Annual Report
and Accounts 2023
Howden Joinery Group Plc
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Available through
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The UK’s number 1
trade kitchen supplier
Financial Statements
Page Title
The UK’s #1
specialist trade-only
kitchen supplier
We make builders’ lives simpler.
We help them to achieve exceptional results
for their customers, and to profit from it.
We succeed by helping our customers to succeed.
Howden Joinery Group Plc
Annual Report & Accounts 2023
Contents
Strategic Report
Governance
How we create value
02 Performance in 2023
04 Howdens at a glance
08
Our purpose, our culture & values,
our market, our strategy and
our business model
How we preserve value
74 Corporate governance report
76 Board of Directors, key Board activity,
and Executive Committee and
Company Secretary
82 Directors' duties (Section 172(1) statement)
16 Chairman’s statement
84 Stakeholder engagement
19 Chief Executive Officer’s review
92 2018 UK Corporate Governance Code:
28 Key performance indicators
30 Financial review
36 Risk management
38 Principal risks and uncertainties
42 Sustainability matters
69 Going concern and Viability statements
application and compliance
98 Nominations Committee report
108 Remuneration Committee report
132 Audit Committee report
140 Sustainability Committee report
143 Directors’ report, Directors’ statements
and Non-financial and sustainability
information
Financial Statements
Additional Information
Additional information
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
Our financial performance
148 Independent auditor’s report
162 Consolidated income statement
162 Consolidated statement of
comprehensive income
163 Consolidated balance sheet
164 Consolidated statement of
changes in equity
165 Consolidated cash flow statement
166 Notes to the consolidated financial
statements
205 Company balance sheet
206 Company statement of changes in equity
207 Notes to the Company financial statements
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Strategic Report
Performance in 2023
02 Howden Joinery Group Plc
Annual Report & Accounts 2023
Strategic Report
Performance in 2023
Financial highlights
The Group delivered a resilient performance in
2023, against record prior year comparatives
and in, as we anticipated, a more challenging
marketplace.
Sales and profits met expectations and we progressed our investment
programme, which is focused on our key capabilities and gives us, end
to end, a stronger business.
Revenue
£2.3bn
Operating
profit
£340m
Profit
before tax
£328m
2023
2022
2021
2020
2019
£2.3bn
£2.3bn
£2.1bn
2023
2022
2021
£340m
£415m
£402m
2023
2022
2021
£328m
£406m
£390m
£1.5bn
£1.6bn
2020
£196m
2020
£185m
2019
£260m
2019
£261m
Gross
margin
60.8%
Earnings
per share
46.5p
2023 FY
dividend
21.0p
2023
2022
2021
2020
2019
60.8%
60.9%
61.6%
60.1%
2023
2022
2021
2020
25.0p
46.5p
65.8p
53.2p
62.3%
2019
35.0p
2023
2022
2021
2020
2019
21.0p
20.6p
19.5p
18.2p
3.9p
Howden Joinery Group Plc
Annual Report & Accounts 2023
03
Net cash
at year end
£283m
2023
2022
2021
2020
2019
£283m
£308m
£267m
£515m
£431m
Dividends
paid in year
£114.1m
£114.1m
£115.0m
£133.6m
2023
2022
2021*
2020
£0.0m
2019
£70.6m
* 2021 included a special dividend of £54.1m.
Share
buybacks
£50m
2023
£50m
2022
2021
£50m
2020
£10m
2019
£126m
£250m
Operational highlights
32
new UK depots
5
new depots
in France
5
new depots
in Republic
of Ireland
23
new kitchen
ranges
Near-term
Science-based
Net Zero targets
approved
Making more
products in our
own UK factories
Continuing to
strengthen our
digital offering
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Strategic ReportStrategic ReportPage TitleStrategic ReportPage Title
Howdens at a glance
04 Howden Joinery Group Plc
Annual Report & Accounts 2023
Strategic Report
Howdens at a glance
Howden Joinery Group Plc
Annual Report & Accounts 2023
05
The UK’s largest
specialist trade-only
kitchen supplier
At Howdens, we aim to be the best at what we do – the supply of
kitchens, joinery products and related services to tradespeople.
We do this by having a single-minded focus on our trade customers with
all our operations designed and structured around making life easier
for them, so that by trading with us they can get their jobs done right
first time for their customers.
Global
sourcing
UK
manufacturing
& distribution
Nationwide
depot network
Resources and
relationships
Resources and
relationships
Resources and
relationships
• Global supply chain
• Skilled and motivated
• Decentralised business
expertise
• Trusted supplier
relationships, and the
scale of our operations,
give us access to the
latest products at the
best prices
• Responsible purchasing
practices
workforce
model
• UK’s largest kitchen
supplier – economies
of scale
• Our own factories – the
choice to make or buy
• Our own warehousing
and distribution network
• 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
Outcomes
• Trade-only, with excellent service
• Happy builders and end-users
• 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
• Sustainable profit growth, sector-leading
margins and strong cash generation
• Returns to shareholders
– our employees
– new depots
– new product
– new manufacturing and logistics
– digital
• Giving back to local communities
• Science-based Net Zero targets in place
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Strategic ReportStrategic ReportPage TitleStrategic ReportStrategic ReportPage Title
Howden Joinery Group Plc
Annual Report & Accounts 2023
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06 Howden Joinery Group Plc
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Annual Report & Accounts 2023
Strategic Report
How we
create value
08
Our purpose, our culture & values, our market,
our strategy and our business model
30 Financial review
36 Risk management
16 Chairman’s statement
19 Chief Executive Officer’s review
28 Key performance indicators
38 Principal risks and uncertainties
42 Sustainability matters
69 Going concern and Viability statements
Performance
and Howdens
at a glance
02
Our purpose,
culture
and values,
market,
strategy and
business
model
08
Chairman’s
statement
16
Chief Executive
Officer’s
review
19
KPIs
28
Financial
review
30
Risk
management
and principal
risks and
uncertainties
36
Sustainability
matters
42
Going concern
and Viability
Statements
69
Financial StatementsAdditional InformationGovernanceStrategic ReportStrategic ReportPage TitlePage Title
Our purpose, our culture & values,
our market, our strategy and
our business model
08 Howden Joinery Group Plc
Annual Report & Accounts 2023
Our purpose-driven approach
Howden Joinery Group Plc
Annual Report & Accounts 2023
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Our purpose
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.
Culture & values
Worthwhile for
all concerned.
Sustainability
Focus on climate
resilience and Net Zero.
Governance
A clear governance
framework. Operating
with integrity.
Our purpose drives our business model and shapes our strategic decisions
See page 10
See page 11
See page 42
See page 72
Strategy
Reach more builders. Offer them the best
product, pricing, service and support.
Generate profits for reinvestment and
shareholder returns.
Business model
Trade-only. In stock from local depots at
best local price. Entrepreneurial depots
supported by UK manufacturing and
efficient sourcing and distribution.
See page 13
See page 14
We respond to external opportunities and mitigate threats
Markets
Competing at all price points.
Gaining market share.
Risks
Effective risk monitoring
and mitigation.
See page 12
See page 36
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
Our business model
and strategy generate
value for a range
of stakeholders
Long-term value for our stakeholders
Long-term, sustainable growth and value for all stakeholders.
Worthwhile for all concerned.
Strategic ReportFinancial StatementsAdditional InformationGovernanceStrategic ReportStrategic ReportPage Title
10 Howden Joinery Group Plc
Annual Report & Accounts 2023
Our purpose
Our culture and values
Howden Joinery Group Plc
Annual Report & Accounts 2023
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To help our trade customers
achieve exceptional results
for their customers and to
profit from it.
Howdens’ focus on serving our trade customers is at the heart
of 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 for builders to fit,
giving them more time.
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, doors, flooring, hardware and
bedrooms. A free design service to help customers and end-
users 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
Staff
Customers
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Government and
local authorities
Suppliers
and landlords
Shareholders
Pensioners
Howdens was founded on the principle that the
business should be worthwhile for all concerned
— 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
since 1995, 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 suppliers 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 900 communities.
• Giving back to charities and local communities.
• Responsible purchasing and environmental policies.
Strategic ReportFinancial StatementsAdditional InformationGovernanceStrategic ReportStrategic ReportPage TitlePage Title
12 Howden Joinery Group Plc
Annual Report & Accounts 2023
Our market
Our strategy
The kitchen market
• 28 million households in the UK; 18 million owned and 10 million rented.
• UK kitchen and joinery market of £12bn1 .
•
•
‘Do It For Me’ and the Trade market continue to be strong.
Howdens sells to Trade customers who work flexibly across 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 3% and will have 2m new citizens2.
• Ageing UK housing stock will drive renovation.
Average age of UK housing stock is around
70 years2.
• Entrepreneurial builders are well placed to win
kitchens, joinery and bedroom work as part of
wider home refurbishment projects. They are
supported by Howdens’ business model.
• Builders have remained optimistic in 2023 and
workloads have remained relatively strong1.
• 15% increase in adult children living with
parents over last 10 years2, together with
hybrid working, mean the kitchen has to
work harder.
• Consumers are more focused on design and
use of kitchen space to maximise flexibility1.
• An ageing population with significant
purchasing power choosing to age in place.
Baby boomers own nearly half, £2tn, of all
British housing equity.
UK Kitchens and joinery market is valued at £12bn1
2023 Market Value1
Total UK kitchens & joinery market1
Kitchens
£6.6bn
Joinery
£5.4bn
Howdens
UK
£2.2bn
£12bn
Competitors
£9.8bn
Significant room to grow market share
1 Howdens estimates based on proprietary data/builder ‘Customer Pulse’ surveys.
2 Office of National Statistics.
Our purpose
To help our trade customers achieve
exceptional results for their customers
and to profit from doing so.
Achieved through:
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
The right amount of the best product,
at the best price.
Prudent financial management
Giving us the tools to do the job.
Supported by:
Our medium-term strategic initiatives page 25
• Developing our digital platforms
• Evolving our depot model
• Improving our product range
• Expanding our international
and supply management
operations
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Measured by:
KPIs page 28
• Sales growth
• Profit before tax
• Cash
• Depot openings
• Health & Safety
• FSC® or PEFC
certified raw
materials
• Waste recycling
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14 Howden Joinery Group Plc
Annual Report & Accounts 2023
Our resilient business model
Howden Joinery Group Plc
Annual Report & Accounts 2023
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The UK’s leading specialist kitchen supplier,
selling only through trade customers.
What
we do
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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 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 900 depots.
• We design and manufacture all of our
own cabinets, as well as some cabinet
frontals, worktops and skirting
boards. We’re agile and we keep the
make vs. buy decision under review.
• We buy in thousands of different
• No two deliveries are alike,
products from hundreds of trusted
suppliers around the world, including
appliances, joinery, flooring and
hardware. We offer everything
necessary to complete any kitchen.
and 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 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 2,100 specialist kitchen
designers support the builder by
visiting the end-user’s home, or
work with them remotely using our
free 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 their 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
900 communities.
• Supporting local and
national charities.
• Responsible ESG practices
and policies.
• See our Sustainability report
on page 42.
Strategic ReportFinancial StatementsAdditional InformationGovernanceStrategic ReportStrategic ReportPage TitlePage Title
Chairman’s statement
16 Howden Joinery Group Plc
Annual Report & Accounts 2023
Strategic Report
Chairman’s statement
Another year of
strong progress
Peter Ventress
Chairman
I am pleased to report the Company
delivered another year of strong
progress supporting our trade
customers with an outstanding
product line up, industry-leading
stock availability and, as always,
a first-class service from our
depot teams.
Another year of strong progress
Despite a challenging macroeconomic environment, I am
pleased to report the Company delivered another year of
strong progress supporting our trade customers with an
outstanding product line up, industry-leading stock availability
and, as always, a first-class service from our depot teams.
During the year we continued to invest in our strategic
initiatives at pace. Our strategy is working well and I am
confident that Howdens’ in-stock, trade-only, local business
model is the best way of supporting the day to day needs of
our customers. This is evidenced by further above market
revenue growth this year. In fact, since the pandemic,
Howdens has grown revenues by over 45% while continuing
to expand the number of customer accounts every year.
Central to our success as always has been the extraordinary
talent and unwavering commitment of our people, whose
entrepreneurial spirit and dedication to our customers make
the business what it is. On behalf of the Board, I’d like to thank
them sincerely for all that they do.
Financial performance
Overall in 2023, revenue was in line with last year’s record
performance, in very challenging kitchen and joinery markets.
We continued to operate the business with sector leading
gross margins of 60.8% (2022: 60.9%) made possible by our
vertically integrated approach and market leading distribution
and supply chain network, which are key differentiators
of the Howdens ‘in-stock’ model. Given the challenging
market environment we remained cautious on the cost base
throughout the year, offsetting inflationary and energy cost
increases with productivity and efficiency benefits. This
protected over £50m of investments in our strategic initiatives
to support future growth. As expected, profit before tax was
lower than the prior year, and earnings per share for the year
were 46.5p per ordinary share (2022: 65.8p).
Strong cash generation remains one of the great hallmarks
of this business. Despite continued capital investments in
our growth initiatives, running with additional safety stock to
protect our customers and returning over £164m of cash to
shareholders in dividends and share buybacks we ended the
year with cash of £282.8m.
Strategic initiatives
Our kitchen and joinery markets are large and fragmented
which presents an attractive long-term growth opportunity
for Howdens. We believe our addressable kitchen and
joinery markets in the UK are around £12 billion compared
with the Company’s UK revenue of around £2.3bn. We are
investing commensurately in our consistent and proven
growth strategy which is now well established under the
leadership of Andrew Livingston and his team.
Howden Joinery Group Plc
Annual Report & Accounts 2023
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Our priorities are to invest in deeper vertical integration, depot
expansion in the UK, product innovation and digital expansion.
We are also investing in our international businesses in France,
Belgium and more recently the Republic of Ireland which all
present further growth opportunities. You can read more
about our progress on many fronts this year in a Q&A with
Andrew, starting on page 19.
Movember’s focus on men’s health issues, particularly mental
health in the construction industry, is particularly appropriate
for Howdens and we look forward to working with them further
during the year ahead.
You can read about some of our considerable progress this
year in our Sustainability report starting on page 42.
A milestone year for ESG
The opportunity to have a positive impact on our environment,
while creating a culture at Howdens where employees from
all walks of life can thrive, underpinned by an appropriate
governance framework to set the right tone, remain important
areas of oversight for the Board. At Howdens we articulate this
as being ‘worthwhile for all concerned’ which means doing the
right thing for our people, our customers, our suppliers, the
environment and the communities we work in.
2023 was a milestone year in Howdens’ efforts to lower its
carbon emissions with our near term Net Zero targets to 2030
being approved by the Science Based Targets Initiative (SBTi).
This solidifies our route-map with appropriate targets so we
can measure our progress. It commits us to reducing our
Scope 1 and 2 emissions by 42% and our Scope 3 supply chain
emissions by 25% by 2030 against a baseline year of 2021. The
business has been on this journey already for many years but
the targets underline our intent to go even further to reduce
emissions and achieve Net Zero by 2050. Over 95% of our
total emissions ultimately come from our supply chain so we
are working in partnership with our major suppliers to share
decarbonisation priorities and plans.
Our social agenda also continues to gain momentum as we
seek to put our people at the heart of who we are and what
we do. Our aim is to provide a culture in which our people
thrive and feel valued for who they are and what they bring to
Howdens. They drive the business forward and make Howdens
a great place to work.
We continued our involvement in the local communities in
which we serve. Our ‘local first’ approach saw us give every
depot a £1,000 charity fund, over which they have absolute
discretion. We continue to support our existing charity
partners such as Leonard Cheshire Disability, Queen Elizabeth
Scholarship Trust (QEST) and the Donmar Warehouse, a
West-End theatre where we fund outreach activities support to
develop skills for young people in their local communities.
The Howdens Worthwhile Foundation also launched two
significant new partnerships in 2023. The ‘Game Changer’
programme, run in partnership with the Football Associations
of England, Scotland and Northern Ireland provides £1m
worth of kitchens and joinery products to grassroots
football clubs every year for three years. During November,
Howdens employees were also involved in fundraising
activities for Movember, our newest charity partner.
Governance and Board changes
As your Chair, one of my key responsibilities is to ensure
good governance (see pages 72 to 145), and I continue to be
well supported by my fellow Board members. This year we
have continued to refresh the Board by rotation, ensuring
we have the right balance of diverse backgrounds, skills
and experience in the team to complement the talents of our
executive team. I thank all those directors who have stepped
down this year for their valuable contributions and I welcome
our new directors to the Board. The team will continue to
maintain rigorous oversight of the strategic, operational and
compliance risks across the Group, refine our path to success
and uphold the high standards expected of us.
In May, Geoff Drabble stepped down from the Board after
nearly eight years of service, in particular as Senior
Independent Director (SID). Andrew Cripps succeeded
Geoff as the SID in addition to his other responsibilities.
At the same time, we announced the appointment of Louis
Eperjesi as a Non-Executive Director with effect from
1 June 2023. Louis is an experienced executive with a long
and distinguished career in the building materials sector, most
recently serving as CEO of Tyman Plc, a leading International
supplier of engineered components and access solutions to
the construction industry.
In July we announced that Debbie White, Non-Executive
Director, informed the Board of her intention to retire in
December 2023 to take up a new position as a Non-Executive
Director and Chair of the Co-operative Group. More recently, in
November we announced that Karen Caddick, Non-Executive
Director and Remuneration Committee Chair, will step down
from the Howdens Board at the end of the Annual General
Meeting on 2 May 2024. We were pleased to announce the
appointment of Vanda Murray as independent Non-Executive
Director who joined the Board in February and will succeed
Karen as Remuneration Committee Chair from 2 May 2024.
Vanda has over 20 years of senior management experience
across a range of sectors, including manufacturing, industrial,
and support services in Europe, the USA, and Asia. We are
planning to recruit more non-executives over time to ensure
we retain a positive gender and ethnic diversity on the Board.
More details of all of these changes can be found in the
Nomination Committee Report, starting on page 98.
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Chief Executive Officer’s review
Chairman’s statement continued
Capital allocation and returns
to shareholders
The Board recognises the importance of shareholder returns
and has been rewarding investors through progressive
dividends and share buybacks in recent years. Our approach
to capital allocation is unchanged. 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.
Taking into account the Group’s prospects and strong financial
position, in July 2023 the Board declared an interim dividend
of 4.8p per ordinary share (2022: 4.7p per ordinary share). The
Board is recommending a final dividend for 2023 of 16.2p per
ordinary share (2022: 15.9p per ordinary share), resulting in
a total dividend of 21.0p per ordinary share (2022: 20.6p per
ordinary share). The total dividend represents a year-over-
year increase of 1.9% and if approved by shareholders at the
AGM in May the final dividend will be paid on 24 May 2024 to
shareholders on the register on 11 April 2024.
Looking ahead
The Group has delivered another year of strong progress 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. 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 our stakeholders.
Our priorities in 2024 will be to continue to drive above
market organic revenue growth, while investing behind the
Company’s differentiated business model. I remain confident
our approach is the right one, and the Board looks forward to
the year ahead with confidence.
Peter Ventress
Chairman
28 February 2024
Further reading
See our Sustainability report
See my introduction to our Governance report
See our Board of Directors
Page
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76
Chief Executive
Officer’s review
Our results demonstrate
the strengths of our
local, trade only, in-stock
business model
Andrew Livingston
Chief Executive Officer
In the UK we believe we gained
market share by volume in 2023,
which helped us mitigate a
decline in the overall size of the
kitchen market.
Q&A With Andrew Livingston,
Chief Executive Officer
The Group delivered a resilient performance in 2023,
against record prior year comparatives and in, as we
anticipated, a more challenging marketplace. Sales and
profits met our expectations and we progressed our
investment programme, which is focused on our key
capabilities and gives us, end to end, a stronger business.
All the questions in this section have been asked by
institutional investors this year.
Q
Given the external challenges of
2023 how do you think Howdens has
done this year?
A
I’m pleased with how we have delivered as a business this
year. Our results demonstrate the strengths of our local,
trade only, in-stock business model and we delivered in a
more challenging marketplace this year. Group sales were in
line with those achieved in 2022, and were up 46% on 2019,
being the year prior to the onset of the pandemic. In the UK,
we gained market share by volume in 2023, which helped
us mitigate the impact of a decline in the overall size of the
kitchen market.
We maintained our industry leading gross margin with gross
profit at around the same level as last year, as we balanced
recovery of significant input cost rises with our commitment
to provide competitive pricing across the board for our
customers. Excluding investment in our strategic initiatives,
we actively contained our operating costs and kept these to
2022 levels, despite ongoing inflationary pressures.
Profit before tax was lower than in 2022, and in line with
market expectations. It was 26% higher than in 2019. Our
builders remained busy, and we made good progress on
our strategic plans for the UK business and sales at our
international operations continued to increase.
The business delivered strong operating cashflow and
we maintained a robust balance sheet. This gave us the
flexibility to continue to invest in future growth and provide
shareholders with enhanced cash returns in the form of an
increased dividend payout for 2023. We also completed a
£50m share buyback programme during the year.
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Annual Report & Accounts 2023
Annual Report & Accounts 2023
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21
Chief Executive Officer’s review continued
Q
You’ve made some major strides
this year in sustainability, where
have you focused your efforts?
A
Yes, we have moved our ‘ESG’ agenda forward significantly.
Most notably we achieved a major milestone this year with
our near term Net Zero plan to 2030, which we submitted
12 months ahead of schedule last year, which has now been
approved by SBTi. We have also committed to set long-term
emissions targets to reach net zero by 2050. Our factories
achieved zero waste to landfill again in 2023 and zero waste
to landfill across our UK depots reached 99.7%.
External suppliers represent most of our total emissions and
aligning the supply base with our reduction targets is a key
priority. Our suppliers will, progressively from 2024 onwards
be contractually obliged to have Net Zero targets in place
and sustainability now forms a key part of our product design
process, both for internally-generated products and those
that we source. We are making good progress and in 2023
modifications to our best-selling Greenwich Matt kitchen
frontals mean that they are now 100% recyclable. We have
also launched a plastic pledge initiative looking across all
products to remove reduce or replace plastic packaging
where possible.
Q
How resilient is the business to
current economic conditions?
A
Resilience is a key strength of our local, trade only in stock
model and we believe we increased our market share by
volume this year, consolidating the gains made in 2022.
The foundation for this is our strong product line-up, high
stock availability, industry leading service levels and our
entrepreneurial depot teams who serve a trade customer
with a similar mindset. In a challenging year, where market
volumes fell significantly, we held our revenues to 2022 levels
with average customer spend matching the previous year and
we had a record number of customer accounts as at year-end.
We also increased some prices, which helped us defray most
of the impact of significant rises in annualised input costs,
and to sharpen our pricing elsewhere.
As well as maintaining an industry leading gross margin, the
business continued to deliver volumes on our core products,
which in aggregate were well ahead of pre-pandemic times.
Our model is hard to replicate and we have initiatives in
place to make it more so, in markets with significant longer-
term growth opportunities for us. We continue to prioritise
investment in the business on this basis.
Q
Are you running out of opportunities for
your UK kitchen and joinery business?
A
Quite the opposite, our own research shows that the UK
kitchen and joinery markets are large and fragmented with
a significant opportunity for Howdens to continue to grow its
market share. Our findings indicate the value of the kitchen
market last year was around £6.6bn. The UK joinery market
is also large and very fragmented at around £5.4bn across
the four segments that Howdens supplies; joinery, doors,
flooring and hardware. Consequently, we believe Howdens’
addressable market for kitchens and joinery is around £12bn
compared with Howdens’ UK revenue of £2.2bn last year.
We also entered the fitted bedroom market in 2023, which
we think has an addressable market of over £1.2bn so we still
have a huge opportunity to generate profitable growth in the
UK for many years to come.
