Howden Joinery Group

Howden Joinery Group Plc

Annual Report and Accounts 2015

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…that has remained unchanged in good times 

and bad since we started the business in 1995:

01

Howden Joinery Group Plc Annual Report & Accounts 201502

The strategic report, directors’ report  
and governance statements

The strategic report 

Chairman’s statement 
04
Chief Executive’s statement – our business model, market and strategy  06
Review of operations and finance 
12
Going Concern, Viability Statement and other Statements of the  
Directors in connection with this Annual Report and Accounts 
Principal risks and uncertainties 
Corporate social responsibility 

17
19
23

Directors’ report

Board of Directors 
Directors’ report 

Governance statements

Corporate Governance Report 
Report of the Remuneration Committee 
Audit Committee Report 
Nominations Committee Report 

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 
Independent auditor’s report to the members  
of Howden Joinery Group Plc 
Company balance sheet 
Notes to the Company balance sheet 
Parent company and subsidiary undertakings 
Five year record 
Shareholder ranges 
Advisors and committees 
Corporate timetable 

36
39

41
47
67
73

78
79
80
81
82
83

123
127
128
132
133
134
135
136

 
REVENUE  
(UK)
£1,203.8m
(2014: £1,075.5m)

OPERATING 
PROFIT
£221.9m
(2014: £189.8m)

GROSS  
MARGIN
64.3%
(2014: 63.7%)

03

YEAR END 
CASH
£226.1m
(2014: £217.7m)

EARNINGS 
PER SHARE
27.3p  
PER SHARE
(2014: 24.6p)

FULL YEAR 
DIVIDEND
9.9p  
PER SHARE
(2014: 8.4p)

Howden Joinery Group Plc Annual Report & Accounts 201504

Chairman’s statement

CONTINUING STRONG PERFORMANCE
Over the last two decades Howdens has evolved and grown 
to become the leading supplier of kitchens in the UK, focused 
on providing good service to small builders and value to all 
concerned. By following the precepts of a sound business 
model the company has survived and thrived in widely varying 
market conditions and created an excellent platform for 
further growth.

I am pleased to report that your company had another very 
good year. Following an outstanding performance in 2014, 
we reported a sales increase of 12%, together with a further 
increase in gross margin to 64.3% and continuing strong  
cash generation. 

Our goal as a Board has always been to make the right 
decisions based on the long-term opportunities for the 
business. We are clear that, in order to fulfil its considerable 
potential, Howdens must continue to invest in both capacity 
and capability through the economic cycle. A programme of 
ongoing investment is under way across the Group, including 
in manufacturing, warehousing, distribution, depot operations 
and organisational development. While the phasing of 
this programme will take into account prevailing economic 
conditions, we view it as an essential strategic undertaking 
that will support sustained growth and value creation in the 
years ahead.

This is in addition to the £70m share repurchase programme 
announced in February 2015, which has already returned 
£45m to shareholders.

THE IMPORTANCE OF HOWDENS’ CULTURE
The principal reason for Howdens’ continuing success is its 
unwavering adherence to its fundamental values of integrity, 
fairness and respect for others. The business has a strong and 
distinctive culture – local, personal and entrepreneurial – that 
allows the individual to flourish and encourages exceptional 
performance. This culture of service and opportunity has  
stood Howdens in good stead and will continue to do so as  
the business grows. 

Howdens’ character and culture, which set the business apart 
from its competitors, have been ably nurtured by a strong 
executive management team under the leadership of Matthew 
Ingle. Their stewardship of Matthew’s original vision and their 
collective commitment to the continuing evolution of the 
business mean that Howdens is well placed to go forward  
with confidence. 

BOARD CHANGES
After nearly ten years as Chairman of Howdens I will be retiring 
from the Board in May 2016. It has been a great privilege to 
chair the Board of this unique business and to be involved in 
its remarkable story.

In light of our performance and of our confidence in the 
prospects of the business, the Board is recommending a final 
dividend of 7.1p, bringing the dividend for the year to 9.9p 
(2014: 8.4p). This is in line with our stated dividend policy, 
which is set out in detail in the Review of Operations and 
Finance on page 13. 

In Richard Pennycook the Board has chosen an extremely 
able and experienced Chairman as my successor. Richard 
already knows Howdens and its culture, and shares both 
the commercial acuity and the values that underpin its past, 
present and future performance. I wish him every success in 
his new role.

In addition, we have decided to return a further £55m of cash 
to shareholders by way of a share repurchase programme 
to be implemented over the course of the next two years. 

In July 2015 we were pleased to welcome Geoff Drabble to the 
Board as a Non-Executive Director. Geoff is Chief Executive 
Officer of the international equipment rental company Ashtead 

Group plc, and his experience of a business where local, 
timely, personal service is of prime importance brings a 
directly relevant perspective to the Board.

In December 2015 we were also pleased to appoint Andrew 
Cripps as a Non-Executive Director. Andrew is a Non-Executive 
Director of Booker plc, and Chairman of its Audit Committee. 
His extensive Board experience, and audit committee 
expertise in particular, will make a strong contribution to 
Howdens as it grows in reach and scale. Andrew will take over 
as Chairman of the Audit Committee from Richard Pennycook 
at the Annual General Meeting in May 2016.

Michael Wemms, who has given over nine years of unstinting 
service to the Board, has overseen the process of the 
appointment of a new Chairman. Given the extent of changes 
to the Board, and in the interests of continuity, he has agreed 
to serve as a Non-Executive Director for one more year. We will 
endeavour to use the opportunity of Michael’s retirement from 
the Board to increase the diversity of our membership and 
further enhance the mix and balance of background, skills  
and experience that are represented.

GOVERNANCE 
We aim to uphold high standards of governance in a 
constantly changing environment where perceptions, as well 
as regulations, continue to evolve. Our Corporate Governance 
Report on page 41 sets out our procedures and reports on  
our compliance record throughout the year.

PEOPLE AND RESPONSIBILITY
Howdens’ people embody the idea of local service, both  
for our customers and for the wider community. They have 
maintained this ethos under pressure and in the context of 
a rapidly growing business that makes more demands on 
individuals, and confers more responsibility on them, than  
ever before. On behalf of you all I would like to thank them 
for their outstanding efforts on all fronts in 2015.

05

The generosity of spirit they display beyond the workplace 
makes a tremendous difference to the lives of many people. 
In 2015 our employees across the business were responsible 
for over 3,600 donations, in cash and in kind, amounting to a 
value of £1.9 million. The full extent of our involvement in local 
communities is detailed in the Corporate Social Responsibility 
Report, beginning on page 23.

In the same Report we describe what we have done and are 
doing to fulfil our responsibilities as corporate citizens in the 
broadest sense. Howdens aims to promote safety, energy-
efficiency and environmental awareness, and recognises the 
importance of training, development and opportunities for 
young people, because all of these things directly reflect our 
own values. 

LOOKING AHEAD
Howdens is facing the future from a position of stability and 
strength. It has a capable and experienced management 
team who are implementing a proven strategy that will deliver 
further growth. We remain watchful, given the increased 
uncertainty surrounding the economic outlook. The path 
Howdens is following is one which allows both continuity and 
change. The business has the resources, the culture, the skills 
and the strategic flexibility to allow it to take advantage of the 
many opportunities that lie ahead. 

Will Samuel
Chairman

24 February 2016

Howden Joinery Group Plc Annual Report & Accounts 2015Chief Executive’s statement

06

OUR MODEL
Wanting everyone to do well
Howdens is a highly successful business, with 623 local 
depots, over 360,000 active customer accounts and over 
8,000 employees who are looking forward to a future of 
opportunities for themselves and their families as well as  
for the business.

Looking back, it may appear that Howdens was always 
destined to get to this point and beyond. But in 1995, when 
the business started, nothing was predetermined. Howdens’ 
success did not happen by accident, and it was neither 
obvious nor easy.

The growth and development of Howdens have been driven 
by its model, culture and values, which remain as relevant as 
they have always been. The central idea of the business is 
that it should be worthwhile for all concerned. Putting this into 
practice – wanting others to do well, not just ourselves – is 
what sets Howdens apart, and what will guarantee its future. 

Wholly focused on the small builder
Howdens is the leading supplier of kitchens to small builders 
across the country. From the outset, our business model was 
designed around their needs. 

Builders have busy lives
Local builders are entrepreneurs running small businesses. 
They need to remain profitable while juggling several jobs at 
once. Their plans change from week to week and from day 
to day, depending on whether their customers change their 
minds, whether something unexpected has been discovered 
behind a partition wall, whether everything required for the 
job has been delivered as promised, whether anyone is off 
sick, and of course whether frost or rain mean they have to 
reschedule the work they had originally planned to do. 

We’re always ready 
Howdens is a trade-only business, offering nearly 60 
kitchen ranges from local stock, together with accessories, 
appliances, sinks and taps, worktops, flooring, lighting and 
hardware, and a range of joinery including internal and 
external doors, skirting and stair parts. Howdens is always 
in stock locally, and everything can be picked up from our 
local depot – there’s no waiting for items to be ordered, or 
replaced, or swapped, or brought back.

We help builders make money
Howdens’ in-stock model allows the small builder to plan and 
sell a kitchen and fit it when he wants to do so. Our skilled 
planners help the builder to secure the job in the first place.  
An expert, accurate plan ensures that everything will look good 
and fit, saving the builder time and supporting his margin. 

When a builder comes into our depot for the first time, we open 
a nett monthly account for him, which gives him the ability to 
manage his cash flow. The builder can complete the job and 
get paid long before he has to pay Howdens.

The local depot manager is authorised to give the builder a 
personal, confidential discount, which gives him the freedom 
to manage his own margin.

Many skills
The builder is a project manager, in charge of assembling and 
coordinating many skills in order to achieve a satisfactory 
kitchen installation. These include joinery, tiling, plastering, 
painting, glazing, electrical work, plumbing and heating as  
well as other more specialist skills.

Saving time and money
Howdens sells pre-assembled cabinets, increasingly with 
pre-fitted elements, which saves the builder hours, if not 

07

days, on site. Our cabinets are designed to be robust and 
easy to install. They are manufactured to high standards of 
consistency and they do not break. This is what we call no-call-
back quality – and it saves the builder even more time. 

Howdens buys raw material and product in volume, and 
manufactures efficiently, so we can offer our customers quality 
at an affordable price. For example, we sell granite from stock, 
cutting out unnecessary costs as well as long lead times. 

Trusted managers
Builders know us personally, not as a corporation but as 
individual managers in their local area who understand the 
way they work and can provide practical help. Builders buy 
from Howdens because our managers are authorised to 
discount prices, swap items, take decisions and give advice.

Running their own depots
Managers hire their own staff locally and develop relationships 
with local builders. They do their own marketing to existing  
and potential customers. They adjust their pricing to suit  
local conditions. 

Managers manage their own stock. They work out where 
to put everything they can sell – old favourites and new 
introductions. Every day, they balance the needs of builders, 
end-users, staff and everyone in their local area who has an 
interest in the success of their depot.

Shared goals
Managers are in charge of their own margin, and effectively 
of their own business. Both managers and staff are strongly 
incentivised on a share of their local profit less any stock 
loss, which results in a common aim to improve service, and 
consequently profit, with virtually no stock loss. 

“Do what you say” is a principle that extends right across the 
business. Builders depend on it – and so do our factories and 
our suppliers.

Being important to our suppliers
A shared understanding of what is expected ensures the 
smooth operation of our flexible, reactive supply chain and 
the support functions on which the depots depend. In our 
peak autumn trading period in 2015, our supply division 
made 9,800 deliveries to our depots, and of the 7 million 
items received only 160 were incorrect, which equates to a 
success rate of 99.998%. It is very hard to achieve service of 
that order without shared values and personal relationships at 
every level, both within the business and with our 200 UK and 
international suppliers of bought-in product and raw materials.

Efficient manufacturing
Our two factories in Yorkshire and Cheshire are configured to 
the precise requirements of our model. 

They serve only one customer – Howdens – and do not 
supply anyone else. Everything in the factories is arranged to 
suit our requirements and we use only the space we need. 
The machinery is bespoke to Howdens. The staff know our 
specifications. There are no special orders. Working practices 
are agreed on the basis of known quantities, phasing and 
predictability. There is no unnecessary waste anywhere, 
whether of time, space, or product.

Lowest cost of supply
We have our own warehouses and distribution operations, and 
our trucks deliver our product only to Howdens depots. We 
manage our fleet efficiently so that wherever possible trucks 
do not return to base empty. 

This allows us to keep Howdens’ depots replenished with 
the right stock at the lowest cost. We are committed to 
maintaining and increasing our investment in supply to  
support significant further growth. 

Howden Joinery Group Plc Annual Report & Accounts 201508

Chief Executive’s statement continued

Scalable systems
We have also invested in robust, stable, scalable systems 
capable of supporting our current and future requirements. 
These systems include manufacturing, warehouse 
management, transport monitoring, depot stock and sales 
reporting, payment processing and management information 
as well as industry-leading design tools for kitchen planning. 
During our peak trading period in October 2015, we processed 
nearly £146,000 in one minute, and we have plenty of 
capacity to trade at an even faster pace.

Low-cost depots
At depot level, Howdens has none of the costs usually 
associated with kitchen retailers such as expensive 
showrooms, installation services and national advertising 
campaigns. A typical Howdens depot occupies around 10,000 
square feet, costs approximately £250,000 to fit out and 
breaks even once it has achieved sales of £650,000. 

Builders pay promptly for Howdens’ service
Howdens extends a significant amount of working capital to 
our trade account holders on a continuous basis. Last year 
this amounted to nearly £2.5bn. At the same time, we have a 
highly efficient collection operation and the total cost of credit 
control, including bad debts, decreased to less than 1% of 
Group revenue. In other words, builders are prepared to pay, 
and pay promptly, for the Howdens proposition.

An integrated model
The Howdens model works because we implement it as  
a whole, not piecemeal.

For example, we could not satisfy the builder’s day-to-day 
needs without giving our depot managers the autonomy  
to make decisions on the spot.

Nor could we collect prompt payment without keeping every 
item required by the builder in stock and making sure it is, as 
our mission statement promises, of no-call-back quality. 

OUR MARKET
Life is in the kitchen 
Every home has a kitchen, and the kitchen is fundamental 
to the home. Our daily lives are played out in the kitchen. We 
celebrate, commiserate, plan, argue, agree, make lists, mend 
things, cook, eat, clean, work, shop, watch television and feed 
the dog in the kitchen.

The pace of change is accelerating 
Twenty years ago, DIY was still viewed as a reasonable way of 
tackling a range of household repair jobs. Today, we cannot 
manage the simplest of tasks. Putting up a shelf is challenging 
for many, let alone fitting a kitchen.

No time, no tolerance
Our lives are changing rapidly and in many ways. We don’t 
have time to visit lots of showrooms or stay at home all day for 
delivery. We have no tolerance for mistakes or breakdowns. 
And we want things sorted out – just fix it, right now, is the cry.

Reliable information
Not enough time and too much information. For ideas and 
advice on any aspect of domestic life, we turn to the internet.  
The only snag is how to make sense of the avalanche 
of information released by a few clicks.  Is it comment, 
advertisement or fact? To sort things out quickly, most  
of us welcome some help. 

09

Higher expectations
We expect our kitchens, and everything in them, to be better 
designed, to include more functions, to perform better, to have 
more robust surfaces, to use less energy, to be child-friendly – 
at all price points. 

We all need a local builder
At Howdens we have always believed that the best way to get 
a kitchen installed and working is to have it fitted by a small 
builder. This is truer than ever before. 

The small builder serves a variety of customers including 
landlords, tenants, homeowners, housing associations and 
local authorities. The builder goes where the work is, which is 
why he needs to know that Howdens keep everything in stock.

A changing housing market
As house prices have risen, the private rental sector has 
expanded to meet demand. Of the 25 million homes in the UK, 
nearly 20% are now privately rented. More people are renting 
from private landlords than from local authorities or housing 
associations. 156,000 new homes were built last year – but 
that doesn’t change the fact that there is still a lot of old 
housing stock needing more frequent repairs.

New technology in the home
Technological developments are changing our expectations  
in the home, and in the kitchen in particular. 

Howdens already sells a growing range of programmable 
appliances. The connected home, with systems that allow the 
householder to control everything remotely, from cooking and 
washing to heating, lighting, security and more, is no longer a 
distant dream. 

Making life easier for the builder
Our aim is to help the builder save time and make money. 
Innovation has led to the use of new materials and the 
continuing introduction of new products that make life easier 
for him. For example, Howdens’ offer now includes pre-primed, 
pre-glazed doors, kitchen cabinets with pre-fitted elements, 
premium screws and a ‘smart latch’ that can be fitted in five 
minutes, a quarter of the time required for a traditional latch.

Sophisticating kitchens 
Kitchens are continually sophisticating. This does not mean 
they are becoming more expensive. On the contrary, they are 
now expected to do more for less. Kitchens are far from being 
commoditised, and the need for them to be properly installed 
is growing all the time.

Builders need sound advice and good training in order to do 
a proper job. That is why we make sure our depot staff are 
trained to the highest standards, and why we are increasing 
our focus on apprenticeships and the learning of new and 
traditional skills.

Helping the builder to be responsible 
Builders also need to know the products they are using are 
entirely reliable, and comply with an increasing number 
of regulations governing safety, data security, energy use, 
sustainability, the use of labour and waste management –  
to name but a few. 

You can read more about how we address regulations and 
expectations in our Corporate Social Responsibility Report 
beginning page 23. 

Howden Joinery Group Plc Annual Report & Accounts 2015Chief Executive’s statement continued

10

OUR STRATEGY
Choices and opportunities 
Howdens has done well, and continues to do well. The success 
of the business has created more choices and opportunities 
than we could possibly have imagined when we opened our 
first depots in 1995. 

More new depots 
As far as new depot openings are concerned, we are still a 
long way from saturation coverage of the country. The small 
builder’s need for a truly local, convenient service is growing 
all the time. When we open new depots in a city or area where 
we are already present, the net effect is to increase sales from 
that area, usually by the second year of operation. 

Our horizons are both wider and further away than they used to 
be, which means we face more complex challenges along with 
richer opportunities.

Personal vs. digital
Howdens is about people and development. In an increasingly 
digital-dependent world, the Howdens depot is a hub of 
humanity and physicality, providing personal service in 
response to real, physical problems that require immediate 
fixing. This in itself represents a tremendous opportunity  
for us. 

Looking after our customers
The first job of a new depot is to open accounts. An account 
is a personal relationship to be looked after for the long term. 
As life in general and kitchens in particular become more 
complex, it seems reasonable to expect that we will need 
more people with specific skills – designers, salespeople, 
experienced managers – to look after our builders and 
increase sales per account as well as the volume of accounts.

Proper service
So we plan to continue to recruit good people who understand 
our values and culture, and to support our staff with more 
training, more targeted incentives, even better systems, 
improved planning tools and everything we can do to allow 
them to offer proper service to the small builder. 

People and organisation 
We have always invested in upgrading all parts of our 
business, including product design, manufacturing, logistics, 
warehousing, systems and offices as well as people and 
incentives. Over the past two years we have devoted 
considerable energy and effort to organisational development 
to make sure we have the right structure, as well as the 
right people, to support a bigger future. Here again, we are 
fortunate. Howdens prospects, coupled with its philosophy  
and culture, strike a chord with many people’s values and 
vision for the years ahead.

Securing the future 
Howdens has to continue to invest simply in order to stand still.
We have no choice if we are to continue to support the 
essential ingredients of our offer – range, quality, availability 
and price – at speed and at scale.

The business is performing well, and has prospects. So we  
are able to invest in its future as well as its present needs.

Manufacturing investment
With this in mind, we have decided to make significant 
investments in our manufacturing and warehousing capacity  
to meet planned demand to 2020 and beyond. 

When making this investment, we have to take into account 
the size and complexity of our prospects and how we should 
support them. There are four main areas to consider. 

11

First, there are things that become old or need to be retired. 
This includes everything from equipment in our factories to our 
distribution centre in Northampton which is approaching the 
end of its viable life.

Second, there is brand new technology: there is always a 
better mousetrap – and there is evolution too.

Third is disaster recovery. Now that the business is so much 
more valuable, we have to pay attention to our disaster 
recovery capability and the need for dual running if necessary.

Finally, do we have enough capacity to serve our aspirations 
for the future? This involves long-term property decisions as 
well as planning for production and logistics.

Continuous testing 
We also continue to carry out tests of all descriptions in all 
areas. These include testing the market for products new to 
Howdens such as granite worktops and branded appliances, 
and developing an exclusive, premium cabinet – all available 
from stock. This naturally makes demands on space within 
depots, but it also opens up new opportunities to open 
accounts, increase sales per account, improve margin, 
increase stock turn and attract new people to the business. 

Experimenting beyond the UK 
Another area in which we continue to test the Howdens 
proposition is continental Europe. Later this year we will have 
a total of 24 depots outside the UK: 20 in France (with two 
different formats), two in Belgium, one in the Netherlands and 
one in Germany. So sooner or later we will be looking at two 
formats and four countries.

We are still at the trial stage outside the UK. We continue to 
make interesting and sometimes surprising discoveries in 
these different markets – for example, about the levels of 
discount that motivate builders, which formats are the most 
attractive to most customers, and the complex relationships 
between the various parties involved in installing a kitchen. 
By the end of 2016, we will have a better view of the  
strategic options.

Worthwhile for all concerned 
The overriding aim of Howdens is to create a lasting business 
that is worthwhile for all concerned – customers, prospective 
customers, homeowners, tenants, local communities, local, 
national and international suppliers, investors, existing staff, 
their families, apprentices and those yet to join the business or 
be touched by it. We have no intention of letting them down.

Ultimately, it comes down to this. The builder is our brand. Our 
job is to resource the builder, and to resource our staff, so that 
they can help the builder in the best way they can.

Howdens is a successful, balanced business, investing 
in sensible things and prepared for opportunities as well 
as threats. The key to this is that we have lowest cost of 
production, flexible production and a low break even point in 
our depots, which are focused on the repair, maintenance and 
improvement market and have a growing trade account base.

Matthew Ingle 
Chief Executive Officer

24 February 2016

Howden Joinery Group Plc Annual Report & Accounts 2015Review of operations and finance

12

FINANCIAL  REVIEW
Financial results for 2015
The information presented here relates to the 52 weeks to 
26 December 2015 and the 52 weeks to 27 December 2014 
(continuing operations), unless otherwise stated1. 

Selling and distribution costs and administrative expenses 
increased by £57.8m to £562.5m. This increase reflects the 
costs of new depots, investment in both short- and longer-term 
growth. It also reflects the impact of inflation, including on 
payroll costs, as well as an increase in pension costs.

The financial performance of the Group during 2015 benefited 
from our strong competitive position and continuing focus on 
improving operational performance. 

Operating profit increased by £32.1m to £221.9m.

The net interest charge rose by £1.3m to £2.3m, reflecting a 
higher finance expense in respect of pensions. The net result 
was that profit before tax increased by £30.8m to £219.6m. 

Revenue £m

Group

comprising:

2015

2014

1,220.2

1,090.8

Howden Joinery UK depots

1,203.8

1,075.5

Howden Joinery continental 
Europe depots

16.4

15.3

Profit before tax £m

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Total Group revenue increased by £129.4m to £1,220.2m.
Howden Joinery UK depot revenue rose by 11.9% to 
£1,203.8m, increasing by 9.2% on a same depot basis. 

This growth reflects the active development of the business 
and is a testament to the strength of the Howdens business 
model. In particular, we have continued to open new depots 
and further increased the number of customer accounts, 
which enabled us to grow turnover in existing depots of  
all ages. 

Sales from our depots in continental Europe rose by £1.1m  
to £16.4m. Within this, underlying sales from our original 
depots in France increased by 4% in constant currency terms. 

Gross profit rose by £89.9m to £784.4m. The gross profit 
margin for the year increased to 64.3% (2014: 63.7%). This 
included a benefit from the strengthening of the pound against 
the euro. It also reflected our continuing focus on reducing 
the cost of manufactured and bought-in products, and the 
success of our depots in increasing margin throughout 
the depot network. Excluding the currency gain, the gross 
profit margin would have been 63.5%, a slight decline 
versus 2014, reflecting the cost of testing, i.e. the impact 
of sales of discontinued product, and the cost of promoting 
granite worktops.

1 

 There were no discontinued operations in 2015. In 2014, there was  
an exceptional profit after tax on discontinued operations of £9.1m. 

The tax charge on profit before tax was £44.2m, an effective 
rate of tax of 20.1%.

Basic earnings per share were 27.3p (2014: 23.2p).

At 26 December 2015, the pension deficit shown on the 
balance sheet was £49.2m (27 December 2014: £142.6m). 
The decrease in the deficit was due to lower liabilities arising 
primarily from an increase in the discount rate and the Group’s 
£45m contribution to fund the deficit, partly offset by less than 
expected asset returns. 

We saw strong cash flow in 2015, with a net cash inflow from 
operating activities of £158.3m. This was after the £45m cash 
contribution to the Group’s defined benefit pension scheme.

Working capital increased by £19.2m. An increase in stock 
was partly offset by an increase in trade creditors and a 
decrease in trade debtors. This reflected the rise in the 
number of builders opening accounts with Howdens and their 
willingness to pay promptly for the service we offer them.

Also included within net cash flows from operating activities 
was tax paid totalling £35.3m.

 
 
 
 
 
 
 
 
Payments to acquire fixed and intangible assets totalled 
£45.9m (2014: £32.8m), reflecting increased investment in 
our supply operations, which we discuss in the Operational 
Review below. 

In line with the announcement of a £70m share repurchase 
programme made in February 2015, £45.3m was spent 
acquiring the Group’s own shares. These shares, totalling 
9,152,000, are held in treasury, to use for future obligations 
for company share schemes.

Reflecting the above, there was a net cash inflow of £8.4m in 
2015, the Group having net cash at the year-end of £226.1m 
(27 December 2014: £217.7m 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.

In light of this policy, and given the operational performance of 
the business in 2015, the Board has decided to recommend to 
shareholders a final dividend of 7.1p, giving a total dividend for 
the year of 9.9p (2014: 8.4p). This equates to a dividend cover 
of 2.75x.

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 an additional £55m of cash to 
shareholders by way of a further share repurchase programme. 
This 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 mission of Howdens 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”.

13

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 over 600 depots across the UK, we 
continue to see the opportunity to transform the scale of the 
business, seeing scope for up to 800 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 2015, 30 new depots were opened, 
bringing the total number of depots trading at the end of the 
year to 619. In addition, seven depots were relocated and 
seventeen were extended. 

Our account base continued to grow, increasing by 35,000 
net new accounts in 2015. While there has been a significant 
increase in accounts, our debt collection performance 
continues to be robust.

