
to both sides as representatives develop their confidence and
skills as advocates for their colleagues. After each meeting,
feedback is summarised and presented at the next Board
meeting for noting or discussion. We have elevated the
importance of colleague feedback in Board decision-making
and our NCV representatives know that their views
are listened to and result in concrete actions.
NATIONAL COLLEAGUE VOICE (NCV) MEETING TOPICS, BOARD ATTENDEES AND OUTCOMES
Month
‘Big Topic’ discussed
NED attendee
What we did as a result
AUG
2021
DEC
2021
JAN
2021
APR
2021
MAY
2021
JUN
2021
Sustainability
Marion Sears
William Reeve
Developed our communication approach around how we engage our colleagues
and customers with our sustainability plan.
Wellbeing
None
On the back of the feedback, we changed the way we communicated our
wellbeing benefits on our communication platforms, to make it clearer and more
accessible.
We launched a trial of additional store tech equipment investment, to help with
the service of customers.
Engagement
survey results
Reward
Sir Will Adderley
Feedback informed the development of several policies including ways of
working, SLAs on maintenance issues, Christmas opening hours, frequency of
technology updates and store uniforms.
Marion Sears
William Reeve
Feedback had led to prioritising hourly rates over a thank you bonus to increase
level of pay for store colleagues.
An explanation of the role and remit of the Remuneration Committee in setting
Executive pay was provided and colleagues were pleased at the level of care and
scrutiny exercised by the Committee.
Diversity and
inclusion
Marion Sears
Sir Will Adderley
Feedback led to sharing more stories about colleagues within our networks,
to raise awareness of diversity and inclusion matters. Also clarifying that the
networks are open to all colleagues, and the importance of the role of an ally.
New year plans
Marion Sears
Immediate feedback on our business plans for FY23, which had been
communicated that same day. Feedback informed our plans to support
colleagues with the cost of living.
ANNUAL REPORT AND ACCOUNTS 2022 99
DUNELM GROUP PLC
Corporate governance report
Section 172 Companies Act 2006 continued
Suppliers
WHY WE ENGAGE
We do not manufacture the vast majority of products that
we sell. Therefore we need to maintain relationships with
suppliers and manufacturers worldwide who can meet our
high standards. We are a demanding yet fair customer who
aims to meet agreed terms and conditions. We work closely
with our committed suppliers to develop long-standing
relationships and business growth opportunities through
regular engagement.
i
For more information see page 47.
WHAT OUR SUPPLIERS CARE ABOUT
• Fair trading and prompt payment terms.
• Mutual operational improvements.
• High ethical standards (to combat bribery, corruption and
modern day slavery).
• Working in partnership to improve environmental and
sustainable sourcing.
• A business that treats them fairly.
• A business they are proud to supply.
• A growth opportunity for their business.
HOW WE ENGAGE AND HOW WE MEASURE OUR EFFECTIVENESS
Key management
responsibility
Core operational
engagement channels
How our Board
engages directly
How our Board is
informed/keeps oversight
Measures routinely
reviewed by the Board
COMMERCIAL
DIRECTOR –
MEMBER OF
THE EXECUTIVE
BOARD
Annual supplier
conference.
Ad hoc supplier meetings
with Board members.
Annual colleague
conference (key suppliers
normally attend).
Deputy Chairman and
Executive management
attend the supplier
conference.
CEO and Deputy
Chairman meet regularly
with suppliers.
Deputy Chairman, CEO,
CFO and Company
Secretary attend annual
colleague conference.
Via several teams,
including our Design and
Quality and Sourcing
departments; with core
supply chains through
our supplier auditing
processes.
24/7 independent
whistleblowing hotline*.
—
—
* Denotes independent feedback channel.
Annually at Board
meetings:
• Update on ethical
trading/modern
slavery
• Supply chain whistleblowing
reports
• Ethical trading/modern slavery
and supplier payment terms
updates
• Supplier payment
• % Tier 1 factory base audited/
terms reported and
published
low-medium risk audit
performance
Ongoing:
• Supplier interests
championed by Deputy
Chairman
• Whistleblowing
hotline* issues (if any)
analysed by Company
Secretary and reported
monthly to Board
• % products containing
responsibly sourced cotton,
timber, and palm oil
• CO2 emissions #
Measures in bold are reviewed at
every Board meeting; others at
least once a year.
# denotes Group KPI
(pages 24-25)
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ANNUAL REPORT AND ACCOUNTS 2022
G
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Shareholders
WHY WE ENGAGE
Continued access to capital is important if we are to
achieve our long-term aspirations. We work to ensure that
our shareholders and their representatives have a good
understanding of our strategy, business model, investment
opportunities and culture, and we aim to be transparent
and comply with shareholder governance requirements.
Shareholder engagement is a Board affair.
WHAT OUR SHAREHOLDERS CARE ABOUT
• Long-term value creation and growth opportunities.
• High-functioning Board and senior executive team.
• Financial stability and disciplined management.
• Culture and shared values conducive to good
governance and long-term growth.
• Transparency and acting fairly between shareholders.
• Reputation for high standards of business conduct.
• Increasing focus on ethics and sustainability.
• Climate change and biodiversity risks and opportunities.
HOW WE ENGAGE AND HOW WE MEASURE OUR EFFECTIVENESS
Key management
responsibility
Core operational
engagement channels
How our Board
engages directly
How our Board is informed/
keeps oversight
Measures routinely
reviewed by the Board
CEO, CFO and NEDs
attend.
• NED attendance at
• Analysis of share price and share
results presentations
register movements*
• Feedback from results
• Dividend and total shareholder return
CEO, CFO,
COMPANY
SECRETARY
Results
announcements/
presentations at least
six times a year
(with feedback
follow-up* by financial
PR adviser/broker).
Corporate Governance
presentation.
presentations and
investor meetings
twice a year*
• Ad hoc presentations
from brokers
• AGM voting, shareholder
comments and proxy
reports presented*
• Diluted earnings per share #
• Free cash flow #
• Profit before tax #
• Twice-yearly feedback from results
presentations and investor meetings
• AGM feedback and voting from
shareholders and proxy agencies
• Bank covenant compliance
• CO2 emissions #
• Customer/supplier sustainability
measures
Measures in bold are reviewed at every
Board meeting; others at least once a year.
# denotes Group KPI (pages 24-25)
• In FY22, we also presented an update on our sustainability
agenda to an investor conference hosted by our brokers.
• All Directors will be available at the Annual General Meeting
to meet with shareholders and answer their questions.
• The Company Secretary reviews corporate governance
guidelines prepared by our major institutional investors
and their representatives and proxy advisers, and
attends updates from professional advisers summarising
shareholder expectations and voting actions. A summary
of recent developments is provided to the Board at
each meeting.
• Attendance and voting at the AGM.
Feedback received is considered in relation to our strategy,
capital and dividend policy, and governance priorities.
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* Denotes independent feedback channel.
SHAREHOLDER ENGAGEMENT IN MORE DETAIL
The Board, as a whole, is able to obtain a clear understanding
of the views of Dunelm shareholders through various means
of engagement and feedback channels:
• 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-year
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.
• Our Chair and Committee Chairs are available to
shareholders and respond on matters relating to their
responsibilities where requested.
• Corporate Governance meetings with our major
institutional shareholders, attended by the Deputy
Chairman, Sir Will Adderley, the Non-Executive Directors
and Company Secretary.
Corporate governance report
Section 172 Companies Act 2006 continued
IMPACT OF DECISIONS ON CLIMATE CHANGE AND
OUR ENVIRONMENT
As a result of our engagement, we know that matters relating
to climate change and the environment are considered
important to all our key stakeholder groups. In the table
below we summarise important climate change and other
environmental issues and how these are managed and
communicated to our Directors. In addition, we share
how our Board and Board Committees oversaw and were
kept informed on various sustainability topics throughout
FY22, including details of presentations and papers
from internal and external specialists. Details of actions
taken to understand the impact of climate change and
biodiversity on our business, and to monitor and reduce
our environmental impact, can be found in the Carbon
Reduction and TCFD sections of our Sustainability section
on pages 36 to 41 and 61 to 67.
KEY
MANAGEMENT
RESPONSIBILITY
WHAT MATTERS
TO OUR
STAKEHOLDERS
HOW BOARD IS
INFORMED
• CEO (as Chair of Pathway to Zero Working
Group, from July 2021).
• All other members of the Executive Board
have specific responsibilities within their
functional areas.
• Reducing energy usage.
• Reducing emissions from company vehicles.
• Reducing overall GHG emissions.
• Promoting circular solutions, reducing
impact on biodiversity and scarce natural
resources, through product design, closed
loop products, options to reuse, repair,
take-back and recycle.
• Minimising waste, packaging materials and
single-use plastics (across supply chain).
• Responsible sourcing – both ethical and
environmental standards (for example,
cotton, timber, palm oil and coffee).
• Responsible waste management across our
own operations (in-store, delivery network
distribution and support centres).
• Engaging with customers, colleagues,
suppliers and industry groups to promote
and share solutions and best practice.
• Regular presentations on sustainability topics.
• Strategy Day discussion topic.
• Monthly Board report from the Company
Secretary.
• Energy, waste and emissions KPIs reviewed
by the Board regularly.
• Tracking of KPIs against Group sustainability
targets quarterly from FY23.
REPUTATION FOR HIGH STANDARDS OF
BUSINESS CONDUCT
On pages 92 to 93 in this governance report, we explain
how the Board oversees and monitors our culture, including
how our colleagues are expected to maintain our reputation
for high standards of business conduct, by complying with
our Code of Business Conduct and our Colleague Code of
Conduct; how both colleagues and suppliers must comply
with our Anti-Corruption and Anti-Bribery Policy; and
how suppliers and partners must adopt our Ethical Code
of Conduct for Suppliers and Partners. More importantly,
we explain how our shared values and culture guide what
we do and how we do things.
ACTIONS/CHANGE RESULTING FROM BOARD
ENGAGEMENT AND DISCUSSIONS
When making decisions which require balance across
different stakeholder interests, the Board is careful to
consider each stakeholder group separately and in the
context of the long-term interests of the Company. We also
carefully consider whether a decision is consistent with our
culture and shared values, and to ensure that we maintain the
Group’s reputation. Principal decisions made by the Board
during the period where different stakeholder interests were
discussed and considered include:
• To declare a final and special dividend in September
2021, and to declare an in interim and special dividend in
February 2022.
• To recommence a share buyback programme to satisfy
employee entitlements under share incentive schemes.
• To acquire the Sunflex business.
• To invest further in pay for our hourly-paid colleagues
and support colleagues on the lowest pay scale, as well
as our HGV drivers and colleagues in warehousing and
distribution.
• To increase investment in technology, data and insight,
supply chain capacity and human resources to deliver and
support future growth.
• To increase investment in the removal of gas-fired heating
and increase in-house resource to meet our climate
change targets.
• Investment in a new delivery hub in Daventry to support the
growth of our furniture business.
• To invest in our store estate (‘Brilliant stores’ initiative).
On pages 103 to 105 we share three case studies that
show how principal decisions made by the Board involved
considerable debate and discussion and the balancing of
competing interests of key stakeholders.
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Colleague pay decisions taken in FY22
With the business facing post-Covid recruitment
challenges and colleagues facing increased financial
pressures, our Board took the decision to make significant
and ‘flexed’ pay increases across the business, incurring
additional employment costs.
BUSINESS CONTEXT
Dunelm employs over 11,000 colleagues, the majority
of whom are hourly-paid and work in our stores and
distribution centres. Our Remuneration Strategy and
Remuneration Principles are set out in the Remuneration
Policy, and applied throughout the organisation.
Recruitment pressures
In FY22, like many other businesses, we faced a number
of workforce pressures. As the UK emerged from the
Covid pandemic towards the end of 2021, competition
for talent increased the risk of higher labour turnover (with
a consequent loss of knowledge and productivity) and
made it difficult to attract new colleagues in general and,
specifically, in certain areas, such as warehousing and
distribution, technology and digital.
Financial pressures
At the same time, our colleagues faced increasing financial
pressures, with the UK experiencing rising inflation,
particularly in energy, fuel and food bills, and an increase
in National Insurance from April 2022. Combined, these
factors have a disproportionate impact on people at the
lower end of the income scale, including many of our
colleagues, as these costs make up a larger proportion
of their household expenses.
FY22 PAY REVIEW
Hourly-paid colleagues
The annual pay review for most of our hourly-paid
colleagues, who tend to earn the least, usually takes effect
in April each year. In October 2021, we implemented
an exceptional increase to the pay of our warehouse
and distribution colleagues to ensure that their pay was
competitive. For other hourly-paid colleagues, we awarded
an average base pay increase in April 2022 of 7.65%,
which is just over 1% above the increase in the National
Living Wage of 6.6%, as set by the UK Government. This
differential also moved the rate for our store colleagues
to the upper end of the median scale.
Monthly-paid colleagues
The pay review of our monthly-paid colleagues (in
management and support functions) takes place every
August. Usually, we award a flat average rate of increase
across all roles. This year, we decided to implement a
graded approach: colleagues at the lowest tier of our four
‘job levels’ received an average increase of 7%, with other
colleagues receiving an increase that averaged 4%.
Importance of colleague engagement in
decision-making
The Board engages formally with colleagues on pay each
year at a dedicated National Colleague Voice meeting
(see page 99). We also ask questions about pay in our
formal engagement survey, the results of which are fed
back twice a year to the Board. Through this engagement
we know that colleagues are attracted by our overall
employment proposition, which includes a range of
benefits, training and development opportunities,
inclusive wellbeing and mental health programmes, and
additional financial support. However, colleagues also tell
us consistently that they value their fixed pay.
DISCUSSION AND DEBATE
In awarding these pay increases the Board considered
our purpose and shared values, feedback from colleague
engagement and the long-term impact of these outcomes
on the business. For example, the Board discussed the
potential impact of additional employment costs on short-
term profit and shareholder returns, while noting that
ordinary dividend payments had resumed and two special
dividends had been paid in the year (in October 2021 and
March 2022). The Board considered the positive impact
on our customers, recognising that our ability to attract
and retain a higher calibre of engaged, skilled customer-
facing colleagues would provide better customer
service. The Board also noted that the business aimed to
recover additional employment costs through increased
productivity rather than price increases or reducing
investments in other parts of our business. Overall, our
Board considered the approach of awarding a pay increase
that is weighted towards those who are paid the least to
be consistent with our purpose and our shared values of
‘Stronger together’ and ‘Long-term thinking’, in line with
the strategic development of our customer proposition,
and supportive of colleagues who are most impacted by
inflationary cost increases. The Board also concluded that
for these reasons, the proposed investment in pay would
benefit shareholders and the prospects of the business
over the long term.
Risks to Dunelm:
Opportunities
for Dunelm:
Increased employment costs; short-term
impact on profit; diversion from shareholder
returns or other investments.
Improved ability to attract and retain talent;
improved colleague engagement and
financial wellbeing; improved customer
proposition; positive long-term impact on
profits for shareholders.
Key stakeholder
trade-offs:
Colleagues v Shareholders
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S172 case studies continued
New warehouse and hub in Daventry
To support the growth of our furniture and online business,
our Board took the decision to invest in a new furniture
warehouse and Home Delivery Network hub.
by increasing volumes of other products currently going
through third parties, so employment would be maintained;
and that the complexity of managing product flows
distributed across multiple third parties would be reduced
for our Merchandising and Supply Chain teams.
BUSINESS CONTEXT
In January 2022 we started the phased opening of a new
furniture warehouse in Daventry. This project also involved
transferring the home delivery network (HDN) depot
from Northampton and existing furniture operations from
our Stoke warehouse to the new warehouse. Specifically
designed for stocking, handling and distributing furniture
products – and now linked to HDN to improve order
fulfilment and home delivery capacity – the new Daventry
warehouse will help us meet customer demand for furniture
products and overall growth aspirations for our business.
DISCUSSION AND DEBATE
In making its decision, the Board considered the risk to
profit of increasing our fixed costs (offset by reduced
costs of third-party storage and stock movements) and
of business disruption as we transfer to a new site, which
would impact shareholders and any colleagues whose pay
included performance-related incentives.
The Board also considered potential impacts on
colleagues and local communities. It noted that all Dunelm
colleagues in the Northampton depot would be offered
the opportunity to transfer to Daventry (around 14 miles
away), and that this operation would expand, creating new
job opportunities in the local community; that reduction in
furniture volumes through our Stoke site would be offset
For other stakeholders, the Board noted that increased
capacity would enable us to deliver a better service to
customers, which would also benefit suppliers through
increased sales. The warehouse’s location in the centre of
the UK is serviced by excellent trunking routes, which will
help optimise journeys and shorten delivery times, and
there is the possibility of transporting stock by rail from
ports, in both cases reducing road miles and environmental
impact. The additional environmental impact of operating
a new facility would be offset by decreasing the use of
third-party storage facilities. The Board decided that the
long-term benefits of investing in capacity to meet our
growth and improve our customer proposition outweighed
the disadvantages.
Risks to Dunelm: Short-term impact on profit; impact on
Opportunities
for Dunelm:
short-term bonus and long-term incentives
for certain colleagues; increased fixed cost
base; diversion from other investments.
Improved customer proposition; additional
capacity for growth of the furniture business;
increased employment; reduced carbon
emissions; long-term benefit to shareholders,
customers, colleagues, suppliers and
communities.
Key stakeholder
trade-offs:
Customers v Shareholders
Creating joy for our colleagues means
creating a quality working environment.”
Our 200,000 square foot Daventry warehouse is located in a
well‑known logistics hub with excellent access to trunk roads and the
future possibility of linking up ports by rail.
GROWING WITH PURPOSE
Our operations team worked closely with the landlord to discuss
bespoke lay-out requirements, local infrastructure and labour pools, our
shift and vehicle movement patterns, environmental impacts and future
growth prospects. The warehouse is built with modern materials, is well
insulated and has three-stage automatic sensor lighting, complemented
by skylights to provide natural light. Outside, EV chargers are installed
for colleagues and visitors and inside there are lithium-free charging
points for electric forklift trucks. To facilitate colleague journeys to
and from the site, there is a 24-hour bus service and cycle lanes, and
to enhance colleague wellbeing an outdoor seating area with a new
planting scheme has been created. To better engage our colleagues
with the wider Dunelm business, care has been taken to make the
warehouse ‘feel like home’ through impactful store images and
branding. Our current focus is on building colleague competencies in
new ways of working and embedding warehouse management systems
in our new, bespoke facility.
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‘Brilliant Stores’ plan
To support ongoing investment in our stores to create
future value, our Board approved a Group-wide ‘Brilliant
Stores’ plan to focus time and resource more effectively.
BUSINESS CONTEXT
Our stores play a vital role for our customers, many of
whom will research or place orders online but also come
into our stores to browse, get expert help, measure up
items and test out products, or come in for a drink, snack
or chat. Increasingly, our stores and Pausa cafes are
used as social hubs and are supporting local communities
and businesses.
‘BRILLIANT STORES’ PLAN
As well as continuing to open new stores, we have an
ongoing programme to invest in upgrading our existing
store estate and installing the latest formats. In FY22, we
invested in nine large and medium-sized refits as well as
installing 18 new furniture formats, 11 new decorating
fixtures and four Pausa cafes. In addition to this, at its
Strategy Day in 2021, the Board debated and approved
a Group-wide ‘Brilliant Stores’ plan as part of our
ongoing investment in our store estate and performance,
reinforcing the importance of stores to our long-term
business model.
Our aim is for every store to be brilliant every day. By
bringing together all the elements that we know we need
to get right to make our stores brilliant under one umbrella,
we can focus time and resource more effectively. Although
the outcome of the initiatives is store-focused, we keep our
customers at the forefront of our thinking to ensure that
our online and store shopping experiences are seamless,
for example when collecting a Click and Collect order or
returning a home delivery order.
MEASURING AND MONITORING PROGRESS
We use store scorecards to measure and monitor
performance and the impact of initiatives implemented.
Up-to-date metrics (by store or region) can be accessed
at any time by store coaches and are an important
improvement driver. They include typical ‘hard’ retail
measures such as sales information by shopping
channels, perfect order scores, speed of service and stock
management, but also ratings from customers about
how friendly the service was and colleague engagement
scores. Each store coach is held accountable for his or
her scorecard performance which is also fed back into
appraisal and bonus calculations. Separately, we monitor
and rank store community engagement levels on our
community leader board.
DISCUSSION AND DEBATE
Our ‘Brilliant Stores’ plan pulls in knowledge and expertise
from around the Group, encouraging greater colleague
collaboration and engagement. It is purpose-led, and
strengthens our customer proposition and our ability
to create thriving local communities. Investing in store
colleague training and technology to make their tasks
easier also promotes colleague engagement in our store
teams. Whilst additional resource and investment in our
stores refit and ‘Brilliant Stores’ plan may impact short-term
profit and shareholder returns, the Board considered these
and concluded that the ongoing importance of stores to
our future long-term value creation and the stakeholder
benefits outweighed these considerations.
Risks to Dunelm:
Opportunities
for Dunelm:
Increased investment costs; short-term
impact on profit; diversion from shareholder
returns or other investments.
Improved ability to attract and retain
customers; improved colleague engagement;
improved customer proposition; positive
long-term impact on profits for shareholders.
Key stakeholder
trade-offs:
Customer v Shareholders
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GROUP BOARD OVERSIGHT OF S172 AND ENVIRONMENTAL, SOCIAL AND GOVERNANCE TOPICS FY22
Date
Board/Committee
Topic
JUL
2021
SEPT
2021
OCT
2021
NOV
2021
JAN
2022
FEB
2022
Board
New sustainability governance for FY21 led by CEO under ‘Pathway to Zero’ structure.
Update on Scope 3 carbon footprint and options for Scope 3 greenhouse gas emissions target.
Audit and Risk
Committee
Review of principal risks, including: climate change and environment; regulatory and compliance; brand
damage; and people and culture.
Review of annual report disclosures, including risks and uncertainties, Audit and Risk Committee Report,
voluntary TCFD disclosure and sustainability KPIs.
Anti-corruption and anti-bribery policy update.
Board
Review of principal risks, including: climate change and environment; regulatory and compliance; brand
damage; and people and culture.
Approved target to reduce Scope 3 greenhouse gas emissions by 30% by 2030 in absolute terms, matching
target for Scope 1 emissions; committed to purchasing renewable energy (Scope 2 emissions).
Approved annual report disclosures, including Sustainability section, principal risks, and uncertainties and
voluntary TCFD disclosure.
Annual review of stakeholder engagement and balance, and review of culture KPIs.
Remuneration
Committee
Reviewed performance against KPIs in FY21 annual bonus, which included customer and colleague
satisfaction scores.
Set targets for FY22-24 LTIP award which include climate change-related targets.
Board
Approved annual Modern Slavery Act statement and Gender Pay Gap Report.
Reviewed August National Colleague Voice meeting report where ’Big Topic’ was sustainability.
Board
People update from Stores and People Director, including consideration of reward, training and development
and diversity data (age, gender, ethnicity).
Approved terms of sustainability-linked Revolving Credit Facility, including targets linked to carbon reduction,
packaging reduction, use of more responsibly produced cotton and provision of customer take-back schemes.
External presentation on diversity (neurodiversity).
Board
Sustainability progress update.
Annual presentation on health and safety and waste management.
External presentation on diversity (gender).
Audit and Risk
Committee
Half-year review of principal risks, including: climate change and environment; regulatory and compliance;
brand damage; and people and culture.
Update on FY22 TCFD report progress.
Annual review of Tax Strategy.
Anti-corruption and anti-bribery policy update.
Board
Half-year review of principal risks, including: climate change and environment; regulatory and compliance;
brand damage; and people and culture.
Annual approval of Tax Strategy.
Product strategy, including sustainable products.
Board
MAR
2022
People update from Stores and People Director, including consideration of: talent management, diversity
data (age, gender, ethnicity).
Approved Gender Pay Gap Report.
Nominations
Committee
National
Colleague Voice
Executive Director and Executive Board talent and succession (attended by external talent consultant).
Remuneration strategy, executive pay and fair reward.
Board
External presentation on mental health and wellbeing (human connections in a digital world) and business
strategies to regenerate nature, society and the economy.
Audit and Risk
Committee
Review of verification process for environmental, social and governance KPIs.
Updated climate change risk assessment for TCFD, including three temperature rise scenarios. Proposed
TCFD disclosures.
APR
2022
MAY
2022
JUN
2022
At every meeting:
Regulatory and policy breaches (if any), people update, health and safety update, review of reports from
whistleblowing helpline, sustainability update including quarterly KPIs.
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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.
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. For details of the specific skills and
experience of each Director see the Directors’ biographies
on pages 84 to 87.
CLEAR AND FORMAL BOARD RESPONSIBILITIES
The Board has adopted written statements setting out
the respective responsibilities of the Chairman, the
Deputy Chairman, the Chief Executive Officer, the Senior
Independent Director of the Board, Board Committee
members and the Company Secretary; these are available
on the Group’s website or from the Company Secretary. A
summary of the responsibilities of the Directors is set out
on page 108. An overview of responsibilities for individual
Board Committees and their Chairs are set out in the relevant
Committee reports.
ABOUT OUR BOARD
Board structure
The Board has agreed that our optimum Board size is
between nine and eleven Directors, with an Independent
Chair, four Executives/Non-Independent Directors, and
between four and six independent Non-Executive Directors.
We consider this structure gives the right level of independent
challenge, and mix of backgrounds and skills, and is one that
allows for effective decision-making. We maintain a clear
division of responsibilities between the leadership of the
Board and the executive leadership of the business.
Independent 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
September 2022 and we confirmed that Andy Harrison was
independent on appointment to the Board and subsequently
as Chairman, and that Alison Brittain, Ian Bull, Kelly Devine,
William Reeve, Peter Ruis, Arja Taaveniku, and Vijay Talwar
are independent.
Non-Independent Director
The Board has treated Marion Sears as a Non-Independent
Non-Executive 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 Sir 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 Sir Will Adderley are parties
to a Relationship Agreement (referred to in the section
headed ‘Managing conflicts of interest’ on page 166) 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.
Board tenure and diversity
Board refreshment is a continued area of focus. Both tenure
and diversity are considered in our succession planning and
covered in more detail in the Nominations Committee Report
on pages 110 to 119.
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BOARD RESPONSIBILITIES
Position
Chairman
Responsibilities
• The leadership, effectiveness and governance of the Board.
• 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.
• Ensuring that the Directors receive accurate, timely and clear information.
• Chairing the Nominations Committee.
• Promoting a culture of openness and debate.
• Facilitating constructive Board relations.
Deputy Chairman
• Maintaining a close dialogue with the Chairman and the CEO.
• Contributing to the development of the Group’s purpose, culture and values by promoting and visibly
demonstrating the Company’s long-established shared values.
• Assisting the CEO in strategic and operational activities as requested.
• Supporting and deputising for the Chairman as required.
• Member of the Nominations Committee.
Senior Independent
Non-Executive Director
• Acting as a ‘sounding board’ for the Chairman and an intermediary for the other Directors.
• Leading the Non-Executive Directors in their annual assessment of the Chairman’s performance.
• Making oneself available to shareholders, particularly if they have concerns that the normal channels have
failed to resolve, or for which such contact would be inappropriate.
• Leading the Chair succession process.
Chief Executive Officer
• Proposing the strategic objectives of the Group for approval by the Board, and delivering the strategic and
financial objectives in line with the agreed purpose and strategy.
• Leading the Executive Board and senior management in managing the operational requirements of the business.
• Leading the climate change and sustainability objectives of the Group.
• Providing clear and visible leadership of our shared values.
• Effective and ongoing communication with colleagues and shareholders.
Chief Financial Officer
• Working with the CEO to develop and implement the Group’s purpose and strategic objectives.
• The financial delivery and performance of the Group.
• Ensuring that the Group remains appropriately funded to pursue the strategic objectives.
• Ensuring proper financial controls and risk management of the Group and compliance with associated
regulation.
• Investor relations activities and communications with shareholders.
Non-Executive Directors
• Constructive contribution and challenge to the development of strategy and ensuring that decisions are taken
so as to promote the success of the Company in the interests of all stakeholders.
• Monitoring operational and financial performance and scrutiny of management performance in the delivery
of strategic objectives.
• Oversight of financial and other controls and processes for risk management.
• Engaging with colleagues (for example through the National Colleague Voice) so as to represent the
‘Colleague Voice’ at the Board.
Designated
Non-Executive Director
for colleague matters
Company Secretary
• Supporting the Chairman and the Non-Executive Directors with their responsibilities.
• Advising on regulatory compliance, corporate governance, climate change and sustainability.
• Facilitating individual induction programmes for Directors and assisting with their development as required.
• Communications with shareholders and organisation of the AGM.
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We therefore request that shareholders take into account our
specific circumstances when making their voting decision
in relation to the waiver resolution, and we hope that
shareholders will support the Board’s recommendation.
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. We would like to
reiterate 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 purchased 2,500,000 of its
own shares during the financial year. See page 30 for an
overview of our capital and dividend policy.
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.
SHARE BUYBACK AND RULE 9 WAIVER
Since the time of flotation of the Company, the members of
the Adderley family, including Bill and Jean Adderley and Sir
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 ‘Takeover Code’). At the date
of this report, Sir Will Adderley controls 37.3% of the issued
share capital of the Company, and the Concert Party controls
42.8%. Bill and Jean are no longer Directors of the Company
or actively involved, although Sir Will Adderley is a Director
and Deputy Chairman.
As usual we will be requesting authority to buy back up to
5 million shares (2.5%) of our share capital) at the AGM. This
authority is to allow the Company to purchase shares in order
to satisfy future share option entitlements for Executives,
excluding Sir Will Adderley. Given that it is expected that
shares bought by Dunelm in the market will be reissued, then
no dilution or change of control should occur either for the
Concert Party or for other shareholders. As Sir Will Adderley
has a beneficial interest of above 30% of our share capital,
and the interest of the Concert Party is less than 50%, for the
Company to exercise the authority to buy back shares we
have to ask shareholders to approve a waiver of Rule 9 of the
Takeover Code, as otherwise Sir Will would be required by
law to make an offer to buy all of the shares in the Company.
We understand that a number of shareholders have concerns
about Rule 9 waivers in general, as they can lead to major
shareholders gaining ‘creeping control’; as a result they may
be bound by their voting policy to vote against the resolution.
We hope that shareholders will give this administrative matter
full consideration and conclude that they can support the
waiver, notwithstanding any internal voting policy. In this
regard we would like to reassure shareholders that:
• Shares bought back by the Company would be held in
treasury and used only to satisfy share option entitlements,
and not cancelled.
• Since 2012, Sir Will Adderley no longer participates in
the Long-Term Incentive Plan or any other share-based
incentive plan, and therefore his shareholding will not
increase through that mechanism.
• Since flotation of the Company in 2006, the Adderley family
has reduced its holding (from 67% to 42.8% currently).
• There has been a Relationship Agreement in place since
flotation which provides safeguards to other shareholders –
for details please see the Directors’ Report on page 166.
ANNUAL REPORT AND ACCOUNTS 2022 109
DUNELM GROUP PLC
Corporate governance report
Composition, succession
and evaluation
Nominations
Committee Report
Andy Harrison
Chair of the Nominations Committee
Dear shareholder
In yet another very challenging year, Dunelm has delivered
a record performance for our shareholders and indeed
an excellent performance for all our stakeholders. This is a
tribute to all my Dunelm colleagues and a testament to our
talented, committed and cohesive leadership team. In this,
my last report as Chair of the Board and the Nominations
Committee, I would like to say a huge thank you to our
colleagues for their hard work, commitment and continued
determination and ambition to grow our company in a
sustainable way consistent with our purpose, ambitions
and shared values.
BOARD SUCCESSION
We believe that the optimal size of our Board is between
nine and eleven Directors. This will enable us to comply
with all the governance requirements on independence
and diversity, while maintaining a cohesive culture in which
all Board members can continue to contribute fully.
We endeavour to manage our succession plan to ensure
that we have the appropriate and diverse range of skills
and experience needed to deliver our strategy for the
benefit of our stakeholders. We also take care to ensure
that all new members of our Board are aligned to our
purpose and culture, and share our values, whatever
their skills and background.
When we appoint a Non-Executive Director (NED) to
the Board or when a Director takes on any additional
responsibilities we always assess their other commitments
to ensure that they have sufficient time to dedicate to
Dunelm, including during periods of unanticipated
additional activity.
CHAIR SUCCESSION
An important focus for the Committee this year has
been to carefully manage my succession. My nine-year
tenure on the Board is due to expire on 1 September
2023 and we have been keen to manage the succession
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process in a careful and timely fashion. William Reeve, our
Senior Independent Director, led the search process, which
commenced in 2021 to ensure that there was sufficient
time to find a candidate of the right calibre, available within
our time frame. On 21 July 2022 we announced that Alison
Brittain would join the Board on 7 September 2022 as a
Non-Executive Director, and it is expected that she will
succeed me as Chair early in 2023, and I am delighted that
Dunelm has been able to attract a candidate of her skills and
experience and approach, whose values are clearly aligned to
ours. I am sure that Alison will help us to unlock the potential
of the business even faster, and I look forward to working with
her as she transitions into the Chair role.
CFO SUCCESSION
Laura Carr advised the Committee in December 2021 that she
intended to step down from the Board in June 2022, to take
up a new opportunity outside of retail and the public markets.
Laura has made a tremendous contribution as CFO during
her tenure of three and a half years, and on behalf of the
Board I thank her, and we wish her well in her new role.
We started the search for Laura’s successor early in 2022
and I was very pleased that in April we were able to announce
that Karen Witts would join us as CFO in June. Karen is
an accomplished finance leader who brings a wealth
of experience from a number of roles with high-profile,
consumer-facing brands. She has already started to make
a strong contribution to the Board and the Executive team.
NED SUCCESSION
During the year, two Non-Executive Directors joined the
Board, to enhance our skills and to support our ambitious
growth plans. They also enhance the diversity of our Board
in terms of background, experience, gender and approach.
As I mentioned last year, to increase our NED experience of
large-scale digital commerce, including cyber security and
multichannel supply chains, Vijay Talwar joined the Board on
1 October 2021. Vijay has already contributed to our business
discussions, and not least in terms of cyber security.
I am also pleased that we were joined on 1 March 2022 by
Kelly Devine. Kelly brings experience from the fast-changing
international payments industry, driven by technology,
changing consumer behaviour and the power of data.
She has already started to broaden our discussions.
We now have the required number of independent
Directors on the Board, and also meet the requirements
of the Corporate Governance Code on diversity of gender
and background. The process for the appointment of all
of the new Board members is described in the Nominations
Committee Report, and I thank all of my Board colleagues
for the time that they have invested this year in this
important activity.
DIVERSITY AND INCLUSION
Last year I reported on the creation and roll out of Dunelm’s
diversity and inclusion programme across the business,
designed to step change our approach. This has continued
throughout the year with the full support of the Board, and
more details can be found in the Sustainability section on
page 52. This year the Board and Executive Board again
participated in interactive learning sessions on neurodiversity
and gender, designed to build our knowledge and
understanding, and help us to consider how we can promote
diversity and inclusion throughout the business. We also
review diversity KPIs at least twice a year alongside the other
colleague measures as part of our oversight of the people
policies and culture of the business.
At Board level, our policy is that our Board should always
be of mixed gender, and in all recent appointments we have
requested that a range of candidates from diverse social and
ethnic backgrounds be brought forward for consideration.
Further details can be found in our report on page 52. I am
pleased that all of our appointments this year have enhanced
the diversity of our Board.
SUCCESSION AND TALENT
Last year I reported on how we have accelerated our
approach to succession planning and talent management
across the business. We are now in the second year of a
three-year programme, which has been fully rolled out
throughout the business, so that all management colleagues
now discuss their development and aspirations with their
manager at least once a year. This has created a far more
robust and effective process for identifying and growing
our talent. Further details can be found in the Sustainability
section on page 57. The Nominations Committee has had
direct oversight of how this has been implemented for the
members of the Executive Board, and all members with
operational roles now have potential internal successors in
place. At Board level, I encourage each Board member to
have an open conversation with myself about future intentions
as part of the annual Board review.
BOARD EFFECTIVENESS
We were not due to hold an external Board review until FY23,
but we decided to bring this forward to FY22 specifically to
focus on the priorities for the incoming Board Chair and to help
her as she develops her agenda. The review concluded that
the Board is performing effectively, and helped us to set some
priorities for the forthcoming years as set out on page 117.