Q
Turning to growth, how are the UK
depot openings and refits going?
Are you hitting your financial hurdles
in terms of the financial returns?
A
High service levels, including local proximity and immediate
availability are very important to our customers and we
continue to see profitable opportunities to open depots. We
are using our updated format for all depot openings. Deployed
in several forms, the format enables us to provide the best
depot environment in which to work and conduct 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. We opened 33 new depots in 2023 with a
total of 840 trading at the end of 2023. Overall, we continue to
believe there is scope for around 1,000 depots in the UK and
we plan to open around a further 30 depots in 2024.
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Managing our portfolio of kitchen ranges efficiently is
crucial for both best availability, which is highly valued by
our customers, and for profitability. In recent years we have
reorganised our range architecture, removing duplications,
and improved the balance between new kitchen introductions
and timely discontinuations. We have also introduced a more
efficient way of testing new kitchen colours and finishes which
we call ‘Find the Gap’, which enables us to bring more proven
new kitchen styles to market more quickly and our new paint
to order service is also informing our from stock ranging
decisions. At the end of 2023, around 60% of the kitchens
available from stock comprised ranges brought to market
between 2021 and 2023, and for 2024 we have a lower number
of new kitchen introductions but fewer retirements than in
recent times.
Price featured prominently in 2023, and given prevailing
pressures on household budgets, we expect it to do so again in
2024. Our offering as enhanced by our 2024 NPI programme is
well positioned to take advantage of this. With an emphasis on
value for money and choice at all price-points, our NPI for 2024
includes nine new kitchen ranges aimed at the entry and mid-
market segments and we have also introduced clearer and
more delineated pricing within ranges and across families.
We are innovating in other product categories and are adding
bedrooms to our all depot offering. In 2023 we brought to
market seven new entry level kitchen ranges, adding new
frontal (door) options, and this year we are adding two more.
In 2023, we also continued to develop our higher priced
kitchen portfolio, which is a large segment of the market,
representing 30% plus of total market sales, where we are
under-represented. The paint to order service for customers
buying our Chilcomb and Elmbridge ranges, which we started
offering in the second half of 2023, has been very favourably
received by customers and depots alike.
These will include some more in the smaller sized format using
our next day ‘XDC’ delivery service to supplement in-depot
stock holdings. The smaller version enables us to open a depot
in places lacking suitable properties to accommodate the
standard one, or open an infill depot to provide a more local
service in less densely populated areas.
We have progressed our revamp programme for existing
depots. This continues to receive very positive feedback
from depot staff and customers alike and providing such an
attractive trading and working environment is important to
our competitive position. In 2023 we planned to complete
around 80 depots and in fact achieved a further 89 by the end
of December bringing the total revamped to 274. The revamps
are budgeted to pay back costs in less than four years and
depot P&Ls are charged a reformat cost which ensures depot
teams are motivated to deliver incremental sales. As we
revamp more of our estate, we are modifying the scale and
scope of the revamp at depots with relatively lower catchment
areas so as to maintain incremental returns.
In 2024 we plan to revamp around 85 more depots which
means by the end of 2024 we expect to have revamped around
54% of the 670 depots which opened in the old format and
expect to have around 64% of all UK depots trading in the
updated one.
Q
Over the past couple of years there
has been a great deal of emphasis
on new product introductions.
Why is it so important?
A
We are committed to providing market leading and
competitively priced product for our customers to sell to
theirs. In 2023 we introduced 23 new kitchen ranges, which
was on a par with 2022, and we want to lead the market with
the latest trends that keep us front of mind for both builders
and their customers.
Sales of new products continue to make a significant
contribution to our performance. Sales of new product
introduced (‘NPI’) in 2023 and 2022 represented around
22% of total UK product sales. Sales of NPI during 2022 alone
increased by some 34% in 2023 and as in 2O22, higher priced
kitchens continued to contribute more to our kitchen mix
by volume than previously, which has a positive impact on
our average kitchen invoice value. So it has become very
important to us for these reasons.
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Chief Executive Officer’s review continued
Q
Solid work surfaces was a new
adjacency last year. How has it
developed in 2023 and how has this
helped Howdens address the higher
price kitchen market?
A
The premium worksurfaces business has performed very
strongly in 2023 and it’s been a priority for us to develop
a market-leading supply and fit capability as we have
moved into the higher priced kitchen segment. Following
the acquisition of the Sheridan worktop business two years
ago and other investments, our in-house manufacturing
capacity is now amongst the largest in the UK. The number
of solid surface worktop orders taken by depots increased
significantly in 2023 as we continued to improve our offer.
Last year we added six more ‘entry level’ decors to our solid
surface ‘Template and Fit’ service and with the integration of
Sheridan largely complete, we also reduced the time between
template and fit to an industry leading five days in the second
half of the year. For 2024 we have a comprehensive offering of
48 decors to suit all budgets.
Q
You are continuing to invest in
manufacturing, what’s the ultimate
goal in terms of what products you
make versus what you buy in?
A
We make all of our kitchen cabinets and some of the other
kitchen products we sell, which is a significant source of
competitive advantage for us in several ways. We keep under
review what we believe is best to make or buy, balancing cost
and overall supply chain availability, resilience and flexibility.
We have recently invested in new lines at our Howden site,
which are amongst the most advanced of their type in Europe.
These give us the ability to make a wide variety of kitchen
furniture, principally frontals (doors) and panels, for more of
our ranges, at the same quality as we can source externally
but at a lower cost and at a reduced lead time to delivery.
Production on the new lines totalled around 600,000 pieces
in 2023 with a full year capacity of around 2 million pieces
going forward. Separately we have also invested in two
lines to facilitate our paint to order initiative. Located in a
purpose-built facility near our Howden site, the lines give us an
industry leading production capability in this area. Lastly our
second architrave and skirting line became operational this
year, enabling us to service in-house more of the substantial
increase in demand we have seen for these products and for
which we are extending our offering in 2024. We continue to
see good opportunities to extend what we manufacture in-
house over time.
Q
Being in stock is very important for
Howdens’ trade customers, how are
you continuing to improve your service
to them?
A
It’s critical, we’re an in-stock business and the trade tell
us that a high level of stock availability is one of the key
reasons they buy from us. In 2023, facilitated by our new
stock management system, we rolled-out our ‘Daily Traders’
initiative to all UK depots. Daily Traders is a means to improve
customer service levels and increase sales by optimising
in-depot stock holdings of best-selling SKUs and associated
‘range completers’.
Sales of these are outperforming those of non-Daily Trader
SKUs and we have seen improvements to other key metrics
including a reduction in customer back-orders and a higher
proportion of stock being replenished via a depot’s core
weekly delivery order. This gives us efficiencies as it reduces
utilisation of our XDC cross docking service introduced
last year.
Building on this, we have recently improved stock
replenishment by supplementing the depots core weekly
delivery order with investment in a next day service via a
regional cross docking centre (or ‘XDC’) combined with a
rebalancing of where we hold stock. XDC is now a key enabler
to delivering the levels of high service and availability
which differentiate our offer. The improvements to stock
replenishment enable depots to hold deeper stocks of faster
selling lines, for example Daily Traders and makes it simpler
and more efficient for them to deliver superior service levels
and availability, backed by certainty over lead time to delivery
for items not held at depot level.
Q
Can the Howdens model work in other
countries and how are your fledgling
businesses in France and the Republic
of Ireland (ROI) shaping up?
A
Yes, there’s certainly potential to apply Howden’s vertically
integrated in stock, local business model to other geographies.
In both France and ROI where we have established businesses
the response we are getting from trade customers when they
start to use Howdens is very encouraging. We are proceeding
cautiously to ensure we establish the Howdens model in
the right way particularly as we train and develop new
entrepreneurial depot managers and their teams, which is
critical to the success of the business.
In 2023, our operations based in France returned increased
sales in a market at least as challenging as the one in the
UK. By the end of 2022 we had doubled the depots trading in
France and Belgium to 60 in a two-year period and opened a
further five at the end of 2023. Consequently, when compared
with their UK counterparts, many of our depot managers
in France are less experienced in nurturing trusted trade
relationships and for 2024 we are focussing on depot team
development to foster these, and so we expect to open around
5 new depots this year. Alongside team development, we
are investing in the business through enhanced offerings
of ‘footfall promoting’ products and 2024 will see a regular
schedule of ‘trade days’ at all depots with aligned promotional
activity and more supplier support.
We commenced trading in the Republic of Ireland in 2022,
using a similar depot location strategy to that in France, with
the depot teams there supported by our UK infrastructure
and our digital platform. During 2022 we opened five depots
clustered around Dublin and our arrival in the Irish market
attracted much attention locally. We opened five depots in
2023, of which three are around Dublin and two serve the Cork
area, taking the total trading to ten at the year-end. We are
encouraged by depot sales to date and in 2024, we plan to
open around five more depots, taking the total trading to 15.
Q
What are the advantages of digital
for the business and how are they
likely to evolve?
A
We use digital to reinforce our model of strong local
relationships between depots and their customers by
raising brand awareness, to support the business model
with new services and ways to trade with us, and to deliver
productivity benefits and more leads for our depot teams
and our customers.
In 2023, use of our online account facilities, which provide
efficiencies and benefits for customers and depots alike, has
continued to increase. New registrations totalled some 75,000
and around 48% of customers had an online account at the
year end. Following a substantial increase in 2022, total users
viewing our trade platform increased by 7%, with around 75%
of users regularly looking at their confidential prices.
Website visits to howdens.com, at 19.6 million, exceeded those
of four key competitors. We continued to have the highest
number of fitted kitchen site visits, and the time spent viewing
pages and the number of pages viewed per visit were at
consistently high levels. Across social media platforms, our
follower base at around 554,000 was up 16%, with around
5.4 million monthly engagements. As our digital presence
has grown, awareness of Howdens amongst end-consumers
has increased. In 2023, our unprompted brand awareness
amongst end-consumers at 31%, was approaching three times
what it was across 2019, and we continue to push harder to
improve brand awareness.
In 2023 we added new features to our trade platform which
collectively improve stock and account knowledge, promote
frequency and ease of trading and reduce time consuming
manual tasks in depots, including stock allocation. This year
we tested a digitised in-depot stock management system to
record and pick deliveries, check allocations, and determine
depot stock levels, which is now being installed in all UK
depots. The stock surety this and other initiatives provides,
has enabled us to upgrade significantly the ‘click and collect’
service we offer to customers or ‘Live Stock’ as we call it.
By mid-2024, the online account customers of all our depots
will be able to check real time availability of stock on a depot-
by-depot basis and make multiple purchases of products in
the same family simultaneously. In addition, they will be able
to place orders for collection at a time of their choosing, and
in two clicks elect to pay either when placing their orders or on
their normal terms see product reviews and special deals on
product which may be of interest.
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Chief Executive Officer’s review continued
Q
What are your expectations
for Howdens in 2024?
A
We’re confident of building on the strong foundations we have
laid in recent years. We are well planned on our strategic
initiatives, which are aimed at increasing our market share
profitably, as we deliver value to customers across all price
points. High stock availability is a major contributor to our
performance and in 2024 we will continue with our safety
stock policies at the more normalised levels by volume we
deployed in 2023.
All of our confirmed new kitchen ranges for 2024 will be in-
stock by the end of June, well ahead of peak Autumn trading,
with an emphasis on entry and mid-price ranges together with
our very competitively priced premium kitchen offering. We
have a programme of ‘Rooster Deals’ promotions in place to
keep Howdens at the front of the trade’s mind, together with
other price initiatives.
We will continue to make improvements to service and
availability including by utilising XDCs efficiently and through
our Daily Traders and Live Stock initiatives. We are increasing
the range of services and functionality we offer online to the
benefit of our depot teams, customers and end-users alike.
We will be making more in the UK, as our new lines at Howden
move up towards full scale production, our solid surface
business grows, and bedroom volumes increase. During 2024
we plan to open around 30 depots in the UK and refurbish
around another 85 existing depots in the updated format.
In France and Belgium we plan to have around 70 depots
trading in 2024, with around 15 trading in the Republic of
Ireland by the end of 2024.
We have made an encouraging start to 2024 in market
conditions unchanged from 2023 and we are on track to
meet our expectations for the business in 2024. We aim to
retain a profitable balance between margin and volume, as
we continue to maintain competitive pricing whilst aligning
operating costs and working with suppliers to keep product
and input costs controlled.
We are confident that our business model is the right
one to address the opportunities our markets present.
We are well placed to outperform our competitors in
2024 as we continue to invest in our key capabilities and
growth opportunities which are pivotal to the longer-term
development of the business.
Watch Andrew’s update on
our strategic initiatives at
Howdens’ recent Full Year
Results presentation on
29 February 2024.
Our strategic initiatives
We have made further progress on our medium-term strategic initiatives,
and we expect to deliver profitable growth and market share gains
over the medium term. The four strategic initiatives are:
Evolve our depot model
Improve our range and supply management
Develop our digital capabilities and services
Expand our international operations
1
2
3
4
1
Evolve our depot model – we want to improve
our depot network over time to ensure we use
space more efficiently, and to provide the best
environment for our customers to do business in.
High service levels, including local proximity and immediate
availability are very important to our customers and we have
continued to extend our depot footprint to support growth.
Overall, we believe that there is an opportunity to open
around 1,000 depots in the UK over time. At the end of 2023
there were 840 depots trading and we are opening around
25–30 a year in the most attractive local regions.
In 2018 we developed an updated depot format and have
been rolling it out across our depot estate. It provides
an attractive space for us to do business with our Trade
customers, a place for them to bring their customers to see
our product range and to work with our kitchen designers,
and an improved warehouse space that makes space
utilisation and productivity gains in a cost-effective way, by
using vertical racking. The reformats are budgeted to pay
back costs in less than four years. Depot P&Ls are charged
a reformat cost which ensures depot teams are motivated
to deliver incremental sales.
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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.
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Chief Executive Officer’s review continued
Our strategic initiatives continued
2
Improving our range and supply management
– to help customers’ buying decisions, to
improve service and to enhance productivity
in our manufacturing, sourcing and supply
chain activities.
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 we
are offering the right number of range families, designed to
fit all budgets. More recently we have placed more emphasis
on building out our share of higher priced kitchens where we
have been historically under-represented. This has included
expanding our offering to encompass template to fit solid
worksurfaces, a wider range of appliances (including own
label) and premium services such as paint to order. We are
also innovating in other product categories to expand our
share of attractive niche markets in joinery.
Howdens is an in-stock business and the trade tell us that a
high level of stock availability is one of the key reasons they
buy from us.
We protect stock availability in several ways, which helps
us deal with supply chain disruption and maintain our
service levels. We have improved stock replenishment
by supplementing the depots’ core weekly delivery
order with investment in a next day service via
a network of 12 regional cross docking centres
(or ‘XDCs’) which was completed in 2023.
XDC’s are a key enabler to delivering the levels of high
service and availability which differentiate our offer. The
improvements to stock replenishment enable depots to hold
deeper stocks of faster selling lines and makes it simpler and
more efficient for them to deliver superior service levels and
availability, backed by certainty over lead time to delivery for
items not held at depot level.
We make all the kitchen cabinets and some of the other
kitchen products we sell, which is the source of competitive
advantage for us in several ways. We keep under review
what we believe is best to make or buy, balancing cost and
overall supply chain availability, resilience and flexibility.
We have invested in new furniture lines at our Howden site,
which are amongst the most advanced of their type in Europe,
with a full year capacity of around 2 million pieces going
forward. These give us the ability to make a variety of kitchen
furniture, principally frontals and panels, but also skirting and
architraves, for more of our ranges, at the same quality as we
can source externally but at a lower cost and at a reduced lead
time to delivery. We have also invested in two lines to facilitate
our ‘Paint to Order’ initiative. Located in a purpose-built facility
near our Howden site, the lines give us an industry leading
production capability.
3
4
Digital – we are developing our digital platforms
to raise brand awareness, support the business
model and to deliver productivity gains and
leads for depots and customers.
Our digital strategy reinforces our model of strong local
relationships between depots and their customers by raising
brand awareness and further supports the business model
with new services and ways to trade. It also frees up time for
depot staff and customers to use more productively.
Our online account facilities provide benefits for both
customers and depots. Use continues to increase. Customers
with an online account have, on average, continued to trade
with us more frequently, spent significantly more, and bought
across more product categories.
As our digital presence has grown, awareness of Howdens
amongst end-consumers has increased. We have added
new features to our trade platform which improve stock and
account knowledge, promote frequency and ease of trading
and reduce time consuming manual tasks in depots. The stock
surety this and other initiatives such as Daily Traders provide,
now enable us to upgrade significantly the ‘click and collect’
service we offer.
We have also invested in capabilities which help end users
interact with Howdens online at each stage of their buying
decision. As our digital presence has grown, awareness of
Howdens amongst end-consumers has increased. We ended
the year with 540,000 followers across the major social media
channels with a significant rise in the number of engagements.
International – Expanding our presence in
attractive kitchen and joinery markets outside
the UK.
While the UK market for kitchens and joinery is large,
fragmented and attractive, we believe that there is an
opportunity to take Howdens’ highly differentiated in-stock,
trade only local business models to other markets outside the
UK. For example, the company has established 65 depots in
France and Belgium and in 2022 we also opened for business
in the Republic of Ireland where we now have 10 depots.
A good example is France, where we believe the kitchen
market is worth around €3.9 billion, excluding appliances,
with most kitchens purchased through kitchen specialists
and DIY stores. Currently there is limited choice locally for
builders to be served by a dedicated supplier where products
are available from stock either same day or next day. We
have tested our ability to access this sizeable market in
several ways before adopting ‘a city-based’ approach,
serving solely trade customers, led and staffed by people who
embrace the Howdens way of doing business. Alongside team
development, we are also investing in the business through
enhanced offerings of ‘footfall-promoting’ products and a
regular schedule of ‘trade days’ at all depots with aligned
promotional activity and more supplier support. Our current
strategy is to establish profitable businesses in these regions
which deliver attractive returns for our shareholders.
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Strategic ReportStrategic ReportStrategic ReportPage TitlePage Title
Key performance indicators
28 Howden Joinery Group Plc
Annual Report & Accounts 2023
Key performance indicators
Strategy
Risk
Remuneration
Links to:
Howden Joinery Group Plc
Annual Report & Accounts 2023
29
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 2023, in line with market expectations.
n
b
3
.
2
£
n
b
3
.
2
£
n
b
1
.
2
£
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 of £328m in 2023.
m
0
9
3
£
m
6
0
4
£
m
8
2
3
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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 has remained low and is
also significantly below the HSE all-industry average for the year.
See page 56 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 2024.
Links to strategy, risks and remuneration
Reach more builders
Failure to maximise growth potential
Deterioration of model & culture
Progress
We ended 2023 with 32 more depots in the UK, 5 more in France
and an additional 5 in the Republic of Ireland. We plan to continue
to expand our network in 2024.
5
5
1
4
0
4
2
4
9
1
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
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
dividendand 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 £119m in capital expenditure for future
growth and have also returned £164m in dividends and
buybacks, ending the year with £283m cash.
£283m
year end cash
£119m
capex
£164m
dividends &
share buybacks
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 page 50 for
more details.
Links to strategy, risks and remuneration
Product innovation
Product relevance
Continuity of supply
Zero to landfill
Why we measure it
One of the pillars of our business model is our efficient production,
which gives us a significant cost advantage. Reusing, recovering
or recycling as much of our waste as we can benefits stakeholders
as it reduces our both our emissions and our costs.
Links to strategy, risks and remuneration
Operational excellence
Prudent financial management
All of chipboard
& MDF used in our
manufacturing
processes is from
FSC® or PEFC
certified sources
Progress
At the end of 2022 we were zero to landfill across our
manufacturing and warehouse operations. We are pleased to
announce that in 2023 we are now zero to landfill across our
whole UK operations. See page 57 for more details.
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Strategic ReportStrategic ReportStrategic ReportPage Title
Financial review
30 Howden Joinery Group Plc
Annual Report & Accounts 2023
Strategic Report
Financial review
• Maintained sector leading
Financial results for 20231
margins in higher inflationary
environment
• Continued investment in
strategic initiatives
• 21.0p 2023 full year dividend
Paul Hayes
Chief Financial Officer
Tight cost control enables us
to protect our investments in
strategic growth initiatives.
Revenue
Group revenue of £2,310.9m was in line with last year (2022:
£2,319.0m) and 45.9% ahead of the same period in 2019. UK
depot revenue of £2,241.1m (2022: £2,256.1m) was broadly
consistent with last year’s record performance and 1.7% lower
on a same depot basis.
Revenue in the international depots was 11.0% ahead of the
prior year at £69.8m (2022: £62.9m) and included sales in
the Republic of Ireland, where we opened depots last year, for
the first time. We continued to expand our international depot
network with ten openings in the year, bringing the total to 75.
Gross profit
We maintained our sector leading margins by appropriately
balancing pricing and volumes in an environment of high
inflation. Gross profit was broadly similar to last year at
£1,403.9m (2022: £1,411.2m).
The slightly lower gross margin percentage of 60.8%
(2022: 60.9%) reflected the dilutive impact of a higher mix
of everyday joinery products and growth of our solid work
surfaces offering which performed strongly in its first full year
of trading. Solid work surfaces, often associated with sales
of higher priced kitchens, make an attractive cash margin
contribution but have a lower gross margin percentage than
most of Howdens kitchen products. During the year we also
delivered a number of productivity improvements in our
manufacturing operations which partially offset increases
in commodities, wage inflation and energy costs.
Operating profit and profit before tax
Operating profit was below last year at £340.2m (2022:
£415.2m) given the continued investment in the strategic
initiatives and £17m of additional costs arising from an
additional 53rd week. It was, however, 30.8% ahead of
pre-COVID profit levels in 2019 of £260.0m.
Operating expenses increased by £67.7m to £1,063.7m
(2022: £996.0m) with productivity and efficiency actions
taken throughout the year more than offsetting cost increases
of around £50m relating to inflation. This tight cost control
enabled us to protect our ongoing investments in our strategic
growth initiatives across the business. The £53m of strategic
investments this year included £16m on new UK depots
opened in 2022 and 2023 and £12m on international depots
opened in the period and prior year.
1
2
The information presented relates to the 53 weeks to 30 December 2023
and the 52 weeks to 24 December 2022 unless otherwise stated.
Same depot basis for any year excludes depots opened in that year
and the prior year.
Howden Joinery Group Plc
Annual Report & Accounts 2023
31
Revenue1 £m
Group:
UK depots – same depot basis2, 4
UK depots opened in previous two years
Howden Joinery UK depots – total sales
International depots
Revenue €m
International – same depot basis2
Depots opened in previous two years
Total – international depots
2023
No. of depots
2,310.9
2,195.3
45.8
2,241.1
68.8
58.4
21.9
80.3
915
777
63
840
75
35
40
75
20225
2,319.0
2,232.8
23.33
2,256.1
62.9
66.8
6.9
73.7
1 The information presented relates to the 53 weeks to 30 December 2023 and the 52 weeks to 24 December 2022 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.
4 One depot was closed in the UK at the end of 2023.
5 During 2022, 25 depots were opened and 5 depots were closed in France.
Cash
The net cash inflow from operating activities was £470.8m
(2022: £548.5m). Overall working capital increased by £35.0m
with stock £10m higher, mainly as a result of inflation. Debtors
at the end of the period were £39m lower than at the end of
the previous period with ageing in good shape and benefitting
from the later timing of the year end. Creditors were £64.3m
lower. Capital expenditure net cash payments were below
the prior year at £118.9m (2022: £140.8m). Corporation tax
payments were £63.5m (2022: £101.5m), and dividends
amounted to £114.1m (2022: £115.0m). Share buy backs
totalled £50.0m (2022: £250.5m). The interest and principal
paid on lease liabilities totalled £121.8m (2022: £79.2m).