Growth was seen in depots of all ages. To enable us to deliver 
this growth while maintaining the level of service that our 
small builder customers expect, employee numbers in existing 
depots were increased by more than 500.

Product and marketing
We continue to enhance our product offering with the 
introduction of a number of new products during the year 
across all product categories. Among the 20 new kitchens 
launched during the year were ‘tongue and groove’ options 
within our popular Burford family, more stone-coloured options 
within our existing kitchen ‘families’ and the introduction of 
ivory-coloured options to a number of our kitchen ranges. 

In autumn 2014, we experimented with offering affordable 
granite worktops from stock in a small number of depots. 
During 2015, the trial was extended, and granite is now sold  
in all of our depots.

Since its launch in 2009, our Lamona-branded range of 
kitchen appliances has been very successful. We continue to 
invest in Lamona and to develop it further. Following on from 
the success of the premium, touch-control pyrolytic oven that 
we introduced in 2014, we launched two premium, touch-
control double multi-function ovens during 2015.

Howden Joinery Group Plc Annual Report & Accounts 2015Review of operations and finance continued

14

Supporting our offering of Lamona premium ovens, after an 
initial trial of additional branded appliances, we are selling a 
selection of AEG and Neff cooking, refrigeration, dishwashing 
and laundry appliances throughout our depot network.

We also started work on a number of projects that will increase 
the resilience of our cabinet manufacturing operations by 
reducing risk and increasing back-up, including the ability 
to engage in dual running if required. These include the 
development of a new production facility at Howden.

We continue to invest in our marketing communications and 
brand advertising.

•  In our kitchen collection brochure, we have introduced 

a new format to highlight each kitchen ‘family’ and have 
added a flooring section. We have redesigned our appliance 
literature, introducing lifestyle photographs to make it more 
appealing and aspirational for end-consumers. 

•  To further raise awareness of the Howdens brand, we 

attended 15 county shows and agricultural fairs throughout 
the UK during the summer.

Where appropriate, our branding now includes the Royal Arms, 
following the award to Howden Joinery of a Royal Warrant By 
Appointment to Her Majesty the Queen in 2015. This features 
on our websites and on our vehicle fleet livery, and in our 
marketing material.

Manufacturing and logistics operations 
Our UK-based manufacturing and logistics operations play a 
vital role in guaranteeing an uninterrupted supply of product to 
our small builder customers from local stock nationwide. This 
requires us to have the space and the flexibility to respond to 
each depot’s individual needs, even during our peak October 
trading period, when sales are more than double the level seen 
in other periods.

In February 2015, we said that we had undertaken a review 
of the medium- and longer-term growth prospects for 
the business and had identified more opportunities than 
previously foreseen. With this in mind, we said that we had 
considered how to ensure that we are best placed to deal 
with and take advantage of what the future might bring. One 
outcome of this work was the identification of a programme of 
investment in our supply operations that would prepare them 
for future growth while also improving the resilience of our 
cabinet manufacturing operations.

During the course of 2015, we carried out or started work  
on a number of projects, the most significant of which were 
as follows:

Manufacturing operations
We embarked on projects to replace two aging cabinet panel 
production lines at our Howden site and increase production 
capacity of the cabinet component lines at our Runcorn site.

The existing obsolete boiler and associated heating 
infrastructure at Runcorn has been replaced by a state-of-the-
art biomass heating system. Like the system installed at our 
Howden site in 2014, the heat generated attracts payments 
provided by the Renewable Heat Incentive programme. More 
detail of the benefits of this new system can be found in the 
CSR Report on page 27.

Logistics
Our national distribution centre near Northampton is nearly 
forty years old and the end of its viable life is in sight. Having 
examined various possibilities we have entered in to a long-
term agreement to occupy a new 650,000 sq ft warehouse 
that is being built near Raunds, to the east of our existing 
national distribution centre. We expect this facility to be ready 
for us to begin occupation before the end of 2016. While this 
major construction project is under way we have taken short-
term leases on a number of warehouses in order to support 
our planned capacity requirements.

During the year, we replaced our fleet of 460 trailer units for 
our fleet of lorries. These have been custom-designed and 
built to meet our requirements, and have a revised livery 
designed to improve brand awareness. This follows the 
replacement of the fleet’s 100 tractor units in 2014.

Continental Europe
At the end of 2014, we said that we intended to add a second 
phase of seven depots to our existing operations in northern 
France. Five of these depots were opened in 2015 and the 
remaining two opened following the year end. Elsewhere, we 
opened an outlet in Amsterdam and are planning to open a 
similar outlet in Hamburg, Germany, in the course of 2016. The 
purpose of these trials is to allow us to learn about different 
markets. They complement a larger outlet in Lyon, France and 
two depots in Belgium, which were opened in late 2014, and 
a further outlet in Marseille, France that started trading in 
February 2016.

GROUP DEVELOPMENTS
Banking arrangements
The Group has reached agreement to extend its existing 
£140m committed bank facility from its present term of  
July 2016 to July 2019. 

 
Pension scheme funding
In July 2015, we announced that agreement had been reached 
with the Trustees of the Group’s defined benefit pension 
scheme in relation to the schedule of payments towards the 
funding of the scheme’s deficit from April 2015. As a result,  
the Group will continue to make deficit contributions 
equivalent to £35m per annum until 30 June 2017.

KEY FINANCIAL PERFORMANCE INDICATORS
The Group uses a number of financial performance indicators 
to measure operational and financial activity in the business. 
These are shown in the financial highlights on the first page 
of this Annual Report. Non-financial indicators are discussed 
further in the corporate social responsibility report on pages 
23 to 35.

15

Payments until then, along with those made since 
6 April 2014, will fund the deficit calculated as at the  
actuarial valuation date of 5 April 2014.

The extent to which any further contributions are required 
beyond 30 June 2017 will be assessed as part of the next 
formal actuarial valuation of the scheme.

CURRENT TRADING AND OUTLOOK FOR 2016
Howdens Joinery UK depot sales in the first two periods of 
2016 (to 20 February) were up 7.1% on the same period last 
year (this excludes the first week, which had two fewer trading 
days in 2016 than in 2015), in line with our expectations. 
Along with the evidence we have of trading prospects, this 
would suggest that market conditions remain stable.

We believe there is considerable scope for further expansion 
of the UK depot network and see the opportunity for up to 800 
depots. We are currently planning to open around 30 depots in 
the UK in 2016, four of which are already open and trading. In 
continental Europe, we plan to open our first outlet in Germany 
as we continue to trial.

As already mentioned, 2015 saw us take the first steps 
to increase our warehousing capacity, invest in our 
manufacturing operations and expand our trial in continental 
Europe. Clearly, this activity affected operating costs in 
2015 and we expect it to continue to do so in 2016, with 
an anticipated increase in operating costs of around £15m. 
This is in addition to the higher costs that will arise from the 
ongoing growth of the business and the effect of inflation. 
Our investment in the resilience and capacity of our supply 
operations means that capital expenditure for 2016 is 
expected to be around £75m.

Howdens is well-founded and strongly positioned, and we 
look forward to continued growth in 2016. However, we are 
watchful for the increased risks to the UK economy from a 
less predictable global picture and the uncertainty that an EU 
referendum might bring, together with the currently weaker 
exchange rate. As always, we will act quickly to adapt our 
business to the market and economic conditions we encounter.

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.

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

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 around 30 depots in 2016, although 
it should be noted that we have the ability to adjust the rhythm 
of the opening programme in line with economic conditions.

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 has access to an asset-backed loan facility if additional 
financing is required. Treasury operations are managed within 
policies and procedures approved by the Board.

The main potential 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. 

Howden Joinery Group Plc Annual Report & Accounts 2015Review of operations and finance continued

16

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.

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, the returns of capital to shareholders, the level 
of capital expenditure, or by issuing new shares.

The Group has an asset-backed bank facility which allows 
borrowing of up to a maximum of £140m, dependent on the 
actual levels of stock and trade debtors held at any time. The 
facility has been renewed in 2015 and is now due to expire in 
July 2019. The facility was not used at any point during 2015.

The Group’s committed borrowing facility contains certain 
financial covenants which have been met throughout 2015. 
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.

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 2015 year end, the Group had £166m of cash, £60m 
of short term investments, and £118m of funds available to 
borrow under the committed borrowing facility (in line with the 
levels of stock and trade debtors at the year end).

Counterparty risk
Group Treasury policy on investment restricts counterparties 
to those with a short-term credit rating at least equivalent to 
Standard and Poor’s A-1 or Moody’s 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. 

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 £9.9m. The Group does not have many overseas 
assets/liabilities, so the impact of currency translation on 
these items is not material.

The principal exchange rates affecting the profits of the Group 
are set out in the table below.

NEW ACCOUNTING STANDARDS
None of the new accounting standards that came into effect 
during 2015 had a material implication for the Group.

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

Interest rate risk
The Group has not had any borrowings during 2015 and does 
not consider interest rate risk to be significant at present.

Mark Robson
Deputy Chief Executive and Chief Financial Officer
24 February 2016

Principal exchange rates  
versus UK pound (£)

United States dollar (US$)

Euro (€)

2015  
Average

2015  
Year-end

2014  
Average

2014 
 Year-end

1.53

1.38

1.49

1.36

1.65

1.24

1.56

1.27

17

Going Concern, Viability Statement and other Statements of the 
Directors in connection with this Annual Report and Accounts

GOING CONCERN
The Group meets its day-to-day working capital requirements 
through cash generated from operations. If required, the 
Group also has access to an asset-backed lending facility of 
£140m which expires in July 2019. 

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 net cash balances and its committed bank 
facility, and that it would not breach the facility 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 financial statements.

VIABILITY STATEMENT
In accordance with Provisions C2.1 and C2.2 of the UK 
Corporate Governance Code, the Directors have assessed the 
viability of the Company over a period longer than the period 
of twelve months from the date of the approval of the financial 
statements as provided in the Going Concern statement 
above. The Directors have assessed whether the Company will 
continue to operate and will be able to meet its liabilities as 
they fall due during the three-year period to December 2018. 
A three-year period was agreed to be the most appropriate time 
period to ensure alignment with the Company’s existing rolling 
three-year strategic planning process, as detailed below.

The review of the Company’s long-term viability was 
undertaken with reference to the Company’s work on strategic 
planning in 2015 which covered the three year period to 
December 2018. This included sensitivity analysis of the 
Company’s strategic plans and considered scenarios with 
reduced sales, margin and cash flow. This analysis was 
modelled on the most severe downturn in sales and margin 
that the Company has experienced over a three-year period. 
The Directors also considered that the Company’s strong cash 
position, plus the availability of the £140m committed banking 
facility, the operational flexibility afforded by the depot opening 
programme, the certainty afforded from long-term supply 
agreements and the robust disaster recovery and business 
continuity management frameworks supported the prospect  
of long-term viability.

The Directors also undertook a robust assessment of the 
Company’s principal risks. These risks are set out on pages 
19 to 22. This assessment followed the implementation of a 
number of enhancements to the risk management processes 
during 2015. Specifically, we changed our risk reporting to 
include a risk appetite statement and to emphasise the details 
of certain inherent risks identified as key to the business. 
These enhancements to the monitoring of principal risks have 
helped to increase visibility of the risks which the Company is 
most reliant on the internal control environment to mitigate. 

Having taken into account the Company’s current position, 
strategic plans and principal risks in their evaluation of the 
prospects of the business, the Directors confirm that they have 
a reasonable expectation that the Company will continue to 
operate and will be able to meet its liabilities as they fall due 
during the three-year period to December 2018. 

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. 

Howden Joinery Group Plc Annual Report & Accounts 2015Going Concern, Viability Statement and other Statements of the 
Directors in connection with this Annual Report and Accounts continued

18

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

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 24 February 2016 and is signed on its behalf by: 

Matthew Ingle 
Chief Executive 

Mark Robson 
Deputy Chief Executive and Chief Financial Officer 

24 February 2016

•  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 Directors have taken all the steps that they ought to 

have taken as Directors in order to make themselves 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. 

Principal risks and uncertainties

Howdens operates in an environment that includes different types of risk. Our approach to risk is adaptive, and is designed to 
ensure that we are protecting what we have while also responding to opportunities to grow and create value.

19

OUR APPROACH TO RISK
Howdens’ operating model of an in-stock business, with dedicated supply systems, supportive suppliers and loyal, committed 
staff who understand the business ethos of service and help for other people underpins the need to protect what we have 
worked hard to create. The numbers tell a compelling story, future opportunities are apparent and the marketplace is evolving.

Our approach to risk reflects both the success of the business and its prospects. Opportunity risk is managed closely and 
depends on our ability to understand and manage the key drivers of success and maintain the delicate balance between them.  
To support this, our approach considers both short and long term risks within a timeframe of up to three years. 

Our local builders rely on us to support their needs. They expect us to be flexible so that they can meet the ever-changing needs 
of their customers. A culture of personal integrity, stock availability, business resilience and excellent levels of customer service 
are all strategically important factors that we take into account in the risk management process embedded across the Group. 

RISK MANAGEMENT PROCESS

Operations

Risk Department

Executive Committee

The Board

Top-down  
risk identification

OPERATIONAL  
RISK REGISTERS

Bottom-up  
risk identification

Risk Universe 

Facilitate  
identification  
of key risks

Independent appraisal

Review net risk score

Monitoring  
risks

Setting  
risk appetite

KEY RISK REGISTER

Assessing  
risk tolerances

Review key risks

Identify principal risks

Our risk management process reflects the Group’s business model of decentralised local autonomy, and it benefits from the openness 
and honesty of our culture. Each division identifies risks through both ‘bottom-up’ and ‘top-down’ risk identification processes.

Risks are reviewed quarterly by the senior management team in each division. The risk management process looks at each 
potential risk to the division’s objectives, assigning probability and impact scores in the absence of any mitigating controls. This 
results in a “gross risk score”. The next step involves identifying the mitigating controls already in place within the business to 
manage risks. Once these controls have been considered, risk scores are reassessed and we arrive at a “net risk score” for each 
risk. If the net risk score is considered to be above our level of appetite for that risk, as determined by the Board, we implement 
further mitigation to reduce the score to a tolerable level.

A Key Risk Register is produced, prioritised by net risk scores. This is reviewed by the Executive Committee every quarter, 
together with qualitative summaries of any significant changes to the risk profile. The outcome of this review is then fed back to 
the divisions for consideration of any changes.

In addition to these key risks, other risks that have the highest gross scores but which have been mitigated, via a robust system 
of controls, to a tolerable net score are reported to the Executive Committee and Board. This helps the business to monitor those 
risks where we have the greatest reliance on the controls in place to manage them. As a result of these additional risks being 
reviewed by the Executive Committee and Board, key risks with a high gross score but low net score have been agreed as new 
principal risks (Cyber Security Incident and Credit Control Failure).

Howden Joinery Group Plc Annual Report & Accounts 2015Principal risks and uncertainties continued

20

During the year increased emphasis has been placed on the quality of risk reporting to the Executive Committee and the Board, 
with greater focus on principal risks, ensuring clear visibility of the full risk profile of the business.

The Audit Committee conducts an annual review of the entire process to help confirm that our risk management approach is 
monitoring risk appropriately and that risk appetite is being set at the right level. 

Ultimately, risk is the responsibility of the Board, and therefore key risks are formally considered by the Board every six months. 
As part of this process the Board reviews the key risks and identifies the principal risks. To that end, the Directors confirm they 
have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its buisness 
model, future performance, solvency or liquidity. 

PRINCIPAL RISKS
Below we describe our principal risks and what we do to mitigate them. The table summarises the nature of the risks and the ‘risk 
trend’, which indicates how gross risk has changed over the year. 

Principal risk

Changes in market conditions

Deterioration of business model and culture

Failure to maximise growth potential of the business

Interruption to continuity of supply

Loss of key personnel

Credit control failure *NEW

Cyber security incident *NEW

Gross risk trend in 2015

No change

No change

No change

No change

No change

No change

Increased

Principal risk can have a serious impact on the position, performance, development and prospects of the Group.

CHANGES IN MARKET CONDITIONS 
Description, impact and link to strategy
The Group’s products are sold from stock to local builders, most of whom run small businesses, for installation in public and 
private housing, mainly in the repair, maintenance and improvement markets. 

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

A change in market conditions could affect our ability to achieve our sales and profit forecasts, which in turn could put pressure 
on our cash availability and banking covenants. On the other hand changed market conditions could also provide opportunities to 
exploit new markets and create value. 

Whilst there was no reported change to the gross risk trend in relation to change in market conditions during 2015, we anticipate 
that the increased uncertainty in global markets observed this year may cause this particular gross risk to increase in 2016.

Mitigating factors
We monitor and identify key market drivers and trends as well as maintaining close relationships with customers who may give an 
early warning of slowing demand. We can take swift management action to change cost levels and inventory in a measured way to 
mitigate the effects of a change in market conditions, consequently helping to ensure that we have sufficient cash and borrowing 
facilities for business needs and adequate covenant headroom. 

DETERIORATION OF BUSINESS MODEL AND CULTURE 
Description, impact and link to strategy
The future success of the business depends on the successful implementation of the Group’s business model and on its  
locally-enabled, entrepreneurial culture. 

21

Our local managers provide excellent service to local business people who trust us to support them, and to local communities 
who rely on us to behave responsibly. If the Group fails to implement its business model in the locally-enabled, decentralised 
manner envisaged, there may be an adverse impact on the Group’s future financial condition and profitability. 

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

FAILURE TO MAXIMISE THE GROWTH POTENTIAL OF THE BUSINESS
Description, impact and link to strategy
Customers’ changing expectations and demands, new market opportunities, the extent and configuration of the depot network and 
the performance of existing depots all present Howdens with significant opportunities for growth. Failure to recognise, understand 
and exploit the potential these offer, in line with our business model and risk appetite, or failure to align current structures and 
skills to meet the challenges they present, could affect our ability to obtain maximum benefit from our growth opportunities.

Mitigating factors
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. Existing structures and skills are reviewed in the context of 
growth and adjusted where necessary.

INTERRUPTION TO CONTINUITY OF SUPPLY 
Description, impact and link to strategy
The Group’s business model requires every depot to be able to supply product from local stock. Any disruption to our relationship 
with key suppliers or interruption to manufacturing operations could adversely affect the Group’s ability to implement the 
business model.

Mitigating factors
With suppliers, the Group implements multiple sourcing strategies wherever possible in order to mitigate the effect of a key 
supplier being unable to deliver goods or services. We also enter into long-term contracts to secure supply of our key materials. 
Good supplier relationships are maintained by prompt settlement of invoices, regular communication, and an annual supplier 
conference. We adopt best practice health & safety and fire prevention procedures. Business continuity plans are in place for 
key production processes, and significant investment in disaster recovery capability is in place. The Group has announced a 
major programme of investment in its manufacturing facilities to ensure that manufacturing capacity is sufficient to match our 
expected growth, as well as in further cabinet production capacity to provide additional cover in the event of an interruption to 
manufacturing operations. 

Howden Joinery Group Plc Annual Report & Accounts 2015Principal risks and uncertainties continued

22

LOSS OF KEY PERSONNEL 
Description, impact and link to strategy
Howdens’ model relies upon people to behave in a way which reflects the culture and values of the business: this is critical 
to the success of the decentralised business model. The skills, experience and performance of key members of the Group’s 
management team make a major contribution to the success of the business. The loss of a key member of the Group’s 
management team could adversely affect the Group’s operations.

Mitigating factors
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.

CREDIT CONTROL FAILURE
Description, impact and link to strategy
Our customers rely on our trade account facilities to enable them to get paid for completed projects before they have to pay  
for the products and materials they have used. Cash flow is critical to their business. To help support them, Howdens provides 
each account holder with an account on nett monthly terms. Failure to provide, or service, these facilities could affect our  
ability to continue to support our customers, and potentially our ability to collect debt.

Mitigating factors
Howdens has an effective trade account policy used to agree terms with our customers and efficient processes for the 
collection of debt which are closely and regularly monitored. These are supported by robust systems and tested business 
continuity plans. Good personal relationships are maintained with builders, both at depot level and within the credit control 
department. In addition, concentration of debt is limited, as debt exposure is spread across over 360,000 customer accounts. 

CYBER SECURITY INCIDENT
Description, impact and link to strategy
The Group depends on a core set of critical IT systems which are fundamental to the day-to-day running of the business.  
These systems are at risk from increasingly sophisticated security threats. Should a security breach occur, this could cause 
a system and/or sensitive data to be compromised.

Mitigating factors
Sophisticated security measures are in place across the business including security policies developed by our Information 
Systems team, laptop encryption, anti-virus and anti-malware protection, e-mail scanning and IT perimeter and firewall 
monitoring. External specialists are used to test system vulnerabilities via penetration tests. Disaster recovery capability  
and business continuity plans are in place, these are tested periodically. 

23

Corporate social responsibility

OUR APPROACH TO DOING BUSINESS
A typical Howdens depot employs about a dozen people and brings economic and 
social benefits to many times that number. Each depot runs an average of around 500 
customer accounts, so it directly supports the activity of 500 local small businesses. 
They depend on Howdens not only for products but also for trade terms, margin 
opportunity and business planning tools. 

The depots and their customers, together with Howdens’ manufacturing and 
distribution sites, also generate employment for other local tradespeople and service 
providers, including plumbers, electricians, drivers, stationery suppliers, caterers, 
cleaners and childminders. 

The builder’s reputation, as well as his livelihood, depends on Howdens. Our product 
looks good, is easy to fit, does not break and meets constantly evolving standards. 
Kitchen users expect us to source raw materials in a way that is sustainable, to treat 
our environment with care and to make sure our appliances are not only safe but 
energy-efficient.

As a trade business with local accounts, Howdens’ employees see the same 
customers, day in, day out. Those customers expect to see familiar faces in their 
depot too. At Howdens, the job is to try to solve problems for others – whether small 
builders, kitchen users, suppliers, staff, neighbours or young people seeking skills, 
apprenticeships and training opportunities. 

In short, an enormous number of people have come to rely on Howdens in a huge 
variety of ways. Each of these people has a local and personal relationship with 
Howdens, not a corporate one. That means a lot, especially in uncertain times.  
They trust Howdens not to let them down. 

Howdens is committed to repaying their trust with demonstrable good service,  
fair dealing and opportunities for all involved. Because real success, for Howdens,  
is about growing a great business that can create wealth, as well as profit.

Worthwhile for all concerned

Howden Joinery Group Plc Annual Report & Accounts 2015Corporate social responsibility continued

24

RAW MATERIALS AND BOUGHT-IN PRODUCT

Overview
In this section we discuss the importance of the quality, 
environmental, Health & Safety and ethical standards of our 
suppliers, as well as our work to reduce the energy and water 
consumption of our own-brand appliances.

Approximately one-third of the costs of goods sold by Howdens 
is accounted for by products we manufacture ourselves 
within our two UK factories. These are items such as kitchen 
cabinets, worktops and skirting boards. The remaining two-
thirds are the products which are bought in from our national 
and international supply base. These products include items 
such as internal and external joinery doors, hardware, cabinet 
doors, sinks and taps, flooring, lighting and, of course, a wide 
range of kitchen appliances. 

Our suppliers
We work closely with our suppliers to ensure that not only 
do they meet our specifications in terms of quality, volume, 
availability and cost but also that the manner in which they 
operate and produce these goods is ethical and sustainable. 

It is important to Howdens that our suppliers respect their 
employees’ health, safety and welfare in terms of working 
conditions and rights. We also expect them to care for the 
environment by sourcing and using their raw materials 
in a responsible manner and encourage them to look for 
opportunities to improve the safety and energy efficiency of 
the products or materials that they provide to us.

We have built strong relationships with our suppliers, which 
creates an environment conducive to positive change. We 
work closely with them to identify improvement opportunities 
within their operation which will bring benefits to all concerned, 
for example in operational efficiencies, waste reduction and 
quality improvements.

We employ processes for continuous monitoring, regular 
assessment and audit to ensure that suppliers share our  
own business values and ethics. 

Responsible use of timber
Over 75% of the products we supply to the builder are timber 
or timber-based products. It is our responsibility to make  
sure that the timber used has come from legally harvested 
and sustainable sources, whether in the raw materials used  
in our manufacturing processes or contained within our 
bought-in products.

The introduction of the European Timber Regulations in 2013 
has raised the profile of the global issue of illegal logging 
and deforestation and provided the industry with very clear 
guidelines for due diligence during the procurement process. 
We constantly review our due diligence system in line with 
evolving standards and stakeholder expectations. Howdens 
has been approved by the Timber Trade Federation as having 
an environmental due diligence system in place which is 
equivalent to their Responsible Purchasing Policy.

We strive to source our timber-based products from either 
FSC® (the UK Forestry Stewardship Council) or PEFC™ 
(Programme for the Endorsement of Forest Certification) 
certified sources. All of the kitchen ranges which are 
manufactured in our own factories are FSC® certified.  
This is in line with our rolling KPI: 

“To ensure that 100% of the wood-based material used  
in our manufacturing processes comes from FSC®  
certified sources.”

25

energy efficiency, the dishwasher also offered customers 
a reduction in water consumption of 25% compared to our 
previous best performer.

We also made improvements to our extractors in 2015 in line 
with evolving eco-design legislation, and we are undertaking 
a number of projects through 2016 and 2017 that will deliver 
further improvements in the energy efficiency performance of 
this range.

We continue to introduce new, more energy-efficient products 
in our own-brand Lamona range. For instance, in 2014 we 
introduced a pyrolytic, self-cleaning oven with increased 
insulation that makes it more efficient in operation. Pyrolytic 
ovens also remove the need to use chemicals to clean the 
oven. We have continued with development work in 2015 to 
further increase the efficiency of this product, and we expect to 
introduce the first A+ rated model in our cooking range in 2016.

“Road to rail” transport initiative
During 2015 we have taken a proactive approach to reducing 
our carbon footprint on the majority of our freight routes from 
Europe. Prior to 2015, the majority of our European freight 
was transported by road and delivered directly to us by our 
suppliers. In 2015 we took control of the freight from these 
suppliers and transferred a substantial proportion of the  
freight to rail transport. 

In 2015, we used 220,000 cubic metres of chipboard and 
30,000 cubic metres of MDF in our manufacturing process.  
As has been the case since 2006, all of this material came 
from FSC® certified sources. All of our manufactured  
products hold the FSC® chain of custody certification.

We aim to source our bought-in products to the same 
standard. One of the metrics we use to monitor our progress 
in this area is the percentage of kitchen ranges which we 
can market as being collectively FSC® compliant. A typical 
kitchen range will consist of a combination of items which 
we have manufactured ourselves and other items which we 
have bought in. We only market a range as FSC® compliant if 
all individual product parts in that range are certified. At the 
end of 2015, 72% of our kitchen ranges met this standard 
compared to 68% in 2014 and 64% in 2013.