I look forward to meeting shareholders at the AGM.
Yours faithfully,
Andy Harrison
Chair of the Nominations Committee
14 September 2022
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NOMINATIONS COMMITTEE MEMBERSHIP
The Directors who served on the Committee during the year
and their attendance is set out below:
From
To
Meetings
attended
Member
Andy Harrison
(Chair)
Sir Will Adderley
Ian Bull
Kelly Devine1
William Reeve
Peter Ruis
1 September
2014
17 February
2011
10 July 2019
1 March 2022
1 July 2015
10 September
2015
Marion Sears
18 January 2005
Arja Taaveniku
15 February
2021
Vijay Talwar1
1 October 2021
To date
To date
To date
To date
To date
To date
To date
To date
To date
3/3
3/3
3/3
1/1
3/3
3/3
3/3
3/3
2/2
1. Kelly Devine and Vijay Talwar were appointed to the Board during the
financial year, and joined the Nominations Committee on appointment.
Alison Brittain joined the Board on 7 September 2022, after the end of the year,
and became a member of the Committee on that date.
The Company Secretary acts as secretary to the Committee.
Additionally, two presentations were made to the Board on succession and
talent management, one attended by the independent consultant referred to
below under ‘Succession and Talent’, and both attended by the People and
Stores Director.
No Director attended that part of a meeting during which his or her own
position was discussed.
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continued
SUMMARY OF THE NOMINATIONS COMMITTEE’S
PRINCIPAL ACTIVITIES IN FY22
Succession principles
Our Board succession plan is designed to achieve
a Board that:
• Is cohesive, engaged, aligned to purpose and shared
values.
• Has diversity of nationality, ethnicity, gender, thought
and skills to deliver our strategy.
• Has strong executive capability.
Board appointments and induction
FY22 appointments reflect ambitious multichannel growth
plans, mindful of best governance practices.
• Completed search for Chair; Alison Brittain joined the
Board on 7 September 2022 and is expected to succeed
Andy Harrison as Chair early in 2023.
• Appointment of two Independent Non-Executive Directors:
– Vijay Talwar joined in October 2021, bringing
multichannel retail and digital expertise.
– Kelly Devine joined in March 2022, with a background
in consumer and data.
• Appointment of Executive Director:
– Karen Witts joined the business and Board as CFO
in June 2022.
• New Board members welcomed into the business through
a comprehensive induction, co-ordinated by the Company
Secretary in FY22.
Board effectiveness
• Oversight of external Board review to ensure that the Board
is working as effectively as possible.
• Ongoing review of the Board’s composition, to ensure it
follows best practice and meets the strategic needs of the
business, taking into account the main trends and factors
affecting the long-term success and future viability of
the Group.
Group-wide role
• Played an active role in the increased focus on succession
and talent management across the whole business, and our
approach to diversity.
• Oversight of the Board and the Group’s diversity and
inclusion programme to increase inclusion and diversity
of gender, ethnicity, background, thought and skills
throughout the business.
Focus FY23
• Continuing to oversee the ongoing Board succession plan.
• Continuing to oversee succession and talent management,
and diversity throughout the business.
OUR NOMINATIONS COMMITTEE’S ACTIVITIES
IN MORE DETAIL FY22
The following pages provide details of the role of the
Nominations Committee and the work it has undertaken
during the year.
PRINCIPAL DUTIES
The purpose of our Nominations Committee is: to assist
the Board by keeping the composition of the Board under
review; to conduct a rigorous and transparent process against
objective criteria – with due regard for the benefits of the
Board’s diversity – when new appointments to the Board are
made; to oversee the succession plans for the Board and
senior management; and to ensure that there are processes
in place to secure a diverse pipeline of potential candidates
for succession to key management positions and to the Board.
The full terms of reference for the Committee can be found
on the Group’s website: corporate.dunelm.com. These terms
were last reviewed by the Committee in June 2020.
BOARD CHANGES IN FY22 AND PLANNED
SUCCESSION ACTIVITY
Board succession has played a larger than usual part of
the Committee’s activities in the year, as we sought both
a Board Chair and CFO, and made two Non-Executive
Director appointments. In all cases appointments were made
against objective criteria, and the Committee specified that
candidates be sought from a range of diverse ethnic and
social backgrounds, and for both male and female candidates
to be put forward.
Chair succession
A major focus for the Committee this year has been the search
for my own successor. Although I am not required to retire
from the Board until 1 September 2023, I have always said that
I remain flexible to the wishes of the Board. The search process
was started early in 2021, so as to give the Board the maximum
time to find a candidate of the required calibre, and, of equal
importance, who shares the Dunelm culture and values.
The process was led by William Reeve, the Senior
Independent Director. I did not play a part in this, although
William did seek my views at specific stages. An external
search firm, Russell Reynolds, was appointed to lead the
search. Given the sensitivity of the appointment we decided
not to also use the Nurole platform, as is our normal practice
on the appointment of a Non-Executive Director (NED). The
search firm spoke to all of the Directors and the Company
Secretary to seek their input before drawing up a role
specification which was agreed by the Committee. We were
looking for an experienced business leader, who has worked
in a range of large, consumer-facing businesses and has a
track record of delivering growth.
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Non-Executive Director succession
Last year I reported that we had identified a need for a further
NED with experience in digital businesses, including digital
risk management, and to meet the increasing regulatory
requirements of an Audit and Risk Committee member –
financial expertise and a deeper ability to understand cyber
risk. On 14 July 2021 we announced the appointment of
Vijay Talwar to the Board, and Vijay joined the Board on
1 October 2021.
We also commenced the search for an additional female NED,
so as to meet the required gender balance on the Board. I
was pleased to be able to announce the appointment of Kelly
Devine to the Board with effect from 1 March 2022. Kelly
has a background in economics and has built her career in
the payments industry. Her current role is President, UK and
Ireland of Mastercard, where she has overseen significant
market share expansion, business diversification and delivery
of high employee engagement. Her experience in the
fast-changing international payments industry, driven by
technology, changing consumer behaviour and the power
of data, will strengthen our Board as we accelerate our
multichannel growth.
Ongoing activity
The Board’s priority for this year is to complete the Chair
and CFO transitions and to continue to develop strong
relationships between all of our Board members. There are no
scheduled Board vacancies until 2024, so we will commence
our planning for these during the coming financial year.
In her most recent CEO role at Whitbread PLC, from which
she will retire early in 2023, Alison has been responsible for
successfully scaling the company’s various hospitality brands
before overseeing the sale of its Costa Coffee portfolio in
2019. Since then, she has refocused the Group as a pureplay
hotel company, strengthening the success of the UK business
whilst developing an international platform for long-term
growth. Prior to joining Whitbread PLC, Alison held a number
of senior roles in the UK banking industry. As stated above,
we were also seeking an individual whose personal values
are aligned to our own. William Reeve and other Committee
members interviewed a number of the shortlisted candidates,
and all members of the Board met with the preferred
candidate and gave their unanimous support. The Committee
therefore recommended to the Board that Alison Brittain be
appointed to join the Board on 7 September 2022, with the
aim of succeeding me as Chair on my retirement early in 2023.
CFO succession
Laura Carr, the Chief Financial Officer (CFO), advised the
Board in December 2021 that she intended to step down
from the Board to take up a role outside of retail and the
public markets. A search for her successor commenced in
January 2022. The Committee engaged an external search
firm, Sam Allen Associates, to conduct the search. A role
specification was agreed by the Committee with input from
other Committee members and from Nick Wilkinson, the
Chief Executive Officer, given the important executive role
that the CFO will play in the business. Following an extensive
search process, a shortlist was drawn up of candidates who
had the required skills and experience, and whose approach
was aligned with the Group’s shared values. This included
candidates from a diverse range of backgrounds, as well as
an internal candidate. Candidates met with myself and Nick
Wilkinson, Ian Bull, who chairs the Audit and Risk Committee,
and other Board members. References were taken and all
were positive. The Board accepted the recommendation of
the Nominations Committee that Karen Witts be offered the
CFO position.
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continued
OVERVIEW OF FY22 APPOINTMENTS AND FUTURE BOARD SUCCESSION PLANNING
Position
Actions and timings
Rationale/best practice
Chair designate
• Commenced search process in 2021 for
Chair to succeed Andy Harrison when he
retires in 2023.
• Alison is a highly experienced business leader who brings
considerable experience from a range of consumer-facing
companies, with a track record of delivering growth.
CFO
NED with digital
experience
and deeper
understanding
of digital/cyber risk
Additional
female NED
• Alison Brittain joined the Board on
• Continue to meet best practice, having either female CFO, CEO,
7 September 2022, and is expected to
succeed Andy Harrison as Chair early
in 2023.
SID or Chair; early adoption of new UK Listing Rule.
• We will exceed the Hampton-Alexander guidance of 40% female
representation on Board; early adoption of new UK Listing Rule.
• Immediate search undertaken for a new
CFO following Laura Carr’s resignation
announcement in December 2021.
• Accomplished finance leader who brings a wealth of experience
from a number of roles with consumer-facing brands.
• Continue to meet best practice, having either female CFO, CEO,
• Appointment of Karen Witts announced
SID or Chair; early adoption of new UK Listing Rule.
in April 2022.
• Karen joined the Board on 9 June 2022
• Brings us in line with Hampton-Alexander guidance; over 40%
of female representation on Board; early adoption of new
UK Listing Rule.
• Vijay Talwar’s appointment confirmed in
• Vijay brings additional financial expertise to our Audit and Risk
July 2021.
Committee capability.
• Vijay joined the Board in October 2021.
• As a non-UK national from a non-white background, Vijay
strengthens the Board’s diversity profile, meeting Parker Review
guidelines; early adoption of new UK Listing Rule.
• Appointment of Kelly Devine announced in
• Offers consumer and data expertise.
January 2022.
• Kelly joined the Board in March 2022.
• Brings us in line with Hampton-Alexander guidance; over 40%
of female representation on Board; early adoption of new UK
Listing Rule.
BOARD APPOINTMENT PROCESS
For all Board appointments and our ongoing succession
plans we generally follow this well-rehearsed process,
adapting where necessary to account for specific skills
required and circumstances.
• Detailed role and person specification drawn up by
Nominations Committee.
• Independent external search consultant appointed
to conduct the process. NED vacancies usually
also advertised on the Nurole platform, to open
the search to a potentially wider and more diverse
range of applicants.
• Equal number of male and female candidates feature
on the longlist as standard practice. Search consultant
also asked to bring forward candidates from a diverse
background.
• Initial candidates meet with Chair and at least one
other Board member; shortlist candidates meet with
other Board members.
• Extensive references taken and, for NEDs, an
assessment of candidates’ other commitments made
to ensure they have sufficient time to dedicate to
Board member duties.
• Nominations Committee makes final recommendation,
subject to unanimous Board support.
Our purpose, culture and shared values
Preservation of our culture and shared values – through
alignment with our purpose – has always been a Board
priority. No appointment is made to the Board unless we
are satisfied that the individual is a good cultural fit, is fully
aligned to our shared values, and will be an appropriate role
model for our colleagues and all of our stakeholders. These
considerations also form part of all of our Board succession
planning. Further details of our shared values, and how
they are aligned to our refreshed purpose and embedded
throughout our business, and how the Board monitors these,
are set out in the Corporate Governance Report.
Board induction process
Each new Board Director receives a full and tailored
induction, led by the Chairman and the Company Secretary.
The Company Secretary provides a full set of relevant
documents and access to past Board and Committee papers,
as well as a briefing on Directors’ duties and responsibilities.
Induction meetings are held with all Board members
and members of the Executive Board, as well as other
senior management and external advisers relevant to that
Director’s interests and any specific Board responsibilities.
A programme of site visits is also arranged.
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Board succession
We have always had a formal, long-range plan for how Board
membership should develop. This aims to balance continuity
of service with a regular refreshment of skills and experience
needed to deliver our evolving strategy. In general, and as
discussed during our Board evaluation, we aim to maintain
a Board of between nine and eleven Directors (current
membership is twelve, but will be eleven when Andy Harrison
retires, early in 2023), with ideally no more than one new
appointee in any year.
We regularly 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 Board
Diversity and Inclusion Policy, and mindful of the Guidelines
set out in the Parker Review that all FTSE 250 companies
should have a Board member of colour by 2024, we also have
regard to the requirement to achieve a diversity of characters,
backgrounds and experiences amongst Board members,
as well as of ethnicity and gender. All Board appointments
irrespective of background must satisfy the high standards
Dunelm requires. Candidates must have the competence
to contribute to wide-ranging debates and cope with the
demands of a stretching future-focused agenda, and share
our values.
We also take into account the corporate governance
guidance on Chairman and Non-Executive Director tenure;
for reference the tenure and re-election cycle is summarised
in the table on page 119. Our updates on recent and planned
Board appointments are described on page 114.
As described above, during the financial year we welcomed
two new Independent Non-Executive Directors, Vijay Talwar
and Kelly Devine, to our Board. On 7 September 2022 we
were joined by Alison Brittain who it is planned will succeed
Andy Harrison as Chair in early 2023 after an induction and
handover period. Karen Witts joined the Board as CFO in
June 2022, succeeding Laura Carr who stepped down from
the Board in that month.
Executive Board succession
For some years, the Board has regularly reviewed the
composition and succession plans in place for members of the
Executive Board and their direct reports. In addition, the CEO
discusses with the Non-Executive Directors the performance
of individual Executive Board members and any changes that
he proposes to make to this team. Whilst this activity does not
take place formally within the meetings of the Nominations
Committee, it does form part of its work in overseeing the
Executive Board development and succession process, and
the pipeline of talent available for succession to the Board.
Dunelm Board members have regular contact with members
of the Executive Board and the wider Dunelm Leadership
Team, 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 Non-Executive
Directors meet members of the Executive Board or Dunelm
leadership team on a less formal basis.
Succession and talent management
The Committee is responsible for Board succession planning
and monitoring Executive Board succession to ensure that the
respective composition of these leadership bodies enables
us to embed and deliver our purpose ‘To help create the joy
of truly feeling at home, now and for generations to come’;
and that we have the capability to progress our ambitious
growth strategy. We maintain a consistent recruitment
approach across the business; our Board and Nominations
Committee members have oversight of, and follow, Dunelm’s
Talent Management Strategy (see pages 57 to 58) and its
management of succession and talent.
Under the guidance of the Committee, the Talent Committee
comprising Executive Board members was established in
September 2020, led by the Chief Executive Officer, Nick
Wilkinson, and supported by an external consultant. Its
members include the People and Stores Director and other
members of the Executive Board. Its purpose is to develop
and implement a more structured ‘Home of Talent’ process,
to ensure that there is a strong succession pipeline for our
Executive Directors, members of the Executive Board and
throughout the business. The Group is mid-way through a
three-year project to embed a ‘Know-Grow-Flow’ mechanism
throughout the business, which is designed to ensure that
talented individuals with diverse skills and backgrounds
can thrive and have the opportunity to move across and
up in the organisation. Further details can be found in our
Sustainability section.
Nick Wilkinson reports at least twice a year to the Committee
(in relation to the development and succession of Executive
Board members) and the Stores and People Director reports
twice a year to the Board (in respect of other colleagues). The
Nominations Committee agreed that this is an appropriate
structure, given that matters relating to our workforce are
whole-Board topics.
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FIVE-YEAR BOARD EVALUATION CYCLE SUMMARY
FY18
Internal
Chair-led evaluation with individual members
FY19
Internal
Chair-led evaluation with individual members
FY20
External
External evaluation led by Lorna Parker
FY21
Internal
Chair-led evaluation with individual members
FY22
External
External evaluation led by Lorna Parker
BOARD EFFECTIVENESS
Each Director receives a formal evaluation of their
performance during the year, which is conducted
by the Chairman. The Senior Independent Director
reviews the performance of the Chairman and feeds
back to the other Board members.
The performance of our Board and Committees is also
formally evaluated as a whole. In FY21 the review was
led by the Chairman. The actions taken as a result of
this are described on the following pages. We were not
due to hold an external Board review until FY23, but
we decided to appoint Lorna Parker, who we trust and
who has facilitated our reviews in the past, to carry out
a review for us. We asked Lorna specifically to focus on
the priorities of the incoming Board Chair, so as to help
her as she develops her agenda.
FY21 Board evaluation summary
The recommendations arising from our FY21 internal Board evaluation, conducted by the Chairman, Andy Harrison, and the
actions implemented in response are set out below:
Outcomes and recommendations from FY21 evaluation
Actions implemented
Ensure there are regular discussions of ‘what keeps us awake
at night’.
Continue to develop the work of the Risk and Resilience Committee.
Board members to feed back suggestions for additional KPIs which
they would find useful.
Scheduled discussion deferred to October 2022 due to Covid
restrictions – we find these discussions to be more effective if they
take place in person.
The Risk and Resilience Committee is now well established and is
a forum for more in-depth discussion of risk and monitoring of risk
KPIs by the Executive Board, which is then reported to the Audit
and Risk Committee.
KPIs further refined, particularly customer and colleague KPIs.
Continue to address governance requirements in a pragmatic way
to ensure that the majority of Board time is spent on strategy; keep
committee memberships under review.
Managed by the Chairman and Company Secretary – majority of
time spent on strategy. Current committee membership considered
to be the most effective solution.
Continue search for an additional female NED.
Continue to build on succession plans for the Executive Board and
oversee talent management in the business.
Kelly Devine appointed in March 2022. In addition, both the new
CFO, Karen Witts, and the Chair Designate, Alison Brittain are female,
meaning that five of the current twelve Board members are female.
Discussed at two Nominations Committee and two Board meetings
during the year. Succession plans in place for all members of the
Executive Board with operational duties.
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OVERVIEW OF FY22 BOARD EXTERNAL
EVALUATION PROCESS
Confidential questionnaire
Completed by each Director and Company Secretary
Individual meetings between Lorna Parker and
Directors and Company Secretary
Presentation of results to Board
Discussion
Agreed actions
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FY22 BOARD EVALUATION
Lorna Parker, a Board evaluation specialist, led the external
Board evaluation in May and June 2022. The process involved
each Director and the Company Secretary completing a
confidential questionnaire, which included questions on
a number of relevant, forward-looking topics as well as
a number of regular ‘standard’ questions on committee
performance, stakeholder engagement, agenda topics and
meeting management. This was followed up by individual
meetings between Lorna Parker and each of the Directors
and the Company Secretary to discuss the outcome of the
questionnaire and views on the Board’s priorities for the
incoming Chair. All Board members actively engaged in the
process and provided open and constructive comments.
Lorna then summarised the outcomes and reviewed this with
the Chairman before presenting it back to the Board in July. A
number of actions were agreed and these are set out below.
The review recognised that in the past two years the Board
has developed and changed, with new NEDs and two key
roles in the process of transitioning to new incumbents.
There is a breadth and depth of complementary skills and
experiences around the table with more diversity in terms
of youth, ethnicity, gender and international background
than previously. The Board continues to function well, and
Board dynamics are good, with trust, respect and openness
between all Directors, and alignment around the immediate
strategic priorities.
FY22 Board evaluation summary
A summary of actions from our latest evaluation is set out below:
Topic
Action
STRATEGY
DEVELOPMENT
• Continue to carefully balance time spent on activities promoting ‘value creation’ with the ‘value
protection’ role of the Board.
• Ensure that more time is set aside to discuss long-term, strategic topics, in the context of the risk
appetite and ambition of the Board.
• Increase the amount of time available for less formal, discursive interactions.
• Continue to invite external speakers, to build knowledge on strategic topics and stimulate discussion.
NED INVOLVEMENT IN
THE BUSINESS
• Set aside agenda time for NEDs to share their experiences on a topic of mutual interest.
• NEDs are encouraged to spend more time interacting with colleagues in the business outside of formal
meetings, for example through attendance at National Colleague Voice meetings and on-site meetings
with management.
TALENT AND
SUCCESSION
• Continue to build visibility of talent management and succession for the Executive team and other
senior roles through the Nominations Committee and Board discussions.
MEETING AND OTHER
INTERACTIONS
• Adapt the meeting schedule to have fewer and longer ‘in person’ meetings focused on strategy
development, using remote meetings for more routine or transactional matters.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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Composition, succession and evaluation
continued
DIVERSITY AND INCLUSION
The Board’s ambition to secure the best talent in Dunelm
includes being known for our inclusive, diverse and tolerant
culture, as encapsulated in our ’stronger together’ shared
value. For Dunelm to continually improve as a business, it
is crucial that we select and recruit the best people in the
industry. This involves calling on the widest possible pool
of candidates and selecting them based on their ability to
do the job regardless of their gender, marital status, sexual
orientation, disability, race, religion, colour, nationality,
ethnic origin, or age.
The Board agrees that diversity of input helps to promote
better decision-making and is focused on three broad
activities:
• Refine the way we recruit.
• Identify, support and mentor existing diverse talent
in the business.
• Increase the diversity amongst senior appointments
as they are made.
Diversity and inclusion programme
In FY21, a significant programme – overseen by the Board –
was launched to promote diversity and inclusion throughout
the Group with the support of a specialist consultancy.
This has continued in FY22, as we build more awareness
across the business, and we have set up and developed four
networks enabling colleagues to share experiences, each
sponsored by a member of the Executive Board. Awareness
training has been rolled out across the business and there
have been numerous posts in our Home Comforts intranet
by colleagues providing information and sharing their stories.
The Group Board and Executive Board have again attended
awareness-raising workshops on specific topics, designed
to educate and stimulate discussion (see opposite).
FY22 COMMITTEE AND BOARD TALENT AND
DIVERSITY AND INCLUSION ACTIVITY
Board/
Committee
Board
Date
NOV
2021
Topic
People update
from the Stores and
People Director,
which included
consideration of
the following topics
Presenter(s)
Amanda Cox
(Stores and
People
Director)
• Reward
• Training and
development
• Diversity data
(age, gender,
ethnicity)
Diversity –
Neurodiversity
Board
Board
Diversity – Gender
JAN
2022
MAR
2022
Board
Nominations
Committee
People update
from the Stores and
People Director,
which included
consideration of
the following topics
• Talent
management
• Diversity data
(age, gender,
ethnicity)
Executive Director
and Executive
Board talent and
succession
Unleashed
(external
diversity
expert
consultancy)
Unleashed
(external
diversity
expert
consultancy)
Amanda Cox
(Stores and
People
Director)
External talent
consultant
Nick Wilkinson
(CEO)
attending
i Our Group equality and diversity policy is available on our
website, corporate.dunelm.com and is reviewed periodically,
giving due consideration to legislative changes.
118 DUNELM GROUP PLC
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Gender, age and ethnicity
Gender diversity has been an area of focus for us for many
years. We have continued to make progress in balancing
our gender ratios in the workforce, and have seen a shift
towards female representation on our senior leadership
team: 50% of our Executive Board and 43% of our senior
leadership roles are held by women, and at the date of
this Annual Report, 42% of Board Directors, including our
Chair Designate, Alison Brittain and our CFO, Karen Witts,
are female, as is the Company Secretary. Full details of the
gender balance on our Board and in our senior management
population as at year end are set out on page 52 in our
Sustainability section. Dunelm published its fifth Gender Pay
Gap Report in April 2022, and an overview is provided on
page 55 in our Sustainability section.
As part of its oversight of colleague policies and practices
across the Group, the Board also receives a full breakdown of
our colleague population by age, and, for the last 18 months,
we have been collecting ethnicity data on new joiners. In 2021
we trialled our first colleague census; this proved a useful
exercise and we are working with our Data and Analytics
Team to refine this before relaunching. Through our planned
census roll out we aim to provide the Board with more robust
ethnicity data, to enable us to develop our strategy and action
plan further. As mentioned above, at Board level we now
meet the Parker Review guidelines on ethnic representation.
Further commentary on our colleague population and
findings is made in our Sustainability section, on page 54.
OUR BOARD DIVERSITY POLICY
This year we have updated the policy so that it meets best
practice governance guidelines and the new UK Listing Rule.
Our overriding concern is to ensure that the Board and
Group comprise outstanding individuals who can lead the
business effectively in a manner aligned to our purpose and
shared values. We believe the Group’s best interests are
served by ensuring that these individuals represent a range
of skills, experiences, backgrounds and perspectives. Our
Company culture must be inclusive, and it is our policy that
the Board should always be at least 40% female – and ideally
higher to meet increasing expectations, and that at least one
of the Chair, Senior Independent Director, CEO and CFO
positions must be held by a woman. We also aim to ensure
that we have at least one Board Director from an ethnically
diverse background.
• We support the objective of promoting diversity in all
of its forms on our Board and throughout the Group.
• We shall continue to ensure that specific effort is made to
bring forward diverse candidates for senior management
and Board appointments.
• We will monitor the Group’s approach to people
development to ensure that it continues to enable talented
individuals, regardless of gender, marital status, sexual
orientation, disability, race, religion, colour, nationality,
ethnic origin, or age to enjoy career progression
within Dunelm.
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TENURE AND RE-ELECTION OF DIRECTORS
The Nominations Committee considers the length of
service of Board members at least annually. The tenure
of the Non-Executive Directors is set out below:
Current
term (years) Next renewal
Additional
Board role
Member
Appointment
Andy
Harrison
September
2014
8
0
3
0
7
September
2022
July 2019
March
2022
July 2015
Alison
Brittain
Ian Bull
Kelly
Devine
William
Reeve
Peter
Ruis
Marion
Sears
September
2023
Chairman and
Nominations
Chair
September
2025
Chair
Designate
July 2025
Audit and Risk
Chair
March 2025
July 2024
Remuneration
Chair and
Senior
Independent
Director
Designated
NED for
colleague
matters
September
2015
7
July 2004
18
September
2024
July 2023
Arja
Taaveniku
February
2021
Vijay
Talwar
October
2021
1
0
February
2024
October
2024
Marion Sears has served 18 years on the Board. Marion is now
considered by the Board to be non-independent in view of
her tenure. See page 107 for more details.
In accordance with our policy and the UK Corporate Governance
Code, all Directors will seek election or re-election at the
2022 AGM, and as now required by the Listing Rules, all
Non-Executive Directors will be subject to an additional vote
by shareholders independent of the Adderley family.
Approved by the Board on 14 September 2022.
Andy Harrison
Chair of the Nominations Committee
14 September 2022
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Audit, risk and
internal control
FRAUD RISK
With the additional regulatory focus on fraud risk, the
Committee reviewed the outcome of the entity level fraud
risk assessment, and the planned next steps. These include
enhancing the documentation of controls, identifying and
addressing any gaps in mitigation, and consolidating and
improving the fraud reporting mechanisms that are currently
in place. The Committee will keep this under review in the
coming year.
INTERNAL AUDIT
KPMG completed their second full year as our internal
auditor. During the year they completed reports on
stock management, contract management, follow up on
segregation of duties and GDPR compliance. For details on
the scope of the internal audits see page 128. Work on the
two final reports, Validation of Assurance Activity and General
IT Controls, was underway at the year end. Management is
working through the various recommendations, as well as
those from previous reports, and an update is provided to
the Committee at every meeting (as well as being reviewed
monthly by the CEO, the CFO and other members of the
Executive Board).
CLIMATE CHANGE
Last year management commissioned the Carbon Trust
to carry out a first stage high-level climate change risk
assessment, the output of which informed the debate at
the Board strategy day in May 2021, and the finalisation of
our 2030 ambitions and greenhouse gas emission targets.
It was also incorporated into the review of principal risks
by the Committee and the Board in September 2021. We
published an abbreviated disclosure under the Task Force
on Climate-Related Financial Disclosures (TCFD) in the FY21
Annual Report ahead of the regulatory requirement to do so.
We have built on this work with the help of EY, to refine our
risk assessment, test key risks against three climate change
scenarios, and assess the financial impact of climate change.
This has informed our first full report under TCFD in this
year’s Annual Report and Accounts. The report is on page
61. The Committee had oversight of this work and reviewed
the process for verifying climate change-related and other
sustainability KPIs in the report. We also noted that EY have
provided limited assurance in respect of the four sustainability
targets that are in our Revolving Credit Facility (RCF) and
in management long-term incentives. During the year, our
external auditors, PwC, reviewed certain elements of our
climate-change related disclosures, and the scope of their
work is set out in their audit report.
Audit and Risk
Committee Report
Ian Bull
Chair of the Audit and Risk Committee
Dear shareholder
I am pleased to provide you with an overview of the
Committee’s main activities, progress in a number of
areas, and specific areas of focus during the year.
RISK AND CONTROL
During the year good progress has been made to improve
controls. Following a review of accountabilities across the
Group, a number of new roles were created in the Finance
team to enhance capability and reduce overreliance on key
individuals. The restructured Finance team includes a Head
of Process Transformation and Controls who will focus on
driving control improvements both in Finance and across
the business. In addition to this, the project to improve
processes and controls in the commercial function is fully
underway, with dedicated resource and governance. This
is a significant multi-year programme with meaningful
investment that will create a robust platform for future
growth. The Board receives regular updates on this.
The Risk and Resilience Committee met monthly
throughout the year and conducted eight ‘deep dive’ peer
reviews of certain principal risk areas, as well as a horizon
scanning exercise and a fraud risk assessment facilitated
by KPMG. Cross functional reviews of the principal risks
have improved the management assessment of potential
impacts and resulted in a more holistic approach;
for example, dependence on third-party information
technology has been considered in the context of other
principal risks such as supply chain disruption risk, as
well as in relation to the specific IT principal risk. While
this is not a formal Board committee, the conclusions and
actions from the deep dives are circulated to the Board
and the Audit and Risk Committee, and feed into the Board
risk review process. This provides an additional level of
assurance and offers the Committee deeper insight into
how risks are managed operationally. For more details on
the activities of the Risk and Resilience Committee during
the year see page 126.
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AUDIT AND CORPORATE GOVERNANCE REFORM
The Board and the Committee support measures that
increase the quality of governance, audit, and transparency
for the benefit of our shareholders and other stakeholders.
Last year the Committee considered the proposals for the
reform of audit and corporate governance set out in the
consultation paper issued by Department for Business,
Energy and Industrial Strategy (BEIS) in March 2021 and
assessed the steps and actions that we may need to take
if these requirements are implemented. In May 2022, BEIS
published its response to the consultation and, while the
outcome is still to be determined, we have started work to
address matters which are likely to be implemented. These
include the focus on internal controls described above,
as well continuing to develop our Viability Statement,
distributable reserve tests and Audit and Assurance Policy,
to ensure Dunelm is ready to adopt any regulatory changes
in the near future.
AUDIT QUALITY INDICATORS
The Committee reviews the effectiveness of the external
audit annually using a set of qualitative criteria. During the
year we have developed indicators covering areas such
as levels of professional scepticism, timely audit planning,
communication approach and findings, appropriate use of
specialists/experts, team continuity and supervision, quality
of the audit team and quality and timeliness of information.
These will be further refined for the FY23 audit.
EXTERNAL AUDITOR TENDER
By the end of FY23, PwC will have been our auditors for
ten years and it is a requirement under our auditor rotation
policy that we tender the statutory audit at least every ten
years. Accordingly, we will tender the FY24 statutory audit
during the upcoming financial year and while it is unlikely
to be in force for this audit tender cycle, the Committee
and management will also consider the impact of the audit
market reform announced in May 2022 which includes the
appointment of a challenger firm as auditor or as part of a
managed shared audit. The audit tender process will be
overseen by the Audit and Risk Committee and is expected
to conclude later in FY23. A resolution proposing the
appointment of the selected firm will be put to shareholders
at the 2023 Annual General Meeting.
Finally, I would like to take the opportunity to extend my
thanks to my Committee colleagues for their work and
support during the year and also welcome Kelly Devine
and Vijay Talwar to the Committee, as well as Karen Witts as
CFO. I look forward to working with all of my colleagues in
the coming year, and to meeting shareholders at the AGM.
Yours faithfully,
Ian Bull
Chair of Audit and Risk Committee
14 September 2022
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AUDIT AND RISK COMMITTEE MEMBERSHIP
The following Directors served on the Committee during
the year, and their meeting attendance is set out in the
table below:
Member
Ian Bull
(Chair)
Kelly
Devine1
William
Reeve
Peter
Ruis
From
10 July
2019
1 March
2022
1 July
2015
10
September
2015
Meetings
attended
To
Skill
area
To date
3/3
Financial
To date
1/1 Operational
To date
3/3 Operational
To date
3/3 Operational
Arja
Taaveniku2
15 February
2021
Vijay
Talwar1
1 October
2021
To date
2/3 Operational
To date
2/2
Financial
1. Kelly Devine and Vijay Talwar were appointed to the Board during the
financial year and joined the Audit and Risk Committee on appointment.
2. Arja Taaveniku was unable to attend the meeting in June 2022 due to
a prior commitment.
The Company Secretary, Dawn Durrant, acts as secretary to the Committee.
The Committee also met in September 2022.
The Chief Executive Officer, Chief Financial Officer, the Chairman, the Chair
Designate and Deputy Chairman of the Board usually attend meetings by
invitation. In addition, the following attended: Group Finance Director, Chief
Information Officer, representatives of PwC (for external audit matters) and
representatives of KPMG (for internal audit matters).
The Board considers that the following members of the Committee have
recent and relevant financial experience:
• Ian Bull, Chair of the Committee, by virtue of his professional qualification
and his previous executive roles, including as Chief Financial Officer of
Parkdean Resorts Group, Ladbrokes plc and Greene King plc, and his
other non-executive roles which include chairing the Board of Lookers plc,
chair of the Audit Committee at Domino’s Pizza Group plc until 2022 and
chair of the Audit Committee at St. Modwen Properties plc until 2021.
• Vijay Talwar is a Certified Public Accountant and recent CEO of Wish.com
and director of the parent company, ContextLogic Inc, which is listed on
the US NASDAQ.
Other members of the Committee also demonstrate a breadth of
experience across the retail and consumer goods sector through their
current and previous roles. For more information on their skills and
experience see the Directors’ biographies on pages 84 to 87.
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continued
SUMMARY OF PRINCIPAL ACTIVITIES AND
FOCUS FY22
The Committee has a broad remit and to ensure that it
discharges its responsibilities effectively meeting agendas
are planned to allow time for routine items to be covered
sufficiently. These include financial, reporting, audit,
assurance, and risk matters. We also allow time to consider
and focus on specific ad hoc items which are topical, timely
or ‘forward looking’. During the year the Committee met
three times at appropriate intervals in the financial reporting
and audit cycles and also met in September 2022 when it
approved the FY22 Annual Report and Accounts. A summary
of the key items of business considered by the Committee
in the year is set out below:
Routine items
• Approval of the FY21 full-year results issued in
September 2021 and the approval of the FY22 half-year
results issued in February 2022 and full-year results
issued in September 2022.
• Assessment and challenge of management’s approach to
key estimates and adjustments used in respect of the half-
and full-year results.
• Review of the process for identifying and managing
risk and a full review of the principal risks and how they
are managed in September 2021, a mid-year review in
February 2022, and a further review in September 2022.
• Update on the work undertaken by the Risk and Resilience
Committee during the year including the outcome of deep
dives on principal risk topics.
• Review of the risk management process, risk appetite
statement and risk KPIs.
• Review of business continuity and crisis management
planning.
• Verification of the independence of the external auditor,
approval of the scope of the audit plan and the audit fee,
and review of the external auditor’s audit findings.
• Review of fraud and Bribery Act controls and cyber security,
which are standing agenda items for each meeting.
• Review of supplier payment practices.
• Receipt of internal audit plan and completed reports.
AUDIT AND RISK COMMITTEE 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 Group 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
effectiveness, independence, quality, and the
provision of additional services.
• Hold sessions with external auditor and internal
auditor without management present.
Full terms of reference for the Committee can be found
on the Group’s website, corporate.dunelm.com. These
were last reviewed in June 2022.
Specific topics and items reviewed
• Review of the process to verify environmental, social and
governance KPIs.
• Approach to climate change risk assessment and reporting,
and preparation for reporting under the Task Force on
Climate-Related Financial Disclosures.
• Understanding and considering our approach to proposed
audit and corporate governance reforms issued by BEIS
and the Financial Reporting Council (FRC).
• Review of progress on improvements and developments
• Roadmap to implement more systematic process of internal
in the internal control environment.
controls.
• Approval of the annual Audit and Risk Committee Report.
• Cyber security and IT general controls.
• Review of whether the FY21 and FY22 Annual Reports are
• Internal control and fraud.
‘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 external auditor performance.
• Formal review of Committee effectiveness.
• Intercompany dividend flows and parent company reserves.
• Update on Plastic Packaging Tax.