Reflecting the above, there was a net cash outflow of £23.1m
(2022: outflow of £207.3m), leaving the Group with cash at the
year end of £282.8m (2022: £308.0m).
We also invested £25m in warehouse and transportation
initiatives including the full year impact of our investment in
our regional cross docking facilities (XDCs).
The net interest charge was £12.6m (2022: £9.4m). Profit
before tax of £327.6m was £78.2m below the prior year
(2022: £405.8m) and 25.7% ahead of 2019 (2019: £260.7m).
Tax, profit after tax and basic
earnings per share
The tax charge on profit before tax was £73.0m (2022:
£31.6m) and represented an effective tax rate of 22.3%
(2022: 7.8%). This includes a higher corporation tax rate for
businesses introduced in the UK from April 2023. The lower
tax rate in the prior year reflected the previously announced
backdated tax credit relating to the patent box claim which
was included in Howdens’ financial statements last year.
While always subject to review by HMRC, as previously
indicated, the Group expects an ongoing reduction of around
3% to Howdens effective tax rate, assuming current marginal
tax rates.
Profit after tax was £254.6m (2022: £374.2m). Reflecting
the above and the benefit of the reduced share count following
the share buyback, basic earnings per share were lower at
46.5p (2022: 65.8p).
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32 Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial review continued
How we make cash and how we spend it
Cash generation and use
+£488m
-£107m
-£46m
-£17m
-£64m
-£119m
£m
£900
£800
£700
£600
£500
£400
£300
£200
£100
0
m
8
0
3
£
22
-£114m
+4m
-£50m
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3
8
2
£
23
Opening
net cash
Operating
cash flows
– pre leases
Lease
Payments
Working
capital
changes
Pension
contribution
Tax
paid
Capex
Dividends
paid
Shares
repurchased
Other
Closing
net cash
Uses of cash
2022
2023
£156m
£250m
£115m
£114m
£50m
£114m
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 period-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.
Considering the Group’s prospects and strong financial
position, in July 2023 the Board declared an interim dividend
of 4.8p per ordinary share (2022: 4.7p per ordinary share).
The Board is recommending a final dividend for 2023 of 16.2p
per ordinary share (2022: 15.9p per ordinary share), resulting
in a total dividend of 21.0p per ordinary share (2022: 20.6p
per ordinary share). The total dividend represents a year-over-
year increase of 1.9% and if approved by shareholders at the
AGM in May the final dividend will be paid on 24 May 2024 to
shareholders on the register on 12 April 2024.
Pensions
At 30 December 2023, the defined benefit pension scheme
was in a deficit position of £12.6m on an IAS 19 basis
compared to a deficit of £41.5m on 24 December 2022.
The scheme is closed for future accrual.
The triennial actuarial valuation of the scheme was conducted
as at 31 March 2023 and the scheme was in a surplus position
on a technical provisions basis. The Company and Trustee
agreed a new recovery plan in November 2023, should the
scheme move into a technical deficit, and this agreement
will run until 31 May 2026. This recognises the improvement
in the pension scheme funding since it was last set in 2020.
Under this agreement deficit contributions of £1m a month
will be made if there is a deficit, on a technical provisions
basis for more than two consecutive months. This compares
to the previous rate of rate of £2.5m per month. In the year to
30 December 2023 deficit payments totalled £19m.
Howden Joinery Group Plc
Annual Report & Accounts 2023
33
Howdens’ approach to capital structure
Investing in organic growth:
• Open new and revamp existing depots
• Disciplined range management
• Optimise manufacturing & logistics
• Grow digital platform
Progressive ordinary
dividend growth:
• Sustainable growth through the cycle
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
Technical guidance for 2024
Income statement
• Continued operating expense investment to support our
strategic initiatives including new depots, manufacturing
and supply chain and digital investments.
• Given the current Red Sea situation, we are rerouting
a significant proportion of our Far East freight and
we anticipate additional costs of around £5m at
current pricing.
• Foreign exchange sensitivity on COGS of Euro:
+/ – €0.01 = £1.8m; US Dollar: +/ – $0.01 = £0.8m.
• Patent box impact on the Group’s effective tax rate
3% lower to around 23%.
Cashflow
• Year-end receivables are expected to increase in 2024
due to the later timing of Period 12 end with a proportion
of peak trading customer payments not being due until
after the year end.
• Capital expenditure anticipated at c.£125m including
investments to support our strategic initiatives.
• Following triennial valuation in 2023, reduced cash
contribution to the Group pension scheme to £1m per
month should the scheme be in deficit for more than
two consecutive months.
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34 Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial review continued
Use and management of financial
instruments, and exposure to
financial risk
The Group holds financial instruments for one principal
purpose: to finance its operations. The Group does not
currently use derivative financial instruments to reduce its
exposure to interest or exchange rate movements.
Counterparty risk
Group Treasury policy on investment restricts counterparties
to those with a short-term credit rating at least equivalent to
Standard and Poor’s A-1 or Moody’s P-1. It also places limits
on the maximum amount which can be invested with a single
counterparty. The Group continuously reviews the credit
quality of counterparties, the limits placed on individual credit
exposures and categories of investments.
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 £8.2m. The principal exchange
rates affecting the profits of the Group are set out in the
following table.
Principal exchange rates versus UK pound (£)
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 2023 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 as part of our going concern assessment,
which is further detailed beginning at page 69.
At the 2023 year end, the Group had £283m of net cash and
£150m of funds available to borrow under the committed
borrowing facility.
1.50
1.25
1.00
0.75
0.50
0.25
0
1.23
1.21
1.24
1.27
1.17
1.14
1.15
1.15
22
23
22
23
United States dollar (US$)
Euro (€)
Average rate
2023 Year-end
2022 Year-end
1
Same depot basis for any year excludes depots opened in that year and the prior year.
2
As previously indicated FY2023 has an additional 53rd week in December representing around £17m of additional operating costs with no incremental sales.
Interest rate risk
The Group has not had any borrowings during 2023 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 2023 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
28 February 2024
Howden Joinery Group Plc
Annual Report & Accounts 2023
35
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Non-financial and sustainability
information
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 145
shows where in this Annual Report and Accounts to find
each of the disclosure requirements.
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 82 and
83. On pages 84 to 91, 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.
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Risk management
36 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
37
Risk management
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.
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
Emerging risks
Climate-related risk
Climate-related risk is an emerging risk, but is not a principal
risk for us. 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 2023,
and more detail on this can be found in our TCFD report at
page 60. In 2023 our key climate risk developments include:
Risk identification
We have continued to engage with some of our key
stakeholders, including our insurers and suppliers,
to understand how their focus on climate risk is likely to
change going forward and the impact it will have on us.
Risk management
We have refined our risk assessment approach, that
is modelled on the British Standard (BS EN ISO14091)
and tailored to meet our needs, so that it enables robust
prioritisation of risk exposures for treatment.
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.
We consider emerging risks as part of our routine risk
management process. We discuss emerging risks regularly
within the management team and, where appropriate, with
the Board.
We conduct periodic ‘horizon scans’ of emerging risks with
the Executive Committee to gain insight on what our long-term
risk profile looks like. Conducting this process enables us to
consider risk over three timescales:
Short term
Those risks that are strategically and/or operationally
important to us now and into the near future. They are
typically visible, understood and already covered well
in our operational risk register.
Medium term
Risks that are tactically important to achievement of our
longer-term objectives, development and growth plans.
Long term
Longer term trends that could impact on the development
of our strategic objectives. The output of this process is
discussed with the Executive Committee and the Board.
If a specific emerging risk requires a more immediate
response, we discuss it with the Business Continuity and/or
Executive Committee as appropriate. Examples of emerging
risks we are currently considering are:
• The governance of Artificial Intelligence technology
and its use in Howdens.
• The changing geopolitical situation in the Middle East,
Eastern Europe and China, and its potential impact on
our supply base and on the UK economy.
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
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. Risks 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
• 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 (see page 79).
Risk response
• Where risks exceed our appetite, mitigation
plans are drawn up by functional leaders
and agreed with the Executive Committee.
People
responsible
Top-down
Board
Executive
Committee
Audit Committee
Risk team
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.
Functional
leaders
Operational
management
Risk team
Bottom-up
Reports/documents
Principal risks
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.
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Principal risks and uncertainties
38 Howden Joinery Group Plc
Annual Report & Accounts 2023
Principal risks and uncertainties
2023 Principal risks
The arrows alongside each risk show the year on year change
Howden Joinery Group Plc
Annual Report & Accounts 2023
39
Links to strategy
Reach more builders
Operational excellence
Product innovation
Prudent financial management
1. Market conditions
R O P F
4. People
R O P F
Risk and impact
Mitigating factors
Risk and impact
Mitigating factors
Our business could be adversely
affected if we were unable to attract,
retain and develop our staff, or if we
lost a key member of our team.
• We continue to invest in our employee value proposition, striving to provide the best
possible working environment and growth opportunities for our employees.
• The Executive Committee and senior leadership team assess succession plans for
key roles regularly to ensure that appropriate continuity in place.
• The Remuneration Committee and Board are regularly updated on key people activity
such as our internal projects to improve diversity as well as key programmes such as
employee financial education.
• We continue to support a wide variety of apprenticeships, accreditations and
development programmes across all areas of our business.
Risk appetite
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.
5. Health and safety
R O P F
Risk and impact
Mitigating factors
We have a larger estate which employ
various activities that could cause
harm to our staff, our customers,
their customers and the communities
around us.
• We have invested in safe ways of working. 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.
• We make sure we keep talking about health and safety at every level of the business,
led by the Executive Committee.
Risk appetite
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.
We sell our products to small
builders who install them in
different types of housing. Our sales
depend on the demand for repair,
maintenance, and improvement
services. If activity falls in these
areas, it can affect our sales.
• We have proven expertise in managing selling prices and costs. Data on competitors,
depot activity and pricing is discussed by the Executive Committee at each meeting.
• We use insights from our depot network, our builders’ forums and other channels.
This is reviewed regularly by the Executive Committee and the Board.
• We use our good relationships with our suppliers to alert us of any changes. Our
suppliers update us on their assessment of trading and market performance through
regular reviews with our leadership team. We also gather insights from supplier visits
and our Supplier Conference.
Risk appetite
We have a low appetite for market conditions risks and we maintain close relationships with our customers and suppliers to identify
movements early to enable appropriate action to be taken.
2. Supply chain
R O P F
Over 2023 this risk has decreased as our supply base continues to improve and return to a more pre-pandemic environment.
Risk and impact
Mitigating factors
Disruption to our relationship with
key suppliers, manufacturing and
distribution operations could affect
our ability to service our customers’
needs. If this happened, we could lose
customers and sales.
• We maintain strong relationships with our suppliers. We use long-term contracts and
multiple sourcing to safeguard the supply of key products.
• We have invested in our supply chain and distribution to secure capacity and agility
when it is required. We have optimised our stock levels.
• Supplier reviews are discussed regularly with the Executive Committee. In addition, a
sub-committee monitors governance of supplier risk and considers potential issues.
Risk appetite
We have a very low appetite for supply chain risks and put considerable effort into identifying them early to enable us to prevent stock
issues at our depots.
3. Maximising growth
R O P F
Risk and impact
Mitigating factors
Failure to recognise, innovate and
exploit opportunities could impact on
growth, we must align our business
model, risk appetite, structures, and
skills with opportunities to maximise
our growth potential.
• 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. Our strategic priorities are actively discussed at the senior leadership,
Executive Committee and Board level. The Board is updated on the strategic plan
regularly, and there is a regular programme of ‘Spotlight’ sessions which examine
specific areas of the strategy.
Risk appetite
We have a balanced appetite for risk when it comes to growth, we are willing to accept some risk where we see opportunity but carefully
balance that risk with the potential reward presented.
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Strategic ReportStrategic ReportStrategic ReportPage Title
40 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
41
Principal risks and uncertainties continued
2023 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
6. Cyber security
R O P F
8. Product
R O P F
Risk and impact
Mitigating factors
Risk and impact
Mitigating factors
A major cyber security breach
could result in systems being
unavailable, causing operational
difficulties, and/or sensitive data to
be unavailable or compromised.
• 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 mitigation.
• We employ industry standard IT security controls and regularly engage external
specialists to validate the effectiveness of our controls against best practice.
• We have robust disaster recovery and business continuity plans that are
tested regularly.
• We adopt a continuous improvement approach to IT security and continue to invest
in the security of our systems.
Risk appetite
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.
7. Business model & culture
R O P F
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.
Risk appetite
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.
If we do not support the builder
with products that they and
their customers want, we could lose
their loyalty and sales could diminish.
• Our product team regularly refresh our offerings to meet builders’ and end-users’
expectations for design, price, quality, availability and sustainability.
• We work with our suppliers, 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.
Risk appetite
We have a balanced appetite for product risk and are willing to take some calculated risks when selecting new products to continue to meet
the need of our customers.
9. Business continuity & resilience
R O P F
Risk and impact
Mitigating factors
We have some key business
operations and locations in
our infrastructure that are critical
to the continuity of our business
operations.
• We maintain and regularly review our understanding of what our critical operations are.
• 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.
Risk appetite
We have 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.
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Strategic ReportStrategic ReportStrategic ReportPage TitlePage Title
Sustainability matters
42 Howden Joinery Group Plc
Annual Report & Accounts 2023
Strategic Report – Sustainability Matters
Sustainability matters
Worthwhile for
all concerned
44 Why Sustainability matters to us
51 Decarbonising the distribution fleet
45 Our ESG strategy
52 Sustainable product offer and product innovation
46 Our Net Zero commitment and targets
54 EDI & wellbeing
47 Our emissions and how we plan to reduce them
48 Our material sustainability issues
49 Supplier engagement – addressing Scope 3
emissions together
56 Health & safety, carbon neutral,
renewable energy and waste
58 Our impact on stakeholders
60 TCFD – building climate resilience
50 Renewable energy & sustainable operations
67 Our SECR and Scope 3 reporting
Why
Sustainability
matters to us
44
Our ESG
strategy
45
Net Zero
46
Our material
sustainability
issues
48
Renewable
energy &
sustainable
operations
50
Our impact on
our stakeholders
58
Our TCFD
reporting
60
Our SECR
and Scope 3
reporting
67
Howden Joinery Group Plc
Annual Report & Accounts 2023
43
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Strategic ReportStrategic ReportPage Title
Why Sustainability matters to us
Our ESG strategy
44 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
45
Why Sustainability matters to us
Our ESG strategy
Sustainability generates
long-term value
Sustainable behaviour helps Howdens to grow in a way that
preserves our culture, supports our business model, increases
business resilience, mitigates our risks and addresses the
material needs of our stakeholders.
Sustainability is part of our culture
The Howdens culture is to be ‘worthwhile for all concerned’.
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.
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 900 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 38.
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, where sustainability
considerations are built in as a pillar of the design process,
mitigates our ‘Product design relevance’ risk.
Our material sustainability areas
and our ESG strategy
We previously carried out an assessment of our material
sustainability areas in 2020. During 2023 we refreshed
this by commissioning an independent review with
third party specialists, consulting both external and
internal stakeholders.
We present the findings of the materiality assessment and
show how the material topics are aligned to the strategic
pillars and foundation principles of our ESG strategy at page
48. Our ESG strategy is summarised on the next page.
Our sustainability KPIs, Our Net Zero
SBTi 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 50, 56 and 57.
Our SBTi Net Zero targets were submitted in the first half of
2023 and were approved in January 2024. We present these
targets on page 46 and will be tracking progress against their
first 6-year phase in future reports.
Our PSP share plan includes ESG-related vesting targets
which are aligned with our Net Zero goal. Please see page 130
for details of the targets.
ESG strategic highlights of 2023
Road to Net Zero
• Science-based targets submitted and approved
(pages 46 and 47).
• Extensive supplier engagement – linked to our SBTs
(page 49).
• Reporting our Scope 3 data for first time (page 68).
Climate resilience
• Physical risk assessment (pages 49, 66).
Materiality
• Materiality assessment reperformed (page 48).
•
Interviews with internal and external stakeholders.
Charities and communities
Our work in these two important areas is covered in the
Chairman’s statement on page 17.
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 140.
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.
Strategic
Objectives
Strategic
Pillars
Foundations
Our strategy
Net Zero
Climate Resilience
Renewable energy
/sustainable
operations
Supply chain
emissions
Decarbonise
the fleet
Sustainable
product offer
& innovation
Supply chain
risk mapping
& resilience
See page 50
See page 49
See page 51
See page 52
See pages 49 & 66
EDI: Strategic priorities & wellbeing
See pages 54 & 55
Behavioural health & safety: Maintain & next steps
See page 56
Effective waste management: Zero to landfill
See page 57
Emissions reductions: Carbon neutral
See page 56
Governance
Effective reporting & disclosure
UN SDG description and relevant targets under each SDG
Our material SDGs
‘ 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.
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Strategic Report – Sustainability MattersStrategic ReportStrategic ReportPage Title
Our Net Zero commitment and targets
Our emissions and how we plan to reduce them
46 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
47
Our Net Zero commitment and targets
Our emissions and how we plan to reduce them
TARGET: Net Zero by 2050
First steps to the target – against a 2021 baseline:
• 42% reduction in Scope 1 and 2 emissions by 2030
• 25% reduction in Scope 3 emissions by 2030
• 90% reduction in all emissions by 2050
1 Biomass boilers (in use since 1995)
2 FSC® & PEFC chain of custody introduced
3 Carbon Trust standard (first carbon reduction plan)
4 Further investment in biomass for factory heating
15
5 Development and intro of 100% recycled and 100% recyclable cabinet legs
13
14
6 Zero to landfill achieved from manufacturing
7 Introduction of renewable electricity in Supply
8 Carbon neutral status achieved at Howden and Runcorn manufacturing sites
9 Introduction of renewable electricity in depots
10 Committed to Science Based Targets initiative (SBTi) with Net Zero plan
12
11 Introduction of HVO alternative fuel
12 Introduction of EV trucks
13 Long-term exploration of alternative
fuels, materials and technologies
14 Approval for SBTi
15 Interim 2030 emission reduction
targets (reduce by 50% vs 2021 baseline)
16 NET ZERO
ROAD TO
ZERO
OUR JOURNEY TO
ZERO WASTE
ZERO EMISSIONS
4
3
2
1
9
10
11
7
8
5
6
% CO2 Emission Reduction
0
3
0
2
4
2
0
2
3
2
0
2
2
2
0
2
1
2
0
2
8
1
0
2
3
1
0
2
2
1
0
2
8
0
0
2
4
0
0
2
%
7
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1
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0
5
0
2
8%
Scope 3 – Investments
(Pension scheme)
Total 2021
baseline emissions:
1.2m TCO2e
(estimated)
14%
Scope 3 – Other
34%
Scope 3 – Use of
sold products
4%
Scope 1
1%
Scope 2 –
Market based
40%
Scope 3 – Purchased
goods and services
“We are developing the options
to meet our SBTi targets”
Scope 1 & 2
Scope 3
A – Distribution
B – Renewable energy
D – Supply chain
LNG trials and HVO usage underway
Electric vehicles where feasible
– test and develop business case
Engaging logistics providers
for solutions
All sites to switch 100% renewable
energy. Invest in solar generation
C – Electric fleet
Company car transition
to 100% electric/PHEV
Initial focus on top 6 suppliers then
roll out our findings across supply
base (page 49)
Capture emissions data
Establish reduction plans
and metrics
Identify risks and opportunities
Costs of change
1) Minimal cost of change so far – including moving depots to renewable energy tariff in 2022. No material financial impact
of meeting our SBTi targets in short or medium term (page 60)
2) Driving energy efficiency is an opportunity to tackle escalating costs in an inflationary environment
3) Increasing confidence that suppliers will be able to achieve 2030 targets without significant adverse cost impact
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Strategic Report – Sustainability MattersStrategic ReportStrategic ReportPage TitlePage Title
Our material sustainability issues
Supplier engagement – addressing Scope 3 emissions together
48 Howden Joinery Group Plc
Annual Report & Accounts 2023
Our material sustainability issues
Refreshing our ESG materiality assessment in 2023
We last carried out an ESG materiality assessment in 2020 as part of a wider ESG Strategic Review. One of our priorities in
2023 was to refresh the assessment by commissioning an independent specialist review and carrying out interviews with
both internal and external stakeholders.
Methodology and results of the materiality assessment and stakeholder engagement:
1. Desktop analysis
and issue identification
2. Stakeholder
engagement
3. Refinement and
consolidation of issues
Research into our initial internal
views and communications around
material issues. Identifying issues
which external stakeholders and peer
companies, sector guidance and
frameworks commonly identify as
being material.
Identifying a list of possible material
topics for stakeholder interviews.
Interviews with key stakeholders to
discuss the possible material issues
identified in step 1, and to get their
views on any other issues which they
considered to be material.
This involved interviews with investors,
suppliers, depot managers, other
employees, and members of the senior
leadership team.
The findings from all the stakeholder
group interviews were examined and
consolidated into the matrix below.
We then compared them with our
existing ESG strategic pillars and
foundation values. Whilst there were
variations in some of the terminology
used, we were encouraged to see that
the issues identified were the issues
we were already focusing on.
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Higher importance for stakeholders
Supply Chain and
Materials Sourcing
Transparency and Disclosure
Carbon Footprint
and GHG Emissions
Packaging Material
and Waste
Forestry and Timber Supply Chain
Customer Relations
Manufacturing Impact
Sustainable
Product and Brand
Distribution Impact
Waste Management
Circularity
Climate Risk
Health and Safety
Employee Development
Employee Engagement
Board Accountability
Employee Wellbeing
Moderate importance
Higher importance for Howdens
Howdens view
Equality, Diversity
and Inclusion
Business Resilience
and Compliance
Communities and Charity
Link to our ESG strategic pillars
Link to our ESG foundation values
Link to wider business strategy and governance
Stakeholder view
Gathered from interviews with depot
managers, employees, suppliers
and investors.
Howdens View
Gathered from interviews with
the senior leadership team.
Correlation of material topics with our ESG strategy
As well as showing the relative importance of each of the topics that arose in our stakeholder interviews, the diagram above
shows how they link to our ESG strategic pillars and foundation values, set out at page 45, or in some cases, how they link with
our wider business strategy and our governance.
Howden Joinery Group Plc
Annual Report & Accounts 2023
49
Supplier engagement – addressing Scope 3
emissions together
Why supplier engagement is important
95% of our baseline total emissions are Scope 3. 76% of these
relate to goods purchased from our suppliers and the use of
products that we source from our suppliers.
We can only achieve our Net Zero SBTi targets by collaborating
with our key suppliers.
Engaging with our top suppliers in 2023
During the first part of 2023, we engaged with our top 28
suppliers. It then became clear that we were likely to learn
more by narrowing this down and concentrating in depth
on our top six suppliers, who account for 25% of our total
supplier emissions.
Whilst these six were the largest suppliers by spend, and the
most critical to our business, they also covered a variety of
business structures, product types, and geographies.
Engagement in action:
supplier ESG summits
In July, we co-hosted our first ESG supplier collaboration
summit in Venice in partnership with one of our largest
cabinet frontal suppliers, Friul. Together we gathered Friul’s
key suppliers from around the world to share decarbonisation
activities and to discuss solutions for future emissions
reductions and other ESG priorities.
Our joint aim for the conference was to send a strong message
to the Tier 2 and further upstream suppliers and focus on
shared ESG objectives that will give mutual benefit. Main
outcomes were:
• Giving a strong demonstration of industry leadership
and a message to our wider supply chain.
• Confirming that all the suppliers are active on ESG, from
emissions reduction to sustainable material innovation.
• Discussing and sharing Initiatives which are already
underway, including: MDF recycling; renewable energy;
Net Zero targets, and product circularity.
• Encouraging future investments in resource, technology
and data verification.
