Howden Joinery Group Annual Report 2014

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FY2014 Annual Report · Howden Joinery Group

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They want the blue back-
board now instead
of the grey, Joe

No problem, Steve, we’ve got
the whole lot here

Annual Report and Accounts 2014

Ok, Dave, we’ll sort
it out for you right away

Great, Bill, that means I can
finish the job this week

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The financial statements

Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Notes to the consolidated financial statements
Company balance sheet
Notes to the Company balance sheet
Independent auditor’s report to the members of Howden Joinery Group Plc
Parent company and principal subsidiary undertakings
Five year record
Shareholder ranges
Advisors and committees
Corporate timetable

68
69
70
71
72
73
115
116
120
124
125
126
127
128

The strategic report, directors’ report and governance statementsThe strategic reportBusiness overview 01 Chairman’s statement 08 Chief Executive’s statement 10 Review of operations and finance 14 Principal risks and uncertainties 20 Corporate social responsibility (CSR) report 22Directors’ reportBoard of directors 28 Directors’ report 30Governance statementsDirectors’ remuneration report 32 Corporate governance report 49Report of the Audit Committee 55 Report of the Nominations Committee 61Statements of the directors in connection with this Annual Report and Accounts 66REVENUE (UK)

OPERATING PROFIT
(before exceptional items)

£1,075.5M

£189.8M

(2013: £940.7m)

(2013: £140.7m)

01
01

YEAR END CASH

£217.7M

(2013: £140.5m)

FULL YEAR
DIVIDEND
8.4P PER SHARE

(2013: 5.5p)

Gross margin further improved to 63.7% (2013: 61.7%)

Strong cash flow enabling substantial increase in dividend and £70m
share purchase programme

Basic earnings per share increased from 15.3p to 24.6p

30 new depots opened in 2014, bringing total to 589

18 new kitchens introduced, further enhancing our product offering

Significant increase in capital expenditure announced (c.£60m p.a. over the next three
years) to support future growth

Further progress with our 11 trade depots in France

Howden Joinery Group Plc Annual Report & Accounts 2014What we do

We supply from local stock nationwide the small builder’s
ever-changing routine, integrated kitchen and joinery
requirements, assuring best local price, no-call-back
quality and confidential trade terms.

We sold 3.8 million cabinets, 2.3 million joinery doors, over 2 million

square feet of flooring, 870,000 worktops and breakfast bars.

We opened 30 depots in the UK, bringing the total number of depots

in operation to 589.

We operated over 330,000 active credit accounts for our builder

customers, an increase of over 40,000 compared to 2013.

We employed over 1,100 experienced kitchen designers who carried

out over 290,000 kitchen surveys.

We occupied 1 million square feet of factory space in two

factories and 1.5 million square feet of warehousing in our

main distribution centre.

We launched 18 new kitchen designs together with new products

in every category including appliances, worktops, sinks, doors,

flooring and accessories.

We made significant progress with our 11 trade depots in France

and started testing new depot formats in France and Belgium.

We had 7.5 million visits to our website and the number of movie

views on our YouTube channel rose to over 700,000.

Howdens was founded in 1995. ln its first year of operation
it had just 14 depots and sales of £1m. Today, Howden Joinery
Group is the UK’s leading trade supplier of kitchens, with
sales of over £1bn.

Howden Joinery Group Plc Annual Report & Accounts 2014

What Howdens means

Howdens employs over 7,000 people in full-time jobs. 5,300 of
them work in our local depots across the country. A further 490
people work in our manufacturing sites in the North of England,
in which we have invested over £24m in the last three years.

Howdens employed 280 modern apprentices (145 of whom were

subsequently offered full-time employment) and 40 trainee designers.

In partnership with the CITB (the training body for the construction

industry) we funded the Howden Joinery Bursary for 40 apprentice

joiners, helping young people to learn valuable joinery skills.

We ranked No.12 in the Sunday Times Best Big Companies To Work

For list, and No.3 in the Fair Deal category, in which employees rate

the business according to whether they feel fairly compensated for

what they do.

Howdens was responsible for the pensions of over 15,800 people.

We celebrated our 10th year of partnership with Leonard Cheshire

Disability, to whom we have donated 50 inclusive kitchens that can

be used by people of all abilities. We help to fund LCD’s flagship

volunteering programme and our staff regularly take part in

fundraising challenges to support LCD’s work.

During one week in October, we raised over £60,000 (with donations

from staff, customers and the company) for 45 homeless charities

across the UK.

Our employees were responsible for over 3,000 donations to local

activities and associations amounting to a total of nearly £1.5 million.
As well as cash donations and fundraising initiatives, joinery and

kitchen equipment was given and installed in local schools, village

halls, care homes, youth groups and sports clubs.

Howden Joinery Group Plc Annual Report & Accounts 2014

Life in the kitchen

Seen the finish
on this?

Yeah, going to
look good

Soup bowls in
here, everyone

Three more
boxes to come

Stop teasing him
and give me a
hand, will you?

That’s like,
so random

Easy to fit, looks good, doesn’t break

You won’t be on
anything unless
you clear up this
mess!

Hey, looks like
we’re on…

Just give it to me,
Mum, that’ll do

When’s
your train?

Happy birthday,
Katie

I hope they
leave some cake
for me…

The kitchen has to work, every day

Howden Joinery Group Plc Annual Report & Accounts 2014Howdens is about the lives we lead, the encounters we have and the kitchens we all use08

Chairman’s statement

OVERVIEW
2014 was a notable year for Howdens, and
one in which we made significant progress
on a number of fronts. A milestone was
reached with sales of over £1 billion. Gross
margin continued to improve and strong
cash generation resulted in the further
strengthening of our balance sheet. We
have identified more opportunities to take
Howdens’ business further forward, and
we are well placed so to do. Over the course
of the year we took important steps to
develop the organisation, and its talent,
that will allow us to make the most of
these significant opportunities.

STRATEGIC PROGRESS
During 2014 we increased our focus on
improving the performance of our depots and
of our supply operations through mobilising
our managers and their teams and engaging
them in our shared objective – to build a
business that we can all be proud of that will
continue to deliver value to all concerned for
many years to come.

Howdens is now operating on a very large
scale in a world that grows more complex every
day. Managing this combination of scale and
complexity successfully is our primary task.

We have developed a strategic plan for
Howdens to 2020 and beyond. This plan
envisages the further development of our UK
operations through continuing improvements
in the performance of existing depots and
significant further expansion of our depot
network to take advantage of new opportunities
beyond those originally envisaged.

It follows that it is a priority to make sure that
nothing interrupts the continuing availability of
stock to our depots. We are therefore stepping
up our investment in manufacturing, distribution
and infrastructure as the business grows. In
particular, we plan to invest in new warehousing
facilities and in the resilience of our operations
to support future growth. We expect capital
expenditure across the business to be in the

order of £60m per annum over the next three
years. Mark Robson discusses our investment
programme in more detail on page 17.

For some years we have also been exploring
the prospects for Howdens beyond the UK. We
have effected a step change in the profitability
of our French depots and we believe the
time is right to build on the nucleus of our
French business. We are also drawing on our
experience to test our way forward in Belgium
and Holland.

ORGANISATIONAL DEVELOPMENT
In May, following a review of our structure
and capabilities, we announced a number of
organisational changes designed to support the
continuing growth and development of Howdens.

Mark Robson was appointed Deputy Chief
Executive, and is now responsible for the day-
to-day management of the business. Matthew
Ingle continues in his role as Chief Executive,
focusing on the further development and
implementation of our strategy, and in particular
on the culture and the values of the business
that have served Howdens so well and will
underpin our future success.

This powerful combination of Matthew and Mark
is supported by Rob Fenwick, who spearheaded
the restructuring of Howdens' supply operations
from 2005 and leads the supply division, and
Andy Witts, a co-founder of the business and
leader of the depot management team. Together,
our senior executives are leading the work of
organisational and talent development and
recruitment that is essential to the long-term
sustainability of the business.

SHAREHOLDER RETURNS
Our stated intention is an earnings per share
based dividend cover of between 2.5 and 3.0
times, with one-third of the previous year’s
dividend being paid as an interim dividend for
the following year.

Given the operational performance of the
business and the level of cash generation in
2014, the Board is proposing a final dividend

in respect of the year of 6.5p per share, giving
a total dividend of 8.4p per share for 2014
(2013: 5.5p).

importance of our values, of fair dealing and of
personal, local accountability.

We have said that we are targeting a capital
structure that is both prudent and recognises
the inherent leverage in the business and,
after considering our capital requirements,
will return surplus capital to shareholders as
appropriate. The Group has significant property
leases for the depot network, and continues to
have a material defecit in the Group pension
fund and a small number of legacy liabilities
related to the Group’s former ownership of
MFI. Taking into account this underlying level
of gearing, the Board continues to believe that
it is appropriate for the Group to be able to
operate throughout the working capital cycle
without incurring bank debt.

Against this background, the Board has
reviewed the Group’s cash balances in light
of our future investment opportunities,
anticipated peak working capital requirements
and the trading outlook. As a result it
has decided to return £70m of cash to
shareholders by way of a share repurchase
programme. This will commence shortly and
will be implemented over the course of the
next two years.

BOARD COMPOSITION
The Board functions as a small but effective
team and I am indebted to my fellow directors
for their hard work and commitment to the
Group. In particular I would like to thank
Michael Wemms, our Senior Independent
Director, for his work as Chair of the
Remuneration Committee, a role which has
now been taken on by Tiffany Hall. Michael and
I have both served on the Board for eight years
and the Board is therefore giving consideration
to the appointment of our successors. In my
case, the transition to my replacement will
be overseen by Michael. The Board is also
considering the merits of appointing a further
non-executive director.

A RESPONSIBLE BUSINESS
I firmly believe that Howdens’ commitment to
growth and development must be matched
by a continued focus on being a responsible
company. Our business model emphasises the

We work to make sure these values are
reflected in the way we treat individuals, in our
interactions with the wider community and in
the work we do to reduce our environmental
impact. In all of these areas, we aim to
implement standards that will deliver lasting
benefits. A detailed report on our corporate
responsibilities can be found on pages 22
to 27.

2014 was an extremely busy year for Howdens
and one which placed considerable demands
on our people and, in turn, on their families.
I am sure that you would wish me to place
on record our great appreciation of their
considerable efforts and achievements.

LOOKING AHEAD
Howdens has undergone a major transition in
the last five years. Since 2009, profits have
more than doubled, as have earnings per share,
and the balance sheet has been transformed.
Legacy pressures have been overcome, our
strategic flexibility has considerably increased
and we see good prospects for the further
development of the business.

Looking ahead, we expect that the strong
cash generation that is a feature of Howdens’
business model will enable us both to pay
attractive dividends to shareholders and to
make the substantial capital investments
necessary to make the most of the many
opportunities we have identified within and
beyond the UK.

The environment in which we operate is
constantly changing. We remain confident in
the resilience and flexibility of the Howdens
model, and it goes without saying that we will
continue to adapt rapidly to suit economic and
market conditions and to manage the business
in the fashion that has served us so well over
the years.

Will Samuel
Chairman

25 February 2015

Howden Joinery Group Plc Annual Report & Accounts 2014Chief Executive’s statement

STRATEGIC OVERVIEW
Howdens supplies kitchens and joinery
to trade professionals.

We supply these products to builders
when they want them, i.e. from stock,
on confidential trade terms.

That is what we do, but it is not the idea
of the business.

The idea of the business is about building
worthwhile, personal relationships so
that we can deliver value to all concerned
– which means small builders, kitchen
users, employees (including past and future
employees and their families), business
partners, shareholders, local communities
and in fact everyone whose life is touched
by Howdens.

To make the business work properly, we have
to do things in an uncompromising way.

We have to build relationships of trust with our
suppliers, both of raw materials and of finished
products, so that we can offer the right design,
quality and price in every category.

We also have to recruit and retain highly
motivated staff who consistently do what
they say and are prepared to take personal
responsibility for their actions.

We have to design, manufacture and source
products expertly and at lowest cost, and
distribute them in such a way that our depots
are always in stock locally and never let the
builder down.

We have to have low central overheads,
because builders only want to pay for things
they need.

Finally, we have to earn the confidence and
trust of builders, who rely on us to support their
reputation with products of the right type and
quality that their customers are proud to own.

So Howdens is a direct, person-to-person
business. This is its core strength and its
difference. This is the source of its ability to
deliver value in more ways to more people.

The business functions because individuals
rely on each other to deal promptly, effectively
and fairly with everyone, whether they are in
a factory, depot, warehouse, design studio
or office.

This sounds straightforward, but it is hard
work. Everything is finely balanced, because
everyone depends on everyone else. Personal
relationships are individual, dynamic and
unpredictable. Businesses find talking about
them, and managing them, uncomfortable, but
Howdens is built on them.

Howdens’ competitive advantage is rooted in
our ability to manage the complexity that is
involved in doing what it takes to sustain these
relationships and to offer direct, practical
help, every day, to hundreds of thousands of
customers and thousands of different homes
around the country.

This is the basis on which Howdens was
founded in 1995, and these are the principles
which have driven its growth and survival and
created opportunities for further expansion.
They have been resilient enough to help it
withstand restructuring, recession and the
collapse of MFI, and strong enough to underpin
a business that employs over 7,000 people,
operating out of two factories, a national
distribution centre and nearly 600 depots, and
generating operating profit of £190 million on
sales of over £1 billion. The same principles
continue to drive our strategic objective of
delivering better and better service, person to
person, wherever it is required.

BUSINESS MODEL
The kitchen

Kitchens are one of the few things we all use
every day, no matter where or how we live.
Something as important as a kitchen really
has to work, and keep working.

The kitchen transcends whatever we might be
doing in it at any particular moment. It has to
cope with people of all ages using it for many
purposes: cooking, eating, drinking, washing,
ironing, reading, writing, studying, talking,
celebrating, commiserating and making plans.
Not to mention the baby bashing the table, the
dog licking the cabinets and a teenager trying
out a new invention on the worktop.

We place enormous and ever-increasing
demands on the kitchen, and we expect it to
take them. We also expect that the kitchen will
make our lives easier and more enjoyable.

This is not a new idea. The functionality of
the kitchen has been becoming increasingly
complex since the Middle Ages. Most of us
now understand that a kitchen that looks good
and works properly must be installed by a
professional fitter, which is why Howdens sells
only to builders.

The depot

We sell locally, from trade-only depots staffed
by local people who know their area and know
what their customers want.

A newly opened Howdens depot grows
business by talking to local builders and
opening credit accounts for them.

Our depots are typically around 10,000 square
feet in size, in industrial locations rather than
retail parks, and employ between six and ten
staff. They are low-cost, both in terms of rent
and fit-out, and become profitable when they
reach annual sales of £650,000, which they
usually do by their second year of operation.

The builder’s working day is unpredictable, so
we keep all our products in stock locally.

Anything, from a tube of glue to a complete
kitchen, can be collected by the builder as
soon as he needs it. Service is more than
initial availability, so all Howdens’ products are
designed from scratch to be quick and easy
to install as well as fit for purpose and robust
in daily use. We undertake to swap anything,
locally, right away, if it is no longer needed or
something is not quite right.

We offer builders, and hence end-users, a free
kitchen planning service that we believe is
second to none, not only because it uses the
latest technology but because it is delivered by
expert planners on a personal basis.

Every Howdens kitchen is the result of a series
of critical conversations between the people
who plan it, buy it, install it and use it. And
before that, between the people who design it,
source it, make it, test it, photograph it, write
about it, pack it and take it to the depot.

Howdens offers the builder a personal,
confidential discount so that he can determine
his margin for each job, and a nett monthly
credit account, which means the builder can get
paid by his customer before he has to pay us.

The builder’s account is held at his local
depot, and his discount is agreed between
him and the depot manager. Credit control is
managed centrally, which has proved to be a
highly efficient way of minimising bad debt and
supporting personal relationships.

Depot managers, and their staff, are
incentivised on a share of their own depot’s
profit, less stock loss. There is virtually no
stock loss. Depot staff are entrepreneurial
and accountable.

Incentives are very important to every part
of Howdens’ business, not only to depots.
They may relate to specific targets or to
outperformance against a range of indicators
compared to the previous year’s results.
Individuals and teams who deliver outstanding
service receive significant, sometimes life-
changing, rewards.

Howden Joinery Group Plc Annual Report & Accounts 201412

Chief Executive’s statement continued

Supplying the depot

The depot depends directly on Howdens’
supply operation, which encompasses the
sourcing of raw materials and of bought-in
product, product development, manufacturing,
logistics, warehousing and timely distribution
to every Howdens depot.

This is all owned and controlled by Howdens.

We design and manufacture kitchen cabinets
and worktops in our own factories in Howden in
East Yorkshire and Runcorn in Cheshire.

Large volumes, long runs, modern production
equipment and efficient working practices
mean that Howdens can achieve lowest cost
of production.

The same principles apply to bought-in product.
When we put in a purchase order, it is for
large volumes, to our own specifications and,
critically, to our own availability requirements.
An order from Howdens allows our suppliers to
operate more efficiently and plan ahead more
easily. It allows us to guarantee availability,
quality and price – and thereby service –
to our customers.

This level of service could not be delivered
without logistics and systems that work,
and do not fail.

First, Howdens depot managers interpret their
own sales patterns and local knowledge to
choose how much product they require.

Then, they rely on our truck fleet to deliver it
nationwide without delay so that all our depots
are always in stock.

All of this activity, whether in manufacturing,
distribution or sales, is underpinned by a well-
invested, robust, stable and scalable systems
infrastructure that has plenty of scope to
handle significant further growth.

OPERATING ENVIRONMENT
The builder’s market

From the outset, Howdens has been designed
around the needs of the small builder.

The small builder is an entrepreneur who
migrates from one sector of the market to
another by recommendation. His customers
may be owner-occupiers, private landlords or
local developers. Equally, they may be housing
associations or local authorities. Sometimes
the small builder will fit out a shop, or a studio,
or an office, as well as a private home. The
pattern of his work will vary from season to
season and from year to year.

Howdens benefits directly from this flexibility.
It is the builder who regulates the mix of end-
users, allowing us immediate access, at no
extra cost, to all sectors of the market.

Today, Howdens serves a significant share
of the retail market in the UK without any
of the costs, such as showrooms, fitters or
home delivery, that are normally associated
with retail.

What is changing?

Our expectations of what is “normal” continue
to change.

We are less and less prepared to wait for
anything. We don’t want to queue for a till or at a
helpdesk. We haven’t got time to waste waiting
for quotations, plans, deliveries, installation,
repairs and someone to answer the phone. We
expect service right away.

We are also less tolerant of mistakes or things
that go wrong. We don’t just want someone to
answer the phone, we want a helpful, informed
person who can deal with whatever we need,
now. We want every product, big or small, to look
good, work well and not break. We want clear
instructions and correct information.

This will include more depots in France, where
we have achieved significant improvements
in profitability. We continue to test depot
formats in France and Belgium (and will shortly
start a test in Holland) in order to understand
more about operating successfully in markets
beyond the UK.

We have the opportunity to transform our
warehousing and distribution operations in
order to meet our need for increased capacity.
We plan to invest significantly in this area
to ensure that all our depots continue to be
always in stock.

As kitchens become ever more complex,
and the digitally connected lifestyle more
widespread, we will invest in product
innovation, but also in every aspect of
product – choice, design, usability, materials
technology and manufacturing excellence.

We will be increasing our capital expenditure to
reflect these strategic priorities.

All of this will also, of course, mean further
investment in people. Howdens is an idea
that recruits people who want to be part of
it – a world in which proper value is placed on
personal relationships and where they can do a
thorough job.

We are working to build an organization that
is capable of supporting this vision, and of
sustaining a business that is worthwhile for
all concerned.

Matthew Ingle
Chief Executive

25 February 2015

We also expect product to make our lives
easier and easier. This means that product
innovation at all price points is an ongoing
priority for Howdens.

For most of us, there is also less space. In the
home, this means more kitchen designs that
make the best use of every available inch. On
the roads, this means more builders getting
stuck in traffic more often, which means that
ideally the nearest Howdens depot is on their
doorstep. In our cities, and across the UK,
increasing demand for space means we have to
have strong property skills and the reflex to think
further ahead about our requirements.

Howdens sells more kitchens than any other
player in the UK market. In 2014 we sold around
3.8 million cabinets to nearly 330,000 credit
account holders. Since 2008 the number of
SKUs, or stock-keeping units, in our business
has risen by 100%.

So we want to go on delivering constantly
improving service to an increasing number of
customers, and we will continue to invest in
space, systems and resources to manage scale
and complexity, service, people and our future.

PROSPECTS CREATE
OPPORTUNITIES
Howdens works because the idea of the
business – to deliver a service of value, person
to person, in the one place that is central to
our daily lives – is strong enough to appeal to
a large and growing number of people, and
because we have stuck to our values from the
outset in implementing this idea.

When we started Howdens we did not know how
many depots we would be able to open.

We have continued to open local depots in
response to demand, as more and more people
become engaged with what Howdens stands
for and what this business can do. It is now
clear that we have a huge opportunity to deliver
Howdens service on an even larger scale, so we
plan to go on opening local depots wherever we
see good prospects for them.

Howden Joinery Group Plc Annual Report & Accounts 2014Review of operations and finance

FINANCIAL RESULTS FOR 2014

The information presented here relates to the 52 weeks to
27 December 2014 and the 52 weeks to 28 December 2013,
(continuing operations before exceptional items), unless
otherwise stated1.

The financial performance of the Group during 2014 benefited
from the Group’s competitive position and the continuing focus
on improving operational performance. We also benefited from
the continuation of improved market conditions seen since the
summer of 2013.

Total Group revenue increased by £134.3m to £1,090.8m.

Revenue £m

Group

comprising:

Howden Joinery UK depots

Howden Joinery French depots

2014

1,090.8

1,075.5

15.3

2013

956.5

940.7

15.8

Howden Joinery UK depot revenue rose by 14.3% to £1,075.5m,
increasing by 10.8% on a same depot basis.

This growth was achieved through a number of factors and is a
testament to the strength of the Howdens business model. We
have continued to open new depots and increased the number of
customer accounts. As well as driving an increase in revenue, the
business continued to focus on price discipline and margin.

Sales by our French depots of £15.3m increased by 2% on a
same depot basis in constant currency terms, whilst falling
slightly on a reported basis. Profitability has improved following
changes to the commercial strategy in our French depots.

Gross profit rose by £104.3m to £694.5m. The gross profit
margin for the year increased to 63.7% (2013: 61.7%). This
reflected the continuing focus on efforts within supply to reduce
the cost of manufactured and bought-in products, and price
discipline and margin achievement across all depots. It also

included a benefit from the strengthening of the pound against
both the euro and US dollar.

Selling and distribution costs, and administrative expenses
increased by £55.2m to £504.7m. The increase reflects the
costs of new depots, investment in growth and the impact of
inflation, including on payroll costs.

Operating profit increased by £49.1m to £189.8m.

The net interest charge fell by £4.7m to £1.0m, due to a lower
finance expense in respect of pensions. The net result was
profit before tax rose by £53.8m to £188.8m.

Profit before tax

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Basic earnings per share were 23.2p (2013: 15.9p).

In 2014, there was an exceptional profit after tax from
discontinued operations of £9.1m. This mainly comprised
income of £11.1m arising from the release of a tax creditor
(following partial resolution of a dispute with HMRC regarding
the tax treatment of certain expenses relating to our legacy
properties), partially offset by a charge of £2.2m relating to an
increase in the provision for our remaining legacy properties.

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At 27 December 2014, the pension deficit shown on the
balance sheet was £142.6m (28 December 2013: £54.3m).
The increase in the deficit was due to higher liabilities arising
primarily from a decrease in the discount rate, which more than
offset the Group’s contribution to fund the deficit and better
than expected asset returns.

£m

Change
+£104.3m

4
1
0
2

5
4
9
6

We saw strong cash flow in 2014.

There was a net cash inflow from operating activities of
£147.8m. This was after a cash contribution to the Group’s
pension schemes, in excess of the operating charge, of £32.8m2
and payments relating to legacy properties totalling £5.3m.

1 There were no exceptional items from continuing operations in 2014. In 2013, there was an exceptional operating cost before tax of £4.5m from continuing

operations. In 2014, there was an exceptional profit after tax on discontinued operations of £9.1m. There were no discontinued operations in 2013.

2 As previously announced, an additional one-off payment for the pension year ending April 2015 of £10m will be paid in 2015.

Excluding the legacy property payments, underlying working
capital was broadly unchanged. Increases in stock and
debtors were offset by an increase in trade creditors.

Also included within net cash flows from operating activities
was tax paid totalling £30.3m.

Payments to acquire fixed and intangible assets totalled
£32.8m (2013: £24.7m).

Reflecting the above, there was a net cash inflow of £77.2m in
2014, the Group having net cash of £217.7m at the end of the
year (28 December 2013: £140.5m net cash).

DIVIDEND AND RETURN OF SURPLUS CASH TO
SHAREHOLDERS

The Group’s dividend policy is to target dividend cover of
between 2.5x and 3x, with one third of the previous year’s
dividend being paid as an interim dividend each year. Given
the operational performance of the business and the cash
generation in 2014, in light of this policy, the Board has
decided to recommend to shareholders a final dividend of 6.5p,
giving a total dividend for the year of 8.4p (2013: 5.5p). This
equates to a dividend cover of 2.75x, the Board intending to
pursue a progressive dividend policy in future years.

As previously stated, the Board intends to target a capital
structure that is both prudent and recognises the benefits of
operational and financial leverage, and, after considering our
capital requirements, to return surplus cash to shareholders
as appropriate. The Group has significant property leases for
the depot network, and continues to have a material deficit
in the Group pension fund and a small number of remaining
legacy liabilities related to the Group’s former ownership of
MFI. Taking into account this underlying level of gearing, the
Board believes it is appropriate for the Group to be able to
operate through the annual working capital cycle without
incurring bank debt.

The Board has reviewed the cash balances in light of the
Group’s future investment opportunities, expected peak
working capital requirements and trading outlook. As a result, it
has decided to return £70m of cash to shareholders by way of a
share repurchase programme. This will commence shortly and
will be implemented over the course of the next two years.

Shares that are bought in the market by our brokers will either
be held in treasury, to use for future obligations for company
share schemes, or cancelled.

OPERATIONAL REVIEW

The business model of Howden Joinery is “To supply from local
stock nationwide the small builder’s ever-changing, routine,
integrated kitchen and joinery requirements, assuring best
local price, no-call-back quality and confidential trade terms”.

Since it started in autumn 1995, the business has opened
new depots and increased turnover continuously, except for a
12-month period in 2008-9.

Even today, with nearly 600 depots across the UK, we
continue to see the opportunity to transform the scale of the
business, seeing scope for at least 700 depots. We continue
to invest in all aspects of the growth and performance of the
business, including new depots and depot operations, existing
and new employees, product development, and manufacturing
and distribution.

UK depot network and operations
During the course of 2014, 30 new depots were opened,
bringing the total number of depots trading at the end of the
year to 589. In addition, two depots were relocated and three
were extended.

In the summer of 2012, we began trials of a 'virtual showroom'
that is designed to support our 1,000 depot-based kitchen
designers. When working with our account holders' clients in
our depots, this allows kitchen designs to be shown on a large
HD television screen or projected on to a wall in the depot in a
large high-definition format, along with other material designed
to support product sales. Often, this will be accompanied by a
refurbishment of the office in which the designers work. This
project to roll-out 'virtual showrooms' across all of our depots
has been completed.

To support our account holders and improve our service to
their clients, we undertook a project to install A3 printers in all
of our depots. These provide builders with a technical drawing
of each kitchen design that is much more usable
on-site. They also allow more impressive visualisations of
the kitchen to be provided to the builder's client. This project
has also been completed.

Our account base continues to grow, having increased by over
40,000 net new accounts in 2014. Initiatives to stimulate
account openings meant this was double the number seen in
previous years. While there has been a significant increase
in accounts in recent years, our debt collection performance
continues to be robust.

Howden Joinery Group Plc Annual Report & Accounts 2014
Review of operations and finance continued

Product and marketing
We continue to enhance our product offering, having
introduced a number of new products during 2014 across
all our product categories.

Notable amongst these were eighteen new kitchens, which
included: six gloss options and two matt options in our
Greenwich family; three options in a new, lower-priced, gloss
integrated handle range, Clerkenwell; and three options in a
new, premium, Tewkesbury framed family.

To ensure we cater for all budgets and price points, we have
introduced a number of new products, including: a premium
touch control Lamona pyrolytic oven, combination microwave
and warming drawer; a collection of premium handles and a
range of competitively priced rose handles; and a new ‘entry
priced’ rigid cabinet.

In addition, we continue to enhance our other product offerings,
including new products in our worktops and backboards,
sinks, doors and flooring ranges. We also started a trial of
selling affordable granite worktops from stock, beginning in
a small number of depots. Initial results from this have been
encouraging and the trial has recently been extended to an
additional 40 depots.

We continue to invest in our marketing communications and
brand advertising. As well as updating our range of marketing
literature and the Howdens website (www.howdens.com),
we embarked on a partnership with pottery designer and
manufacturer Emma Bridgewater. Emma designed for us a
pair of Howdens mugs and fluted bowls that were given away
with every kitchen plan for limited periods, the partnership
being featured in our adverts and on the Howdens website. To
further raise awareness of the Howdens brand, we attended
13 county shows and agriculture fairs throughout the UK during
the summer.

Manufacturing and logistics operations
Our UK-based manufacturing and logistics operations play a
vital role in ensuring that we are able to supply our small builder
customers from local stock nationwide at all times, having
the flexibility to respond to each depot’s individual needs. We
continue to invest in these operations so as to ensure that this
aspect of the Howdens model is never compromised, even
during our critical ‘Period 11’, when sales are more than double
the level seen in other periods.

We are close to completing a two-year project to replace obsolete
boilers and the associated heating infrastructure at our site in
Howden with a state-of-the-art biomass heating system. This
will ensure that we continue to be compliant with environmental
emissions legislation and will reduce manufacturing costs, as the
heat generated attracts payments provided by the Renewable
Heat Incentives programme.

We have completed the replacement of the 100 'tractor units' for
our fleet of lorries. These are Euro 6 compliant and are fitted with
the latest technology for environmental compliance. In addition,
they have enhanced safety features, including:
• crash avoidance technology that assists the driver when it

detects the risk of a collision; and

• forward facing cameras for incident recording, to help with

accident investigation and insurance claims.

Replacement of 400 ‘trailer units’ for our fleet of lorries will begin
in the spring.

Continental Europe
As we set out at the interim results in July, we have amended
the pricing strategy in our French depots. As a result, we
have seen an improvement in the financial performance of
the depots, notwithstanding the widely reported economic
headwinds in the country.

This has given us the confidence to add a second phase of
depots to our operations in northern France, our plan being to
open seven new depots during the second half of 2015.

It has also given us the confidence to extend the trial, both in
France and in other countries in continental Europe. First, we
have opened two depots in Belgium that are the same format
as our existing French depots and will allow us to learn about
a slightly different market. Second, we have opened an outlet
with a new format and branding further south in France, with
another planned to be opened late in 2015. This is larger
than existing depots, and will be used to test a number of new
initiatives. We also intend to begin a trial in Holland, where we
plan to open a similar larger format depot towards the end of
this year.

GROUP DEVELOPMENTS

Legacy properties
The Group continues to reduce its legacy property portfolio.

The Group remains committed to its view that the number of
depots in the UK can be increased from its current level of 589
to at least 700. During the course of 2015, we are currently
planning to open up to 30 depots in the UK.

One lease was terminated in 2014, at a cost of just over £3m,
and one lease, with less than six months remaining, was
released early. In addition, the leases of two properties expired
during the year.

This means that there are now five legacy properties remaining,
with net annual rent and rates of less than £1m.

INVESTMENT PROGRAMME

We have undertaken a review of the medium and longer-term
growth prospects for the business and have identified more
significant opportunities than previously foreseen. Kitchens
continue to grow in complexity as kitchen users expect
increasing functionality as well as a constant flow of new
designs. At the same time, our account base continues to grow,
and we are focused on delivering better and better local service
to more and more builders.

We are well positioned and look forward to continued growth.
As in recent years, we will act quickly and appropriately adapt
our business model to the market and economic conditions
we encounter.

KEY FINANCIAL PERFORMANCE INDICATORS

The Group uses a number of financial performance indicators to
measure operational and financial activity in the business.
Non-financial indicators are discussed further in the corporate
social responsibility report on pages 22 to 27.

Total sales growth
Growth in sales of the UK Howden Joinery depots is key
to enhancing shareholder value. This measure, along with
monitoring our programme of depot openings, tracks the ability
of the Group to grow the business.

Following on from this review, we have been considering how to
ensure that we are best placed to deal with and take advantage
of what the future might bring.

Operating profit
The Group targets steady growth in operating profit before
exceptional items over the medium-term.

In respect of our supply operations, a number of areas have
been identified for investment in the coming years. These include
preparing for future growth and improved resilience of our
cabinet manufacturing operations, a new national distribution
centre (NDC) for bought-in products, increased manufacturing
capacity in non-cabinet products and replacing aged
manufacturing assets. As a result, we expect capital expenditure
across the business to average around £60m per annum over
the next three years. The exact phasing of this will depend on the
timing of the building and fitting-out of the new NDC.

CURRENT TRADING AND OUTLOOK FOR 2015

Howden Joinery UK depot sales in the first two periods of 2015
(to 21 February) were up 9.9% on the same period last year
(this excludes the first week, which had one less trading day in
2015 than in 2014), in line with our expectations. Along with
the evidence we have of trading prospects, this would suggest
that market conditions remain unchanged.

Earnings per share (EPS)
We believe that EPS, while not perfect, is an accessible measure
of the returns we are generating as a Group for our shareholders,
and also has the merit of being auditable and well understood.
The key measure of short-term financial performance is basic
earnings per share before exceptional items.

Depot openings
The business model is based on individual depots providing
kitchens to small builders within a local community. The
continuing drive to open new depots in new localities is
therefore key to the Group’s growth prospects. Howden Joinery
currently intends to open 30 depots in 2015, although it should
be noted that we have the ability to adjust the rhythm of the
opening programme in line with economic conditions.

