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Annual Report and Accounts 2022
Howden Joinery Group Plc
Available through
the Trade only
Howdens – UK’s #1
specialist trade-only
kitchen supplier
We make the builder’s life simpler. We help
them to achieve exceptional results for
their customers, and to profit from it.
We succeed by helping our customers
to succeed.
Overview / Contents
01
Contents
Strategic Report
Governance
08
Our purpose, our culture & values, our market,
our strategy and our business model
16 Chairman’s statement
19 Chief Executive’s statement
28 Key performance indicators
30 Financial review
36 Risk management and principal risks
46 Sustainability matters
71 Going concern and Viability statements
74 Other Directors’ statements
78 Corporate governance report
80 Board of Directors
82 Key Board activity
84 Executive Committee and Company Secretary
86 Directors' duties (Section 172(1) statement)
88 Stakeholder engagement
96 2018 UK Corporate Governance Code:
application and compliance
102 Nominations Committee report
112 Remuneration Committee report
136 Audit Committee report
144 Sustainability Committee report
146 Directors’ report
Financial Statements
Additional Information
150
Independent auditor’s report
164 Consolidated income statement
164 Consolidated statement of
comprehensive income
165 Consolidated balance sheet
166 Consolidated statement of changes in equity
167 Consolidated cash flow statement
168 Notes to the consolidated financial statements
205 Company balance sheet
206 Company statement of changes in equity
207 Notes to the Company financial statements
212 Parent company and all subsidiary undertakings
213 Five year record
214 Shareholder and share capital information
216 Shareholder Ranges
216 Corporate timetable
217 Advisors and registered office
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceOverviewPage Title 02
Overview / Performance in 2022
03
Performance in 2022
Financial highlights
Revenue
£2.3bn
Operating
profit
£415m
Profit
before tax
£406m
n
b
1
.
2
£
n
b
3
.
2
£
n
b
5
.
1
£
n
b
6
.
1
£
n
b
5
.
1
£
m
0
4
2
£
m
0
6
2
£
m
6
9
1
£
m
2
0
4
£
m
5
1
4
£
m
0
9
3
£
m
6
0
4
£
m
9
3
2
£
m
1
6
2
£
m
5
8
1
£
Net cash
at year end
£308m
m
5
1
5
£
m
1
3
4
£
m
8
0
3
£
m
7
6
2
£
m
1
3
2
£
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Gross
margin
60.9%
%
7
.
1
6
%
3
.
2
6
%
1
.
0
6
%
6
.
1
6
%
9
.
0
6
Earnings
per share
65.8p
p
3
.
1
3
p
0
5
3
.
p
9
.
4
2
2022 FY
dividend
20.6p
p
8
.
5
6
p
2
.
3
5
p
5
.
9
1
p
6
0
2
.
p
2
.
8
1
p
6
.
1
1
p
9
.
3
Dividends
paid in year
£115m
m
6
.
3
3
1
£
m
0
.
5
1
1
£
m
3
.
8
6
£
.
m
6
0
7
£
m
0
0
£
.
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
2018
2019
2020
2021*
2022
“ Howdens achieved another set of strong results in
2022, with rapid progress on executing our strategic
priorities and continued market share gains.
Our teams have been agile in navigating high levels of
inflation and supply chain disruption while supporting
our customers with a market leading product range, high
stock availability and outstanding customer service.”
Andrew Livingston – CEO
* 2021 included a special dividend of £54.1m.
Share
buybacks
£250m
m
0
5
2
£
m
1
3
1
£
m
6
2
1
£
m
0
1
£
m
0
5
£
2018
2019
2020
2021
2022
Operational highlights
30 new UK
depots
20 additional
depots in
France
5 new depots
in Republic of
Ireland
21 new kitchen
ranges
Good progress
on our ESG
commitments
Making more
product in our
own factories
Continuing to
strengthen our
digital offering
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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OverviewOverviewPage TitlePage Title
04
Overview / Howdens at a glance
05
Howdens at a glance
The UK’s largest
specialist trade-only
kitchen supplier
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...
... and to provide the builder’s customer with enough choice, advice and
aftersales to make a home to be proud of.
Global
sourcing
Resources and
relationships
• Global supply chain
expertise
• Trusted supplier
relationships give us
access to the latest
products at the best
prices
• Responsible purchasing
practices
UK
manufacturing
& distribution
Resources and
relationships
• Skilled and motivated
workforce
• UK’s largest kitchen supplier
– economies of scale
• Our own factories – the
choice to make or buy
• Our own warehousing
and distribution network
Nationwide
depot
network
Resources and
relationships
• Decentralised business
model
• Empowered local depot
managers, close to the
trade
• Trusted customer
relationships with around
half a million builders
• Local depot network with
a nationwide reach
• The right product. In stock
in local depots at best
local price
Supporting
the builder
Worthwhile
for all concerned
Resources and relationships
• Trade-only, with excellent service
• Helping our trade customers to succeed in
selling to their customers:
– Trade accounts support the builder’s
cashflow
– Design and planning services
– Home visits for end-users
– Marketing materials
– The right product. In-stock in local depots
•
•
Competitive confidential pricing
Digital tools to help the trade and end-users
Outcomes
• Happy builders and end-users
• Sustainable profit growth, sector-leading
margins and strong cash generation
• Returns to shareholders
• Investment in:
– our employees
– new depots
– new product
– new manufacturing and logistics
– digital
– new jobs throughout our business
• Giving back to local communities
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceOverviewOverviewPage TitlePage Title Strategic Report
06
Strategic report / Contents
07
Strategic report
How we
create value
2022 performance and
Howdens at a glance
Our purpose, culture and
values, market, business model
and strategy
Chairman’s statement
Howdens delivered a strong performance
in 2022.
Chief Executive’s statement
To help our trade customers achieve
exceptional results for their customers.
02
08
16
19
Financial review
2022 current trading and outlook for 2023.
Risk management and
principal risks
Our approach to risk and how we manage
it. Our principal risks and what we’re doing
to mitigate their potential effects.
Sustainability report
Why sustainability matters to us.
Going concern and Viability
30
36
1 Identification
2 Assessment
Functional management and leaders formally identify
risks twice a year providing both a bottom-up and a
top-down perspective. We record these in functional risk
registers for each area of our business. We also conduct
ad hoc reviews of new and emerging risks throughout
the year as they arise.
We assess risks using a Group-wide scoring mechanism
that considers both the likelihood of occurrence and the
potential impact. We prioritise them by their risk score
and an assessment of the level of exposure against our
risk appetite is conducted. Risk that exceed our appetite
may require additional risk response.
4 Monitoring and reporting
We provide a consolidated key risks report to the
Executive Committee and Board for review, using
escalation criteria previously set by them. Mitigation
plans and the progress against them are also reported.
The Board consider and agree the key risks, appetites
and mitigation strategies which are fed back to risk
owners. We conduct this exercise twice yearly and it is
used to determine the Group’s principal risks.
46
3 Response
Risks that require a response have additional mitigation
strategies agreed and a future action plan drawn up
together with a timeframe. We assign responsibility for
implementation of action plans.
71
08
Our purpose, our culture & values, our market,
our business model and our strategy
16 Chairman’s statement
19 Chief Executive’s statement
28 Key performance indicators
30 Financial review
36 Risk management and principal risks
46 Sustainability matters
71 Going concern and Viability statements
74 Other Directors’ statements
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Strategic ReportPage TitlePage Title
Our purpose, our culture & values, our market,
our strategy and our business model
08
Strategic report / Our purpose-driven approach
09
Our purpose-driven approach
Our purpose
Culture & values
Sustainability
Governance
To help our trade customers achieve exceptional results for their
customers and to profit from doing so. When our customers succeed,
we succeed and our stakeholders succeed.
Worthwhile for
all concerned.
The importance of
sustainable behaviour
is recognised right
through the business.
A clear governance
framework. Operating
with integrity.
See page 10
See page 11
See page 46
See page 76
Our purpose drives our business model and shapes our strategic decisions
Culture is aligned
with purpose, values
and strategy
Sustainable behaviour preserves
our culture, maintains focus on
our business model, mitigates our
risks and addresses the needs
of our stakeholders
Our governance framework
guides all decisions
and outcomes
Strategy
Business model
Reach more builders. Offer them the best
product, pricing, service and support.
Generate profits for reinvestment and
shareholder returns.
Trade-only. In stock from local depots.
Entrepreneurial depots supported by
UK manufacturing and efficient
sourcing and distribution.
Our business model and
strategy generate value for
a range of stakeholders
See page 13
See page 14
We respond to external opportunities and mitigate threats
Markets
Risks
See page 12
See page 36
Long-term value for our stakeholders
Long-term, sustainable growth and value for all stakeholders.
Ensuring that our business positively impacts the world around
us and the people in it.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage Title 10
Our purpose
Our culture and values
Strategic report / Our culture and values
11
To help our trade customers
achieve exceptional results
for their customers and to
profit from it.
Howdens’ focus on serving our trade customers underpins
everything we do. We believe the best way to source and install
a kitchen is to work with your local tradesperson, and we are
clear that the purpose and future success of our business lies
in serving the trade market to the highest standards.
Product leadership
Product design and testing facilities ensure that we offer
the right product styles that are attractive to consumers;
designed to be trade quality and easy to fit with the builders
in mind (‘fit and forget quality’).
Our relationship with our trade customers has three key
facets, each supported by our entrepreneurial culture.
Trade value
Trade service and convenience
Depots located where our customers need them; monthly
account facilities; product in-stock to get the job done
including appliances, joinery, flooring and hardware.
A design service to help customers choose and
plan their kitchens.
Best local trade prices enabled by in-house manufacturing,
long-term key supplier agreements and a low-cost depot
operating model.
Environment
and communities
Suppliers
and landlords
Staff
Customers
Government and
local authorities
Shareholders
Pensioners
Howdens was founded on the principle
that the business should be worthwhile for
all concerned — customers, prospective
customers, homeowners, tenants, local
communities, our suppliers, our investors,
our staff and their families.
This founding principle
has shaped our business
model and our strategic
decisions for more than
25 years, and it continues
to be at the heart of what
we do.
Worthwhile for our trade customers
Worthwhile for our suppliers
• Profitability, convenience, service, support
• Strong and enduring relationships based on trust
• Great product range for them to offer to their customers
• Working together to develop new products and deliver
• Outstanding service
• Trusted personal relationships – we do what we say
• Trade accounts and confidential discounts
• Design, planning and marketing support
Worthwhile for our staff
• A good wage, plus local profit-sharing and incentives,
excellent rewards and recognition for outstanding
performance
• An entrepreneurial culture, with central support
• A growing company with opportunities to develop and
progress. Structured career development programmes
best service
• Scale – good opportunities for them to build a profitable
business by working with us
Worthwhile for our other stakeholders
• Delivering consistent long-term value for shareholders
with a growing dividend and return of surplus cash through
share buybacks
• Helping end-users at each stage of their buying decision
•
Important local employer in over 850 communities
• Giving back to charities and local communities
• Responsible purchasing and environmental policies
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic Report 12
Our market
Our strategy
Strategic report / Our strategy
13
The kitchen market
• 29 million homes in the UK. 18 million owned and 11 million rented
• UK kitchen and joinery market of £11.5bn1
• The market continues to shift from DIY to ‘Do It For Me’
• Howdens sells to the Trade sector, who supply a broad range of markets,
including owner-occupied homes, private rentals and social housing
• Our Contracts division supports the increasing demands of the new build market
Structural drivers
Recent trends
• Population growth: by 2030 UK population will
grow by 5% and will have 2m new citizens (ONS2)
• Ageing UK housing stock will drive renovation.
Average age of UK housing stock is 70 years (ONS2)
• Healthy consumer balance sheets and high
employment. UK consumers saved over
£200bn during the pandemic (ONS2)
•
Increased end user interest in sustainable
products. 44% of households are switching off
or moving to more energy efficient appliances
(NatWest)
• Entrepreneurial builders are well placed
to win kitchens and joinery work as part of
wider home refurbishment projects. They are
supported by Howdens’ in-stock, trade-only
business model
• Post pandemic UK hybrid working, at up to
5 times pre-pandemic levels, leads
to increased wear and tear in the home
• Consumer mindset more focused on design
and use of kitchen space to maximise flexibility
(Howdens’ proprietary data)
• An ageing population with significant
purchasing power choosing to age in place.
Baby boomers own nearly half, £2tn, of all
British housing equity
• As mortgage rates rise and the cost of living
crisis puts pressure on household budgets,
data suggests that people are staying put and
investing in their current homes rather than
moving
Our purpose
To help our trade customers achieve
exceptional results for their customers
and to profit from doing so.
Achieved via:
Our long-term strategic objectives
Reach more builders
Grow market share. Increase
trade convenience.
Operational excellence
Increase customer service, efficiency,
trade value and profitability.
Product innovation
Prudent financial management
The right amount of the best product,
at the best price.
Giving us the tools to do the job.
Measured by:
KPIs (page 28)
• Sales growth
• Profit before tax
• Cash
• Depot openings
• Health & Safety
• FSC® or PEFC certified
raw materials
• Waste recycling
Growing our market
• Product to compete at all price
points. Take more market share
• Continue excellent customer
satisfaction with both builders
and end-users
1 Howdens estimates based on proprietary data.
2 Office of National Statistics.
• Reach more builders
With 500K+ customer accounts Howdens
supply to 1 in 3 tradespeople. Opportunity
to grow customer base further.
1.4m
tradespeople
in the UK2
Underpinned by:
Our medium-term strategic initiatives (page 21)
• Evolving our depot model
• Developing our digital platforms
• Improving our product range
• Expanding our international
and supply management
operations
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic Report
14
Strategic report / Our resilient business model
15
Our resilient business model
The UK’s leading specialist kitchen supplier,
selling only through trade customers.
What
we do
1. Product manufacturing and sourcing
2. Distribution
3. Depots designed for our trade customers
• Our manufacturing and sourcing
experts ensure that we offer
attractive products that are trade
quality and easy to fit.
• We design and manufacture all of
our own cabinets, around 5 million
in 2022, as well as some cabinet
frontals, worktops and skirting
boards. We’re agile and we keep the
make vs. buy decision under review.
• We make what it makes sense for
us to make in our UK factories
and we buy other product in from
our suppliers.
• Our in-house distribution operation
delivers from our factories and
central warehouses to our network
of over 850 depots.
• We buy in thousands of different
• No two deliveries are alike, and
products from hundreds of trusted
suppliers around the world, including
appliances, joinery, flooring and
hardware. We offer everything
necessary to complete any kitchen.
each one must be correct, complete
and on time. We can guarantee
this because we control our own
distribution.
• Our business depends on
entrepreneurial depot managers and
the relationships between our highly
motivated and incentivised depot
teams and their local builders.
• A typical Howdens depot is in an edge-
of-town location – more convenient for
our trade customers, and cheaper to
rent. Around 85% of our UK customers
live within 5 miles of a Howdens depot.
• Our in-stock model means that
builders can get the products
they need at short notice, even when
plans change part way through a job.
• We offer the builder quality products,
excellent levels of service and trade
accounts that allow them up to eight
weeks to pay. We focus on helping
our customers succeed. When they
make money, we make money.
4. Consumers/
Homemakers
• Our 1,600 specialist kitchen
designers support the builder by
visiting the end-user’s home, or
work with them remotely using our
new virtual design service, and
helping them choose, plan and
design their dream kitchens.
The value
we create
1. Customers
2. Staff
3. Suppliers
4. Investors
• Save time and money with Howdens. Trade quality, full product range for the
complete kitchen, available from stock at competitive, confidential prices.
• Trusted personal relationships providing outstanding service,
from kitchen design to delivery and aftersales support.
• Trade accounts allow the builder to finish their project and get paid by their
customer before they need to pay us. Online account management and anytime
ordering tools help the busy builder.
• A growing company with
opportunities for training,
development and
career progression.
• A safe working environment,
good salary, pension and benefits,
with local profit-sharing and
incentives.
• Strong and enduring relationships
• Long-term value creation,
based on trust.
• Co-operative engagement on new
products and the scale necessary
to support suppliers’ businesses
and investment plans.
generating cash for further
profitable investment in the
business and to support a
growing dividend.
• Surplus cash after investment
and dividends is returned to
shareholders through share
buybacks.
5. Communities
and environment
• Employment opportunities
and good neighbour in over
850 communities.
• Supporting local and national
charities.
• Responsible ESG practices and
policies.
• See our Sustainability report on
page 46.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage Title Chairman’s statement
16
Strategic report / Chairman’s statement
17
Chairman’s
statement
Demonstrating the strength
of our trade-only, in-stock
business model
“ Howdens delivered a strong
performance in 2022, set against a
record prior year performance and
an increasingly challenging external
geo-political and macro-economic
environment”
Peter Ventress
Chairman
Demonstrating the strength of our trade-
only, in-stock business model
Howdens delivered a strong performance in 2022, set
against a record prior year performance and an increasingly
challenging external geo-political and macro-economic
environment. Our teams have been adept at navigating
the business through high levels of inflation and further
supply chain disruption while supporting our customers
with a strong product line up, high stock availability and
outstanding service.
I am delighted to have been given the opportunity to join
the Board of Howdens as Chairman. As I joined last July I
was struck by many qualities of the business with its very
strong customer-centric culture, differentiated business
model, and the excellent leadership team who are focused
on driving performance. As I have spent time in the business
this year, above all else, I have been struck by the talent and
unwavering commitment of Howdens’ 12,000 associates. They
are the lifeblood of this business and have again steadfastly
committed to keeping our customers running this year, in turn
keeping millions of homes and businesses functioning. On
behalf of the Board, I would like to express our sincere thanks
to them and recognise their outstanding contribution to
our success.
Financial performance
Overall, in 2022 Group revenue was up 10.8% compared with
2021, and 46.4% ahead of pre-pandemic levels in 2019. The
Group delivered a 4.0% increase in profit before tax compared
with 2021 and 55.7% ahead of 2019. Earnings for the year were
65.7p per ordinary share, an increase of 23.5% on the prior
year and up 87.7% on 2019.
Strong cash generation remains one of the great hallmarks
of this business. Despite investing in additional inventory to
ensure high levels of stock availability for our customers and
returning £250m of cash to shareholders we ended the year
with cash of £308m. The strength of the Group’s financial
position enables a continued focus on our long-term strategic
initiatives despite continued near-term uncertainties.
This year we have also remained firmly focused on executing
our organic growth strategy at pace under the leadership
of Andrew Livingston and his team. The pandemic has
confirmed to your Board that our strategy is the right one and
we continue to invest in deeper vertical integration, depot
expansion in the UK and France, and product innovation.
You can read more about our progress on many fronts this
year in Andrew’s statement, starting on page 19.
Strategic initiatives
Our people
Our kitchen and joinery markets are large and fragmented with
the opportunity for Howdens to continue to grow its market
share. For example, we believe our addressable market in the
UK for the markets we currently operate in is around £11.5bn
compared with Howdens’ UK revenue of around £2.3bn. We
are investing commensurately in our consistent and proven
organic growth strategy which is now well established
under the leadership of Andrew Livingston and his team.
Our priorities are to invest in evolving our depot model,
improving our product range and supply chain, developing
our digital platforms and expanding the Howdens’ model
selectively outside the UK. As Chairman, I am very supportive
of the Group’s ambitions and believe in the exciting growth
opportunities ahead for Howdens to continue to gain profitable
market share.
The opportunity to have a positive impact on our environment
is also a key part of our overall growth plans. We describe this
as making sure Howdens is ‘worthwhile for all concerned’
which means for our people, our customers, our suppliers the
environment and the communities we work in. This year we
have adopted the Task Force on Climate-Related Financial
Disclosures (TCFD) which are set out starting on page 54.
In addition, we have also committed to the Science Based
Targets Initiative (SBTi) signifying our intention to reduce
emissions throughout the supply chain and to achieve
Net Zero by 2050.
Howdens’ key asset is its workforce and we want to attract,
train and retain great people from the widest possible pool
of talent. We remain focused on creating an engaging place
to work with fulfilling jobs and a strong culture that supports
everyone to do their best. Listening to our employees is key.
Over 7,000 completed the Best Companies engagement
survey in March and it was pleasing to see that colleagues
feel very positive about working at Howdens. We were proud
to receive a ‘two-star’ accreditation as a company ‘with an
outstanding commitment to workplace engagement’. In
fact, Howdens was ranked 10th in the top 100 UK’s Best Big
Companies To Work For last year up from 14th in 2020 which is
impressive considering the challenges of the last two years as
a result of the COVID-19 pandemic.
I am also particularly proud of our continued commitment
to apprenticeships and the value that they can bring to our
business as we compete for future talent. We currently have
603 apprentices working in a range of tailored programmes
throughout all areas of the business. These individuals are
taking the apprenticeship route to gain higher level skills and
professional qualifications and we were delighted to celebrate
the success of 300 employees this year who completed
their programmes with us. I am confident that many of these
individuals will be the Howdens leaders of the future and I wish
them every success in their careers.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage Title 18
Strategic report / Chief Executive’s statement
19
Chief Executive’s statement
Chairman’s statement continued
Our teams are also highly active in our local communities.
This year we announced a new partnership with the Football
Association to support their Game Changer programme to
help local communities to improve their club kitchen facilities.
Over the next 3 years Howdens will donate over £3m of our
kitchen and joinery products to support this important cause.
This not only improves the clubs, and their ability to generate
revenue, but also helps the lives of families in the communities
as well as supporting local tradespeople and businesses.
Capital allocation and returns to
shareholders
Our approach to capital allocation is unchanged. We focus
on achieving sustainable profit growth by investing in and
developing our vertically integrated business. We also
want to maintain and grow our ordinary dividend in line
with earnings to reward shareholders with an attractive
ongoing income stream. After allowing for these uses of cash,
Howdens remains committed to returning any surplus capital
to shareholders.
The Group’s dividend policy is to target a dividend cover
of between 2.5x and 3.0x. Taking into account the Group’s
prospects and strong financial position, in July 2022 the Board
declared an interim dividend of 4.7p per ordinary share. The
Board is recommending a final dividend for 2022 of 15.9p per
ordinary share, giving a total dividend of 20.6p per ordinary
share. (2021: 19.5p per ordinary share) and representing
a year-over-year increase of 5.6%. The final dividend will
be paid on 19 May 2023 to shareholders on the register on
11 April 2023.
In February 2023, the Board decided that the Group will
undertake a new £50m share buyback programme which we
will aim to complete over the next 12 months. This is in addition
to the £250m share buyback programme announced last
year, which was completed during the second half of 2022.
Governance
Companies today are judged by their integrity and
trustworthiness as much as by their financial performance.
One of my key responsibilities as Chairman is to set the tone
for Howdens and ensure good governance (see pages 76 to
147). In my early months as incoming Chairman I have been
extremely well supported by the members of the Board. With
their diverse backgrounds, they bring balance and a wealth
of skills and experience to our organisation that complements
the talents of our executive team. I thank them all for their
valuable contribution as we continue to maintain oversight
of the strategic, operational and compliance risks across
the Group, refine our path to success and uphold the high
standards expected of us.
On behalf of the Board I would also like to thank my
predecessor Richard Pennycook, who retired in September,
for his strong leadership and commitment over the last 8
years. He successfully oversaw a huge amount of positive
change over that period including an orderly succession from
Howden’s founding CEO Matthew Ingle to Andrew Livingston in
2018, and I am personally grateful to Richard for the time and
invaluable support he gave to me during my induction.
In February, we announced that Geoff Drabble will step down
from the Board at the end of the Annual General Meeting on
4 May 2023. On behalf of the Board, I’d like to thank Geoff
for his nearly eight years of service, in particular, as Senior
Independent Director and as the Non-Executive Director
Responsible for Workforce Engagement. He has made a
significant contribution to Howdens during a very successful
period of growth in the Company’s history and we wish
him well in the future. The Nominations Committee has a
comprehensive succession planning process and a further
announcement on the handover of Geoff’s responsibilities will
be made in due course.
Looking ahead
The Group performed strongly in 2022 and while the
macroeconomic and geopolitical environment is uncertain,
our business model is resilient, and we start the new financial
year in a position of strength, leveraging our scale and
expertise to continue to support our customers.
I am proud to have joined Howdens. It is a great business with
a clear strategy, well defined executional plans and huge
growth potential. Looking ahead, we remain excited about the
significant structural growth opportunities in our markets and
our ability to generate further sustainable long-term value for
all our stakeholders.
Peter Ventress
Chairman
6 March 2023
Further reading
See our Sustainability report
Page 46
See my introduction to our
Governance report
See our Board of Directors
Page 78
Page 80
Chief Executive’s
statement
Howdens delivered a strong
performance in 2022, with
good progress on executing our
strategic priorities and further
market share gains.
Andrew Livingston
Chief Executive Officer
Perspectives on 2022 results
Howdens delivered a strong performance in 2022, with good
progress on executing our strategic priorities and further
market share gains. During the year our teams have been
adept at navigating the challenges of high inflation and
supply chain disruption, while supporting our customers with
a market leading product range, high stock availability and
outstanding customer service.
Our markets are large and fragmented which gives us a long-
term opportunity for growth. In response, we are continuing
to expand our depot network, improve our product range,
optimise our manufacturing and supply chain, and develop our
digital capabilities. We see potential for around 1,000 depots
in the UK and we are now selectively expanding our business
model internationally in France and the Republic of Ireland.
Our robust financial position underpins our strategy,
funding investment in our growth initiatives, expanding our
manufacturing and supply chain capabilities, and supporting
ongoing cash returns for shareholders.
Operational highlights
We achieved another record sales performance in our peak
trading period in the autumn.
We opened 30 new depots in the UK, bringing the total to 808
at period end. We revamped 82 older UK depots during the
year with around 50% of UK depots now trading in the updated
format. We also opened 25 new depots in France (and closed
5) bringing the total to 60 at the period end, and we opened 5
new depots in the Republic of Ireland.
We made further progress on new product introductions
including 21 new kitchen ranges in the period. Sales of new
products introduced in 2021 and 2022 represented 22% of UK
product sales in 2022.
We invested in upgrading our manufacturing capacity and
capabilities to support future growth. This included solid work
surfaces, architrave and skirting products.
We largely completed the roll-out of the regional cross-docking
network (XDC) serving most of our UK mainland depots,
improving product availability.
We invested in our digital platform which saves our trade
customers time and money and supports them in optimising
the procurement process for end users.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage Title 20
Strategic report / Chief Executive’s statement
21
Chief Executive’s statement continued
We have moved our ESG agenda forward.
Size of the UK kitchen market
We believe the opportunities for the Howdens model
are greater than we previously thought, and we are
investing in the business accordingly.
Definitions and estimates of the size of the UK kitchen market
vary, however, based on proprietary research, we think a
reasonable estimate of the market as we think about it, was
around £7 billion by value, as at the end of 2022.
This is a larger value than we had assumed previously and
gives us plenty of room to increase our market share.
Similarly for our other product categories, which include
joinery and hardware, we now think the value of our
addressable UK market is some £4.5 billion, with our share
of such categories lower than our kitchen share.
Prior to any change in market volumes, this gives us total
addressable markets of around £11.5 billion in the UK versus
the £2.26 billion of UK sales we achieved in 2022.
In 2021 we achieved carbon neutral manufacturing at our
Howden and Runcorn sites.
In 2022 we maintained zero waste to landfill across all
manufacturing and logistics, with our UK depots reaching
99.7%.
In October 2022, 96% of our UK depots switched to using
renewable energy, generated in the UK primarily from wind,
solar or hydro power.
We have committed to develop our Net Zero targets with the
Science Based Targets Initiative, signifying our intention to
significantly reduce emissions throughout our supply chain
and to achieve Net Zero by 2050, having halved our direct
emissions by 2030.
For more information on our progress on ESG, please see our
Sustainability report starting on page 46.
Importance of our business model
The results demonstrate the strength of our local,
trade-only in-stock model and we believe we took
market share again this year, following the gains
made last year.
A strong product line-up, high stock availability, industry
leading service levels and a very engaged team have all
contributed to our performance, which benefits from the
ongoing investments in our customer focused strategic
initiatives.
In 2022 our customers on average spent more with us than in
2021 and we had a record number of customer accounts as at
the year-end.
We also increased prices, which helped us defray most of
the significant rises in input costs across the year. As well
as protecting gross margin, the business delivered annual
volumes well ahead of pre-COVID times.
Sales for our peak autumn trading period, which for us
comprised periods 10 and 11, were the highest ever,
with our supply operations delivering an exemplary
level of service to our depots.
Update on strategic initiatives
Howdens has made further
progress on its strategic
initiatives, and we expect to deliver
profitable growth and market
share gains over the medium term.
The four strategic initiatives are:
1)
Evolving our depot model
2)
Improving our product range and supply
management
3)
Developing our digital platforms
4)
Expanding our international operations
1) Evolving our depot model
High service levels, including local proximity and
immediate availability are very important to our
customers and we have continued to extend our UK
depot footprint in 2022.
We are opening all new depots in our updated format which
is designed to provide the best environment in which to do
business and to make space utilisation and productivity
gains in a cost-effective way, by using vertical racking in the
warehouse section of the depot.
In 2022, we opened 30 new depots and we believe there is
potential for around 1,000 depots in the UK, including c.25 in
Northern Ireland and we plan to open around.30 new depots
in 2023.
We have also continued with our revamp programme
for existing depots, and the programme is delivering
additional sales and has received very positive
feedback from depots and customers.
During the year, including relocations, we reformatted 82
depots, taking the total number of reformatted depots to 185
at the year-end.
The scale and scope of the revamps has been refined and,
in 2023 we will shorten the reformatting timetable in some
cases, reducing disruption to the refit and lowering, where
appropriate, costs by modifying the scope and scale of some
revamps to maintain incremental returns.
Overall, we will continue to target a payback of up to 4 years
for these projects. Including relocations, we plan to revamp
around 80 more depots in 2023.
By the end of 2023 we expect to have around 50%
of all UK depots, trading in the updated format.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage TitlePage Title 22
Strategic report / Chief Executive’s statement
23
Chief Executive’s statement continued
Update on strategic initiatives continued
The updated depot format
Updated front area creates the best environment for
our customers to do business in. Better warehouse racking
delivers more stock, in less space, with reduced picking times.
2) Improving product range and supply management
Range management
As product lifecycles shorten, managing the number
of kitchen ranges efficiently is crucial for both
our customers, who want best availability, and
for profitability.
We are managing range introductions and clearances so
that our 2023 current range count is around 90, organised in
10 families. New products for 2022 featured 21 new kitchen
ranges with total sales ahead of 2021 and 2019 with more
emphasis on higher priced kitchens and on ensuring more of
our most popular styles were accessible to all budgets.
Total sales of all product introduced in 2021 and 2022
represented around 22% of our UK product sales. During
2022, we focused on building out our ranges of higher priced
kitchens, where we are under-represented. Sales in this
category grew strongly in the period and contributed to the
percentage increase in average kitchen invoice value.
We also grew our market share significantly in the solid work
surface category. These products are often associated with
sales of higher priced kitchens, and the acquisition of the
Sheridans business along with additional investments has
expanded our range and manufacturing capacity to support
this significant opportunity.
Value for money consistently drives consumer buying
decisions and is likely to be more of a feature in 2023 given
mounting pressures on household budgets. We also expect
some consumers to reallocate how they spend their budget for
example, between cabinetry, worktops and appliances.
As a result, in 2023 we will increase the net number of ranges
aimed at entry and the mid-market segments, making more
kitchen looks and styles accessible to all budgets.
This is also important as kitchens from these segments are a
major contributor to keeping our unit costs of manufacture low.
“ Based around our core building blocks of Trade Service &
Convenience, Trade Value and Product Leadership, we have
initiatives in place to exploit opportunities in a challenging market”
t
r
o
p
e
R
c
g
e
t
a
r
t
S
i
New product for 2023 will feature around 23 new
kitchen ranges.
Features of our 2023 new product introductions will
include:
•
Extending our entry ranges with more colour options
including Greenwich in Reed Green, Witney in Pebble
and Navy and Allendale in Dusk Blue plus new frontals
for Greenwich and Witney to match the new ‘Croft Grey’
kitchen cabinet we are introducing this year.
• Refreshing the look of our bestselling shaker family, which
we have named Halesworth and adding a new mid-priced
beaded shaker family called Bridgemere, initially available
in three colours.
• Maintaining a similar range count to last year in higher
price kitchens, with the same number of families but
introducing additional new colours for 2023. We are also
adding more decors to our solid surface offering and
refining the template to fit service to ensure the best
service to our customers.
•
Introducing more new products in other categories both
for everyday lines and kitchen products. This includes
more colours and bolder styles at all price points in doors,
expanding our flooring ranges and further additions to our
Lamona brand, which is the leading integrated appliance
brand in the UK. We are also adding more styles, colours
and finishes in sinks and taps.
Manufacturing and supply chain
Our dedicated manufacturing and supply chain is
critical to the success of our in-stock offer.
We supply all product, whether manufactured or sourced, to
all depots. Since the COVID-19 pandemic we have continued
to hold enhanced safety stock as a contingency against
unexpected demand patterns and interruptions to supply
to support our customers.
We keep under review what we believe it is best to
make or buy, balancing cost and overall supply chain
availability, resilience and flexibility.
In 2019, we invested in manufacturing technology to enable
us to make the doors for our popular Hockley kitchen ranges.
Since then, we have invested in new lines which will enable us
to make frontals for more of our kitchen ranges, at the same
quality as we can source externally but at a lower cost and
at a reduced lead time. The new lines, located at our Howden
site, are now manufacturing frontals and will be moving up to
full scale production during the course of 2023. Our second
architrave and skirting line is also now operational, enabling
us to service in-house more of the substantial increase in
demand we have seen for these products.
Last year we announced our plans to expand, over the
next few years, our kitchen manufacturing capacity and
capabilities and to reconfigure some of the supporting
infrastructure at our Howden factory and we are continuing
to progress the investments required to achieve this.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationGovernance
24
Strategic report / Chief Executive’s statement
25
Chief Executive’s statement continued
Update on strategic initiatives continued
Regional cross-docking centres (XDCs)
The roll out of our XDC programme was completed
early in the new financial year and the service is
now available to nearly all UK mainland depots.
This approach improves stock replenishment through regional
hubs that supplement the depots’ core weekly replenishment
with a next day service.
XDCs also optimise the service levels our depots can deliver to
customers by rebalancing inventory and freeing up more time
and resources to focus on sales and service while reducing
the need for inter-depot stock transfers.
This year we will continue to optimise the service balancing
cost and availability with providing the best service to
support our trade customers’ daily needs. By rebalancing
where we hold stock and changing the delivery pattern of
some lines to depots, depots can allocate more warehouse
space to faster selling lines and can reduce stocks of slower
moving lines while providing a high level of service across the
product range.
XDC is now seen as a key point of differentiation by
both customers and our depot teams versus the best
competitor offerings.
“ We keep under review what we believe it is best to make or buy,
balancing cost and overall supply chain availability, resilience
and flexibility”
3) Developing our digital platforms
4) Expanding our international operations
Our digital strategy reinforces our model of strong
local relationships between depots and their
customers by raising brand awareness, supporting
the business model with new services and ways to
trade with us and delivering productivity benefits for
depot employees and customers.
Our international operations, predominantly based
in France continue to make good progress. The
business model for France is similar to the UK with a
market size in kitchens of around €4.3bn (excluding
appliances).
In 2022 we added to our capabilities for the builder, including
new functions which improves our digital offerings.
The French market has low penetration rates of integrated
kitchens and most are purchased through DIY outlets and
specialist small independent businesses.
The Trade App which puts more aspects of the local depot in
the hands of our customers was launched in February last
year. This replicated core features of the online trade platform
including customers’ account details and credit status,
making them readily accessible on the move.
Since 2019, we have been opening depots in small clusters
within cities which benefit from word of mouth between
customers and our ability to build a local and trusted brand.
Clustering also helps to build the Howdens culture within our
business teams.
Customers can also view their open orders, and new features
include rapid check in at any depot, order status updates and
an easy order collection function.
We continue to see high levels of engagement with
our web platforms and growth in our social media
presence which also stimulates interest in viewing
our products and services on Howdens.com.
New registrations totalled nearly 80,000 and around 45% of
our customers had an online account by the end of 2022.
‘Impressions’ were present in 15% more organic search results
a month with site visits at 21 million. The time users spent
looking at pages increased by 51% and the number of pages
viewed per session also increased.
Across our social media sites our follower base was c.455,000,
up 14%, with 1.6 million users actively engaging monthly.
In 2023 we will be adding new services and capabilities
which collectively improve lead quality, stock and account
knowledge, promote frequency of trading and reduce time
consuming manual tasks in depots, including stock allocation.
By the end of 2022 we increased the number of depots trading
in France and Belgium to 60 with a significant proportion in
the Paris metro area. We are continuing to selectively invest in
expanding the business and expect to open around 30 depots
in the next two years with around 10 new depots in 2023.
We believe appreciation of the advantages of our trade-only
in-stock model, our service levels and competitive pricing is
growing, and with around 90% of product common to our UK
ranges this helps us realise scale benefits.
We are using a similar approach to that in France,
adapted to fit the population distribution of the
Republic of Ireland and with the depots supported
by our UK infrastructure.
During 2022 we opened our first 5 depots clustered around
Dublin. Our arrival in the Irish market has attracted much
attention locally and we are encouraged by depot sales to date.
In 2023, we plan to have at least 10 depots trading by the end
of the year. This city-based approach fits with Irish population
distribution and the depots can be supported by the UK.
XDCs
Maintaining our in-stock offer, delivering superior customer
service, and freeing up time and resources in our depots.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage TitlePage Title 26
Strategic report / Chief Executive’s statement
27
“ We have made an encouraging start to 2023
and we are confident in our business model
across changing market conditions”
Chief Executive’s statement continued
Prospects for 2023
Given prevailing macroeconomic circumstances,
including on-going inflationary cost pressures, we are
expecting a more challenging marketplace in 2023.
However, we have prepared for this and our customers, mainly
self-employed people, are adept at managing their businesses
through such times.
Delivered by our highly entrepreneurial and well incentivised
teams across the business, I believe that our service-
orientated, trade-only, in-stock, local model is the right one
to deliver sustainable market share gains across changing
market conditions.
Our model is difficult to replicate and compete with, and
we have initiatives in place to make it more so, in markets
where the longer-term opportunities for us are larger than
we previously thought. We are prioritising investment in the
business on this basis.
We are well planned on our strategic initiatives which
are aimed at increasing our market share profitably.
High stock availability is a major contributor to our
performance and in 2023 we will continue with our safety
stock policies but at more normalised levels.
Most of our new kitchen ranges for 2023 will be in stock by the
end of June, well ahead of peak autumn trading, and with more
emphasis on entry and mid-price points.
We have a programme of ‘Rooster’ promotions in place to
keep Howdens at the front of the trade’s mind together with
our ‘Bang on the Money’ price initiative.
We will continue to make improvements to service and
availability, including by utilising XDCs efficiently. We are
increasing the range of services and functionality we offer
online to the benefit of our depot teams, customers and
end-users.
We will be making more in the UK, as our new kitchen door and
skirting lines commence fuller-scale manufacturing, and our
solid surface business grows.
During 2023 we plan to open around 30 depots in the UK and
refurbish around another 80 existing depots to the updated
format.
In France we plan to have around 70 depots trading by the
end of 2023, and to have around 10 trading in the Republic
of Ireland.
Whilst it is early days, we have made an encouraging
start to 2023 and we are confident in our business
model across changing market conditions
We aim to retain a profitable balance between margin and
volume, whilst aligning operating costs and working with
suppliers to keep product and input costs controlled.
Sales in periods one and two increased versus the comparable
ones last year and our feedback is that builders currently
remain busy.
We are mindful of the challenges current macro-economic
conditions including ongoing inflationary cost pressures, and
we are trading against record prior year comparators.
However we have, at present, the momentum for another
successful year in 2023 and we will continue to invest in our
key capabilities and growth opportunities which are pivotal to
the longer-term development of the business.
Andrew Livingston
Chief Executive Officer
6 March 2023
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage TitlePage Title Key performance indicators
28
Strategic report / Key performance indicators
29
Key performance indicators
Financial
Non-Financial
Sales
Why we measure it
We believe that there are considerable opportunities to grow
sales. As sales grow, we believe there are economies of scale
which will also allow us to grow long-term profitability.
Links to strategy, risks and remuneration
Reach more builders
Failure to maximise growth potential
Depot staff bonuses are directly linked to their depot’s sales
Progress
Total Group sales of £2.3bn in 2022, up 10.8%.
n
b
1
.
2
£
n
b
3
.
2
£
n
b
5
.
1
£
n
b
6
.
1
£
n
b
5
.
1
£
Profit before tax
Why we measure it
Profit before tax is a simple and widely understood
measure. We consider that it gives a complete picture
of our performance as it includes all of our operating,
selling and distribution, admin and financing expenses.
Links to strategy, risks and remuneration
Operational excellence
Prudent financial management
Failure to maximise growth potential
Deterioration of model & culture
Executive Committee and senior management
bonuses are directly linked to PBT
Progress
Profit before tax in 2022 increased to £406m.
m
0
9
3
£
m
6
0
4
£
m
9
3
2
£
m
1
6
2
£
m
5
8
1
£
Health & Safety
Why we measure it
We have over 12,000 employees working in our factories,
our logistics operation, our support sites and our depots and
we need to keep them all safe at work.
Links to strategy, risks and remuneration
Operational excellence
Health & Safety
Progress
Our rate of RIDDOR-reportable injuries decreased significantly
from 2021 to 2022, and is also significantly below the HSE all-
industry average for the year. See page 64 for more detail.
Depot openings
Why we measure it
We believe that there is some way to go before the UK market is
saturated. We continue to identify possible sites for new depots
whilst at the same time keeping our model flexible, and allowing
us to take account of economic conditions and phase the speed
of our growth accordingly. We plan to expand our depot network
in the UK, France and the Republic of Ireland in 2023.
Links to strategy, risks and remuneration
Reach more builders
Failure to maximise growth potential
Deterioration of model & culture
Progress
We ended 2022 with 30 more depots in the UK, 20 more in France
and we opened our first 5 depots in the Republic of Ireland. We
plan to continue to expand our network in 2023.
5
5
1
4
0
4
3
3
9
1
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Cash
Why we measure it
We aim to cover our investment needs, to retain at least one
year’s working capital requirement, to pay a progressive
dividend and to return surplus cash to shareholders (see
page 33 for details of our capital allocation model).
Links to strategy, risks and remuneration
Prudent financial management
Invest in our strategic priorities
Return surplus cash to shareholders
Executive Committee and senior management bonuses
are directly linked to cash generation targets
Progress
We have invested £155m in capital expenditure and acquisitions
for future growth and have also returned £365m in dividends and
buybacks, ending the year with £308m net cash.
Links to:
Strategy
Risk
Remuneration
Use of FSC® or PEFC
certified materials
Why we measure it
We use almost a third of a million cubic metres of chipboard
and MDF in our factories. FSC® and PEFC are the two
main certification bodies. Ensuring that all our MDF and
chipboard is certified by them gives us assurance over
their provenance. See pages 66 and 67 for more details.
Links to strategy, risks and remuneration
Product innovation
Product relevance Continuity of supply
100% of wood-
based material
used in our
manufacturing
processes from
FSC® or PEFC
certified sources
Production waste
recycling
Why we measure it
One of the pillars of our business model is our efficient
production, which gives us a significant cost advantage.
Recycling as much of our waste as we can benefits stakeholders
as it reduces our emissions and our costs.
Links to strategy, risks and remuneration
Operational excellence
Prudent financial management
Progress
We are pleased to maintain the result that 100% of
our production waste was reused recovered or recycled.
See page 68 for more details.
100%
%
5
.
8
9
%
8
.
9
9
%
0
0
1
%
0
0
1
%
0
0
1
2018
2019
2020
2021
2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage TitlePage Title Financial review
30
30
Strategic report / Financial review
3131
Financial review
• Strong results with further
Financial results for 20221
market share gains
• Continued investment in our
strategic initiatives
• Good cash generation and
robust balance sheet
• 20.6p 2022 full year dividend
and £50m share buyback
programme announced
Paul Hayes
Chief Financial Officer
Revenue
Group revenue of £2,319.0m was ahead by 10.8% (2021:
£2,093.7m) and 46.4% higher than the same period in 2019,
with the growth rate in the second half increasing versus 2019
at a higher rate than the first half.
UK depot revenue grew 10.4% to £2,256.1m (2021: £2,043.3m)
and increased by 7.7% on a same depot basis2 to £2,193.3m
(2021: £2,035.8m); this excludes the additional revenue from
depots opened in 2022 and 2021 of £62.8m (2021: £7.5m).
Revenue in the international depots was £62.9m (2021:
£50.4m). On a local currency basis, revenue at our depots
in France and Belgium increased by 14.8% on a same depot
basis2 (excluding the 35 depots opened in the last two years).
In April, we entered the Republic of Ireland market for the first
time. In all, we opened 5 new depots in the Dublin area by the
end of 2022 with good engagement from local builders.
Gross profit
We continued to maintain sector leading margins by
appropriately balancing pricing and volumes in a higher
inflationary environment. Gross profit was £122.2m higher
at £1,411.2m (2021: £1,289.0m). The lower gross margin
percentage of 60.9% (2021: 61.6%) was predominantly due
to the dilutive impact of the successful growth of solid work
surfaces, following the acquisition of Sheridan last year. These
products, which are often associated with sales of higher
priced kitchens, make an attractive cash margin contribution
but have a lower gross margin percentage than most
Howdens’ kitchen products.
Operating profit
Operating profit was ahead of last year and 2019 at
£415.2m (2021: £401.7m) and 59.7% ahead of pre-COVID
levels (2019: £260.0m).
Operating expenses increased by 12.3% to £996.0m (2021:
£887.3m; 2019: £726.2m). As expected, costs increased due
to continued investment in our growth initiatives across the
business and input cost and energy price inflation. Compared
to 2021 this included £42m on existing depots, £17m on new
UK depots opened in 2021 and 2022 and £8m on international
depots opened in the period and prior year. We also invested
£31m in warehouse and transportation initiatives including in
regional cross docking facilities (XDCs).
The net interest charge was £9.4m (2021: £11.4m) and,
as a result profit before tax of £405.8m was 4.0% ahead
of the prior year (2021: £390.3m) and 55.7% ahead of 2019
(2019: £260.7m).
1
2
The information presented relates to the 52 weeks to 24 December
2022 and the 52 weeks to 25 December 2021 unless otherwise stated.
Same depot basis for any year excludes depots opened in that year
and the prior year.
Revenue1 £m
Group:
Howden Joinery UK depots – same depot basis2
UK depots opened in previous two years
Howden Joinery UK depots – total sales
Howden Joinery Continental European depots
Revenue €m
France and Belgium – same depot basis2
Depots opened in previous two years
Revenue from closed depots
Republic of Ireland (from April 2022)
France and Belgium – total sales
2022
No. of depots
2,319.0
2,193.3
62.83
2,256.1
62.9
59.5
12.3
0.7
1.3
73.8
873
747
61
808
65
30
35
(5)
5
65
2021
2,093.7
2,035.8
7.5
2,043.3
50.4
51.8
0.4
6.2
–
58.4
1 The information presented relates to the 52 weeks to 24 December 2022 and the 52 weeks to 25 December 2021 unless otherwise stated.
2 Same depot basis for any year excludes depots opened in that year and the prior year.
3 2022 includes additional 3rd party sales generated by the Sheridans solid work surface business acquired in the period.
Tax, profit after tax and basic
earnings per share
In recent years the UK Government has introduced the Patent
Box Tax Relief Scheme which allows companies to benefit
from investments made in intellectual property including
new product innovations. In 2017, Howdens applied for, and
was granted, a patent for the design of a new multi-part,
adjustable cabinet leg that is used in many of our cabinet
ranges, which makes them faster and easier to adjust and fit.
Discussions were opened with HMRC late in 2020 and in 2022,
after seeking non-statutory clearance on some technical
matters, HMRC agreed in principle to Howdens submitting a
claim for the product.
The Group has prepared the financial statements for the
year ended 24 December 2022 to include the impact of the
claim. A prior year current tax credit of £36.1m has also been
recognised for the prior financial periods 2017 to 2021. The
success of the claim is subject to review and confirmation
by HMRC. If successful the Company expects, assuming
prevailing marginal tax rates, a benefit to the underlying
effective tax rate of around 3% in subsequent years. The cash
benefit will be realised following approval by HMRC.
As a result, the tax charge on profit before tax was £31.6m
(2021: £75.8m) and represented an effective tax rate of 7.8%
(2021: 19.4%). Excluding the patent box claim the underlying
effective tax rate was 16.7% (2021: 19.4%).
Consequently, profit after tax was £374.2m (2021: £314.5m)
and, reflecting the above and the reduced share count
following the share buyback, basic earnings per share
were ahead by 23.7% at 65.8p (2021: 53.2p).
Cash
The net cash inflow from operating activities was £546.5m
(2021: £530.7m).
Net working capital increased by £51.7m with stock £70m
higher as a result of cost increases and additional safety
stock to support our customers. Debtors at the end of the
period were £24m higher than at the end of the previous
period with ageing in good shape. Creditors were £42m higher.
Capital expenditure was £130.4m excluding the Sheridans
land acquired (2021: £85.9m) and the total cash outflow for
the Sheridans acquisition was £25m which included £10m
to acquire the site. Corporation tax payments were £101.5m
(2021: £73.1m), and dividends amounted to £115.0m (2021:
£133.6m). Share buybacks totalled £250.5m (2021: £50.0m)
and the difference between the cash paid and the operating
charge for the Group’s pension schemes was an inflow of
£2.0m (2021: outflow of £18.5m). The interest and principal
paid on lease liabilities totalled £79.2m (2021: £85.8m).
Reflecting the above, there was a net cash outflow of £207.3m
(2021: cash inflow of £84.6m), leaving the Group with cash at
the year end of £308.0m (25 December 2021: £515.3m).
In September, the Company signed a new £150 million,
five-year, multi-currency revolving credit facility replacing
the previous asset backed lending facility. The new facility
remains undrawn.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportPage Title
32
Strategic report / Financial review
33
Financial review continued
How we make cash and how we spend it
Cash generation and use
£1,000
£800
£600
£400
£200
m
£
m
5
1
5
£
21
0
Opening
net cash
Uses of cash
£18.5m
2021
2022
+£547m
-£79m
-£52m
£2m
-£102m
-£155m
-£115m
-£250m
-£3m
m
8
0
3
£
22
Operating
cash flows
– pre leases
Lease
Payments
Working
capital
changes
Pension
contribution
Tax
paid
Capex and
acquisition
Dividends
paid
Shares
repurchased
Other
Closing
net cash
£85.9m
£50m
£133.6m
£155m
£250m
£115m
Pension deficit
Capex
Share buyback
Dividend
Capital allocation and returns
to shareholders
We have a well-established policy for capital allocation. We
focus on achieving sustainable profit growth by investing in
and developing our business. We also want to maintain and
grow our ordinary dividend in line with earnings to reward
shareholders with an attractive ongoing income stream. After
allowing for these uses of cash, Howdens remains committed
to returning any surplus capital to shareholders.
Within its definition of surplus capital, the Board’s objective
is for the Group to be able to operate through the annual
working capital cycle without incurring bank debt, noting that
there is seasonality in working capital balances through the
year, particularly in advance of our peak trading period in the
second half. We also take into account that the Group has a
significant property lease exposure for the depot network,
and a large defined benefit pension scheme. Our policy
remains that when year end cash is in excess of £250m we
expect to return surplus cash to shareholders. This provides
sufficient headroom to support organic growth, our seasonal
working capital requirements and ongoing investments in our
strategic initiatives, while maintaining a strong balance sheet.
On this basis, the Board has decided that the Group will
undertake a further £50m share buyback programme.
A £250m share buyback programme was announced
and completed last year.
Taking into account the Group’s prospects and strong
financial position, in July 2022 the Board declared an interim
dividend of 4.7p per ordinary share (2021: 4.3p per ordinary
share). The Board is recommending a final dividend for 2022
of 15.9p per ordinary share (2021: 15.2p per ordinary share),
resulting in a total dividend of 20.6p per ordinary share (2021:
19.5p per ordinary share). The total dividend represents a
year-over-year increase of 5.6% and the final dividend will
be paid on 19 May 2023 to shareholders on the register on
11 April 2023.
Howdens’ approach to capital structure
Investing in organic growth:
Progressive ordinary dividend growth
• Open new and revamp existing depots
• Sustainable growth through the cycle
• Disciplined range management
• Optimise manufacturing & logistics
• Grow digital platform
Return surplus cash
to shareholders:
• After organic investment needs
• Seasonal working capital movements
• Fund pension scheme
• Distribute cash >£250m
Modest investment
in adjacencies:
• Vertical integration e.g. solid surfaces
• Land purchases for expansion
Acquisitions
Pensions
In February 2022, Howdens acquired Sheridan Fabrications
Ltd, for a total consideration of £25m including £10m for
the purchase of the site. Sheridans is a leading industry
specialist for the manufacture, fabrication, laser templating
and installation of premium worksurfaces. The acquisition
supports our ambition to develop our Howdens Work
Surfaces (HWS) operations as the market leading supply and
fit business. We are continuing to invest in expanding our
capacity and we have now rolled out HWS to all regions and
solid surface worktop orders have significantly increased on
the prior period.
At 24 December 2022, the defined benefit pension scheme
was in a deficit position of £42m on an IAS 19 basis compared
to a surplus of £141m on 25 December 2021. This movement
from a surplus to a deficit was primarily a result of an increase
in the net discount rate resulting in a reduction in the liabilities
of £571m, and a decrease in asset valuations of £754m. The
extreme market volatility in September 2022 led to changes
in the Plan’s investments to meet collateral requirements and
high inflation experienced through 2022 also increased the
liabilities. The defined benefit pension scheme is closed for
future accrual.
The pension has returned to a small deficit on a technical
provisions basis from November 2022 and, as a result,
deficit contributions of £2.5m a month re-commenced in
January 2023. It is possible that the scheme could return to
a surplus position on a technical provisions basis. If this were
the case for more than two consecutive months then deficit
contributions would cease. The next full triennial valuation of
the scheme will be carried out as at 31 March 2023.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage TitlePage Title 34
Strategic report / Financial review
35
Financial review continued
Current trading and outlook for 2023
Current trading
The following table shows sales in the first two periods of the
new financial year to 18 February 2023 in absolute terms, on a
same depot (LFL) basis1.
Revenue growth (%)
UK depots
International depots*
Periods 1–2
%
6.1%
19.4%
LFL%
4.7%
7.8%
*
5 depots were opened in the Republic of Ireland and 5 French depots were
closed in 2022.
We are on track with our plans for 2023 to capitalise on the
significant ongoing opportunity to gain further market share.
During 2023 we will face strong prior year comparatives and,
particularly in the first half, the full year impact of inflationary
cost increases and our ongoing investments in our strategic
initiatives. This includes 61 new UK depots opened in the past
two years, expanding our manufacturing and supply chain
capabilities including XDC, ongoing digital development to
support our customers and new depot openings in France and
the Republic of Ireland. In 2023, capital expenditure will be
around £130m, at similar levels to last year.
While it is still early in the new financial year, sales in the first
few weeks have been encouraging in the UK. We continue to
seek to maintain a profitable balance between pricing and
volume and have implemented a price increase from the start
of the year to recover rising input costs. We have a strong
product line up and will place considerable emphasis on new
product introductions with around 23 new kitchen ranges
planned. We are increasing the number of ranges we offer in
entry-level and mid-priced kitchen ranges and have refreshed
our line-up of higher-priced kitchens, a segment of the market
where we are under-represented.
While mindful of ongoing macroeconomic uncertainty,
we are investing in the business for the long-term and the
fundamentals of our business model remain robust and
attractive. Howdens is in good shape and we are well prepared
to address the opportunities and challenges ahead in 20232.
1
2
Same depot basis for any year excludes depots opened in that year
and the prior year.
As previously indicated FY2023 has an additional 53rd week in December
representing around £17m of additional operating costs with no
incremental sales.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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 a £150m revolving credit
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 foreign currency risk, counterparty
risk, funding and liquidity risk and interest rate risk, which are
discussed below.
No speculative use of derivatives, currency or other
instruments is permitted. The Treasury function does not
operate as a profit centre and transacts only in relation to the
underlying business requirements.
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 adverse impact of exchange rates on currency
transactions in the year was £0.7m. The principal exchange
rates affecting the profits of the Group are set out in the
following table.