In November we applied this successful format for a
collaboration summit in Turkey, with appliance supplier BEKO
and their parent company. Seven of their main material
suppliers shared their ambitions and decarbonisation plans
with us and we discussed how their own Net Zero plans could
work alongside ours, for our mutual benefit.
Engagement in action: Net Zero
commitments strengthen bonds
with long-term supply partners
Our sustainability strategy hinges on working with engaged
and proactive suppliers. Many have been working on
improving efficiencies and adding value for some time,
however, understanding the investments required to gather
the data and turn it into meaningful sustainable actions
remains a challenge.
Our biggest chipboard supplier, Egger, has always placed
sustainability at the heart of its operations, in line with its
founder’s belief that ‘wood is far too valuable to just throw it
away’. As a result Egger has defined emissions targets, aiming
to achieve Net Zero by 2050, with near term 2030 targets,
many of which were initiated to support and align to our SBTI
targets. Egger has committed significant investments to
ensure delivery of its, and our, Net Zero plan.
Engagement in action: ESG objectives
included in standard supplier terms
of business
Initial ESG objectives were introduced into our Supplier Code
of Conduct in 2022. Throughout this year we have worked
to increase our understanding of the complexities around
gathering and sharing good quality data, particularly around
Scope 3, and how this effects the way we do business.
In 2024 we will be introducing clauses into our standard
supplier terms and conditions making it clear that we expect
our suppliers to comply with Net Zero obligations and carbon
data reporting.
Agenda for the future
Key points for the future agenda on supplier engagement will be:
•
Improving accuracy of supply chain emissions data
to ensure a robust emissions figure.
• Working with our main suppliers to capture real
emissions data from the value chain, supported by
science-based targets.
• Continuing to lead and work with our supply partners to
encourage actions that support our Net Zero emissions
reduction targets.
Supply chain risk mapping and
resilience to climate change
As we describe in our TCFD report (page 66), we are currently
in Phase 2 of our physical climate risk assessment work,
that involves using a specialist climate diagnostic tool to
assess current and future potential supply chain exposures.
Physical climate-related risks are captured across multiple
scenarios including extreme winds, flooding, heat stress, sea
level rise, etc. We have started by analysing exposure of our
key suppliers and expect to have finished and reviewed this
analysis in H1 2024.
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Strategic Report – Sustainability MattersStrategic ReportStrategic ReportPage TitlePage Title
Renewable energy & sustainable operations
Decarbonising the distribution fleet
50 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
51
Renewable energy & sustainable operations
Decarbonising the distribution fleet
Sustainable sourcing
All of chipboard
& MDF used in our
manufacturing
processes is from
FSC® or PEFC
certified sources
KPI – FSC®/PEFC
We used 270,000 cubic metres of chipboard and 60,000 cubic
metres of MDF in our factories in 2023 – enough to fill the Albert
Hall more than 3 times – so it’s natural that we have a long-
standing KPI requiring all wood to be from certified sources.
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.
Emissions reduction developments
in 2023
Waste heat recovery
As part of our Net Zero strategy towards a 42% reduction
in our emissions by 2030, we have started a project at our
manufacturing site at Howden which recovers heat from our
generators and uses it to heat another part of the factory. This
will reduce our reliance on gas and reduce our emissions by
600 TCO2e/year. The project will be operational in 2024.
Energy monitoring
Energy-efficient production has always been part of our
business model, so over the years we’ve already identified and
implemented several large-scale energy-saving opportunities.
In 2023 we’ve started to install energy monitors at a process
level. This gives our engineering and operations teams the
ability to see the energy consumption at an individual process
level. In the first phase of this project we’ve identified emission
reductions of over 300 TCO2e/year.
Solar energy investment approved
Solar panel investment has been approved in 2023 at our
manufacturing site in Howden. The first phase will see PV
panels installed on our main warehouse roof, covering an area
of 350,000 ft2. The work will begin in 2024 and we expect to
see the benefit fully in 2025. Whilst dependent on the sun, the
emissions reduction is calculated to be 1,000 TCO2e/year and
an 8% reduction in purchased energy.
We are 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.
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, Anti-
Bribery and the SEDEX RADAR tool.
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. The
remaining suppliers share their ethical data with us by
different means, including SAP Ariba.
During 2023 we continued to risk rate all our suppliers by
using the SEDEX RADAR tool. We have onboarded 55 new sites
and currently 324 supplier sites share their ethical data with
us. One third of suppliers sites have had a SEDEX Members
Ethical Trade Audit (‘SMETA’, an audit designed to help protect
workers from unsafe conditions, overwork, discrimination, low
pay, and forced labour) in the last 3 years.
Using SEDEX insight, we are continuing to work with suppliers
to deliver improvements in working practices across our
supply chain.
Since last year we have successfully implemented SAP Ariba
SLP (Supplier Lifecycle and Performance) to enhance supplier
onboarding and requalification to align with anti-corruption,
human rights and sustainability goals, as well as the Group’s
code of ethics.
Our modern slavery statement can be found on our website
here: www.howdenjoinerygroupplc.com/governance/modern-
slavery-statement.
Whilst we have always taken a zero tolerance approach to
any infraction on human rights we have introduced a more
comprehensive Human Rights Policy, which was approved
by the Board in 2023 and which is on our website: https://
investorcom.sitefinity.cloud/docs/librariesprovider25/
archives/governance/human-rights-policy.pdf
Strategic importance and
current position
We operate our own transport fleet, and it accounts for around
a third of our Scope 1 baseline CO2 emissions, so it’s a clear
ESG strategic priority area for us.
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. With existing
technology, the scope for step changes in a fleet that’s
already operating at a high level of efficiency is small but given
the size of our distribution operation our fleet drove around
18m miles in 2023, every incremental gain is worthwhile.
Adopting new technologies
where available
Where possible, we are trialling new technologies. 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 continued to use HVO in 2023, and
we have committed to double our 2023 usage in 2024.
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
have six LNG vehicles in the fleet at the end of 2023 and we
plan to add to that number in 2024.
Sharing ideas and aims with
our partners
With current technology, there isn’t a viable electric vehicle
option that has the range to replace our long-haul fleet. Our
XDC network (described at page 26), involves shorter-range
deliveries and is operated on our behalf by third party logistics
partners. In 2023 we engaged with one of our partners and
came to an agreement whereby they are operating two
electric vehicles to deliver on our behalf. Plans are in place to
increase the use of electric vehicles in 2024.
We have been engaging and collaborating with our sub-
contractors to understand what they are doing to reduce
carbon emissions. For instance, in 2023 we shared an idea
with our XDC partners around adjusting the layout of their
vehicles’ cargo area, which allows them to increase the
volume of product on each delivery and reduce the total
miles travelled.
Efficiency and safety through driver
training and route planning
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. We have
had an improvement in driver telematic scores of 5% year on
year, delivering increased efficiency and safety.
As our depot network has expanded over the years, we plan to
reassess our delivery schedule in 2024 with the aim of driving
down the distance we travel.
Metrics and targets
Our fleet is in the process of developing a 2030 emissions
reduction plan, aligned with our SBTi Net Zero commitments.
The first step of this is the emissions reduction targets which
are built into our PSP share awards (page 127) and are aligned
with the first 5-year targets in our SBTs, giving minimum
vesting at a total cumulative reduction from our 2021 baseline
of 12%,and a maximum payout at 15%.
Progress against these targets is show below:
0.75
0.70
0.65
0.60
0.55
0.50
0.45
2021
baseline
2022
actual
2023
actual
2024
2025 –
minimum
2025 –
maximum
Actuals CO2KG/Km
Target CO2KG/Km
Vesting target
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Strategic Report – Sustainability MattersStrategic ReportStrategic ReportPage TitlePage Title
Sustainable product offer and product innovation
52 Howden Joinery Group Plc
Annual Report & Accounts 2023
Sustainable product offer
and product innovation
Our ambition is to create sustainable products that we’re proud
of. We make almost 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. Sustainability
is built into our product design process and is one of our five standard pillars that we base new product design and
sourcing decisions on, sitting alongside quality, design, cost and availability.
Some recent examples of building sustainable considerations into new product are shown below.
1
1 Cabinet guarantees and recycling
The product that sits at the heart of our business, all our cabinets come with a 25-year guarantee.
We can offer that because we know quality and longevity are built into the design. We hold the
furniture industry (FIRA) gold award for product excellence for our rigid cabinets. They are also
90% recyclable at end of life.
The chipboard in our cabinets is made using 35% recycled content. The cabinet feet are made of
100% recycled plastic and are 100% recyclable at end of life.
2 Recycled laminate worktops
Our own-manufactured laminate worktops are now made using 75% recycled content.
3 New developments
We are always looking for ways to improve the environmental impact of our products.
Notable developments in 2023 are:
•
Our new Halesworth frontals are made using 50% less plastic, resulting in 50%
less CO2 emissions.
• Our bestselling Greenwich Matt frontals are now 100% recyclable.
4 Plastic pledge
Our ‘Plastic pledge’ is an initiative looking across all the products we sell, and aiming
to reduce, remove, and replace plastic in our packaging wherever possible.
Finding plastic-free replacements for some elements of packaging can be difficult because the
product has to be protected all the way through the supply chain from manufacture to end-user.
We are very pleased to have launched our first Lamona own-brand appliances with polystyrene-
free packaging. Polystyrene is not commonly recyclable in domestic waste collections, and
where it is recycled it takes a lot of energy to break it down. We’ve managed to find a solution
which replaces the polystyrene with cardboard but which still offers the protection that our
customers need.
In 2023 we removed approximately 300k pieces of polystyrene from the products we sold.
Our aim is to increase this figure as we find more wins across the product range.
5 Eco washing machines
On Lamona washing machines, we worked with our third-party manufacturer to make the eco
setting the default setting for the wash programme. This is not the case on all other brands.
We work hard to build reliability into all our own-brand Lamona appliances and we’re proud to
back that up with a 3-year warranty as standard. Where we have warranty claims we encourage
end-users to accept our offer of sending an engineer to repair their appliance rather than replace
it under the terms of the warranty. This happens in over 90% of claims.
3
2
Howden Joinery Group Plc
Annual Report & Accounts 2023
53
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EDI & wellbeing
54 Howden Joinery Group Plc
Annual Report & Accounts 2023
EDI & wellbeing
Rewarding careers, opportunities to develop and thrive
“ I want Howdens to always be a ‘home from home’ place to work, where you are
valued for who you are and where you can give the best of yourself, make meaningful
contributions and build life-long friendships.”
Andrew Livingston – CEO
At Howdens, we pride ourselves on being a place where
every individual is actively encouraged to succeed,
both for their personal growth and for the benefit of the
business. This ethos is deeply rooted in our inclusive
culture, which respects and values diverse backgrounds.
Support for ALL
The role of managers in creating an inclusive workplace is
critical. That’s why we launched a development programme
for managers, including modules on Actively Supporting Your
Team and Creating an Environment of Trust and Openness.
Our Inclusion Strategy
We have structured our inclusion strategy around three
key areas:
1
Worthwhile for ALL
Clarifying and demonstrating our dedication to inclusion.
Making a tangible difference, ensuring that everyone feels
valued and supported.
2
Support for ALL
Empowering our managers. By providing them with the
right tools and knowledge, they can foster an inclusive
environment and get the best out of all their team members.
3
Accessible for ALL
Broadening our reach. By attracting diverse talent, we’re
not just filling positions; we’re enriching our workplace
with a variety of perspectives and experiences.
These values are at the heart of our workplace culture, where
we want every employee to feel an integral part of the Howdens
family. Our diversity priorities – Gender, Ethnicity and Disability
– provide a framework for locally driven activities, led by our
Executive Committee-sponsored employee working groups.
Worthwhile for ALL
This year we’ve taken further tangible steps forward.
Employees can share their own career success stories via a
dedicated space on our intranet so that we can encourage
others to progress themselves too. A highlight was the launch
of a powerful social mobility video featuring employees
sharing their personal journeys.
We’re also enhancing our approach to diversity data. Our aim
is to have a more comprehensive data set in 2024, which will
help us tailor our efforts more effectively.
We’ve also continued to deliver specific Equality, Diversity,
and Inclusion (‘EDI’) awareness training for managers and
their teams. We’ve refreshed our e-learning resources and
launched new manager toolkits to reinforce practical learning
and provide support when needed.
Case study
Women in Manufacturing and Engineering
(WIME)
Our partnership with Longcroft School in Yorkshire is a
good example of our outreach. This collaboration, part
of the WIME initiative, showcases STEM careers to young
female students.
During an event at the school, some of our female
operations managers spoke about their careers. Later, we
hosted the students at our Howden site for a factory tour
and team activities, giving them a taste of the wide range
of career opportunities that Howdens can offer.
The feedback from the event was very positive.
Thanks for a really great day! The students
got a lot out of it and felt really welcome...
a huge thank you to you and your teams for
arranging and supporting our visit.
Teacher at Longcroft School
Accessible for ALL
Our goal is for everyone who works with us to feel that
Howdens is somewhere they are welcomed and supported to
thrive. Part of this is our commitment to social mobility. We
help career progression through apprentice programmes
and in-house training. We’re creating new learning pathways,
especially for critical roles. An example is our new programme
to train Kitchen Sales Designers.
Our commitment to nurturing ‘homegrown’ talent continues. In
2023, we recruited 362 new apprentices across the business.
We also launched a Chartered Management Degree
Apprentice Scheme, providing work experience across
different operational areas along with a degree qualification
and real opportunities for career progression.
We remain committed to transferring 20% of our
apprenticeship levy to fund construction apprenticeships
in small businesses across the UK, directly addressing a
skills gap relevant to our customer base. To date we have
committed more than £880,000.
2023 Update on Our EDI priorities
Our Executive Committee sponsors continue to lead employee
working groups focusing on gender, disability, and ethnicity.
Gender
An International Women’s Day event in March 2023 was a
highlight, featuring inspiring stories and interactive sessions.
The Gender group has also organised events and educational
sessions on the Menopause, developed toolkits for managers
and employees, and introduced wellbeing baskets in
restrooms. An e-learning module for managers is part of
our journey towards Menopause-friendly accreditation.
Ethnicity
This year we’ve published an EDI Toolkit for managers which
includes guidelines for considering the diversity of local
communities in recruitment and learning resources on
different religions and cultures.
We launched awareness communications on festivals such
as Ramadan and Diwali. We held a listening session with
ethnic minority employees in Birmingham. The focus was on
understanding their lived experiences and how we can be
more inclusive. More sessions are planned for 2024.
Howden Joinery Group Plc
Annual Report & Accounts 2023
55
Disability
We’ve achieved Disability Committed status, the first stage
of the Disability Confident Government scheme.
Update on our wellbeing strategy
In 2023, we delivered a series of events on the key
aspects of our wellbeing strategy: physical, mental,
and financial wellbeing.
Financial Wellbeing
We held sessions during National Pensions Week, attended by
hundreds of employees. We also introduced a new workplace
ISA and a Cycle to Work scheme. A new retail discount
platform provides savings for all employees.
Mental wellbeing
We’ve partnered with Retail Trust for our Employee Assistance
Programme (EAP). A Mental Health toolkit for managers was
launched, and events like ‘Walk this May’ encouraged walking
for mental health benefits.
Physical wellbeing
As well as our focus on the Menopause, mentioned above,
we hosted webinars on various health topics for everyone
including ‘Know your numbers’ – blood pressure and resting
heart rate checks – and CPR/Defibrillation sessions as part of
National Heart Month.
We have continued promoting our health benefits, including
more accessible discounted gym memberships and we have
trained more Employee Wellbeing Representatives.
Case study
Counter Talk podcast
Our Counter Talk podcast,
featuring employees telling
their own mental health stories
and support strategies, was a
significant step in promoting
open conversations about
mental health. It highlighted
the supportive culture
at Howdens.
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known I needed to keep it to myself, because
it’s going to cause a problem, but with
Howdens you know that if you open up there
is going to be a whole load of support.
Quote from an employee who shared their experiences.
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Health & safety, carbon neutral,
renewable energy and waste
56 Howden Joinery Group Plc
Annual Report & Accounts 2023
Health & safety, carbon neutral,
renewable energy and waste
Keeping our people safe and healthy
Reportable injuries/100k employees –
Reportable injury rates remain low
300
250
200
150
100
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0
2018
2019
2020
2021
2022
2023
HSE all-industry rate
Howdens
Our safety KPI has remained low at 153 RIDDOR reportable
injuries per 100,000 employees in 2023. This is 29% below
the 2022/2023 HSE All-Industry rate of 215.
Our accident severity rate has also remained low at 33.4 hours
lost to accidents per 100,000 hours worked.
Our network of over 850 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.
Across the business we continue to work hard to embed the
cultural value that safe operations is our way of doing things.
In 2023 we introduced H&S recognition initiatives, such
as the ‘Safety Good Spot’ and ‘Local Safety Hero’ Awards,
celebrating the positive impacts of employee participation
and proactive behaviour.
To maintain momentum on our safety culture improvement
plan we have partnered with the Centre for Human Factors
(CFHF) at the University of Hull. In 2024, the CFHF will be
working with us to get a deeper understanding, through
engagement, of the human factors and cultural elements
that we can foster and, where necessary, improve on to
embed and mature our safety culture.
Carbon Neutral certification
changes to Route to Net Zero
Standard
Manufacturing accounts for a significant proportion of
our total Scope 1 and 2 emissions, and is entirely under our
control, so it always made sense for us to start our emissions
reduction efforts there. It also has a direct benefit to our
profitability as it reduces input costs.
We previously had a commitment to achieve carbon neutral
manufacturing at our Howden and Runcorn sites by 2021,
which we achieved and which we had certified by the Carbon
Trust, a global climate consultancy (with evidence provided
in accordance with PAS 2060:2014 – Specification for the
demonstration of carbon neutrality).
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). We committed to
annual recertification which we successfully received in 2022.
From 2023 the Carbon Trust is no longer offering Carbon
Neutral verification at a site level and is transitioning to a more
demanding certification – the Route to Net Zero Standard.
This standard aims to ensure transparency and clarity of
environmental claims with an expectation of high ambition.
It has a greater emphasis on reduction, more rigorous and
ambitious requirements and a focus on language to enhance
clarity of meaning. The scope of the Net Zero Standard is wider
than the previous Carbon Neutral certification as it will cover
the whole Group’s operations.
We consider achieving the Route to Net Zero Standard as the
next step in our Net Zero journey and a way to demonstrate
our commitment to climate leadership, moving on from the
achievement of Carbon Neutrality. The standard is aligned
with our science-based carbon reduction targets with SBTi
and, if achieved, will provide assurance that we are on track
to achieve our targets and adopting
sustainability best practices. We have
begun working with the Carbon Trust
with the aim of achieving the standard
and will report on our progress and
targets as they develop.
Reducing waste
Zero to landfill
across all UK
operations
Maintaining zero to landfill in 2023 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.
Rather than sending our waste offsite to be burnt for energy
recovery, we took the more difficult but more responsible
method of using the principles of the ‘Waste Hierarchy’ and
maximising the amount that we can reuse, recycle or recover.
We have maintained this performance in 2021, 2022 and 2023,
and this is our target for the future.
All UK depots zero to landfill at the end of 2023. 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 made further progress in 2022. In 2023 we
have found a partner who can service our UK depot network
with waste collection that offers ‘cradle to grave’ due diligence
and tracing which means that by the end of 2023 all of our
depots are now zero to landfill. We intend to maintain this
performance in the future.
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 2023 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 by our
biomass boilers was equivalent to the average electricity
consumption of almost 9,000 households.
Howden Joinery Group Plc
Annual Report & Accounts 2023
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Use of renewable energy sources
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 (‘REGOs’), and by the end of 2023
96% of all UK energy was coming from renewable sources.
Each year, this will avoid around 10,000 tonnes of indirect
carbon emissions. The impact of this can be seen in our
market-based emissions 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 1m sq ft of
manufacturing space with 98% less carbon emissions.
During 2023 we have approved investment in solar panels at
our manufacturing site in Howden, which will come online in
2024 and which we discuss further at page 50.
We also use alternative, plant-based, HVO fuel in our lorry fleet,
as we discuss further on page 51.
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Our impact on stakeholders
58 Howden Joinery Group Plc
Annual Report & Accounts 2023
Strategic Report – Sustainability Matters
Our impact on our stakeholders
Environment
100% All of our chipboard is from
sustainably managed UK forests
across our UK operations
Zero to
landfill
10,000 tonnes of waste sawdust converted
to energy to heat our factories
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Annual Report & Accounts 2023
59
Shareholders
£114m dividends paid
£50m share buybacks
The wider economy
£482m of tax generated or collected.
Corporation tax, NI PAYE and VAT
£345m of working capital extended to our
customers in our peak trading period
445,000 small business customers supported by our
trade account facility in our peak trading
period. No fees, up to 8 weeks to pay
Apprentices
492 apprentices in training
1 in 10 of our current employees started their
Howdens career as an apprentice
263 apprentices completed programmes
in 2023
258 apprentices were appointed
to permanent roles in 2023
11% of our highest performing kitchen
sales designers started their
Howdens career as an apprentice
Community & charity
£1m three-year ‘Game Changer’ partnership
launched with English, Scottish and Irish
Football Associations
19th year of our national partnership with Leonard
Cheshire. Supporting disabled young adults to
find valuable roles within their communities
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People
Over 12,000 full-time jobs with prospects. In manufacturing, in over
900 local depots, and in distribution, systems and support
Over 900 local communities where we employ people
£656m salaries and benefits paid to our employees in 2022
£269m 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
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Task Force on Climate-Related Financial
Disclosures – building climate resilience
Our approach to TCFD
We see TCFD as a useful framework to help us assess our climate resilience. We use it to talk about our climate risks and opportunities, to build
them into our strategy and to measure our progress.
We have made good progress in 2023. We are using specialised technology to collect both physical and transition climate risk and opportunity
data across our value chain. We’ve started to connect this technology with our key suppliers so we can access and challenge this data more easily
and use it to build a collective picture of the challenges and solutions together.
We committed to SBTi Net Zero in 2022 and have had our targets approved in January 2024. We have started to collect real Scope 3 emissions data
through our value chain. This is a complex exercise, and still involves some estimations, but we are making progress (page 68).
No identified short or medium-term material climate-related risks
The results of our scenario modelling agreed with the results of our existing business risk management process (described starting on page 36),
in that they did not identify any material climate-related risks in the short or medium term.
We are reviewing our supply chain in greater depth and are not currently aware of any material physical risks. We evaluate physical risks for time
horizons to 2050.
No identified material financial impact of meeting our SBTi targets in the
short or medium-terms
We have examined the estimated incremental costs of meeting our SBTi targets over the next three years, and neither the incremental capex
requirement nor the net annual effect on operating profit is material.
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 Listing Rule 9.8.6R, i.e. that we are fully compliant with all 11 of the TCFD recommendations, and that we
have taken into account all relevant and material elements of the recommended TCFD disclosures – including the TCFD’s all-sector guidance and,
where appropriate, the supplemental guidance for non-financial groups, as well as the climate-related financial disclosures required by section
414CB(A1) and (2A) of the Companies Act 2006.
TCFD recommended disclosure
Our disclosure and developments in 2023
Focus areas for 2024 and beyond
GOVERNANCE
A Describe the Board’s
oversight of climate-
related risks and
opportunities.
• This process is led by the Board’s
• The Sustainability Committee will
Sustainability Committee, whose report is at
page 140.
• The Sustainability Committee met three times
during 2023. The Director of ESG* reported to
the Sustainability Committee at each meeting
and provided updates on the climate-related
risks and opportunities.
• The Board considers climate risks together
with other risks as part of its overall risk
review processes described in detail starting
at page 36.
• When considering any material investment
proposition, the Board considers the likely
climate-related consequences.
meet regularly in 2024 and will make
recommendations to the Board as
appropriate.
• The Director of ESG will provide regular
progress updates.