Howden Joinery Group Plc Annual Report & Accounts 2014Review of operations and finance continued

USE AND MANAGEMENT OF FINANCIAL INSTRUMENTS,
AND EXPOSURE TO FINANCIAL RISK

The Group holds financial instruments for one principal
purpose: to finance its operations. The Group does not currently
use derivative financial instruments to reduce its exposure to
interest or exchange rate movements. The Group finances its
operations by using cash flows from operations, and it also has
access to longer-term loan facilities from banks if additional
financing is required. Treasury operations are managed within
policies and procedures approved by the Board.

The main risks arising from the Group’s financial instruments
are funding and liquidity risk, interest rate risk, counterparty
risk and foreign currency risk, which are discussed below.
No speculative use of derivatives, currency or other
instruments is permitted. The Treasury function does not
operate as a profit centre and transacts only in relation to the
underlying business requirements.

In addition, our pension trustees, who carry a charge over
the share capital of Howden Joinery Limited, have a separate
covenant test around the EBITDA of Howden Joinery Limited.

The Group’s latest forecasts and projections have been
stress-tested for reasonably possible adverse variations in
trading performance and show that the Group will operate
within the terms of its borrowing facility and covenants for
the foreseeable future.

At the 2014 year end, the Group had £131.9m of cash, £85.0m
of short-term investments, and £112.0m of funds available to
borrow under the committed borrowing facility (in line with the
levels of stock and trade debtors at the year-end).

Interest rate risk
The Group has not had any borrowings during 2014 and does
not consider interest rate risk to be significant at present.

Funding and liquidity
The Group’s objective with respect to managing capital is
to maintain a balance sheet structure that is both efficient
in terms of providing long-term returns to shareholders
and safeguards the Group’s ability to continue as a going
concern. As appropriate, the Group can choose to adjust its
capital structure by varying the amount of dividends paid to
shareholders, returns of capital to shareholders, issuing new
shares or the level of capital expenditure.

Counterparty risk
Group Treasury policy on investment restricts counterparties to
those with a minimum Standard and Poor’s/Moody’s short-term
credit rating of A-2/P-1. It also places limits on the maximum
amount which can be invested with a single counterparty.
Investments mainly consist of bank deposits, UK Treasury bills
and liquidity funds. The Group continuously reviews the credit
quality of counterparties, the limits placed on individual credit
exposures and categories of investments.

The Group began 2014 with an asset-backed bank facility
which allowed borrowing of up to a maximum of £160m,
dependent on the actual levels of stock and trade debtors
held at any time. This maximum amount reduced to £140m in
May 2014 in line with the terms agreed at the inception of the
facility. The facility is due to expire in July 2016. The facility was
not used at any point during 2014.

The Group’s committed borrowing facility contains certain
financial covenants which have been met throughout 2014. The
covenants are tested every four weeks and are based around:
(i) fixed charges; (ii) tangible net worth; and (iii) earnings before
interest, tax, depreciation and amortisation (EBITDA) for
Howden Joinery Limited.

Foreign currency risk
The most significant currencies for the Group are the US
dollar and the Euro. It is the Group’s current policy that routine
transactional conversion between currencies is completed at
the relevant spot exchange rate. This policy is reviewed on a
regular basis.

The net impact of exchange rates on currency transactions in
the year was £8.0m. The Group does not have many overseas
assets/liabilities, so the impact of currency translation on
these items is not material.

Set out in the table below are the principal exchange rates
versus the UK pound affecting the profits of the Group:

Principal exchange rates versus UK pound (£)

United States dollar (US$)

Euro (€)

2014
Average

1.65

1.24

2014
Year-end

1.56

1.27

2013
Average

1.56

1.18

2013
Year-end

1.64

1.19

NEW ACCOUNTING STANDARDS

The Group implemented IAS 19 (revised) “Employee Benefits”
during the year. This has had the effect of decreasing the
profit for the period, and of increasing other comprehensive
income for the period by equal and opposite amounts. It has
had no net effect on total income or net assets. Details of
the adoption of this IFRS are given in note 2 to the financial
statements, and details of the amounts and line items
affected is given in note 21.

CAUTIONARY STATEMENT

Certain statements in this Annual Report are forward-looking.
Although the Group believes that the expectations reflected
in these forward-looking statements are reasonable, we can
give no assurance that these expectations will prove to have
been correct. Because these statements contain risks and
uncertainties, actual results may differ materially from those
expressed or implied by these forward-looking statements.
We undertake no obligation to update any forward-looking
statements whether as a result of new information, future
events or otherwise.

By order of the Board

Mark Robson
Deputy Chief Executive
and Chief Financial Officer
25 February 2015

Howden Joinery Group Plc Annual Report & Accounts 2014Principal risks and uncertainties

The Board has carried out a robust assessment of the principal risks facing the company and considers that the Group’s principal
risks and uncertainties, together with an indication of actions taken to manage and mitigate them, are as detailed below. They do
not comprise all risks associated with the Group and are not set out in any order of priority. Additional risks not presently known to
management or currently deemed to be less material may also have an adverse effect on the Group’s business in the future.

Risk

Description and Impact

Mitigating Factors

Market conditions

The Group’s products are predominantly sold to small local builders for installation in public and
private housing, mainly in the repair, maintenance and improvement markets.

We monitor the market closely and can take swift management action as necessary in response to adverse changes,

with the aim that the business is aligned to market conditions and, consequently, that we should have sufficient cash

and borrowing facilities for business needs and adequate covenant headroom.

The Group’s results are consequently dependent on levels of activity in these markets, which are
impacted by many factors including general economic conditions, consumer confidence, interest rates
and credit availability, unemployment, demographic trends and, in the short-term, weather.

A severe downturn in market conditions could impact on our ability to achieve our sales and profit
forecasts. This could in turn put pressure on our cash availability and banking covenants.

The future success of the business depends on the successful implementation of the
Group’s business model and locally-enabled, entrepreneurial culture.

In particular, if the Group fails to implement its business model in the locally-enabled,
decentralised manner envisaged, there may be an adverse effect on the Group’s future
financial condition and profitability.

The Group considers that there is significant potential for growth, and has identified this
as a strategic opportunity and aim.

If the growth opportunities are not understood and exploited in line with our business model, or if
current structures and skills within the Group are not aligned to meet the challenges of growth, there
may be an adverse effect on the Group’s ability to obtain maximum benefit from this growth potential.

Failure to implement
the Group’s business
model and culture

Failure to maximise
exploiting the
growth potential
of the business

Continuity of supply

The Group’s business model requires that every depot can supply product from local stock.

Any disruption to the relationship with key suppliers or interruption to manufacturing operations
could adversely affect the Group’s ability to implement the business model.

Led by the actions of the Board and Executive Committee, the business model and the Howdens culture are at the centre of

the activities and the decision-making processes of the Group, and are continually emphasised. The Executive and senior

management regularly visit our depots and factories, and hold regular events during which they reinforce the importance of the

Group’s business model and culture. Throughout the business, successful implementation of the Group’s business model and

culture forms the basis of the incentive structure.

The Group places continuing focus on the opportunities, challenges and additional requirements related to growth. The potential

for growth is incorporated into group strategic plans and budgets, and existing structures and skills are reviewed in the context

of growth, and adjusted where necessary.

With suppliers, the Group tries to maintain dual supply wherever possible to mitigate the effects if a key supplier was unable to

deliver goods or services. We also enter into long-term contracts to secure supply of our key materials. Good supplier relations

are maintained by prompt settlement of invoices, regular communication and an annual supplier conference. Within our

manufacturing operations, we adopt best practice health & safety and fire prevention procedures. Business continuity plans

are in place for key production processes. The Group continues to make significant investment in its manufacturing facilities,

to enable manufacturing capacity to match our expected growth as well as providing further cabinet production capacity which

now provides additional cover in the event of an interruption to manufacturing operations.

Loss of key
personnel

The skills, experience and performance of key members of the Group’s management team make
a large contribution to the Group’s success.

The Group uses the Remuneration Committee to ensure that key team members are appropriately compensated

for their contributions and incentivised to continue their careers with the Group.

The loss of a key member of the Group’s management team could adversely affect the
Group’s operations.

The Board has carried out a robust assessment of the principal risks facing the company and considers that the Group’s principal

risks and uncertainties, together with an indication of actions taken to manage and mitigate them, are as detailed below. They do

not comprise all risks associated with the Group and are not set out in any order of priority. Additional risks not presently known to

management or currently deemed to be less material may also have an adverse effect on the Group’s business in the future.

Risk

Description and Impact

Mitigating Factors

Market conditions

The Group’s products are predominantly sold to small local builders for installation in public and

private housing, mainly in the repair, maintenance and improvement markets.

We monitor the market closely and can take swift management action as necessary in response to adverse changes,
with the aim that the business is aligned to market conditions and, consequently, that we should have sufficient cash
and borrowing facilities for business needs and adequate covenant headroom.

The Group’s results are consequently dependent on levels of activity in these markets, which are

impacted by many factors including general economic conditions, consumer confidence, interest rates

and credit availability, unemployment, demographic trends and, in the short-term, weather.

A severe downturn in market conditions could impact on our ability to achieve our sales and profit

forecasts. This could in turn put pressure on our cash availability and banking covenants.

Failure to implement

The future success of the business depends on the successful implementation of the

the Group’s business

Group’s business model and locally-enabled, entrepreneurial culture.

In particular, if the Group fails to implement its business model in the locally-enabled,

decentralised manner envisaged, there may be an adverse effect on the Group’s future

Failure to maximise

The Group considers that there is significant potential for growth, and has identified this

financial condition and profitability.

as a strategic opportunity and aim.

model and culture

exploiting the

growth potential

of the business

If the growth opportunities are not understood and exploited in line with our business model, or if

current structures and skills within the Group are not aligned to meet the challenges of growth, there

may be an adverse effect on the Group’s ability to obtain maximum benefit from this growth potential.

Continuity of supply

The Group’s business model requires that every depot can supply product from local stock.

Any disruption to the relationship with key suppliers or interruption to manufacturing operations

could adversely affect the Group’s ability to implement the business model.

Led by the actions of the Board and Executive Committee, the business model and the Howdens culture are at the centre of
the activities and the decision-making processes of the Group, and are continually emphasised. The Executive and senior
management regularly visit our depots and factories, and hold regular events during which they reinforce the importance of the
Group’s business model and culture. Throughout the business, successful implementation of the Group’s business model and
culture forms the basis of the incentive structure.

The Group places continuing focus on the opportunities, challenges and additional requirements related to growth. The potential
for growth is incorporated into group strategic plans and budgets, and existing structures and skills are reviewed in the context
of growth, and adjusted where necessary.

With suppliers, the Group tries to maintain dual supply wherever possible to mitigate the effects if a key supplier was unable to
deliver goods or services. We also enter into long-term contracts to secure supply of our key materials. Good supplier relations
are maintained by prompt settlement of invoices, regular communication and an annual supplier conference. Within our
manufacturing operations, we adopt best practice health & safety and fire prevention procedures. Business continuity plans
are in place for key production processes. The Group continues to make significant investment in its manufacturing facilities,
to enable manufacturing capacity to match our expected growth as well as providing further cabinet production capacity which
now provides additional cover in the event of an interruption to manufacturing operations.

Loss of key

personnel

The skills, experience and performance of key members of the Group’s management team make

a large contribution to the Group’s success.

The Group uses the Remuneration Committee to ensure that key team members are appropriately compensated
for their contributions and incentivised to continue their careers with the Group.

The loss of a key member of the Group’s management team could adversely affect the

Group’s operations.

Howden Joinery Group Plc Annual Report & Accounts 2014Corporate social responsibility (CSR) Report

In response to the Financial Reporting Council’s guidance to companies to reduce the overall length of their annual
reports, an abridged version of the 2014 CSR report is set out below which contains the headline information in
relation to the year and disclosures that are required by law. A full version of the 2014 CSR report can be accessed
at www.howdenjoinerygroupplc.com

INTRODUCTION

Howden Joinery Group’s business is centred on the manufacture and sale of kitchens and joinery to trade customers. With 589
depots throughout the UK, we are a local business with national scale and therefore have unique responsibilities to all of the
communities in which we operate. As such, we continue to focus on our five key responsibilities:

1. Responsibility to
manufacture safe
and sustainable
product

2. Responsibility
to our staff

5. Responsibility to
future generations

3. Responsibility
to customers
and suppliers

4. Responsibility to
local communities

Through the setting of rolling and extended key performance indicators (KPIs), it demonstrates our long-term commitments
in these areas.

RESPONSIBLE MANUFACTURING AND SOURCING

During 2014, our UK-based manufacturing teams produced approximately:

3.8 million
cabinets

870,000 kitchen worktops
and breakfast bars

1.6 million
kitchen frontals

2.0 million painted
skirting boards

We remain committed to UK manufacturing and continued to invest in our Supply division during 2014.

MANAGING OUR IMPACT ON THE ENVIRONMENT

Wood
Manufactured product
Our approach: Given that wood-based products are central to
our business, we continue to set challenging targets for the
responsible use of these products and paper products. Our
rolling KPI to monitor the provenance of our wood-based product
is to ensure that 100% of our wood-based product used in our
manufacturing processes comes from certified sources.

In 2014, we used 213,000 cubic metres of chipboard and
29,000 cubic metres of MDF in our manufacturing process. As
has been the case every year since 2006, all of this came from
certified sources.

All of the kitchen ranges which are manufactured at our
factories are certified by the UK Forest Stewardship Council (UK
FSC) and over 99% of all products we manufacture in-house are
FSC compliant (2013: 99%).

Our KPI for the use of cardboard packaging is that all
packaging should be sourced from recycled or certified
sources. In 2014 we used 2,300 tonnes of cardboard
packaging all of which came from recycled sources. This was
less than 2013, which itself was a reduction of circa 20% from
2012. We continue to look for design improvements and to
achieve a similarly high standard in the future.

Waste
Our approach: Our employees are encouraged to consider
how we can improve our environmental performance in
all areas by reducing consumption, reusing materials and
recycling wherever possible.

In 2014, our Supply division continued to recycle waste in line
with their rolling KPI which is to recycle more than 95% of all
manufacturing waste produced.

• Of the 29,900 tonnes of waste produced (2013: 28,100),

97% was recycled (2013: 98%).

• Despite increased volume through-put, ‘out-of-gate’ waste
decreased from 23,967 tonnes in 2013 to 21,514 tonnes
in 2014. Similarly, the volume of waste sent to landfill
decreased by 86 tonnes in 2014 to 644 tonnes.

• In 2014, we converted 5,825 tonnes of sawdust into energy
at our Howden and Runcorn sites (2013: 4,853 tonnes) to
heat our factories. This equates to approximately 31k MWh
of energy generated from sawdust in 2014. 6,426 tonnes
of milled sawdust went to a local manufacturer of animal

bedding where the sawdust is recycled for use in bedding for
horses, cattle and other livestock (2013: 11,823 tonnes).
The reduction in this amount from the previous year was
a result of 3,624 tonnes of milled sawdust being used for
additional biomass during 2014.

• We continue with the initiative started in 2007 to recover
and repair pallets which would otherwise have been
scrapped. Last year we recovered or repaired more than
143,000 pallets (2013: 130,000).

• Our recycling programme in our Trade division, introduced
in 2012, continues to be introduced to new depots as they
open. Recycling volumes in 2014 were consistent with those
achieved in 2013 and we will continue to work with our
waste contractor to identify further recycling opportunities
in the depots.

Bought-in product
Our approach: Ethical and environmental sourcing continues
to be an important factor when we determine which suppliers
we use. In order to ensure consistency with our manufactured
product, we aim to source from suppliers who have similarly
high standards and international accreditation.

• Development of our international supply base continues
to improve with suppliers performing better year on year,
in areas such as Quality, Environmental, Health & Safety
and Ethical performance. Continuous monitoring, regular
assessments and audits take place to ensure that suppliers
maintain our strict standards. There have been no reported
instances where our suppliers have failed to satisfy the
Howden Joinery requirements.

• Following the introduction of the EU Timber Regulations in
March 2013 we have continued our certification with the
Timber Trade Federation under their Responsible Purchasing
Policy. To that end we undertake due diligence on all timber
we source to determine the risk that illegal timber may
enter our supply chain. Our due diligence system has been
assessed by the Timber Trade Federation as meeting the
Core Criteria for Procurement Due Diligence.

• Howden Joinery has been certified by the FSC and the
European Programme for the Endorsement of Forest
Certification (PEFC) since February 2008. At the end of
2014, 39 of our 57 kitchen ranges (68% of our kitchens)
were fully compliant with FSC requirements (compared to
64% in 2013 and 55% in 2012). We aim to improve on this
percentage for a fifth consecutive year in 2015.

Howden Joinery Group Plc Annual Report & Accounts 201424

Corporate social responsibility (CSR) Report continued

Energy
Our approach: Our efforts to reduce energy use across the
business are recognised by our accreditation under the Carbon
Trust Standard. During 2014, the Company was re-assessed
and re-certified under the Carbon Trust Standard. As well as
assessing the Group’s overall reduction in energy usage over
a three-year period, the Standard also looks at general energy
management systems across the business and the ways in
which energy reduction is encouraged across all sites.

kWh per cabinet
One of our key metrics for energy usage in the factories is the
electricity we consume per cabinet produced. During 2014,
we continued to make significant improvements in our energy
management through the efforts of our employees and the
application of new technology. Our achievements in 2014
resulted in the figure dropping from 2.65kWh per cabinet in
2013 to 2.49kWh per cabinet in 2014, a 6% reduction from
the previous year. We managed to achieve this reduction in
our consumption per cabinet by production process efficiency
improvement, HEAT Team energy saving campaigns, LED lighting
conversions, plus numerous small engineering improvements.

Given the progress made in 2014, our target for 2015 is to
maintain the consumption per cabinet level achieved in 2014.

ISO 14001
All our Supply division sites – manufacturing, distribution or
warehouse related – have maintained compliance with their
ISO 14001 standard for Environmental Management as well
as helping the Group retain its certification under the Carbon
Trust Standard.

Biomass factory heating system
In 2011, the EU introduced a Directive aimed at improving
global air quality standards and, as a result, DEFRA published
new standards and targets to significantly improve emission
levels from wood combustion plants within the UK.

The previous boiler system on the Howden site was in excess
of 20 years old and at the end of its economic useful life.
By investing in state of the art biomass boiler and heating
systems in 2014, at a cost of £5m, we have reduced our future
emissions and are now capable of ensuring our continued
compliance in an environment of increasingly stringent
legislative targets.

The system utilises the waste produced from our
manufacturing processes on site and therefore has a positive
effect on our waste management impacts. As previously
noted, in 2014, we converted 5,825 tonnes of sawdust into

energy at our Howden and Runcorn sites which equates to
approx 31k MWh of energy generated from sawdust during
the year. It is also interesting to note that our CO2 equivalent
emissions are 16 times lower than if natural gas were used
to heat the factories.

The system is fully compliant with the UK Government’s
Renewable Heat Incentive.

Transport
Truck Fleet
During 2014, despite delivering 5% more volume, we reduced
the number of kilometres driven by our trucks by 150,000km,
a reduction of 0.7% on 2013. We have maintained the gains in
miles per gallon (mpg) that we achieved in 2013 following the
implementation of a new tracking system across the truck fleet
in 2012.

In November 2014, an exercise commenced to replace the
existing tractor fleet. By end of January 2015 all core fleet was
Euro 6 compliant. We anticipate further improvements to mpg
in 2015 with the new fleet.

Car Fleet
In our Trade division, delivery of manager and sales
representatives’ vehicles with more eco-friendly models has
continued as planned. During 2015, 75% of our core fleet will
have CO2 emissions of 99g/km or less.

Appliances
As part of our ongoing programme of energy and water
reducing KPIs, in last year’s report we introduced
a KPI in relation to our bestselling cooling products:

“ To reduce the energy consumption on our bestselling
Lamona fridge freezers by 5% over the next three years (on
a kWh basis).”

I am pleased to report good progress against this KPI with a
2% reduction in energy consumption being achieved in the first
year. We will continue to work towards achieving the 5% target
over three years.

In relation to our other appliances, over the last three years
we have reduced energy consumption by 5% and water
consumption by 7% in our Lamona dishwashers. This has
resulted in the amount of water needed per cycle by up to
five litres. Over the same period, we have improved our own-
branded washer-dryer, reducing energy consumption by 19%
and 16% on water usage.

In previous years, we have also stated our commitment to gaining Energy Savings Trust (EST) certification for some of our
appliances. Unfortunately this scheme came to an end in 2013, at which point we had 19 certified appliances. Despite the
withdrawal of the scheme, we remain committed to improving the design and efficiency of our products.

Greenhouse Gas (GHG) emissions data
Our Greenhouse Gas emissions data is set out below. We are pleased to report that our Scope 2 emissions reduced year-on-
year, as did our turnover ratio (total CO2 emissions/tCO2e per £m) which continued its downward trend. We will continue to adopt
measures aimed at reducing both total CO2 outputs and as a percentage of turnover.

Scope 1 – Direct: Gas

Scope 1 – Direct: Diesel

Scope 1 – Direct: Other fuels

SCOPE 1 – DIRECT: TOTAL

Scope 2 – Indirect: Electricity

SCOPE 2 – INDIRECT: TOTAL

TOTAL (Scope 1 and 2)

Turnover (£m)

Turnover ratio (tCO2e per £m)

Total CO2 emissions
(tonnes) 2014

Total CO2 emissions
(tonnes) 2013

1,836

25,522

1,158

28,516

26,999

55,515

1,090.8

50.9

2,110

23,790

1,250

27,150

27,357

54,507

956.5

57.0

Scope 1 relates to direct emissions released into the atmosphere from activities owned or controlled by the Company. This includes the consumption of gas and vehicle
fuel. Scope 2 relates to indirect emissions associated with the consumption of purchased electricity. These emissions are a consequence of the Company’s activities but
occur at sources which the Company does not own or control.

The methodology used follows the principles of the GHG Protocol and/or ISO14064.

80.0

70.0

60.0

50.0

40.0

Total Carbon usage (000’s tCO2e)
Turnover ratio (tCO2e per £m)
Turnover ratio inflation adjusted (tCO2e per £m)

2009

2010

2011

2012

2013

2014

Howden Joinery Group Plc Annual Report & Accounts 2014Corporate social responsibility (CSR) Report continued

PEOPLE:
SUPPORTING OUR WORKFORCE

Employee responsibility
Our approach: We aim to provide a positive work environment
for all our staff, whether they work in factories, warehouses,
depots or offices. Our culture emphasises the importance
of individual accountability, which means the personal
responsibility of each of us towards those we work with every
day. We are proud of this culture, which encourages openness
and transparency within the business and has been vital to its
growth and development since 1995.

Health & Safety
There has been a significant reduction in the number of
RIDDOR (Reporting of Injuries, Diseases, and Dangerous
Occurrences Regulations 2013) reportable accidents
experienced across the Company this year to 24 compared to
36 in 2013, despite increasing throughput. This is as a result of
increased focus on accident awareness through training, better
information and feedback to all levels on trends and accident
causes which have occurred.

All three manufacturing and distribution sites have once again
been awarded the prestigious “International Safety Award”
given by the British Safety Council. All three sites achieved
Distinctions. It is worth noting that world-wide there were 43
Distinctions awarded (from 550 applicants), with Howdens
receiving three of them.

Additionally, the British Safety Council Audits of our Supply
division demonstrated our continuous improvement and all sites
were recertified to OHSAS 18001 and “5-star” best practice.
We also maintained certification to the ISO 14001 Standard for
Environmental Management.

Sadly, a fatality occurred in November at a depot, where an
LGV driver died while unloading a lorry. Investigations into the
incident are in progress at the time of writing this report and
therefore it is inappropriate to comment further.

Training
Howden Joinery’s heritage and culture means we place a high
value on the whole range of skills – technical, commercial and
interpersonal – that are practised by local tradespeople. We
are keen to promote the use of these skills in the workplace
and interest in them in the wider community.

Employee training at Howdens
Our staff have also benefited from our investment in internal
courses, with over 181,649 training hours completed during
the year. Courses are offered in subjects ranging from HR skills
to manual handling, from diversity and inclusion to health and
safety, from environmental awareness to LGV and fork-lift
truck driving. We plan to continue to invest in training and
development in 2015 as well as maintain a strong in-house
delivery capability as we continue to encourage staff to achieve
training qualifications themselves.

Developing apprenticeships in-house
During 2014, the Group employed 10 modern apprentices in
our Supply division, all of which are apprenticed in engineering.
We introduced a Manufacturing Operations apprenticeship
programme in order to develop multi-skilled machine operators
with the potential of promotion into future leadership roles.
We also employed 270 modern apprentices within the depot
network practising a broad range of skills.

Pioneering bursary scheme for apprentice joiners
As well as helping promote the value of apprenticeships in-
house, we also continue to help the next generation of builders
and joiners by supporting apprentices in the wider community.
In partnership with CITB (the Sector Skills Council and Industry
Training Board for the construction industry), we continue
to offer the Howden Joinery Bursary for new apprentice
joiners and, during 2014, we agreed to extend the funding to
accommodate a further 20 places. The scheme was the first
of its kind in the country and, other than stipulating that the
money be used specifically to fund apprentice joiners, Howdens
has no involvement in choosing either the apprentices or the
companies involved.

Leonard Cheshire Disability: Just over ten years ago we
formed a corporate/charity partnership with Leonard Cheshire
Disability (LCD). Like Howdens, they put local communities
at the heart of their work. Founded in 1948 with over 150
services across the UK, this outstanding and inspirational
charity supports thousands of disabled people every year, both
in the UK and through an international network covering over
50 countries worldwide. To celebrate our 10 year partnership
we have produced a commemorative booklet that profiles our
work together over the years. This is available online at www.
howdens.com/about-us/leonard-cheshire-disability/.

More of detail about our charitable activities can be found
in our ‘Truly Local’ books, which are available online at www.
howdens.com/about-us/atruly-local-business/. These provide a
snapshot of just some of the activities in which we are involved
but are not necessarily documented in this report.

Matthew Ingle
Chief Executive
25 February 2015

Human Rights Policy
Howden Joinery promotes the observance of internationally
recognised labour standards, in particular human rights.
Our employment contracts and CSR policy provide that the
Company will promote these standards and all our employees
must adhere to a code of ethics in order to achieve the highest
possible standard of integrity in our business relationships.

Given the number of international suppliers with which we do
business, the Group also considers the impact of its activities
on human rights throughout its supply chain. All suppliers are
subject to rigorous audits prior to commencing business with us.

The Howdens Board will keep the need for a specific human
rights policy under review.

PEOPLE:
PLAYING AN ACTIVE ROLE IN OUR LOCAL COMMUNITIES

Each depot, manufacturing site, distribution and support centre
fulfils an important role in the life of the area it serves. So as
a locally driven business it is our policy to encourage staff at
each of our sites to support and engage with local community
activities. Cash and stock donations, together with employee
fund raising initiatives, support a broad cross section of local
causes including: schools, colleges, sports clubs, care homes,
hospices, scouts/guides, youth groups, village halls and many
other community activities.

In line with the growth of our business we have significantly
increased our support for corporate projects and the capacity
for each cost centre to support local good causes. This year
our staff were responsible for 3,166 donations to local good
causes (2013: 1,990) amounting to £1.459m across the Group
(2013: £704k).

Howden Joinery Group Plc Annual Report & Accounts 2014Board of directors

WILL SAMUEL

Non-executive Chairman
Appointed non-executive director
July 2006

Appointed Chairman October 2006

MATTHEW INGLE

Chief Executive
Appointed director April 1998

Appointed CEO October 2005

MARK ROBSON

Deputy Chief Executive
and Chief Financial Officer
Appointed director and CFO April 2005

Appointed DCEO May 2014

Committees:
Nominations (Chairman)

Current Appointments:
• Chairman of TSB Bank Group Plc
• Chairman of Ecclesiastical Insurance

Group plc

Current Appointments:
• None

Previous experience:
• MD Magnet Trade
• Set up Howden Joinery in 1995

Previous experience:
• Group FD Delta plc
• Qualified chartered accountant

with Price Waterhouse

Previous experience:
• Senior Advisor to Lazard & Co
• Senior advisor to the Prudential

Regulation Authority (PRA, formerly
the Financial Services Authority)

• Director, Schroders plc
• Co-Chief Executive Officer at Schroder
Salomon Smith Barney (a division of
Citigroup Inc)

• Vice Chairman, European Investment

Bank of Citigroup Inc

• Chairman of H P Bulmer plc
• D eputy Chairman of Inchcape plc
• Non-executive director of the Edinburgh

Investment Trust plc

• Trustee and Honorary Treasurer of

International Alert

• Qualified chartered accountant

MARK ALLEN

TIFFANY HALL

RICHARD PENNYCOOK

MICHAEL WEMMS

Non-executive director
Appointed May 2011

Non-executive director
Appointed May 2010

Non-executive director
Appointed September 2013

Senior Independent
(non-executive) director
Appointed November 2006

Committees:
Audit
Nominations
Remuneration

Committees:
Audit
Nominations
Remuneration
(Chairman from May 2014)

Committees:
Audit (Chairman)
Nominations
Remuneration

Committees:
Audit
Nominations
Remuneration
(Chairman until May 2014)

Current Appointments:
• CEO of Dairy Crest Group plc
• Trustee for The Prince’s

Countryside Fund

• Non-executive dIrector

of Dairy UK

• Director for the GLF

Schools Board

Previous experience:
• Sales & Operations Director
and divisional Managing
Director roles (Dairy Crest
Group plc)

Current Appointments:
• Managing Director at BUPA

Current Appointments:
• CEO of The

Current Appointments:
• Non-executive director of

Home Healthcare

Co-operative Group

Moneysupermarket.com plc

• Senior Independent Director
and Chairman of the Audit
Committee of Persimmon plc

• Non-executive Chairman of

The Hut Group Limited

Previous experience:
• UK Marketing Director BUPA
• Head of Marketing at

British Airways

• Chairman of Airmiles and

BA Holidays

• Head of Global Sales and

Distribution and Head of UK
Sales and Marketing (BA)
• Non-executive director of

Think London

Previous experience:
• Group Finance Director at

WM Morrison Supermarkets
plc, RAC Group plc, JD
Wetherspoon plc, HP Bulmer
Holdings plc and Laura
Ashley Holdings plc

Previous experience:
• Executive director of Tesco plc
• Chairman of House of

Fraser plc

• Chairman of the British

Retail Consortium
• Non-executive director

• Chief Executive Officer at

Welcome Break Holdings Ltd

of Majid al Futtaim, A&D
Pharma and Coles Myer Ltd.

• President of Allders

International North America

• Non-executive director of

Richer Sounds plc
• Qualified chartered

accountant

The terms and conditions of appointment of all directors are available upon request at the Company’s registered office during normal business hours and at the AGM for
fifteen minutes prior to and at the end of the meeting.

Howden Joinery Group Plc Annual Report & Accounts 2014Directors’ report

The directors have pleasure in submitting their report and the audited financial statements for the 52 week period ended
27 December 2014. Comparative figures relate to the 52 weeks ended 28 December 2013.

In order to make our annual report and accounts more accessible, and in keeping with the restructured directors’ report adopted
for the period ended 28 December 2013, a number of the sections traditionally found in this report can now be found in other
sections of this annual report and accounts where it was deemed that the information would be presented in a more connected
and accessible way. The directors’ report is comprised of the sections detailed below and the Business Review and statement on
political contributions on page 31.

Any sections that have been moved have been cross-referenced below for ease of reference:

Located in the Strategic Report:

Principal Group activities, business review and results: The principal activities of Howden
Joinery Group plc and its subsidiaries can be found on pages 1 to 27.

Dividend: Information about the final dividend can be found in the Chairman’s statement on
pages 8 and 9 and the Review of operations and finance on page 15.

Located in the Corporate
Social Responsibility Report:

Greenhouse Gas Emissions: Details of the Group’s greenhouse gas emissions, as required
by Schedule 7 of the Large and Medium-Sized Companies and Groups (Accounts and
Reports) Regulation 2008 (SI 2008/410) as amended by the Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations 2013 (SI 2013/1970), are set out on page 25.

Located in the Corporate
Governance Report:

Share capital, substantial shareholdings and acquisition of the Company’s own shares:
Information in this regard can be found on pages 51 and 52.

Employees: Information about the Group’s employees is located on page 52.

Directors: Details of directors and their interests are on page 52.

Annual General Meeting: Information about the Annual General Meeting, including
reappointment of the Group’s Auditors, can be found on page 52.

A copy of the UK Corporate Governance Code can be accessed at
https://www.frc.org.uk/Our-Work/Codes-Standards/Corporate-governance.aspx

Located in the Nominations
Committee Report:

Directors: Information with regard to the appointment and replacement of directors is
located on page 65.

Employees: Information about the total number of employees and gender diversity statistics
are located on page 64. The average number of employees and their remuneration are
shown in note 8 to the financial statements.

The statements of the directors in connection with the Annual Report and Accounts can be found on pages 66 and 67. These
statements include the Going Concern statement, the Statement of Directors’ Responsibilities, the statements in relation to Audit
Information and Auditors and the Directors’ Responsibility Statement.

BUSINESS REVIEW

The Company is required by the Companies Act 2006 to include a business review in this report.

The information that fulfils the requirements of the business review can be found in the following sections which are
incorporated in this report by reference:

• Chairman’s statement on pages 8 to 9.

• Chief Executive’s statement on pages 10 to 13.

• Review of operations and finance and Review of principal risks and uncertainties on pages 14 to 21 (which includes key

performance indicators) and the illustrated business model on pages 2 to 7.

• Corporate governance report on pages 49 to 54 and Going Concern statement on page 66.

• Audit Committee report on pages 55 to 60.

• Corporate social responsibility report on pages to 22 to 27 containing environmental matters, social & community issues and

additional information on employees.

The full results for the period are shown in the financial statements on pages 68 to 119.

Information about the use of financial instruments by the Company and its subsidiaries is given in note 28 to the financial statements.