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VIABILITY STATEMENT AND RISK MANAGEMENT
At the Committee’s meeting in September 2022, 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, including the
impact of a downturn in consumer demand and inflationary
pressures, and the process by which they are managed by
the Board and management, and were able to support the
adoption by the Board. The Going Concern and Viability
Statement can be found on pages 80 to 81.
REVIEW OF NARRATIVE REPORTING
The narrative sections of this report including the corporate
governance disclosures have been enhanced to address
the findings of the FRC in its Annual Review of Corporate
Reporting issued in October 2021, its Review of Corporate
Governance Reporting issued in November 2021, and
recommendations from relevant thematic reviews and
financial reporting lab reports published by the FRC
throughout the year. As a result of this review, a number
of improvements have been made to the disclosures in
this report, including those which relate to the Corporate
Governance Code, s172 of the Companies Act 2006, the
Viability and Going Concern Statement, principal risks,
TCFD and climate change-related reporting and alternative
performance measures (APMs).
FOCUS AREAS FOR FY22 AND BEYOND
• Preparing for implementation of audit and corporate
governance reforms anticipated following the BEIS
consultation.
• Continuing to evolve our approach to risk and resilience
through oversight of the Risk and Resilience Committee.
• Ensuring risk management is instrumental in driving the
internal audit and assurance plan.
• Continuing close oversight by the Board of development
of our IT general controls and cyber security capabilities
and our GDPR governance.
• New reporting requirements for FY22, FY23 and beyond.
• Continuing to evolve our environmental, social and
governance reporting and the quality of supporting data, in
line with emerging regulations and investor requirements.
• Maintaining high standards in relation to material estimates,
judgements and rationale.
COMMITTEE EFFECTIVENESS
The effectiveness of the Committee was reviewed by the
Committee at its meeting in June 2022. This concluded that
the expected progress had been made in FY22, and that all
areas were rated at least “good” against our target measures,
apart from “forward looking and appropriate internal control
processes and systems”, which was rated “fair” and reflects
the outcome of the KPMG healthcheck that was completed
in FY21. As noted elsewhere in this report, further process is
planned in FY23, specifically on documenting controls and
processes and fraud risk.
SIGNIFICANT ISSUES AND JUDGEMENTS RELATING
TO THE FINANCIAL STATEMENTS
Within its terms of reference, the Committee monitors the
integrity of the annual and interim reports, including a review
of the significant financial reporting matters and judgements
contained in them.
At its meetings in September 2021, February 2022 and
September 2022, 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. There
were no material matters requiring the Committee to make
amendments to the interim and annual reports.
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continued
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
REPORTING
Last year we reported for the first time in accordance
with the Task Force on Climate-Related Financial
Disclosures (TCFD), ahead of the introduction of the
regulatory requirement to do so. This year, with the
support of specialists from advisory firm EY, we have
issued our first full report.
Our Group strategy, targets and plans have continued
to evolve this year, as has the approach from the Board
and Audit and Risk Committee. In preparation for the
full TCFD report this year, management reviewed our
existing climate change risk assessment to identify
areas of development, specifically to cover the
physical climate risk to our raw material supply, a more
robust analysis against three climate scenarios and
a quantitative assessment of the impact of climate
change, together with a set of appropriate KPIs. The
Committee and management acknowledged that
external expert support would be required to complete
this work. EY was appointed in December 2021 to assist
us and advise on how to reflect this in our financial
statements, as well as the narrative disclosures. The
outcome of this work is reflected in our TCFD report and
in the financial statements. In addition, we appointed
EY to provide limited assurance in respect of the
Environmental, Social and Governance (ESG)-linked
KPIs set out in our Revolving Credit Facility (RCF) as at
FY22 year end, which include a target to reduce the
Group’s Scope 1 emissions. All other KPIs relating to
TCFD have been reviewed by PwC for consistency with
the financial statements. During the year, status updates
on the progress of the work were provided to the Board
and the Committee at regular intervals to provide an
opportunity for feedback, scrutiny, and challenge.
During the year, management also strengthened the
process by which all sustainability KPIs set out in the
Annual Report are measured. This was reviewed by the
Committee in June 2022 and found to be satisfactory.
DISCUSSING AND ADDRESSING SIGNIFICANT ISSUES
The major accounting issues discussed by the Committee in
September 2022 in relation to the FY22 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 there was a high degree of consistency
in the methodology applied by management compared
with the prior year, with updated inputs based on trading
experience. The Committee concluded that the values
recorded 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 Accounts as a whole are ‘fair,
balanced and understandable’. Factors taken into account
included:
• Does the narrative of the CEO Review and CFO 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?
• Is the language and tone of voice used commensurate with
the spirit of ‘fair, balanced and understandable’?
• Is there a clear link and consistency in reporting of climate-
related risks, including the outcome of scenario analysis
disclosed, KPIs and carbon commitments in the Strategic
Review of the Annual Report and the financial statements?
Committee members received the draft Annual Report
and Accounts in advance and had the opportunity to make
comments in advance of the formal meeting at which the
report was tabled for approval.
Following its review, the Committee confirmed to the Board
that in its view the FY22 Annual Report was ‘fair, balanced and
understandable’ and provided the information necessary for
our shareholders to assess the Group’s position, performance,
business model and strategy.
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EXTERNAL AUDITOR
The report and financial statements were audited by
PricewaterhouseCoopers LLP, following the firm’s
appointment as statutory auditor in January 2014. Our audit
partner from the FY19 audit onwards is Mark Skedgel.
PricewaterhouseCoopers LLP attended the Committee
meetings in September 2021, and February, June and
September 2022. The Committee also met privately with the
auditor during each meeting and, as Chair of the Committee,
I had regular dialogue with the audit partner.
EXTERNAL AUDIT EFFECTIVENESS AND
INDEPENDENCE
It is the responsibility of the Audit and Risk Committee to
assess the effectiveness and independence of the external
audit process.
The CFO and her team presented their review of the FY21
audit in February 2022. This covered a number of aspects
including:
• The quality of the audit work and the 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, the robustness of challenge
to management and appropriate scepticism and findings
on areas which required management judgement.
• The findings from the FRC’s annual inspection of auditors
published in July 2021.
The Committee reviewed the effectiveness of the audit, taking
into account the CFO’s paper. Its conclusion was that the
audit had been effective and carried out with the necessary
objectivity and challenge to demonstrate independence,
and that there were no significant issues to highlight. The
indicators covered areas such as levels of professional
scepticism, timely audit planning, communication approach
and findings, appropriate use of specialists/experts, team
continuity and supervision, quality of the audit team and
quality and timeliness of information. These will be further
refined for the FY23 audit.
EXTERNAL AUDITOR APPOINTMENT FOR FY22
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.
In February 2022, the external auditor presented their strategy
for the FY22 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 £301,500 (FY21: £254,000).
Taking into account the review of the FY21 audit and
the proposed plan and fee, the Committee agreed that
PricewaterhouseCoopers LLP be reappointed as auditor
for the FY22 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.
SAFEGUARDING AUDITOR INDEPENDENCE
AND OBJECTIVITY
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 and jeopardise the independence of the
audit process.
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,
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; and 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.
We believe that our policy is still relevant and safeguards
auditor independence and objectivity effectively. In June
2020, we adopted a formal policy on recruitment of former
employees of the external auditor, which is also available
on our website, to further promote this. We are pleased
to confirm that we complied with all of these policies
during the year.
During the period we paid PricewaterhouseCoopers LLP
£42,000 (2021: £40,000) for their review of the interim financial
statements (considered to be a non-audit service). This was
12.2% of the total audit fees, and the three year average is
12.4%. No other non-audit services were provided by the
external auditor. Fees paid to PricewaterhouseCoopers LLP
for audit work were £301,500 (2021: £254,000).
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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Corporate governance report
Audit, risk and internal control
continued
AUDITOR ROTATION
A competitive tender is in the best interests of shareholders,
and our auditor rotation policy is that we will tender the audit
at least once every ten 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. PwC has been the Group’s statutory
auditor since January 2014. In accordance with this policy the
Committee has decided to initiate a tender process in respect
of the FY24 statutory audit and will have regard to
the Government’s audit reform proposal to include a
challenger firm as part of the tender process and consider
the approach to implementation of a managed shared audit.
The audit tender process will be overseen by the Audit and
Risk Committee and is expected to conclude later this year. A
resolution proposing the appointment of the selected firm will
be put to shareholders at the 2023 Annual General Meeting.
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.
RISK MANAGEMENT AND INTERNAL CONTROL
Effectiveness of risk management and internal
control systems
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 effectiveness of our risk management and internal
control systems are reviewed annually and this was carried
out in September 2021 and September 2022. The conclusion
of this review was that:
• The systems established by management to identify,
assess, manage, and monitor financial and non-financial
risks and identify emerging risks have been improved year
over year and are effective; and
• The assurance on risk management and internal control
systems is sufficient to enable the Board to satisfy itself that
they are operating effectively.
In forming its view, the Committee considered the following:
• Regular risk reviews conducted in September 2021,
February 2022 and September 2022;
• KPIs to measure the effectiveness of the mitigations in place
for our principal risks;
• Biannual review of principal risks by the Board;
• The formal risk appetite statement which is reviewed by the
Committee annually;
• Regular feedback and updates from the Risk and Resilience
Committee on its work;
• Management review of the principal and operational risk
registers at least twice a year;
• Management report on developments and improvements
to the control environment;
• The conclusions of the internal and external audit reports;
• Continued progress on improving business continuity
plans, including IT continuity, and keeping plans up to
date; and
• Satisfactory insurance programme in place.
RISK AND RESILIENCE COMMITTEE
The Risk and Resilience Committee was established
in FY21. The monthly meetings are chaired by the CFO
and attended by the Company Secretary, the Chief
Information Officer, the Group Finance Director, the
Head of Health and Safety, Risk and Insurance and
other senior representatives from relevant teams.
In addition, a representative from KPMG is invited
to attend the meetings to provide the benefit of their
experience, insight, and challenge. At each meeting
a detailed cross-functional peer review of the principal
risk and associated mitigations is conducted to
provide challenge and to identify any cross-functional
dependencies or impacts, and any emerging risks.
Standing agenda items for each meeting also include
a review of cyber security KPIs, and of KPIs associated
with each principal risk that are used to identify
any failures in risk mitigation which would require
management action. In depth reviews of principal risks
are conducted on a rotational basis; the intention is to
review each principal risk at least once every two years,
with the highest-impact risks (measured by likelihood
and severity) reviewed annually but refocused as
necessary to consider emerging risks. A forward plan
of in-depth reviews is agreed at the beginning of the
financial year. A summary of the discussions and actions
is circulated to the Executive Board after each meeting
and the Audit and Risk Committee is updated at
each meeting.
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Summary of the Risk and Resilience Committee’s key activities
during the year:
• Completed eight peer deep dive reviews of certain
principal risk areas.
• In October 2021 a ‘Horizon Scanning’ session was led
by KPMG and attended by the CEO and a number of the
executive management team to establish whether there
were any gaps in our risk registers.
• Regular discussions of any emerging risks such as the
impact of the war in Ukraine.
• A full review of our principal risks was conducted at half and
full year following separate individual review sessions with
each of the executive risk owners and their teams.
• Updates on crisis management from the Head of
Health and Safety, Risk and Insurance which included
learnings from two planned crisis simulations and from
an unannounced crisis management group mobilisation
event in December 2021.
• A session on fraud risk management led by KPMG to assess
the robustness of our controls and to understand current
fraud trends.
i
See page 69 for further information on our risk
management framework.
One of the key risk factors to the effectiveness of the control
environment identified by KPMG was the level of resourcing
in the Finance team and overreliance on key individuals.
During the year the Finance team was restructured, and
accountabilities changed. Eight new roles were created
and filled, including a new Head of Process Transformations
and Controls who reports to the Group Finance Director.
This key role will provide dedicated resource to focus on
driving control improvements both in finance and across the
business, especially as we undertake system transformation,
as well as preparation for more stringent regulatory
requirements.
The Committee is of the view that our control environment
remains satisfactory and progressive improvements are
being made.
INTERNAL AUDIT
The internal audit function was outsourced to KPMG
in December 2019. The purpose, scope and authority
of KPMG is defined within its charter which is approved
by the Committee annually. KPMG’s role as internal auditor
is to provide independent and objective assurance to the
Committee and senior management on matters set out
in the internal audit plan.
The Committee considers that the processes in place to
manage risk by the Board and management are robust
and working effectively.
The internal audit engagement partner attends all scheduled
meetings of the Committee and further meets with members
of the Committee and its Chair without management present.
During the year KPMG presented the internal audit plan
together with an overview of its approach to delivering
the internal audit function over the next 18 months. The
Committee also received updates on progress against
the internal audit plan, which included a summary of the
results of any completed audits, any changes to the plan,
and commentary on how lessons learned from the internal
audits were shared across the business. The Committee also
approved the deferral of the Cyber Security follow up to FY23
to allow the business time to implement the actions arising
from the original audit and replaced the Cyber Security follow
up with an internal audit on General IT controls which will have
a broader scope than previous years.
INTERNAL CONTROL FRAMEWORK
Management is responsible for establishing and maintaining
an effective system of internal controls and the Committee
has responsibility for ensuring the effectiveness of those
controls. In the last 18 months there has been a continuous
detailed assessment of and progressive improvement in
our general control environment, which began in FY20
with the internal controls ‘health check’ completed by
KPMG, followed by ongoing regular internal audit reviews
and reports, and a review of our readiness to implement
a detailed and documented internal controls framework
should it be required, also conducted by KPMG. Further to
this and, as reported last year, management is conducting a
multi-year programme of investment in modernisation of our
key business systems to ensure that we have the foundations
in place to support our ambitious strategic growth plans,
commencing with our commercial systems.
The Board continues to monitor progress and the Committee
receives relevant updates on any aspects that impact internal
controls and risk management.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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Corporate governance report
Audit, risk and internal control
continued
IT SYSTEMS, CYBER SECURITY AND DATA
PROTECTION/GDPR
Cyber and data 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 set out in the
Principal Risks and Uncertainties section on page 78 of this
Annual Report.
We have a number of policies in place to set out how we
manage IT, cyber security and data, including an overall
Personal Information Security Policy, a Data Protection Policy,
and other policies covering matters such as use of social
media and personal devices to access Group systems.
In 2020 we decided to align to the ISO 27001 framework.
We carry out formal penetration testing at least annually;
this happens far more frequently when we test new areas of
the commercial website and any new software developments.
Vulnerability assessments are carried out continuously.
Significant improvements in cyber security have been made
by the Information Security and Development Security &
Operations teams in line with the recommendations in the
cyber security maturity assessment completed by KPMG last
year. The strategy and priorities for the next three years have
been developed, additional resources recruited, and work
commenced on the foundational controls required to mature
the security posture. There has been a significant drop in
the overall risk caused by vulnerabilities in our estate and an
increased response to any new, zero-day threats. Additionally,
Deloitte has been engaged as our security service partner,
which will see an increase in the knowledge and skills of
the relevant internal teams and the availability of expert
responders to any security incidents.
We have a Data Protection Steering Group, which is attended
by the Head of Information Security, members of the legal
team and other managers, and reports to the Company
Secretary and the Chief Information Officer. The Steering
Group has oversight of GDPR compliance, and during the
year has systematically reviewed our position against the
detailed requirements of the Information Commissioner’s
Office. This group will also oversee the implementation of the
recommendations of the KPMG internal audit review on GDPR
which is referred to opposite. In FY23, the Company Secretary
will review the governance in place to ensure that our
regulatory requirements continue to be met as the business
becomes increasingly digital. She will conduct this with the
Data Engineering Director, the Head of Data Management,
the Head of Information Security and other senior leaders; she
will report back to the Committee on this work.
KPMG completed the following reviews in the year:
Internal audit review
Overview of scope
Stock management
To focus on controls over stock movement,
returns of stock, obsolescence and valuation.
Contract
management
Segregation of
duties – follow up
A detailed review of Dunelm’s contract
management and compliance framework was
completed. The audit included a review of
contract due diligence and risk assessment
processes, legal review, delegation of
authority, retention, accessibility & security of
contracts, and contract monitoring. A specific
focus on ethical sourcing and assessment
was applied in response to recent issues
highlighted in the retail sector.
To follow up on the progress made by
management in implementing the actions
agreed in the ‘FY21 Core Financial Controls
internal audit’ to remediate the risks identified.
GDPR compliance
A ‘deep dive’ internal audit of GDPR to ensure
there are no further gaps in compliance.
The findings and actions from internal audit reviews are
agreed with the relevant business area, communicated to
the Committee and tracked through to completion. Areas
where the Committee has focused particular attention on
action resolution include the on-going work around data
security and supplier risk management, including contract
governance. All agreed actions have been completed in the
approved timescale, although some items have required
extension as remediation requirements become better
understood. The outputs from remediation activities are
used to inform the rolling internal audit plan.
The assurance mapping exercise undertaken by KPMG in
FY21 identified a significant amount of assurance activity
across all principal risks, as well as some inefficiencies
and gaps. Within the scope of each of the internal audits
listed above KPMG conducted a validation exercise of the
documented assurance activity to review the gaps and
inefficiencies identified and recommend management
actions to address these.
The risk-based internal audits planned for FY23 comprise:
• General IT Controls (report finalised post year end);
• Validation of Assurance Activity (report finalised post
year end);
• Code of Conduct;
• Third-party risk management;
• Cyber Security follow up; and
• Review of ESG processes.
As we move into the third year of our engagement with
KPMG, during which the business has developed significantly,
particularly due to the growth of our digital business, the
Committee has asked our CFO Karen Witts, who joined the
Group in June 2022, to review the effectiveness of the internal
arrangements over the coming year and discuss any proposed
internal audit arrangements with the Committee Chair.
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AUDIT AND CORPORATE GOVERNANCE REFORM
The Committee has considered and continues to monitor
the proposed audit and corporate governance reforms set
out in the consultation paper issued by Department for
Business, Energy and Industrial Strategy (BEIS) in March
2021, of which further details were published in May 2022.
While the outcome is yet to be determined, we have started
work to address matters which are likely to be implemented,
and which we consider will add value to our business. We
will continue to progress our plans to develop our Viability
Statement, distributable reserve tests, and Audit and
Assurance Policy, to ensure Dunelm is ready to adopt any
regulatory changes in the near future.
The Board and the Committee support measures that
increase the quality of governance, audit and transparency
for the benefit of our shareholders and other stakeholders,
and as usual, we will aim to apply any changes that are
implemented in a pragmatic way so as to deliver this outcome.
Approved by the Board on 14 September 2022.
Ian Bull
Chair of the Audit and Risk Committee
14 September 2022
Data breach/incident response plan
Our information security incident management process
is documented and tested annually. Our process includes
definitions of what determines a major or minor incident
and the steps we are required to take. Any major incident
is escalated to the Cyber Security Incident Response Team
(CSIRT) and significant incidents are raised to the Company
Secretary and Chief Information Officer (both Executive
Board members), who would invoke our Crisis Management
Plan, if necessary. In the event of any significant data breach,
we would comply with our obligations to notify impacted
individuals in a timely manner.
Responsibility for privacy and data security
The Chief Information Officer has executive responsibility for
managing risks relating to IT systems, data and cyber security.
The Company Secretary is responsible for compliance with
data protection legislation. This year we formally appointed
our Company Secretary as the Data Protection Officer, to
reflect the increasing sophistication of our data analytics
capability. In addition to this, a Head of Data Management
has recently been appointed, to oversee the quality and
integrity of our data. Cyber security is a standing agenda item
for the Audit and Risk Committee and Risk and Resilience
Committee, with a ‘deep dive’ scheduled at least annually.
The output of this meeting is reported monthly to the
Executive Board.
SUNFLEX ACQUISITION
On 3 May 2022, the Group completed the acquisition of the
assets of the Sunflex business. Sunflex is a supplier of curtain
tracks, poles and blinds to Dunelm and other businesses
and operates from one facility in the UK. While this is a small
acquisition with a simple operating model, the Company
Secretary led a process post-acquisition to ensure that
key financial and compliance controls were implemented.
These included financial delegated authorities, health and
safety, competition law, anti-bribery and cyber security.
These were reported to the Board at the May meeting.
Management also incorporated additional risks arising from
the Sunflex acquisition into the year-end review of principal
and operational risk registers. As part of the acquisition of
Sunflex, we considered IFRS 3 Business Combinations, and
have determined that the acquired set of activities and assets
is a purchase of a business, and as such has been classed as
a business combination. We have therefore assessed the fair
value of the assets, determined any identifiable intangible
assets and worked through the relevant disclosures required
within the financial statements. For more information refer to
note 27 of the financial statements on page 207.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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Corporate governance report
Remuneration
Remuneration
Committee Report
William Reeve
Chair of Remuneration Committee
REMUNERATION COMMITTEE MEMBERSHIP
The Directors who served on the Committee during the year
and their attendance is set out below:
Member
William Reeve
(Chair)
Ian Bull
Kelly Devine1
Andy Harrison
Peter Ruis
Arja Taaveniku
From
To
1 July 2015
To date
10 July 2019
1 March 2022
1 September
2014
10 September
2015
15 February
2021
To date
To date
To date
To date
To date
To date
Meetings
attended
4/4
4/4
2/2
4/4
4/4
4/4
2/2
Vijay Talwar1
1 October 2021
1. Kelly Devine and Vijay Talwar were appointed to the Board during the
year and joined the Remuneration Committee on appointment.
Alison Brittain joined the Board on 7 September 2022, after the end of the
financial year, and became a member of the Committee on that date.
The Company Secretary acts as secretary to the Committee. No Director
ever participates when his or her own remuneration is discussed.
130 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
Dear shareholder
INTRODUCTION
Our Executive Board performed strongly throughout the year,
delivering another year of strong growth and record Profit
Before Tax (PBT) of £212.8m, even when compared to FY21
PBT of £157.8m, which in itself was a record. This is despite
disruption and uncertainty due to Covid-19 in the first half of
the year, ongoing international supply chain disruption, and
significant cost inflation. With a little bit of hindsight, it is clear
that FY22 was an exceptional year, combining strong recovery
from the pandemic which the Executive Board then made
the most of and grew market share, and with good strategic
progress as we continued to build our customer proposition,
digital capability, supply chain capacity and our approach to
climate change and sustainability. We have also continued
to support the financial and emotional wellbeing of our
colleagues, and of our communities.
CHIEF EXECUTIVE PAY OUTCOME
Our senior management team performed strongly in a
difficult year in which we achieved record sales and profits
for the Group, even after making significant investment in
capacity and capability to drive future growth, and after
managing disruption from Covid-19 and from international
supply chains and inflationary pressures. A high proportion of
our executive remuneration is in performance-related variable
pay so as to incentivise and reward strong performance,
and so this has resulted in a high bonus outcome for FY22.
Our strong performance over the last three years has also
delivered full LTIP vesting. These outcomes are reflected in
the reported single figure remuneration earned by our Chief
Executive, Nick Wilkinson, of £2.7m (2021: £3.8m). In line with
our policies, over 75% of Nick’s FY22 pay will vest or be held
in shares, and at least two thirds of these (after payment of tax
and National Insurance contributions) must be retained.
The Committee considers that this pay outcome is fair and
well-deserved and it reflects the overall shareholder and
stakeholder experience of the Group, as well as the strong
performance of the executives.
CHIEF FINANCIAL OFFICER PAY
The Board was sorry that Laura Carr decided to step down
from the Board as Chief Financial Officer (CFO) on 8 June
2022 after more than three years of service, during which she
performed strongly and was an integral part of the Executive
Board, to take up a role in private equity. Laura worked her full
notice period so as to mitigate disruption to the Board and the
business as a result of her departure, and she was paid salary
and benefits to the date that she left. Laura did not receive any
other compensation and although she worked for 11 months
of the year, in accordance with the practice applied to other
colleagues who voluntarily resign, all of her FY22 bonus and
share award entitlements have lapsed. Laura is obliged to
retain Dunelm shares equal to 1× salary until June 2024 in line
with the shareholding guidelines set out in our policy.
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Karen Witts joined as CFO in June 2022, the final month of
the financial year. Her base salary of £450,000 is higher than
Laura’s but is within the current median range for the top
50 companies in the FTSE250, and reflects her skills and
experience. Karen’s pay in FY22 of £52,000 included pro
rata participation in the FY22 bonus as part of her joining
arrangements, and two thirds of this after tax is required to
be invested in Dunelm shares, to be held in accordance with
the shareholding guidelines set out in the Remuneration
Policy. Karen has also been issued with a pro-rated award
under the FY22-24 Long-Term Incentive Plan. Apart from
relocation costs and an accommodation and travel allowance,
no other joining arrangements were awarded. Karen invested
£200,000 in Dunelm shares shortly before she joined the
Group, in accordance with our shareholding guidelines.
VESTING OF INCENTIVES IN FY22
Following the specific temporary incentive arrangements for
the FY20 and FY21 annual bonus, for FY22 we reverted to our
usual cash bonus. The Committee set bonus targets related
to sales (25% weighting), PBT (50% weighting), and strategic
and personal progress, including customer and colleague
satisfaction measures and at least one other measure
linked to our “Pathway to Zero” ambition (25% weighting).
The Committee has determined that 90% of the maximum
bonus opportunity has been earned by Nick Wilkinson and
67.5% by Karen Witts (pro-rated from date of employment).
Karen has declined any payment in respect of personal and
strategic objectives given her relatively short tenure during
the financial year. After payment of tax and National Insurance
liabilities, at least two thirds of this must be invested in
Dunelm shares which are retained for at least the duration of
employment, in accordance with the shareholding guidelines
which are set out on page 140.
For the LTIP covering the performance period July 2019-June
2022, 100% of the award granted in 2019 to Nick Wilkinson
will vest in October 2022, representing 134,984 shares, plus
special dividend equivalents. During the performance period
for this LTIP award Dunelm’s diluted EPS grew at a compound
annual rate of 18.8%. After sales to cover tax and National
Insurance liabilities, at least two thirds of these shares must
be retained for at least the duration of employment, in
accordance with the shareholding guidelines which are set
out on page 140. No adjustment was made to the targets or
the vesting outcome in respect of our decision to repay funds
received from the Job Retention Scheme in FY21, to reflect
FY20 financial performance which was significantly impacted
by Covid-19, or any other reason.
STAKEHOLDER ALIGNMENT
After considering the experience of each of our key
stakeholder groups during FY22 the Committee determined
that the FY22 pay outcome for Nick Wilkinson and Karen
Witts is fair and reasonable and reflects the performance of
the Group and stakeholder experience. No discretion was
exercised by the Committee to adjust the FY22 bonus outturn
as a result.
In making this determination, the Committee considered the
following factors:
• The financial performance of the Group has been strong,
delivering record sales and profit, despite the Covid-19
crisis and the external environment throughout the financial
year referred to above.
• Although the share price has fallen significantly in the
second half of the year, the advice given by our brokers
is that this reflects the financial markets’ general view of
the UK retail sector and growth stocks in the light of the
changed economic conditions and the war in Ukraine, rather
than management performance or a Group-specific issue.
• Further, at least two thirds of the bonus and shares vesting
(after payment of tax and National Insurance liability)
must be retained in Dunelm shares in accordance with
the Company’s shareholding guidelines.
• Significant progress has been made to advance the
strategic objectives designed to accelerate future growth
and advance the Group’s long-term ambitions.
• The Group has significantly advanced its sustainability
ambitions, setting science-based targets to reduce
greenhouse gas emissions by 50% by 2030, progressed the
creation of roadmaps to deliver these, and moved forward
on people, diversity, human rights and community matters.
• The business performed strongly on colleague
engagement scores and implemented customer
proposition improvements.
• All colleagues received a pay increase during the year;
hourly paid colleagues in our warehouses and stores
received an annual pay increase that exceeded the 6.6%
increase in the national living wage; nearly 1,000 colleagues
in the FY19-21 Sharesave doubled their savings due to the
increase in the share price over the period of the scheme;
colleagues in a bonus scheme will receive a similar outcome
as a percentage of bonus opportunity to that of the CEO.
• Continued support was given to local communities and
charitable activity, as described elsewhere in this report.
• Feedback from the National Colleague Voice (NCV) on
Executive pay has been that colleagues are satisfied with
pay awarded provided that it reflects the performance of
the business.
• In the year, the Group paid an interim dividend of 14p per
share to shareholders and two special dividends of 65p per
share in October 2021 and 37p per share in March 2022.
The Board is recommending to shareholders that a final
dividend of 26p per share be paid in December 2022.
• No claims for Covid-related government support were
made in FY21 or FY22 and in FY21 the Group repaid £14.5m
claimed from the Government’s Job Retention Scheme in
FY20 and in FY22 repaid £4.0m in Covid-related grants
received in FY21. No adjustments were made to LTIP targets
in respect of the impact of Covid-19 or the repayment of
Covid-related support. Colleagues who were placed on
furlough in FY21 received the same payments that they
would have received via the Government scheme, funded
by the Group. No colleagues were put on furlough in FY22.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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Corporate governance report
Remuneration continued
Executives’ annual bonus and FY23-25 LTIP
We will adhere to our usual policy of paying our FY23
annual bonus in cash, two thirds of which, for the Executive
Directors, (after payment of tax and National Insurance
liability) must be invested in Dunelm shares to be retained
during employment. Targets will be based on our annual
budget and are 75% financial and 25% strategic and
personal, including environmental, social and governance
measures linked to delivery of our strategy. We have also
set targets for awards to be made under our Long-Term
Incentive Plan, expected to be made in October 2022,
and these are 80% financial and 20% environmental,
social and governance related. Further details are set
out in the Implementation Report.
Pension
In August 2021, Nick Wilkinson volunteered to reduce
his pension entitlement going forward to the workforce
average, which is 3% of base salary, where it remains.
This rate also applies to Karen Witts, the only other
Executive Director who receives a pension allowance.
CONCLUSION
The Committee considers that the single figure
remuneration received by Nick Wilkinson and Karen
Witts in respect of FY22 is appropriate to provide reward,
motivation, and retention, with over 75% of Nick’s award
being paid or invested in shares subject to holding
requirements. I hope that shareholders will agree that
the outcome is aligned to shareholders and all other
stakeholders and that you will support the resolution
in relation to the Implementation Report.
Our Remuneration Policy is due for regular renewal at the
2023 AGM, and as I mentioned above I will be writing to
our major shareholders and their representatives during
the year with our proposals.
I look forward to meeting shareholders at the AGM.
Yours faithfully,
William Reeve
Chair of the Remuneration Committee
14 September 2022
FY19-21 SHARESAVE
Nick Wilkinson participated in the FY19-21 Sharesave,
alongside over 900 other colleagues across the entire
business. Options were granted at 479p, and at the time of
maturity of the scheme (1 January 2022) the price of Dunelm
Shares was 1,318p per share. Nick exercised his options on
14 February 2022 and retained all his shares.
FY23 REMUNERATION
Pay Structure
We apply a consistent pay structure throughout the business,
with the remuneration of Executive Directors more heavily
weighted towards variable pay and share-based incentives
than other colleagues, so that a greater part of their pay is
linked to successful delivery of strategy and aligned with
shareholders. For FY23 we have taken the decision to invest
more in the pay of our hourly paid colleagues and our office
based colleagues on the lowest grade, recognising that they
have been impacted disproportionately by rising energy
prices. The median pay increase across the Group has
therefore been 7.6%, with management receiving a lower
average increase of around 4%.
Executives’ base salary
At our annual review of Nick Wilkinson’s remuneration, the
Committee determined that Nick has continued to perform
strongly throughout the year, and this has been reflected
in the financial performance of the Group.
We noted that due to the successful, profitable growth of
the Group during recent years, our CEO’s base salary is
now at the lower quartile versus our peers, and the bonus
opportunity of 125% of salary is now below the lower quartile.
The Committee would like the flexibility to increase the
quantum of the CEO’s potential performance-related pay,
in line with stretching performance targets, but is unable
to do so under the terms of the current Remuneration Policy.
We expect to discuss this with our major shareholders and
their representatives as part of the consultation process
for the 2023 policy renewal.
Nick has asked not to receive a base pay increase for FY23,
and the Board has reluctantly agreed. The base pay increase
that Nick has declined to take was a 4% increase in base
salary, in line with the increases given to management
colleagues across the Group, and also to incorporate his 5%
travel allowance into his base pay. This takes into account the
median pay award made to the wider colleague population
of 7.6%, including awards to hourly paid colleagues across the
business which averaged 7.6%. The Committee considered
a wider range of stakeholder considerations, including
the feedback on Executive Director pay given by the NCV
referred to above. Both his base salary and total remuneration
package remain positioned between the lower quartile and
median when compared with his peers.
Karen Witts joined the Group on 9 June 2022 and her base
salary is eligible for review in August 2023.
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Remuneration at a glance
Our remuneration principles guide the overall remuneration structure that we have
adopted for our Executive Directors, as summarised below. Both relate directly to
our long-term strategic goal of delivering value for our shareholders and other
stakeholders through the profitable growth of a purpose-led, quality business.
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SUMMARY OF EXECUTIVE PAY
REMUNERATION PRINCIPLES
BASE PAY
LTIP
Median or below
Upper quartile
Up to 200% of salary
Three-year performance period
Two-year retention period
Linked to profit and strategic/ESG
targets
PENSION
SHAREHOLDING TARGETS
Aligned to workforce average, 3%
1 x salary after three years
BENEFITS
Median
2 x salary after five years
Two-year post-termination holding
requirement
LIFETIME LOCK-IN
2/3 of bonus and LTIP outcome
retained in shares for duration of
employment
ANNUAL CASH BONUS
CLAWBACK AND MALUS PROVISIONS
Median
125% of pay
Linked to performance: sales, profit,
strategic/ESG, personal
On bonus and LTIP
Consistent,
simple, transparent
Aligned to
shared values
and ownership
structure
Applied
consistently
throughout
organisation
Enshrined
in Directors’
Remuneration
Policy 2020
Reflect Board’s
desire to reward
sustainable,
profitable growth
over the longer term
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Remuneration continued
How our remuneration policy is linked to our strategy
GROUP STRATEGY
Deliver value for our shareholders and other stakeholders through long-term, sustainable, profitable growth
Remuneration strategy
• Pay fairly for an individual’s role and responsibilities
Remuneration structure
• Base pay and benefits at median or below
• Reward strong performance
• Focus on long-term value creation
• Align executives with shareholders through
share ownership
• Annual bonus at median
• Long-Term Incentive Plan at upper quartile
• Two thirds of variable pay retained in shares for
duration of employment and for a further two
years in line with our shareholding guidelines
ABOUT OUR REMUNERATION POLICY
Our binding Remuneration Policy was last updated in 2020, and approved by shareholders at the AGM on 17 November 2020
with over 99% 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 the creation of long-term, sustainable growth in shareholder value through delivery of the objectives set
out in our corporate purpose and ambitions, which are all long-term in nature. It is also consistent with our shared values, which
include ‘long- term thinking’ and to ‘act like owners’. Our approach is also in keeping with the family origin of the business, and
is important to the Adderley family, who remain our largest shareholders.
The following table summarises how the Remuneration Committee has addressed the factors set out in Provision 40 of the 2018
UK Corporate Governance Code in setting the remuneration structure and Remuneration Policy:
HOW WE ADDRESSED PROVISION 40 OF THE UK CORPORATE GOVERNANCE CODE
CLARITY
Remuneration
arrangements should
be transparent and
promote effective
engagement with
shareholders and
the workforce
SIMPLICITY
Remuneration
structures should
avoid complexity and
their rationale and
operation should be
easy to understand
• The remuneration arrangements for the Executive Directors are set out in a clear and simple way in the Directors’
Remuneration Policy and in the plan rules for each incentive plan. Guides are provided to participants explaining
how each incentive plan operates.
• The Committee is committed to transparent disclosure. Full details of incentive targets and outcomes are
published in detail in the Annual Report on Remuneration each year.
• Queries on remuneration practices from shareholders or colleagues are welcomed by the Committee throughout
the year and encouraged at the AGM and at the annual presentation to the NCV by the Committee chair.
• Executive remuneration was discussed at the investor Corporate Governance presentation in March 2022
when discussion topics raised by shareholders included the ability of the Group to pay market rates to attract
talented executives within the terms of the Remuneration Policy, choice of LTIP targets, shareholder approach
to assessment of variable pay outcomes and the personal shareholding targets for Executive Directors.
• Since flotation of the Company, the approach of the Remuneration Committee has been to maintain a
remuneration structure that is simple in nature and it is well understood.