• The Board incorporated environmental
measures for 2023 executive share plan. The
Remuneration Committee regularly monitor
progress against each of these measures.
Updated environmental measures are in
place for the 2024 plan see page 130.
* The Director of ESG is a management role and is not a Director of the Board of Howden Joinery Group Plc.
TCFD recommended disclosure
Our disclosure and developments in 2023
Focus areas for 2024 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
to manage and mitigate climate risks and take
advantage of opportunities. The role of the
ExCo is set out on pages 75, 80 and 81 .
• ExCo members have been assigned key
responsibilities on managing climate risks
and opportunities.
• Management will continue to engage with our
supply chain in 2024.
• The ExCo are responsible for delivering
the climate-related targets determined by
the Board.
• The Director of ESG advises both Board
and ExCo on progress against targets and
other initiatives. He presented at all of the
Sustainability meetings in 2023.
• ExCo reviewed the TCFD materiality impact
assessments and scenario analysis in 2023.
• The Director of ESG worked with ExCo during
the year to develop strategies to manage risks
and pursue opportunities.
• Our supplier engagement activities in 2023
(pages 49, 88 and 89) demonstrated industry
leadership and provided clear messaging
that our suppliers need to be active on
emissions reductions.
STRATEGY
A Describe the climate-
related risks and
opportunities the
organisation has
identified over the
short, medium, and
long term.
B Describe the impact of
climate-related risks
and opportunities on
the organisation’s
businesses, strategy,
and financial
planning.
• Our climate risk assessment identified no
significant short or medium-term climate-
related risks.
• We give more detail on the potential risks and
opportunities starting at page 64.
• Continuing to engage with our supply chain
to obtain further data, which may also give
additional information on ESG risks and
opportunities as they evolve.
• We did a physical climate risk assessment
over various timeframes in 2021, and
we have built on this by doing additional
physical climate risk assessment in 2023.
No significant short or medium-term risks
were identified.
• 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 64.
• We discuss our Net Zero commitment on
page 46.
• Climate-related risk screening is being
incorporated into the due diligence process
for major capital expenditure decisions.
• Further collaboration with our top 30
suppliers should give us additional data
on specific climate risks and opportunities
that may inform our strategy and
financial planning.
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TCFD – building climate resilience continued
TCFD recommended disclosure
Our disclosure and developments in 2023
Focus areas for 2024 and beyond
TCFD recommended disclosure
Our disclosure and developments in 2023
Focus areas for 2024 and beyond
STRATEGY CONTINUED
C Describe 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.
• We constructed draft climate impact
• We will refresh our scenario analysis in 2024.
scenarios in 2021, including a scenario
aligned with below 2°C. These are described
on page 64. They did not identify any
material challenges to strategy in the short
or medium-term.
• We will continue to review various options for
decarbonisation, including new technology,
as and when it becomes available, and to
consider whether there are any emerging
implications for our future strategy.
• We tested the scenario results with
management, ExCo and Board in 2022.
•
In 2023, we established a TCFD working group
to review the Net Zero strategy. No significant
short or medium-term implications for our
strategy were identified.
• We use the same approach as for other risks
(see pages 36 – 37), combined with horizon
scanning to improve identification of medium
and longer-term climate transitional and
physical risks.
• Continue to improve our risk identification
process, incorporating more data streams
and trends.
• Continue to 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
(e.g. through our brokers, insurers external
professional bodies and forums).
• Board will formalise a risk appetite for climate-
related risk.
• We use an approach modelled on British
Standards, based on risk impact and our
adaptive capacity.
• We have built the outputs of our climate risk
assessment into operational risk registers.
•
In 2023 we have improved our identification
process for climate physical risks by using a
modelling tool, covering all operations over a
short, medium and long term.
• We have engaged with our stakeholders,
including our insurers, to understand how
their focus on climate risk is likely to develop.
B Describe the
organisation’s
processes for
managing climate-
related risks.
• We manage climate-related risks in the same
way as our other risks (see pages 36 – 37),
albeit that time horizons may be longer.
• Challenge the business on the effectiveness
and accuracy of mitigation plans, including
evidence of progress.
• A member of the ExCo owns each risk and
• We continue to view climate risks as emerging
leads the relevant operational teams as they
control day-to-day risk management and
mitigation.
risks see page 36.
C Describe how
processes for
identifying, assessing,
and managing
climate-related risks
are integrated into the
organisation’s overall
risk management.
• We use the same approach as for other risks
(see pages 36 – 37). We record them in our
risk registers alongside our other operational,
financial and strategic risks, albeit that we
typically use longer time horizons when
looking at climate risks.
• We review and update them twice a year.
• We have an emerging risk identification and
management approach, with dedicated
reporting to Exec and Board.
• Continue with specific climate-focused risk
register reviews.
• Continue to develop reporting to Exec
and Board.
METRICS AND TARGETS
A Disclose the
metrics used by
the organisation
to assess climate-
related risks and
opportunities
in line with its
strategy and risk
management process.
B Disclose Scope
1, Scope 2 and, if
appropriate, Scope 3
greenhouse gas (GHG)
emissions and the
related risks.
C Describe the
targets used by
the organisation to
manage climate-
related risks and
opportunities
and performance
against targets.
• Our emissions reporting starts at page 67.
• We are in the process of amending our
This is central to our SBTi targets, which were
approved in January 2024 and which will be
key metrics for the future.
• We have long-standing KPIs on use of FSC®
and PEFC raw materials and on production
waste recycling – we report on these on pages
50 and 57.
standard contract terms with our long-term
suppliers to make it clear that we expect them
to work with us to reduce carbon emissions
in the supply chain. The aim is that this will
eventually lead to mutually agreed targets.
• As we continue with supplier engagement,
we will collect further supply chain emissions
data, which will allow us to encourage
suppliers to set SBTi targets.
• See our emissions reporting, starting on page
68. We have disclosed estimated Scope 3
emissions for the first time in 2023.
• We will continue to work with our supply
chain to gather additional data to inform our
Scope 3 emissions reporting.
• We consider the risks relating to emissions
as part of our overall climate risk reporting,
summarised above.
• Performance against non-financial KPIs is
shown on pages 29, 50, 56 and 57.
• Our SBTi Net Zero targets are shown at
page 46.
• We incorporated environmental targets,
aligned with our SBTi Net Zero targets, into
our share plans for the first time in 2022. More
details are given at pages 127 and 130.
• Continue to monitor performance against
targets including assessing the industry
specific metrics and targets introduced by
latest frameworks and standards such as TPT
(Transition Plan Taskforce) and ISSB.
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TCFD – building climate resilience continued
Main risks and opportunities from our scenario modelling so far
Details of the scenarios
and time horizons
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 for transition risks and opportunities, which
we further split into time horizons, which we classify below as
short term (to 2024), medium term (to 2026) and long term (to
2030). Physical risks are assessed using longer time horizons
to 2050 and beyond (for chronic risks such as sea-level rise).
We have chosen the long-term horizon as it aligns with our
first major milestone in our Net Zero plans (see page 46).
We have chosen the duration of the short and medium terms
because they align with the Group’s strategic business and
financial planning cycles. We plan to refresh our scenario
analysis during 2024, an exercise which will include reviewing
the time horizons.
We developed three scenarios to frame our discussions of
potential climate risks and opportunities. These scenarios
were based on the well-regarded and widely-used scenarios
developed by Inevitable Policy Response, and were then
enhanced to include additional factors specific to Howdens.
The scenarios are:
1)
2)
3)
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.
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.
Results and next steps
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 (pages 38 to 41) and also
indicated the resilience of our current strategy, in that they did not identify any material climate-related risks.
Under each scenario there were several possible short, medium and long-term risks and opportunities. We have summarised
the most likely ones below. Whilst we have indicated the most relevant time horizon(s) for each risk and opportunity, there is
inevitably significant crossover between the outputs of the different scenarios and time horizons, so our description of each
risk and opportunity, as well of the related impact, contains an element of aggregation.
Over time we will continue to refresh and develop our scenario analysis. Our intention is to revisit it in 2024.
Overview of opportunities
Most relevant
time horizons
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
(2026–2030)
Increased sales.
Greater brand
awareness.
Increased market share.
Stronger employee
retention/relations.
Promoting awareness of our
sustainability and Net Zero
ambitions to employees,
customers and end users.
Sustainable customer offering
and bringing the suppliers on
the Net Zero and sustainability
journey with us.
Overview of opportunities
Most relevant
time horizons
Impact
Mitigation actions
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 and
materials 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
(2024–2026)
Absolute reductions in
energy consumption:
medium to long term
(2026–2030)
Deployment of
Decarbonisation
technologies such as
hydrogen: medium to
long term (2026–2030)
Capitalise on energy
opportunities:
installation of solar
panels/wind turbines
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.
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.
OPPORTUNITY: Area of impact – Access to capital
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 financing.
Short to medium term
(2024–2026)
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
(2026–2030)
Support the future
sustainability of
our assets and the
Howdens brand.
Sustainable design is built in
as a pillar of our new product
development process.
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
(2026–2030)
Pressure on
supply chains to
decarbonise: medium
to long term (2026–
2030)
Raw materials
cost increase/
unavailability: medium
to long term (2026–
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.
Our commitment to SBTi Net Zero
targets will help with mitigating
the impact of future carbon prices
due to absolute reductions in our
emissions.
We are using technology to
collect data directly from our
suppliers, which will give us an
increased understanding of
potential supply chain impacts
and allow us to collaborate with
suppliers to mitigate the potential
future effects.
For instance, the supply chain
data should give us a more
detailed view of potential effects
on key raw materials and help us
formulate mitigation strategies
where necessary.
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TCFD – building climate resilience continued
Our SECR and Scope 3 reporting
Our SECR and Scope 3 reporting
Most relevant
time horizons
Impact
Mitigation actions
SECR – Emissions reporting
Overview of opportunities
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. 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.
To further understand the risks at
a granular level, we have deployed
a two-phase physical risk
assessment of our own locations
in the UK and our suppliers’
locations around the world.
Phase 1, which is completed,
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, which is in progress
will deliver a vulnerability and
resilience option assessment
and it will allow us to estimate
our Value at Risk for physical
exposure and to understand our
suppliers’ adaptive capacity.
Interruption to
operations: physical
impacts of climate
change could cause
supply chain disruption/
physical route
disruptions. We will
have a fuller view of
potential value at risk
once we have completed
Phase 2 of our physical
risk assessment. We
consider that we have a
high level of expertise in
supply chain planning
and successfully
planned for and dealt
with the disruptions of
COVID and Brexit.
Additional capital
expenditure: physical
climate risks may require
us to improve/update our
infrastructure, which will
increase our capex.
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
(2024–2026)
Additional capital
expenditure: to
decarbonise our own
operations, e.g. our
buildings and fleet.
Transitional
investment: medium to
long term (2026–2030)
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 (2026–2030)
Impact on future sales:
from inability to meet
customer needs.
We are currently carrying out a
study, which will clarify levers of
decarbonisation available to us.
We have estimated the
incremental costs of meeting
our SBTi targets over the next
three years, and neither the
capex requirements nor the net
annual effect on operating profit
are material.
Our ESG strategic ambition is to
be the UK’s leading responsible
kitchen business. This
commitment drives us to maintain
a focus on sustainable product
(pages 52 and 53).
Absolute carbon emissions reduced 3.6% against 2022
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. The intensity measure
was chosen because it was felt most relevant to show changes in emissions relative to changes in turnover.
We have used the Operational Control boundary, which includes all UK and International operations with the exception of our
new Paint to Order factory, which was commissioned in the second half of 2023. 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.
The 2023 data below includes additional emissions from the trade of Sheridan Fabrications Ltd, a business which we acquired
part way through 2022, for the first time. Reliable data was not available for this business for 2022 or earlier years, so prior
year figures have not been adjusted. Total scope 1 and 2 emissions for the Sheridans business in 2023 were less than 1% of total
Group emissions.
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
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
2023
13,075
24,665
1,380
408
39,528
13,725
53,253
1,266
40,794
2,310.9
23.0
28.7
17.7
22.0
2022*
13,032
28,302
1,354
469
43,157
12,067
55,224
5,193*
48,350
2319.0
23.8
28.4
20.8*
24.9*
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Energy consumption used to calculate above emissions (kWh)
290,613,944
321,585,787
Proportion of CO2 emissions generated in the UK:
Proportion of total energy consumed (kWh) in the UK:
98.6%
98.3%
98.6%
98.5%
*
Restated data for 2022. In our 2022 reporting, the figure for Scope 2 – Indirect: Electricity – market-based was incorrectly reported as 101 tCO2e, when it should
have been 5,193 tCO2e. This error came to light in 2023. The 2022 data has been restated to reflect the correct figure. The 2023 market-based figure for indirect
electricity is significantly lower because it reflects a full year of renewable energy.
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Strategic Report – Sustainability MattersStrategic ReportStrategic ReportPage TitlePage Title
68 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
69
Our SECR and Scope 3 reporting continued
Strategic Report
Going concern and Viability statements
Going concern and Viability statements
SECR Reporting
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
2019
2020
2021
2022
2023
Total Absolute Carbon emissions (‘000s tCO2e) (Location Based)
Total Carbon emissions (‘000s tCO2e) (market-based)
Carbon Intensity ratio (tCO2e per £m) (location Based)
Additional carbon intensity ratio (tCO2e per £m) net (market-based)
Energy efficiency initiatives
See pages 50 and 51 for examples of developments in 2023
in our manufacturing and transport operations, our most
significant sources of Scope 1 and 2 emissions.
Use of renewable energy sources
We discuss this on pages 50 and 51.
Our 2023 Scope 3 emissions
As shown below and on page 47, around 95% of our emissions fall outside of our direct control and are reported as Scope 3
emissions. Renowned for being a more difficult area to gather consistent and quality data, we are continuing to make good
progress with improving the integrity of our Scope 3 numbers and, for example, are working with our largest suppliers initially
to collate and improve the quality of data on the emissions associated with our purchased goods and services (see page 49).
The majority percentage of our Scope 3 data has been calculated using available primary data. Where necessary, estimates have
been used for some categories and therefore are subject to change. In accordance with the Science Based Target Initiative’s
recalculation policy, updated data will be published when available. Any estimates are in line with the GHG Protocol Corporate
Accounting and Reporting Standard and are based on a combination of internal data coupled with the best available public
sources on CO2 emissions factors. To further aid transparency, we have coded the data below to show its source and status.
Category
TCO2e
%
1
Purchased goods and services
493,845
53%
Relative importance
of Scope 3 categories
12
11
1
2
3
4
7
9
2 Capital goods
3
Fuel and energy related activities
48,684
10,856
4 Upstream transportation & distribution
43,166
5 Waste
6 Business travel
7
Employee commuting
8 Upstream leased assets
9 Downstream transportation
10 Processing of sold products
11 Use of sold products
12 End-of-life treatment
13 Downstream leased assets
14 Franchises
15 Investments (Pensions)
5%
1%
5%
0%
0%
1%
0%
4%
0%
945
2,391
12,961
N/A
34,858
N/A
257,811
28%
31,581
N/A
N/A
N/A
3%
0%
0%
0%
Key to Scope 3 data
Source of data
Derived from data that is within our direct control
or that we can more easily verify
Derived from data that is not within our direct
control or that is more difficult to verify
Not applicable
Total
937,098
100%
Status of data
Most secure – Good quality data/high confidence in estimations
Less secure – some work to do to verify data quality/reasonable reliance on Industry estimations
Least secure – more work to do to verify data quality/high reliance on industry estimation/assumption
Not applicable
Going concern
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.
Going concern review period
The going concern review period covers the period of at
least 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 38.
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 2023, as well as early weeks’ trading in 2024.
They have reviewed the Group balance sheet at 30 December
2023, noting that the Group is debt-free, has cash and cash
equivalents of £283m, 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 2023
Group forecast, prepared in December 2023 and including
the actual results of the 2023 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) .
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.
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.
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Strategic Report – Sustainability MattersStrategic ReportStrategic ReportPage TitlePage Title
70 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
71
Going concern and Viability statements continued
Going concern continued
Long-term prospects and viability
Long-term prospects and viability continued
Borrowing facility and covenants
Assessment of long-term prospects
Assessment of viability
Results of scenario testing
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
2023 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.
Results of scenario testing
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.
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.
The Directors have assessed the Group’s long-term
prospects, solvency and liquidity, with particular reference
to the factors below:
Current position
• History of profitable trading, with strong net profit margins.
• Cash and cash equivalents balance at 30 December 2023
of £283m.
• 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 36–37,
followed by 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.
Time period and scenario modelling
The Directors’ review of the Group’s long-term viability used
a three-year period to December 2026. 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.
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.
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 2026.
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Further reading relevant to
going concern and viability
Principal risks and mitigations
Trading results
Balance sheet
Page
38–41
16–35, and the Financial
Statements
163
187
Details of our £150m borrowing facility
Auditor’s report, with details of their work and
conclusions on going concern and viability
148–161
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Strategic ReportStrategic ReportStrategic ReportPage TitlePage Title
Governance
Governance
Governance
72 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
How we
preserve value
74 Corporate governance report
76 Board of Directors
78 Key Board activity
98 Nominations Committee report
108 Remuneration Committee report
132 Audit Committee report
80 Executive Committee and Company Secretary
140 Sustainability Committee report
82 Directors' duties (Section 172(1) statement)
143 Directors’ report
84 Stakeholder engagement
144 Directors’ statements
92 2018 UK Corporate Governance Code: application
145 Non-financial and sustainability information
and compliance
Corporate
governance
report
74
Board of
Directors
76
Nominations
Committee
report
98
Remuneration
Committee
report
108
Audit
Committee
report
132
Sustainability
Committee
report
140
Howden Joinery Group Plc
Annual Report & Accounts 2023
73
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Page TitlePage Title
Governance
Corporate governance report
Governance
74 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Corporate
governance report
Board meeting attendance
Peter Ventress (7/7)
Louise Fowler (7/7)
Karen Caddick (6/7)1
Paul Hayes (7/7)
Andrew Cripps (7/7)
Andrew Livingston (7/7)
Geoff Drabble (3/4)2
Debbie White (7/7)
Louis Eperjesi (3/3)
1
2
Karen was unable to attend the November Committee meeting due
to illness.
Geoff retired from the Board following the AGM in May. The Board meeting
was held immediately before the AGM and therefore he did not attend.
Peter Ventress
Chairman
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.
2024 Annual General Meeting (AGM)
Details of the 2024 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.
Introduction from the Chairman
Howdens is a resilient and well-run business. In my Chairman’s
statement at the beginning of this Annual Report and
Accounts (pages 16 to 18), I spoke of the many challenges
facing our business and the corresponding effect of these
challenges on our end markets. During such periods, it is
vital that boards provide clear and consistent leadership,
underpinned by robust corporate governance practices.
The work of this Board and its Committees are set out on the
following pages and I hope that is showcases our governance
achievements and priorities for the year ahead.
I was pleased when Howdens rejoined the FTSE 100 in
September 2023 during my first full year as Chair. As a
Board we recognise the additional scrutiny from a corporate
governance perspective that this will bring but we are prepared
to live into the high standards expected of us. We will also take
time to consider the revisions to the UK Corporate Governance
Code and what that will mean for us as a Board going forward.
Fundamentally, we remain committed to the high governance
standards which we have set ourselves and supporting the
fundamental principle that Howdens should be worthwhile for
all concerned.
Board succession
During the 2023 we announced the retirement of three of our
experienced Non-Executive Board members: Geoff Drabble,
Debbie White and Karen Caddick as part of our wider succession
plans to refresh the Non-Executive Board. Whilst these Directors
all contributed hugely to the success of Howdens during their
respective tenures, we have already appointed two highly
experienced Non-Executive Directors in Louis Eperjesi and
Vanda Murray who bring a vast amount of experience to the
board table as well as a fresh perspective. More information
on Louis and Vanda’s appointments can be found in the
Nominations Committee Report beginning on page 98.
We will continue to work with the Nominations Committee
during 2024 to further refresh the Board, mindful of
our commitment to having a more diverse Board to lead
the business.
Strategy
The Board discussed strategy and its strategic initiatives
throughout the year. We continued to invest in deeper vertical
integration, the depot expansion and refurbishment programme,
product innovation and digital expansion, as well as supporting
continued investment into the international businesses.
ESG and the work of the Sustainability Committee were
also a key feature of the work of the Board during the year.
We continued to build out the remit of the Sustainability
Committee and were pleased to receive approval from
the Science Based Targets Initiative (SBTi) of our Net Zero
targets. Our environmental commitments are as important
strategically to the Board as our other strategic initiatives
and we will continue to monitor our performance and hold
management to account on delivery of these targets.
Howden Joinery Group Plc
Annual Report & Accounts 2023
75
Stakeholders
This report details how we have engaged with our stakeholders
and how, as a Board, we balance their respective needs.
Throughout 2023, we were in regular dialogue with the Pension
Trustees of the Howden Joinery Defined Benefit Plan. Following
the shock volatility in the gilts market in the autumn of 2022,
we engaged with the Trustees on their updated investment
strategy. From July, the Board agreed interim deficit recovery
payments following the expiry of the previous deficit recovery
plan and in November the Board and the Trustees completed
the triennial actuarial valuation, agreeing an updated deficit
recovery plan for the next three years. The Board is looking
forward to further engagement with the Trustees, and all our
other stakeholders, in the year ahead.
The Board in 2024
I am pleased with how the Board’s agenda has developed
during 2023 and the introduction of ‘spotlight sessions’ was
widely welcomed in the Board evaluation feedback. We have a
full programme of spotlight sessions in 2024 (details of which
can be found on pages 78 and 79) which builds on the updates
presented in 2023.
The Board will also work with the Remuneration Committee on
updating the Directors Remuneration Policy and I look forward
to working with our new Remuneration Committee Chair,
Vanda Murray, in engaging with shareholders on the draft
policy in the second half of the year.
I also look forward to engaging with our shareholders at the
AGM in May.
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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
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Board and Executive Committee structure
Board of Directors
Peter Ventress
Chairman
Andrew Cripps
Senior Independent Director
Karen Caddick
Non-Executive Director
Louise Fowler
Non-Executive Director
Louis Eperjesi
Non-Executive Director
Vanda Murray
Non-Executive Director
Executive Directors
Andrew Livingston
Chief Executive Officer
Paul Hayes
Chief Financial Officer
Executive Committee
Guy Eccles
Group HR Director
Julian Lee
Operations Director
Theresa Keating
Group Finance Director
Stuart Livingstone
Trade Director
David Sturdee
Chief Customer Officer
Richard Sutcliffe
Supply Chain Director
Andy Witts
Chair of International
Page Title
Governance
Board of Directors
Governance
76 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
77
Governance
Corporate governance report continued
Board of Directors
Executive Directors
Non-Executive Directors
Andrew Livingston
Chief Executive Officer
Paul Hayes
Chief Financial Officer
Peter Ventress
Non-Executive Chairman
Andrew Cripps
Senior Independent Director
Karen Caddick
Independent
Non-Executive Director
Louis Eperjesi
Independent
Non-Executive Director
Louise Fowler
Independent
Non-Executive Director
Vanda Murray OBE
Independent
Non-Executive Director
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.
Appointed
Peter was appointed to the
Board as an independent Non-
Executive Director in July 2022
and became Chairman and
Chairman of the Nominations
and Sustainability Committees
in September 2022.
Andrew was appointed to the
Board in December 2015 and
became Chair of the Audit
Committee in May 2016 and
Senior Independent Director in
July 2023.
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.
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.
Karen was appointed to the Board
in September 2018 and became
Chair of the Remuneration
Committee in September 2019.
Louis was appointed Non-
Executive Director in June 2023.
Louise was appointed to the
Board in November 2019.
Vanda was appointed to the
Board in February 2024.
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.