Eco-Design within our appliances
As part of our ongoing programme of energy and water use 
reduction, we introduced a KPI in 2013 in relation to our 
bestselling cooling products:

“To reduce the energy consumption on our bestselling 
Lamona fridge freezers by 5% over the three years 2014–
2016 (on a kWh basis).”

We have made a cumulative reduction of 2% since 2013,  
and we continue to work towards achieving this KPI by the  
end of 2016.

In 2015 we devoted significant effort to the introduction of 
other branded appliances into our product portfolio. This 
included the introduction of three products with an A++ 
energy efficiency rating: a fridge freezer, an integrated washing 
machine, and a dishwasher. In addition to the increased

Howden Joinery Group Plc Annual Report & Accounts 2015 
Corporate social responsibility continued

MANUFACTURING AND LOGISTICS OPERATIONS

26

Overview
Our manufacturing and logistics operations account for 
approximately two thirds of total Group CO2 emissions.  
Our main areas of focus are operating in a responsible 
manner, managing our energy usage, managing waste  
and packaging and the health, safety, and development  
of our 1,350 employees.

In 2015, our factories manufactured approximately 
4.1 million cabinets, 0.9 million worktops and breakfast bars, 
1.4 million frontals and 2.3 million painted skirting boards. 
Within our logistics operation, our truck fleet made over 
90,000 deliveries to our depots, equating to approximately 
14.5 million road miles. 

Responsible operations
All of our manufacturing, warehousing and transport activities 
are certified to the ISO 14001 standard for Environmental 
Management. This not only gives us some assurance that we 
have good environmental management processes in place, but 
it also supports our drive for continuous improvement in areas 
such as sustainable energy, waste and material management.

Energy usage
One of our key metrics for energy usage in the factories is 
the electricity we consume per cabinet produced (kWh per 
cabinet). We started measuring this in 2008 and we are 
pleased that this figure has significantly decreased during this 
time. During 2015, we continued to make improvements in our 
energy management through the efforts of our employees and 
the application of new technology. Our achievements in 2015 
resulted in the usage dropping from 2.49kWh per cabinet in 
2014 to 2.41kWh per cabinet in 2015, a 3% reduction from 
the previous year and a 33% reduction since our baseline year, 

2008. Extraction, lighting and compressed air optimisation 
have been the largest contributors to this energy reduction 
but we have also gained benefits from soft controls such as 
reporting leaks, energy awareness training, and the initiatives 
of our Energy Action Team who have been instrumental in 
workforce engagement and behavioural improvements. Given 
the progress made over the last few years, our target for 2016 
is to at least maintain the consumption per cabinet level 
achieved in 2015.

Waste
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. This ethos is at the centre of our culture, 
and links to our strategic objective of lowest-cost supply. 

We have a rolling KPI for waste, which is:

“To reuse or recycle more than 95% of all manufacturing 
waste produced.”

In 2015, we reused or recycled 98% of our manufacturing 
waste (2014: 97%). This includes the factory sawdust waste 
which was burnt in our biomass heating system and which is 
discussed below.

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 136,000 pallets, which 
is slightly fewer than the 2014 figure of 143,000. However, 
this is because we have begun to introduce the use of a more 
robust design of pallet, which lasts longer and requires less 
repair work. 

27

Biomass Factory Heating System
In 2014, we invested £5m and replaced ageing boilers at 
our Howden factory with state of the art biomass boiler 
and heating systems, which are fully compliant with the UK 
Government’s Renewable Heat Incentive scheme. The system 
utilises the waste sawdust produced from our manufacturing 
processes on site and therefore has a positive effect on 
our waste management activities whilst also reducing CO2 
emissions and saving us the cost of the equivalent bought-in 
fuel. In 2015, we converted over 12,000 tonnes of sawdust 
into energy at our Howden and Runcorn sites which equates to 
approximately 34,000 MWh of energy generated from sawdust 
during the year, enough energy to provide heat and hot water 
for around 1,900 average households for a year.

Packaging
Our challenge with packaging the products that we 
manufacture ourselves is to select environmentally appropriate 
packaging, to reduce the amount of packaging used, wherever 
possible, and at the same time to protect our products so that 
they reach our customers undamaged and in line with the 
premise of no-call-back quality which is central to our mission. 

We have a KPI as follows:

“All cardboard packaging for our manufactured products 
should be sourced from recycled or certified sources”.

In 2015 we used 2,227 tonnes of cardboard packaging, all  
of which came from recycled sources.

Truck fleet
During 2015, despite handling an 11% increase in product 
volume delivered, we kept the increase in number of miles 
driven by our trucks to 9%. Our programme to replace the 
existing tractor fleet was completed in January 2015, and 
all our core fleet is now Euro 6 compliant. We have also 
begun trialling the use of “tall boy” taller trailers for cabinet 
distribution from our Runcorn factory, resulting in an annual 
reduction in trailer loads equivalent to 784 standard trailers.

Responsible behaviour, in terms of both fuel usage and safety, 
is a main area of focus for our truck fleet. We make use of 
advanced in-cab telemetry to measure and benchmark driver 
performance. We debrief our drivers at regular intervals, 
and work with any drivers who are not driving to the highest 
efficiency and safety benchmarks in order to improve their 
performance. This has delivered a 6% improvement in mpg in 
2015 compared to last year.

Where possible our trucks try to avoid returning to base empty, 
and so we will contract to carry loads for other companies 
where this suits our schedule. In this way we contribute to a 
reduction in the total number of lorries on the road and the 
associated emissions.

Sadly, one of our trucks was involved in a fatal road traffic 
accident in December. Investigations into the incident are in 
progress at the time of writing this report and therefore it is 
inappropriate to comment further.

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
 
Corporate social responsibility continued

MANUFACTURING AND LOGISTICS OPERATIONS CONTINUED

28

Health & safety
All of our manufacturing, warehousing and transport activities 
are certified to the OHSAS BS18001 standard for Health and 
Safety Management. We also invite the British Safety Council 
to audit our operations to “5 Star” Best Practice criteria. 
For the last five years, since we first invited this scrutiny and 
assessment, we have continued to achieve the maximum 
rating of 5 stars, demonstrating our commitment to providing  
a safe and healthy working environment and culture. 

In addition, all of our 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 only 29 Distinctions awarded 
(from 545 applicants), with Howdens receiving three of them.

The legislation called the Reporting of Injuries, Diseases and 
Dangerous Occurrences Regulations is known as RIDDOR. 
During 2015, there was one RIDDOR-reportable injury 
accident, which represents a reduction from the six reported 
in 2014, and a reduction of 83% over the last five years. The 
average time lost for all incidents has fallen by 71% over 
the same five-year period to 16.9 hours per 100,000 hours 
worked in 2015. 

Employee development
Our supply division has held Accredited Centre status with 
the Institute of Leadership Management since 2012. We also 
deliver management and leadership development to support 
the future growth of the business.

As well as supporting staff to gain externally-recognised 
qualifications, our staff have also benefitted from our 
investment in a range of development, with over 14,000 
training hours completed during the year, an increase of 
30% over 2014. Formal training courses are offered in a 
range of subjects from compliance and Health and Safety 
to Management and Leadership skills. We plan to continue 
to invest in learning and development throughout 2016, 
maintaining a strong in-house delivery capability balanced  
with relevant external qualifications.

Developing apprenticeships in-house
During 2015, we continued to further promote the use of 
apprenticeships within the workplace. We currently employ 
29 modern apprentices in our supply division, whose 
apprenticeship disciplines are in various areas of our business. 
During 2015 we introduced a Manufacturing Operations 
apprenticeship programme in order to develop multi-skilled 
machine operators with the potential to be promoted into 
future leadership roles. A further 6 apprentices are currently 
being recruited.

We have also started work on a project to develop new drivers 
for our truck fleet. Recognising the shortage of suitably 
qualified drivers, and the benefits of being able to train our 
own drivers to our own high standards, our objective is to 
support drivers to become qualified so that they can go on  
to enjoy rewarding careers with Howdens. 

IN THE DEPOTS

29

Overview
Our trade division operates from a network of 623 UK depots, 
plus central offices which provide support services such as 
marketing, HR and finance. The trade division employs around 
6,800 people, which represents around 80% of the total 
Group workforce. 

Our aim is to deliver the best possible standards of customer 
service, and to create the best possible working environments 
for our employees. We place great importance on Health & 
Safety, the professional development of our employees, and 
the management of our resources, including energy usage and 
recycling to minimise waste. The division is responsible for 
around a third of the Group’s total CO2 emissions. 

Health & Safety
Safety in our depot network is of prime importance to us. 
To that end, we have a KPI as follows:

KPI: RIDDOR Accidents per 100,000 hours worked is 0.09% 
this year compared to 0.13% in 2014.

The number of RIDDOR-reportable accidents in our depots and 
offices in 2015 has reduced to 14 compared to 18 in 2014. 
This improvement is against a background of an additional 
30 depots, increased average headcount across all of our 
depots, and increased turnover across the whole business. This 
reduction is a result of: increased focus on accident awareness, 
further training initiatives, better information and feedback on 
the causes of any accidents that have occurred, and analysis of 
trends in both reportable accidents and near misses. 

Another way of monitoring safety performance is to track the 
total hours lost across all accidents. This gives us an indication 
of the severity of accidents, coupled with how effective we are 

at rehabilitating our people back into the workplace. We have 
seen a positive trend this year, with hours lost reducing from 
7,619 to 4,270.

Additional Health & Safety information and training initiatives 
have been implemented throughout the year as part of a 
plan of continuous improvement. In particular, in 2015 we 
launched several initiatives designed to make our policies 
and procedures more engaging and accessible, including the 
development of the “Your Safety, Your Depot” initiative, in which 
we extracted key “Safe Systems Of Work” into pictorial form, 
and supported them with a film and a questionnaire-style test. 

Other developments are the commissioning of a  
cloud-based system to simplify our existing safety-
management system, providing an improved management 
dashboard and online audit and incident-tracking capability, 
and the commissioning of a bespoke £1m failsafe alert system 
to provide an additional aid to our network of forklift truck 
drivers in supporting their safe decisions.

To encourage and maintain a strong Health & Safety culture, 
we ran numerous training and refresher courses during the 
year. 534 depot managers and assistant managers, together 
with other staff at all levels, attended these courses, covering 
a range of topics, including Managing Safety for Executives, 
defensive driving, fire safety training, manual handling and our 
handyman safety and tool training course. 

The Health & Safety team within the trade division has been 
further strengthened in 2015 to support the Group’s growth 
agenda and to ensure more locally delivered training and 
advisor visits. This has resulted in a 56% increase in advisor 
visits to individual depots, to reinforce the culture of Health & 
Safety and to assist local depot managers and their teams.

Howden Joinery Group Plc Annual Report & Accounts 2015 
Corporate social responsibility continued

IN THE DEPOTS CONTINUED

30

Employee training, development and retention
In addition to the Health & Safety training referred to previously, 
our divisional training team continue to deliver personal and 
professional training to staff across the entire division in 
order to ensure that they are able to provide the best possible 
standards of service to our customers, and to have fulfilling and 
rewarding careers. The team delivered over 175,000 training 
hours during the year. Courses are offered in many subjects 
including: kitchen design, sales and product training, EPOS 
system training, fork-lift-truck driving, leading people, recruiting 
and selection, diversity and inclusion, and training sessions 
which reinforce the Howdens culture and business model. We 
plan to continue to invest in learning and development in 2016 
in line with our strategic business objectives.

In 2015 we also continued to deliver the BTEC Level 2 Award 
in Trade Business Services through internal job-related 
training. This course is unique to Howdens. During the year, 
712 employees were successful in gaining certificates 
through this programme. 

In order to support the future growth of the business and 
our strategic objectives, we have increased our focus on 
management and leadership development. In 2015 we 
started to build on the range of existing training programmes 
that we offer at all levels of the business so that these include 
an additional focus on the development of our current and 
future leaders. 

We have laid the foundations of the Howdens Academy which 
will focus on ensuring that our staff have the skills to perform 
to the highest standards in their current role and can take 
opportunities for further development in readiness for future 

roles. The Howdens Academy will operate as a new brand 
for the division, through which all learning and development 
programmes will be designed and delivered. 

Developing worthwhile careers and retaining skilled staff is 
very important to us, and we are delighted that 1,800 of them 
were promoted into new roles during the course of the year.

Developing apprenticeships
Our successful partnership with The Real Apprenticeship 
Company to promote the use of apprenticeships within the 
workplace continued throughout 2015. By the end of the 
year, we employed 296 modern apprentices within the depot 
network who are practising a broad range of skills. A further  
63 apprentices are currently being recruited.

During the year, the business saw 234 apprentices gain their 
apprenticeship qualification, and 201 apprentices became 
full-time employees, some of whom achieved this status prior 
to the completion of their qualification. 

We have recently embarked on two further apprenticeship 
initiatives on which we plan to report more fully once they  
are up and running. 

First, we are working on the design of a specific in-house 
three year apprenticeship programme which will see 
apprentices gain a nationally-recognised qualification in their 
first year, before continuing their development in the second 
and third years through Howdens-specific courses which  
will support and develop them into specific roles within  
the business. 

Second, as part of the ongoing government reform of the 
apprenticeship framework in England, we have been accepted 
to chair the “Trailblazer” group for Trade Business Services, 
through which we are working with a group of other business-
to-business employers and the Department of Business, 
Innovation and Skills to develop a specific apprenticeship 
programme for our sector.

Energy usage
Car Fleet
Rolling replacement of depot manager and sales 
representatives’ vehicles with cleaner and more  
energy-efficient models has continued as planned.  
At the end of 2015, 82% of our core fleet has CO2  
emissions of 99g/km or less. 

Waste
The depot recycling programme was introduced in 
2012 and continues to be implemented in new depots  
as they open. We are working with our waste contractor  
to identify further recycling opportunities in the depots.

IN THE WIDER COMMUNITY

31

Overview
Each Howdens depot, manufacturing site, distribution and 
support centre, fulfils an important role in the life of the 
immediate area in which it is located. Each of our sites 
depends on its local community for its success and growth. 
Howdens’ culture places great importance on personal 
relationships and individual accountability, and we encourage 
staff at each of our sites to support and engage with local 
community activities and charitable initiatives. 

Howdens also has a long-standing partnership with Leonard 
Cheshire Disability, with whom we share many values and 
especially our belief in the importance of the individual and  
of a society where every person is equally valued.

We are also active in sponsoring apprentice joiners in  
the community.

Local community charitable initiatives
We continue to help and encourage each of our operating 
and support sites to contribute to local good causes. This 
year our staff were responsible for over 3,600 cash and stock 
donations to local good causes amounting to £1.9m across 
the Group. 

These donations typically supported a broad cross-section  
of local causes including schools, colleges, sports clubs, care 
homes, hospices, scouts, guides and youth groups, village 
halls, and many other community activities and projects. For 
example, this year we supplied and fitted 75 complete kitchens 
in response to requests from local good causes.

Howden Joinery Group Plc Annual Report & Accounts 2015Corporate social responsibility continued

IN THE WIDER COMMUNITY CONTINUED

32

During 2014 we extended our charitable support to supporting 
homeless charities. We have continued this work in 2015 
and the generosity of our employees across the business, 
augmented by contributions from customers and the 
Company, meant that we were able to raise over £30,000  
(with donations from staff, customers and the Company) for  
36 homeless charities located across the whole of the UK. 

More details about our charitable activities, together with 
examples of some of the individual efforts that our employees 
have made to support both local and national charities  
can be found online at www.howdens.com/about-us/a-truly-
local-business/

Leonard Cheshire Disability
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 200 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. More details  
of our involvement with LCD are available online at  
www.howdens.com/about-us/leonard-cheshire-disability  
and more information about LCD can be found at  
www.leonardcheshire.org.

Volunteers play a vital role in helping LCD to provide their 
services to over 6,500 people across the UK. Over the years 
Howdens have helped to fund many areas of volunteer 
training and recruitment. Just over three years ago we 
began to support an innovative LCD project called “Can Do”. 
This project gives young disabled adults the chance to find 
long-term employment or volunteering positions within their 
own communities as well as providing them with individual 
mentoring, group support, a social network and accredited 
vocational courses.

In its first few years of operation “Can Do” expanded into four 
regions covering approximately a third of the country. In 2014 
we doubled the level of our support for this project, which 
together with matched funding from the National Lottery,  
has meant that “Can Do” the project now covers the entire  
UK mainland with huge potential for expansion, particularly  
in the inner city areas. We continued our funding for the 
project in 2015 at the same level. In 2015 the project gave 
direct assistance to over 1,000 young disabled adults,  
finding over 3,500 volunteering opportunities for them,  
which in turn generated over 10,000 hours of volunteering  
by these individuals.

Many “Can Do” participants continue to benefit from the 
facilities and healthy eating courses at the joint Howdens-LCD 
training kitchen project at LCD Bell’s Piece, Farnham, Surrey. 
Carers and support workers from across the country also 
attend courses at the centre, learning how they can better 
support their clients and residents in the preparation of food 
and the development of general cooking skills. Due to the 
success of this training kitchen, we are planning to install 
another similar kitchen for LCD in Inverness in the next  
few months.

We are committed to the installation of activity and training 
kitchens in other LCD homes across the country. We take on 
projects as prioritised by LCD and when convenient for each 
home. This year we have completed 11 installations. 
We have also agreed to step up our involvement in future 
years, and have pledged to supply and fit kitchens from our 
range wherever they are needed in any of LCD’s homes and 
kitchen training facilities across the country. 

33

Over the past few years we have shared our accumulated 
experience and learning in the field of inclusive kitchens 
with other related charities, both with regard to design 
understanding and kitchen installations. Two inclusive 
kitchens were donated this year. We also make our innovative 
inclusive kitchen design features and solutions available to 
our own kitchen designers in the form of in-depth case studies 
which are made available to them on the Company intranet.

At the end of 2015, Howdens had provided funding for 
40 apprenticeship placements. We are pleased with the 
feedback from the scheme to date, not only from the newly 
qualified joiners themselves but also from the companies 
who now see the value of apprentices and are committed 
to employing more of them in the future. Out of the 40 
employers who have participated in the project, 18 have 
taken on further apprentices.

Inspired by working with LCD residents and carers, our 
inclusive kitchen research continues to enable us to offer 
affordable kitchen solutions to people of all abilities. This 
year, we exhibited in partnership with LCD at NAIDEX, the UK’s 
largest disability, rehabilitation and homecare event. Howdens 
designs and makes kitchens which are available to users of all 
abilities, and exhibiting at this event allows us to demonstrate 
our commitment to a wider audience.

Queen Elizabeth Scholarship Trust (“QEST”)
2015 saw Howdens’ first donation to QEST, the charitable 
arm of the Royal Warrant Holders’ Association. Our donation 
will be used to support QEST’s scholarship and apprentice 
programmes in traditional and contemporary crafts, and 
thereby make a vital contribution to the British craft industry. 
More information about QEST can be found at www.qest.org.
uk/about-qest/

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. Since 2010 we have worked in partnership with 
CITB (the Sector Skills Council and Industry Training Board 
for the construction industry) to provide the Howden Joinery 
Bursary for new apprentice joiners. The scheme was the first 
of its kind in the country, its aim being to fund first year wages 
for apprentice joiners in companies which would otherwise feel 
unable to afford to fund an apprentice. 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.

E-ACT
In May, Howdens also engaged with E-ACT, a leading 
independent academy sponsor, responsible for managing, 
maintaining and developing academies, to fund three students 
to complete a three-year full-time apprenticeship programme. 
In addition, Howdens committed to £20,000 per year 
funding for three years to assist with developing community 
engagement, which will include both the apprenticeship 
programme and wider enrichment work.

Howden Joinery Group Plc Annual Report & Accounts 2015Corporate social responsibility continued

GREENHOUSE GAS AND EMISSIONS 

34

Total CO2 Emissions (Tonnes)
2015

Total CO2 Emissions (Tonnes)
2014

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)
Inflation adjusted turnover ratio (tCO2e per £m)

We are pleased to report that our turnover ratio (tonnes of 
CO2 per £m) continued its downward trend, both in absolute 
terms and when adjusted for inflation. Both of these measures 
reduced by 5% between 2014 and 2015, despite a 12% 
increase in turnover.

We will continue to adopt measures aimed at reducing  
both total CO2 outputs and as a percentage of turnover.

80

70

60

50

2,544

25,427

1,516

29,487

29,578

29,578

59,065

1,220.2

48.4

51.8

1,836

25,522

1,158

28,516

26,999

26,999

55,515

1,090.8

50.9

54.4

Total Carbon usage (‘000s tCO2e)
Turnover ratio (tCO2e per £m)
Inflation adjusted turnover ratio (tCO2e per £m)

2011

2012

2013

2014

2015

EXTERNAL ACCREDITATION  
RELATING TO THE WHOLE BUSINESS

HUMAN RIGHTS AND MODERN SLAVERY

35

Carbon Trust
In 2015 the Group retained its accreditation under the Carbon 
Trust Standard, which requires a reduction in total energy  
use across the whole business over a three-year period.  
This reduction was particularly pleasing given the 28% 
increase in turnover between 2013 and 2015.

The Energy Saving Opportunity Scheme (ESOS)
ESOS is a Government-regulated scheme which requires large 
companies to complete an energy audit every four years. 
Companies have to calculate their total energy consumption 
and identify their areas of significant energy consumption. 
Independent external assessors then verify the work that 
the Company has done, carry out an audit of these areas 
and come up with suggestions for possible energy-reduction 
initiatives. The assessors carried out work at our factories and 
with our logistics team, as well as at a sample of depots.

The ESOS audit requirements applied to Howdens for the first 
time in 2015. We have worked with our external assessors 
to complete our audit in advance of the December 2015 
deadline, and we are currently reviewing the findings in  
order to determine which of the suggested possible  
energy-reduction initiatives is likely to yield the best returns.

Human rights
Howdens promotes the observance of internationally 
recognised labour standards, with particular regard to human 
rights. Our employment contracts and policies 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 Board will keep the need for a specific human rights policy 
under review.

Modern slavery
The Modern Slavery Act 2015 requires larger companies to 
produce a slavery and human trafficking statement, setting 
out the steps that they have taken to ensure that there is 
no modern slavery within their business and in their supply 
chains. This will be applicable to Howdens for the first time 
in our 2016 Annual Report & Accounts.

We have begun our assessment of the requirements of the 
Modern Slavery Act and are developing a workplan to ensure 
that we are in a position to report the relevant information.  
We look forward to sharing this information with you in our 
2016 Annual Report.

Howden Joinery Group Plc Annual Report & Accounts 2015Board of Directors

EXECUTIVE DIRECTORS

36

NON-EXECUTIVE CHAIRMAN

MATTHEW INGLE
Chief Executive Officer 

MARK ROBSON
Deputy Chief Executive  
and Chief Financial Officer

WILL SAMUEL
Chairman*

Matthew was appointed Chief Executive 
Officer in October 2005. 

He set up Howdens in 1995 and has 
been responsible for its growth into a 
successful business today. 

Prior to joining the Company he had 
been Managing Director of the Magnet 
Trade operation. He was elected to the 
Board of the Company in 1998.

Mark was appointed Deputy Chief 
Executive in May 2014, having joined 
the Board in April 2005 as Chief 
Financial Officer. 

Mark spent the previous six years as 
Group Finance Director at Delta plc. 
Prior to this, he had held a number 
of senior financial positions with ICI 
between 1985 and 1998. 

Matthew has no external appointments.

He is a Chartered Accountant and 
qualified with Price Waterhouse.

Committee membership: 
None

Mark has no external appointments.

Committee membership: 
None

Will was appointed Non-Executive 
Director in July 2006 and became Non-
Executive Chairman in October 2006. 

He is Chairman of TSB Bank Plc, and 
Chairman of Ecclesiastical Insurance 
Group plc. Prior to this he was a Senior 
Advisor to Lazard & Co, Senior Advisor 
to the Prudential Regulation Authority 
(PRA, formerly the Financial Services 
Authority), Director of Schroders plc, 
Co-Chief Executive Officer at Schroder 
Salomon Smith Barney (a division of 
Citigroup Inc).

He has also served as Vice Chairman, 
European Investment Bank of Citigroup 
Inc, Chairman of H P Bulmer plc, Deputy 
Chairman of Inchcape plc, a Non-
Executive Director of the Edinburgh 
Investment Trust plc and on the Board 
of Trustees and Honorary Treasurer of 
International Alert. 

He is a Chartered Accountant.

Committee membership: 
•  Nominations (Chairman)

*  As announced by the Company on 2 December 2015, Will Samuel will step down from the Board with effect from the AGM on 5 May 2016. Richard Pennycook will 

take over the role of Non-Executive Chairman from that date.

NON-EXECUTIVE DIRECTORS

37

MARK ALLEN

ANDREW CRIPPS

GEOFF DRABBLE

Mark was appointed Non-Executive 
Director in May 2011. 

Andrew was appointed Non-Executive 
Director in December 2015. 

Geoff was appointed Non-Executive 
Director in July 2015. 

He is Chief Executive Officer of Dairy 
Crest Group plc. 

After a period at Shell, Mark joined Dairy 
Crest in 1991 as a general manager 
and, after being promoted through 
a variety of roles including Sales & 
Operations Director and two divisional 
Managing Director roles, he was 
appointed to Dairy Crest’s main Board  
in 2002, becoming Chief Executive  
in 2006. 

He is a Trustee for The Prince’s 
Countryside Fund and a Non-Executive 
Director of Dairy UK. He is also a 
Director for The GLF Schools Board.

Committee membership: 
•  Audit
•  Remuneration
•  Nominations 

He is Deputy Chairman of Swedish 
Match AB, Chairman of the Audit 
Committee of Booker Group plc and 
Senior Independent Director and 
Chairman of the Audit Committee at the 
2 Sisters Food Group and Stock Spirits 
Group plc. 

Having qualified as a Chartered 
Accountant with KPMG, his consumer 
product experience included Executive 
Director roles in the UK and Europe with 
Rothmans International, where he was 
Corporate Finance Director.

More recently, Andrew has been Non-
Executive Director of a number of public 
companies with consumer-facing and 
manufacturing businesses.

Committee membership: 
•  Audit
•  Remuneration
•  Nominations 

He is the current Chief Executive Officer 
of Ashtead Group Plc, the FTSE100 
international equipment rental company. 
He was appointed as Chief Executive in 
January 2007, having served as Chief 
Executive Designate from October 2006 
and as a Non-Executive Director since 
April 2005. 

Geoff was previously an Executive 
Director of The Laird Group plc where he 
was responsible for its Building Products 
division. Prior to joining The Laird Group, 
he held a number of senior management 
positions at Black & Decker.