• Executive Directors (and senior leadership) receive fixed pay (salary, benefits, pension), and participate in a single
short-term incentive (the “Annual Bonus”) and a single long-term incentive (the “LTIP”).
• The financial performance criteria for the Annual Bonus and LTIP are linked to reported figures, usually PBT for the
annual incentive, and earnings per share for the long-term incentive. Hence, they are transparent and predictable.
• A percentage of the performance criteria for the Annual Bonus, and from FY21 for the LTIP, is linked to
delivery of strategic objectives, which include measurement via numerical KPIs that are used by the Board
and management to measure performance, such as colleague and customer satisfaction and measures
linked to our sustainability strategy.
• The Committee reviews the appropriateness of targets annually, being mindful of alignment with strategy and
keeping them simple. For example, the PBT and LTIP financial targets are aligned to the annual budget and
5 year plan.
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HOW WE ADDRESSED PROVISION 40 OF THE UK CORPORATE GOVERNANCE CODE
RISK
• The Committee considers that the incentive arrangements do not encourage inappropriate risk-taking, due to the
Committee’s rigorous process for reviewing incentive outcomes.
• The ability to mitigate potential risks is within in the Remuneration Policy and the rules of the performance-related
incentive plans. Examples include:
– The Policy provides wide-ranging flexibility to adjust payments where outcomes are not considered to reflect
underlying business performance, stakeholder experience or individual contributions, or where behaviours are
inconsistent with the risk appetite of the Group. No such adjustments were made in FY22;
– The inclusion of malus and clawback provisions under a wide range of potential scenarios; and
– The majority of the variable remuneration of the Executive Directors is paid in shares which are subject to
in-employment and post-employment shareholding requirements.
• At the time of approving the Policy and annually in the annual report full information on the potential values of the
Annual Bonus and LTIP are provided, with strict maximum opportunities and minimum, on target and maximum
performance scenarios. An indication of the potential impact of a 50% share price appreciation on the value of
LTIP awards is also included.
• The FY22 Annual Bonus and LTIP award opportunities were in line with the maximum opportunity in the Policy.
Remuneration
arrangements should
ensure reputational
and other risks from
excessive rewards, and
behavioural risks that
can arise from target
based incentive plans,
are identified and
mitigated
PREDICTABILITY
The range of possible
values of rewards to
individual directors
should be identified
and explained at the
time of approving
the Policy
PROPORTIONALITY
• Payments under variable incentive schemes require robust performance against challenging conditions over
The link between
individual awards, the
delivery of strategy
and the long-term
performance of the
Group should be clear.
Outcomes should
not reward poor
performance.
the short and longer term. For example, 50% of the Annual Bonus is based on PBT, and 25% on sales, with 40%
of the opportunity earned for achieving budgeted PBT; and 80% of the LTIP target is linked to EPS growth over
a three-year period, paying out 50% of “on target” performance. Both measures are Group KPIs.
• Non-financial performance measures account for 25% of the opportunity for Annual Bonus and 20% of the LTIP.
These are linked to delivery of strategic objectives which are key to the long-term growth of the Group, and a
number of them are linked to Group KPIs, including for example customer NPS, colleague NPS and reductions
in carbon emissions.
• The Committee considers the formulaic outcome, as well as other relevant factors, when making decisions on
remuneration outcomes.
• Outcomes do not reward poor performance due to the Committee’s overriding discretion to depart from
formulaic outcomes which do not reflect underlying business performance.
ALIGNMENT TO
CULTURE
Incentive schemes
should drive
behaviours consistent
with company purpose,
values, and strategy.
• The Committee sets the remuneration principles that apply to all colleagues and is satisfied that these drive the
right behaviours and reinforce the Group’s purpose (to help create the joy of truly feeling at home, now and for
generations to come) and shared values (act like owners, keep listening and learning, stronger together and long-
term thinking), which in turn promote an appropriate culture. Our shared values are reflected in the measures
used in our incentive schemes. For example, our incentive arrangements link to them in the following ways:
– Financial targets under the Annual Bonus and all targets for the LTIP are the same for all management, regardless
of seniority, linking everyone’s contribution to a shared Group financial outcome.
– Strategic targets require our Executive Directors and senior leadership to work together to deliver strategic
growth and value to our stakeholders. For example, increasing the number of active customers requires input
from product, marketing, digital, stores and supply chain colleagues.
– Non-financial performance measures in the Annual Bonus and LTIP incentivise participants to choose the
right path for our customers, our people and shareholders by using measures which directly assess outcomes
for these stakeholders, for example colleague and customer NPS, and measures related to delivery of our
sustainability strategy.
– The use of LTIP holding periods, requirement to invest a percentage of Annual Bonus in shares and our
shareholding requirements strengthen the focus on our long-term strategic aims and ensure alignment with
the interests and experiences of shareholders, both during and after employment.
The Remuneration Committee considers that the policy and practices have operated as intended. The Company has attracted
high quality executives; overall levels of pay over recent years have been in line with the value delivered to shareholders and
other stakeholders; and positive feedback has been received from shareholders via AGM voting and other engagement
mechanisms such as the engagement process conducted in connection with the 2020 Policy renewal, and from colleagues
through our regular consultations with the NCV.
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Remuneration continued
Directors’ Remuneration Policy 2020
THE POLICY REPORT
Future policy table
The following table sets out the structure of remuneration for Directors of the Company under the Policy which was approved
by shareholders at the AGM on 17 November 2020 with over 99% of votes in favour. This Policy will remain in force until
the AGM in 2023. The Policy can be viewed in the 2020 Annual Report which is available on the corporate website at:
https://corporate.dunelm.com/investors/reports-and-presentations/
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 Group-wide review unless other circumstances apply,
such as:
– A significant change in the size, scale or complexity of the role or of the Group’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.
PERFORMANCE
METRICS
• None, although performance of the individual is considered at the annual salary review.
• No recovery provisions apply to base salary.
RETIREMENT BENEFITS
PURPOSE
AND LINK TO
STRATEGIC
OBJECTIVES
• To provide a competitive post-retirement benefit.
• To attract and retain the high-calibre talent necessary to develop and deliver the business strategy.
OPERATION
• Contribution equivalent to a percentage of base salary made to a defined contribution plan or paid as a cash allowance.
• No element other than base salary is pensionable.
• For any Executive Director appointed before 1 July 2020, 8% of salary.
• For any Executive Director appointed on or after 1 July 2020, an amount as a percentage of base salary not exceeding
the average paid in respect of the wider workforce (currently 3%).
Please note that from FY22 the incumbent Executive Director(s) have agreed to reduce their entitlement to the
workforce average.
• None.
• No recovery provisions apply to retirement benefits.
• To provide a competitive benefits package.
• To attract and retain the high-calibre talent necessary to develop and deliver the business strategy.
MAXIMUM
OPPORTUNITY
PERFORMANCE
METRICS
BENEFITS
PURPOSE
AND LINK TO
STRATEGIC
OBJECTIVES
OPERATION
• 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 or an appropriate travel allowance; and 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.
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BENEFITS
MAXIMUM
OPPORTUNITY
PERFORMANCE
METRICS
• Current benefits provided are described in the Implementation Report from page 147.
• The Committee reserves the right to provide such benefits as it considers necessary to support the strategy of the Group.
• The Committee does not consider it to be appropriate to set a maximum cost to the Group of benefits to be paid.
• None.
• No recovery provisions apply to benefits.
ANNUAL BONUS
Awards to be made to Executive Directors other than Sir Will Adderley, who has requested that he not be considered
for an annual bonus
• Rewards and incentivises delivery of annual financial, strategic and personal targets.
PURPOSE
AND LINK TO
STRATEGIC
OBJECTIVES
OPERATION
• Delivered as soon as reasonably practicable after the approval of this Policy as a conditional award of:
Annual bonus
specifically
for FY20 to
address Covid-19
situation
– 11,594 shares in Dunelm in the case of Nick Wilkinson; and
– 7,675 shares in Dunelm in the case of Laura Carr.
• Each award will vest, subject to closed periods:
– As regards 50% of the shares subject to it, rounded down to the nearest whole share where necessary, on the first
dealing day after the announcement of Dunelm’s results for FY21; and
– As regards the balance of the shares subject to it, on the first dealing day after the announcement of Dunelm’s results
for FY22.
• At least two thirds of the shares acquired (after sale of shares to cover tax and National Insurance obligations) must be
retained for the duration of employment and are then subject to post-departure holding requirements as set out in the
‘Shareholding requirements’ section on page 140.
OPERATION
• Granted as soon as reasonably practicable after the approval of this Policy as a conditional award of:
Annual bonus
specifically
for FY21 to
address Covid-19
situation
– 59,130 shares in Dunelm in the case of Nick Wilkinson; and
– 40,291 shares in Dunelm in the case of Laura Carr.
• Subject to the satisfaction of the performance targets and closed periods, each award will vest:
– As regards 50% of the shares subject to it, rounded down to the nearest whole share where necessary, on the first
dealing day after the announcement of Dunelm’s results for FY21; and
– As regards the balance of the shares subject to it on the first dealing day after the announcement of Dunelm’s results
for financial year FY22.
• The Committee has discretion to adjust the number of shares in respect of which an award vests, either upwards or
downwards, if it considers that the formulaic output does not reflect its assessment of overall financial or non-financial
performance of the participant or the Group, or is inappropriate in the context of circumstances that were unexpected
or unforeseen at the start of the relevant year, or is inappropriate for any other reason.
• At least two thirds of the shares acquired (after sale of shares to cover tax and National Insurance obligations) must be
retained for the duration of employment and are then subject to post-departure holding requirements as set out in the
’Shareholding requirements’ section on page 140.
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Remuneration continued
ANNUAL BONUS
Awards to be made to Executive Directors other than Sir Will Adderley, who has requested that he not be considered
for an annual bonus
OPERATION
Annual bonus
for FY22 and
subsequent years
to which this
Policy applies
MAXIMUM
OPPORTUNITY
Annual bonus
specifically
for FY20 due
to Covid-19
situation
MAXIMUM
OPPORTUNITY
Annual bonus
specifically
for FY21 due
to Covid-19
situation
MAXIMUM
OPPORTUNITY
Annual bonus
for FY22 and
subsequent years
to which this
Policy applies
• Ordinarily paid in cash, after the results for the financial year have been audited, subject to performance targets
having been met, with two thirds of the bonus earned required to be invested in Dunelm shares, which must be
retained for the duration of employment and are then subject to post-departure holding requirements as set out
in the ’Shareholding requirements’ section below.
• Alternatively, if the Committee considers that FY22 or any later year to which this Policy applies is substantially
impacted by the Covid-19 pandemic, the award may be delivered as a conditional award of Dunelm shares granted
shortly after the start of the year over shares with a market value equal to the maximum bonus opportunity and with
vesting subject to satisfaction of performance targets, as with the bonuses for FY20 and FY21. For these purposes
the market value of a share will be the average share price over June and July of that year (consistent with the approach
for the bonuses in respect of FY20 and FY21) unless the Remuneration Committee determines otherwise. Subject to
the satisfaction of the performance targets, each award will vest:
– As regards 50% of the shares subject to it, on the first dealing day after the announcement of Dunelm’s results for the
financial year in respect of which the bonus is earned; and
– As regards the balance of the shares subject to it, on the first dealing day after the announcement of Dunelm’s results
for the following financial year.
• At least two thirds of the shares acquired (after sale of shares to cover tax and National Insurance obligations) must be
retained for the duration of employment and are then subject to post-departure shareholding requirements as set out
in the ’Shareholding requirements’ section on page 140.
• The Committee has discretion to adjust the bonus pay-out upwards or downwards if it considers that the formulaic
outturn does not reflect its assessment of overall financial or non-financial performance of the participant or the Group,
or is inappropriate in the context of circumstances that were unexpected or unforeseen at the start of the relevant year,
or is inappropriate for any other reason.
• In the case of Nick Wilkinson, a conditional award of 11,594 shares in Dunelm.
• In the case of Laura Carr, a conditional award of 7,675 shares in Dunelm.
• Dividend accruals may be made in respect of special dividends paid during the vesting period applicable to an award.
• Subject to the Committee’s discretion to override formulaic outturns, these awards will not be subject to further
performance targets as they reflect the outcome of the performance targets for FY20, as set out on pages 144 to 146
of the FY20 annual report.
• In the case of Nick Wilkinson, a conditional award of 59,130 shares in Dunelm.
• In the case of Laura Carr, a conditional award of 40,291 shares in Dunelm.
• Dividend accruals may be made in respect of special dividends paid during the vesting period applicable to an award.
Payment would only be made in respect of shares vesting after applying performance criteria.
• Subject to the Committee’s discretion to override formulaic outturns, for financial measures threshold performance
5% of the shares will vest and for on-target performance 40% of the maximum opportunity will be earned. Bonuses will
typically be earned between threshold and on-target and between on-target and maximum on a straight-line basis.
• For strategic measures and personal goals, vesting of the bonus will be determined by the Committee between 0% and
100% based on its assessment of the extent to which the relevant metrics or objectives have been met.
• Maximum opportunity – 125% of base salary per annum.
• Where bonus awards are granted as share awards, dividend accruals may be made in respect of special dividends
paid during the vesting period applicable to an award. Payment would only be made in respect of shares vesting after
applying performance criteria.
• Subject to the Committee’s discretion to override formulaic outturns, for threshold performance, for financial measures
5% of the maximum opportunity will be earned and for on-target performance 40% of the maximum opportunity will
be earned. Bonuses will typically be earned between threshold and on-target and between on-target and maximum
on a straight-line basis.
• For strategic measures and personal goals, vesting of the bonus will be determined by the Committee between 0% and
100% based on its assessment of the extent to which the relevant metrics or objectives have been met.
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ANNUAL BONUS
Awards to be made to Executive Directors other than Sir Will Adderley, who has requested that he not be considered
for an annual bonus
PERFORMANCE
METRICS
• No further performance targets will apply to the share awards granted in respect of the bonuses for FY20 as those awards
reflect the outcome of the performance targets for that year, as set out on pages 144 to 146 of the FY20 Annual Report.
• Stretching performance targets are set each year. Performance targets for the Executive Directors may be based on
financial objectives and/or strategic objectives and/or personal goals set by the Remuneration Committee annually.
• Financial objectives may 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.
• Ordinarily, at least 50% of the annual bonus for executives will be subject to financial objectives.
• For the avoidance of doubt, share awards in respect of the bonuses for FY20 will not be subject to further performance
targets as they reflect the outcome of the performance targets for that year, as set out on pages 144 to 146 of the FY20
Annual Report.
• Awards are subject to recovery provisions (malus and clawback) as set out on page 140.
LONG TERM
INCENTIVE PLAN
Awards to be made to Executive Directors other than Sir Will Adderley, who has requested that he not be considered
for LTIP awards
PURPOSE
AND LINK TO
STRATEGIC
OBJECTIVES
• Supports delivery of strategy by requiring the achievement of financial targets which include EPS, which the Committee
believes to be the most appropriate measure for medium-term performance, aligned with our growth ambitions and
continuing to win market share. EPS growth is also a prime driver of shareholder value creation. Flexibility will be
retained to base part of the award on other financial or strategic measures in order that targets can be tailored to the
circumstances of each grant.
• 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
• 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.
• A majority of shares must be retained as set out in the ‘Shareholding requirements’ section on page 140.
• The Committee has discretion to adjust the LTIP vesting outturn upwards or downwards if it considers that the formulaic
output does not reflect its assessment of overall financial or non-financial performance of the participant or the Group,
or is inappropriate in the context of circumstances that were unexpected or unforeseen at grant, or is inappropriate for
any other reason.
MAXIMUM
OPPORTUNITY
• The maximum annual award for Executive Directors is 200% of salary.
• 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.
PERFORMANCE
METRICS
• For at least 75% of an award, one or more financial measures, which will include a measure based on EPS, assessed over
the three-year performance period. The balance of the award will be based on one or more other financial, strategic,
environmental, social and governance measures.
• The Remuneration Committee considers the targets annually, taking into account a range of factors which will include
the Group’s plans, external forecasts and the overall business environment.
• Subject to the Committee’s discretion to override formulaic outturns, for financial measures 10% of an award will vest
for threshold performance (the lowest level of performance at which awards will vest), rising to up to 50% for achieving
a stretching level of ‘on-target’ performance and to 100% for achieving or exceeding a stretch level of performance.
Vesting between threshold and on-target and between on-target and maximum will typically be on a straight-line basis.
• For strategic, environmental, social or governance measures, vesting will be determined by the Committee between
0% and 100% based on its assessment of the extent to which the relevant measures have been met.
• Awards are subject to recovery provisions (malus and clawback) as set out on page 140.
ALL EMPLOYEE SHARE PLAN (SHARESAVE)
• Promotes share ownership by all eligible colleagues (including Executive Directors).
PURPOSE
AND LINK TO
STRATEGIC
OBJECTIVES
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ALL EMPLOYEE SHARE PLAN (SHARESAVE)
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.
MAXIMUM
OPPORTUNITY
PERFORMANCE
METRICS
• None.
SHAREHOLDING REQUIREMENTS
To align the interests of Executive Directors with those
of shareholders and to promote long-term thinking, the
Committee has adopted shareholding requirements which
apply both during employment and for a period following
employment, as set out below (although the Remuneration
Committee retains the right to waive this requirement in
exceptional circumstances, such as death, divorce, ill health,
or severe financial hardship).
SHAREHOLDING REQUIREMENTS DURING
EMPLOYMENT
• Executive Directors are expected to make a personal
investment in Dunelm shares on appointment as an
Executive Director (subject to closed periods).
• 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.
• At least two thirds of shares acquired pursuant to the
vesting of any share awards (after sale of shares to cover
tax and National Insurance obligations) must be retained
during employment.
• Two thirds of any cash bonus earned (after tax and National
Insurance obligations have been met) must be invested
in Dunelm shares, which must then be retained during
employment.
• All of the shares acquired pursuant to the vesting of any LTIP
award granted after 1 July 2020 (after sale of shares to cover
tax and National Insurance obligations) must be retained
for two years, and two thirds of those shares must then be
retained during employment.
• The relevant shares must be retained regardless of whether
the Executive Director has achieved the required 100% or
200% of salary shareholding, therefore building to a higher
personal shareholding level over time.
SHAREHOLDING REQUIREMENTS FOLLOWING
TERMINATION OF EMPLOYMENT
Following termination of their employment for any reason,
an Executive Director must retain for two years shares equal
to the lower of the shareholding requirement applicable
immediately prior to departure (100% of salary if they leave
within five years of appointment or 200% of salary if they
leave five years or more after appointment) as appropriate or
their actual shareholding on departure. This is a contractual
requirement set out in each Director’s service contract.
140 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
The Company also reserves the right to require share
certificates to be lodged in its custody.
RECOVERY PROVISIONS (MALUS AND CLAWBACK)
The annual bonus (including any granted as a share award)
and LTIP are subject to recovery provisions as set out below.
Malus provisions apply which enable the Committee to
determine before the payment of an annual bonus or the
vesting of an LTIP award, that the bonus opportunity or LTIP
award may be cancelled or reduced.
Clawback provisions apply which enable the Committee
to determine for up to three years following the payment
of a cash bonus or the vesting of an LTIP award, or for three
years after the end of the performance period for a share
award granted in respect of a bonus, that the amount of the
bonus paid may be recovered and that the LTIP or share
bonus award may be cancelled or reduced (if it has not
been exercised) or that recovery may be applied to it (if it
has been exercised).
The malus and clawback provisions may be applied in the
event of:
• 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;
• Fraud; 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.
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NON-EXECUTIVE DIRECTORS
FEES
PURPOSE
AND LINK TO
STRATEGIC
OBJECTIVES
• To attract and retain a high-calibre Chair and Non-Executive Directors by offering competitive fee levels.
OPERATION
• Fees for the Chair and Non-Executive Directors are set by the Board. No Director participates in any decision relating
to his or her own remuneration.
• The Chair 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 Group-wide increase. In addition, there will be a periodic
review against market rates, taking into account time commitment and any change in the 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 Chair
or Non-Executive Director of the appropriate calibre.
• With the exception of colleague discount, no benefits are paid to the Chair 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.
The Company may deliver any element of fixed remuneration
for an Executive Director in shares rather than in cash or
any other form in which it is usually provided. The number
of shares would be such a number as having a value at the
relevant time equal to the value of the fixed remuneration
being delivered in cash.
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 FY22 the Committee determined the financial measures
and the weighting of financial and non-financial measures
based on specific business priorities in a particular year.
Financial measures will ordinarily represent a majority.
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.
LTIP
For the LTIP, at least 75% of the award will be based on one
or more financial measures, which will include EPS. The
Remuneration Committee considers EPS to be the most
appropriate measure for medium-term performance, aligned
with our growth ambitions and continuing to win market
share. EPS growth is also a prime driver of shareholder value
creation. The use of EPS for Dunelm’s LTIP is also considered
appropriate because of the low level of leverage in the
business and because it is the main driver of cash generation.
Capital expenditure controls exercised by the Board are
sufficiently rigorous to avoid EPS accretion by means of
ineffective investment of capital.
Any part of the award not based on financial measures
will be based on strategic measures, which may include
environmental, social and governance measures.
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.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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Remuneration continued
ILLUSTRATIVE PERFORMANCE SCENARIOS
The following graphs set out what Nick Wilkinson and Karen Witts, two of the Executive Directors in office at the date of this
report, could earn in FY23 under the following scenarios:
Nick Wilkinson*
Karen Witts*
)
0
0
0
‘
£
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
3,500
3,000
2,500
2,000
1,500
1,000
500
0
1,522
38%
19%
43%
In line with
exp ectatio ns
649
100%
Minim u m
Fixed pay
LTIP
2,541
46%
29%
25%
M axim u m
3,123
19%
37%
23%
21%
M axim u m plus 50 %
increase in price of
LTIP shares vestin g
)
0
0
0
‘
£
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
3,500
3,000
2,500
2,000
1,500
1,000
500
0
502
100%
Minim u m
1,177
38%
19%
43%
In line with
exp ectatio ns
Fixed pay
LTIP
1,964
46%
29%
25%
M axim u m
2,414
19%
37%
23%
21%
M axim u m plus 50 %
increase in price of
LTIP shares vestin g
Annual bonus
Plus 50% increase in price of LTIP
shares vesting
Annual bonus
Plus 50% increase in price of LTIP
shares vesting
* Please note some % in graphs above have been manually amended to resolve roundings (i.e. so that they add up exactly to 100%).
At his request, Sir Will Adderley, who is an Executive Director, does not receive any remuneration apart from an annual salary,
car allowance and healthcare benefits. Therefore, his remuneration has not been included in the scenarios above.
Fixed pay comprises base salary, benefits and pension only (see table below).
Nick Wilkinson
Karen Witts
The following assumptions have been made in respect of the scenarios above:
Base
(last known
salary)
£’000
582
450
Benefits
£’000
50
38
Pension
(3% of salary)
£’000
17
14
Performance level
Fixed pay
Annual Bonus
As above
Nil
LTIP
Nil
Minimum
(performance
below threshold)
In line with
expectations
Maximum
performance
As above
As above
40% of annual
bonus will vest
50% of the LTIP award (i.e. 100% of salary for Nick Wilkinson and Karen Witts), based
on face value of the award at the date of grant.
100% of annual
bonus will vest
100% of the LTIP award (i.e. 200% of salary for Nick Wilkinson and Karen Witts),
based on face value of the award at the date of grant.
Maximum
performance, plus
share price increase
As above
100% of annual
bonus will vest
100% of the LTIP award (i.e. 200% of salary for Nick Wilkinson and Karen Witts), plus
an increase in the value of the LTIP of 50% across the relevant performance period
to reflect possible share price appreciation.
142 DUNELM GROUP PLC
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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 Karen Witts during the year as:
• Actual pay will reflect Group 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 vest
by reference to performance in the year. This valuation
is based on the expected face value at the date of grant
without making any assumptions for changes in the share
price (other than as noted in relation to the final scenario).
• No adjustment is made for payment of special dividend
equivalents as the level of these cannot be determined
at the date of this report.
SERVICE CONTRACTS AND LOSS OF OFFICE PAYMENTS
All of the Executive Directors have service contracts.
The notice period for termination for Sir Will Adderley is
12 months from either party, and for Nick Wilkinson and
Karen Witts 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 any cash annual bonus, provided that
it is pro-rated to service.
Share bonus awards will lapse on termination of employment
before vesting other than in the event of death, serious
ill health or any other reason at the discretion of the
Remuneration Committee. If an award does not lapse, the
Remuneration Committee will determine whether it vests on
termination or at the ordinary vesting date. If termination is
during the performance period, the extent of vesting will be
determined by reference to the performance conditions and,
unless the Remuneration Committee determines otherwise, a
reduction to reflect the proportion of the performance period
that had elapsed at cessation.
The limited circumstances in which unexercised LTIP awards
might be exercised following termination of an Executive
Director’s service contract are set out below.
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 the
Chair. 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.
Details of the likely duration of the service contracts for
Executive Directors and the letters of appointment for the
Non-Executive Directors are set out in Table 7 on page 155
of the Implementation Report.
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.
• Any exercise would be subject to assessment of the
performance condition (and the exercise of any discretion
to vary formulaic outturns in line with the policy table) and,
unless the Committee determined otherwise, a reduction to
reflect the proportion of the performance period that had
elapsed at cessation.
• 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, LTIP awards would be subject to the applicable
malus and clawback provisions.
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Remuneration continued
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 Group).
Other payments
The Committee reserves the right to make any other
payments in connection with a Director’s cessation of office
or employment where the payments are made in good
faith in discharge of an existing legal obligation (or by way
of damages for breach of such an obligation) or by way
of settlement of any claim arising in connection with the
cessation of a Director’s office or employment or for any fees
for outplacement assistance and/or the Director’s legal and/or
professional advice fees in connection with their cessation of
office or employment.
CHANGE OF CONTROL AND OTHER
CORPORATE EVENTS
Share bonus awards
Share bonus awards will vest on a change of control or
winding up of the Company before the originally anticipated
vesting date. If vesting is during the performance period,
the extent of vesting will be determined by reference to
the performance conditions and, unless the Remuneration
Committee determines otherwise, a reduction to reflect the
proportion of the performance period that had elapsed at the
date of the relevant event.
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 (unless the Remuneration
Committee decides not to apply a time-based reduction)
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 or any share bonus awards,
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.
OPERATION OF SHARE PLANS
The Committee may amend the terms of awards and options
under the Company’s share plans in accordance with the plan
rules in the event of a variation of Dunelm’s share capital or a
demerger, special dividend or other similar event or otherwise
in accordance with the rules of those plans. Awards may be
settled, in whole or in part, in cash, although the Committee
would only settle an Executive Director’s award in cash in
exceptional circumstances, such as where there is a regulatory
restriction on the delivery of shares, or in connection with the
settlement of tax liabilities arising in respect of the award.
EXECUTIVE PAY AND THE PAY OF OTHER COLLEAGUES
The principles set out in the remuneration strategy on page
133 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 build and maintain a shareholding in the
Company as set out on page 140.
The remuneration of colleagues below the Board reflects the
seniority of the role, market practice and the ability of the
individual to influence Group performance.
All colleagues with a minimum service requirement (usually
three months or less) 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.
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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 line with the 2018 Corporate Governance Code:
• The Committee formally approves the remuneration
of the Company Secretary and all members of the
Executive Board.
• At least annually, the People and Stores Director provides
information to the Board about workforce policies and
practices.
• The Board receives a ‘Colleague Dashboard’ twice a
year, which contains a number of colleague measures,
including gender and age split, gender and ethnicity pay
(ethnicity pay based on preliminary data) reward, Sharesave
participation, colleague engagement, voluntary turnover
and internal promotion.
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 all 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 March 2022, and a copy of the
presentation is on our website: 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), ISS, Glass Lewis and Pensions
Investment Research Council (PIRC) are also considered by
the Board.
All Directors usually attend the Annual General Meeting, and
the Chairman and the Chair of the Remuneration Committee
may be contacted via the Company Secretary during the year.
We consulted with shareholders in relation to the 2020
Policy including, in particular, our approach to share bonus
awards proposed specifically due to the Covid-19 situation
for FY20 and FY21, our approach to LTIP awards for FY21,
pensions and salary increases. We were pleased with the
level of engagement from shareholders and for the support
shown for our proposals, which we finalised having regard
to feedback received. The Remuneration Committee has also
taken the views of shareholders into account when setting
the remuneration of newly appointed directors, the annual
pay increases and fee increases for directors, and the variable
pay outcomes for the Executive Directors.
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 Group’s strategy:
• No more should be paid than is necessary.
• Pension provision will be in line with the policy.
• 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 Group.
Circumstances in which the Committee might apply this
discretion include:
• Where an interim appointment is made on a short-term
basis, including where the Chair 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.
• 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 from page 136. The
Committee would explain the rationale for the remuneration
package in the next Annual Report.
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Remuneration continued
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 Chair 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.
LEGACY REMUNERATION ARRANGEMENTS
The Committee reserves the right to make remuneration
payments and payments for loss of office (including
exercising any discretion available to it in connection with
any such payment) notwithstanding that they are not in line
with the Policy set out above where the terms of payments
were agreed:
• Before the Policy came into effect (provided that, in the
case of any payments agreed on or after 11 November 2014
they are in line with any applicable shareholder approved
Directors’ remuneration policy in force at the time they were
agreed or were otherwise approved by shareholders); or
• At a time when the relevant individual was not a
Director of the Company (or other person to whom the
Policy set out above applies) and, in the opinion of the
Committee, the payment was not in consideration for the
individual becoming a Director of the Company (or other
such person).
For these purposes, ‘payments’ includes the satisfaction
of variable remuneration and, in relation to an award over
shares, the terms of the payment are ‘agreed’ no later than
the time the award is granted.
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Implementation Report
This section of the report sets out how the Directors’
Remuneration Policy which was approved by shareholders
on 17 November 2020 has been applied in FY22.
The information contained in this Implementation Report
is unaudited unless specifically stated as being audited.
REMUNERATION COMMITTEE MEMBERSHIP
The table below sets out the membership of the
Remuneration Committee and the attendance of Directors
at meetings during the year:
Member
William Reeve
(Chair)
Ian Bull
Kelly Devine1
Andy Harrison
Peter Ruis
Arja Taaveniku
Vijay Talwar1
From
To
Meetings
attended
1 July 2015
10 July 2019
1 March 2022
1 September
2014
10 September
2015
15 February
2021
1 October 2021
To date
To date
To date
To date
To date
To date
To date
4/4
4/4
2/2
4/4
4/4
4/4
2/2
1. Kelly Devine and Vijay Talwar were appointed to the Board during the year
and joined the Remuneration Committee on appointment.
Alison Brittain joined the Board on 7 September 2022, after the end of the year,
and became a member of the Committee on that date.
The Company Secretary acts as secretary to the Committee. No Director ever
participates when his or her own remuneration is discussed.
ADVISERS
The Committee has appointed Deloitte to provide general
advice in relation to executive remuneration on an ad hoc
basis due to their expertise and sound advice given in
previous years. Total fees paid to Deloitte for remuneration-
related work in the year were £14,850 (FY21: £16,550) which
was a mixture of fixed fees and time spent basis, depending
on the work conducted.
Deloitte also provided non-remuneration-related consultancy
services in the year in relation to supporting the Group in
improving processes and controls in the commercial function.
This appointment was made based on Deloitte’s expertise on
an arm’s length basis and without reference to the fact that
Deloitte also provides remuneration advice.
Having reviewed the fees paid to Deloitte for non-
remuneration-related work as specified above, the
Committee noted that Deloitte provides remuneration advice
through a team which is separate to the other consultancy
teams. Deloitte is also 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
remuneration advice that they have received from Deloitte
in the year has been objective and independent.
The Chief Executive Officer attends part of Committee
meetings by invitation to make recommendations as to the
remuneration payable to below Board executives. The Stores
and People Director attends part of 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.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
147
Corporate governance report
Remuneration continued
SINGLE FIGURE FOR TOTAL REMUNERATION (AUDITED INFORMATION)
The following table sets out total remuneration for Directors for the period ended 2 July 2022:
Table 1 – Directors’ remuneration – single figure table
Salary/fees1
£’000
Benefits2
£’000
Pension5
£’000
Total fixed
remuneration6
£’000
Bonus3
£’000
Share bonus
award lapse3
£’000
LTIP awards4
£’000
Total variable
remuneration7
£’000
Total
£’000
Director
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Executive
Nick
Wilkinson
Laura Carr
Karen
Witts
Sir Will
Adderley
Non-Executive
Andy
Harrison
Marion
Sears
William
Reeve
Peter Ruis
Ian Bull
Arja
Taaveniku
Vijay
Talwar
Kelly
Devine
Paula
Vennells
Total
580
372
27
—
216
54
71
54
64
54
40
18
563
383
—
—
216
52
68
52
62
19
—
—
48
19
2
50
21
—
20
20
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20
13
45
31
648
404
658
435
653
—
570
386
—
(192)
— 1,382 2,528 2,035 3,098 2,683 3,756
212 2,388
—
(192) 1,953
— 1,567
—
22
30
20
20
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
216
216
54
71
54
64
54
40
18
52
68
52
62
19
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
22
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
52
20
—
20
216
216
54
71
54
64
54
40
18
52
68
52
62
19
—
—
—
—
—
—
—
—
—
—
—
—
43
1,550 1,458
—
89
—
91
—
34
—
43
—
76 1,673 1,625
—
675
—
956
—
(192)
—
43
—
—
— 1,382 4,095 1,865 5,051 3,538 6,676
—
—
—
1. Paula Vennells was appointed to the Board on 4 September 2019 and stepped
4. The figure for Nick Wilkinson is the value of the FY20-22 LTIP award whose
down on 25 April 2021. Arja Taaveniku was appointed to the Board on 15 February
2021. Vijay Talwar was appointed to the Board on 1 October 2021 and Kelly
Devine was appointed on 1 March 2022. Laura Carr stepped down from the
Board on 8 June 2022 and Karen Witts joined the Board on 9 June 2022. Basic
salary/fee for Paula Vennells, Arja Taaveniku, Vijay Talwar and Kelly Devine and
salary, pension and benefits for Laura Carr and Karen Witts are pro-rated over
the relevant year. From 1 August 2021, Nick Wilkinson’s and Laura Carr’s salary
increased by 3.5%. Sir Will Adderley’s base salary is held at £1 per annum. Andy
Harrison, the Chairman, asked not to be considered for a fee increase in FY22.
The fees for the other Non-Executive Directors were increased by 3.5%.
2. Benefits include the cost 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. Karen Witts
is entitled to an allowance of £1,500 per month to cover the cost of rent on a
property close to the office in Leicester and travel costs. This is for 12 months from
9 June 2022 and then until she purchases a home close to Leicester, or for the
duration of her of employment should Karen not choose to do so.
3. Nick Wilkinson was awarded an annual performance-related bonus for FY22 with
a maximum face value of 125% of contractual salary. The performance conditions
which applied to the bonus were set in September 2021 and are described in the
report below. Due to cessation of her employment before the payment date Laura
Carr was not entitled to an annual bonus for FY22. Payment of bonuses earned
for FY20 and FY21 which would normally have been paid in cash, were deferred
in shares under a Share Bonus Award, with 50% vesting in September 2021 and
50% vesting in September 2022. The value of these awards was included in the
‘single figure’ tables for FY20 and FY21 respectively and has not been included
in this table. The shares which would have vested to Laura in September 2022
have lapsed following cessation of her employment. The amount included in the
share bonus award lapse column has been calculated as the difference between
the original bonus values and the market value of the shares exercised in the
first tranche in September 2021. Further details can be found in the Policy table
and the FY20 and FY21 Annual Reports. Karen Witts was awarded a pro-rated
performance-related annual bonus for FY22, reflective of the period from her
start date to the end of the financial year and subject to the financial performance
criteria applicable to Nick Wilkinson. Karen declined any payment in respect of
personal and strategic performance (25% of opportunity) given the relatively
short period that she had been in role during the financial year.