The subsidiary and associated undertakings principally affecting the profits or net assets of the Group in the year are listed in
the table of parent company and principal subsidiary undertakings on page 124. There have been no significant events since the
balance sheet date.

POLITICAL CONTRIBUTIONS

The Group made no political donations during the current and previous period.

By order of the Board

Forbes McNaughton
Secretary
25 February 2015

Howden Joinery Group Plc Annual Report & Accounts 2014Directors’ remuneration report –
Summary of directors’ remuneration policy

STATEMENT TO SHAREHOLDERS FROM THE CHAIR
OF THE REMUNERATION COMMITTEE

Dear Shareholder

On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for 2014 in my new role as Chairman
of the Howdens Remuneration Committee. Michael Wemms
stepped down as Chairman of the Committee on 8 May 2014,
and I and the other members of the Committee would like
to thank him for his extensive contribution and for the
insightful input and experience he brought to our discussions
as Chairman.

At the 2014 AGM, we received approval for our remuneration
policy with a vote in favour of 98.4%. We believe that
this clearly demonstrates the high level of confidence
our investors have in the alignment of our remuneration
framework with shareholders and with the continued growth
and development of our Company. In my new role as Chair
of the Remuneration Committee I have been out to meet a
number of our largest shareholders, and their comments
and feedback support this view.

As we are not seeking approval for a new policy this year, we
include a summary of our approved policy in this report to
support our investors in considering the information set out in
our annual report on remuneration. Our full policy is available
to review on our website at www.howdenjoinerygroupplc.com

It is intended that our approved remuneration policy will
continue to apply for this year. The Committee continues to
believe that the structures set out in this policy are the most
appropriate for the business, although we will continue to
monitor these arrangements and will consider whether changes
to the structure are appropriate as part of the remuneration
review planned for later in the year. If it is determined that
policy changes are appropriate, the Committee will seek to
amend the policy and put this to a shareholder vote at the
appropriate time.

Context to reward outcomes
Over the past year we have continued to deliver strong growth
across the business. We have achieved sales of over £1 billion
and our gross margin continues to improve. The strength of our
business model has driven strong cash generation, supporting
return of capital to our shareholders and allowing us to
consider a number of investment opportunities both in the UK
and further afield.

Profit growth and cash management (which are within
management’s control and influence) are considered to be
the key drivers of shareholder value at Howdens. As such, our
incentive arrangements are designed to reward participants
only if strong performance is achieved against these drivers.
The Committee carefully considered appropriate targets for
our incentive schemes based on internal budget figures, prior
year PBT and brokers’ forecasts.

We believe our remuneration policy has played a key role in
helping to achieve our goals and ensuring existing shareholders
benefit from Howdens’ success.

Following an in depth review, we announced a number of
organisational changes in May designed to support the
continued growth and development of our company. As part of
these changes, Mark Robson was appointed to the position of
Deputy CEO and CFO and is now responsible for the day to day
management of the business in addition to his responsibilities
as CFO.

Decisions made in 2014
The Committee met four times in the year, once more than in
our ordinary cycle. The additional meeting was in view of the
organisational changes discussed above, with the Committee
believing it necessary to thoroughly consider and discuss the
remuneration of those executives whose roles have changed. In
particular, the Committee considered an appropriate salary level
for Mark Robson in his new role. Given his significant increase in
remit and his past performance in delivering our strong recent
growth, the Committee awarded him a 5% salary increase
effective from the date he took on his new responsibilities.

This year, payouts for our executive directors under the bonus
were at 127% of salary, reflecting the strong profit growth (37%)
and cash generation (cash flow of £218m) achieved over the
year. Co-Investment plan shares have vested at their maximum
potential, reflecting a PBT growth over the last three years
averaging 20% per annum, and an exceptionally strong share
price increase, from £1.31 (at the date of grant) to £3.64.

The key decisions made by the Committee included:

• Approval of 2014 annual bonus payouts at 127% of

salary following exceptionally strong profit and cash flow
performance in the year.

• Approval of the vesting in full of the 2012 Co-Investment

plan reflecting the strong profit and share price performance
achieved over the last three years.

• Approval for Mark Robson’s revised salary in view of his

new role.

Implementation of policy in 2015
The revised 2014 UK Corporate Governance Code includes
a requirement that clawback and malus provisions apply to
incentive scheme awards. Although our policy does not include
formal clawback provisions, the Committee believe that it
is in the interests of our shareholders to include provisions
allowing the Company to recover amounts paid or reduce
vesting outcomes in certain scenarios. As such, clawback and
malus provisions will apply to awards made under the annual
bonus (for the bonus corresponding to FY15 onwards) and the
Co-Investment Plan (for grants made in 2015 and onwards).
Further details on these provisions are set out in our Annual
Report on Remuneration on pages 39 to 48.

In light of the overall opportunity of the package, executive
directors will not receive a salary increase for 2015. We will
continue to keep these salaries under review.

The PBT and cash flow targets for the annual bonus have been
increased to reflect the improved prospects for our Company
over the coming year, considered in the context of internal
budget and brokers forecasts.

The Co-Investment Plan will continue to be used as our
long-term incentive vehicle for executive directors in 2015. The
PBT target range applying to the plan for 2015 will be 8% to 20%
p.a. growth, in line with the targets for awards made in 2014.
The Committee believes that this range continues to represent
a stretching level of long-term growth for the business.

Finally, I would like to thank my fellow Committee members as
well as those other individuals who supported the Committee
during the year for their hard work and commitment. As a
Committee, we remain committed to open and transparent
dialogue with our shareholders. If you would like to discuss any
part of our remuneration policy, I would welcome your views.

On behalf of the Board

Tiffany Hall
Remuneration Committee Chairman
25 February 2015

Howden Joinery Group Plc Annual Report & Accounts 2014Directors’ remuneration report –
Summary of directors’ remuneration policy continued

Remuneration policy
Howdens Remuneration Policy, as set out in our 2013 Annual Report and Accounts, was approved by shareholders at the 2014
AGM with the intention that it apply for three years from that date. Our Remuneration Policy is also available in full on our website,
at www.howdenjoinerygroupplc.com. No changes are proposed to this policy and so for clarity for shareholders we set out in this
report a summary of its key elements, together with information on our approach to implementing policy in 2014 and 2015.

Future policy table – executive directors
Remuneration is benchmarked against rewards available for equivalent roles in a suitable comparator group. In addition to
benchmarking, the Committee considers general pay and employment conditions of all employees within the Group and is
sensitive to these, to prevailing market conditions, and to governance requirements.

The table below sets out the key components of executive directors’ pay packages, including why they are used and how they
are operated in practice.

Element and how
it supports our
strategy

Base salary

Recognises the
market value
of the executive’s
role, skill,
responsibilities,
performance and
experience.

Benefits

Provides a
competitive level
of benefits.

Annual bonus

Incentivises
annual profit
and cash flow
performance over
the financial year.
Deferral links
bonus payout
to share price
performance over
the medium-term.

Performance Measures

None

Operation

Opportunity

Salaries are reviewed annually,
and are effective from 1
January each year. Salaries
will not be changed outside of
the annual review, except for
in exceptional circumstances,
such as a mid-year change
in role.

Increases will normally be only for inflation and/or in line
with the wider employee population.
Salaries are set within a range defined by a market
benchmark derived from companies of a comparable size
operating in a similar sector (policy is to pay median). The
peer group used is reviewed whenever benchmarking
is performed, and the Committee applies judgement
in identifying appropriate peer group constituent
companies. The individual’s level of total remuneration
against the market is considered at the same time.
Reviews will also take into account the performance of
the individuals, any changes in their responsibilities, pay
increases for the wider workforce and internal relativities.
2014 and 2015 salary levels are detailed in the
‘Statement of implementation of remuneration policy in
2015’ section on page 46.

Howdens pays the cost of
providing the benefits on a
monthly basis or as required
for one-off events.

Benefits are based upon market rates and include receipt
of a car allowance; non-exclusive use of a driver; health
insurance and death-in-service insurance payable by
the Company.

None

Threshold performance under both PBT and cash flow
components will result in a payout of 18% of salary for
2015. The Committee may change the threshold payout
levels over the life of the policy.
The cash flow element can result in a payout of up to 20%
of salary. Achievement against PBT targets can result in
a payout of up to 200% of salary. However as the total
bonus receivable by executives cannot exceed 200% of
salary, the maximum payout under PBT is limited by the
achievement against cash flow targets.
The maximum bonus potential of 200% of salary
represents a notional cap on the profit share component
and the Committee does not envisage this level of payout
being attained.

Performance is assessed
annually against cash flow and
PBT targets.
Any bonus earned in excess of
100% of salary is deferred into
shares. Shares are paid out in
equal tranches on the first and
second anniversary of deferral
date. Payment is subject to
continued employment.
No dividend equivalents accrue
on matching awards.
The Company has the ability
to withhold payment of part or
all of the bonus if it does not
believe the vesting outcome is
a fair reflection of individual or
Company performance.

Performance is measured
over the financial year.
If an event occurs which
causes the Committee
to consider that the
performance targets are
no longer appropriate, the
Committee may substitute
or vary the targets in such
manner as is reasonable
in the circumstances and
produces a fairer measure
of performance and is not
materially more or less
challenging to satisfy.
The Committee may
change the weightings
of the performance
measures over the life
of the policy.

Operation

Opportunity

Performance Measures

PBT performance
is measured over a
three year period. The
targets are set at the
start of each three year
performance period.

The CEO can invest up to the lesser of 650,000 shares or
150% of salary.
The Deputy CEO and CFO* is able to invest an equivalent
proportion of salary.
Each invested share is matched by the Group with up
to two shares, subject to performance. For threshold
performance, 0.3 matching shares vest per invested share.
Note that the maximum matching opportunity allowable
under this policy is set below the limit allowable under the
scheme rules of five matching shares per invested share.
The Company does not intend to make awards above the
policy maximum of two shares per invested share.

The plan allows for awards to be granted to participants
of up to 100% of salary in restricted shares or 200%
of salary in market value options, with threshold
performance delivering 15 percent of maximum.
Awards under this plan have not been granted to
executive directors since 2010 and will not be granted in
years when executive directors also receive CIP awards.

PBT performance would
be measured over a
three year period. The
targets would be set at
the start of the three year
performance period.

Element and how
it supports our
strategy

Co-Investment
Plan (CIP)

Focuses
management
on longer-term
PBT growth than
addressed by the
annual bonus.
Long-term PBT
growth is key to
the generation
of shareholder
value.

Long-Term
Incentive Plan
(LTIP)

An alternative
to the CIP.

Executives have the
opportunity to participate in
the CIP on an annual basis.
The CIP operates over a three
year cycle.
The investment is funded
by executive directors
themselves from their personal
shareholding (deferred annual
bonus shares are not allowable
for investment purposes).
The matching shares vest after
a three year vesting period
subject to performance against
PBT growth targets.
The Company has the ability
to vary the performance
conditions if events happen
which cause the Committee
to consider that they have
ceased to be a fair measure
of individual or Company
performance.
No dividend equivalents
accrue on matching shares.

Awards of restricted shares or
share options may be made
under the LTIP.
Awards are not currently being
granted under the plan but the
Committee retains the flexibility
to use it in future years as an
alternative to the CIP.
The shares or options would
vest after a three year vesting
period subject to performance
against PBT growth targets.
The Company has the ability
to vary the performance
conditions if events happen
which cause the Committee
to consider that they have
ceased to be a fair measure
of individual or Company
performance.

* On 30 May 2014, Mark Robson was promoted from his role of CFO to Deputy CEO and CFO. His remuneration package remains in line with the policy previously
applicable to him as CFO. Further details are laid out in the ‘approach to implementation of policy’ section of the annual report on remuneration on page 39.

Howden Joinery Group Plc Annual Report & Accounts 2014
Directors’ remuneration report –
Summary of directors’ remuneration policy continued

Element and how
it supports our
strategy

Pension

Provides
competitive
long-term savings
opportunities.

Performance Measures

None

Operation

Opportunity

The Howden Joinery Group Pension Plan is a hybrid defined benefit, occupational
pension plan.
The defined benefit pension accrues on a Career Average Revalued Earnings (CARE)
basis at the rate of 1/50th of actual pensionable pay in each year (currently capped at
£142,200; the cap increases annually in line with CPI).
In addition the Company will match any voluntary member contribution made to
the defined contribution top-up section to a maximum of 8% of pensionable pay.
Alternatively, a participant may receive a salary supplement of 8% of salary in lieu
of this defined contribution opportunity.
A pension supplement system operates concurrently with the Plan which recognises that
pension entitlement in respect of the CARE part of the Plan is capped. This supplement is
30% of basic salary above the Plan Cap to reflect competitive market practice.
The CEO has chosen to opt out of membership of the Plan and consequently receives a
salary supplement of 30% of salary in lieu of pension.
This plan is now closed to new entrants. If an executive director joins who is not already
a member of the plan, they will be able to participate in the new auto-enrolment defined
contribution scheme or to receive a supplement payment of 30% of total base salary.

Shareholding
requirement

Strengthens
alignment of
interests between
participants and
shareholders.

Fees for
non-executive
directors

To attract NEDs
who have a
broad range
of experience
and skills to
oversee the
implementation
of our strategy.

Executive directors are
expected to retain vested
shares from deferred bonus
and long-term incentive awards
(net of income tax and national
insurance contributions)
until they reach the minimum
requirements.
Unvested deferred bonus and
long-term incentive shares are
not taken into account.

The fees for the non-executives
are determined by the
Chairman and Chief Executive.
The fee for the Chairman
is determined by the
Remuneration Committee while
the Chairman is absent.
No other services are provided
to the Group by non-executive
directors.

The CEO is expected to build up a holding
of 200% of base salary.
Other executive directors are required to
hold 100% of base salary.

None

NEDs are not eligible
to participate in any
performance related
arrangements.

Fees for non-executive directors are set out in the
“statement of implementation of remuneration policy in
2015” section on page 46.
The fees reflect the time commitment and responsibilities
of the roles. Accordingly committee chairmanship and
Senior Independent Director (SID) fees are paid in
addition to the NEDs’ basic fee. Committee chairmanship
fees apply only to the Audit and Remuneration
Committees. The Chairman receives no fees in addition
to the Chairman’s fee.
Fees may be reviewed every year, and are set within
a range defined by a market benchmark of FTSE 250
companies. Benchmarking is typically undertaken every
three years.

Approach to recruitment remuneration
The treatment and design of the various elements of remuneration paid to new recruits is set out in the table below. The
Committee’s policy is to pay no more than is necessary to attract appropriate candidates to the role. However, in unusual
circumstances, an arrangement may be established specifically to facilitate recruitment of a particular individual. Any such
arrangement would be made only where critical to the recruitment of an exceptional candidate, and within the context of
minimising the cost to the Company.

Component

Policy

General

The Committee’s approach to recruitment remuneration is to pay no more than is necessary to attract
appropriate candidates to the role.

Any new executive director’s ongoing package would be consistent with our remuneration policy as set out
in this report.

Base salary
and benefits

The salary level will be set taking into account the responsibilities of the individual and the salaries paid to
similar roles in comparable companies (policy is to pay median). In certain circumstances the Committee may
initially position the executive director’s salary below the market level and increase it to market levels through
exceptional increases over an appropriate period of time.

The executive director will be eligible to receive benefits in line with Howdens’ benefits policy as set out in the
remuneration policy table.

Should relocation of a newly recruited executive director be required, reasonable costs associated with this
relocation will be met by the Company. Such relocation support could include but not be limited to payment of
legal fees, removal costs, temporary accommodation/hotel cost, a contribution to stamp duty, replacement of
non-transferrable household items and related taxes incurred. In addition, and in appropriate circumstances, the
Committee may grant additional support in relation to the payment of school fees and provision of tax advice.

Pension

The executive director will be able to participate in the auto-enrolment defined contribution scheme or to receive
a supplement payment of up to a maximum of 30% of base salary.

Annual bonus

The executive director will be eligible to participate in the annual bonus scheme as set out in the remuneration
policy table.

The maximum potential opportunity under this scheme is 200% of salary.

Long-term
incentives

The executive director will be eligible to participate in the long-term incentive schemes set out in the
remuneration policy table. This allows for awards to be made under either the CIP or the LTIP (but not both).

Accordingly the executive director may be offered a maximum investment opportunity under the CIP of the lesser
of 650,000 shares and 150% of salary, with each invested share being matched by up to two matching shares.
Alternatively awards may be made under the LTIP to a maximum of 100% of salary in restricted shares or 200%
of salary in options.

Replacement
awards

The Committee may grant the executive director awards to replace awards from a previous employment that are
forfeited. Should replacement awards be made, any awards granted would be no more generous overall in terms
of quantum or vesting period than the awards due to be forfeited. In determining the quantum and structure of
these commitments, the Committee will take into account the fair value and, as far as practicable, the timing
and performance requirements of remuneration foregone.

Howden Joinery Group Plc Annual Report & Accounts 2014Directors’ remuneration report –
Summary of directors’ remuneration policy continued

Policy on payment for loss of office
The treatment of the various elements of remuneration payable to executive directors in a loss of office scenario is set out in the
table below. In exceptional circumstances an arrangement may be established specifically to facilitate the exit of a particular
individual, however any such arrangement would be made within the context of minimising the cost to the Company. The Committee
will only take such a course of action where it considers it to be in the best interests of shareholders. Full disclosure of any
payments will be made in accordance with the new Remuneration Reporting regulations.

Component

Policy

General

Base salary
and benefits

When determining any loss of office payment for a departing individual the Committee will always seek to
minimise cost to the Company whilst seeking to reflect the circumstances in place at the time. As an overriding
principle there should be no element of reward for failure.

In the event of termination by the Company, there will be no compensation for loss of office due to misconduct or
normal resignation. In other circumstances, executive directors may be entitled to receive compensation for loss
of office which will be paid monthly for a maximum of twelve months. Such payments will be equivalent to the
monthly salary that the executive would have received if still in employment with the Company.

Pension

An enhanced pension is payable in the event of retirement through ill health. There is no scope for
enhancements to individuals’ accrued pension entitlements for other loss of office scenarios.

Annual bonus Where an executive director’s employment is terminated after the end of a performance year but before the

payment is made, the executive may be eligible for an annual bonus award for that performance year subject to
an assessment based on performance achieved over the period. No award will be made in the event of gross
misconduct.

Where an executive director’s employment is terminated during a performance year, a pro-rata annual incentive
award for the period worked in that performance year may be payable subject to an assessment based on
performance achieved over the period.

Long-term
incentives
and deferred
annual bonus

The treatment of outstanding deferred annual bonus is governed by written agreements with individuals and
the treatment of long-term incentive awards by the rules of the relevant plan. Individuals are defined as either
a good or bad leaver for the purposes of outstanding incentive awards. Good leavers are those leaving under
pre-specified circumstances (such as retirement, ill health or disability) or those deemed by the Committee at its
absolute discretion as a good leaver given the circumstances surrounding the loss of office. All other leavers are
bad leavers.

If an individual is a good leaver or dies then they will either continue to hold the award which will vest on the
normal vesting date based on Howdens performance (where applicable), or the Committee may exercise
discretion to accelerate vesting of the award, pro-rated to reflect the extent to which the performance targets
have been met (allowing for the curtailed performance period). In both scenarios the amount vesting is pro-rated
for the proportion of the period elapsed when the individual leaves.

If an individual is a bad leaver then all awards to which they are conditionally entitled will lapse in full.

Directors’ remuneration report –
Annual report on remuneration

This annual report on remuneration outlines remuneration related activities and outcomes over the past year. The report
represents the implementation of the Company’s remuneration policy, which was approved by shareholders at the 2014 AGM
and is set out in full in the 2013 Annual Report and Accounts and on the Group’s website.

Those sections of this report which have been audited are indicated in the title to the section.

Approach to implementation of policy
All remuneration paid to our executive directors in 2014 has been in line with our approved policy. Although this policy applies
specifically to executive directors of the Group, Executive Committee members participate in the same incentive schemes as the
executive directors at a reduced level to ensure alignment between the leadership team with each other and with our shareholders.

Mark Robson change in role
On 30 May 2014, Mark Robson was appointed to the role of Deputy CEO and CFO of the Group. In his new role, Mr Robson is
responsible for the day to day management of the business in addition to his responsibilities as CFO, representing a significant
increase in Mr Robson’s remit. Accordingly, the Committee carefully considered market benchmarking information in line with our
policy and determined that an increase of 5%, to £421,000, was appropriate. This increase reflects the extent of Mr Robson’s new
responsibilities, together with his exceptional performance in role and his contribution to our strong profitable growth.

There are no other changes to Mr Robson’s package, which remains in line with policy. As such, areas of our approved policy
applying to the CFO role continue to apply to Mr Robson as Deputy CEO and CFO.

Clawback and malus
In response to the release of the 2014 Corporate Governance Code, the Committee has determined that clawback and malus
provisions should apply to awards made under the Annual Bonus (for the bonus corresponding to the 2015 financial year onwards),
and the Co-Investment Plan and Long-term Incentive Plan (for grants made in 2015 onwards).

Although our remuneration policy does not include a formal clawback policy, the Committee believes that it is in the interests of
our shareholders to implement provisions entitling the Company to recover amounts paid or reduce vesting outcomes in certain
scenarios. It is the Committee’s intention that formal clawback and malus provisions be incorporated into our approved policy when
this is next reviewed.

Further details around the provisions to be implemented for 2015 are set out in the ‘statement of implementation of remuneration
policy’ section on page 47.

Howden Joinery Group Plc Annual Report & Accounts 2014Directors’ remuneration report –
Annual report on remuneration continued

Single total figure of remuneration (subject to audit)
The table below sets out the aggregate remuneration received by directors for 2013 and 2014. Further details on the pension,
annual bonus and Co-Investment Plan figures are contained in following sections.

Base
salary/fees

Taxable benefits1

Bonus

2014

2013

2014

2013

2014

2013

Long-term
Incentive awards

2014
(CIP)

2013
(CIP)

Pension

Total

2014

2013

2014

2013

£000’s

Year

Chairman

Will Samuel

190

180

–

190

180

Executive
directors

Matthew Ingle

Mark Robson2

572

413

572

401

Sub-total

1,175

1,153

Non-executive
directors

Mark Allen

Angus Cockburn

Tiffany Hall

Richard
Pennycook

Michael Wemms

Total

Note

–

493

–

728

513

723

509

4,732

3,685

3,319

2,589

1,241

1,232

8,051

6,274

172

171

343

170

166

6,223

5,168

4,465

3,698

336 10,878

9,046

–

1,374

1,344

1,241

1,232

8,051

6,274

343

336 11,077

9,237

1 The benefits figure comprises receipt of a car allowance; non-exclusive use of a driver; health insurance and death in service insurance payable

by the Company.

2 Mark Robson received a salary increase of 5% effective as of 30 May 2014 (from £401,000 to £421,000), reflecting his additional responsibilities in
his new role as Deputy CEO and CFO. The figure shown above therefore represents 5 months at his original salary and 7 months at the revised figure.

3 Due to a clerical payroll error, Mr. Robson was not paid a component of his benefits package in 2012 or 2013. The amounts not paid to Mr. Robson in

2012 or 2013 will be paid to him as part of his 2015 benefits package to ensure that his overall remuneration position is up to date.

The aggregate Directors’ remuneration, including salary, bonus, benefits and cash pension allowances is £3,025k.

Additional requirements in respect of single figure table (subject to audit)
Annual bonus targets and outcomes
The table on the following page sets out the 2014 annual bonus targets and performance outcomes which underlie the bonus
figures shown in the single total figure of remuneration table for 2014.

These targets were set by the Remuneration Committee in February 2014 in line with the approach detailed in our approved policy.
As incentive targets they are designed to be stretching for participants in light of Howdens’ budget, prior year PBT and brokers’
forecasts. They do not represent the Group’s budget figures for last year.

The Remuneration Committee was satisfied that the payments fairly reflected Group performance for 2014.

PBT

Cash flow

Overall

Threshold

Target

Above
target Achieved Threshold

Target Maximum Achieved

Total

Cash Deferred

Performance

£138m £161m £185m £189m

£148m £170m

£189m £218m

Payment
(% of salary
unless
otherwise
stated)

10%

85%

105%

107%

15%

20%

20% 127% 100%

Outcomes for executive
directors (£000)

Matthew Ingle

Mark Robson

726

524

572

413

27%

154

111

Co-Investment Plan
The table below sets out the details of the 2012 Co-Investment Plan targets and performance outcomes which underlie the Co-
Investment Plan figures shown in the single total figure of remuneration table for 2014. These awards will vest on 26 March 2015.

The 2012 CIP is based on three year growth in PBT from that achieved in 2011. In our 2011 Annual Report and Accounts the
PBT figure for the year was disclosed as £110.0m. This was updated in the FY 2012 Annual Report and Accounts to £111.0m in
view of the closure in 2012 of the Asia Supply Division and subsequent recategorisation of £1.0m of 2011’s “Cost of sales” as a
“Discontinued operations: Loss before tax – exceptional item”.

In such scenarios the Committee believes that it should determine on a case by case basis whether an adjustment should be made
through consideration of a range of factors including materiality, the extent to which the circumstances are within management’s
control and the impact on the overall vesting outcome.

Consideration of 2014 PBT indicated that the base PBT figure used was not material for the purpose of calculating the 2012 Co-
Investment Plan vesting outcome, with full vesting being projected in either scenario. As such, the Committee determined that the
restated figure of £111m should be used in this case.

Performance

Vesting (matching shares per invested share)

Three year PBT growth

Threshold

6% p.a.

0.3

Maximum

12% p.a.

2.0

Achieved

20% p.a.

2.0

Given the performance achieved as set out above, the table below sets out the value of this award for participants. This is based on
a share price of £3.64, being the three-month average share price to 27 December 2014.

Outcomes for executive directors

Matthew Ingle

Mark Robson

Number of
awards vesting

Total value at £3.64
per share

(‘000)

1,300

912

(£000’s)

4,732

3,319

Howden Joinery Group Plc Annual Report & Accounts 2014Directors’ remuneration report –
Annual report on remuneration continued

Total pension entitlements (subject to audit)
Executive directors are eligible to participate in the Howden Joinery Group Pension Plan (the Plan), details of which are provided in
the policy table on page 36. The plan is not open to new joiners.

The table below sets out the accrued pension for both executive directors, with pension values calculated using the HMRC method.
No additional benefits become receivable if executive directors retire early. Matthew Ingle had a fully funded pension position
in 2006 and hence has chosen to opt out of membership of the Plan. Mr Ingle therefore receives a salary supplement of 30% of
salary in lieu of pension (£171,510 in 2014).

Although Mr Ingle has now reached his normal retirement date under the Plan, he did not draw any pension in the year.

Accrued
pension at
27 Dec 2014
£000’s

Normal
retirement
date

50 28/09/2014

29 16/01/2019

Name

Matthew Ingle

Mark Robson

Pension value in the
year from defined
benefit component

Pension value in the
year from defined
contribution component

Pension value in
year from cash
allowance

Total

£000’s

–

172

171

Loss of office payment or payments to past directors (subject to audit)
No loss of office payments or payments to past directors were made in the year under review.

Scheme interests awarded during the financial year (subject to audit)
During 2014 the executive directors were invited to participate in the Co-Investment Plan. The plan operated in line with our
approved policy, and as such was in line with awards granted in 2013, as follows:

• The CEO was able to invest up to the lesser of 650,000 shares and 150% salary of his own shares into the plan for three
years. At the time of award, 150% of salary equated to 226,566 shares (based on a closing share price of £3.79 on the
day prior to grant).

• The Deputy CEO and CFO was able to invest up to the same proportion of salary as the CEO.

• Both the CEO and Deputy CEO and CFO invested the full amount.

• Under the Plan, each invested share is matched by up to two additional shares which vest subject to the achievement of

stretching PBT growth targets.

• In setting the performance targets, the Remuneration Committee aims to align management’s reward with longer-term PBT

growth which is central to the achievement of the Group’s strategy. Targets for the 2014 CIP were set in line with policy and as
such provide a range which represents long-term success for Howdens.

• This award is not subject to a clawback provision, however the Company does retain the right to vary the performance

conditions if events happen which cause the Committee to consider that they have ceased to be a fair measure of individual or
Company performance. Future awards under the CIP will be subject to a clawback provision, as set out in the “implementation of
remuneration policy in 2015” section of the report on page 47.

The table below provides further details of this award.

Nature of award

Level of award

PBT component vesting
schedule

Restricted shares awarded under the Co-Investment Plan

Executive

CEO

Deputy CEO & CFO

Number of
invested shares

Maximum potential
matching shares

226,566

158,917

453,131

317,834

Face value of
CIP award*

£1,715,101

£1,203,002

PBT growth
performance condition

20% p.a.

Number of matching shares that
would vest per invested share

2.0

Straight-line vesting between these points

8% p.a.

Less than 8% p.a.

0.3

–

Performance period

Vesting date

Performance measured from FY2014 to FY2016

26 March 2017

* Based on a share price of £3.79, being the closing price on the 25 March 2014 (source: Datastream). Represents matching shares only.

Statement of directors’ shareholding and share interests (subject to audit)
In order that their interests are aligned with those of shareholders, executive directors are expected to build up and maintain a
personal shareholding in the Company.

Under the share ownership guidelines the Chief Executive is required to hold a personal shareholding equal to twice his basic
salary. Other executive directors are required to hold a personal shareholding equal to their basic salary. Shares deferred under
the deferred bonus plan and unvested incentive shares are not counted towards this requirement.

There are no shareholding guidelines for non-executive directors.

The table below sets out the total shares in the Group held or potentially held by directors and the extent to which the executive
directors have met the shareholding guidelines.

Shareholding
requirement
%

Shareholding
requirement
(number of
shares)*

Owned
outright
(including
connected
persons)

Share awards
subject to
performance
conditions

Options
subject to
performance
conditions

Subject to
deferral

Vested but
unexercised
options

Current
shareholding
(% of salary)*

Guideline
met?

200%

100%

N/A

314,313 4,570,661

22,532

2,473,761

115,730 1,975,403

16,066 1,735,170

–

2,910%

1,708%

N/A

40,000

3,000

42,000

Director

Matthew Ingle

Mark Robson

Will Samuel

Mark Allen

Tiffany Hall

Richard Pennycook

Michael Wemms

* Based on a share price of £3.64, being the three-month average share price to 26 December 2014 (source: Datastream). This is calculated using those shares owned

outright by the executive director only.

The table above highlights the significant investment held by executive direct ors in Howdens shares, which is well in excess of that
required under their shareholding guidelines.

Howden Joinery Group Plc Annual Report & Accounts 2014Directors’ remuneration report –
Annual report on remuneration continued

The table below sets out options exercised by the executive directors in the year, following the full vesting of option awards in 2008,
2012 and 2013.

Director

Matthew Ingle

Mark Robson

Performance graph and table

No of options
exercised

Average
exercise Price

3,756,045

–

£0.65

–

Average market
value at exercise
date

Average gain on
exercise of share
options

£3.70

–

£3.05

–

500

450

400

350

300

250

200

150

100

Year

Dec 09

Dec 10

Dec 11

Dec 12

Dec 13

Dec 14

FTSE 250 (excluding Investment Trusts)

Howdens

CEO single figure1 (£000’s)

Annual bonus – % of maximum

LTI vest – % of maximum

20092

1,399

63%

–

20102

1,458

69%

–

20113

6,083

66%

100%

20124

3,401

51%

100%

20135

5,168

63%

89%

20146

6,221

64%

100%

The graph above illustrates the Company’s TSR performance relative to the constituents of the FTSE 250 index (excluding
investment companies) of which the Company is a constituent. It shows that over the past six years Howden Joinery Group has
generated significantly higher returns than the FTSE 250 (excluding Investment Trusts).

Beneath the graph is a history of the CEO single figure and incentive payout levels. It shows that the bonus has recognised
consistently strong annual performance, and that long-term incentives (LTI) have reflected the challenges that faced the Company
after 2008 and recognised the turnaround delivered by the Group since then. These figures are buoyed by significant share price
increases over the periods, as illustrated by the graph.

Notes

1. Each CEO single figure has been prepared as per the prescribed methodology, and includes base salary, benefits, pension and annual bonus payments. The figures

also include long-term incentive vests where relevant.

2. No long-term incentives vested which relate to the 2009 and 2010 CEO single figures.

3. The 2011 CEO single figure includes the vesting of the 2009 premium priced option awards. This comprised two equal tranches of options, one with a premium

exercise price of 25p and the other with a premium exercise price of 50p (share price at grant was 18.75p). The awards vested in full as cumulative PBT in the three
financial years ending in 2009, 2010 and 2011 exceeded the target set of £90 million. The value shown in the single figure reflects the significant increase in share
price over the period to £1.188 at the date of vest (a growth of 81% p.a.).

4. The 2012 CEO single figure includes the vesting of the 2010 market priced option award, which had an exercise price of 87p. The share options vested in full as the
Group’s 2012 PBT exceeded the maximum growth target of RPI + 8% p.a. on 2009 PBT. The value shown in the single figure reflects the significant increase in share
price over the period to £2.38 at the date of vest (a growth of 43% p.a.).

5. The 2013 CEO single figure includes the partial vesting of the 2011 CIP award. 89% of the matching shares vested as the Group’s 2013 PBT had grown at 11% p.a.
on 2010 PBT. The value shown in the single figure reflects the significant increase in share price growth over the period to £3.19 (the three-month average to 28
December 2013, source: Datastream) from £1.10 (at the date of grant), a growth of 43% p.a.

6. The 2014 CEO single figure includes the full vesting of the 2012 CIP award. 100% of the matching shares vested as the Group’s 2014 PBT had grown at 20% p.a. on
2011 PBT. As with the CIP award vesting in 2013, the value shown in the single figure reflects the significant share price growth over the period to £3.64 (the three-
month average to 26 December 2014, source: Datastream) from £1.31 (at the data of grant), a growth of 41% p.a.

Percentage change in remuneration of director undertaking the role of chief executive
The table below sets out the change in short-term pay from 2013 to 2014 of the CEO compared to all employees
(on a per capita basis).