Principal exchange rates versus UK pound (£)
1.50
1.25
1.00
0.75
0.50
0.25
0
1.38
1.33
1.23
1.21
1.16
1.18
1.17
1.14
21
22
21
22
United States dollar (US$)
Euro (€)
Average rate
2022 Year-end
2021 Year-end
Counterparty risk
Interest rate 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. The Group continuously reviews the credit
quality of counterparties, the limits placed on individual credit
exposures and categories of investments.
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 a committed, multi-currency, revolving credit
facility which allows borrowing of up to a maximum of £150m.
The facility was not used at any point during 2022 and is in
place until September 2027. More details of this facility are
given in note 19 to the financial statements.
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 2022 year end, the Group had £308m of net cash and
£150m of funds available to borrow under the committed
borrowing facility.
The Group has not had any borrowings during 2022 and does
not consider interest rate risk to be significant at present.
New accounting standards
None of the new accounting standards that came into effect
during 2022 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
Paul Hayes
Chief Financial Officer
6 March 2023
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage TitlePage Title Risk management and principal risks
36
Strategic report / Risk management
37
Risk management and principal risks
Risk management
At a glance
•
Our principal risks
Our risk appetite is adaptive
Market conditions
Supply chain
Maximising growth
People
Health and Safety
Cyber security
Business model & culture
Product
Business continuity & resilience
See page 39
Our risk heat map
Low
If the risk presents a hazard to our
operations or strategy
Higher
If the risk presents us with a sale or
service improvement opportunity
Balanced
For all other risks we carefully balance
the risk and our mitigation efforts with
the potential reward
Our most significant
emerging risks
Geopolitical
Digital
Climate-related risk:
•
Transitional risks as the world moves
toward a zero carbon economy; and
•
Physical risks presented by the
changing climate
See page 39
Our approach to risk, and emerging risks
Our approach to risk
When we look at risks, we specifically think about internal and
external drivers of operational, hazard, financial and strategic
risk areas over short, medium and long-term timescales. We
consider the effects they could have on our business model,
our culture and our strategy which we set out starting at
page 8, and which we encourage you to refer to as you read
this section.
Risk appetite
‘Risk appetite’ describes the amount of risk we are willing to
tolerate, accept or seek. Our risk appetite is determined by the
nature of the risk and how that risk could affect us.
We have a higher appetite for risks that present us with a clear
opportunity for reward, and we actively seek out those that
provide the greatest opportunities.
We have some appetite for risks with a possible opportunity for
reward. With these risks, we carefully balance our mitigation
efforts with our view of the possible rewards.
We have a very low appetite or tolerance for risks that only
have negative consequences, particularly when they could
adversely impact health & safety, our values, culture or
business model. We aim to eliminate these risks with our
mitigation efforts.
The Board sets and regularly reviews their risk appetite for
key and principal risks. This appetite is used by the Executive
Committee when considering risk mitigation strategies.
Climate-related risk – an emerging risk which is not a principal risk
We handle climate risk in the same way as our other risks,
albeit that time horizons may be longer. We have continued
to develop our climate risk approach during 2022, more
detail on our this can be found in our TCFD section at page
54. Over 2022 our key climate risk developments include:
Risk management
We have developed a risk assessment approach that is
modelled on the British Standard (BS EN ISO14091) and
tailored to meet our needs, that enables robust prioritisation
of risk exposures for treatment.
Risk identification
We have engaged with some of our key stakeholders,
including our insurers, to understand how their focus on
climate risk is likely to change going forward and the impact
it will have on us.
Integration into our risk management framework
We have integrated climate risks into our operational risk
registers which benefit from clear ownership and formal
review as part of our regular risk process.
Emerging risks – none of which are principal risks
We consider emerging risks as part of our risk management
approach using both internal expertise and external
resources to identify emerging issues and their potential
impact. We consider risk over three different time horizons:
Horizon One – (Current issues out to 12/18 months) –
Typically operational in nature and robustly covered by the
current process.
Horizon Two – (12/18 months to 5 years) – Includes those
risks that may impact on achievement of our strategic
objectives as well as new risks our strategic objectives may
present to the business.
Key areas of emerging risk remain:
Climate
We have an established Sustainability Committee, devolved
from the Board, who support them in establishing our
climate strategy, identifying, and managing climate risk and
setting metrics and targets – see TCFD reporting page 54.
Digital
As we continue to develop our digital capabilities to
provide our customers with the services they need, we
will come across new risks that will need managing to an
acceptable level.
Horizon Three – (5 years plus) – Risks that may shape our
strategic direction beyond the next 5 years.
Geopolitical
Where appropriate, emerging risks are escalated to the
Executive and Board as part of our regular risk reporting.
As a global business we are exposure to geopolitical risks
around the world and the political environment has been
presenting challenges over 2022 that may continue into
2023 and beyond. We include geopolitical risk in our risk
review process and consider the impacts they could have
on our risk profile in areas such as Supply Chain, Growth and
Market Conditions.
We consider tax risks and our tax strategy as part of our operational risk management. We operate a specific tax risk register with risks owned by senior staff members
and with Executive oversight. We do not consider taxation as a principal risk to Howdens. Our Group UK tax strategy may be found at www.howdenjoinerygroupplc.com/
governance/group-uk-tax-strategy
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportPage Title 38
Strategic report / Risk management
39
Risk management continued
Principal risks and uncertainties
The risk management process
The main steps in the process are set out below:
1 Identification
2 Assessment
Functional management and leaders formally identify
risks twice a year providing both a bottom-up and a
top-down perspective. We record these in functional risk
registers for each area of our business. We also conduct
ad hoc reviews of new and emerging risks throughout
the year as they arise.
We assess risks using a Group-wide scoring mechanism
that considers both the likelihood of occurrence and the
potential impact. We prioritise them by their risk score and
an assessment of the level of exposure against our risk
appetite is conducted. Risk that exceed our appetite
may require additional risk response.
4 Monitoring and reporting
We provide a consolidated key risks report to the
Executive Committee and Board for review, using
escalation criteria previously set by them. Mitigation
plans and the progress against them are also reported.
The Board considers and agrees the key risks, appetites
and mitigation strategies which are fed back to risk
owners. We conduct this exercise twice yearly and it is
used to determine the Group’s principal risks.
Risk governance
3 Response
Risks that require a response have additional
mitigation strategies agreed and a future action
plan drawn up together with a timeframe. We assign
responsibility for implementation of action plans.
Key activities
Risk monitoring and reporting
People
responsible
Reports/documents
Principal risks
• We determine our principal risks from
the key risk report and agree them with
Executive Committee and Board.
• Executive Committee and Board challenge
and agree the Group’s key risks, appetites
and mitigation strategies twice yearly.
• Key risks, assessments and responses are
consolidated into a key risk report.
Risk response
• Where risks exceed our appetite, mitigation
plans are drawn up by functional leaders
and agreed with the Executive Committee.
Risk assessment
• Risks are prioritised using a Group-wide
scoring mechanism and are compared to
our risk appetite.
Risk identification
• We conduct operational risk register reviews
regularly to monitor current and emerging
risks.
• We review internal/external emerging issues
prior to each register review.
Top-down
Board
Executive
Committee
Audit Committee
Risk team
Functional
leaders
Operational
management
Risk team
Bottom-up
We consolidate the principal risks from the
key risk report. These are those risks that we
consider could have a potentially material
impact on our operations and/or achievement
of our strategic objectives.
Key risk report
We consolidate our key risk report from the
risk registers. This report outlines the highest
scoring risks, emerging risk issues, the biggest
influences to our risk profile and changes to the
risks reported. The key risk report also provides
a Group-wide perspective on risks escalated.
Risk register
We record risk registers for each functional
area, aligned with the operating model of
the business. The register includes all of the
information required to accurately capture the
risk and is maintained on our risk management
information system. We identify an owner
for each risk register responsible for its
maintenance as well as the risks it contains.
Principal risks
• No new principal risks
• 1 risk score has increased – Market conditions
• 1 risk score has decreased – Business model & culture
Risk heat map
To help visualise our principal risks, we have plotted them on the heat map below.
The individual risks are described in more detail on the following pages.
r
e
h
g
H
i
8
9
4
6
3
5
7
2
1
t
c
a
p
m
I
r
e
w
o
L
Brexit
Lower
Likelihood
Higher
Risk
1 Market conditions
2 Supply chain
3 Maximising growth
4 People
5 Health and safety
6 Cyber security
7 Business model
& culture
8 Product
9 Business continuity
& resilience
Any breakdown of this agreement has the potential to bring
with it some risk for all companies operating in the UK and
the European Union. The main areas of potential risk for
Howdens include:
We continue to actively monitor the ongoing relationship
between the EU and UK and reconsider our mitigation plans
and potential impacts as part of our risk process.
• Free trade & customs risks
— Loss of free trade status.
— Exit from the customs arrangements.
— No regulatory co-operation.
• Strategy & business plan risks
— Consumer/Investor uncertainty.
— Currency and stock market volatility.
COVID-19
Whilst the impact of COVID-19 was lower in 2022 than in
previous years, we remained vigilant and promptly dealt with
any issues that arose during the year. Our learnings of what
risks to expect and how to deal with them gained over
2020–21 helped us effectively manage these issues over 2022
and will continue to help us be prepared going forward.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage TitlePage Title
40
Strategic report / Principal risks and uncertainties
41
Principal risks and uncertainties continued
2022 Principal risks
The arrows alongside each risk show the year on year change
Links to strategy
Reach more builders
Operational excellence
Product innovation
Prudent financial management
1. Market conditions
2. Supply chain
Over 2022 the scoring of this risk has increased because of continuing economic uncertainty.
Risk and impact
Mitigating factors
Risk and impact
Mitigating factors
• Our products are mostly
sold to small builders and
installed in owner-occupied
and private and public sector
rented housing, mainly in
the repair, maintenance and
improvement markets. If
activity falls in these markets,
it can affect our sales.
• We have proven expertise in managing both selling prices and costs. This continues to be
a main area of focus.
• We have a good record of dealing with changes in market conditions. We monitor activity
across our supply chain and depots closely, using the good relationships we have to give
us early warnings of changing conditions. This enables us to take swift mitigating action
to emerging market risk factors.
Mitigation actions in 2022
•
•
Closely monitored the UK and global geopolitical environments, the impact on the cost of
living and of operating our business.
Frequent scenario planning based on latest information to ensure our plans were
appropriate to changing market conditions.
Risk appetite
Shifts in the market conditions can impact small builders, and therefore our sales. We manage this risk through active
market analysis and competitor review, and then optimising selling prices and our costs. We have a low appetite for market
conditions risks and maintain close relationship with the small builder to identify movements early to enable appropriate
action to be taken.
• Any disruption to our
relationship with key
suppliers or interruption
to manufacturing and
distribution operations
could affect our ability to
deliver the in-stock business
model and to service our
customers’ needs. If this
happened, we could lose
customers and sales.
• We build strong relationships with our suppliers, focused on integrity, fairness, and
respect, and which are worthwhile for all concerned.
• Where appropriate we enter long-term contracts to secure supply of key products,
services, and raw materials.
• Wherever possible we have multiple-sourcing strategies for our key products, to reduce
the effect of a supply failure.
• We have invested in our supply chain operations and this investment gives us increased
capacity and agility.
• We are also investing in new warehouse space to support our distribution capabilities
and equip them for growth.
Mitigation actions in 2022
• Closely monitored the UK and global geopolitical environments and the impacts on our
supply chain.
• Maintained our Authorised Economic Operator (AEO) preferred importer/exporter status
to reduce potential customs delays.
• Optimised our safety stocks levels, to reduce the potential risk of global supply
constraints.
• Improved manufacturing planning and scheduling to ensure stock availability ahead of
demand, supporting our in-stock business model.
Risk appetite
Howdens is an in-stock business. Our customers expect this and rely on it. Because of this we have a very low appetite for
supply chain risk and will put extra effort in identifying them early and putting in place appropriate mitigation to prevent
stock issues at our depots.
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Strategic report / Principal risks and uncertainties
43
43
Principal risks and uncertainties continued
2022 Principal risks continued
The arrows alongside each risk show the year on year change
Links to strategy
Reach more builders
Operational excellence
Product innovation
Prudent financial management
3. Maximising growth
5. Health and safety
Risk and impact
Mitigating factors
Risk and impact
Mitigating factors
• If we don’t innovate,
• The opportunities and challenges related to growth are a major area of focus throughout
• Howdens is about people
• Since the beginning of our business, we have invested in safe ways of working.
recognise and exploit our
growth opportunities in line
with our business model
and risk appetite, or if we
don’t align structures and
skills to meet the challenges
of growth, we won’t get
maximum benefit from our
growth potential.
the business, at all levels.
• We continue to invest in our depot environment, people, services, and systems, and our
manufacturing and distribution capabilities to equip them for growth.
• Growth activities are reviewed in the light of our risk appetite, values, business model
and culture.
• Plans to continue with our expansion of our operations in France, and other territories.
Mitigation actions in 2022
• Converted a further 82 UK depots to the new depot environment.
• Opened a further 30 depots in the UK.
• Opened 20 additional depots in France.
• Opened 5 depots in Republic of Ireland.
• Further strengthening of our solid worksurface offering with the acquisition and
integration of Sheridan Fabrications into the Howden Work Surfaces team.
Risk appetite
We see a significant potential for growth which brings with it both opportunities and challenges. We have a medium
appetite for risk when it comes to growth, we are willing to accept some risk where we see a growth opportunity, carefully
balancing the risk we are taking with the potential reward that the opportunity presents.
4. People
Risk and impact
Mitigating factors
• Our operations could be
adversely affected if we were
unable to attract, retain and
develop our colleagues; or if
we lost a key member of our
team.
• We invested heavily in our employee value proposition, always striving to provide the
best possible working environment and growth opportunities for all our colleagues.
• We support our colleagues with a wide variety of apprenticeships, accreditations and
development programmes across all areas of our business.
• We use the Remuneration Committee to ensure that key team members are appropriately
compensated for their contributions and incentivised to continue their careers with us.
• We work continuously to ensure that appropriate continuity and succession plans are in
place. We will continue to focus on leadership development and succession planning.
• Equality, diversity & inclusion (EDI) Programme in place with specific goals established.
Mitigation actions in 2022
• Wellbeing programme continued, with further training made available for all our people.
• Continued to increase our apprenticeship offerings.
Risk appetite
The success of our business is driven by our people and their unwavering customer focus. We have a low appetite for
people risk and work hard in ensuring that they feel valued, rewarded appropriately, and have opportunities to develop
and progress in their Howdens career.
and relationships. We have
over 850 depots, 12,000
employees, hundreds of
suppliers and hundreds of
thousands of customers.
• If we do not ensure safe
ways of working across
the business, this could
compromise the safety and
wellbeing of individuals and
the reputation and viability of
the business.
Risk appetite
We have developed dedicated health and safety teams and formalised systems
that help us stay safe.
• We monitor, review, and update our practices to take account of changes in our
environment or operations and in line with best practice and changing legislation.
• Most importantly, we make sure we keep talking about health and safety at every level
of the business, led by the Executive Committee.
Mitigation actions in 2022
•
Transitioned to ISO45001 standards across all Trade Operations.
• Maintained COVID-19 safe practices in line with government advice.
Care for the health & safety of employees, customers, suppliers and everyone who comes into contact with Howdens is
integral to our values and to our behaviours. We put a great deal of effort into identifying and managing health & safety
issues before they occur and have a very low appetite for Health & Safety risks.
6. Cyber security
Risk and impact
Mitigating factors
• If we experienced a major
security breach, this could
result in a key system
being unavailable causing
operational difficulties,
and/or sensitive data to be
unavailable or compromised.
This could also lead to breach
of customer data.
• We place continuous focus on training our people in cyber security, as we recognise that
these risks are dynamic, not always technical and awareness is our first point of control.
• We employ complex technical IT security controls to protect our information and our key
systems. We regularly engage external specialists to validate the effectiveness of our
controls against industry best practice.
• We have robust disaster recovery and business continuity plans, and we test them
regularly.
• We adopt a continuous improvement approach to IT security and continue to invest in
the security of our systems.
Mitigation actions in 2022
• We reviewed and tested our cyber security posture with engagement of third party
expertise to provide insight, assurance and guidance.
• We improved our 24/7 monitoring with the introduction of additional robust controls.
Risk appetite
We depend 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. We have a very low appetite for cyber security risk
and manage IT security closely to secure the confidentiality, integrity and availability of these systems.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Strategic report / Principal risks and uncertainties
45
Principal risks and uncertainties continued
2022 Principal risks continued
The arrows alongside each risk show the year on year change
Links to strategy
Reach more builders
Operational excellence
Product innovation
Prudent financial management
7. Business model & culture
8. Product
Over 2022 the likelihood of this risk has reduced because of on-going focus of the management teams on our unique model and
culture.
Risk and impact
Mitigating factors
• If we lose sight of our values,
model, or culture we will
not successfully service
the needs of the local small
builder and their customers,
and our long-term
profitability may suffer.
• Our values, business model and culture are at the centre of our activities and decision-
making processes, and they are led by the actions of the Board, Executive Committee,
and senior management.
• The Board and Executive Committee regularly visit our depots and factories, our logistics
and support locations and hold events to reinforce the importance of our values, model,
and culture.
• Regular ‘Town Hall’ meetings are held to bring together teams and discuss our successes
and challenges ahead.
• Worthwhile foundation in place to further develop our charitable efforts.
Mitigation actions in 2022
• Continued our ESG programme enhancement, focusing on re-enforcing our core values
and further embedding our equality, diversity and inclusion standards.
• Events to recognise and reward, for example our annual, ‘Golden Rooster’ employee
awards event and our Apprentice Graduation Ceremony.
Risk appetite
Our future success depends on continuing to maintain our values, our unique business model, and our locally enabled,
entrepreneurial culture. To secure this we have a very low appetite for risks that can adversely impact on our business
model and culture and put great emphasis on identifying issues and addressing them early.
Risk and impact
Mitigating factors
• Kitchen technology and
• Our dedicated product team regularly refresh our offerings to meet builders’ and end-
design do not stand still, and
our products must reflect
that.
• If we do not support the
builder with new products
that their customers want, we
could lose their loyalty and
sales could diminish.
users’ expectations for design, price, quality, availability and sustainability.
• We work with external design and brand specialists and attend product design fairs to
monitor likely future trends.
• Our local depot staff have close relationships with their customers and end-users, and
we actively gather feedback from them about changes in trends.
• We work with our suppliers, to develop new and improved products for the future, some
of which are unique to Howdens. Several new products were introduced during the year
across all product categories.
Mitigation actions in 2022
• 21 new kitchen ranges launched.
• Sheridan Fabrications solid worksurface offering acquired and integrated into Howden
Worksurfaces.
• Restructured our Product and Marketing teams, providing greater insight and resilience.
• Continued to develop our website & marketing offering to builders and end-users to
provide new tools to make their lives easier.
Risk appetite
Ensuring that we have product that meet the design, price and quality needs of the small builder and their customer is a
key focus of the business model and is a critical element of our future success and growth aspirations. In meeting this we
accept that a measured amount of risk must be taken when selecting new products and we have a medium appetite for
product risk.
9. Business continuity & resilience
Risk and impact
Mitigating factors
• We have key business
• We maintain and regularly review our understanding of what our critical operations are.
operations and locations
in our infrastructure that
are critical to business
continuity. They include
areas such as, our Credit
Control Department, our
Manufacturing & Logistics
operations and key IT
systems.
Risk appetite
• We ensure resilience by design, building high levels of protection into key operations and
spreading risk across multiple sites where possible.
• We ensure appropriate business continuity plans are in place for these and have a Group
wide incident management team and procedures established.
• We regularly review our continuity plans covering our sourcing and logistics approaches
to support peak trading.
Mitigation actions in 2022
• Closely monitored the UK and global geopolitical environments and the impacts to the
continuity of our operations.
Our key operations are essential for ensuring our customers can get the product and services they want when they need
them. To secure this we maintain a very low appetite for Business Continuity risk, ensuring that critical functions are
resilient and appropriate business continuity plans are in place to protect them.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage TitlePage Title
Sustainability matters
46
46
Strategic report / Contents
47
47
Sustainability matters
Worthwhile for
all concerned
Why sustainability matters
Our sustainable business model and culture.
Our material areas, KPIs and commitments.
Our four ESG commitments
Update on progress.
Net Zero commitment
We have identified the major steps to
achieve Net Zero emissions.
Our TCFD reporting
Climate risks and opportunities.
Our impact on our stakeholders
A summary of our social and
environmental footprint.
Zero waste
to landfill
100%
Manufacturing
& distribution
48
50
52
54
62
Our people
Health, safety and wellbeing. Career
opportunities and support for development.
Sustainable supply chain
Certified wood, responsible purchasing,
efficient distribution.
Sustainable product
New product development, product
re-engineering, sustainable
sourcing strategy.
Our environment and
SECR reporting
Reducing waste, lowering net emissions.
Our communities
Local projects and national partnerships.
48 Why Sustainability matters to us
50 Our four ESG strategic
commitments
52 Net Zero commitment
54 Our TCFD reporting
62 Our impact on stakeholders
64 Our people
66 Sustainable supply chain
67 Sustainable product
68 Our environment and SECR
70 Our communities
64
66
67
68
70
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Why Sustainability matters to us
48
Strategic report / Why Sustainability matters to us
49
Why Sustainability matters to us
Sustainability generates long-term value
TCFD reporting
Howdens is a growing business. Sustainable behaviour
helps us grow in a way that preserves our culture, supports
our business model, increases business resilience, mitigates
our risks and addresses the needs of our stakeholders.
We see TCFD as a useful framework to build climate resilience
in the business. We are using it to talk about how we identify
and manage climate risks and opportunities, how we build
them into our strategy and how we measure our progress.
Sustainability is part of our culture
We talk about the Howdens culture as being ‘worthwhile for all
concerned’ and ‘creating the conditions that allow everyone
to succeed’. Our business needs to be worthwhile for our
staff, our customers, our suppliers, the environment and the
communities we work in.
Sustainability supports our business model
Sustainable behaviour gives us a competitive advantage and
builds business resilience.
Lowest cost production in our own UK factories leads naturally
to minimising waste, energy and raw materials. Our mission
statement aim of ‘no-call-back quality’ means that we need to
produce and source product which is durable and safe.
Being trusted partners to our suppliers and customers means
that our relationships need to be worthwhile for all parties over
the long term.
We have over 850 depots in the UK and Europe. Each one of
them relies on strong local relationships to trade profitably, so
we need to be a good neighbour in each of those communities.
Sustainability mitigates our risks
We discuss our principal risks beginning on page 39.
Sustainable behaviour helps us to address some of
those risks.
For example, we invest in keeping our people safe, developing
their skills, and offering them a great place to work. We do
this because it’s the right thing to do, but it also mitigates our
‘Health & Safety’ and ‘Loss of key personnel’ risks.
Developing and maintaining sustainable supplier relationships
mitigates our ‘Interruption to continuity of supply’ risk. Energy-
efficient, safe and durable product mitigates our ‘Product
design relevance’ risk.
The Board and Executive Committee lead
our commitment to sustainability
The importance of sustainable behaviour is recognised right
through the business. You can see the Board’s Statements
of Intent on Health & Safety and Sustainability at:
www.howdenjoinerygroupplc.com/sustainability/group-
health-safety-and-sustainability-policies. The Board’s
Sustainability Committee met regularly throughout the year
and their report begins on page 144.
Our TCFD reporting begins on page 54.
The material sustainability areas for
us and our stakeholders
On pages 64 to 70 we report on progress in our five material
sustainability areas:
People: keeping them safe, offering rewarding careers.
Sustainable supply chain: certified wood, responsible
purchasing, efficient distribution.
Sustainable product: developing new sustainable products,
re-engineering existing products, having a sustainable
sourcing strategy.
Environment and operations: reducing waste, responsible
operations, lowering emissions.
Communities: local community projects, our nationwide work
with Leonard Cheshire Disability and I can & I am.
We last reviewed our material sustainability areas in 2020 as
part of a wide-ranging ESG Strategic Review. We have begun
a project to revisit and reassess our material areas in line with
the progress that we’re making in areas such as TCFD and our
path to Net Zero, and we look forward to communicating the
findings to you in our next report.
Our sustainability KPIs, commitments
and targets. ESG and remuneration.
Our sustainability KPIs cover safety, use of wood from certified
sources, and avoiding sending waste to landfill. You can find
them on pages 64 to 68.
Our 2020 ESG strategic review resulted in four strategic
commitments, which we report on at pages 50 and 51. It
also resulted in a number of additional targets and research
projects in each of our material areas, which we report on
under the relevant area.
As we work towards the commitments, learn more about the
targets and research projects, and move further down our
road to Net Zero this may lead to new KPIs and key metrics in
the future.
Our 2023 PSP share plan will include ESG-related vesting
targets. Please see page 131 for details of the targets.
UK’s leading responsible
kitchen business
A sustainable product offering,
responsibly manufactured or sourced,
that meets the needs of the builder and
the end-consumer
Our vision
A unique and
sustainable culture
Maintaining and building on our culture
of being worthwhile for all concerned.
Continuing to grow a sustainable
business that appeals to current and
future stakeholders.
Leader in risk and
resilience governance
An agile and resilient business,
proactively managing ESG risks,
with transparent high-quality
stakeholder reporting.
Represented by:
Our four strategic commitments
Zero waste
to landfill
Maintain zero waste to
landfill in manufacturing and
distribution. Zero waste to
landfill in depots over time,
with target of less than 5%
by end of 2022.
Carbon neutral
manufacturing
Achieve carbon neutral
manufacturing by the end of
2021, and maintain that status
as the business grows.
Best practice in UK
behavioural safety
and wellbeing
Maintain international
safety standard ISO 45001
in our manufacturing and
distribution operations.
Achieve ISO 45001 in our
depot network.
Highly effective
ESG reporting and
disclosure
Progressive, phased
implementation of high-
quality reporting.
See more on pages 50 and 51.
Underpinned by:
Our material sustainability areas
People
Keeping our 12,000
employees safe and
well. Supporting
their growth, offering
them great rewards
for success, and
opportunities to grow
with us.
Sustainable
supply chain
Certified raw materials
from sustainable
sources. Responsible
purchasing, working
with our international
network of over
250 main suppliers.
Efficient distribution.
Sustainable
product
Continuous research
and evolution of
our products and
packaging. Refining our
efficient manufacturing
processes and working
with our suppliers on
bought-in product.
Our
environment
Reducing waste,
lowering emissions,
working with the
Carbon Trust to
achieve continuing
improvements.
Communities
Being a responsible
member of over 850
local communities
in the UK and
internationally.
Supporting a range
of local and national
charities.
See more, starting at page 64.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage Title Our four ESG strategic commitments
50
Strategic report / Our four ESG strategic commitments
51
Our four ESG strategic commitments
Progress on our four ESG strategic commitments
Environment
UK’s leading responsible kitchen business
Zero waste to landfill
Carbon neutral manufacturing
100%
Manufacturing
& distribution
99.7%
Depots
100%
Achieved in 2021
Social
A unique and sustainable culture
Governance
Leader in risk and resilience governance
Best practice in UK Behavioural
Safety and wellbeing – ISO 45001
Highly effective ESG reporting
and disclosure, including KPIs
100%
Manufacturing
& distribution
100%
UK depot
network
TCFD and ISS reporting
in place. ESG 360
implementation in
progress.
Progress in 2022
Progress in 2022
Progress in 2022
Progress in 2022
In 2020 we achieved zero waste to landfill in our
manufacturing and distribution, and we have maintained
that in 2022. Rather than sending our waste offsite to be
burnt for energy recovery, we took the slower but more
responsible method of using the principles of the ‘Waste
Hierarchy’ and maximising the amount that we can reuse,
recover or recycle.
It’s a lot more challenging to achieve zero waste to landfill
in our network of over 800 UK depots. From a baseline
of 60% of depot waste avoiding landfill in 2019, we set
the target of getting to over 95% by the end of 2022. We
exceeded that target in 2021, and at the end of 2022 we
have 99.7% of depot waste avoiding landfill, and we are
busy trying to find solutions for the remaining 0.3%.
Our commitment was to achieve carbon neutral
manufacturing by 2021, which we had confirmed by the
Carbon Trust (with evidence provided in accordance with
PAS 2060:2014 – Specification for the demonstration of
carbon neutrality).
Manufacturing accounts for a significant proportion of
our total Scope 1 and 2 emissions, and is entirely under
our control, so it makes sense for us to start there. Our
approach was to reduce emissions as much as possible
with current technology or renewable energy, and then
to offset residual emissions with Gold Standard carbon
offsets (shown on the independent GSF Registry here:
https://registry.goldstandard.org/projects/details/583).
Our commitment was to achieve the international
safety standard ISO 45001 across our manufacturing,
distribution and depot network by the end of 2021.
We achieved the ISO in our factories and distribution
network in 2020. In 2021 we completed the work in our
depots but were not able to achieve accreditation before
the end of the year due to COVID-19 restrictions on
auditors visiting our depots.
We are very pleased to report that we were able to
reschedule the depot audits which had been delayed
by COVID in 2021, and we achieved ISO 45001 in our UK
and Republic of Ireland network of over 800 depots in
early 2022.
This year’s TCFD reporting starts on page 54.
We implemented the ISS ESG reporting platform in 2021,
to benchmark against peers and provide stakeholders
easier access to detailed ESG information. In 2022 we
have been making sure our data is up to date.
We’ve implemented ‘ESG 360’ in 2022, a platform that we
will use to collect our own energy consumption data and
the Scope 1, 2 and 3 emissions of our top 30 suppliers. We
will also use it to collate and analyse physical risk data for
our own locations and those of our supplier base, to model
climate scenarios and project the emissions reductions
and cost implications of various decarbonisation options
linked to science-based Net Zero targets.
Worthwhile for all concerned
Worthwhile for all concerned
Worthwhile for all concerned
Worthwhile for all concerned
Alignment to UN SDGs
Our material SDGs
UN SDG description and relevant targets under each SDG
Our material SDGs
UN SDG description and relevant targets under each SDG
‘ Promote sustained, inclusive and sustainable economic growth,
full and productive employment and decent work for all’
SDG targets: 8.4, 8.5, 8.6, 8.7, 8.8.
‘ Ensure sustainable consumption and production patterns’
SDG targets: 12.2, 12.5, 12.6, 12.7.
‘ Take urgent action to combat climate change and its impacts’
SDG targets: 13.1, 13.2.
‘ Protect, restore and promote sustainable use of terrestrial ecosystems,
sustainably manage forests… and halt biodiversity loss’
SDG targets: 15.1, 15.2.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Net Zero commitment
52
Strategic report / Net Zero commitment
53
Net Zero commitment
We have identified the major steps
to achieve Net Zero emissions
Howdens signed up to the Science Based Targets Initiative (SBTi)
Net Zero Ambition in 2022. We hope to receive approval of our
targets in 2023, and to report in more detail in our 2023 report.
In the meantime, we present a summary of our findings and
plans so far.
On track to set near and long-term targets
Key activities
• 42% reduction in Scope 1 & 2 by 2030
• Comprehensive supply chain mapping
• 25% reduction in Scope 3 by 2030
• Detailed internal emissions mapping
• 90% reduction in all emissions by 2050 – including growth
• Key suppliers engaged on emissions data and climate risks
Suppliers are critical to achieving
our targets
Costs of change
1) Minimal cost of change so far – including moving depots
• Top 27 suppliers are circa 80% of all our emissions
to renewable energy tariff in 2022
• Primarily European based, some in the Far East
2) Driving energy efficiency is an opportunity to tackle
• Making more product ourselves and controlling our own
escalating cost
freight helps reduce emissions
3) Gives confidence that suppliers will be able to achieve
2030 targets without significant adverse cost impact
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450,000
400,000
350,000
300,000
250,000
D
Scope 3 (Categories 1 & 2
only)= approx 400,000 tCO2e
200,000
150,000
100,000
50,000
C
B
A
Scopes 1&2
= 45,000 tCO2e
30% reduction from baseline
Scope 1 & 2
Scope 3
“We are developing the options to optimise meeting targets”
A – Distribution
B – Renewable energy
D – Supply chain
LPG and HVO Trials underway
Electric vehicles where feasible
– test and develop business case
Engaging logistics providers
for solutions
Switch all operations sites and
depots to 100% renewable
C – Electric fleet
Company car transition to
100% electric
Focus on top 27 suppliers –
c.80% of all emissions
Roll out ESG 360 system:
Capture emissions data
Establish reduction plans /metrics
Identify risks and opportunities
Net Zero
0
2021 Baseline
2030
2040
2050
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Our TCFD reporting
54
Strategic report / TCFD – building climate resilience
55
Task Force on Climate-Related Financial Disclosures –
building climate resilience
Our approach to TCFD
Rather than seeing it as a compliance exercise, we see
TCFD as a useful framework to build climate resilience in the
business. We are using it within the business to talk about
our identification and management of climate risks and
opportunities, to build them into our strategy and to measure
our progress.
We have continued to make good progress on TCFD-related
actions in 2022. We have started to use specialist technology
to collect both physical and transition climate risk and
opportunity data across our value chain. This technology
will be connected with our key suppliers so we can build a
collective picture of the challenges and solutions together.
We will continue to collect this data in 2023, which will help
us to understand the granular impact of climate risks and
opportunities and to implement associated mitigation actions.
We have also committed to SBTi Net Zero and will be
submitting our targets for approval in 2023. We have started
to collect real Scope 3 emissions data throughout our value
chain, which is a complex exercise. We have also engaged our
top 30 suppliers and have held a specific supplier conference
to build a coalition of partners on the journey to Net Zero.
No identified significant short or medium-
term climate-related risks
The results of our scenario modelling agreed with the results
of our existing business risk management process (described
starting on page 37, in that they did not identify any significant
short or medium-term climate-related risks.
We are reviewing our full supply chain and are not currently
aware of any material short or medium-term physical risks, nor
do we anticipate any such risks. We evaluate physical risks for
time horizons between 2020 and 2050.
Compliance with the TCFD
recommendations
The following pages set out the 11 TCFD recommended
disclosures, showing where we are now, the progress we’ve
made this year, and our main areas of focus for the future.
We consider that we’re fully complaint with the TCFD
recommendations under the Governance, Strategy and Risk
Management sub-headings, and that we’re partially compliant
with the recommendations for Metrics and Targets.
As we set out on page 48, we have metrics and targets which
we measure and disclose. However, we expect to refine and
revise them in the near future as, for instance, new priorities
develop as we get our SBTi targets approved and we carry out
repeated iterations of our climate scenarios. We anticipate that
we will be introducing revised metrics over the next two years.
On Scope 3 emissions, we expect them to be a material
part of our total emissions, and we are currently working on
calculating reliable and robust estimates for our main sources
of Scope 3 emissions, but this is a complex area, involving
several assumptions and estimates, and we don’t yet have
a full picture. We will aim to disclose full Scope 3 emissions
within the next year.
TCFD recommended
disclosure
GOVERNANCE
Our disclosure and developments in 2022
Focus areas for 2023 and beyond
A. Describe the
• The Board looks at material climate-related risks and
Board’s oversight
of climate-
related risks and
opportunities.
opportunities when setting and monitoring Group strategy,
and considers climate risks as part of its overall risk review
processes described in detail starting at page 37.
• This process is led by the Board’s Sustainability Committee,
whose report is at page 144.
• The Sustainability Committee met twice during 2022 and
made recommendations to the Board as appropriate. The
Director of ESG* reported to the Sustainability Committee at
each meeting, and provided updates on the climate-related
targets and goals which are considered in more detail in this
Sustainability report.
• When considering any investment proposition, the Board
considers the likely climate-related consequences of any
decisions. The best example of this is in the investment in in-
house manufacturing. The associated environmental benefit
of this investment is an estimated reduction of 200 tonnes of
CO2 due to fewer loads being transported internationally.
• The Sustainability Committee
will meet regularly in 2023 and
will make recommendations to
the Board as appropriate on key
climate actions.
• The Director of ESG will provide
regular updates on the progress
to Net Zero roadmap to the
Committee.
TCFD recommended
disclosure
Our disclosure and developments in 2022
Focus areas for 2023 and beyond
GOVERNANCE CONTINUED
B. Describe
•
management’s
role in assessing
and managing
climate-related
risks and
opportunities.
It is the Executive Committee’s (ExCo) responsibility to
execute Group strategy and implement programmes to
manage and mitigate climate risks and take advantage of
opportunities. The role of the ExCo is set out on pages 84
and 85 of the Corporate Governance report.
• ExCo members will be assigned
key responsibilities on managing
climate risks and opportunities.
• We will continue to engage with
our supply chain in 2023.
• The ExCo are therefore responsible for delivery of the
climate-related targets determined by the Board, which are
considered in detail in this Sustainability report.
• The Director of ESG advises both Board and ExCo and
reports to the Sustainability Committee at each of their
meetings on progress against targets and other initiatives.
He presented at both of the Sustainability meetings in 2022.
• ExCo reviewed the TCFD materiality impact assessments
and scenario analysis in 2022.
• The Director of ESG worked with ExCo to develop sustainable
strategies during the year.
• ExCo engaged our top 30 suppliers and held a specific
supplier conference to build a coalition of partners on the
journey to Net Zero.
STRATEGY
A. Describe the
climate-related
risks and
opportunities the
organisation has
identified over the
short, medium,
and long-term.
• We scrutinised and tested the results of our initial climate
risk and opportunity assessment with operational areas,
ExCo and Board. No significant short or medium-term
climate-related risks were identified.
• Further quantification of climate
risks and opportunities after
obtaining further data from the
value chain.
• We deployed technology to collect climate-related risk and
opportunity data directly from our key suppliers.
• We give more detail on the potential risks and opportunities
starting at page 58.
B. Describe the
• We did a physical climate risk assessment over various
• An ESG/climate screening,
impact of climate-
related risks and
opportunities on
the organisation’s
businesses,
strategy, and
financial planning.
timeframes in 2021, and we have reviewed the initial results.
• We have continued to explore ways of building potential
risks and opportunities into strategic and financial planning.
• We give more detail on possible impacts starting on page 58.
• We discuss our Net Zero commitment on page 52. Once we
have approval and external validation of our SBTi Net Zero
targets as being aligned with the Paris agreement, we look
forward to publishing them.
including use of scenarios, will
be incorporated into the due
diligence process for major
capital expenditure decisions.
• Direct data collection from
the value chain is currently in
progress to establish a clear
picture of various risks and
opportunities.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
* The Director of ESG is a management role and is not a Director of the Board of Howden Joinery Group Plc.
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage Title 56
Strategic report / TCFD – building climate resilience
57
TCFD – building climate resilience continued
Our disclosure and developments in 2022
Focus areas for 2023 and beyond
TCFD recommended
disclosure
Our disclosure and developments in 2022
Focus areas for 2023 and beyond
TCFD recommended
disclosure
STRATEGY CONTINUED
C. Describe the
• We constructed draft climate impact scenarios in 2021,
• Further iterations of the
resilience of the
organisation’s
strategy, taking
into consideration
different climate-
related scenarios,
including a 2°C or
lower scenario.
RISK MANAGEMENT
A. Describe the
organisation’s
processes for
identifying and
assessing climate-
related risks.
based on our initial assessment of material risks, including
a scenario aligned with below 2°C.
scenarios, with quantification
of risks and opportunities.
•
In 2022 we tested the draft scenario results, discussed with
management, ExCo and Board, and started the process of
building financial models from the scenarios (with a focus
on carbon price).
•
Identifying the implications
carbon pricing with various
scenarios including various
options for decarbonisation.
• The results of our testing showed the resilience of our
current strategy, in that no significant short or medium-
term climate-related risks were identified.
• We combine our long-standing, bottom-up risk process with
improved identification of medium and longer-term climate
transitional and physical risks through horizon scanning.
See pages 37 and 38 for more detail.
• Continue to improve our
risk identification process,
incorporating more data streams
and trends.
• We assess and prioritise climate risk using an approach
that is modelled on British Standards (BS EN ISO14091),
based on risk impact (the expected adverse effect that may
occur from exposure to the risk) and our adaptive capacity
(our ability to adapt to potential consequences and to take
advantage of opportunities).
• We have built the outputs of our inherent climate risk
assessment into operational risk registers. We have
adapted our risk process to capture key climate metrics and
targets.
• Assess key metrics and targets,
and the operational plans to
meet them.
• Review the external environment
for changes in climate risks
and new mitigation strategies
(through our brokers, insurers
external professional bodies
and forums).
• Board will formalise a risk
• We have engaged with our stakeholders, including our
appetite for climate-related risk.
insurers, to understand how their focus on climate risk is
likely to change going forward.
B. Describe the
• We manage climate-related risks in the same way as our
organisation’s
processes for
managing climate-
related risks.
other risks (see pages 37 and 38), albeit that time horizons
may be longer.
• A member of the ExCo owns each risk and leads the
relevant operational teams as they control day-to-day risk
management and mitigation.
•
In 2022 we carried out a specific, climate-focused round of
risk register reviews to educate operational teams with the
aim to ensure that we manage climate risks as effectively as
other risks.
• Challenge the business on the
effectiveness and accuracy
of mitigation plans, including
evidence of progress.
• Climate risks remains an
emerging risk currently,
emerging risks are escalated
as necessary to the Group ExCo
and Board.
RISK MANAGEMENT CONTINUED
C. Describe how
processes for
identifying,
assessing, and
managing climate-
related risks are
integrated into
the organisation’s
overall risk
management.
• They have always been part of our overall risk identification
and management process described in detail at pages 37
and 38.
• They are recorded in our Group and functional risk registers
alongside our other operational, financial and strategic
risks.
• They are formally reviewed twice a year as part of this
process to ensure they accurately reflect our current risk
exposure.
• One key difference between climate-related risks and other
risks is that we typically use longer time horizons when
looking at climate risks.
•
In 2022 we implemented a new emerging risk identification
and management approach, with dedicated reporting to
Exec and Board. We also started a project to capture Board
risk appetite for climate risks.
METRICS AND TARGETS
A. Disclose the
• We have long-standing KPIs on use of FSC® and PEFC raw
metrics used by
the organisation
to assess climate-
related risks and
opportunities
in line with its
strategy and risk
management
process.
materials and on production waste recycling – we report on
these at page 66 and page 68.
•
In 2022 we reviewed the outputs of our detailed 2021 TCFD
project to see if this suggests extra or alternative KPIs, as
well as to identify whether there are any other important
climate-related metrics.
• We developed the first iteration of an ESG metrics
dashboard for internal review and stakeholder consultation
of any potential new KPIs.
• We began consideration of how climate-related metrics
might build into consideration of future investment
decisions.
B. Disclose Scope
1, Scope 2 and,
if appropriate,
Scope 3
greenhouse gas
(GHG) emissions
and the related
risks.
• See our SECR reporting, starting on page 68.
• We consider the risks relating to emissions as part of our
overall climate risk reporting, summarized above.
• We have estimated our material sources of Scope 3
emissions (category 1).
• Selected appropriate assumptions and started to
investigate which of our Scope 3 emissions we can try to
gather reliable data on.
C. Describe the
• We are currently researching and developing these targets
as part of the overall TCFD implementation process.
• We have carried out research and development of potential
new TCFD metrics and targets, based on the outcomes of
the TCFD implementation project so far.
targets used by
the organisation
to manage
climate-related
risks and
opportunities
and performance
against targets.
• Continue with specific climate-
focused risk register reviews.
• Continue to develop reporting to
Exec and Board.
• Further internal review and
stakeholder consultation of
potential new KPIs will take place
with formalisation of key metrics.
• An external TCFD readiness
assurance project has been
carried out with satisfactory
results.
• As part of the ESG due diligence
process for investment decisions,
specific metrics will be created as
part of the ESG strategy.
• We are currently in the process
of collecting and measuring
the full Scope 3 emissions (15
categories) and will complete our
baseline year (2021) calculations
by Q1 2023.
• Finalising quantitative metrics
and targets for material climate
risks and opportunities and assign
to the senior executive team.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage TitlePage Title 58
Strategic report / TCFD – building climate resilience
59
TCFD – building climate resilience continued
Main risks and opportunities from our scenario modelling so far
Results and next steps
Details of the scenarios
We began our work on climate scenario planning in 2021.
We looked at both physical and transition risks and held
a series of workshops with stakeholders from across the
business to identify and discuss potential significant risks
and opportunities. Our discussions concentrated on the time
period to 2030, which we further split into short-term (to 2023),
medium-term (to 2026) and long-term (to 2030).
We developed three scenarios to frame our discussions of
potential climate risks and opportunities:
1)
Less than 2ºC scenario: Where governments and
regulators act quickly and take the lead with a series
of measures aimed at achieving the Paris Agreement
targets. This scenario envisages swift action, a high
level of legislation and emphasis on mechanisms
such as carbon pricing and financial incentives for
decarbonisation.
2)
3)
Where lack of agreement between governments leads
to an initially slow pace of change, but where a series of
social tipping points see a response to climate change
which is led by citizens putting pressure onto governments
and companies to act.
Where there is some commitment from governments,
companies and citizens to a Net Zero transition, but where
these commitments aren’t always fully developed or
enforced, and may sometimes be overridden by political,
commercial, or individual concerns in the short and
medium-term, requiring more severe policy action and
enforcement in the longer-term.
Our initial scenario modelling work has given us an increased understanding of the qualitative impacts of climate change on
our business across various time horizons, although we recognise that it is an iterative and dynamic process. The results of our
scenario modelling agreed with the results of our existing business risk management process, which we describe in more detail
starting on page 37, in that they did not identify any significant short or medium-term climate-related risks.
Under each scenario there were several possible medium and long-term risks and opportunities, which we have summarised
below. Over time we will continue to develop this analysis, which will include quantifying any potential material impacts and
setting a strategic direction to mitigate any potential significant risks and maximise the potential opportunities.
The results of our testing showed the resilience of our current strategy, in that no significant short or medium-term climate-
related risks were identified.
Overview of opportunities
Time horizon
Impact
Mitigation actions
OPPORTUNITY: Area of impact – Brand
Delivering on our aim to be the UK’s leading
responsible kitchen business and creating
a brand that is recognised as a leader in
managing climate-related risk could result in
increased sales, greater brand awareness,
increased market share and increased
attractiveness to current and future employees.
Medium to long-term
(2025–2030)
Increased sales.
Greater brand
awareness.
Increased market
share.
Stronger employee
retention/ relations.
Upskilling staff and promoting
awareness of our stance
regarding SBTi and Net Zero
ambitions.
Sustainable customer offering
and bringing the suppliers on
the Net Zero and sustainability
journey with us.
OPPORTUNITY: Area of impact – Cost reduction
Continuing to focus on energy efficiency,
pushing through our targeted improvements
and taking future steps on the path to
decarbonisation could lead to a lower cost base.
Relevant factors could be things such as:
• Access to grants, subsidies and favourable
tax treatment for adopting decarbonisation
technologies
• Absolute reductions in energy consumption
will lower costs, particularly in times of
rising energy prices, extended application
of carbon pricing and an increase in the
underlying carbon price.
Grants and subsidies:
short to medium-term
(2022–2025)
Absolute reductions in
energy consumption:
medium to long-term
(2025–2030)
Deployment of
Decarbonisation
technologies such as
hydrogen: medium to
long-term (2025–2030)
Capitalise on energy
opportunities:
installation of solar/
wind etc., will help
in reducing costs
and lead to carbon
emission savings.
Own energy
generation:
by accessing grants
and subsidies and
deploying latest
decarbonisation
technologies.
OPPORTUNITY: Area of impact – Access to capital
Reducing energy consumption
will help mitigate the impact of
rising energy prices/ carbon
pricing.
Deploying new renewable
technologies with grants
will lower the own capex
requirements and improve
energy security.
Building a climate resilient strategy and
communicating it effectively to the market
could increase the demand for our shares and
could also give us access to lower-cost bonds
and loans.
Short to medium-term
(2022–2025)
Increased demand
for shares.
Access to sustainable
finance opportunities.
Clearly communicating our
sustainability and climate
resilient actions to our existing
and future investors.
OPPORTUNITY: Area of impact – Product design
Taking the lead in producing sustainable
products before our competitors could increase
our competitive advantage and market share.
Medium to long-term
(2025–2030)
The future
sustainability of
our assets: develop
sustainability metrics
to be employed at the
point of design.
Implementing circular
practices will promote the
‘worthwhile’ image of our
brand and will help us lead by
example.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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60
Strategic report / TCFD – building climate resilience
61
TCFD – building climate resilience continued
Overview of risks
Time horizon
Impact
Mitigation actions
Overview of risks
Time horizon
Impact
Mitigation actions
RISK: Area of impact – Decarbonisation
Decarbonisation of our
distribution and depot fleets
could require transitional
investment and/or adjustments
to current working practices.
Adjustments to
current working
practices: short
to medium-term
(2022–2025)
Additional capital
expenditure: to
decarbonise our own
operations e.g. our
buildings and fleet.
Transitional
investment:
medium to long-term
(2025–2030)
RISK: Area of impact – Customer expectations
Failure to meet customer
demands for sustainable
products could reduce market
share.
Failure to meet
demands: medium
to long-term
(2025–2030)
We are currently carrying out a Net Zero
feasibility study with high level cost
implications, which will clarify levers of
decarbonisation available to us.
We are also Implementing and ESG/climate
screening into the due diligence process
prior to asset acquisition.
Impact on future sales:
from inability to meet
customer needs.
We plan to be a leader in sustainability in
the kitchen business and will leverage our
Net Zero strategy to achieve this goal.
RISK: Area of impact – Sourcing
Future physical or legal barriers
arising from climate change
could bring challenges to
sourcing some of our products
in the future – principally items
which we currently source from
overseas.
Causes could be things such as:
• Carbon pricing
• Pressure on supply chains
to decarbonise, especially in
emerging markets
• Some current raw materials
could increase in cost or
become unavailable in the
future, so alternatives would
have to be found.
Carbon pricing:
medium to long-term
(2025–2030)
Pressure on
supply chains
to decarbonise:
medium to long-term
(2025–2030)
Raw materials
cost increase/
unavailability:
medium to long-term
(2025–2030)
Carbon pricing: £2.9m –
£5.1m (assumption of £50
per tonne of CO2e carbon
price).
Pressure on supply chains
to decarbonise: as climate
change is a global issue, our
supplier base will also be
impacted with the drive to
decarbonise.
Raw materials cost
increase/ unavailability:
there may be adverse
impact on availability of
certain raw materials in
the future.
We have signed up for SBTi Net Zero
targets and we are currently formulating
a fully-costed Net Zero action plan, which
will help with mitigating the impact of
future carbon prices due to absolute
reductions in our emissions.
We have deployed technology to collect
data directly from our suppliers, which will
help us understand the granular impacts
and to implement subsequent actions for
resilience.
The data collected from suppliers will
provide clarity on the criticality of certain
raw materials and help us formulate a
mitigation strategy.
RISK: Area of impact – Operations
The physical risk to our
operations from climate
change can include extreme
weather events and rising sea
levels. These risks could require
additional capital expenditure
or could interrupt operations.
The physical risk
assessment:
identifies potential
risks in the short,
medium and long
term (2022–2050).
However, no
significant physical
risks were identified
in the short or
medium term. We are
currently working
with suppliers for
more granular data
throughout the
supply chain – this
work is ongoing.
Interruption to operations:
physical impacts of climate
change could cause supply
chain disruption/ physical
route disruptions.
To further understand the risks at a
granular level, we have deployed a two-
phased Physical Risk Assessment of our
own locations in the UK and our suppliers’
locations around the world.
Additional capital
expenditure: physical
climate risks may require
us to improve/ update our
infrastructure, which will
increase our capex.
Phase 1 identified the physical risks such
as coastal flooding, rising sea levels, heat
stress and drought in certain regions and
locations, using timeframes up to 2050.
Phase 2 of our physical risk assessment,
which we are currently embarking upon,
will deliver a vulnerability and resilience
option assessment and it will allow us to
determine our Value at Risk for physical
exposure and understand our suppliers’
adaptive capacity.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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62
62
Sustainability matters
Our impact on stakeholders
Environment
260,000m3 of chipboard from sustainably
managed UK forests
100% of manufacturing waste reused
recycled or recovered
10,000 tonnes of waste sawdust converted
to energy to heat our factories
People
603 apprentices in training
1 in 12 of our current employees started their
Howdens career as an apprentice
4% of our employees are apprentices
335 apprentices were appointed to
permanent roles in 2022
603 internal promotions made in 2022
Strategic report / Our impact on stakeholders
6363
Community & charity
18th year of our national partnership with Leonard
Cheshire. Supporting disabled young adults to
find valuable roles within their communities
£1.3m in donations to local charities and community
activities across our network in the UK
and Europe
Shareholders
£115m dividends paid
£250m share buybacks
The wider economy
£508m of tax generated or collected.
Corporation tax, NI PAYE and VAT
£327m of working capital extended to over 430,000
small businesses in our peak trading period.
No fees, up to 8 weeks to pay
Over 430,000 small businesses in our peak trading period.
No fees, up to 8 weeks to pay
People
Over
12,000
full-time jobs with prospects. In manufacturing,
in over 850 local depots, and in distribution,
systems and support
850 local communities where we employ people
£624m salaries and benefits paid to our employees in 2022
£257m cash contributed to our pension schemes
in the last 5 years
100% of UK employees in share ownership schemes
10th in the 2022 Best Big Companies to work for awards
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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64
Sustainability matters
Our people
Strategic report / Our people
65
Keeping our people safe and healthy
Rewarding careers, opportunities to develop and thrive
2022 highlights
2022 highlights
• Our safety KPI has decreased from 196 RIDDOR1 reportable
injuries per 100,000 employees in 2021 to 140 in 2022. This is also
significantly below the 2021/2022 HSE All-Industry rate of 222.
• Our injury severity rate has also significantly decreased from 2021
to 2022 at 26.2 hours lost per 100,000 hours worked (2021: 33.4
hours/100,000 hrs worked).
• Our network of over 800 depots in the UK and Republic of Ireland
was awarded the ISO 45001 certification in early 2022. This was
achieved by implementing simple and visual safety management
systems and actively encouraging the participation of all staff to
help continuously improve Health & Safety (H&S) performance. We
had already held ISO 45001 certification across our manufacturing
and distribution network since 2009.
• We have developed our construction-based H&S systems for our
Solid Work Surface Installations and Contracts operations, which are
rapidly-expanding areas of growth.
Reportable injuries/100k
employees – Reportable injury
rates decreased in 2022
300
250
200
150
100
50
0
2017
2018
2019
2020
2021
2022
HSE all-industry rate
Howdens
• At the beginning of May 2022, our Supply division launched its first ever Safety Climate Survey created by the HSE.
The survey was open for four weeks and colleagues in Howden Manufacturing, Runcorn, Howden Work Surfaces and
Transport operations were asked to tell us what they thought of how we manage H&S, engage our people and promote
participation. We received over 600 responses which gave us an in-depth insight into our cultural strengths and where
we can improve. The outputs of the survey have been used by our operational leadership teams to establish H&S
objectives for 2023.
• We continue to prioritise our employees’ health and wellbeing. Following feedback through our employee engagement
survey, we increased our support and investment in this area, taking a more holistic approach that includes physical,
mental and financial wellbeing. We introduced a Wellbeing Committee for Operations, with 24 reps from across our sites.
We introduced the AXA Health app for all employees, encouraging them to take regular steps to becoming healthier.
We continue to promote relevant services available through our Employee Assistance Programme (EAP), and provided
access to free blood pressure and resting heart-rate checks. We partnered with specialist organisations to provide
workplace support for mental health and women’s health issues.
Update on areas of focus from our 2020 ESG Strategic Review
ISO 45001
Achieve ISO 45001 across our manufacturing,
distribution and UK depot network.
2022 update: See page 51, and above. We obtained ISO
45001 certification for our UK and Republic of Ireland depot
network in 2022. We had already achieved ISO 45001 across
our manufacturing and distribution network in 2020.
BRITISH COUNCIL 5-STAR SAFETY STANDARD
Achieve this standard at all manufacturing and
logistics sites by the end of 2026.
2022 update: We value the 5 star audit process as it drives
excellence in health, safety and wellbeing with a significant focus
on H&S culture which is aligned to our own medium-term H&S
objectives. We remain committed to achieving the 5-star standard,
although we have changed our timescale from 2023 to 2026 in
order to align with the timescale of our medium-term objective.
BEHAVIOURAL HEALTH & SAFETY
Continue with our behavioural safety
and safety culture approach across the Group.
2022 update: We are the final stages of delivering our Senior
Management H&S behavioural training programme in our
depot network. This is a comprehensive training package which
emphasises the importance of leading by example, establishing a
generative culture and winning hearts and minds through effective
communication and participation of all staff within the business.
WELLBEING
Develop a Group wellbeing strategy.
2022 update: We have taken a more holistic approach,
incorporating physical, mental and financial wellbeing. This
provides greater support for our employees, whose needs are
evolving post-pandemic and during a cost-of-living crisis.