148 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
three-year performance period ends on the last day of the financial period being
reported on. The price used to calculate the value of the awards, which will vest
on 16 October 2022 was the average of Dunelm’s closing share price over the
last three months of the FY22 financial year, which was 909.11p per share. It also
includes a ’special dividend equivalent’ of 32p per share in respect of the special
dividend paid on 11 October 2019, of 65p per vested share in respect of the
special dividend paid on 8 October 2021, and of 37p per vested share in respect
of the special dividend paid on 18 March 2022. The share price used to calculate
the number of shares in Nick’s ‘special dividend equivalent’ was 731p per share
in respect of the October 2019 special dividend, 1,310p per share in respect of
the October 2021 special dividend and 1,127p per share in respect of the March
2022 special dividend being the share price the day before the special dividend
date. The amount of the values above include an element that may be attributed
to share price increase of £103,000 for Nick. No discretion was applied to adjust
the amount vesting for share price appreciation or depreciation or for any other
reason. The figures for Nick Wilkinson and Laura Carr for the FY19-21 LTIP award
have been restated to show the actual value of the award on vesting which was
197,693 shares times share price at close of business on 17 October 2021 of
1,279p for Nick and 115,785 shares times share price at close of business on 30
November 2021 of 1,353p for Laura. The Remuneration Committee did not apply
discretion to adjust the outcome of the performance criteria applicable to this
award to reflect share price appreciation or depreciation, or for any other reason.
Sir Will Adderley has asked not to be considered for an LTIP award.
5. Pension for FY22 is 3% of contractual salary from 1 August 2022 for Nick
Wilkinson, Laura Carr and Karen Witts. Prior to this pension entitlement for Nick
Wilkinson and Laura Carr was 8% of contractual salary from 1 August 2021, and
10% of contractual salary prior to that. Sir Will Adderley waived his entitlement to
a pension from 1 July 2015.
6. Total fixed remuneration includes salary/fees, benefits and pension.
7. Total variable remuneration includes bonus and LTIP awards.
G
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FY22 ANNUAL BONUS
Each of Nick Wilkinson and Karen Witts were eligible to earn
an annual bonus of up to 125% of base salary during the year,
subject to meeting the performance targets set out below.
The bonus of Karen Witts was pro-rated from the date she
joined the Group. Laura Carr stepped down from the Board
in June 2022 and therefore her annual bonus lapsed. Will
Adderley asked not to be considered for an annual bonus.
Financial targets – 75% of bonus opportunity
Two targets were set in respect of FY22, achievement of
budgeted sales and PBT.
Sales – 25% of bonus opportunity
The target was set so that no part of the bonus would be paid
until sales of £1,424.4m were achieved and maximum bonus
would be paid at £1,668.6m. Between those points, bonus
would be paid on a straight-line basis, with “on-target” bonus
paid at £1,483.8m. Market consensus for FY22 sales at the
date the target was set in July 2021 was for sales of £1,425m.
FY22 sales were £1,553.1m. Targets and performance were
calculated on a 52 week basis. Therefore 70% of this element
has been earned (2021: 100%).
PBT – 50% of bonus opportunity
The target was set so that no part of the bonus would be
paid until PBT of £157.4m was achieved and maximum bonus
would be paid at £180.4m. Between those points, bonus
would be paid on a straight-line basis, with “on-target” bonus
paid at £164.0m. Market consensus for FY22 PBT at the date
the target was set in July 2021 was for PBT of £168m, although
at this point the market was not aware of significant budgeted
increase in revenue investment in FY22 to drive future
growth. FY22 PBT significantly exceeded budget at £209.0m.
Targets and performance were calculated on a 52 week basis.
Therefore 100% of this element has been earned (2021: 75%).
Personal and strategic targets – 25% of bonus opportunity
Nick Wilkinson
Progress was measured against the six strategic focus areas
described in the FY21 annual report. Assessment was made
by reference to performance across the objectives as a whole,
with no specific weighting.
Details of Nick’s targets and performance against them is set
out on page 151. Based on this, the Committee considered
that strong strategic progress had been made both overall
and across all six focus areas, and expectations were greatly
exceeded in key profitability measures. Strong progress had
been made in developing and executing the sustainability
strategy, as well as developments to the customer proposition
and strengthened internal capability and succession. It
therefore assessed that 90% of the personal and strategic
targets had been met by Nick, (2021: 88% personal and 80%
strategic) which earned 22.5% of total bonus opportunity.
Karen Witts
Karen joined the Group in the final month of the financial year.
Karen asked not to be considered for any element of bonus
linked to personal objectives given that she had only been in
role for three weeks of the year.
ASSESSMENT OF BONUS OUTCOME AFTER APPLYING
PERFORMANCE CONDITIONS
The Committee reviewed the outcome of performance
against the targets described above. It also considered the
overall business context and stakeholder experience. It
concluded that the Executive Board had delivered very strong
performance, despite ongoing external challenges due to
Covid-19 in the first half of the year, ongoing international
supply chain disruption, and significant cost inflation. Record
sales and profit have been delivered, as well as improved
colleague engagement scores and market share gains, while
the strong financial and market position has been maintained.
Acceleration of digital growth has continued, data resource
and capability has been built, and the customer proposition
has been strengthened. There has been a further step change
in the Group’s sustainability ambition, knowledge and plans.
Meaningful progress has also been made to ensure that the
business demonstrably delivers value to all of its stakeholders,
for the climate, and to society as a whole.
Taking all of the above into account, it was agreed that the
bonus outcome after applying the measures described was
fair, reasonable and appropriate.
DISCRETION
The Committee carefully considered whether it should exercise
its discretion to adjust the overall outcome of the FY22 annual
bonus after applying the performance criteria described
above. In doing so it considered the following factors:
• The financial performance of the Group has been strong,
delivering record sales and profit, despite the Covid-19
crisis and the external environment throughout the financial
year referred to earlier in the report.
• Although the share price has fallen significantly in the
second half of the year, the advice given by our brokers
is that this reflects the financial markets’ general view of
the UK retail sector and growth stocks in the light of the
changed economic conditions and the war in Ukraine rather
than management performance or a Group-specific issue.
• Further, at least two thirds of the bonus and shares vesting
(after payment of tax and National Insurance liability)
must be retained in Dunelm shares in accordance with the
Company’s shareholding guidelines.
• Significant progress has been made to advance the
strategic objectives designed to accelerate future growth
and advance the Group’s long-term ambitions.
• The Group has significantly advanced its sustainability
ambitions, setting ambitious science-based targets
to reduce greenhouse gas emissions by 50% by 2030,
progressed the creation of roadmaps to deliver these, and
moved forward on people, diversity, human rights and
community matters.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
149
Corporate governance report
Remuneration continued
• The business performed strongly on colleague
engagement scores and implemented customer
proposition improvements.
• All colleagues received a pay increase during the year;
hourly paid colleagues in warehouses and stores received
an annual pay increase that exceeded the 6.6% increase
in the national living wage; nearly 1,000 colleagues in
the FY19-21 Sharesave doubled their savings due to the
increase in share price over the period of the scheme;
colleagues in a bonus scheme will receive a similar outcome
as a percentage of bonus opportunity to that of the CEO.
• Continued support was given to local communities and
charitable activity, as described elsewhere in this report.
• Feedback from the NCV on executive pay has been that
colleagues are satisfied with pay awarded provided that
it reflects the performance of the business.
• In the year, the Group paid an interim dividend of 14p per
share to shareholders and two special dividends, 65p per
share in October 2021 and 37p per share in March 2022.
The Board is recommending to shareholders that a final
dividend of 26p per share be paid in December 2022.
• No claims for Covid-related government support were
made in FY21 or FY22 and, in FY21, the Board repaid
£14.5m claimed from the Government’s Job Retention
Scheme in FY20 and in FY22 repaid £4.0m in Covid-related
grants received in FY21. No adjustments were made to LTIP
targets in respect of Covid or repayment of Covid-related
support. Colleagues who were placed on furlough in FY21
received the same payments that they would have received
via the Government scheme, funded by the Group. No
colleagues were put on furlough in FY22.
Having considered all of the above factors, the Committee
agreed that the FY22 annual bonus outcome for Nick
Wilkinson and Karen Witts was fair and reasonable in the
circumstances, reflected shareholder and wider stakeholder
experience, and should not be adjusted.
Total bonus earned in respect of FY22 performance is set out
in the table below:
Table 2 – Annual bonus earned in respect of FY22
performance
Nick Wilkinson
Karen Witts1
Laura Carr2
Sir Will Adderley
(waived entitlement)
Bonus
awarded
£
653,045
22,148
—
—
Percentage of
maximum
award
90%
67.5%
N/A
N/A
1. Karen Witts has declined any payment in respect of personal and strategic
objectives given her relatively short tenure during the financial year.
2. Laura Carr was not eligible to receive a bonus for the year as she left the
Group in June 2022.
FY20 AND FY21– SHARE BONUS AWARDS
Payment of bonus earned for FY20 and FY21 which would
normally have been paid in cash, was in deferred shares,
with 50% vesting in September 2021 and 50% in September
2022. Although these awards were paid in the FY22 and FY23
financial years, in accordance with reporting guidelines the
value of the FY20 and FY21 bonus awards were included
in the ‘single figure’ tables for FY20 and FY21 respectively,
and not in the FY22 table in this report. Further details of
these awards are set out in the Policy table and the FY20 and
FY21 annual reports. Shares vesting have been retained in
accordance with the Lifetime Lock-in.
Shares that were due to vest under the share bonus award
to Laura Carr in September 2022 lapsed on her leaving the
Group in June 2022.
150 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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Related KPI
target
Increase
customer
satisfaction
score (NPS)
Customer
frequency 2.9x
Related KPI
performance
Missed customer
NPS target
by 5.6%
Customer
frequency
at year end
was 3.1x
8% Reduction
in scope
1 carbon
emissions per
£m of sales v
FY19 baseline
19.6% reduction
in scope
1 carbon
emissions per
£m of sales v
FY19 baseline
Exceed
budgeted PBT
of £164.0m
Delivered PBT
on a 52 week
basis of £209.0m
Maintain cost:
serve ratio
Cost: serve
ratio improved
by 0.1%
Improve
colleague
satisfaction
(eNPS) score
Colleague
satisfaction
(eNPS) score
improved by 1%
Nick Wilkinson – Performance against strategic and personal objectives
Objective
Performance
Invest successfully in growth
drivers to improve customer
proposition
c.25% weighting
Further develop strategic
plans particularly on
sustainability (Focus Area 0)
c.25% weighting
Develop Executive Board
performance
and succession
c.25% weighting
Exceeded expectations
• Deployed FY22 investment plan and delivered strong progress across all
Focus Areas.
• Delivered improvements to customer proposition in website, stores and post
sales experience. Higher than expected volumes coupled with supply and labour
constraints impacted the customer satisfaction score which meant that the
targeted improvement was not met.
• Increased customer frequency as stores re-opened strongly and digital sales
continued to be strong.
• Made material progress in our data resource and capability.
Greatly exceeded expectations
• Set ambitious 2030 targets for Scope 3 greenhouse gas reduction (target for
Scopes 1 and 2 set in FY21). Significantly increased resource, capability and
knowledge, and started to embed carbon reduction objectives throughout
the business, particularly through our product design and sourcing. Set
detailed roadmap to achieve Scope 1 targets and made progress on gas
decarbonisation, moving owned car fleet away from fossil fuels and provision
of customer take-back scheme. Worked with EY, the British Retail Consortium
and Textiles 2030 to understand the drivers of carbon reduction and start to
build and execute our Scope 3 roadmap. Sustainability – linked Revolving Credit
Facility in place from December 2021.
• Developed the customer proposition despite greater than expected operational
focus caused by supply and pricing issues. Added ‘Good & Circular’ to the
proposition, and increased focus on Value & Choice.
Exceeded expectations
• Executive Board performing strongly as a team.
• Onboarded a new Chief Information Officer, who has built the Tech team and
increased engagement.
• Recruited a CFO to replace Laura Carr, who resigned to take up an opportunity
outside of retail and the public markets.
• Recruited a Company Secretary, to replace Dawn Durrant who is retiring from
this role at the 2022 AGM.
• Internal succession and talent management process established, delivering a
step change in the quality of people development and succession. Active steps
taken to develop internal successors for key Executive Board roles.
Maintained a highly
effective and ambitious
performance environment
in the face of continuing
disruption from external
challenges (Covid, inflation,
international freight)
Greatly exceeded expectations
• Achieved an environment in which the business can deliver both higher
growth (investing, proposition development, learning) and focus on excellent
operational execution, despite significant supply and cost issues.
• Interim results presentation marked a step up in quality and supporting analysis.
• Evolved effective hybrid ways of working for Support Centre colleagues.
c.15% weighting
• Reset the performance environment post lockdown to avoid fatigue, increase
connection and empowerment.
Explore alternative sources
of growth and strategic
development, including
acquisitions and partnership
opportunities
c.10% weighting
Greatly exceeded expectations
• Delivered the acquisition of the Sunflex business, and successfully integrated it,
to secure a strategic source of supply to a key growth category.
• Investigated a further acquisition but opted to pursue an alternative organic
approach to achieve the desired strategic objective.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
151
Corporate governance report
Remuneration continued
LTIP – AWARDS EARNED IN RESPECT OF
PERFORMANCE IN FY20-22
The performance condition which applied to the FY20-22
LTIP award was that compound growth in diluted EPS over
the three-year performance period of July 2019 to July
2022 should exceed the compound growth in RPI over the
same period by between 3% and 12%. Over the three-year
performance period which ended on 2 July 2022, reported
diluted EPS grew at a compound annual rate of 18.8%.
This is 13.3% above the compound annual growth in RPI over
the same period. Accordingly, 100% of this award has vested
to Nick Wilkinson as set out below. This is included in the
single figure for total remuneration for FY22 as set out in
Table 1. Laura Carr’s FY20-22 LTIP award lapsed on her
leaving the Group in June 2022.
Table 3 – LTIP awards earned in respect of performance in
FY20-22
Nick Wilkinson
Shares vesting
Percentage of
maximum award
134,984
100%
No awards are due to vest to Sir Will Adderley in respect of
the LTIP. Nick Wilkinson will also receive £154,921 by way
of ‘special dividend equivalent’ in relation to the special
dividend of 32p per share paid on 11 October 2019, of 65p
per share paid on 8 October 2021 and of 37p per share
paid on 18 March 2022. In each case these will be paid in
shares. The number of shares to vest for Nick Wilkinson is
17,041. These values are included in the single figure for
total remuneration for FY22 as set out in Table 1 on page
148, and the basis on which they have been calculated is set
out in note 4 of Table 1. Shares vesting must be retained in
accordance with the shareholding guidelines set out in the
Remuneration Policy.
AWARDS MADE TO DIRECTORS UNDER SHARE INCENTIVE SCHEMES IN FY22
LTIP awards were made on 20 October 2021 to Nick Wilkinson and on 9 June 2022 to Karen Witts as set out below:
Table 4 – LTIP awards made to Directors during FY22 (audited information)
Name
Award
Face value at
date of award
(200% of
salary)
Number
of shares
Nick
Wilkinson
Nil cost option
under LTIP
89,078
£1,164,2501
Performance
period
Vesting
date
% vesting at
threshold
performance
July 2021 to
June 2024
20 October
2024
6.67%
Performance conditions
Financial measures (80% of
opportunity)
Diluted EPS for FY24.
No part of this element of the award will
vest if EPS is less than 66.6p.
10% of this element of the award vests
if EPS is 66.6p, 50% vests if EPS is 72.2p,
75% vests if EPS is 80.9p and 100% vests
if EPS is 88.8p or more. Performance
between these percentage thresholds
will be calculated on a straight-line basis.
Non-financial measures (20% of
opportunity)
Three sustainability-based measures,
each accounting for 1/3 of this element
of the award, on a simple pass or fail
basis against target. Full details were in
the FY21 annual report.
All of the shares vesting (after payment
of tax and National Insurance) must be
held for two years from the vesting date,
and then two thirds of these must be
held for the duration of employment.
Karen Witts
Nil cost option
under LTIP
73,979
£699,8412
As for Nick Wilkinson
July 2021 to
June 2024
9 June 2025 6.67%
1. Based on the closing share price on 19 October 2021 of 1,307p per share.
2. Based on the average of the closing share prices over the period 1 April-8 June 2022 of 946p per share.
The awards are eligible to receive a ‘special dividend equivalent’ in respect of the special dividends of 65p per share paid on
8 October 2021, of 37p per share paid on 18 March 2022 and any other special dividend paid before the awards vest.
An LTIP award on the same terms as Nick Wilkinson of 54,628 shares was also made to Laura Carr on 20 October 2021, which
lapsed on her leaving the Group on 8 June 2022.
152 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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PAYMENTS TO PAST DIRECTORS AND FOR LOSS OF
OFFICE (AUDITED INFORMATION)
No payments have been or are being made to any former
Director in the financial year in respect of loss of office or
the termination of his or her employment.
STATEMENT OF DIRECTORS’ SHARE INTERESTS
Executive Directors are subject to a shareholding target
which requires them to build a 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 or share bonus award and LTIP awards
earned (after payment of tax and National Insurance liability
on exercise) in Dunelm shares. In addition, for LTIP awards
granted from 2020 onwards, all shares received (after sales
to cover tax and National Insurance liability on exercise) must
be retained for two years from vesting, then up to one third
can be sold, the remainder being retained for the duration
of employment. Post-employment shareholding requirements
also apply, as set out in the Remuneration Policy.
All Executive Directors comply with this requirement at
financial year end. Laura Carr complied with this requirement
at 8 June 2022, the date upon which she stepped down from
the Board.
Nick Wilkinson was appointed on 1 February 2018 and
Karen Witts was appointed on 9 June 2022. As at 2 July 2022,
they have beneficial shareholdings equal to 356% and 44%
of salary respectively (based on the closing share price at
year-end, see below for details).
Table 5 and Table 6 show the interests of the Directors in
shares of the Company at 2 July 2022.
Table 5 – Shareholdings of Directors and Persons Closely Associated with them (audited information)
Sir Will Adderley
Ian Bull
Kelly Devine
Andy Harrison
William Reeve
Peter Ruis
Marion Sears
Arja Taaveniku
Vijay Talwar
Nick Wilkinson
Laura Carr2
Karen Witts
Percentage of
salary at 2 July
2022 (where
applicable)1
Shareholding target
(where applicable)
At 2 July 2022
1p Ordinary
Shares
At 26 June 2021
1p Ordinary
Shares
76,371,779
76,371,779
11,000
—
454,811
22,000
—
4,000
—
416,480
18,000
—
105,000
105,000
6,000
—
—
—
249,759
125,749
356%
107,799
36,000
23,744
—
N/A
44%
1× salary by Feb 2021
2× salary by Feb 2023
1× salary by Nov 2021
2× salary by Nov 2023
1× salary by July 2025
2× salary by July 2027
1. Based on the closing share price of 830p at 2 July 2022 and base salary at 1 August 2022.
2. Laura Carr left the Group on 8 June 2022.
Since 2 July 2022, Vijay Talwar purchased 9,670 shares and Karen Witts has purchased 1,174 shares bringing her total
shareholding to 24,918 shares. Karen’s share purchase was pursuant to her obligation under the Life-time Lock-in to invest
at least two thirds of her annual bonus (after payment of tax and National Insurance) in Dunelm Shares.
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Remuneration continued
Table 6: Directors’ interests in options at the period end (audited information)
All share awards held by the Executive Directors who served during the year, together with any movements, are shown below:
Share options
lapsed during
the year
Share
options at
2 July 20221
End of
performance
period
Option price
Share options
vested and
exercised
during
the year3
—
(180,802)
—
—
—
(5,797)
Sir Will
Adderley
Nick
Wilkinson
Date of
award
—
October
2018
October
2019
November
2020
October
2021
Nature
of award
—
FY19-21
LTIP
FY20-22
LTIP
FY21-23
LTIP
FY22-24
LTIP
Share
options at
27 June 2021
Nil
180,802
134,984
94,846
Share options
granted
during
the year
—
—
—
—
—
89,078
November
2020
FY20
Share Bonus
November
2020
FY21
Share Bonus
11,594
59,130
Sharesave
3,757
—
—
—
Karen
Witts
Laura
Carr2
November
2018
November
2021
June
2022
November
2018
October
2019
November
2020
October
2021
Sharesave
FY22-24
LTIP
FY19-21
LTIP
FY19-22
LTIP
FY21-23
LTIP
FY22-24
LTIP
—
—
1,720
73,979
105,893
71,481
58,166
—
—
—
—
54,628
(3,757)
—
—
(105,893)
—
—
—
—
—
—
—
(71,481)
(58,166)
(54,628)
November
2020
FY20
Share Bonus
November
2020
FY21
Share Bonus
7,675
40,291
November
2019
Sharesave
2,752
—
—
—
(3,837)
(3,838)
(16,211)
(24,080)
—
(2,752)
—
—
—
—
—
—
Nil
—
—
June 2021
134,984
June 2022
94,846
June 2023
89,078
June 2024
5,797
June 2020
—
1,720
December
2021
December
2024
73,979
June 2024
—
—
—
—
—
—
—
June 2021
June 2022
June 2023
June 2024
June 2020
June 2021
December
2022
—
—
—
—
—
—
—
479p
1,046p
—
—
—
—
—
—
—
654p
(24,012)
(11,105)
24,013
June 2021
Interests in share awards table excludes dividend equivalent shares.
1.
2. Laura Carr’s last day of employment at Dunelm was 8 June 2022 and all her unvested share options lapsed on leaving.
3. During the year Nick Wilkinson and Laura Carr made gains on share options exercised of £3,003,000 and £1,863,000 respectively. Sir Will Adderley and
Karen Witts did not exercise any options.
Performance conditions in respect of the LTIP awards above granted in FY19 and FY21 are subject to the performance
conditions described in the Remuneration Report set out in the FY19 and FY21 annual reports respectively, and the
performance conditions in respect of the award granted in FY20 are in the FY21 Remuneration Report. The FY21 Share Bonus
awards granted to Nick Wilkinson were subject to the performance conditions referred to on pages 155 to 158 of the FY21
annual report. No conditions were applied to the FY20 Share Bonus Awards. LTIP awards are eligible to receive a ‘special
dividend equivalent’ in respect of any special dividend paid during the performance period applicable to the award and up
to the date of vesting. The second tranche of the Share Bonus Awards which vest in September 2022 is eligible to receive a
special dividend equivalent in respect of the special dividends paid in October 2021 and March 2022.
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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 period end, over the last ten-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 Sir Will
Adderley, and six months for Nick Wilkinson and Karen Witts.
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 7 – Directors’ service contracts
Start date
Unexpired
Sir Will Adderley
Nick Wilkinson
Karen Witts
Marion Sears1
Andy Harrison
William Reeve
Peter Ruis
Ian Bull
Arja Taaveniku
Kelly Devine
Vijay Talwar
Alison Brittain2
28 September 2006
1 February 2018
9 June 2022
22 July 2004
1 September 2014
1 July 2015
10 September 2015
10 July 2019
15 February 2021
1 March 2022
1 October 2021
7 September 2022
N/A
N/A
N/A
10 months
12 months
21 months
23 months
33 months
17 months
29 months
24 months
36 months
Notice period
12 months
6 months
6 months
1 month
3 months
1 month
1 month
1 month
1 month
1 month
1 month
1 month
1. Marion Sears has now served more than nine years on the Board her contract is renewed for one-year terms (rather than three), with the notice period referred
to above.
2. Should Alison Brittain succeed Andy Harrison as Chair, her notice period will be increased to 3 months.
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Remuneration continued
RELATIVE TOTAL SHAREHOLDER RETURN (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 8 – Total shareholder return performance graph (rebased to 2 July 2012 = 100)
The shares traded in the range of 777p to 1,399p during the year and stood at 830p at 1 July 2022.
Dunelm
FTSE 250
FTSE 350 General Retail
1,000
900
800
700
600
500
400
300
200
100
0
)
0
0
1
o
t
d
e
s
a
b
e
R
(
e
c
n
a
m
r
o
f
r
e
p
R
S
T
Aug 12
Jun 13
Apr 14
Feb 15
Dec 15 Oct 16
Aug 17
Jun 18
Apr 19
Feb 20
Dec 20 Oct 21
Aug 22
Source: Factset as of 11th August 2022. 1. Last 10 years data on weekly frequency. FTSE 350 General Retail Index includes Dunelm.
Table 9 – 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:
FY22 Nick Wilkinson
FY21 Nick Wilkinson
FY20 Nick Wilkinson1
FY19 Nick Wilkinson
FY18 Nick Wilkinson2
FY18
FY17
FY16
FY16
FY15
John Browett2
John Browett
John Browett
Sir Will Adderley3
Sir Will Adderley4
FY15 Nick Wharton4
FY14 Nick Wharton5
FY13 Nick Wharton
CEO single
figure of total
remuneration
£’000
Annual bonus
payment against
maximum
opportunity %
Long-term
incentive vesting
rates against
maximum
opportunity %
2,683
3,756
885
1,365
308
429
722
489
10
507
110
1,509
1,292
90.0%
81.2%
20.0%
97.9%
13.3%
N/A
14.0%
57.7%
N/A
5%
N/A
22.5%
97.0%
100.0%
100.0%
19.8%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
77.5%
86.7%
1. During the period April to June 2020 inclusive, Nick Wilkinson took a voluntary 90% reduction in base salary.
2. 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 FY18 is pro-rated by time of service as Chief Executive Officer.
3. Sir Will Adderley was succeeded by John Browett as Chief Executive Officer on 1 January 2016. The data for each Director for FY16 is pro-rated by time of service
as Chief Executive Officer. Sir Will Adderley’s base salary was reduced to £1 on 1 July 2015.
4. Sir 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 FY15 is pro-rated by time of service as Chief Executive Officer.
5. Nick Wharton’s first LTIP award vested and was exercised in December 2013. No LTIP awards vested to John Browett during his tenure.
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The table below sets out the increase in total remuneration of the Chief Executive and that of our other colleagues:
Table 10 – Change in Directors’ pay compared with annual change in average employee’s pay
Percentage change in remuneration
between FY21 and FY22
Percentage change in remuneration
between FY20 and FY21
Percentage change in remuneration
between FY19 and FY20
Nick Wilkinson9
Karen Witts8
Laura Carr7,9
Sir Will Adderley
Andy Harrison
Marion Sears
William Reeve5
Peter Ruis
Ian Bull
Arja Taaveniku
Vijay Talwar8
Kelly Devine8
All colleagues3,6
Salary and
fees1
Benefits 9
Short-term
incentive 2,4
Salary and
fees1
3.4%
N/A
3.2%
0.0%
0.0%
3.2%
4.5%
3.2%
2.7%
3.2%
N/A
N/A
4.9%
(4.3%)
N/A
(6.9%)
0.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
14.6%
N/A
(100%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1.8%
N/A
5.0%
0%
0%
0%
8.4%
0%
0%
N/A
N/A
N/A
0.8%
(4.7%)
4.4%
Benefits
3.6%
N/A
2.3%
(4.8%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0%
Short-term
incentive2,4
Salary and
fees1
313.0%
N/A
324.2%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
145.4%
2.0%
N/A
0.0%
0.0%
2.0%
2.0%
2.2%
2.0%
2.0%
N/A
N/A
N/A
3.5%
Benefits
(55.6%)
N/A
Short-term
incentive2,4
(79.2%)
N/A
(93.3%)
(66.3%)
0.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(42.7%)
1. Directors’ remuneration above is based on contractual salary or fees as appropriate, and does not take account of the voluntary salary reductions of 90% and
20% respectively of Nick Wilkinson and Laura Carr between April and June 2020 inclusive, or the waiver by all other Directors of 100% of their fees for this period.
2. Short-term incentive percentage has been calculated in relation to only those colleagues eligible to receive a bonus in the period as this is considered a more
appropriate comparator group. All colleagues’ short-term incentives include a one-off £250 ‘thank you’ payment to all colleagues not usually eligible for a bonus
in respect of FY20 and the ‘thank you’ payment of between £250 and £350 made to colleagues not usually eligible for a bonus in respect of FY21.
3. All colleagues salary increase is calculated only for colleagues employed for the whole of the financial year.
4. The difference between the increase in short-term incentives of the Directors and the ‘all colleagues’ rate reflects the strong performance of the business, and
the fact that a higher proportion of the Directors’ pay is performance-related.
5. The increase in William Reeve’s fee in FY21 is due to the assumption of responsibilities as Senior Independent Director.
6. Comparisons have been made against colleague pay across the entire Group as the parent company employs a limited number of individuals.
7. Laura Carr’s last day of employment was 8 June 2022 and so she was not eligible to receive a bonus in FY22.
8. No comparator data is provided for these Directors as they were appointed during FY22.
9. The decrease in benefits for Nick Wilkinson and Laura Carr in FY22 is due to benefits received in lieu of holiday in FY21 which were not received in FY22.
Table 11 – CEO pay ratio
There are three permissible methods available to calculate the CEO pay ratio, which are outlined below:
Option Method
A
B
C
Determining the total full term equivalent remuneration for all UK employees.
Rank from low to high.
Identify the colleagues at 25th percentile, 50th percentile, 75th percentile.
Identify the colleagues at 25th, 50th, 75th percentile, using the Gender Pay Gap Reporting.
Use a different data set, but calculate in the same way as the Gender Pay Gap Reporting.
Option A is considered the most statistically accurate method and therefore we have opted for this method. The data used to
identify the colleagues at 25th percentile, 50th percentile, 75th percentile was taken on 5 April 2022.
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Remuneration continued
The table below shows the ratio of actual pay of Nick Wilkinson, CEO, to other colleagues. Full year pay data has been used to
calculate these ratios and the elements included are based on the CEO single figure remuneration in Table 1:
Method
Option A
25th percentile
pay
50th percentile
pay
75th percentile
pay
124:1
121:1
112:1
£21,569
£22,193
£24,003
Option A
204:1
204:1
186:1
£19,793
£19,793
£21,740
Option A
Option A
54:1
62:1
47:1
53:1
38:1
43:1
£16,409
£18,918
£23,498
to incentivise long term, sustainable growth and alignment
with shareholders. FY21 and FY22 financial performance
was stronger than FY20, and the share price at the end
of FY21 was higher than in FY22, and these have strongly
influenced the CEO’s ‘single figure’ pay.
• In FY22 we have invested to improve the pay of our hourly-
paid colleagues to upper median or above versus the
market – see case study on page 103.
• It was also noted that the discussion at the NCV had
supported our pay policies and approach – particularly
when it came to attracting and retaining strong and
effective leadership and aligning pay with performance.
• The increase in the number of store colleagues relative to
the total colleague population in FY21 impacted the total
pay and benefits attributable to the percentile bandings.
Table 12 – 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 FY22 and FY21:
Total spend on pay
Ordinary dividend to
shareholders
Distributions to shareholders
via treasury share purchases
Special distributions to
shareholders
Total distributions to
shareholders
FY22
£’m
FY21
£’m % change
194.9
166.7
16.9%
75.1
24.3
209.1%
28.3
207.0
—
—
100.0%
100.0%
310.4
24.3 1,177.4%
This information is based on the following:
• Total spend on pay – total employee costs excluding car and
travel allowances and bonuses from note 4 on page 187.
This excludes £14.5m repayment of the UK Government’s
Job Retention Scheme in the prior year.
• Dividends taken from note 7 on page 189.
Financial year
FY22
FY22 Total pay and benefits
FY21
FY21 Total pay and benefits
FY20 (Based on actual remuneration – including Nick’s 90% pay
reduction during the period April to June 2020)
FY20 (Based on contractual remuneration)
FY20 Total pay and benefits
The following assumptions were made to calculate these
figures:
• We have used a 40-hour week in order to consistently
calculate the annual salary for everyone, converting hourly
rate of pay into a full-time equivalent salary, to ensure
direct comparison.
• 10,669 colleagues were included in the data set.
• 90% bonus outcome for Nick Wilkinson and 100% LTIP
vesting.
Commentary:
The Committee considered whether the median pay ratio
for the year is consistent with the pay, reward and progression
policies for the Group’s UK employees taken as a whole, and
concluded that it is, for the following reasons:
• The pay gap has significantly reduced, compared to the
previous year. The main difference is in the value of the LTIP
vesting.
• Whilst the LTIP is vesting at 100%, the number of shares is
lower than that which vested in 2021 (as the share price was
higher on award) and the share price used to calculate the
notional value on vesting is lower than last year’s.
• The LTIP and bonus are reflective of the strong business
performance shown under Nick’s leadership both in the last
year, in the case of bonus, but also sustainably over the past
three years, which is rewarded through the LTIP.
• The colleagues at the 25th, 50th and 75th percentile are
hourly paid colleagues, reflective of the fact that c.80% of
our colleague base are employed in hourly-paid roles.
• The median pay ratio is considered appropriate and
consistent with the pay and reward policies for the Group’s
UK colleagues. Our remuneration strategy is based on
paying median to market for salary and bonus, and upper
quartile for LTIP awards, with the quantum of performance-
related pay relatively higher in senior colleagues. This is to
reward strong performance and focus on long-term value
creation. The CEO remuneration is reflective of this, as
Nick’s pay has a larger quantum in variable pay.
• The CEO pay ratio in FY20 was lower than the FY21 and
FY22 ratio, but the FY21 ratio was higher than that in
FY22. This reflects the fact that, in line with the Group’s
remuneration strategy, a high proportion of the CEO’s
remuneration is performance-related and paid in shares,
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EXECUTIVE DIRECTOR EXTERNAL BOARD
APPOINTMENTS
Executive Directors are permitted to hold one external
appointment as a Non-Executive Director or similar advisory
or consultative role, subject to the Board being satisfied that
there is no conflict of interest and that the position will not
impact negatively on the executive’s commitment to their
Dunelm role. The Board may allow the executive to retain
any remuneration received in respect of the appointment.
Nick Wilkinson does not hold any external appointments.
Karen Witts is a Non-Executive Director of Ipsen Pharma SA.
Sir Will Adderley is a Director of WA Capital Limited.
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 and for Share
Bonus Awards.
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
GENDER PAY DISCLOSURES
We are committed to paying men and women equally for
roles of the same size and scale. Please see page 55 for details
of our latest Gender Pay Gap report.
Dunelm’s brand purpose is ‘To help create the joy of truly
feeling at home, now and for generations to come.’ We want
everyone to feel that Dunelm is a place for them, and this
applies equally for our colleagues and customers. Diversity,
inclusion, and more generally the wellbeing of our colleagues,
are high on our agenda.
We want all colleagues to feel they can grow with Dunelm and
that they are welcome. Improving our gender balance is part
of this and remains one of our commitments.
We have good male/female representation in our senior
leadership. As at 2 July 2022, our Executive Board had 50%
female representation. When combined with the Group
Board, our senior leadership team is 43% female.
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ENGAGING WITH OUR COLLEAGUES ON PAY
In April 2022, the NCV allocated a full meeting to a discussion
on pay and reward. The meeting was well attended by
representatives from across the business with a 46%/54%
male/female gender split and ethnic diversity representation
of 23%. The meeting was led by our People team who were
joined by Marion Sears, our designated Non-Executive
Director for colleague matters, and William Reeve, Chair of
the Remuneration Committee. The meeting covered two
topic areas as explained below and was followed by group
breakout sessions for further discussion and feedback.
Topic 1: Engaging on colleague pay review
The People Team provided an overview of reward at Dunelm,
with a reminder of the difference between equal pay and fair
pay and the thought process that led to the recent pay review.
This included an explanation of how the People Team had
taken on board colleague feedback and prioritised hourly
rate increases over granting another ‘thank you’ bonus, and
that Dunelm had consciously given a percentage pay increase
higher than most of its peers. Our NCV representatives were
impressed with the amount of thought that went into pay
strategy and were reassured by the benchmarking and further
agreed that the recent pay review was “very fair”.
Topic 2: Engaging on Board remuneration
William Reeve provided an overview of the remit of the
Remuneration Committee, core elements of Dunelm’s
Remuneration Policy and the context in which the Committee
takes decisions. It was explained that the Committee was held
to account through shareholder voting and that for most of
the Dunelm Leadership Team reward was related to business
performance. William also talked about how a significant
proportion of reward is held in shares, including an obligation
to hold shares after leaving Dunelm, to ensure shareholder
alignment. He also highlighted the fixed and variable reward
elements for different role levels. Our NCV colleagues
were pleased by the level of care and scrutiny exercised by
the Remuneration Committee and its long-term thinking.
Colleagues gave very positive feedback about Nick and the
good performance of the Executive Board in guiding the
business through 2020 to 2022.
i
For more information on the NCV and its other activities
during the year see page 99.
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Remuneration continued
STATEMENT OF IMPLEMENTATION OF POLICY IN THE FY23 FINANCIAL YEAR
Base salary and benefits for each of the Executive Directors for FY23 are set out in the table below:
Table 13 – Base salary, benefits and pension for FY23
Name
Base salary
Increase
to base
salary YoY
Benefits
Nick
Wilkinson
£582,125 Nil
Karen
Witts
£450,000 N/A
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.