Louis has a strong background
of manufacturing and supply
of building products in
international markets, together
with commercial, strategy
development, and change
management experience. He is
currently a non-executive director
of Ibstock Plc, Trifast Plc, and
AIM-listed Accsys Technologies
Plc. Louis has had a long career
in the building materials sector,
most recently serving as CEO of
Tyman Plc, a leading international
supplier of engineered
components and access
solutions to the construction
industry. He has also held senior
executive roles in Kingspan Plc,
Baxi Group Ltd, Lafarge SA and
Caradon Plc.
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.
Vanda has over 20 years of senior
management experience across
a range of sectors, including
manufacturing, industrial, and
support services in Europe, the
USA, and Asia. She has previously
served as Chief Executive Officer
of Blick Plc, and UK Managing
Director of Ultrafame Plc, and
she is currently the Chair of
Marshalls Plc and is the Senior
Independent Director and Chair
of the Remuneration Committee
at Bunzl Plc. Vanda’s extensive
experience in both executive
and non-executive roles benefit
Howdens from both a leadership
and a strategy perspective, and
her tenure as a remuneration
committee chair means she will
be able to transition easily into the
Howdens Remuneration Committee
Chair role when Karen Caddick
retires from the Board in May 2024.
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Other listed company appointments
Other listed company appointments
Non-Executive Director of
LondonMetric Property Plc
None
Chairman of Bunzl Plc
None
None
Committee Membership
Committee Membership
Non-Executive Director of Ibstock
Plc, Trifast Plc, and Accsys
Technologies Plc
Non-Executive Director
of Assura Plc
Non-Executive Chair of
Marshalls Plc and Non-
Executive Director of Bunzl Plc
Neither Executive Director is a member of any Board Committee.
N
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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.
Key to Board Committee membership
A
Audit Committee
N
Nominations Committee
R
Remuneration Committee
S
Sustainability Committee
S
Chair of Committee
Page Title
Governance
Key Board activity
Governance
78 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Corporate governance report continued
Key Board activity
Set out below and on the facing page are highlights of the
matters the Board considered in 2023 and will consider in
2024. 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 2023 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.
Howden Joinery Group Plc
Annual Report & Accounts 2023
79
Governance and risk
The Board received governance, legal, and regulatory updates
at regular intervals from the Company Secretary and the
Board’s advisors.
The annual review of the risk and control framework was
presented to the Audit Committee in September 2023
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 41 and on page 96. 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 90 and 91.
January
• Health and safety update
February
• Health and safety update
April
• Health and safety update
• CEO and CFO updates
• CEO and CFO updates
• Board evaluation feedback
May
• Approval of Louis Eperjesi’s
appointment
•
Investor relations update
•
Investor relations update
• CEO and CFO updates
• 2023 Budget review
• Draft 2022 preliminary
• Pensions update
• Principal Risks review2
• Whistleblowing update
results, draft 2022 Annual
Report and Accounts and
2023 AGM documents
• Shareholder and capital
•
Investor relations update
• Broker update
Executive Committee presenters:
returns
DS
Spotlight:
Digital Strategy
• Board evaluation review
• NED fees review
• Group policies
• Principal advisors
Spotlight:
Product
leadership
May – AGM
• All resolutions were
passed with the requisite
majority. Further details
about the meeting may be
found on page 90.
2023
2024
July
• Health and safety update
September
• Health and safety update
• CEO and CFO updates
• CEO and CFO updates
•
Investor relations update
• Manufacturing and
logistics capex approval
•
Investor relations update
• Director training session
(provided by the Group’s
corporate lawyer)
November
• Health and safety update
• CEO and CFO updates
• Pensions update1
•
Investor relations update
• Schedule of Matters
Reserved for the Board
and Board Committee
Terms of Reference
• 2024 Board calendar
Executive Committee presenters:
approval
JL RS
• Approval of Vanda
Murray's appointment
Spotlight:
Trade
Convenience
Executive Committee presenters:
DS
• Draft 2023 Interim results
and announcement,
including consideration
of an interim dividend
• Key and principal risks
review2
• Broker update
• Whistleblowing update
Executive Committee presenters:
DS
Spotlight:
Trusted trade
relationships
January
• Health and safety update
February
• CEO and CFO updates
April
• Health and safety update
• CEO and CFO updates
•
Investor relations update
• Pensions update
• 2024 Budget review
• Draft 2023 preliminary
• CEO and CFO update
May – AGM
• Further details can be
found on page 214
July
• Health and safety update
September
• Health and safety update
November
• Health and safety update
• CEO and CFO update
• CEO and CFO update
• CEO and CFO update
•
Investor relations update
• Employee engagement
• Pensions update
Spotlight:
Trade Service
and Convenience
Executive Committee
presenters
JL
DS
RS
Julian Lee
(Operations Director)
David Sturdee
(Chief Customer Officer)
Richard Sutcliffe
(Supply Chain Director)
•
Investor relations update
• Principal Risks review2
• Whistleblowing report
Spotlight:
Trade Service
and Convenience
results, draft 2023 Annual
Report and Accounts and
2024 AGM documents
• Shareholder and capital
returns
• Board evaluation review
• NED fees review
• Principal advisors
•
Investor relations update
• Broker update
• Group policies
• Strategic planning
(separate session)
Spotlight:
Product
Leadership:
Vertical
Integration
Spotlight sessions
Spotlight 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
• Draft 2024 Interim results
•
Investor relations update
Spotlight:
International
development
and announcement,
including consideration
of an interim dividend
• Broker update
• Key risks review
• Whistleblowing report
• Employee engagement
update
Spotlight:
Product
Leadership:
Sourcing
• Related parties and
conflicts of interest
register
• Board Committees’
Terms of Reference and
the Schedule of Matters
Reserved for the Board
• 2025 Board calendar
• Employee engagement
update
Spotlight:
Entrepreneurial
Culture
1
2
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.
The review includes an assessment of mitigation of the key and principal risks of the Group as appropriate and the Board provides challenge on these to the
Executive Directors. The outcomes are fed back to the Executive Committee for implementation. During 2023, the Board also considered areas of emerging risk,
such as AI governance, and provided challenge to the Executive Directors on the inclusion of these areas.
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Governance
Executive Committee and Company Secretary
Governance
80 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Corporate governance report continued
Executive Committee and Company Secretary
Executive Committee members
Howden Joinery Group Plc
Annual Report & Accounts 2023
81
Company Secretary
Guy Eccles
Group HR Director
Theresa Keating
Group Finance Director
Julian Lee
Operations Director
Stuart Livingstone
Trade Director
David Sturdee
Chief Customer Officer
Richard Sutcliffe
Supply Chain Director and acting
Commercial Director
Andy Witts
Chair of International
Forbes McNaughton
Company Secretary
Appointed
Guy joined Howdens in April
2020 and was appointed Group
HR Director and a member of
the Executive Committee in
February 2024.
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.
Stuart joined Howdens in April
2023 and was appointed to
the Executive Committee in
September 2023.
David joined Howdens in March
2022 and was appointed to
the Executive Committee in
May 2022.
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.
Contribution to the long-term sustainable success of the Company
Guy joined Howdens as Interim
Group HR Director in 2020.
Previously he had been running
his own consultancy providing
HR support to numerous
privately-owned and publicly-
owned companies across a
range of sectors including retail,
healthcare and hospitality. Prior
to that he was HR Director of
B&Q and Screwfix.
Guy has overall responsibility
for all HR matters.
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.
Prior to joining Howdens, Stuart
was Operations Director at Pets
at Home and before this he was
Director of Retail at Screwfix for
six years. He has also held senior
positions at American Golf, Kwik
Fit, and Whitbread.
Stuart has overall responsibility
for the performance and
culture of the depots in the UK.
He oversees the evolution of
our depot estate, including our
strategically important depot
reformatting and the opening
of new depots.
Executive Directors
Andrew Livingston
Chief Executive Officer
Paul Hayes
Chief Financial Officer
Andrew and Paul’s profiles
may be found on page 76.
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.
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 lead the highly
successful XDC project, which
is delivering superior service
levels and availability to depots.
Richard is also acting Commercial
Director. This role includes range
management, a key strategic
initiative. Balancing choice and
new product with disciplined
range management is crucial
to ensuring both availability
and profitability.
Andy was one of the founding
members of the Howdens depot
management team, having
joined from Magnet in 1995.
Andy was promoted to Sales
Director in January 2007 and
was appointed Chief Operating
Officer of Trade in January 2014.
In November 2023, following
a handover period with Stuart
Livingstone (Trade Director),
Andy became Chair of Howdens’
international businesses.
Andy’s main function as Chair
of the international businesses
is to provide executive
oversight of and counsel to
the maturing French, Belgian
and Irish businesses. He also
supports the Chief Executive
on exploring further international
opportunities and other
ad hoc projects.
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.
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Governance
Directors' duties (Section 172(1) statement)
Governance
82 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Corporate governance report continued
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.
Reputation
The desirability
of the company
for maintaining a
reputation for high
standards of
business
conduct.
Workforce
The interests of the company’s employees.
...Customers
Long-term
thinking
The likely consequences
of any decision in the
long term.
Investors
The need for every
member to be treated
fairly and for no member
to be favoured over
another member.
Suppliers
The need to foster
the company’s
business
relationships with
(amongst others)
suppliers and…
Howden Joinery Group Plc
Annual Report & Accounts 2023
83
Howdens was founded on the principle that the business should be
worthwhile for all concerned. It's a principle that on 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 2023, please see pages 78 and 79.
The Board regularly considers feedback from the Company’s
stakeholders. These are set out in detail on pages 84 to 91. 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 from investors in
relation to the operation of the Directors’ Remuneration Policy for
2023 and direct 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 previous 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 2023.
Shareholder returns
In February 2023, the Board recommended a final dividend for
2022 of 15.9p per ordinary share and, in July 2023, it further
recommended an interim dividend of 4.8p per ordinary share. In
line with its capital allocations policy (more detail about which
can be found on page 32), in February 2023, the Board also
approved a £50m 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 whilst delivering a
progressive dividend.
The Board takes regular feedback from its 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.
Howdens has a prudent risk appetite towards balance sheet
management, an approach which has provided a source of great
strength in challenging recent years. As markets recovered
from the shock of COVID-19, 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.
Pension deficit recovery payments
and triennial valuation
The Board meets with the independent Chair of the Pension
Trustees at least annually and is mindful of its obligations to all
employees and former employees in all its pension arrangements.
Maintaining a strong covenant (the underlying financial strength
and resilience of the Company) is the Board’s primary objective
and this underpins the strength of the defined benefit pension
scheme. However, the Board is also committed to supporting the
funding position of the scheme in proportion to its responsibilities
to all of its stakeholders.
Following the expiry at the end of June 2023 of the previous
deficit recovery plan agreed between the Company and the
Pension Trustees, the Board agreed to continue deficit recovery
payments of £1m per month until the conclusion of the triennial
actuarial valuation which was ongoing at the time. The triennial
valuation (as at 31 March 2023) was completed in November 2023.
Following the review, the Company agreed to maintain deficit
repair contributions at the rate of £12m per year and renewed the
'switch off' mechanism if full funding on the Technical Provisions
basis was met. Full funding on this level was achieved at the date
of the agreement and as a result the deficit repair contributions
were suspended. At the end of January 2024, the scheme was in a
modest surplus and as such deficit recovery payments remained
suspended at that time.
The Company and Trustee Board continue to work together on
the long-term investment strategy for the scheme with the aim to
reduce reliance on the Company and the CFO reports to the Board
on these matters as appropriate.
Investment in strategic initiatives
The Board believes that it is in the best interests of all stakeholders
to invest in long-term, sustainable initiatives for the business.
This includes continued investment in the depot network
(both new depots and reformats), in digital infrastructure, and
the international business. It also includes investment in our
manufacturing and logistics capabilities.
In September 2023, the Board approved investment in panel
production and a new profile line at the Howden site in East
Yorkshire. Our dedicated manufacturing is critical to the future
success of our in-stock offer and the Board keep under review
the mix of product bought-in versus that manufactured in-house,
balancing cost, resilience, and flexibility.
In considering its approval of the investment, the Board considered
the payback on investment and that the investment supported
the Group’s strategic plans to support core manufacturing
processes, which in turn represented good value for shareholders.
Furthermore, it was noted that, with ever-improving machinery
safety requirements, the new machinery would possess enhanced
safety features which were in the interests of the workforce
working on the lines, and that, whilst the panel machining
investment would lead to fewer panels being bought in from
external suppliers, because demand was expected to grow, the
reduction in bought-in panels would occur over the long-term
allowing suppliers time to adjust their plans.
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Governance
Stakeholder engagement
Governance
84 Howden Joinery Group Plc
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Howden Joinery Group Plc
Annual Report & Accounts 2023
85
Governance
Corporate governance report continued
Stakeholder engagement
Howdens' stakeholders
Trade customers
INDIRECT
DIRECT
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Stakeholder and
forms of engagement
Trade cusandmers
pages 84 and 85
Workforce
Suppliers
Pensioners
Shareholders
pages 86 and 87
pages 88 and 89
pages 88 and 89
pages 90 and 91
Engagement with our trade
customers includes the following:
• Local depots
• Customer research
• Customer surveys
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.
Twice a year, to ensure we keep abreast of any emerging
areas of difficulty for three of our key stakeholders
(depots, builders, and end-users), we carry out 'Voice of
the Customer' research. During 2023, we received around
2,500 responses from this research. This has helped inform
the prioritisation within our brand strategy.
Brochure research focus group
In 2023, we carried out research with both end-users
and our depots to understand the purchase journey
and role of the brochure, the brochure's performance
versus competitors', and perceptions of Howdens. A mix
of qualitative and quantitative methodologies was used,
including focus groups and online surveys. Follow up
surveys were also completed to assess improvements
made in our follow-up edition of the brochure.
Cabinet research study
As part of our continual efforts to make builders' lives easier,
we undertook a cabinet research study with our builder
customers to understand the importance and perception of
our cabinet quality.
27 tradespeople fitting at least two kitchens per year took
part in four focus groups across two sites – one in the North
and another in the South. The outcome focused on ensuring
Howdens' cabinets remain best in class for our customers,
with options for future improvements being investigated.
Our depot managers feed back our trade customers' views
to management at Regional Board meetings (see 'Workforce'
on page 86 for further information), which the Trade Director
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, Trade Director 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
In addition to the face-to-face conversations we have with
our customers in our depots, we run monthly trade customer
surveys to better understand our trade customers' sentiment,
price and value perceptions, purchase behaviour, business
prospects, 'cost of living impacts', and forecasted activity.
Ad hoc 'deep dive' surveys are also used to ask trade
customers about various product categories, including what
is important to them within those product categories, what
more they need from us, and what could cause them to shop
elsewhere. In 2023, we completed deep dive surveys for all of
our core categories. We received around 10,000 responses
from our customers which has helped inform category
strategy including supporting with brand and ranging
direction, and depot training.
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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
As a result of the Best Companies survey in March 2022,
we have remained focussed on providing more support
for employee wellbeing, an area that was highlighted for
improvement. In 2023:
• We expanded our provision of employee wellbeing
representatives. Nine new representatives were trained
across our Support functions. This is in addition to those
already at our manufacturing and logistics sites.
• We have partnered with a new provider, the Retail Trust,
for our Employee Assistance Programme providing a 24/7
helpline, counselling services and signposting to other
support.
• We have continued our focus on Mental Health, working
with ANDYSMANCLUB to support men’s mental health. Our
new partnership with Movember has further bolstered this
support. As referenced on page 55, we now have a mental
health toolkit and our Counter Talk podcast on mental
health was a first, encouraging more employees to be open
about mental health and to support each other.
• Once again, in July 2023, we gave employees access to
'Know your numbers' (pre-peak blood pressure and resting
heart rate checks) and CPR / Defibrillation sessions as part
of Heart Month. 825 employees attended these sessions.
• We continued our menopause awareness training,
partnering with Wellbeing of Women and Henpicked to
give us access to a range of webinars on broader women’s
health issues and support tools. We have developed a
Menopause e-learning package which will launch in 2024.
More information is included on page 55.
We have also provided support around financial wellbeing.
Pensions briefings delivered across the business to over 400
employees and a further 80 attended pre-retirement sessions.
We launched a new workplace ISA, a Cycle to Work scheme
and a new retail discount platform via Retail Trust.
We have a wellbeing calendar for 2024, which continues to
build on the themes of men’s and women’s physical health,
mental health and financial wellbeing with a drum beat of
internal comms and a hub on our intranet site.
Further information on inclusion and wellbeing may be found
on pages 54 and 55 of the Sustainability matters report.
Regional Board meetings
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
Trade Director (and, previously, 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 Regional Board
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 UK regions in total and there are around five
Regional Board meetings held per region per year, providing
many opportunities each year for two-way discussions about
critical business issues.
Townhalls and feedback sessions
The Operations Director continues to hold at least two
business updates each year for all employees based at
our manufacturing and logistics locations, supported by
members of the Operations Leadership Team. The Operations
Leadership Team also hold ‘Ask away’ sessions with groups of
employees. All new starters are invited to a 'Meet and Greet'
session with members of the Operations Leadership Team and,
as part of that, all new starters are asked for their feedback
about what they are enjoying and what we could do better.
In 2023, we continued to engage with the collective
groups and undertook training together, facilitated by
ACAS to help build even more productive and effective
working relationships. As a result of the feedback from
our trade union and works council groups, we have made
enhancements to payslip access and remuneration
information, launched the new in-house Occupational
Health service, expanded and developed our wellbeing
support framework including new wellbeing rep training via
the Retail Trust, and continued to enhance benefits access
and provision.
In 2023, a new Employee Engagement Forum was created
in HWS West (Normanton) to ensure that as we harmonised
terms and conditions we did it in a way that included,
involved, and had the employee voice at the heart of what
we did. This Forum meets on a regular basis to focus on the
issues and opportunities most important to our workforce.
We strongly believe direct communication is the best
method of engagement.
At each of our manufacturing and logistic sites regular
feedback sessions are held with employees. It was through
these channels that employees continue to express any
concerns or opportunities for improvement. Following some
of these sessions, we have committed to improving our
agreement for ‘Flexible Working Arrangements’, ensuring
people have a better balance, whilst also ensuring we continue
to maintain our excellent service levels.
The Howdens Show
In January 2023, we hosted the Howdens Show, which
welcomed over 1,100 employees to the International
Convention Centre in Wales. Our CEO 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.
Monthly townhalls are hosted by our Supply Chain Director,
who is also acting Commercial Director, and separately by
our Chief Customer Officer. The townhalls focus on business
updates and updates on work ongoing within specific teams.
Employees are given the opportunity to ask questions 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.
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.
The Board's workforce engagement
arrangements
Following the retirement in 2023 of Geoff Drabble, who
was the Non-Executive Director Responsible for Workforce
Engagement, a review of workforce engagement by the
Board was undertaken. Given the complexity of Howdens
operations (when considering the variety of role types
in our vertically integrated business and its various
geographies), it was agreed by the Board that workforce
engagement would become a collective responsibility for
the all the Board members. This will ensure that the diversity
of Howdens workforce are properly and proportionately
represented. Further detail about the new arrangements is
set out on page 92.
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.
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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
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) has helped improve
the onboarding and management of our suppliers and allows
them to transact and communicate with us digitally.
The Howden Joinery Defined Benefit Pension Plan (the
‘DB Plan’) has over 10,300 members, of whom c.5,700
are deferred members, and c.4,600 are pensioners
and dependants.
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. The Company and Trustees
have an information sharing protocol in place which is
reviewed annually.
In 2023, the Company engaged with the Trustee Board on a
number of matters outside of the normal engagement cycle of
investment and funding strategy, including:
• an extension to the existing deficit repair plan;
• collaboration on the triennial actuarial valuation;
• review and implementation of a new investment strategy;
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Supplier conferences
Maintaining strong supplier relationships based on trust is
a key facet of our resilient business model (see page 15).
Co-operative engagement with suppliers on new products
and the scale necessary to support suppliers' businesses
and investment plans helps us to ensure the relationships are
enduring and worthwhile for both parties.
In November 2023, we applied the successful format of the
July summit to a further collaboration summit with one of
our appliance suppliers and their parent company. Further
information about the supplier engagement activities
we undertook in support of our Net Zero plans, and the
outcomes of these, can be found on page 49 within our
Sustainability matters report.
Supplier engagement is also key in our plans to achieve our
Net Zero SBT Plans (further detail about our Net Zero SBT
Plans can be found on pages 46 and 47). In July 2023, we
co-hosted our first ESG supplier collaboration summit in
partnership with one of our largest cabinet frontal suppliers.
The triennial actuarial review as at 31 March 2023 was
completed in November 2023. The Company agreed to
maintain the new run rate for deficit repair contributions of
£12m per year and continued the ‘switch off’ mechanism if
full funding on the Technical Provisions basis is met for two
consecutive periods.
The Company and the Trustees agreed that, as the Plan was
fully funded on a Technical Provisions basis at the date the
new actuarial assumptions were agreed, deficit recovery
payments should cease and resume only if there were two
consecutive periods of the DB Plan returning to deficit (on a
Technical Provisions basis). Since November, there have not
been two consecutive periods in deficit and therefore, at the
date of approval of this report, deficit recovery payments
have not resumed.
• completion of the Trustees' first formal TCFD disclosures
and net zero commitment for the Plan;
• enhanced monitoring of LDI collateral headroom and
overall liquidity;
• review and approval of information sharing protocols; and
• preparations for the pensions dashboard roll out.
Newsletters
In October 2022, a newsletter was sent to all members of the
DB Plan. The newsletter provided updates on matters such as
Trustee Board changes, appointment of a new Plan actuary,
changes to the online member portal, latest funding position
and financial review, and climate governance requirements.
Triennial valuations
Ensuring that there is an appropriate balance between
shareholder distributions and DB Plan deficit funding is a
priority for the Board.
The Company agreed interim deficit recovery payments in the
first half of the year of £1m per month ahead of the expiry of
the previous deficit recovery plan at the end of June.
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Shareholders
Engagement with our shareholders
includes the following:
• Annual General Meeting
• Shareholder meetings and roadshows
Annual General Meeting (AGM)
The 2023 AGM was held in-person and was an opportunity for
the Board members to be able to converse with shareholders
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, the Board was asked
questions on the following topics: stock availability and team
incentives. The questions raised were answered fully on the
day and no further action or considerations were required.
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.
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Shareholder meetings
During 2023, we continued to focus our approach working with
our corporate brokers to identify potential target investors
located in the major investor hubs internationally. 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
investors, 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 has
been used to prioritise meetings for the investor programme
throughout the year.
Following each period end, the Board is provided with an
investor relations update, which gives an overview of investor
feedback. The Director of Investor Relations regularly
provides feedback at Board meetings on the investor
relations 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 continue to be
supportive of the Company’s strategic initiatives and the
resilience of Howdens' business model despite challenging
market conditions.
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.
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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.
Site visits to London based depots to highlight the
capabilities of our new reformatted depots and small
format depots.
Supporting industry conferences held by the major
banks selling equities.
Targeted marketing roadshows to major investor hubs
internationally.
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2018 UK Corporate Governance Code: application and compliance
Governance
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2018 UK Corporate Governance Code: application and compliance
2018 UK Corporate Governance Code: application of Principles
The Financial Reporting Council (FRC) published the 2024
UK Corporate Governance Code on 22 January 2024. This
iteration of the UK Corporate Governance Code will, in the
main, apply to premium listed companies' financial years
commencing 1 January 2025.
This Annual Report and Accounts has been prepared under
the 2018 UK Corporate Governance Code (the ‘Code’), 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 5, 12, 40, and 41.
Provision 5 provides that boards should understand the
views of the company’s other key stakeholders and that, for
engagement with the workforce, one or a combination of the
following methods should be used: (i) a director appointed
from the workforce; (ii) a formal workforce advisory panel; or
(iii) a designated non-executive director.