1
‘RIDDOR injuries’ are injuries reportable to the HSE under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013.
• We remain focused on creating an engaging place
to work with fulfilling jobs and a strong culture that
supports everyone to do their best. Listening to our
employees is key. Over 65% of our employees completed
the Best Companies engagement survey in March.
Based on their feedback, we ranked 10th in the 2022
Best Big Companies to Work For list, up four places since
we last participated in 2020. We’re using the feedback
to make Howdens an even greater place to work for our
employees.
• Howdens has a long-standing commitment to
apprenticeships and the development of ‘homegrown’
talent. In 2022, we recruited 555 new apprentices and, in
December, had 603 on programmes across the business.
We’re proud that one in 12 of our current employees
started their Howdens career as an apprentice, and
we continue to champion apprenticeships through our
sponsorship of the National Apprenticeship Awards.
In June, Howdens was ranked 17th in the UK’s Top 100
Apprenticeship Employers.
• To ease the pressure from the rising cost of living, in
• We reviewed our learning and development offer to
September, we gave employees a £500 one-off payment.
We also increased our employer pension contributions.
We provided access to information and tools to enable
employees to better manage their finances and plan for
their future. This includes practical online advice through
our Employee Assistance Programme.
ensure it was aligned to the skills and roles required for
our growth strategy. We introduced a more interactive
induction, blending both Company and local information
that gives new employees a warm welcome and strong
launch pad for a successful Howdens career. The new
L&D approach launches in February 2023.
Update on areas of focus from our 2020 ESG Strategic Review
EQUALITY DIVERSITY AND INCLUSION (EDI)
To develop our EDI roadmap and strategy to 2025.
2022 update: Howdens is a place where everyone is welcome, and
everyone has the opportunity to thrive. We believe that a diverse
workforce is more innovative, more creative, more collaborative and,
as a result, enables our continued success. For this reason, we are
committed to making Howdens an even more diverse and inclusive
workplace – not just for our employees, but for our customers and
communities, too.
We have made good progress with our EDI and strategy. Our
executive sponsors are leading employee working groups for the
three priority themes: gender, disability and ethnicity.
The groups have engaged specialist organisations that are helping
to articulate our vision for each theme, create action plans and gain
relevant accreditation.
SOCIAL MOBILITY
To improve social mobility through the career
development we offer.
2022 update: Social mobility is an integral part of our founding
principle, ‘worthwhile for all concerned’, and we continue to improve
social mobility for our employees through career and personal
development. In 2022, we took a ground-breaking step towards
improving social mobility in the UK more generally by supporting
apprenticeships outside of Howdens.
Our aim is to embed inclusion so EDI is not seen as a standalone
initiative. As of December 2022, 87% of people managers have
received EDI awareness training.
We are pursuing accreditation as a Disability Confident Employer
and as a Menopause-Friendly Workplace, supported by Leonard
Cheshire and Wellbeing for Women respectively. We hope to achieve
these in 2023.
Our employees support our commitment to create a more inclusive
workplace. We used the engagement survey process to collect
anonymous diversity data. Over 5,000 employees voluntarily
provided personal information about gender identification,
disabilities and ethnicity, and we are using it to shape how we can
best support our employees.
We have committed to transferring 20% of our apprenticeship levy
to fund construction apprenticeships in small businesses across
the UK. More specifically, we target the investment in deprived
communities that we serve.
By doing this, we address the skills gap in the construction industry,
support small businesses – our customers – to grow and create
jobs, and tackle social mobility challenges across the UK. This is in
addition to the work we already do to actively recruit care leavers.
In recognition of this work, Howdens received the UK Social Mobility
Award for Innovation in October.
LOOKING AHEAD TO 2023
In 2023, we want to bring together our ambitions for EDI with the work
we are doing to address social mobility, all of which reinforce that
Howdens is ‘open for all’. Moreover, we believe that consolidating
our efforts will have an even greater impact for our employees, our
customers, our stakeholders and the communities we serve.
range of potential candidates. We’ll launch our refreshed careers
website in the first half of the year, which will promote Howdens’
inclusive workplace. We will continue to develop partnerships with
more regional organisations to support people of all ages and
backgrounds into employment.
As part of this, we’ll actively work to diversify our talent pool, using
new channels and targeted marketing campaigns to attract a wider
We’ll share our updated strategy for diversity and inclusion, which
will include social mobility, in next year’s Annual Report.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage Title Sustainable supply chain
Sustainable product
66
Sustainability matters
Sustainable supply chain
Sustainability matters
Sustainable product
Strategic report / Sustainable product
67
Certified wood, efficient distribution, responsible purchasing
High-quality, sustainable product that we’re proud of
2022 highlights
• We used over 260,000 cubic metres of chipboard and
65,000 cubic metres of MDF in our factories in 2022 –
enough to fill the Albert Hall more than 3 times – so it’s
natural that we have a long-standing KPI requiring this
wood to be 100% certified.
• FSC® or PEFC™ certification means that the wood comes
from responsibly-managed forests and that we have
independent documented evidence of an unbroken chain
of ownership all the way from the forest to us – via the
mill, the importer and our suppliers.
• We are also members of Timber Development UK and are
recognised by them as a ‘Responsible Purchaser’, which
means that we have third-party assurance on our timber
purchasing due diligence systems.
100%
100% of chipboard & MDF
used in our manufacturing
processes is from FSC® or
PEFC™ certified sources
• Our transport fleet drove over 18 million miles in 2022, so we need it to be both efficient and
safe. All of our trucks comply with the latest emissions standards, and we’ve fitted refinements to the standard build to
increase efficiency and reduce emissions even further. In 2022 we began using Hydrotreated Vegetable Oil (HVO) as part
of our fleet fuel mix. HVO is a sustainably sourced second-generation biofuel. It is plant-based and can replace diesel
without requiring engine modifications. It reduces CO2 by 90% compared to diesel, and also has lower nitrogen oxide and
particulate emissions. We have also begun to trial trucks which run on Bio-LNG, a fuel produced by anaerobic digestion
of organic waste, manure and sewage which produces 80% less CO2 than diesel.
• We invest in safety and energy-efficiency training for our drivers. We combine this with the latest in-cab telemetry and
a system of daily debriefs where driver behaviour is assessed against energy-efficiency and safety targets. We reward
drivers who reach the highest standards, and we work with any drivers who need help to improve. In recent years, we
have invested in training our own new drivers via a driving apprenticeship scheme. This helps to encourage our high
standards from the beginning of a driver’s career.
• All of our buyers and our compliance team have taken and passed the Chartered Institute of Procurement and Supply’s
Ethical Procurement & Supply training, and we have a rolling programme of refresher training on Modern Slavery and
Anti-Bribery.
• Recognising that our highest exposure to modern slavery is through our supply chain, we have taken a robust approach
to ethical and sustainable procurement. We continue our partnership with SEDEX (Supplier Ethical Data Exchange); and
over 90% of our current suppliers are registered and completed their self-assessments on the platform. During 2022 we
continued to risk rate all our suppliers by using the SEDEX RADAR tool. Over 35% of suppliers are classed as low risk and
a further 59% are classed as moderate risk. The remaining 6% of suppliers, classed as high risk, have had a third party
ethical audit in last 3 years. Using SEDEX insight, we are continuing to work with suppliers to deliver improvements in
working practices across our supply chain. Currently 264 supplier sites share their ethical data with us.
• Since last year we have improved our supplier onboarding process and we are implementing SAP Ariba SLP (Supplier
Lifecycle and Performance) to enhance supplier qualification to align with anti-corruption, human rights goals,
sustainability and the Company’s code of ethics.
• Our modern slavery statement can be found here: www.howdenjoinerygroupplc.com/governance/modern-slavery-
statement.
Results of our 2020 ESG Strategic Review – Future commitments, targets and ongoing work
REDUCING FUEL CONSUMPTION
MPG improvement targets for our distribution
fleet. Targeting a 3% improvement by 2023.
2022 update: We are slightly ahead of our 2023 target.
Against a 2020 baseline of 9.89 MPG, we have achieved a
3.3% improvement with our 2022 12 month rolling average of
10.21 MPG.
INCREASING ENERGY EFFICIENCY
Introducing new CO2KG/km emission targets for
our distribution fleet.
2022 update: This is a new target in 2022. The target is a 15%
reduction by 2026, against a 2021 baseline of 0.721 CO2 Kg/Km.
The sustainable cabinet
Our ambition is to create sustainable products that we’re proud of. We make over 4.5 million cabinets a year in our own UK
factories, so this is a product where our choices can make a real difference.
We buy our chipboard from sustainably managed UK forests. For every acre of trees used, an acre or more is planted.
When the cabinet has come to the end of its life in the home it can be recycled and broken down to produce more chipboard,
which can be used to make more cabinets in the future.
We don’t only want to do things to an incredibly high standard – we want them to be sustainable too.
Egger receives
recycled wood
from the
cabinet
At the end of
its life, the
cabinet can
be recycled
Wood from
sustainably
managed
UK forests
Our own fleet takes the
cabinets to our depots
Our supply partner,
Egger, makes the wood
into chipboard
We make the chipboard
into cabinets in our
UK factories
Other product highlights
of the year
•
100% of kitchen range SKUs
now FSC® or PEFC™ certified
• FSC®/PEFC™ certified timber
in joinery and flooring SKUs
increased from 38% to 63%
• Continuing to embed
sustainability as a pillar of our
product development process
• Creating a new role of
Sustainable Product Developer
to deliver further benefits in
packaging and product design
in 2023 and beyond
•
Removal of polystyrene from
Clerkenwell frontals produced
on our new production line
• Launched our first own-brand
Lamona product with EPS-free
packaging
• A+ energy rated products in all
extractor designs
Results of our 2020 ESG Strategic Review – Future commitments, targets and ongoing work
FSC© & PEFC™ TIMBER: 100% of our kitchen
frontals to have FSC® or PEFC™ timber
certification by the end of 2022.
2022 update: 100% of all our kitchen frontals were made from FSC®
or PEFC™ certified materials. All the frontals which we manufacture
ourselves are certified, and we insist on certification for all new
frontals which are manufactured by third parties.
SUPPLIER CODE OF PRACTICE: Introduce code of
practice for all timber suppliers, clarifying our
commitment and expectations regarding ESG
standards throughout the supply chain.
2022 update: Our new Supplier Code of Conduct has been issued
to all suppliers, and mandates that they use the SEDEX sourcing
platform. See page 68 for more details.
PACKAGING: Removal or reduction in environmental impact of plastic we use in product and packaging.
2022 update: We are aiming to remove 17 tonnes of plastic packaging from glazed moulded skin doors replacing this with a corrugated
solution that is recycled, recyclable and FSC® certified. We will also build on the work to remove polystyrene from our packaging across
product categories through 2023 whist looking for opportunities to remove or reduce plastic from our product. In 2022 we removed over
300,000 pieces of polystyrene from our packaging, replacing them with a paper-based alternative that is recycled and recyclable. This is
enough polystyrene to fill eight 44-tonne lorry trailers.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernance Our environment and SECR
68
Sustainability matters
Our environment and SECR reporting
Strategic report / Our environment and SECR reporting
69
Reducing waste, responsible operations, lowering emissions
SECR – Emissions reporting
2022 highlights
• Maintaining zero to landfill in 2022 in our
manufacturing and logistics operations. We were very
pleased to achieve this in 2020 through our approach
of removing or minimising the use of resources in the
first instance, and then maximising the amounts of
waste that we can reuse, recycle and recover. We have
maintained this performance in 2021 and 2022 and this
is our target for the future.
• Less than 1% to landfill in our UK depots in 2022. This
metric is part of one of our main ESG commitments, and
we’ve made significant progress in 2022, ending the year
with 99.7% of depot waste avoiding landfill. See page 50
for more details.
100% of production
and warehouse
waste reused,
recovered or
recycled
100%
•
ISO 14001. Our manufacturing, warehousing and transport are certified to ISO 14001 Environmental Management
System. This assures us that we have sustainable processes in place and encourages us to look for improvements.
• Sawdust-to-heat. In 2022 we converted over 10,000 tonnes of sawdust into energy in biomass boilers at our Runcorn
and Howden factories. This is enough sawdust to fill 13 Olympic swimming pools, and it would otherwise have to have
been transported elsewhere to be reused. Using it to heat our factories also saves us money. The energy generated our
biomass boilers was equivalent to the average electricity consumption of over 10,000 households.
Results of our 2020 ESG Strategic Review – Future commitments, targets and ongoing work
ZERO TO LANDFILL: Zero to landfill across our UK
depot network over time, with a target of less
than 5% to landfill by the end of 2022.
2022 update: Exceeded the 2022 target at 99.7%. See page 50.
CARBON NEUTRAL MANUFACTURING: Carbon
neutral manufacturing by the end of 2021.
2022 update: Achieved in 2021 and maintained in 2022.
See page 50.
SECR Reporting
Energy efficiency initiatives
Over 10 years, our carbon intensity ratio tCO2e / £m turnover
has decreased by 58%. Reducing energy consumption and
maximising efficiencies has become business as usual,
focused on where our large consuming assets are. This is
predominantly in our manufacturing sites at Howden and
Runcorn.
Our energy reduction strategy has been targeted towards
high consumers such as extraction and compressed air
systems with energy efficient drives and variable demand
optimisation. LED Lighting, new asset specification and asset
automation continues to significantly contribute to these
ongoing reductions. Our other main area of focus has been on
our transport fleet, which we discuss on page 66.
Use of renewable energy sources and carbon offsets
Our commitment to renewable energy use expanded in
2022 to include substantially all our depot and office estate.
Our manufacturing, distribution and depot network now
use grid electricity from renewable sources backed by
Renewable Energy Guarantees or Origin (REGO). Each year,
this will avoid around 10,000 tonnes of indirect carbon
emissions. The impact of this can be seen in our market-based
reporting figures.
Biomass heat generation has been a feature of our Howden
and Runcorn sites for almost 25 years with a combined
heat output of 46,000MWh pa, we can heat 1msqft of
manufacturing space with 98% less carbon emissions.
In 2021 we achieved carbon neutral manufacturing at
our Howden and Runcorn sites. We committed to annual
recertification and in 2022, we retired 11,363 Gold Standard
Carbon offsets. Independent registry and verification details
can be found on page 50.
Absolute carbon emissions reduced 3.5% against 2021
Emissions reporting methodology
Footprint calculations performed in accordance with the WRI GHG Protocol and market-based emissions are reported
in accordance with the GHG Protocol Scope 2 Guidance – An amendment to the GHG Protocol. Emissions are reported in
accordance with HMG Environmental Reporting Guidelines including Streamlined Energy and Carbon Reporting (SECR). All
footprint calculations are subject to internal quality checks at source data and final report stages.
We have used the Operational Control boundary which includes all UK and International operations with the exception of Sheridan
Fabrications Ltd, which we acquired during 2022. There are no process emissions within Howdens, as defined in the GHG protocol,
and fugitive emissions from air conditioning systems are omitted due to insignificant materiality to the overall footprint.
Total CO2 emissions (Tonnes)
Scope 1 – Direct: Gas
Scope 1 – Direct: Owned Transport (LGV/Van/Car)
Scope 1 – Direct: Other fuels
Scope 1 – Direct: Biomass
Scope 1 – Direct: Total
Scope 2 – Indirect: Electricity – location-based
TOTAL Scope 1 and 2 absolute emissions – location-based
Scope 2 – Indirect: Electricity – market-based
TOTAL Scope 1 and 2 – market-based
Carbon offsets tCO2e
TOTAL (Scope 1 and 2) net emissions
Turnover (£m)
Carbon intensity ratio (tCO2e per £m) gross, location-based
Inflation adjusted intensity ratio (tCO2e per £m) gross, location-based
Additional carbon intensity ratio (tCO2e per £m) net, market-based
Additional inflation adjusted intensity ratio (tCO2e per £m) net, market-based
2022
13,032
28,302
1,354
469
43,157
12,067
55,224
101
43,258
(11,363)
31,895
2319
23.8
28.4
13.8
16.4
2021
15,707
27,626
1,684
642
45,659
11,585
57,243
7,460
53,118
(12,648)
40,470
2093.7
27.3
29.9
19.3
21.1
Energy consumption used to calculate above emissions (kWh)
321,588,787
308,287,239
Proportion of CO2 emissions generated in the UK:
Proportion of total energy consumed (kWh) in the UK:
98.6%
98.5%
99.0%
98.6%
Our record over the past five years is shown on the chart below:
60.0
50.0
40.0
30.0
20.0
10.0
0.0
2018
2019
2020
2021
2022
Total absolute carbon emissions (‘000s tCO2e) (location-based)
Total carbon emissions (‘000s tCO2e) (market-based)
Carbon intensity ratio (tCO2e per £m) – Gross (location-based)
Additional carbon intensity ratio (tCO2e per £m) net (market-based)
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage Title Our communities
Going concern and Viability statements
70
Sustainability matters
Our communities
Strategic report / Going concern and Viability statements
71
Going concern and Viability statements
Local and national donations and partnerships
Going concern
2022 highlights
Partnerships
Howdens actively partners with like-minded organisations
who share our ambitions to improve people’s lives.
Our partnership with Leonard Cheshire Disability entered
its 18th year. As well as donating kitchens during the year,
Leonard Cheshire Disability provided support on our
equality, diversity and inclusion programme, sharing their
expert knowledge on disability and skills.
We also continued our partnership with ‘I Can & I Am’,
the charity whose purpose and passion it is to inspire
confidence in young people and to help them to maintain
good mental health by offering pastoral services via a
converted double decker bus (www.icanandiam.com/
the-bus/).
Three exciting new partnerships were launched in 2022
that promote young people and skills. Howdens sponsored
the Donmar Warehouse’s ‘Take the Stage’ programme,
which invites young people who may not have access to
theatre to devise a new work that is in response to a Donmar
production and is reflective of their perspectives of the
world. Take the Stage gives access to a leading team of
theatre makers, with their performance being shared on
the Donmar stage in front of an invited audience (www.
donmarwarehouse.com/donmar-local/take-the-stage/).
Howdens also funded the Queen Elizabeth Scholarship Trust
(QEST) and National Saturday Club’s new ‘Craft&Making’
Saturday Club, which launched in January 2023. The
Craft & Making Saturday Club will give young people
the opportunity to explore and engage with craft-based
activities, developing their creativity and hand-making skills
(www.saturday-club.org/subject/craft-making/).
Howdens also launched the ‘Game Changer’ programme
in partnership with the Football Association (FA). This
exciting new initiative involves Howdens donating £1 million
of kitchens each year for three years to grass roots
football clubs. This programme will have nationwide reach
and will benefit local clubs who are so often the heart of
the community.
Howdens Worthwhile Foundation
Our community and charitable activities will continue to
transition to the Howdens Worthwhile Foundation during
2023. The Foundation will build on the exciting partnerships
already in place with the primary purpose of supporting
skills, inspiration, young people and inclusivity. It will also
facilitate the local donations and fundraising that has
always been central to our communities strategy.
Giving back to local communities
Our employee-led communities strategy continued in 2022
with Howdens donating £1.3m to charities and community
groups. The largest proportion of our giving is decided by
our people who chose to donate cash and stock to a diverse
group of causes, including hospices, colleges, health and
mental health charities as well as local sports clubs, youth
groups and community projects. Unsurprisingly, there
was more focus in 2022 on groups helping with the cost of
living crisis with food banks, housing trusts and homeless
charities receiving bigger donations than ever before.
Local donations and fundraising will continue to form the
backbone of our 2023 communities strategy.
Supporting our employees support the causes
that matter to them
Howdens donated to thousands of different charities
and community groups during 2022 but our employees
continued to fundraise for the causes that meant the most
to them. Early in the year, Howdens employees raised over
£42,000 for the Disasters Emergency Committee (DEC)
Ukraine appeal, with a significant proportion donated via
payroll giving. Howdens matched all employee funds raised
and donated an additional £7,000 through a separate
initiative. In total over £91,000 was raised for the DEC appeal.
One of our Area Managers, Ed Gregory, completed his goal of
raising £100,000 for The Children’s Hospital Charity, Sheffield.
Initially giving himself 10 years to achieve this ambitious
target, Ed completed it in five years. By fundraising with
colleagues, via collection buckets in depots and with a little
help from Howdens at the end, these donations will support
key projects at the children’s hospital going forwards.
In December, our employees raised money for Nurture a
Child’s Christmas appeal. Nurture a Child is a Hull based
charity close to our factory in Howden. Their appeal relies
on volunteers to produce Christmas gifts for local older
children and teenagers in care who otherwise would receive
little or nothing on Christmas Day. Thanks to the efforts of
our people, 382 gifts were donated last Christmas.
The Directors have adopted the going concern basis in
preparing the financial statements and have concluded that
there are no material uncertainties leading to significant doubt
about the Group’s going concern status. The reasons for this
are explained below.
2.
A ‘severe but plausible’ downside scenario based on the
worst 12-month year-on-year actual fall ever experienced
in the Group’s history. This is more significant than the
combined effect of COVID and Brexit on 2020 actual
performance.
Going concern review period
The going concern review period covers the period of
12 months after the date of approval of these financial
statements. The Directors consider that this period continues
to be suitable for the Group.
Assessment of principal risks
The Directors have reached their conclusion on going concern
after assessing the Group’s principal risks, as set out in detail
in the ‘Principal risks and uncertainties’ section, starting on
page 39.
Whilst all the principal risks could have an impact on the
Group’s performance, the specific risks which could most
directly affect going concern are the risks relating to
continuity of supply, changes in market conditions, and
product relevance. The Group is currently holding additional
amounts of faster-moving inventory as a specific mitigation
against supply chain disruption, and the Directors consider
that the effects of the other risks could result in lower sales
and/or lower margins, both of which are built into the financial
scenario modelling described below.
Review of trading results, future trading
forecasts and financial scenario modelling
The Directors have reviewed trading results and financial
performance in 2022, as well as early weeks’ trading in
2023. They have reviewed the Group balance sheet at
December 2022, noting that the Group is debt-free, has cash
and cash equivalents of £308m, and appropriate levels of
working capital.
They have also considered three financial modelling scenarios
prepared by management:
1.
A ‘base case’ scenario. This is based on the final 2022
Group forecast, prepared in November 2022 and including
the actual results of the 2022 peak sales period.
This scenario assumes future revenue and profit in
line with management and market expectations as well
as investments in capital expenditure and cash outflows
for dividends and share buybacks in accordance with our
capital allocation model (see pages 32 and 33) .
This scenario models a reduction in most of the variable
cost base proportionate to the reduction in turnover.
It includes lower capital expenditure at a lower level
than in the base case, but which is still in line with our
announced strategic priorities for growth, namely: new
depot openings and refurbishments; investment in our
manufacturing sites, investment in digital and expanding
our international operations. It also includes dividends
and share buybacks in line with the Group’s stated capital
allocation model.
In this scenario the Board considered the current
economic conditions that the Company and its customers
are facing, and noted that the downside scenario included
allowances for reduced demand and increased costs to
reflect such adverse conditions.
3.
A ‘reverse stress-test’ scenario. This scenario starts
with the severe but plausible downside model and reduces
sales even further, to find the maximum reduction in sales
that could occur with the Group still having headroom over
the whole going concern period, without the need to take
further mitigating actions.
Capital expenditure in this scenario has been reduced to
a ‘maintenance’ level. Variable costs have been reduced
in proportion to the reduction in turnover on the same
basis as described in the severe but plausible downside
scenario. It assumes no dividends or share buybacks.
Borrowing facility and covenants
The Group has a five-year, committed, multi-currency
revolving credit facility of up to £150m which expires in
September 2027 and which was not drawn at the period end.
A summary of the facility is set out in note 19 to the December
2022 Group financial statements.
As part of the scenario modelling described above, we have
tested the borrowing facility covenants and the facility
remains available under all of the scenarios. We have
therefore included the credit available under the facility
in our assessment of headroom.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic Report
72
Strategic report / Going concern and Viability statements
73
Going concern and Viability statements continued
Going concern continued
Long-term prospects and viability
Long-term prospects and viability continued
Results of scenario testing
Assessment of long-term prospects
In the base case and the severe but plausible downside
scenarios, the Group has significant headroom throughout
the going concern period after meeting its commitments.
The Directors have assessed the Group’s long-term
prospects, solvency and liquidity, with particular reference
to the factors below:
In the reverse stress-test scenario, the results show that sales
would have to fall by a significant amount over and above the
fall modelled in the severe but plausible downside scenario
before the Group would have to take further mitigating actions.
The likelihood of this level of fall in sales is considered to
be remote.
Conclusion on going concern
Taking all the factors above into account, the Directors believe
that the Group is well placed to manage its financing and
other business risks satisfactorily and have a reasonable
expectation that the Group will have adequate resources to
remain in operational existence for the going concern review
period set out above. Accordingly, they continue to adopt the
going concern basis in preparing these financial statements.
Current position
• History of profitable trading, with strong net profit margins.
• Cash and cash equivalents balance at 24 December 2022
of £308m.
• Debt-free. Consistently cash-generative. Proven ability to
maintain strong cash balances whilst also investing for
growth and returning cash to shareholders.
• £150m committed borrowing facility, due to expire in
September 2027. Unused, but available if needed.
• Strong relationships with suppliers and customers.
•
•
Proven ability to flex the operating cost base in a severe
economic downturn.
Robust disaster recovery and business continuity
framework.
Strategy and business model
• Proven, successful business model.
•
Demonstrated agility and resilience of the business
model to adverse economic conditions.
•
Clear strategic direction.
Robust assessment of principal risks
•
•
The Directors’ role in the risk identification, management,
and assessment process is outlined on pages 36 to 45,
together with details of the principal risks and mitigations.
The Directors are satisfied that they have carried out a
robust assessment of the Group’s principal risks over the
viability period on the basis already described in the going
concern disclosure directly above.
The Directors consider that the reasonably foreseeable
financial effects of any reasonably likely combination of the
Group’s principal risks are unlikely to be greater than those
effects which were modelled in the severe but plausible
downside and reverse stress-test scenarios.
Results of scenario testing
The results of the base case and plausible downside scenario
modelling showed that the Group would have sufficient
headroom over the viability assessment period.
The reverse stress-test showed that the level of fall in sales
required in the first year of the viability assessment period
was significantly more than the fall modelled in the severe but
plausible downturn scenario before the Group would have to
take further mitigating actions. The likelihood of this level of fall
in sales is considered to be remote.
Conclusion on viability
Having considered the Group’s current position, strategy,
business model and principal risks in their evaluation of the
prospects of the business, and having reviewed the outputs
of the scenario modelling, the Directors concluded that they
have a reasonable expectation that the Group will continue
to operate and to meet its liabilities in full and as they fall due
during the three-year period to December 2025.
Assessment of viability
Time period and scenario modelling
The Directors’ review of the Group’s long-term viability used
a three-year period to December 2025. This was considered
to be the most suitable period as it aligns with the Group’s
strategic planning process.
The financial modelling to support the assessment of viability
was based on the three scenarios used for the going concern
assessment and detailed above. We have tested the borrowing
facility covenants and the facility remains available under
all of the viability scenarios. We have therefore included
the credit available under the facility in our assessment of
headroom.
1.
2.
3.
The base case scenario takes the base case described
in the discussion of going concern above and extends it
over the viability assessment period. It assumes future
revenue and profit in line with management expectations,
investments in capital expenditure and cash outflows for
dividends and share buybacks in accordance with our
capital allocation model (see pages 32 and 33).
The severe but plausible downturn scenario takes the
same decline over the going concern period as described
in the discussion of going concern above, and then
assumes a phased recovery over the rest of the three-year
period. It assumes capex at a lower level than in the base
case but which is still in line with our announced strategic
priorities for growth, and dividends and share buybacks in
line with our capital allocation model.
The reverse stress-test scenario assumes a phased
recovery of margin and profit on the same bases as for
the severe but plausible downturn scenario. This is then
stress-tested to find the maximum amount by which sales
in the first year would have to fall before the Group would
no longer have headroom at any point in the viability
assessment period, without taking further mitigating
actions. It assumes capex at a maintenance level and no
dividends or share buybacks.
Further reading relevant to going concern and viability
Principal risks and mitigations
Trading results
Balance sheet
Details of our £150m borrowing facility
Pages 39 to 45
Pages 19 to 35, and the
Financial Statements
Page 165
Page 188
Auditor’s report, with details of their work and conclusions on going concern and viability
Pages 150 to 163
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage TitlePage Title Other Directors’ statements
74
Strategic report / Other Directors’ statements
75
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 and is signed on its behalf by:
Andrew Livingston
Chief Executive Officer
Paul Hayes
Chief Financial Officer
Other Directors’ statements
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in
accordance with applicable law and regulations. Company
law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under
that law they are required to prepare the Group financial
statements in accordance with international accounting
standards in conformity with the requirements of the UK-
adopted international accounting standards and applicable
law and have elected to prepare the parent Company
financial statements in accordance with UK accounting
standards and applicable law, including FRS 101 Reduced
Disclosure Framework.
Under Company law the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
parent Company and of the Group’s profit or loss for that
period. In preparing each of the Group and parent Company
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable,
relevant, reliable and prudent;
•
•
for the Group financial statements, state whether they
have been prepared in accordance with international
accounting standards in conformity with UK-adopted
international accounting standards;
for the parent Company financial statements, state
whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and
explained in the parent Company financial statements;
• assess the Group and parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters
related to going concern; and
• use the going concern basis of accounting unless they
either intend to liquidate the Group or the parent Company
or to cease operations, or have no realistic alternative but
to do so.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the parent Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the
parent Company and enable them to ensure that its financial
statements comply with the Companies Act 2006. They are
responsible for such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking
such steps as are reasonably open to them to safeguard
the assets of the Group and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report and Corporate
Governance Statement that complies with that law and those
regulations. The Directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the Company’s website. Legislation in the UK
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Section 172(1) statement
The Board reviews all matters and decisions through the
consideration and discussion of reports which are sent in
advance of each of their meetings and through presentations
to the Board. When the Directors discharge their duty as set
out in section 172 of the Companies Act 2006 (‘section 172’ or
‘s.172’), they have regard to the other factors set out on page
82 and they also consider the interests and views of other
stakeholders, including our pensioners, regulators and the
government, and the customers of our trade customers.
The Directors are required to include a statement of how they
have had regard to stakeholders and the other factors set
out in section 172(1)(a) to (f) when performing their duty. The
full s.172(1) statement may be found on pages 86 and 87. On
pages 88 to 95, we have set out examples of how the Directors
have had regard to the matters in s.172(1)(a) to (f) when
discharging their section 172 duty.
Non-financial reporting
In order to consolidate our reporting requirements under
sections 414CA and 414CB of the Companies Act 2006 in
respect of Non-Financial Reporting, the table on page 147
shows where in this Annual Report and Accounts to find each
of the disclosure requirements.
Disclosure of information to the auditor
Having made the requisite enquiries, the Directors in office at
the date of this report have each confirmed that, so far as they
are aware, there is no relevant audit information (as defined by
section 418 of the Companies Act 2006) of which the Group’s
auditor is unaware, and each of the Directors has taken all the
steps they ought to have taken as a Director to make themself
aware of any relevant audit information and to establish
that the Group’s auditor is aware of that information. This
confirmation is given and should be interpreted in accordance
with the provisions of section 418 of the Companies Act 2006.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationStrategic ReportGovernanceStrategic ReportStrategic ReportPage Title Governance
76
Governance
How we
preserve value
Corporate governance report
Board of Directors
Key Board activity
Executive Committee
and Company Secretary
Section 172(1) statement and
stakeholder engagement
Board of Directors
Peter Ventress
Chairman
Geoff Drabble
Senior Independent Director
Karen Caddick
Non-Executive Director
Andrew Cripps
Non-Executive Director
Louise Fowler
Non-Executive Director
Debbie White
Non-Executive Director
Executive Directors
Andrew Livingston
Chief Executive Officer
Paul Hayes
Chief Financial Officer
Executive Committee
78
Julian Lee
Operations Director
Theresa Keating
Group Finance Director
David Sturdee
Chief Customer Officer
Andy Witts
COO: Trade
Mark Slater
Commercial Director
Richard Sutcliffe
Supply Chain Director
UK Corporate Governance Code
application and compliance
Company Secretary
Forbes McNaughton
80
82
84
86
INDIRECT
DIRECT
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Total Executive Director – Fixed vs Variable Pay
Audit Committee report
Sustainability
Committee report
2022
2021
78 Corporate governance report
80 Board of Directors
82 Key Board activity
84 Executive Committee and
Company Secretary
86 Directors' duties (Section
172(1) statement)
88 Stakeholder engagement
96 2018 UK Corporate Governance
Code: application and
compliance
102 Nominations Committee report
112 Remuneration Committee
report
136 Audit Committee report
144 Sustainability Committee
report
146 Directors’ report
96
102
Fixed
Variable
112
136
144
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Governance / Contents
77
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GovernancePage Title
Corporate governance report
78
Governance / Corporate governance report
79
Corporate
governance report
Board meeting attendance
Peter Ventress (3/3) Appointed 1 July 2022
Richard Pennycook (6/6) Retired 17 September 2022
Karen Caddick (8/8)
Andrew Cripps (8/8)
Geoff Drabble (8/8)
Louise Fowler (7/8)1
Paul Hayes (8/8)
Andrew Livingston (8/8)
Debbie White (7/8)2
1
2
Louise was unable to attend the June Board meeting due to a pre-existing
commitment. The June Board meeting comprised updates from the
CEO and CFO but did not have a wider agenda. The Company Secretary
updated Louise following the meeting.
Debbie was unable to attend the March Board meeting due to a
conflicting work commitment. The March Board meeting was an
additional meeting to the Board’s usual calendar to consider the
appointment of the new Chair. Debbie received the Board papers in
advance of the meeting and was able to feed back her views to the
Senior Independent Director before the meeting.
Using the corporate governance report
Part 1:
Board and Executive Committee profiles and key
Board activity during the year.
Part 2: Directors' duties and section 172 disclosure.
Part 3: Stakeholder engagement.
Part 4: UK Corporate Governance Code compliance.
2023 Annual General Meeting (AGM)
Details of the 2023 AGM may be found in the
'Additional information' section on page 214.
Share capital and significant agreements
Disclosures may be found in the ‘Additional information’
section on pages 214 and 215.
Peter Ventress
Chairman
Introduction from the Chairman
In my Chairman’s statement at the beginning of this Annual
Report (pages 16 to 18), I spoke of the importance of integrity
and trustworthiness in business in the modern world. Good
governance practices are the bedrock for these principles and
I’m pleased to report that I have joined a highly experienced
and high-performing Board.
The Board’s agenda focuses on the best outcomes for all
our stakeholders. It is varied, as you will see on the following
pages, and balanced between our commercial imperative
and governance safeguards. It gives me great pleasure to
join a Board and a Company in such an exciting phase of
its development and I look forward to building on the Board
agenda from my predecessor, Richard Pennycook.
Strategic initiatives
In April, the Board considered the updated ‘Raised Ambition’
strategic plan. These plans were subsequently presented to
me by management during my induction into the business.
I am pleased that the Board was able to continue to support
management’s strategic initiatives during the year. The
acquisition of the Sheridan solid surface worktop business,
additional land purchases at the Howden site and investment
in a new ‘paint to order’ line were all investments approved by
the Board.
My first Board meeting in July was in France and the Board
spent time in the French business with the local management
team. The investment in the international business is one of
the Board’s main strategic initiatives and it was pleasing to see
the Howdens model performing well outside of the UK.
When considering investment opportunities, the Board has
regard to a wide range of different stakeholder considerations.
Sometimes there are conflicting considerations and the
Board must balance these in a fair and considered way. More
information on the way we balance Directors’ duties can be
found on page 87.
Stronger governance
I was pleased that health and safety was already on the
agenda of all Board meetings and it will remain our primary
concern during the decision making process. It is also first on
the agenda at Executive Committee meetings and operational
Regional Board meetings, demonstrating that it is deeply
embedded in our culture.
The Board also spent a significant amount of time on employee
engagement during the year. Presentations were received
from the Group HR Director and Howdens participated in the
Best Companies survey in 2022, ranking in the top 10 best
big businesses to work for. The Board took time to consider
the results of the engagement survey and are working
with management to address areas for improvement. The
survey also provided the opportunity to capture (voluntarily)
information about our employees which will assist with our
equality, diversity and inclusion programmes. Employees are
a key stakeholder and the Board was pleased to support the
additional payment of £500 per employee recommended by
management. We will continue to look for ways to improve our
employee engagement during 2023.
Sadly, following the shock volatility in the gilts market in
the autumn, the Plan’s investment strategy came under
significant stress and deficit contributions have since
recommenced.
We will also be taking more time to consider our wider equality,
diversity and inclusion programmes at all levels of the
business, promoting career paths and focusing on employee
engagement.
We live in interesting times. At the beginning of 2022, there
were still widespread lockdown restrictions and virtual
Board meetings, and whilst these restrictions have largely
disappeared, Howdens is not immune to the impact of shocks
be they from international events or market volatility closer
to home. It is our resilient business model, strong governance
and the principle that everything we do must be worthwhile for
all concerned that will mean Howdens continues to grow from
strength to strength.
During 2023, the Board approved the move from a secured to
an unsecured credit facility. This was significant as it removed
one of the final legacy issues and encumbrances from the
restructuring of the old MFI business. The new facility, more
information on which can be found in note 19 on page 188,
provides the Board with greater optionality and flexibility when
considering strategic opportunities in the future.
The Board in 2023
I look forward to developing and improving the Board’s agenda
in 2023. As you can see on pages 82 and 83 of this report, we
are introducing ‘spotlight sessions’ to the majority of Board
meetings. These sessions look to build on the Board’s existing
agenda and will give the Board time with the wider Executive
team and their direct reports to discuss the fundamentals of
the business model, strategy and future plans.
We also look forward to working with the Pension Trustees
during the year in reshaping their strategy. In the 2021 Annual
Report, we reported that the Defined Benefit Pension Plan
(the 'Plan') funding position had improved so that it was
in surplus on a technical provisions basis and therefore
Company contributions to the deficit had ceased.
Board and Executive Committee structure
Board of Directors
Peter Ventress
Chairman
Geoff Drabble
Senior Independent Director
Karen Caddick
Non-Executive Director
Louise Fowler
Non-Executive Director
Andrew Cripps
Non-Executive Director
Debbie White
Non-Executive Director
Executive Directors
Andrew Livingston
Chief Executive Officer
Paul Hayes
Chief Financial Officer
Executive Committee
Julian Lee
Operations Director
Theresa Keating
Group Finance Director
David Sturdee
Chief Customer Officer
Andy Witts
COO: Trade
Mark Slater
Commercial Director
Richard Sutcliffe
Supply Chain Director
Company Secretary
Forbes McNaughton
Roles
Further information about the
role of the Board, the Executive
and Non-Executive Directors,
external advisors and individuals
may be found on our website:
www.howdenjoinerygroupplc.
com/governance/division-of-
responsibilities
Howden Joinery Group Plc / Annual Report & Accounts 2022
Strategic ReportFinancial StatementsAdditional InformationGovernanceGovernanceGovernancePage Title
Board of Directors
80
Governance / Corporate governance report
81
Corporate governance report continued
Board of Directors
Executive Directors
Non-Executive Directors
Key to Board Committee membership
Audit Committee
Remuneration Committee
Nominations Committee
Sustainability Committee
Chair of Committee
Independence
The Board considered that all of the Non-Executive Directors
were independent for the full duration of the period being
reported on and that Peter Ventress was independent upon
his appointment as Chairman.
Andrew Livingston
Chief Executive Officer
Paul Hayes
Chief Financial Officer
Peter Ventress
Independent Non-Executive
Chairman
Geoff Drabble
Senior Independent Director and
Non-Executive responsible for
workforce engagement
Appointed
Appointed
Andrew was appointed to
the Board as Chief Executive
Officer on 2 April 2018.
Paul was appointed to the
Board as Chief Financial Officer
on 27 December 2020.
Peter was appointed to the
Board in July 2022 and became
Non-Executive Chairman and
Chairman of the Nominations
Committee and Sustainability
Committee in September 2022.
Geoff was appointed to the
Board in July 2015 and became
Senior Independent Director in
September 2019 and Non-
Executive Responsible for
Workforce Engagement in 2019.
Contribution to the long-term
sustainable success of the Company
Contribution to the long-term
sustainable success of the Company
Andrew has a strong track
record of performance,
execution and driving
change through improving
digital capability, ranges
and new site openings. He
also has knowledge of key
European geographies, is a
competent French speaker,
and has an entrepreneurial
mindset. This mindset fits
the Howdens culture which
has served the Company
well and is fundamental to its
success. He was previously
the CEO of Screwfix and has an
MBA from the London Business
School.
Paul is an experienced finance
executive and has a proven
track record in consumer and
manufacturing businesses.
From 2017 until its acquisition
by Recipharm AB in February
2020, Paul was CFO of Consort
Medical Plc, a leading drug
and device manufacturing
business. Before this, he was
the Group Finance Director
of Vitec Group plc from 2011
to 2017. Paul has extensive
experience in senior finance
roles at a number of UK and
US listed companies including
Signet Jewelers, RHM Plc
and Smiths Group Plc. He is a
Chartered Accountant having
qualified with Ernst & Young and
has a first class Masters degree
in Mechanical Engineering,
Manufacture & Management.
As former Chairman of
Galliford Try plc and current
Chairman of Bunzl plc, Peter
has in-depth knowledge of
UK listed companies and the
associated high corporate
governance standards
required by such companies.
He was also formerly Chief
Executive Officer of Berendsen
plc and has held several senior
executive roles including
International President of
Staples Inc and Chief Executive
Officer of Corporate Express
NV, meaning he has extensive
experience in international
distribution businesses and
brings a wealth of relevant
commercial, financial and high-
level management experience
to the Board.
Geoff brings extensive
experience of the building
products and construction
markets having spent over a
decade as CEO of Ashtead Group
Plc in addition to his current
appointment as Chairman
of Ferguson Plc. He also has
extensive experience from his
time as an executive director
at the Laird Group, where he
was responsible for the Building
Products division. Geoff
understands and has managed
businesses with multi-site
depot operations and he has
strong business-to-business
sector experience. Geoff is also
Chairman of DS Smith Plc, the
global provider of sustainable
packaging solutions, paper
products and recycling services.
Karen Caddick
Independent
Non-Executive Director
Andrew Cripps
Independent
Non-Executive Director
Louise Fowler
Independent
Non-Executive Director
Debbie White
Independent
Non-Executive Director
Karen was appointed to the Board
in September 2018 and became
Chair of the Remuneration
Committee in September 2019.
Andrew was appointed to the
Board in December 2015 and
became Chair of the Audit
Committee in May 2016.
Louise was appointed to the
Board in November 2019.
Debbie was appointed to the
Board in February 2017.
Karen’s professional experience
provides her with a strong
diversity of perspective and
cultural fit to help with the
leadership of the Howdens
business. Having served as
the Group Human Resources
Director of large listed
organisations such as Saga
Plc and RSA Insurance Group
Plc (now RSA Insurance Group
Limited), Karen has particular
strengths in organisational
development, delivery of
diversity programmes, and
executive remuneration. These
attributes have stood Karen in
good stead for her role as Chair
of the Remuneration Committee
and has made her a valuable
addition to the Nominations
Committee.
Andrew brings extensive
experience as a non-executive
director and audit committee
chair with particular knowledge
of branded consumer
and business-to-business
products, manufacturing
and distribution in the UK
and continental Europe.
His experience of multisite
wholesale distribution to
small business customers at
Booker Group Plc is valuable to
the Board’s decision-making
process. He is a Chartered
Accountant and former
Finance Director with extensive
recent and relevant financial
experience.
Louise has over 25 years’
customer, brand and digital
experience at a senior level.
Her experience encompasses
publicly listed and private
businesses, the mutual sector
and not-for-profit organisations.
Louise’s strong background
in consumer experience and
reputation is valuable to the
Company as it strives to provide
a strong aftersales service
to further support the builder
customer. Her digital experience
also provides valuable insight
given the investment the
Company continues to make in its
digital programme. Louise is an
Honorary Professor in Marketing
at Lancaster University
Management School.
Debbie has extensive
experience in the B2B sector
from her time leading Interserve
Plc and the Sodexo global
healthcare and government
businesses. She has in-depth
knowledge of a number of
markets, specifically the UK
and France, both of which are
key to Howdens. Her previous
experience as a CFO and her
current experience as Chair
of the Audit Committee of
a NASDAQ-listed business
enables her to bring strong
financial awareness and
competence to the Board.
Debbie was previously interim
HR Director at BT Plc and has
also supported Howdens
management in the formation
and delivery of its Equality,
Diversity and Inclusion (EDI)
programme.
Other listed company appointments
Other listed company appointments
Non-Executive Director of
LondonMetric Property Plc
None
Chairman of Bunzl Plc
Chairman of Ferguson Plc
Chairman of DS Smith Plc
None
None
Non-Executive Director
of Assura Plc
Non-Executive Director
of PAVmed Inc, Lucid
Diagnostics Inc1, and Spire
Healthcare Group plc1
Committee Membership
Committee Membership
Neither Executive Director is a member of any Board Committee.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
1
The Board considered Debbie’s proposed appointment as Non-Executive Director of Spire Healthcare Group plc and Director of Lucid Diagnostics Inc (a
subsidiary of PAVmed Inc, of which Debbie was already a director). The Board was satisfied that Debbie had the requisite time available to commit to her
responsibilities in her role as Non-Executive Director of Howdens. Further information is available on page 98.
Strategic ReportFinancial StatementsAdditional InformationGovernanceGovernanceGovernancePage Title Key Board activity
Corporate governance report continued
Key Board activity
Set out below and on the facing page are highlights of the matters
the Board considered in 2022 and will consider in 2023. Not all of the
matters the Board considered or will consider are listed, therefore this
should not be considered an exhaustive list of activities.
In addition to the matters shown on the 2022 timeline, at each meeting
the Board received strategic, operational and financial updates from
the CEO and CFO. The Board also considered aspects of Group culture
and strategy at various points during the year.
82
2022
Governance / Corporate governance report
83
Governance and risk
The Board received governance, legal, and regulatory updates at
regular intervals from the Company Secretary and the Board’s advisors.
Reporting from our whistleblowing helpline is also considered by
the Board on a biannual basis.
Risk remains a matter reserved for the Board and a detailed review of
our risk management processes and principal risks can be found on
pages 36 to 45. We have reviewed our risk management processes
and remain satisfied that they are robust and effective.
Shareholder engagement
Information about how we engage with shareholders can be found
in our section on stakeholder engagement on pages 94 and 95.
January
• Health and safety
February
March
• 2022 budget approval
• Appointment of new
• 2022 budget review
• Draft 2021 preliminary
Chairman
results
• Draft 2021 Annual Report
and Accounts and 2022
AGM documents
• Dividend and capital
returns
• Non-Executive Directors’
fees
• Principal advisors
• Whistleblowing report
February
• Health and safety
• Board evaluation
• Draft 2022 preliminary
results, draft 2022 Annual
Report and Accounts and
2023 AGM documents
• Shareholder and capital
returns
• NED fees
• Group policies
• Principal advisors
April
• Health and safety
• DB pension plan update
• Shareholder feedback
following 2021 Full Year
results
• Broker update
• Ukraine crisis update
• Strategic planning
(separate session)
April
• Health and safety
• Strategic opportunities
and long-term planning
• Pensions
•
Investor relations
Spotlight
Product leadership
• Capital allocation
•
Investor relations update
• Principal risks review
2023
January
• Health and safety
• 2023 budget
•
Investor relations
• Principal risks
• Whistleblowing report
Spotlight
Trade service
and convenience:
Digital strategy
Spotlight sessions
May – AGM
All resolutions were passed
with the requisite majority.
Further details about the
meeting may be found on
page 94.
June
• AGM feedback
• Consumer and market
update
July
• France and Belgium
Business update
• New factory line approval
• HR update
•
Investor relations update
• Draft interim results
and announcement
• Key risks review
• Whistleblowing report
September
• Health and safety
•
'Cost of living' help for
employees
• Employee survey update
• Supply Chain and
Operations update
November
• Health and safety
• Operations, Commercial
and Supply Chain
updates
• Pensions update1
•
Investor relations update
•
Investor relations update
• Schedule of Matters
• Broker presentation,
market update
Executive Committee presenters:
Executive Committee presenters:
KH
RS JL
May
• AGM – further details may
be found on page 214.
July
• Health and safety
September
• Health and safety
November
• Health and safety
• Draft 2023 Interim results
• Employee engagement
• Pensions
• Key risks
• Broker update
• Whistleblowing report
• Director training session
(to be provided by the
Group’s corporate lawyer)
•
Investor relations
• Corporate governance
• Board Committees’ Terms
of Reference
• Schedule of Matters
Reserved for the Board
• 2024 Board calendar
Spotlight
Trade service
and convenience:
Depot evolution
Spotlight
Trusted trade
relationships:
Customer
Spotlight
Trade value:
Vertical integration
Reserved for the Board
and Board Committee
Terms of Reference
• 2023 Board calendar
Executive Committee presenters:
AW MS RS
Executive Committee
presenters
KH
RS
JL
AW
MS
Kirsty Homer
(Group HR Director)
Richard Sutcliffe
(Supply Chain Director)
Julian Lee
(Operations Director)
Andy Witts
(COO: Trade)
Mark Slater
(Commercial Director)
1
The Company’s actuaries reported
to the Board on routine funding
and investment matters
and the Chair of the Pension
Trustees attended to provide an
overview of the Trustees’ funding
and investment strategy and to
seek approval from the Board of its
long-term strategy proposal.
Spotlights sessions, introduced for the first time in 2023, are sessions with the wider Executive team and their direct reports to
discuss the fundamentals of the business model, strategy and future plans. Topics will focus on the five pillars of the business:
• Trade service & convenience
• Trade value
• Trusted trade relationships
• Product leadership
• Entrepreneurial culture
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Strategic ReportFinancial StatementsAdditional InformationGovernanceGovernanceGovernancePage Title Executive Committee and Company Secretary
84
Governance / Corporate governance report
85
Corporate governance report continued
Executive Committee and Company Secretary
Executive Committee members
Company Secretary
Theresa Keating
Group Finance Director
Julian Lee
Operations Director
Mark Slater
Commercial Director
David Sturdee
Chief Customer Officer
Richard Sutcliffe
Supply Chain Director
Andy Witts
Chief Operating Officer: Trade
Forbes McNaughton
Company Secretary
Appointed
Theresa joined Howdens in
September 2000 and has been
a member of the Executive
Committee since February
2012.
Julian joined Howdens in 2003
and was appointed to the
Executive Committee in July
2020.
Mark joined Howdens in June
2019 as a member of the
Executive Committee.
David joined Howdens in March
2022 and was appointed to the
Executive Committee in May
2022.
Contribution to the long-term sustainable success of the Company
Theresa was appointed Group
Finance Director in May 2014,
having been Group Financial
Controller since 2007. She
joined the Group Finance team
in 2000 having previously held
various commercial finance
roles at Waterstones, HMV and
Heals. Theresa is also a trustee
of E-Act, a multi-academy trust.
Theresa's role as Group
Finance Director includes
leading the key controls
project, which is improving the
business's capability to identify
operational, IT and financial
controls which mitigate our key
and principal risks.
Prior to joining Howdens,
Julian worked in a number of
strategic and operational roles
within the Silentnight Group.
He joined Howdens in 2003 as
a leader of the Manufacturing
Division and from 2005 to
2009 was head of international
sourcing and supply chain in
Asia. Since 2009, Julian has
made a major contribution
to the transformation
of our supply chain and
operations and in 2020, he
was appointed Operations
Director, encompassing both
manufacturing and logistics.
Julian leads our strategic
manufacturing investments,
including increased in-house
manufacturing capability and
capacity.
Executive Directors
Mark has over 25 years’
experience in retail and trade
businesses working in senior
commercial, marketing and
strategy roles. Prior to joining
the business, Mark held senior
commercial positions with Travis
Perkins Plc, The Walt Disney
Company and Dixons Carphone.
Mark's role as Commercial
Director includes range
management, which is one of
the business's key strategic
initiatives. Balancing choice and
new product with disciplined
range management is crucial to
ensuring both availability and
profitability.
Prior to joining Howdens, David
was Chief Customer Officer and
Chief Operating Officer at Yum!
Brands, responsible for Pizza
Hut Europe across 25 countries
and over 1,500 outlets. He was
with Yum! Brands for 14 years
with roles in the Middle East &
North Africa, Asia Pacific, and
Europe.
David is responsible for
developing a longer-term
customer strategy at Howdens
to support our depot teams in
managing their relationships
with customers and to deliver
our ambitious growth plans.
David’s role also encompasses
leading our IT, Digital, and
Marketing teams to continually
develop and grow awareness of
the Howdens brand.
Richard joined Howdens
in January 2019 and was
appointed to the Executive
Committee in July 2020.
Andy joined Howdens in July
1995 and has been a member
of the Executive Committee
since September 2008.
Forbes joined Howdens in
July 2012 and was appointed
Group Company Secretary in
May 2014.
Appointed
Prior to joining Howdens,
Richard was Director of Supply
Chain at Screwfix. Before this,
he held senior supply chain
and business planning roles at
Hobbycraft, Wyevale Garden
Centres and B&Q.
Richard's role as Supply
Chain Director encompasses
optimising stock holdings
across the business and
ensuring Howdens maintains
market leading stock
availability. He is also leading
the XDC project, which is
delivering superior service
levels and availability to
depots.
Andy was one of the founding
members of the Howdens depot
management team, having
joined from Magnet in 1995.
He was promoted from the
regional team to become Sales
Director in January 2007 and
was appointed Chief Operating
Officer of Trade in January 2014.
Andy has overall responsibility
for the performance and
culture of depots and
associated support functions
in the UK and the Republic
of Ireland. He oversees the
evolution of our depot estate,
including our strategically
important depot reformatting
and the opening of new depots.
He is key in ensuring our depots
build trusted relationships with
local tradespeople.
Contribution to the long-
term sustainable success
of the Company
Forbes joined the Company
as Deputy Company
Secretary in 2012 following
a period of secondment
from KPMG. He is a fellow of
the Chartered Governance
Institute (CGI) and is
Secretary to the Executive
Committee as well as to the
Board of Directors.
Forbes is the link between the
Executive Committee and
the Board and is responsible
for managing a number
of external stakeholder
relationships such as with
the Pensions Trustees and
external regulators. He is the
head of the legal function
in addition to his corporate
governance responsibilities.
Andrew Livingston
Chief Executive Officer
Paul Hayes
Chief Financial Officer
Andrew and Paul’s profiles
may be found on page 80.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Directors' duties
Section 172(1) statement
A director of a company is required to act in a way they consider, in good faith, would
most likely promote the success of the company for the benefit of its members as a whole.
In doing this, the director must have regard, amongst other matters, to the following:
Environment and community
The impact of the company’s operations
on the community and the environment.
Long-term thinking
The likely consequences of
any decision in the long term.
Reputation
The desirability of the company for
maintaining a reputation for high
standards of business conduct.
Investors
The need for every member to be treated
fairly and for no member to be favoured
over another member.
Workforce
The interests of the company’s employees.
Suppliers
The need to foster the
company’s business
relationships with
(amongst others)
suppliers and…
...Customers
Howdens was founded on the principle that the business
should be worthwhile for all concerned. It's a principle that the
business continues to live into today. But balancing the needs
and views of all of our stakeholders can be challenging as there
are often competing interests at stake. This is why the Board
first and foremost considers our purpose, our culture, our
mission and our strategy to ensure all decisions have a clear
and consistent rationale. For details on the matters which the
Board discussed and debated during 2022 please see pages 82
and 83.
The Board regularly considers feedback from the Company’s
stakeholders. These are set out in detail on pages 88 to
95. This engagement is effective and in keeping with the
Company’s culture. For example, much of the feedback is
through face-to-face conversations rather than being written,
but where there is need for formality and confidentiality,
such as whistleblowing, this is also provided. Stakeholder
feedback can directly affect the Board’s decision making,
such as feedback received in relation to the application of the
Directors’ remuneration policy in 2023 and employee feedback
at Regional Board meetings, but it also provides the context
for decision making, particularly where there are competing
stakeholder interests.
As Directors, when we discharge our duty as set out in section
172 of the Companies Act 2006 (‘Section 172’), we have regard
to the other factors set out on the facing page. In addition to
these factors, we also consider the interests and views of other
stakeholders, including our pensioners, regulators and the
government, and the customers of our trade customers.
We have set out some examples below of how the Directors
have had regard to the matters in section 172(1)(a)–(f) when
discharging their Section 172 duty and the effect on certain
decisions taken by them in 2022.