Car allowance; travel and accommodation allowance
of £1,500 per month; private health insurance for the
individual and their family; permanent health cover;
life assurance; mobile phone; colleague discount.
Increase to
benefits year
on year
Pension
Change to
pension
contribution
year or year
Nil
£17,464
Nil
N/A
£13,500
N/A
Sir Will
Adderley
£1
Nil
Car allowance; private health insurance for the individual
and their family; permanent health cover; life assurance;
mobile phone; colleague discount.
Nil
Nil
N/A
Sir Will Adderley has asked that he not be considered for a pay increase.
BASE SALARY
Nick has asked for no base salary increase in FY23. Had
Nick not made this request the Committee had agreed that
they would like to award an increase in base salary to Nick
Wilkinson in view of his strong performance and that of the
Group. The Committee considered his total remuneration
for FY22, the performance of the business, the other
stakeholder considerations outlined in relation to payment
of the FY22 annual bonus award, including the feedback
on Executive Director pay given by the NCV, and the wider
economic climate.
The Committee noted that due to the successful, profitable
growth of the Group during his tenure, Nick’s base salary is
now at or below lower quartile for his peers, and the bonus
opportunity of 125% of salary is also now uncompetitive.
The Committee would like to increase the quantum of
Nick’s potential profit-related pay, in line with stretching
performance targets, but is unable to do so under the terms
of the current Remuneration Policy. The Committee will
therefore be discussing this with shareholders as part of
the consultation process for the 2023 policy renewal.
In light of this, the Committee decided to remove Nick’s
contractual travel allowance of 5% of base salary and make
a corresponding increase in his base pay. In addition, the
Committee rewarded Nick a 4% increase in base salary. This
increase is below the median pay increase across the Group
of 7.6%. However given that Nick has declined the base salary
increase and the decision to remove his 5% of salary travel
allowance and make a corresponding increase in his base
salary, Nick’ base pay for FY23 will be unchanged at £582,125
and he will retain his travel allowance.
Karen Witts joined the Board on 9 June 2022. Her base salary
was set at median for the top 50 companies of the FTSE250 on
appointment and reflected her skills and experience. It is first
eligible for review in August 2023.
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PENSION
The pension entitlement of both Nick Wilkinson and Karen
Witts is 3% of base salary, which is in line with the workforce
average.
FY23 ANNUAL BONUS
Nick Wilkinson and Karen Witts have each been awarded
a bonus opportunity of up to 125% of base salary. The
performance conditions attached to the bonus are:
• 50% linked to achievement of budget PBT.
• 25% linked to achievement of budget sales.
• 25% linked to achievement of strategic and personal
targets, aligned to the Group strategy. These include
customer and colleague satisfaction measures, and at least
one other environmental, social and governance measure
linked to our ‘Pathway to Zero’ ambition.
The budget sales and PBT are 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 Karen Witts have contractually 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. Shares
held on termination of employment will be retained for up
to a minimum of two years as required by the shareholding
requirements set out in the Remuneration Policy.
Sir Will Adderley has asked that he not be considered for
a bonus award.
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LTIP FY23-25
In line with our 2020 Remuneration Policy, an award is
expected to be made to Nick Wilkinson and Karen Witts in
October 2022 under the Long-Term Incentive Plan over shares
to the value of 200% of salary. 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. All of the vested shares (after sales to cover tax and
National Insurance liability on exercise) must be retained for
two years after vesting, after which one third of these may
be sold and the remainder must be retained for the duration
of employment. Shares held on termination of employment
will be retained for a minimum of two years as required by the
shareholding requirements set out in the Remuneration Policy.
Our current intention is that the FY23-25 LTIP awards will be
granted in line with our standard approach (with the number
of shares to be awarded based on the average share price for
the three business days preceding grant) and we will review
the final outturn to ensure that there have not been any windfall
gains. This is in addition to the performance underpin and
review of the final outturn to ensure it is warranted based on
shareholder experience over the performance period.
The performance criteria that apply to the award were set by
the Remuneration Committee in line with the Remuneration
Policy, and are set out below:
Financial measures: 80% of the award
Diluted EPS of the
Company for FY25
Less than
83.4p
83.4p
87.6p
95.5p
103.4p
or more
Percentage of this
element of the
FY23-25 Award
vesting1
Nil
10%
50%
75%
100%
Non-financial measures: 20% of the award
Measure
Reduction in Scope 1 greenhouse
gas emissions per £m sales against
a FY19 base
Percentage of own brand cotton products
which meet our ‘More Responsibly
Sourced Cotton’ standard
Reduction in plastic packaging of own
brand products against FY20 base
% of own brand products for which we
offer an easy to use take-back service
with a credible end of life solution in at
least 90% of our superstore estate
FY25 Target
32%
100%
30%
50%
% of LTIP
award
5%
5%
5%
5%
These targets were chosen because they are aligned to our
strategy and long-term targets, and they cover areas where
we are able to make the most impact on the environment
and provide the most benefit to our customers and our
communities. Reduction of our Scope 1 greenhouse gas
emissions will enable us to reduce our impact on climate
change in line with our Pathway to Zero commitment.
Products purchased for resale, and their packaging, account
for over 80% of Dunelm’s carbon footprint, and cotton
products comprise about half of these. Cotton which meets
our More Responsibly Sourced standard will have a lower
carbon footprint, as well as using less water and meeting our
ethical/social standards. Enabling customers to take back
products and reducing plastic packaging also reduces waste
and adverse environmental impacts. The Committee has
set stretching meet/fail targets rather than setting a target
range in order to incentivise management to make significant
progress in delivering these important objectives.
1. Performance between each of these percentage thresholds will be
calculated on a straight-line basis.
Sir Will Adderley has asked that he not be considered for an
LTIP award.
Note that these numbers assume that UK corporation tax
increases to 25% from April 2023. Should this assumption
prove incorrect the Committee expects to adjust the targets
proportionately and disclose this in the Annual Report. This
corporation tax increase also accounts for the relatively modest
increase in EPS in the above target range, which the Committee
is satisfied will reward a stretch level of performance.
SHARESAVE
An invitation will be issued in October 2022 to all eligible
employees, to apply for options to be granted under the
Sharesave scheme at a 20% discount to the average closing
market price of Dunelm Group shares on the three dealing days
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.
JOINING ARRANGEMENTS FOR KAREN WITTS
Karen Witts joined the Board as Chief Financial Officer on
9 June 2022. Her remuneration package is in accordance
with Dunelm’s Remuneration Policy and that of her
successor, Laura Carr, and reflects her skills and experience.
In order to secure her services we needed to agree certain
joining arrangements.
Karen was financially disadvantaged by joining Dunelm as she
had to forego remuneration payable by her former employer
which was forfeit when she took up employment with Dunelm.
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We therefore agreed that we would partially compensate
her for costs incurred and remuneration foregone. These
arrangements were:
• A conditional award under the FY22-24 LTIP award on
joining to the value of 200% of salary, pro-rated to 1 March
2022 to reflect a percentage of time she will have been
employed over the three-year performance period which
commenced in June 2021, plus a further two months
(77.77% of the full award). The performance conditions
associated with this are set out in the FY21 annual report.
• Pro-rated participation in the FY22 Annual Bonus scheme,
reflective of the period from Karen’s start date to the end of
the financial year, and subject to the financial performance
criteria applicable to Nick Wilkinson. Karen has declined
any payment to be made in respect of personal
performance as she has only been employed for a short
period during the financial year.
• A contribution of up to £50,000 towards the cost of purchasing
and furnishing a home close to Dunelm’s offices in Leicester,
on the understanding that the purchase completes within
two years of the commencement of her employment.
The majority of any furnishings should be purchased from
Dunelm. Approvable expenses will include stamp duty and
any agents’ fees plus furnishings, fixtures and fittings.
• An allowance of £1,500 per month to cover the cost of rent
on a property close to Dunelm’s offices in Leicester and/or
other expenses and travel costs. This will apply during the
first twelve months of employment and will then continue
until Karen purchases a home close to Leicester, or for the
duration of employment should Karen choose not to do
so (in which case the £50,000 contribution to relocation
expenses referred to above will not be paid).
The maximum amount of Karen’s joining compensation is less
than that put in place for her predecessor, Laura Carr, in 2018.
If Karen voluntarily leaves the business or is lawfully dismissed
within two years of commencing her employment with the
Group, she will be liable to repay this joining compensation.
The Remuneration Committee was satisfied that this joining
compensation is proportionate and reflects remuneration
foregone on a ‘like-for-like’ basis.
NON-EXECUTIVE DIRECTOR FEES FOR FY23
Fees to be paid to Non-Executive Directors in FY23, as set out in the table below:
Table 14 – Non-Executive Director fees
Andy Harrison1
Position
Chairman
Alison Brittain2
Non-Executive Director
Ian Bull
Audit and Risk Committee Chair
Kelly Devine
Non-Executive Director
William Reeve
Remuneration Committee Chair
Senior Independent Director (SID)
Peter Ruis
Non-Executive Director
Marion Sears
Non-Executive Director
Arja Taaveniku
Non-Executive Director
Vijay Talwar
Non-Executive Director
Committee/
SID fee
Increase
in base fee
year-on-year
Increase in
Committee/
SID fee
year-on-year
Nil
Nil
£10,785
Nil
£10,785
£6,852
Nil
Nil
Nil
Nil
Nil
N/A
4%
4%
4%
4%
4%
4%
4%
4%
N/A
N/A
4%
N/A
4%
4%
N/A
N/A
N/A
N/A
Base fee
£216,487
£45,363
£55,747
£55,735
£55,747
£55,747
£55,747
£55,747
£55,747
1. Andy Harrison has waived his fee increase for FY23.
2. Alison Brittain’s fee is pro-rated to her start date of 7 September 2022. Should she succeed Andy Harrison as Chair during the year, her base fee will be increased
to £322,400 per annum, inclusive of all committee chair fees. This base fee was set by the Remuneration Committee at median for companies in the FTSE50-150,
reflecting the growth ambition of the Group over Alison’s likely tenure as chair.
Fees above are for the full year and reflect Board responsibilities at the date of this report.
STATEMENT OF SHAREHOLDER VOTING
At the Annual General Meeting on 16 November 2021, the total number of shares in issue with voting rights (excluding treasury
shares) was 203,275,126. Details of voting on remuneration-related resolutions are set out below:
Table 15 – Voting on remuneration-related resolutions at the 2021 AGM
Resolution
Votes for
% of votes cast
Votes against
% of votes cast
Votes withheld
% withheld
Approve Annual Remuneration Report
182,896,339
98.58
2,642,335
1.42
97,528
0.05
Approved by the Board on 14 September 2022.
William Reeve
Chair of the Remuneration Committee
14 September 2022
162 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
Directors’ report
The Directors present their report together with the audited
financial statements for the period ended 2 July 2022.
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Disclosures that are relevant to the Directors’ report have
been incorporated by reference and can be located elsewhere
within the Annual Report and Accounts as noted below.
STRATEGIC REPORT
The Group’s Strategic Report is set out on pages 1 to 81. This
contains an indication of likely future developments in the
business of the Company and the Group.
CORPORATE GOVERNANCE
Our Corporate Governance Report on pages 82 to 162
explains how we have applied the Code’s Principles as set out
in the UK Corporate Governance Code published in July 2018
(the ‘Corporate Governance Code’).
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
of Directors’
Report headed
‘Shareholder and
voting rights’.
RESULTS AND DIVIDENDS
The consolidated profit of the Group for the year after taxation
was £171.2m (2021: £128.9m). The results are discussed in
greater detail in the CFO’s review on pages 27 to 31.
A final ordinary dividend of 26p per share (2021: 23p per
share) is proposed in respect of the period ended 2 July 2022,
to add to two special dividends of 65p and 37p per share paid
on 8 October 2021 and 18 March 2022 respectively (2021:
nil) and an interim ordinary dividend of 14p per share paid on
8 April 2022 (2021: 12p per share). The final dividend will be
paid on 5 December 2022 to shareholders on the register at
11 November 2022.
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 79 and note 17 to the annual financial statements.
STAKEHOLDER ENGAGEMENT
Details of how the Directors have engaged with employees
and other stakeholders, and had regard to the interests of
colleagues and the need to foster the Company’s business
relationships with suppliers, customers and others and the
effect of that regard, including on the principal decisions
taken by the Company during the financial year, are set out in
the Corporate Governance Report on pages 95 to 102, with
complementary information in the Strategic Report on pages
42 to 60. Our s172(1) Companies Act 2006 statement can be
found on page 81.
EMPLOYEE INFORMATION
Information relating to employees of the Group, including our
approach to disabled persons, is set out in the ‘Community’
section of the Sustainability section on pages 52 to 58.
Share incentive schemes in which employees participate are
described in the Remuneration Report on pages 143 to 146.
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. There are no special voting rights attached to any of
the Company’s shares. In order to be passed, an ordinary
resolution of the Company must be supported by at least 50%
of the votes cast at a shareholders’ meeting, and a special
resolution by at least 75% of votes cast.
On 2 October 2006, Jean Adderley, Bill Adderley and Sir
Will Adderley (all shareholders at that time) entered into a
Relationship Agreement with the Company, pursuant to which
each of Jean Adderley, Bill Adderley and Sir 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, Sir Will 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 LR11.1.7.R(4)
of the Listing Rules applies involving Jean Adderley, Bill
Adderley or Sir 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.
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Directors’ report continued
WA Capital Limited and Nadine Adderley, to whom
Sir 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 (as at 1 January 2018 this
reference is now LR 9.2.2AD R(1)). 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 Sir 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.
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. As at 2 July 2022, its capital comprised 203,426,835
(2021: 202,833,931) fully paid Ordinary shares of 1p each.
During the year and in accordance with the authority issued
by shareholders at the 2020 Annual General Meeting, and
a further authority at the 2021 Annual General Meeting,
592,904 Ordinary Shares were allotted at par value to satisfy
the vesting and exercise of awards of Ordinary Shares made
under the Company’s share-based incentive arrangements.
At 2 July 2022, the Company held 1,686,200 Ordinary Shares
in treasury (2021: 160,319).
Under the authority provided at the 2021 Annual General
Meeting the Company commenced a share buy back
programme on 18 November 2021. During the year ended
2 July 2022 the Company purchased 2,500,000 Ordinary
Shares for a total consideration of £28,239,372 and these
shares are held in treasury with no voting or dividend rights.
974,119 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, 40,689 Ordinary Shares have
been moved out of treasury to employees who exercised
options under a share incentive scheme.
Further details on the Company’s share capital are set out
in note 20 to the financial statements.
164 DUNELM GROUP PLC
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SUBSTANTIAL SHAREHOLDERS
At 2 July 2022 the following had notified the Company of a
disclosable interest in 3% or more of the nominal value of the
Company’s Ordinary Shares:
Sir Will Adderley
Jean Adderley
J P Morgan Asset Management
abrdn plc
Jupiter Fund Management PLC
Royal London Asset
Management Limited
Ordinary
Shares
Percentage of
share capital
75,231,779
9,968,500
11,320,031
10,274,359
10,044,063
36.98
4.92
5.56
5.05
4.95
9,907,809
4.87
Sir 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.
Between the period end date and 14 September 2022 we
have been notified of the following:
On 31 August 2022, J P Morgan Asset Management disclosed
that their holding has fallen below the applicable threshold
for disclosure.
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 84 to 87.
Details of changes to the Board during the period are set out
on page 87. Details of the interests of the Directors in shares
of the Company can be found in the Implementation Report
section of the Remuneration Report on page 153.
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 in the Corporate Governance Report
on page 90, 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.
APPOINTMENT AND REMOVAL OF DIRECTORS AND
ANNUAL RE-ELECTION
The Articles of Association of the Company provide that
a Director may be appointed by ordinary resolution of the
Company’s shareholders in a 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 Board’s policy is that all Directors are subject to annual
re-election and therefore should stand down and offer
themselves for re-election at each Annual General Meeting.
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 Nominations Committee makes recommendations to the
Board on the appointment and removal of Directors.
For each Director, reasons are provided in the Notice of
Annual General Meeting stating why their contribution
is, and continues to be, important to Dunelm’s long-term
success. 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.
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 are 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.
INDEMNITIES AND INSURANCE
During the year the Company entered into a deed of
indemnity in favour of each of its Directors and the Company
Secretary to the extent permitted by law in respect of costs
of defending claims against them and third-party liabilities.
These provisions, deemed to be qualifying third-party
indemnity provisions pursuant to section 234 of the Act,
were in force from 12 May 2022 to the year ended 2 July
2022. Deeds of indemnity in favour of Karen Witts and Alison
Brittain were entered into on 9 June 2022 and 7 September
2022 respectively on their appointment to the Board. All these
remain in force as at the date of this report.
A copy of the indemnity is available for inspection at the
Company’s registered office during normal business hours
and will be available for inspection at the Company’s Annual
General Meeting.
The Group maintained Directors’ and Officers’ liability
insurance cover for its Directors and officers as permitted
under the Articles of the Company and the Companies Act
2006 throughout the financial year.
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• Kelly Devine’s spouse, Todd Latham, is the CEO of Dividio,
which is a potential supplier to Dunelm. Authorised on the
basis that there are sufficient safeguards in place to prevent
any actual conflict arising.
• Vijay Talwar was CEO of Wish.com, a company based
in San Francisco which sells some homewares in the
UK. Authorised as Wish.com operates as a marketplace
platform with no own brand offer, and the homewares offer
is limited and does not compete with Dunelm.
• William Reeve has a small stake in ConferWith, a company
which facilitates video chat with a customer care adviser and
which has a contractual relationship with Dunelm. Authorised
as William is not involved in decisions made by either
ConferWith or Dunelm in respect of any business relationship,
and that any relationship is on arm’s length terms.
DONATIONS
The Group does not make any political donations.
PUBLIC POLICY
We are members of the British Retail Consortium and support
relevant campaigning activity by that body. During the
year we have not taken part in any direct lobbying or public
policy activity.
ARTICLES OF ASSOCIATION
The Company’s Articles of Association may only be
amended, or new articles adopted, by a special resolution
of shareholders.
MANAGING CONFLICTS OF INTEREST AND RELATED-
PARTY MATTERS
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:
• Sir Will Adderley is a major shareholder and connected to
other major shareholders. Authorised on the basis that Sir
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 Sir 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.
• Kelly Devine is the Head of Mastercard for the UK and
Ireland. Mastercard indirectly provides payment services
to Dunelm but there is no direct contractual relationship.
Authorised on the basis that there are sufficient safeguards
in place to prevent any actual conflict arising. More recently
Mastercard has approached Dunelm to initiate discussions
about their buy now pay later service, in accordance with
the authorisation Kelly will not be directly involved any
negotiations and any relationship would be on an arms-
length terms.
166 DUNELM GROUP PLC
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NON-FINANCIAL INFORMATION STATEMENT FY22
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
required
Some of our relevant policies
(see website: corporate.dunelm.com)
Where to read about our impact, including principal risks relating
to these matters in this report and KPIs
Environmental
matters
Responsible Animal Welfare Policy
Measuring and rewarding progress against our ambition about being a
good company
Page(s)
24
Responsible Timber Policy
Sustainability section and sustainability metrics, targets and progress
33 and 35
Responsible Cotton Policy
‘Carbon Reduction’ and ‘Circular economy’ in Sustainability section
36 and 42
Plastic and Packaging Policy
Task Force on Climate-related Financial Disclosures report
Responsible Palm Oil Sourcing Policy
‘Climate change and environment’ principal risk
Task Force on Climate-related Financial
Disclosures report 2022
Sustainability Home Page
Chairman’s letter in Corporate Governance Report
‘Impact of decisions on climate change and our environment’ in s172
Companies Act statement
‘Group Board oversight of s172 and ESG topics FY22’ in Corporate
Governance Report
‘ESG reporting’ in Audit and Risk Committee
61
76
82
102
106
124
ESG matters within Directors Report on Remuneration
151 and 152
Employees
Equality and Diversity Policy
Streamlined and Energy Carbon Reporting in directors report
Measuring and awarding progress against our ambition about being a
good company
Health and Safety Policy
Whistleblowing Policy
Chairman’s letter
CEO Review
168
24
14
16
Risk Appetite statement
Sustainability section and sustainability metrics, targets and progress
33 and 35
Gender Pay Report 2022
‘Colleagues’ and ‘Health and Safety’ within Community in Sustainability
section
52 and 59
Equality and Diversity Policy
‘People and culture’ and ‘Regulatory and Compliance’ principal risks
74 and 79
Domestic Abuse Policy
‘How the Board oversees culture’ in Corporate Governance Report
92
Human rights
Ethical Code of Conduct for Suppliers
and Partners
s172 Companies Act Statement – colleagues and case study on
colleagues pay
98 and 103
‘Diversity and inclusion’ in Nominations Committee Report
Directors Report on Remuneration
118
130
‘Circular Economy’ and ‘Community’ within Sustainability section
42 and 49
Modern Slavery Statement
‘Brand damage’ principal risk
s172 Companies Act statement – Suppliers
Social matters
Our purpose
’Growing with purpose’ in Strategic Report
Ethical Code of Conduct for Suppliers
and Partners
Chairman’s Letter
Modern Slavery Statement
Tax Strategy
Privacy Policy
CEO Review
CFO Review
‘Community’ within Sustainability section
Ethical Code of Conduct
‘People and culture’ principal risk
Anti-Corruption and Anti-Bribery Policy
‘Group Board oversight of s172 and ESG topics FY22’ in Corporate
Governance Report
‘Doing the right thing’ within ‘Community’ in Sustainability section
‘Brand damage’ principal risk
Anti-bribery
and corruption
Business model
75
100
6 to 13
14
16
26
49
74
106
60
75
‘Business Model’ and ‘our strategy’ in Strategic Report
Measuring and rewarding progress against our ambitions
4 and 22
24 to 25
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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Corporate governance report
Directors’ report continued
STREAMLINED ENERGY AND CARBON REPORTING
(SECR)
In the table below we set out the energy disclosures required
by the Companies (Directors’ Report) and Limited Liability
Partnerships (Energy and Carbon Report) Regulations 2018.
Streamlined Energy and Carbon Reporting (SECR)
Summary MWh1
FY202
FY212
FY22
Purchase of energy
50,547
53,158 51,980
Vehicles on Company business
Vehicles in the Home Delivery
Network
3,720
4,382
3,979
12,198 15,959 15 ,773
66,465
73,499 71,732
1. We have used the conversion factors published in BEIS GHG conversion
factors for company reporting to convert from passenger miles in
company-owned vehicles to MWh.
2. FY20 and FY21 figures restated as part of refining our data on Scope 1
and 2 emissions.
The increase in energy between FY20 and FY22 is related to
the expansion of our vehicle home delivery network, aligned
to our business growth.
The greenhouse gas emissions disclosure required under the
Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013 can be found on pages 36 to 41 together
with further details on our energy and carbon reduction
progress.
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.
This document also contains non-financial information and
data. While reasonable steps have been taken to ensure that
this is correct, it has not been externally audited or verified
unless specifically stated in this document.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at 11:30am on
Wednesday 30 November 2022 at the Dunelm 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 14 September 2022.
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.
Dawn Durrant
Company Secretary
14 September 2022
IMPORTANT EVENTS SINCE 2 JULY 2022
There have been no important events affecting the Company
or any subsidiary since 2 July 2022.
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Statement of directors’ responsibilities
in respect of the financial statements
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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’s and parent company’s position and performance,
business model and strategy.
Each of the directors, whose names and functions are listed
in the Governance section confirm that, to the best of their
knowledge:
• the group and parent company financial statements,
which have been prepared in accordance with UK-adopted
international accounting standards, give a true and fair view
of the assets, liabilities and financial position of the group
and parent company, and of the 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’s 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’s and parent company’s auditors are aware
of that information.
Nick Wilkinson
Chief Executive Officer
14 September 2022
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 year. Under that law the directors
have prepared the group and the parent company financial
statements in accordance with UK-adopted international
accounting standards.
Under company law, 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 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 UK-adopted international
accounting standards have been followed, 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 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 also responsible for keeping adequate
accounting records that are sufficient to show and explain
the group’s 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.
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.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
169
Financial statements
Independent auditors’ report
to the members of Dunelm Group plc
OUR AUDIT APPROACH
Overview
Audit scope
• The group is structured with one segment which comprises
a consolidation of the parent company and eight additional
components.
• For the purposes of the group financial statements, we
conducted an audit of the complete financial information
of one financially significant component, together with
additional procedures performed centrally including the
group consolidation.
• We separately audited the parent company financial
statements.
Key audit matters
• Inventory provisions (group)
• Recoverability of investments in subsidiary undertakings
(parent)
Materiality
• Overall group materiality: £10,640,000 (2021: £7,800,000)
based on 5% of profit before tax.
• Overall parent company materiality: £1,600,000 (2021:
£5,400,000) based on 1% of total assets.
• Performance materiality: £8,000,000 (2021: £5,850,000)
(group) and £1,200,000 (2021: £4,050,000) (parent
company).
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.
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 2 July 2022 and of the
group’s profit and the group’s and parent company’s cash
flows for the 53 week period then ended;
• have been properly prepared in accordance with UK-
adopted international accounting standards; and
• have been prepared in accordance with the requirements
of the Companies Act 2006.
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 parent company statement of financial position as at 2
July 2022; the consolidated income statement, consolidated
statement of comprehensive income, consolidated statement
of cash flows, consolidated statement of changes in equity,
parent company statement of cash flows and parent company
statement of changes in equity for the period then ended; the
accounting policies; and the notes to the financial statements.
Our opinion is consistent with our reporting to the Audit and
Risk Committee.
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.
Other than those disclosed in note 3, we have provided no
non-audit services to the parent company or its controlled
undertakings in the period under audit.
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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.
Carrying value of investments in the parent company is a new key audit matter this year. Covid-19 pandemic impact, which was a
key audit matter last year, is no longer included because of the reduced level of uncertainty in respect of the impact of Covid-19
on the Group and Company. Otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Inventory provisions (group)
Refer to the Audit and Risk Committee Report, the Accounting
Policies, note 3 (Operating Profit) and note 13 (Inventories) to
the Consolidated Financial Statements.
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; and a further provision for ‘at
risk’ lines where the calculated provision was not considered to
be sufficient.
Recoverability of investments in subsidiary
undertakings (parent)
Refer to note 4 (Investments) to the Parent Company Financial
Statements.
In accordance with IAS 36 (Impairment of assets), the Parent
Company’s investments balance of £64.8m (FY21: £60.7m) should
be carried at no more than its recoverable amount, being the higher
of fair value less costs to sell and its value in use. IAS 36 requires an
entity to determine whether there are indications that an impairment
loss may have occurred and if so, make a formal estimate of the
recoverable amount.
We tested sales made post period-end to ensure that inventory items
were held at the lower of cost and NRV.
We examined inventory write-offs in the financial period to ensure they
are consistent with the key assumptions used in the inventory provision
model at the year end.
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 a sample of inputs
to source documentation and testing freight and duty costs.
We tested the integrity of the provision model to ensure that it
was using the underlying data correctly and calculating provision
amounts accurately.
We challenged management’s assumptions on what they deemed the
‘at risk’ inventory lines were, and corroborated whether these lines were
at risk with the Merchandising team. We also independently challenged
the completeness of the ‘at risk’ lines based on our understanding of
the nature of the group’s inventory lines.
We found that the NRV provision against inventory was consistent with
the evidence obtained.
We evaluated whether any indications that an impairment loss may have
occurred in relation to the Parent Company’s investments balance with
specific consideration given to the following:
•
•
•
the market capitalisation of the Group is significantly in excess
of the investments balance, noting that substantially all of the
market capitalisation is considered to be in relation to one indirect
subsidiary (Dunelm (Soft Furnishings) Ltd) of the Parent Company;
the trading results of Dunelm (Soft Furnishings) Ltd are not worse
than expected and are not expected to be worse in future periods;
and
there have not been and are not expected to be any significant
changes with an adverse impact in relation to the technological,
market, economic or legal environment in which this indirect
subsidiary operates.
We consider management’s conclusion that there are no indicators
of impairment to be appropriate.
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ANNUAL REPORT AND ACCOUNTS 2022
171
Financial statements
Independent auditors’ report continued
to the members of Dunelm Group plc
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 reporting segment which comprises a consolidation of the parent company and eight
additional components.
In establishing the overall approach to the group audit, we identified one component: Dunelm (Soft Furnishings) Ltd, which, as
the sole trading legal entity in the Group, required an audit of its complete financial information due to its financial significance
to the group.
Further specific audit procedures over central functions including the Group consolidation, equity, taxes and the business
combination were performed.
With regards to assessing potential risks arising from climate change we enquired of management as to their risk assessment,
obtained their papers and also assessed commitments made by Dunelm Group plc in the Annual Report and Accounts
and their website. We also considered the industry in which Dunelm Group plc operates and assessed the nature and
magnitude of assets held at the period-end date which could be subject to either transition or physical climate risks. Based
on management’s assessment noted on page 185 we did not identify any audit risks which were expected to be significantly
impacted by the effects of climate change, principally due to the fact that the majority of the Group’s asset base is expected
to be realised in the short to medium term.
All audit procedures were performed by the Group Engagement Team. The scoping above gave us the evidence we needed
for our opinion on the group financial statements as a whole.
The Parent Company is comprised of one component which was subject to a full scope audit for the purposes of the Parent
Company financial statements.
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
How we determined it
Rationale for benchmark applied
Group financial statements
Parent company financial statements
£10,640,000 (2021: £7,800,000).
£1,600,000 (2021: £5,400,000).
5% of profit before tax
1% of total assets
We have applied this benchmark, a
generally accepted auditing benchmark,
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 benchmark,
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.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the
scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for
example in determining sample sizes. Our performance materiality was 75% (2021: 75%) of overall materiality, amounting to
£8,000,000 (2021: £5,850,000) for the group financial statements and £1,200,000 (2021: £4,050,000) for the parent company
financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range
was appropriate.
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We agreed with the Audit and Risk Committee that we
would report to them misstatements identified during our
audit above £530,000 (group audit) (2021: £390,000) and
£80,000 (parent company audit) (2021: £270,000) as well
as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
CONCLUSIONS RELATING TO GOING CONCERN
Our evaluation of the directors’ assessment of the group’s and
the parent company’s ability to continue to adopt the going
concern basis of accounting included:
• We obtained management’s going concern assessment
and ensured that this was consistent with board approved
budgets;
• We have evaluated management’s forecasting accuracy
based on historical budgets versus actual performance;
• We obtained confirmation from lenders of the level of
drawn and undrawn revolving credit facilities and tested the
actual and forecast covenant compliance associated with
these facilities; and
• We assessed the adequacy of the going concern
disclosures in the accounting policies.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt
on the group’s and the parent company’s ability to continue
as a going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
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 and Directors’ Report, we
also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit,
the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
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 2 July 2022
is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
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.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the group’s
and the parent company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the
directors’ statement in the financial statements about whether
the directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
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, which includes reporting based on the
Task Force on Climate-related Financial Disclosures (TCFD)
recommendations. 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.
Directors’ Remuneration
In our opinion, the part of the Remuneration Committee
report to be audited has been properly prepared in
accordance with the Companies Act 2006.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the directors’
statements in relation to going concern, longer-term viability
and that part of the corporate governance statement relating
to the parent company’s compliance with the provisions of
the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate
governance statement as other information are described in
the Reporting on Other Information section of this report.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of
the corporate governance statement, included within
the Strategic report and Corporate governance report is
materially consistent with the financial statements and our
knowledge obtained during the audit, and we have nothing
material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a
robust assessment of the emerging and principal risks;
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
173
Financial statements
Independent auditors’ report continued
to the members of Dunelm Group plc
• The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being
managed or mitigated;
• The directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identification of any material uncertainties to the group’s
and parent company’s ability to continue to do so over a
period of at least twelve months from the date of approval
of the financial statements;
• The directors’ explanation as to their assessment of the
group’s and parent company’s prospects, the period this
assessment covers and why the period is appropriate; and
• The directors’ statement as to whether they have a
reasonable expectation that the parent company will be
able to continue in operation and meet its liabilities as they
fall due over the period of its assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the
longer-term viability of the group was substantially less in
scope than an audit and only consisted of making inquiries
and considering the directors’ process supporting their
statement; checking that the statement is in alignment with
the relevant provisions of the UK Corporate Governance
Code; and considering whether the statement is consistent
with the financial statements and our knowledge and
understanding of the group and parent company and their
environment obtained in the course of the audit.
In addition, based on the work undertaken as part of
our audit, we have concluded that each of the following
elements of the corporate governance statement is materially
consistent with the financial statements and our knowledge
obtained during the audit:
• The directors’ statement that they consider the
Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for
the members to assess the group’s and parent company’s
position, performance, business model and strategy;
• The section of the Annual Report that describes the review
of effectiveness of risk management and internal control
systems; and
• The section of the Annual Report describing the work of the
Audit and Risk Committee.
We have nothing to report in respect of our responsibility to
report when 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.
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 in respect of the financial statements, 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.
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect
material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry,
we identified that the principal risks of non-compliance
with laws and regulations related to employment regulations,
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 financial statements such as the Companies
Act 2006. 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 the posting
of journals with unexpected account combinations, which
manipulate revenue or profits, and management bias in
accounting estimates and judgements. Audit procedures
performed by the engagement team included:
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• Discussions with management, internal audit and the
Company Secretary, including consideration of known
or suspected instances of non-compliance with laws and
regulation and fraud;
• Assessment of matters reported on the Group’s
whistleblowing log;
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 obtained all the information and explanations
• Searches for news articles which would highlight potential
we require for our audit; or
non-compliance with laws and regulations;
• Identifying and testing journal entries, in particular journal
entries posted with unusual account combinations which
manipulate revenue or profits; and
• 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
• Challenging assumptions and judgements made by
law are not made; or
management in their significant accounting estimates and
judgements, in particular in relation to inventory provisions
(see related key audit matter).
• the parent company financial statements and the part of the
Remuneration Committee report to be audited are not in
agreement with the accounting records and returns.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that
are not closely related to events and transactions reflected
in the financial statements. 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.
Our audit testing might include testing complete populations
of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting
a limited number of items for testing, rather than testing
complete populations. We will often seek to target particular
items for testing based on their size or risk characteristics.
In other cases, we will use audit sampling to enable us to
draw a conclusion about the population from which the
sample is selected.
A further description of our responsibilities for the audit of the
financial statements is located on the FRC’s website at:
This description forms part
of our auditors’ report.
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.
We have no exceptions to report arising from this
responsibility.
APPOINTMENT
Following the recommendation of the Audit and Risk
Committee, we were appointed by the members 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 nine years,
covering the years ended 28 June 2014 to 2 July 2022.
Other matter
In due course, as required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rule 4.1.14R, these
financial statements will form part of the ESEF-prepared
annual financial report filed on the National Storage
Mechanism of the Financial Conduct Authority in accordance
with the ESEF Regulatory Technical Standard (‘ESEF RTS’).
This auditors’ report provides no assurance over whether
the annual financial report will be prepared using the single
electronic format specified in the ESEF RTS.