Salary

Taxable benefits

Bonus

£000’s

£000’s % increase

£000’s

£000’s % increase

£000’s

£000’s % increase

2014

2013

2014

2013

2014

2013

CEO

572

–

All full time employees
(per capita)

(0.2)%

2.0%

726

723

0.4%

(4.2)%

10.1%

The slight decrease in the average per capita salary for our wider workforce reflects a significant number of new recruitments in the
year (from an average monthly number of full time equivalent employees of 6,499 in 2013 to 7,210 in 2014). These recruitments
were typically at a more junior level, positioned below the average salary of the wider workforce.

The average salary increase awarded to our existing employees in the year was 3%, in recognition of the continuing strong
performance of our business. The increase in bonus payouts to our workforce further reflects the significant growth achieved in the
year and the Company’s intention that our employees are rewarded for driving this success.

For 2015 the CEO will receive no salary increase, compared to an anticipated typical wider workforce increase of c. 3% of salary.

Relative importance of spend on pay
The table below sets out the change in total remuneration spend of the Group from 2013 to 2014 compared to: the total dividend
paid by the Group; the total remuneration spend of the Group as a percentage of revenue; and the two incentive performance
measures PBT and cash flow. The figures are shown in £m, unless otherwise specified.

Year

2013

2014

% increase

Total remuneration
spend

Total dividend

£m

256.2

286.5

12%

£m

23.3

40.3

173%

Total remuneration
spend as a %
of revenue

27%

26%

(3)%

PBT

£m

138

189

37%

Cash flow*

£m

158

218

38%

* Net cash flow from operating activities, being the definition used for the annual bonus scheme.

The figures above reflect our continuing growth in terms of financial performance, progression of Howdens’ dividend policy, and a
significant increase in our workforce (as detailed above). We note that as new recruits have typically been at more junior roles in the
business, the total remuneration spend as a percentage of our revenues has reduced.

External appointments
It is recognised that executive directors may be invited to become non-executive directors of other companies and that exposure to
such duties can broaden their experience and skills, which will benefit the Company. Howden Joinery Group allows executive directors
and other appropriate senior employees to accept a maximum of one non-executive appointment outside the Company, subject to
permission from the Committee, provided this is not with a competing company nor likely to lead to conflicts of interest. No such
appointments are currently in place. Executive directors may retain the fees paid to them in respect of their non-executive duties.

Howden Joinery Group Plc Annual Report & Accounts 2014Directors’ remuneration report –
Annual report on remuneration continued

Statement of implementation of remuneration policy in 2015
Remuneration policy will be implemented from 2015 as follows:

Base salaries and fees
Base salary increases for 2015 are set out in the table below:

Matthew Ingle
Mark Robson

2014

Salary

£000’s
572
421

Percentage Increase
from 2013
–
5%*

2015

Salary

£000’s
572
421

Percentage increase
from 2014
–
–

* In July 2014, Mark Robson received a salary increase of 5% (from £401,000 to £421,000) applied retrospectively from 30 May 2014, which was the date on which Mr

Robson took on his new responsibilities as the Group’s Deputy CEO and CFO. No other changes were made to Mr Robson’s remuneration package.

NED fee increases for 2015 are set out in the table below. NED fees have not been increased since 2013.

Chairman fee
Basic NED fee
Additional SID fee
Committee Chair fee

2014

Fee

£000’s
190
45
3
8

Percentage increase
from 2013
–
–
–
–

2015

Fee

£000’s
190
45
3
8

Percentage increase
from 2014
–
–
–
–

Annual bonus measures
The table below sets out annual bonus measures for 2015. This is the same structure as used in 2014 and is in line with our
approved policy. Targets for these measures are considered commercially sensitive by the Committee and so are not disclosed
here. The profit share percentages for CEO and Deputy CEO and CFO have been reduced from 0.325% and 0.228% respectively to
reflect increased performance expectations for 2015. Performance targets, together with achievement against them, will be set out
in full in the 2015 Annual Report on Remuneration.

PBT

Definition
Pre-exceptional profit before tax from
continuing operations

Performance level
Threshold
Target
Above target

Cash flow Net cash flow from operating activities,

taking into account the efficiency with which
working capital is used, and adjusted for
exceptional items

Threshold
Target
Maximum

Payout level
10% of salary
85% of salary
Profit share for the CEO: 0.246% of PBT.
Profit share for the Deputy CFO: 0.181% of PBT.
Subject to aggregate bonus payout cap
of 200% of salary
8% of salary
15% of salary
20% of salary

Any bonus earned in excess of 100% of salary will be deferred into shares. Deferred shares will be paid out in equal tranches on
the first and second anniversary of deferral date.

Co-Investment Plan measure and targets
The table below sets out CIP performance measures and targets for awards to be made in 2015:

PBT component
vesting schedule

PBT growth performance condition
20% p.a.

Number of matching shares that
would vest per invested share
2.0

Straight-line vesting between these points

8% p.a.
Less than 8% p.a.

0.3
–

Clawback and malus provisions
The 2015 annual bonus and Co-Investment Plan grants will be subject to provisions that allow the Committee to reduce amounts
vesting (malus) or reclaim awards paid (clawback) as follows:

Cash bonus (up to 100% of salary)

Clawback provisions will apply for a period of two years following payment.

Deferred bonus (50% of deferred amount –
one year deferral period)

Malus provisions will apply for the deferral period (one year) with clawback
applying for a further year following vesting.

Deferred bonus (50% of deferred amount –
two year deferral period)

Co-Investment Plan

Malus provisions will apply for the deferral period (two years).

Clawback provisions will apply to amounts vesting under the CIP for
two years following the vesting date.

Clawback provisions will apply in the event of material misstatement of accounts, erroneous assessment of a performance target,
where the number of plan shares under an award was incorrectly determined, or gross misconduct by a director.

Consideration by the directors of matters relating to directors’ remuneration
Membership of the Committee
The Remuneration Committee comprises of four independent non-executive directors who have no personal financial interest,
other than as shareholders, in the matters to be decided. During the year, the members of the Committee were:

• Tiffany Hall (Chairman of the Committee from 8 May 2014)

• Mark Allen

• Richard Pennycook

• Michael Wemms (Chairman of the Committee until 8 May 2014)

Under its terms of reference (published in the Governance section of Howden Joinery Group Plc website at
www.howdenjoinerygroupplc.com and reviewed on an annual basis) the Committee is responsible for determining
the broad policy and specific remuneration packages for executive directors, the Company Secretary and other members
of the Executive Committee, including pension rights and, where applicable, any compensation payments. The Committee
is also regularly updated on pay and conditions applying to other employees in the Company.

The Committee met four times during 2014 and attendance of the Committee is shown in the table below. The meetings covered
the following key areas:

• Approve salaries for the Executive Board members and Executive Committee, including the increase for Mark Robson resulting

from his change in role.

• Review the developments in corporate governance best practice and competitive market practice trends during the course of

the year, including the provisions of the revised Corporate Governance Code.

• Review and approve the remuneration report to shareholders.

• Review and approve the Chairman’s fees.

• Review and approve the terms and conditions of the annual bonus and long-term incentives awarded in 2014, including

determining the appropriate performance targets.

• Review and approval of annual bonus payouts and share-based awards vesting in 2014.

• Review and approve the terms of reference of the Committee.

• Consider and approve clawback and malus provisions for the Company’s incentive schemes.

• Initial review of incentives for 2015.

• Review of the balance between risk and reward to ensure that the incentives are compatible with the Company’s risk policies

and systems. The Committee concluded that the incentives did not expose the Company to any excessive risk and were
appropriately managed.

Howden Joinery Group Plc Annual Report & Accounts 2014Directors’ remuneration report –
Annual report on remuneration continued

Attendance at Remuneration Committee meetings is set out in the table below:

Committee member

Mark Allen

Tiffany Hall*

Richard Pennycook

Michael Wemms*

Attendance

Number of
meetings

* Denotes Chairman. Michael Wemms was Remuneration Committee Chairman for the February Remuneration Committee meeting and until 8 May 2014. Tiffany Hall

was Remuneration Committee Chairman thereafter and was Chairman of the June, July and November Remuneration Committee meetings.

Advice to the Committee
The Committee regularly consults with the Chief Executive on matters concerning remuneration, although he is never present when
his own reward is under discussion. The Company Chairman attends the Remuneration Committee by invitation except when his
own remuneration is determined. The Company Secretary acts as secretary to the Committee but is never present when his own
reward is determined.

The Committee also has access to detailed external information and research on market data and trends from independent
consultants. PricewaterhouseCoopers LLP (PwC) is the Committee’s retained independent advisor and provided advice to
the Committee during the year. PwC has been independent advisor to the Committee since 2007, and was appointed by the
Committee as the result of a tender process. Work undertaken by PwC for the Committee included updating the Committee
on trends in compensation and governance matters and advising the Committee in connection with benchmarking of the
total reward packages for the executive directors and other senior members of staff. A representative from PwC attends each
meeting of the Remuneration Committee. Fees paid to PwC in relation to remuneration services provided to the Committee
in 2014 totaled £137,450, with fee levels based on the quantity and complexity of work undertaken. PwC also provided risk
assurance and tax advice to the Company during 2014.

The Committee reviews the objectivity and independence of the advice it receives from PwC at a private meeting each year. It is
satisfied that PwC is providing robust and professional advice. PwC is a member of the Remuneration Consultants’ Group which
operates a code of conduct in relation to executive remuneration consulting in the UK.

Statement of voting at general meeting
The table below shows the voting outcome at the May 2014 AGM for the approval of the 2014 Remuneration Report and
Remuneration Policy.

Votes

1 10,319,810 votes (2% of all votes) were withheld.

2 438,496 votes (0% of all votes) were withheld.

Remuneration Policy1

Remuneration Report2

For

98.41%

Against

1.59%

For

98.83%

Against

1.17%

The Committee was pleased with the strong vote in favour received from shareholders for both our remuneration policy and annual
report on remuneration.

Tiffany Hall
Remuneration Committee Chairman
25 February 2015

Corporate governance report

STATEMENT OF COMPLIANCE

THE BOARD

The Company remains committed to the principles of
corporate governance contained in the UK Corporate
Governance Code (the “Code”) for which the Board is
accountable to shareholders.

Throughout the 52 weeks ended 27 December 2014, the
Company has been in compliance with the provisions, including
the main and supporting principles as set out in the Code,
applicable to accounting periods commencing on or after
1 October 2012.

Examples of how the main and supporting principles have been
applied are set out below and in the Remuneration report and
Committee reports. The Board received a formal update in
September 2014 on the amendments made to the Code by the
FRC during the year and continue to apply the Code in the spirit
in which it was adopted.

INTRODUCTION FROM THE CHAIRMAN

The financial, strategic and organisational progress made
during 2014 was facilitated by a stable and effective Board
with clearly defined responsibilities. Our priority is to ensure the
long-term sustainability of the Company has absolute primacy
and we have therefore invested time and effort during the year
on strategic and organisational development. As a Board we
are acutely aware that we must remain vigilant in ensuring that
the requisite structural safeguards are in place to protect the
interests of our key stakeholders and realise the full potential
of the business.

I have stated previously that, as a locally empowered,
entrepreneurial business, Howden Joinery is dependent
on a strong, effective and consistent governance culture
throughout the business, and this remains the case. Howdens
has a distinctive and clearly defined culture which has been
a principal cause of its success. Our core values are based
around personal accountability, fair dealing, respect for others
and recognition of effort. We insist on the importance of
keeping our promises and we put direct, personal relationships at
the heart of our business. Safeguarding and sharing the culture
and values of the business is a primary function of the Board.

The Board is responsible for leading the corporate governance
agenda and the purpose of this report is to set out in detail
the structure of the Board, the Group’s approach to risk and
internal control, and to provide some detail on our shareholder
base and share capital structure.

Each of the Board’s principal Committees has a dedicated
report and therefore any information relating to Audit,
Remuneration or Nominations Committee matters can be
found therein.

Role
The business of the Group is managed by the Board who
may exercise all the powers of the Company subject to the
provisions of the Articles of Association, the Companies Act
and any ordinary resolution of the Company.

The Board has responsibility for the overall management and
performance of the Group. They are collectively responsible for
challenging and assisting in the development of strategy and
ensuring that there are sufficient resources in place to meet
the strategic objectives which have been set.

The directors are also responsible for determining the nature
and extent of significant risks and maintaining sound risk
management and internal control procedures throughout
the Group.

The Board reviews the performance of and provides counsel
to the senior management in their day to day running of the
business, and is ultimately responsible for the safeguarding of
shareholders’ interests and ensuring its own effectiveness.
The Board is also responsible for protecting the culture and
values of the business, a role particularly pertinent to Howdens
where integrity, respect and recognition are fundamental
tenets of the business.

Decisions reserved for consideration by the Board are
detailed in a schedule which is reviewed annually and was last
reviewed and approved in January 2015. These key matters
include decisions about strategy, acquisition and disposals,
risk management and internal control, capital projects over a
defined level, annual budgets, Group borrowing facilities and
consideration of significant financial and operational matters.
The Board also considers legislative, environmental, health &
safety, governance and employment issues.

Board composition
The Board is structured to ensure that there is a clear
distinction between the strategic functions of the Board and
the operational management of the Company. The Board
currently comprises two executive directors, the Chairman and
four non-executive directors. Details of the individual directors
can be found on page 28 to 29.

Will Samuel was the non-executive Chairman during the
whole period.

Howden Joinery Group Plc Annual Report & Accounts 2014Corporate governance report continued

Executive directors
Matthew Ingle continued in his role as Chief Executive during
the period. In addition to his role as Chief Financial Officer,
Mark Robson was promoted to Deputy Chief Executive in May
2014 and as such assumed responsibility for the day-to-day
management of the business. Mr Ingle was appointed to the
Board in 1998; Mr Robson in 2005.

Non-executive directors
The non-executive directors have been selected for the
diversity of their backgrounds as well as their personal
attributes and experience. The current board members bring a
wide range of skills and experience to the Board and all actively
contribute in discussion.

The Board considered that the following directors were deemed
to be independent during the period:

• Mark Allen

• Tiffany Hall

• Richard Pennycook

• Michael Wemms (Senior Independent Director)

The Chairman, Will Samuel, was considered to be
independent on appointment as outlined in the Code. At all
times during the period the Company adhered to provision
B.1.2 of the Code which provides that at least half of the
Board excluding the Chairman must be independent and to
the provisions of the Code relating to the composition of the
Audit, Remuneration and Nominations Committees.

The Board is proposing that all of the directors will be subject to
re-election at the 2015 AGM.

Attendance
The Board holds regular meetings and receives accurate
and timely information. During 2014, the Board held seven
formal Board meetings and a number of other meetings and
teleconferences to discuss and review progress on issues
affecting the Group during the year.

Attendance

No. of meetings

Attendance at the Committee meetings of the Board are set out
in the individual committee reports.

If a director is unable to attend a meeting, they are
nevertheless provided with all the papers and information
relating to the meeting and are encouraged to discuss the
issues arising directly with the Chairman and executive
directors. The non-executive directors also met twice during
the year without the executive directors present.

Division of responsibilities
The roles of Chairman and Chief Executive are separate and
clearly defined. The Chairman is primarily responsible for
leadership of the Board and has a pivotal role in creating the
conditions for individual director and board effectiveness
including ensuring a culture of openness and debate in
the boardroom. The Chairman is responsible for setting
the Board’s agenda and works closely with the Company
Secretary in this regard. He ensures that adequate time for
discussion is afforded to all agenda items at meetings. It is
also the responsibility of the Chairman to ensure effective
communication with the shareholders. The executive directors
are responsible for satisfactory execution of the policies and
strategy agreed by the Board.

In accordance with the Code, the Board has established Audit,
Remuneration and Nominations Committees, each with defined
terms of reference. The membership of the Committees and
their terms of reference are reviewed annually and are available
on the Group’s website, www.howdenjoinerygroupplc.com. The
work of each of the Committees is considered in individual
reports in this Annual Report and Accounts.

The Group has an Executive Committee comprising those
members detailed on page 127. The principal purpose of
the Committee, which meets at least twice a month, or more
frequently if required, is the implementation of the Group’s
strategy and operational plans. The Committee monitors the
operational and financial performance of the business, as well
as being responsible for the optimisation of resources and the
identification and control of operational risk within the Group.

Will Samuel*
Matthew Ingle
Mark Robson
Mark Allen
Tiffany Hall
Richard Pennycook
Michael Wemms

* denotes Chairman

7
7
7
7
7
7
7

Pensions Committee and Disclosure Committee
The Board has also established a Pensions Committee dealing
with matters associated with the Group’s pension scheme (the
work of this Committee can be found in its annual report on the
Group’s website at www.howdenjoinerygroupplc.com) and a
Disclosure Committee which considers matters which could
give rise to an obligation to make a market announcement
under the FCA Listing Rules.

This table above shows the number of meetings individual
directors could have attended (taking account of eligibility,
appointment and retirement dates during the year) and their
actual attendance.

Board evaluation
During the year, the Board agreed that the 2014 evaluation
would be undertaken by the Senior Independent Director, with
support from the Company Secretary. The last Board evaluation
was undertaken by Internal Audit Limited, an external
consultant, in accordance with provision B.6.2 of the Code.
The evaluation was undertaken following the September Board
meeting and was conducted within a methodology previously
agreed with the Board. This comprised a series of interviews
with all Board members and focused on the following areas:

• the size, balance and dynamics of the Board;

• an overview of protocol, debate and decision making

at Board and Committee meetings;

• the performance of individual directors;

• organisational development at Board and senior

management level;

• the Board’s approach to strategy and to risk governance;

• the oversight by the Board of financial and operational

performance, and of the issues around resources, people,
behaviour and culture;

• company secretarial support and Board information; and

• shareholder focus.

The evaluation report was presented to the Board by the Senior
Independent Director in February 2015 and the Board
accepted its findings. Subsequent to the review, the Chairman
and Company Secretary implemented a number of
recommendations to better facilitate and safeguard effective
behaviours at Board level.

It should be noted that there is a formal procedure to allow
all directors to take independent external advice if and when
necessary at the Company’s expense. In addition, working
with the Chairman, the Company Secretary is responsible for
ensuring that Board procedures are followed and all directors
have access to his advice and services.

In line with the Board’s stated policy, and in accordance with
provision B.6.2 of the Code, the 2015 evaluation exercise is
scheduled to be undertaken internally.

Directors’ indemnity & insurance
In accordance with the Articles of Association, the Company has
provided indemnities to the directors (to the extent permitted by
the Companies Act) in respect of liabilities incurred as a result
of their office. In addition the Company maintains appropriate
insurance cover against legal action brought against it or its
subsidiaries, directors and officers. Neither the indemnity nor
insurance provides cover in the event that the director is proved
to have acted dishonestly or fraudulently.

SHAREHOLDERS AND SHARE CAPITAL

Relations with shareholders
The Board considers its relationship with both institutional
and private investors to be important and readily enters into
dialogue with investors. On behalf of the Board, the Company
has consulted extensively with its principal shareholders
during the course of 2014 in relation to the ongoing progress
of the Company and also in relation to identifying appropriate
executive incentive arrangements. The Company is aware of
the stewardship obligations of institutional investors as set out
in the UK Stewardship Code and will continue to work with its
institutional investors to ensure that they are able to satisfy
these requirements.

Both of the executive directors, the Chairman, and a number
of non-executive directors met with shareholders during the
year and all of the directors make themselves available for
meetings with shareholders as required.

The Company’s updated corporate website
(www.howdenjoinerygroupplc.com) includes a specific
investor relations section and provides an effective channel
for communication with existing and potential investors. The
Board receives regular reports from the Deputy Chief Executive
and Chief Financial Officer with regard to relations with the
major shareholders and developments and changes in their
shareholdings. The Board also commissions regular feedback
reports from the Company’s joint brokers, UBS and JP Morgan
Cazenove.

Substantial shareholdings
As at 25 February 2015, the Company had been notified
in accordance with Rule 5 of the Disclosure and Transparency
Rules, of the following voting rights as a shareholder of
the Company:

Blackrock Inc

Standard Life Investments Ltd

Legal & General Group Plc

Odey Asset Management LLP

Schroders Plc

Jupiter Asset Management Ltd

Old Mutual Asset Managers (UK) Ltd

Percentage of
issued share
capital/voting rights

9.99%

9.94%

4.97%

4.95%

4.86%

4.55%

4.11%

The percentage interest is as stated by the shareholder at the
time of notification and current interests may vary.

Howden Joinery Group Plc Annual Report & Accounts 2014Corporate governance report continued

Annual General Meeting
The 2015 Annual General Meeting (AGM) is to be held at UBS
Investment Bank, 1 Finsbury Avenue, London, EC2M 2PP on
6 May 2015 at 11:00am.

The AGM provides shareholders with an opportunity to discuss
the Group’s progress and operations directly with the Board.
At the AGM, the Company proposes separate resolutions on
each substantially separate issue and the numbers of proxy
votes cast for and against each resolution are made available
to shareholders when voting has been completed. The notice of
the AGM is sent to shareholders at least twenty one clear days
before the meeting.

Deloitte LLP have expressed their willingness to continue in
office as auditors and a resolution to reappoint them will be
proposed at the forthcoming AGM.

Share capital
Details of the issued share capital, together with details of
the movements in the Company’s issued share capital during
the year are shown in note 23. The Company has one class of
ordinary shares which carry no right to fixed income. Each share
carries the right to one vote at general meetings of the Company.

There are no specific restrictions on the size of a holding nor
on the transfer of shares which are both governed by the
general provisions of the Articles of Association and prevailing
legislation. The Articles may be amended by special resolution
of the shareholders.

The directors are not aware of any agreements between
holders of the Company’s shares that may result in restrictions
on the transfer of securities or on voting rights.

Details of employee share schemes are set out in note 26.
Shares held by the Howden Joinery Group Plc Employee Share
Trust abstain from voting. No person has any special rights of
control over the Company’s share capital and all issued shares
are fully paid.

There are a number of agreements that take effect, alter
or terminate upon a change of control such as commercial
contracts, bank loan agreements and employee share plans.
The only one of these which is considered to be significant in
terms of likely impact on the business of the Group as a whole,
is the bank facility (as described in note 20) which requires
majority lender consent for any change of control.

Should such consent not be forthcoming, a change of control
would trigger a mandatory repayment of the entire facility.
The directors are not aware of any agreements between the
Company and its directors or employees that provide for
compensation for loss of office or employment that occurs
because of a takeover bid.

Acquisition of the Company’s own shares
As at 27 December 2014, the directors had authority under
the shareholders’ resolutions of 8 May 2014 to purchase
through the market 64,644,470 of the Company’s ordinary
shares at prices ranging between 10p and the higher of
(a) 105% of the average middle market quotation for an
ordinary share as derived from the London Stock Exchange
Daily Official List for the five business days immediately
preceding the day on which the ordinary share is purchased
and (b) an amount equal to the higher of the price of the
last independent trade of an ordinary share and the highest
current independent bid for an ordinary share as derived from
the London Stock Exchange Trading System. The authority
expires at the conclusion of the next AGM or within 18 months
from the date of passing.

Directors and their interests
Details of the directors in office on 27 December 2014 are
shown on pages 28 to 29 and their share interests on page 43.

EMPLOYEES

The average number of employees and their remuneration are
shown in note 8 to the financial statements.

At the year end, the Group had 7,506 employees (2013: 6,601)
throughout the United Kingdom and overseas and strives to
engage its employees wherever possible in its business goals
by means of regular regional and local staff meetings.

The Board remains committed to linking reward to business
budgets and targets thereby giving employees the opportunity
to share in the financial success of the Group. In keeping with
the structure of the business, the Company is committed to
applying this policy locally, and as a result, staff of all levels
regularly benefit from achieving local targets throughout
the year. The Board also recognises employees for their
contribution through the use of employee incentive plans and
share plans within overall remuneration.

RISK AND INTERNAL CONTROL

The Board is responsible for the Group’s system of internal
control and for reviewing its effectiveness, whilst the role of
management is to implement Board policies on risk and control.
Such a system is, however, designed to manage rather than
eliminate the risks of failure to achieve business objectives. In
pursuing these objectives, internal controls can only provide
reasonable assurance against misstatement or loss. The UK
Corporate Governance Code recommends that the Board at
least annually reviews the effectiveness of the Group’s system of
internal controls, including financial, operational and compliance
controls and risk management.

The Board has conducted reviews of the effectiveness of the
system of internal controls through the processes described
below and is satisfied that it accords both with the Code and
with the Turnbull Guidance. The Board has not identified or been
advised of any failings or weaknesses which it has determined to
be significant; therefore a confirmation in respect of necessary
actions has not been considered appropriate.

A description of the Group’s principal risk and uncertainties
can be found on pages 20 to 21 of the Strategic Report.

Risk management
The Board can confirm that, for the 2014 financial year, and
up to the date of approval of the Annual Report and Accounts,
there has been an ongoing process for identifying, evaluating
and managing the significant risks faced by the Group which is
reviewed regularly by the Board and accords with the Turnbull
Guidance. Under the guidance of the Deputy Chief Executive and
Chief Financial Officer, it is the responsibility of the Executive
Committee to review the effectiveness of the risk management
process and internal controls on behalf of the Board. The
Executive Committee regularly reports to the Board on how risks
are being managed. In addition, there is a mechanism in place to
report significant control breakdowns or risk occurrences to the
Executive Committee.

An ongoing process for the effective management of risk
has been defined by the Board and is embedded throughout
the various tiers of the organisation. It is operated in the
following stages:

• Each operating division and central function identifies key
risks through the adoption of both a “bottom-up” and “top-
down” process. These key risks are regularly reviewed by the
senior management team in each division. The key risks to
each business area’s objectives are identified and scored
for probability and impact. The key controls to manage the
risks to the desired level are identified.

• A local database of risks and controls is maintained within
each operating division and central service function. This
is consolidated into a central register which becomes the
key risk register for the Group. The Group Risk department
facilitates the identification of these risks and provides an
independent appraisal of the interpretation of the scoring
mechanism, to ensure that the key risks are brought forward
to the Executive Committee. The Executive Committee then
reviews the key risks to assess the effectiveness of the risk
management strategies.

• The senior management team within each operating division
and within the central functions are responsible for the
ongoing review of their functions’ risk registers.

• Regular reporting on internal and external changes that
affect the risks or their importance to the business, and
any risk occurrences, are reported upwards through their
register to the Executive Committee.

• Key risks and their management and any areas for

improvement are regularly reported to and discussed
at the Executive Committee.

• A review of the risk process and risk management systems

is undertaken by the Audit Committee annually.

• Overall risk is a matter reserved for the Board as a whole
and as such key risks arising within the business are
formally discussed by the Group Board every six months.

• In order to gain assurance that the Group’s risk process
is effective a periodic review of both the Audit and Risk
Process is conducted by an appropriately qualified and
experienced external assurance service provider. This
is conducted every five years and was last undertaken
during 2012 by PricewaterhouseCoopers. In 2014,
PricewaterhouseCoopers were engaged by the Company
to provide assurance that existing risk management
process and framework remained appropriate not only on
a contemporary basis but also for a future business, taking
into account long-term strategic goals and growth plans.
The review included consideration of the changing risk
environment and key risks to growth.

Howden Joinery Group Plc Annual Report & Accounts 2014Corporate governance report continued

Internal control
The Group has an established framework of internal controls,
which includes the following key elements:

• The Board reviews Group strategy and the executive

management are accountable for performance within the
agreed strategy.

• The Group and its subsidiaries operate control procedures
designed to ensure complete and accurate accounting
of financial transactions, and to limit exposure to loss of
assets or fraud. Measures taken include physical controls,
segregation of duties in key areas and periodic Internal
Audit reviews.

• The Audit Committee meets regularly and its

responsibilities are set out in the Audit Committee
Report. It receives reports from the Internal Audit
function on the results of work carried out under an
annually agreed audit programme. The Audit Committee
has full and independent access to the internal and
external auditors.

• The Internal Audit function facilitates a process whereby

operating entities provide certified statements of
compliance with specified and appropriate key financial
controls. These controls are then cyclically tested by
Internal Audit to ensure they remain effective, and are
being consistently applied.

• The Audit Committee will annually assess the effectiveness
of the assurance provided by the internal and external
auditors. Every five years, an external assessment is
undertaken with regard to the assurance provided by the
Internal Audit department. An external review was last
undertaken by PricewaterhouseCoopers in 2012.

By order of the Board

Will Samuel
Chairman
25 February 2015

Report of the Audit Committee

CHAIRMAN

Richard Pennycook
MEMBERS

Mark Allen
Tiffany Hall
Michael Wemms

AUDIT COMMITTEE MEETINGS

Attendance

No. of meetings

Richard Pennycook *

Mark Allen

Tiffany Hall

Michael Wemms

* Denotes Chairman

Only the attendance of members of this committee is shown, although other
directors, where appropriate, have often also attended at the invitation of the
chairman of the committee.

The Chairman of the Board along with the Chief Executive, Deputy Chief Executive
and Chief Financial Officer, Group Finance Director, Head of Risk and Internal Audit,
representatives from the Finance function and senior representatives of the external
auditors are regularly invited to attend all or part of our meetings as and when
appropriate. The Audit Committee reserves the right to request any non-members
to withdraw from any meeting.

COMPOSITION OF THE COMMITTEE

FUNCTION

In compliance with the Code and the Committee’s terms of
reference, during the year the Audit Committee comprised
wholly of independent non-executive directors. Subject to
successful annual re-election to the Board, and as provided
by the UK Corporate Governance Code, appointments to
the Audit Committee are for a period of three years and are
extendable by two additional three-year periods.

The Board is dependent on the Audit Committee to review the
Group’s internal financial controls, to assess the work and
independence of the external auditor, the effectiveness of
the internal audit function and risk management processes,
and to ensure the integrity of financial reporting. As such it is
crucial that the Committee conducts itself in an informed and
efficient way.

Committee membership is reviewed as part of the annual
review of Board effectiveness. This year’s review concluded
that the current mix of financial and commercial experience of
the Audit Committee, and that of its advisors, is such that the
Committee can effectively exercise its responsibilities to the
Group in relation to risk and controls.

The Audit Committee is responsible for ensuring that the
Group’s financial systems provide accurate and up-to-date
information, that the Group’s published financial statements
represent a true and fair reflection of this position and for
ensuring the effectiveness and rigorousness of the internal
control framework on behalf of the Board.

The Committee is permitted by its terms of reference to obtain
independent external advice at the Group’s expense.

More detail on the specific responsibilities of the Audit
Committee is set out within this report.

Howden Joinery Group Plc Annual Report & Accounts 2014Report of the Audit Committee continued

• reviewing the Going Concern report, in the context of the

longer-term viability of the business, prior to consideration
by the Board;

• ensuring that information flows from the senior

management and external auditors are such that the
information received by the Committee is complete,
accurate, timely and robust;

• monitoring and reviewing the effectiveness of the Group’s

internal audit function;

• making recommendations to the Board in relation to

the appointment of the external auditor and approving
the remuneration and terms of engagement of the
external auditor;

• reviewing and monitoring the external auditor’s independence
and objectivity and the effectiveness of the audit process,
taking into consideration relevant UK professional and
regulatory requirements;

• reviewing the external auditor’s audit risks and Audit

Committee reports; and

• developing and implementing a policy on the engagement of
the external auditor to supply non-audit services, taking into
account relevant ethical guidance regarding the provision of
non-audit services by the external audit firm.

As a result of its work during the year, the Audit Committee has
concluded that it has acted in accordance with its terms of
reference during the period and has ensured the independence
and objectivity of the external auditors.

COMMITTEE CHAIRMAN

The Chairman of the Audit Committee is responsible for
determining the Committee’s agenda and for maintaining the
key relationships between the Group’s senior management,
Head of Risk and Internal Audit, the Company Secretary and
senior representatives of the external auditor. To that end, he is
also responsible for ensuring that key audit issues are reported
to the Board in an effective and timely manner and that they
are reported to shareholders via this report.

Richard Pennycook was Chairman of the Committee throughout
the year. Richard is a Fellow of the Institute of Chartered
Accountants in England and Wales. He is currently the Group
CEO of The Co-operative Group and was a Finance Director for
over 20 years, most of that time as a Public Company Finance
Director. Richard is also Chairman of the Audit Committee
at Persimmon PLC, the FTSE 100 house builder. As such the
Board considers that he had the requisite recent and relevant
financial experience during the year to satisfy Provision C.3.1 of
the UK Corporate Governance Code.

PRIMARY RESPONSIBILITIES OF THE AUDIT COMMITTEE

The Committee is responsible for reporting to the Board,
identifying any matters in respect of which action or
improvement is needed, making recommendations as to the
steps to be taken and monitoring the effectiveness of any
resulting activity. It is also responsible for:

• monitoring the integrity of the financial statements of

the Group and any formal announcements relating to the
Group’s financial performance and reviewing significant
financial reporting judgements contained therein (although
the Board as a whole remains responsible for determining
whether the Annual Reports and Accounts as a whole are
fair, balanced and understandable);

• reviewing the Group’s internal financial controls and internal

control systems;

• reviewing the Group’s risk management processes,
systems and reports (although the Board as a whole
remains responsible for overseeing the overall risk profile
of the business);

OVERVIEW OF ACTIONS TAKEN BY THE AUDIT COMMITTEE DURING THE YEAR TO DISCHARGE ITS DUTIES

Financial Reporting and External Audit

• Reviewing the Group’s annual report and accounts, the half-yearly financial report published in July 2014 and the interim

management statements. As part of this review the Committee received a report from Deloitte on their audit of the annual
report and accounts and review of the half-yearly financial report which took into account the Group’s key risks and going
concern considerations;

• conducting a separate review of the audit of the French business;

• reviewing the processes necessary to ensure that the Board is able to confirm that the annual report and accounts are “fair,

balanced and understandable”;

• considering the processes in place to generate forecasts of cash flow and accounting valuation information, including the
choice and consistent use of key assumptions. A description of the Group’s significant accounting policies can be found in
note 2 of the consolidated financial statements on pages 73 to 77;

• reviewing the effectiveness of the Group’s internal financial controls (with specific reference to controls in place on a divisional

basis) and reviewing the disclosures made in the annual report and accounts on this matter;

• receiving reports from the external auditors on the conduct of their audit, their review of accounting policies, areas of

judgement and their comments on risk and the effectiveness of internal controls;

• reviewing the proposed plan of work presented by the external auditors, including audit risks, terms of engagement and fees;

• undertaking an assessment of the qualification, expertise and resources, and independence of the external auditor and the
effectiveness of the audit process. This included consideration of a report on the audit firm’s own quality control procedures
and the audit firm’s annual transparency report;

• assessing the risk of a possible withdrawal of the external auditors from the market; and

• holding confidential sessions with the independent auditors and the head of internal audit in the absence of executive

directors and Company executives.