£500 payment to employees
In September 2022, all UK employees (below the first two tiers
of senior management) received a one-off payment of £500.
This was in recognition of the direct impact on employees’
everyday lives of the high inflation environment and increasing
energy bills. The total cost to the Company of the one-off
payment was c.£7m.
Reward and recognition are key features of working at
Howdens and the Company scored well in the 2022 Best
Companies employee survey (further detail about which
may be found on pages 65 and 90). Following engagement
with employees and trade unions directly with our CEO
and members of the Executive Committee, the Board was
supportive of management’s recommendation that the
Company should provide the additional support for its
workforce. This was especially the case given that Howdens’
culture is that it should be a business which is worthwhile
for all concerned. Maintaining our unique culture and strong
reputation for rewarding our people fairly means that we can
both attract and retain the best people, who in turn ensure the
business’s long-term strategic aims are met.
Shareholder returns
Howdens has a prudent risk appetite towards balance sheet
management, an approach which has provided a source
of great strength through the challenges of the COVID-19
pandemic in recent years. As markets have recovered, the
Company prudently reinstated its capital priorities, including
the return to paying dividends in 2021, and the return of surplus
capital in the second half of the year. These returns were only
initiated after having repaid all government support received
early in the pandemic.
In February 2022, the Board recommended a final dividend
for 2021 of 15.2p per ordinary share, giving a total dividend
of 19.5p per ordinary share for 2021. In line with its capital
allocations policy (more detail about which can be found on
page 18), the Board also approved a £250m share buyback
programme. In making its capital returns decisions, the Board
considered its long-term strategy of continuing to invest in
depots, manufacturing and logistics capabilities and related
strategic investments while delivering a progressive dividend.
The Board takes regular feedback from shareholders on the
most appropriate method of returning capital, including at
the AGM where all shareholders, regardless of the size of their
shareholding, are invited to attend and ask questions of the
Board. Our CEO and CFO also discuss this during investor
roadshows following results announcements.
Sheridan acquisition
In February 2022, Howdens acquired Sheridan Fabrications
Limited (‘Sheridan’), which was the UK’s largest supplier
of luxury kitchen worktops. In acquiring the business,
Howdens was able to benefit quickly from the additional in-
house manufacturing capacity and Sheridan's established
experience in the solid work surface market.
In coming to its decision to acquire Sheridan, the Board
considered Howdens’ customers, who were seeing solid
work surfaces becoming a feature of modern kitchens and a
growing demand for the provision of bespoke fitted products.
The design, template, manufacture, and fitting of premium solid
kitchen surfaces therefore would support our trade customers
in selling to their customers. In addition, the Board was satisfied
that such an acquisition represented good value to its investors
as it supported the business’s long-term strategic aims.
Paint to order
In July 2022, the Board approved investment in a ‘paint-to-
order’ manufacturing infrastructure to support the provision of
a wider range of kitchen colours on certain premium product
ranges. The provision of such a service allows our trade
customers to provide more choices to their customers and
therefore to compete more effectively, whilst also allowing
Howdens to satisfy demand without carrying additional
inventory to support a broader product range.
In considering its approval of the investment, the Board
considered the payback on investment and that the investment
supported the Group’s strategic plans, which in turn
represented good value for shareholders.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Stakeholder engagement
•
Howdens' stakeholders
Trade customers
Engagement with our trade
customers includes the following:
• Local depots
• Customer research
• Customer surveys
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Stakeholder and forms of engagement
Trade customers
pages 88 to 89
Workforce
Suppliers
Pensioners
Shareholders
pages 90 to 91
pages 92 to 93
pages 92 to 93
pages 94 to 95
Local depots
The primary method of engaging with our trade customers
since Howdens opened its doors in 1995 has been through
conversations at the local depot. The relationship between the
depot manager and the trade customer has always been at
the heart of what we do.
Our depot managers feed back our trade customers' views
to management at Regional Board meetings (see 'Workforce'
on page 91 for further information), which the COO of Trade
is present at and which the CEO and other members of the
Executive Committee frequently attend. Feedback from
Regional Board meetings influences product and pricing
decisions. However, it also reinforces our strategic decisions
on new depot openings, ensuring that we are maintaining
excellent customer service and investing in new product. From
these meetings, managers were able to feedback directly to
the CEO, COO of Trade and other senior executives about any
matters affecting their depots and their customers.
Board members, Executive Committee members and senior
managers regularly visit depots to ensure they hear from
trade customers and the depots teams first-hand.
Trade customer surveys
We run periodic trade customer surveys to better understand
our trade customers' forecasted activity, confidence of the
industry over the next three months, and how we compare
to our competitors. We also use the surveys to ask trade
customers about 'hot topics' such as the cost of living crisis,
use of our digital platform, perception of certain products, and
sustainability, for example, 'end-of-life' issues with kitchens, so
that we can feed this back into our sustainability agenda.
We also carry out regular surveys (at least bi-annually)
with end-users online and trade customers by telephone.
The purpose is to track customer sentiment and associated
measures around the Howdens brand.
In 2022, trade customers participated in 'deep dive'
research into flooring and ironmongery, which led to the
improvement of merchandising and education around
flooring within depots and partnerships with new flooring
brands. They also helped us identify that our handle offering
could be expanded, so new styles were launched in 2022
and more will be launched in 2023.
In addition, in 2022, end-users participated in ad hoc
research into their purchasing journey. From this research
we learned that there were changes we could make to our
printed literature to help our customers better sell to their
customers, the end-users. We will be publishing our new
brochure in Q2 2023 in line with the changes identified by
the research.
Cabinet research builder study
In 2021, as part of our continual efforts to make builders'
lives easier, we undertook a cabinet research study with our
builder customers (see page 87 of the 2021 Annual Report),
and in 2022 several actions were implemented.
The research study helped us identify more ways to support
our builder customers, such as by making improvements to
the installation activities and configuration of our drawer
box offer. It also identified that builders' knowledge of
our cabinet offer could be improved further and so our
marketing communications were improved to give better
visibility of some items. QR codes now also link to product
information and installation guides to ensure customers
can more easily access the information they need.
Landlord research
We conducted research with our landlord customers
to ensure we remain aware of their product, price and
service needs and that we remain competitive against our
competition in all sectors of the market.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Stakeholder engagement continued
Workforce
Engagement with our workforce
includes the following:
• Employee engagement survey
• Regional Board meetings
• Townhalls and feedback sessions
• Trade union and works council meetings
• Whistleblowing helpline
Best Companies survey
In March 2022, employees were given the chance to have
their say and participate in the Best Companies engagement
survey. Over 7,300 surveys were completed by employees. The
results from the survey showed that, on the whole, employees
felt they are paid fairly for the work they do relative to people
in similar positions in similar organisations, and that they
believe the organisation does a lot to protect the environment.
An aspect which the survey showed required attention was
that many in the workforce wanted more support with their
wellbeing. As a result of the survey, the following actions have
been taken:
•
•
•
•
•
•
Our Supply Operations team has formed a wellbeing
committee, with 24 representatives across our
manufacturing and logistics sites.
We introduced a health app from an external provider to
encourage employees to take regular steps to become
healthier.
In June 2022, we started a partnership with
ANDYSMANCLUB to support men’s mental health. 270
employees attended face-to-face and virtual presentations
from ANDYSMANCLUB.
In July 2022, we gave employees at five of our largest
sites access to free blood pressure, heart rate, oxygen
saturation, temperature and weight checks. Over 370
employees were checked over the course of seven days.
We are piloting menopause awareness training and have
partnered with Wellbeing of Women and Henpicked, two
menopause in the workplace specialists, giving us access
to a range of webinars and support tools.
We are continuing to monitor and encourage the utilisation
of flexible work patterns and will gather employee insights
on peak times of demand/productivity by role to inform
where flexibility can be offered.
As part of the survey process, we asked employees to provide
diversity information anonymously if they felt comfortable to
do so. We are now using this anonymous data to inform our
equality, diversity and inclusion strategy and action plans.
Further information on our EDI roadmap and strategy may be
found on page 65 of the sustainability matters report.
Regional Board meetings
Engagement with the Trade Union and works councils
Howdens respects the collective bargaining of its
employees and actively engages with the Trade Union
and works councils collectively at least quarterly. Local
sites host Trade Union representative meetings and works
councils meetings monthly – site leadership and HR attend
these meetings.
In 2022, there were a number of significant areas of
engagement with the collective groups which included
enhancements to benefits and facilities (for example
Occupational Health provision), and the annual pay review.
The Howdens Show
In February 2022, we hosted the Howdens Show, which
welcomed over 1,000 employees to the International
Convention Centre in Wales. Our CEO and COO of Trade
hosted the event, which was a chance to set the scene
for the year ahead and it featured business, charity and
community updates from senior members of staff from
across the business.
Whistleblowing helpline
The Company uses a third-party operated, confidential
whistleblowing helpline. The helpline is multilingual and
available 24 hours a day. The Company Secretary provides
the Board with a bi-annual report which details the number
and nature of whistleblowing instances made during the
period. Whilst no specific complaints were escalated for
Board attention, the governance processes are in place
should this be deemed necessary.
Non-Executive Director responsible for
workforce engagement
In 2019, the Board appointed Geoff Drabble as the Non-
Executive Director responsible for workforce engagement.
Regional Board meetings are a forum for the depot leadership
team and Executive Committee members to discuss strategy
and day-to-day business matters on a regular basis. Our
COO of Trade attends all meetings and all regional directors,
area managers, and depot managers attend the meetings
applicable to their region. Our CEO also attends a majority of
these meetings. Certain support functions (including Supply,
Commercial, Finance, and HR) also regularly attend. Members
of the Board periodically attend Regional Board meetings.
There are nine regions in total and one Regional Board
meeting is held per region every other period, providing many
opportunities each year for two-way discussions about critical
business issues.
Townhalls and feedback sessions
The Operations Director holds at least two business updates
each year for the manufacturing and logistics teams, and
members of the Operations Leadership Team also hold ‘Ask
away’ sessions with groups of employees. At each of our
manufacturing and logistic sites regular feedback sessions
are held with employees and it was through these channels
that employees expressed concern over the cost of living. As
a result, the Operations Director fed back these concerns to
the Executive Committee, who in turn informed the Board and
proposed the one-off payment to all UK employees below the
first two tiers of senior management. The Board approved that
the payment be made to employees in September 2022. More
information about this payment can be found on page 87.
Monthly townhalls are hosted by the Commercial Director
and Supply Chain Director. The townhalls focus on business
updates, with topics such as insights and market trends,
marketing plans, digital roadmap, new HR processes
(including equality, diversity and inclusion initiatives) and
supply chain updates being covered. Employees are given
the opportunity to ask questions throughout the meeting and
the meetings also act as an opportunity to give recognition to
employees who are going 'above and beyond' in their work.
Informal feedback sessions are hosted by area managers to
address local issues in depots. These sessions are usually
organised by job role, but may also be organised by depot or
a specific issue. Issues raised are often of a local nature and
are resolved locally. Where there are broader issues, area
managers will liaise with the wider business for a resolution.
These forums also act as an opportunity to exchange best
practice as well as to meet colleagues from other depots.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Stakeholder engagement continued
Suppliers
Engagement with our suppliers
includes the following:
• Supplier conferences and meetings
• Category team relationships
Pensioners
Engagement with our pensioners
includes the following:
• Board engagement with the Trustee Board
• Newsletters
• Triennial valuations
Supplier conferences
Our key suppliers are invited to join senior leadership at
our supplier conference. This is an important date in our
calendar as it’s a time when the Company can communicate
its priorities and any changes in the business to its suppliers,
ensuring a consistent message is heard by all.
In 2022, we hosted our supplier conference ‘Delivering
Success in 2022 and Beyond' in-person. The conference
was used to maintain the ongoing conversation with our
key partners, informing them of our initiatives and business
priorities and to ensure we continued to take advantage of the
range of opportunities throughout the year. We also covered
ESG matters including modern slavery and other global issues
affecting us all. The conference was attended by over 100
senior executives from our suppliers who were able to network
with and ask questions of our senior leadership team and their
industry peers.
The Howden Joinery Defined Benefit Pension Plan (the
‘DB Plan’) has over 10,300 members, of whom c.6,000
are deferred members, and c.4,300 are pensioners and
dependents.
Board engagement with the Trustee Board
The Trustee Board, chaired by an independent trustee, is
responsible for investment strategy and for the day-to-
day running of the DB Plan. There are a number of matters
reserved for the Company as sponsor under the Trust deed,
and the Board invites the Chair of the Trustees to present to the
Board every year and provide an update on matters affecting
the membership.
In 2022, the Company engaged with the Trustee Board on a
number of matters outside of the normal engagement cycle
of investment and funding strategy, including rationalisation
of the corporate structure, the Company's refinancing
arrangements, information sharing protocols, transfer of
the defined contribution plan 'Top-Up' account to a Master
Trust, progressing GMP equalisation, September 2022 market
volatility, and the Trustee Board's preparation of Task Force on
Climate-Related Financial Disclosures (TCFD).
In addition to our general supplier conference, for the first
time we hosted a virtual ESG conference for our top 30
suppliers (calculated on a spend and emissions basis), which
was attended by our Commercial Director and Director of
ESG. The aim of the conference was to engage our suppliers
on emissions reporting, identification of climate risk to the
supply chain and plans to reduce emissions, and to embed
the importance of our sustainability agenda. The conference
provided a useful forum to raise awareness of what our
suppliers are already doing to become more sustainable. To
ensure we keep momentum on this subject, additional visits
will be made to supplier sites and further sustainability focus
sessions will be held. It is anticipated that the ESG conferences
will be held on a regular basis going forwards.
Category team relationships
and supplier management
Our internal commercial structure is organised into
categories. The use of categories provides clearer
accountabilities for product ranging decisions and with
greater internal accountability comes the fostering of
stronger relationships with our suppliers. Suppliers are
engaged with focused teams within the organisation and
this clarity brings the opportunity for even more valuable
discussions.
In addition, we have also partnered with SAP Ariba to further
strengthen the way we do business with our suppliers in an
efficient and more sustainable (paperless) way. SAP Ariba
Supplier Life Cycle Performance (SLP) will help improve
the onboarding and management of our suppliers and will
allow them to begin transacting and communicating with
us digitally.
Newsletters
In July and November 2022, newsletters were sent to all
members of the DB Plan. The newsletters provided updates
on matters such as Trustee Board changes, the transfer of
DB Plan Top-Up account to a Master Trust, the appointment of
auditors, latest funding position and financial review, and new
climate governance requirements.
Following two consecutive periods of the DB Plan funding
falling into deficit on a Technical Provisions basis, the
Company recommenced payments of £2.5m per month
in January 2023. Should the DB Plan return to surplus on a
Technical Provisions basis for two consecutive periods, the
agreed 'switch off' mechanism will once again operate and
payments will cease.
Triennial valuations
Ensuring that there is an appropriate balance between
shareholder distributions and DB Plan deficit funding is a
priority for the Board. The triennial actuarial review as at
31 March 2020 was completed in April 2021.
The Company agreed to maintain deficit repair contributions
at the rate of £30m per year, with an agreed 'switch off'
mechanism if full funding on the Technical Provisions basis
was met. Full funding on this level was achieved and therefore
the deficit repair contributions were suspended in July 2021.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Shareholders
Engagement with our shareholders
includes the following:
• Annual General Meeting
• Shareholder meetings and roadshows
• Shareholder consultations
• Asset reunification and e-comms
Annual General Meeting (AGM)
The 2022 AGM was the first AGM held since 2019 without
any COVID-19 restrictions in place. It was a pleasure to be
able to welcome shareholders back to in-person meetings
and for the Board members to be able to converse with them
and to present their updates to them directly. Members of
our Executive Committee and senior leadership team were
also present to meet with shareholders outside of the formal
business of the meeting.
During the Q&A session at the AGM, shareholders asked
questions on the following topics: environmental targets,
depot revamps, new depots, share buybacks, and gearing.
In addition to the in-person meeting, shareholders were
provided with the opportunity to submit any questions they
had of their Board of Directors through a question facility on
the Company’s corporate website. This facility remained open
throughout the year following the conclusion of the AGM.
Shareholder meetings
During 2022, we reinvigorated our approach to investor
meetings as part of the implementation of a new investor
strategy. We started by conducting external research with our
corporate brokers to identify potential target investors located
in the major investor hubs. This included domestic investors
in the UK but also international funds buying equities in North
America and Europe. For each hub Howdens has identified a
small group of potential investor targets which includes a mix
of both existing holders that are underweight in our stock and
non-holders who are already invested in distribution peers.
This targeting work was used to prioritise meetings for the
investor programme throughout the year.
Following each period end, the Board is provided with an
investor relations (IR) update, which gives an overview
of investor feedback. The Director of Investor Relations
regularly provides feedback at Board meetings on the IR
programme. Following the half-year and full-year results,
more detailed feedback sessions were held with the Board to
discuss shareholder views on the results and the Company’s
strategy. In summary, investors remain very supportive of
the Company’s strategy and the resilient nature of Howdens'
'trade-only', in-stock business model.
During the year the major activities were as follows:
• Engagement with the 15 sell side analysts who cover
the Company and maintenance of Company compiled
consensus forecasts.
• Post-financial results roadshows with major institutional
shareholders and the Executive Directors and Director of
Investor Relations.
• Ad hoc in-person and virtual one-to-one meetings as
requested by shareholders and non-holders.
• Site visits to our factory in Howden and depots with small
groups of institutional holders and non holders to highlight
our key strategic initiatives.
• Supporting industry conferences held by the major banks
selling equities.
• Targeted marketing roadshows to major investor hubs
internationally.
Directors' remuneration consultation
The Chair of the Remuneration Committee invited the
Company's largest shareholders and shareholder
representative groups to feed back their views on proposals
for the operations of the remuneration policy for 2023.
Further information about the consultation and its
outcomes may be found on page 114 of the Remuneration
Committee report.
Asset reunification and e-communications
The Company, in conjunction with its Registrar, commenced
a proactive asset reunification programme in November
2022. The programme targeted holders of certificated
ordinary shares who had 12 consecutively uncashed
dividends and sought to reunite them with their shares and
unclaimed dividend payments.
In addition, also in conjunction with our Registrar, we wrote
to ordinary shareholders receiving hard copies of our
Annual Report and Accounts, notice of meetings, and proxy
forms and asked them to opt in if they wished to receive
these documents as hard copies in future. This process has
led to a c.81% reduction in the number of copies of the 2022
Annual Report and Accounts that need to be mailed out to
ordinary shareholders.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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2018 UK Corporate Governance Code: application and compliance
The Financial Reporting Council (FRC) published its most
recent iteration of the UK Corporate Governance Code (the
‘Code’) in 2018, which applies to accounting periods beginning
on or after 1 January 2019. We are pleased to report that the
Company applied all the Principles of the Code throughout the
period, and we have reported in summary below how we have
done so. Throughout the financial period under review, the
Company was compliant with all Provisions of the Code, except
for Provisions 38, 40 and 41.
Provision 38 provides that executive director pension
contribution rates (or payments in lieu) should be in line with
those available to the workforce. Our remuneration policy
(‘Policy’), which was approved by shareholders in 2022, and
our previous Policy approved in 2019, stipulate that Executive
Director new joiners’ pension contribution rates must be in
line with that available to the wider workforce. Throughout the
2022 financial year, our Chief Financial Officer (appointed to
the Board in December 2020) received a pension contribution
rate which was in line with the wider workforce. However, our
Chief Executive (appointed to the Board in April 2018), received
a pension contribution rate that, whilst in line with the 2019
and 2022 Policies for existing Directors, was not in line with the
wider workforce until April 2022. This is because the reduction
of fixed, contractual remuneration was applied carefully and
proportionally over time. Further detail is set out on page 115
of the Remuneration Committee report. The Board confirms
that the Chief Executive's pension contribution rate will be in
line with the wider workforce throughout the financial year
ending 2023 and therefore the Company will be compliant with
Provision 38.
Provision 40 provides that when determining executive
director remuneration policy and practices, remuneration
committees should address whether remuneration
arrangements promote effective engagement with the
workforce. Provision 41 provides that the annual report of
remuneration committees should include a description of the
engagement that has taken place with the workforce to explain
how executive remuneration aligns with wider company pay
policy. The Remuneration Committee did not directly consult
with the workforce on Executive Director pay arrangements
during 2022; however, the Committee receives reports from
management on pay and benefits across the workforce to
ensure that there is good alignment on remuneration across
the organisation as a whole. In addition, in 2021, the Board
approved an update to the Company's Share Incentive
Plan (SIP), our UK all-employee share plan, which allows all
employees with shares held in the SIP trust to exercise voting
rights on those shares. This means our UK employees with SIP
shares (the majority of the workforce) are able to vote on the
Directors' remuneration report and the Directors' remuneration
policy (when applicable) at general meetings of the Company.
The Remuneration Committee will keep under review the
need to engage the workforce more directly on Executive
remuneration arrangements. Details of how Executive Director
pay is considered in the context of the workforce is set out on
page 126.
Section 1:
Board leadership and company purpose
Section 1:
Board leadership and company purpose continued
A
C
E
A successful company is led by an effective and
entrepreneurial board, whose role is to promote the long-
term sustainable success of the company, generating value
for shareholders and contributing to wider society.
Howdens’ founding principle of being worthwhile for
all concerned supports the premise that its role is to
ensure long-term, sustainable growth and value for all
its stakeholders.
During 2022, the Company (led by the Board) increased
shareholder returns, paid more tax, employed more people,
and contributed to the communities in which we operate.
Further information on our sustainable business model and
strategy can be found on pages 13 to 15. Our contribution to
wider society and our statement of the extent of consistency
with the TCFD framework can be found in our sustainability
matters report beginning on page 54.
Governing in an effective way ensures the framework and
controls needed to align our operations with our strategy are
in place. It is only by doing this that we can ensure long-term
strategic success of the Company for our stakeholders. We
discuss throughout the Governance section how our actions
help to preserve the value that the business generates and
how they support the strategy. For example, we have set out
the way our remuneration structure supports our strategic
aims on pages 117 to 119.
B
The board should establish the company’s purpose, values
and strategy, and satisfy itself that these and its culture
are aligned. All directors must act with integrity, lead by
example and promote the desired culture.
An explanation of our purpose, values and strategy are
set out in the strategic report which starts on page 8. The
Board regularly discusses the importance of Howdens’
unique culture and are mindful that it remains aligned with
its purpose, values and strategy. Workforce engagement
is also an important part of the Board’s agenda and more
information about the methods of engagement with the
workforce may be found on pages 90 and 91.
Integrity and sympathy to the Howdens culture are
paramount when the Board recruits new members to
the Board. More information about our recruitment and
inductions process can be found on pages 107 and 109.
The board should ensure that the necessary resources are
in place for the company to meet its objectives and measure
performance against them. The board should also establish
a framework of prudent and effective controls, which enable
risk to be assessed and managed.
The board should ensure that workforce policies and
practices are consistent with the company’s values and
support its long-term sustainable success. The workforce
should be able to raise any matters of concern.
The Board and its committees review workforce policies
and practices on a regular basis. A Group policy framework
has been established and is reported on to the Board on
an annual basis, as well as any updates needed for Group
policies. Part of this review includes ensuring that policies
remain aligned to the Howdens culture and support long-
term success.
One example of this is how our Remuneration Committee
considers the pay policies and practices of the wider
workforce when determining Executive reward. More
information in this regard can be found on page 126.
All employees are able to raise any matters of concern using
the confidential whistleblowing helpline. The helpline is
available 24 hours a day, it is multilingual, and it is operated
by an independent third party. The Board receives reporting
from the helpline twice a year and any matters of significant
concern are escalated as appropriate by the Company
Secretary who oversees the helpline with support from the
internal audit team.
The Board is satisfied that the necessary resources are in place
to ensure that the Company meets its objectives and measures
performance against them. Our KPIs and how we have
performed against them can be found on pages 28 and 29.
More information on our risk processes, including our
principal and emerging risks, can be found on pages 36 to
45. Our Audit Committee report provides a summary of our
internal control framework on page 142.
D
In order for the company to meet its responsibilities to
shareholders and stakeholders, the board should ensure
effective engagement with, and encourage participation
from, these parties.
Howdens has a broad group of clearly defined stakeholders
and Board members actively engage with each of these
groups regularly. A detailed explanation of our engagement
with our shareholders and wider stakeholder base, and how
this engagement has informed the Board’s decision making
processes can be found on pages 88 to 95. How the Board
members discharged their ‘section 172’ statutory directors'
duties is described on pages 86 and 87.
Section 2: Division of responsibilities
F
The chair leads the board and is responsible for its overall effectiveness in directing the company. They should demonstrate
objective judgement throughout their tenure and promote a culture of openness and debate. In addition, the chair facilitates
constructive board relations and the effective contribution of all non-executive directors, and ensures that directors receive
accurate, timely and clear information.
The Board confirms that Peter Ventress was independent on
appointment when assessed against the circumstances set
out in Provision 10 of the Code. The roles of Chief Executive
and Chairman are not held by the same individual and the
Chairman has never held the position of Chief Executive of
the Company. These factors help ensure that the Chairman
demonstrates objective judgement throughout his tenure.
The Chairman is mindful of his role in facilitating constructive
Board relations and promoting a culture of openness and
debate amongst the Board. This in turn encourages the
effective contribution of all the Non-Executive Directors.
The 2022 externally-facilitated Board evaluation concluded
that the Board was effective, supportive and doing well. There
were suggested areas for improvement with some Directors
highlighting that the Board remained in transition following the
change of Chair. Further information about the outcomes and
process of the evaluation may be found on pages 110 and 111.
The Chairman is also mindful of the need for the Directors to
receive information which is accurate, timely and clear. He is
supported in this by the Company Secretary, who ensures the
effective flow of information in a timely manner between the
Board and senior management.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Corporate governance report continued
2018 UK Corporate Governance Code: application of Principles
Section 2: Division of responsibilities continued
Section 3: Composition, succession and evaluation
G
I
J
K
The board, supported by the company secretary, should
ensure that it has the policies, processes, information,
time and resources it needs in order to function effectively
and efficiently.
All of the Directors of the Company have access to the
advice of the Company Secretary, who is responsible for
advising the Board on all governance matters.
The Board has implemented a Group policy framework which
is considered by the Board on an annual basis. Individual
policies and associated practices are considered alongside
the framework review process.
As stated in the Schedule of Matters Reserved for the Board
(which may be found at www.howdenjoinerygroupplc.com/
governance/tor-and-schedule-of-matters) the appointment
and removal of the Company Secretary is a decision for the
Board as a whole.
The board should include an appropriate combination
of executive and non-executive (and, in particular,
independent non-executive) directors, such that no one
individual or small group of individuals dominates the
board’s decision-making. There should be a clear division of
responsibilities between the leadership of the board and the
executive leadership of the company’s business.
At least half of the Board was made up of Independent
Non-Executive Directors (not including the Chairman)
throughout the reporting period. The Non-Executive
Directors that the Board considered to be independent are
shown as such on pages 80 and 81. The Board confirms that
all the Non-Executive Directors (excluding the Chairman)
were independent during the reporting period and that the
Chairman was independent on appointment.
There is a clear division of responsibilities between the
leadership in the organisation. The responsibilities of
the Chairman, Chief Executive, and Senior Independent
Director may be found on the Company’s website (www.
howdenjoinerygroupplc.com/governance/division-of-
responsibilities) and the function of the Board Committees
may be found in the respective committee terms of
reference, also available on the Company’s website
(www.howdenjoinerygroupplc.com/governance/tor-and-
schedule-of-matters).
H
Non-executive directors should have sufficient time to meet their board responsibilities. They should provide constructive
challenge, strategic guidance, offer specialist advice and hold management to account.
The number of Board meetings which were held during the
reporting period and the attendance at each of these meetings
may be found on page 78. Similarly, the number of meetings
of each Board Committee and the attendance may be found
on the following pages: 102 (Nominations Committee), 112
(Remuneration Committee), 136 (Audit Committee), and 144
(Sustainability Committee).
When reviewing the Nominations Committee’s
recommendation to appoint a new Director, the Board will
always assess whether the candidate is able to allocate
enough time to the role. Similarly, when assessing the
acceptability of an existing Director’s wish to take on external
appointments, the Board will assess the additional demand on
that Director’s time before authorising the appointment. This
occurs within the Board's agreed existing protocol whereby
any significant appointments taken on whilst serving as a
Director of the Company must be approved by the Board before
they are entered into. This is set out in the Schedule of Matters
Reserved for the Board which may be found on the Company’s
website (www.howdenjoinerygroupplc.com/governance/tor-
and-schedule-of-matters).
During the reporting period, Debbie White's appointment as
Non-Executive Director of the London Stock Exchange-listed
company, Spire Healthcare Group plc, was authorised by the
Board. Debbie's appointment as a director of the NASDAQ-
listed company, Lucid Diagnostics Inc (a subsidiary of
PAVmed Inc, of which Debbie was already a director), was also
authorised by the Board. Prior to the appointments, the Board
considered whether Debbie could allocate enough time to her
role as a Non-Executive Director of Howdens. The Board was
satisfied that Debbie had the requisite time to fulfil the new role
as well as her current role with Howdens, particularly given her
role at BT Plc as interim HR Director ceased in November 2022.
Members of the senior management team regularly presented
to the Board (see pages 82 and 83 for a timeline of Board
meetings and information regarding any Executive Committee
attendees), which provided an opportunity for the Board to
constructively challenge and to provide advice to our senior
management team.
Information about the management of conflicts between the
duties Directors owe the Company and either their personal
interests or other duties they owe to a third party may be found
on page 143.
Appointments to the board should be subject to a formal,
rigorous and transparent procedure, and an effective
succession plan should be maintained for board and senior
management. Both appointments and succession plans
should be based on merit and objective criteria and, within
this context, should promote diversity of gender, social and
ethnic backgrounds, cognitive and personal strengths.
The Nominations Committee engages external search
consultancies when searching for Board position
candidates. Further information about the appointments
process is available on page 107 of the Nominations
Committee report and the Board’s diversity policy is
available on page 106.
The Nominations Committee regularly reviews the skills
matrix and the tenure of each Board member (see pages
104 and 107 respectively for further details). This ensures
the Board’s succession plan remains aligned with the
natural rotation of Directors off the Board and the strategic
objectives of the business.
The succession plans for the senior management team are
regularly reviewed by the Nominations Committee.
The board and its committees should have a combination
of skills, experience and knowledge. Consideration should
be given to the length of service of the board as a whole and
membership regularly refreshed.
The Board uses a skills matrix to ensure it has the necessary
combination of skills, experience and knowledge to meet its
strategic objectives, business priorities and to ensure the
unique Howdens culture is maintained. The skills matrix may
be found on page 104.
The tenure of each Director may be found on pages 107 and
108. The Board has a good balance of new and longer-serving
Directors. As at the year end date, tenures of the Non-
Executive Directors (including the Chairman) range from six
months to 7.5 years, and the average tenure is 4.7 years.
L
Annual evaluation of the board should consider its
composition, diversity and how effectively members
work together to achieve objectives. Individual evaluation
should demonstrate whether each director continues to
contribute effectively.
Details of the 2022 externally-facilitated Board evaluation
process and outcomes may be found on pages 110 and 111 of
the Nominations Committee report.
The specific reasons why the Board considers that each
Director’s contribution is, and continues to be, important to
the Company’s long-term sustainable success may be found
on pages 80 and 81. Reference to the specific reasons and
where to find them in the Annual Report and Accounts will
accompany the resolutions to re-elect the Directors in the
2023 AGM Notice. The Board recommends that shareholders
vote in favour of the re-election of all the Directors.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Corporate governance report continued
2018 UK Corporate Governance Code: application of Principles
Section 4: Audit, risk and internal control
Section 5: Remuneration
M
O
P
R
The board should establish formal and transparent
policies and procedures to ensure the independence
and effectiveness of internal and external audit
functions and satisfy itself on the integrity of financial
and narrative statements.
The board should establish procedures to manage risk,
oversee the internal control framework, and determine
the nature and extent of the principal risks the company
is willing to take in order to achieve its long-term
strategic objectives.
The Board has established formal and transparent policies
and procedures, which ensure the external auditor and
internal audit function are independent and effective and
are accountable to the Audit Committee. The Board also
monitored the integrity of the annual and interim financial
statements of the Company through the Audit Committee.
Further information about the work of the Audit Committee,
including the subjects above, may be found in the Audit
Committee report, which begins on page 136.
N
The board should present a fair, balanced and
understandable assessment of the company’s
position and prospects.
A statement regarding the Directors’ responsibility
for preparing the Annual Report and Accounts and
the Directors’ assessment of the Annual Report and
Accounts, taken as a whole, as being fair, balanced and
understandable and providing the necessary information
for shareholders to assess the Company’s position,
performance, business model and strategy, may be found
on pages 74 and 75.
The Board is responsible for the Group’s systems of
internal control and risk management, and for reviewing
their effectiveness. The Board is assisted with these
responsibilities by the Audit Committee. Such a system
is designed to manage rather than eliminate the risks of
failure to achieve business objectives, as well as to help the
business take appropriate opportunities. The Board has
conducted reviews of the effectiveness of the system of
internal controls through the processes described within the
'Risk management' and ‘Principal risks and uncertainties’
sections (see pages 36 to 45) and are satisfied that it
accords with the Code and with the Guidance on Risk
Management, Internal Control and Related Financial and
Business Reporting. As described in the Audit Committee
report on page 142, a key controls project is ongoing across
the Group to focus and further strengthen our overall control
framework. This work to further enhance internal controls
will lead to better assurance and efficiencies through
opportunities to formalise and automate controls and
improve visibility to the Executive Committee and Board in a
consistent way across the Group.
The assessment of the principal and emerging risks, the
uncertainties facing the Group, and the ongoing process for
identifying, evaluating and managing the significant risks
faced by the Group is set out in the 'Risk management' and
‘Principal risks and uncertainties’ sections (see pages 36
to 45. The Board confirms that it has conducted a robust
assessment of the principal and emerging risks.
Remuneration policies and practices should be designed
to support strategy and promote long-term sustainable
success. Executive remuneration should be aligned to
company purpose and values, and be clearly linked to the
successful delivery of the company’s long-term strategy.
The way the Remuneration Committee has ensured our
remuneration policies and practices are aligned with our
culture, our strategy and risk management is discussed
in the Remuneration Committee report, which starts on
page 112.
Directors should exercise independent judgement and
discretion when authorising remuneration outcomes,
taking account of company and individual performance,
and wider circumstances.
The Remuneration Committee membership is made up of
only independent Non-Executive Directors.
Details of whether the Remuneration Committee exercised
its discretion during the year may be found on page 115 of
the Remuneration Committee report.
Q
A formal and transparent procedure for developing policy
on executive remuneration and determining director and
senior management remuneration should be established.
No director should be involved in deciding their own
remuneration outcome.
By order of the Board
Peter Ventress
Chairman
6 March 2023
The Remuneration Committee has delegated responsibility
for setting the Executive Directors’ remuneration under the
shareholder-approved Directors' remuneration policy (the
full policy is set out in full at www.howdenjoinerygroupplc.
com/governance/remuneration-policy). The Remuneration
Committee also has delegated responsibility for setting the
Chair of the Board’s remuneration and the remuneration
of senior management (i.e. the members of the Executive
Committee and the Company Secretary). No Director is able
to determine their own remuneration outcome.
The Remuneration Committee reviews workforce
remuneration and related policies when setting Executive
Director remuneration. Ensuring these factors are always
considered means our remuneration policies are clear and
as predictable as possible. Further information may be
found in the Remuneration Committee report on page 126.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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102
102
Governance / Nominations Committee report
103
Nominations
Committee report
2022 meeting attendance
Richard Pennycook (1/2)1 Retired 17 September 2022
Peter Ventress (1/1) Appointed 1 July 2022
Karen Caddick (3/3)
Andrew Cripps (2/3)1
Geoff Drabble (3/3)
Louise Fowler (3/3)
Debbie White (2/3)1
1
Andrew and Debbie were unable to attend the March Nominations
Committee meeting due to conflicting work commitments. The March
meeting was an additional meeting to the Board’s usual calendar to
consider the appointment of the new Chair. Both Non-Executive Directors
received the Committee papers in advance of the meeting and were able
to feed back their views to the Senior Independent Director before the
meeting. Richard did not attend this meeting as it was called to discuss
his succession.
Key activities in the year ahead
•
•
•
All current Directors will stand for election
or re-election at the AGM on 4 May 2023.
Regular updates on Executive Committee and
senior management succession and talent planning
will be provided to the Committee.
The Committee will undertake its review of skills,
composition and size of the Board.
•
Review of the Boardroom Diversity Policy.
Peter Ventress
Nominations Committee Chairman
Introduction from the Committee Chairman
I am pleased to present this report covering the work of the
Nominations Committee in 2022.
Despite its slightly reduced role following the introduction of
the Sustainability Committee, the Nominations Committee
continues to be one of the core governance safeguards for
the Company. Investors are now prepared to take direct action
against individual directors by voting against their annual
reappointment. This can be for a whole host of different
governance issues and it is generally the Nominations
Committee that is responsible for considering such matters
and acting upon such shareholder concerns. This report
details how the Committee seeks to avoid such issues by
engaging in transparent processes and adopting best
practice guidance.
Succession
The appointment of a new Chair, as reported in last year’s
Committee report, was the only Board change during the year.
My appointment to the Board followed a rigorous process,
which is detailed later in this report on page 109. There
followed a short handover period with the previous Chair,
Richard Pennycook, which provided a seamless transition of
the leadership of the Board. At no point was Richard involved in
the process of appointing me as his successor.
The Committee was also involved with new appointments to
the Executive Committee. Further details in respect of each of
these appointments are set out later in this report.
Composition and diversity
The Nominations Committee remains mindful of the
importance of broadening diversity within leadership and
senior management teams. Whilst we have made good
progress on our equality, diversity and inclusion agenda in
recent years, we also recognise that there is more work to
be done to make Howdens a more diverse organisation. To
that end, we have updated our Boardroom diversity policy to
include specific gender and ethnicity targets for the first time.
2022 Nominations
Committee activity
February
Committee meeting
• Board evaluation process and outcomes
• Board recommendations for AGM elections
• Draft 2021 Nominations Committee report
March
Committee meeting (out of cycle)
• Chair succession – recommendation to the Board to
appoint Peter Ventress as a Non-Executive Director and
Chair-elect
September
Committee meeting
• Externally-facilitated Board evaluation approval
• Board succession planning, including consideration of
diversity, tenure and skills matrix
• Board diversity policy
• Nominations Committee Terms of Reference
These targets are in line with best practice guidance and I look
forward to the Committee reporting against these targets in
future years. Our boardroom gender and ethnicity data at the
end of 2022 is set out below on this page and the facing page.
More information on the equality, diversity and inclusion
agenda is contained in the sustainability matters report and
the Sustainability Committee report on pages 65 and 145
respectively.
The Committee will spend more time reviewing the make-up of
the Board in 2023. We currently have a good mix of skills and
experience on our Board but we are aware as a Nominations
Committee that we will need to recruit to replace two of our
most senior Non-Executive Directors (who have the important
roles of Senior Independent Director and Audit Committee
Chair) in the near future. In doing so, we will need to be
mindful to ensure that we retain the skills required to support
Howdens’ continued growth, its strategic activities and its
ever broadening commitments on environmental, social and
governance matters. The Committee will also continue to work
with the Executive Directors on the skills and diversity of the
senior management teams below Board level.
Evaluation
In 2022, in line with the Board’s stated practice, an external
Board evaluation was undertaken. Unlike the previous two
reviews which circumstance dictated were conducted
remotely, the review included face to face interviews with all
members of the Board as well as observations from a full set
of Board and Committee meetings. More information on the
Board evaluation process and outcomes are set out on pages
110 and 111.
I look forward to reporting directly to shareholders at our
AGM in May.
Peter Ventress
Nominations Committee Chairman
Board gender split
Board ethnicity split
Howdens1
Females:
37.5%
FTSE 2502
Females:
40.1%
Female
Male
1 Figures correct as at 24 December 2022.
2
Figures derived from the February 2023 FTSE Women Leaders Review.
Howdens
director
positions1
0%
FTSE 250
director
positions2
10%
Ethnic
minority
representation
No ethnic
minority
representation
1 Figures correct as at 24 December 2022.
2
Figures derived from the 2022 Parker Review update 'Improving the
Ethnic Diversity of UK Boards'.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Nominations Committee report continued
Composition
Skills and experience matrix
The Nominations Committee used a skills matrix when assessing its Non-Executive Director succession plans. The matrix
highlights where the skills and experience of our Non-Executive Directors are particularly strong, where there are opportunities
to further grow the Board’s collective knowledge, and to inform the Board’s future composition as Non-Executive Directors
naturally rotate off the Board.
Diversity
Group gender diversity statistics
The Nominations Committee reviews the gender statistics shown in the chart below. Where other data is available, this is
presented to the Committee in order to determine whether there are any implicit diversity issues.
Skills and experience
Industry/Sector
Business-to-business
Manufacturing
Logistics, distribution and supply chain management
Consumer goods
Geographic exposure
UK
Europe
Governance
UK listed companies
Company chair experience
Remuneration committee chair experience
Audit committee chair experience
Policy development
Senior independent director experience
Technical
Accounting and Finance
Audit
Executive management
Risk management
HR/Remuneration
Ecommerce
Marketing
IT/Cyber security
Legal
Howdens-specific considerations
Vertical integration
Multisite depot operation
Importance
M
Medium
H
High
Number of Non-Executive Directors
Importance
Direct experience
Indirect experience
Group gender diversity as at 24 December 2022
The percentages shown in brackets below indicate the change since 2021.
H
H
H
H
H
M
H
M
M
M
M
M
H
H
H
H
M
M
M
M
M
H
H
6
4
4
5
6
5
6
4
4
3
4
2
3
3
6
5
4
3
3
1
1
4
4
0
2
2
0
0
1
0
1
0
0
1
0
3
1
0
1
2
3
3
3
2
2
2
Male
Female
Board
Grades 1 to 32
3,674 (+4%)
42 (+31%)
2 (0%)
3 (0%)
5 (0%)
6 (0%)
136 (+19%)
8,348 (+5%)
Senior Management1
Group3
1
2
3
Members of the Executive Committee, excluding Executive Directors and including the Company Secretary.
Includes Grades 1–3 equivalents.
Calculated on an individual basis, not on an FTE basis. Includes UK, France, Belgium, the Republic of Ireland, and Isle of Man.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Nominations Committee report continued
Composition continued
Boardroom Diversity Policy
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,
socio-economic background, or formal qualifications.
We believe that it is in the interests of the business and of
its shareholders for us to build a Board whose membership
is diverse in perspective and experience, as this facilitates
better decision-making. We are also mindful of the outputs
and recommendations from both the Parker Review and the
FTSE Women Leaders Review when making appointments
to the Board and membership of the Board is currently in line
with their targets.
However, the Board is mindful of the forward looking
recommendations of both the Parker Review and FTSE
Women Leaders Review and it is the Board’s aspiration that
it will have at least one member from an ethnic minority by
year end 2024., The Board will also target having a minimum
female membership of 40% and at least one woman director
in one of the ‘Big 4’ roles (those being Senior Independent
Director, Chair, CEO, and CFO) by year end 2025.
The Nominations Committee will continue to seek diversity
of mindset as well as of gender, race, ethnicity, and socio-
economic background when considering new appointments
in the period to 2024, 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 24 December 2022, 37.5% of Board members were
women. Both of the Executive Directors were male. There
were no members of the Board from ethnic minority groups
as at 24 December 2022.
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.
Succession
An integral part of the work of the Nominations Committee is to establish and maintain a stable leadership framework and to
proactively manage changes and their impacts on the future leadership needs of the Company, both in terms of Executive
and Non-Executive leadership. Ensuring the correct leaders are in place enables the organisation to compete effectively in the
marketplace and therefore to meet its various obligations to its stakeholders.
As detailed in the rest of the report, the Nominations Committee has managed succession programmes for both the Board and
senior management, which have ensured that the necessary skills, expertise and experience are present in the leadership of
the organisation.
Non-Executive tenure as at 24 December 2022
Years
0
1
2
3
4
5
6
7
8
9
Peter Ventress
Louise Fowler
Karen Caddick
Debbie White
Andrew Cripps
Geoff Drabble
Board succession
The Nominations Committee regularly reviews the skills and
expertise that are present on the Board and compares these
to the expertise that it believes are required given the strategy,
business priorities and culture of the organisation.
Since Howdens began trading in 1995, its core strategy has
remained largely unchanged. The market, the size, and the
stage of maturity of our organisation however have changed,
and so our Board has needed to evolve through sensible and
well-managed succession planning that does not compromise
the stability of the Board.
The process normally used in relation to Non-Executive
Director appointments is set out below. We continue to manage
a phased succession programme for Non-Executive Directors
and are pleased with the balance of length of tenure, as well
as of diversity, background and perspective of our current
Non-Executive Directors. The process for the Chairman’s
succession is set out in the case study on page 109.
Retirement
The Nominations Committee is progressing a phased
transition on Board succession and, as part of this process,
following nearly 8 years of service, Geoff Drabble will retire
at the forthcoming Annual General Meeting (AGM). An
announcement will be made in due course regarding the
succession of the Senior Independent Director and Non-
Executive Director responsible for workforce engagement
roles that Geoff currently holds.
Appointment
Where it is identified through Board succession planning
that a Non-Executive appointment is required to the Board,
the Nominations Committee will engage an external search
consultancy to undertake the process of recruiting a
new Non-Executive Director.
The external search consultancy would be made aware of our
Boardroom Diversity Policy (if they were not already) and the
Nominations Committee would specifically task them with
producing a diverse shortlist of candidates for the position.
The skills matrix (the current version of which may be found on
page 104), together with the collective knowledge, experience
and diversity of the Board and the length of service of the
Directors, would be used by the Committee to highlight where
there were opportunities for a new Non-Executive Director to
contribute to the skillset of the Board and would inform the
search that external search consultancy undertake.
Following longlisting and shortlisting processes, and prior
to any recommendation being made by the Nominations
Committee to the Board, the preferred candidate would meet
with each existing member of the Board.
Induction
Working with the Company Secretary, new Directors
undertake an induction programme tailored to the needs of
the individual. However, they will generally include a number
of site visits and meetings with members of the Executive
Committee, key employees and advisors. Site visits include our
manufacturing sites, our distribution centre and depots. New
Directors will also be provided with a mixture of documentation
including Company publications, Board materials and some
formal information on the role and responsibilities of UK-listed
company directors.
The Group’s induction programme for newly appointed
Directors will continue to be centred on familiarisation with
the Group’s operations, key individuals and external advisors.
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Nominations Committee report continued
Succession continued
Senior management succession
The Committee received regular updates regarding senior
management1 succession planning. These updates included
the planning and processes involved with the appointment
of a new Trade Director. Further detail may be found below.
Trade Director
Following an extensive search over a number of years, the
Board has appointed Stuart Livingstone as Trade Director.
An Executive Committee role, the Trade Director will take over
key parts of Andy Witts’ Chief Operating Officer: Trade role,
following a handover during 2023 and will be responsible for
the day to day running of the depots thereafter.
Stuart has extensive operational experience in multi-site and
trade businesses. His former roles include: Operations Director
at Pets at Home and Director of Retail at Screwfix. Stuart will
join Howdens in the second quarter of 2023.
Andy Witts will remain in the business and will take on an
oversight and advisory role as Chairman of Howdens’
international businesses. In this role, Andy will be able to
provide counsel to our maturing French and Belgian business
as well as the fledgling Irish business. He will also support the
CEO on exploring further international opportunities.
Group HR Director
At the end of 2022, Kirsty Homer, Group HR Director, decided
to leave Howdens. During her two years in the business, Kirsty
made a significant impact at Howdens and we wish her well
for the future. Guy Eccles has been appointed as interim
HR Director on a temporary basis. Guy has extensive HR
leadership experience in large multinational organisations and
previously held the interim Group HR Director role at Howdens
between April 2020 and August 2021.
The Nominations Committee will continue to work with the
CEO and interim Group HR Director on senior management
succession and development in 2023.
Company and Executive Committee tenure as at 24 December 2022
Years
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
David Sturdee
Julian Lee
Richard Sutcliffe
Mark Slater
Theresa Keating
Andy Witts
Paul Hayes
Andrew Livingston
e
e
t
t
i
m
m
o
C
e
v
i
t
u
c
e
x
E
s
r
o
t
c
e
r
i
D
e
v
i
t
u
c
e
x
E
Company Tenure
Executive Committee Tenure
1
The definition of ‘senior management’ for this purpose is defined in footnote 4 of the 2018 UK
Corporate Governance Code as ‘the executive committee or the first layer of management
below board level, including the company secretary’.
Case study
Chairman Succession
We reported in the 2021 Nominations Committee report
that the succession process for the appointment of a new
Chairman of the Board was at an advanced stage and
that an announcement regarding the appointment of a
successor to Richard Pennycook would be made in due
course. In March 2022, Howdens announced that Peter
Ventress would be appointed to the Board on 1 July 2022 as
Chairman Designate and Non-Executive Director and would
assume the role of Chairman from 17 September 2022.
Whilst the appointment process was provided in some
detail in out 2021 report, it was incomplete and details
regarding the new Chair’s induction into the business were
not provided (as they had not been finalised). Induction
processes are vital for any new employee but particularly
so for individuals who have core decision making
responsibilities which affect the business as a whole.
With that in mind, the Nominations Committee
recommended a short handover period between the
new and incumbent Chairman to allow the new Chair to
observe how the Board and its Committees operated
before having the responsibility for chairing the meetings.
It was however agreed that too long a transition period
could lead to a lack of clarity on where the Board would
look for direction and therefore a two-month handover
period was thought most appropriate.
Following his appointment to the Board, Peter received
a bespoke induction to the business. Howdens is not
a business that can be learned by reading minutes,
it is a business that requires an acute sense of feel.
As well as depot visits, Peter visited key manufacturing
facilities and warehouses, meeting employees
and senior managers from the business.
He received a presentation of the Group’s strategic plans
(which had been presented to the Board earlier in the
year) from the Executive Committee and he attended a
number of operational sites. Detailed updates on product,
design, innovation and sourcing were provided as well as
updates (and visits where appropriate) on key strategic
initiatives such as Howdens Work Surfaces. Peter’s first
Board meeting was in France, allowing him access to
the international senior management team and French
depot network.
In recognition of his key governance responsibilities,
Peter received detailed information concerning Board
processes and Group structures. He was given unfettered
access to management responsible for governance
without other senior management present, including the
Company Secretary, Head of Internal Audit and Risk, and
Director of Investor Relations. Peter also met with the
Board’s advisors (brokers, lawyers, actuaries, external
communications and remuneration consultants) who
regularly update the Board and its Committees.
Perhaps most importantly, Peter was able to participate in
the activities that help to define Howdens’ unique culture.
This included observing a Regional Board meeting prior to
peak autumn trading and attending recognition events for
depot management and senior sales management.
Peter will continue his induction into Howdens during 2023
with further events and meetings scheduled. He is keen
to meet with shareholders during the year to share his
observations of the business and to discuss his plans for
the Board going forwards.
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Nominations Committee report continued
Evaluation
In line with the Board’s policy to undertake an external Board effectiveness review every three years, and following the 2020 and
2021 reviews which were undertaken by the Senior Independent Director with support from the Company Secretary, the 2022
Board evaluation was conducted by Lisa Thomas of Independent Board Evaluation (IBE)1, an external third-party consultant. The
evaluation took a light touch approach, given the Chair’s recent appointment to the Board and Board members were asked to
focus their comments on the main areas for improvement. A fuller review of the Board’s responsibilities will be carried out later
in the three-year cycle.
Evaluation areas of focus
Boardroom culture and focus
Board resources
Board composition and succession
Strategy
Advisors to the Board
Chair succession
Papers and presentations
Relationship with senior management
Board meetings
Governance, compliance,
and risk management
Methodology
The process is outlined below:
• The review of the Howdens Board was conducted following
briefings from the Chair, CEO and Company Secretary.
•
•
•
•
Observation of the Board and Committee meetings on
19 November 2022.
Interviews were conducted with all members of the Board
and the Company Secretary to consider their views.
The conclusions of the evaluation, including the
observations and recommendations were presented
to the Chairman.
The detailed report and main observations were presented
to the Nominations Committee in February 2023 by the
Chairman, and a discussion, with Lisa present, is planned
for a later meeting.
Conclusions and recommendations
The feedback from the Board was positive with the majority
stating that the Board was effective, supportive and doing well
but some suggest areas for improvement, considered below,
with some members of the Board highlighting that the Board
remained in transition following the change of Chair.
The focus and balance of the agenda in 2022 was rated as
‘good’ and meetings were considered to be well organised.
Boardroom culture was described positively and the
relationship with the senior team was supportive and
transparent. In addition, there was high confidence in how the
Board is tackling the commercial agenda and universal Non-
Executive membership of the Committees of the Board was
considered helpful and efficient.
Recommended areas for development and actions
going forward
• People. Additional focus on the people agenda at the
Nominations Committee could help management better
realise talent pipeline and diversity opportunities. More
data in the Board packs could be provided to assist with
the oversight of a strong company culture, and initiatives
to reboot Employee Engagement at Board level following
the pandemic, including NED engagement visits, should be
encouraged.
• Pay. Some Remuneration Committee processes should
be reviewed following the approval by shareholders of
the Directors remuneration policy in 2022.
•
Board composition and culture. A lack of diversity of
background at Board and senior management level was
considered and would need to be addressed through a
phased transition process. The Board would also be open
to more optionality in the debate of issues and welcome
more diverse input.
Influence on Board composition
Members of the Board discussed the recommendations of
the Parker and FTSE Women Leaders Reviews. In 2023, the
Nominations Committee will continue its focus on succession
planning and will ensure that when it looks to recommend new
appointments, that the process has been inclusive of not only
a broad range of mindsets, but also a variety of backgrounds,
including race, ethnicity and gender.
Nominations Committee evaluation
The feedback gathered indicated that the Nominations
Committee had engaged well over the year but that there were
potential areas for improvement and engagement. These
included spending more time on the people agenda, which
was highlighted as one of the main areas for development.
Senior management succession plans and the diversity
pipeline in the business were two areas where it was felt that
the Committee could add more value. The succession plan
reviews, which would be reported to the Board, would cover
long-term, contingency and business-as-usual succession
matters, whilst the pipeline discussion should focus on
diversity in senior management roles, distinct from diversity in
the wider business which could continue to be considered as a
matter for the Sustainability Committee.
In relation to Board succession, the Committee should
work on a plan for Board composition that will increase the
diversity and skills base of the Board, and likelihood of broader
challenge.
By order of the Board
Peter Ventress
Nominations Committee Chairman
6 March 2023
1
Independent Board Evaluation and Lisa Thomas do not have any other
business relationship with the Company or with any member of the Board.
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Remuneration
Committee report
2022 meeting attendance
Karen Caddick (6/6)
Andrew Cripps (6/6)
Geoff Drabble (6/6)
Louise Fowler (6/6)
Debbie White (6/6)
Key activities in the year ahead
• Governance updates from advisors.
• Shareholder update by the Remuneration
Committee Chair at the AGM.
• Planning for 2024 incentives (taking into account
risk and other matters).
• Review of the Remuneration Committee Terms of
Reference.
• Approval of the 2024 Remuneration Committee
calendar.
Karen Caddick
Remuneration Committee Chair
Annual Remuneration
Committee Chair’s statement
I am pleased to present the Howden Joinery Group Plc
Remuneration Committee report for 2022. The report has
been prepared in compliance with the requirements of the
Large and Medium-sized Companies and Groups Regulations
2013 and incorporates changes made under the updated EU
Shareholder Rights Directive (SRD II).
Using this report
We have sought to make our Remuneration Committee
report as straightforward to access as possible. The content
of the report is governed by various legislation and listed
company disclosure requirements and, on occasion, this
results in duplication of information. We have tried to reduce
this wherever possible and present the information in an
accessible and more intuitive way. The report is split into
three sections:
1. This Committee Chair’s statement
2. Summary of the Directors’ remuneration policy
3. The Directors’ remuneration report
We have divided the Directors’ remuneration report into four
parts:
Part 1
Company performance and stakeholder experience
Part 2 Application of policy in 2022
Part 3
Implementation of policy in 2023
Part 4 Additional disclosures
We believe that this format clearly differentiates each of the
relevant sections of the Remuneration Committee report,
directs users to the sections relevant to their use, and is also
fully compliant with all applicable rules.