From the beginning of the reporting period until 4 May 2023,
the Company was compliant with Provision 5 having appointed
Geoff Drabble as the Non-Executive Director Responsible for
Workforce Engagement in 2019. Following Geoff’s retirement
from the Board, a review of workforce engagement by the
Board was undertaken and it was agreed that, given the
complexity of Howdens operations (when considering the
variety of role types in our vertically integrated business
and its various geographies), workforce engagement would
become a collective responsibility for the Board. This will
ensure that the diversity of Howdens' workforce is properly
and proportionately represented. The Board will consider
employee engagement at two dedicated sessions each year
and a dashboard of key employee engagement metrics will
be developed for these meetings. In keeping with Howdens’
culture of open and direct feedback, an annual programme
of employee engagement events will be collated, which will
include Regional Board meetings, factory ‘fish and chip Friday’
listening sessions, EDI listening sessions, town hall sessions
and other engagement activities. Non-Executive Directors will
be expected to attend a minimum number of sessions each
year and to provide feedback formally after each session.
It is anticipated that these measures will be sufficient to
satisfy Provision 5 of the Code, and an explanation of the
effectiveness of the new arrangements will be reported in
the 2024 Annual Report and Accounts. During the period of
review of workforce engagement by the Board during 2023,
members of the Board continued to attend Regional Board
meetings across the country (further information on these
meetings may be found on pages 86 and 87), where Depot
Managers were able to directly engage with the Directors
as well as members of the Executive Committee.
The Board considers the attendance at Regional Board
meetings (which are Howdens’ primary method for direct
employee engagement and an efficient way of accessing a
significant proportion of the employee population) to be an
effective measure of employee sentiment. The Board has also
received regular updates from management on matters such
as trade union and workers council relations.
Provision 12 provides that the board should appoint one of
the independent non-executive directors to be the senior
independent director (SID). Until 4 May 2023, Geoff Drabble
held this role. The role is now held by Andrew Cripps, who was
appointed to it on 13 July 2023. Whilst there was a technical
breach of this provision for a short period during this reporting
period, this occurred during a quiet time in both our Board
and corporate calendars and, should an urgent need have
arisen, the Board had long-serving members with previous
SID experience. The Company can confirm that it expects
to be compliant with this provision throughout the 2024
reporting period.
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 2023; 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, the Company's Share Incentive Plan (SIP), which
is a UK all-employee share plan, 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 UK Corporate Governance Code 2024 has removed
Provision 40 of the 2018 Code and therefore there will be no
non-compliance with this provision when the 2024 version
of the Code is adopted. 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 122.
Section 1: Board leadership and company purpose
A
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.
Further information on our resilient business model and strategy
can be found on pages 8 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 42.
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 113 to 116.
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.
C
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.
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 86 and 87.
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 page 103.
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. 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 82 to 91. How the Board
members discharged their ‘Section 172’ statutory directors'
duties is described on pages 82 and 83.
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
41. Our Audit Committee report provides a summary of our
internal control framework on page 138.
E
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 122.
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.
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Governance
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2018 UK Corporate Governance Code: application of Principles continued
Section 2: Division of responsibilities continued
Section 2: Division of responsibilities continued
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 2023 internal Board evaluation concluded that the Board
was effective, supportive of management and doing well.
Further information about the outcomes and process of the
evaluation may be found on pages 106 and 107.
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.
I
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.
Section 3: Composition, succession and evaluation
G
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 76 and 77. 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 74. Similarly, the number
of meetings of each Board Committee and the attendance
may be found on the following pages: 98 (Nominations
Committee), 108 (Remuneration Committee), 132 (Audit
Committee), and 140 (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, no existing Directors took on additional
external appointments.
Members of the senior management team regularly
presented to the Board (see pages 78 and 79 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 pages 135 and 139.
K
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 100.
The tenure of each Director may be found on pages 103 and
104. 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 6
months to 8 years, and the average tenure is 4.2 years.
J
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 103 of the Nominations Committee report
and the Board’s diversity policy is available on page 102.
The Nominations Committee regularly reviews the skills
matrix and the tenure of each Board member (see pages
100, 103 and 104 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.
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 2023 internal Board evaluation process
and outcomes may be found on pages 106 and 107 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 76 and 77. Reference to the specific reasons and
where to find them in the Annual Report and Accounts will
accompany the resolutions to elect or re-elect Directors in the
2024 AGM Notice. The Board recommends that shareholders
vote in favour of the election or re-election of all the Directors.
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Page TitlePage Title
Governance
Governance
96 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
97
Governance
Corporate governance report continued
2018 UK Corporate Governance Code: application of Principles continued
Section 4: Audit, risk and internal control
Section 5: Remuneration
M
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.
O
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 132.
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, can be found on page 144.
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
41) 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 138, the management team
continued to 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, Audit 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 41). The Board confirms that it has conducted a robust
assessment of the principal and emerging risks.
P
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.
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.
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 108.
R
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 can be found on page 109 of the
Remuneration Committee report.
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 can be found in
the Remuneration Committee report on page 122.
By order of the Board
Peter Ventress
Chairman
28 February 2024
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Page TitlePage Title
Governance
Nominations Committee report
Governance
98 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Governance
Nominations
Committee report
2023 meeting attendance
Peter Ventress (4/4)
Karen Caddick (3/4)1
Andrew Cripps (4/4)
Geoff Drabble (1/2)2
Louis Eperjesi (2/2)
Louise Fowler (4/4)
Debbie White (4/4)
1
2
Karen was unable to attend the November Committee meeting due
to illness.
Geoff retired from the Board following the AGM in May. The out-of-
cycle May Nominations Committee meeting was held immediately
before the AGM and therefore he did not attend.
Peter Ventress
Nominations Committee Chair
Key activities in the year ahead
• All current Directors will stand for election or
re-election at the AGM on 2 May 2024.
•
•
•
•
•
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.
Board evaluation planning.
Review of the Committee’s Terms of Reference.
Introduction from the Nominations
Committee Chair
I am pleased to present this report covering the work of the
Nominations Committee in 2023.
2023 was my first full year in charge of the Nominations
Committee and we have made good progress during the year.
One of the main features of the role of the Chairman of the Board
is to take a leading role in determining the composition and
structure of the board. I was very fortunate to inherit an engaged
and well-balanced Board with a good mix of skills and experience
when I took on the role in 2022, but with routine retirements
during 2023 and coming in 2024 we have an opportunity to build
a Board of Directors to support Howdens and the management
team in the next phase of its development. There is also an
opportunity to address some of the wider diversity issues that
all companies are currently facing.
The Nominations Committee primary function is to enable the
Board to put the right people in the right places, both at Board
and senior management level. It must do so in a way that is
transparent and procedurally fair to ensure the avoidance of
bias and I am pleased that the Committee has been engaged
and challenged throughout the year.
Succession
During 2023 two directors retired from the Board and two were
appointed. Geoff Drabble and Debbie White retired with nearly
15 years of Howdens’ experience between them. They have
been replaced by Louis Eperjesi and Vanda Murray who bring
a huge amount of relevant sector and executive experience
to the table. Details of the appointment processes for both
Louis and Vanda are contained in this report on page 103.
Karen Caddick also expressed her intention to retire from the
Board following the AGM in 2024 and therefore Vanda will
additionally take on the role of Remuneration Committee Chair
following Karen's retirement.
The Committee was also involved with new appointments
to the Executive Committee and received an update from
the Chief Executive on his senior management succession
strategy. We have included a case study in this report on the
induction of the new Trade Director (page 105).
Board gender split
Howdens1
Females:
37.5%
FTSE 1002
Females:
42.6%
Female
Male
1 Figures correct as at 30 December 2023.
2
Figures derived from the February 2024 FTSE Women Leaders Review.
Howden Joinery Group Plc
Annual Report & Accounts 2023
99
Composition and diversity
The Nominations Committee remains mindful of the
importance of diversity and inclusion and of the benefits of
that it brings to our teams. More information on Howdens’
ongoing equality, diversity and inclusion programmes can be
found on pages 54 and 55 of the Sustainability matters report.
In 2023, the Committee committed to meeting the gender
and ethnicity targets contained in the FTSE Women Leaders
Review and the Parker Review. We remain committed to
these targets but, following Howdens’ readmission to the
FTSE 100 in September 2023, we are no longer in line with the
recommendations of the Parker Review. It is our intention
to be compliant with the recommendations of the Parker
Review and appoint at least one director from an ethnic
minority background before the end of 2024. Similarly,
it is the Committee’s intention to be compliant with the
recommendations of the FTSE Women Leaders Review to have
at least 40% female representation on the Board and to have
identified a woman for one of the ‘big four’ board roles (Chair,
SID, CEO and CFO) by the end of the year. I look forward to
providing an update on our progress in the 2024 Nominations
Committee Report.
Evaluation
In line with the Board’s stated practice, we conducted an
internal review of Board effectiveness in 2023. For the first time,
a third-party platform was used to collate more quantitative
data on the Board’s perceptions of its priorities, strategic
objectives, and leadership, as well as governance structures
and process. More information on the Board evaluation process
and outcomes is set out on pages 106 and 107.
I look forward to answering any questions on the work of the
Nominations Committee from shareholders at our AGM in May.
Peter Ventress
Nominations Committee Chair
2023 Nominations
Committee activity
February
Committee meeting
•
•
•
Board evaluation process and outcomes
Non-Executive Director succession update
Board recommendations for AGM elections
• Draft 2022 Nominations Committee report
May
Committee meeting (out of cycle)
•
Non-Executive Director succession –
recommendation to appoint Louis Eperjesi to the
Board and the Audit, Nominations, Remuneration
and Sustainability Committees
September
Committee meeting
•
•
•
Senior management talent update
Board Diversity policy
Board succession planning, including
consideration of diversity, tenure and skills matrix
•
Internally facilitated Board evaluation approval
• 2024 Nominations Committee calendar
• Nominations Committee Terms of Reference
November
Committee meeting (out of cycle)
• Non-Executive Director succession –
recommendation to appoint Vanda Murray to the
Board and the Audit, Nominations, Remuneration
and Sustainability Committees
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Board ethnicity split
Howdens1
director
positions
0%
FTSE 1002
director
positions
18%
Ethnic
minority
representation
No ethnic
minority
representation
1 Figures correct as at 30 December 2023.
2
Figures derived from the March 2023 Parker Review update
'Improving the Ethnic Diversity of UK Business'.
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Governance
Governance
100 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Nominations Committee report continued
Composition
Howden Joinery Group Plc
Annual Report & Accounts 2023
101
Skills and experience matrix
Diversity
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.
Board and Executive Committee Diversity
Listing Rule 9.8.6R(9) requires that a company state whether it has met certain targets on diversity. These targets and whether
the Company has met them as at the reference date1 of 30 December 2023 are set out below. The Board confirms that no
changes to the membership of the Board have occurred between the reference date and 28 February 2024 that have affected
the Company’s ability to meet one or more of the targets.
Number of Non-Executive Directors
Importance
Direct experience
Indirect experience
Target:
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
Senior independent director experience
Policy development
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
H
H
H
H
H
M
H
M
M
M
M
M
H
H
H
H
M
M
M
M
M
H
H
6
5
4
5
6
5
6
4
5
2
4
5
1
1
6
5
2
3
5
0
0
5
3
0
1
2
1
0
1
0
1
1
2
0
1
5
3
0
1
4
3
1
5
4
1
3
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(i) At least 40% of the individuals
on the Board of Directors are
women.
(ii) At least one of the following senior
(iii) At least one individual on the
positions on the Board of Directors is held
by a woman: (a) the Chair; (b) the Chief
Executive; (c) the Senior Independent
Director; or (d) the Chief Financial Officer.
Board of Directors is from a
minority ethnic background.
Has the target
been met by the
Company?
The Company has not yet met
target (i). The Board is made up
of 37.5% women.
The Company has not yet met target (ii).
The Company has not yet met
target (iii).
If the target has
not been met,
why this is the
case:
Debbie White retired as a Non-
Executive Director at the end of
2023 after seven years on the
Board to focus on her new role as
Chair of the Co-operative Group.
Had Debbie remained on the
Board for the duration of her final
three-year appointment period,
the Board would have been
compliant with this target from
1 February 2024. It is the Board's
stated intention to meet this
target by the end of 2024.
The Board has a well established CEO and
CFO and appointed a new Chair in 2022.
Whilst the SID role became vacant during
2023, two of the female Non-Executive
Directors had indicated that they would
retire from the Board in the near future and
it was determined that Andrew Cripps had
the most relevant experience to perform this
role in the short-term whilst a longer-term
candidate was identified. It is the Board's
stated intention to have identified a female
candidate for one of the roles listed above
before the end of 2024.
As part of its succession process,
the Board considered candidates
from minority ethnic backgrounds
in 2023. The Board determined
that alternative candidates were
better suited (due to relevant
sector experience, for example) for
those roles at that time. However,
the Company is committed to
the appointment of at least one
individual from an ethnic minority
background before the end of 2024.
The data below is presented in accordance with the FCA’s Listing Rule 9.8.6R(10). The applicable reference date1 for this data is
30 December 2023. To collect this data, the Company asked members of the Board and Executive Management2 to complete a
confidential and anonymous online survey.
Gender identity or sex:
Men
Women
Not specified/prefer not to say
Ethnic background:
White British or other White
(including minority white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/
Black British
Other ethnic group, inc. Arab
Not specified / prefer not to say
Board Members
Number
Percentage
5
3
–
62.5%
37.5%
–
Board Members
Number
Percentage
Number of senior
positions on the
board (CEO, CFO,
SID and Chair)
4
–
–
Number of senior
positions on the
board (CEO, CFO,
SID and Chair)
Executive Management2
Number
Percentage
6
1
–
85.7%
14.3%
–
Executive Management2
Number
Percentage
8
–
–
–
–
–
100%
–
–
–
–
–
4
–
–
–
–
–
7
–
–
–
–
–
100%
–
–
–
–
–
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1
The reference date follows the Company’s year end date. The Company operates a financial reporting calendar of 13 periods and therefore the year end date will
change year-on-year.
2
'Executive Management' means members of the Executive Committee (not including the Executive Directors) and the Company Secretary.
Page TitlePage Title
Governance
Governance
102 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Nominations Committee report continued
Composition continued
Group Gender Diversity
The Nominations Committee reviews the gender statistics shown in the table below. Where other data is available, this is
presented to the Committee in order to determine whether there are any implicit diversity issues. The reference date for the data
below is 30 December 2023.
Board of Directors
Senior Management1
Grades 1 to 32
Group3
Number
%
Number
%
Number
%
Number
Men
Women
5
3
62.5%
37.5%
6
1
85.7%
14.3%
131
45
74.4%
25.6%
8,438
3,705
%
69.5%
30.5%
1 Members of the Executive Committee, excluding Executive Directors and including the Company Secretary.
2 These are generally the direct reports of Senior Management and includes Grades 1 to 3 equivalents.
3 Calculated on an individual basis, not on an FTE basis. Includes UK, France, Belgium, the Republic of Ireland, and the Isle of Man.
Boardroom Diversity Policy
Group 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,
sexual orientation, disability, 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. 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 will have identified at least one
woman director for one of the ‘Big 4’ roles (those being
Senior Independent Director, Chair, CEO, and CFO) by year
end 2024.
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 2024, and it will continue to review
this policy on an annual basis to ensure it remains
appropriate. This policy shall also apply to each of the
Audit, Nominations, and Remuneration Committees of the
Board and we will ensure that at least 40% of members of
each of these committees are female. 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 30 December 2023, 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 30 December 2023.
We want Howdens to be a place where everyone is
welcomed and has the opportunity to thrive, being
Worthwhile for ALL concerned. We’re committed to
encouraging diversity, inclusion and equality amongst our
workforce and to eliminating unlawful discrimination. We
value the difference a diverse workforce brings and want
each employee to be respected, able to be themself and
give their best. Howdens will aim to:
• Create a working environment free of bullying,
harassment, victimisation and unlawful discrimination,
promoting dignity and respect for all, and where
individual differences and the contributions of all
workers are recognised and valued regardless of
background.
• Seek to ensure that no one is unlawfully discriminated
against or harassed inside or outside the workplace
(when dealing with customers, suppliers or other
business contacts or when wearing Howdens branded
clothing) and on work related trips or events, including
social events.
• Encourage equality, diversity, and inclusion in the
workplace by providing training opportunities, booklets
and toolkits and facilitating open conversations.
• Take seriously complaints of bullying, harassment,
victimisation and unlawful discrimination by employees
and other workers, customers, suppliers, visitors, the
public and any others during the organisation’s work
activities.
• Make opportunities for training, development and
progress available to all staff, who will be helped and
encouraged to develop to their full potential, so their
talents and resources can be fully utilised to maximise
the efficiency of the organisation.
• Make decisions concerning employees based on merit,
apart from those limited exemptions and exceptions set
out under Equality Act 2010.
• Ensure recruitment practices are fair and transparent,
and regularly updated to reflect changes in the law.
• Monitor the make-up of the workforce regarding
information such as age, sex, ethnic background, sexual
orientation, religion, or belief, so that we continue to meet
the aims and commitments set out in this policy.
Howden Joinery Group Plc
Annual Report & Accounts 2023
103
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 30 December 2023
Years
0
1
2
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5
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9
Louis Eperjesi
Peter Ventress
Louise Fowler
Karen Caddick
Debbie White
Andrew Cripps
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.
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 retired at
the Annual General Meeting (AGM) in May 2023.
In July 2023, it was announced that Debbie White would
retire from the Board in December 2023. This followed the
announcement that Debbie would be appointed to the board
of the Co-operative Group (the 'Co-op') as an Independent
Non-Executive Director in August 2023 and in February 2024
would be appointed Chair of the Co-op board.
In November 2023, it was announced that Karen Caddick, who
currently chairs the Remuneration Committee, would retire at
the AGM in May 2024. Vanda Murray (whose appointment was
also announced in November 2023) will become Chair of the
Remuneration Committee following the 2024 AGM.
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 100), 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.
During the year, the Nominations Committee recommended
the appointment of Louis Eperjesi and Vanda Murray to
the Board.
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Governance
104 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Nominations Committee report continued
Succession continued
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.
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.
Trade Director
Stuart Livingstone joined Howdens as Trade Director in April
2023 and was appointed to the Executive Committee in
September 2023. A detailed case study on his induction into
the business is set out on the opposite page.
The Nominations Committee will continue to work with the CEO
and Group HR Director on senior management succession and
development in 2024.
Company and Executive Committee tenure as at 30 December 2023
Years
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
Stuart Livingstone
David Sturdee
Julian Lee
Richard Sutcliffe
Theresa Keating
Andy Witts
Paul Hayes
Andrew Livingston
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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’.
Howden Joinery Group Plc
Annual Report & Accounts 2023
105
Case study
Trade Director appointment
As reported in the 2022 Nominations Committee Report,
Stuart Livingstone was appointed Trade Director in early
2023 with a view to taking over key aspects of Andy Witts’
role as Chief Operating Officer of Trade later in the year
following a thorough induction and handover process.
Below, we set out further detail on the selection process
for the role and the tailored induction and handover
programme put in place for Stuart.
Recruitment
The process of finding a successor for Andy has been long
and rigorous given the strategic importance of the role.
From the outset of the recruitment process, we were clear
that candidates needed to possess broad leadership skills,
a strong sense of the importance of Howdens’ unique
culture and the ability to build long term relationships
with stakeholders.
During the recruitment process, a diverse pool of
candidates was considered. Short-listed candidates were
invited to spend a significant time in the business during
the process, both in depot and manufacturing operations.
In addition to the CEO’s and Andy Witts’ involvement,
selected members of the Board and Executive team
met with candidates to provide better understanding
of role and the Company. Prior to final decision making,
candidates performed a psychometric assessment.
Stuart has a strong track record of running large scale
multi-site operations in a wide range of businesses. Prior
to joining Howdens, he was Operations Director at Pets at
Home and before this he was Director of Retail at Screwfix
for six years. Stuart has also held senior positions at
American Golf, Kwik Fit, and Whitbread.
Induction and handover
When Stuart joined Howdens, he immediately began his
tailored induction programme. The first and longest part
of his induction was divided into three distinct phases,
centred around the Trade team:
1. Time in depots
Stuart spent the first five weeks of his induction working
in a range of depots shadowing all depot roles. A key
objective of this time was to ensure that he understood
from firsthand experience the pivotal role that depot
manager autonomy and entrepreneurialism, and high-
quality, local trade relationships play in our business
model. Another key objective was to ensure that Stuart
understood the value and part each depot role plays in
contributing to the success of that depot.
2. Time in the field
Stuart spent a significant amount of time with the regional
directors and area managers visiting around 200 depots
and attending Regional Board meetings (more information
about Regional Board meetings can be found on page
86). From his time out in the field, Stuart was able to
understand fully the role of the field operational leaders
and the ways in which they embed the significance of
strategically important metrics within their teams.
3. Time with Andy Witts
Over his more than 28-year tenure, Andy has amassed
a vast knowledge and experience of matters relating to
Howdens’ culture, the workings of the Trade team, our
builder customers, and our competitors. The final phase
of Stuart’s induction in Trade was therefore spent working
shoulder-to-shoulder with Andy Witts. Stuart also closely
shadowed Andy in the lead up to, and throughout, our
crucial peak trading period during the autumn.
In addition to his time spent with the Trade team, Stuart
spent time with our Supply team. As our Supply team’s
only customer is our Trade team, it was important that
Stuart was able to gain a thorough understanding of how
the relationship between the teams works, and that he
could gain an appreciation for the scale and capabilities of
the in-house manufacturing facilities as well as the goods
and materials which are brought in from external partners.
Stuart spent several days visiting our manufacturing and
logistics sites across UK.
Stuart continues to build and forge relationships with
leaders across the business, including within the
commercial, property and corporate teams. Since
September 2023, Stuart has been an Executive Committee
member and has attended the fortnightly meetings of
the Committee. At the end of October 2023, following the
autumn peak trading period, he fully took over primary
responsibility for the Trade Division from Andy Witts.
Andy remains a member of the Executive Committee in
his new role as Chair of the International Businesses but
he remains on hand to provide counsel to Stuart and the
business as and when required.
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Governance
106 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Nominations Committee report continued
Evaluation
Following the external Board effectiveness review in 2022, and in line with the Board’s policy to undertake an external
effectiveness review every three years, the 2023 Board effectiveness review was conducted internally. Whilst previous internal
reviews had been conducted by the Senior Independent Director with support from the Company Secretary, the Nominations
Committee agreed to use a third-party platform (BoardClic) to facilitate the review.
Unlike previous internal reviews which relied heavily on the qualitative data provided through interviews with each of the
Board members, Executive Committee members and advisors, the BoardClic platform enabled the Committee to collate more
quantitative data on the Board’s perceptions of its priorities, strategic objectives, and leadership, as well as governance
structures and process. The new platform also greatly streamlined the board evaluation review process and enables the
Committee to benchmark its review data against other boards. It is intended to use the platform in future years (both for internal
and supporting external reviews) and thereby create a more iterative process, with trends from prior years being available in
future years.
Evaluation areas of focus
Purpose and strategy
Chair
Board agenda and meetings
Relationship with senior management
Talent and culture
Risk management
Board composition and dynamics
Information and reporting
Methodology
The process is outlined below:
•
Instructions were sent to Board members on how to create
an account and access the platform.
• All Directors were invited to provide feedback on the Board
• Directors were also invited to provide their observations
of the Board evaluation review and any other points they
wanted to raise outside of the platform.
and the Committees of the Board of which they were
members. Each section contained a mix of rating questions
based on scale of 1 to 7 as to how much the participant
agreed or disagreed with a particular statement and free
text questions where the participant could provide an
answer in their own words. Some roles were automatically
excluded from participating in certain questions (generally
where this pertained to their own role, such as the Chair).