Internal Audit and Control

• Reviewing the processes used by the Group for identifying, evaluating and mitigating risks;

• receiving reports from the Internal Audit function on its work and monitoring the status of actions taken in response to its

findings;

• receiving reports from the Internal Audit function on the controls in place to mitigate fraud risk;

• receiving reports from our divisional Finance Directors in respect of the control environment within their divisions, including an

information systems control update from PricewaterhouseCoopers;

• consideration of business continuity management and impact assessment on mission critical activities;

• receiving a presentation from the Head of Risk on the risk environment;

• assessing the coverage of independent assurance by reviewing the Group assurance map;

• reviewing business continuity management provisions; and

• reviewing activity reported under the Group’s whistleblowing policy.

Governance

• External review of effectiveness as an Audit Committee as part of the Board’s evaluation process;

• consideration of the results of the BIS Cyber Governance Health Check Tracker Report;

• receiving updates from the external auditor on latest governance practices for Audit Committees and changes in statutory

reporting requirements;

• considering information in relation to audit tendering;

• reviewing directors’ conflicts of interest; and

• reviewing the Committee’s terms of reference and recommending that they be approved by the Board.

Howden Joinery Group Plc Annual Report & Accounts 2014Report of the Audit Committee continued

We invite senior management from the business to come and talk about the financial controls in their business areas. During 2014,
the Director of Commercial Finance and Head of Compliance of the Trade division presented on the control environments in their area.

As in previous years, experts from Deloitte were invited to update the Committee on recent developments in the areas of
governance, accounting and reporting. All members of the Committee are members of the Deloitte Academy which provides in
depth updates on financial and reporting matters.

AREAS OF SIGNIFICANT FINANCIAL JUDGEMENT CONSIDERED BY THE AUDIT COMMITTEE DURING THE YEAR

The Committee recognises that some areas of accounting require judgements to be exercised. In relation to the Group, the
principle areas of judgement relate to recoverability of trade debtors, inventory obsolescence, and actuarial assumptions. It is
the policy of the Board that a conservative approach be taken in all areas requiring judgement.

The Audit Committee considered the following key areas of significant financial judgement during the year:

Recoverability of trade debtors

Given the make-up of the receivables
ledger being a high number of relatively
small accounts, the recoverability of trade
debtors and the level of provisioning for
bad and doubtful debts were regularly
reviewed by the Board.

Valuation of Inventory

The valuation of inventory, including the
existence of obsolete and excess stock
and the appropriateness of the judgements
applied within the obsolescence provision
were regularly considered by the Board.

Actuarial assumptions

The Committee considered and approved
the appropriateness of the actuarial
valuations for the defined benefit pension
scheme prepared for compliance with
the relevant accounting and disclosure
requirements and the assessment of the
appropriateness of the assumptions used.

Mitigating actions:
•

•

The Committee received updates from and challenged management on the
debtor ageing profile, provisioning levels and the level of bad-debt write-off.
The Committee received reports from the Head of Internal Audit and Risk in
relation to management’s treatment of credit control and the collection of
outstanding debts.
The Committee also reviewed the work done by the external auditor on trade
receivables to confirm both existence and recoverability and considered the
need to continue to review the rate of provisioning in light of the reduction in
the level of bad-debt write-offs.

Mitigating actions:
• The Committee reviewed and challenged the management reports used to value

and confirm the existence of inventory.

• They also received reports from the external auditor on inventory in considering
the appropriateness of provisions held against the carrying value of inventory,
having regard to the age of discontinued lines and volumes of continuing lines
relative to the expected usage.

• The Committee invited divisional management to attend one meeting in order to
provide more in depth analysis on specific trends identified in the presentation
received from the Head of Internal Audit.

Mitigating actions:
•

•

The Committee reviewed reports from the Pensions Sub-Committee and
external auditor which considered the appropriateness of the assumptions.
In addition to receiving reports, the Chairman of the Audit Committee is a
member of the Pensions Sub-Committee and he attended all meetings of the
Sub-Committee during the year. All members of the Audit Committee have
a standing invitation to the Pensions Sub-Committee where the actuarial
valuations are assessed.

All of the matters considered above were discussed with the Deputy Chief Executive and Chief Financial Officer, Group Finance
Director and the external auditor. The Committee was satisfied that each of the matters set out above have been fully and
adequately addressed by the Executive Committee, appropriately tested and reviewed by the external auditor and the disclosures
made in the annual report and accounts were appropriate.

EXTERNAL AUDITOR

The Committee is responsible for the development,
implementation and monitoring of the Group’s policy on
external audit in line with relevant ethical standards and
guidance. The current policy sets out the categories of non-
audit services which the external auditors will and will not be
allowed to provide to the Group, subject to de minimis levels.
All relevant fees proposed by the external auditors must be
reported to and approved by the Audit Committee.

During the year, the external auditors continued to provide tax
advice relating to the Group’s obligations in respect of former
MFI properties and its overseas subsidiaries. The Committee
reviewed the ongoing nature and cost of this work during the
year and approved the continued involvement of Deloitte LLP
in this regard as it was concluded they were best placed to
supply such tax services in a cost effective manner due to the
experience and qualifications of the individuals providing such
services, their knowledge of the Group and its tax affairs and
the best interests of the Group were served by engaging them.

Auditor independence and fees
The Committee recognise that auditor independence is an
essential part of the audit framework and the assurance
it provides. To fulfil our responsibilities regarding the
independence of the external auditors, the Committee
undertook a comprehensive review during 2014 encompassing
the following:

• review of the independence of the external auditors and the
arrangements which Deloitte LLP have in place to identify,
report and manage conflicts of interest;

• review of the changes in key external audit staff for the current
year and the arrangements for the day to day management
of the audit relationship. The lead statutory audit partner last
changed in March 2012 at the end of the 2011 year-end audit
in accordance with the ethical standards;

• consideration of the effectiveness of the external auditors
through a review of their plan of work and the outputs
arising from the audit;

• consideration of the overall extent of non-audit services
provided by the external auditors, in addition to case by
case approval of the provision of non-audit services as
appropriate; and

• consideration of the likelihood of a withdrawal of the

auditor from the market and note taken of the fact that
there are no contractual obligations to restrict the choice
of external auditors.

To assess the effectiveness of the external auditor,
we reviewed:

• the arrangements for ensuring the external auditor’s

independence and objectivity;

• the external auditor’s fulfilment of the agreed audit plan and

any variations from the plan;

• the perceptions of the auditor and audit process from key

management personnel in the finance function;

• the robustness and perceptiveness of the auditor in their
handling of the key accounting and audit judgements; and

• the content of the external auditor’s report on internal control.

Details of Deloitte LLP’s fees for audit and non-audit work
during 2014 are included in note 7 to the financial statements
on page 80. No services were provided by the external auditor
pursuant to contingent fee arrangements. Given the specific
nature of the fees incurred, and having reviewed the safeguards
Deloitte LLP has in place to protect their independence as
auditors, we are satisfied the non-audit work has not impaired
their independence.

The Audit Committee also has a policy in relation to the
employment of former members of the external audit team.
This policy states that, whilst the Group would not normally
employ a former member of the external audit team, if
appropriate, individual cases may be considered by the
Chairman of the Committee and Chief Financial Officer.

Audit tender
The external audit was last tendered in 2002. This resulted
in a change to the Group’s external auditor, with Deloitte
LLP replacing the previous incumbent audit firm. The Audit
Committee is mindful of the provisions relating to audit
tendering in the UK Corporate Governance Code and the
FRC’s Guidance on Audit Committees to put the external audit
contract out to tender at least every ten years.

The FRC guidelines provide that audit tendering should
normally fit the five year cycle of lead audit partner rotation.
Our current lead audit partner has now completed three years
of a five year cycle. Taking this into account, and on the basis
of our work above, we concluded that the independence
criteria under the relative standards continued to be met
and accordingly it was not necessary to tender for the audit
work at this time. The Committee has therefore unanimously
recommended to the Board that a proposal be put to the
shareholders at the Annual General Meeting that Deloitte
LLP be reappointed as external auditor and that the directors
be authorised to fix their remuneration. At the year end the
external auditor formally confirmed their independence and
objectivity had been maintained.

Howden Joinery Group Plc Annual Report & Accounts 2014Report of the Audit Committee continued

INTERNAL AUDIT

THE YEAR AHEAD

The Committee also facilitates the Board in its fulfilment of its
responsibilities relating to the adequacy of the resourcing and
plans of the Internal Audit department. During the year,
we reviewed:

It is anticipated that the Committee will meet three times in
2015 in conjunction with the annual reporting cycle. I will be
available at the Annual General Meeting on 6 May 2015 to
answer any questions about the work of the Audit Committee.

• Internal Audit’s programme of work and progress made

By order of the Board

against planned activity;

• results of key audits and other significant findings including
the adequacy and timeliness of management’s response;

• the level and nature of assurance activity performed by

Richard Pennycook
Audit Committee Chairman
25 February 2015

Internal Audit; and

• staffing, reporting and effectiveness of divisional audits.

During the year, the Committee considered the effectiveness
of the Internal Audit function and the Internal Audit three-year
plan. The Committee concluded that the function remained
effective, well-led and had a well-defined remit. An independent
review of the Internal Audit function was last undertaken by
PricewaterhouseCoopers in 2012. An external review of this
function is conducted every five years.

The Group’s whistleblowing policy contains arrangements
for the Head of Internal Audit to receive, in confidence,
complaints on accounting, risk issues, internal controls,
auditing issues and related matters for reporting to the Audit
Committee as appropriate. Issues raised and investigated
under this policy were formally reviewed during the year. The
Committee reviewed and approved the Group’s whistleblowing
policy during the year.

The Audit Committee’s terms of reference include all matters
indicated by Disclosure and Transparency Rule 7.1 and the
UK Corporate Governance Code. The Committee’s terms of
reference were approved at the meeting of the Committee in
November 2014.

To view the Audit Committee’s full terms of
reference please refer to the Company’s website:
www.howdenjoinerygroupplc.com

Report of the Nominations Committee

CHAIRMAN

Will Samuel
MEMBERS:

Mark Allen
Tiffany Hall
Richard Pennycook
Michael Wemms

NOMINATIONS COMMITTEE MEETINGS

Attendance

No. of meetings

Will Samuel*

Mark Allen

Tiffany Hall

Richard Pennycook

Michael Wemms

* Denotes Chairman

Only the attendance of members of this committee is shown, although other
directors, where appropriate, have often also attended at the invitation of the
chairman of the committee.

COMPOSITION OF THE COMMITTEE

FUNCTION

In accordance with its terms of reference, the Nominations
Committee consists of five members: the Chairman of the
Board, who (in accordance with provision B.2.1 of the Code)
also chairs the Committee, and all of the independent non-
executive directors.

Only members of the Committee have the right to attend
Committee meetings. However, other individuals such as
the Chief Executive and external advisors may be invited to
attend for all or part of any meeting, as and when appropriate.
Appointments to the Committee are for a period of up to
three years, which can be extended for two further three-year
periods, provided the director remains independent.

The Committee keeps under review the size, composition and
structure of the Board and makes recommendations to the
Board for all new appointments and reappointments.

In recent years, the Board as a whole has chosen to consider
executive succession planning rather than delegate it to the
Nominations Committee.

Howden Joinery Group Plc Annual Report & Accounts 2014Report of the Nominations Committee continued

The Nominations Committee played an active role during 2014. During the year the Committee met five times to consider:

• non-executive succession planning and management;

• the renewal of Mark Allen’s non-executive director contract;

• the Board’s policy on diversity;

• the format and scope of the 2014 Board evaluation process;

• the reappointment of directors at the 2014 AGM; and

• the performance of the Committee and the appropriateness of the Committee’s terms of reference.

In addition, the Committee played a central role in determining the organisational changes announced on 30 May 2014. The
appointment of Mark Robson as Deputy Chief Executive, in addition to his role as Chief Financial Officer, was the result of the
extensive work undertaken by both the Board and Nominations Committee on organisational development. Recognising the
additional operational responsibilities taken on by Mr Robson, the Committee was also instrumental in increasing the finance
responsibilities of Theresa Keating, already a member of the Executive Committee, and her appointment as Group Finance
Director. These changes were made as part of the continuing development of the Company to enable future growth.

During the year the Board continued to work with leadership consulting firm Heidrick and Struggles to undertake a detailed talent
management evaluation programme on both the members of the Executive Committee and the next tier of Senior Managers. The
Board remain committed to ensuring there are no skills gaps at Executive or Senior Manager level and that there is a robust talent
pipeline in support of the Executive. Heidrick and Struggles has no other connection with the Company.

NON-EXECUTIVE TENURE (STATED FIGURES ARE TO 27 DECEMBER 2014)

Michael Wemms

Tiffany Hall

Mark Allen

Richard Pennycook

Years on Board

The Nominations Committee remains committed to a programme of reviewing and refreshing the non-executive membership of the
Board to ensure that there is sufficient balance between the introduction of fresh perspective and ensuring continuity and stability.
Where possible, the Board will ensure a phased transition of non-executives in order to avoid wholesale changes to the make-up of
the Board to the possible detriment of the Company.

DIVERSITY

Boardroom diversity
The Board recognises the importance of ensuring that there is diversity of perspective, background and approach in its
management team and on its Board. Since the business was established in 1995 it has sought to enable individuals to progress
within the organisation regardless of age, gender, background or formal qualifications.

We have appointed one female director and two male directors to our Board since May 2010, which means that currently 14% of
Board members are women.

We believe that it is in the interests of the business and of its shareholders for us to build a stable, cohesive and representative
Board. Whilst the setting of targets on particular aspects of diversity may be relevant in many cases, we feel that this could be
given inappropriate focus within the context of a smaller board resulting in the possible overlooking of certain well-qualified
candidates. The Nominations Committee will continue to seek diversity of mindset as well as of gender and background when
considering new appointments in the period to 2016.

More widely, we are committed to developing a long-term pipeline of executive talent that reflects the diversity of Howdens’
business and its stakeholders.

Employee diversity policy
The Group promotes the importance of diversity and adopts an Equal Opportunities Policy under which training and career
development opportunities are available to all employees, regardless of gender, religion or race. The Group is committed to meeting
the code of practice on the employment of disabled people and full and fair consideration is given to disabled applicants for
employment. It aims to do all that is practicable to meet its responsibility towards the employment and training of disabled people
and welcomes, and considers fully, applications by disabled persons, having regard to their particular aptitudes and abilities.
It is also the Group’s policy to retain employees who may become disabled while in service and to provide appropriate training.

Howden Joinery Group Plc Annual Report & Accounts 2014Report of the Nominations Committee continued

Gender statistics
A Group-wide breakdown of gender statistics for all employees at 27 December 2014 is as follows:

Board

Executive Committee members
(including directors of the main Board)

Executive Committee members
(excluding directors of the main Board)

Senior Management group*

Group (Total)

Female
employees

Male
employees

Total

1,983

5,523

104

7,506

% of Female
employees

14.3% (2013: 14.3%)

28.6% (2013: 37.5%)

40.0% (2013: 50.0%)

18.3% (2013: 20.2%)

26.4% (2013: 25.8%)

* The Senior Management Group includes employee Grades 1–3 (on the Hays evaluation basis) and divisional, regional and area sales managers. It does not include

members of the Board or the Executive Committee.)

Board

Executive Committee members
(including directors of the main Board)

Executive Committee members
(excluding directors of the main Board)

Senior Management group*

Group (Total)

The Nominations Committee reviews these gender statistics against Office for National Statistics (ONS) averages each year and, in
relation to gender diversity in the Board, against other FTSE250 company averages. Similarly, where other data is available, this is
presented to the Committee in order to determine whether there are any implicit diversity issues.

Male

Female

APPOINTMENT PROCESS

With regard to the appointment and replacement of directors, the Company is governed by its Articles of Association, the UK
Corporate Governance Code, the Companies Act and related legislation.

DIRECTOR INDUCTION

Working with the Company Secretary, new directors undertake an induction programme tailored to the needs of the individual.
However, they will generally include a number of site visits and meetings with members of the Executive Committee, key employees
and advisors. Site visits include our manufacturing sites, our distribution centre and depots. New directors will also be provided
with a mixture of documentation including company publications, Board materials and some formal information on the role and
responsibilities of UK listed company directors.

The Group’s induction programme for newly appointed directors will continue to be centred on familiarisation with the Group’s
operations, key individuals and external advisors.

ONGOING TRAINING

The Chairman meets with individual directors annually to discuss, amongst other things, individual training and development
needs. Ongoing training and development for the directors includes attendance at formal conferences and internal events as well
as briefings from external advisors.

Directors are also encouraged to attend external seminars and briefings as part of their continuous professional development.
The non-executive directors are also encouraged to meet with Howdens’ employees at all levels in order to maintain a broad
purview of the business.

RE-ELECTION OF DIRECTORS

As stated in the Corporate Governance report, all of the directors will retire at the Annual General Meeting (AGM) in accordance
with the UK Corporate Governance Code and each will offer themself for re-election in accordance with Article 118 of the Articles
of Association.

In proposing their re-election, the Chairman confirms that the Nominations Committee has considered the formal performance
evaluation in respect of those directors seeking re-election and the contribution and commitment of the directors that are required
to offer themselves for re-election. He has confirmed to the Board that their performance and commitment is such that the
Company should support their re-election.

In relation to Michael Wemms’ re-election at the 2015 AGM, the Board is aware that during November 2015 Mr Wemms’ tenure as
non-executive director of the Company will exceed nine years. As a result of this, the Nominations Committee undertook a rigorous
review of Mr Wemms’ position and concluded in its recommendations to the Board that Mr Wemms remained independent in both
character and judgement, and that he continued to provide invaluable experience and insight in his capacity both as non-executive
director and Senior Independent Director.

No director was able to vote in respect of their own re-election when consideration was given to director re-election at the AGM.

Information on the directors’ service agreements, options and interests of the directors and their families in the share capital of the
Company is set out in the separate Directors’ remuneration report on pages 32 to 48. Details of indemnity provisions made for the
benefit of directors are given in the Corporate Governance report on page 51.

By order of the Board

Will Samuel
Nominations Committee Chairman
25 February 2015

To view the Nominations Committee full terms of reference please refer to the Company’s website:
www.howdenjoinerygroupplc.com

Howden Joinery Group Plc Annual Report & Accounts 2014Statements of the directors in connection
with this Annual Report and Accounts

GOING CONCERN

The Group’s business activities, together with the factors likely
to affect its future development, performance and position
are set out in the Chairman’s statement on pages 8 to 9, the
Chief Executive’s statement on pages 10 to 13 and the Review
of operations and finance on pages 14 to 19. The Review of
operations and finance describes the financial position of the
Group, its cash flows, liquidity position, borrowing facilities, and
the Group’s objectives, policies and processes for managing
its commercial and financial risks. The Group’s financial risk
management objectives and its exposures to credit risk and
liquidity risk in relation to financial instruments are described
in note 28 to the financial statements.

The Group meets its day to day working capital requirements
through cash generated from operations, and, if required, by
utilising an asset-backed lending facility of £140m. The current
facility expires in July 2016.

The Group’s forecasts and projections have been stress-
tested for reasonably possible adverse variations in economic
conditions and trading performance. The results of this testing
show that the Group should be able to operate within the level
of its current facility and covenants.

After making due enquiries the directors have a reasonable
expectation that the Company and the Group have adequate
resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the Annual Report and Accounts.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The directors are responsible for preparing the Annual Report,
directors’ remuneration report and the financial statements in
accordance with applicable law and regulations.

Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors are required to prepare Group financial statements in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and Article 4 of the
IAS Regulation and have chosen to prepare the parent company
financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company
law the directors must not approve the accounts unless they
are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company
for that period.

In preparing the parent company financial statements, the
directors are required to:

• select suitable accounting policies and then apply them

consistently;

• make judgements and accounting estimates that are

reasonable and prudent;

• state whether applicable UK Accounting Standards have

been followed subject to any material departures disclosed
and explained in the financial statements; and

• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.

In preparing the Group financial statements, International
Accounting Standard 1 requires that directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a

manner that provides relevant, reliable, comparable and
understandable information;

• provide additional disclosures when compliance with the

specific requirements in IFRSs is insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and
financial performance; and

• make an assessment of the Company’s ability to continue as

a going concern.

The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at
any time the financial position of the Company and enable
them to ensure that the financial statements comply with
the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.

The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.

AUDIT INFORMATION AND AUDITORS

Each of the persons who is a director at the date of approval of
this Annual Report and Accounts confirm that:

• so far as each of the directors is aware, there is no relevant
audit information of which the Company’s auditors are
unaware; and

• the director has taken all the steps that he ought to have
taken as a director in order to make himself aware of
any relevant audit information and to establish that the
Company’s auditors are aware of that information.

The confirmation is given and should be interpreted in
accordance with the provisions of s418 of the Companies
Act 2006.

DIRECTORS’ RESPONSIBILITY STATEMENT

We confirm to the best of our knowledge:

• the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair
view of the assets, liabilities, financial position and profit
or loss of the Group and Company, and the undertakings
including the consolidation taken as a whole;

• the Annual Report and Accounts includes a fair review of

the development and performance of the business and the
position of the Group and Company and the undertakings
including the consolidation taken as a whole, together with a
description of the principal risks and uncertainties
they face; and

• 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
Company’s performance, business model and strategy.

This responsibility statement was approved by the Board of
Directors on 25 February 2015 and is signed on its behalf by:

Matthew Ingle
Chief Executive

Mark Robson
Deputy Chief Executive
and Chief Financial Officer

25 February 2015

Howden Joinery Group Plc Annual Report & Accounts 2014Consolidated income statement

Continuing operations:

Revenue – sale of goods

Cost of sales

Gross profit

Selling & distribution costs

Administrative expenses

Operating profit

Finance income

Finance expense

Other finance expense – pensions

Profit before tax

Tax on profit

Profit after tax

Discontinued operations:

Exceptional item – loss on discontinued operations

Exceptional item – tax on discontinued operations

Profit after tax on discontinued operations

52 weeks to
27 December
2014

Notes

£m

1,090.8

(396.3)

694.5

(423.9)

(80.8)

189.8

0.6

(0.1)

(1.5)

188.8

(40.1)

148.7

(2.1)

11.2

9.1

52 weeks to 28 December 2013

restated*

Before
exceptional
items

Exceptional
items
(note 6)

£m

956.5

(366.3)

590.2

(375.5)

(74.0)

140.7

0.4

(0.4)

(5.7)

135.0

(33.7)

101.3

–

£m

–

(4.5)

–

(4.5)

0.5

(4.0)

–

Total

£m

956.5

(366.3)

590.2

(375.5)

(78.5)

136.2

0.4

(0.4)

(5.7)

130.5

(33.2)

97.3

–

Profit for the period attributable to the equity holders of the parent

157.8

101.3

(4.0)

97.3

Earnings per share*:

From continuing operations

Basic earnings per 10p share

Diluted earnings per 10p share

From continuing and discontinued operations

Basic earnings per 10p share

Diluted earnings per 10p share

*Restated for amendments to IAS19 – see note 2.

23.2p

23.0p

24.6p

24.4p

15.3p

15.2p

15.3p

15.2p

Consolidated statement of comprehensive income

Profit for the period

Items of other comprehensive income:

Items that will not be reclassified subsequently to profit or loss:

Actuarial (losses)/gains on defined benefit pension scheme

Deferred tax on actuarial losses/(gains) on defined benefit pension scheme

Effect of change in UK tax rate on deferred tax on cumulative actuarial loss

Deferred tax on pension contributions

Current tax on pension contributions

Items that may be reclassified subsequently to profit or loss:

Currency translation differences

Other comprehensive income for the period

Total comprehensive income for the period
attributable to equity holders of the parent

*Restated for amendments to IAS19 – see note 2.

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

£m

157.8

(119.6)

23.9

–

(6.3)

6.8

(0.2)

(95.4)

£m

97.3

73.0

(16.8)

(1.6)

–

0.5

55.1

62.4

152.4

Howden Joinery Group Plc Annual Report & Accounts 2014Consolidated balance sheet

27 December 2014

28 December 2013

Notes

£m

Non-current assets

Other intangible assets

Property, plant and equipment

Deferred tax asset

Bank borrowings net of prepaid fees

Current assets

Bank borrowings net of prepaid fees

Inventories

Trade and other receivables

Investments

Cash at bank and in hand

Total assets

Current liabilities

Trade and other payables

Current tax liability

Current borrowings

Non-current liabilities

Non-current borrowings

Pension liability

Deferred tax liability

Provisions

Total liabilities

Net assets

Equity

Called up share capital

Share premium account

ESOP reserve

Other reserves

Retained earnings

Total equity

3.4

107.1

40.3

0.3

151.1

0.6

143.1

133.1

85.0

131.9

493.7

644.8

(186.1)

(7.9)

–

(194.0)

(0.1)

(142.6)

(2.6)

(10.6)

(155.9)

(349.9)

294.9

64.7

87.5

2.4

28.1

112.2

294.9

3.7

95.5

23.2

0.9

123.3

0.1

123.4

122.4

–

139.7

385.6

508.9

(158.4)

(18.7)

(0.1)

(177.2)

(0.1)

(54.3)

(3.6)

(12.0)

(70.0)

(247.2)

261.7

64.3

87.5

(6.3)

28.1

88.1

261.7

The financial statements were approved by the Board and authorised for issue on 25 February 2015 and were signed on its behalf by:

Mark Robson
Deputy Chief Executive and Chief Financial Officer

Consolidated statement of changes in equity

At 29 December 2012

Accumulated profit for the period*

Net actuarial gain on defined benefit scheme*

Effect of change in UK tax rate on deferred tax on
cumulative actuarial loss

Current tax on share schemes

Deferred tax on share schemes

Effect of change in UK tax rate on deferred tax on
cumulative balance on share schemes

Currency translation differences

Net movement in ESOP

Issue of new shares

Dividends declared and paid

At 28 December 2013

Accumulated profit for the period

Net actuarial loss on defined benefit scheme

Deferred tax on pension contributions

Current tax on pension contributions

Current tax on share schemes

Deferred tax on share schemes

Currency translation differences

Net movement in ESOP

Issue of new shares

Dividends declared and paid

At 27 December 2014

Called
up share
capital

Share
premium
account

£m

64.2

£m

87.2

ESOP
reserve

£m

(19.0)

Other
reserve

Retained
profit

£m

Total

£m

–

0.1

–

64.3

0.3

–

87.5

–

0.4

–

64.7

–

87.5

–

12.7

–

8.7

–

2.4

£m

28.1

–

(47.7)

112.8

97.3

56.2

(1.6)

4.6

3.1

(1.0)

0.5

–

97.3

56.2

(1.6)

4.6

3.1

(1.0)

0.5

12.7

0.4

(23.3)

88.1

157.8

(95.7)

(6.3)

6.8

5.0

(1.9)

(0.2)

–

(0.4)

(41.0)

261.7

157.8

(95.7)

(6.3)

6.8

5.0

(1.9)

(0.2)

8.7

–

(41.0)

294.9

28.1

112.2

(6.3)

28.1

The ESOP reserve includes shares in Howden Joinery Group Plc with a market value on the balance sheet date of £23.8m
(2013: £36.2m), which have been purchased in the open market and which are held by the Group’s Employee Share Trusts in
order to satisfy share options and awards made under the Group’s various share-based payment schemes.

The Other reserve was created in the year to 30 April 1994, following a Group reconstruction.

*Restated for amendments to IAS19 – see note 2.

Howden Joinery Group Plc Annual Report & Accounts 2014Consolidated cash flow statement

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

Notes

£m

Group operating profit before tax and interest

Continuing operations

Discontinued operations

Group operating profit before tax and interest

Adjustments for:

Depreciation and amortisation included in operating profit

Share-based payments charge

Loss on disposal of property, plant and equipment and intangible assets

Exceptional items (before tax)

Operating cash flows before movements in working capital

Movements in working capital and exceptional items

Increase in stock

Increase in trade and other receivables

Increase in trade and other payables and provisions

Difference between pensions operating charge and cash paid*

Net cash flow – exceptional items

Cash generated from operations

Tax paid

Net cash flow from operating activities

Cash flows used in investing activities

Payments to acquire property, plant and equipment and intangible assets

Interest received

Receipts from sale of property, plant and equipment and intangible assets

Net cash used in investing activities

Cash flows used in financing activities

Interest paid

Receipts from issue of share capital

Receipts from release of shares from share trust

Decrease in prepaid loan fees & loans

Repayment of capital element of obligations under finance leases

Dividends paid to Group shareholders

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

20, 24

There are no cash flows from discontinued operating, investing, or financing activities.

*Restated for amendments to IAS19 – see note 2.

189.8

(2.1)

187.7

20.8

6.4

0.4

2.1

217.4

(19.7)

(10.7)

23.9

(32.8)

–

(39.3)

178.1

(30.3)

147.8

(32.8)

0.6

0.3

(31.9)

(0.1)

–

2.3

0.1

–

(41.0)

(38.7)

77.2

139.7

216.9

136.2

–

136.2

18.7

8.4

–

4.5

167.8

(7.5)

(26.4)

11.7

(32.9)

(4.5)

(59.6)

108.2

(21.0)

87.2

(24.7)

0.4

–

(24.3)

(0.1)

0.4

4.3

(1.1)

(0.1)

(23.3)

(19.9)

43.0

96.7

139.7

Notes to the consolidated financial statements

1 GENERAL INFORMATION

Howden Joinery Group Plc is a company incorporated in the
United Kingdom under the Companies Act 2006. The registered
office address is 40 Portman Square, London W1H 6LT. The
nature of the Group’s operations are set out in the Strategic
Report, and the Group’s principal activity is the sale of kitchens
and joinery products, along with the associated manufacture,
sourcing, and distribution of these products.

These financial statements are presented in UK pounds
sterling, being the currency of the primary economic
environment in which the Group operates.

Foreign operations are included in accordance with the
policies set out in note 2.

2 SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation
The Group’s accounting period covers the 52 weeks to
27 December 2014. The comparative period covered the
52 weeks to 28 December 2013.

Statement of compliance and basis of preparation
The Group’s financial statements have been prepared in
accordance with the IFRSs adopted for use in the European Union
and International Financial Reporting Interpretations Committee
(“IFRIC”) interpretations and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS. They
therefore comply with Article 4 of the EU IAS Regulation.

The financial statements have been prepared on the historical
cost basis, and on the going concern basis, as described in the
going concern statement in the Statement of the directors on
page 66. The principal accounting policies are set out below.

Adoption of new accounting standard in the period
The Group has implemented IAS 19 (revised) for the first time
in the current period. The revised standard has been adopted
retrospectively, and in accordance with the transitional
provisions set out in IAS 19.173. The comparative period has
been restated where relevant. The main effects of adopting this
standard are outlined below:

– The administration costs of the defined benefit pension

scheme, which were previously deducted from returns on
assets, are now added to the pension expense and thus
form part of administrative expenses.

– The interest income on plan assets, which forms part of the
net pensions finance charge, is now calculated at the same
rate used to calculate the interest expense on the pension

liability. The rate was previously based on the expected
returns on the various asset types held in the investment
portfolio, but it is now based on the discount rate and derived
from high-quality corporate bond yields.

– As the Group has always recognised actuarial gains and

losses in full and immediately, there is no effect on the prior
period defined benefit obligation.

The result of the restatement was to give a decrease in the profit
for the period for each of the periods presented, and an equal and
opposite increase in other comprehensive income for each period.
This resulted in no change to total comprehensive income or to net
assets. As the profit for the period decreased, so did the restated
EPS for each period. Further details of the amounts of these
changes, and the line items affected, are given in note 21.

Standards in issue but not yet effective
At the date of authorisation of these financial statements,
the following standards, amendments to standards, and
interpretations, were in issue but not yet effective for the
Group in these financial statements:

Annual Improvements to IFRSs: 2011 – 2013 Cycle (Dec 2013)

Annual Improvements to IFRSs: 2010 – 2012 Cycle (Dec 2013)

Amendments to IAS 19 (Nov 2013): Defined Benefit Plans
Employee Contributions

Amendments to IAS 36 (May 2013): Recoverable Amount
Disclosures for Non-Financial Assets

Amendments to IAS 39 (Jun 2013): Novation of Derivatives and
Continuation of Hedge Accounting

Amendments to IFRS 10, IFRS 11, IFRS 12, IAS 27 and IAS 28:
Investment Entities

Amendments to IAS 32 (Dec 2011): Offsetting Financial Assets
and Financial Liabilities

IFRIC 21: Levies

IFRS 9: Financial Instruments

IFRS 14: Regulatory Deferral Accounts

IFRS 15: Revenue from Contracts with Customers

The directors anticipate that the adoption of the other
standards and interpretations mentioned above will have
no material impact on the Group’s financial statements when
the relevant standards come into effect.

Howden Joinery Group Plc Annual Report & Accounts 201474

Basis of consolidation
Subsidiaries are all entities over which the Group has control.
“Control” is defined in this case as the power to govern
financial and operating policies so as to obtain benefits from
the subsidiaries’ activities. Subsidiaries are fully consolidated
from the date on which control is established until the date
that control ceases. Control is achieved where the Group has
the power to govern the financial and operating policies of an
investee entity so as to obtain benefits from its activities.

Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for
goods and services, based on despatch of goods or services
provided to customers outside the Group, excluding sales taxes
and discounts. Interest income is recognised in the income
statement as it accrues, using the effective interest method.

Inventories
Inventories are stated at the lower of cost and net
realisable value. Cost includes an attributable proportion of
manufacturing overheads based on budgeted levels of activity.
Cost is calculated using a standard cost which is regularly
updated to reflect average actual costs. Provision is made for
obsolete, slow-moving, or defective items where appropriate.