Committee membership: 
•  Audit
•  Remuneration
•  Nominations 

Howden Joinery Group Plc Annual Report & Accounts 2015Board of Directors continued

NON-EXECUTIVE DIRECTORS CONTINUED

38

TIFFANY HALL

RICHARD PENNYCOOK

MICHAEL WEMMS
Senior Independent Director

Tiffany was appointed Non-Executive 
Director in May 2010. 

Richard was appointed Non-Executive 
Director in September 2013.

Michael was appointed Non-Executive 
Director in November 2006. 

She is currently Managing Director at 
BUPA Home Healthcare. Tiffany was 
previously UK Marketing Director at 
BUPA and Head of Marketing at British 
Airways. She was also Chairman of 
Airmiles and BA Holidays. Prior to that, 
she held various positions at British 
Airways including Head of Global Sales 
and Distribution and Head of UK Sales 
and Marketing. Tiffany was previously a 
Non-Executive Director of Think London.

Committee membership: 
•  Audit
•  Remuneration (Chairman)
•  Nominations 

He was Chairman of House of Fraser plc 
from 2001 until November 2006 and 
was an Executive Director of Tesco plc 
from 1989 to 2000. He was Chairman 
of the British Retail Consortium from 
2004 until 2006 and has also held 
Non-Executive Director positions with 
Moneysupermarket.com plc, Majid 
al Futtaim, A&D Pharma and Coles 
Myer Ltd. 

He is currently Chairman of the Board 
of Trustees of E-ACT, the independent 
academy sponsor.

Committee membership: 
•  Audit
•  Remuneration 
•  Nominations 

He is a fellow of the Institute of 
Chartered Accountants in England and 
Wales and has been a public company 
director for over 20 years. He is  
currently Group Chief Executive of The 
Co-operative Group, having previously 
been Group Finance Director. 

He is also Non-Executive Chairman of 
The Hut Group Limited and is currently 
Senior Independent Director and 
Chairman of the Audit Committee 
of Persimmon plc, though he has 
announced his intention to retire from 
the Board of Persimmon at their AGM 
in April 2016. Richard also serves as 
Chairman of the Institute For Turnaround.

His previous Finance Director roles 
include Wm Morrison Supermarkets plc, 
RAC Group plc, H P Bulmer Holdings plc, 
Laura Ashley Holdings plc and  
J D Wetherspoon plc. 

Richard’s other past roles include 
President of Allders International North 
America, Chief Executive Officer of 
Welcome Break Holdings Ltd and a Non-
Executive Director of Richer Sounds plc.

Committee membership: 
•  Audit (Chairman)
•  Remuneration
•  Nominations 

 
Directors’ report

The Directors have pleasure in submitting their report and the audited financial statements for the 52 week period ended  
26 December 2015. Comparative figures relate to the 52 weeks ended 27 December 2014.

39

In order to make our Annual Report and Accounts more accessible 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 comprises the sections detailed below together with the Business 
Review and statement on political contributions on page 40. 

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 4 to 35.

Dividend: Information about the final dividend can be found in the Chairman’s Statement  
on page 4 and the Review of Operations and Finance on page 13.

Going Concern, Viability and other Statements of the Directors: These statements may be 
found on page 17.

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 34.

Located in the Corporate  
Social Responsibility Report:

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 44 and 45.

Employees: Information about the Group’s employees is located on page 45.

Directors: Details of Directors and their interests are on page 45 and details of Directors’ 
Indemnity and Insurance on page 43.

Annual General Meeting: Information about the Annual General Meeting, including 
reappointment of the Group’s Auditors, can be found on page 44. A copy of the UK Corporate 
Governance Code can be accessed at www.frc.org.uk. 

Located in the Nominations 
Committee Report:

Directors: Information with regard to the appointment and replacement of Directors is located 
on page 75.

Employees: Information about the total number of employees and gender diversity statistics 
are located on page 77. The average number of employees and their remuneration are shown 
in note 7 to the financial statements.

Howden Joinery Group Plc Annual Report & Accounts 2015Directors’ report continued

40

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 4 and 5; 

•  Chief Executive’s statement which includes a review of our model, our market and strategy on pages 6 to 11;

•  Review of operations and finance (which includes key performance indicators) on pages 12 to 16;

•  Going Concern and Viability statements on pages 17 to 18; 

•  Review of principal risks and uncertainties on pages 19 to 22;

•  Corporate social responsibility report on pages 23 to 35 containing environmental matters, social & community issues  

and additional information on employees. 

•  Corporate governance report on pages 41 to 46; and

•  Remuneration, Audit and Nomination Committee Report on pages 47 to 77.  

The full results for the period are shown in the financial statements on pages 78 to 131. 

Information about the use of financial instruments by the Company and its subsidiaries is given in note 27 to the  
financial statements. 

The subsidiary undertakings affecting the profits or net assets of the Group in the year are listed in the table of parent company 
and subsidiary undertakings on page 132. There have been no significant events since the balance sheet date. 

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

By order of the Board 

Forbes McNaughton 
Secretary 
24 February 2016

(Chairman)

(From 1 December 2015)
(From 3 July 2015)

STATEMENT OF COMPLIANCE
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.

41

Throughout the 52 weeks ended 26 December 2015, 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 2014.

It should be noted that from November 2015, Michael Wemms 
has served as Non-Executive Director for more than nine years. 
The Board are aware of Code Provision B.1.1 which provides 
that tenure in excess of nine years is one factor boards should 
consider when determining whether a non-executive director is 
independent. However, following a recommendation from the 
Nominations Committee, the Board are satisfied that Michael 
remains independent in both character and judgement. 
The Board will keep the independence of all Non-Executive 
Directors under close review. 

Examples of how the main and supporting principles have 
been applied are set out below and in the Remuneration  
report and Committee reports.

Corporate Governance Report

BOARD MEMBERSHIP 
Will Samuel 
Mark Allen
Andrew Cripps  
Geoff Drabble 
Tiffany Hall 
Matthew Ingle
Richard Pennycook
Mark Robson
Michael Wemms

In compliance with Provision B.1.2 of the UK Corporate 
Governance Code, at least half of the Directors were 
independent throughout the year.

MEETING ATTENDANCE
The Board held regular meetings during 2015 and received 
accurate and timely information. Only the attendance of 
Directors is shown in the table below, although members 
of the Executive Committee have also attended at the 
invitation of the Chairman and Chief Executive.

Attendance

No. of meetings

Will Samuel

Mark Allen

Geoff Drabble

Tiffany Hall

Matthew Ingle

Richard Pennycook

Mark Robson

Michael Wemms

7

7

3

7

7

7

7

7

7

7

3

7

7

7

7

7

This table and the attendance tables in the Committee 
reports show the number of meetings individual Directors 
could have attended (taking account of eligibility, 
appointment and retirement dates during the year)  
and their actual attendance.

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.

There were no Board meetings following Andrew Cripps’ 
appointment on 1 December and therefore he did not 
attend any meetings during the year.

Howden Joinery Group Plc Annual Report & Accounts 2015Corporate Governance Report continued

42

INTRODUCTION FROM THE CHAIRMAN
The continuing success of Howdens’ business is dependent 
on its ability to sustain its strong and distinctive culture, which 
from the outset has been based on personal accountability 
and respect for the individual.

Our corporate governance framework is designed to 
safeguard the interests of shareholders and to help ensure 
the successful development of the business over the long-
term. With these objectives in mind, the Board is committed 
to upholding the highest standards of corporate governance 
and making sure that the procedures and practices of 
the business continue to be fair, appropriate, effective 
and compliant with both the spirit and the letter of the UK 
Corporate Governance Code. 

THE BOARD
Role
The business of the Company 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 Board is 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 2016. 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 
six Non-Executive Directors. Details of the individual Directors 
can be found on pages 36 to 38.

Will Samuel was the Non-Executive Chairman during the 
whole period. As announced on 2 December, having served 
as Non-Executive Chairman of the Company since 2006, Will 
Samuel will step down from the Board from the Annual General 
Meeting in May 2016 and Richard Pennycook will assume the 
role of Non-Executive Chairman from that date. An overview of 
the Chairman succession process can be found on page 74 of 
the Nominations Committee report. The Board considers that 
Richard Pennycook will be independent upon his appointment 
as Chairman.

Executive Directors
Matthew Ingle and Mark Robson continued in their respective 
roles throughout the year as Chief Executive and Deputy Chief 
Executive and Chief Financial Officer. 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
•  Andrew Cripps
•  Geoff Drabble
•  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.

The Board is proposing that all of the Directors, with the 
exception of Will Samuel who will stand down, will be subject to 
election or re-election at the 2016 AGM dependent on whether 
they were appointed prior to or after the 2015 AGM. 

43

Company Secretary
The Company Secretary provides the Board with guidance 
on various governance matters, under the direction of the 
Chairman, and ensures that effective and timely information 
flows between the Board and the Senior Management as well 
as within the Board and between the Board’s Committees. 
All of the Directors have direct and unfettered access to the 
Company Secretary.

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 that all Directors have access to 
his advice and services.

Executive development and succession
Executive succession and development are matters reserved 
for the Board. During the year the Board received two 
presentations from the Group HR Director on the succession 
and development of Howdens’ senior management, which 
included members of the Executive Committee. In addition, 
the Directors received organisational development updates as 
part of the standard Board reports.

There were three appointments to the Executive Committee 
during 2015. Gareth Hopkins was appointed interim HR 
Director in April 2015. Gareth had previously worked in the 
business as a HR consultant for 15 months and was previously 
Group HR Director at Dairy Crest Group plc and Whitworths. 
Kevin Barrett was appointed as Group Development Director 
in September 2015. Prior to joining Howdens, Kevin spent 10 
years at Sainsbury’s where he held a variety of roles including 
Director of Strategy. At the end of 2015, Clive Cockburn was 
appointed Chief Information Officer, replacing David Hallett who 
stood down after 10 years in the role. Clive joined Howdens in 
2002 as Head of IT Infrastructure and Service Delivery.

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 below.

The Group has an Executive Committee comprising those 
members detailed on page 135. 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. 

The Board has also established a Pensions Committee dealing 
with matters associated with the Group’s pension scheme and 
a Disclosure Committee which considers matters which could 
give rise to an obligation to make a market announcement 
under the FCA Listing Rules.

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.

Conflicts of interest
The Companies Act 2006 places a duty upon Directors to 
ensure that they do not, without the Company’s prior consent, 
place themselves in a position where there is a conflict, or 
possible conflict, between the duties they owe the Company 
and either their personal interests or other duties they owe to 
a third party.

If any Director becomes aware that they, or any party 
connected to them, have an interest in an existing or proposed 
transaction with the Company, they must notify the Board as 
soon as practicable. The Board has the authority to authorise 
a conflict if it is determined that to do so would be in the best 
interests of the Company. 

Howden Joinery Group Plc Annual Report & Accounts 201544

Corporate Governance Report continued

Board evaluation
In line with its stated policy of externally facilitating the Board 
evaluation process every three years in line with Provision 
B.6.2 of the Code, the Board agreed that the 2015 evaluation 
would be undertaken by the Senior Independent Director, with 
support from the Company Secretary. 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, including  

the Chairman;

•  the Chairman succession process and Non-Executive 

Director rotation;

•  organisational succession and 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 January 2016 and the Board 
accepted its findings. Further to the review, the Chairman 
and Company Secretary began to implement a number of 
recommendations to better facilitate and safeguard effective 
behaviours at Board level.

The 2016 Board evaluation exercise will be undertaken by an 
external facilitator.

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 2015 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, the 
Remuneration Committee 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 corporate website,  
www.howdenjoinerygroupplc.com, includes a dedicated 
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 Numis.

Substantial shareholdings
As at 24 February 2016, 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:

Shareholder

BlackRock, Inc

Standard Life Investments Limited

FMR LLC (Fidelity  
Management and Research)

Jupiter Asset Management Limited

Legal and General Group Plc

% of  
voting rights

Date of last 
notification 

9.99

6.99

5.07

4.55

3.97

Feb 2014

Nov 2015

Oct 2015

Nov 2014

July 2013

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

Annual General Meeting
The 2016 Annual General Meeting (AGM) is to be held at UBS 
Investment Bank, 1 Finsbury Avenue, London, EC2M 2PP on 
5 May 2016 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.

45

Deloitte LLP have expressed their willingness to continue 
in office as auditor and a resolution to reappoint them will 
be proposed at the forthcoming AGM. Details of when the 
Company will next re-tender the audit can be found on  
pages 70 to 71 of the Audit Committee Report.

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 22. 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, both of which are 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 25. 
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.

As at 26 December 2015, the Company held 9,152,000 
ordinary shares in Treasury following the commencement of 
the on-market share repurchase programme in 2015. These 
shares have no voting rights and will be used solely for the 
satisfaction of employee share awards.

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 19), 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 26 December 2015, the Directors had authority under 
the shareholders’ resolutions of 6 May 2015 to purchase 
through the market 65,158,082 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 26 December 2015 are 
shown on pages 36 to 38.

EMPLOYEES
The average number of employees and their remuneration 
are shown in note 7 to the financial statements.

At the year end, the Group had 8,271 employees (2014: 7,506) 
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.

Howden Joinery Group Plc Annual Report & Accounts 2015Corporate Governance Report continued

46

RISK AND INTERNAL CONTROL
The Board is responsible for the Group’s systems 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 
reviews the effectiveness of the Group’s system of internal 
controls at least annually, 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 
within the principal risks and uncertainties section of the 
Strategic Report on pages 19 and 20 and are 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.

Risk management
The Group’s risk assessment process and the way in which 
significant business risks are managed is a key area of focus 
for the Board. The Group’s assessment of the principal risks 
and uncertainties, as described within the Strategic Report on 
pages 19 to 22, outlines the ongoing process for identifying, 
evaluating and managing the significant risks faced by the 
Group. The Board can confirm that it has conducted a robust 
assessment of the principal risks and identified two additional 
risks that they consider to be principal. These have therefore 
been disclosed as part of the principal risks disclosure in line 
with the 2014 Corporate Governance Code.

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.

•  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 unfettered 
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

24 February 2016

Report of the Remuneration Committee

(Chairman)

COMMITTEE MEMBERSHIP 
Tiffany Hall 
Mark Allen
Andrew Cripps  
Geoff Drabble 
Richard Pennycook 
Michael Wemms 

(From 1 December 2015)
(From 3 July 2015)

In compliance with the UK Corporate Governance Code 
and the Committee’s terms of reference, during the 
year the Remuneration Committee comprised wholly 
of independent Non-Executive Directors. Subject to 
successful annual re-election to the Board, appointments 
to the Remuneration Committee are for a period of three 
years which may be extended by the Committee provided 
the Director remains independent.

MEETING ATTENDANCE
The Committee meets at least three times a year and at 
any other such time as the Chairman of the Committee 
requires. Only the attendance of members of this 
Committee is shown in the table below, although other 
Directors, where appropriate, have often also attended  
at the invitation of the Committee Chair.

Tiffany Hall

Mark Allen

Geoff Drabble

Richard Pennycook

Michael Wemms

Attendance

No. of meetings

4

4

2

4

4

4

4

2

4

4

There were no Remuneration Committee meetings following 
Andrew Cripps’ appointment on 1 December and therefore 
he did not attend any meetings during the year.

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

47

INTRODUCTION BY THE COMMITTEE CHAIRMAN
On behalf of the Board, I am pleased to present the Report 
of the Remuneration Committee for 2015, prepared in 
compliance with the reporting requirements of the Large and 
Medium-sized Companies and Groups Regulations 2013.

Alongside approval of the Annual Report on Remuneration, at 
the AGM on 5 May 2016 we will also be seeking shareholder 
approval for a revised Executive Director Remuneration Policy, 
which we set out in full on pages 49 to 57. 

Our existing policy was approved by shareholders at the 
2014 AGM and therefore would ordinarily expire at our AGM 
in 2017. However, the Committee wishes to ensure that our 
remuneration framework retains maximum alignment with 
the strategic needs of the Company, and supports succession 
planning and recruitment at the Executive Committee level. As 
such, we believe that the introduction of a revised policy one 
year ahead of the normal cycle is appropriate. 

2015 reward outcomes 
2015 was another successful year for Howdens. The executive 
team continue to implement our strategic plans, delivering 
improvements in the depot network and investing in our 
capacity and capabilities across manufacturing, distribution 
and infrastructure – as well as continuing to explore the 
international development potential of the Company. 

Another year of strong cash generation has enabled us to meet 
our stated intention of an earnings per share dividend cover of 
2.5 – 3.0 times, with one-third of the previous year’s dividend 
being paid as an interim dividend in the following year. 

Howdens has also achieved another year of strong profit 
growth. Stretching PBT and cash flow targets were set under the 
bonus, against which the business has delivered exceptional 
performance (2015 PBT of £220m and cash flow of £234m). 
Bonus outcomes reflect this, with payouts of 112% of salary. 

This performance is mirrored by that achieved over the last 
three-year period with share price growth of 28% per annum 
(a total of 207%) and PBT growth of 17% per annum. In light of 
this very strong performance, the Co-Investment Plan shares 
awarded under the 2013 grant will vest at their maximum 
potential – two matching shares for each one invested. 

Our revised policy from 2016 
The Committee has undertaken a comprehensive review of 
the remuneration framework used for Executive Directors 
and the Executive Committee (who share a common incentive 
structure). The outcome of this review is a number of revisions 
to our remuneration policy, better aligning the way we reward 
our leaders with the future needs of the business and its 
strategic ambitions. 

Howden Joinery Group Plc Annual Report & Accounts 2015Report of the Remuneration Committee continued

48

The core change in our revised policy is a shift from the use of 
a Co-Investment Plan, which supported and incentivised our 
business well through the rapid growth of the last few years,  
to a Performance Share Plan (PSP). 

The maximum opportunity for our Executive Directors under 
the PSP will be 270% of salary compared to the historic 
maximum of 300% available under the Co-Investment Plan. 
Whilst we recognise that this maximum opportunity under the 
PSP is positioned at upper quartile when compared to the 
market, our remuneration policy is (and has historically been) 
one of above-market levels of reward for above-market levels 
of performance. The 20% per annum PBT growth requirement, 
which will operate for 2016 awards, exceeds brokers forecasts 
and represents a very stretching PBT growth ambition when 
considered against market expectations and long-term 
incentive target ranges for profit and earnings measures 
across the FTSE 250. Targets will be reviewed annually to 
ensure that the level of performance required to achieve the 
maximum level of opportunity continues to require this level of 
strong performance by the business. 

The new PSP will have an additional two year post-vest holding 
period, increasing the total time from grant to final release to 
five years. This is in line with emerging market practice, and 
supports the continued strength of shareholder alignment that 
was delivered through significant levels of shareholding under 
the co-investment structure. 

We have also reduced the maximum opportunity under the 
bonus to 150% of salary to support alignment with market 
practice. The Committee will, however, retain the flexibility 
in exceptional circumstances to use the historic maximum 
of 200% - although we do not currently expect to use this 
flexibility over the life of this policy, and would consult with 
shareholders before doing so. For the avoidance of doubt,  
this additional flexibility would never be used retrospectively. 

Performance measures 
The Committee does not consider any change in performance 
measures to be appropriate at this time. Sustainable profit 
growth is at the heart of the Howdens entrepreneurial culture. 
It is a simple metric that is easily understood by our employees 
from depot managers to the senior managers, and we believe 
by having a profit sharing approach that extends deep into the 
organisation we are able to support the motivation and well-
being of our workforce. PBT is also a key performance indicator 
for the Company, and is directly correlated to the value we are 
able to deliver to our shareholders. Therefore for 2016 the PSP 
will (in line with the previous Co -Investment Plan) be based 

on PBT growth, with the bonus based on a combination of PBT 
and cash flow performance.

However, we do recognise feedback from our shareholders 
around the variety of measures we use, and are comitted to 
an annual review of the measures used under incentive plans 
to ensure these remain appropiate for the business as it 
evolves. As such, we have introduced increased flexibility with 
regards to our ability to change the performance measures 
under our policy to enable us to make these changes as 
required in the future.

To ensure shareholders are comfortable with the level of rigour 
in the assessment of performance over time, all measures 
under the PSP, and at least 70% of measures under the Annual 
Bonus, will be based on financial targets. If the Committee 
believes that changes to measures are appropriate, we will 
discuss the proposed new measures to be used with our 
largest shareholders in advance of implementation.

Shareholder views 
As part of the development of this policy, I wrote to our largest 
shareholders together with the Investment Association and 
ISS in order to seek their views on our proposals. We received 
strong positive feedback, with particular praise around the 
simplicity of our arrangements, the consistency of our cascade 
through the business and the reduction in quantum in both the 
short and long-term incentives. 

During consultation, our investors also indicated that they 
were keen to see an increased shareholding requirement for 
our Deputy CEO and CFO, and we have therefore amended our 
shareholding guidelines such that all Executive Directors are 
required to hold at least 200% of salary in the Company’s shares 
(note that the CEO and Deputy CEO and CFO hold 3,537% and 
2,246% of salary respectively in the Company’s shares). 

Salary and fee changes 
Executive Directors will not receive a salary increase for 2016. 

The Board has also reviewed the fees paid to the Chairman 
and Non-Executive Directors through consideration of FTSE 
250 market benchmarks, and the increased size of the 
Company and time commitment required for these roles since 
fees were last revised in 2013. The fee paid to the Company 
Chairman will rise to £250,000 (from £190,000). This will take 
effect when Richard Pennycook takes over as Chairman from 
the AGM. The NED base fee and Committee Chairmanship fees 
will rise to £55,000 and £10,000 (from £45,000 and £8,000) 
respectively. The Senior Independent Director fee will increase 
from £3,000 to £10,000.

I would like to thank my fellow Committee members and the other individuals who have supported the Committee through  
the year, and particularly with the remuneration review process. The Committee is committed to an open and transparent  
dialogue with our investors, and therefore I would welcome your views on any part of this report or our revised policy.

49

DIRECTORS’ REMUNERATION POLICY
Howdens’ Remuneration Policy, as set out in our 2013 Annual Report and Accounts, was approved by shareholders  
at our 2014 AGM with the intention that it apply for 3 years from that date. It is also available in full on our website,  
at www.howdenjoinerygroupplc.com. 

In order to ensure continued alignment between remuneration and the evolving strategic direction of our business, the 
Committee has deemed it appropriate that a new policy be proposed to shareholders for approval. This policy is set out  
below, with the intention that it apply for three years from the date of the 2016 AGM.

Future policy table – Executive Directors
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. 

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. 

Element and how  
it supports our 
strategy 

Base salary

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

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.

2015 and 2016 salary levels are 
detailed in the “Statement of 
implementation of remuneration policy 
in 2016” section on page 64.

Howden Joinery Group Plc Annual Report & Accounts 2015Report of the Remuneration Committee continued

50

Element and how  
it supports our 
strategy 

Benefits 

Provides a 
competitive level  
of benefits.

Annual Bonus

Incentivises annual 
performance over 
the financial year.

Deferral links bonus 
payout to share 
price performance 
over the medium 
term.

Performance  
Measures

None.

For 2016 the annual 
bonus will be based 
on PBT and cash 
flow measures.

The Committee 
retains the flexibility 
to use alternative 
measures during 
the life of this policy, 
subject to at least 
70% of the bonus 
being based on 
financial metrics.

Operation

Opportunity

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. 

Performance is assessed annually 
against cash flow and PBT targets. 

The maximum opportunity under the 
annual bonus is 150% of salary.

The Committee has the flexibility 
to apply a maximum opportunity of 
up to 200% of salary in exceptional 
circumstances.

If the Committee considers it 
appropriate to use a maximum 
opportunity of over 150% of salary, we 
will notify our largest shareholders in 
advance, and discuss with them the 
rationale for such an exceptional award. 
The exceptional maximum would not 
be used on a retrospective basis, and 
would be based on pre-determined and 
stretching performance 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.

Malus provisions apply for the duration 
of the performance period and to shares 
held under deferral.

Clawback provisions apply to cash 
amounts paid for two years following 
payment, and to vested deferred shares 
under the first tranche for one year 
following vesting. Therefore clawback 
and/or malus will operate on the award 
for a total period of up to two years after 
the performance period. 

Clawback may be applied in the 
following scenarios:

– 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. 

No dividend equivalents accrue on 
deferred shares.

Element and how  
it supports our 
strategy 

Performance  
Share Plan (PSP) 

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

Pension 

Provides 
competitive 
long-term savings 
opportunities.

51

Performance  
Measures

2016 awards will be 
based in full on PBT 
growth.

The Committee 
retains the 
flexibility to use 
alternative financial 
performance 
measures during the 
life of this policy.

Operation

Opportunity

The maximum opportunity under the 
PSP is 270% of salary.

Executives have the opportunity to 
participate in the PSP on an annual 
basis. The PSP operates over a three-
year cycle. 

Under the PSP, awards will be 
granted towards the beginning of the 
performance period and vest based 
on performance over the following 
three-year performance period. Malus 
provisions apply for the duration of the 
vesting period.

Vested awards are subject to a two-year 
holding period following vesting, during 
which no performance measures apply. 

Clawback provisions apply for the 
duration of the holding period, through 
which vested awards may be reclaimed 
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. 

No dividends accrue on unvested shares.

The Howden Joinery Group Pension Plan is a hybrid defined benefit, occupational 
pension plan. 

None.

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 £144,000; 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 basic salary.

Howden Joinery Group Plc Annual Report & Accounts 2015Report of the Remuneration Committee continued

52

Element and how  
it supports our 
strategy 

All-employee share 
incentive scheme 

To encourage share 
ownership across 
the Company.

Shareholding 
Requirement 

Strengthens 
alignment of 
interests between 
participants and 
shareholders.

Operation

Opportunity

Executive Directors are able to 
participate in HMRC approved share 
plans available to all employees of the 
Company.

The maximum participation levels will 
be set based on the applicable limits set 
by HMRC.

Performance  
Measures

None.

Executive Directors are expected to 
build up a holding of 200% of base 
salary.

None.

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. PSP shares within  
a holding period are counted towards 
the requirement.

Elements of previous policy under which unvested awards are still outstanding 

Co-Investment  
Plan (CIP)

Previous long-term 
incentive plan. 
Awards under the 
CIP were granted 
in 2014 and 2015 
and these vest in 
2017 and 2018 
respectively.

No awards will be 
made under this 
plan in future.

Executives had the opportunity to 
participate in the CIP on an annual 
basis. The CIP operates over a three-
year cycle. The investment was funded 
by Executive Directors themselves 
from their personal shareholding. 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.

PBT performance 
measured over a 
three-year period. 

The CEO could invest up to the lesser of 
650,000 shares or 150% of salary.

The Deputy CEO and CFO was 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.