2022
It is hard to remember a year when there has been as much
focus on pay as there has been in 2022. Rising inflation and
the subsequent cost of living crisis has caused us to rebase
our thinking on pay across the organisation. In September,
Howdens announced that it would give all UK employees
(except the most senior management) a one-off discretionary
payment of £500 per employee at a cost of c.£7m. This
payment was gratefully received by Howdens employees and
was made with total support from the Board.
During the year, the Remuneration Committee continued
to monitor changes in average FTE salaries and bonuses
across all operational and support roles to ensure that
there remained alignment on pay between our senior
management and that of the wider workforce.
We are satisfied that there remains good alignment due
to Howdens’ unique incentive culture across all roles and
when setting Executive pay, the Committee has regard to
a number of factors which include pay across the wider
workforce, CEO and gender pay gap ratios and the experience
of our shareholders. In a year where there has been so
much volatility in pricing, wages and equity markets, the
Remuneration Committee has sought to maintain a consistent
approach in line with our principles on pay.
The Committee also received updates on the wider employee
benefit landscape, including on the Group pension scheme,
where participation rates remain high, and on the all employee
share awards made under the Share Incentive Plan. It also
received an update from the Group HR Director on the Group’s
gender pay gap, data and the plans in place to address it. I am
pleased to report that, as shown in our Gender Pay Gap Report
(which can be found at www.howdenjoinerygroupplc.com/
governance/gender-pay-gap-reports) our pay gap reduced
year on year from 4.5% to 3.9%. There is clearly more that
needs to be done and the Remuneration Committee will keep
monitoring this important data point. More information on
our broader diversity and inclusion priorities can be found
on pages 65 and 145. An additional share award was also
granted to senior employees below Executive Committee level
in September 2022 (more information on this award can be
found on page 125).
I am pleased to report that the Directors’ remuneration policy
that was contained in the 2021 Remuneration Committee
report received strong support with 90.7% of shareholders
approving its adoption. The policy was updated following
consultation with our largest shareholders. A summary of the
new policy is included in this report starting on page 117. There
were no significant changes to the existing remuneration
framework or policy but some changes were made to provide
the Committee with greater flexibility going into the next
three-year cycle. As reported later on, the Committee has
already used this flexibility to incentivise and retain our strong
performing Executive team over the economic cycle.
The Committee also changed its advisor during the year. PwC
had advised the Howdens Remuneration Committee since
2007 and following the approval of the Directors’ remuneration
policy at the Annual General Meeting (AGM), it was felt an
appropriate time to refresh the advisors to the Committee.
Following a rigorous tender process, which is considered in
more detail on page 135, the Committee agreed to appoint
Korn Ferry as its advisor. I’d like to take this opportunity to
thank PwC for their support over the years and to welcome
Korn Ferry to Howdens.
As reported on page 96, the Remuneration Committee did not
consult with the wider workforce on Executive Director pay
arrangements in 2022. The Committee has safeguards in place
(as considered in this report), which ensure good alignment on
remuneration across the organisation as a whole.
It is worth remembering that all eligible employees with shares
in the Share Incentive Plan, which is the significant majority
of UK employees given that Free Shares are granted to all
UK employees each year, have a de facto say on Executive
Director pay when such matters are considered at
general meetings.
In line with the 2022 AGM, I will be presenting a summary
of the work of the Committee in 2022 at the 2023 AGM on
4 May 2023.
2022 reward outcomes
Annual bonus
For the 2022 annual bonus, performance was based on
the delivery of both profit and cash flow targets. For the full
year we have reported an increase in sales of 10.8% and
an increase in profit of 4.0%. These results are particularly
impressive given the strong performance of the business
in 2021.
This strong financial performance meant that full year profit
before tax (PBT) and cash flow were above our maximum
outperformance targets resulting in a bonus of 150% of salary
for our Executive Directors.
Performance Share Plan (PSP)
The 2020 PSP introduced a relative total shareholder returns
(TSR) measure for the first time in addition to the existing
three-year PBT growth measure.
As reported in the 2020 Remuneration Committee report,
the original weighting of the award was to be 67% for PBT
growth and 33% for the TSR measure. However, given the
uncertainty caused by the COVID-19 pandemic in H1 2020,
the Remuneration Committee initially delayed the grant of
the 2020 PSP and later that year agreed that the weightings
of the two performance measures would be reversed for
2020 only, with PBT growth carrying a 33% weighting and
relative TSR carrying a 67% weighting. The rationale for this
was that relative TSR provided a more robust measure of
management’s performance over the three-year period given
the extreme levels of uncertainty around lockdowns and
absolute trading performance.
To determine TSR performance, Howdens is ranked against
a comparator group of similar sized companies, those being
50 above and 50 below Howdens by market capitalisation in
the FTSE All Share index at or shortly before the start of the
performance period (excluding Investment Trusts). There is
zero pay out for below median performance and threshold
vesting at 15% of the maximum opportunity at median. 100%
of the opportunity is paid out when performance is equal
to or more than upper quartile performance and there is
straight-line vesting between the threshold and maximum
opportunities.
Howdens TSR performance during the three-year period
equated to vesting at 15% of the total opportunity for
this measure.
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Remuneration Committee report continued
Annual Remuneration Committee Chair’s statement continued
PBT performance targets for the period required 5% per
annum PBT growth to achieve threshold vesting and 15% per
annum PBT growth to achieve maximum vesting. The 2020
PSP performance was measured to FY 2022 and, over the
three-year period, PBT increased by 15.9% per annum,
which equated to vesting at 100% of the total opportunity
for this measure.
In aggregate, the 2020 PSP will vest at 43% of the
maximum opportunity.
2023 reward and incentives
In December 2022, I wrote to our largest shareholders to
seek their feedback on our proposals for the operation of
the Directors' remuneration policy in 2023. Whilst all of
our proposals were in keeping with our approved policy,
we acknowledged the need to balance the views of our
shareholders with our ambitions to retain and incentivise
a strong performing Executive team over the economic
cycle and to live into our remuneration philosophy to pay
above-market levels of reward for above-market levels
of performance. We have listened to our shareholders
throughout this feedback process and have set out our
proposals for 2023 below.
Salary
Salary increases for the Executive Directors will be in line with
the wider workforce. These will be effective from 1 January
2023, the timing of which is also aligned to increases for the
wider workforce.
Whilst the Committee is mindful of the external guidance
to consider salary increases for executive directors below
the rate of increases given to all employees, the salaries of
our CEO and CFO are currently c.10% below the mid-market
level for companies of a broadly similar average market
capitalisation and therefore we believe that it remains
appropriate to increase their salaries in line with the wider
workforce. As mentioned earlier in this statement, the
Committee has been monitoring the Company’s approach
to the impact of the cost of living crisis on employees and
is satisfied that both the annual salary review and one-off
payments are proportionate.
Annual bonus
Under the updated policy approved in 2022, we increased
the normal maximum policy limit under the annual bonus to
200% of salary for Executive Directors, although there was
no change to the operation of policy of 150% of salary for
both Executive Directors for the 2022 financial year. Having
reviewed the position, taking into account market data for
companies that operate in the same or similar industries
and UK listed companies of a similar size and complexity, the
Committee is increasing the annual bonus opportunity for
both our Executive Directors to 200% of salary.
The Committee is fully aware of investor concerns regarding
benchmarking-led increases; however, we believe this
increase is necessary to correct the significant gap to market
in total remuneration opportunity and to reflect the continued
growth of the business. In the 2021 Directors’ Remuneration
report we committed to consulting with shareholders if we
were considering increasing the level of bonus opportunity
above 150% of salary and we did this prior to reaching our
final conclusion. Without this change, we believe that a
significant increase in base salary would be required to meet
our remuneration philosophy of paying above market levels of
reward for above market levels of performance.
For the 2023 annual bonus, we replicated the methodology
of PBT and cash flow measures used in the 2022 annual
bonus. The measures retain their previous weighting of
85% of maximum opportunity for PBT and 15% of maximum
opportunity for cash flow. This maintains the focus on profit in
incentives and alignment with the depots, whilst maintaining a
healthy stretch between target and maximum bonus levels to
ensure strong shareholder alignment. The Committee has set
sufficiently stretching targets for the annual bonus in 2023.
PSP
Since 2020, the PSP has operated with two performance
measures: PBT and relative total shareholder returns (TSR). In
the two most recent grants, the award was based 67% on PBT
and 33% on TSR relative to a peer group of the 50 companies
above and below Howdens ranked by market capitalisation.
Having reviewed these two metrics considering the Group’s
strategic plan and key priorities, the Committee is proposing
the addition of the following metrics:
• Return on Capital Employed (ROCE) (10% weighting) – to
incentivise management to generate a high level of returns
and balance this with capital allocation effectively as they
invest to deliver future growth plans. The range we set will
reflect a combination of analyst consensus estimates and
internal forecasts; and
• Environmental measure(s) (10% weighting) – as part
of the policy review, the Committee introduced greater
flexibility under the PSP to allow the use of non-financial
measures, such as ESG related measures, for up to 25%
of the maximum opportunity. The Committee believes
that it is the right time to introduce such a measure at
10%, which will have a range of quantitative, externally
assessed targets aligned to our stated goals of carbon/
waste reduction.
The introduction of these new measures will reduce the
PBT weighting to 60%, but it will remain the largest part of
the performance measures. PBT is the core performance
metric used throughout the business, from our depot teams
through to Executive Directors. We will retain the same TSR
performance condition with a 20% weighting. The new ROCE
metric and the new Environmental metric will make up the
remainder of the award.
The Committee has also concluded that the PBT target range
should reflect a combination of analyst consensus estimates,
internal forecasts and our long-term strategic goals. This
means we will be moving away from the automatic use of
the prior year PBT figure as the base for targets for the 2023
and future grants. This latter approach does not produce
meaningful targets in periods of volatility as they can end up
being too low or too high as we have seen in respect of the
2021 and 2022 grants. The new approach seeks to ensure
that there is clear alignment between vesting outcomes
and performance and reduces the risk of a 'boom and bust'
cyclical payment cycle.
The Committee considers this mix of measures to be
appropriate as the Group’s focus on profitability is maintained,
which is consistent with Howdens’ culture, whilst adding
ROCE to focus on maintaining strong returns on capital and
an environmental measure to reflect a very important part
of our strategy. The TSR element continues to provide an
important alignment with the shareholder experience over
the performance period.
To ensure that our remuneration philosophy is upheld, the
Committee will continue to ensure that all performance targets
are suitably stretching for the level of remuneration available
within the context of our internal expectations and external
forecasts. Further details of the measures, targets and
weightings are set out on pages 130 and 131 of this report.
No changes are proposed to long-term incentive opportunity
for 2023, and therefore the CEO will receive an award
equivalent to 270% of salary and the CFO will receive an
award of 220% of salary.
Pensions
Since May 2022, both Executive Directors' pension benefits
have been aligned with the wider workforce. This was in
line with the Committee’s commitment that there would be
alignment by the time of the Company’s next policy cycle.
The Directors' remuneration policy provides that new
Executive Directors will only participate in the Company’s
pension arrangements with contributions in line with those
of the wider workforce.
Senior management and the wider workforce
In addition to the Executive Directors, the Howdens
Remuneration Committee also sets remuneration for senior
management. We classify ‘senior management’ as members
of the Executive Committee (excluding Executive Directors), the
Company Secretary and the Head of Internal Audit and Risk.
During the year, the Committee agreed in principle to review
the long-term incentive awards granted to senior management
grades below Executive Committee level. More information
on the new incentive structure for this group can be found on
pages 119 and 125.
The Committee also received updates on all-employee
remuneration related policies in order to provide the context
for, and to ensure alignment with, the policy on Executive
Director remuneration. In 2019, the Committee adopted
a dashboard in line with Provision 33 of the UK Corporate
Governance Code, which shows some of the key internal and
external measures that the Committee members are aware of
when determining Executive Director and senior management
remuneration (further detail on the dashboard may be found
on page 126).
I hope the information presented within this report provides a
clear explanation as to how we have operated our Directors'
remuneration policy over 2022 and how we intend to implement
it for 2023. We continue to be committed to an open and
transparent dialogue with our stakeholders, and the Committee
would welcome any feedback or comments you have on this
report, our policy or how we implement the policy in 2023.
Karen Caddick
Remuneration Committee Chair
Whether the Committee exercised
discretion for the incentive period
ending 24 December 2022
The Committee considered the financial performance
for the incentive period ending 24 December 2022. PBT
for the year was £405.8m and cash flow was £498.0m.
Three-year PBT increased by 15.9% per annum and
relative TSR for the period was 'median'. The Committee
considered whether the incentive outturns projected for
the 2022 annual bonus and 2020 PSP were proportionate
to financial and relative TSR performance. It also
considered whether there were any other external
factors it was aware of that would make decreasing the
payments under these awards appropriate.
In reaching its conclusion, the Committee considered
the remuneration experience structures and policies for
the workforce as a whole in 2022, the relative ratios of
Executive and employee reward, continued alignment
to shareholder value, as well as the predictability and
proportionality of the incentives, and their ongoing
alignment to culture. The Committee took all of these
matters into consideration and agreed that the vesting
in full of these awards without adjustment or withholding
was the right overall outcome.
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Remuneration Committee report continued
Annual Remuneration Committee Chair’s statement continued
Summary of the Directors’ remuneration policy
Fixed
Variable
2022 Remuneration Committee activity
January
July
Committee meeting
•
Investor feedback on proposed Directors’ remuneration policy
Committee meeting
• Workforce pensions communications
• Executive Director and senior management salary review
• Gender pay gap reporting
• Governance update
• Committee advisor review
September
Share award grants
• Additional conditional share award grant for senior
management approved (excluding Executive Committee
and Executive Directors)
November
Committee meeting
• 2023 incentives
• Executive compensation review
• Update on outstanding awards
• Risk and rewards consideration
• 2023 Remuneration Committee calendar
• Review of Committee’s terms of reference
December
Shareholder communication
• Remuneration Committee Chair communication with
shareholders regarding proposed operation of policy in 2023
February
Committee meeting
• Shareholder feedback on proposed Directors’ remuneration
policy
• 2022 incentive considerations (including workforce reward,
shareholder alignment, CEO pay ratio and gender pay gap)
• Governance update
• Draft 2021 Directors’ remuneration report
• 2022 share awards planning
• Committee advisor review
• Chair fee
Shareholder Communication
• Remuneration Committee Chair communication with
shareholders confirming proposed changes to new Directors'
remuneration policy following shareholder feedback
April
Share award grants
• SIP Free Shares grant to all eligible UK employees approved
• PSP grant to Executive Directors and senior management
Committee meeting
• Workforce earnings analysis
• LTIP leaver treatment
May
AGM
• Directors' remuneration policy approved by shareholders
• 2021 Directors' remuneration report approved by shareholders
Howdens’ Directors' remuneration policy, as set out in our 2021 Annual Report and Accounts, was approved by shareholders at our
2022 AGM. Set out below is a summary of that policy, how that policy links to strategy, and consideration of some of the factors the
Committee addressed when formulating the policy. How the policy has been applied during 2022 and will be applied during 2023
can be found on subsequent pages in the report.
The full Directors' remuneration policy can be viewed at www.howdenjoinerygroupplc.com/governance/remuneration-policy.
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.
Operation
Opportunity
Performance
measures
Element and how
it supports our
strategy
Base salary
Recognises the
market value of
the Executive
Director’s
role, skill,
responsibilities,
performance and
experience.
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.
Benefits
Provides a
competitive level
of benefits.
Howdens pays the cost
of providing the benefits
on a monthly basis or as
required for one-off events.
Increases will normally be only for inflation and/or in line with the
wider employee population.
None.
Salaries are set with consideration of each Executive Director's
performance in role and responsibilities, and within a range defined
by a market benchmark derived from companies of a comparable
size operating in a similar sector. 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.
2022 and 2023 salary levels are detailed on page 130.
Benefits are based upon market rates and include receipt of a
car allowance, health insurance and death-in-service insurance
payable by the Company.
None.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Summary of the Directors’ remuneration policy continued
Element and how
it supports our
strategy
Annual bonus
Incentivises
annual
performance over
the financial year.
Deferral links
bonus payout
to share price
performance over
the medium-term.
Operation
Opportunity
Performance
measures
Performance is assessed annually against targets made up of
at least 75% financial metrics.
At least 30% of any bonus earned is deferred into shares.
Shares are paid out on the second anniversary of deferral date.
The Committee has the discretion to adjust the bonus outcome
in light of overall underlying performance. Any adjustment
made using this discretion will be explained in the following
Annual Report on Remuneration.
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. Therefore clawback and/or malus will
operate on the award for a total period of up to two years after
the performance period.
The threshold for the
annual bonus will be
dependent on the
individual measures used
each year. For 2023, the
annual bonus will be based
on PBT and cash flow, with
threshold payout being
20% of salary.
The maximum opportunity
under the annual bonus is
200% of salary.
For FY 2023, the annual
bonus level will be
increased to 200% of
salary, with the position
reviewed each year.
For 2023 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 75% of
the bonus being
based on financial
metrics.
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.
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.
Executives have the opportunity to participate in the PSP on an
annual basis. The PSP operates over a three-year vesting cycle.
Under the PSP, awards will generally 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.
The Committee has the discretion to adjust the PSP outcome in
light of overall underlying performance. Any adjustment made
using this discretion will be explained in the following Annual
Report on Remuneration.
The threshold for the PSP
will be 15% of maximum.
This may be amended
by the Committee
dependent on the
maximum opportunity
in a given year.
The maximum opportunity
under the PSP is 270%
of salary.
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 maybe 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.
For 2023, the
PSP will be based
on PBT growth,
relative TSR,
return on capital
employed, and
an environmental
measure.
The Committee
retains the
flexibility to
use alternative
measures during
the life of this
policy, subject
to at least 75%
of the PSP being
based on financial
metrics.
Element and how
it supports our
strategy
Operation
Performance Share Plan (PSP) continued
Fixed
Variable
Opportunity
Performance
measures
Shareholding
requirement
strengthens
alignment of
interests between
participants and
shareholders.
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.
Executive Directors will be
required to retain 100%
of their shareholding
requirement (i.e. 200% of
base salary or full actual
holding if lower) for two
years post-cessation
from the Board of Howden
Joinery Group Plc.
Pension
Provides
competitive long-
term savings
opportunities.
Executive Directors will be entitled to participate in the Howdens Retirement Savings Plan
with contribution rates in line with the wider workforce. The level of salary supplement is
aligned to the maximum pension benefit available to the Executive Director.
None.
All-employee share incentive plan
To encourage
employee share
ownership.
Executive Directors are able to participate in the tax-
advantaged Share Incentive Plan available to
all eligible UK employees.
None.
The maximum
participation levels
will be set based on
the applicable limits
set by HMRC.
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 participate in the same
incentive schemes as the Executive Directors, at a reduced level, to ensure alignment between the leadership team and with
our shareholders.
Below Executive Committee level, certain senior management grade participate in a similar annual bonus plan that is linked to
PBT and cash flow. The promotion of employee share ownership is also cascaded through all tiers of management. From 2023,
a deferred bonus share arrangement will replace the PSP for these employees. Given the variable pay-outs of the LTIP in recent
years and the increasing complex measures being introduced for the Executive award, it was felt that an alternative structure
would be more effective, providing a greater level of understanding and engagement, and therefore retention, among this cohort
of employees (further information about incentives below the Executive Committee level may be found on page 125). Free shares
grants are made at a reduced level to a wider population within Howdens that do not use performance conditions to encourage
share ownership throughout the Company. Employees can also purchase additional shares in the Company in a tax efficient way
through our Buy As You Earn scheme, which operates under the Share Incentive Plan.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Remuneration Committee report continued
Summary of the Directors’ remuneration policy continued
Non-Executive Directors' remuneration policy
The Group’s policy on Non-Executive Director (NED) and Chairman fees and benefits is set out below.
Operation
Opportunity
Performance Measures
NEDs are not eligible
to participate in any
performance related
arrangements.
The fees for the Non-Executive
Directors are determined
by the Chairman and Chief
Executive and approved by
the Board.
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.
Fees for Non-Executive Directors are set out
in the statement of implementation of policy
on page 130.
The fees reflect the time commitment and
responsibilities of the roles. Accordingly,
committee chairmanship, Senior Independent
Director (SID) and the Non-Executive Director
responsible for employee engagement 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 and having regard
to the base salary increase payable to the wider
workforce. Benchmarking is typically undertaken
every three years.
Non-Executive Directors are entitled to receive expenses in respect of reasonable
travel and accommodation costs.
None.
Element and how
it supports our strategy
Fees
To attract NEDs who
have a broad range
of experience and
skills to oversee the
implementation of
our strategy.
Benefits
To attract NEDs who
have a broad range
of experience and
skills to oversee the
implementation of
our strategy.
Underlying principles
When determining the Directors' remuneration policy, the Committee was mindful of its obligations under Provision 40 of the
UK Corporate Governance Code to ensure that the policy and other remuneration practices were clear, simple, predictable,
proportionate, safeguarded the reputation of the Company and were aligned to Company culture and strategy. Set out on the
following page are examples of how the Committee addressed the factors.
Fixed
Variable
Clarity
Remuneration arrangements
should be transparent and
promote effective engagement
with shareholders and
the workforce.
In 2021, the Company invited its principal shareholders and shareholder representative groups
to consult on the updated Directors' remuneration policy and received supportive feedback.
The draft policy was updated following feedback from shareholders. In 2022, the Company
contacted its principal shareholders to consider various changes to remuneration practice
that were permitted under the policy.
All UK employees are awarded Free Shares in the Company through the Share Incentive Plan
(SIP). UK employees are also able to participate in a partnership and matching shares programme
which also operates through the SIP. All employees with shares held in the SIP trust are able to
exercise voting rights on those shares and vote on the Directors' remuneration report and the
Directors' remuneration policy (when applicable) at general meetings of the Company. Further
information on workforce engagement can be found on pages 90 and 91.
The Directors' remuneration policy has received positive feedback from stakeholders in relation
to its simplicity.
The Committee’s approach to performance measures had always been that they must be
understandable for participants in the schemes in order to ensure they are effective.
Whilst the Committee has consciously not set an absolute annual quantum on Executive
remuneration, this is something that the Committee will keep under review. The total pay of
the Executive Directors is considered by the Committee as well as pay ratios with the wider
workforce and shareholder returns.
The range of possible values of rewards for the Executive Directors is considered on page 129.
The range of possible values of rewards for the Executive Directors was also communicated in
the 2021 Remuneration Committee report when a revised Directors' remuneration policy was
communicated to shareholders.
The Committee has a wide range of discretion in relation to variable pay awards, new joiners,
and leavers, which were identified and explained when the policy was approved.
The Committee remains confident that the awards used to ensure continued delivery of strategy
and long-term performance are working as intended and that they are delivering outcomes in
line with our wider stakeholder experience.
In 2022, the annual bonus paid out in full following delivery of exceptional PBT results in
challenging market conditions, exceeding market expectations. However, despite the strong
profit performance, the vesting percentage for the long-term incentive award was 43% due to
challenging share price performance in the final year of the award. This impacted the outturn of
the relative TSR measure resulting in a lower vesting percentage.
The Committee remains confident that the incentive schemes operated under the Directors'
remuneration policy are aligned with purpose, values and strategy.
Howdens’ staff are paid on the performance of their local depot or on the profitability of the
Group as a whole. This has created an autonomous, entrepreneurial, profit-focused culture
and is reflected in the heavy weighting given to profit measures in our incentive schemes for
Executive Directors and senior management.
Simplicity
Remuneration structures
should avoid complexity and
their rationale and operation
should be easy to understand.
Risk
Remuneration arrangements
should ensure reputational
and other risks from excessive
rewards, and behavioural risks
that can arise from target-
based incentive plans, are
identified and mitigated.
Predictability
The range of possible values
of rewards to individual
directors and any other limits or
discretions should be identified
and explained at the time of
approving the policy.
Proportionality
The link between individual
awards, the delivery of strategy
and the long-term performance
of the company should be clear.
Outcomes should not reward
poor performance.
Alignment to culture
Incentive schemes should drive
behaviours consistent with
company purpose, values and
strategy.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Remuneration Committee report continued
Directors’ remuneration report
Part 1: Company performance and stakeholder experience
In this opening section of the Directors’ remuneration report, we detail some of the considerations the Committee has
regard to when implementing the Directors' remuneration policy. Contained in this section are specific disclosures on
Group performance, as well as comparative disclosures on the relative importance of spend on pay, historic CEO single
figure, CEO ratio and all-Director remuneration relative to average employees.
Director pay
Our corporate performance and remuneration
Historic single figure
The table and graph below show the historic CEO single figure and incentive payout levels. They show that, with the
exception of 2020, the annual bonus has performed strongly and that long-term incentives have reflected the challenging
market conditions.
The maximum bonus opportunity reduced from 200% of basic salary to 150% following the approval of the Directors’
remuneration policy by shareholders in May 2016.
Year
2013
2014
2015
2016
2017
2018
CEO single figure (£'000)
5,168
6,221
5,225
3,098
1,268
2,569
Annual bonus (% of maximum)
LTIP vest (% of maximum)
63%
89%
64%
56%
48%
100%
100%
100%
35%
0%
75%
0%
2019
1,391
76%
0%1
2020
816
0%
0%
2021
3,951
100%
100%
2022
2,373
100%
43%
1 Andrew Livingston was appointed as CEO in April 2018 and therefore he was not granted an award under the LTIP in 2017.
’
)
s
0
0
0
£
(
e
r
u
g
F
e
g
n
S
i
l
i
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
CEO single figure
Annual bonus (% of maximum)
LTIP vest (% of maximum)
100
80
60
40
20
0
%
o
f
i
m
a
x
m
u
m
Group performance
Total shareholder return (TSR)
The graph below illustrates the Company’s TSR
performance relative to the constituents of the FTSE 250
(excluding investment trusts) of which the Company is a
constituent. It shows that over the past 10 years Howdens
has generated significantly higher returns than the FTSE
250 (excluding Investment Trusts).
Profit before tax (PBT)
The graph below illustrates the Company’s historic
PBT performance.
Howdens historic TSR
Howdens historic PBT (£m)
700
600
500
400
300
200
100
0
2012 2013
£405.8m
£390.3m
£237.0m
£238.5m
£260.7m
£188.8m
£219.6m
£232.2m
£185.3m
£133.9m
450
400
350
300
250
200
150
100
50
0
2014
2015
2016
20 17 2018 2019 2020 2021 2022
2013
2014
2015
2016
20 17 2018 2019 2020 2021 2022
Howdens
FTSE 250 (excluding Investment Trusts)
Relative importance of spend on pay
The graph below sets out the change in the Group’s total remuneration spend from 2021 to 2022 compared to
the total returns to shareholders of the Group and the two incentive performance measures PBT and cash flow.
650
600
550
500
450
400
m
£
350
300
250
200
150
100
50
0
+12.8%
m
1
.
4
2
6
£
m
3
.
3
5
5
£
21
22
+98.8%
.
m
0
5
6
3
£
22
m
6
.
3
8
1
£
21
Total spend on pay
Total returns to shareholders
-5.9%
.
m
0
9
2
5
£
m
0
.
8
9
4
£
+4.0%
m
3
.
0
9
3
£
m
8
.
5
0
4
£
21
22
PBT*
21
22
Cash flow**
* See consolidated income statement on page 164.
** Net cash flow from operating activities is the definition used for the annual bonus scheme (see page 130).
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Directors’ remuneration report
Part 1: Company performance and stakeholder experience continued
CEO pay ratio table
Howdens has calculated the CEO pay ratio for 2022 in line with the updates to the Directors’ Remuneration Reporting
Regulations. The data used to calculate the CEO pay ratio was accurate as at 31 December 2022. In accordance with section 17
of The Companies (Miscellaneous Reporting) Regulations 2018, method A was used in the calculation of the pay ratios; ranking
the pay and benefits of all our UK employees for the relevant financial year to identify the 25th, 50th, and 75th percentile-ranked
employees and using the pay and benefits figures for these three UK employees to determine the pay ratios at each quartile.
Method A has been used as it has been identified by the Department for Business, Energy and Industrial Strategy in its guidance
as the most statistically accurate method for identifying the pay ratios.
Year
2022
2021
2020
2019
2018
Method
25th percentile pay ratio
50th percentile pay ratio
75th percentile pay ratio
A
A
A
A
A
74:1
135:1
31:1
71:1
122:1
64:1
113:1
25:1
58:1
100:1
53:1
93:1
21:1
48:1
81:1
It should be noted that the CEO did not receive any remuneration relating to long-term incentive share awards in 2019 or 2020 as
he was appointed to the Board in 2018. He also did not receive any annual bonus in 2020 during which time all other employees
received variable performance bonus pay. The combination of these factors resulted in a lower than anticipated CEO pay ratio
in 2019 and 2020. In 2021, the CEO pay ratio increased due to the vesting in full of the 2019 long-term incentive share award. In
2022, the ratio has reduced as the 2020 long-term incentive share award will vest at 43% of maximum and the share price upon
which the award is valued is lower than in 2021.
The total pay, benefits, and salary of each employee who is the best equivalent of the 25th, 50th, and 75th ranked employee is
as follows:
Total pay and benefits (FTE)
Salary (including overtime) (FTE)
£32,066
£22,450
£37,105
£26,260
£45,006
£32,026
25th percentile
50th percentile
75th percentile
The pay and benefits of employees was calculated in line with the Single Total Figure of Remuneration methodology. In our
calculations we used actual pay from 1 January 2022 to 31 December 2022. Joiners, leavers and part time employees’ earnings
have been annualised on an FTE basis (excluding any payments of a one-off nature).
Where bonus payments are made on a weekly, monthly or quarterly basis, we included payments made in the 2022
compensation year; however, for annual bonus payments, we estimated the bonus due to employees for the 2022 compensation
year (payment is due in March 2023). P11D values are based on the 2021/22 reportable values, however, they have been
annualised accordingly.
Howdens’ vertically integrated business means that our workforce is made up of a wide range of roles from kitchen designers
to skilled engineers, from warehouse staff to senior management. We work on the premise that Howdens must be worthwhile
for all concerned and our reward structures across the business are designed to reflect the levels of personal autonomy and
outperformance we expect from every individual. Our pay structures vary between roles to deliver an appropriate balance
between fixed and variable pay. Emphasis on profit in our reward structures, from the depots to the Executive Directors, helps
to provide some alignment of reward across the business.
It is a feature of our pay structure that senior management often receive a larger proportion of their total pay through incentives
and the outcome of incentives is likely to be the main cause of variability in the ratio in future years.
The Remuneration Committee is regularly updated on the benefits provided across the business and are mindful that
consistency of approach and fairness are two key principles and important drivers for change.
Case study
Review of incentives below Executive Committee level
Having a talent pipeline that is highly motivated and highly
incentivised is key to Howdens long-term success. It is this
group that provides front-line support for the Executive
Committee in delivering the strategic priorities of the
Board and it is this leadership group who will become
future Executive Committee members.
Following the review, the Committee agreed to replace
the long-term incentive plan for Grade 1s and 2s with a
deferred bonus share award. This award replaces the PSP
and looks to provide a more consistent vesting pattern
through the trading cycle whilst providing sufficient
incentive to maximise performance.
In previous years the performance measures for
incentives for our Grade 1s and 2s have been aligned to
those for members of the Executive Committee, albeit at a
lower quantum. This has generally worked well, particularly
in relation to the annual bonus where an annual stretch
target was introduced for this cohort in 2020. However,
it became apparent that the long-term incentive awards
granted to Grade 1s and 2s had not been as effective in
recent years and were not highly valued by management.
Share price movement and volatility of long-term incentive
outcomes had resulted in this group having less shares in
the Company than they would have done previously. As a
Remuneration Committee, we want to promote employee
share ownership at all levels but it is particularly important
that our most senior employees share our shareholder
experience and have skin in the game.
In September 2022, the Remuneration Committee took
steps to address this by granting an additional share
award under the existing LTIP rules. This share award to
Grade 1s and 2s was made without financial performance
conditions but was conditional upon three years
continued employment from the date of grant. At that
time, the Committee also agreed to review the long-term
incentive plan arrangements for this group for 2023.
The sole measure for the deferred bonus share award
is PBT, our most important KPI. Like the PSP, there is a
performance range with 20% of the award vesting at
the bottom of the range and a 100% vesting at stretch
target. The performance period for the award will be one
year, reduced from three years under the PSP. However,
shares under the award will be deferred for two years (in
line with the Executive Committee deferral period) during
which time dividends will be payable but employees will
not be able to sell or transfer their awards. Normal 'Good'
and 'Bad' leaver provisions will apply with shares being
retained from 'Bad leavers'.
The Committee believes that by introducing the new
award structure, it will remove some of the complexity in
measures being included in the Executive awards and will
result in more consistent outcomes and greater retention
for this group of key employees.
Whilst the work of the Committee is necessarily focused
on members of the Executive Committee, it is also
important to demonstrate that the Remuneration
Committee is actively involved in the total reward
structures of all our employees.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Directors’ remuneration report
Part 1: Company performance and stakeholder experience continued
All-Director remuneration relative to average employees
Listed companies are required to disclose the annual change in each director’s pay in comparison to the average change in
employee pay. This comparison is made on salary, bonus and taxable benefits and as such does not include some of the elements
disclosed under the single figure of remuneration table such as pension contribution or long-term incentives. While the SRD
II requires a listed entity to provide employee pay information for that entity only (i.e. not on a group-wide basis), a ‘Group’
comparator has therefore also been included in the table below as this provides a more representative comparison.
% change in Basic Salary
% change in Benefits
% change in Bonus
2021
to 2022
2020
to 2021
2019
to 2020
2021
to 2022
2020
to 2021
2019
to 2020
2021
to 2022
2020
to 2021
2019
to 2020
Average Howden Joinery Group
Plc employee remuneration1
Average Howdens Group
employee remuneration
–
5%
–
1%
–
–
–
–
–
–
–
4%
(9)%
(15)%
9%
(4)%
38%
12%
1
In the financial year ended 24 December 2022, Howden Joinery Group Plc did not employ any individuals.
% change in Basic Salary / Fees
% change in Benefits
% change in Bonus
2021
to 2022
2020
to 2021
2019
to 2020
2021
to 2022
2020
to 2021
2019
to 2020
2021
to 2022
2020
to 2021
2019
to 2020
Executive Directors
Andrew Livingston1
Paul Hayes2
Non-Executive Directors
Karen Caddick3
Andrew Cripps
Geoff Drabble3
Louise Fowler4
Peter Ventress5
Debbie White
Former Directors
Richard Pennycook6
5%
80%
(85)%
–
84%
–
3%
3%
3%
3%
6%
6%
4%
3%
–
3%
12%
–
3%
3%
3%
4%
–
4%
3%
–
18%
5%
22%
–
3%
100%
0%
0%
–
0%
0%
0%
0%
–
(89)%
0%
0%
100%
–
(100)%
(50)%
390%
515%
300%
100%
(100)%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(26)%
2%
3%
100%
0%
(100)%
1
In 2021, following shareholder consultation, Andrew Livingston's salary was increased by 12%. The rationale for this increase may be found on page 105 of the
2020 Annual Report and Accounts. In 2020, Andrew also received a relocation allowance as permitted under the Director’s remuneration policy.
2 Paul Hayes was appointed to the Board on 27 December 2020 and therefore did not receive a salary, benefits, or bonus as a Director in respect of the 2020
financial year. Comparative figures cannot therefore be calculated for the periods '2019 to 2020' and '2020 to 2021'.
3
In September 2019, Karen Caddick was appointed Remuneration Committee Chair and Geoff Drabble was appointed Senior Independent Director. Geoff also
assumed additional responsibilities as the Non-Executive Director responsible for employee engagement at the beginning of 2019. The increases shown in their
Non-Executive Director fees for 2019 to 2020 are predominantly due to these changes.
4
Louise Fowler was appointed to the Board in November 2019 and did not receive a full year of fees in respect of that year. The percentage change between 2019
and 2020 was therefore substantial as the figures are not pro-rated for the purposes of the above calculations.
5 Peter Ventress was appointed to the Board in July 2022. Comparative figures cannot therefore be calculated for the periods reported above.
6 Richard Pennycook, former Non-Executive Chairman, retired from the Board in September 2022 and therefore did not receive a full year of fees in respect of
2022. The percentage decrease between 2021 and 2022 was therefore substantial as the figures are not pro-rated for the purposes of the above calculations.
Wider workforce considerations
The Remuneration Committee received updates from the Group HR Director in respect of average salary of an employee in
2022 compared to previous years for depot, manufacturing, and logistics roles. When determining the base salary, benefits
and variable pay awards for the Executive Directors and senior management, the Committee had regard to the information
contained in a Provision 33 Dashboard, which includes information such as the CEO pay ratio, gender pay gap statistics, and
the salary, bonus, pensions, benefits and share plan arrangements available to the wider workforce.
Directors’ Remuneration Report
Part 2: Application of policy in 2022
Fixed
Variable
In this section of the Directors’ remuneration report we set out how the Committee has executed policy for 2022.
Disclosures in this section are retrospective and where applicable are shown against prior year comparator.
Single figure of remuneration (audited)
Salary/Fees
Taxable Benefits
Pension
Total Fixed
Bonus
LTIP
Total Variable
Fixed
Variable
Total
Remuneration
£000s
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Executive
Directors:
Andrew Livingston
670
Paul Hayes
438
650
425
Total
1,108
1,075
20
36
56
2
0
0
4
74
74
76
60
70
70
73
58
194
261
27
162
60
701
–
58
590
0
0
33
19
20
39
0
0
0
1
0
–
1
2
84
48
91
31
774
522
760
1,004
476
657
975
638
595
2,216
1,599
3,191
2,373
3,951
–
–
657
638
1,179
1,114
132
122
1,296
1,236
1,661
1,613
595
2,216
2,256
3,829
3,552
5,065
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
76
74
76
64
70
70
73
59
221
261
162
–
61
59
734
592
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
76
74
76
64
70
70
73
59
221
261
162
–
61
59
734
592
Non–Executive
Directors:
Karen Caddick
Andrew Cripps
Geoff Drabble
Louise Fowler
Richard
Pennycook
Retired Sept 2022
Peter Ventress
Appointed July 2022
Debbie White
Total
Total current Executive Director fixed vs variable pay
36%
24%
20212022
2021
64%
76%
Fixed
Variable
Notes to the single figure table
Executive Directors
Salary
Salaries will not be changed outside of the annual review,
unless there are 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 market benchmark derived
from companies in a similar sector. Salaries for 2023 can be
found on page 130. 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.
Taxable benefits
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.
Pension
Both Executive Directors received a cash benefit in lieu
of pension during the year. More information about
Executive Director pension benefits can be found on
pages 115 and 119.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Governance / Remuneration Committee report
129
Remuneration Committee report continued
Directors’ remuneration report
Part 2: Application of policy in 2022 continued
Notes to the single figure table continued
Annual bonus (audited)
Targets
Our annual bonus for 2022 was based on PBT and cash
flow measures subject to an aggregate maximum of 150%
of salary. The PBT and cash flow measures were weighted
as follows:
Threshold
Target
Outperformance
PBT component
Cash flow component
£340m
(17% of salary)
£420m
(3% of salary)
£370m
(63.67% of salary)
£445m
(11.25% of salary)
£400m
(127.5% of salary)
£469m
(22.5% of salary)
70% of the annual bonus will be paid in cash and 30%
of the annual bonus will deferred as shares, which will
vest two years following the deferral date (subject to
continued employment).
Outcomes for the year
The PBT figure for the year in relation to the annual bonus
is £405.8m. The cash flow figure for the year in relation
to the bonus was £498.0m. In aggregate, the Executive
Directors will receive an annual bonus of 150% of salary
for 2022.
PBT (% of salary)
Cash Flow (% of salary)
Total Bonus (% of salary)
Total Bonus (£'000)
Andrew
Livingston
127.5%
22.5%
150.0%
1,004
Paul
Hayes
127.5%
22.5%
150.0%
657
Performance Share Plan (PSP) (audited)
Targets
The PSP awards granted from 2020 onwards have
been measured against PBT growth and relative total
shareholder returns (TSR) over a three-year period. The
PBT growth and TSR for the 2020 award was measured
between FY 2019 to FY 2022. Any shares that vest under
the PSP award are subject to a two-year post-vest holding
period for serving Executive Directors.
Outcomes for the year
33% of the 2020 PSP award was based on a PBT growth
threshold requirement of 5% p.a. and a maximum
requirement of 15% p.a. At the threshold requirement, 15%
of the PBT growth component of the award would vest.
The PBT for 2022 was £405.8m, and therefore growth on
FY 2019 was 15.9% p.a. This component of the award will
vest at 100% of maximum opportunity.
67% of the 2020 PSP award was based on a relative TSR
measure. The threshold vesting for the TSR component of
the award was where the Company was ranked 'median'
compared to the comparator group of companies. The
maximum vesting was where the Company ranked 'at
or above upper quartile'. At threshold, 15% of the TSR
component would vest. Based on performance to FY
2022, the Company was ranked 'median' compared
to the comparator group and therefore 15% of the TSR
component of the award will vest.
The overall final vesting of the 2020 PSP award is 43% of
the maximum opportunity. £45,174 of Andrew Livingston's
award is attributable to share price increases. The share
price at the date of grant was 510.40p and the three
month average to 24 December 2022, the price on which
the value of the award is calculated, was 552.35p.
l e m e n t
w E
2 . 5 %
2
C a s h Fl o
BT Element
P
P
B
T E
l
e
m
e
n
t
Annual
bonus
outcome
P
B
T
E
l
e
m
e
n
t
100%
127.5%
PBT Eleme n t
t
n
e
m
e
l
E
T
B
P
P BT Element
T Growth
%
3
3
B
P
onent
p
m
o
R C
S
T
%
3
4
PSP
outcome
T
S
R Component
67%
67%
m
o
R C
S
T
t
n
e
n
o
p
m
o
R C
S
T
5
7
%
p o nent
Directors’ remuneration report
Part 3: Implementation of policy in 2023
Fixed
Variable
In this section of the Directors’ remuneration report we set out how the Committee has implemented policy for 2023.
Disclosures in this section are forward looking. The outcome of any variable award for Executive Directors will be
reported in the Remuneration Committee report for the financial year 2023.
2023 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 remains 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. The Committee reviews this on
an annual basis.
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
Directors' 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 beneath the charts.
Value of package
Andrew Livingston
Paul Hayes
Maximum +
16%
28%
37%
19%
5,108
Maximum +
18%
31%
34%
17%
3,001
Maximum
20%
34%
46%
4,150
Maximum
22%
37%
41%
2,491
On-target
35%
23%
42%
2,305
On-target
39%
25%
36%
1,400
Minimum
100%
815
Minimum
100%
542
0
1,000
2,000
3,000
4,000
5,000
6,000
0
500
1,000
1,500
2,000
2,500
3,000
3,500
£’000
£’000
Fixed elements of remuneration
Annual bonus
LTIP
LTIP (attributable to 50% share price appreciation)
Fixed elements of remuneration consist of the annual salary that the Executive Director will receive for 2023, alongside their 2023 pension entitlement, and actual
benefits received in 2021/22 (as a proxy for 2023).
Annual bonus is based on a maximum opportunity of 200% of salary and an on-target opportunity of 100% of salary.
LTIP is based on a maximum opportunity of 270% of salary for Andrew Livingston and 220% of salary for Paul Hayes. The overall policy maximum is 270% of salary.
Target opportunity is calculated as 50% of maximum (135% of salary for Andrew Livingston and 110% of salary for Paul Hayes).
The ‘maximum +’ includes share price appreciation of 50%. This column is calculated on the same basis as the maximum column however includes an uplift of 50%
total over three years for the PSP.
Opportunity (% of salary)
Target reached
Target not reached
Opportunity (% of salary)
Target reached
Target not reached
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Governance / Remuneration Committee report
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Remuneration Committee report continued
Directors’ remuneration report
Part 3: Implementation of policy in 2023 continued
Non-Executive Director fees
Fee increases from 2023 are set out in the table below. Non-Executive Director fees are generally aligned to the average increase
for the wider workforce. However, for 2023, the Non-Executive Directors have agreed to waive this increase. The only exception is
the increase to the Committee Chair fee, which had fallen behind benchmark.
2023
2022
Annual Fee
Effective date
Annual Fee
Effective date
Basic
NED fee1
Chair
fee
SID
fee
NED Responsible
for Workforce
Engagement fee
Committee
Chair fee
£60,250
£325,000
£10,600
£5,400
£17,000
1 January 2023
£60,250
£325,000
£10,600
£5,400
£13,300
1 January 2022
1
The Chair of the Board of Directors does not receive the basic Non-Executive Director fee or an additional fee for chairing the Nominations and Sustainability
Committees.
Executive Director base salaries
Base salary increases from 2023 are set out in the table below. The rationale for the increases may be found in the Annual
Remuneration Committee Chair statement on page 114. For 2023, salary increases for the wider workforce were, on average
across the Group, 6.3% of salary.
PBT growth – 60% weighting
PBT component
vesting schedule
Relative TSR – 20% weighting
Comparator group
and averaging period
for TSR performance
Performance
assessment
PBT growth performance condition
£484m
£400m
Less than £400m
Straight-line vesting between these points
Fixed
Variable
Payout level
100% of maximum
15% of maximum
0% of maximum
• Companies ranked up to 50 above and 50 below Howdens by market capitalisation in the FTSE All Share index at
or shortly before the start of the performance period (excluding Investment Trusts).
• One month TSR average for the month preceding the first day of the performance period and one month TSR
average for the final month of the performance period.
Performance against comparator group
Equal to or above upper quartile
Payout level
100% of maximum
Straight-line vesting between these points
Equal to median
Below median
15% of maximum
0% of maximum
2023
2022
Return on Capital Employed (ROCE) – 10% weighting
Executive Directors
Salary (£'000)
Effective date
Salary (£'000)
Effective date
Andrew Livingston
Paul Hayes
Annual bonus measures
710
464
1 January 2023
1 January 2023
670
438
1 January 2022
1 January 2022
The table below sets out annual bonus measures for 2023. Targets for these measures are considered commercially sensitive by
the Board and so are not disclosed here. Performance targets, together with achievement against them, will be set out in full in
the 2023 Remuneration Committee report.
Performance
assessment
ROCE component
measurement details
Calculated by dividing the Group operating profit by the average capital employed under management’s control,
expressed as a percentage. The capital employed will include investments in assets, working capital and related
balances but will exclude balances that relate to historic or long-term financing or are outside the control of
current management. Excluded items include: cash, pension deficit repair contributions, deferred tax and long-
term financing of the Group, such as lease liabilities and borrowings.
ROCE performance condition
30%
25%
Less than 25%
Straight-line vesting between these points
15% of maximum
0% of maximum
Payout level
100% of maximum
Bonus measure
Definition
Performance level Pay out level
PBT
Pre-exceptional profit before tax from continuing operations
Cash
Flow
Net cash flow from operating activities, taking into account
the efficiency with which working capital is used, and
adjusted for exceptional items
Threshold
Target
Maximum
Threshold
Target
Maximum
17% of salary
85% of salary
170% of salary
3% of salary
15% of salary
30% of salary
Performance Share Plan (PSP) measures
Set out on the facing page are the performance measures and relative weightings for each of the measures. Detail about the new
measures introduced for the 2023 PSP may be found in the Annual Remuneration Committee Chair statement on page 114. The
maximum opportunity under the PSP is 270% of base salary for Andrew Livingston (CEO) and 220% of base salary for Paul Hayes
(CFO). The performance period is three years, measured over the relevant financial years. See page 134 for scheme interests
awarded in 2022.
The Committee agreed that for the 2023 PSP it would move away from using the prior year PBT outturn as the basis for target in
the coming year. Going forwards, the Committee will determine threshold and vesting targets by having regard to a combination
of analyst consensus estimates, internal forecasts, and our long-term strategic goals.
Environmental measure – 10% weighting
Environmental component
measurement details
All carbon emission and waste targets to be achieved by 31 December 2025. Base year for all targets is 2021
(other than for those relating to manufacturing sites achieving or maintaining carbon neutral status).
Improving our carbon
intensity ratio
Year-on-year cumulative average
Scopes 1 and 2 carbon emissions
reduction, based on tCO2e per £m
Fleet emissions reduction
UK primary fleet only, based on
CO2KG/km
Achieving carbon neutral status
across manufacturing sites
Maintain certified carbon neutrality
or, in newly acquired sites, achieve
certified carbon neutrality
Performance condition
4.2% p.a. reduction
Payout level
33.3% of maximum
Straight-line vesting between these points
4.0% p.a. reduction
Below 4.0% p.a. reduction
15% reduction
7.5% of maximum
0% of maximum
33.3% of maximum
Straight-line vesting between these points
12% reduction
Below 12% reduction
Four manufacturing sites
7.5% o f maximum
0% of maximum
33.3% of maximum
Straight-line vesting between these points
Two manufacturing sites
0% of maximum
Under the terms of the Directors' remuneration policy approved by shareholders at the 2022 AGM, the 2023 PSP awards will be
subject to a two-year post-vesting holding period.
A target of a minimum average over three years of 99% waste avoiding landfill across UK operations will apply which, if not achieved, will result in a
downward modifier to the outcome under this Environmental measure.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Governance / Remuneration Committee report
133
Remuneration Committee report continued
Directors’ remuneration report
Part 4: Additional disclosures
In this section of the Directors' remuneration report, more detail is provided in respect of a number of key disclosures.
These disclosures include Executive Director pension entitlements, shareholdings, external appointments and
contractual arrangements. More detail is also provided on the operation of the Remuneration Committee and AGM voting
performance.
Service contracts and letters of appointment
All Executive Directors' employment contracts are not fixed term, but 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
Director 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.
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
• 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
Non-Executive Director appointments are for an initial period of three years. They are subject to re-appointment annually at
the Annual General Meeting 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. Copies of the Directors’ service contracts and
letters of appointment are available at the Company’s registered office during usual business hours.
Loss of office payments or payments to past Directors (audited)
No loss of office payments or payments to past Directors were made in the year under review.
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. Howdens allows Executive Directors and
other appropriate senior employees to accept a maximum of one external 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.
Andrew Livingston is currently Non-Executive Director of LondonMetric Property Plc, a FTSE 250 REIT. Andrew received £56,714.16
in fees in respect of his role as Non-Executive Director. Andrew held this position upon appointment. Paul Hayes does not have any
external appointments. Executive Directors may retain the fees paid to them in respect of their non-executive duties.
Total pension entitlements (audited)
Executive Directors are invited to participate in the Howdens Retirement Savings Plan (the 'Plan') or receive an amount in lieu of
membership of the Plan. More information on pension entitlements for Executive Directors can be found on pages 115 and 119
and in the Directors' remuneration policy at www.howdenjoinerygroupplc.com/governance/remuneration-policy
The table below sets out the payments made in lieu of membership of the Plan for the Executive Directors who served during the
year. No additional benefits become receivable if Executive Directors retire early.
Accrued pension at 24 December 2022 (£'000)
Normal retirement date
Pension value in the year from defined benefit component (£'000)
Pension value in the year from defined contribution component (£'000)
Pension value in the year from cash allowance (£'000)
Total
Executive Directors
Andrew Livingston
Paul Hayes
–
–
–
–
84
84
–
–
–
–
48
48
Fixed
Variable
Director shareholdings (audited)
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 of at least 200% of salary.
The table below sets out the total shares held together with unvested Performance Share Plan awards and those held subject
to deferral conditions. Neither of the Executive Directors held share options in the Company that were subject to performance
conditions or held share options that were vested but unexercised.
Shareholding requirement %
Shareholding requirement (number of shares)1
Shares owned outright (including by connected persons)2,5
Current shareholding (% of salary)¹
Guideline met
Unvested deferred bonus shares
Share awards subject only to continued employment3
Share awards subject to performance conditions and continued employment4
Current Executive Directors
Andrew Livingston
Paul Hayes
200%
242,600
318,772
263%
Y
19,432
165
676,790
200%
158,595
22,816
29%
N
12,705
118
250,377
1
2
3
Based on a share price of £5.5235, being the three-month average price to 24 December 2022, and basic salary as at 24 December 2022. This is calculated by
using only those shares owned outright by the Executive Directors and their connected persons at 24 December 2022 and the Executive Director’s salary at
that date.
Includes Share Incentive Plan (SIP) partnership and dividend shares.
Includes only SIP free and matching shares.
4 Performance Share Plan awards under the Long-Term Incentive Plan.
5
Between 24 December 2022 (the end of the period) and 6 March 2023, Andrew Livingston has acquired 42 SIP Partnership Shares. No other changes to the
Executive Directors' total shareholdings (including any holdings of their connected persons) have occurred between the end of the period and 6 March 2023.
Non-Executive Director shareholdings (audited)
There is no shareholding requirement for Non-Executive Directors.
Shareholding1,2:
1
Including shares held by connected persons.
Non-Executive Director
Karen
Caddick
6,000
Andrew
Cripps
3,000
Geoff
Drabble
3,000
Louise
Fowler
470
Peter
Ventress
–
Debbie
White
4,562
2 No changes to the Non-Executive Directors’ total shareholdings (including any holdings of their connected persons) have occurred between the end of the period
and 6 March 2023.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Governance / Remuneration Committee report
135
Remuneration Committee report continued
Directors’ remuneration report
Part 4: Additional disclosures continued
Scheme interests awarded during the financial year (audited)
During 2022, the Executive Directors were invited to participate in the Performance Share Plan (PSP) and Share Incentive Plan
(SIP), as set out in the table below. Further information on conditional shares and SIP free and matching shares may be found in
note 23 on page 199:
Nature of award:
Award of Conditional Shares under the PSP
Number of shares under award
Face value of award1
Performance condition
TSR performance condition:
PBT performance condition:
TSR component vesting schedule
PBT component vesting schedule
Performance period
Grant date
Vesting date
Additional holding period
CEO
234,516
£1,808,000
CFO
124,941
£963,000
Proportion of PSP award subject to the performance condition
33%
67%
Position at which Howdens ranks
compared to comparators
At or above upper quartile
Proportion of TSR portion
of Award that may vest
100%
Straight line vesting between these two points
At median
Below median
Annualised PBT growth over
Performance Period
15% p.a.
15%
0%
Proportion of PBT portion
of Award that may vest
100%
Straight line vesting between these two points
5% p.a.
Less than 5% p.a.
15%
0%
Performance measured from FY2021 to FY2024
6 Apr 2022
6 Apr 2025
2 years
1 Based on a share price of £7.708, being the closing price on 5 April 2022.
Nature of award:
Free and Matching Shares under the SIP1
Award type
Award date
Vest date
Number of shares
under award
Award price2
Face value of
award2
CEO
Free Shares
6 Apr 2022
6 Apr 2025
Matching Shares
19 May 2022
19 May 2025
Matching Shares
17 Jun 2022
17 Jun 2025
Matching Shares
19 Jul 2022
19 Jul 2025
Matching Shares
19 Aug 2022
19 Aug 2025
Matching Shares
19 Jan 2022
19 Jan 2025
CFO
Free Shares
6 Apr 2022
6 Apr 2025
Matching Shares
19 May 2022
19 May 2025
32
7
8
8
7
6
32
31
£7.708
£6.564
£5.994
£6.266
£6.588
£8.216
£7.708
£6.564
£246.65
£45.95
£47.95
£50.13
£46.12
£49.30
£246.65
£203.48
1
Free and Matching Share awards under the SIP do not have performance conditions; however, there is a service condition of three years from the Award date
during which time the participant must remain employed by a UK Howdens Group company to avoid forfeiting the award.
2 The face value of the award is calculated using the share price at grant (the 'Award price').
Fixed
Variable
Consideration by the Directors of matters relating to Directors’ remuneration
The Committee met six times during 2022 and discussed a number of items for which it is responsible. 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 and senior management (that being the members of the Executive Committee, the Company
Secretary and the Head of Internal Audit and Risk), 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.
Advisors to the Committee
The Committee regularly consults with the CEO, CFO and the Group HR Director on matters concerning remuneration, although
they are never present when their own reward is under discussion. The Company Chair 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. A representative from the Committee's independent advisor usually attends each meeting of the Remuneration
Committee. PricewaterhouseCoopers LLP (PwC) was the Committee’s retained independent advisor until September 2022.
PwC had been independent advisor to the Committee since 2007. During 2022, the Committee reviewed the independence and
tenure of PwC as adviser to the Committee and agreed that a new advisor would provide a fresh perspective to the Committee.
Following a tender process, Korn Ferry was appointed by the Committee in September 2022 to be its independent advisor.
Korn Ferry is a member of the Remuneration Consultants’ Group, which operates a code of conduct in relation to executive
remuneration consulting, and it does not provide any other services to the Group. PwC provided consultancy advice and support
to the internal audit function to the Company during 2022.
The Committee is satisfied that its advisors provided robust and professional advice during the year. Work undertaken during
the year 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.