Property, plant and equipment
On adopting IFRS, the Group adopted the transitional provisions
of IFRS 1 to use previous revaluations of freehold properties as
the new deemed cost at the date of transition to IFRSs.

All property, plant and equipment is stated at cost (or deemed
cost, as applicable) less accumulated depreciation, and less
any provision for impairment.

Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the
income statement.

Intangible assets – software
Where computer software is not an integral part of a related
item of computer hardware, the software is classified as an
intangible asset. The capitalised costs of software for internal
use include external direct costs of materials and services
consumed in developing or obtaining the software and payroll
and payroll-related costs for employees who are directly
associated with and who devote substantial time to the project.
Capitalisation of these costs ceases no later than the point
at which the software is substantially complete and ready
for its intended internal use. These costs are amortised over
their expected useful lives, which are reviewed annually. The
expected useful life is four years.

Impairment of assets
The carrying amount of the Group’s assets is reviewed at
each balance sheet date to determine whether there is any
indication of impairment. If such an indication exists, the
asset’s recoverable amount is estimated.

Apart from in the case of trade and other receivables,
and inventories, an impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its
recoverable amount. Impairment losses are recognised in
the income statement.

For trade and other receivables and inventories which are
considered to be impaired, the carrying amount is reduced
through the use of an allowance for estimated irrecoverable
amounts. Changes in the carrying value of this allowance are
recognised in the income statement.

Depreciation of property, plant and equipment is provided to
write off the difference between their cost and their residual
value over their estimated lives on a straight-line basis. The
current range of useful lives is as follows:

Current tax
The tax expense represents the sum of the tax currently
payable and deferred tax.

Freehold property

50 years

Short leasehold property

the period of the lease, or the
individual asset’s life if shorter

Plant, machinery & vehicles

3–20 years

Fixtures & fittings

2–15 years

Capital work in progress and freehold land are not depreciated.

The tax currently payable is based on taxable profit for
the financial period. Taxable profit differs from net profit
as reported in the income statement because it excludes
items of income or expense that are taxable or deductible in
other financial years and it further excludes items that are
never taxable or deductible. The Group’s liability for current
tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.

Residual values, remaining useful economic lives and
depreciation periods and methods are reviewed annually
and adjusted if appropriate.

Additional income taxes that arise from the distribution of
dividends are recognised at the same time as the liability to
pay the related dividend.

Notes to the consolidated financial statements continuedDeferred tax
Deferred tax is provided in full using the balance sheet liability
method. It is the tax expected to be payable or recoverable
on the temporary difference between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The following temporary
differences are not provided for: goodwill not deductible for tax
purposes; the initial recognition of assets and liabilities other
than in a business combination that affect neither accounting
nor taxable profit; and differences relating to investments
in subsidiaries to the extent that they will not reverse in the
foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of
the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the balance sheet date.

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 utilised. The carrying amounts of
deferred tax assets are reviewed at each balance sheet date
and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of
the asset to be recovered.

Deferred tax is charged or credited to the income statement
except when it relates to items charged or credited directly
to equity, in which case the deferred tax is also recognised
in equity.

Foreign currencies
Foreign currency transactions
Transactions in foreign currency are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are translated at the exchange rate ruling at
the date. Foreign exchange gains and losses are recognised in
the income statement.

Foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation,
where applicable, are translated into sterling at foreign
exchange rates ruling at the balance sheet date. The results
and cash flows of overseas subsidiaries and the results of joint
ventures are translated into sterling on an average exchange
rate basis, weighted by the actual results of each month.

Exchange differences arising from the translation of the
results and net assets of overseas subsidiaries are taken
to equity via the statement of comprehensive income.

Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event, it is probable that the Group
will be required to settle that obligation, and a reliable estimate
can be made of the amount required to settle the obligation.

Provisions are measured at the directors’ best estimate of the
expenditure required to settle the obligation at the balance
sheet date, taking into account the risks and uncertainties
surrounding the obligation, and are discounted to present
value where the effect is material.

Pensions
Payments to defined contribution retirement benefit schemes
are charged to the income statement as they fall due.

The Group operates a defined benefit pension scheme. The
Group’s net obligation in respect of the defined benefit pension
scheme is calculated by estimating the amount of future
benefit that employees have earned in return for their service
in the current and prior periods. That benefit is then discounted
to determine its present value, and the fair value of any scheme
assets is deducted. The discount rate used is selected so as
to closely approximate the yield at the balance sheet date on
AA-rated bonds that have maturity dates approximating to
the terms of the Group’s obligations. Because there are no
AA-rated bonds with maturity dates which are as long as those
of the Group’s retirement benefit obligations, the discount
rate is derived using the rate of return of zero-coupon Gilts
which have the same maturity as the Group’s obligations,
to which is added a premium which is calculated to account
for the difference in risk between Gilts and AA-rated bonds.
The calculation is performed by a qualified actuary using the
projected unit method. Scheme assets are valued at bid price.

Current and past service costs are recognised in operating
profit and net financing costs include interest on pension
scheme liabilities and assets.

All actuarial gains and losses as at 25 December 2004, the
date of transition to IFRSs, were recognised. Actuarial gains
and losses that arise subsequent to 25 December 2004 in
calculating the Group’s obligation in respect of a scheme
are recognised immediately in reserves and reported in the
statement of comprehensive income.

Leased assets
Leases are classified as finance leases when the terms of
the lease transfer substantially all the risks and rewards of
ownership to the Group. All other leases are classified as
operating leases. For property leases, the land and building
elements are treated separately to determine the appropriate
lease classification.

Howden Joinery Group Plc Annual Report & Accounts 201476

Finance leases
Assets funded through finance leases are capitalised as
property, plant and equipment, and depreciated over their
estimated useful lives or the lease term, whichever is shorter.
The amount capitalised is the lower of the fair value of the
asset or the present value of the minimum lease payments
during the lease term at the inception of the lease. The
resulting lease obligations are included in liabilities net of
finance charges. Finance costs on finance leases are charged
directly to the income statement.

Operating leases
Assets leased under operating leases are not recorded on the
balance sheet. Rental payments are charged directly to the
income statement.

Lease incentives
Lease incentives primarily include up-front cash payments or
rent-free periods. Lease incentives are capitalised and spread
over the period of the lease term.

Leases with predetermined fixed rental increases
The Group has some leases with predetermined fixed rental
increases. These rental increases are accounted for on a
straight-line basis over the period of the lease term.

Borrowing costs
Borrowing costs are recognised in profit or loss in the period in
which they are incurred. In the case of prepaid loan facility fees,
they are capitalised and set against the related borrowings, and
then amortised over the life of the related loan facility.

Other payables
Other payables are stated at their fair value.

Share-based payments
The Group has applied the requirements of IFRS 2 Share-based
payments. In accordance with the transitional provisions,
IFRS 2 has been applied to all grants of equity instruments
after 7 November 2002 that were unvested at the date of the
Group’s transition to IFRS.

The Group issues equity-settled share-based payments to
certain employees. Equity-settled share-based payments
are measured at fair value at the date of grant. The fair value
determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting
period, based on the Group’s estimate of shares that will
eventually vest.

Financial instruments
Financial assets and financial liabilities are recognised on the
Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument.

Trade receivables
Trade receivables do not carry any interest and are stated at
their nominal value, as reduced by appropriate allowances for
estimated irrecoverable amounts. Such allowances are raised
based on an assessment of debtor ageing, past experience, or
known customer circumstances.

Cash at bank and in hand and Cash and cash equivalents
Cash at bank and in hand, which is the term used in the
balance sheet, comprises cash on hand together with demand
deposits, and other short-term highly liquid investments that
are readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value.

Cash and cash equivalents, which is the term used in the
cash flow statement, comprises cash at bank and in hand,
as defined immediately above, together with any overdrafts
repayable on demand, and any current asset investments with
a maturity date of less than three months from the balance
sheet date.

Net cash
Net cash, as shown in note 24, comprises cash and cash
equivalents plus any bank borrowings/prepaid loan fees, and
any finance leases.

Current asset investments
From time to time, the Group uses short-term investments
in UK Gilts as part of its cash management activities. The
Group reviews these investments before entering into them,
and, after establishing that the Group has both the intention
and the ability to hold these investments to maturity, they are
classified as held-to-maturity and are initially recognised at
cost, including any transaction fees.

Subsequent to initial recognition, these investments are carried
at amortised cost using the effective interest method. Income
from these investments is recognised in the income statement
on an effective yield basis.

Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that
evidences a residual interest in the assets of the Group
after deducting all of its liabilities.

Notes to the consolidated financial statements continuedBank borrowings
Interest-bearing bank loans and overdrafts are recorded at the
proceeds received, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and
direct issue costs, are accounted for on an accrual basis to
the income statement using the effective interest rate method
and are added to the carrying amount of the instrument to the
extent that they are not settled in the period in which they arise.

Income taxes
The Group recognises expected liabilities for tax based on an
estimation of the likely taxes due, which requires significant
judgement as to the ultimate tax determination of certain
items. Where the actual liability arising from these issues
differs from these estimates, such differences will have an
impact on income tax and deferred tax provisions in the period
when such determination is made.

Trade payables
Trade payables are not interest bearing and are stated at their
nominal value.

Exceptional items
Certain items do not reflect the Group’s underlying trading
performance. If such items are significant in terms of size or
nature, they would be classified as exceptional. Gains and
losses on these discrete items, such as profits on disposal of
assets, operations, and property interests, restructuring costs,
and other non-operating items can have a material impact on
the absolute amount of and trend in profit from operations
and the result for the period. Therefore, any material gains and
losses on such items are analysed as exceptional. Where there
are any net immaterial amounts arising from such items during
a period, they are not presented as exceptional items.

Discontinued operations
Cash flows, income and expenses that relate to a major
component of the business or geographical region that has
been sold or is classified as held for sale are shown separately
from continuing operations, together with any related tax.

3 CRITICAL ACCOUNTING JUDGEMENTS
AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The Group makes judgements and assumptions concerning
the future that impact the application of policies and reported
amounts. The resulting accounting estimates calculated using
these judgements and assumptions will, by definition, seldom
equal the related actual results but are based on historical
experience and expectations of future events. The judgements
and key sources of estimation uncertainty that have a
significant effect on the amounts recognised in the financial
statements are discussed below.

Post-employment benefits
The Group operates a defined benefit scheme for its employees.
The present value of the scheme’s liabilities recognised at
the balance sheet date is dependent on interest rates of high
quality corporate bonds. The net financing charge recognised
in the income statement is dependent on the interest rate of
high quality corporate bonds. Other key assumptions within
this calculation are based on market conditions or estimates of
future events, including mortality rates, as set out in the relevant
note to these financial statements.

Allowances against the carrying value of inventories
The Group reviews the market value of and demand for
its inventories on a periodic basis to ensure that recorded
inventory is stated at the lower of cost and net realisable
value. In assessing the ultimate realisation of inventories,
the Group is required to make judgements as to future
demand requirements and to compare these with the current
or committed inventory levels. Factors that could impact
estimated demand and selling prices are the product lifecycles
of different ranges, and the extent to which they meet builder’s
and end user’s requirements.

Allowances against the carrying value of trade receivables
Using information available at the balance sheet date, the
Group reviews its accounts receivable balances and makes
judgements based on an assessment of debt ageing, past
experience, or known customer circumstances in order to
determine the appropriate level of allowance required to
account for potential uncollectable trade receivables.

Provisions
Descriptions of the provisions held at period end are given in
the provisions note. These provisions are estimates and the
actual costs and timing of future cash flows are dependent on
future events. Any difference between expectations and the
actual future liability is accounted for in the period when such
determination is made.

The property provisions require judgement and estimation in
determining management’s best estimate of the following main
areas: the costs of future dilapidations; the length of time it
might take to find a tenant for a vacant property; the likely rent
which could be achieved from letting a vacant property; the
amount which the landlord of a property may accept as a lump
sum in order to release the Group from its future obligations;
the amount and timing of likely future increases in rent and
other property costs; the extent, and hence the likely cost,
of any associated legal and professional advice which will be
required; and future maintenance costs.

Howden Joinery Group Plc Annual Report & Accounts 20144 REVENUE

An analysis of the Group’s revenue is as follows:

Continuing operations

Sales of goods

Finance income

Total revenue

There was no revenue from discontinued operations.

5 SEGMENTAL REPORTING

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

1,090.8

0.6

1,091.4

956.5

0.4

956.9

(a) Basis of segmentation and other general information
Information reported to the Group’s Executive Committee is focused on one operating segment, Howden Joinery. Thus, the
information required in respect of profit or loss, assets and liabilities, can all be found in the relevant primary statements and
notes to these consolidated financial statements.

The Howden Joinery business derives its revenue from the sale of kitchens and joinery products.

(b) Other information

Capital additions

Depreciation and amortisation

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

32.9

(20.8)

£m

24.7

(18.7)

(c) Geographical information
The Group’s operations are mainly located in the UK, with a small presence in France and Belgium. The Group has depots located
in the UK, France and Belgium. The number of depots in each location at the current and prior period ends is shown in the five year
record which is located towards the back of this Annual Report. The Group’s manufacturing and sourcing operations are located in
the UK.

The following table analyses the Group’s revenues from external customers by geographical market, irrespective of the origin
of the goods:

Revenues from external customers

France and Belgium

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

1,075.5

15.3

1,090.8

940.7

15.8

956.5

Notes to the consolidated financial statements continued

The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment and
intangible assets, analysed by the geographical area in which the assets are located:

Carrying amount of segment assets

France and Belgium

Non-current assets (excluding deferred tax assets)

France and Belgium

Additions to property, plant and equipment and intangible assets

France and Belgium

27 December 2014

28 December 2013

£m

634.2

10.6

644.8

498.1

10.8

508.9

27 December 2014

28 December 2013

£m

109.5

1.3

110.8

99.4

0.7

100.1

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

32.1

0.8

32.9

£m

24.5

0.2

24.7

6 CONTINUING OPERATIONS – EXCEPTIONAL ITEMS

Exceptional items for the 52 weeks to 27 December 2014
There were no continuing exceptional items in the period. However, there were discontinued exceptional items and these are
analysed in note 29.

Exceptional items for the 52 weeks to 28 December 2013
During the period, the Group reconfigured its transport operations to better reflect the geographical mix of its sales in the UK,
and to improve service to depots. This restructuring involved closure, relocation and reorganisation costs.

The costs are shown below, together with the associated tax credit.

The restructuring was completed by the end of the period. £4.5m of the expenses were paid in the period, and are shown in the
consolidated cash flow statement.

Exceptional costs before tax

Tax on exceptional costs

Exceptional costs after tax

52 weeks to
28 December 2013

£m

(4.5)

0.5

(4.0)

Howden Joinery Group Plc Annual Report & Accounts 20147 OPERATING PROFIT

Operating profit has been arrived at after (charging)/crediting:

Net foreign exchange gain/(loss)

Depreciation of property, plant and equipment:

– on owned assets

– on assets held under finance lease

Amortisation of intangible assets (included in administrative expenses):

– on owned assets

Cost of inventories recognised as an expense

Write down of inventories

Loss on disposal of fixed assets

(Increase)/decrease in allowance for doubtful debts (note 18)

Staff costs (note 8)

Minimum lease payments under operating leases

Auditor’s remuneration for audit services (see below)

All of the items above relate to continuing operations.

A more detailed analysis of auditor’s total remuneration is given below:

Audit services

Fees paid to the Company’s auditor for the audit
of the Company’s annual financial statements

Fees paid to the Company’s auditor and their associates
for other services to the Group:

– the audit of the subsidiary companies pursuant to legislation

Total audit fees

Other services

Audit-related assurance services

Tax compliance services

Tax advisory services

Total non-audit fees

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

8.0

(19.1)

(0.1)

£m

(5.2)

(17.2)

(0.1)

(1.6)

(1.4)

(399.8)

(357.9)

(4.5)

(0.4)

(0.5)

(286.5)

(55.7)

(0.4)

(3.2)

–

1.3

(258.0)

(55.0)

(0.3)

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

(0.1)

(0.3)

(0.4)

(0.1)

(0.3)

(0.1)

(0.2)

(0.3)

(0.1)

(0.2)

(0.4)

Fees payable to Deloitte LLP and their associates for non-audit services to the Company are not required to be disclosed because
the consolidated financial statements are required to disclose such fees on a consolidated basis.

Details of the Group’s policy on the use of auditors for non-audit services, the reasons why the auditor was used rather than
another supplier and how the auditor’s independence and objectivity were safeguarded are set out in the Audit Committee Report.
No services were provided pursuant to contingent fee arrangements.

Notes to the consolidated financial statements continued
8 STAFF COSTS

The aggregate payroll costs of employees, including executive directors, were:

Wages and salaries

Social security costs

Pension operating costs (note 21)

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

(244.6)

(24.3)

(17.6)

(286.5)

£m

(217.1)

(24.5)

(16.4)

(258.0)

Wages and salaries includes a charge in respect of share-based payments of £6.4m (2013: £8.4m).

The average monthly number of persons (full time equivalent, including executive directors) employed by the Group during the
period was as follows:

9 FINANCE INCOME

Bank interest receivable

Total finance income

10 FINANCE EXPENSES AND OTHER FINANCE EXPENSE - PENSIONS

Finance expenses

Interest payable on bank loans

Finance charge on remeasuring creditors to fair value

Other interest

Total finance expenses

52 weeks to
27 December 2014

52 weeks to
28 December 2013

Number

7,210

Number

6,499

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

0.6

£m

0.4

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

–

(0.1)

£m

(0.1)

(0.2)

(0.4)

The finance charge on remeasuring creditors to fair value in the prior period related to an element of the property provision which
was for empty properties with long leases remaining. In the current period, following continued property disposals and lease
expiries, the charge was less than £0.1m.

Other finance expense – pensions

Pensions finance expense

*Restated for amendments to IAS19 – see note 2.

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

£m

(1.5)

£m

(5.7)

Howden Joinery Group Plc Annual Report & Accounts 2014

11 TAX

(a) Tax in the income statement

Continuing operations

Discontinued operations

Total

52 weeks to
27 December
2014

52 weeks to
28 December
2013
restated*

52 weeks to
27 December
2014

52 weeks to
28 December
2013
restated*

52 weeks to
27 December
2014

52 weeks to
28 December
2013
restated*

£m

44.1

(1.7)

42.4

(0.6)

(1.7)

(2.3)

28.1

(0.8)

27.3

5.5

0.4

5.9

Current tax

Current year

Adjustments in respect
of previous periods

Total current tax

Deferred tax

Current year

Adjustments in respect
of previous periods

Total deferred tax

£m

–

(11.2)

–

Total tax charged/(credited)
in the income statement

40.1

33.2

(11.2)

£m

–

44.1

(12.9)

31.2

(0.6)

(1.7)

(2.3)

28.1

(0.8)

27.3

5.5

0.4

5.9

28.9

33.2

UK Corporation tax is calculated at 21.5% (2013: 23.25%) of the estimated assessable profit for the period. Tax for other countries
is calculated at the rates prevailing in the respective jurisdictions.

(b) Tax relating to items credited to equity

Deferred tax (credit)/charge to other comprehensive income
on actuarial loss/gain on pension scheme

Deferred tax charge to other comprehensive income on pension contributions

Current tax credit to other comprehensive income on pension contributions

Deferred tax charge/(credit) to equity on share schemes

Current tax credit to equity on share schemes

Charge to equity re tax rate change**

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

£m

(23.9)

6.3

(6.8)

1.9

(5.0)

–

(27.5)

£m

16.8

–

(3.1)

(4.6)

2.6

11.7

The tax relating to items credited to equity all relates to continuing operations.

(c) Reconciliation of the total tax charge
The total tax charge for the period can be reconciled to the result per the income statement as follows:

Profit before tax

Continuing operations

Discontinued operations

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

188.8

(2.1)

186.7

restated*

£m

130.5

–

130.5

Notes to the consolidated financial statements continued

Tax at the UK corporation tax rate of 21.5% (2013: 23.25%)

IFRS 2 share scheme charge

Expenses not deductible for tax purposes

Overseas losses not utilised

Change of tax rate**

Non-qualifying depreciation

Tax adjustments in respect of previous years in relation to legacy properties***

Other tax adjustments in respect of previous years

Total tax charged in the income statement

Restated for amendments to ISA19 – see note 2.

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

£m

40.1

0.2

2.1

0.2

0.1

0.7

(11.1)

(3.4)

28.9

£m

30.3

–

2.2

–

0.4

0.7

–

(0.4)

33.2

In July 2013, Parliament approved the Finance Bill which reduces the UK Standard rate of corporation tax from 23% to 21% with effect from 1 April 2014 and 21%
to 20% from 1 April 2015. All deferred tax assets and liabilities have been recognised at 20% (2013: 20%). Current and deferred taxes are therefore calculated at
different rates for the period.

*** See note 29(c).

12 EARNINGS PER SHARE

52 weeks to 27 December 2014

52 weeks to 28 December 2013 – restated*

Weighted
average
number of
shares

Earnings
per share

Earnings

Weighted
average
number of
shares

£m

Earnings

£m

Earnings
per share

From continuing operations

Basic earnings per share

Effect of dilutive share options

Diluted earnings per share

From discontinued operations

Basic earnings per share

Effect of dilutive share options

Diluted earnings per share

From continuing and discontinued operations

Basic earnings per share

Effect of dilutive share options

Diluted earnings per share

*Restated for amendments to IAS19 – see note 2.

148.7

640.7

–

6.2

148.7

646.9

9.1

–

9.1

640.7

6.2

646.9

157.8

640.7

–

6.2

157.8

646.9

23.2

(0.2)

23.0

1.4

–

1.4

24.6

(0.2)

24.4

97.3

–

97.3

636.6

5.6

642.2

15.3

(0.1)

15.2

97.3

–

97.3

636.6

5.6

642.2

15.3

(0.1)

15.2

Howden Joinery Group Plc Annual Report & Accounts 2014

13 DIVIDENDS

Amounts recognised as distributions to equity holders in the period

Interim dividend for the 52 weeks to 27 December 2014 – 1.9p per share

Final dividend for the 52 weeks to 28 December 2013 – 4.5p per share

Interim dividend for the 52 weeks to 28 December 2013 – 1.0p per share

Final dividend for the 53 weeks to 29 December 2012 – 2.7p per share

Dividends proposed at the end of the period (but not recognised in the period)

Proposed final dividend for the 52 weeks to 27 December 2014 – (6.5p per share)

Proposed final dividend for the 52 weeks to 28 December 2013 – (4.5p per share)

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

12.2

28.8

–

41.0

£m

–

6.3

17.0

23.3

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

41.6

£m

28.4

The directors propose a final dividend in respect of the 52 weeks to 27 December 2014 of 6.5p per share, payable to ordinary
shareholders who are on the register of shareholders at 22 May 2015, and payable on 19 June 2015.

Dividends have been waived indefinitely on all shares held by the Group’s employee share trusts, which have not yet been
awarded to employees.

The proposed final dividend for the current period is subject to the approval of the shareholders at the 2015 Annual General
Meeting, and has not been included as a liability in these financial statements.

14 OTHER INTANGIBLE ASSETS

The other intangible assets shown below all relate to software, as detailed further in the accounting policies note.

Cost

At 29 December 2012

Additions

At 28 December 2013

Exchange adjustments

Additions

Disposals

At 27 December 2014

Amortisation

At 29 December 2012

Charge for the period

At 28 December 2013

Exchange adjustments

Charge for the period

Disposals

At 27 December 2014

Net book value at 27 December 2014

Net book value at 28 December 2013

£m

16.1

1.1

17.2

(0.1)

1.3

(6.1)

12.3

12.1

1.4

13.5

(0.1)

1.6

(6.1)

8.9

3.4

3.7

Notes to the consolidated financial statements continued15 PROPERTY, PLANT AND EQUIPMENT

Freehold
property

Short-term
leasehold
property

Plant,
machinery
& vehicles

Fixtures &
fittings

£m

Cost

At 29 December 2012

Additions

Disposals

Reclassifications

At 28 December 2013

Exchange adjustments

Additions

Disposals

Reclassifications

At 27 December 2014

Accumulated depreciation

At 29 December 2012

Charge for the period

Disposals

At 28 December 2013

Exchange adjustments

Charge for the period

Disposals

At 27 December 2014

Net book value at 27 December 2014

Net book value at 28 December 2013

21.6

0.1

–

21.7

–

0.3

–

0.1

22.1

2.2

0.3

–

2.5

–

0.3

–

2.8

19.3

19.2

35.2

4.3

–

0.2

39.7

–

4.4

(3.1)

0.9

168.5

8.4

(1.5)

11.2

186.6

–

10.5

(61.1)

3.5

41.9

139.5

12.8

2.8

–

145.9

9.2

(1.4)

15.6

153.7

–

2.9

(2.9)

15.6

26.3

24.1

–

10.7

(60.6)

103.8

35.7

32.9

Capital
WIP

£m

11.6

4.3

–

78.8

6.5

(0.3)

–

(11.4)

85.0

(0.1)

8.3

(6.2)

–

87.0

65.5

5.0

(0.3)

70.2

(0.1)

5.3

(6.1)

69.3

17.7

14.8

4.5

–

8.1

–

(4.5)

8.1

–

8.1

4.5

TOTAL

£m

315.7

23.6

(1.8)

–

337.5

(0.1)

31.6

(70.4)

–

298.6

226.4

17.3

(1.7)

242.0

(0.1)

19.2

(69.6)

191.5

107.1

95.5

The Group has pledged its property, plant and equipment to secure bank borrowings. More details are given in note 20.

At 27 December 2014, the Group had entered into contractual commitments to acquire property, plant and equipment amounting
to £4.3m (2013: £3.6m).

Analysis of assets held under finance leases

Cost

Accumulated depreciation

Net book value

27 December 2014

28 December 2013

Plant, machinery
& vehicles

£m

0.5

(0.3)

0.2

Total

£m

0.5

(0.3)

0.2

Plant, machinery
& vehicles

£m

0.5

(0.2)

0.3

Total

£m

0.5

(0.2)

0.3

Howden Joinery Group Plc Annual Report & Accounts 2014

16 DEFERRED TAX

The following are the major deferred tax assets and liabilities recognised by the Group, and the movements on them during the
current and prior reporting periods:

At 29 December 2012

(Charge)/credit to income statement

(Charge)/credit outside income statement

Effect of tax rate change – income statement

– equity

At 28 December 2013

Credit to income statement

Credit/(charge) outside income statement

At 27 December 2014

Retirement
benefit
obligations

Accelerated
capital
allowances

Company
share
schemes

Other timing
differences

£m

35.5

(6.2)

(16.8)

–

(1.6)

10.9

–

17.6

28.5

£m

0.5

(0.1)

–

(0.2)

–

0.2

1.6

–

1.8

£m

5.4

1.1

3.1

(0.3)

(1.0)

8.3

–

(1.9)

6.4

£m

0.4

(0.2)

–

0.2

0.7

–

0.9

Total

£m

41.8

(5.4)

(13.7)

(0.5)

(2.6)

19.6

2.3

15.7

37.6

Deferred tax arising from accelerated capital allowances, company share schemes and other timing differences can be further
analysed as an £11.7m asset and a £2.6m liability (2013: £12.3m asset and £3.6m liability).

The presentation in the balance sheet is as follows:

Deferred tax assets

Deferred tax liabilities

27 December 2014

28 December 2013

£m

40.3

(2.6)

37.6

£m

23.2

(3.6)

19.6

At the balance sheet date the Group had unused trading tax losses with a potential value of £10.1m (2013: £10.5m). No deferred
tax asset has been recognised as it is not considered probable that future taxable profits will be available against which the unused
tax losses can be utilised. The Group also has carried forward capital losses and the related potential deferred tax asset of £17.2m
(2013: £17.0m) which has not been recognised. Both of these losses may be carried forward indefinitely.

17 INVENTORIES

Raw materials

Work in progress

Finished goods and goods for resale

Allowance against carrying value of inventories

27 December 2014

28 December 2013

£m

4.2

4.1

147.2

(12.4)

143.1

£m

3.4

2.7

129.3

(12.0)

123.4

The Group has pledged its inventories to secure bank borrowings. More details are given in note 20.

Notes to the consolidated financial statements continued

18 OTHER FINANCIAL ASSETS

Trade and other receivables

Trade receivables (net of allowance)

Prepayments and accrued income

Other receivables

27 December 2014
£m

28 December 2013
£m

102.9

28.7

1.5

133.1

96.3

24.6

1.5

122.4

Trade and other receivables are not interest-bearing, and are on commercial terms. Their carrying value approximates to their fair value.

An analysis of the Group’s allowance for doubtful receivables is as follows:

Balance at start of period

Increase/(decrease) in allowance recognised in the income statement

Balance at end of period

27 December 2014
£m

28 December 2013
£m

6.8

0.5

7.3

8.1

(1.3)

6.8

The Group’s exposure to the credit risk inherent in its trade receivables is discussed in note 28. The Group has no significant
concentration of credit risk, with exposure spread over a large number of customers. Interest is charged at appropriate market
rates on balances which are in litigation.

Before accepting any new credit customer, the Group obtains a credit check from an external agency to assess the potential
customer’s credit quality, and then sets credit limits on a customer-by-customer basis. These credit limits are reviewed regularly. In the
case of one-off customers, the Group’s policy is to require immediate payment at the point of sale, and not to offer credit terms.

The historical level of customer default is low, and as a result the “credit quality” of period end trade receivables is considered
to be high. The Group reviews trade receivables past due but not impaired on a regular basis and considers, based on past
experience, whether the credit quality of these amounts at the balance sheet date has deteriorated since the transaction was
entered into and therefore whether the amounts are recoverable or require provision. Regular contact is maintained with all
such customers and, where necessary, legal action is taken to recover the receivable. An allowance for impairment is made for
any specific amounts which are considered irrecoverable or only partly recoverable. There is also a separate allowance, which is
calculated as a percentage of sales. At the period end, the total bad debt provision of £7.3m (2013: £6.8m) consists of a specific
provision of £2.9m (2013: £3.3m) which has been made against specific debts with a gross carrying value of £3.7m (2013: £4.1m),
and a provision of £4.4m (2013: £3.5m) based on sales and on the historic default rate. To the extent that recoverable amounts
are estimated to be less than their associated carrying values, impairment charges have been recorded in the consolidated income
statement and the carrying values have been written down to their recoverable amounts.

£4.6m of debts were written off in the period (2013: £5.0m). Included within the Group’s aggregate trade receivables balance are
specific debtor balances with customers totalling £16.5m before bad debt provision (2013: £13.0m before provision) which are
past due as at the reporting date. The Group has assessed these balances for recoverability and believes that their credit quality
remains intact.

Howden Joinery Group Plc Annual Report & Accounts 2014

An ageing analysis of these past due trade receivables is provided as follows:

1–30 days past due

31–60 days past due

61–90 days past due

90+ days past due

Total overdue amounts, excluding allowance for doubtful receivables

27 December 2014

28 December 2013

£m

8.9

1.7

1.0

4.9

16.5

£m

6.1

1.4

1.0

4.5

13.0

There were no trade receivables which would have been impaired at either period end were it not for the fact that their credit terms
were renegotiated. The Group does not renegotiate credit terms.

Cash at bank and in hand
Cash at bank and in hand, which is the term used in the balance sheet, comprises cash on hand together with demand
deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject
to an insignificant risk of changes in value. Cash at bank is either in current accounts, or is placed on short-term deposit, and
is available on demand. Interest on short-term deposits is paid at prevailing money market rates. The carrying amount of these
assets approximates to their fair value.

Current asset investments
Current asset investments comprise investments in short-term UK Gilts. They have maturity dates ranging between 1 and 3 months
from the balance sheet date. They return a fixed rate of interest. The weighted average effective interest rate on
the Gilts held at the balance sheet date is 0.3% pa.

These investments are classified as held-to-maturity, and are held at amortised cost. There were no such investments at the prior
period end.

The directors estimate that the fair value of these investments at the current period end is equal to their carrying value.

Assets pledged as security
The Group has pledged its other financial assets to secure its bank facility. More details are given in note 20.

19 OTHER FINANCIAL LIABILITIES

Trade and other payables

Current liabilities

Trade payables

Other tax and social security

Other payables

Accruals and deferred income

27 December 2014

28 December 2013

£m

80.1

51.7

6.9

47.4

£m

70.4

40.4

5.5

42.1

186.1

158.4

Trade payables, other payables, and accruals principally comprise amounts due in respect of trade purchases and ongoing costs.
Their carrying value in both periods approximates to their fair value.

The average credit taken for trade purchases during the period, based on total operations, was 46 days (2013: 44 days).

The Group’s policy on payment of creditors is to agree terms of payment prior to commencing trade with a supplier, and to abide
by those terms on the timely submission of satisfactory invoices.

Notes to the consolidated financial statements continued
20 BORROWINGS

Total borrowings

Current assets

Bank borrowings (net of prepaid fees)

Current borrowings

Current portion of finance lease obligations

Non-current assets

Bank borrowings (net of prepaid fees)

Non-current borrowings

Non-current portion of finance lease obligations

Total net borrowings

Bank borrowings
The bank borrowings are repayable as follows:

Disclosed under current assets

On demand or within one year

Less: prepaid issue fees set against borrowings

Disclosed under non-current assets

Prepaid issue fees

Total bank borrowings, net of prepaid fees

27 December 2014

28 December 2013

£m

(0.6)

–

(0.3)

0.1

(0.8)

£m

(0.1)

0.1

(0.9)

0.1

(0.8)

27 December 2014

28 December 2013

£m

–

(0.6)

(0.3)

(0.9)

£m

0.4

(0.5)

(0.1)

(0.9)

(1.0)

The Group’s accounting policy is to capitalise prepaid loan facility issue fees and to set them against the related borrowings.
The fees are then amortised over the life of the facility. The Group’s current facility expires in July 2016. At the current and prior
period ends, the amount of fees relating to the period in excess of one year from the balance sheet date were greater than the
corresponding amounts drawn down under the facility, thereby creating a net debit balance as shown above. At the current period
and prior ends, the amount of fees relating to the period less than one year from the balance sheet date was also greater than the
corresponding amount drawn down.