Mark Skedgel (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
14th September 2022
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
175
FINANCIAL STATEMENTS Financial statements
Consolidated Income Statement
For the 53 weeks ended 2 July 2022
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
2022
53 weeks
£’m
1,581.4
(772.0)
809.4
(591.7)
217.7
1.2
(6.1)
212.8
(41.6)
171.2
84.5p
83.6p
2021
52 weeks
£’m
1,336.2
(647.3)
688.9
(522.5)
166.4
0.1
(8.7)
157.8
(28.9)
128.9
63.7p
62.9p
Note
2
3
5
5
6
8
8
Consolidated Statement of Comprehensive Income
For the 53 weeks ended 2 July 2022
Profit for the period
Other comprehensive income/(expense):
Items that may be subsequently reclassified to profit or loss:
Movement in fair value of cash flow hedges
Deferred tax on hedging movements
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
Note
17
12
2022
53 weeks
£’m
2021
52 weeks
£’m
171.2
128.9
32.4
(5.3)
27.1
198.3
(17.7)
2.2
(15.5)
113.4
176 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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A
N
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A
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S
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A
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E
M
E
N
T
S
Consolidated Statement of Financial Position
As at 2 July 2022
Non–current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Derivative financial instruments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current tax asset
Derivative financial instruments
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Derivative financial instruments
Total current liabilities
Non-current liabilities
Bank loans
Lease liabilities
Provisions
Derivative financial instruments
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
Note
2 July 2022
£’m
26 June 2021
£’m
9
10
11
12
13
14
15
16
11
18
11
19
20
9.9
173.7
248.5
4.1
4.6
440.8
223.0
22.9
1.1
19.9
30.2
297.1
737.9
(223.2)
(52.8)
—
(276.0)
(52.8)
(225.3)
(5.5)
—
(283.6)
(559.6)
178.3
2.0
1.7
43.2
20.2
111.2
178.3
14.8
162.6
262.0
11.4
0.3
451.1
172.4
11.8
2.4
0.4
128.6
315.6
766.7
(181.8)
(49.0)
(5.1)
(235.9)
—
(244.3)
(4.5)
(0.8)
(249.6)
(485.5)
281.2
2.0
1.6
43.2
(4.3)
238.7
281.2
The financial statements on pages 176 to 207 were approved by the Board of Directors on 14 September 2022 and were signed
on its behalf by:
Karen Witts
Chief Financial Officer
14 September 2022
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
177
Financial statements
Consolidated Statement of Cash Flows
For the 53 weeks ended 2 July 2022
2022
53 weeks
£’m
2021
52 weeks
£’m
Note
5
3
3
3
3
27
21
21
11
7
5
15
15
212.8
4.9
217.7
30.5
48.6
0.3
(0.1)
4.8
301.8
(40.3)
(7.7)
33.2
(14.8)
(35.2)
251.8
(0.7)
(23.3)
(17.7)
0.1
(41.6)
3.9
(28.3)
85.0
(31.0)
(2.2)
(4.8)
(50.2)
(282.1)
(309.7)
(99.5)
1.1
128.6
30.2
157.8
8.6
166.4
31.8
45.7
2.3
1.0
7.5
254.7
(54.2)
4.1
15.1
(35.0)
(35.5)
184.2
(0.6)
(15.1)
—
0.1
(15.6)
1.8
—
—
(45.0)
(0.8)
(5.3)
(54.0)
(24.3)
(127.6)
41.0
(2.4)
90.0
128.6
Cash flows from operating activities
Profit before taxation
Net financial expense
Operating profit
Depreciation and amortisation of property, plant and equipment and intangible
assets
Depreciation of right-of-use assets
Loss on disposal and impairment of property, plant and equipment and intangible
assets
(Gain)/loss on disposal and impairment of right-of-use assets
Share-based payments expense
Operating cash flows before movements in working capital
Increase in inventories
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Net movement in working capital
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of intangible assets
Acquisition of property, plant and equipment
Acquisition of Business combination
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of treasury shares and ordinary shares
Purchase of treasury shares
Drawdowns on Revolving Credit Facility
Repayments of Revolving Credit Facility
Interest paid and loan transaction costs
Interest paid on lease liabilities
Repayment of principal element of lease liabilities
Ordinary dividends paid
Net cash used in financing activities
Net (decrease)/increase 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
178 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
Consolidated Statement of Changes in Equity
For the 53 weeks ended 2 July 2022
Issued
share
capital
£’m
Share
premium
account
£’m
Capital
redemption
reserve
£’m
Hedging
reserve
£’m
Retained
earnings
£’m
Note
As at 28 June 2020
Profit for the period
Movement in fair value of cash flow hedges
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
Movement on cash flow hedges transferred to
inventory
Ordinary dividends paid
Total transactions with owners, recorded directly
in equity
As at 26 June 2021
Profit for the period
Movement in fair value of cash flow hedges
Deferred tax on hedging movements
Total comprehensive income for the period
Proceeds from issue of shares
Proceeds from issue of treasury shares
Purchase of treasury shares
Share-based payments
Deferred tax on share-based payments
Current tax on share options exercised
Movement on cash flow hedges transferred to
inventory
Ordinary dividends paid
Total transactions with owners, recorded directly
in equity
As at 2 July 2022
17
12
21
12
17
7
17
12
20
21
21
12
17
7
2.0
—
—
—
—
—
—
—
—
—
—
—
2.0
—
—
—
—
—
—
—
—
—
—
—
—
—
2.0
1.6
—
—
—
—
—
—
—
—
—
—
—
1.6
—
—
—
—
0.1
—
—
—
—
—
—
—
0.1
1.7
43.2
—
—
—
—
—
—
—
—
—
—
—
43.2
—
—
—
—
—
—
—
—
—
—
—
—
—
43.2
5.3
—
(17.7)
2.2
(15.5)
—
—
—
—
5.9
—
5.9
(4.3)
—
32.4
(5.3)
27.1
—
—
—
—
—
—
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A
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E
M
E
N
T
S
Total equity
attributable
to equity
holders of
the Parent
£’m
173.4
128.9
(17.7)
2.2
113.4
1.8
7.5
2.9
0.6
121.3
128.9
—
—
128.9
1.8
7.5
2.9
0.6
—
(24.3)
5.9
(24.3)
(11.5)
238.7
171.2
—
—
171.2
—
3.9
(28.3)
4.8
0.8
2.2
(5.6)
281.2
171.2
32.4
(5.3)
198.3
0.1
3.9
(28.3)
4.8
0.8
2.2
(2.6)
—
—
(282.1)
(2.6)
(282.1)
(2.6)
20.2
(298.7)
(301.2)
111.2
178.3
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
179
Financial statements
Accounting Policies
For the 53 weeks ended 2 July 2022
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 176 to 207 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 in stores and online.
BASIS OF PREPARATION
The financial statements presented cover a 53 week
trading period for the financial period ended 2 July 2022
(2021: 52 week period ended 26 June 2021).
On 31 December 2020, IFRS as adopted by the European
Union at that date was brought into UK law and became
UK-adopted International Accounting Standards, with
future changes being subject to endorsement by the UK
Endorsement Board. Dunelm Group plc transitioned to
UK-adopted International Accounting Standards in its
Company financial statements on 27 June 2021. This change
constitutes a change in accounting framework. However,
there is no impact on recognition, measurement or disclosure
in the period reported as a result of the change in framework.
The financial statements of Dunelm Group plc have been
prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting
under those standards. These financial statements are
presented on pages 176 to 207.
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
At the time of approving the financial statements, the Board
of Directors is required to formally assess that the business
has adequate resources to continue in operational existence
for the foreseeable future and as such can continue to adopt
the ‘Going Concern’ basis of accounting. To support this
assessment, the Board is required to consider the Group’s
current financial position, its strategy, the market outlook and
its principal risks.
180 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
The key judgement that the Directors have considered in
forming their conclusion is the potential impact on future
revenue, profits and cashflows of a downturn in consumer
spending away from homewares due to the current economic
environment, resulting in no growth in Year 1 and lower sales
and margin across all channels throughout the review period.
They have also considered a deeper downturn in consumer
spending away from homewares, resulting in negative growth
in Year 1 and lower sales and margin across all channels
throughout the review period.
In both downside scenarios Dunelm has sufficient liquidity
to continue trading, including maintaining the payment of
dividends in line with its dividend policy, and to comfortably
meet its financial covenants. Reverse stress modelling has
demonstrated that a prolonged sales reduction of 30% from
Q2 FY23 and 37% from FY24 is required to breach covenants
by the end of FY24 and a 55% sales reduction is required to
breach the RCF limit by the end of FY24, assuming reasonable
mitigating actions have been implemented.
In such an event, management would follow a similar course
of actions to those initially undertaken during the recent
Covid-19 pandemic.
As a result, the Board believes that the Group is well
placed to manage its financing and other significant risks
satisfactorily and that the Group will be able to operate within
the level of its facilities for the foreseeable future. For this
reason, the Board considers it appropriate for the Group
to adopt the going concern basis in preparing its financial
statements. In addition, based on a review of the impact of
climate change, climate change is not expected to have a
significant impact in the Group’s going concern assessment.
Further detail in respect of the Directors’ going concern
assessment are included in the going concern statement
on pages 80 to 81.
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 2 to 81. In addition, note 17
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
Based in the IAS 1 definitions, there are no significant
estimates or critical judgements used in the Financial
Statements. The inventory provision is not considered a
significant estimate as there is not a significant risk of a
material adjustment to the level of the provision in the next
12 months. Management do, however, consider the inventory
provision to be a key estimate as it is based on assumptions
relating to a highly material balance (gross inventory) and is
subject to uncertainty. It is therefore disclosed as an other
estimate in line with IAS 1.
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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 based on estimated
selling price with future price reductions assumed to be in
line with historic margin analysis on a line-by-line basis, and
applied to the inventory population as deemed appropriate
given the expected sell through period and discontinuation
status. A 100 basis points change in the provision rate of each
stock discontinuation category would lead to a change in the
provision of £2.0m (2021: £1.7m). Consideration is also given
to whether any stock categories require additional provision
due to specific circumstances in place at the period end date.
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 website,
excluding sales between Group companies, and is after
deducting returns, relevant discounts 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.
In general, these conditions for store sales are met at the point
of sale. The exceptions to this are custom-made products
and Click & Collect sales, where revenue is recognised at the
point that the goods are collected, and gift vouchers, where
revenue is recognised when the vouchers are redeemed
aside from the element management do not expect to be
redeemed based on historical data which is recognised at the
point of sale. Revenue on home delivery sales is recognised at
the point of delivery. Revenue is settled in cash at the point of
sale for all revenue channels.
The Group has two types of products; stocked products
and products which are sent directly from suppliers to
customers. Management has established that the Group acts
as a principal for both types of products and thus should
recognise revenue as the gross amount of consideration to
which it expects to be entitled.
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 the period end but returned
after the period end. The Group recognises the expected
value of revenue relating to returns within sales provisions and
the expected value of cost of sales relating to the returned
items is included within inventories.
For the purposes of the financial statements, management
has concluded that since customers access the Group’s
products across multiple channels and their journey often
involves more than one channel, disaggregation of revenue
would not be appropriate.
EXPENSES
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 Consolidated
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 addition, in some circumstances employees may provide
services in advance of the grant date and therefore the
grant date fair value is estimated for the purposes of
recognising the expense during the period between service
commencement period and grant date.
At the end of each reporting period, the Group revises its
estimates of the number of options that are expected to vest
based on the non-market vesting conditions. It recognises
the impact of the revision to original estimates, if any, in
the Consolidated Income Statement, with a corresponding
adjustment to equity.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
181
Financial statements
Accounting Policies continued
For the 53 weeks ended 2 July 2022
When options are exercised, the Company either issues new
shares, or uses treasury shares purchased for this purpose.
For newly 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 are 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 Consolidated Statement
of Financial Position date. Resulting exchange gains or losses
are recognised in the Consolidated Income Statement for
the period in financial income and expenses, except when
deferred as qualifying cash flow hedges.
TAXATION
Tax on the profit or loss for the period comprises current
and deferred tax. Tax is recognised in the Consolidated
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 Consolidated Statement of
Financial Position date, together with any adjustment to tax
payable in respect of previous periods.
Deferred tax is provided using the Statement of Financial
Position 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 Consolidated Statement of Financial Position 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.
DIVIDENDS
Dividends are recognised as a liability in the period in which
they are approved such that the Group is obligated to pay
the dividend.
182 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
INTANGIBLE ASSETS
Intangible assets comprise of software development,
licences, rights to brands and customer lists, and are stated
at cost less accumulated amortisation and impairment. 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 the estimated useful life.
Acquired computer software licences are capitalised on
the basis of the costs incurred to acquire and bring to use
the specific software. These costs are amortised over their
estimated useful lives.
Costs associated with maintaining computer software
programmes are recognised as an expense as incurred.
Development costs that are directly attributable to the design
and testing of identifiable and unique software products
controlled by the Group are recognised as intangible assets
when the following criteria are met:
• It is technically feasible to complete the software product
so that it will be available for use;
• Management intends to complete the software product
and use or sell it;
• There is an ability to use or sell the software product;
• It can be demonstrated how the software product will
generate probable future economic benefits;
• Adequate technical, financial and other resources to
complete the development and to use or sell the software
product are available; and
• The expenditure attributable to the software product
during its development can be reliably measured.
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 Consolidated Income
Statement on a straight-line basis over the estimated useful
life of the asset. These are as follows:
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.
Cost includes the original purchase price of the asset and
the costs attributable to bringing the asset to its working
condition for intended use.
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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.
Interest charges are included in finance costs in the
Consolidated Income Statement.
Depreciation
Depreciation is charged to the Consolidated 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, or useful life if shorter
Fixtures, fittings, and
equipment
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.
LEASES
Lease recognition
At the inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if it conveys the right to control the use of an identified
asset for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control the use
of an identified asset, the Group uses the definition of a lease
in IFRS 16.
Right-of-use assets
The Group recognises right-of-use assets at the
commencement date of the lease. Right-of-use assets
are measured at cost, less accumulated depreciation and
impairment losses and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognised, adjusted for any
lease payments made at or before the commencement
date, less any lease incentives received. Right-of-use assets
are depreciated over the shorter of the asset’s useful life or
the lease term on a straight-line basis. Right-of-use assets
are subject to, and reviewed regularly for, impairment.
Depreciation of right-of-use assets is included in operating
costs in the Consolidated Income Statement.
Lease liabilities
At the commencement date of the lease, the Group
recognises lease liabilities measured at the present value
of the lease payments to be made over the lease term.
Lease payments include fixed payments less any lease
incentives receivable.
In calculating the present value of lease payments, the
Group uses its incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease
is not readily determinable. The carrying amount of lease
liabilities is remeasured if there is a modification, a change
in the lease term or a change in the fixed lease payments.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets
and lease liabilities for short-term leases of machinery and
equipment that have a lease term of less than 12 months
and leases of low-value assets (defined as assets with
a value, when new, of £5,000 or less). Lease payments
relating to short-term leases and leases of low-value assets
are recognised as an expense on a straight-line basis over
the lease term.
Subsequent measurement
The lease liability and right-of-use asset is subsequently
remeasured to reflect changes in:
• The lease term (using a revised discount rate);
• The assessment of a purchase option (using a revised
discount rate); and
• Future lease payments resulting from a change in an index
or a rate used to determine those payments (using an
unchanged discount rate).
Lease modifications may also prompt remeasurement
of the lease liability unless they are determined to be
separate leases.
The payments related to leases are presented under cash
flow from financing activities in the Consolidated Cash
Flow Statement.
FINANCIAL INSTRUMENTS
Recognition and 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 the Consolidated Income Statement.
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 the Consolidated Income Statement
and presented in other gains/(losses) together with foreign
exchange gains and losses.
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ANNUAL REPORT AND ACCOUNTS 2022
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Financial statements
Accounting Policies continued
For the 53 weeks ended 2 July 2022
• 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 the Consolidated Income
Statement in the period in which it arises.
Impairment of financial assets
The Group uses a forward-looking approach to assess 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.
Derivatives
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
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 attributable to a particular risk associated with a highly
probable forecasted transaction.
Any gains or losses arising from changes in fair value
derivative financial instruments not designated as hedges are
recognised in the Consolidated Income Statement.
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 the Consolidated Income Statement, 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.
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
184 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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 the Consolidated
Income Statement 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/loss and deferred
costs of hedging in equity at that time remain 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/loss and deferred costs of hedging that were reported
in equity are immediately reclassified to the Consolidated
Income Statement.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the Consolidated Statement of Financial
Position 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 Group 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.
GOVERNMENT GRANTS
The Group applies IAS 20 ‘Accounting for Government
Grants and Disclosure of Government Assistance’ when
accounting for government grants. A government grant is not
recognised until there is reasonable assurance that the Group
will comply with the conditions attaching to it, and that the
grant will be received. Government grants are recognised in
the Consolidated Income Statement over the same period
as the related costs for which the grants are intended to
compensate. The Group has chosen to present receipt and
repayment of government grants against the related expense.
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.
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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 rate 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 Consolidated Statement of
Financial Position date.
IMPAIRMENT OF NON-FINANCIAL ASSETS
The carrying amounts of the Group’s assets are reviewed
annually at each Consolidated Statement of Financial
Position 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. A cash-generating unit has been defined
as an individual store or the online business. If an impairment
loss is identified for a cash-generating unit, the loss shall be
allocated to reduce the carrying amount of the assets of the
unit pro-rated on the basis of the carrying amount of each
asset in the unit for both property, plant and equipment and
right-of-use assets. Impairment losses are recognised in the
Consolidated Income Statement.
SHARE CAPITAL
Where the Group purchases its own equity share capital
(treasury shares), the consideration paid, including any
directly attributable incremental costs, is deducted from
equity attributable to the Group’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 Group’s equity holders.
PROVISIONS
A provision is recognised in the Consolidated Statement
of Financial Position when the Group has a current legal
or constructive obligation as a result of a past event and
it is probable that an outflow of economic benefits will be
required to settle the obligation, and the amount has been
reliably measured.
A provision for onerous contracts is recognised when the
expected benefit to be derived by the Group from a contract
is lower than the unavoidable costs of meeting its obligations
under the contract.
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.
CLIMATE CHANGE
In preparing the financial statements we have considered the
potential impact of climate change. Given that the identified
risks of climate change are expected to be present in the
medium to long term our focus has been on the non-current
assets within the Statement of Financial Position. Specifically,
for the material non-current assets, we note the following:
• The plant, property and equipment, and the right-of-
use assets have relatively short useful lives (the average
remaining lease term of our leasehold land and buildings
is 5.2 years). The longer life assets relate to freehold stores
and our head office, none of which are located in areas
identified as being at significant risk to climate change
• The intangible assets, which consist of a brand, internally
generated and other software, have a useful life of 3 to 5
years and therefore we would not expect the identified risks
to impact these assets.
The other non-current assets were also reviewed, and no risk
was identified. Current assets, by their nature, are expected
to be fully utilised within the business in the short term
and no climate risk has been identified in this time horizon.
Consequently, there has been no material impact on the
financial reporting judgements and estimates applied in the
preparation of the FY22 Annual Report and Accounts. Please
see page 76 of the Annual Report and Accounts for further
detail on our climate change risk assessment.
NEW STANDARDS AND INTERPRETATIONS
No new standards, amendments or interpretations, effective
for the first time for the financial period beginning on or after
27 June 2021 have had a material impact on the financial
statements of the Group.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
185
Financial statements
Notes to the Consolidated
Financial Statements
For the 53 weeks ended 2 July 2022
1. Revenue
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 their journey often 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. The Executive Board reviews
internal management reports on a monthly basis and performance 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 24 to 25.
Management believes that these measures are the most relevant in evaluating the performance of the Group and for making
resource allocation decisions.
All material operations of the Group 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.
At the year end the company had £12.2m (2021: £11.8m) of sales orders placed that will be recognised in the Consolidated
Income Statement when the goods are despatched in the following financial year.
2. Operating costs
Selling and distribution costs
Administrative expenses
2022
53 weeks
£’m
469.4
122.3
591.7
2021
52 weeks
£’m
423.9
98.6
522.5
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3. Operating profit
Operating profit is stated after charging/(crediting) the following items:
Cost of inventories included in cost of sales
Amortisation of intangible assets
Depreciation of owned property, plant and equipment
Depreciation of right-of-use assets
Loss on disposal and impairment of property, plant and equipment and intangible assets
(Gains)/losses on disposal and impairment of right-of-use assets
Expense related to short-term leases
2022
53 weeks
£’m
765.3
6.2
24.3
48.6
0.3
(0.1)
0.6
2021
52 weeks
£’m
638.5
7.3
24.5
45.7
2.3
1.0
1.8
The cost of inventories included in cost of sales includes the impact of a net increase in the provision for obsolete inventory of
£4.2m (2021: £5.3m increase) of which £2.6m relates to Sunflex.
The analysis of the auditors’ remuneration is as follows:
Fees payable to the Group’s auditors for the audit of the Parent and consolidated annual financial
statements
Fees payable to the Group’s auditors and their associates for other services to the Group
• Audit of the Company’s subsidiaries pursuant to legislation
• Other assurance services (See Audit and Risk Committee Report on page 120 for further
information)
4. Employee numbers and costs
The average monthly number of people employed by the Group (including Directors) was:
Selling
Distribution
Administration
2022
53 weeks
Number
of heads
9,544
963
925
11,432
2022
53 weeks
Full time
equivalents
5,437
930
906
7,273
The aggregate remuneration of all employees (including Directors) comprises:
Wages and salaries (including termination benefits)
Social security costs
Share-based payment expense
Pension costs – defined contribution plans
2022
53 weeks
£’000
2021
52 weeks
£’000
46
256
42
29
225
40
2021
52 weeks
Number
of heads
9,039
829
704
10,572
2022
53 weeks
£’m
211.1
14.3
4.9
5.2
235.5
2021
52 weeks
Full time
equivalents
5,390
812
695
6,897
2021
52 weeks
£’m
190.8
13.0
7.5
4.5
215.8
In the prior year, payroll costs included £14.5m relating to the Board’s decision to repay claims made in 2020 under the UK
Government’s Coronavirus Job Retention Scheme.
Details of Directors’ remuneration, share options, long-term incentive schemes and pension entitlements are disclosed in the
Remuneration Report on pages 130 to 162 and in the Related Parties note 25 on page 206.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
187
Financial statements
Notes to the Consolidated
Financial Statements continued
For the 53 weeks ended 2 July 2022
5. 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
Interest on lease liabilities
Net financial expense
6. 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
Impact of change in tax rate
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 19.0% (2021: 19.0%)
Factors affecting the charge in the period:
Non-deductible expenses
Adjustments in respect of prior periods
Impact of change in tax rate
Tax charge
2022
53 weeks
£’m
2021
52 weeks
£’m
0.1
1.1
1.2
(0.9)
(0.4)
—
(4.8)
(6.1)
(4.9)
0.1
—
0.1
(0.8)
(0.2)
(2.4)
(5.3)
(8.7)
(8.6)
2022
53 weeks
£’m
2021
52 weeks
£’m
39.0
(0.2)
38.8
3.0
(0.2)
—
2.8
41.6
2022
53 weeks
£’m
212.8
40.4
1.6
(0.4)
—
41.6
32.7
(1.7)
31.0
(1.3)
—
(0.8)
(2.1)
28.9
2021
52 weeks
£’m
157.8
30.0
1.4
(1.7)
(0.8)
28.9
The taxation charge for the period as a percentage of profit before tax is 19.5% (2021: 18.3%).
The UK Government substantively enacted an increase in the corporation tax rate to 25.0% effective from 1 April 2023.
The deferred tax asset as at 2 July 2022 has been calculated based on the rate of 25.0% unless the asset/liability is expected
to be realised or settled before the rate increase in which case the rate of 19.0% has been used.
188 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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7. Dividends
The dividends set out in the table below relate to the 1 pence Ordinary Shares:
Interim dividend for the period ended 26 June 2021
Special dividend for the period ended 26 June 2021
Final dividend for the period ended 26 June 2021
Interim dividend for the period ended 2 July 2022
Special dividend for the period ended 2 July 2022
– paid 12.0 pence
– paid 65.0 pence
– paid 23.0 pence
– paid 14.0 pence
– paid 37.0 pence
2022
53 weeks
£’m
—
131.9
46.8
28.3
75.1
282.1
2021
52 weeks
£’m
24.3
—
—
—
—
24.3
The Board are proposing a final dividend of 26.0 pence per Ordinary Share for the period ended 2 July 2022 which equates to
£52.9m. Subject to shareholder approval at the AGM this will be paid on 5 December 2022 to shareholders on the register at the
close of business on 11 November 2022.
8. 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 21).
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 Group’s Ordinary Shares during the period.
Weighted average numbers of shares:
Weighted average number of shares in issue during the period
Impact of share options
Number of shares for diluted earnings per share
Profit for the period
Earnings per Ordinary Share – basic
Earnings per Ordinary Share – diluted
2022
53 weeks
‘000
202,722
2,135
204,857
2022
53 weeks
£’m
171.2
84.5p
83.6p
2021
52 weeks
‘000
202,445
2,445
204,890
2021
52 weeks
£’m
128.9
63.7p
62.9p
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
189
Financial statements
Notes to the Consolidated
Financial Statements continued
For the 53 weeks ended 2 July 2022
9. Intangible assets
Cost
At 28 June 2020
Additions
Disposals
At 26 June 2021
Additions
Acquisition through business combination
Disposals
At 2 July 2022
Accumulated amortisation
At 28 June 2020
Charge for the financial period
Disposals
Impairment
At 26 June 2021
Charge for the financial period
Disposals
At 2 July 2022
Net book value
At 28 June 2020
At 26 June 2021
At 2 July 2022
Software
development
and licences
£’m
Rights to
brands and
customer lists
£’m
51.7
0.6
(0.3)
52.0
0.9
—
(0.3)
52.6
29.0
7.3
(0.3)
1.2
37.2
6.2
(0.2)
43.2
22.7
14.8
9.4
11.0
—
—
11.0
—
0.5
—
11.5
11.0
—
—
—
11.0
—
—
11.0
—
—
0.5
Total
£’m
62.7
0.6
(0.3)
63.0
0.9
0.5
(0.3)
64.1
40.0
7.3
(0.3)
1.2
48.2
6.2
(0.2)
54.2
22.7
14.8
9.9
All amortisation is included within operating costs in the Consolidated Income Statement.
There was no trigger for impairment in the period. Last year’s impairment of £1.2m relates to tablet-based sales enabling
software that was impaired following the development and roll out of new functionality in this area.
Within software development and licences there were no additions (2021: nil) related to internally generated assets.
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10. Property, plant and equipment
Cost
At 28 June 2020
Additions
Disposals
At 26 June 2021
Transfer
Additions
Acquisition through business combination
Disposals
At 2 July 2022
Accumulated depreciation
At 28 June 2020
Charge for the financial period
Disposals
Impairment
At 26 June 2021
Transfer
Charge for the financial period
Disposals
At 2 July 2022
Net book value
At 28 June 2020
At 26 June 2021
At 2 July 2022
Freehold land
and buildings
£’m
Leasehold
improvements
£’m
Fixtures, fittings
and equipment
£’m
97.7
—
—
97.7
—
0.1
9.2
—
107.0
16.4
1.7
—
—
18.1
—
1.8
—
19.9
81.3
79.6
87.1
160.6
3.8
(6.7)
157.7
1.2
13.3
0.1
(8.3)
164.0
84.8
13.2
(6.2)
0.1
91.9
(0.5)
14.4
(8.1)
97.7
75.8
65.8
66.3
119.9
9.0
(4.7)
124.2
(1.2)
12.6
0.3
(3.7)
132.2
101.6
9.6
(4.3)
0.1
107.0
0.5
8.1
(3.7)
111.9
18.3
17.2
20.3
Total
£’m
378.2
12.8
(11.4)
379.6
—
26.0
9.6
(12.0)
403.2
202.8
24.5
(10.5)
0.2
217.0
—
24.3
(11.8)
229.5
175.4
162.6
173.7
All depreciation and impairment charges have been included within operating costs in the Consolidated Income Statement.
There was no trigger for impairment in the period. Last year’s impairment of £0.2m relates to store impairment. The recoverable
amount was determined as the value in use, applying a discount rate of 10.0% (pre-tax).
Similar asset categories have been amalgamated into leasehold improvements and fixtures, fittings and equipment in the
current year. The nature of this change is presentational under IAS 1.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
191
Financial statements
Notes to the Consolidated
Financial Statements continued
For the 53 weeks ended 2 July 2022
11. Leases
Right-of-use assets included in the Consolidated Statement of Financial Position at 2 July 2022 were as follows:
At the beginning of the period
Additions
Disposals
Impairment
Depreciation
At the end of the period
2022
Land and
buildings
£’m
254.7
30.9
(0.1)
—
(45.1)
240.4
2022
Motor vehicles,
plant and
equipment
£’m
7.3
4.4
(0.1)
—
(3.5)
8.1
2022
Total
£’m
262.0
35.3
(0.2)
—
(48.6)
248.5
Right-of-use additions include £3.1m of lease modifications (2021: £1.3m).
Lease liabilities included in the Consolidated Statement of Financial Position at 2 July 2022 were as follows:
At the beginning of the period
Additions
Disposals
Interest
Repayment of lease liabilities
At the end of the period
2022
Land and
buildings
£’m
(286.1)
(31.5)
—
(4.7)
52.2
(270.1)
2022
Motor vehicles,
plant and
equipment
£’m
(7.2)
(4.4)
0.1
(0.1)
3.6
(8.0)
2022
Total
£’m
(293.3)
(35.9)
0.1
(4.8)
55.8
(278.1)
2021
Total
£’m
283.3
25.5
(0.1)
(1.0)
(45.7)
262.0
2021
Total
£’m
(314.4)
(26.9)
0.1
(5.3)
53.2
(293.3)
The discount rate applied across all lease liabilities ranged between 0.9% and 2.8% (2021: 1.0% and 2.1%). The discount rate
reflects our incremental borrowing rate which we assess by considering the marginal rate on the Group’s RCF, the Bank of
England base rate, the yield on Government bonds and the term of the lease.
The maturity analysis of the lease liabilities is as follows:
Current
Non-current
2022
£’m
(52.8)
(225.3)
(278.1)
The remaining contractual maturities of the lease liabilities, which are gross and undiscounted, are as follows:
Less than one year
One to two years
Two to five years
Five to ten years
More than ten years
Total undiscounted lease liability
The average remaining lease term of our leasehold land and buildings is 5.2 years.
2022
£’m
(57.1)
(53.2)
(111.9)
(68.3)
(5.0)
(295.5)
2021
£’m
(49.0)
(244.3)
(293.3)
2021
£’m
(53.7)
(51.8)
(119.1)
(78.2)
(10.1)
(312.9)
192 DUNELM GROUP PLC
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11. Leases continued
The following amounts have been recognised in the Consolidated Income Statement:
Depreciation of right-of-use assets
Gain on disposal of right-of-use assets
Impairment of right-of-use assets
Interest expenses (included in financial expenses)
Expense relating to short-term leases
2022
53 weeks
Land and
buildings
£’m
2022
53 weeks
Motor vehicles,
plant and
equipment
£’m
2022
53 weeks
Total
£’m
2021
52 weeks
Total
£’m
45.1
(0.1)
—
4.7
0.5
3.5
—
—
0.1
0.1
48.6
(0.1)
—
4.8
0.6
45.7
—
1.0
5.3
1.8
There was no trigger for impairment in the current year. The prior year’s impairment of £1.0m relates to store impairment.
The recoverable amount has been determined as the value in use applying a discount rate of 10.0% (pre-tax).
The total cash outflow for leases during the financial period was £55.0m (2021: £59.3m).
12. Deferred tax assets/liabilities
Deferred tax is provided in full on temporary differences under the liability method using a taxation rate of 25.0% unless the
asset/liability is expected to be realised or settled before the corporation tax rate increase in 2023 in which case the rate of
19.0% has been used.
Deferred taxation assets and liabilities are attributable to the following:
Assets
Liabilities
Net assets/(liabilities)
Property, plant and equipment
Share-based payments
Hedging
Other temporary differences
Deferred tax recoverable/(payable)
after more than 12 months
Deferred tax recoverable/(payable)
within 12 months
2022
£’m
0.7
7.5
—
0.2
8.4
Assets
2022
£’m
1.4
7.2
8.6
2021
£’m
3.6
6.5
1.0
0.3
11.4
2021
£’m
4.6
6.8
11.4
2022
£’m
—
—
(4.3)
—
(4.3)
2021
£’m
—
—
—
—
—
2022
£’m
0.7
7.5
(4.3)
0.2
4.1
Liabilities
Net assets/(liabilities)
2022
£’m
(0.2)
(4.3)
(4.5)
2021
£’m
—
—
—
2022
£’m
1.2
2.9
4.1
2021
£’m
3.6
6.5
1.0
0.3
11.4
2021
£’m
4.6
6.8
11.4
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
193
Financial statements
Notes to the Consolidated
Financial Statements continued
For the 53 weeks ended 2 July 2022
12. Deferred tax assets/liabilities continued
The movement in the net deferred tax balance is as follows:
Property, plant and equipment
Share-based payments
Hedging
Other temporary differences
Property, plant and equipment
Share-based payments
Hedging
Other temporary differences
13. Inventories
Raw materials
Work in progress
Goods for resale
Balance at
28 June
2020
£’m
Recognised in
income
£’m
Recognised in
equity
£’m
2.5
2.2
(1.2)
0.7
4.2
Balance at
27 June
2021
£’m
3.6
6.5
1.0
0.3
11.4
1.1
1.4
—
(0.4)
2.1
—
2.9
2.2
—
5.1
Recognised in
income
£’m
Recognised in
equity
£’m
(2.9)
0.2
—
(0.1)
(2.8)
—
0.8
(5.3)
—
(4.5)
2022
£’m
1.7
1.6
219.7
223.0
Balance at
26 June
2021
£’m
3.6
6.5
1.0
0.3
11.4
Balance at
2 July
2022
£’m
0.7
7.5
(4.3)
0.2
4.1
2021
£’m
—
—
172.4
172.4
Goods for resale includes a net realisable value provision of £21.4m (2021: £17.2m). Write-downs of inventories to net realisable
value amounted to £20.1m (2021: £16.4m). These were recognised as an expense during the period and were included in cost
of sales in the Consolidated Income Statement. As at 2 July 2022, included within the above is £10m relating to Sunflex.
14. Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
2022
£’m
2.9
9.5
10.5
22.9
2021
£’m
0.9
4.8
6.1
11.8
All trade receivables are due within one year from the end of the reporting period.
No impairment was incurred on trade and other receivables during the period and the expected credit loss provision held at
period end is nil (2021: nil). No material amounts are overdue (2021: nil).
194 DUNELM GROUP PLC
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15. Cash and cash equivalents
Cash at bank and in hand
2022
£’m
30.2
2021
£’m
128.6
The Group deposits funds only with institutions that have a credit rating of ‘A’ and above and the term is less than three months.
16. Trade and other payables
Trade payables
Accruals and deferred income
Taxation and social security
Other payables
2022
£’m
98.3
86.8
34.0
4.1
2021
£’m
69.4
69.9
42.3
0.2
223.2
181.8
Other payables includes £3.1m payable for the acquisition of Sunflex (note 27).
17. Financial risk management
The Board of Directors has overall responsibility for the oversight of the Group’s risk management framework. A formal process
for reviewing and managing risk in the business is in place.
CREDIT RISK
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the Group’s deposits with banks and financial institutions as well as foreign
exchange hedging agreements with its banking counterparties. The Group only deals with creditworthy counterparties and
uses publicly available financial information to rate its counterparties, therefore 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 an ‘A’
credit rating. The credit limit for the syndicate banks is up to £60m. All other parties are limited to £25m.
The Group’s maximum exposure to credit risk is represented by the carrying amount of financial assets. No collateral is held
(2021: nil). At the period end the maximum exposure is detailed in the table below:
Current
Cash and cash equivalents
Trade and other receivables
Accrued income
Derivative financial instruments
Total current financial assets
Non-current
Derivative financial instruments
Total financial assets
2022
£’m
30.2
12.4
0.6
19.9
63.1
4.6
67.7
2021
£’m
128.6
5.7
0.3
0.4
135.0
0.3
135.3
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
195
Financial statements
Notes to the Consolidated
Financial Statements continued
For the 53 weeks ended 2 July 2022
17. Financial risk management continued
CREDIT RISK
Trade and other receivables include rebates due from suppliers recognised as a reduction to cost of sales in the period to which
they relate. 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 (ECL) 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 ECL due to the way the Group operates.
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 26 June 2021 and 2 July 2022 was determined to not be significant 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 the capital management section of this note.
All cash flows on financial liabilities for 2022 and 2021 are contractually due within one year with the exception of provisions,
bank loans, derivative financial liabilities and lease liabilities. The details of lease liabilities are shown in note 11.
Total borrowings of £54.0m (2021: nil) reflect the level of facility drawdown at the period end on the Group’s RCF.
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.
During the period, if SONIA interest rates had been 100 basis points higher with all other variables held constant, post-tax profit
would have been £0.1m lower (2021: nil impact).
FOREIGN CURRENCY RISK
All of the Group’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 30% (2021: 30%) of stock purchases in the
period ended 2 July 2022.
The Group uses various means to cover its exposure to US dollars including holding US dollar cash balances and taking out
forward foreign exchange contracts for the purchase of US dollars. All the Group’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. There is a low level of coverage beyond the 18-month horizon.
Cash flow hedges are in place to manage foreign exchange rate risk arising from forecast purchases denominated in US dollars.