Performance measures and targets
As part of the Committee’s review of our remuneration arrangements, we have considered the appropriateness of the 
performance measures we have historically used, as well as the potential merits of incorporating measures which deliver 
increased focus on other elements of our financial performance. The Committee believes that the current measures continue 
to be appropriate for our business, and therefore no change in performance measures will be made for 2016 awards, which are 
cascaded across the Executive Directors, Executive Committee and senior management.

53

Sustainable profit growth is at the heart of the Howdens’ entrepreneurial culture. It is a simple metric that is easily understood by 
our employees from depot managers to the CEO, and we believe that by having a profit-sharing approach that extends deep into 
the organisation we are able to support the motivation and wellbeing of our workforce. PBT is also a key performance indicator for 
the Company, and is directly correlated to the value we are able to deliver to our shareholders. 

Cash flow also continues to be a key internal metric for Howdens. We believe that the incorporation of this measure in the bonus 
focuses our leadership on strong working capital management, supports strong sustainable profit growth and the delivery of 
returns to our shareholders.

Reflecting shareholder feedback, we recognise that during the life of this policy it may become appropriate to amend the 
performance measures used for our incentives. It is for this reason that we have added the flexibility into our policy to change 
performance measures, subject to 70% of the bonus and 100% of the PSP being based on financial metrics. Each year we will 
carefully consider our strategy and the challenges facing the business, and will review measures to ensure that they continue to 
drive strong alignment with the delivery of value to shareholders.

Annual bonus – 2016
The table below sets out additional information on performance conditions relating to the 2016 annual bonus:

Measure

PBT

Cash flow 

Definition

How targets are set

Pre-exceptional profit before tax from continuing 
operations.

Set by the Remuneration Committee in light of Howdens’ 
budget, brokers’ forecasts and prior year PBT. 

Net cash flow from operating activities, taking into 
account the efficiency with which working capital is 
used, and adjusted for exceptional items.

Cash flow targets generated by Howdens’ financial model, 
based on modelled scenarios under which threshold, 
target and outperformance levels of PBT are achieved.

Commercial sensitivity precludes the advance publication of bonus targets but targets will be disclosed retrospectively in the 
Annual Report on Remuneration. For 2015 targets please see the annual bonus targets and outcomes table on page 59. 

Performance Share Plan – 2016
The PSP has replaced the Co-Investment Plan and will also be based solely on nominal PBT performance for the 2016 award. 
Targets are considered by the Remuneration Committee to provide a range which represents long-term success for Howdens, and 
are kept under review in light of brokers’ forecasts and inflation forecasts. In the event that inflation significantly increases, the 
Committee will reconsider the operation of this measure to ensure that the use of nominal targets is appropriate.

The intended targets for 2016 PSP grants are detailed in the “Statement of implementation of remuneration policy in 2016” 
section on page 64.

Howden Joinery Group Plc Annual Report & Accounts 2015Report of the Remuneration Committee continued

54

Remuneration policy for other employees
The remuneration policy described above applies specifically to Executive Directors of the Group. However, the Remuneration 
Committee believes it is appropriate that all reward received by senior management is directly linked to the performance of the 
Company and aligned with shareholder value. Accordingly, Executive Committee members (a further six individuals) 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.

Below this level, a system of profit-sharing and the encouragement of share ownership is cascaded through all tiers of 
management. Individuals within the upper tiers of the organisation participate in a similar bonus plan that is linked to PBT and 
cash flow. These individuals also participate in a PSP, which vests dependent on the same performance measures as the PSP 
awarded to Executive Directors.

Share grants are made at a reduced level to a wider population within Howdens that do not use performance conditions.  
These awards are made in order to encourage share ownership throughout the Company.

NED fee policy 
The Group’s policy on Non-Executive Director (NED) and Chairman fees is set out below. 

Element and how it 
supports our strategy Operation

Fees for Non-
Executive Directors

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

The fees for the Non-Executive Directors 
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.

Opportunity

Performance  
Measures

Fees for Non-Executive Directors are set 
out in the statement of implementation 
of policy in the following financial year 
section on page 64.

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

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 comparably sized 
companies. Benchmarking is typically 
undertaken every three years. 

2016 remuneration scenarios 
The remuneration package for the Executive Directors is designed to provide an appropriate balance between fixed and variable 
performance-related components, with a significant proportion of the package weighted towards long-term variable pay. The 
Committee is satisfied that the composition and structure of the remuneration packages is appropriate, clearly supports the 
Company’s strategic ambitions and does not incentivise inappropriate risk-taking and reviews this on an annual basis. 

55

The composition and value of the Executive Directors’ remuneration packages in a range of performance scenarios are set 
out in the charts below. These show that the proportion of the package delivered through long-term performance is in line 
with our remuneration policy and changes significantly across the performance scenarios. As a result, the package promotes 
the achievement of superior long-term performance and aligns the interests of the Executive Directors with those of other 
shareholders. A brief description of each remuneration scenario is set out below the charts.

Value of package (£’000)

Matthew Ingle

Mark Robson

Maximum

24%

27%

49%

3,164

Maximum

27%

26%

47%

2,409

On-target

36%

27%

36%

2,106

On-target

39%

26%

35%

1,630 

Minimum

100%

763

Minimum

100%

641

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0

500

1,000

1,500

2,000

2,500

Fixed elements  
of remuneration

Annual Bonus

PSP

Statement of consideration of employment conditions elsewhere in the Group
When making decisions on executive reward, the Remuneration Committee considers the wider economic environment and 
conditions within the Company. In particular, the Committee considers pay conditions for the wider workforce when reviewing 
base salaries for Executive Directors. For 2016, salary increases for the wider workforce are around 3% of salary. The Company 
considers no further remuneration comparison measurements.

Additionally, some of the Company’s workforce are unionised or belong to a works council. Howdens maintains open lines 
of communication with these bodies and the Committee is always made aware of any relevant information in relation to 
remuneration policy. Notwithstanding that the Committee does not specifically invite employees to comment on the Directors’ 
remuneration policy, it does take any comments made by employees into account. 

Statement of consideration of shareholder views 
The Committee remains committed to maintaining an ongoing and transparent dialogue with its shareholders. This Executive 
remuneration policy was shared with our major shareholders and shareholder representation bodies in advance of the publication 
of this report, and the Chair met with key representatives from each in order to invite comment.

Feedback received was carefully considered by the Committee and incorporated where appropriate into the proposed policy.

Howden Joinery Group Plc Annual Report & Accounts 2015Report of the Remuneration Committee continued

56

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

General

Base salary and benefits

Pension

Annual bonus

Policy

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.

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-transferable 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.

The Executive Director will be able to participate in the new auto-enrolment defined contribution 
scheme or to receive a supplement payment of up to a maximum of 30% of basic salary.

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 150% of salary, although in exceptional 
circumstances the Committee may choose to apply a maximum of up to 200% of salary.

Long-term incentives

The Executive Director will be eligible to participate in the PSP set out in the remuneration policy table.

Replacement awards

Accordingly, the Executive Director may be offered a maximum opportunity under the PSP of the 270% 
of salary in performance shares.

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.

 
Service contracts and letters of appointment
All Executive Directors’ employment contracts have twelve months’ notice of termination on both sides. 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. Executive Directors will be expected to mitigate their loss within a twelve-month period  
of their departure from the Company.

57

In their service contracts, Executive Directors have the following remuneration-related contractual provisions:
•  Receipt of a salary, which is subject to annual review

•  Receipt of a car allowance and non-exclusive use of a driver

•  Health insurance and death-in-service insurance payable by the Group 

•  Eligibility to participate in any bonus scheme or arrangement which the Company may operate from time to time,  

subject to the plan’s rules

•  Participation in the Company’s pension plan, subject to the approval of the Board

Non-Executive Director appointments are for an initial period of three years. They are subject to re-appointment annually in 
accordance with the UK Corporate Governance Code. Non-Executive Directors are not entitled to any form of compensation in the 
event of early termination for whatever reason.

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

General

Base salary and 
benefits

Pension

Annual bonus

Long-term 
incentives and 
deferred annual 
bonus

Policy

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. 

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.

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. 

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.

Howden Joinery Group Plc Annual Report & Accounts 2015Report of the Remuneration Committee continued

58

DIRECTORS’ REMUNERATION REPORT
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, with historic information based on the policy approved 
at the 2013 AGM and forward-looking information on that set out in the policy section of this report (subject to approval by 
shareholders at the 2016 AGM).

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

Single total figure of remuneration (subject to audit)
The table below sets out the aggregate remuneration received by Directors for 2014 and 2015. Further details on the pension, 
annual bonus and Co-Investment Plan figures are contained in following sections.

£000

Year

Chairman

Will Samuel

Base salary/fees

Taxable benefits

Bonus

2015

2014

2015

2014

2015

2014

Long-term 
incentive awards

2015 
(CIP)

2014 
(CIP)

Pension

Total

2015

2014

2015

2014

190

190

–

–

–

–

–

–

–

–

190

190

Executive Directors

Matthew Ingle

Mark Robson

572

421

572

413

Sub-total

1,183

1,175

2161

762

292

19

49

68

–

–

–

–

–

–

640

471

728

513

3,625

4,732

2,543

3,319

1,111

1,241

6,168

8,051

172

175

347

172

171

5,225

6,223

3,686

4,465

343

9,101 10,878

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

45

53

53

22

4

48

45

50

53

–

–

51

45

53

53

22

4

48

45

50

53

–

–

51

–

–

–

–

–

–

1,408

1,374

292

68

1,111

1,241

6,168

8,051

347

343

9,326 11,077

Non-Executive 
Directors

Mark Allen

Tiffany Hall

Richard Pennycook

Geoff Drabble

Andrew Cripps

Michael Wemms

Total

Notes

1.  During the year, the Remuneration Committee agreed that the permanent place of work for tax purposes for the Chief Executive should be changed to reflect the increased 
requirement on him to attend the Company’s London office on a more regular basis. As a result of this, the Committee agreed that the costs of travel between his home and 
the London office, as well as related subsistence, would continue to be met by the Company as a taxable benefit.

2.  As reported in the 2014 Remuneration Report, 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, which totalled £27k were paid to him as part of his 2015 benefits package to ensure that his overall remuneration position was up 
to date.

The aggregate Directors’ remuneration, including salary, bonus, benefits and cash pension allowances is £3,100k.

 
Additional requirements in respect of single figure table (subject to audit)
Annual bonus targets and outcomes
The table below sets out the 2015 annual bonus targets and performance outcomes which underlie the bonus figures shown in 
the single total figure of remuneration table for 2015. 

59

These targets were set in February 2015 in line with the policy on annual bonus. As incentive targets they are designed to be 
stretching for participants, and do not represent the Group’s budget figures for last year.

The Remuneration Committee was satisfied that the payments fairly reflected Group performance for 2015.

Threshold

Target

PBT

Above  
target

Cash flow

Overall

Achieved Threshold

Target Maximum Achieved

Total

Cash Deferred

Performance

£188.8m £212.5m Profit share

£219.6m £194m £218m £249m £233.6m

Payment 

(% of salary 
unless 
otherwise 
stated)

10%

85%

0.246% of  
PBT (CEO)
0.181% of  
PBT (Deputy 
CEO and CFO)

94%

8%

15%

20%

18%

112% 100%

12%

Outcomes for  
Executive Directors (£000)

Matthew Ingle

Mark Robson

640

471

572

421

68

50

Co-Investment Plan
The table below sets out the details of the Co-Investment Plan targets and performance outcomes which underlie the  
Co-Investment Plan figures shown in the single total figure of remuneration table for 2015. These awards vest on  
26 March 2016.

Performance

Vesting (matching shares per invested share)

3 year PBT growth

Threshold

6% p.a.

0.5

Maximum

12% p.a.

2 

Achieved

17%

2

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 £5.03, being the three-month average share price to 26 December 2015.

Outcomes for Executive Directors 

Matthew Ingle

Mark Robson

Number of awards 
vesting (‘000)

Total value at £5.03  
per share (£000)

721

506

3,625

2,543

Howden Joinery Group Plc Annual Report & Accounts 2015Report of the Remuneration Committee continued

60

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 future policy table on page 51. 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 (£172k) in 2015.

Accrued  
pension at  
28 Dec 2015 

£000

Normal 
retirement  
date

54

32

28/09/2014

16/01/2019

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

 £000

–

58

£000

–

34

 £000

172

83

Total 

£000

172

175

Name

Matthew Ingle

Mark Robson

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 2015, the Executive Directors were invited to participate in the Co-Investment Plan. The plan operated on the same basis 
as the awards which were granted in 2014, 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 185,416 shares (based on a closing share price of £4.63 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.

The table below provides further details of this award.

Nature of award

Restricted shares awarded under the Co-Investment Plan

Level of award

Executive

Number of invested shares

Maximum potential 
matching shares

Face value of CIP award*

CEO

Deputy CEO

185,416

136,541

PBT growth performance condition

370,832

273,081

£1,716,952

£1,264,365

Number of matching shares that  
would vest per invested share

PBT component 
vesting schedule

20% p.a.

2.0

Straight-line vesting between these points

Straight-line vesting between these points

8% p.a.

Less than 8% p.a.

0.3

–

Performance period

Vesting date

Performance measured from FY2015 to FY2017 inclusive

26 March 2018

*Based on a share price of £4.63, being the closing price on the 25 March 2015 (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.

61

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

n/a

n/a

n/a

n/a

n/a

n/a

227,316 4,020,583

28,372

1,544,593

83,698 1,879,589

18,967

1,096,377

–

–

–

–

3,537%

2,246%

Y

Y

n/a

n/a

n/a

n/a

n/a

n/a

n/a

40,000

3,000

–

–

3,000

3,000

42,000

Director

Matthew Ingle

Mark Robson

Will Samuel

Mark Allen

Andrew Cripps

Geoff Drabble

Tiffany Hall

Richard Pennycook

Michael Wemms

* Based on a share price of £5.03, being the three-month average share price to 26 December 2015 (source: Datastream). This is calculated using those shares owned 

outright by the Executive Directors only.

The table above highlights the significant investment held by Executive Directors in the shares of Howden Joinery Group plc, which 
is well in excess of that required under their shareholding guidelines. Neither of the Executive Directors exercised any options in 
the Company during the period under review and nor did they have any vested but unexercised options at 26 December 2015.

Howden Joinery Group Plc Annual Report & Accounts 2015 
Report of the Remuneration Committee continued

Performance graph and table

62

Year

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

6,223

64%

100%

20157

5,225

56%

100%

FTSE 250 (excluding Investment Trusts)

Howdens

700

600

500

400

300

200

100

0

December 2009

December 2010

December 2011

December 2012

December 2013

December 2014

December 2015

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).

Above 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 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 incentive 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 3 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 over the period to £3.19 (the 3 month average to 28 December 2013, source: 
Datastream) from £1.10, 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. The value shown in the single figure reflects the significant share price over the period to £3.64 (the 3 month average to 27 December 2014, source: Datastream) 
from £1.31, a growth of 41% p.a.

7.   The 2015 CEO single figure includes the full vesting of the 2013 CIP award. 100% of the matching shares vested as the Group’s 2015 PBT had grown at 17% p.a. on 2012 

PBT. The value shown in the single figure reflects the significant share price over the period to £5.01 (the 3 month average to 26 December 2015, source: Datastream) from 
£2.42, a growth of 28% p.a.

Percentage change in remuneration of director undertaking the role of chief executive officer
The table below sets out the change in short-term pay from 2014 to 2015 of the CEO compared to all employees (on a per 
capita basis).

63

Salary

Taxable Benefits

Bonus

CEO

All full time employees (per capita)

2015

2014

£000’s

£000’s

% 
increase

2015

2014

£000’s

£000’s

572

23

572

23

–

2.46%

216

1

19

1

% inc/
(dec)

1,137%

(1.76)%

2015

2014

£000’s

£000’s

% inc/
(dec)

(14)%

640

8

728

8

2.71%

As previously reported in the notes to the single total figure of remuneration table on page 58, the significant increase in relation 
to the CEO’s taxable benefits is exclusively the result of the decision of the Remuneration Committee during the year to agree to 
change his place of work to the Company’s London office.

The decrease in the average taxable benefits of all full time employees reflects the impact of a significant number of new 
recruitments during the year. These recruitments were typically into roles that do not attract a high level of taxable benefits.

For 2016, the CEO will receive no salary increase, compared to a 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 2014 to 2015 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

2014

2015

% increase

Total remuneration 
 spend

Total shareholder  
returns 

 £m

286.5

323.4

13%

£m

40.3

105.0

161%

Total remuneration  
spend as a %  
of revenue

26%

27%

4%

PBT 

£m

189

220

16%

Cash flow* 

£m

218

234

7%

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

The figures above reflect continuing growth in terms of financial performance, progression of the Company’s dividend policy and 
a significant increase in our workforce. It is pleasing to note that despite the fact that new recruits have typically been at more 
junior roles in the business, total remuneration as a percentage of revenue has increased.

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 2015Report of the Remuneration Committee continued

64

Statement of implementation of remuneration policy in 2016
Remuneration policy will be implemented from 2016 as follows.

Base salaries and fees
Base salary increases from 2015 are set out in the table below. 

Matthew Ingle

Mark Robson

2015

2016

Salary

572

421

Percentage increase  
from 2014

–

5%*

Salary

572

421

Percentage increase  
from 2015

–

–

*Increase applied from 30 May 2014, being the date Mr Robson took on the responsibilities of his new role as Deputy CEO and CFO. 

Non-Executive Director fees
As provided in the Chairman’s letter, the Board has reviewed the fees paid to the Chairman and Non-Executive Directors through 
consideration of FTSE 250 market benchmarks, and the increased size of the Company and time commitment required for these 
roles since fees were last revised in 2013. The fee paid to the Company Chairman will rise to £250,000 (from £190,000). This will 
take effect when Richard Pennycook takes over as Chairman at the AGM in May 2016. 

Chairman fee

Basic NED fee

Additional SID fee

Committee Chair fee

2015

2016

Percentage increase 
from 2014

Fee

Percentage increase 
from 2015

Fee

£190,000

£45,000

£3,000

£8,000

–

–

–

–

£225,000

£55,000

£10,000

£10,000

18%

22%

333%

25%

Annual bonus measures
The table below sets out annual bonus measures for 2016, which are the same measures as for 2015. As set out in the policy 
section of this report, 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 have been reduced from 0.246% and 0.181% respectively 
to reflect increased performance expectations for 2016. Performance targets, together with achievement against them, will be 
set out in full in the 2016 Annual Report on Remuneration.

Definition

Performance level

Payout level

PBT

Pre-exceptional profit before tax  
from continuing operations

Threshold

Target

10% of salary

85% of salary

Above target

Profit share for the CEO: 0.210% of PBT

Profit share for the Deputy CFO: 0.155% of PBT

Subject to aggregate bonus payout cap of 150% of salary

Cash flow Net cash flow from operating 

Threshold

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

Target

Maximum

8% of salary

15% of salary

20% of salary

 
Performance Share Plan measure and targets
The table below sets out PSP performance measures and targets for awards to be made in 2016.

65

PBT component vesting schedule

PBT growth performance condition

Payout level

20% p.a.

270% of salary (100% of maximum)

Straight-line vesting between these points

8% p.a.

Less than 8% p.a.

40.5% of salary (15% of maximum)

–

Consideration by the directors of matters relating to directors’ remuneration
Membership of the Committee
The Remuneration Committee comprises six independent Non-Executive Directors who are listed at the beginning of this report 
and who have no personal financial interest, other than as shareholders, in the matters to be decided. 

Under its terms of reference, which are 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 2015. The meetings covered the following key areas:

•  Review of executive remuneration and development of the revised policy proposed in this report.

•  Approve salaries for the Executive Board members and Executive Committee.

•  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 2015, including 

determining the appropriate performance targets.

•  Review and approval of annual bonus payouts and share based awards vesting in 2015.

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

•  Initial review of the ongoing appropriateness and relevance of the remuneration policy and 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 2015 
Report of the Remuneration Committee continued

66

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 2015 
totalled £177,400, with fee levels based on the quantity and complexity of work undertaken. PwC also provided internal audit 
advice to the Company during 2015.

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 2015 AGM for the approval of the 2015 Remuneration Report and Policy.

Votes

Remuneration Report1

For

97.46%

Against

2.54%

Note 1: 221,756 votes (<1% of all votes) were withheld.

The Committee was pleased with the strong vote in favour which the Group received from shareholders.

THE REMUNERATION COMMITTEE IN 2016
The Remuneration Committee is scheduled to meet at least three times during 2016. It will continue to consider the ongoing 
appropriateness of executive remuneration; review developments in corporate governance best practice and competitive market 
practice trends; review and approve the remuneration report to shareholders; review and approve the terms and conditions of 
the annual bonus and long-term incentives, including determining the appropriate performance targets; and review the balance 
between risk and reward to ensure that the incentives are compatible with the Company’s risk policies and systems. 

By order of the Board 

Tiffany Hall 
Remuneration Committee Chairman

24 February 2016

Audit Committee Report

(Chairman)

COMMITTEE MEMBERSHIP 
Richard Pennycook 
Mark Allen
Andrew Cripps  
Geoff Drabble 
Tiffany Hall
Michael Wemms

(From 1 December 2015)
(From 3 July 2015)

In compliance with the UK Corporate Governance Code 
and the Committee’s terms of reference, during the year 
the Audit Committee consisted wholly of independent 
Non-Executive Directors. Subject to successful annual  
re-election to the Board, appointments to the Audit 
Committee are for a period of three years, which may  
be extended by the Committee provided the Director 
remains independent.

MEETING ATTENDANCE
The Committee meets at least three times a year and at 
any other such time as the Chairman of the Committee 
requires. Only the attendance of members of this 
committee is shown in the table below, although other 
Directors, where appropriate, have often also attended  
at the invitation of the Committee Chair.

Richard Pennycook

Mark Allen

Geoff Drabble

Tiffany Hall

Michael Wemms

Attendance

No. of meetings

3

3

1

3

3

3

3

2

3

3

There were no Audit Committee meetings following Andrew 
Cripps’ appointment on 1 December and therefore he did 
not attend any meetings during the year.

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.

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

67

INTRODUCTION BY THE COMMITTEE CHAIRMAN
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.

The 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.

It is has primary responsibility 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);

•  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;

•  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; 

•  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;

•  Reviewing the going concern report and the report on the 
longer-term viability of the business, prior to consideration 
by the Board; and

•  Monitoring and reviewing the effectiveness of the Group’s 

Internal Audit function.

Howden Joinery Group Plc Annual Report & Accounts 2015Audit Committee Report continued

68

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.

OVERVIEW OF ACTIONS TAKEN BY THE  
AUDIT COMMITTEE DURING THE YEAR 

Financial reporting and external audit
During the year the Committee considered:

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

•  The Group’s annual report and financial statements, the 

half-yearly financial report published in July 2015 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, going concern considerations and  
longer-term viability;

•  The 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;

•  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 page 83;

•  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;

•  Whether the Annual Report and Accounts were ‘fair, 

balanced and understandable’.

•  An assessment of the qualification, expertise, 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; and

•  The risk of a possible withdrawal of the external auditors 

from the market.

The Committee also held confidential sessions with the 
independent auditors and the Head of Risk and Internal Audit 
in the absence of Executive Directors and representatives 
from the Finance function.

Internal audit and control
Following the appointment of a new Head of Risk and Internal 
Audit during the year, the Committee extended meetings in 
order to allow additional consideration of internal audit reviews 
and plan. This work included:

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

•  Consideration of the controls in place to mitigate fraud risk; 

•  Receiving presentations from divisional Finance 

Directors in respect of the control environment within 
their divisions, including an IT control update from 
PricewaterhouseCoopers; 

•  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
In order to discharge its governance duties, the Committee:

•  Received updates from the external auditor on latest 

governance practices for Audit Committees and changes in 
statutory reporting requirements; 

•  Was subject to an effectiveness review as part of the 

Board’s evaluation process;

•  Considered the results of the BIS Cyber Governance Health 

Check Tracker Report;

•  Received an update on the changes in legislation in relation 

to audit tendering;

•  Reviewed the Directors’ conflicts of interest; and 

•  Reviewed the Committee’s terms of reference.

Senior management from the business were invited to discuss 
the financial controls in their business areas. During 2015, 
the Director of Commercial Finance and Head of Compliance 
of the Trade division gave presentations 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, audit tendering, accounting and reporting. 
All members of the Committee are members of the Deloitte 
Academy which provides in-depth updates on financial and 
reporting matters.

69

Areas of significant financial judgement 
considered by the Audit Committee during the year
The Committee recognises that some areas of accounting 
require judgement to be exercised. In relation to the Group, the 
principal 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 is 
taken in all areas requiring judgement.

Recoverability of trade debtors
The Committee received updates from management on the 
ageing debtor profile, provisioning levels and the level of bad-
debt write-off. They 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.

Valuation of inventory
The Committee reviewed 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.

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. The Committee 
reviewed reports from the Pensions Sub-Committee and 
external auditor which considered the appropriateness of  
the assumptions.

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 legislation, 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. The Committee is aware of the regulatory 
restrictions on non-audit services that will be applicable to  
the Company from the financial year end 2017 and has put  
in place transitional arrangements to take effect during 2016 
in order to ensure compliance with the regulations.

All relevant fees proposed by the external auditors must be 
reported to and approved by the Audit Committee.

Auditor independence and fees
The Committee recognises that auditor independence is  
an essential part of the audit framework and the assurance 
it provides. To fulfil its responsibilities regarding the 
independence of the external auditors, the Committee 
undertook a comprehensive review during 2015 
encompassing the following:

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

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

•  A 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 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 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

•  Deliberation 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.

Howden Joinery Group Plc Annual Report & Accounts 2015Audit Committee Report continued

70

To assess the effectiveness of the external auditor,  
the Committee 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. 

At the year end, the external auditor formally confirmed that 
their independence and objectivity had been maintained.

Details of Deloitte LLP’s fees for audit and non-audit work 
during 2015 are set out below and are included in note 6 
to the financial statements on page 90. 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, the 
Committee was satisfied the non-audit work has not  
impaired their independence.

Audit Fees

Non-Audit Fees

Ratio

2015

 (£000)

383

224

58%

2014

 (£000)

383

325

89%

Policy for non-audit services
The main aims of this Policy are to ensure the independence of 
the auditors in performing the statutory audit and to avoid any 
conflict of interest by clearly detailing the types of work that 
the auditors can and cannot undertake.

The policy specifies the type of non-audit work for which 
the auditors can be engaged without referral to the Audit 
Committee for which a case-by-case decision is necessary or 
from which the auditors are excluded.

The policy aims to ensure that in providing non-audit services 
the auditors do not audit their own work or make management 
decisions for the Company or any of its subsidiaries. The Policy 
also clarifies responsibilities for the agreement of fees payable 
for non-audit work.

The Audit Committee also has a policy in relation to the 
employment of former members of the external audit team. 