All bank borrowings shown above are in sterling, and are drawn under the £140m (2013: £160m) committed bank facility. The
terms of this facility are explained further in the final paragraph of note 28(a).

This facility is secured on the property and other assets of the Group. The carrying values of each of these classes of assets is as
presented in the balance sheet and notes to these consolidated financial statements.

The available facility limit is calculated every week, based on the asset backing at the time and can never exceed £140m. In
accordance with the terms of the facility agreement this limit reduced from £160m to £140m in May 2014. As at 27 December 2014,
the Group had available £112m of undrawn committed borrowing facilities, in respect of which all conditions precedent had been met
(28 December 2013: £123m), in addition to the Group’s cash and short-term investments as shown on the Balance Sheet.

If the Group were to use the facility, it would carry interest at a rate of LIBOR plus a margin. The margin would vary between 200
and 250 basis points and would be determined by the Group’s rolling Adjusted Profit Before Tax.

Howden Joinery Group Plc Annual Report & Accounts 201490

Finance lease obligations
The finance lease obligations are repayable as follows:

Current liabilities

Within one year

Non-current liabilities

In the second year

In the third to fifth years inclusive

Total finance lease obligations

27 December 2014

28 December 2013

£m

–

0.1

–

0.1

£m

0.1

–

0.1

0.2

All of the finance lease obligations are in sterling. Each lease contract is at a fixed interest rate. The finance lease obligations were
unsecured, and the average remaining lease term at the period end was 2 years and 6 months (2013: 2 years and 3 months).

The reconciliation items between the total future minimum lease payments and their present value is as follows:

Minimum lease payments

Present value of minimum lease payments

27 December 2014

28 December 2013

27 December 2014

28 December 2013

£m

–

0.1

–

0.1

£m

0.1

–

0.1

0.2

Amounts payable under finance leases

Within one year

In the second year

In the third to fifth years inclusive

Less: future finance charges

Present value of lease obligations

Disclosed as:

Current

Non-current

£m

–

0.1

–

0.1

–

0.1

–

0.1

£m

0.1

–

0.1

0.2

–

0.2

0.1

0.2

Interest rate and fair value information for bank borrowings and finance lease obligations
The weighted average interest rates paid were as follows:

Finance lease obligations

Bank borrowings

The directors estimate the fair value of the Group’s borrowings is as follows:

Finance lease obligations

Bank borrowings

*The Group did not incur any interest on borrowings in the current period.

52 weeks to
27 December 2014

52 weeks to
28 December 2013

6.0

N/A*

5.0

2.5

27 December 2014

28 December 2013

£m

0.1

(0.9)

£m

0.2

(1.0)

Notes to the consolidated financial statements continued

21 RETIREMENT BENEFIT OBLIGATIONS

(a) Overview of all retirement benefit arrangements
Defined contribution: auto-enrolment plan
The Group operates an auto-enrolment defined contribution plan for employees, in line with recent UK Government legislation.
Under the terms of this scheme, employees make pension contributions out of their salaries, and the Group also makes additional
contributions. The Group decided to give employees the option to enter this plan earlier than the mandatory start date, and so the
auto-enrolment plan was open to employees from November 2012 on a voluntary, opt-in, basis, although it was not mandatory to
enrol employees into this plan until July 2013.

The total cost charged to income in respect of this plan in the current period of £2.7m (2013: £1.4m) represents the Group’s
contributions due and payable in respect of the period. Due to the timing of payments, £0.3m (2013: £0.2m) of this amount was
unpaid at the period end, but was paid shortly afterwards.

Defined contribution: other plan
The Group operates a defined contribution plan for its employees. The assets of this plan are held separately from those of the
Group, and are under the control of the scheme trustees. This plan began operation during 2006.

The total cost charged to income in respect of this plan in the current period of £0.8m (2013: £0.8m) represents the Group’s
contributions due and paid in respect of the period.

Defined benefit plan
Characteristics and risks of the plan
The Group operates a funded pension plan which provides benefits based on the career average pensionable pay of participating
employees. This plan was closed to new entrants from April 2013.

The assets of the plan are held separately from those of the Group, being held in a trustee-administered pension plan and invested
with independent fund managers. The trustee directors of the plan comprise three member-elected trustees, two independent
trustees, and three Group-appointed trustees. All trustees are required to act in the best interests of the plan beneficiaries.

The plan exposes the Group to actuarial risks, such as longevity risk, interest rate risk, and market (investment) risk.

Accounting and actuarial valuation
Contributions are charged to the consolidated income statement so as to spread the cost of pensions over the employees’ working
lives with the Group. The present value of the defined benefit obligation, the related current service cost, and past service cost are
determined by a qualified actuary using the projected unit method. The most recent completed actuarial valuation was carried out
at 5 April 2011 by the plan actuary. The actuary advising the Group has subsequently rolled forward the results of the 5 April 2011
valuation to 27 December 2014, and has restated the results onto a basis consistent with market conditions at that date.

Funding and estimated contributions
The Group has an agreement with the pension plan trustees to make additional deficit contributions to the plan over and above
the normal level of contributions as follows: £25m per year until 31 March 2015, and £35m per year from 1 April 2015 until
30 June 2017. This annual contribution may be increased by a one-off £10m per year, if profits are above pre-agreed levels until
31 March 2015. An additional payment was triggered by the Group’s 2014 profit being in excess of the pre-agreed level, and
accordingly an additional one-off payment of £10m will be paid in 2015. More details of the one-off payment and the funding
arrangements are given in our Interim Management Statement of 5 November 2014 and in our RNS news announcement of
12 June 2012.

The funding agreement is subject to review as part of the 2014 triennial valuations and will be agreed with the Scheme trustees
during 2015. The trustees and the Group agree the contributions to be paid into the Plan.

The Group’s estimated contributions to the defined benefit plan in the 52 weeks ending 26 December 2015 are £57m. This figure
has been arrived at by assuming that our funding arrangement with the trustees and our payment to the Pension Protection Fund
remain at the same level as in 2014. It also includes a one-off additional payment to the plan of £10m, which is mentioned above
and which will be paid in 2015.

Howden Joinery Group Plc Annual Report & Accounts 2014

Differences between the defined benefit pension deficit on an IAS 19 basis and on a funding basis
As is mandatory under International Financial Reporting Standards, the Group values its pension deficit in these accounts on
an IAS 19 basis. As shown below, the IAS 19 deficit at the current period end is £142.6m. On a funding basis (also know as a
“Technical Provisions basis”, being the basis on which the triennial actuarial valuations are carried out), the funding deficit at the
current period end is estimated at £249m, this estimate being based on an approximate roll-forward of the 2011 triennial funding
valuation, updated for market conditions.

French post-employment benefits
As explained in more detail in note 22, we have recognised a provision for a post-employment benefit which is payable to
employees in our French subsidiaries under French law on retirement. It is a lump sum payable on retirement, not a recurring
pension. As such, there is no underlying pension plan.

(b) Adoption of revisions to IAS 19 in the current period
The revised IAS 19 was adopted in the current period. As required, prior periods have been restated as if the revised standard had
been in force in those periods.

Further detail of the nature of the revisions is given at note 2. Their financial effect is shown below:

52 weeks to
27 December 2014

52 weeks to
28 December 2013

Income statement

Admin expenses – increase to defined benefit pensions current service cost

Other finance charge – pensions. Increase to charge

Tax charge – deferred tax element of current tax charge

Net decrease in profit for the period

Other comprehensive income (“OCI”)

Change in gross actuarial gain – increase in OCI

Change in deferred tax on actuarial gain – decrease in OCI

Net increase in OCI for the period

Net effect on total income (and net assets)

Earnings per share

Reduction in basic EPS (pence/share)

Reduction in diluted EPS (pence/share)

£m

2.0

6.3

(1.7)

6.6

(8.3)

1.7

(6.6)

–

(1.0)

£m

1.8

1.6

(0.9)

2.5

(3.4)

0.9

(2.5)

–

(0.4)

(0.3)

Notes to the consolidated financial statements continued(c) Total amounts charged/(credited) in respect of pensions in the period

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

Charged to the income statement

Defined benefit plan – current service cost

Defined benefit plan – administration costs

Defined benefit plan – total operating charge

Defined benefit plan – net finance charge

Defined contribution plans – total operating charge

French post–employment benefits – charge in period

Total net amount charged to profit before tax

Charged to equity

Defined benefit plan – net actuarial losses/(gains) net of deferred tax

Total charge/(credit)

*Restated for amendments for IAS19 – see note 2.

(d) Other information – defined benefit pension plan
Key assumptions used in the valuation of the plan

Rate of increase of pensions in deferment capped at lower of CPI and 5%

Rate of CARE revaluation capped at lower of RPI and 3%

Rate of increase of pensions in payment:

– pensions with increases capped at lower of CPI and 5%

– pensions with increases capped at lower of CPI and 5%, with a 3% minimum

– pensions with increases capped at the lower of LPI and 2.5%

Rate of increase in salaries

Inflation assumption – RPI

Inflation assumption – CPI

Discount rate

The following mortality tables were used:

Mortality before retirement – 2013 and 2014:

Mortality in retirement for current and future
pensioners – 2013 and 2014:

£m

12.4

1.7

14.1

1.5

3.5

0.2

19.3

95.7

115.0

£m

12.5

1.5

14.0

5.7

2.4

–

22.1

(56.2)

(34.1)

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

2.15%

2.45%

3.55%

2.25%

4.45%

3.45%

2.45%

3.50%

2.60%

2.70%

3.65%

2.30%

4.70%

3.70%

2.70%

4.80%

Males AM00 Ultimate
Females AF00 Ultimate

Males S1PMA, CMI 2010 core projections with a long-term
improvement rate of 1.5% pa
Females S1PFA, CMI 2010 core projections with a long-term
improvement rate of 1.5% pa

* The underlying S1PMA and S1PFA tables are also adjusted by scaling factors. Separate scaling factors apply to males and females and to the different categories

of members.

Howden Joinery Group Plc Annual Report & Accounts 2014

The mortality assumption adopted by the Group in 2013 and 2014 is equivalent to the following life expectancies:

Non-pensioner (age 45)

Pensioner (age 65)

2014

2013

Male (years)

Female (years)

Male (years)

Female (years)

89.5

88.6

91.8

89.6

89.3

88.5

91.7

89.5

Sensitivities
If there was an increase/decrease in the discount rate of 0.25%, there would be a corresponding decrease/increase in the scheme
liabilities of around 5%, or £54m, and a decrease/increase in the total service cost of around 4.4% or £0.8m.

An increase of 0.25% to the inflation rate would increase scheme liabilities by around £35m, or 3.2%, and would increase total
service cost by around £0.5m or 2.8%. A decrease of 0.25% to the inflation rate would decrease scheme liabilities by around
£31m, or 2.8%, and would decrease total service cost by around £0.4m or 2.2%. The effect of an increase in inflation is not the
exact equal and opposite of the effect of a decrease in inflation because of the effect of various caps and collars on various
tranches of pension benefits (for instance, some pension increases are capped at the lower of LPI and 2.5%, as noted above).

The effect of increasing the assumption regarding life expectancy by one year longer than shown above would be to increase the
assessed value of liabilities by around 2% or £22m, and would increase total service cost by around £0.3m or 1.6%.

The sensitivities above are applied to the defined benefit obligation at the end of the reporting period. Whilst the analysis does not
take account of the full distribution of cash flows expected under the scheme, it does provide an approximation to the sensitivity of
the assumptions shown.

Analysis of plan assets

Government bonds

Equities

– passive equities

– low volatility equities

Private equity

Alternative growth assets

– fund of hedge funds

– absolute return fund

Corporate bonds

Commerical property fund

Cash and cash equivalents

Total

27 December 2014

28 December 2013

Quoted market
price in an
active market

No quoted market
price in an
active market

Quoted market
price in an
active market

No quoted market
price in an
active market

£m

335.2

85.2

176.9

–

78.3

59.3

92.7

45.5

11.7

£m

–

58.7

–

£m

226.9

108.9

144.5

57.7

56.1

86.2

35.7

23.5

£m

–

63.6

–

884.8

58.7

739.5

63.6

The plan assets do not include any of the Group’s own financial instruments nor any property occupied by, or other assets used by,
the Group.

Notes to the consolidated financial statements continuedAsset allocation
The trustees’ current chosen long-term asset allocation strategy for the plan, as noted in the plan’s most recent audited accounts
(for the year to 5 April 2014), is to target an allocation of 55% in return-seeking assets (such as equities, alternative growth assets,
and the commercial property fund), and 45% in risk-reducing assets (such as government bonds, corporate bonds, and cash and
cash equivalents).

Analysis of plan liabilities

Active members

Deferred members

Pensioners

Total no./average duration

27 December 20141

28 December 20132

No. of members

Duration (yrs)

No. of members

Duration (yrs)

2,021

6,561

2,890

11,472

2,182

6,698

2,714

11,594

The number of members is as per the 5 April 2014 trustees’ report, and the duration is as at 5 April 2014 (being the date of the triennial valuation
which is in progress).

The number of members is as per the 5 April 2013 trustees’ report, and the duration is as at 5 April 2011 (being the date of the last triennial valuation).

Balance sheet
The amount included in the Balance Sheet arising from the Group’s obligations in respect of defined benefit retirement benefit
plan is as follows:

Present value of defined benefit obligations

Fair value of scheme assets

Deficit in the scheme, recognised in the Balance Sheet

Movements in the present value of defined benefit obligations were as follows:

Present value at start of period

Current service cost

Administration cost

Interest on obligation

Contributions from scheme members

Actuarial losses/(gains):

– changes in financial assumptions

– experience

Benefits paid, including expenses

Present value at end of period

*Restated for amendments to IAS 19 – see note 2.

27 December 2014
£m

28 December 2013
£m

(1,086.1)

943.5

(142.6)

(857.4)

803.1

(54.3)

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

£m

857.4

12.4

1.7

40.6

0.2

212.5

(12.0)

(26.7)

1,086.1

£m

874.9

12.5

1.5

38.4

0.2

(47.3)

–

(22.8)

857.4

Howden Joinery Group Plc Annual Report & Accounts 2014

Movements in the fair value of the plan’s assets is as follows:

Fair value at start of period

Interest income on plan assets

Contributions from plan members

Contributions from the Group

Actuarial gains

Benefits paid, including expenses

Fair value at end of period

Movements in the deficit during the period are as follows:

Deficit at start of period

Current service cost

Administration cost

Employer contributions

Other finance charge

Actuarial losses gross of deferred tax

Deficit at end of period

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

£m

803.1

39.1

0.2

46.9

80.9

(26.7)

943.5

£m

720.4

32.7

0.2

46.9

25.7

(22.8)

803.1

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

£m

(54.3)

(12.4)

(1.7)

46.9

(1.5)

(119.6)

(142.6)

£m

(154.5)

(12.5)

(1.5)

46.9

(5.7)

73.0

(54.3)

Income statement
Amounts recognised in the income statement arising from the Group’s obligations in respect of the defined benefit plan are shown below.
Amount charged to operating profit:

Current service cost

Administration cost

Net cost

The current service cost is included in the financial statement heading Staff costs.

Amount credited to other finance charges:

Interest income on plan assets

Interest cost on defined benefit obligation

Net charge

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

£m

12.4

1.7

14.1

£m

12.5

1.5

14.0

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

£m

(39.1)

40.6

1.5

£m

(32.7)

38.4

5.7

The actual return on plan assets was £120.0m (52 weeks to 28 December 2013: £58.4m).

*Restated for amendments to IAS19 – see note 2.

Notes to the consolidated financial statements continued

Statement of comprehensive income
Amounts taken to equity via the statement of comprehensive income in respect of the Group’s defined benefit plan are shown below:

52 weeks to
27 December 2014

52 weeks to
28 December 2013
restated*

Actuarial gain on plan assets

Actuarial (loss)/gain on plan liabilities

Net actuarial (loss)/gain, before associated deferred tax

*Restated for amendments to IAS19 - see note 2.

22 PROVISIONS

At 29 December 2012

Additional provision in the period

Provision released in the period

Utilisation of provision in the period

At 28 December 2013

Additional provision in the period

Provision released in the period

Utilisation of provision in the period

At 27 December 2014

Property

Warranty

Business
closure

£m

17.8

1.8

(0.2)

(10.4)

9.0

3.3

(0.2)

(5.3)

6.8

£m

3.4

2.8

(0.3)

(3.0)

2.9

3.6

–

(2.9)

3.6

£m

0.9

–

(0.8)

0.1

–

(0.1)

–

£m

80.9

(200.5)

(119.6)

French post-
retirement
benefits

£m

–

0.2

–

0.2

£m

25.7

47.3

73.0

Total

£m

22.1

4.6

(0.5)

(14.2)

12.0

7.1

(0.3)

(8.2)

10.6

Property provision
The property provision covers two main areas: (i) onerous leases on any non-trading leased properties, and (ii) obligations to make
dilapidations payments to landlords of leased properties.

There is a discussion of the main sources of estimation and uncertainty which apply to this provision at note 3. The amount of the
expected future cash flows has been adjusted to reflect the expected range of possibilities.

The timing of outflows from the provision is variable, and is dependent on property lease expiry dates, on opportunities to surrender
leases, and on the timing of dilapidations assessments and works.

In the prior period there was an increase of £0.1m to one element of the property provision which was for empty properties with
long leases remaining, and which related to the unwinding of the discount rate over time. In the current year, following continued
property disposals and lease expiries, the comparable charge was less than £0.1m.

Howden Joinery Group Plc Annual Report & Accounts 2014
98

Warranty provision
The warranty provision relates to amounts due in respect of product warranties. As products are sold, the Group makes provision
for claims under warranties. As claims are made, the Group utilises the provision and then uses this historical data to periodically
revise the basis on which it makes further provision.

Business closure provision
The provision for business closure relates to the costs of closure of the former Group subsidiary company Howden Joinery Supply
Division (Asia) Ltd. This closure was almost entirely completed at the end of 2013, but the final small cash outflows were paid in
2014 and the small unutilised remaining provision was released.

French post-employment benefits
This provision relates to a benefit which is payable to employees in our French subsidiaries under French law on retirement. It is a
lump sum payable on retirement, not a recurring pension. It will only be payable if any of the eligible employees are employed by our
French subsidiaries immediately before their retirement.

The provision represents our best estimate of the potential liability and it is calculated based on several factors, mainly the age
profile and salary details of the current workforce in France, and the current rate of staff turnover.

23 SHARE CAPITAL

52 weeks to
27 December 2014

52 weeks to
28 December 2013

52 weeks to
27 December 2014

52 weeks to
28 December 2013

Ordinary shares of 10p each

Number

Allotted, called up and fully paid

Balance at the beginning of the period

642,782,361

642,016,063

Issued during the period

3,759,135

766,298

Balance at the end of the period

646,541,496

642,782,361

£m

64.3

0.4

64.7

£m

64.2

0.1

64.3

24 NOTES TO THE CASH FLOW STATEMENT

(a) Net cash flows from operating activities

Net cash flow from operating activities comprises:

Continuing operating activities

Discontinued operating activities

Discontinued operations – exceptional items

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

147.8

–

147.8

£m

87.2

–

87.2

Notes to the consolidated financial statements continued
(b) Reconciliation of net cash

Net cash at start of period

(Decrease)/increase in cash

Increase in short-term investments

Decrease in bank loans/prepaid loan fees

Decrease in finance leases

Net cash at end of the period

Represented by:

Cash

Short-term investments

Bank loans/prepaid loan fees

Finance leases

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

140.5

(7.8)

85.0

(0.1)

0.1

217.7

131.9

85.0

0.9

(0.1)

217.7

£m

96.4

43.0

–

1.1

–

140.5

139.7

–

1.0

(0.2)

140.5

Cash at bank
and in hand

Short-term
investments

SUBTOTAL
Cash and cash
equivalents

Bank loans/
prepaid loan
fees (note 20)

Finance leases

£m

139.7

(7.8)

131.9

£m

–

85.0

£m

139.7

77.2

216.9

£m

1.0

(0.1)

0.9

£m

(0.2)

0.1

(0.1)

TOTAL
Net cash

£m

140.5

77.2

217.7

At 28 December 2013

Cash flow

At 27 December 2014

The short-term investments have a maturity of less than three months, and as such are considered to be cash equivalents for the
purposes of the cash flow statement.

Howden Joinery Group Plc Annual Report & Accounts 201425 FINANCIAL COMMITMENTS

100

Capital commitments

Contracted for, but not provided for in the financial statements

27 December
2014

28 December
2013

£m

4.3

£m

3.6

Operating lease commitments
The Group as lessee
Payments under operating leases during the period are shown at note 7. At the balance sheet date, the Group had outstanding
lease commitments for future minimum lease payments under non-cancellable operating leases which fall due as shown below:

Payments falling due

Within one year

In the second to fifth year inclusive

After five years

Properties

Other leases

Total

27 December
2014

28 December
2013

27 December
2014

28 December
2013

27 December
2014

28 December
2013

£m

46.3

140.1

75.1

261.5

46.0

146.0

75.4

267.4

11.7

27.8

10.9

50.4

10.5

12.2

2.4

25.1

58.0

167.9

86.0

311.9

56.5

158.2

77.8

292.5

The Group as lessor
The Group sublets certain leased properties to third parties. At the balance sheet date, the Group had contracted with tenants for
the following future minimum lease payments:

Payments receivable

Within one year

In the second to fifth year inclusive

After five years

Finance lease commitments are analysed in note 20.

27 December
2014

28 December
2013

£m

0.7

2.5

1.3

4.5

£m

0.8

2.3

0.5

3.6

Notes to the consolidated financial statements continued26 SHARE-BASED PAYMENTS

1) Details of each scheme
The Group recognised a charge of £6.4m (2013: charge of £8.4m) in respect of share-based payments during the period. The
Group has various share-based payment schemes, which are all equity-settled. The main details of all schemes which existed
during the period are given below.

101

a) Co-Investment Plan
This is a co-investment plan where each participant is permitted to invest a limited amount of shares on an annual basis for the
purposes of the Plan.

2011 award: 25% of the award will vest if PBT growth at the end of the 2013 financial year is at a rate of 6% p.a., based on the
December 2010 accounts. 100% of the award will vest if PBT growth on the same basis is 12% p.a. or above.

2012 award: 25% of the award will vest if PBT growth at the end of the 2014 financial year is at a rate of 6% p.a., based on the
December 2011 accounts. 100% of the award will vest if PBT growth on the same basis is 12% or above.

2013 award: 25% of the award will vest if PBT growth at the end of the 2015 financial year is at a rate of 6% p.a., based on the
December 2012 accounts. 100% of the award will vest if PBT growth on the same basis is 12% or above.

2014 award: 15% of the award will vest if PBT growth at the end of the 2016 financial year is at a rate of 8% p.a., based on the
December 2013 accounts. 100% of the award will vest if PBT growth on the same basis is 20% or above.

b) Executive Share Options
This is a discretionary share option plan. These options are granted with an exercise price equal to market value.

The vesting period is three years from the date of grant with an exercise period of seven years (i.e. a total life of ten years). In the
information below, these options have been further subdivided according to their different performance conditions, in order to give
more meaningful information. The different subdivisions and performance conditions are as follows:

(i) 40% vesting if EPS growth equals RPI + 40%, rising to 100% vesting for EPS growth of RPI + 100%.

(ii) EPS growth must equal RPI + 9%. If this is achieved there will be full vesting. If this is not achieved there will be no vesting.

(iii) Full vesting will occur if the Group’s cumulative profit before tax is at least £90m over the three financial years ending

December 2009, 2010, and 2011. If this is not achieved there will be no vesting.

c) Howden Joinery Group Long-term Incentive Plan
This is a discretionary plan under which the Group may grant different types of share award including market value and nil cost
options, conditional awards of shares and restricted shares (where the employee is the owner of the shares from the date of award
but subject to forfeiture). Unless otherwise specified all awards have substantially the same terms.

(i)

Market value options, the vesting period for which is three years from the date of grant with an exercise period of seven years
(i.e. a total life of ten years). Options will vest if cumulative PBT of £90m is achieved over the three financial years ending 2009,
2010 and 2011.

(ii) Market value options which vest after a three year period from the date of grant. 15% of the options will vest if the Group

achieves growth in pre-exceptional PBT equivalent to RPI over the performance period; 100% will vest if pre-exceptional PBT
growth is equivalent to RPI + 8% is achieved.

(iii) Conditional Share Award - shares will vest at the end of a three year period commencing on the date of grant subject to

continuing employment.

Howden Joinery Group Plc Annual Report & Accounts 2014

(iv) Market value options:

102

2011 Grant: 25% of the award will vest if PBT growth at the end of the 2013 financial year is at a rate of 6% p.a., based on the
December 2010 accounts. 100% of the award will vest if PBT growth on the same basis is 12% p.a. or above.

2012 grant: 25% of the award will vest if PBT growth at the end of the 2014 financial year is at a rate of 6% p.a., based on the
December 2011 accounts. 100% of the award will vest if PBT growth on the same basis is 12% p.a. or above.

2013 grant: 25% of the award will vest if PBT growth at the end of the 2015 financial year is at a rate of 6% p.a., based on the
December 2012 accounts. 100% of the award will vest if PBT growth on the same basis is 12% p.a. or above.

d) Share Incentive Scheme (Freeshares)
This is an ‘all-employee’ share incentive plan whereby participants receive a grant of free shares in the Group. If the employees are
still employed by the Group three years after the grant, then the shares vest. Dividends are paid out on the shares between award
date and vesting date. There are no other performance conditions attached to these awards.

e) Share Award Plan
This is a discretionary plan under which the Group may grant nil cost options subject to conditions as determined by the Group.
2013 award: shares will vest at the end of a five year period commencing on the date of grant, subject to continuing employment.

2) Movements in the period
a) Co-investment Plan: 2011, 2012, 2013 & 2014 awards

52 weeks to
27 December 2014

52 weeks to
28 December 2013

Number

WAEP (£)

Number

WAEP (£)

In issue at start of period

Granted in period

Lapsed in period

Exercised in period

In issue at end of period

Exercisable at end of period

Number of options in the closing balance
that were granted before 7 November 2002

Weighted average share price for options
exercised during the period

Weighted average contractual life remaining
for share options outstanding at the period
end (years)

Weighted average fair value of options
granted during the period (£)

Range of exercise prices for options
outstanding at the period end (£):

– from

– to

10,926,262

1,433,043

(713,677)

(3,662,341)

7,983,287

–

0.89

3.62

–

N/A

3.46

8,503,782

2,422,480

–

10,926,262

–

1.09

2.24

–

N/A

–

N/A

Notes to the consolidated financial statements continuedb) Executive Share Options
i) 40% vesting if EPS growth = RPI + 40% rising to 100% vesting if EPS growth = RPI + 100%

103

52 weeks to
27 December 2014

52 weeks to
28 December 2013

In issue at beginning of period

Granted in period

Lapsed in period

Exercised in period

In issue at end of period

Exercisable at end of period

Number of options in the closing balance
that were granted before 7 November 2002

Weighted average share price for options
exercised during the period

Weighted average contractual life remaining
for share options outstanding at the period
end (years)

Weighted average fair value of options
granted during the period (£)

Range of exercise prices for options
outstanding at the period end (£):

– from

– to

ii) Full vesting if EPS increases by RPI + 9%

In issue at beginning of period

Granted in period

Lapsed in period

Exercised in period

In issue at end of period

Exercisable at end of period

Number of options in the closing balance
that were granted before 7 November 2002

Weighted average share price for options
exercised during the period

Weighted average contractual life remaining
for share options outstanding at the period
end (years)

Weighted average fair value of options
granted during the period (£)

Range of exercise prices for options
outstanding at the period end (£):

– from

– to

WAEP (£)

1.07

N/A

1.07

N/A

3.70

Number

275,483

–

(275,483)

–

N/A

WAEP (£)

1.07

N/A

1.07

2.32

Number

683,952

–

(408,469)

275,483

–

N/A

1.07

52 weeks to
27 December 2014

52 weeks to
28 December 2013

WAEP (£)

1.00

N/A

1.00

3.48

Number

148,383

–

(5,000)

(42,383)

101,000

–

N/A

1.00

WAEP (£)

1.00

N/A

1.00

2.30

Number

601,693

–

(11,000)

(442,310)

148,383

–

N/A

1.00

Howden Joinery Group Plc Annual Report & Accounts 2014

iii) Cumulative PBT of £90m over three financial years ending 2009, 2010 and 2011

104

52 weeks to
27 December 2014

52 weeks to
28 December 2013

In issue at beginning of period

Granted in period

Lapsed in period

Exercised in period

In issue at end of period

Exercisable at end of period

Number of options in the closing balance
that were granted before 7 November 2002

Weighted average share price for options
exercised during the period

Weighted average contractual life remaining
for share options outstanding at the period
end (years)

Weighted average fair value of options
granted during the period (£)

Range of exercise prices for options
outstanding at the period end (£):

– from

– to

Number

2,147,229

–

(2,147,229)

–

N/A

WAEP (£)

0.50

N/A

0.50

N/A

3.71

Number

8,125,944

–

(5,978,715)

2,147,229

–

N/A

0.50

WAEP (£)

0.38

N/A

0.33

0.50

2.31

c) Howden Joinery Group Long-term Incentive Plan
i) Cumulative PBT of £90m over three financial years ending 2009, 2010 and 2011

52 weeks to
27 December 2014

52 weeks to
28 December 2013

In issue at beginning of period

Granted in period

Lapsed in period

Exercised in period

In issue at end of period

Exercisable at end of period

Number of options in the closing balance
that were granted before 7 November 2002

Weighted average share price for options
exercised during the period

Weighted average contractual life remaining
for share options outstanding at the period
end (years)

Weighted average fair value of options
granted during the period (£)

Range of exercise prices for options
outstanding at the period end (£):

– from

– to

Number

469,263

–

(258,200)

211,063

–

N/A

0.36

WAEP (£)

0.36

N/A

0.36

3.79

Number

1,831,965

–

(1,362,702)

469,263

–

N/A

0.36

WAEP (£)

0.42

N/A

0.44

0.36

2.32

Notes to the consolidated financial statements continued

ii) 2012 PBT increase by between RPI and RPI + 8%

52 weeks to
27 December 2014

52 weeks to
28 December 2013

105

In issue at beginning of period

Granted in period

Lapsed in period

Exercised in period

In issue at end of period

Exercisable at end of period

Number of options in the closing balance
that were granted before 7 November 2002

Weighted average share price for options
exercised during the period

Weighted average contractual life remaining
for share options outstanding at the period
end (years)

Weighted average fair value of options
granted during the period (£)

Range of exercise prices for options
outstanding at the period end (£):

– from

– to

Number

1,908,156

–

(1,573,491)

334,665

–

N/A

0.81

WAEP (£)

0.81

N/A

0.81

3.69

Number

5,792,057

–

(11,152)

(3,872,749)

1,908,156

–

N/A

0.81

WAEP (£)

0.81

N/A

0.81

2.36

iii) Conditional Share Award – subject to continuing employment

52 weeks to
27 December 2014

52 weeks to
28 December 2013

In issue at beginning of period

Granted in period

Lapsed in period

Exercised in period

In issue at end of period

Exercisable at end of period

Number of options in the closing balance
that were granted before 7 November 2002

Weighted average share price for options
exercised during the period

Weighted average contractual life remaining
for share options outstanding at the period
end (years)

Weighted average fair value of options
granted during the period (£)

Range of exercise prices for options
outstanding at the period end (£):

– from

– to

Number

1,558,100

630,800

(148,600)

(474,600)

1,565,700

–

1.31

3.47

–

WAEP (£)

–

N/A

3.74

Number

1,542,800

617,000

(142,800)

(458,900)

1,558,100

–

1.23

2.14

–

WAEP (£)

–

N/A

2.38

Howden Joinery Group Plc Annual Report & Accounts 2014(iv) 2011, 2012, 2013 & 2014 grants – PBT to increase by between 6% – 12%

106

52 weeks to
27 December 2014

52 weeks to
28 December 2013

In issue at beginning of period

Granted in period

Lapsed in period

Exercised in period

In issue at end of period

Exercisable at end of period

Number of options in the closing balance
that were granted before 7 November 2002

Weighted average share price for options
exercised during the period

Weighted average contractual life remaining
for share options outstanding at the period
end (years)

Weighted average fair value of options
granted during the period (£)

Range of exercise prices for options
outstanding at the period end (£):

– from

– to

d) Share Incentive Scheme (Freeshares)

In issue at beginning of period

Granted in period

Lapsed in period

Exercised in period

In issue at end of period

Exercisable at end of period

Number of options in the closing balance
that were granted before 7 November 2002

Weighted average share price for options
exercised during the period

Weighted average contractual life remaining
for share options outstanding at the period
end (years)

Weighted average fair value of options
granted during the period (£)

Range of exercise prices for options
outstanding at the period end (£):

– from

– to

WAEP (£)

1.18

2.38

1.40

1.58

1.55

N/A

2.81

Number

2,728,400

1,199,454

(206,704)

(573,897)

3,147,253

347,821

–

1.38

1.70

1.08

3.78

WAEP (£)

1.55

3.79

1.62

1.13

2.47

1.09

3.60

Number

1,972,342

867,602

(97,363)

(14,181)

2,728,400

–

1.21

1.00

1.09

2.38

52 weeks to
27 December 2014

52 weeks to
28 December 2013

WAEP (£)

–

N/A

–

3.43

Number

152,515

–

(32,066)

120,449

–

N/A

–

WAEP (£)

–

N/A

–

2.61

Number

194,639

–

(42,124)

152,515

–

N/A

–

Notes to the consolidated financial statements continued

e) Share Award Plan – subject to continuing employment

52 weeks to 27
December 2014

52 weeks to 28
December 2013

107

In issue at beginning of period

Granted in period

Lapsed in period

Exercised in period

In issue at end of period

Exercisable at end of period

Number of options in the closing balance
that were granted before 7 November 2002

Weighted average share price for options
exercised during the period

Weighted average contractual life remaining
for share options outstanding at the period
end (years)

Weighted average fair value of options
granted during the period (£)

Range of exercise prices for options
outstanding at the period end (£):

– from

– to

Number

69,009

–

69,009

–

3.25

N/A

–

WAEP (£)

Number

WAEP (£)

N/A

–

N/A

–

N/A

–

N/A

–

N/A

–

69,009

–

69,009

–

4.25

1.00

3) Fair value of options granted
The fair value of all options granted is estimated on the date of grant using either a binomial option valuation model or a Black
Scholes model depending on the complexity of the option.