Total fees paid to the Committee’s advisors in relation to remuneration services provided to the Committee totalled £153,000
with fee levels based on the quantity and complexity of work undertaken.
Voting at the 2022 AGM
The results of the advisory vote in respect of the Directors’ remuneration report ('Report') and the binding vote on the Directors’
remuneration policy ('Policy') at the 2022 AGM may be found in the chart below, along with the 2021 and 2020 AGM results.
For¹
Against
AGM voting outcomes
Report
2022
For 90.72%
Against 9.28%
Withheld2 55,715
Policy
For 90.67%
Against 9.33%
Withheld2 3,928,507
2021
Report
For 95.36%
Against 4.64%
Withheld2
147,941
2020
Report
For 98.28%
Against 1.72%
Withheld2 4,495,906
1. A vote 'for' includes those votes giving the Chair discretion.
2. A vote 'withheld' is not a vote in law.
By order of the Board
Karen Caddick
Remuneration Committee Chair
6 March 2023
Howden Joinery Group Plc / Annual Report & Accounts 2022
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136
Governance / Audit Committee report
137
Audit Committee
report
2022 meeting attendance
Andrew Cripps (5/5)
Karen Caddick (5/5)
Geoff Drabble (5/5)
Louise Fowler (5/5)
Debbie White (5/5)
Key activities in the year ahead
• Review of the Annual Report and Accounts
and preliminary results announcement.
• Review of Audit Committee effectiveness.
• KPMG’s reappointment as auditor to be
recommended to shareholders at the Annual
General Meeting (AGM).
• Shareholder update by the Audit Committee
Chair at the AGM.
• Review of the 2023 interim results.
• Consideration of internal audit’s annual plan,
findings, independence, and resources.
• Review of key controls.
• Approval of the 2024 Audit Committee calendar.
Andrew Cripps
Audit Committee Chair
Introduction from the Committee Chair
I am pleased to present this report covering the work of the
Audit Committee.
In 2022, global events and business developments have
required us to review a variety of financial and control risks at
each meeting. In addition to our normal business overseeing
the external and internal processes, we have also received
updates from management on cyber and information security
strategy, depot compliance and we met with the Commercial
Finance Director to consider that function's risks and priorities.
Volatility in financial markets in the autumn also resulted in
the Committee calling an additional meeting in January 2023
with the Company’s pension advisors to review valuations of
pension fund assets and liabilities because the carrying value
of the pension fund is a significant item in the consolidated
balance sheet.
During 2022, the new lead external audit partner and I were in
regular contact and, at each meeting, the Committee received
updates on KPMG's progress in their first year as our external
auditor. More information on the onboarding process can
be found in the case study on page 140. I’d also like to take
this opportunity to thank Deloitte for their tenure as external
auditor to Howdens.
I reported last year on our project to review the Group’s
internal controls to reappraise and document key controls
and strengthen evidencing of the control environment. This
work has continued throughout 2022 with the Audit Committee
receiving updates on the project at each of its meetings during
the year. This is considered in more detail on page 142 but I am
pleased to note that the Group has made significant progress
in documenting and 'attesting' controls and is automating
controls wherever possible. This will improve our ability to
evidence our control environment and enable the Committee
to provide greater assurance to the Board.
The Committee undertook its regular governance reviews,
reviewing external audit policies, monitoring the effectiveness
of the external audit process and reviewing conflicts of
interest. We await the outcome of the Government’s White
paper on 'Restoring trust in audit and corporate governance'
and believe that we remain well positioned to respond to any
proposed changes.
Finally, I was pleased no questions were raised by the FRC
following their review of our 2021 Annual Report and Accounts
in accordance with Part 2 of the FRC Corporate Reporting
Review Operating Procedures1. It was also pleasing to receive
a number of accolades during the year in respect of the quality
of our external reporting. Howdens was the recipient of the
Annual Report of the Year – FTSE 250 award by the Chartered
Governance Institute (formerly the ICSA) which recognised
that our 2021 Annual Report had a consistently high standard
of commentary throughout the report and offered real
insights into the business. Later in the year, the FRC used
our schematic on purpose, culture, sustainability and
governance as a best practice example in their publication
‘What makes a good… Annual Report and Accounts’.
Whilst it is reassuring to receive external recognition, we
recognise the ongoing importance of maintaining rigorous
reporting standards and will continue to strive for high
standards in both our financial and non-financial reporting.
I look forward to reporting directly to shareholders at our
AGM in May.
Andrew Cripps
Audit Committee Chair
2022 Audit Committee activity
February
July
Committee meeting
• 2021 draft Annual Report
and Accounts and Full Year
Announcement
• External audit report
• External audit policies
•
Internal audit report
• Key controls project
• Audit Committee
effectiveness
• Discussion with external
auditor (without
management present)
Committee meeting
• 2022 half-year results,
including going concern
considerations
• External auditor half-year
review
• Cyber security update
•
Internal audit report
• Key controls project update
• Conflicts of interest review
• Discussion with external
auditor (without
management present)
April
September
Committee meeting
•
Information security and
cyber security reviews
• Key controls project update
•
Internal audit report
• 2022 external audit plan
• Effectiveness of the
external auditor and audit
processes
• Discussion with Head of
Internal Audit (without
presence of management)
Committee meeting
• Cyber security strategy
• Depot compliance review
•
Internal audit report
• Annual Report timetable
• Key controls project update
• Fraud control framework
• Commercial Finance
Director update
• Discussion with Head of
Internal Audit (without
management present)
May
AGM
• The appointment of KPMG LLP as the external auditor
and authority for the Directors to determine the auditor’s
remuneration were approved by shareholders
November
Committee meeting
• External audit update
• Key controls project update
• 2023 internal audit plan
• Terms of reference review
and budget
• 2023 Audit Committee
• Audit and assurance
calendar
policy update
1
The FRC’s review was based on the Annual Report and Accounts and did not benefit from detailed knowledge of the business or an understanding of the
underlying transactions entered into. It was, however, conducted by FRC staff with an understanding of the relevant legal and accounting framework.
The review carried out by the FRC provides no assurance that the Annual Report and Accounts were correct in all material respects; the FRC’s role is not
to verify the information provided but to consider compliance with reporting requirements.
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Audit Committee report continued
Financial reporting
Results review
The Audit Committee reviewed the Group’s 2022 Annual
Report and Accounts and the half-yearly financial report
published in July 2022.
As part of these reviews, the Committee received papers
from management on accounting policy, areas of significant
judgement, the Group's key risks, going concern considerations
and longer-term viability. The Committee also discussed
reports from KPMG on their audit of the Annual Report and
Accounts and review of the half-yearly financial report.
The Committee considered whether the Annual Report and
Accounts were fair, balanced and understandable and
contained the information necessary for shareholders to
assess the Company’s position, performance, business model,
and strategy.
Controls over financial reporting
The Committee received a report from the Head of Internal
Audit and Risk on the results of key control questionnaires
prepared by Group and Divisional management. The
effectiveness of the Group’s internal financial controls (with
specific reference to controls in place on a divisional basis)
and the disclosures made in the Annual Report and Accounts
on this matter were reviewed by the Audit Committee.
The Committee also received regular updates in respect of the
key controls project during the year. More information on the
key controls project can be found on page 142.
Areas of significant financial judgement
The Committee exercises its judgement in deciding the areas
of accounting that are significant to the Group’s accounts. The
external auditor's report details the results of their procedures
in relation to these areas to the Committee.
The matters shown below have been discussed with the Chief
Financial Officer, Group Finance Director, and the external
auditor. The Committee is satisfied that each matter has been
fully and adequately addressed by the Executive Committee,
appropriately tested, and reviewed by the external auditor,
and the disclosures made in the 2022 Annual Report and
Accounts are appropriate.
Areas of significant financial judgement:
Inventory obsolescence provisioning
Defined benefit pension scheme
Parent company accounting (new in 2022)
Inventory obsolescence provisioning
The Group’s in-stock model (further information about which
may be found on pages 14 and 15) and the scale of our product
range necessitates tight management of inventory to ensure
local availability of stock while at the same time minimising
obsolescence and wastage. In 2022, management continued
to take a strategic position on stock.
The external auditor provided reports to the Committee which
considered the appropriateness of provisions held against the
carrying value of inventory, while also having regard to the age
of discontinued lines and volumes of continuing lines relative to
the expected usage and the levels of historical write-offs.
The Committee reviewed the processes used to value each
category of inventory, including the assumptions behind
obsolescence provisions, and were satisfied with the
judgements made.
Actuarial valuation of pension fund liabilities
Whilst there were no changes in the year to the methodology
for the valuation assumptions, the significant change to the
discount rate during the year meant that there was additional
focus on this judgemental disclosure.
The Committee met with the Company's actuaries and
carefully reviewed their report, concluding that:
•
the actuarial assumptions applied to pension fund liabilities,
and in particular the discount, inflation and mortality
assumptions, were consistent and appropriate; and
•
they concurred with the views of the external auditors.
Valuation of pension fund assets
The Audit Committee also considered processes to value
pension fund assets. Following market volatility in September
2022, 76% of total pension fund assets at the 2022 financial
period end (2021: 35%) were assets for which there is no
observable market value (see page 196). Some of the asset
valuations required judgement because manager valuations
at the balance sheet date were not expected to be available
until after the finalisation of this report. To minimise the risk
that the valuations were not in line with assumptions, the
asset managers were contacted to check for indicators of
impairment or expected impairments, any significant market
events that may have impacted the assets since the latest
valuation, or any significant changes in fund composition
which would lead them to think that there had been any
impairment since the most recent valuation date. The
Committee concurred with the approach taken.
Parent company accounting
During the year, management reassessed accounting in the
parent company, Howden Joinery Group Plc. This has led
to clarification of the disclosure of the parent company‘s
investment in its principal subsidiary and an impairment of
an inter-company receivable in the parent company balance
sheet. In addition, a review of the Group’s leases under IFRS16
identified that certain leases needed to be included in the
parent company accounts rather than being accounted for
in the operating companies utilising the relevant properties
because the parent company is the signatory of these leases.
These changes resulted in prior year adjustments to the
parent company’s accounts, including to distributable
reserves. However, these do not affect the consolidated
results of the Group previously reported.
The Audit Committee reviewed management’s proposals
relating to the parent company and concluded that all
recommendations were appropriate. Further details of the
changes to the parent company balance sheet may be found
on page 209.
Other areas of Audit Committee consideration
Patent Box tax relief
The Board approved the submission of a claim for tax relief
under the UK Patent Box Tax Relief Scheme in July 2022, as
set out in detail on page 31. Following the approval, the claim
was included in the 2021 tax computation. The claim relates
to a patented cabinet leg and the submission to HMRC covers
the total period claimable since the patent was filed in 2017.
The Committee reviewed the recommendations of EY tax
specialists who have been advising the Company on the claim.
The Company has to recognise the full likely amount of the
claim in the financial statements in accordance with IFRIC
23 given the success of the claim is deemed to be more
likely than not. However, the amounts will only be confirmed
when the relevant tax returns are agreed by HMRC. The Audit
Committee considered the Company’s accounting treatment,
assumptions surrounding the valuation of the claim, and the
views of the tax advisors and external auditors, and concurred
with the approach taken.
Governance
Governance updates
Updates on the latest governance practices for audit
committees and changes in reporting requirements
were provided by the external auditor. In addition to other
resources, members of the Audit Committee are members of
the KPMG Board Leadership Centre, which provides updates
on financial and reporting matters.
The Committee received regular updates on the proposed
corporate governance reforms as set out in the
Government's White paper ‘Restoring trust in audit and
corporate governance’.
Committee effectiveness
An effectiveness review was carried out on the Committee and
its members as part of the wider external Board evaluation
process. The review concluded that the current mix of
financial, commercial and relevant sector experience of the
Audit Committee, and that of its advisors, was such that the
Committee could effectively exercise its responsibilities
to the Group in relation to risk and controls.
Policies and conflicts
The Committee reviewed its policies in relation to allocation
of non-audit work (further detail on this policy may be found
on pages 141 and 142) and employment of ex-audit firm
personnel. It also reviewed the Directors’ conflicts of interest
register. Further information about the Committee's review of
conflicts of interest may be found on page 143.
Competition and Markets Authority (CMA) Order
compliance
The Audit Committee confirms that the Company has complied
with the provisions of the Order throughout its financial period
ended 24 December 2022 and up to the date of this report.
Committee membership
The Committee is composed entirely of independent
Non-Executive Directors. Independence is critical for fair
assessment of the management team and the external and
internal audit functions.
Committee Chair
Andrew Cripps was appointed Audit Committee Chair in May
2016. He is responsible for determining the Committee’s
agenda and for maintaining the key relationships between
the Group’s senior management, Head of Internal Audit and
Risk, the Company Secretary and senior representatives of
the external auditor. 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 in
the Annual Report.
Andrew will present a summary of the work of the Audit
Committee to shareholders at the 2023 AGM.
Recent and relevant financial experience
Andrew Cripps is a qualified Chartered Accountant and
has held executive director roles in the UK and Europe with
Rothmans International, where he was Corporate Finance
Director. More recently, Andrew has been Audit Committee
Chair of a number of FTSE 250 and other public companies.
Competence relevant to the sector
The unique business model of Howdens means it does not
naturally fit into one sector and therefore when the Committee
undertook an assessment of its skills and experience it
assessed them against a number of sectors relevant to the
Company. These included building and construction, multi-
site wholesale, manufacturing and logistics, and service
to customers.
The Committee concluded that competence relevant to these
sectors was well represented within the current membership.
Thorough inductions are provided to the Committee members
and opportunities to meet with senior management and
Executives further enhance their working knowledge of the
way the Company operates.
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Audit Committee report continued
External auditor*
External auditor independence
External auditor
KPMG LLP ('KPMG')
External auditor appointed 12 May 2022
Lead audit partner
Robert Brent
Lead audit partner tenure
Year 1 (of a 5-year cycle)
Total fees paid to
auditor in the year
£1.2m (non-audit fees accounted
for £0.1m of the total fee)
* The information above is correct as at 24 December 2022.
External audit tender
Following a comprehensive external audit tender process,
the Audit Committee made a recommendation to the Board
in 2021 to appoint KPMG as the Group’s external auditor from
2022. The Board recommended KPMG's appointment to its
shareholders at the 2022 AGM and shareholders approved
the appointment with 98.8% of votes in favour. A case study
on the onboarding of the new external auditor can be found
below. The Board will recommend KPMG's re-appointment to
shareholders at the 2023 AGM.
Auditor independence is an essential part of the audit
framework and the assurance it provides. The Committee
therefore undertook a comprehensive review of auditor
independence prior to appointment and during 2022, which
included:
• A review of the independence of the external auditor and
the arrangements which they have in place to restrict,
identify, report and manage conflicts of interest.
•
•
•
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.
Consideration of the overall extent of non-audit services
provided by the external auditor, in addition to case-by-
case approval of the provision of non-audit services
as appropriate.
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 auditor.
Case study
External auditor transition
Transitioning to a new external auditor creates a
number of risks and benefits for companies. Ensuring
that the new auditor is prepared and ‘hits the ground
running’ on their first audit can help to mitigate some
of these risks. Selecting the right audit team that will
work collaboratively with the Company’s finance teams
and minimise management disruption is essential.
However, an updated audit approach and fresh
perspective also benefits audit quality, so it is important
to ensure a seamless transition between ingoing and
outgoing auditors.
During the external auditor tender process, the Audit
Committee considered proposals on the approach to
transition from the incumbent auditor (Deloitte). In their
proposal, KPMG set out their transition methodology and
timetable, which is considered in this case study.
Following confirmation of the Company’s intention to
appoint KPMG as auditor, KPMG set out to execute their
transition plans to the agreed timetable. Five factors for
a successful transition were identified:
1. Early clearance of accounting judgements
2.
3.
4.
Clear understanding of how the Howdens
business operates
Focus on all aspects of reporting, including
statutory accounts
Early and proactive communication and
identification of issues all year round
5. Focused approach without compromising quality
From June 2021, KPMG shadowed Deloitte and this
continued throughout the 2021 year-end process. The
KPMG team were able to observe ways of working with the
Howdens finance teams and familiarise themselves with
the key accounting judgements and risk assessments.
Senior members of the KPMG team also attended Audit
Committee meetings from July 2021 to observe the
Committee at work. Concurrently, the KPMG team met with
the Howdens finance and internal audit teams to discuss
plans for the 2022 half-year review and audit.
Following the conclusion of the 2021 audit by Deloitte,
KPMG undertook a thorough review of the outgoing
auditor’s audit files, launched the KPMG Clara
collaboration tool and provisionally confirmed key
accounting policies and approach to judgements. There
were initial walkthroughs of the end-to-end processes for
the key transaction flows (such as revenue recognition
and inventory management). The approach towards
technology was set out in a detailed plan, as well as data
extraction to assess the general IT control environment.
The Audit Committee received an update on how transition
plans were progressing at the April 2022 Committee
meeting. The lead audit partner also met with all members
of the Board ahead of the half-year review to discuss their
expectations and areas of focus for the audit process.
The successful transition process has resulted in a high-
quality audit from the KPMG team and a corresponding
level of assurance for the Audit Committee. We will
continue to refine the audit process further in future years.
At the year end, the external auditor formally confirmed
that they had complied with the requirements of the FRC
Ethical Standard as well as internal requirements and their
independence and objectivity had been maintained. The Audit
Committee also has a policy in relation to the employment of
former members of the external audit team.
External auditor effectiveness
To assess the effectiveness of the external auditor, the
Committee reviewed:
• The proposed plan of work presented by the external
auditor, including audit risks, materiality, terms of
engagement and fees prior to commencement of the
2022 audit.
• The external auditor’s fulfilment of the agreed audit plan
and any variations from the plan.
Performance expectations
for the external auditor
Specific auditor responsibilities
• Discuss the audit plan, materiality, and areas of
focus in advance.
• Report issues at all levels within the Company in a
timely fashion.
• Ensure clarity of roles and responsibilities between
local KPMG and Howdens’ Finance teams.
• Respond to any issues raised by management on a
timely basis.
• Meet agreed deadlines.
• Evaluation from key management personnel and members
• Provide continuity and succession planning of key
of the Committee of the external auditor’s exercise of
professional scepticism and challenge.
• Robustness and perceptiveness of the auditor in their
handling of the key accounting and audit judgements.
•
Internal control and risk content of the external
auditor’s report.
•
Independence of thought and potential for conflict.
External auditor fees
All relevant fees proposed by the external auditor must be
reported to and approved by the Audit Committee.
Details of external audit fees may be found in the table on
the facing page and in note 4 to the consolidated financial
statements (page 172).
Policy for non-audit services provided by
the external auditor
The main aims of this policy are to:
• Ensure the independence of the auditor in performing
the statutory audit; and
• Avoid any conflict of interest by clearly detailing the types
of work that the auditor can and cannot undertake.
The Audit Committee has reviewed the policy for non-audit
services to ensure that it is in line with the FRC’s Revised
Ethical Standards 2019 (which took effect from 15 March
2020) and the FRC’s Audit Quality Practice Aid 2019.
The policy, in line with regulation, substantially limits the non-
audit services which can be provided by the external auditor.
The policy provides:
• A 70% cap of the value of the audit fee for all non-audit
services calculated on a rolling three-year basis.
• Categories of service that are prohibited from being
carried out by the auditor.
staff members of KPMG.
• Provide sufficient time for management to consider
draft auditor's reports and respond to requests
and queries.
• Ensure consistent communication between local
and central audit teams.
Wider responsibilities
• Provide timely up-to-date knowledge of technical
and governance issues.
• Serve as an industry resource, communicating
best practice trends in reporting.
• Adhere to all independence policies.
• Deliver a focused and consistent audit approach
for the Group that reflects local risks and
materiality.
• Liaise with the Howdens Internal Audit and Risk
team to avoid duplication of work.
• Provide consistency in advice at all levels.
• Ultimately, provide a high-quality service to the
Board, be scrupulous in their scrutiny of the Group
and act with utmost integrity.
Independence
The Committee reviews the independence of
the external auditor bi-annually. This includes
consideration of the potential for conflicts of interest
as well as the auditor's internal procedures to ensure
independence of its staff.
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Audit Committee report continued
The policy specifies a de minimis limit as well as the type of
non-audit work that the auditor may be engaged in without
the matter first being referred to the Audit Committee, which
considers each referral on a case-by-case basis.
The policy ensures that the auditor does not audit its 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.
No non-audit services were provided by KPMG during the year.
Controls and internal audit
Internal control framework
The Group has an established framework of internal controls,
which includes the following key elements:
•
•
•
•
•
The Board approves the Group’s strategy and annual
budgets; the Executive Committee is accountable for
performance within these.
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 Terms
of Reference (which may be found on the Company’s
website at www.howdenjoinerygroupplc.com/governance/
corporate-governance-report/terms-of-reference-of-the-
audit-committee). It receives reports from the Internal
Audit function on the results of work carried out under
an annually agreed audit programme. Operational and
compliance controls are considered when the Committee
reviews the annual Internal Audit programme. The Audit
Committee has full and unfettered access to the internal
and external auditors.
Operating entities provide certified statements of
compliance with specified key financial, IT and cyber
controls. These controls are cyclically tested by Internal
Audit to ensure they remain effective and are being
consistently applied.
The Audit Committee annually assesses the effectiveness
of the assurance provided by the internal and
external auditors.
Key Controls
Good progress in delivery of the project continued throughout
2022 with regular updates being provided to the Audit
Committee. Internal project management and governance
frameworks were determined to be working effectively and
the Committee was satisfied with the progress made during
the year.
The Committee remains committed to the activities to
strengthen the control environment regardless of the outcome
of the Government's White paper 'Restoring trust in audit and
corporate governance', although it is likely that this will guide
prioritisation and activity for 2023.
Internal audit
The Internal Audit team has continued to develop its
capabilities during the year. This includes further development
of data analytics and systemisation of controls. An updated
Internal Audit Charter has been approved by the Committee
and communicated to management, thereby refreshing
understanding of responsibilities for internal controls and their
verification, based on the three lines of defence model.
The Committee reviewed:
•
•
•
Internal Audit’s programme of work and resources and
approved its annual plan and budget.
The level and nature of assurance activity performed by
Internal Audit.
Results of audits and other significant findings including
the adequacy and timeliness of management’s response.
•
Staffing, reporting and effectiveness of divisional audit.
Independent assurance
The Committee assessed the coverage of independent
assurance by reviewing the annual internal audit plan against
the Group’s key controls.
Internal audit effectiveness
The Committee considered that the Internal Audit function
remained effective and provided a comprehensive level of
assurance through its programme of work.
The Audit Committee has commissioned an external
assessment of the internal audit function every five years
to assess the performance and effectiveness of the Internal
Audit department.
As reported in the 2021 Annual Report and Accounts,
management have challenged and reviewed key controls
across the business to focus and further strengthen our
overall control framework. Sponsored by the CEO and CFO,
and reporting regularly to the Audit Committee, this project
is improving our capability to identify operational, IT and
financial controls which mitigate our key and principal risks
and evidence their effective implementation.
In 2021, the Audit Committee commissioned an external
quality assessment (EQA) readiness assessment (a standard
developed by the Chartered Institute of Internal Auditors) of the
internal audit function. An EQA evaluates conformance with the
International Professional Practices Framework (IPPF), which
includes the Code of Ethics, the Core Principles, the Definition
of Internal Audit and the International Standards for the
Professional Practice of Internal Auditing (the IIA Standards).
Whistleblowing
Complaints on accounting, risk issues, internal controls,
auditing issues and related matters are reported to the Audit
Committee as appropriate. Oversight of the Company’s
whistleblowing policy is a matter considered by the Board. The
Board receives biannual updates on whistleblowing statistics
and trends (see pages 82 and 83).
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. The Audit Committee
reviews the output of this process annually to ensure it is
appropriately monitored.
By order of the Board
Andrew Cripps
Audit Committee Chair
6 March 2023
The readiness assessment concluded that the function’s
processes were effective and robust and would be sufficient
to meet the requirements of a full EQA. No areas reviewed were
considered to be of concern, although a small number of best
practice improvement recommendations were made and have
been implemented in 2022.
Given the output of the EQA readiness assessment, the Audit
Committee agreed to reconsider external assessment of the
function in three years' time. As such, the next effectiveness
review will be considered in 2024.
Fraud risk
The Committee considered the controls in place to mitigate
fraud risk and received a report from Internal Audit which
confirmed the effectiveness of those controls. A further
enhancement project is underway as part of our key controls.
Cyber and information security risk
The risk of a cyber security incident is considered to be one of
the Group’s principal risks. More information on this risk can be
found on page 43.
Updates on cyber and information security were presented
to the Committee by the Head of Information Security
and the Director of Infrastructure and Service Delivery at
the Committee meetings in April and July. In September,
the Committee noted that, in addition to the development
of technical controls to mitigate the increasing risk of a
cyber security incident, a revised strategy for Security
Governance had been implemented to ensure clear direction
to the business.
There were no significant information security breaches
during the year and there have been no such breaches during
the preceding three-year period.
Divisional controls
Senior management from the business are invited to discuss
the controls in their business areas. The Director of Finance
and the Head of Compliance for the Trade division gave
presentations on the key risks and control environments in
their area. In September, the Commercial Finance Director
also presented to the Committee.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
GovernanceGovernancePage TitlePage TitleStrategic ReportFinancial StatementsAdditional InformationGovernance Sustainability Committee report
144144
Governance / Sustainability Committee report
145
Sustainability
Committee report
2022 meeting attendance
Peter Ventress (1/1) Appointed 1 July 2022
Richard Pennycook (1/1) Retired 17 September 2022
Andrew Cripps (2/2)
Karen Caddick (2/2)
Geoff Drabble (2/2)
Louise Fowler (2/2)
Debbie White (2/2)
Key activities in the year ahead
• Receive updates on workforce skills
and development.
• Receive updates on sustainability strategy,
including Net Zero plans.
• Review of the Sustainability Comittee Terms
of Reference.
• Approval of the 2024 Sustainability Committee
calendar.
Peter Ventress
Sustainability Committee Chairman
Introduction from the Sustainability
Committee Chair
Howdens has a sustainable business ethos. Being ‘worthwhile
for all concerned’ means that having a positive impact on
our environment is a key part of our overall growth plans. But
we are also committed to making our business more diverse,
creating opportunities for all, and removing barriers to
employment. These are the matters, in line with commercial
considerations, that matter most to our employees, our
investors, and our wider stakeholder base.
Many of the items considered and approved at the
Sustainability Committee are considered in detail in the
sustainability matters report (which begins on page 46),
part of the strategic report, so this Committee report is
necessarily shorter than other Committee reports to avoid
duplication. However, it is important to detail the role, remit,
and responsibilities of the Committee, to highlight some of the
key work of the Committee during the year, and to consider the
work of the Committee in the year ahead.
Role, remit and responsibilities
The primary purpose of the Howdens Sustainability
Committee is to assist the Board in articulating and developing
its sustainability strategy and providing oversight of
sustainability initiatives across the business, in line with the
purpose, values, and strategy of Howdens as established
by the Board. This includes monitoring the content and
completeness of Howdens’ external statements, disclosures,
and other reporting on sustainability matters.
Setting the tone from the top on environmental and social
matters, ensuring that these priorities are embedded in wider
strategy, and developing robust KPIs are key functions of the
Committee and I am pleased to report that the first full year of
the Sustainability Committee has been a successful one.
The key duties the Committee carries out in relation to any
environment and climate action and Howdens’ contribution
to society were set out on page 143 of the 2021 Annual Report
and Accounts, which can be accessed on our corporate
website (www.howdenjoinerygroupplc.com). However, it will
also consider any other matters referred by the Board or its
Committees relevant to sustainability.
The remit of the Sustainability Committee does not cover
governance matters per se and these remain a matter for the
Board and its Committees. The Committee will also liaise as
necessary with all other Board Committees as required.
The work of the Committee in 2022
Reducing carbon
Having made great progress on energy and waste reduction in
2021, particularly achieving carbon neutral in manufacturing
at our Howden and Runcorn sites, the Committee was mindful
to keep the momentum into 2022. Building a credible SBTi Net
Zero plan and extending carbon neutral to Howdens Work
Surfaces were two priorities for the Committee during the year.
More information on our SBTi Net Zero plans can be found on
page 52. The Committee will monitor the development of these
plans, particularly the initiatives to reduce Scope 3 emissions
which make up 90% of the Group’s total emissions.
To support the implementation of the Net Zero plan, the
Remuneration Committee has for the first time introduced
carbon reduction measures as part of our Executive
remuneration framework (see page 114).
TCFD – business resilience
The Sustainability Committee is mindful to understand key
climate risks and opportunities. We do this through our
business resilience framework, which is documented through
our TCFD disclosures.
These disclosures are contained in the strategic report on
pages 54 to 61. The Committee has encouraged a simple and
pragmatic approach to business resilience. Building on the
disclosures in 2021, the Committee considered three model
scenarios, a materiality impact assessment and associated
action plan. These are integrated with the SBTi Net Zero
plans which include comprehensive supply chain mapping, a
compelling customer sustainability offer and regular review of
Howdens sustainability strategy.
Supported by external consultancy, TT Impact Strategies,
the Group utilised the following methodology for TCFD
implementation:
1. Governance and oversight: Board and management
oversight to ensure that climate issues are embedded in
the strategic planning/ enterprise risk management.
2022 Sustainability
Committee activity
April
Committee meeting
• Sustainability progress
• EDI, wellbeing and apprenticeships
• Modern Slavery Statement
September
Committee meeting
• Sustainability progress, including Net Zero plans, TCFD
disclosures and industry leadership
• EDI and apprentices
• 2023 Committee calendar
• Terms of reference
2. Assess materiality of climate-related risks: Understand
Apprentices
potential climate related risks and opportunities for
Howdens’ business involving all relevant internal
stakeholders.
3. Develop and define scenarios: Construct appropriate
scenarios to develop relevant narratives according to
Howdens’ context and business model.
4. Evaluate business impacts: For each scenario (three
scenarios), identify key strategic and financial impacts –
qualitative to quantitative.
5.
Identify potential responses: Use the results to identify
realistic strategic responses to manage risks and
opportunities.
6. Document and disclose: Communicate to relevant parties
– the inputs, assumptions, methods, outputs, and potential
management responses.
The Committee received updates on Howdens' apprenticeship
programmes at each of its meetings during the year. Having
committed to transferring 20% of the apprenticeship levy to
fund construction apprenticeships in small businesses across
the UK, it was particularly pleasing to receive the UK Social
Mobility Award for Innovation in October.
More information on Howdens' approach to social mobility can
be found on page 65.
Sustainability in 2023
The Committee will continue to focus on the core
environmental and social matters that matter the most to our
stakeholders. This will include further development of our SBTi
Net Zero carbon reduction strategy and promoting our EDI
agenda. We will continue to communicate our progress and
priorities as part of Howdens wider strategy.
By order of the Board
Peter Ventress
Sustainability Committee Chairman
6 March 2023
Equality, diversity and inclusion (EDI)
The Sustainability Committee received updates from the
Group HR Director and the senior HR team on the progress
made during the year in respect of the EDI Group. Building on
the progress made during 2021, the Committee considered
updates on Executive Sponsorship of priority areas, training,
engagement and data. In the short term, business focus is on
building foundations, increasing confidence and capability,
but in the longer term, the business believes that a mature EDI
programme will provide a competitive advantage and will be
fully integrated into our ways of working.
In September, the Committee received the Best Companies
diversity data. Data captured as part of the Best Companies
survey provided the Company with its first diversity census.
The Committee noted that the data was being used to drive
local EDI activities. Around 5,900 of the 7,300 employees
who participated in the survey completed the EDI questions,
equating to an average response rate of 80%.
The Committee also considered the work done to date on
employee wellbeing.
Howden Joinery Group Plc / Annual Report & Accounts 2022
GovernancePage TitleStrategic ReportFinancial StatementsAdditional InformationGovernanceGovernance Directors’ report
146
Directors’ report
The Directors have pleasure in submitting their report and the audited financial statements for the 52 week period ended
24 December 2022. Comparative figures relate to the 52 weeks ended 25 December 2021.
To make our Annual Report and Accounts more accessible, a number of the sections traditionally found in this report can be
found in other sections of this Annual Report and Accounts where it is deemed that the information is presented in a more
connected and accessible way. The Directors’ report comprises the sections detailed below, including the statement on political
donations and research and development (‘R&D’). Any sections that have been moved have been cross-referenced below for
ease of reference:
Located in the sustainability report:
Located in the strategic report:
Greenhouse gas emissions and streamlined energy and
carbon reporting (SECR): Details of the Group’s greenhouse
gas emissions, as required by Sch. 7 of the Large and
Medium-Sized Companies and Groups (Accounts and
Reports) Regulation 2008 as amended by the Companies Act
2006 (Strategic Report and Directors’ Report) Regulations
2013, are set out on page 69. Information required by
the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 as amended
by the Companies (Directors' Report) and Limited Liability
Partnerships (Energy and Carbon Report) Regulations 2018
(SI 2018/1155), may be found on pages 68 and 69.
Located in the governance section:
2018 UK Corporate Governance Code (the ‘Code’):
Information on how the Company applied the Principles and
complied with the Provisions of the Code may be found on
pages 96 to 101. A copy of the Code can be accessed via
www.frc.org.uk.
Internal control and risk management arrangements:
Internal control arrangements information may be found in
the Audit Committee report on page 142. Risk management
arrangements information may be found on pages 36
to 38 and in the Principal risks and uncertainties section
beginning on page 39.
Diversity policies: The Board and Group diversity policies
are available on page 106 of the Nominations Committee
report.
Stakeholder engagement: Details regarding the
engagement with suppliers, customers, and others in
business relationships with the Company, as required by
Sch. 7 to the Large and Medium-Sized Companies and
Groups (Accounts and Reports) Regulations 2008 (as
amended by the Companies (Miscellaneous Reporting)
Regulations 2018), may be found on pages 88 to 95.
Employees: Information about the total number of
employees and gender diversity statistics are located
on page 105. The average number of employees and
their remuneration are shown in note 21 on page 192. The
methods of engaging with the workforce may be found
on pages 90 and 91. All eligible UK employees have been
invited to participate in a free share award under the
Company’s Share Incentive Plan (SIP) each year since
2015, and in 2021 and 2022 were invited to participate in
a new SIP Partnership and Matching Shares plan. Further
details of the SIP may be found in note 23 on page 199.
Principal Group activities, business review and results:
The principal activities of Howden Joinery Group Plc and its
subsidiaries can be found on pages 2 to 35.
Dividend: Dividend information can be found in the
Chairman’s statement on page 18 and the ‘Financial review’
on page 32.
Directors’ statement of disclosure of information to
the auditor: This statement may be found on page 74.
Located in the additional information section:
Annual General Meeting (AGM): Information about
AGM can be found on page 214. The recommendation to
reappoint KPMG LLP as the Group’s auditor, can be found on
pages 136 and 140.
Share capital, substantial shareholdings and acquisition
of the Company’s own shares: Information in this regard
can be found on pages 214 and 215.
Indemnity and Insurance: Details of Directors’ Indemnity
and Insurance is located on page 215.
Significant agreements: Details of any agreements that
take effect, alter or terminate upon a change of control may
be found page 215.
Disclosure required under Listing Rule 9.8.4R: The
locations in this Annual Report and Accounts of disclosures
in relation to LR 9.8.4R are set out below:
•
•
•
Details of long-term incentive schemes: note 23
beginning on page 199.
Dividend waivers: page 214.
Published profit forecast made during the reporting
period to 24 December 2022: page 215.
The remaining disclosures required by LR 9.8.4R are not
applicable to the Company.
Political donations and R&D
The Group made no political donations during the current and
previous financial year. Nor has it made any contributions
to any non-UK political party during the current or previous
financial year. The Group also has not undertaken research
and development activities during the 2022 financial period.
By order of the Board
Forbes McNaughton
Company Secretary
6 March 2023
Governance / Directors’ report
147
Non-financial reporting
Non-financial measures are an important part of our business and we have recognised the importance of non-financial
information in our annual reports for many years. The Board is committed to acting responsibly and working with our
stakeholders to manage the social and ethical impact of our activities. We aim to treat all our stakeholders fairly and with
integrity, as we explain in the introduction to our sustainability matters report on page 48.
We have a number of Group policies to provide guidance to our employees. The policies are designed to be easily
understood and they generally include examples of acceptable and unacceptable behaviours.
In order to consolidate our reporting requirements under sections 414CA and 414CB of the Companies Act 2006 in
respect of non-financial reporting, the table below shows where in this Annual Report and Accounts to find each of the
disclosure requirements.
Focus area
Policies and statements
More information and outcomes
Environmental
matters
Sustainability and Corporate
Social Responsibility
Statement of Intent (see
Group website).
Social matters
Respect for
human rights
Sustainability and Corporate
Social Responsibility
Statement of Intent (see
Group website).
Sustainability and Corporate
Social Responsibility
Statement of Intent, and
Modern Slavery Statement
(see Group website).
• Greenhouse gas emissions and streamlined energy and carbon reporting
(pages 68 and 69).
• Discussion of the Company’s progress on implementing the recommendations of
the Task Force on Climate-Related Financial Disclosures (pages 54 to 61).
• Discussion of the UN Sustainable Development Goals and our progress on 'zero
waste to landfill' and carbon neutral manufacturing (page 50).
• KPI on production waste reuse, recovery, and recycling and our target of 100% of
wood-based material used in manufacturing processes being made from FSC® or
PEFC certified sources (page 29).
• Discussions of our efforts to reduce waste and our responsible, energy-efficient
operations (page 50).
• Our impact on our stakeholders (starting on page 62) and engagement
with stakeholders (starting on page 88).
• Our work with local and national charities (page 70).
• Discussion of the UN Sustainable Development Goal 8 (Decent Work and Economic
Growth) (page 50).
• Our Modern Slavery Statement (see Group website) sets out how we actively
monitor suppliers and train our procurement staff.
•
Internationally recognised labour standards form part of our contracts
of employment.
Anti-bribery
and corruption
Anti-bribery and corruption,
conflicts of interest,
corporate gifts and
hospitality, anti-money
laundering, anti-tax evasion
and competition law.
• The Board considers and approves the following Group policies: anti-bribery and
corruption, anti-money laundering, anti-tax evasion, competition law policy, market
abuse compliance and the Modern Slavery Statement and whistleblowing.
• We have a rolling programme of refresher training on modern slavery and anti-
bribery for our compliance team and buyers.
• Further information about our whistleblowing facility may be found on pages 91, 97
Employees
Health & Safety Statement of
Intent (see Group website),
market abuse compliance,
data protection and privacy,
and whistleblowing.
and 143.
• KPI on Health and Safety and discussion of Health and Safety performance and
initiatives (page 29).
• Discussion of employee rewards and benefits, development opportunities and
apprentice schemes (pages 65, 119 and 121).
• Diversity policies and statistics (pages 105 and 106).
• Workforce engagement (pages 90 and 91).
• Directors’ remuneration policy (see Group website for the full policy or pages 117 to
121 for a summary of the policy).
We outline our business model on pages 14 and 15. All of our non-financial KPIs are presented together on page 29.
A discussion of our principal and emerging risks, including those related to our business relationships, products and
services, as well as a description of our risk management process, starts at page 36.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Strategic ReportFinancial StatementsAdditional InformationGovernanceGovernanceGovernancePage Title Financial Statements
148
Financial Statements / Contents
149
Financial Statements
Our financial
performance
Revenue
£2,319m (2021: £2,094m)
Profit before tax
£406m (2021: £390m)
Net cash
£308m (2021: £515m)
2018
2019
2020
2021
2022
£1,511m
£1,584m
£1,548m
2018
2019
£239m
£261m
2020
£185m
£2,094m
£2,319m
2021
2022
£390m
£406m
2019
2020
2021
2022
2018
£231m
£267m
£431m
£515m
£308m
2022
£250.5m
Share buybacks
£250.5m (2021: £50.0m)
2018
£62.2m
2019
£55.2m
2020
£9.8m
2021
£50.0m
150 Independent auditor’s report
164 Consolidated income statement
164 Consolidated statement of comprehensive income
165 Consolidated balance sheet
166 Consolidated statement of changes in equity
167 Consolidated cash flow statement
168 Notes to the consolidated financial statements
205 Company balance sheet
206 Company statement of changes in equity
207 Notes to the Company financial statements
Operating profit
£415m (2021: £402m)
EPS
65.8p (2021: 53.2p)
Dividends paid
£115m paid in 2022
2018
2019
£240m
£260m
2018
2019
31p
35p
2018
£68.3m
2019
£0m
2020
£196m
2020
25p
2020
£68.3m
2021
2022
£402m
£415m
2021
2022
53.2p
2021 (inc. £54.1m special dividend)
£133.6m
65.8p
2022
£115.0m
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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A
Financial StatementsPage TitlePage Title
Independent auditor’s report
150
Financial Statements / Independent Auditor’s Report
151
Independent auditor’s report
To the members of Howden Joinery Group Plc
1. Our opinion is unmodified
In our opinion:
•
•
•
•
the financial statements of Howden Joinery Group Plc give a true and fair view of the state of the Group’s and of the
Parent Company’s affairs as at 24 December 2022, and of the Group’s profit for the 52 week period then ended;
the Group financial statements have been properly prepared in accordance with UK-adopted international accounting
standards;
the Parent Company financial statements have been properly prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework; and
the Group and Parent Company financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
What our opinion covers
We have audited the Group and Parent Company financial statements of Howden Joinery Group Plc (‘the Company’) for the
52 week period ended 24 December 2022 (FY22) included in the Annual Report and Accounts, which comprise:
Group (Howden Joinery Group Plc and its
subsidiaries)
Parent Company (Howden Joinery Group Plc)
• Consolidated income statement
• Company balance sheet
• Consolidated statement of comprehensive income
• Company statement of changes in equity
• Consolidated balance sheet
• Notes 1 to 7 to the Parent Company financial statements,
• Consolidated statement of changes in equity
• Consolidated cash flow statement
• Notes 1 to 26 to the Group financial statements,
including the accounting policies in note 1.
Basis for opinion
including the accounting policies in note 1.
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis
for our opinion. Our audit opinion and matters included in this report are consistent with those discussed and included in our
reporting to the Audit Committee (“AC”).
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to listed public interest entities.
2. Overview of our audit
Factors driving our view of risks
We have undertaken a risk assessment to identify those
matters that, in our professional judgment, were of most
significance in the audit of the financial statements of
the current period. We have considered the sector in
which the Company operates and the external factors
that drives the key underlying risks. We have determined
that the accounting for inventory is of significance to our
audit given the retail nature of the Group. We have also
identified the defined benefit plan given the sensitives
to movements in the key assumptions. In addition, the
scheme assets include a high proportion of assets (such as
unquoted equity, property and credit funds) for which there
is no external observable market price (“Level 3 pension
assets”).
Key Audit Matters
Accounting for inventories (Group)
Defined benefit pension scheme (Group)
Recoverability of Parent Company’s investment
in subsidiaries and debt due from group entities
(Parent Company)
Item
4.1
4.2
4.3
Audit committee interaction
During the year, the AC met 5 times. KPMG are invited to attend all Audit Committee meetings and are provided with
opportunities to meet with the Audit Committee in private sessions without the Executive Directors being present. For each
Key Audit Matter, we have set out communications with the Audit Committee in section 4, including matters that required
particular judgement for each. We also have opportunities to meet with the Audit Committee Chair outside the formal Audit
Committee meetings, to discuss our ongoing audit and developments with regard to the key judgments.
The matters included in the Audit Committee report on page 138 are materially consistent with our observations of
those meetings.
Our independence
We have fulfilled our ethical responsibilities under, and we
remain independent of the Group in accordance with, UK
ethical requirements including the FRC Ethical Standard as
applied to listed public interest entities.
We have not performed any non-audit services during FY22
or subsequently which are prohibited by the FRC Ethical
Standard.
We were first appointed as auditor by the shareholders for
the 52 week period ended 24 December 2022 on 12 May
2022. The period of total uninterrupted engagement is for
the financial year ended 24 December 2022.
The Group engagement partner is required to rotate every
5 years. As these are the first set of the Group’s financial
statements signed by Robert Brent, he will be required to
rotate off after the FY26 audit.
Materiality (item 6 below)
The scope of our work is influenced by our view of
materiality and our assessed risk of material misstatement.
We have determined overall materiality for the Group
financial statements as a whole at £19.0m and for the
Parent Company financial statements as a whole at £12.0m.
We determined that profit before tax from continuing
operations is the benchmark for the Group. As such, we
based our Group materiality on profit before tax from
continuing operations, of which it represents 4.7%.
Materiality for the Parent Company financial statements
was determined with reference to a benchmark of Parent
Company total assets of which it represents 1.0%
Total audit fee
Audit related fees (including interim review)
Other services
Non-audit fee as a % of total audit
and audit related fee %
Date first appointed
Uninterrupted audit tenure
Next financial period which requires a tender
Tenure of Group engagement partner
£1.1m
£0.1m
£nil
n/a
12 May 2022
1 year
2032
1 year
Materiality levels used in our audit (FY22 £m)
Group
GPM
HCM
PLC
LCM
2.4
AMPT
0.95
19
18
12.3
12
Group
Group Materiality
GPM
HCM
PLC
LCM
Group Performance Materiality
Highest Component Materiality
Parent Company Materiality
Lowest Component Materiality
AMPT
Audit Misstatement Posting Threshold
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Strategic ReportFinancial StatementsAdditional InformationGovernanceFinancial StatementsFinancial StatementsPage Title
152
Financial Statements / Independent Auditor’s Report
153
Independent auditor’s report continued
To the members of Howden Joinery Group Plc
Group scope (item 7 below)
We have performed risk assessment and planning procedures to
determine which of the Group’s components are likely to include risks of
material misstatement to the Group financial statements and the type
of procedures to be performed at these components. The audit of all
components, including the audit of the parent company, was performed
by the Group team.
The Group has 14 reporting components. We determined individually
financially significant components as those contributing at least 10% of
total revenue or total assets. We selected these because these are the
most representative of the relative size of the components. We identified
5 components as individually financially significant components and
performed full scope audits on these components.
The components within the scope of our work accounted for the percentages
illustrated opposite. Our audit of the Group was undertaken to the materiality
levels specified above and was performed by a single audit team.
In addition, we have performed Group level analysis on the remaining
components to determine whether further risks of material misstatement
exist in those components.
Coverage of Group financial statements
Profit
before tax
Total assets
96%
4%
95%
5%
Revenue
97%
3%
We consider the scope of our audit, as communicated to the Audit
Committee, to be an appropriate basis for our audit opinion.
Full scope audits
Reviews of financial information (including enquiry)
The impact of climate change on our audit
We have considered the potential impacts of climate change on the financial statements as part of planning our audit.
On page 36, the Group has explained that climate change is its most significant emerging risk. It identifies this both in terms
of transitional risks as the world moves towards a zero-carbon economy, and the physical risks presented as climate change.
The Group has set its own targets to reduce emissions, as described on page 52.
Climate change impacts the Group in a variety of ways, and pages 59 to 61 describe the associated risks and opportunities
identified by the directors. These include the impact of climate risk on the reputation of the Group. However, the Group has not
identified any risks which have a material impact on the preparation of the financial statements.
We performed a risk assessment, taking into account climate change risks and commitments made by the Group, of how
climate change may impact the financial statements and our audit. This included enquiries of management, consideration of
the Group’s processes for assessing the potential impact of climate change risk on the financial statements and assessing
the TCFD scenario analysis performed by the Group.
We held discussions with our own climate change professionals to challenge our risk assessment.
Based on our risk assessment we determined that the climate related risks to the Group’s business, strategy and financial
planning do not have a significant impact on balances in the financial statements or on our key audit matters.
We have read the Group’s disclosure of climate related information in the front half of the annual report as set out on pages 52
to 61, and considered consistency with the financial statements and our audit knowledge.
3. Going concern, viability and principal risks and uncertainties
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group
or the Parent Company or to cease their operations, and as they have concluded that the Group’s and the Parent Company’s
financial position means that this is realistic. They have also concluded that there are no material uncertainties that could
have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the
financial statements (“the going concern period”).
Our conclusions
• We consider that the directors’ use of the going concern
basis of accounting in the preparation of the financial
statements is appropriate;
• We have not identified, and concur with the directors’
assessment that there is not, a material uncertainty
related to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s or
Parent Company’s ability to continue as a going concern
for the going concern period;
• We have nothing material to add or draw attention to
in relation to the directors’ statement in note 1 to the
financial statements on the use of the going concern
basis of accounting with no material uncertainties that
may cast significant doubt over the Group and Parent
Company’s use of that basis for the going concern period,
and we found the going concern disclosure in note 1 to be
acceptable; and
• The related statement under the Listing Rules set out
on page 71 is materially consistent with the financial
statements and our audit knowledge.
Going concern
We used our knowledge of the Group, its industry, and the
general economic environment to identify the inherent risks
to its business model and analysed how those risks might
affect the Group’s and Company’s financial resources or
ability to continue operations over the going concern period.
The risks that we considered most likely to adversely affect
the Group’s and Company’s available financial resources
over this period were :
• Customer confidence in light of the current cost of
living challenges, and the possibility of this negatively
impacting the group’s sales;
• The impact of significant inflationary pressures on the
Group’s supply chain.
We considered whether these risks could plausibly affect the
liquidity or covenant compliance in the going concern period
by assessing the degree of downside assumption that,
individually and collectively, could result in a liquidity issue,
taking into account the Group’s and Company’s current and
projected cash and facilities (a reverse stress test).
We assessed the completeness of the going concern
disclosure in note 1 to the financial statements.
Accordingly, based on those procedures, we found the
directors’ use of the going concern basis of preparation
without any material uncertainty for the Group and Parent
Company to be appropriate. However, as we cannot
predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were
made, the above conclusions are not a guarantee that the
Group or the Parent Company will continue in operation.
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Our reporting
We have nothing material
to add or draw attention
to in relation to these
disclosures.
We have concluded that
these disclosures are
materially consistent with
the financial statements
and our audit knowledge.
Independent auditor’s report continued
To the members of Howden Joinery Group Plc
Disclosures of emerging and principal risks and longer-term viability
Our responsibility
We are required to perform procedures to identify whether there is a material inconsistency
between the directors’ disclosures in respect of emerging and principal risks and the viability
statement, and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw attention to in
relation to:
•
•
•
the directors’ confirmation within the Viability statement that they have carried out a
robust assessment of the emerging and principal risks facing the Group, including those
that would threaten its business model, future performance, solvency and liquidity;
the Principal Risks and uncertainties disclosures describing these risks and how
emerging risks are identified and explaining how they are being managed and
mitigated; and
the directors’ explanation in the Viability statement of how they have assessed the
prospects of the Group, over what period they have done so and why they considered
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 are also required to review the Viability statement set out on page 73 under the
Listing Rules.
Our work is limited to assessing these matters in the context of only the knowledge acquired
during our financial statements audit. As we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the absence of anything to report on these
statements is not a guarantee as to the Group’s and Parent Company’s longer-term viability.
4. Key audit matters
What we mean
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
by us, including those which had the greatest effect on:
•
•
the overall audit strategy;
the allocation of resources in the audit; and
• directing the efforts of the engagement team.
We include below the Key Audit Matters in decreasing order of audit significance together with our key audit procedures to
address those matters and our results from those procedures. These matters were addressed, and our results are based on
procedures undertaken, for the purpose of our audit of the financial statements as a whole. We do not provide a separate opinion
on these matters.
4.1 Accounting for inventory (Group)
Financial Statement Elements
Inventories gross value
Inventories provision
FY22
£426.8m
£53.5m
Our results
FY22: Acceptable
Description of the Key Audit Matter
Our response to the risk
Accounting for inventory (quantities and cost)
The Group holds a significant amount of inventory across
its large depot network and a number of warehouses. As
at 24 December 2022, net inventory, after recognising
relevant provisions is £373.3 million.
The Group’s inventory is comprised of a wide product
range, typically held in large quantities. The Group
conducts periodic inventory counts at its warehouses
and annual counts at each of its depots, which are
performed throughout the year. It updates its inventory
records to reflect the results of the counts.
Cost of inventory is based on a standard cost which
is updated annually. Variances to standard cost are
analysed and apportioned to inventory at the period end.
Whilst the quantities and cost of inventory is not
considered to represent a significant risk of material
misstatement, it is one of the matters that has the
greatest effect on our overall audit strategy; the
allocation of resources in the audit; and directing the
efforts of the engagement team in order to conclude.
Subjective estimate
The scale of the Group’s product range means there
is significant management judgement in determining
the adequacy and completeness of the inventory
obsolescence provision, in particular the provision
applied to discontinued and slow-moving product lines. In
addition, given the judgement required in determining this
provisioning which relies on forward-looking information,
we have therefore identified this as an area at higher risk of
fraud or error.
The effect of these matters is that, as part of our
risk assessment, we determined that the inventory
obsolescence provision has a high degree of estimation
uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the financial
statements as a whole.
Our procedures to address the risk included:
• Tests of detail: we counted a sample of inventory lines across a sample of
the Group’s depots and warehouses and compared the results of our counts
to the Group’s inventory records. Where our counts were performed prior to
or after the period-end, we rolled forward or backward our count results to
the period-end date and tested any movements in inventory quantities by
comparing to relevant supporting documentation. We examined the results
of our count procedures using statistical routines.
• Test of detail: we evaluated the appropriateness of the variances to standard
cost which are apportioned to inventory by comparing those variances back
to relevant source data and independently recalculating the amount.
• Our sector experience: we assessed management’s methodology and key
assumptions supporting the inventory provision, including the expected level
of inventory that will not be in demand and respective sales prices, against
our knowledge of the business and industry.
• Historical comparisons: we assessed management’s assumptions made
in the inventory obsolescence provision by comparing to the historical
utilisation.
• Test of detail: we evaluated the appropriateness of each of the key
assumptions within the provision which are supported by data elements
back to relevant source data and challenged the level of provision applied
by management to discontinued items by independently recalculating the
provision percentages.
• Test of detail: we evaluated the completeness of the provision by testing a
sample of current inventory lines for slow moving items or sales prices below
cost to evaluate whether additional provisioning is required.
• Assessing transparency: we assessed the adequacy of the financial
statement disclosures about the degree of estimation uncertainty in
arriving at the net realisable value.
We performed the detailed tests above rather than seeking to rely on any of
the group’s controls because our knowledge of the design of these controls
indicated that we would not be able to obtain the required evidence to support
reliance on controls.
Communications with the Howden Joinery Group Plc’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
• Our approach to the audit of inventory provisioning including details of our planned substantive procedures and the extent of our control
reliance; and
• Our conclusions on the appropriateness of the Group’s inventory provisioning methodology, accounting policies and disclosures.
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
• Subjective auditor judgement was required in assessing the adequacy of the inventory obsolescence provision, in particular the provision
percentages applied to the discontinued and slow-moving inventory lines.
Our results
We found the carrying value of inventory, including the level of inventory obsolescence provisioning, to be acceptable.
Further information in the Annual Report and Accounts: See the Audit Committee report on page 138 for details on how the Audit
Committee considered inventory obsolescence provisioning as an area of significant attention, page 182 for the accounting
policy on inventory obsolescence provisioning, and note 12 for the financial disclosures.
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Independent auditor’s report continued
To the members of Howden Joinery Group Plc
4.2 Defined benefit pension scheme (Group)
Financial Statement Elements
Gross defined benefit liability
Carrying value of assets for which there is no
quoted market price in an active market
FY22
£930.5m
£677.4m
Our results
FY22: Acceptable
Description of the Key Audit Matter
Our response to the risk
Subjective valuation
A significant level of estimation is required in order to determine
the valuation of the gross defined benefit liability. Small changes
in the key assumptions (in particular, discount rates, inflation
and mortality rates) can have a material impact on the amount
recognised in the financial statements.
In addition, the pension asset portfolio includes a high proportion of
assets (such as unquoted equity, property and credit funds) with no
observable market price (“Level 3 pension assets”), the valuation of
which requires significant judgement as a result of valuations being
unavailable at the balance sheet date (‘lagged valuations’). These
holdings together represented 32% (£286.0 million) of the total
pension assets held.
There is also a risk that, for certain of these assets, more recent
valuations are not expected to be available before the accounts are
finalised that should be reflected in the final position.
The effect of these matters is that, as part of our risk assessment, we
determined that valuation of the gross defined benefit obligation and
Level 3 pension assets have a high degree of estimation uncertainty,
with a potential range of reasonable outcomes greater than our
materiality for the financial statements as a whole, and possibly
many times that amount. The financial statements (note 22) disclose
the sensitivities estimated by the Group.