Audit tender
Following the completion of the 2015 audit, the Audit 
Committee considered whether it was in the best interests 
of the Company to re-tender the external audit at the end of 
the current lead audit partner rotation cycle. The current lead 
audit partner, Ed Hanson, has completed four years of a five 
year cycle. The external audit was last tendered in 2002 which 
resulted in a change to the Group’s external auditor, with 
Deloitte LLP being appointed. 

In reaching its conclusion, the Committee considered the 
transitional arrangements for mandatory audit tendering and 
auditor rotation published by the Department for Business, 
Innovation and Skills in March 2015 which provided that 
the Company could not enter into or renew its engagement 
for audit services with Deloitte LLP beyond June 2023, 
having been engaged as external auditor for over eleven 
but for less than twenty years. The Committee was also 
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 and that audit tendering should normally 
fit the five-year cycle of lead audit partner rotation.

71

After careful consideration, and in compliance with the 
Statutory Audit Services for Large Companies Market 
Investigation (Mandatory Use of Competitive Tender Processes 
and Audit Committee Responsibilities) Order 2014 (the “CMA 
Order”), the Audit Committee determined that it was not in the 
best interests of the Company to re-tender the external audit 
at the end of the current lead audit partner cycle on the basis 
that there remained sufficient auditor independence  
and effectiveness to ensure a robust audit process and it 
would provide the continuity of the external auditor during  
the handover of the Chairmanship of the Audit Committee 
during 2016.

Therefore the Committee concluded that the Company would 
re-tender the external audit and change auditor no later than 
the conclusion of the subsequent five-year lead audit partner 
cycle in 2021. However, the Committee agreed to keep the 
need to re-tender and change auditor under review during  
this cycle.

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 in 2016 and that the Directors be authorised 
to fix their remuneration.

INTERNAL AUDIT

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

•  Internal Audit’s programme of work and progress made 

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 

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 employees to have access to a confidential outsourced 
service, which allows calls and emails to be received in 
multiple languages, 24 hours a day. Complaints on accounting, 
risk issues, internal controls, auditing issues and related 
matters are reported to the Audit Committee as appropriate. 
Issues raised and investigated under this policy were formally 
reviewed during the year. 

COMMITTEE MEMBERSHIP

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 Cooperative 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.

Howden Joinery Group Plc Annual Report & Accounts 201572

Audit Committee Report continued

Membership
Committee membership and effectiveness is reviewed as part 
of the annual review of Board effectiveness. In addition, the 
Committee reviewed its own effectiveness by completing an 
Audit Committee effectiveness tool. The review encompassed 
a mix of qualitative and regulatory considerations as well as 
reviewing Committee structure, responsibilities and reporting. 
Both reviews 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 Committee is permitted by its terms of reference to obtain 
independent external advice at the Group’s expense.

THE AUDIT COMMITTEE IN 2016

The Audit Committee is scheduled to meet at least three times 
during 2016 in conjunction with the annual reporting cycle. 
It will continue to consider all of the matters set out above 
for which it has primary responsibility in relation to financial 
statements, reporting and controls, the work of the external 
auditor and the Internal Audit function. It will continue to 
consider the Company’s governance arrangements and review 
the Committee’s terms of reference. 

Andrew Cripps will become Chairman of the Audit Committee 
in May 2016.

By order of the Board 

Richard Pennycook 
Audit Committee Chairman

24 February 2016

Nominations Committee Report

(Chairman)

COMMITTEE MEMBERSHIP 
Will Samuel  
Mark Allen
Andrew Cripps  
Geoff Drabble 
Tiffany Hall
Richard Pennycook
Michael Wemms

(From 1 December 2015)
(From 3 July 2015)

In compliance with the UK Corporate Governance Code and 
the Committee’s terms of reference, during the year the 
Nominations Committee consisted wholly of independent 
Non-Executive Directors. Subject to successful annual 
re-election to the Board, appointments to the Nominations 
Committee are for a period of three years, which may  
be extended by the Committee provided the Director 
remains independent.

MEETING ATTENDANCE
The Committee meets at least twice a year and at any other 
such time as the Chairman of the Committee requires. 
Only the attendance of members of this committee is 
shown in the table below, although other Directors, where 
appropriate, have often also attended at the invitation of 
the Committee Chair.

73

INTRODUCTION BY THE COMMITTEE CHAIRMAN
The primary function of a Nominations Committee is to ensure 
that the Company’s people agenda is aligned to its underlying 
purpose and its strategic objectives. In the first instance, 
this involves building a board of directors with the requisite 
balance of skills, experience and diversity of mindset to 
achieve this.

To that end, the Howdens Nominations Committee keeps 
under review the size, composition and structure of the 
Board and makes recommendations to the Board for all new 
appointments and reappointments. Given the uniqueness of 
the Howdens business model, this requires the Nominations 
Committee, on behalf of the Board, to identify individuals not 
only with the requisite skill set but who also subscribe to a 
common set of values, who have an inherent understanding  
of and sympathy with Howdens’ entrepreneurial culture and 
who continually strive for improvement across all parts of 
the business.

In support of the primary function of continually assessing 
the needs of the Board in relation to the Company, the 
Committee oversees the Director induction programme and 
determines the Company’s policies on Boardroom diversity 
and Board effectiveness.

Attendance

No. of meetings

During the year, the Committee met on four occasions in order 
to consider:

Will Samuel

Mark Allen

Geoff Drabble

Tiffany Hall

Richard Pennycook

Michael Wemms

3

4

2

4

3

4

4

4

3

4

4

4

Mr Samuel and Mr Pennycook absented themselves for all 
matters concerning the Chairman succession process.

There were no Nominations Committee meetings following 
Andrew Cripps’ appointment on 1 December and therefore 
he did not attend any meetings during the year.

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

•  Non-Executive succession planning and management,  
in particular in relation to the appointment of a new 
Chairman and two Non-Executive Directors;

•  The renewal of Michael Wemms’ letter of appointment;

•  The Board’s policy on diversity;

•  The form and scope of the 2015 Board evaluation exercise;

•  The reappointment of Directors at the 2015 Annual General 

Meeting; and

•  The ongoing appropriateness of the Committee’s terms 

of reference.

Howden Joinery Group Plc Annual Report & Accounts 2015Nominations Committee Report continued

BOARD COMPOSITION

74

Board Succession
An effective Nominations Committee will establish a stable 
leadership framework. Part of its work must also be to 
proactively manage change to reassess the future leadership 
needs of the Company. As detailed in the report below, the 
Howdens Nominations Committee has successfully managed 
a Board succession programme in recent years which has 
ensured a smooth introduction of new Directors to the Board.

The Nominations Committee remains committed to a 
programme of reviewing and refreshing the Non-Executive 
membership of the Board to ensure there is sufficient balance 
between the introduction of fresh perspectives and the 
maintenance of 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.

Executive succession planning is a matter which is explicitly 
reserved for the Board as a whole and is considered in the 
Corporate Governance Report on page 43.

Non-Executive Tenure as at 26 December 2015:

Will Samuel*

Michael Wemms

Tiffany Hall

Mark Allen

Richard Pennycook

Geoff Drabble

Andrew Cripps

Chairman Succession
The Company announced on 2 December that, having served 
as Non-Executive Chairman of the Company since 2006, Will 
Samuel would step down from the Board with effect from 
the Annual General Meeting in May 2016 and that Richard 
Pennycook, who has been a Non-Executive Director of 
Howdens since September 2013, would assume the role of 
Non-Executive Chairman from that date.

In order to help ensure a rigorous process the Nominations 
Committee agreed to engage executive search firm Zygos 
Partnership (Zygos) to facilitate the Chairman selection 
process. The Nominations Committee also agreed that the 
Senior Independent Director would lead the selection process, 
and whilst Mr Samuel’s opinion would be sought at each stage, 
he would absent himself from wider discussion and would not 
be involved in decision-making.

Subsequent to the appointment of Zygos, the Committee 
agreed the terms upon which the process would be 
undertaken. Initially, a role specification, including appropriate 
candidate profile and necessary personal characteristics, 
was decided. On that basis, Zygos produced a long-list of 
candidates on behalf of the Committee which the Committee 
subsequently reviewed and refined to a shortlist of four 
candidates. Profiles for shortlisted candidates were submitted 
to the Committee and all prospective candidates met with 
the Senior Independent Director, with most candidates 
meeting with all members of the Committee. After careful 
consideration, and having ensured the requisite availability of 
the preferred candidate and that the Committee were satisfied 
that he would be able to meet the time demands of the role, 
the Committee recommended the appointment of Richard 
Pennycook as Chairman to the Board. This recommendation 
was subsequently approved.

0

1

2

3

4

5

6

7

8

9

10

Zygos Partnership has no other connection with the Company.

* 

 Will Samuel was appointed Non-Executive Director in July 2006 and appointed 
Chairman of the Company in October 2006. He was independent upon appointment.

75

Appointments
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. On that basis, in early 2015, the Nominations 
Committee executed its long-term succession plans and began 
a search for a new Non-Executive Director. This was to ensure 
that a continuous transition process could take place between 
new and long-serving Non-Executives. Zygos was engaged 
by the Committee to assist with the identification of suitable 
candidates. The shortlisted candidates met with all Executive 
and Non-Executive Directors prior to the deliberations of 
the Nominations Committee and, having considered the 
merits of all of the candidates, including relevant experience 
and diversity of perspective, the Committee made its 
recommendation to the Board and Geoff Drabble was 
appointed Non-Executive Director on 3 July.

Concurrent to the Chairman succession process, in recognition 
of the fact that the current Audit Committee Chairman was 
a candidate for the Chairman role, a process to appoint a 
Non-Executive Director who could ultimately become Audit 
Committee Chairman was undertaken. Once again, Zygos was 
engaged by the Committee to assist with the identification of 
candidates with the requisite financial experience to replace 
Richard Pennycook should it become necessary. As with 
the recruitment of Geoff Drabble, short listed candidates 
met with all Executive and Non-Executive Directors. The 
Nominations Committee then deliberated, taking into account 
all of the requisite considerations set out previously and 
made its recommendation to the Board. Pursuant to this 
recommendation, Andrew Cripps was appointed as Non-
Executive Director on 1 December. Andrew will take over from 
Richard as Audit Committee Chairman with effect from the 
2016 AGM. Both Geoff Drabble and Andrew Cripps bring  
a wealth of commercial, executive and non-executive 
experience and have proven track records in leadership in 
their respective fields.

Reappointments
Upon the recommendation of the Nominations Committee, 
and after careful consideration, the Board agreed to reappoint 
Michael Wemms as Non-Executive Director and Senior 
Independent Director in November 2015. Michael was 
appointed as Non-Executive Director in November 2006 and, 
whilst it was noted that the UK Corporate Governance Code 
identifies non-executive tenure in excess of nine years as being 
one circumstance which may impede a director’s ongoing 
independence, the Board was satisfied that Michael remained 
independent in character and judgement and therefore 
approved a one-year extension to his letter of appointment.

The Board also recognised of the importance of the role of the 
Senior Independent Director in facilitating a smooth transition 
process between the outgoing and incoming Chairmen, 
ensuring a continuing clear division of responsibilities in the 
period before the changeover took place, while also assisting 
in the development of the working relationship between the 
new Chairman and the Chief Executive in the months following 
the Annual General Meeting.

Annual General Meeting (AGM) elections  
and re-elections
As stated in the Corporate Governance Report, and with 
the exception of Will Samuel who will retire immediately 
following the AGM, all of the Directors not appointed since 
the last AGM will retire 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 
at the 2016 AGM. Geoff Drabble and Andrew Cripps, having 
been appointed since the last AGM, will offer themselves  
for election in accordance with Article 117 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.

Howden Joinery Group Plc Annual Report & Accounts 2015Nominations Committee Report continued

76

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 Report 
of Remuneration Committee on pages 47 to 66. Details of 
indemnity provisions made for the benefit of Directors are 
given in the Corporate Governance report on page 43.

DIRECTOR INDUCTION AND TRAINING
All new Directors undertake an induction programme upon 
joining the Board. Whilst each induction programme is tailored 
to the specific needs of the individual, we strive to provide a 
dynamic introduction to the real nature of the business through 
the provision of specifically selected information, by meeting 
with individuals (both internal and external) who are central to 
the ongoing success of the business and by visiting key sites 
such as depots, manufacturing sites and distribution centres.

The Nominations Committee recognises that regular 
reacquaintance with the culture of the business underpins the 
effectiveness of Non-Executive Directors. Therefore, Non-
Executive Directors are invited to attend Howdens’ events and 
locations and meet with employees at any time following their 
initial induction.

The individual training and development needs of Directors 
are considered as part of the annual Board evaluation 
process. Ongoing training and development for the Directors 
includes attendance at formal conferences and internal 
events as well as briefings from external advisers. All 
members of the Board are members of the Deloitte Academy 
which provides in-depth updates on financial reporting and 
corporate governance matters.

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 
view of the business.

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 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 2017, and  
it will continue to review this policy on an annual basis to 
ensure it remains appropriate.

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

As at 26 December 2015, 11% of Board members were 
women. Both of the Executive Directors were male. 

Group 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. The Group 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.

Group Gender Diversity Statistics as at 26 December 2015:

77

Board

Executive Committee Members 
(including Executive Directors)

2015

2014

Female 

Male 

Total

1

1

8

7

9

8

% of 
Female 

11.1%

12.5%

Female 

Male 

Total

1

2

6

5

7

7

% of 
Female 

14.3%

28.6%

Senior Management Group*

25

96

121

20.5%

19

85

104

18.3%

Group (Total)

2,306

5,965

8,271

27.9%

1,983

5,523

7,506

26.4%

(*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.)

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.

THE NOMINATIONS COMMITTEE IN 2016
The Nominations Committee is scheduled to meet at least twice during 2016. It will continue to consider Board succession  
and review the balance of skills on the Board. In addition, it will also assess the time commitment and performance of Non-
Executive Directors, plan the external board evaluation process, discuss boardroom diversity, and review the Committee’s  
terms of reference. 

Richard Pennycook will become Chairman of the Nominations Committee in May 2016.

By order of the Board 

Will Samuel 
Nominations Committee Chairman

24 February 2016

Howden Joinery Group Plc Annual Report & Accounts 2015Consolidated income statement

78

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

Notes

£m

£m

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

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

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

4

6

8

9

9

10

28

11

11

11

11

1,220.2 

1,090.8 

(435.8)

784.4 

(475.0)

(87.5)

221.9 

1.8 

–

(4.1)

219.6 

(44.2)

175.4 

–

–

–

(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 

175.4 

157.8 

27.3p

27.2p

27.3p

27.2p

23.2p

23.0p

24.6p

24.4p

Consolidated statement of comprehensive income

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

79

Profit for the period

Items of other comprehensive income:

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

Actuarial gains/(losses) on defined benefit pension scheme

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

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

£m

175.4 

58.4 

(11.7)

–

–

(0.9)

45.8 

221.2 

£m

157.8 

(119.6)

23.9 

(6.3)

6.8 

(0.2)

(95.4)

62.4

Howden Joinery Group Plc Annual Report & Accounts 2015Consolidated balance sheet

80

26 December 2015

27 December 2014

Notes

£m

£m

Non-current assets

Intangible assets

Property, plant and equipment

Deferred tax asset

Long-term prepayments

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

Share capital

Share premium account

ESOP reserve

Treasury shares

Other reserves

Retained earnings

Total equity

13

14

15

19

19

19

16

17

17

23

18

19

19

20

15

21

22

4.6 

129.2 

18.6 

0.6 

–

153.0 

–

177.1 

129.5 

60.0 

166.1 

532.7 

685.7 

(197.7)

(5.2)

–

(202.9)

–

(49.2)

(2.0)

(9.9)

(61.1)

(264.0)

421.7 

65.2 

87.5 

11.0 

(45.3)

28.1 

275.2 

421.7 

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 

The financial statements were approved by the Board and authorised for issue on 24 February 2016 and were signed on its 
behalf by:

Mark Robson
Deputy Chief Executive and Chief Financial Officer

Consolidated statement of changes in equity

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

Accumulated profit for the period

Net actuarial gain on defined benefit scheme

Current tax on share schemes

Deferred tax on share schemes

Currency translation differences

Net movement in ESOP

Issue of new shares

Purchase of shares into treasury

Dividends declared and paid

At 26 December 2015

Called 
up share 
capital

Share 
premium 
account

£m

64.3

£m

87.5

–

–

–

–

–

–

–

–

0.4

–

64.7

–

–

–

–

–

–

0.5

–

–

–

–

–

–

–

–

–

–

–

–

87.5

–

–

–

–

–

–

–

–

–

ESOP 
reserve

Treasury 
shares

Other 
reserve

Retained 
profit

£m

(6.3)

–

–

–

–

–

–

–

8.7

–

–

2.4

–

–

–

–

–

8.6

–

–

–

£m

-

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(45.3)

–

£m

28.1

–

–

–

–

–

–

–

–

–

–

28.1

–

–

–

–

–

–

–

–

–

81

Total

£m

261.7

157.8

(95.7)

(6.3)

6.8

5.0

(1.9)

(0.2)

8.7

–

(41.0)

294.9

175.4

46.7

3.8

(1.6)

(0.9)

8.6

–

(45.3)

(59.9)

421.7

£m

88.1

157.8

(95.7)

(6.3)

6.8

5.0

(1.9)

(0.2)

–

(0.4)

(41.0)

112.2

175.4

46.7

3.8

(1.6)

(0.9)

–

(0.5)

–

(59.9)

275.2

65.2

87.5

11.0

(45.3)

28.1

The ESOP reserve includes shares in Howden Joinery Group Plc with a market value on the balance sheet date of £29.2m  
(2014: £23.8m), 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.

Howden Joinery Group Plc Annual Report & Accounts 2015Consolidated cash flow statement

82

52 weeks to  
26 December 2015 

52 weeks to 
27 December 2014 

Notes

£m

£m

Group operating profit before tax and interest

Continuing operations

Discontinued operations

Group operating profit before tax and interest

28

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

Decrease/(increase) in trade and other receivables

Increase in trade and other payables and provisions

Difference between pensions operating charge and cash paid

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

Payments to acquire own shares

Receipts from release of shares from share trust

Decrease in prepaid loan fees & loans 

Increase in long-term prepayments

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

19, 23

23

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

221.9 

–

221.9 

21.6 

7.5 

0.9 

–

251.9 

(34.0)

3.6 

11.2 

(39.1)

(58.3)

193.6 

(35.3)

158.3 

(45.9)

0.7 

–

(45.2)

–

(45.3)

1.1 

0.9 

(0.6)

(0.1)

(59.9)

(103.9)

9.2 

216.9 

226.1 

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

83

Notes to the consolidated financial statements

1 GENERAL INFORMATION
Howden Joinery Group Plc is a company incorporated in 
England and Wales under the Companies Act 1985. 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 
26 December 2015. The comparative period covered the 
52 weeks to 27 December 2014.

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 Strategic Report on page 17. 
The principal accounting policies are set out below.

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: 2010 – 2012 Cycle

Annual Improvements to IFRSs: 2011 – 2013 Cycle

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

Amendments to IAS 1: Disclosure Initiative

Annual Improvements to IFRSs: 2012 – 2014 Cycle

Amendments to IAS 16 and IAS 41: Bearer Plants

Amendments to IFRS 11: Acounting for interests in  
Joint Operations

Amendments to IAS 16 and IAS 38: Acceptable Methods  
of Depreciation and Amortisation

Amendments to IAS 27: Equity Method in Separate  
Financial Statements

IFRS 15: Revenue from Contracts with Customers

IFRS 9: Financial Instruments

IFRS 16: Leases

IFRS 14: Regulatory Deferral Accounts

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, other than in the case of 
IFRS 15 and IFRS 16, which are discussed below.

IFRS 15: Revenue from Contracts with Customers
IFRS 15 requires companies to look at their contracts with 
customers and, where relevant, to break these contracts down 
into separate performance obligations, allocating a price to 
each performance obligation and recognising the revenue 
related to each obligation at a point in time or over a period of 
time which reflects the completion of that obligation. Its effect 
is expected to be most significant for companies which, for 
example, sell combined bundles of both goods and services, 
and companies who have long-term contracts. The Group’s 
business model does not include any such transactions, and, 
as stated below, the Group recognises revenue on despatch 
from our depots, so we do not anticipate that the new IFRS 
will bring about any significant change to our current revenue 
recognition processes.

Another change which IFRS 15 will bring about is that it will 
require companies to adjust the amount of revenue they 
recognise by deducting from each period’s turnover an amount 
representing any sales for which they estimate they will not 
receive payment and any goods or services which they estimate 
may be faulty at the point of sale. At present, any costs relating 
to bad debts are charged as costs in the period in which they 
are incurred, whereas IFRS 15 requires that an estimate of 
these costs is deducted from revenue in the same period as 
the related sales are recognised. If any items are found to be 
faulty at the point of sale, they are typically returned to the 
selling depot within a few days and the sale is reversed, so it 
is not anticipated that we will have to adjust turnover for these 
items as a result of adopting IFRS 15. Although the Group does 
not have a history of incurring significant bad debt costs, or 
significant costs related to goods which are faulty at the point 
of sale, it is anticipated that the introduction of the new IFRS 

Howden Joinery Group Plc Annual Report & Accounts 201584

will result in a small amount of costs being deducted from 
revenue at the time of sale rather than being charged as costs 
when incurred. IFRS 15 has been issued with an effective date 
of 1 January 2018, but it has not yet been adopted by the EU. 
If it is adopted by the EU with the same effective date, it would 
be applicable to the Group for the first time in its financial 
statements for the period to December 2019.

IFRS 16: Leases
IFRS 16 will remove the present distinction between operating 
leases and finance leases, and will bring all leases onto the 
balance sheet and see them treated in a way which is broadly 
similar to the treatment of finance leases under IAS 17, the 
current leasing standard. Lessees will recognise both an asset 
and a liability for each lease, and will have to recognise an 
element of each lease payment as an interest charge. 

IFRS 16’s most significant effect on the Group will be in the 
area of leased depot and office properties, although the 
Group also leases other assets such as mechanical handling 
equipment, commercial vehicles and cars. Under the current 
leasing standard, these leases fall to be treated as operating 
leases. This means that these leases are currently not 
represented on the balance sheet, and that the associated 
lease payments are charged to income on a straight-line basis 
over the course of the lease. When IFRS 16 comes into effect, 
the Group will have to bring these leases onto the balance 
sheet and to recognise a notional interest charge on its  
lease payments.

The effect of this will be that the Group’s gross assets and 
gross liabilities will each increase by a broadly equal and 
opposite amount, to reflect the additional assets represented 
by the right to use the leased assets and the related liabilities 
to make future lease payments. There will also be a timing 
effect in the income statement, as interest on leases will 
have to be charged in a similar way to that in which interest 
is charged on a loan. This will result in more interest being 
charged in the early periods of each lease and less interest 
being charged on the later payments. 

IFRS 16 has been issued, with an effective date of 
1 January 2019, but it has not yet been adopted by the EU. 
If it is adopted by the EU with the same effective date, it will 
be applicable to the Group for the first time in its financial 
statements for the year to December 2020. The Group has  
not yet carried out a detailed assessment of the possible 
range of effects on its balance sheet and income statement  
at the date of approval of these financial statements.

Basis of consolidation
Subsidiaries 
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. 

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:

Freehold property 

50 yrs

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.

Notes to the consolidated financial statements continuedResidual values, remaining useful economic lives and 
depreciation periods and methods are reviewed annually  
and adjusted if appropriate.

Current tax
The tax expense represents the sum of the tax currently 
payable and deferred tax. 

85

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

Intangible assets
Our intangible assets represent computer 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 lives range between four and seven years, 
depending on the nature of the software.

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.

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. 

Additional income taxes that arise from the distribution of 
dividends are recognised at the same time as the liability to 
pay the related dividend.

Deferred 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.

Howden Joinery Group Plc Annual Report & Accounts 201586

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 also 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.

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.

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.

Notes to the consolidated financial statements continued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 23, 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. 

87

Bank 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.

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.

Howden Joinery Group Plc Annual Report & Accounts 201588

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.

4 REVENUE
An analysis of the Group’s revenue is as follows: 

Continuing operations

Sales of goods

Finance income

Total revenue

All revenue was from continuing operations.

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

£m

£m

1,220.2 

1.8 

1,222.0

1,090.8 

0.6 

1,091.4

5 SEGMENTAL REPORTING
(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 of 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  
26 December 2015

52 weeks to  
27 December 2014

£m

45.9 

(21.6)

£m

32.9 

(20.8)

Notes to the consolidated financial statements continued 
(c) Geographical information
The Group’s operations are mainly located in the UK, with a small presence in France, Belgium, the Netherlands, and Germany. 
The Group has depots located in the UK, France, Belgium, and the Netherlands, and is in the process of establishing a depot in 
Germany. 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. 

89

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 

UK

Continental Europe

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

£m

£m

1,203.8 

16.4 

1,220.2 

1,075.5 

15.3 

1,090.8 

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

UK

Continental Europe

Non-current assets (excluding deferred tax assets)

UK

Continental Europe

Additions to property, plant and equipment and intangible assets

UK

Continental Europe

 26 December 2015 

 27 December 2014 

£m

£m

671.9 

13.8 

685.7 

634.2 

10.6 

644.8 

26 December 2015 

27 December 2014 

£m

£m

128.8 

5.6 

134.4 

109.5 

1.3 

110.8 

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014 

£m

44.2 

1.7 

45.9 

£m

32.1 

0.8 

32.9 

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
90

6 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 in allowance for doubtful debts (note 17)

Staff costs (note 7)

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  
26 December 2015

52 weeks to  
27 December 2014

£m

9.9

(19.7)

(0.1)

(1.8)

(429.4)

(6.6)

(0.9)

(1.0)

(323.4)

(66.0)

(0.4)

£m

8.0 

(19.1)

(0.1)

(1.6)

(399.8)

(4.5)

(0.4)

(0.5)

(286.5)

(55.7)

(0.4)

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

£m

(0.1)

(0.3)

(0.4)

(0.1)

(0.1)

(0.1)

(0.3)

£m

(0.1)

(0.3)

(0.4)

(0.1)

(0.1)

(0.1)

(0.3)

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 Commitee Report. 
No services were provided pursuant to contingent fee arrangements.

Notes to the consolidated financial statements continued 
 
7 STAFF COSTS
The aggregate payroll costs of employees, including executive directors, were:

91

Wages and salaries

Social security costs

Pension operating costs (note 20)

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

£m

(275.6)

(25.8)

(22.0)

(323.4)

£m

(244.6)

(24.3)

(17.6)

(286.5)

Wages and salaries includes a charge in respect of share-based payments of £7.5m (2014: £6.4m).