The key assumptions used in the models were:

Dividend yield (%)

Expected share price volatility (%)

Historical volatility (%)

Risk-free interest rate (%)

Expected life of options (years)

52 weeks to
27 December 2014

52 weeks to
28 December 2013

1.5

2.2

4.2

2.5

1.1

4.4

Historical volatility is measured for each scheme over the period equal to the vesting period of the scheme. The figure arrived at is
then used as the best estimate of expected future volatility.

Howden Joinery Group Plc Annual Report & Accounts 2014

27 RELATED PARTY TRANSACTIONS

108

Companies which are related parties
Transactions between Group companies, which are related parties, have been eliminated on consolidation and are not disclosed in
this note. All transactions between the Group and the Group’s pension schemes have been disclosed in note 21.

Remuneration of key management personnel
Key management personnel comprise the Board of Directors (including non-executive directors) and the Executive Committee.
Details of the aggregate remuneration to these personnel is set out below. The figure disclosed for share-based payments
represents the gain realised on the exercise of share options in the year, albeit that those options will have been granted in
previous periods. All figures include any related employer’s National Insurance.

Short-term employment benefits

Share-based payments

Other transactions with key management personnel
There were no other transactions with key management personnel.

28 FINANCIAL RISK MANAGEMENT

52 weeks to
27 December 2014

52 weeks to
28 December 2013

£m

6.6

26.9

33.5

£m

6.7

21.1

27.8

(a) Capital risk management
The Group manages its capital structure to maximise the return to shareholders through the optimisation of its debt and equity
balance, trading-off the benefits of financial leverage with the expected future costs of financial distress.

The capital structure of the Group consists of debt (including the borrowings disclosed in note 20 offset by cash and short-term
investments) and equity attributable to equity holders of the parent (including issued share capital and reserves as disclosed in the
Consolidated Statement of Changes in Equity, and in note 23).

The Board of Directors reviews the capital structure regularly, including, but not limited to, at the time of preparing annual budgets,
preparing three-year corporate plans, and considering corporate transactions. As part of this review, the Board reviews the cost of
capital and the risks associated with each class of capital. The Group will balance its overall capital structure through the payment
of dividends, new share issues and share buy-backs, taking on or issuing new debt or repaying any existing debt.

At the period end, the Group had a £140m committed bank facility secured against the assets of the Group and based on
three sub-facilities (stock, trade receivables, and a cash flow facility). The facility limit is the lower of £140m and the sum of the
sub-facilities. Under the terms of the facility, none of the Group’s principal subsidiary companies can sign up to additional secured
borrowings, other than those expressly permitted within the terms of the facility. The facility (i) permits normal trade credit granted
to it in the ordinary course of business; (ii) allows up to £10m of additional secured borrowings, and (iii) allows up to £20m of
finance lease borrowing. The facility expires in July 2016.

Notes to the consolidated financial statements continued
(b) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and
equity instrument are disclosed in note 2 to the financial statements.

109

Financial assets (current and non-current)

Trade receivables

Cash and cash equivalents

Current asset investments

Financial liabilities (current and non-current)

Trade payables

Borrowings

27 December 2014

28 December 2013

£m

102.9

131.9

85.0

80.1

(0.8)

£m

96.3

139.7

–

70.4

(0.8)

(d) Financial risk management
General
The Group is exposed in varying degrees to a variety of financial instrument related risks. The Board has approved and monitors
the risk management processes, including documented treasury policies, counterparty limits, controlling and reporting structures.
The types of risk exposure, the way in which such exposure is managed, and the quantification of the level of exposure in the
balance sheet is shown below (subcategorised into credit risk, liquidity risk and market risk). The Group is actively engaged in the
management of all of these financial risks in order to minimise their potential adverse impact on the Group’s financial performance.

The principles, practices and procedures governing the Group-wide financial risk management process have been approved by the
Board and are overseen by the Executive Committee. In turn, the Executive Committee delegates authority to a central treasury
function (‘Group Treasury’) for the practical implementation of the financial risk management process across the Group and for
ensuring that the Group’s entities adhere to specified financial risk management policies. Group Treasury regularly reassesses and
reports on the financial risk environment, identifying and evaluating financial risks. The Group does not take positions on derivative
contracts and only enters into contractual bank deposit or lending arrangements with counterparties that have investment grade
credit ratings.

Howden Joinery Group Plc Annual Report & Accounts 2014

110

Cash and cash equivalents
Cash at bank and in hand, which is the term used in the balance sheet, comprises cash on hand together with demand deposits, and
other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant
risk of changes in value. Cash and cash equivalents, which is the term used in the cash flow statement, comprises cash at bank and in
hand, as defined immediately above, together with any overdrafts repayable on demand and current asset investments.

Arrangements are in place to ensure that cash is utilised most efficiently for the ongoing working capital needs of the Group’s
operating units and to ensure that the Group earns the most advantageous rates of interest available. The prime consideration in
the investment of cash balances is the security of the asset, followed by liquidity and then yield.

Current asset investments consist of UK Government Treasury Bills with an initial term to maturity of up to three months. These
investments are held to maturity and, whilst of lower liquidity than cash, will ensure that the primary Group policy objective of asset
security is met.

Management of trade receivables is discussed in note 18.

(e) Credit risk
The Group’s principal financial assets are cash, investments, and trade and other receivables. The Group’s credit risk is mainly
confined to the risk of customers defaulting on sales invoices raised. The Group has adopted a policy of only dealing with
creditworthy counterparties as a way of mitigating the risk of financial loss from defaults.

The Group’s policy on dealing with trade customers is described in the accounting policies and in note 18. Trade receivables
consist of a large number of customers. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
The Group does not have any significant credit risk exposure to any single counterparty.
The Group limits exposure to credit risk on liquid funds and investments through adherence to a policy of minimum short-term
counterparty credit ratings assigned by international credit-rating agencies (Standard & Poor’s A-2 and Moody’s P-1).

Full disclosure of the Group’s maximum exposure to credit risk is presented in the following table:

Trade receivables (net of allowance)

Cash

Current asset investments

Total credit risk exposure

27 December 2014

28 December 2013

£m

102.9

131.9

85.0

319.8

£m

96.3

139.7

–

236.0

Notes to the consolidated financial statements continued

(f) Liquidity risk
Liquidity risk is the risk that the Group could experience difficulties in meeting its commitments to creditors as financial liabilities
fall due for payment. The Group manages its liquidity risk by using reasonable and retrospectively-assessed assumptions
to forecast the future cash-generative capabilities and working capital requirements of the businesses it operates and by
maintaining sufficient cash and investment reserves, committed borrowing facilities and other credit lines as appropriate.
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has agreed an appropriate liquidity
risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing
facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and
liabilities as far as is possible. Included in note 20 is a description of additional undrawn facilities that the Group has at its disposal
to further reduce liquidity risk. In addition, the Financial Review contains a section describing the interaction of liquidity risk and
the going concern review.

111

Maturity profile of outstanding financial liabilities
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The Group has no
derivative financial liabilities. The tables have been drawn up on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

At 27 December 2014

Trade payables

Finance leases

At 28 December 2013

Trade payables

Finance leases

Bank loan

Within 1 year

Floating
interest

£m

Fixed
interest

£m

–

Within 1 year

Floating
interest

£m

Fixed
interest

£m

–

Capital

£m

80.1

–

80.1

Capital

£m

70.4

0.1

0.4

70.9

2–3 years

Floating
interest

£m

–

2–3 years

Floating
interest

£m

–

Capital

£m

–

0.1

Capital

£m

–

0.1

–

0.1

Fixed
interest

£m

–

Fixed
interest

£m

–

Total

£m

80.1

0.1

80.2

Total

£m

70.4

0.2

0.4

71.0

Note: it has been assumed that, where applicable, interest and foreign currency exchange rates prevailing at the reporting balance sheet date will not vary over the time
periods remaining for future cash flows.

Howden Joinery Group Plc Annual Report & Accounts 2014
112

(g) Market risk
This is the risk that financial instrument fair values will fluctuate owing to changes in market prices. The significant market risks to
which the Group is exposed are foreign exchange risk, and interest rate risk. These are discussed further below:

Foreign exchange risk
The Group is exposed to foreign exchange risk, principally as a result of operating costs incurred in foreign currencies, and to a
lesser extent, from non-Sterling revenues. The Group’s policy is generally not to hedge such exposures. The exposure of the Group’s
financial assets and liabilities to currency risk is as follows:

27 December 2014

28 December 2013

Euro

Trade receivables

Other receivables

Cash and cash equivalents

Trade payables

Other payables

US Dollar

Cash and cash equivalents

Trade payables

Hong Kong Dollar

Cash and cash equivalents

TOTAL

£m

1.6

0.8

4.4

(16.5)

(0.8)

(10.5)

–

(0.8)

–

(11.3)

£m

1.7

0.6

5.5

(16.4)

(0.7)

(9.3)

3.9

(3.8)

0.1

0.3

(8.9)

Interest rate risk
The Group does not have any significant exposure to interest rate risk.

Payments on the Group’s finance leases are fixed on inception of the lease contract, and as such are regarded as fixed rate borrowings.

Notes to the consolidated financial statements continued

(h) Financial instrument sensitivities
Financial instruments affected by market risk include borrowings, deposits, trade receivables and trade payables. The following
analysis, required by IFRS 7, is intended to illustrate the sensitivity of the Group’s financial instruments as at its year end to
changes in market variables, being exchange rates and interest rates. The sensitivity analysis has been prepared on the basis
that the components of net debt and the proportion of financial instruments in foreign currencies are all constant. For floating
rate liabilities, the analysis is prepared assuming that the amount of liability outstanding at the year end date was outstanding
for the whole year. As a consequence, this sensitivity analysis relates to the position as at the balance sheet date. The following
assumptions were made in calculating the sensitivity analysis:

113

• Debt and other deposits are carried at amortised cost and therefore carrying value does not change as interest rates move.

• No sensitivity is provided for accrued interest as accruals are based on pre-agreed interest rates and therefore are not

susceptible to further rate movements.

• Finance lease interest payments are fixed at the inception of the contract and are not subject to repricing. They have therefore

been excluded from this analysis.

• Translation of foreign subsidiaries and operations into the Group’s presentation currency have been excluded from the sensitivity.

Using the above assumptions, the following analyses show the illustrative effect on the income statement and equity that would
result from reasonably possible changes in the relevant foreign currency or interest rates:

Interest rate sensitivity
The sensitivity analysis below has been determined based on the exposure to interest rates for floating rate non-derivative
instruments at the balance sheet date. The Group holds no derivative financial instruments. Fixed rate liabilities are not susceptible
to changes in interest rates, and are omitted from the analysis below. For floating rate liabilities, the analysis is prepared assuming
the amount of the liability outstanding at the balance sheet date was outstanding for the whole year. A 50 basis points increase is
used as this represents management’s assessment of the possible change in interest rates.

At the reporting date, if interest rates had been 50 basis points higher and all other variables were held constant, the Group’s net
profit and profit and loss reserve would remain the same (2013: remain the same).

For a decrease of 50 basis points, the current year figures would remain the same (2013: remain the same).

Foreign exchange sensitivity
As noted above, the Group is mainly exposed to movements in Euro, and US dollar exchange rates. The following information
details the Group’s sensitivity to a 10% weakening or strengthening in pounds Sterling against the Euro, and the US Dollar. These
percentages are the rates used by management when assessing sensitivities internally and represent management’s assessment
of the possible change in foreign currency rates. The sensitivity analysis of the Group’s exposure to foreign currency risk at the
reporting date has been determined based on the change taking place at the end of the financial period, and based on the
outstanding foreign currency balances at the period end.

10% weakening of Sterling to Euro

10% strengthening of Sterling to Euro

10% weakening of Sterling to US dollar

10% strengthening of Sterling to US dollar

27 December 2014

28 December 2013

£m

(1.2)

1.0

(0.1)

0.1

£m

(1.0)

0.8

–

The Group’s sensitivity, on the basis above, to a strengthening or weakening of Sterling to the Hong Kong Dollar was less than
£0.1m at both the current and prior period ends.

Howden Joinery Group Plc Annual Report & Accounts 2014

29 DISCONTINUED OPERATIONS

114

There were no discontinued operations in the prior period.
All discontinued operations in the current period are discontinued exceptional items, and are analysed as follows:

Increase to discontinued operations property provision

Release of discontinued interest accrual

Exceptional item – loss on discontinued operations

Release of tax creditor for discontinued operations

Tax credit on increase to discontinued operations property provision

Exceptional profit after tax

Note

(a)

(b)

(c)

(a)

52 weeks to
27 December 2014

£m

(2.2)

0.1

(2.1)

11.1

0.1

9.1

(a) Increase to discontinued property provisions
During the current period, we have increased the provision for our remaining legacy properties.

(b) Release of discontinued interest accrual
In prior periods, the Group had been accruing for possible interest which would be due in relation to overdue tax in the event that
we were unsuccessful in our dispute with HMRC relating to discontinued operations (see (c) below). Following the partial resolution
of this dispute in the current period, we now have certainty that some of this accrual will no longer be needed. We have therefore
released this amount in the current period.

(c) Release of tax creditor for discontinued operations
During the current period, we received a First Tier Tribunal judgement which gave a partial resolution of a dispute with HMRC,
regarding the tax treatment of certain expenses relating to our legacy properties which had been incurred in prior periods.

In prior years, we had prepared our tax computations for accounts purposes on the basis that the disputed expense items would
not be deductible for tax, and we provided for tax on that basis. Now that the judgement has given us certainty that particular
expenses may be treated as deductible for tax, we are recognising a credit of £11.1m of tax in the current period.

Notes to the consolidated financial statements continued
Company balance sheet

Non-current assets

Investments in subsidiaries

Deferred tax

Bank borrowings net of prepaid fees

Current assets

Bank borrowings net of prepaid fees

Debtors

Current asset investments

Cash at bank and in hand

Current liabilities

Creditors: amounts falling due within one year

Net current liabilities

Total assets less current liabilities

Non-current liabilities

Provisions

Net assets

Equity

Called up share capital

Share premium account

Retained earnings reserve

Total equity

27 December 2014

28 December 2013

Notes

£m

115

699.0

0.2

0.3

699.5

0.6

33.4

85.0

119.9

238.9

(580.1)

(341.2)

358.3

–

358.3

64.7

87.5

206.1

358.3

699.0

0.2

0.9

700.1

0.1

16.1

–

126.1

142.3

(544.8)

(402.5)

297.6

(2.5)

295.1

64.3

87.5

143.3

295.1

These financial statements were approved by the Board on 25 February 2015 and were signed on its behalf by:

Mark Robson
Deputy Chief Executive and Chief Financial Officer

For and on behalf of Howden Joinery Group Plc, registered number 02128710

Howden Joinery Group Plc Annual Report & Accounts 2014Notes to the Company balance sheet

1 SIGNIFICANT COMPANY ACCOUNTING POLICIES

116

General information
Howden Joinery Group Plc is a company incorporated in the United Kingdom under the Companies Act 2006.

Basis of presentation
The Company’s accounting period covers the 52 weeks to 27 December 2014. The comparative period covered the 52 weeks
to 28 December 2013.

Basis of accounting
The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been
prepared under the historical cost convention and in accordance with applicable United Kingdom law and United Kingdom
Generally Accepted Accounting Standards. The principal accounting policies are presented below and have been applied
consistently throughout the current and prior periods. They have also been prepared on the going concern basis as described
in the going concern statement in the Statement of the directors in connection with this Annual Report and Accounts on page 66.

Investments in subsidiaries
These investments are shown at cost less provision for impairment.

Current asset investments
From time to time, the Company uses short-term investments in UK Gilts as part of its cash management activities. The Company
reviews these investments before entering into them, and, after establishing that the Company has both the intention and the
ability to hold these investments to maturity, they are classified as held-to-maturity and are initially recognised at cost, including
any transaction fees.

Subsequent to initial recognition, these investments are carried at amortised cost using the effective interest method. Income from
these investments is recognised in the income statement on an effective yield basis.

Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax
rates and laws that have been enacted or substantively enacted by the balance sheet date.

Cash flow statement
The Company is exempt from the requirement of FRS 1 (revised) to include a cash flow statement as part of its Company financial
statements because it prepares a consolidated cash flow statement which is shown as part of the consolidated Group accounts.

Related parties
The Company has taken advantage of paragraph 3(c) of FRS 8 (“Related Party Disclosures”) not to disclose transactions with Group
entities or investees of the Group qualifying as related parties.

2 PROFIT AND LOSS ACCOUNT

As permitted by section 408 of the Companies Act 2006, no separate profit and loss account is presented for the Company. The
Company result after tax for the 52 weeks to 27 December 2014 was a profit of £104.2m (52 weeks to 28 December 2013: profit
after tax for the period of £101.8m).

The Company has no employees (2013: none), did not pay directors’ emoluments (2013: £nil), and the fees payable to the
Company’s auditor for the audit of the Company’s annual accounts (£10,000 in both current and prior periods) were borne by a
fellow Group undertaking.

3 INVESTMENTS IN SUBSIDIARIES

Cost and carrying value

At 28 December 2013 and 27 December 2014

Details of principal subsidiary undertakings are given on page 124.

4 DEFERRED TAX

The deferred tax all relates to short-term timing differences.

5 DEBTORS

Other debtors

Corporation tax

Other tax and social security

Shares in
subsidiary
undertakings

Long-term loans
to subsidiary
undertakings

£m

262.1

£m

436.9

Total

£m

699.0

117

27 December 2014
£m

28 December 2013
£m

0.1

33.3

–

33.4

0.7

15.1

0.3

16.1

6 CURRENT ASSET INVESTMENTS

Current asset investments comprise investments in short-term UK Gilts. They have maturity dates ranging between one and three
months from the balance sheet date. They return a fixed rate of interest. The weighted average effective interest rate on the Gilts
held at the balance sheet date is 0.3% p.a.

These investments are classified as held-to-maturity, and are held at amortised cost. There were no such investments at the
prior period end.

7 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Other tax and social security

Owed to subsidiaries

Accruals and deferred income

27 December 2014
£m

28 December 2013
£m

0.2

578.7

1.2

580.1

–

543.6

1.2

544.8

Howden Joinery Group Plc Annual Report & Accounts 2014

Notes to the Company balance sheet continued

8 ANALYSIS OF BORROWINGS

118

Analysis of total borrowings

The borrowings are repayable as follows:

Disclosed under current assets

On demand or within one year

Less: prepaid issue fees set against borrowings

Disclosed under non-current assets

Prepaid issue fees

Total borrowings

27 December 2014

28 December 2013

£m

–

(0.6)

(0.3)

(0.9)

0.4

(0.5)

(0.1)

(0.9)

(1.0)

The Company’s accounting policy is to capitalise prepaid loan facility issue fees and to set them against the related borrowings.
The fees are then amortised over the life of the facility. The Company’s current facility expires in July 2016. At the current and
prior period ends, the amount of fees relating to the period in excess of one year from the balance sheet date were greater than
the corresponding amounts drawn down under the facility, thereby creating a net debit balance as shown above. At the current
period end, the amount of fees relating to the period less than one year from the balance sheet date was also greater than the
corresponding amount drawn down, creating a further net debit balance.

All borrowings are in sterling.

The weighted average interest rates paid on the borrowings were as follows:

52 weeks to
27 December 2014

52 weeks to
28 December 2013

N/A*

2.5%

The directors estimate the fair value of the Company’s borrowings are as follows:

27 December 2014

28 December 2013

£m

(0.9)

£m

(1.0)

*The Company did not incur any interest on borrowings in the current period.

9 PROVISIONS

At 28 December 2013

Additional provision in the period

Utilisation of provision in the period

Release of provision in the period

At 27 December 2014

119

Property provision

£m

2.5

1.3

(3.7)

(0.1)

–

Total
£m

2.5

1.3

(3.7)

(0.1)

–

The property provision covers two main areas: (i) onerous leases on any non-trading leased properties, and (ii) obligations to make
dilapidations payments to landlords of leased properties.

The amount of the expected future cash flows has been adjusted to reflect the expected range of possibilities.

The timing of outflows from the provision is variable, and is dependent on property lease expiry dates, on opportunities to surrender
leases, and on the timing of dilapidations assessments and works.

10 SHARE CAPITAL

52 weeks to
27 December 2014

52 weeks to
28 December 2013

52 weeks to
27 December 2014

52 weeks to
28 December 2013

ORDINARY SHARES OF 10p EACH

Number

Allotted, called up and fully paid

Balance at the beginning of the period

642,782,361

642,016,063

Issued during the period

3,759,135

766,298

Balance at the beginning and end of the period

646,541,496

642,782,361

£m

64.3

0.4

64.7

11 RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS’ FUNDS

At 28 December 2013

Retained profit for the period

Dividend paid

Shares issued

At 27 December 2014

Called up
share capital

Share premium
account

Retained
earnings

£m

64.3

–

0.4

64.7

£m

87.5

–

87.5

£m

143.3

104.2

(41.0)

(0.4)

206.1

£m

64.2

0.1

64.3

Total

£m

295.1

104.2

(41.0)

–

358.3

Howden Joinery Group Plc Annual Report & Accounts 2014
Independent auditor’s report to the members
of Howden Joinery Group Plc

120

Opinion on financial
statements of Howden
Joinery Group Plc

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the parent

company’s affairs as at 27 December 2014 and of the Group’s profit for the 52 weeks then ended;

• the Group financial statements have been properly prepared in accordance with International

Financial Reporting Standards (IFRSs) as adopted by the European Union;

• the parent company financial statements have been properly prepared in accordance with United

Kingdom Generally Accepted Accounting Practice; and

• the financial statements have been prepared in accordance with the requirements of the Companies

Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

The financial statements comprise the Consolidated Income Statement, the Consolidated Statement
of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Changes
in Equity, the Consolidated Cash Flow Statement and the related notes 1 to 29. This also comprises
the Parent Company Balance Sheet and related notes 1 to 11. The financial reporting framework
that has been applied in the preparation of the Group financial statements is applicable law and
IFRSs as adopted by the European Union. The financial reporting framework that has been applied in
the preparation of the Parent Company financial statements is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Going concern

As required by the Listing Rules we have reviewed the directors’ statement on page 66 that the Group is
a going concern. We confirm that:

• we have concluded that the directors’ use of the going concern basis of accounting in the preparation of

the financial statements is appropriate; and

• we have not identified any material uncertainties that may cast significant doubt on the Group’s ability

to continue as a going concern.

However, because not all future events or conditions can be predicted, this statement is not a
guarantee as to the Group’s ability to continue as a going concern.

Our assessment of
risks of material
misstatement

The assessed risks of material misstatement described below are those that had the greatest
effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the
engagement team:

121

Risk

The recoverability of trade debtors and
appropriateness of the bad debt provision
Management judgement is required in
determining the completeness of the trade
receivables provision and in assessing its
adequacy through considering the expected
recoverability of the year-end trade receivables
(£110.2m gross of a £7.3m provision). Further
information is included in note 3 and note 18.

The appropriateness of the stock
obsolescence provision
Management judgement is required in
determining the completeness of the stock
obsolescence provision (£155.5m gross of a
£12.4m provision) and making an assessment
of its adequacy. In particular, the judgement
involved determining the appropriate provision
percentage based on the level of forecast sales.
Further information is included in note 3 and
note 17.

How the scope of our audit responded to the risk

We have challenged management’s assumptions
in calculating the bad debt provision. This
includes reviewing the ageing of receivables
in comparison to previous years, testing the
integrity of ageing and reviewing the level of bad
debt write offs in the current year and against
the prior year. We also checked the recoverability
of outstanding debtors through examination
of subsequent cash receipts and tested the
operating effectiveness of the relevant credit
control procedures management has in place.

We have tested that the book value of stock does
not exceed its net realisable value by comparing
the actual sales value to the book value for
a sample of lines. We have challenged the
assumptions used in arriving at management’s
stock obsolescence provision. In respect of
discontinued ranges, we have checked the dates
they were discontinued, assessed the ageing
and the level of provision applied. We have
also reviewed the actual and forecast sales of
those provisioned stock lines to check that the
provision percentage applied is appropriate.

The appropriateness of the actuarial assumptions
used in determining the defined benefit pension
scheme deficit
Management judgement is required in determining
the key actuarial assumptions that underpin the
calculation of the defined benefit deficit (£142.6m).
In particular, the discount rate, inflation rate and
mortality assumptions. Further information is
included in note 3 and note 21.

We have used our pension specialists to assist
us in assessing the appropriateness of the
assumptions underlying the valuation of the
pension deficit by reviewing the actuarial report
and challenging each of the assumptions by
comparison to available market data. We have
also assessed the competence of the actuaries
used by management in determining the
actuarial assumptions.

Last year our report included one other risk which is not included in our report this year: provision for
vacant properties. The number of vacant properties has fallen in the year and the risk of an understated
provision is no longer considered to be a key risk to the Group financial statements.

The description of risks above should be read in conjunction with the significant issues considered by
the Audit Committee discussed on pages 55 to 60.

Our audit procedures relating to these matters were designed in the context of our audit of the financial
statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion
on the financial statements is not modified with respect to any of the risks described above, and we do
not express an opinion on these individual matters.

Our application
of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our audit work and in evaluating the
results of our work.

We determined materiality for the Group to be £8m (2013: £6m), which is approximately 5% (2013: 5%)
of profit before tax.

We agreed with the Audit Committee that we would report to the Committee all audit differences in
excess of £160,000 (2013: £120,000), as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.

We also report to the Audit Committee on disclosure matters that we identified when assessing the
overall presentation of the financial statements.

Howden Joinery Group Plc Annual Report & Accounts 2014Independent auditor’s report to the members
of Howden Joinery Group Plc continued

122

An overview of the
scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including
Group-wide controls, and assessing the risks of material misstatement at the Group level. Based on that
assessment, our Group audit scope focused on the UK, French and Belgian trading entities and each of
the Head Office companies which was consistent with the prior year. All of these entities were subject to a
full scope audit and this gave us coverage of 100% of the Group’s net assets, revenues and profit before
tax for the 52 weeks ended 27 December 2014. Audits of all locations are performed at a materiality
level determined by reference to a proportion of Group materiality appropriate to the relative scale of the
business concerned. The materiality levels used ranged between 50% and 95% of Group materiality.

Opinion on other
matters prescribed
by the Companies
Act 2006

In our opinion:

• the part of the Directors’ Remuneration Report to be audited has been properly prepared in

accordance with the Companies Act 2006; and

• the information given in the Strategic Report and the Directors’ Report for the financial year for

which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

Adequacy of
explanations
received and
accounting records

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the parent company, or returns adequate

for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Directors’
remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures
of directors’ remuneration have not been made or the part of the Directors’ Remuneration Report to
be audited is not in agreement with the accounting records and returns. We have nothing to report
arising from these matters.

Corporate
Governance
Statement

Our duty to read
other information
in the Annual Report

Under the Listing Rules we are also required to review the part of the Corporate Governance
Statement relating to the Company’s compliance with ten provisions of the UK Corporate
Governance Code. We have nothing to report arising from our review.

Under International Standards on Auditing (UK and Ireland), we are required to report to you if,
in our opinion, information in the Annual Report is:

• materially inconsistent with the information in the audited financial statements; or

• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the

Group acquired in the course of performing our audit; or

• otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between
our knowledge acquired during the audit and the directors’ statement that they consider the Annual
Report is fair, balanced and understandable and whether the Annual Report appropriately discloses
those matters that we communicated to the Audit Committee which we consider should have been
disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.

123

Respective
responsibilities of
directors and auditor

Scope of the audit
of the financial
statements

As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards for Auditors.

We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit
methodology and tools aim to ensure that our quality control procedures are effective, understood and
applied. Our quality controls and systems include our dedicated professional standards review team
and independent partner reviews.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to
the Company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.

An audit involves obtaining evidence about the amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the Group’s and the parent company’s circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant accounting
estimates made by the directors; and the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.

Edward Hanson (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London
United Kingdom

25 February 2015

Howden Joinery Group Plc Annual Report & Accounts 2014
Parent company and all subsidiary undertakings
as at 27 December 2014

124

PARENT COMPANY

Howden Joinery Group Plc

COUNTRY OF REGISTRATION OR INCORPORATION

England and Wales

ALL SUBSIDIARY UNDERTAKINGS

Intermediate holding company

Howden Joinery Holdings Limited

England and Wales

Trading

Howden Joinery Limited

Houdan Cuisines SA

Lamona Cuisines SAS

Houdan Cuisines SPRL

Property Management

Howden Joinery Properties Limited

Howden Kitchens Properties Limited

Administration and employee services

England and Wales

France

Belgium

England and Wales

Howden Joinery Corporate Services Limited

England and Wales

Howden Joinery People Services Limited

England and Wales

Dormant

Howden Kitchens Limited

Galiform Limited

England and Wales

The Company ultimately owns 100% of the ordinary share capital of all of the companies listed above.

Five year record

Summarised income statement

Revenue – continuing operations

Operating profit – continuing operations

Loss from discontinued operations

Dec 2014
52 weeks

Dec 2013
52 weeks

Dec 2012
53 weeks

Dec 2011
52 weeks

Dec 2010
52 weeks

125

£m

1,090.8

956.5

887.1

853.8

807.9

Profit on continuing ordinary activities before tax

188.8

133.9

Full year dividend per share (pence)

Basic EPS – continuing operations (pence)

8.4

23.2

5.5

15.7

189.8

(2.1)

187.7

138.0

–

138.0

119.8

(4.4)

115.4

112.1

3.0

15.3

115.3

(9.3)

106.0

111.0

0.5

13.5

107.4

–

107.4

100.9

–

11.1

Summarised balance sheet

Total non-current assets

Inventories

Receivables

Payables and provisions

Pension liability

Net cash, short-term investments and borrowings

Total net assets

Number of depots at end of year

France

Belgium

Capital expenditure

151.1

123.3

140.4

132.3

140.2

143.1

133.1

(207.2)

(142.6)

(73.6)

217.4

294.9

589

123.4

122.4

(192.6)

(54.3)

(1.1)

139.5

261.7

559

–

115.9

96.0

(180.4)

(154.5)

(123.0)

95.4

112.8

529

–

118.5

95.3

(196.1)

(136.9)

(119.2)

57.1

70.2

509

–

105.5

95.0

(216.9)

(135.7)

(152.1)

35.0

23.1

489

–

Howden Joinery Group Plc Annual Report & Accounts 2014Shareholder ranges as at 27 December 2014

126

Number
of holders

Percentage
of holders

Number
of shares

Percentage
of shares

Corporate holders

0 to 1,000

1,001 to 5,000

5,001 to 10,000

10,001 to 50,000

50,001 to 100,000

100,001 to 250,000

250,001 to max

Individual holders

0 to 1,000

1,001 to 5,000

5,001 to 10,000

10,001 to 50,000

50,001 to 100,000

100,001 to 250,000

250,001 to max

Total

147

241

121

237

961

6,321

1,407

178

8,012

8,973

1.6

2.7

0.7

1.4

0.8

0.9

2.6

64,440

607,579

479,091

3,260,519

4,601,279

13,226,855

611,081,926

10.7

633,321,689

70.4

15.7

2.0

1.0

0.1

–

0.1

2,522,255

3,350,817

1,310,714

1,861,643

492,363

732,906

2,949,109

89.3

13,219,807

–

0.1

0.5

0.7

2.1

94.5

98.0

0.4

0.5

0.2

0.3

0.1

0.4

2.0

100.0

646,541,496

100.0

127

Advisors and committees

PRINCIPAL BANKER

Lloyds
10 Gresham Street
London
EC2V 7AE

JOINT FINANCIAL ADVISORS AND STOCKBROKERS

JP Morgan Cazenove
20 Moorgate
London
EC2R 6DA

UBS
1 Finsbury Avenue
London
EC2M 2PP

SOLICITORS

Freshfields Bruckhaus Deringer
65 Fleet Sreet
London
EC4Y 1HS

AUDITOR

Deloitte LLP
2 New St Square
London
EC4A 3BZ

REGISTRAR

Computershare Investor Services
The Pavilions
Bridgwater Road
Bristol
BS13 8AE

REGISTERED OFFICE

40 Portman Square
London
W1H 6LT

REMUNERATION COMMITTEE

Tiffany Hall (Chair)
Mark Allen
Richard Pennycook
Michael Wemms

NOMINATIONS COMMITTEE

Will Samuel (Chair)
Mark Allen
Tiffany Hall
Richard Pennycook
Michael Wemms

AUDIT COMMITTEE

Richard Pennycook (Chair)
Mark Allen
Tiffany Hall
Michael Wemms

EXECUTIVE COMMITTEE

Matthew Ingle
Mark Robson
Rob Fenwick
Julie French
David Hallett
Theresa Keating
Andy Witts

Howden Joinery Group Plc Annual Report & Accounts 2014Corporate timetable

128

2015

Interim Management Statement

Half-Yearly Report

Interim Management Statement

End of financial year

30 April

23 July

12 November

26 December

129

This document is printed on Arcoprint, which is an FSC®
Certified Paper. Pulps used are chlorine-free and acid-free.

FSC® – Forest Stewardship Council®. This ensures there is an
audited chain of custody from the tree in the well-managed
forest through to the finished document in the printing factory.

This report is a CarbonNeutral® certified publication.

10311 HWDN – AR14 5 Financials AW13.indd 129

24/03/2015 16:40

Howden Joinery Group Plc Annual Report & Accounts 2014They want the blue back-
board now instead
of the grey, Joe

No problem, Steve, we’ve got
the whole lot here

Annual Report and Accounts 2014

Ok, Dave, we’ll sort
it out for you right away

Great, Bill, that means I can
finish the job this week

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