Our procedures to address the risk included:
• Benchmarking assumptions: we challenged, with the support
of our own actuarial specialists, the key assumptions applied in
the estimation of the pension liability, being the discount rate,
inflation rate and mortality/life expectancy, by comparing to
externally derived data.
• Actuary’s credentials: we assessed the competence,
capabilities and objectivity of the Group’s actuarial expert.
• Assessing valuers’ credentials: we evaluated the scope,
competencies and objectivity of the Group’s external experts
who assisted in determining the key unobservable inputs and
market indices used in the valuation of Level 3 pension assets.
• Methodology choice: we assessed the process adopted by
management to tackle the challenge of ‘lagged valuations’
for the Level 3 pension assets. We assessed the information
provided by the external fund managers, and assessed the risk
of material movements to the balance sheet date by reference to
external economic benchmark data.
• Assessing transparency: we considered the adequacy of the
Group’s disclosures in respect of the sensitivity of the pension
deficit to these assumptions.
We performed the tests above rather than seeking to rely on any
of the Group’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through the
detailed procedures described.
Communications with the Howden Joinery Group Plc’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
4.3 Recoverability of parent company’s investment in subsidiaries
and debt due from group entities (parent company)
Financial Statement Elements
Investments in subsidiaries
Amounts owed by wholly-owned
subsidiary companies
FY22
£699.0m
£103.3m
Description of the Key Audit Matter
Our response to the risk
Our results
FY22: Acceptable
Low risk, high value
The carrying amount of the parent Company’s investments in
subsidiaries and intra-group debtor balance represents 66% of the
Company’s total assets. Their recoverability is not at a high risk
of significant misstatement or subject to significant judgement.
However, due to their materiality in the context of the parent
Company financial statements, this is considered to be the area
that had the greatest effect on our overall parent Company audit.
Our procedures to address the risk included:
• Comparing valuations: comparing the carrying amount of the
company’s investments in subsidiaries with the expected value
of the business based on forecasted dividends to ultimately be
received from the trading entity within the Group.
• Tests of detail: Assessing 100% of group debtors to identify, with
reference to the relevant debtors’ draft balance sheet whether
they have a positive net asset value and therefore coverage
of the debt owed, as well as assessing whether those debtor
companies have historically been profit-making.
We performed the tests above rather than seeking to rely on any of
the Company’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through the
detailed procedures described.
Communications with the Howden Joinery Group Plc’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
• Our approach to the audit of parent company investments in subsidiaries and intra-Group receivables including details of our planned
substantive procedures and the extent of our control reliance;
• The prior year restatement made to the Parent company balance sheet relating to the recoverability of the investments and debts due
•
from Group entities, and the associated disclosures.
In addition we have discussed the prior year restatement made to the Parent company balance sheet relating to lease accounting, as
disclosed in note 6.
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
• The valuation of investments where the carrying value exceeded the net asset value and the inclusion of dividends to be received by the
• Our definition of the Key Audit Matter relating to the valuation of the defined benefit pension obligation and specifically the rationale for the
parent company from other Group entities.
inclusion of the valuation of level 3 pension assets in the definition of our Key Audit Matter;
• We discussed our audit response to the Key Audit Matter which included the use of specialists to challenge the key aspects of
management’s actuarial valuation; and
• The adequacy of the disclosures, particularly as it relates to the judgement regarding the valuation of Level 3 pension assets.
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
• Subjective and complex auditor judgement was required in evaluating the key actuarial assumptions used by the Group (including the
discount rate, inflation and mortality assumptions) as well as evaluating the fair value measurement approach for the Level 3 pension
assets.
Our results
We found the valuation of the gross defined benefit pension liability estimation and valuation of level 3 assets to be acceptable.
Further information in the Annual Report and Accounts: See the Audit Committee report on page 138 for details on how the Audit
Committee considered validity of pension assumptions and carrying value of assets for which there is no quoted market price in
an active market as an area of significant attention, page 192 for the accounting policy on defined benefit pensions, and note 22
for the financial disclosures.
Our results
We found the company’s conclusion that there is no impairment of its investments in subsidiaries or intra-group debtor balance to be
acceptable.
Further information in the Annual Report and Accounts: See the Audit Committee report on page 128 for details on how the Audit
Committee considered parent company investments and intra-group receivables as an area of significant attention, page 209
for the accounting policy on parent company investments and intra-Group receivables, and note 3 for the financial disclosures.
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Independent auditor’s report continued
To the members of Howden Joinery Group Plc
5. Our ability to detect irregularities, and our response
Fraud – identifying and responding to risks of material misstatement due to fraud
Fraud risk assessment
Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included :
• Enquiring of directors, the audit committee, internal audit and inspection of policy documentation as to the Group’s high-
level policies and procedures to prevent and detect fraud, including the internal audit function, and the Group’s channel
for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud.
• Reading Board and audit committee meeting minutes.
• Considering remuneration incentive schemes and performance targets for management and directors including the
long-term incentive plan for management remuneration.
• Using analytical procedures to identify any unusual or unexpected relationships.
Risk communications
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout
the audit.
Fraud risks
As required by auditing standards, and taking into account possible pressures to meet profit targets and market
expectations, we perform procedures to address the risk of management override of controls, in particular the risk that Group
management may be in a position to make inappropriate accounting entries and the risk of bias in accounting estimates
such as the inventory obsolescence provisions and pension assumptions. On this audit we do not believe there is a fraud risk
related to revenue recognition because there are limited opportunities to fraudulently adjust revenue recognition given the
high volume and low value nature of purchases.
We identified a fraud risk related to the inventory obsolescence provision in response to possible pressures to meet profit
targets or market expectations.
Link to KAMs
Further detail in respect of the inventory obsolescence provision is set out in the key audit matter disclosures in section 4 of
this report.
Procedures to address fraud risks
We performed procedures including:
•
Identifying journal entries and other adjustments to test for all full scope components based on risk criteria and comparing
the identified entries to supporting documentation. These included those posted by users outside of their expected
business area and those posted to unusual accounts.
• Assessing whether the judgements made in making accounting estimates are indicative of a potential bias.
Laws and regulations – identifying and responding to risks of material misstatement relating to
compliance with laws and regulations
Laws and regulations risk assessment
Identifying and responding to risks of material misstatement related to compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience, and through discussion with the directors (as required
by auditing standards), and discussed with the directors the policies and procedures regarding compliance with laws and
regulations.
As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including
the entity’s procedures for complying with regulatory requirements.
Risk communications
We communicated identified laws and regulations throughout our team and remained alert to any indications of
non-compliance throughout the audit.
Direct laws context and link to audit
The potential effect of these laws and regulations on the financial statements varies considerably.
The Group is subject to laws and regulations that directly affect the financial statements including financial reporting
legislation (including related companies legislation), distributable profits legislation, pension scheme legislation and taxation
legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related
financial statement items.
Most significant indirect law/ regulation areas
The Group is subject to many other laws and regulations where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the
loss of the Group’s license to operate. We identified the following areas as those most likely to have such an effect: health and
safety and employment laws recognising the nature of the Group’s activities.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry
of the directors and other management and inspection of regulatory and legal correspondence, if any. Therefore if a breach
of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
Context
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have properly planned and performed our audit in accordance
with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing
standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit
procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud
and cannot be expected to detect non-compliance with all laws and regulations.
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Independent auditor’s report continued
To the members of Howden Joinery Group Plc
6. Our determination of materiality
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative
considerations to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating
the effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.
£19.0m
Materiality for the group financial statements as a whole
What we mean
Basis for determining materiality and judgements applied
A quantitative reference for the purpose of
planning and performing our audit.
Materiality for the Group financial statements as a whole was set at
£19.0m. This was determined with reference to a benchmark of Group
profit before tax from continuing operations (‘PBTCO’).
We determined that Group profit before tax from continuing operations
(‘PBTCO’) is the main benchmark for the Group as this is the primary
measure by which stakeholders and the market assess the performance of
the group.
Our Group materiality of £19.0m was determined by applying a percentage
to the Group profit before tax from continuing operations. When using a
benchmark of Group profit before tax to determine overall materiality,
KPMG’s approach for public interest entities considers a guideline range
3% – 5% of the measure. In setting overall Group materiality, we applied a
percentage of 4.7% to the benchmark.
Materiality for the Parent Company financial statements as a whole
was set at £12.0m, determined with reference to a benchmark of Parent
Company total assets, of which it represents 1.0%.
£12.3m
Performance materiality
What we mean
Basis for determining materiality and judgements applied
Our procedures on individual account
balances and disclosures were performed to
a lower threshold, performance materiality,
so as to reduce to an acceptable level the risk
that individually immaterial misstatements
in individual account balances add up to
a material amount across the financial
statements as a whole.
We have considered performance materiality at a level of 65% of
materiality for Howden Joinery Group Plc Group financial statements as a
whole to be appropriate.
The Parent Company performance materiality was set at £7.8m,
which equates to 65% of materiality for the Parent Company financial
statements as a whole.
We applied this percentage in our determination of performance
materiality based on an increased aggregation risk, having considered our
risk assessment of the entity’s control environment.
£0.95m
Audit misstatement posting threshold
What we mean
Basis for determining materiality and judgements applied
We set our audit misstatement posting threshold at 5% of our materiality
for the Group financial statements. We also report to the Audit Committee
any other identified misstatements that warrant reporting on qualitative
grounds.
This is the amount below which identified
misstatements are considered to be clearly
trivial from a quantitative point of view. We may
become aware of misstatements below this
threshold which could alter the nature, timing
and scope of our audit procedures, for example
if we identify smaller misstatements which are
indicators of fraud.
This is also the amount above which all
misstatements identified are communicated to
Howden Joinery Group Plc’s Audit Committee.
The overall materiality for the Group financial statements of £19.0m compares as follows to the main financial statement
caption amounts:
Total Group
Revenue FY22
£2,319.0m
0.8%
Group profit
before tax FY22
£405.8m
4.7%
Total Group
Assets FY22
£2,032.7m
0.9%
Financial statement Caption
Group Materiality as % of caption
7. The scope of our audit
Group scope
What we mean
How the Group audit team determined the procedures to be performed across the Group.
The Group has 14 reporting components. In order to determine the work performed at the reporting component level, we
identified those components which we considered to be of individual financial significance, those which were significant due
to risk and those remaining components on which we required procedures to be performed to provide us with the evidence we
required in order to conclude on the group financial statements as a whole.
We determined individually financially significant components as those contributing at least 10% of total revenue, total net
assets or total assets. We selected these because these are the most representative of the relative size of the components.
We identified 5 components as individually financially significant components and performed full scope audits on these
components.
The components within the scope of our work accounted for the following percentages of the Group’s results, with the prior
year comparatives indicated in brackets:
Scope
Full scope audits
Reviews of financial information
(including enquiry)
Total
Number of
components
Range of
materiality
applied
Group
revenue
Total profits and
losses that made
up Group PBT
5
£2.4m – £18.0m
97%
£2.0m – £10.0m
9
14
3%
100%
96%
4%
100%
Group
total
assets
95%
5%
100%
The remaining 3% of total Group revenue, 4% of total profits and losses that made up Group profit before tax and 5% of total
Group assets is represented by 9 reporting components, none of which individually represented more than 5% of any of total
Group revenue, total profits and losses that made up Group profit before tax or total Group assets. For these components,
we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of
material misstatement within these.
The work on all of the financially significant components, including the audit of the Parent Company, was undertaken to the
materiality levels specified above and performed by the Group team.
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Independent auditor’s report continued
To the members of Howden Joinery Group Plc
8. Other information in the annual report
The directors are responsible for the other information presented in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
All other information
Our responsibility
Our responsibility is to read the other information and, in doing so, consider whether,
based on our financial statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or our audit knowledge.
Our reporting
Based solely on that work we
have not identified material
misstatements or inconsistencies
in the other information.
Strategic Report and Directors Report
Our responsibility and reporting
Based solely on our work on the other information described above we report to you as follows:
• we have not identified material misstatements in the strategic report and the directors’ report;
•
•
in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ Remuneration Report
Our responsibility
We are required to form an opinion as to whether the part of the Directors’
Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006.
Corporate governance disclosures
Our responsibility
We are required to perform procedures to identify whether there is a material
inconsistency between the financial statements and our audit knowledge, and:
•
•
•
the directors’ statement that they consider that the annual report and financial
statements taken as a whole is fair, balanced and understandable, and provides
the information necessary for shareholders to assess the Group’s position and
performance, business model and strategy;
the section of the annual report describing the work of the Audit Committee,
including the significant issues that the Audit Committee considered in relation to
the financial statements, and how these issues were addressed; and
the section of the annual report that describes the review of the effectiveness of the
Group’s risk management and internal control systems.
Our reporting
In our opinion the part of the
Directors’ Remuneration Report
to be audited has been properly
prepared in accordance with the
Companies Act 2006.
Our reporting
Based on those procedures, we
have concluded that each of these
disclosures is materially consistent
with the financial statements and
our audit knowledge.
We are also required to review the part of the Corporate Governance Statement relating
to the Group’s compliance with the provisions of the UK Corporate Governance Code
specified by the Listing Rules for our review.
We have nothing to report in this
respect.
Other matters on which we are required to report by exception
Our responsibility
Under the Companies Act 2006, we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
•
the Parent Company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the accounting
records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Our reporting
We have nothing to report in these
respects.
9. Respective Responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 146, the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error;
assessing the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Parent
Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared using the single electronic
reporting format specified in the TD ESEF Regulation. This auditor’s report provides no assurance over whether the annual
financial report has been prepared in accordance with that format.
10. The purpose of our audit work and to whom we owe our responsibilities
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.
Robert Brent
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
8 March 2023
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Strategic ReportFinancial StatementsAdditional InformationGovernanceFinancial StatementsFinancial StatementsPage TitlePage Title Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
164
Financial Statements / Consolidated balance sheet
165
Consolidated income statement
Consolidated balance sheet
Continuing operation:
Revenue
Cost of sales
Gross profit
Operating expenses
Operating profit
Finance income
Finance costs
Profit before tax
Tax on profit
Profit for the period attributable to the equity holders of the parent
Earnings per share:
Basic earnings per 10p share
Diluted earnings per 10p share
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
2,319.0
(907.8)
1,411.2
(996.0)
415.2
3.8
(13.2)
405.8
(31.6)
374.2
65.8p
65.6p
2,093.7
(804.7)
1,289.0
(887.3)
401.7
–
(11.4)
390.3
(75.8)
314.5
53.2p
53.0p
Notes
2, 3
4
5
6
7
8
8
Consolidated statement of comprehensive income
Profit for the period
Items of other comprehensive income:
Items that will not be reclassified subsequently to profit or loss:
Actuarial (losses)/gains on defined benefit pension scheme
Deferred tax on actuarial gains and losses on defined benefit pension scheme
Change of tax rate on deferred tax
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
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
Notes
374.2
314.5
22
7
7
(183.0)
34.8
11.0
2.1
(135.1)
239.1
170.4
(33.5)
(8.5)
(2.3)
126.1
440.6
Non-current assets
Intangible assets
Property, plant and equipment
Lease right-of-use assets
Pension asset
Deferred tax asset
Prepaid credit facility fees
Current assets
Inventories
Corporation tax
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Lease liabilities
Trade and other payables
Current tax liability
Provisions
Non-current liabilities
Pension liability
Lease liabilities
Deferred tax liability
Provisions
Total liabilities
Net assets
Equity
Share capital
Capital redemption reserve
Share premium
ESOP and share-based payments
Treasury shares
Retained earnings
Total equity
Notes
24 December 2022
£m
25 December 2021
£m
9
10
11
22
7
12
7
13
18
11
14
7
15
22
11
7
15
16
16
16
16
16
16
35.9
398.7
614.3
–
35.9
1.0
22.6
295.8
555.8
140.8
13.4
0.3
1,085.8
1,028.7
373.3
32.3
233.3
308.0
946.9
2,032.7
(95.3)
(433.9)
–
(12.0)
(541.2)
(41.5)
(570.0)
(3.8)
(4.5)
(619.8)
(1,161.0)
871.7
56.1
9.1
87.5
11.7
(25.5)
732.8
871.7
301.6
–
205.8
515.3
1,022.7
2,051.4
(57.5)
(384.7)
(25.9)
–
(468.1)
–
(533.7)
(37.7)
(20.4)
(591.8)
(1,059.9)
991.5
59.8
5.4
87.5
5.9
(27.1)
860.0
991.5
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
The financial statements were approved by the Board and authorised for issue on 6 March 2023 and were signed on its behalf by
Paul Hayes
Chief Financial Officer
Strategic ReportFinancial StatementsAdditional InformationGovernanceFinancial StatementsFinancial Statements Consolidated statement of changes in equity
Consolidated cash flow statement
166
Financial Statements / Consolidated cash flow statement
167
Consolidated statement of changes in equity
Consolidated cash flow statement
Share
capital
£m
60.3
Capital
redemption
reserve
£m
Share
premium
account
£m
ESOP and
share-based
payments
£m
Treasury
shares
£m
Retained
earnings
£m
4.9
87.5
(3.5)
(28.2)
599.8
At 26 December 2020
Accumulated profit for the period
Other comprehensive income for the period
Total comprehensive income for the period
Current tax on share schemes
Deferred tax on share schemes
Movement in ESOP
Reclaim of forfeited dividends
Proceeds from sale of forfeited shares
Buyback and cancellation of shares
Transfer of shares from treasury into share trust
Dividends
At 25 December 2021
Accumulated profit for the period
Other comprehensive income for the period
Total comprehensive income for the period
Current tax on share schemes
Deferred tax on share schemes
Movement in ESOP
Buyback and cancellation of shares
Transfer of shares from treasury into share trust
Dividends
At 24 December 2022
–
–
–
–
–
–
–
–
(0.5)
–
–
–
–
–
–
–
–
–
–
0.5
–
–
–
–
–
–
–
–
–
–
–
–
–
59.8
5.4
87.5
–
–
–
–
–
(3.7)
–
–
–
–
–
–
–
–
3.7
–
–
–
–
–
–
–
–
–
–
–
56.1
9.1
87.5
–
–
–
–
–
10.5
–
–
–
(1.1)
–
5.9
–
–
–
–
–
7.4
–
(1.6)
–
11.7
Total
£m
720.8
314.5
126.1
314.5
126.1
440.6
440.6
(0.1)
(0.1)
1.3
–
0.2
1.8
1.3
10.5
0.2
1.8
(50.0)
(50.0)
–
–
(133.6)
(133.6)
–
–
–
–
–
–
–
–
–
1.1
–
–
–
–
–
–
–
–
374.2
374.2
(135.1)
(135.1)
239.1
239.1
0.4
(1.3)
–
0.4
(1.3)
7.4
(250.5)
(250.5)
1.6
–
–
–
(115.0)
(115.0)
(25.5)
732.8
871.7
The item ‘Movement in ESOP’ consists of the share-based payment charge in the year, together with any receipts of cash from
employees on exercise of share options.
At the current period end there were 5,237,907 ordinary shares held in treasury, each with a nominal value of 10p (2021:
5,567,555 shares of 10p each).
We present a description of the nature and purpose of each reserve at note 16.
(27.1)
860.0
991.5
Difference between pensions operating charge and cash paid
Operating profit
Adjustments for:
Depreciation and amortisation of owned assets
Depreciation, impairment and loss on termination of leased assets
Share-based payments charge
(Increase)/decrease in prepaid credit facility fees
(Profit)/loss on disposal of property, plant and equipment and intangible assets
Operating cash flows before movements in working capital
Notes
9, 10
11
Movements in working capital
Increase in inventories
(Increase) in trade and other receivables
Increase in trade and other payables and provisions
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
Receipts from sale of property, plant and equipment and intangible assets
Acquisition of subsidiary – net of cash acquired
26
Interest received
Net cash used in investing activities
Cash flows used in financing activities
Payments to acquire own shares
Receipts from release of shares from share trust
Inflow from receipt of forfeited dividends
Inflow from sale of forfeited shares
Dividends paid to Group shareholders
Interest paid – including on lease liabilities
Repayment of principal on lease liabilities
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of movements in exchange rates on cash held
Cash and cash equivalents at end of period
18
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
415.2
44.0
80.8
7.3
(0.7)
(0.1)
546.5
(69.8)
(23.7)
41.8
2.0
(49.7)
496.8
(101.5)
395.3
(140.8)
0.7
(14.6)
1.1
(153.6)
(250.5)
0.1
–
–
(115.0)
(13.1)
(66.1)
(444.6)
(202.9)
515.3
(4.4)
308.0
401.7
40.6
74.8
10.1
0.3
3.2
530.7
(46.6)
(39.2)
84.1
(18.5)
(20.2)
510.5
(73.1)
437.4
(85.9)
0.1
–
–
(85.8)
(50.0)
0.4
0.2
1.8
(133.6)
(11.0)
(74.8)
(267.0)
84.6
430.7
–
515.3
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
We present an analysis of cash and non-cash changes in liabilities due to financing activities in note 18.
Strategic ReportFinancial StatementsAdditional InformationGovernanceFinancial StatementsFinancial Statements Notes to the consolidated financial statements
168
169
Notes to the consolidated financial statements
The order of the notes is set out below. Significant accounting policies and, where applicable, information relating to
significant judgements and sources of estimation uncertainty are presented as part of the related note.
General information
Company and currency details
Statement of compliance and basis of preparation
Capital structure and risk
16 Share capital and reserves
17 Dividends
18 Notes to the cash flow statement
19 Borrowing facility
20 Financial risk management
Employees
21 Staff costs and number of employees
22 Retirement benefit obligations
23 Share-based payments
Other supporting notes
24 Financial commitments
25 Related party transactions
26 Acquisition of subsidiary
General information
1 General information
Company and currency details
Foreign currency transactions
Foreign operations
Accounting period
Impairment of assets
Statement of compliance and basis of preparation
Going concern
Standards in issue but not yet effective
Earnings
2 Revenue
3 Segmental reporting
4 Operating profit
5 Finance income
6 Finance costs
7 Current and deferred tax
8 Earnings per share
Operating assets and liabilities
9
Intangible assets
10 Property, plant and equipment
11 Lease right-of-use assets and lease liabilities
12 Inventories
13 Other financial assets
14 Other financial liabilities
15 Provisions
Howden Joinery Group Plc (‘the Company’) is a company
incorporated in the United Kingdom under the Companies
Act 2006. Its registered office address is 40 Portman Square,
London W1H 6LT. The nature of the Group’s operations and
principal activities are set out in the Strategic Report.
These financial statements are presented in pounds sterling,
the currency of the primary economic environment in which
the Group operates. Foreign operations are included on the
basis set out below.
Foreign currency transactions
Transactions in foreign currency are translated at the
exchange rate on the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are translated at the exchange rate at the
balance sheet date. Foreign exchange gains and losses are
recognised in the income statement.
Foreign operations
The assets and liabilities of foreign operations are translated
into sterling at foreign exchange rate at the balance sheet
date. The results and cash flows of overseas subsidiaries 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.
Accounting period
The Group’s accounting period covers the 52 weeks to
24 December 2022. The comparative period covered the
52 weeks to 25 December 2021.
Impairment of assets
The carrying amount of the Group’s assets is reviewed at
least annually 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 Group financial statements have been prepared in
accordance with UK-adopted international accounting standards.
The financial statements have been prepared on the historical
cost basis, modified for certain items carried at fair value, as
stated in the accounting policies.
These consolidated financial statements include the accounts
of the Company and all entities controlled by the Company (its
subsidiaries, together referred to as ‘the Group’) from the date
control commences until the date that control ceases.
‘Control’ is defined as the Group having power over the
subsidiary, exposure or rights to variable returns from the
subsidiary, and the ability to use its power to affect the amount
of returns from the subsidiary. Further details of all subsidiaries
are given in the ‘Additional Information’ section at the back of
this Annual Report. All subsidiaries are 100% owned and the
Group considers that it has control over them all.
Going concern
The Directors have undertaken a robust assessment and
concluded that it is appropriate to prepare the financial
statements on the going concern basis. They have not
identified any material uncertainties. Full details are set out in
the strategic review, starting on page 71.
The going concern review period covers the period of
12 months after the date of approval of these financial
statements. The Board has considered the trading results and
financial performance in 2022, and the Group balance sheet
at 24 December 2022, noting that the Group is debt-free, has
cash and cash equivalents of £308m, and appropriate levels
of working capital. The Group also has a five-year, committed,
multi-currency revolving credit facility of up to £150m which
expires in September 2027 and which was not drawn at the
year end.
Management have modelled various scenarios including:
• A ‘base case’ scenario. This is based on the final 2022
Group forecast, prepared in November 2022 and including
the actual results of the 2022 peak sales period.
• A ‘severe but plausible’ downside scenario based on the
worst 12-month year-on-year actual fall ever experienced
in the Group’s history. This is more significant than the
combined effect of COVID and Brexit on 2020 actual
performance.
• A ‘reverse stress-test’ scenario.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial Statements / Notes to the consolidated financial statementsStrategic ReportFinancial StatementsAdditional InformationGovernanceGovernancePage TitleFinancial Statements
170
171
General information continued
In the base case and the severe but plausible downside scenarios, the Group has significant headroom throughout the going
concern period after meeting its commitments. In the reverse stress-test scenario, the results show that sales would have to fall
by a significant amount over and above the fall modelled in the severe but plausible downside scenario before the Group would
have to take further mitigating actions. The likelihood of this level of fall in sales is considered to be remote.
Taking all the factors above into account, the directors believe that the Group is well placed to manage its financing and other
business risks satisfactorily and have a reasonable expectation that the Group will have adequate resources to remain in
operational existence for the going concern review period set out above.
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 2018–2020 cycle
Amendments to IAS 37: Costs of fulfilling an onerous contract
Amendments to IAS 16: Property, plant and equipment
Amendment to IFRS 3: Business Combinations
Amendments to IAS 1: Presentation of financial statements and IFRS Practice Statement 2: Disclosure of accounting policies
Amendments to IAS 12: Deferred tax related to assets and liabilities arising from a single transaction
IFRS 17: Insurance Contracts
Amendments to IAS 1 – Classification of liabilities as Current or Non-Current
Amendments to IFRS 16: Lease Liability in a Sale and Leaseback
The Directors anticipate that the adoption of the standards and interpretations mentioned above will have no significant impact
on the Group’s financial statements when the relevant standards come into effect.
Significant accounting judgements and major sources of estimation uncertainty
The Group recognises significant judgement and estimation uncertainty in connection with its defined benefit pension scheme. It
also recognises estimation uncertainty over making allowances against the carrying value of inventory. More details are given in
the relevant notes.
Other significant accounting policies
These are presented as part of the related note to the financial statements.
Earnings
2 Revenue
Accounting policy
3 Segmental reporting
(a) Basis of segmentation, and other general information
Information reported to the Group’s Executive Committee, which is regarded as the chief operating decision maker, 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, and related services.
(b) Geographical information
The Group’s operations are mainly located in the UK, with a small presence in France, Belgium and the Republic of Ireland. The
Group has depots in each of these locations, with the first depot in the Republic of Ireland opening in 2022. The number of depots
in each location at the current and prior period ends is shown in the five year record which is located towards the back of this
Annual Report. The Group’s manufacturing and sourcing operations are located in the UK.
The following table analyses the Group’s revenues from external customers by geographical market, irrespective of the origin of
the goods:
Revenues from external customers
UK
France, Belgium and Ireland
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
2,256.1
62.9
2,319.0
2,043.3
50.4
2,093.7
The following is an analysis of the carrying amount of 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 assets
UK
France, Belgium and Ireland
Non-current assets
UK
France, Belgium and Ireland
24 December 2022
£m
25 December 2021
£m
1,903.1
129.6
2,032.7
1,991.9
59.5
2,051.4
24 December 2022
£m
25 December 2021
£m
975.4
74.5
1,049.9
982.8
32.5
1,015.3
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
122.7
24.5
147.2
82.8
7.0
89.8
The Group recognises revenue when it has satisfied its performance obligations to the customer and the customer has
obtained control of the goods or services being transferred. Revenue from sales of goods is recognised on collection or
delivery of the goods. Revenue from services is recognised when the customer accepts that the services are complete.
We measure revenue at the fair value of the consideration received or receivable, excluding sales taxes and discounts.
We recognise interest income as it accrues and measure it using the effective interest rate method.
Additions to property plant and equipment and intangible assets
UK
France, Belgium and Ireland
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Notes to the consolidated financial statements continuedFinancial Statements / Notes to the consolidated financial statementsStrategic ReportFinancial StatementsAdditional InformationGovernanceGovernanceGovernancePage TitlePage Title 172
173
Earnings continued
4 Operating profit
Operating profit has been arrived at after (charging)/crediting:
Net foreign exchange (loss)/gain
Depreciation of property plant and equipment
Amortisation of intangible assets
Depreciation and impairment of lease right-of-use assets
Cost of inventories recognised as an expense
Write down of inventories
Profit/(loss) on disposal of fixed assets
Increase in allowance for expected credit losses on trade debts
Staff costs
Auditor’s remuneration for audit services
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 (review of the half-year results)
Tax compliance services
Tax advisory services
Total non-audit fees
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
(0.7)
(36.5)
(7.5)
(80.8)
(893.1)
(14.0)
–
(1.6)
(624.1)
(1.1)
5.2
(31.5)
(9.1)
(74.8)
(789.9)
(20.0)
(3.2)
(2.9)
(553.3)
(0.7)
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
(0.2)
(0.9)
(1.1)
(0.1)
–
–
(0.1)
(0.2)
(0.5)
(0.7)
(0.1)
–
–
(0.1)
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 Corporate Governance
Report. No services were provided pursuant to contingent fee arrangements.
5 Finance income
Bank interest receivable
Other finance income – pensions
6 Finance costs
Interest expense on lease liabilities
Other finance expense – pensions
Other interest
Total finance costs
7 Current and deferred tax
Accounting policy
Income tax
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
1.1
2.7
3.8
–
–
–
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
(13.1)
–
(0.1)
(13.2)
(11.0)
(0.4)
(0.0)
(11.4)
The tax expense represents the sum of current tax and deferred tax. It is recognised in profit or loss except to the extent that it
relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax
Current tax is based on taxable profit for the financial period and any adjustments to tax payable or receivable for prior years.
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 as well as items that are never taxable or deductible.
It is calculated as the best estimate of the tax expected to be paid or received. It reflects any uncertainty related to income
taxes and is measured using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax
Deferred tax 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. It is accounted for using
the balance sheet liability method. It is calculated at the tax rates that are expected to apply in the period when the liability
is settled, or the asset realised, based on tax laws and rates that have been enacted or substantially enacted at the balance
sheet date.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised
to the extent that it is probable that taxable profits will be available against which deductible temporary differences can
be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial
recognition of other assets and liabilities in a transaction (other than in a business combination) that affects neither the
taxable profit nor the accounting profit.
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.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Earnings continued
Current tax:
(a) Tax in the income statement
Current tax:
Current year
Adjustments in respect of previous periods*
Total current tax
Deferred tax:
Current year
Adjustments in respect of previous periods*
Effect of changes in tax rate
Total deferred tax
Total tax charged in the income statement
(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:
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
77.2
(33.6)
43.6
2.1
(14.7)
0.6
(12.0)
31.6
77.3
(0.5)
76.8
0.4
(1.7)
0.3
(1.0)
75.8
Profit before tax
Tax at the UK corporation tax rate of 19% (2021: 19%)
IFRS2 share scheme charge
Expenses not deductible for tax purposes
Overseas losses not utilised
Non-qualifying depreciation
Super deduction – capital allowances
Rate change
Patent box claim
Other tax adjustments in respect of previous years
Total tax charged in the income statement
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
405.8
390.3
77.1
0.3
1.0
2.7
1.6
(2.4)
0.6
(9.0)
(40.3)
31.6
74.1
(0.3)
1.7
2.2
0.6
(0.6)
(1.7)
–
(0.2)
75.8
UK Corporation tax is calculated at 19% (2021: 19%) of the estimated assessable profit for the period. Tax for other countries is
calculated at the rates prevailing in the respective jurisdictions.
*
The adjustments in respect of previous periods are primarily driven by two items:
As a result of a patent granted in 2021, a tax deduction was taken in relation to the Patent Box legislation for the periods
from 2017 to 2021 by resubmitting the relevant tax computations accordingly. This legislation allows the income directly
attributable to patented items to be taxed at 10% instead of 19% and the resubmission resulted in a prior year current tax
credit of £36.1m.
As a result of the change of the tax rate from 19% to 25%, it was decided that the group would not claim capital allowances
other than the deductions available under the capital allowance super deduction regime. This was to preserve the tax benefit
available to be realised at a higher tax rate. This adjustment gave rise to a £10.4m debit to current tax and a corresponding
£10.4m credit to deferred tax.
(b) Tax relating to items of other comprehensive income or changes in equity
Deferred tax (credit)/charge to other comprehensive
income on actuarial difference on pension scheme
Change of rate effect on deferred tax
Deferred tax charge/(credit) to equity on share schemes
Current tax (credit)/charge to equity on share schemes
Total(credit)/charge to other comprehensive income or changes in equity
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
(34.8)
(11.0)
1.3
(0.4)
(44.9)
33.5
8.5
(1.3)
0.1
40.8
The Group’s effective rate of tax is 7.8% (2021: 19.4%). The lower effective tax rate is largely driven by the effect of the Patent Box
deduction which was realised during the period as discussed in note 9(a) above.
Deferred tax:
Analysis of deferred tax assets and liabilities, and the movements on them during the period.
At 26 December 2020
(Charge)/credit to income statement
Credit to the income statement – change of rate
Credit outside the income statement- change of rate
(Charge)/credit outside the income statement
At 25 December 2021
(Charge)/credit to income statement
(Charge) to the income statement – change of rate
Credit outside the income statement – change of rate
(Charge)/credit outside the income statement
At 24 December 2022
Retirement
benefit
obligations
£m
Accelerated
capital
allowances
£m
Company
share
schemes
£m
Other
temporary
differences
£m
Leasing
£m
9.1
(2.3)
–
(8.5)
(33.5)
(35.2)
–
–
11.0
34.8
10.6
1.3
(1.1)
–
–
–
0.2
12.9
(0.4)
–
–
12.7
0.3
1.9
–
0.3
1.0
3.5
–
–
0.2
(1.5)
2.2
3.1
(0.5)
0.7
–
–
3.3
0.2
–
–
–
3.5
1.5
1.4
1.0
–
–
3.9
(0.6)
(0.2)
–
–
3.1
Total
£m
15.3
(0.6)
1.7
(8.2)
(32.5)
(24.3)
12.5
(0.6)
11.2
33.3
32.1
Deferred tax arising from accelerated capital allowances can be further analysed as a £16.5m asset and a £3.8m liability (2021:
£2.7m asset and £2.5m liability).
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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177
Earnings continued
The presentation in the balance sheet is as follows:
Deferred tax assets
Deferred tax liabilities
24 December 2022
£m
25 December 2021
£m
35.9
(3.8)
32.1
13.4
(37.7)
(24.3)
At the balance sheet date the group had unused tax losses as disclosed below. These losses are carried forward by particular
group companies and may only be offset against profits of that particular company. Deferred tax assets are not recognised
in relation to these losses as it is not considered probable that suitable future taxable profits will be available in the relevant
company against which the unused losses can be utilised. Specifically, in the case of the trading and non-trading losses this is
due to the unpredictability of future profit streams in the relevant entities, while for the capital losses it is due to the future capital
gains not currently being forecast to arise. All unrecognised losses may be carried forward indefinitely and have been valued in
GBP at the year end closing exchange rate.
The analysis below does not include any tax losses attributable to our former subsidiaries in the Netherlands and Germany,
which have now ceased to trade.
Trading losses
Non-trading losses
Capital losses
Total losses
24 December 2022
£m
25 December 2021
£m
77
20
86
183
63
20
86
169
The losses disclosed above relate to activities both in the UK and in overseas jurisdictions. Of the trading losses, £31m relate to
UK activities with the remainder being attributable to Belgium (£1m), Ireland (£2m) and France (£43m). All of the non-trading
losses and capital losses are attributable to UK activities.
8 Earnings per share
From continuing operations
Basic earnings per share
Effect of dilutive share options
Diluted earnings per share
52 weeks to 24 December 2022
52 weeks to 25 December 2021
Earnings
£m
374.2
–
374.2
Weighted average
number of shares
m
Earnings per
share
p
568.6
2.1
570.7
65.8
(0.2)
65.6
Earnings
£m
314.5
–
314.5
Weighted average
number of shares
m
Earnings per
share
p
591.2
2.1
593.3
53.2
(0.2)
53.0
The difference between the weighted average number of shares used in the calculation of basic earnings per share and the total
number of shares in issue at the period end is due to the net effect of time-apportioned adjustments for shares held in treasury,
shares held in trust which are not unconditionally vested, and shares bought back and cancelled in the period.
Operating assets and liabilities
9
Intangible assets
(a) Total amounts recognised in the balance sheet
Goodwill
Software
(b) Goodwill
24 December 2022
£m
25 December 2021
£m
12.4
23.5
35.9
–
22.6
22.6
The goodwill all arose on the acquisition in the current year of Sheridan Fabrications Ltd. Further details, together with the
accounting policy for goodwill, are given in note 26.
(c) Software
Accounting policy
Directly attributable costs incurred for the development of computer software controlled by and for use within the business
are capitalised and written off over their estimated useful lives, which are reviewed annually and which range between three
and seven years. No amortisation is charged on assets under construction.
Amounts paid to third parties for development of assets not controlled by the Group are expensed over the period where the
Group receives the benefit of the use of these assets. Licence fees for using third-party software are expensed over the period
the software is in use.
Cost
At 26 December 2020
Exchange adjustments
Additions
Disposals
Reclassifications
At 25 December 2021
Exchange adjustments
Additions
Acquisition of subsidiary (note 26)
Disposals
Reclassifications
At 24 December 2022
Accumulated depreciation
At 26 December 2020
Exchange adjustments
Charge for the period
Disposals
At 25 December 2021
Exchange adjustments
Charge for the period
Disposals
At 24 December 2022
Net book value at 24 December 2022
Net book value at 25 December 2021
Intangible assets
in use
£m
Assets under
construction
£m
50.6
(0.1)
5.6
(13.1)
3.3
46.3
0.1
1.8
0.3
(5.2)
2.5
45.8
(29.2)
0.1
(9.1)
10.6
(27.6)
(0.1)
(7.5)
5.1
(30.1)
15.7
18.7
2.9
–
4.4
(0.1)
(3.3)
3.9
–
6.5
–
(0.1)
(2.5)
7.8
–
–
–
–
–
–
–
–
–
7.8
3.9
TOTAL
£m
53.5
(0.1)
10.0
(13.2)
–
50.2
0.1
8.3
0.3
(5.3)
–
53.6
(29.2)
0.1
(9.1)
10.6
(27.6)
(0.1)
(7.5)
5.1
(30.1)
23.5
22.6
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Operating assets and liabilities continued
10 Property, plant and equipment
Accounting policy
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 any
accumulated impairment losses.
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 years
Leasehold property improvements and fittings
the period of the lease, or the individual asset’s life, if shorter
Plant, machinery & vehicles
Fixtures & fittings
3–20 years
2–15 years
Capital work-in-progress and freehold land are not depreciated.
Residual values, remaining useful economic lives and depreciation periods and methods are reviewed regularly
and adjusted if appropriate.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised in
the income statement.
Cost
At 26 December 2020
Exchange adjustments
Additions
Disposals
Reclassifications
At 25 December 2021
Exchange adjustments
Additions
Acquisition of subsidiary (note 26)
Disposals
Reclassifications
At 24 December 2022
Accumulated depreciation
At 26 December 2020
Exchange adjustments
Charge for the period
Disposals
At 25 December 2021
Exchange adjustments
Charge for the period
Disposals
At 24 December 2022
Freehold
property
£m
Leasehold
property
improvements
£m
Plant,
machinery
& vehicles
£m
Fixtures
& fittings
£m
Capital
WIP
£m
42.9
–
12.2
–
–
55.1
–
16.2
0.1
–
1.7
73.1
(7.8)
–
(1.3)
–
(9.1)
–
(1.7)
–
£m
91.9
–
6.6
(7.3)
0.9
92.1
–
16.5
–
(0.3)
(0.2)
£m
184.7
(0.2)
8.7
(12.0)
9.8
191.0
0.1
12.2
0.3
(5.3)
8.1
£m
182.1
(0.6)
29.6
(4.4)
0.4
207.1
0.5
49.6
0.1
(1.3)
8.2
108.1
206.4
264.2
(32.2)
(125.0)
(109.3)
–
(4.7)
7.3
0.1
(11.9)
11.3
(29.6)
(125.5)
–
(5.1)
0.3
(0.1)
(12.3)
4.9
0.2
(13.6)
4.3
(118.4)
(0.1)
(17.4)
1.3
(10.8)
(34.4)
(133.0)
(134.6)
£m
21.5
–
22.7
–
(11.1)
33.1
–
44.4
–
–
(17.8)
59.7
–
–
–
–
–
–
–
–
–
Net book value at 24 December 2022
Net book value at 25 December 2021
62.3
46.0
73.7
62.5
73.4
65.5
129.6
88.7
59.7
33.1
TOTAL
£m
£m
523.1
(0.8)
79.8
(23.7)
–
578.4
0.6
138.9
0.5
(6.9)
–
711.5
(274.3)
0.3
(31.5)
22.9
(282.6)
(0.2)
(36.5)
6.5
(312.8)
398.7
295.8
11 Lease right-of-use assets and lease liabilities
Accounting policy
We assess whether a lease exists at the inception of the related contract. If a lease exists, we recognise a right-of-use asset
and a corresponding lease liability with effect from the date the lease commences.
The lease liability
The lease liability is initially measured at the present value of the lease payments due. As the discount rate inherent in our
leases is not readily determinable, we use the Group’s incremental borrowing rate to discount the payments and arrive at net
present value.
The Group does not have a history of borrowing, and therefore it does not have a credit agency credit rating. Therefore, we
derive the incremental borrowing rate by a process of:
• discussion with our bankers to estimate a reasonable proxy credit rating for the Group;
• using an independent third-party borrowing rate curve, giving indicative costs of borrowing for companies with a
comparable credit rating over various durations, and
• selecting borrowing rates from the appropriate points on that curve to best match the duration of our lease portfolios.
Our leases are on relatively simple terms. Lease payments included in the measurement of the lease liability comprise fixed
lease payments, less any lease incentives. We do not have variable lease payments which depend on an index, residual value
guarantees, purchase options or termination penalties.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
We remeasure the lease liability (and make a corresponding adjustment to the related right-of-use asset) whenever:
•
•
the lease term has changed, in which case the lease liability is remeasured by discounting the revised lease payments
using a revised discount rate; or
the lease payments have changed as a result of a change in an index, or, as is common with property leases, to reflect
changes in market rental rates. In these cases, the lease liability is remeasured by discounting the revised lease payments
using the initial discount rate.
In any cases other than those described immediately above, where a lease contract is modified and the lease modification is
not accounted for as a separate lease, the lease liability is remeasured by discounting the revised remaining lease payments
using a revised discount rate.
The lease liability is presented as a separate item in the balance sheet and is split between current and non-current portions.
The lease right-of-use asset
‘The right-of-use asset comprises the initial measurement of the corresponding lease liability and any initial direct costs of
obtaining the lease. It is subsequently measured at cost less accumulated depreciation and any impairment losses.
Whenever we incur an obligation for costs to restore a leased asset to the condition required by the terms and conditions of
the lease, a provision is recognised and measured under IAS 37.
Right-of-use assets are depreciated over the lease term as this is always shorter than the useful life of the underlying asset.
Depreciation starts at the commencement date of the lease. We do not have any leases that include purchase options or
transfer ownership of the underlying asset.
The right-of-use assets are presented as a separate line item in the balance sheet.
Lease term
It is uncommon for any of our leases to have extension options, although in the case of property leases it is common for us to
enter into a new lease of the same property when the current lease expires. It is also uncommon for us to exit any leases before
the end of their specified maximum term. Therefore we assume on inception that our leases will run to the maximum term in
the lease agreement.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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181
Operating assets and liabilities continued
Amounts recognised in the income statement
Property leases treated as short-term leases when in the process of being renewed
From time to time when renewing a property lease, the new lease may not be formally signed before the end date of the
previous lease. In these circumstances, although both we and the landlord will have agreed our willingness to renew the
lease in principle, and we may also have protection under property law which grants us the right to renew the lease, our
interpretation of IFRS 16 is that there is no enforceable right to renew the lease until the new lease is formally signed.
Therefore, we treat any lease payments made in this period between expiry and renewal as short-term lease payments under
IFRS 16 and we expense them, taking advantage of the IFRS16 short-term lease exemption.
Amounts treated as variable lease payments – rent reviews
It is common for property leases to contain a clause whereby the rent is reviewed every five years and adjusted in line with
prevailing market rates. The process of agreeing rent reviews can sometimes be a lengthy one, and some reviews are not
agreed until after their effective date.
In these cases we will continue to pay rent at the old rate until the rent review is agreed and neither the lease asset nor the
lease liability is remeasured. If the new rent is agreed at a higher rate than the old rent, there will be a one-off payment to the
lessor, covering the increase in rent for the period between the date from which the rent review was effective and the date on
which the rent review was agreed.
This payment is treated as a variable lease payment and is not included in the remeasurement of the lease liability.
The lease asset and liability are remeasured from the rent review agreement date, based on the future agreed cashflows at
the new agreed rent.
Nature of the Group’s leasing activities
Around 90% of our leases by value are for depot, warehouse, and office properties. A typical depot lease would be for a period
of 10 to 15 years, with warehouse and factory leases being for significantly longer and typical office lease periods being shorter.
We also lease other smaller assets such as fork lift trucks, lorries, vans and cars, with typical lease periods ranging up to around
5 years.
Amounts recognised in the balance sheet
Right-of-use assets
Property
Vehicles, plant & machinery
Additions to right-of-use assets in the period
24 December 2022
£m
25 December 2021
£m
565.6
48.7
614.3
141.6
510.9
44.9
555.8
70.0
The additions to right-of-use assets in 2022 includes £1.3m acquired as part of a business combination (see note 26).
Lease liabilities
Current
Non-current
24 December 2022
£m
25 December 2021
£m
(95.3)
(570.0)
(665.3)
(57.5)
(533.7)
(591.2)
Included in net operating expenses
Depreciation of right-of-use assets:
– property
– vehicles, plant & machinery
Impairment and net (gain)/loss on lease termination
Total – recognised in net operating costs
Expense relating to short-term leases
Variable lease payments, not included in the measurement of lease liabilities
Included in finance costs
Interest expense on lease liabilities
Cash flows and maturity analysis of lease liabilities
Total cash outflow for leases
Maturity analysis of lease liabilities
Contractual undiscounted cashflows due
– within 1 year
– 1 to 5 years
– more than 5 years
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
65.4
16.3
(0.9)
80.8
5.4
2.9
13.1
58.0
15.2
1.6
74.8
3.7
1.6
11.0
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
79.2
85.8
24 December 2022
£m
25 December 2021
£m
109.9
285.4
371.6
766.9
68.0
263.5
352.5
684.0
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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183
Operating assets and liabilities continued
12 Inventories
!
Estimation uncertainty – allowances against the carrying values of inventories
In order to achieve the accounting objective that inventories are stated at the lower of cost and net realisable value, the Group
carries an allowance against products which it estimates may not sell at a price above cost, or where we may be holding
levels of product in excess of estimated future demand. The Group bases these estimates on regular reviews of stock levels,
as well as of product lifecycles, selling prices achieved in the market and historical sales profiles of products after they have
been discontinued. These estimates are regularly reviewed against actual experience, and revised to reflect any differences,
but the accuracy of the estimates at any point in time can be affected by the extent to which current products may not follow
historical patterns.
Both the gross inventory balance and the amount of the allowance against carrying value are material items and we
would expect this to remain the case as the Group grows in size, and as consumer demand for regular introductions of
new product continues.
We derive our allowance against carrying value based on specific kitchen ranges and stock items where a decision has been
made to discontinue future sales or where our monitoring of current sales indicates that the rate of sales is in decline and
the product may be coming to the end of its life cycle. The level of judgement and estimation involved requires assessing the
obsolescence risk across a high volume of SKUs, which can have different risk profiles. As such, the allowance is specific in
nature and does not lend itself to meaningful sensitivity analysis in the same way as a figure which is derived by a general
formula. The potential range of reasonable outcomes could be material. In the analysis of the allowance below, we have
separately identified the aggregate gross value of stock against which an allowance has been made.
Once a decision is made to discontinue future sales of a product, it will still be available for sale in depots for a standard period
of time, after which any remaining units of that product will be removed from sale. Our stock allowance is calculated so that
the carrying value of any unsold units is progressively written down to nil over the period during which they are available for
sale. The rate at which the units are written down to nil is based on actual historical experience of realised selling prices for
previous similar products, and recognises that higher selling prices are typically achievable at the beginning of the period
than at the end of the period. Rates are reviewed regularly against historical experience and are adjusted if necessary.
Accounting policy
Inventories are stated at the lower of cost and net realisable value. In the case of manufactured inventories, cost includes
an appropriate share of production overheads based on normal operating capacity, calculated using a standard cost
which is regularly updated to reflect average actual costs. An allowance is made for obsolete, slow-moving, or defective
items where appropriate.
Raw materials
Work in progress
Finished goods and goods for resale
Allowance against carrying value of inventories
24 December 2022
£m
25 December 2021
£m
24.3
6.2
396.3
(53.5)
373.3
16.0
5.6
322.9
(42.9)
301.6
The aggregate carrying amount of specific inventories against which allowances have been made is given below:
Stock with no allowance against it
Stock with an allowance
2022
2021
Gross value of stock
£m
Allowance against
carrying value
£m
Gross value of stock
£m
Allowance against
carrying value
£m
323.3
103.5
426.8
–
(53.5)
(53.5)
269.7
74.8
344.5
–
(42.9)
(42.9)
13 Other financial assets
Accounting policy
Trade receivables do not contain a significant financing component and are stated at their nominal value, reduced by an
allowance for expected credit losses. This approximates to their fair value.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses. This uses a lifetime expected loss
allowance for all trade receivables. To measure the expected credit losses trade receivables have been grouped based on
shared credit risk characteristics and the days past due.
To determine expected credit losses, the Group uses historical observed default rates for these different groups of
receivables, adjusted for forward-looking estimates. The default rates and forward-looking estimates are revised at each
reporting date.
Trade and other receivables
Trade receivables (net of allowance)
Prepayments
Other receivables
An analysis of the Group’s allowance for expected credit losses on debtors is as follows:
Balance at start of period
Acquired with subsidiary (note 26)
Increase in allowance recognised in the income statement
Balance at end of period
24 December 2022
£m
25 December 2021
£m
173.5
55.2
4.6
233.3
166.5
34.3
5.0
205.8
24 December 2022
£m
25 December 2021
£m
15.8
0.2
1.6
17.6
12.9
–
2.9
15.8
Trade receivables – exposure to credit risk and allowance for expected credit losses
We have no significant concentration of credit risk, as our exposure is spread over a large number of customer accounts.
We charge interest at appropriate market rates on balances which are in litigation.
Before accepting any new credit customer, we obtain a credit check from an external agency to assess the potential customer’s
credit quality, and then we set credit limits on a customer-by-customer basis. We review credit limits regularly, and adjust them if
circumstances change. In the case of one-off customers, our 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 as a percentage of sales, and we consider the credit quality of period end trade
receivables to be high. We regularly review trade receivables which are past due but not impaired, and we make an allowance
against them based on any expected credit losses. We base our assessment both on past experience and also on whether there
are any other likely significant future factors which might affect recoverability and influence our assessment of expected credit
losses. We maintain regular contact with customers with overdue debts and, where necessary, we take legal action to recover
the receivable.
We wrote off £7.9m of debts in the period (2021: £5.6m). Included within our aggregate trade receivables balance are specific
debtor balances with customers totalling £44.7m before allowance for expected credit losses (2021: £42.6m before allowance)
which are past due as at the reporting date. We have assessed these balances for recoverability and we believe that their credit
quality remains intact.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Operating assets and liabilities continued
An ageing analysis of these past due trade receivables is 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
24 December 2022
£m
25 December 2021
£m
22.6
6.1
3.8
12.2
44.7
24.8
5.6
2.6
9.6
42.6
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 and cash equivalents
Cash and cash equivalents comprises cash at bank and on hand together with demand deposits, and other short-term
investments (see below). 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 value of these assets
approximates to their fair value.
Short-term 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 intends to hold these investments in
order to collect contractual cashflows which are solely payments of principal and interest, they 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. They form part of our cash and cash
equivalents for cash flow purposes.
There were no investments at the current balance sheet date. The investments held at the previous balance sheet date had
maturity dates ranging between 1 and 3 months. They returned a fixed rate of interest and their weighted average effective
interest rate was 0.02% pa.
The carrying value of these investments at the previous period end approximated to their fair value.
14 Other financial liabilities
Accounting policy
Trade payables are not interest-bearing and are stated at their nominal value, which approximates to their fair value.
Trade and other payables
Current liabilities
Trade payables
Other tax and social security
Other payables
Accruals and deferred income
24 December 2022
£m
25 December 2021
£m
189.5
91.9
37.2
115.3
433.9
178.8
86.6
26.3
93.0
384.7
Trade payables, other payables, and accruals principally comprise amounts due in respect of trade purchases and ongoing costs.
The average credit taken for trade purchases during the period, based on total operations, was 55 days (2021: 59 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.
15 Provisions
Accounting policy
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 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.
At 26 December 2020
Additional provision in the period
Provision released in the period
Utilisation of provision in the period
At 25 December 2021
Additional provision in the period
Provision released in the period
Utilisation of provision in the period
At 24 December 2022
Presented as current liabilities
Presented as non-current liabilities
Property
£m
Warranty
£m
Closure costs
£m
French post-
employment
benefits
£m
5.6
3.2
(0.2)
(1.6)
7.0
1.3
(1.6)
(1.7)
5.0
4.4
0.6
5.0
8.0
7.7
–
(4.8)
10.9
7.0
–
(6.7)
11.2
7.6
3.6
11.2
–
2.2
–
–
2.2
–
(1.4)
(0.8)
0.0
–
–
–
0.3
–
–
–
0.3
–
–
–
0.3
–
0.3
0.3
Total
£m
13.9
13.1
(0.2)
(6.4)
20.4
8.3
(3.0)
(9.2)
16.5
12.0
4.5
16.5
In the current reporting period, provisions have been presented as either current or non-current liabilities for the first time. The
basis of the allocation is outlined for each type of provision, below. In prior periods, all provisions were presented as non-current.
Property provision
The property provision covers obligations to make dilapidation payments to landlords of leased properties. Following the
guidance in the IFRSs governing leases and provisions, our assessment is that, in general, the likelihood of a cash outflow for
dilapidations at the time of signing a lease is remote, and therefore it would be unusual for us to recognise any costs relating to
dilapidations at that time.
In these cases, the event which changes our assessment of the likelihood of a cash outflow for dilapidations from being remote
to being probable, and which therefore triggers our recognition of a provision for that probable outflow, typically occurs as
we come towards the end of a lease and we can assess the condition of the leased property and the likelihood of dilapidations
being payable.
The timing of any outflows from the provision is variable, and is dependent on the timing of dilapidations assessments and works.
Although circumstances will differ from property to property, a typical pattern would be that the outflow would occur within 1–3
years of the provision being made. The amounts provided are specific to each property and are based on our best estimate of
the cost of performing any required works or, in cases where we will not be directly contracting for the works to be done, our best
estimate of the outflow required to settle any claim from the landlord. Where the amounts involved are significant, we would
typically take advice on the likely costs from third-party property maintenance specialists.
For the purposes of allocating this provision between current liabilities and non-current liabilities we have used our best estimate
of when we would reasonably expect outflows to occur, based on circumstances at each relevant property.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Operating assets and liabilities continued
Warranty provision
The warranty provision relates to the estimated costs of product warranties. As products are sold, the Group makes provision
for claims under warranties, based on actual sales and on historical average warranty costs incurred. As claims are made,
the Group utilises the provision and then uses the historical data on the rate and amount of claims to periodically revise our
expectations of the amount of future warranty costs and therefore the rate at which it is appropriate to provide for warranty
costs on each sale in the future.
For the purposes of allocating this provision between current liabilities and non-current liabilities we have used the historical
data on timing and amount of claims to estimate the costs for the next 12 months and have classified this as a current liability.
Closure costs
Closure costs in 2021 relate to closing 5 depots in France, which did not align with our city-based depot expansion plans.