The average monthly number of persons (full time equivalent, including executive directors) employed by the Group during the 
period was as follows:  

8 FINANCE INCOME

Bank interest receivable

Other interest receivable

Total finance income

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014 

Number

8,037

Number

7,210

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

£m

0.8

1.0

1.8

£m

0.6

–

0.6

The other interest relates to the release of an accrual for potential interest payable to HM Revenue & Customs regarding a 
corporation tax dispute. We received a partial judgement in our favour in the year to 27 December 2014, and some of the 
accrued interest was released in that period, as described in note 29 (b) of the 2014 financial statements.

During the current period, we have received notice of a final settlement which means that the remainder of the interest accrual is 
no longer required. Accordingly, it has now been released in full.

9 FINANCE EXPENSES AND OTHER FINANCE EXPENSE – PENSIONS

Finance expenses

Interest payable on bank loans

Other interest

Total finance expenses

Other finance expense – pensions

Pensions finance expense

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014 

£m

–

–

–

£m

(0.1)

–

(0.1)

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014 

£m

(4.1)

£m

(1.5)

Howden Joinery Group Plc Annual Report & Accounts 2015 
92

10 TAX 
(a) Tax in the income statement

Continuing operations

Discontinued operations

Total

52 weeks to  
26 December 
2015

52 weeks to  
27 December 
2014

52 weeks to  
26 December 
2015

52 weeks to  
27 December 
2014

52 weeks to  
26 December 
2015

52 weeks to  
27 December 
2014

£m

£m

£m

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

41.1

(4.6)

36.5

7.3

0.4

7.7

44.1

(1.7)

42.4

(0.6)

(1.7)

(2.3)

Total tax charged/(credited)  
in the income statement

44.2

40.1

–

–

–

–

–

–

–

£m

–

(11.2)

(11.2)

–

–

–

£m

£m

41.1

(4.6)

36.5

7.3

0.4

7.7

44.1

(12.9)

31.2

(0.6)

(1.7)

(2.3)

(11.2)

44.2

28.9

UK Corporation tax is calculated at 20.25% (2014: 21.5%) 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 charge/(credit) to other comprehensive income  
on actuarial gain/loss 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 to equity on share schemes

Current tax credit to equity on share schemes

52 weeks to 
 26 December 2015 

52 weeks to  
27 December 2014 

£m

11.7

–

–

1.6

(3.8)

9.5

£m

(23.9)

6.3

(6.8)

1.9

(5.0)

(27.5)

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  
26 December 2015

52 weeks to  
27 December 2014

£m

£m

219.6

–

219.6

188.8

(2.1)

186.7

Notes to the consolidated financial statements continued 
 
 
 
Tax at the UK corporation tax rate of 20.25% (2014: 21.5%)

IFRS 2 share scheme (charge)/credit

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

52 weeks to 
 26 December 2015 

52 weeks to  
27 December 2014 

93

£m

44.5

(0.3)

1.5

1.1

0.7

0.9

–

(4.2)

44.2

£m

40.1

0.2

2.1

0.2

0.1

0.7

(11.1)

(3.4)

28.9

* 

 In November 2015 Parliament approved the Finance Bill which reduces the UK Standard rate of corporation tax from 20% to 19% with effect from 1 April 2017 and 
19% to 18% from 1 April 2020. All deferred tax assets and liabilities have been recognised at 18% with the exception of items expected to reverse before the tax rate 
reduces to 18%.

**  See note 28(c)

11 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

52 weeks to 26 December 2015

52 weeks to 27 December 2014

Weighted 
average  
number of 
shares

Earnings  
per share

m

p

Weighted 
average  
number of 
shares

Earnings  
per share 

m

p

Earnings 

£m

Earnings

£m

175.4 

642.8 

–

1.6 

175.4 

644.4 

27.3 

(0.1)

27.2 

148.7 

640.7 

–

6.2 

148.7 

646.9 

9.1 

–

9.1 

640.7 

6.2 

646.9 

23.2 

(0.2)

23.0 

1.4 

–

1.4 

24.6 

(0.2)

24.4

From continuing and discontinued operations:

Basic earnings per share

Effect of dilutive share options

Diluted earnings per share

175.4 

642.8 

–

1.6 

175.4 

644.4 

27.3 

(0.1)

27.2 

157.8 

640.7 

–

6.2 

157.8 

646.9 

Howden Joinery Group Plc Annual Report & Accounts 201512 DIVIDENDS  

94

Amounts recognised as distributions to equity holders in the period:

Interim dividend for the 52 weeks to 26 December 2015 – 2.8p per share

Final dividend for the 52 weeks to 27 December 2014 – 6.5p per share

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

Dividends proposed at the end of the period (but not recognised in the period):

Proposed final dividend for the 52 weeks to 26 December 2015 – (7.1p per share)

Proposed final dividend for the 52 weeks to 27 December 2014 – (6.5p per share)

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

£m

 17.9 

 42.0 

–

–

 59.9 

£m

–

–

12.2 

28.8 

41.0 

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014 

£m

45.2

£m

41.6

The directors propose a final dividend in respect of the 52 weeks to 26 December 2015 of 7.1p per share, payable to ordinary 
shareholders who are on the register of shareholders at 20 May 2016, and payable on 17 June 2016.

Dividends have been waived indefinitely on all shares held by the Group’s employee share trusts, which have not yet been 
awarded to employees, other than shares awarded under the Share Incentive Scheme (see note 25(d)). 

The proposed final dividend for the current period is subject to the approval of the shareholders at the 2016 Annual General 
Meeting, and has not been included as a liability in these financial statements.

Notes to the consolidated financial statements continued13 INTANGIBLE ASSETS 
The intangible assets shown below all relate to software, as detailed further in the accounting policies note. 

95

Cost

At 28 December 2013

Exchange adjustments

Additions

Disposals

At 27 December 2014

Exchange adjustments

Additions

Disposals

At 26 December 2015

Amortisation

At 28 December 2013

Exchange adjustments

Charge for the period

Disposals

At 27 December 2014

Exchange adjustments

Charge for the period

Disposals

At 26 December 2015

Net book value at 26 December 2015

Net book value at 27 December 2014

£m

17.2 

(0.1)

1.3 

(6.1)

12.3 

(0.1)

3.0 

–

15.2 

13.5 

(0.1)

1.6 

(6.1)

8.9 

(0.1)

1.8 

–

10.6 

4.6 

3.4

Howden Joinery Group Plc Annual Report & Accounts 201514 PROPERTY, PLANT AND EQUIPMENT

96

Cost

At 28 December 2013

Exchange adjustments

Additions

Disposals

Reclassifications 

At 27 December 2014

Exchange adjustments

Additions

Disposals

Reclassifications 

At 26 December 2015

Accumulated depreciation

At 28 December 2013

Exchange adjustments

Charge for the period

Disposals

At 27 December 2014

Exchange adjustments

Charge for the period

Disposals

At 26 December 2015

Net book value at 26 December 2015

Net book value at 27 December 2014

Freehold 
property

£m

Short-term 
leasehold 
property

Plant, 
machinery  
& vehicles

Fixtures  
& fittings

£m

£m

£m

Capital  
WIP

£m

21.7 

–

0.3 

–

0.1 

22.1 

–

0.5 

–

0.1 

22.7 

2.5 

–

0.3 

–

2.8 

–

0.3 

–

3.1 

19.6 

19.3 

39.7 

–

4.4 

(3.1)

0.9 

41.9 

–

8.3 

(2.3)

1.0 

48.9 

15.6 

–

2.9 

(2.9)

15.6 

–

4.3 

(1.4)

18.5 

30.4 

26.3 

186.6 

–

10.5 

(61.1)

3.5 

139.5 

–

5.3 

(11.8)

4.3 

137.3 

153.7 

–

10.7 

(60.6)

103.8 

–

9.7 

(11.7)

101.8 

35.5 

35.7 

85.0 

(0.1)

8.3 

(6.2)

–

87.0 

(0.1)

8.8 

(2.2)

0.6 

94.1 

70.2 

(0.1)

5.3 

(6.1)

69.3 

(0.1)

5.5 

(2.2)

72.5 

21.6 

17.7 

4.5 

–

8.1 

–

(4.5)

8.1 

–

20.0 

–

(6.0)

22.1 

–

–

–

–

–

–

–

–

–

22.1 

8.1 

TOTAL

£m

337.5 

(0.1)

31.6 

(70.4)

–

298.6 

(0.1)

42.9 

(16.3)

–

325.1 

242.0 

(0.1)

19.2 

(69.6)

191.5 

(0.1)

19.8 

(15.3)

195.9 

129.2 

107.1 

At 26 December 2015, the Group had entered into contractual commitments to acquire property, plant and equipment amounting 
to £21.2m (2014: £4.3m).

Analysis of assets held under finance leases 

Cost

Accumulated depreciation

Net book value

 26 December 2015

 27 December 2014

Plant, machinery  
& vehicles

£m

0.5 

(0.4)

0.1 

Total

£m

0.5 

(0.4)

0.1 

Plant, machinery  
& vehicles

£m

0.5 

(0.3)

0.2 

Total

£m

0.5 

(0.3)

0.2 

Notes to the consolidated financial statements continued 
 
 
 
 
15 DEFERRED TAX 
The following are the deferred tax assets and liabilities recognised by the Group, and the movements on them during the current 
and prior reporting periods:

97

At 28 December 2013

Credit to income statement

Credit/(charge) outside income statement

At 27 December 2014

(Charge)/credit to income statement

(Charge)/credit outside income statement

At 26 December 2015

Retirement  
benefit  
obligations

Accelerated  
capital  
allowances

Company  
share 
 schemes

Other timing 
differences

£m

10.9 

–

17.6 

28.5 

(7.0)

(11.7)

9.8 

£m

0.2 

1.6 

–

1.8 

(0.8)

–

1.0 

£m

8.3 

–

(1.9)

6.4 

–

(1.6)

4.8 

£m

0.2 

0.7 

–

0.9 

0.1 

–

1.0 

Total

£m

19.6 

2.3 

15.7 

37.6 

(7.7)

(13.3)

16.6 

Deferred tax arising from accelerated capital allowances, Company share schemes and other timing differences can be further 
analysed as an £8.8m asset and a £2.0m liability (2014: £11.7m asset and £2.6m liability).

The presentation in the balance sheet is as follows: 

Deferred tax assets

Deferred tax liabilities

26 December 2015

27 December 2014

£m

18.6 

(2.0)

16.6 

£m

40.3 

(2.6)

37.6 

At the balance sheet date the Group had unused trading tax losses with a potential value of £10.9m (2014: £10.1m), of which 
£0.2m (2014: £nil) will expire by 2024. 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 £15.5m (2014: £17.2m) which has not been recognised. These capital 
losses may be carried forward indefinitely.

16 INVENTORIES

Raw materials 

Work in progress

Finished goods and goods for resale

Allowance against carrying value of inventories

26 December 2015

27 December 2014

£m

5.0 

4.5 

184.4 

(16.8)

177.1 

£m

4.2 

4.1 

147.2 

(12.4)

143.1

In the event that the Group were to use its bank facility, it has pledged its inventories as security for any borrowing under the 
facility. More details are given in note 19.

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
 
 
 
 
 
 
98

17 OTHER FINANCIAL ASSETS 
Trade and other receivables 

Trade receivables (net of allowance)

Prepayments and accrued income

Other receivables

26 December 2015 

27 December 2014

£m

97.1 

30.5 

1.9 

129.5 

 £m

102.9 

28.7 

1.5 

133.1 

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 in allowance recognised in the income statement

Balance at end of period

26 December 2015 

27 December 2014 

£m

7.3 

1.0 

8.3 

£m

6.8 

0.5 

7.3

The Group’s exposure to the credit risk inherent in its trade receivables is discussed in note 27. 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. 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 £8.3m (2014: £7.3m) consists of a specific provision of 
£3.3m (2014: £2.9m) which has been made against specific debts with a gross carrying value of £4.2m (2014: £3.7m), and a 
provision of £5.0m (2014: £4.4m) 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. 

£4.7m of debts were written off in the period (2014: £4.6m). Included within the Group’s aggregate trade receivables balance are 
specific debtor balances with customers totalling £19.4m before bad debt provision (2014: £16.5m 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. 

Notes to the consolidated financial statements continued 
 
 
 
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

26 December 2015 
£m

27 December 2014 
£m

99

10.5 

1.9 

1.3 

5.7 

19.4 

8.9 

1.7 

1.0 

4.9 

16.5 

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. 

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 
In the event that the Group were to use its bank facility, it has pledged its trade receivables as security for any borrowing under 
the facility. More details are given in note 19.

18 OTHER FINANCIAL LIABILITIES 
Trade and other payables 

Current liabilities

Trade payables

Other tax and social security

Other payables

Accruals and deferred income

26 December 2015

27 December 2014

£m

£m

85.7 

55.9 

8.2 

47.9 

197.7 

80.1 

51.7 

6.9 

47.4 

186.1

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 (2014: 46 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.

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
 
100

19 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

26 December 2015 

27 December 2014 

£m

–

–

–

–

–

–

£m

(0.6)

–

–

(0.3)

0.1 

(0.8)

26 December 2015 

27 December 2014 

£m

–

–

–

–

–

–

£m

–

(0.6)

(0.6)

(0.3)

(0.3)

(0.9)

During the current period the Group replaced its previous £140m committed borrowing facility, which on inception had 
contained a small loan element as well as an asset-backed lending facility, with a new £140m committed asset-backed lending 
facility which contains no loan element. The previous facility had been due to expire in July 2016, and the new facility expires in 
July 2019. 

Because the previous facility contained a loan element, the prepaid issue fees for that facility fell to be capitalised, set against 
the related borrowings, and amortised over the life of the facility. These prepaid loan fees were disclosed in the Balance Sheet as 
part of borrowings, and were analysed into amounts falling due in less than and more than one year from the Balance Sheet date. 
On replacement of this facility during the current period, these prepaid fees were written off.

As the new facility contains no element of a loan, the arrangement fees for the new facility fall to be treated as prepayments 
rather than as borrowings, and to be written back to the profit and loss account over the life of the new facility. They are included 
under prepayments in the Balance Sheet, with the element due over one year from the balance sheet date being shown as a non-
current prepayment.

At the prior period end, there were no borrowings under the facility, and so the only amounts shown under the heading of 
borrowings were the debit balances relating to the prepaid fees, as shown above.

Notes to the consolidated financial statements continued 
 
 
As with the previous facility, the new facility is secured on the trade receivables and stock 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.

101

The available facility limit is calculated every week, based on the asset backing at the time and can never exceed £140m.  
There were no borrowings under any facility at either the current or previous year end. As at 26 December 2015, the Group  
had available £118m of undrawn committed borrowing facilities, in respect of which all conditions precedent had been met 
(27 December 2014: £112m), 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 of 125 basis points.

20 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 total cost charged to income in respect of this plan in the current period of £3.3m (2014: £2.7m) represents the Group’s 
contributions due and payable in respect of the period. Due to the timing of payments, £0.2m (2014: £0.3m) 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 £0.9m (2014: £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 2014 by the plan actuary. The actuary advising the Group has subsequently rolled forward the results of the 5 April 2014 
valuation to 26 December 2015, 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 of £35m per year until 30 June 2017. 

The Group’s estimated total cash contributions to the defined benefit plan in the 52 weeks ending 24 December 2016 are £47m. 
This assumes that our payment to the Pension Protection Fund remains at a comparable level to 2015.

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
 
102

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 IAS19 basis. As shown below, the IAS19 deficit at the current period end is £49.2m. On a funding basis (also known 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 £167.6m, this estimate being based on an approximate roll-forward of the 2014 triennial 
funding valuation, updated for market conditions. 

French post-employment benefits
As explained in more detail in note 21, we recognised a provision in 2014 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. There is no additional liability to recognise in 2015.

(b) Total amounts (credited)/charged in respect of pensions in the period

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

(Credited)/charged to equity:

Defined benefit plan – net actuarial (gains)/losses, net of deferred tax

Total (credit)/charge

(c) 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 – 2014 and 2015:

Males AMC00 Ultimate

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014

£m

16.2 

1.6 

17.8 

4.1 

4.2 

–

26.1 

(46.7)

(20.6)

 £m

12.4 

1.7 

14.1 

1.5 

3.5 

0.2 

19.3 

95.7 

115.0

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

2.05%

2.40%

2.50%

3.65%

2.25%

4.50%

3.50%

2.50%

3.75%

2.15%

2.45%

2.45%

3.55%

2.25%

4.45%

3.45%

2.45%

3.50%

Mortality in retirement for current  
and future pensioners – 2015:

Mortality in retirement for current  
and future pensioners – 2014:

Females AFC00 Ultimate

S2PFA (females)/S2PMA (males), with an application of scaling factors 
dependent on members’ socio-economic information and an allowance for 
future improvements in line with CMI 2013 core projections with a long-term 
rate of 1.75%

S1PFA (females)/S1PMA (males), with an application of scaling factors 
dependent on members’ socio-economic information and an allowance for 
future improvements in line with CMI 2010 core projections with a long-term 
rate of 1.5%

Notes to the consolidated financial statements continued 
 
 
The mortality assumption adopted by the Group in 2014 and 2015 is equivalent to the following life expectancies:

Non-pensioner (age 45)

Pensioner (age 65)

2015

2014

Male (yrs)

Female (yrs)

Male (yrs)

Female (yrs)

89.4

87.8

92.2

89.3

89.5

88.6

91.8

89.6

103

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 4.7%, or £50m, and a decrease/increase in the total service cost of around 5.4% or £0.9m.

An increase of 0.25% to the inflation rate would increase scheme liabilities by around £27m, or 2.6%, and would increase total 
service cost by around £0.4m or 2.4%. A decrease of 0.25% to the inflation rate would decrease scheme liabilities by around 
£28m, or 2.7%, and would decrease total service cost by around £0.4m or 2.4%. 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 £21m, and would increase total service cost by around £0.3m or 1.8%.

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

 26 December 2015

 27 December 2014

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

348.8 

107.3 

191.0 

–

82.2 

70.0 

90.4 

51.8 

9.6 

951.1 

£m

–

–

–

42.0 

–

–

–

–

–

£m

335.2 

85.2 

176.9 

–

78.3 

59.3 

92.7 

45.5 

11.7 

£m

–

–

–

58.7 

–

–

–

–

–

42.0 

884.8 

58.7 

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.

Asset 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 2015), 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).  

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
 
 
 
 
Analysis of plan liabilities   

104

Active members

Deferred members

Pensioners

Total no./average duration

 26 December 20151

 27 December 20142

Number of members

Duration (yrs) Number of members

Duration (yrs)

1,872

6,448

3,035

11,355

32 

24 

15 

21 

2,021

6,561

2,890

11,472

31 

24 

14 

21

1  The number of members is as per the 5 April 2015 trustees’ report, and the duration is as at 5 April 2014 (being the date of the most recent triennial valuation).

2 

 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 was in progress  
at that time).

Balance sheet 
The amount included in the balance sheet arising from the Group’s obligations in respect of the defined benefit retirement 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 demographic assumptions

– changes in financial assumptions

– experience

Benefits paid, including expenses

Present value at end of period

26 December 2015 

27 December 2014 

£m

(1,042.3)

993.1 

(49.2)

£m

(1,086.1)

943.5 

(142.6)

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014 

£m

1,086.1 

16.2 

1.6 

37.6 

0.1 

10.1 

(55.4)

(19.2)

(34.8)

£m

857.4 

12.4 

1.7 

40.6 

0.2 

–

212.5 

(12.0)

(26.7)

1,042.3 

1,086.1 

Notes to the consolidated financial statements continued 
 
 
 
 
 
 
 
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 (loss)/gain

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 gain/(loss) gross of deferred tax

Deficit at end of period

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014 

105

£m

943.5 

33.5 

0.1 

56.9 

(6.1)

(34.8)

993.1 

£m

803.1 

39.1 

0.2 

46.9 

80.9 

(26.7)

943.5 

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014 

£m

(142.6)

(16.2)

(1.6)

56.9 

(4.1)

58.4 

(49.2)

£m

(54.3)

(12.4)

(1.7)

46.9 

(1.5)

(119.6)

(142.6)

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 Staff Costs.

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014 

£m

16.2 

1.6 

17.8 

£m

12.4 

1.7 

14.1

Howden Joinery Group Plc Annual Report & Accounts 2015Amount credited to other finance charges:

106

Interest income on plan assets

Interest cost on defined benefit obligation

Net charge

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014 

£m

(33.5)

37.6 

4.1 

£m

(39.1)

40.6 

1.5 

The actual return on plan assets was £27.4m (52 weeks to 27 December 2014, £120.0m).

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  
26 December 2015 

52 weeks to  
27 December 2014 

Actuarial (loss)/gain on plan assets

Actuarial gain/(loss) on plan liabilities

Net actuarial gain/(loss), before associated deferred tax

21 PROVISIONS 

£m

(6.1)

64.5 

58.4 

At 28 December 2013

Additional provision in the period

Provision released in the period

Utilisation of provision in the period

At 27 December 2014

Additional provision in the period

Provision released in the period

Utilisation of provision in the period

At 26 December 2015

Property

Warranty

French post-
retirement 
benefits

Business 
closure

£m

9.0 

3.3 

(0.2)

(5.3)

6.8 

2.4 

(1.9)

(1.8)

5.5 

£m

2.9 

3.6 

–

(2.9)

3.6 

4.1 

–

(3.5)

4.2 

£m

–

0.2 

–

–

0.2 

–

–

–

0.2 

£m

0.1 

–

(0.1)

–

–

–

–

–

–

£m

80.9 

(200.5)

(119.6)

Total

£m

12.0 

7.1 

(0.3)

(8.2)

10.6 

6.5 

(1.9)

(5.3)

9.9 

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.

Notes to the consolidated financial statements continued 
 
 
 
 
 
 
 
 
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.

107

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.

22 SHARE CAPITAL

52 weeks to 
 26 December 2015

52 weeks to  
27 December 2014

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

Ordinary shares of 10p each

Number

Number

Allotted, called up and fully paid

Balance at the beginning of the period

646,541,496

642,782,361

Issued during the period

5,289,319

3,759,135 

Balance at the end of the period

651,830,815

646,541,496

£m

64.7 

0.5 

65.2 

£m

64.3 

0.4 

64.7

Howden Joinery Group Plc Annual Report & Accounts 2015 
108

23 NOTES TO THE CASH FLOW STATEMENT
(a) Reconciliation of net cash

Net cash at start of period

Increase/(decrease) in cash

(Decrease)/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

(b) Analysis of net cash

52 weeks to  
26 December 2015 

52 weeks to  
27 December 2014 

£m

217.7 

34.2 

(25.0)

(0.9)

0.1 

226.1 

166.1 

60.0 

–

–

226.1 

£m

140.5 

(7.8)

85.0 

(0.1)

0.1 

217.7 

131.9 

85.0 

0.9 

(0.1)

217.7 

Cash at bank 
and in hand

Short-term 
investments

SUBTOTAL 
Cash and cash 
equivalents

Bank loans/
prepaid loan 
fees (note 20)

Finance leases

£m

131.9 

34.2 

166.1 

£m

85.0 

(25.0)

60.0 

£m

216.9 

9.2 

226.1 

£m

0.9 

(0.9)

–

£m

(0.1)

0.1 

–

TOTAL 
Net cash

£m

217.7 

8.4 

226.1

At 27 December 2014

Cash flow

At 26 December 2015

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.

Notes to the consolidated financial statements continued24 FINANCIAL COMMITMENTS 
Capital commitments 

Contracted for, but not provided for in the financial statements

109

26 December 2015 

27 December 2014 

£m

21.2 

£m

4.3 

Operating lease commitments
The Group as lessee:
Payments under operating leases during the period are shown at note 6. 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

26 December 
2015

27 December 
2014

26 December 
2015

 27 December 
2014

26 December 
2015

27 December 
2014

£m

£m

£m

£m

£m

£m

54.3 

164.1 

81.1 

299.5 

46.3 

140.1 

75.1 

261.5 

13.3 

31.3 

10.7 

55.3 

11.7 

27.8 

10.9 

50.4 

67.6 

195.4 

91.8 

354.8 

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 19.

26 December 2015

27 December 2014

£m

£m

0.8 

1.7 

1.1 

3.6 

£m

£m

0.7 

2.5 

1.3 

4.5

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
 
 
110

25 SHARE-BASED PAYMENTS
1) Details of each scheme
The Group recognised a charge of £7.5m (2014: charge of £6.4m) 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.

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. 

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. 

2015 award: 15% of the award will vest if PBT growth at the end of the 2017 financial year is at a rate of 8% p.a., based on the 
December 2014 accounts. 100% of the award will vest if PBT growth on the same basis is 20% or above.

b) Executive Share Options
This was a discretionary share option plan which was granted in 2005. The options were granted with an exercise price equal 
to market value at the date of grant. The vesting period was three years from the date of grant with an exercise period of seven 
years (i.e. a total life of ten years). The performance conditions were that EPS had to grow by at least RPI + 9%. If this was 
achieved, the options vested fully. If this was 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 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. 

Notes to the consolidated financial statements continued 
 
 
 
(iv)  Market value options:

 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. 

111

 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% p.a. 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% p.a. 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% p.a. or above.

(v)   Performance share plan. This is a conditional share award. The 2015 performance conditions are as follows: if PBT growth at 
the end of the 2017 financial year is below 8% p.a., based on the December 2014 accounts, there will be no vesting. If PBT 
growth is 8% on the same basis, 15% of the award will vest . If PBT growth on the same basis is 20% or above, 100% of the 
award will vest. If PBT growth is between 8% and 20%, the shares will vest on a sliding scale.

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. 
The 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) Executive Co-investment Plan: 2012 – 2015 awards. 