At the Consolidated Statement of Financial Position date, the fair value of US dollar foreign exchange forward contracts held in
cash flow hedges was a £24.5m asset (2021: £5.2m liability) which relates to a commitment to purchase $369.0m (2021: $242.0m)
for a fixed sterling amount. A fair value gain of £32.4m (2021: £17.7m loss) was recognised in other comprehensive income and
no loss (2021: nil) was recognised on cash flow hedges during the period. In the period, a gain of £2.6m (2021: £5.9m 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 Consolidated Income Statement to offset future purchases occurring after the
Consolidated Statement of Financial Position date, the majority of which expire in the next 12 months.
The outstanding US dollar liabilities at the period end were $0.1m (2021: $0.1m).
196 DUNELM GROUP PLC
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17. Financial risk management continued
At the period end if GBP had strengthened by 10% against US dollar with all other variables held constant, post-tax profit would
have been £0.7m higher (2021: £1.5m higher) as a result of foreign exchange gains on translation of US dollar denominated
trade payables and cash and cash equivalents. Other components of equity would have been £2.5m higher (2021: £4.2m 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 US dollar with all other variables held constant, post-tax profit for the period would
have been £0.8m lower (2021: £1.2m lower) and other components of equity would have been £2.5m lower (2021: £6.3m higher).
The US dollar period end exchange rate applied in the above analysis is £1=$1.2087 (2021: £1=$1.3877).
CAPITAL MANAGEMENT
The Group considers equity plus debt as capital. There are no externally imposed capital requirements on the Group.
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 regularly monitors the level of capital in the Group to ensure that this can be achieved.
The Company has a syndicated RCF of £185m which is committed until 9 December 2025, which may be extended by a
maximum of a further two years at Dunelm Group plc’s request, subject to lender consent. There is also an optional accordion
facility of £75m. The terms of the RCF are consistent with normal practice and include covenants in respect of leverage (Group
net debt to be no greater than 2.5x Group EBITDA before exceptional items) and fixed charge cover (Group EBITDAR before
exceptional items to be no less than 1.75x Group fixed charges), both of which were met comfortably as at 2 July 2022 as shown
below. In addition, the Company maintains £10m of uncommitted overdraft facilities with one syndicate partner bank.
The gearing ratio and banking covenants were as follows:
Total borrowings (note 18)
Less: unamortised debt issue costs (note 18)
Less: cash and cash equivalents (note 15)
Net debt/(cash)
Total equity
Total capital
Gearing ratio
Operating profit
Add: Depreciation and amortisation of property, plant and equipment and intangible assets
(note 3)
Add: Loss on disposal and impairment of property, plant and equipment and intangible assets
(note 3)
Adjusted EBITDA*/EBITDA
Leverage ratio
Adjusted EBITDA*/EBITDA
Rent plus RoUA depreciation**/Rent
EBITDAR
Net interest (note 5)
Rent plus RoUA depreciation**/Rent
Fixed charges
Fixed charge cover
2022
53 weeks
£’m
54.0
(1.2)
(30.2)
22.6
178.3
200.9
2021
52 weeks
£’m
—
(0.2)
(128.6)
(128.8)
281.2
152.4
11.2%
(84.5%)
217.7
163.1
30.5
31.8
0.3
248.5
0.09
248.5
50.4
298.9
4.9
50.4
55.3
5.4
2.5
197.4
(0.65)
197.4
53.9
251.3
3.3
53.9
57.2
4.4
* Adjusted EBITDA for 2022 definitions is EBITDA excluding Right of Use Asset Depreciation.
** In the post-IFRS16 calculations, rent plus right-of-use asset depreciation is used as a proxy to pre-IFRS16 rent to keep the pre- and post-IFRS16 calculations as
comparable as possible.
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
197
Financial statements
Notes to the Consolidated
Financial Statements continued
For the 53 weeks ended 2 July 2022
17. Financial risk management continued
In 2022 the banking covenants are calculated on a post-IFRS16 basis, whereas in 2021 the calculation was on a pre-IFRS16
basis. The reason for the change is that the definitions of the covenants were updated in the RCF agreement that was signed in
December 2021 to be on a post-IFRS16 basis. If the 2021 banking covenants were to be calculated on a post-IFRS 16 basis then
the leverage ratio would be (0.64) and the fixed charge cover would be 4.2.
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.
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 hedging reserve.
EFFECTS OF HEDGE ACCOUNTING ON THE FINANCIAL POSITION AND PERFORMANCE
Foreign currency forwards
Carrying amount of asset/(liability)
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)
2022
£’m
24.5
280.4
2021
£’m
(5.2)
174.0
July 2022-
June 2024
1:1
32.4
(32.4)
July 2021-
May 2023
1:1
17.7
(17.7)
£1:US$1.3426 £1:US$1.3493
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.
198 DUNELM GROUP PLC
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17. Financial risk management continued
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.
FINANCIAL ASSETS/(LIABILITIES)
The carrying value of all financial assets and financial liabilities was materially equal to their fair value.
At 26 June 2021
Cash and cash equivalents
Trade and other receivables
Accrued income
Derivative financial instruments
Total financial assets
Trade and other payables
Accruals
Lease Liabilities
Bank loans
Provisions
Derivative financial instruments
Total financial liabilities
Net financial assets/(liabilities)
At 2 July 2022
Cash and cash equivalents
Trade and other receivables
Accrued income
Derivative financial instruments
Total financial assets
Trade and other payables
Accruals
Lease liabilities
Bank loans
Provisions
Derivative financial instruments
Total financial liabilities
Net financial assets/(liabilities)
Financial assets
at amortised
cost
£’m
Financial
liabilities at
amortised cost
£’m
Derivatives used
for hedging
£’m
128.6
5.7
0.3
—
134.6
—
—
—
—
—
—
—
—
—
—
—
—
(69.6)
(57.9)
(293.3)
—
(4.5)
—
(425.3)
134.6
(425.3)
—
—
—
0.7
0.7
—
—
—
—
—
(5.9)
(5.9)
(5.2)
Financial assets
at amortised
cost
£’m
Financial
liabilities at
amortised cost
£’m
Derivatives used
for hedging
£’m
30.2
12.4
0.6
—
43.2
—
—
—
—
—
—
—
43.2
—
—
—
—
—
(102.4)
(74.2)
(278.1)
(52.8)
(5.5)
—
(513.0)
(513.0)
—
—
—
24.5
24.5
—
—
—
—
—
—
—
24.5
Total
£’m
128.6
5.7
0.3
0.7
135.3
(69.6)
(57.9)
(293.3)
—
(4.5)
(5.9)
(431.2)
(295.9)
Total
£’m
30.2
12.4
0.6
24.5
67.7
(102.4)
(74.2)
(278.1)
(52.8)
(5.5)
—
(513.0)
(445.3)
DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
199
Financial statements
Notes to the Consolidated
Financial Statements continued
For the 53 weeks ended 2 July 2022
17. Financial risk management continued
The currency profile of the Group’s cash and cash equivalents is as follows:
Sterling
US dollar
Euro
18. Bank loans
Total borrowings
Less: unamortised debt issue costs1
2022
£’m
19.7
10.4
0.1
30.2
2022
£’m
54.0
(1.2)
52.8
2021
£’m
122.4
5.8
0.4
128.6
2021
£’m
—
(0.2)
(0.2)
1. Unamortised debt issue costs of £0.2m are included in other receivables as at 26 June 2021 as there was no debt at the period end.
Borrowings relate to the Group’s syndicated RCF, as described in note 17. 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 £10m.
The analysis below shows the reconciliation of net debt:
Net cash at 27 June 2021 and 28 June 2020
Net (decrease)/increase in cash and cash equivalents (excluding foreign exchange revaluations)
Effect of foreign exchange (note 5)
Repayments of Revolving Credit Facility
Drawdowns of Revolving Credit Facility
Loan transaction costs
Change in net debt resulting from cash flows
Amortisation of debt issue costs (note 5)
Movement in net debt
Net debt represented by
Cash and cash equivalents (note 15)
Non-current borrowings (note 18)
Net (debt)/cash including unamortised debt issue costs
Unamortised debt issue costs (note 18)
Net (debt)/cash at 2 July 2022 and 26 June 2021
2022
53 weeks
£’m
128.8
(99.5)
1.1
31.0
(85.0)
1.4
(151.0)
(0.4)
(151.4)
30.2
(54.0)
(23.8)
1.2
(22.6)
2021
52 weeks
£’m
45.4
41.0
(2.4)
45.0
—
—
83.6
(0.2)
83.4
128.6
—
128.6
0.2
128.8
200 DUNELM GROUP PLC
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19. Provisions
Property-related
Balance at
26 June 2021
£’m
Utilised in the
period
£’m
Created in the
period
£’m
Released in the
period
£’m
Balance at
2 July 2022
£’m
4.5
(0.1)
2.7
(1.6)
5.5
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.
20. Issued share capital
In issue at the start of the period
Issued during the period in respect of share option schemes
In issue at the end of the period
2022
2021
Number of
Ordinary Shares
of 1p each
Number of
Ordinary Shares
of 1p each
202,833,931 202,833,931
—
592,904
203,426,835 202,833,931
Ordinary shares of 1p each:
Authorised
Allotted, called up and fully paid
2022
Number of
shares
2021
£’m
Number of
shares
500,000,000
203,426,835
5.0 500,000,000
2.0 202,833,931
Proceeds received in relation to shares issued during the period were £0.1m (2021: £nil).
21. Treasury shares
Outstanding at the beginning of the period
Purchased during the period
Reissued during the period in respect of share option schemes
Outstanding at the end of the period
2022
2021
Number of
shares
160,319
2,500,000
(974,119)
1,686,200
£’m
1.4
28.3
(12.2)
17.5
Number of
shares
573,590
—
(413,271)
160,319
£’m
5.0
2.0
£’m
5.1
—
(3.7)
1.4
The Group acquired 2,500,000 (2021: nil) shares through purchases on the London Stock Exchange during the period for a total
value of £28.3m (2021: nil).
The Group reissued 974,119 (2021: 413,271) treasury shares during the period for a total value of £12.2m (2021: £3.7m).
Proceeds from the issue of treasury shares included in the Consolidated Statement of Cash Flows and Consolidated Statement
of Changes in Equity of £3.9m (2021: £1.8m) is the amount employees contributed.
The Group has the right to reissue the remaining treasury shares at a later date.
ANNUAL REPORT AND ACCOUNTS 2022 201
DUNELM GROUP PLC
Financial statements
Notes to the Consolidated
Financial Statements continued
For the 53 weeks ended 2 July 2022
22. Share-based payments
The Group operates a number of share-based payment schemes as follows:
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 diluted earnings per
share relative to RPI as well as continuing employment with the Group.
The Dunelm GSOP provides options over shares, exercisable between three and ten years following their grant, to be allocated
to Dunelm (Soft Furnishings) Ltd employees at the discretion of the Remuneration Committee. No options were granted to any
Directors or changes made to existing entitlements in the year under review. There are no cash-settlement alternatives and they
are therefore accounted for under IFRS 2 as equity-settled awards. Option prices are set at the prevailing market price at the
time of grant. This is a legacy share option scheme and the last grants under this scheme were made in October 2016.
The following table summarises the movement in Dunelm GSOP options during the year:
GSOP
Outstanding at beginning of year
Exercised
Outstanding at end of year
Exercisable at end of year
2022
2021
No. of options
Weighted
average exercise
price (p)
No. of options
Weighted
average exercise
price (p)
3,731
(3,731)
—
—
872.96
(872.96)
—
—
3,731
—
3,731
3,731
872.96
—
872.96
872.96
Exercisable at end of year refers to all share options not exercised which have passed their vesting date, but not yet reached
their expiry date.
The weighted average remaining contractual life of these options is nil years (2021: 2.3 years).
DUNELM GROUP SAVINGS RELATED SHARE OPTION PLAN (SHARESAVE)
The Dunelm Group plc Savings Related Share Option Plan (Sharesave) scheme is open to all colleagues with eligible length
of service. Invitations to participate in the scheme are issued annually and the scheme is ‘approved’ under HMRC rules. The
current maximum monthly savings for the schemes detailed below is £500. Options are granted at the prevailing market rate
less a discount of 20%. Options may be exercised under the scheme within six months of the completion of each three-year
savings contract (from the grant date). There is provision for early exercise in certain circumstances such as death, disability,
redundancy, and retirement. Sharesave options are also accounted for as equity-settled awards under IFRS 2.
The following table summarises the movement in Dunelm Group plc Sharesave options during the year:
Sharesave Plans
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
2022
2021
No. of options
1,571,890
632,092
(807,250)
(214,220)
1,182,512
Weighted
average exercise
price (p)
651.20
1,046.00
483.06
949.37
No. of options
1,773,317
316,251
(310,203)
(207,475)
923.00
1,571,890
31,605
479.00
28,461
Weighted
average exercise
price (p)
549.95
1,167.00
585.64
670.00
651.20
602.00
Exercisable at end of year refers to all share options not exercised which have passed their vesting date, but not yet reached
their expiry date. The figure of 31,605 options (2021: 28,461 options) excludes the provisions for early exercise explained above.
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DUNELM GROUP SAVINGS RELATED SHARE OPTION PLAN (SHARESAVE)
Options outstanding at 2 July 2022 are exercisable at prices ranging between 479.00p and 1,167.00p (2021: 479.00p and
1,167.00p) and have a weighted average remaining contractual life of 2.1 years (2021: 1.6 years), as analysed in the table below:
Sharesave Plans
Exercise price (pence):
479.00
602.00
654.00
1046.00
1167.00
2022
2021
Weighted
average
remaining
contractual life
(years)
—
—
1.0
3.0
2.0
2.1
No. of options
45,502
—
370,906
553,288
212,816
1,182,512
No. of options
842,982
28,461
418,562
—
281,885
1,571,890
Weighted
average
remaining
contractual life
(years)
1.0
—
2.0
—
3.0
1.6
LONG-TERM INCENTIVE PLAN (LTIP)
As explained in the Remuneration Report, the Group operates an equity-settled LTIP scheme for executive directors and other
senior colleagues. Performance conditions for the LTIP awards are detailed in the Remuneration Report. LTIP options are also
accounted for as equity-settled awards under IFRS 2.
The following table summarises the movements in nil cost LTIP awards during the year:
LTIP Awards
Outstanding at beginning of year
Granted
Dividend equivalent awarded in the year
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
2022
2021
No. of options
No. of options
1,733,531
515,226
17,866
(497,830)
(303,126)
1,741,497
424,430
144,686
(95,696)
(481,386)
1,465,667
1,733,531
17,082
5,795
Exercisable at end of year refers to all share options not exercised which have passed their vesting date, but not yet reached
their expiry date.
The weighted average remaining contractual life of these options is 8.0 years (2021: 8.2 years).
ANNUAL REPORT AND ACCOUNTS 2022 203
DUNELM GROUP PLC
Financial statements
Notes to the Consolidated
Financial Statements continued
For the 53 weeks ended 2 July 2022
22. Share-based payments continued
RESTRICTED STOCK AWARD (RSA)
These awards are granted to particular individuals and are dependent on continuing employment. There are no performance
conditions attached to these awards. RSA options are also accounted for as equity-settled awards under IFRS 2.
The following table summarises the movements in nil cost RSA options during the year:
Restricted Stock Awards
Outstanding at beginning of year
Granted
Dividend equivalent awarded in the year
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
2022
2021
No. of options
No. of options
68,103
75,940
2,765
(10,308)
(12,956)
123,544
2,785
34,200
44,479
4,932
(8,944)
(6,564)
68,103
1,456
Exercisable at end of year refers to all share options not exercised which have passed their vesting date, but not yet reached
their expiry date.
The weighted average remaining contractual life of these options is 8.8 years (2021: 8.7 years).
BONUS DEFERRED SHARES AWARD
The Bonus Deferred Shares Award provides options over shares in Dunelm Group plc for colleagues of the Group as a
discretionary bonus. This is an equity-settled share option scheme and there are no performance conditions attached to these
awards, they are only dependent on continued employment. Under this arrangement, colleagues are awarded a number of
options which is based on the cash value of the earned bonus award, determined by their achievement of a mixture of Company
and individual performance metrics, divided by a share price value of 1,189.00p which was approved at the November 2020
AGM. The deferred shares awarded vest in September 2021 and/or September 2022, depending on colleague level.
The Bonus Deferred Shares Award is structured as nil cost options and the following table summarises their movement during
the year:
Bonus Deferred Shares Award
Outstanding at beginning of year
Granted
Dividend equivalent awarded in the year
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
The weighted average remaining contractual life of these options is 0.2 years (2021: 0.7 years).
2022
2021
No. of options
No. of options
494,420
—
9,608
(252,488)
(93,142)
158,398
—
—
509,927
9,889
—
(25,396)
494,420
—
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FAIR VALUE CALCULATIONS
The fair values of all share options granted are calculated at the date of grant using a Black-Scholes option pricing model.
Expected volatility is determined by calculating the historical volatility of the Group’s share price over a period equivalent to the
expected life of an option which is aligned to its vesting period.
The following tables list the inputs to the model used for options granted in the periods ended 2 July 2022 and 26 June 2021
based on information at the date of grant:
Sharesave Plans
Share price at date of grant
Exercise price
Volatility
Expected life
Risk free rate
Dividend yield
Fair value per option
LTIP Awards
Share price at date of grant
Exercise price
Volatility
Expected life
Risk free rate
Dividend yield
Fair value per option
Bonus Deferred Shares
Share price at date of grant
Exercise price
Volatility
Expected life
Risk free rate
Dividend yield
Fair value per option
Restricted Stock Awards
Share price at date of grant
Exercise price
Volatility
Expected life
Risk free rate
Dividend yield
Fair value per option
2022
2021
1,444.23p
1,046.00p
43.54%
3 years
0.63%
2.90%
1,262.00p
1,167.00p
44.11%
3 years
(0.10%)
2.66%
424.30p
332.40p
2022
2021
1,307.00p
0.00p
43.65%
3 years
0.84%
2.90%
1,186.00p
0.00p
43.83%
3 years
0.01%
2.66%
977.40p
909.00p
2022
2021
1,186.00p
n/a
0.00p
n/a
n/a
43.83%
n/a 15-39 months
0.01%
n/a
2.66%
n/a
1,089.30p-
1,148.80p
n/a
2022
2021
1,307.00p
0.00p
46.25%-
43.65%
2-3 years
0.84%
2.90%
1,186.00p
0.00p
43.83%
3 years
0.01%
2.66%
977.40p
909.00p
ANNUAL REPORT AND ACCOUNTS 2022 205
DUNELM GROUP PLC
Financial statements
Notes to the Consolidated
Financial Statements continued
For the 53 weeks ended 2 July 2022
23. Commitments
As at 2 July 2022, the Group had entered into capital contracts amounting to £4.7m (2021: £13.7m). Capital contracts as at 2 July
2022 include commitments for new stores and refits and last year also included a furniture warehouse and a new e-commerce
warehouse.
24. Contingent liabilities
The Group had no contingent liabilities at the period end date (2021: none).
25. Related parties
IDENTITY OF RELATED PARTIES
The Group has related party relationships with its subsidiaries and with its Directors. Transactions between the Group 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 and the Executive Board.
Directors of the Company and their close relatives control 42.9% (2021: 43.0%) of the voting shares of the Company.
Disclosures relating to remuneration of Directors are set out in the Remuneration Report on pages 130 to 162. The remuneration
of the key management personnel is set out below:
Wages and salaries
Short term employee benefits
Post-employment benefits
Share-based payments
2022
53 weeks
£’m
2021
52 weeks
£’m
3.5
4.2
0.1
2.9
10.7
3.0
0.7
0.2
3.2
7.1
Short term employee benefits include a cash bonus in 2022. In the prior year, the 2021 bonus awards to key management
personnel were payable in deferred shares. As such, under IFRS 2, this expense was accounted for under share-based
payments.
The amount of gains made by directors on the exercise of share options are disclosed in the Remuneration Report on page 154.
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.
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26. Ultimate controlling party
The Directors consider that there is no ultimate controlling party of Dunelm Group plc.
27. Business combination
On 3 May 2022, the Group acquired the trade and assets of Sunflex, a division of Hunter Douglas (UK) Limited for a cash
consideration of £20.8m of which £17.7m had been paid as at 2 July 2022 and £3.1m was recognised within other payables.
Sunflex was a key supplier whose principal activity is that of manufacturing and supplying specialist curtain tracks, poles and
blinds. It is this capability and specialist knowledge that will strengthen and broaden our product range.
Since the date of acquisition, the results of Sunflex have been included within the group consolidation. The operations do not
qualify as a separate segment and results are not disclosed separately as they do not materially impact the Group’s result.
If the acquisition had occurred on 26 June 2021, the revenue and profit generated would not be material to the consolidated
position of the Group due to Sunflex previously being a supplier. As at 3 May 2022, £2.0m trade payable were due by Dunelm
to Sunflex.
The purchase has been accounted for as a business combination. The fair value amounts recognised in respect of the
identifiable assets acquired and liabilities assumed are as set out in the table below:
Intangible assets – brands
Freehold buildings
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Accruals and deferred income
Total identifiable assets/(liabilities)
Cash consideration
Goodwill
28. Subsequent events
There are no reportable subsequent events for Dunelm Group plc.
3 May 2022
£’m
0.5
9.2
0.4
10.3
3.8
(2.5)
(0.9)
20.8
(20.8)
—
ANNUAL REPORT AND ACCOUNTS 2022 207
DUNELM GROUP PLC
Financial statements
Parent Company Statement of Financial Position
As at 2 July 2022
Non–current assets
Investments in subsidiary undertakings
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 £150.5m (2021: £24.5m).
Note
4
5
6
7
11
2 July
2022
£’m
64.8
1.0
65.8
98.3
98.3
164.1
(0.3)
(0.3)
(0.3)
163.8
2.0
1.7
19.6
43.2
97.3
163.8
26 June
2021
£’m
60.7
1.8
62.5
478.9
478.9
541.4
(226.6)
(226.6)
(226.6)
314.8
2.0
1.6
15.5
43.2
252.5
314.8
The financial statements on pages 208 to 216 were approved by the Board of Directors on 14 September 2022 and were signed
on its behalf by:
Karen Witts
Director
Company number 04708277
14 September 2022
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Parent Company Statement of Cash Flows
For the 53 weeks ended 2 July 2022
Cash flows from operating activities
Profit before taxation
Dividend income
Net financial income
Operating profit
Share-based payments expense
Operating cash flows before movements in working capital
Decrease in trade and other receivables
Decrease in trade and other payables
Net movement in working capital
Net cash generated from operating activities
Cash flows from investing activities
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of treasury shares and ordinary shares
Purchase of treasury shares
Dividend received
Dividend paid
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
2022
53 weeks
£’m
Note
151.3
(150.2)
(3.1)
(2.0)
0.7
(1.3)
380.7
(226.2)
154.5
153.2
3.1
3.1
3.9
(28.3)
150.2
(282.1)
(156.3)
0.0
0.0
0.0
15
There were no cash movements in 2021, hence no comparatives have been included in the Statement of Cash Flows above.
ANNUAL REPORT AND ACCOUNTS 2022 209
DUNELM GROUP PLC
Financial statements
Parent Company Statement of Changes in Equity
For the 53 weeks ended 2 July 2022
As at 28 June 2020
Profit for the period
Total comprehensive income for the period
Proceeds from issue of treasury shares
Share-based payments
Deferred tax on share-based payments
Dividends
Total transactions with owners, recorded
directly in equity
As at 26 June 2021
Profit for the period
Total comprehensive income for the period
Proceeds from issue of shares
Purchase of treasury shares
Proceeds from issue of treasury shares
Share-based payments
Deferred tax on share-based payments
Current corporation tax on share options exercised
Dividends
Total transactions with owners, recorded
directly in equity
As at 2 July 2022
Note
12
13
5
3
12
12
13
5
8
3
Issued
share
capital
£’m
2.0
—
—
—
—
—
—
—
2.0
—
—
—
—
—
—
—
—
—
—
2.0
Share
premium
account
£’m
Non-
distributable
reserves
£’m
Capital
redemption
reserve
£’m
Total equity
attributable
to equity
holders of
the Parent
£’m
304.5
24.5
24.5
1.8
7.5
0.8
(24.3)
(14.2)
314.8
150.5
150.5
0.1
(28.3)
3.9
4.8
(0.5)
0.6
(282.1)
Retained
earnings
£’m
247.7
24.5
24.5
1.8
2.0
0.8
(24.3)
(19.7)
252.5
150.5
150.5
—
(28.3)
3.9
0.7
(0.5)
0.6
(282.1)
(305.7)
(301.5)
43.2
—
—
—
—
—
—
—
43.2
—
—
—
—
—
—
—
—
—
—
43.2
97.3
163.8
1.6
—
—
—
—
—
—
—
1.6
—
—
0.1
—
—
—
—
—
—
0.1
1.7
10.0
—
—
—
5.5
—
—
5.5
15.5
—
—
—
—
—
4.1
—
—
—
4.1
19.6
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 its subsidiaries.
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Parent Company Accounting Policies
For the 53 weeks ended 2 July 2022
GENERAL INFORMATION
Dunelm Group plc (the ‘Company’) 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
These financial statements have been prepared in accordance
with International Accounting standards in conformity with
the requirements of the Companies Act 2006 (‘IFRS’) and
the applicable legal requirements of the Companies Act
2006. In addition to complying with International Accounting
standards in conformity with the requirements of the
Companies Act 2006, the consolidated financial statements
also comply with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union. These financial statements are
presented on pages 208 to 216.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in
these financial statements.
The annual financial statements are prepared under the
historical cost convention. The financial statements are
prepared in pounds sterling, rounded to the nearest 0.1
million.
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.
Additional considerations relating to the potential downturn
in the homewares market on the going concern assumptions
are set out in the Group’s Financial Statements on page 180.
SHARE-BASED PAYMENTS
Employees of the Company have been granted options
for two equity-settled, share-based compensation plans,
under which the entity receives services from employees
as consideration for equity instruments (options) of the
Company. The fair value of the employee services received
in exchange for the grant of the options is recognised as an
expense. The total amount to be expensed is determined by
reference to the fair value of the options granted:
• Including any market performance conditions (for example,
an entity’s share price);
• Excluding the impact of any service and non-market
performance vesting conditions (for example, profitability,
sales growth targets and remaining an employee of the
entity over a specified time period); and
• Including the impact of any non-vesting conditions (for
example, the requirement for employees to save).
Non-market performance and service conditions are
included in assumptions about the number of options that
are expected to vest. The total expense is recognised over
the vesting period, which is the period over which all of the
specified vesting conditions are to be satisfied.
In addition, in some circumstances employees may provide
services in advance of the grant date and therefore the
grant date fair value is estimated for the purposes of
recognising the expense during the period between service
commencement period and grant date.
At the end of each reporting period, the Company 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 newly issued 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 are considered an integral part
of the grant itself, and the charge will be treated as a cash-
settled transaction.
ANNUAL REPORT AND ACCOUNTS 2022 211
DUNELM GROUP PLC
Financial statements
Notes to the Parent Company
Financial Statements
For the 53 weeks ended 2 July 2022
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 Statement of Financial Position
date, together with any adjustment to tax payable in respect
of previous periods.
Deferred tax provides 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 Statement of Financial Position 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.
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.
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.
NEW STANDARDS AND INTERPRETATIONS
No new standards, amendments or interpretations, effective
for the first time for the financial period beginning on or after
27 June 2021 have had a material impact on the financial
statements of the Group.
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.
There are no significant estimates or judgements in the
Company Financial Statements.
212 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
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1. Income Statement
The Company made a profit after tax of £150.5m (2021: £24.6m). 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.
Disclosures relating to the fees paid to the Company’s auditors are set out in note 3 in the Group’s financial statements on
page 187.
2. Employee costs
The Company’s employees are 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 130 to 162. Share-based payments details are
given in note 13 on page 216.
3. Dividends and special distributions to shareholders
Disclosures relating to dividends and special distributions to shareholders are set out in note 7 in the Group’s financial
statements on page 189.
4. Investments in subsidiary undertakings
Shares in subsidiary undertakings:
As at 28 June 2020
Share-based payments
As at 26 June 2021
Share-based payments
As at 2 July 2022
£’m
55.2
5.5
60.7
4.1
64.8
The share-based payment adjustment to investments reflects share option awards given by the Parent Company to employees
of its subsidiaries.
The following were subsidiaries as at 2 July 2022:
Subsidiary
Proportion of ordinary
shares held
Nature of business
Dunelm Limited
Dunelm (Soft Furnishings) Ltd*
Dunelm Estates Limited*
Zoncolan Limited*
Fogarty Holdings Limited*
Globe Online Limited*
Dunelm (Soft Furnishings) Londonderry Ltd*
100%
100%
100%
100%
100%
100%
100%
* Share capital held by subsidiary undertaking.
Holding company
Retailer of soft furnishings
Dormant company
Dormant company
Non-trading company
Dormant company
Non-trading company
Dunelm Group plc, the Parent Company, and its subsidiaries (excluding Dunelm (Soft Furnishings) Londonderry Ltd) are
incorporated and domiciled in the UK. The registered office is Watermead Business Park, Syston, Leicestershire, England, LE7 1AD.
The registered address for Dunelm (Soft Furnishings) Londonderry Ltd is Faustina Retail Park, 35 Buncrana Road, Londonderry,
Northern Ireland, BT48 8QN.
During the year, the subsidiary Achica Brand Management Limited (a company registered in Cyprus) was liquidated and
is therefore no longer included in the Company’s investments. The Company was disposed of at nil gain, nil loss.
ANNUAL REPORT AND ACCOUNTS 2022 213
DUNELM GROUP PLC
Financial statements
Notes to the Parent Company
Financial Statements continued
For the 53 weeks ended 2 July 2022
5. Deferred tax assets
Employee benefits
The movement in deferred tax assets is as follows:
Employee benefits
Employee benefits
6. Trade and other receivables
Amounts owed by group undertakings
Assets
2022
£’m
1.0
2021
£’m
1.8
Balance at
28 June 2020
£’m
Recognised
in income
£’m
Recognised
in equity
£’m
Balance at
26 June 2021
£’m
0.6
0.4
0.8
1.8
Balance at
27 June 2021
£’m
Recognised
in income
£’m
Recognised
in equity
£’m
Balance at
2 July 2022
£’m
1.8
(0.3)
(0.5)
1.0
2022
£’m
98.3
2021
£’m
478.9
Amounts owed by subsidiary undertakings are repayable on demand. Interest is charged monthly on all intercompany balances
at an annual rate of 2.0%. There is no security on these balances.
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.
7. Trade and other payables
Amounts owed to group undertakings
Other taxation and social security
2022
£’m
—
0.3
0.3
2021
£’m
225.5
1.1
226.6
Amounts owed to subsidiary undertakings are repayable on demand. Interest is charged monthly on all intercompany balances
at an annual rate of 2.0%. There is no security on these balances.
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8. Taxation
Current taxation
UK corporation tax charge for the period
Deferred taxation
Origination of temporary differences
Total tax credit
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 19.0% (2020: 19.0%)
Factors affecting the charge in the period:
Income not subject to tax
Group relief
Tax credit
2022
53 weeks
£’m
2021
52 weeks
£’m
0.6
0.6
0.2
0.8
2022
53 weeks
£’m
151.3
28.7
(28.5)
0.6
0.8
—
—
(0.4)
(0.4)
2021
52 weeks
£’m
24.5
4.7
(4.7)
(0.4)
(0.4)
The UK Government substantively enacted an increase in the corporation tax rate to 25% effective from 1 April 2023. The
deferred tax asset as at 2 July 2022 has been calculated based on the rate of 25% unless the asset/liability is expected to be
realised or settled before the rate increase in which case the rate of 19% has been used.
9. Interest bearing loans and borrowings
The Company’s only interest bearing borrowings relate to intercompany loans which have interest charges of 2% and are not
affected by changes in SONIA.
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
Disclosures relating to issued share capital are set out in note 20 in the Group’s financial statements on page 201.
12. Treasury shares
Disclosures relating to treasury shares are set out in note 21 in the Group’s financial statements on page 201.
ANNUAL REPORT AND ACCOUNTS 2022 215
DUNELM GROUP PLC
Financial statements
Notes to the Parent Company
Financial Statements continued
For the 53 weeks ended 2 July 2022
13. Share-based payments
The Company operates the following share-based payment schemes for the CEO and CFO:
A. LONG-TERM INCENTIVE PLAN (LTIP)
As explained in the Remuneration Report, the Company operates an equity-settled LTIP scheme. Performance conditions for the
LTIP awards are detailed in the Remuneration Report. LTIP options are also accounted for as equity-settled awards under IFRS 2.
B. BONUS DEFERRED SHARES AWARDS
The Bonus Deferred Shares Awards provides options over shares in Dunelm Group plc for participants as a discretionary bonus.
This is an equity-settled share option scheme and there are no performance conditions attached to these awards, they are
only dependent on continued employment. Under this arrangement, participants are awarded a number of options which is
based on the cash value of the earned bonus award – determined by their achievement of a mixture of Company and individual
performance metrics – divided by a share price value of 1,189.00p which was approved at the November 2020 AGM. The
deferred shares awarded vest in September 2021 and September 2022.
14. Contingent liabilities
The Company had no contingent liabilities at the period end date (2021: none).
15. Related parties
Transactions between the Company and its subsidiaries were as follows:
Dividends received
Net interest receivable
Amounts owed by Group undertakings
Amounts due to Group undertakings
2022
53 weeks
£’m
150.2
3.1
153.3
98.3
—
98.3
2021
52 weeks
£’m
24.3
5.0
29.3
478.9
(225.5)
253.4
KEY MANAGEMENT PERSONNEL
All employees of the Company are key management personnel.
Directors of the Company and their close relatives control 42.9% (2021: 43.0%) of the voting shares of the Company.
Wages and salaries
Short term employee benefits
Post-employment benefits
Share-based payments
2022
53 weeks
£’m
2021
52 weeks
£’m
1.6
1.8
0.0
0.9
4.3
1.5
0.3
0.0
1.9
3.7
The amount of gains made by directors on the exercise of share options are disclosed in the Renumeration Report on page 154.
16. Subsequent events
There are no reportable subsequent events for Dunelm Group plc.
216 DUNELM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2022
Other information
Advisers and contacts
Corporate Brokers
Financial Advisers
Legal Advisers
Independent Auditors
Principal Bankers
Barclays Bank plc
5 The North Colonnade
London E14 4BB
Tel: 020 7623 2323
UBS Investment Bank
5 Broadgate
London EC2M 2QS
Tel: 020 7567 8000
Allen & Overy LLP
One Bishops Square
London E1 6AD
Tel: 020 3088 0000
PricewaterhouseCoopers LLP
One Chamberlain Square
Birmingham B3 3AX
Tel: 0121 265 5000
Barclays Bank plc
Midlands Corporate Banking
PO Box 333
15 Colmore Row
Birmingham B3 2BH
Tel: 0345 734 5345
Registrars
Peel Hunt LLP
100 Liverpool Street
London EC2M 2AT
Tel: 020 7418 8900
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Tel: 0371 384 20301
Financial Public Relations MHP Communications
Registered Office
Investor Relations
60 Great Portland Street
London W1W 7RT
Tel: 020 3128 8100
Support Centre
Watermead Business Park
Syston
Leicestershire LE7 1AD
Company Registration No:
4708277
corporate.dunelm.com
Tel: 0116 264 4400
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.
Designed and produced by Instinctif Partners, www.creative.instinctif.com
This report is printed on Revive 100 Silk paper certified in accordance with the FSC® (Forest
Stewardship Council®) and is recyclable and acid-free.
Pureprint Ltd is FSC certified and ISO 14001 certified showing that it is committed to all round
excellence and improving environmental performance is an important part of this strategy.
Pureprint Ltd aims to reduce at source the effect its operations have on the environment and is
committed to continual improvement, prevention of pollution and compliance with any legislation
or industry standards.
Pureprint Ltd is a Carbon/Neutral® Printing Company.
This is to certify that by using Carbon Balanced Paper for the Dunelm Group
Annual Report, Dunelm has balanced through World Land Trust the equivalent
of 268kg of carbon dioxide. This support will enable World Trust to protect
51m2 of critically threatened tropical forest. Issued on 23/09/2022 –
Certificate number CBP014862. Presented by Denmaur Paper Media.
CBP014862
ANNUAL REPORT AND ACCOUNTS 2022 217
DUNELM GROUP PLC
Tel: 0116 264 4400
Email: investorrelations@dunelm.com
corporate.dunelm.com
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