French post-employment benefits provision
This provision relates to a benefit which is payable to employees in our French subsidiary under French law on retirement. It is
a lump sum payable on retirement, not a recurring pension. There will only be an outflow from this provision 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. The calculation to arrive at the
best estimate of the required provision is revised periodically by third-party specialists and our provision is adjusted in line with
the results of this calculation if necessary.
We have estimated that the whole of this provision is non-current.
Balance at the beginning of the period
597,573,827
602,863,861
Bought back and cancelled during the period
(36,657,778)
(5,290,034)
Balance at the end of the period
560,916,049
597,573,827
59.8
(3.7)
56.1
60.3
(0.5)
59.8
Share capital
The Company has one class of ordinary share that carries no right to fixed income. The holders of ordinary shares are entitled
to receive dividends as declared and are entitled to one vote per share at meetings of the Company. All shares rank equally with
regard to the Company’s residual assets.
Description of the nature and purpose of the other reserves shown in the balance sheet
The share premium reserve represents the amounts above the nominal value received for shares sold. The capital redemption
reserve represents the nominal value of share capital bought back and cancelled. The ESOP reserve relates to the costs of
providing share-based payments. The treasury share reserve represents the cost of shares bought from the market and held in
treasury. The retained earnings reserve represents the Group’s cumulative results.
Capital structure and risk
16 Share capital and reserves
Ordinary shares of 10p each:
Allotted, called up and fully paid
52 weeks to
24 December 2022
No.
52 weeks to
25 December 2021
No.
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
18 Notes to the cash flow statement
Analysis of net cash
17 Dividends
Amounts recognised as distributions to equity holders in the period:
Interim dividend for the 52 weeks to 24 December 2022 – 4.7p/share
Final dividend for the 52 weeks to 25 December 2021 – 15.2p/share
Interim dividend for the 52 weeks to 25 December 2021 – 4.3p/share
Final dividend for the 52 weeks to 26 December 2020 – 9.1p/share
Special dividend for the 52 weeks to 26 December 2020 – 9.1p/share
Dividends proposed at the end of the period (but not recognised in the period):
Proposed final dividend for the 52 weeks to 24 December 2022 – (15.9p/share)
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
26.1
88.9
–
–
–
115.0
–
–
25.3
54.2
54.1
133.6
52 weeks to
24 December 2022
£m
87.9
87.9
The Directors propose a final dividend in respect of the 52 weeks to 24 December 2022 of 15.9p per share, payable to ordinary
shareholders who are on the register of shareholders at 11 April 2023, and payable on 19 May 2023.
The proposed final dividend for the current period is subject to the approval of the shareholders at the 2023 Annual General
Meeting, and have not been included as a liability in these financial statements.
Dividends have been waived indefinitely on all shares held by the Group’s employee share trusts which have not yet been
awarded to employees.
At 25 December 2021
Cash flow
At 24 December 2022
Cash at bank
and in hand
£m
490.3
(182.3)
308.0
Current asset
investments
£m
25.0
(25.0)
–
Cash and cash
equivalents,
and net cash
£m
515.3
(207.3)
308.0
The current asset investments had a maturity of less than three months, and as such were considered to be cash equivalents for
the purposes of the cash flow statement. More details are given at Note 13.
Changes in liabilities arising from financing activities
The only liabilities which have changed due to financing activities are lease liabilities. The cash and non-cash changes in lease
liabilities are analysed below.
Opening balance
Cash movement: repayment of principal on lease liabilities
Cash movement: lease interest paid
Non-cash movement: lease interest charged
Non cash movement: net additions to lease liabilities
Closing balance
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
(591.2)
66.1
13.1
(13.1)
(140.2)
(665.3)
(580.5)
74.8
11.0
(11.0)
(85.5)
(591.2)
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Howden Joinery Group Plc / Annual Report & Accounts 2022
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Capital structure and risk continued
19 Borrowing facility
Accounting policy
Fees relating to borrowing facilities are recorded as prepayments and released over the life of the facility.
At the period end date, the Group had a £150m committed multi-currency revolving credit facility, due to expire in September
2027. The Group did not use the facility in the year.
As at 24 December 2022, the full £150m of the facility was available 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 SONIA plus a margin of between 100 and 175 basis points,
with the margin being dependent on the ratio of total net debt to EBITDA.
The facility has two covenants, both of which are calculated on a 12 month rolling basis twice each year, at year end and then
again at half year end. Under one covenant the ratio of EBITDA to net debt has to be less than 3:1, and under the other covenant
the ratio of EBITDA to net finance charges has to be greater than 4:1.
20 Financial risk management
(a) Capital risk management
The Group manages its capital structure to maximise shareholder returns through its debt and equity balance, trading-off the
benefits of financial leverage with the expected future costs of financial distress.
The capital structure of the Group consists of 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 16).
The Board of Directors reviews the capital structure regularly, including 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 costs 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 buybacks, taking on or issuing new debt or repaying any existing debt.
(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 included in the relevant notes to the financial statements. An index to the notes is located
between the cash flow statement and note 1
(c) Categories of financial instruments
Financial assets (current and non-current)
Trade receivables
Cash and cash equivalents
Financial liabilities (current and non-current)
Trade payables
24 December 2022
£m
25 December 2021
£m
173.5
308.0
166.5
515.3
189.5
178.8
(d) Financial risk management
General
The Group is exposed in varying degrees to a variety of financial instrument related risks. The Board has approved and monitors
the risk management processes, including documented treasury policies, counterparty limits, and controlling and reporting
structures. The types of risk exposure, the way in which these exposures are 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 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 13.
(e) Credit risk
The Group’s principal financial assets are cash, investments, and trade and other receivables. Our main credit risk is the risk of
trade customers defaulting their debts. We have a policy of only dealing with creditworthy counterparties in order to mitigate the
risk of defaults.
We describe our policy on dealing with trade customers in note 13. Trade receivables are spread over a large number of
customers, and we do not have a significant exposure to any single counterparty.
We limit our 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.
In addition, the Group Treasury function monitors counterparty risk through credit agency ratings.
Our maximum exposure to credit risk is presented in the following table:
Trade receivables (net of allowance)
Cash
Current asset investments
Total credit risk exposure
24 December 2022
£m
25 December 2021
£m
173.5
308.0
–
481.5
166.5
490.3
25.0
681.8
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Capital structure and risk continued
(f) Liquidity risk
Liquidity risk is the risk that the we could experience difficulties in meeting our 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 Strategic Review contains a section describing the interaction of liquidity risk and the going
concern review.
Maturity profile of outstanding financial liabilities
Our only outstanding financial liabilities, other than leases, are our trade creditors. These are capital liabilities, with no
associated interest, and are payable within one year. Our lease liabilities are disclosed at note 11.
(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 we are exposed are foreign exchange risk, and interest rate risk. These are discussed further below:
Foreign exchange risk
We are 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. Our policy is generally not to hedge such exposures. The exposure of the our financial assets
and liabilities to currency risk is as follows:
(h) Financial instrument sensitivities
Financial instruments affected by market risk include 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 cash 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:
• 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 increase by £0.6m (2021: increase by £1.1m).
24 December 2022
£m
25 December 2021
£m
For a decrease of 50 basis points, the current year figures would decrease by £0.6m (2021: decrease by £1.1m).
Euro
Trade receivables
Other receivables
Cash and cash equivalents
Trade payables
Other payables
US Dollar
Other receivables
Cash and cash equivalents
Trade payables
TOTAL
Interest rate risk
The Group does not have any significant exposure to interest rate risk.
9.4
3.9
56.7
(43.4)
(7.3)
19.3
1.1
25.3
(1.1)
25.3
44.6
6.5
2.7
59.7
(39.3)
(7.5)
22.1
–
23.3
–
23.3
45.4
Foreign exchange sensitivity
As noted above, the Group is mainly exposed to movements in Euro and US dollar exchange rates. The following information
details our sensitivity to a 10% weakening or strengthening in 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 our 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
24 December 2022
£m
25 December 2021
£m
2.1
(1.7)
2.8
(2.3)
2.4
(2.0)
2.6
(2.1)
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Employees
21 Staff costs and number of employees
The aggregate payroll costs of employees, including executive directors, were:
Wages and salaries
Social security costs
Pension operating costs (note 22)
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
(536.3)
(47.8)
(40.0)
(624.1)
(474.6)
(44.7)
(34.0)
(553.3)
Wages and salaries includes a charge in respect of share-based payments of £7.3m (2021: £10.1m).
The average monthly number of persons (including executive directors) employed by the Group during the period was as follows:
52 weeks to
24 December 2022
No.
52 weeks to
25 December 2021
No.
12,408
10,789
22 Retirement benefit obligations
!
Significant judgement and source of estimation uncertainty
There is significant judgement involved in selecting appropriate measurement bases for the actuarial assumptions used to
measure the pension liability.
There is also estimation uncertainty relating to the assumptions, as reasonable alternative assumptions could have led to
measurement at a materially different amount.
The key assumptions within this calculation are discount rate, inflation rates and mortality rates. These are set out
below, together with sensitivity analysis that shows the effect that these estimates can have on the carrying value of the
pension deficit.
There is also significant judgement around the valuation of the subset of the unquoted pension assets for which the most
recent available valuations at the time of approving these financial statements are valuations from the relevant fund
managers as at 30 September. Detail of the approach taken, and of the amounts involved, is given below under the heading
‘Valuation of plan assets’
Accounting policies
Defined contribution pensions
Payments to defined contribution pension schemes are charged to the income statement as they fall due.
Defined benefit pensions
The calculation of the Group’s net asset or obligation is performed by a qualified actuary using the projected unit method.
When the calculation results in a potential asset, the recognised asset is limited to the present value of economic benefits
available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the
present value of economic benefits, consideration is given to any applicable minimum funding requirements. The Group
considers that there are no restrictions caused by IFRIC 14 on recognising any pension asset.
Scheme liabilities are calculated by estimating the amount of future benefit that employees have earned in return for
their service. That benefit is then discounted to determine its present value. The discount rate used is selected 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. This discount rate is also used to calculate the net pension scheme finance charge or credit.
Scheme assets are carried at fair value. More details are given in this note as part of the analysis of plan assets.
Current and past service costs and the net pension finance charge or credit are recognised in the income statement.
Actuarial gains and losses are recognised immediately through the remeasurement of the defined benefit liability and
are taken through the statement of comprehensive income.
(a) Overview of all retirement benefit arrangements
Defined contribution: auto-enrolment plan
The Group operates an auto-enrolment defined contribution plan for employees. 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 £37.0m (2021: £26.5m) represents the Group’s
contributions due and payable in respect of the period. All of this amount was paid in the period as was also the case in the
previous period.
Defined contribution: other plan
The Group operates another 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.
The total cost charged to income in respect of this plan in the current period of £0.6m (2021: £0.7m) 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, and closed to future accrual on 31 March 2021.
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, inflation risk and market (investment) risk.
Longevity risk is the risk that members live for longer than is currently expected. That results in pensions being paid for longer
than expected, thus costing schemes more money.
Examples of interest rate risk are that a decrease in corporate bond yields increases the present value of the defined benefit
obligations, or that a decrease in gilt yields results in a worsening in the Scheme’s funding position.
An example of inflation risk is that an increase in inflation results in higher benefit increases for members which in turn increases
the Scheme’s liabilities.
Investment risk comes from three main sources: risk that the fund will fall in value, risk that the pension fund’s returns will not
keep pace with inflation (real returns are negative), and risk that the pension fund does not perform well enough to keep pace
with the growth in the cost of providing pension benefits.
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 2020 by the plan actuary. The actuary advising the Group has subsequently rolled forward
the results of the 5 April 2020 valuation to 24 December 2022. This roll-forward exercise involves updating all the assumptions
which are market-based (i.e. inflation, discount rate, rate of increase in pensions and rate of CARE revaluation) to values as at
24 December 2022. We are using CMI 2021 mortality tables, being the most recent tables available.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Employees continued
Funding and estimated contributions
The Group’s contributions in the current and prior periods are shown in the tables below. The Group bears the plan’s
administration costs. The Group also has an agreement with the pension plan trustees to make additional deficit contributions
to the plan of £30m per year until June 2023. Under the agreement, the scheme’s funding position is monitored on a monthly
basis and deficit contributions are be suspended if the scheme’s funding position is 100% or greater as at the last working day of
two consecutive months on a Technical Provisions (‘TP’) basis, and is resumed if the funding position subsequently falls back to
below 100% on the last working day of two consecutive months.
The scheme’s funding reached 100% on a TP basis part way through 2021 and additional deficit contributions stopped,
according to the mechanism described above. The scheme remained in surplus on a TP basis until the part way through October
2022, and remained in TP deficit from that point until the 2022 year end. Additional deficit contributions commenced from the
beginning of 2023.
The Group’s estimated total cash contributions to the defined benefit plan in the 52 weeks ending 30 December 2023 are £30.6m.
This figure allows for additional deficit contributions for the whole of 2023 at the current rate of £30m per year.
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 £41.5m. 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 £64.7m, this estimate being based on an approximate roll-forward of the 2020 triennial funding
valuation, updated for market conditions. The IAS 19 valuation requires ‘best estimate’ assumptions to be used whereas the
funding valuation uses ‘prudent’ assumptions. This would typically result in the funding valuation producing a higher deficit,
or a lower asset, than the IAS 19 valuation.
(b) Total amounts charged in respect of pensions in the period
Charged to the income statement:
Defined benefit plan – current service cost
Defined benefit plan – administration cost
Defined benefit plan – total service cost
Defined benefit plan – net finance (credit)/charge
Defined contribution plans – total operating charge
Total net amount charged to profit before tax
Charged to equity:
Defined benefit plan – actuarial losses/(gains)
Total charge/(credit)
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
–
2.4
2.4
(2.7)
37.6
37.3
183.0
220.3
4.8
2.0
6.8
0.4
27.2
34.4
(170.4)
(136.0)
(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%
52 weeks to
24 December 2022
52 weeks to
25 December 2021
2.70%
2.45%
2.65%
3.45%
2.15%
3.15%
2.70%
4.70%
86.6
88.4
87.6
90.2
2.85%
2.55%
2.80%
3.50%
2.20%
3.30%
2.85%
1.90%
86.6
88.4
87.6
90.3
Inflation assumption – RPI
Inflation assumption – CPI
Discount rate
Life expectancy (years): pensioner aged 65
– male
– female
Life expectancy (years): non-pensioner aged 45
– male
– female
Sensitivities
Assumption
Current valuation, using the assumptions above
0.5% decrease in discount rate
0.5% increase in inflation
1 year increase in longevity
Present value of
scheme liabilities at
24 December 2022
£m
Projected 2023 pension cost
Total service
cost
£m
Net interest
(credit)/cost
£m
Net pension
(credit)/expense
£m
931
1,007
968
963
2.6
2.6
2.6
2.6
1.3
4.4
3.1
2.8
3.9
7.0
5.7
5.4
The sensitivities above are applied to the defined benefit obligation at the end of the reporting period, and the projected total
service cost for 2023. Whilst the analysis does not take account of the full distribution of cash flows expected under the scheme,
it does provide a reasonable approximation. The same amount of movement in the opposite direction would produce a broadly
equal and opposite effect.
To address the requirements of both IAS 1 and IAS 19, we note that the effect on the discount rate and inflation sensitivities of
flexing them down to 0.25% or up to 1% in a linear manner would give materially correct results.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Employees continued
Analysis of plan assets
24 December 2022
25 December 2021
Quoted market price in
an active market
£m
No quoted market price
in an active market
£m
Quoted market price in
an active market
£m
No quoted market price
in an active market
£m
Liability-driven investments
174.1
Equities
– passive equities
Private equity
Alternative growth assets
– fund of hedge funds
– absolute return fund
Insurance-linked securities
Corporate bonds
Commercial property funds
Other secure income
Asset-backed securities
Cash and cash equivalents
Total
–
–
–
1.0
–
1.8
7.7
1.2
0.5
25.3
211.6
–
–
0.6
152.4
–
105.2
–
239.9
179.3
–
–
435.7
172.5
–
–
91.4
–
232.2
114.0
–
10.6
21.1
–
–
0.6
148.6
–
100.9
–
175.6
150.1
–
–
677.4
1,077.5
575.8
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.
Valuation of plan assets
All of the quoted assets have a daily price, and therefore are valued using market prices on the last trading day before our year end.
Unquoted investments are stated at values provided by the fund manager in accordance with relevant guidance. Some of
the unquoted investments are valued on a weekly basis, some are valued on a monthly basis, and others are only valued on a
quarterly basis. Based on asset values at the current year end, 48% of the unquoted assets are valued based on a valuation from
fund managers as at 31 December 2022, and a further 10% are valued at 3 January 2023, in both cases they are adjusted for
cash movements and rolled backwards using a suitable index if there is one. The fund managers’ 31 December 2022 valuations
for the remaining 42% of unquoted assets, which have a carrying value of £286.0m at the current period end, are not available
until after these consolidated financial statements are approved and so the only available valuations for these funds at the
current year is the 30 September 2022 valuations from the fund managers, which are adjusted for cash movements and rolled
forward to our year end date using a suitably-correlated index where one is available.
Asset allocation
As set out in the plan’s August 2022 Statement of Investment Principles, the plan trustees’ long-term asset allocation strategy is
to target a 60% allocation of assets to ‘Return-seeking assets’ and a 40% allocation to ‘risk-reducing assets’.
The plans accounts then goes on to explain these classes of assets as follows:
‘Return-seeking assets’ target a higher expected return than that of risk reducing/matching assets and typically have a
higher associated volatility, relative to liabilities. These assets would typically involve equities and could possibly include
alternative asset classes such as different types of absolute return and hedge funds, infrastructure, property and illiquid
credit approaches. Assets used to predominantly manage liquidity and cashflows within the Secure Income portfolio are also
deemed ‘Return-seeking’.
‘Risk-reducing (or matching) assets’ have characteristics that are broadly similar in nature to the liabilities. These assets are
predominantly government or corporate bonds and could also possibly include other financial instruments such as interest
rate and inflation swaps, credit default swaps and cash.
As can be seen from the asset analysis above, the actual mix of assets has been affected by the macroeconomic conditions of
the current year and has resulted in the sale of many of the risk-reducing assets by the year end, with the result that the asset
allocation set out in the August 2022 Statement of Investment Principles is not being met at the year end.
Analysis of plan members, scheme liability split and duration
Deferred members
Total members
Pensioners
Total No./average duration
No. of members
% of total liability
Duration (years)
20221
6,236
6,236
4,233
10,469
63%
37%
100%
19
11
16
1
The membership figures are as given in the plan accounts and are as at 31 March 2022, the date of the latest audited pension plan accounts. The duration and %
of liability figures are as calculated by the Group’s actuary as at the Group’s current year end.
Active members
Deferred members
Subtotal
Pensioners
Total No./average duration
No. of members
% of total liability
Duration (years)
20212
1,231
5,305
6,536
4,031
10,567
67%
33%
100%
24
13
20
2
The membership figures are as given in the plan accounts and are as at 31 March 2021, the date of the latest audited pension plan accounts. Since that date, the
plan has closed to further accrual and all non-pensioner members are now deferred members. The duration and % of liability figures are as calculated by the
Group’s actuary as at the Group’s current year end.
Duration depends on the discount rate. The higher the discount rate, the less valuable are payments in the long-term future –
reducing the average duration of the (discounted) liabilities. There has been a 2.8% increase in the discount rate in 2022, which
has shortened the duration.
Balance sheet
The amount included in the balance sheet arising from the Group’s obligations in respect of defined benefit retirement benefit
plan is as follows:
Present value of defined benefit obligations
Fair value of scheme assets
Surplus/(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
Actuarial losses/(gains):
– changes in financial assumptions
– changes in demographic assumptions
– experience
Benefits paid, including expenses
Present value at end of period
24 December 2022
£m
25 December 2021
£m
(930.5)
889.0
(41.5)
(1,512.5)
1,653.3
140.8
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
1,512.5
1,641.0
–
2.4
28.3
(622.8)
(3.5)
55.8
(42.2)
930.5
4.8
2.0
21.1
(127.7)
(5.2)
20.5
(44.0)
1,512.5
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Employees 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 the Group
(Loss)/return on assets excluding amounts included in net interest
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 income/(charge)
Total remeasurements recognised in other comprehensive income
Deficit at end of period
Income statement
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
1,653.3
31.0
0.4
(753.5)
(42.2)
889.0
1,593.3
20.7
25.3
58.0
(44.0)
1,653.3
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
140.8
–
(2.4)
0.4
2.7
(183.0)
(41.5)
(47.7)
(4.8)
(2.0)
25.3
(0.4)
170.4
140.8
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
Total service cost
The total service cost is included in the financial statement heading Staff Costs.
Amount credited to other finance charges:
Interest income on plan assets
Interest cost on defined benefit obligation
Net charge
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
–
2.4
2.4
4.8
2.0
6.8
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
(31.0)
28.3
(2.7)
(20.7)
21.1
0.4
The actual return on plan assets was a loss of £(722.5)m (52 weeks to 25 December 2021: increase of £78.7m).
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:
Actuarial (loss)/gain on plan assets
Decrease in plan liabilities due to financial assumptions and experience
(Increase) in plan liabilities due to experience
Decrease in plan liabilities due to demographic assumptions
Net actuarial (loss)/gain, before associated deferred tax
23 Share-based payments
Accounting policy
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
(753.5)
622.8
(55.8)
3.5
(183.0)
58.0
127.7
(20.5)
5.2
170.4
The Group issues equity-settled share-based payments. They are measured at fair value at the date of grant. The fair value is
expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest.
1) Details of each scheme
The Group recognised a charge of £7.3m (2021: charge of £10.1m) 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.
Share Incentive Plan (‘SIP’)
This is a UK tax-advantaged ‘all-employee’ share plan under which the Company may grant the following types of awards to
eligible UK employees:
(i)
Free Shares, the vesting and forfeiture period is three years commencing on the date of grant and subject to continued
employment. The shares are not subject to any performance conditions. Dividends are payable on the Free Shares during
the vesting period. Voting rights are attached to Free Shares during the vesting period.
(ii) Partnership Shares, which do not have a vesting period as they are purchased using deductions from the gross pay
of participating employees. The shares are not subject to any performance conditions. Dividends are payable on the
Partnership Shares from grant. Voting rights are attached to Partnership Shares from grant.
(iii) Matching Shares, the vesting and forfeiture period for which is three years commencing on the date of grant and subject to
continued employment and retention of the associated Partnership Shares in the SIP trust. Matching Shares are granted to
participants in a ratio determined by the Company up to a maximum of two free Matching Shares for each Partnership Share
purchased. Matching Shares are not subject to any performance conditions. Dividends are payable on the Matching Shares
during the vesting period. Voting rights are attached to Matching Shares during the vesting period.
(iv) Dividend Shares, which do not have a vesting period as they are purchased using dividend monies payable on existing
SIP shares held in the SIP trust. The shares are not subject to any performance conditions. Dividends are payable on the
Dividend Shares from grant. Voting rights are attached to Dividend Shares from grant.
Free Shares, Partnership Shares, and Matching Shares must be kept in the SIP trust for five years from the date of grant to be
capable of being sold or transferred out of the SIP trust free of income tax and National Insurance contributions (exceptions
apply for ‘good leaver’ scenarios). Dividend Shares must be held in the SIP trust for three years from the date of grant to be
capable of being sold or transferred out of the SIP trust free of income tax liability.
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Employees continued
Howden Joinery Group Long-Term Incentive Plan (‘LTIP’)
This is a discretionary employee share plan under which the Company may grant different types of award including options,
conditional awards and restricted share awards. With the exception of (iv) below, neither dividends nor dividend equivalents are
payable during the vesting period. The different types of awards are as follows:
(i)
Conditional Share Awards, the vesting period for which is three years commencing on the date of grant and subject to
continued employment. The shares are not subject to any other performance conditions.
(ii) Market value options, the vesting period for which was three years commencing from the date of grant with an exercise
period of seven years (i.e. a total life of ten years). The vesting conditions for these options were as follows:
Date of award
Vesting based on growth in profits – from year ended December
Award vests at 25% if profits over the vesting period grow by
Award vests at 100% if profits over the vesting period grow by
– to year ended December
Date of award
Vesting based on growth in profits – from year ended December
Award vests at 15% if profits over the vesting period grow by
Award vests at 100% if profits over the vesting period grow by
– to year ended December
2013
2012
2015
6%
12%
2012
2011
2014
6%
12%
2014
2013
2016
8%
20%
If profits grow by a figure between the upper and lower thresholds for each year, the award vests on a sliding scale.
(iii) Performance Share Plan, the vesting period for which is three years commencing from the date of grant. The awards are
subject to the following performance conditions:
Date of award
Vesting based on growth in profits – from year ended December
– to year ended December
Award vests at 15% if profits over the vesting period grow by
Award vests at 100% if profits over the vesting period grow by
Date of award
Performance Period – from year ended December
– to year ended December
Performance Conditions:
2018
2017
2020
5%
15%
2021
2020
2023
2019
2018
2021
5%
15%
2022
2021
2024
2020
2019
2022
Total shareholder return (the ‘TSR tranche’) represents the following proportion
of the Award
– TSR tranche vests at 15% if the Company is ranked
compared to comparators at
– TSR tranche vests at 100% if the Company is ranked compared to comparators
in the Growth in pre-exceptional profit before tax (the ‘PBT tranche’) represents
the following proportion of the Award
– PBT tranche vests at 15% if profit grows over the Performance Period grow by
– PBT tranche vests at 100% if profit grows over the Performance Period grow by
67%
33%
33%
Median
Upper quartile
Median
Upper quartile
Median
Upper quartile
33%
5%
15%
67%
5%
15%
67%
5%
15%
If profits grow by a figure between the upper and lower thresholds for each year, the award vests on a sliding scale.
(iv) Restricted Share Awards, where the participant receives beneficial entitlement to shares upon grant of the award. The legal
interest however is not transferred to the participant until the forfeiture provisions and restrictions applicable to the awards
cease to apply. The shares are not subject to any performance conditions other than continued employment. Dividends are
payable during the vesting period.
2) Movements in the period
52 weeks to 24 December 2022
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
granted before 7 November 2002
Weighted average share price for options
exercised during the period (£)
Weighted average life remaining for options
outstanding at the period end (years)
Weighted average fair value of options
granted during the period (£)
Exercise price for all options (£)
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
granted before 7 November 2002
Weighted average share price for options
exercised during the period (£)
Weighted average life remaining for options
outstanding at the period end (years)
Weighted average fair value of options
granted during the period (£)
SIP (i)
Number
2,253,629
359,104
(102,785)
(436,287)
LTIP (i)
Number
LTIP (iii)
Number
–
3,324,679
382,200
1,080,204
(38,868)
–
–
2,073,661
382,200
3,066,207
(1,299,808)
(13,646)
LTIP (iv)
Number
13,646
–
–
–
–
–
7.79
N/A
N/A
0.00
1,130,011
14,028
7.10
1.3
7.71
0.00
LTIP (ii)
Number
307,429
–
–
(67,083)
240,346
240,346
–
7.62
–
N/A
–
–
N/A
2.7
5.27
0.00
WAEP
(£)
3.17
N/A
N/A
2.04
3.48
3.48
67
–
6.92
1.4
6.24
0.00
SIP (iii)
Number
18,577
73,576
(12,324)
(558)
79,271
–
–
6.34
2.4
6.50
–
Exercise price for all options (£)
2.38 to 3.79
Howden Joinery Group Plc / Annual Report & Accounts 2022
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Employees continued
52 weeks to 25 December 2021
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
granted before 7 November 2002
Weighted average share price for options
exercised during the period (£)
Weighted average life remaining for options
outstanding at the period end (years)
Weighted average fair value of options
granted during the period (£)
Exercise price for all options (£)
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
granted before 7 November 2002
Weighted average share price for options
exercised during the period (£)
Weighted average life remaining for options
outstanding at the period end (years)
Weighted average fair value of options
granted during the period (£)
SIP (i)
Number
2,685,127
329,076
(118,566)
(642,008)
2,253,629
854,403
15,264
7.96
0.99
7.45
0.00
LTIP (ii)
Number
412,962
–
(7,926)
(97,607)
307,429
307,429
–
8.34
0.00
N/A
Exercise price for all options (£)
1.28 to 3.79
3) Fair value of options granted
LTIP (iv)
Number
64,942
–
–
(51,296)
13,646
–
–
7.33
0.26
N/A
0.00
LTIP (i)
Number
10,000
LTIP (iii)
Number
4,203,998
–
997,693
(600)
(1,877,012)
(9,400)
–
–
–
–
7.47
N/A
N/A
0.00
WAEP
(£)
3.25
N/A
3.79
3.46
3.17
3.17
3,324,679
32
–
N/A
1.35
6.18
0.00
SIP (iii)
Number
–
18,806
(229)
–
18,577
–
–
N/A
2.88
8.68
0.00
The fair value of awards granted is estimated on the date of grant using a binomial or a Monte Carlo option valuation model, as
appropriate for the type of award granted.
The key assumptions used in the model were:
Dividend yield (%)
Expected life of options (years)
Expected share price volatility (%)
52 weeks to
24 December 2022
52 weeks to
25 December 2021
1.8 to 3.4
3.0
32.2 to 32.3
2.2
1.6 to 3.0
22.0 to 31.6
Other supporting notes
24 Financial commitments
Capital commitments
Contracted for, but not provided for in the financial statements:
– Tangible assets
– Intangible assets – software
25 Related party transactions
Companies which are related parties
24 December 2022
£m
25 December 2021
£m
16.1
0.7
16.8
16.1
2.1
18.2
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 22.
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
Termination payments
Share-based payments
Other transactions with key management personnel
There were no other transactions with key management personnel.
26 Acquisition of subsidiary
Accounting policy – business combinations and goodwill
24 December 2022
£m
25 December 2021
£m
10.5
0.8
4.2
15.5
6.6
0.4
0.5
7.5
The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets
meets the definition of a business and control is transferred to the Group.
The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of
activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross
assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired.
Any excess of consideration over net assets acquired is recognised on acquisition as goodwill and tested for impairment at
least annually.
Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
On 13 February 2022, for a total consideration of £15m from existing cash resources, the Group acquired 100% of the shares
and voting rights of Sheridan Fabrications Limited (‘Sheridans’), a leading industry specialist in the manufacture, fabrication,
laser templating and installation of premium worksurfaces. Sheridans employs around 200 people and is based in Normanton,
Yorkshire, around 30 miles from the Group’s factory at Howden.
The acquisition increases the Group’s manufacturing capacity and supports our strategy of increasing our share of this growing
market.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Notes to the consolidated financial statements continuedFinancial Statements / Notes to the consolidated financial statementsStrategic ReportFinancial StatementsAdditional InformationGovernanceGovernanceGovernancePage TitlePage Title 204
Financial Statements / Company balance sheet
205
Company balance sheet
Company balance sheet
The fair value of the major classes of assets and liabilities at acquisition date and the amount of goodwill recognised is
shown below:
Notes
24 December 2022
£m
25 December 2021
(restated – note 6)
£m
Intangible assets – software
Property plant & equipment
Lease right-of-use assets
Inventories
Trade and other receivables and prepayments
Trade and other payables and accruals
Cash
Borrowings
Total lease liabilities
Net assets acquired
Goodwill recognised on acquisition
Consideration paid for the net assets acquired – cash
Additional consideration paid in cash – treated as settlement of
existing debt on acquisition, owed by the Group to Sheridans
Total consideration paid – cash
Total cash consideration paid – net of cash acquired
Fair value recognised
£m
0.4
0.5
1.3
1.9
3.2
(3.2)
0.4
(1.2)
(1.3)
2.0
12.4
14.4
0.6
15.0
14.6
The goodwill represents the expected synergies from the acquisition in expanding the Group’s activities in its addressable
market, including the skills of the assembled Sheridans workforce. None of the goodwill is expected to be deductible for tax
purposes. It is presented on the balance sheet as part of the Group’s intangible assets.
The gross value of trade receivables on acquisition, excluding the debtor due to Sheridans from the Group, was £2.3m. Their fair
value, and the best estimate at acquisition date of the cash flows expected to be collected was £2.1m.
The Group incurred acquisition-related costs of £0.3m, which were expensed in the period and are included in Operating expenses.
Details of the effect of the acquisition on revenue and profit are as follows:
Additional amounts recognised in respect of Sheridans in the Group consolidated statement of
comprehensive income for the period since acquisition date (13 February 2022)
Management’s estimate of results for the combined entity for the current reporting period if the
acquisition date had been at the beginning of the reporting period (26 December 2021)
Revenue
£m
Gross profit
£m
14.4
0.1
2,322.2
1,411.5
The figures in the table above exclude revenue and profit from transactions between Sheridans and the Group. The revenue and
profit figures for the period since 13 February present leasing transactions on an IFRS 16 basis. The estimated figures for the
period between 26 December 2021 and 13 February 2022 are on an FRS102 basis.
The Sheridans factory and offices, together with the land which they stand on – which were not owned by Sheridans Fabrications
Limited – were bought for £10m in a separate transaction. This has been accounted for as an asset purchase, and forms part of
the reported capital expenditure for the period.
Non-current assets
Investments in subsidiaries
Lease right-of-use assets
Amounts owed by wholly-owned subsidiary companies
Deferred tax assets
Prepaid credit facility fees
Current assets
Other debtors
Cash and cash equivalents
Total assets
Current liabilities
Lease liabilities
Amounts owed to wholly-owned subsidiary companies
Non-current liabilities
Lease liabilities
Total liabilities
Net assets
Equity
Called up share capital
Capital redemption reserve
Share premium
Treasury shares
Retained earnings
Total equity
3
7
4
7
7
5
699.0
175.5
103.3
1.0
1.0
979.8
9.9
218.2
228.1
699.0
180.3
1,957.3
–
0.3
2,836.9
9.2
430.4
439.6
1,207.9
3,276.5
(10.2)
(326.8)
(337.0)
(192.1)
(192.1)
(529.1)
678.8
56.1
9.1
87.5
(25.5)
551.6
678.8
(4.2)
(2,324.2)
(2,328.4)
(199.2)
(199.2)
(2,527.6)
748.9
59.8
5.4
87.5
(27.1)
623.3
748.9
The Company profit after tax for the 52 weeks to 24 December 2022 was £293.8m (52 weeks to 25 December 2021: profit after
tax of £79.4m after restatement – see note 6).
The financial statements were approved by the Board and authorised for issue on 6 March 2023 and were signed on its behalf by
Paul Hayes
Chief Financial Officer
For and on behalf of Howden Joinery Group Plc, registered number 02128710
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Notes to the consolidated financial statements continuedStrategic ReportFinancial StatementsAdditional InformationGovernanceGovernanceGovernancePage Title Company statement of changes in equity
Notes to the Company financial statements
206
Financial Statements / Notes to the Company financial statements
207
Company statement of changes in equity
Notes to the Company financial statements
Called up
share capital
£m
Capital
redemption
reserve
£m
Share
premium
account
£m
At 26 December 2020
Effect of restatement – see note 6
Adjusted balances at 26 December 2020
Retained profit for the period, restated – see note 6
Reclaim of forfeited dividends
Proceeds from sale of forfeited shares
60.3
–
60.3
–
–
–
4.9
–
4.9
–
–
Buyback and cancellation of shares
(0.5)
0.5
–
–
59.8
–
(3.7)
–
–
–
5.4
–
3.7
–
–
Transfer of shares from treasury into share trust
Dividends declared and paid
At 25 December 2021, restated – see note 6
Retained profit for the period
Buyback and cancellation of shares
Transfer of shares from treasury into share trust
Dividends declared and paid
At 24 December 2022
The Company’s distributable reserves at period end are:
Retained earnings
Treasury shares
Distributable reserves
Treasury
shares
£m
Retained
earnings
£m
Total
£m
(28.2)
1,032.3
1,156.8
–
(306.8)
(306.8)
(28.2)
–
–
–
1.1
–
725.5
79.4
0.2
1.8
850.0
79.4
0.2
1.8
(50.0)
(50.0)
–
1.1
(133.6)
(133.6)
87.5
–
87.5
–
–
–
–
–
87.5
(27.1)
623.3
748.9
–
–
–
–
–
–
1.6
–
293.8
293.8
(250.5)
(250.5)
–
1.6
(115.0)
(115.0)
56.1
9.1
87.5
(25.5)
551.6
678.8
24 December 2022
£m
551.6
(25.5)
526.1
1 Significant Company Accounting policies
General information
Howden Joinery Group Plc is a company incorporated in the United Kingdom under the Companies Act 2006. The Company’s
principal activity is being the parent company of the Howden Joinery Group. More information about the Group structure is given
at page 212.
Basis of presentation
The Company’s accounting period covers the 52 weeks to 24 December 2022. The comparative period covered the 52 weeks to
25 December 2021
Basis of accounting
These financial statements have been prepared on the going concern basis and in accordance with Financial Reporting
Standard 101 Reduced Disclosure Framework (FRS 101) and the UK Companies Act.
The accounts are prepared under the historical cost convention. Under section 408 of the Companies Act 2006 the Company is
exempt from the requirement to present its own income statement or statement of comprehensive income.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following
disclosures:
• Statement of Cash Flows and related notes;
• a comparative period reconciliation for share capital;
• disclosures in respect of transactions with wholly owned subsidiaries;
• comparative period reconciliations for tangible fixed assets and intangible assets;
• an additional statement of financial position in respect of the restatement at note 6, as required by IAS 1;
• disclosures in respect of capital management;
•
the effects of new but not yet effective IFRSs; and
• disclosures in respect of Key Management Personnel.
As the Group Financial Statements include the equivalent disclosures, the Company has also taken advantage of the
exemptions under FRS 101 available in respect of IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7
Financial Instruments.
Investments in subsidiaries
These investments are shown at cost less any provision for impairment.
Lease accounting
The Company’s accounting policies for leases are the same as those for the Group, which are disclosed at note 11 to the Group
consolidated financial statements.
2 Profit and loss account information
The Company has no employees (2021: none), did not pay directors’ emoluments (2021: £nil), the fees payable to the Company’s
auditor for the audit of the Company’s annual accounts were paid by another Group company in the current period, and were
£10,000 in the prior period.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Strategic ReportFinancial StatementsAdditional InformationGovernanceFinancial StatementsFinancial Statements 208
Financial Statements / Notes to the Company financial statements
209
Notes to the Company financial statements continued
3
Investments in subsidiaries
Cost and carrying value:
At 25 December 2021 and 24 December 2022
Total
£m
699.0
The investment represents the Company’s 100% ownership of Howden Joinery Holdings Limited, which in turn holds 100% of all
other Group companies – either directly or through one its 100%-owned subsidiaries. The combined results and financial position
of the subsidiaries and this Company is shown in the consolidated Howden Joinery Group Plc financial statements.
The investment consists of a capital contribution in addition to ownership of the subsidiary’s share capital of £2, which is held
at cost.
Other than a small amount of interest receivable on cash and cash equivalents, the Company has no income receivable
other than from transactions with its 100%-owned subsidiaries. Expenses payable by the Company to companies outside the
100%-owned Group are in excess of this interest income so it is considered that the market capitalisation of the Group, which was
significantly in excess of the carrying value of the investments in subsidiaries at both the current and prior period end, is a useful
indicator of any possible impairment in the Company’s investment in subsidiaries.
Details of all Group subsidiaries are given on page 212.
4 Other debtors
Other debtors
Other tax and social security
5 Share capital
Ordinary shares of 10p each:
Allotted, called up and fully paid
24 December 2022
£m
25 December 2021
£m
0.4
9.5
9.9
0.3
8.9
9.2
52 weeks to
24 December 2022
No.
52 weeks to
25 December 2021
No.
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
Balance at the beginning of the period
597,573,827
602,863,861
Bought back and cancelled during the period
(36,657,778)
(5,290,034)
Balance at the end of the period
560,916,049
597,573,827
59.8
(3.7)
56.1
60.3
(0.5)
59.8
6 Prior year restatement
During the current period, the Directors have reassessed the Company’s accounting for leases, intercompany receivables and
investment in subsidiaries. This has resulted in prior year adjustments to the Company financial statements, as detailed below.
There is no impact on the consolidated Group financial statements.
(a) Description of restatements
Property lease accounting
On adoption of IFRS16: Leases, the Directors determined that the companies who actively manage and operate the leased
properties should record the lease liabilities and right-of-use lease assets. This approach has been revisited and the revised
conclusion was that leases should be accounted for in the financial statements of the company who is the signatory to the lease.
A review of the Group’s leases identified that there were five leases where this Company was signatory to the lease. Accordingly,
an adjustment has been made to remove these leases from the financial statements of 100%-owned subsidiary company
in which they had previously been reported, and to record them on the Company balance sheet. There is no impact on the
consolidated Group position as previously reported.
Intercompany receivables and investment in subsidiary companies
In prior years, the Directors assessed the recoverability of the intercompany receivables based on the viability of the Group as a
whole. This approach has been revisited to assess the ability and intent of the individual subsidiary entities to repay the amounts
due on demand.
As a result of this review, it has been identified that some intercompany receivables were impaired at 26 December 2020 by
£296.9, with a further impairment arising in the period ending 25 December 2021 of £12.1m, but these impairments had not
been recognised in the parent company’s financial statements. The impairments have therefore been recorded as prior year
adjustments.
An additional result of this review of intercompany debts was that there were insufficient reserves in this Company’s wholly-
owned subsidiary to satisfy part of the dividend paid to this Company in 2021. This proportion of the dividend income has
therefore been derecognised and reflected in the adjustments presented in this Company’s financial statements. There is no
impact on the consolidated Group position as previously reported.
Additionally, the investment in subsidiary entities has been re-presented to reflect the permanent substance of the financing
arrangements. This is solely a disclosure adjustment and has no effect on the Company or Group financial position.
(b) Adjustments arising from restatements
Lease
right-of-use
assets
Current
lease
liabilities
Non-current
lease
liabilities
Intercompany
receivables
Dividend
income from
subsidiary
Net effect of
restatements
on reserves
Property lease accounting – transfer leases from
fellow subsidiary
Intercompany receivables – impairment of
intercompany debt
Effect of restatements on opening balances
as at 26 December 2020
200.4
(6.8)
(203.5)
–
–
–
–
(296.9)
200.4
(6.8)
(203.5)
(296.9)
Property lease accounting – incremental effect in 2021
(20.1)
2.6
4.2
12.1
Intercompany receivables – incremental impairment
in 2021
Partial write back of dividend from subsidiary in 2021
Incremental effect of restatements on year to
25 December 2021 figures
–
–
–
–
–
–
(20.1)
2.6
4.2
(12.1)
–
–
–
–
–
–
–
(71.4)
(9.9)
(296.9)
(306.8)
(1.2)
(12.1)
(71.4)
(71.5)
(84.7)
Assets/(liabilities) recorded on restated balance
sheet at 25 December 2021
180.3
(4.2)
(199.2)
Retained profit for the year to 25 December 2021 – before restatement
Partial write back of dividend from subsidiary in 2021
Intercompany receivables – incremental effect in 2021
Property lease accounting – incremental effect in 2021
Retained profit for the year to 25 December 2021 – restated
£m
164.1
(71.4)
(12.1)
(1.2)
79.4
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Strategic ReportFinancial StatementsAdditional InformationGovernanceFinancial StatementsFinancial StatementsPage TitlePage Title 210
Additional Information / Contents
211
Additional Information
Notes to the Company financial statements continued
Additional Info Divider
7 Lease right-of-use assets and lease liabilities
Nature of the Company’s leasing activities
The Company is the signatory for leases on five warehouse and office properties which are used by other Group companies.
Additional Information
24 December 2022
£m
25 December 2021
£m
175.5
3.1
180.3
0.0
24 December 2022
£m
25 December 2021
£m
(10.2)
(192.1)
(202.3)
(4.2)
(199.2)
(203.4)
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
7.9
4.5
7.8
4.5
52 weeks to
24 December 2022
£m
52 weeks to
25 December 2021
£m
8.7
11.3
24 December 2022
£m
25 December 2021
£m
14.6
42.7
204.6
261.9
8.7
46.7
215.1
270.5
Amounts recognised in the balance sheet
Right-of-use assets
Property
Additions to right-of-use assets in the period
Lease liabilities
Current
Non-current
Amounts recognised in the income statement
Included in net operating expenses
Depreciation of property right-of-use assets
Included in finance costs
Interest expense on lease liabilities
Cash flows and maturity analysis of lease liabilities
Total cash outflow for leases
Maturity analysis of lease liabilities
Contractual undiscounted cashflows due
– within 1 year
– 1 to 5 years
– more than 5 years
Howden Joinery Group Plc / Annual Report & Accounts 2022
212 Parent company and all subsidiary undertakings
213 Five year record
214 Shareholder and share capital information
216 Shareholder Ranges
216 Corporate timetable
217 Advisors and registered office
217 Corporate timetable
t
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A
Financial StatementsPage Title
Parent company and all subsidiary undertakings
Five year record
212
Additional Information / Five year record
213
Parent company and all subsidiary undertakings
Five year record
At 24 December 2022
Parent company
Howden Joinery Group Plc
England and Wales
40 Portman Square, London, W1H 6LT
Country of registration
or incorporation
Registered office
All subsidiary undertakings
Intermediate Holding Companies:
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
Howdens Cuisines SAS
Howdens Cuisines SRL
England and Wales
40 Portman Square, London, W1H 6LT
France
Belgium
1 Rue Calmette, ZA Du Bois Rigault Nord,
62880 Vendin-Le-Vieil
Rue Des Emailleries 4, 6041 Gosselies
Suite 3, One Earlsfort Centre, Earlsfort Terrace,
Dublin 2, Ireland
Howden Joinery (Ireland) Limited
Republic of Ireland
Sheridan Fabrications Limited
England and Wales
40 Portman Square, London, W1H 6LT
Property Management:
Howden Joinery Properties Limited
England and Wales
40 Portman Square, London, W1H 6LT
Howden Kitchens Properties Limited
England and Wales
40 Portman Square, London, W1H 6LT
Administration and Employee Services:
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
England and Wales
40 Portman Square, London, W1H 6LT
Galiform Limited
England and Wales
40 Portman Square, London, W1H 6LT
Foreign Company Registrations:
Howden Joinery Limited
Howden Joinery Limited
Howden Joinery Properties Limited
Isle of Man
Jersey
Isle of Man
33–37 Athol Street, Douglas, Isle of Man, IM1 1LB
40 Portman Square, London, W1H 6LT
33–37 Athol Street, Douglas, Isle of Man, IM1 1LB
Summarised Income Statement
Revenue
Operating Profit
Profit before tax
Full year dividend per share (pence)1
Basic EPS (pence)
Summarised Balance Sheet
Non-current assets excluding
leases and pension
Non-current lease right-of-use assets
Inventories
Receivables (including tax)
Payables and provisions
Pension (liability)/asset
Total lease liabilities
Net cash & short-term investments
Total net assets
Number of depots at end of year
UK
France
Belgium
Republic of Ireland
Netherlands
Germany
TOTAL
Capital expenditure
December 2022
52 weeks
£m
December 2021
52 weeks
£m
December 2020
52 weeks
£m
December 2019
52 weeks
£m
December 2018
52 weeks
£m
2,319.0
2,093.7
1,547.5
1,583.6
1,511.3
415.2
405.8
20.6
65.7
471.5
614.3
373.3
265.6
(454.2)
(41.5)
(665.3)
(542.4)
308.0
871.7
808
58
2
5
–
–
873
141
401.7
390.3
19.5
53.2
332.1
555.8
301.6
205.8
(468.7)
140.8
(591.2)
(411.7)
515.3
991.5
778
38
2
–
–
–
818
86
195.7
185.3
18.2
24.9
290.7
544.2
255.0
166.6
(338.2)
(47.7)
(580.5)
(544.8)
430.7
720.8
748
28
2
–
–
–
778
70
260.0
260.7
3.9
35.0
251.7
–
231.8
193.1
(272.2)
(56.6)
–
96.1
267.4
615.2
732
25
2
–
–
–
759
61
240.1
238.5
11.6
31.3
221.4
–
226.3
186.0
(261.9)
(36.0)
–
114.4
231.3
567.1
694
20
2
–
1
1
718
44
1
Dividends. In 2019, an interim dividend of 3.9p/share and a final dividend of 9.1p/share were declared, making a total of 13.0p/share. However, following the
disruption caused by the outbreak of COVID in early 2021, the 2019 final dividend of 9.1p/share was not paid. In 2021, there was no interim dividend declared,
but (see note 11 of these financial statements), there was a 2020 final dividend of 9.1p/share and also a special dividend of 9.1p/share, making a total of
18.2p/share for 2020.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationGovernanceAdditional InformationAdditional InformationStrategic Report Shareholder and share capital information
214
Additional Information / Shareholder and share capital information
215
Shareholder and share capital information
Annual General Meeting
Share Capital
The 2023 Annual General Meeting (‘AGM’) will be held at
Freshfields Bruckhaus Deringer LLP, 100 Bishopsgate, London,
EC2P 2SR on 4 May 2023 at 11.00am.
Shareholders will have the opportunity to discuss Howdens’
progress and operations directly with the Board at the AGM.
The notice of the AGM will be sent to shareholders at least
21 clear days before the meeting and will detail the resolutions
to be voted on.
Dividend
Subject to the 2022 final dividend payment being approved
by shareholders at the AGM on 4 May 2023, the following
timetable will apply:
2022 Final Dividend
Ex-Dividend date
Record Date
Payment Date
6 April 2023
11 April 2023
19 May 2023
Dividend reinvestment plan (‘DRIP’)
Howden Joinery Group Plc (‘Howdens’) offers a DRIP for our
shareholders in eligible countries who wish to elect to use their
dividend payments to purchase additional ordinary Howdens
shares, rather than receive a cash payment. The DRIP is
provided and administered by Equiniti Financial Services
Limited (‘Equiniti’). Further details regarding the DRIP can be
found on Equiniti’s website: www.shareview.co.uk/info/drip
Dividend payments directly to a bank or building society
account
If you are a shareholder with a UK bank or building society
account, you can arrange through our registrar, Equiniti, to
have dividends paid directly to your account using a bank or
building society mandate. You can arrange this by completing
the form attached to a previous dividend confirmation you
have received, through Equiniti’s Shareview Portfolio website,
portfolio.shareview.co.uk (registration is required), or by
calling Equiniti on +44 (0) 333 207 6558.
Existing dividend mandate details can be amended to have
dividends paid to a different UK bank or building society
account. Dividend mandate details can also be de-selected if
you would prefer to receive payments by cheque.
As at 24 December 2022, the Company had only fully paid
up ordinary 10 pence shares in issue (‘Shares’). Below sets
out the share capital position at 24 December 2022 and at
25 December 2021:
Number of Shares
% change
24 Dec 2022
25 Dec 2021
Total Shares in issue
(6.13)% 560,916,049 597,573,827
Treasury Shares
(5.92)%
5,237,907
5,567,555
Shares with voting rights
(6.14)% 555,678,142 592,006,272
Shares held in Treasury have no voting or dividend rights and
are used solely for the satisfaction of employee share awards.
Details of employee share schemes are set out in note 23 to
the Financial Statements beginning on page 199.
Shares held by the Howden Joinery Group Plc Employee
Benefit Trust abstain from voting at the Company’s general
meetings and waive dividends. Shares held in the Share
Incentive Plan Trust, which have been allocated to employees
through UK all-employee share plans, have both voting and
dividend rights.
Shares in public hands1 (‘Free float’ shares)
As at 24 December 2022, 0.89% of the Company’s issued
share capital was held in Treasury, 0.28% was held by
Directors, persons discharging managerial responsibility
(PDMRs), or connected persons of those Directors or PDMRs,
0.34% was held in employee share trusts (excluding any
allocated shares which are not forfeitable), and 5.13% was
held by major shareholders (those who have declared
holdings above 5%).
Free float shares therefore accounted for 93.36% of the
Company’s issued share capital at the 24 December 2022.
Acquisition of the Company’s own shares
During 2022, the Company repurchased and cancelled
37 million shares worth a total of £250m under its 2022
share repurchase programme. The repurchased shares
represented a nominal value of £3,700,000 and equated to
6.2% of the called up share capital of the Company at the
beginning of the period (excluding Treasury shares).
In line with our capital allocation policy (see the Chairman’s
statement on page 18 for more information) the Company
returns surplus capital to shareholders. The Board considered
that a share buy back programme was, and continues to
be, the most efficient means of deploying surplus capital to
shareholders.
1
The definition of ‘Shares in public hands’ may be found in Listing Rule
6.14.3R. The Company considers shares which meet the definition of
‘shares in public hands’, as set out in the Listing Rules, to be ‘free
float’ shares.
At the AGM on 12 May 2022, the Directors were granted
authority by shareholders to purchase up to 59,200,627 of
the Company’s ordinary shares through the market1. The
authority expires at the conclusion of the 2023 AGM or within
15 months from the date of passing the resolution (whichever
is earlier).
Rights and restrictions
Issued share classes:
Ordinary only (fully paid)
Voting rights at general meetings:
One vote per share
Fixed income rights:
None
Individual special rights of control:
None
Holding size restrictions2:
Transfer restrictions2:
None
None
The Directors are not aware of any agreements between
holders of the Company’s shares that may result in
restrictions on the transfer of shares or on voting rights.
Substantial shareholdings
As at 6 March 2023, 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:
Substantial
Shareholder
% of total
voting rights
Date of last
notification
BlackRock, Inc
5.45%
23 November 2022
The percentage interest is as stated by the shareholder at the
time of notification and current interests may vary.
Significant agreements
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 on page 71 and in note 19
on page 188). If the lender were not prepared to consent to
a change of control, a mandatory repayment of the entire
facility would be triggered.
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.
Provision for indemnity against liability incurred
by a Director
The Company has provided indemnities to the Directors (to
the extent permitted by the Companies Act 2006) in respect
of liabilities incurred as a result of their office. Neither the
indemnity nor any insurance provides cover in the event
that the Director is proven to have acted dishonestly
or fraudulently.
Listing Rule 9.8.4R(2) disclosure
The following statement, characterised as a profit forecast,
was included in the Group’s Trading Update on 3 November
2022 for the financial year ended 24 December 2022:
“ Against a backdrop of economic uncertainty, we will remain
vigilant for any potential headwinds while managing
inflationary and supply chain pressures. We are confident
in our resilient business model and our well-established
strategy. Given the continued momentum in the period, the
Group now expects profit before tax to be marginally ahead
of the average of published analyst consensus forecasts
for FY 2022.”
A footnote to the statement above read:
“ Analysts’ consensus is available on the Howdens corporate
website. Profit Before Tax consensus for 2022 is an average
of £387m with a range of £373m to £410m. The year ended
30 December 2023 contains an additional (53rd) week of
Group operating costs.”
The actual Group profit before tax figure for the period ended
24 December 2022 is set out on page 164.
1
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.
2
Governed by the general provisions of the Articles of Association (which
may be amended by special resolution of the shareholders) and prevailing
legislation.
Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsAdditional InformationGovernanceAdditional InformationAdditional InformationPage TitleStrategic Report Shareholder Ranges
Corporate timetable
Advisors and registered office
216
Additional Information / Advisors and registered office
217
Shareholder Ranges as at 24 December 2022
Advisors and registered office
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
Over 250,000
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
Over 250,000
Number of holders
Number of shares
Percentage of holders
Percentage of shares
81
84
37
152
59
107
219
739
5,189
1,012
108
59
4
1
2
6,375
25,282
208,705
272,882
3,966,359
4,144,297
17,171,999
527,953,053
553,742,577
1,846,330
2,288,323
768,340
1,140,213
311,989
126,277
693,000
7,174,472
1.14
1.18
0.52
2.14
0.83
1.50
3.08
10.39
72.94
14.23
1.52
0.83
0.06
0.00
0.03
89.61
0.00
0.04
0.05
0.71
0.74
3.06
94.12
98.72
0.33
0.41
0.14
0.20
0.06
0.02
0.12
1.28
Total
7,114
560,917,049
100.00
100.00
Principal Banker
Lloyds
25 Gresham Street
London
EC2V 7HN
Joint Financial Advisers
and Stockbrokers
Numis Securities
45 Gresham Street
London
EC2V 7BF
Barclays
1 Churchill Place
Canary Wharf
London
E14 5HP
Solicitors
Freshfields Bruckhaus Deringer
100 Bishopsgate
London
EC2P 2SR
Auditor
KPMG
15 Canada Square
London
E14 5GL
Registrar
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Registered Office
40 Portman Square
London
W1H 6LT
Corporate timetable
2023
Trading update
Annual General Meeting
Half-Yearly Report
Trading update
End of financial year
27 April
4 May
20 July
2 November
30 December
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Howden Joinery Group Plc / Annual Report & Accounts 2022
Howden Joinery Group Plc / Annual Report & Accounts 2022
Financial StatementsGovernanceStrategic ReportAdditional Information
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