 52 weeks to 
26 December 2015

 52 weeks to  
26 December 2015

 52 weeks to  
27 December 2014

 52 weeks to  
27 December 2014

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

Number

7,983,287 

1,035,181 

(285,245)

(4,459,691)

4,273,532 

–

–

1.02

4.38

–

–

WAEP (£)

Number

WAEP (£)

–

–

–

–

–

N/A

3.46

–

–

–

–

–

N/A

4.44

10,926,262 

1,433,043 

(713,677)

(3,662,341)

7,983,287 

–

–

0.89

3.62

–

–

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
 
 
 
 
 
 
112

b) Executive Share Options  
Full vesting if EPS increases by RPI + 9% 

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

 52 weeks to 
26 December 2015

 52 weeks to  
26 December 2015

 52 weeks to  
27 December 2014

 52 weeks to  
27 December 2014

WAEP (£)

1.00

N/A

N/A

1.00

N/A

N/A

4.59

Number

101,000 

–

–

(101,000)

–

–

–

N/A

N/A

N/A

N/A

WAEP (£)

1.00

N/A

1.00

1.00

1.00

1.00

3.48

Number

148,383

–

(5,000)

(42,383)

101,000

101,000 

–

–

N/A

1.00

1.00

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 
26 December 2015

 52 weeks to  
26 December 2015

 52 weeks to  
27 December 2014

 52 weeks to  
27 December 2014

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 (£)

0.36

N/A

N/A

0.36

0.36

0.36

4.88

Number

211,063 

–

–

(16,650)

194,413 

194,413 

–

–

N/A

0.36

0.36

WAEP (£)

0.36

N/A

N/A

0.36

0.36

0.36

3.79

Number

469,263 

–

–

(258,200)

211,063

211,063 

–

–

N/A

0.36

0.36

Notes to the consolidated financial statements continued 
 
 
 
 
 
 
 
 
c) Howden Joinery Group Long-term Incentive Plan 
ii) 2012 PBT increase by between RPI and RPI + 8%

113

 52 weeks to 
26 December 2015

 52 weeks to  
26 December 2015

 52 weeks to  
27 December 2014

 52 weeks to  
27 December 2014

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 (£)

0.81

N/A

N/A

0.81

0.81

0.81

3.69

Number

334,665 

–

–

(122,709)

211,956 

211,956 

–

–

N/A

0.81

0.81

WAEP (£)

0.81

N/A

N/A

0.81

0.81

0.81

4.78

Number

1,908,156 

–

–

(1,573,491)

334,665 

334,665 

–

–

N/A

0.81

0.81

c) Howden Joinery Group Long-term Incentive Plan 
iii) Conditional Share Award – subject to continuing employment

 52 weeks to 
26 December 2015

 52 weeks to  
26 December 2015

 52 weeks to  
27 December 2014

 52 weeks to  
27 December 2014

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

1,565,700 

9,500 

(83,300)

(482,400)

1,009,500 

–

–

0.82

4.29

–

–

WAEP (£)

–

–

–

–

–

N/A

4.48

Number

1,558,100 

630,800 

(148,600)

(474,600)

1,565,700 

–

–

1.31

3.47

–

–

WAEP (£)

–

–

–

–

–

N/A

3.74

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
 
 
 
 
 
 
 
 
iv) 2011, 2012, 2013 and 2014 grants – PBT to increase by between 6% – 12%

114

 52 weeks to 
26 December 2015

 52 weeks to  
26 December 2015

 52 weeks to  
27 December 2014

 52 weeks to  
27 December 2014

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 (£)

1.55

3.79

1.62

1.13

2.47

1.09

3.60

Number

3,147,253 

–

(60,825)

(705,649)

2,380,779 

476,907 

–

0.85

N/A

1.08

3.78

WAEP (£)

2.47

N/A

2.66

1.27

2.83

1.20

4.78

Number

2,728,400 

1,199,454 

(206,704)

(573,897)

3,147,253 

347,821 

–

1.38

1.70

1.08

3.78

(v) 2015 performance share plan. PBT to increase by between 8% – 20%

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

 52 weeks to  
26 December 2015

 52 weeks to  
26 December 2015

Number

WAEP (£)

N/A

–

–

N/A

–

N/A

N/A

–

595,200 

(7,134)

–

588,066 

–

–

2.25

4.38

–

–

Notes to the consolidated financial statements continued 
 
 
 
d) Share incentive scheme (Freeshares)

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

 52 weeks to 
26 December 2015

 52 weeks to  
26 December 2015

 52 weeks to  
27 December 2014

 52 weeks to  
27 December 2014

115

WAEP (£)

–

N/A

N/A

–

–

–

3.43

WAEP (£)

–

–

–

–

–

–

4.75

Number

120,449 

757,100 

(51,300)

(33,420)

792,829 

89,229 

89,229 

2.44

5.18

–

–

Number

152,515

–

–

(32,066)

120,449

120,449 

120,449 

–

N/A

–

–

e) Share Award Plan – subject to continuing employment 

 52 weeks to 
26 December 2015

 52 weeks to  
26 December 2015

 52 weeks to  
27 December 2014

 52 weeks to  
27 December 2014

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

WAEP (£)

–

N/A

N/A

N/A

–

N/A

N/A

WAEP (£)

–

N/A

N/A

N/A

–

N/A

4.41

Number

69,009 

–

–

(46,866)

22,143

–

–

2.25

N/A

–

–

Number

69,009

–

–

–

69,009

–

–

3.25

N/A

–

–

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
 
 
 
 
 
 
 
 
 
116

3) Fair value of options granted   
The fair value of all options granted is estimated on the date of grant using a binomial option valuation model. 
The key assumptions used in the model were: 

Dividend yield (%)

Expected share price volatility (%)

Historical volatility (%)

Risk-free interest rate (%)

Expected life of options (years)

 52 weeks to  
26 December 2015

 52 weeks to  
27 December 2014

1.8 

N/A

N/A

N/A

3.0

1.5 

51

51

2.2

4.2

26 RELATED PARTY TRANSACTIONS
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 20.

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.

52 weeks to  
26 December 2015

 52 weeks to  
27 December 2014

£m

6.2

17.8

24.0

£m

6.6

26.9

33.5

Notes to the consolidated financial statements continued 
 
 
 
 
27 FINANCIAL RISK MANAGEMENT
(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. 

117

The capital structure of the Group consists of cash and short-term investments, the committed borrowing facility discussed 
further in note 19 – if needed – 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 22).

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 two 
sub-facilities (stock and trade receivables). 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. During the period the maturity of the facility was extended from July 2016 to July 2019.

(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.

(c) Categories of financial instruments 

Financial assets (current and non-current)

Trade receivables

Cash and cash equivalents

Current asset investments

Financial liabilities (current and non-current)

Trade payables

Borrowings

26 December 2015

27 December 2014

£m

£m

97.1 

166.1 

60.0 

85.7 

–

102.9 

131.9 

85.0 

80.1 

(0.8)

Howden Joinery Group Plc Annual Report & Accounts 2015118

(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 appropriate credit ratings, as detailed in section (e) below.

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 17.

(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 17. 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-1 and Moody’s P-1). However, 
when accounts are opened in new territories there may be instances where there is no appropriate partner which meets the 
Group’s credit rating conditions. In such circumstances, arrangements with a counterparty which does not meet the Group’s 
credit rating criteria can be made only at the specific approval of the Board and is subject to a maximum cash holding limit.

Notes to the consolidated financial statements continued 
 
 
 
 
 
 
In addition, Group Treasury monitors counterparty risk through regular assesments which take account of counterparties’  
key financial ratios, corporate bond and equity prices together with agency credit ratings.

119

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

26 December 2015

27 December 2014

£m

97.1 

166.1 

60.0 

323.2 

£m

102.9 

131.9 

85.0 

319.8

(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 19 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.

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 26 December 2015

Trade payables

At 27 December 2014

Trade payables

Finance leases

Within 1 year

2–3 years

Capital

£m

85.7 

Floating 
interest

Fixed 
interest

£m

–

£m

–

Capital

£m

–

Floating 
interest

Fixed 
interest

£m

–

£m

–

Within 1 year

2–3 years

Capital

£m

80.1 

–

80.1 

Floating 
interest

Fixed 
interest

£m

£m

–

–

–

–

–

–

Capital

£m

–

0.1 

0.1 

Floating 
interest

Fixed 
interest

£m

£m

–

–

–

–

–

–

Total

£m

85.7

Total

£m

80.1 

0.1 

80.2

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 2015 
 
120

(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:

Euro

Trade receivables

Other receivables

Cash and cash equivalents

Trade payables

Other payables

US Dollar

Cash and cash equivalents

Trade payables

TOTAL

Interest rate risk
The Group does not have any significant exposure to interest rate risk. 

26 December 2015

27 December 2014 

£m

1.8

1.4

4.2

(13.2)

(0.8)

(6.6)

0.1

(0.7)

(0.6)

(7.2)

£m

1.6

0.8

4.4

(16.5)

(0.8)

(10.5)

–

(0.8)

(0.8)

(11.3)

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: 

121

•  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 (2014: remain the same).

For a decrease of 50 basis points, the current year figures would remain the same (2014: 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

26 December 2015 

27 December 2014 

£m

(0.8)

0.6

(0.1)

0.1

£m

(1.2)

1.0 

(0.1)

0.1

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
122

28 DISCONTINUED OPERATIONS 
There were no discontinued operations in the current period.

All discontinued operations in the prior 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

(a) Increase to discontinued property provisions   
During 2014, we increased the provision for our remaining legacy properties.

Note

(a)

(b)

(c)

(a)

52 weeks to  
27 December 2014

 £m

(2.2)

0.1 

(2.1)

11.1

0.1 

9.1

(b) Release of discontinued interest accrual
In periods prior to 2014, 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 period, we had certainty that some of this accrual would no longer be needed.  
We therefore released this amount.

(c) Release of tax creditor for discontinued operations
During 2014, 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. Since the judgement gave us certainty that particular 
expenses may be treated as deductible for tax, we recognised a credit of £11.1m of tax in 2014.

Notes to the consolidated financial statements continued 
 
 
Independent auditor’s report to the members  
of Howden Joinery Group Plc

Opinion on financial 
statements of Howden 
Joinery Group plc

Going concern and the 
directors’ assessment of 
the principal risks that 
would threaten the 
solvency or liquidity  
of the group

Independence

In our opinion:

123

•  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 26 December 2015 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 28. This also comprises the 
Parent Company Balance Sheet and related notes 1 to 10. 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).

As required by the Listing Rules we have reviewed the directors’ statement regarding the 
appropriateness of the going concern basis of accounting contained within note 2 to the financial 
statements and the directors’ statement on the longer-term viability of the group contained on page 17. 

We have nothing material to add or draw attention to in relation to:

•  the directors’ confirmation on page 17 that they have carried out a robust assessment of the principal 
risks facing the group, including those that would threaten its business model, future performance, 
solvency or liquidity;

•  the disclosures on pages 19 to 22 that describe those risks and explain how they are being managed  

or mitigated;

•  the directors’ statement in the Strategic Report to the financial statements about whether they 

considered it appropriate to adopt the going concern basis of accounting in preparing them and their 
identification of any material uncertainties to the group’s ability to continue to do so over a period of 
at least twelve months from the date of approval of the financial statements;

•  the director’s explanation on page 17 as to how they have assessed the prospects of the group, 

over what period they have done so and why they consider that period to be appropriate, and their 
statement as to whether they have a reasonable expectation that the group will be able to continue 
in operation and meet its liabilities as they fall due over the period of their assessment, including any 
related disclosures drawing attention to any necessary qualifications or assumptions.

We agreed with the directors’ adoption of the going concern basis of accounting and we did not identify 
any such material uncertainties. 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.

We are required to comply with the Financial Reporting Council’s Ethical Standards for Auditors and we 
confirm that we are independent of the group and we have fulfilled our other ethical responsibilities in 
accordance with those standards. We also confirm we have not provided any of the prohibited non-audit 
services referred to in those standards.

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. There have been no changes in the risks of material misstatement identified compared to the 
prior year.

Howden Joinery Group Plc Annual Report & Accounts 2015Independent auditor’s report to the members  
of Howden Joinery Group Plc continued

124

Risk

The recoverability of trade debtors and appropriateness  
of the bad debt provision
The Group supplies a large number of small businesses and  
the year end trade debtors balance consists of a high number  
of relatively small accounts. 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. At the year end the Group held trade receivables 
of £105.4m gross of a £8.3m provision. Further information is 
included in notes 2, 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 by recalculating the due date for a sample of invoices 
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 
control procedures management has in place.

The appropriateness of the stock obsolescence provision 
Management judgement is required in determining the 
accuracy of the stock obsolescence provision and in making an 
assessment of its adequacy. In particular, there is judgement 
involved in determining the appropriate provision percentage 
based on the age of discontinued kitchen and non-kitchen stock 
lines at both depots and manufacturing sites and the level of 
forecast sales. At the year end the Group held stock of £193.9m 
gross of a £16.8m provision. Further information is included in 
notes 2, 3 and note 16.

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 to calculate the obsolescence provision and 
specifically with respect to the discontinued lines. We have 
checked the dates they were discontinued and assessed the 
appropriateness of the provision percentages applied through 
reviewing the sales of those lines post discontinuation. For 
other lines we have assessed the forecast sales demand with 
comparison to prior periods.

The appropriateness of the actuarial assumptions  
used in determining the defined benefit deficit 
The Group operates a funded defined benefit scheme which was 
closed to new entrants from April 2013. Management judgement 
is required in determining the key actuarial assumptions that 
underpin the calculation of the defined benefit deficit (£49.2m). 
In particular, the discount rate, inflation rate and mortality 
assumptions. Further information is included in notes 2, 3 and 
note 20. 

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 key assumptions by comparison to 
available market data. We have also benchmarked the key 
assumptions against a population of other companies as at the 
end of December. We have also assessed the competence and 
independence of the external actuaries used by management in 
determining the actuarial assumptions. Competence has been 
assessed by confirming the actuaries have sufficient experience 
and are Fellows of the Institute and Faculty of Actuaries.

The description of risks above should be read in conjunction 
with the significant issues considered by the Audit Committee 
discussed on page 69.

These matters were addressed in the context of our audit  
of the financial statements as a whole, and in forming our 
opinion thereon, and we do not provide a separate opinion  
on these matters.

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.

125

An overview of the scope 
of our audit

We determined materiality for the group to be £10 million (2014: £8 million), which is approximately 5% 
(2014: 5%) of pre-tax profit. Pre-tax profit has been used as it continues to be a key driver of business 
value and an area of focus for stakeholders. This basis is consistent with the prior year. Our audit work 
at the entities was executed at levels of materiality applicable to each individual entity which were lower 
than group materiality and ranged between 50% and 95% of group materiality.

We agreed with the Audit Committee that we would report to the Committee all audit differences in 
excess of £200,000 (2014: £160,000), 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.

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, we focused our audit scope on the UK, French and Belgian trading entities and each of the 
Head Office companies. All of these were subject to a full audit. These locations represent the principal 
business units and account for 99% (2014: 100%) of the group’s net assets, group’s revenue and of 
the group’s profit before tax for the 52 weeks ended 26 December 2015. They were also selected to 
provide an appropriate basis for undertaking audit work to address the risks of material misstatement 
identified above. The UK trading entities and Head Office Companies together account for 98% (2014: 
98%) of Group revenue and were audited by the group team. This audit approach is consistent with the 
prior year. 

At the parent entity level we also tested the consolidation process and carried out analytical procedures 
to confirm our conclusion that there were no significant risks of material misstatement of the 
aggregated financial information of the remaining components not subject to audit.

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

Under the Listing Rules we are also required to review part of the Corporate Governance Statement 
relating to the company’s compliance with certain provisions of the UK Corporate Governance Code.  
We have nothing to report arising from our review.

Howden Joinery Group Plc Annual Report & Accounts 2015Independent auditor’s report to the members  
of Howden Joinery Group Plc continued

126

Our duty to read other 
information in the  
Annual Report

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

Respective  
responsibilities of 
directors and auditor

Scope of the audit of  
the financial statements

•  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.

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). 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

24 February 2016

 
Company balance sheet

Non-current assets

Investments in subsidiaries

Deferred tax

Long-term prepayments

Prepaid loan fees

Current assets

Prepaid loan 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

Treasury shares

Total equity

26 December 2015

27 December 2014

Notes

£m

£m

127

4

8

8

8

5

6

7

9

10

10

10

699.0 

699.0 

–

0.6 

–

0.2 

–

0.3 

699.6 

699.5 

–

41.9 

60.0 

155.4 

257.3 

(383.5)

(126.2)

573.4 

–

573.4 

65.2 

87.5 

466.0 

(45.3)

573.4 

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

These financial statements were approved by the Board on 24 February 2016 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 2015 
 
 
 
 
 
Notes to the Company balance sheet

128

1 SIGNIFICANT COMPANY ACCOUNTING POLICIES
General information
Howden Joinery Group plc is a company incorporated in England and Wales under the Companies Act 1985. 

Basis of presentation
The Company’s accounting period covers the 52 weeks to 26 December 2015. The comparative period covered the 52 weeks 
to 27 December 2014.

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 Strategic Report.

Investments in subsidiaries
These investments are shown at cost less any 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 Financial Reporting Standard 8 (“Related Party Disclosures”) not to 
disclose transactions with Group entities or investees of the Group qualifying as related parties.

2 CHANGE IN ACCOUNTING POLICIES
The Company has not applied any accounting standards for the first time in the current period.

At present, the Group accounts are prepared under IFRS and the Company accounts are prepared under UK GAAP. UK GAAP is 
changing, and the Company is required to make a choice and prepare its 2016 financial statements under one of the two new UK 
Financial Reporting Standards, FRS 101 or FRS 102.

The Company intends to adopt FRS 101 in 2016. FRS 101 allows the Company to apply the same IFRS recognition and 
measurement principles as the Group, with the benefit of reduced disclosure.

A shareholder or shareholders holding in aggregate 5% or more of the total allotted shares in Howden Joinery Group plc may  
serve objections to the use of the disclosure exemptions in writing to the Company’s registered address (40 Portman Square, 
London, W1H 6LT) no later than 4 May 2016.

Further details of FRS 101 and 102 can be found at www.frc.org.uk.

3 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 profit after tax for the 52 weeks to 26 December 2015 was £320.3m (52 weeks to 27 December 2014: profit  
after tax of £104.2m).

129

The Company has no employees (2014: none), did not pay directors’ emoluments (2014: £nil), and the fees payable to the 
Company’s auditor for the audit of the Company’s annual accounts were £10,000 in both current and prior periods.

4 INVESTMENTS IN SUBSIDIARIES 

Cost and carrying value:

At 27 December 2014 and 26 December 2015

Details of subsidiary undertakings are given on page 132.

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 

26 December 2015 

27 December 2014 

£m

0.4 

41.4 

0.1 

41.9 

£m

0.1 

33.3 

–

33.4

6 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. 

The directors estimate that the fair value of these investments at the current period end is equal to their carrying value.

7 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 

Other tax and social security

Owed to subsidiaries

Accruals and deferred income

26 December 2015 

27 December 2014 

£m

–

(382.8)

(0.7)

(383.5)

£m

(0.2) 

(578.7)

(1.2)

(580.1)

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
 
 
130

8 ANALYSIS OF BORROWINGS 
Analysis of total borrowings 

The borrowings are repayable as follows:

Disclosed under current assets:

On demand or within one year

Bank borrowings net of prepaid fees

Disclosed under non-current assets:

Bank borrowings net of prepaid fees

Total borrowings

26 December 2015

27 December 2014 

 £m

£m

–

–

–

–

–

–

–

(0.6)

(0.6)

(0.3)

(0.3)

(0.9)

During the current period the Group replaced its previous £140m committed borrowing facility, which on inception had 
contained a small loan element as well as an asset-backed lending facility, with a new £140m committed asset-backed lending 
facility which contains no loan element. The previous facility had been due to expire in July 2016, and the new facility expires in 
July 2019. 

Because the previous facility contained a loan element, the prepaid issue fees for that facility fell to be capitalised, set against 
the related borrowings, and amortised over the life of the facility. These prepaid loan fees were disclosed in the Balance Sheet  
as part of borrowings, and were analysed into amounts falling due in less than and more than one year from the Balance Sheet 
date. On replacement of this facility during the current period, these prepaid fees were written off.

As the new facility contains no element of a loan, the arrangement fees for the new facility fall to be treated as prepayments 
rather than as borrowings, and to be written back to the profit and loss account over the life of the new facility. They are included 
under prepayments in the Balance Sheet, with the element due over one year from the balance sheet date being shown as a non-
current prepayment.

At the prior period end, there were no borrowings under the facility, and so the only amounts shown under the heading of 
borrowings were the debit balances relating to the prepaid fees, as shown above.

As with the previous facility, the new facility is secured on the trade receivables and stock 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.  
There were no borrowings under any facility at either the current or previous year end. As at 26 December 2015, the Group  
had available £118m of undrawn committed borrowing facilities, in respect of which all conditions precedent had been met  
(27 December 2014: £112m), 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 of 125 basis points.

All borrowings are in sterling.

The Company did not incur any interest on borrowings in either period. The directors estimate that their fair value is equal to  
their carrying value.

Notes to the Company balance sheet continued 
 
9 SHARE CAPITAL 

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

52 weeks to  
26 December 2015

52 weeks to  
27 December 2014

131

ORDINARY SHARES OF 10p EACH

Allotted, called up and fully paid

No.

No.

Balance at the beginning of the period

646,541,496

642,782,361

Issued during the period

5,289,319 

3,759,135 

Balance at the beginning and end of the period

651,830,815

646,541,496

10 RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS’ FUNDS   

At 27 December 2014

Retained profit for the period

Dividend paid

Shares issued

Purchase of shares into treasury

At 26 December 2015

Called up  
share capital 

Share premium 
account 

Retained  
earnings 

£m

64.7 

–

–

0.5 

–

65.2 

£m

87.5 

–

–

–

–

87.5 

£m

206.1 

320.3 

(59.9)

(0.5)

–

466.0 

£m

64.7 

0.5 

65.2 

Treasury 
shares 
£m

–

–

–

–

(45.3)

(45.3)

£m

64.3 

0.4 

64.7

Total 

£m

358.3 

320.3 

(59.9)

–

(45.3)

573.4

Howden Joinery Group Plc Annual Report & Accounts 2015 
 
 
 
 
Parent company and all subsidiary undertakings 
as at 26 December 2015

132

COUNTRY OF REGISTRATION  
OR INCORPORATION

REGISTERED OFFICE

PARENT COMPANY

Howden Joinery Group plc

ALL SUBSIDIARY UNDERTAKINGS

Intermediate Holding Companies:

England and Wales

40 Portman Square, London, W1H 6LT

Howden Joinery Holdings Limited

England and Wales

40 Portman Square, London, W1H 6LT

Howden Joinery International Holdings Limited

England and Wales

40 Portman Square, London, W1H 6LT

Trading:

Howden Joinery Limited

Houdan Cuisines SAS

Lamona Cuisines SAS 

Houdan Cuisines SPRL

Howden Keukens BV

England and Wales

40 Portman Square, London, W1H 6LT

France

France

Belgium

The Netherlands

1 Rue Calmette, ZA Du Bois Rigault Nord, 
62880 Vendin-Le-Vieil

1 Rue Calmette, ZA Du Bois Rigault Nord, 
62880 Vendin-Le-Vieil

Rue Des Emailleries 4, 6041 Gosselies

Van Der Madeweg 55, 1114AM  
Amsterdam-Duivendrecht

c/o Vistra (Germany) GmbH,  
Westendstraße 28, 60325 Frankfurt

Howden Küchen GmbH

Germany

Property management:

Howden Joinery Properties Limited

Howden Kitchens Properties Limited

Administration and employee services:

England and Wales

England and Wales

40 Portman Square, London, W1H 6LT

40 Portman Square, London, W1H 6LT

Howden Joinery Corporate Services Limited

England and Wales

40 Portman Square, London, W1H 6LT

Howden Joinery People Services Limited

England and Wales

40 Portman Square, London, W1H 6LT

Dormant:

Howden Kitchens Limited

Galiform Limited

England and Wales

England and Wales

40 Portman Square, London, W1H 6LT

40 Portman Square, London, W1H 6LT

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

Profit on continuing ordinary activities before tax

Full year dividend per share (pence)

Basic EPS – continuing operations (pence)

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

UK

France

Belgium

Netherlands

Capital expenditure

Dec 2015 
52 weeks

Dec 2014 
52 weeks

Dec 2013 
52 weeks

Dec 2012 
53 weeks

Dec 2011 
52 weeks

133

£m

£m

£m

£m

£m

1,220.2 

1,090.8 

956.5 

887.1 

853.8 

221.9 

–

221.9 

219.6 

9.9

27.3 

189.8 

(2.1)

187.7 

188.8 

8.4 

23.2 

138.0 

–

138.0 

133.9 

5.5 

15.7 

119.8 

(4.4)

115.4 

112.1 

3.0 

15.3

115.3 

(9.3)

106.0 

111.0 

0.5 

13.5 

153.0 

151.1 

123.3 

140.4 

132.3 

177.1 

129.5 

(214.8)

(49.2)

42.6 

226.1 

421.7 

619

17

2

1

46

143.1 

133.1 

(207.2)

(142.6)

(73.6)

217.4 

294.9 

589

12

2

123.4 

122.4 

(192.6)

(54.3)

(1.1)

139.5 

261.7 

115.9 

96.0 

(180.4)

(154.5)

(123.0)

95.4 

112.8 

118.5 

95.3 

(196.1)

(136.9)

(119.2)

57.1 

70.2

559

11

529

11

509

10

33

25

24

20

Howden Joinery Group Plc Annual Report & Accounts 2015Shareholder ranges as at 26 December 2015

134

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

176

223

71

146

74

99

257

1,046

6,146

1,332

160

90

7

3

5

7,743

8,789

2.00

2.54

0.81

1.66

0.84

1.13

2.92

11.9

69.93

15.16

1.82

1.02

0.08

0.03

0.06

88.1

85,565

551,056

518,114

3,805,602

5,430,843

16,228,181

613,007,184

639,626,545

2,423,803

3,159,337

1,171,581

1,830,450

492,463

491,329

2,635,307

12,204,270

100

651,830,815

0.01 

0.08 

0.08 

0.58 

0.83 

2.49 

94.04 

98.1 

0.37 

0.48 

0.18 

0.28 

0.08 

0.08 

0.40 

1.9 

100

135

Advisors and committees

PRINCIPAL BANKER
Lloyds
10 Gresham Street
London
EC2V 7AE

JOINT FINANCIAL ADVISORS  
AND STOCKBROKERS
Numis Securities
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT

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

EXECUTIVE COMMITTEE
Matthew Ingle
Mark Robson
Kevin Barrett
Clive Cockburn
Rob Fenwick
Gareth Hopkins
Theresa Keating
Andy Witts

REMUNERATION COMMITTEE
Tiffany Hall (Chair)
Mark Allen
Andrew Cripps
Geoff Drabble
Richard Pennycook
Michael Wemms

NOMINATIONS COMMITTEE
Will Samuel (Chair)
Mark Allen
Andrew Cripps
Geoff Drabble
Tiffany Hall
Richard Pennycook
Michael Wemms

AUDIT COMMITTEE
Richard Pennycook (Chair)
Mark Allen
Andrew Cripps
Geoff Drabble
Tiffany Hall
Michael Wemms

Howden Joinery Group Plc Annual Report & Accounts 2015Corporate timetable

136

2016

Trading update

Half-Yearly Report

Trading update

End of financial year

28 April

21 July

3 November

24 December

137

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.

Howden Joinery Group Plc Annual Report & Accounts 2015Howden Joinery Group Plc

Annual Report and Accounts 2015

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