• The observations and conclusions of the evaluation were
presented to the Chairman and the detailed report was
presented to the Nominations Committee and the Board at
their meeting in February 2024.
• The Chairman, CEO, and Company Secretary prepared
recommendations for development and actions to be
presented to the Nominations Committee at a future meeting.
Howden Joinery Group Plc
Annual Report & Accounts 2023
107
Conclusions and recommendations
Influence on Board composition
Feedback from the Board was positive overall and reiterated
that Howdens is a high-functioning, high-performing Board
with strong individual committees. The overall conclusion
was that the Howdens Board has the requisite knowledge and
experience required to support the Group’s strategy and to
monitor crucial operations and manages risk well.
The Board’s ‘BoardClic Value Benchmark’ (a score that
encompasses a number of key aspects of value-creating
work, relating to efficiency, alignment, composition and
performance) was higher than the value benchmark and the
Board also achieved above benchmark scores in relation to
the strategy index and ESG index.
Members of the Board discussed the updated recommendations
of the Parker and FTSE Women Leaders Reviews.
In 2024, the Nominations Committee will continue its focus on
Board and senior management succession planning and will
ensure that when it looks to recommend new appointments
to the Board, that the process has been inclusive not only of
a broad range of mindsets, but also a variety of age, gender,
socio-economic background, sexual orientation, disability and
formal qualifications. Our Boardroom Diversity Policy is set out
on page 102.
Nominations Committee evaluation
The highest scores (indicating areas of particular strength)
were received for questions relating to whether the Board
ensures that the Company has the right strategy to fulfil
its purpose, the level of confidence in the CEO’s execution
capacity and the prioritisation of the most important strategic
topics during board meetings.
Feedback from the Nominations Committee evaluation
demonstrated that the Committee continues to deliver on
its objectives and role. The Committee receives effective
support as and when required from the Company Secretary
and other advisors and it liaises well with the Board and
other committees.
In line with the Board evaluation feedback, Committee
members believe that more time should be spent on the
equality, diversity and inclusion agenda. A more structured
and pro-active approach to Board-level succession planning
was also cited as being helpful to increasing the diversity and
skills base of the Board.
By order of the Board
Peter Ventress
Nominations Committee Chair
28 February 2024
Recommended areas for development
and actions going forward
The Chair, CEO and Company Secretary are developing a list
of specific actions and activities to address the areas for
development highlighted by the review. These will include
recommendations relating to:
• Diversity. Building on the review of the talent pipeline
by the Nominations Committee in 2023, the diversity
opportunities at both Board and senior management
level should be addressed more directly, based on robust
data sets.
• Employee engagement. To be reviewed and a refreshed
approach to employee engagement at board-level to be
implemented during the year.
• Board composition and culture. Initiatives to
be considered to better leverage the aggregated
competencies of the Board effectively.
• Board succession. Prioritising the appointment of a high-
calibre replacement for the Audit Committee Chair and
ensuring a smooth transition at the end of 2024.
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Governance
Remuneration Committee report
Governance
108 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Governance
Remuneration
Committee report
2023 meeting attendance
Karen Caddick (4/5)1
Andrew Cripps (5/5)
Geoff Drabble (2/2)
Louis Eperjesi (3/3)
Louise Fowler (5/5)
Debbie White (5/5)
1
Karen was unable to attend the November Committee meeting due to
illness. Andrew Cripps chaired the Committee in Karen's absence.
Karen Caddick
Remuneration Committee Chair
Key activities in the year ahead
• Governance updates from advisors.
• Performance updates on in-flight awards.
•
Agree fees for Chair of the Board.
• Review the UK defined contribution pension
benefits.
•
•
Review the Group’s Gender Pay Gap data and
action plans.
Planning for 2025 incentives (taking into account
risk and other matters).
• Review of the Directors’ Remuneration Policy
and consultation with shareholders ahead of the
2025 AGM.
• Review of the Remuneration Committee Terms
of Reference.
• Approval of the 2025 Remuneration Committee
calendar.
Annual Remuneration
Committee Chair’s statement
I am pleased to present the Howden Joinery Group Plc
Remuneration Committee report for 2023. 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 2023
Part 3
Implementation of policy in 2024
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.
Howden Joinery Group Plc
Annual Report & Accounts 2023
109
2023
2023 was a challenging year for Howdens. Relative
performance was strong and the Remuneration Committee
were particularly pleased with management’s performance
regardless of the significant headwinds. Despite a significant
decline in the kitchens market, management delivered profits
that were in line with market expectations, increased market
share and continued to invest in strategic initiatives.
It was a quieter year for the Remuneration Committee, with the
changes announced in 2022 to annual bonus and long-term
incentives now embedded in our annual cycle of work. There
continued to be lots of external focus on pay with inflation
moving significantly during the year and 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.
As in previous years, the Committee also received updates
on the wider employee benefit landscape, including on the
Group pension scheme. Given the importance of alignment
on pensions between senior management and the wider
workforce, we have included a case study on our Group
pension scheme. It can be found on page 121.
Howdens’ gender pay gap increased year on year from 3.9%
to 5.1%. The gender pay gap report can be found on www.
howdenjoinerygroupplc.com/governance/gender-pay-gap-
reports. The Committee continued to challenge management
to address this further. More information on our broader
diversity and inclusion priorities can be found on pages 54
and 55.
One area of change during 2023 was signposted in the
case study in last year’s report on our review of incentives
below Executive Committee level. 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 replaced the PSP and was intended to remove some of
the complexity in measures being included in the Executive
awards and to result in greater retention for this group of
key employees. Disappointingly, due to challenging market
conditions, the performance conditions for this award were
not met and as such did not result in the purchase of any
deferred bonus shares. However, the Committee remains
confident in the application of the deferred bonus award for
this important cohort.
As in previous years and reported on page 92, the
Remuneration Committee did not consult with the wider
workforce on Executive Director pay arrangements in 2023.
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.
2023 reward outcomes
Annual bonus
Consistent with prior years, the 2023 annual bonus
performance was based on the delivery of both profit and
cash flow targets.
As previously mentioned, market conditions were challenging
in 2023 with the market contracting significantly more than
had been forecast when the budget had been determined.
Despite this, PBT performance for the bonus has resulted in
an above threshold outcome. In considering this outcome,
the Committee noted that expenditure during the year on
strategic initiatives continued and will generate future growth.
The part of this expenditure that was invested in future growth
rather than into 2023 PBT, attributable to the market reducing
by significantly more than had been factored into the annual
budget, was excluded from the PBT figure for bonus purposes
as it is considered an exceptional cost.
The Committee reflected on the formulaic outcome alongside
the fall in the reported Group PBT figure in FY23, the level of the
exceptional expenditure and the strong overall performance
Howdens has delivered relative to market. Having considered
these factors, the Committee concluded that a fair and
appropriate outcome under the PBT element in these
circumstances would be to exercise discretion to reduce the
outcome to threshold performance, which delivers 10% of the
part of the bonus weighted to PBT.
The Committee applied judgment in considering whether this
outcome under the PBT element was appropriate, taking into
account the reported Group PBT figure for FY23, alongside
the total cost of the expenditure and the strong overall
performance Howdens has delivered relative to market.
The Committee concluded that a fair and appropriate
outcome under the PBT element in these circumstances
would be threshold performance which delivers 10% of the
part of the bonus weighted to PBT. As a result, the Committee
exercised discretion to reduce the payout under the PBT
element to threshold.
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Governance
110 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Remuneration Committee report continued
Annual Remuneration Committee Chair’s statement continued
Cash flow performance was more robust and demonstrated
the continued focus of management on this key measure. The
cash flow outturn was above the maximum outperformance
target for this measure resulting in a bonus of 15% of the
maximum annual bonus opportunity being achieved.
This strong relative performance meant that a total annual
bonus of 24% of the maximum annual bonus opportunity for
our Executive Directors was earned.
Performance Share Plan (PSP)
The 2021 PSP was based on the delivery of both a three-year
PBT growth measure and a relative total shareholder returns
(TSR) measure. The weightings for the two performance
measures were 67% PBT and 33% TSR.
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 2021 PSP
performance was measured to FY 2023 and, over the three-
year period, PBT increased by 21% per annum, which equated
to vesting at 100% of the total opportunity for this measure.
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 100% of the total opportunity
for this measure.
In aggregate, the 2021 PSP will vest at 100% of the maximum
opportunity.
2024 reward and incentives
Our approach to executive remuneration recognises 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.
In 2024, we have maintained the principles, measures and
quantums used in 2023. We believe that consistency through
the remuneration cycle is important for both shareholders and
Executives and we are pleased that this year we have been
able to maintain our core methodologies.
Salary
Salary increases for the Executive Directors will be no higher
than the wider workforce. These will be effective from 1 April
2024, which is exceptionally for FY24 later than the normal
effective date of 1 January. This timing is also aligned to
increases for the wider workforce.
The Committee continues to review the Executive Director
remuneration packages annually against companies that
operate in the same or similar sectors to Howdens and
companies of a similar size and complexity.
Annual bonus
The Committee has maintained the annual bonus opportunity
of 200% of base salary for Executive Directors. The Committee
believes that this remains appropriate 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.
For the 2024 annual bonus, we replicated the methodology
of PBT and cash flow measures used in the 2023 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 2024.
PSP
In 2023, two new measures were introduced to the PSP
in addition to the existing performance measures. The
four measures: PBT, relative total shareholder returns
(TSR), Return on Capital Employed (ROCE) and a basket of
complementary Environmental (ESG) measures were intended
to retain a strong focus on profitability (which is consistent
with Howdens’ culture and depot incentives), whilst adding
additional focus on returns and strategically important
environmental goals. The Committee also wanted to retain a
relative measure that aligned Executives’ experience with that
of our shareholders. The weightings were PBT 60%, TSR 20%,
ROCE 10% and ESG 10% of the maximum opportunity.
The Committee believes that these measures and their
respective weightings remained appropriate for the 2024
PSP award and they have been retained accordingly. In
addition, the Committee retained the methodology for
calculating the PBT targets first adopted in 2023.
Howden Joinery Group Plc
Annual Report & Accounts 2023
111
We signposted in last year’s report that we would be moving
away from the automatic use of the prior year PBT figure as
the base for targets for future grants. Instead, the Committee
has adopted a methodology for the PBT target range which
reflects a combination of analyst consensus estimates,
internal forecasts and our long-term strategic goals. We
believe that this approach provides better alignment between
vesting outcomes and performance and reduces the risk of
volatility in the payment cycle.
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 page 127.
No changes are proposed to long-term incentive opportunity
for 2024, 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.
A case study on pension arrangements at Howdens can be
found on page 121.
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.
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 2018, 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 122).
I hope the information presented within this report
provides a clear explanation as to how we have operated
our Directors' remuneration policy over 2023 and how we
intend to implement it for 2024. The Committee is satisfied
that the policy has operated as intended in terms of pay for
performance, taking into account the exercise of Committee
discretion in relation to the 2023 annual bonus outcome. 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 2024.
We are due to review our Directors’ remuneration policy during
2024 and our new Committee Chair, Vanda Murray, will be
consulting with shareholders in the second half of the year. In
the meantime, I look forward to answering any questions on
the work of the Remuneration Committee from shareholders at
our AGM in May.
Karen Caddick
Remuneration Committee Chair
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Governance
112 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Remuneration Committee report continued
Annual Remuneration Committee Chair’s statement continued
2023 Remuneration Committee activity
January
July
Committee meeting
• Shareholder feedback on proposed changes to
Committee meeting
• Performance update on in-flight variable incentive
Executive Directors’ Remuneration not necessitating
a change to Directors’ Remuneration Policy
awards
• Governance update
• Executive Director and senior management salary
review
• Approval of additional retention awards for certain
Executive Committee members (not Executive
Directors)
February
Committee meeting
• Update on UK defined contribution pension benefits
• Annual bonus outcome and performance update on
awards vesting in 2022
• Shareholder feedback on proposed changes to
Executive Directors’ Remuneration not necessitating
a change to Directors’ Remuneration Policy
• 2023 incentive considerations (including workforce
reward, shareholder alignment, CEO pay ratio and
gender pay gap)
• Approval of an alternative equity structure for
senior managers below Executive Committee level
• Review of the treatment of post-vesting holding
period for Good Leavers
August
Share award grants
• SIP Free Shares grant to all eligible UK employees
• Retention award granted for senior manager
(not Executive Director)
September
Committee meeting
• Review of Annual Bonus and LTIP measures
• Review of package for incoming Executive
Committee member
November
Committee meeting
• Performance update on in-flight variable incentive
• Draft 2022 Directors’ remuneration report
awards
• Risk and rewards consideration
• 2024 incentives
• Review of LTIP measures
• 2024 Remuneration Committee calendar
• Review of Committee’s terms of reference
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.
• 2023 share awards planning
• Chair fee review
Shareholder communication
• Conclusions of the Remuneration Committee in
relation to proposed changes to Executive Directors’
Remuneration not necessitating a change to
Directors’ Remuneration Policy
March/April
Share award grants
• Replacement share award made to incoming
senior manager
• PSP grant to Executive Directors and selected
senior management
• Grant of retention awards for certain Executive
Committee members (not Executive Directors)
May
AGM
• 2022 Directors' remuneration report approved by
shareholders
Howden Joinery Group Plc
Annual Report & Accounts 2023
113
Fixed
Variable
Summary of the Directors’ remuneration policy
Howdens’ Directors' remuneration policy, as it is set out in our 2021 Annual Report and Accounts, was approved by shareholders
at our 2022 AGM. 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 2023 and will be applied during
2024 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.
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.
2023 and 2024 salary levels are detailed on page 126.
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.
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114 Howden Joinery Group Plc
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Governance
Remuneration Committee report continued
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.
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.
The threshold for the
annual bonus will be
dependent on the
individual measures
used each year. For
2024, 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 2024, the annual
bonus level will be 200%
of salary, with the position
reviewed each year.
For 2024 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.
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.
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.
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 and the grant
level for the CEO will be
270% and for the CFO will
be 220%.
For 2024, 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.
Howden Joinery Group Plc
Annual Report & Accounts 2023
115
Fixed
Variable
Element and how
it supports our
strategy
Operation
Shareholding requirement
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 and selected senior managers
participate in the same incentive schemes as the Executive Directors, at a reduced level, to ensure alignment between the
leadership team and 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. Since 2023,
a deferred bonus share arrangement replaced 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.
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.
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116 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
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 Board Chair fees and benefits is set out below.
Element and how
it supports our strategy
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 Board Chair and Chief
Executive and approved by
the Board.
The fee for the Board
Chair is determined
by the Remuneration
Committee while the
Board Chair 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 126.
The fees reflect the time commitment and
responsibilities of the roles. Accordingly,
committee chair, Senior Independent Director
(SID) and the Non-Executive Director responsible
for employee engagement fees are paid in
addition to the NEDs’ basic fee. Committee chair
fees apply only to the Audit and Remuneration
Committees. The Board Chair 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.
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.
Howden Joinery Group Plc
Annual Report & Accounts 2023
117
Fixed
Variable
Clarity
Remuneration arrangements
should be transparent
and promote effective
engagement with
shareholders and
the workforce.
Simplicity
Remuneration structures
should avoid complexity
and their rationale and
operation should be easy
to understand.
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.
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 2023, 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 86 and 87.
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 125.
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 2023, the annual bonus paid out at 24% reflecting the highly challenging market conditions and
resultant profit performance during the year. However, despite the challenges during the year, the
vesting percentage for the long-term incentive share plan was 100%, which was due to the strong
profit and relative TSR performance over the three-year performance period. This demonstrates
good alignment of Executive Director remuneration with the long-term performance of the Group.
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.
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118 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
119
Governance
Remuneration Committee report continued
Directors’ remuneration report – Part 1: Company performance and stakeholder experience
In this 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.
Group performance
Total shareholder return (TSR)
The graph below illustrates the Company’s TSR
performance relative to the constituents of the FTSE 350
(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
350 (excluding Investment Trusts).
Profit before tax (PBT)
The graph below illustrates the Company’s historical
PBT performance.
Director pay
Our corporate performance and remuneration
Historical single figure
The table and graph below show the historical CEO single figure and incentive payout levels. They show that the performance of
the annual bonus and long-term incentives have reflected the challenging market conditions.
From 2016 to 2022, the maximum bonus opportunity reduced from 200% of basic salary to 150%. In 2023, following consultation
with shareholders, the maximum bonus opportunity returned to 200% of basic salary.
Year
2014
2015
2016
2017
2018
CEO single figure (£'000)
6,221
5,225
3,098
1,268
2,569
Annual bonus (% of maximum)
64%
56%
48%
LTIP vest (% of maximum)
100%
100%
100%
35%
0%
75%
0%
2019
1,391
76%
0%1
2020
816
0%
0%
2021
3,951
100%
100%
2022
2,571
100%
2023
2,517
24%
43%
100%
Howdens historical TSR
Howdens historical PBT (£m)
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
l
i
i
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
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
350
300
250
200
150
100
50
0
2013
£405.8m
£390.3m
£237.0m
£238.5m
£260.7m
£327.6m
£219.6m
£232.2m
£188.8m
£185.3m
450
400
350
300
250
200
150
100
50
0
2014
2015
2016
20 17 2018 2019 2020 2021 2022 2023
2014
2015
2016
20 17 2018 2019 2020 2021 2022 2023
Howdens
FTSE 350 (excluding Investment Trusts)
Relative importance of spend on pay
The graph below sets out the change in the Group’s total remuneration spend from 2022 to 2023 compared to
the total returns to shareholders of the Group and the two incentive performance measures PBT and cash flow.
700
600
500
400
m
£
300
200
100
0
+5.1%
.
m
0
6
5
6
£
m
1
.
4
2
6
£
-55.0%
.
m
0
5
6
3
£
£164.1m
22
23
22
23
Total spend on pay
Total returns to shareholders
-19.3%
m
8
.
5
0
4
£
m
6
.
7
2
3
£
22
23
PBT1
-9.6%
m
0
.
8
9
4
£
m
7
.
2
5
4
£
22
23
Cash flow2
1 See consolidated income statement on page 162.
2 Net cash flow from operating activities is the definition used for the annual bonus scheme (see page 126).
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Remuneration Committee report continued
Directors’ remuneration report – Part 1: Company performance and stakeholder experience continued
CEO pay ratio table
Howdens has calculated the CEO pay ratio for 2023 in line with the Directors’ Remuneration Reporting Regulations. The data
used to calculate the CEO pay ratio was accurate as at 31 December 2023. 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
2023
2022
2021
2020
2019
2018
Method
25th percentile pay ratio
50th percentile pay ratio
75th percentile pay ratio
A
A
A
A
A
A
76:1
74:1
135:1
31:1
71:1
122:1
65:1
64:1
113:1
25:1
58:1
100:1
54:1
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 reduced as the 2020 long-term incentive share award vested at 43% of maximum and the share price upon which
the award was valued was lower than in 2021. As the total incentive payout level for 2023 performance is broadly similar to 2022,
and there was no share price appreciation in relation to the 2021 LTIP vesting, the 2023 ratio represents only a slight increase
from the prior year's ratio.
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)
£33,278
£23,916
£38,735
£28,055
£46,836
£34,694
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 2023 to 31 December 2023. 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 2023 compensation year; however, for annual bonus
payments, we estimated the bonus due to employees for the 2023 compensation year (payment is due in March 2024). P11D
values are based on the 2022/23 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
Pensions at Howdens
Alignment of Executive remuneration with our depot staff
has always been culturally important at Howdens. This
starts with a strong link between pay and profitability but
extends across a number of other incentives and benefits.
First and foremost, Howdens should be worthwhile for
all concerned.
When the Board agreed to close the Defined Benefit
pension in 2020 (it had been closed to new members
since 2012), it recognised that there was an opportunity
to improve the fairness of pension provision at Howdens
and remove the two-tier benefit structure in place. The
Remuneration Committee also recognised that, following
the decision taken in the 2019 remuneration policy to
align the pension benefits of new Executive Directors with
those of the wider workforce, there was an opportunity
to significantly improve contributions under the existing
Defined Contribution scheme (now called the Howdens
Retirement Savings Plan or HRSP). The resulting HRSP
provides highly competitive retirement benefits for
Executives but also throughout the whole of Howdens.
In 2023, Howdens contributed £42m towards employee
pensions. This was more than any other incentive
during the year. Participation in the HRSP is high with
opt-out levels at 2% at the end of December 2023. One
feature of the HRSP is that it enables employees to
reduce their contributions below the default contribution
level (to zero if needed) and still receive an employer
contribution of 8% of their base salary.
This has been particularly important with household
incomes squeezed in recent years and means that
employees can continue to increase their retirement
savings without compromising their take-home pay.
Employees are encouraged to contribute themselves
towards their pension to help maximise their benefit
and are annually enrolled back on the default
employee contribution but they have the option to
reduce their contributions again if needed.
This flexibility has been well received by employees and
resulted in very low opt-out levels. At the end of December
2023, only 3% of employees had flexed their contribution
level below the default contribution level. Employees
paying more than the default employee contribution
level is high at 45%, with 27% maximising their employer
contribution of 12%.
Howdens employees really see the benefit in the HRSP.
62% of employees who were not automatically enrolled
opted to join and 32% of those are contributing more than
the default contribution level.
The Remuneration Committee will continue to receive
regular updates from management on participation
and employee engagement with the HRSP in the coming
year and continue to ensure alignment with the wider
workforce and fairness remain central tenets when
determining Executive pay.
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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
there is only a requirement for a listed entity to provide employee pay information for that entity (i.e. not on a group-wide basis),
a ‘Group’ comparator has also been included in the table below as this provides a more representative comparison, noting that
Howden Joinery Group Plc did not employ any individuals during 2019 to 2023.
Footnotes have been included beneath the table in relation to the 2022 to 2023 period. Footnotes relating to prior years can be
found in the previous applicable annual report.
% change in Basic Salary
% change in Benefits
% change in Bonus
2022–23
2021–22
2020–21
2019–20
2022–23
2021–22
2020–21
2019–20
2022–23
2021–22
2020–21
2019–20
9%
5%
1%
4%
5%
(9)%
(15)%
9%
(18)%
(4)%
38%
12%
Average Howdens
Group employee
remuneration
Executive
Directors
Andrew
Livingston1
Paul Hayes
Non-Executive
Directors
Karen Caddick
Andrew Cripps2
Louis Eperjesi3
Louise Fowler
Peter Ventress4
Debbie White1
Former Directors
6%
6%
4%
11%
–
0%
101%
0%
3%
3%
6%
6%
–
3%
–
3%
12%
–
3%
–
40%
(6)%
5%
80%
(85)%
84%
–
–
(67)%
(67)%
3%
3%
3%
3%
–
4%
–
4%
18%
5%
–
515%
–
3%
0%
0%
–
25%
0%
100%
0%
–
300%
–
0%
0%
–
0%
–
(89)%
0%
–
100%
–
600%
(100)%
(50)%
390%
100%
(100)%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Geoff Drabble5
(64)%
4%
3%
22%
100%
0%
0%
0%
1 Andrew Livingston's and Debbie White's '2022 to 2023' benefits figures increased by a relatively large amount in percentage terms but remained in line with
expectations in absolute terms.
2
Andrew Cripps was appointed Senior Independent Director in July 2023 and therefore received an additional pro-rated fee for this role in 2023. The increase
shown in his fees for '2022 to 2023' is due to this change.
3 Louis Eperjesi was appointed to the Board in June 2023 and therefore comparative figures cannot be calculated for any of the periods reported above.
4 Peter Ventress was appointed to the Board in July 2022 and therefore did not receive a full year of fees until 2023. The percentage change between 2022 and
2023 was therefore substantial as the figures are not pro-rated for the purposes of the above calculations.
5 Geoff Drabble retired from the Board in May 2023 and therefore did not receive a full year of fees in respect of 2023. The percentage change between 2022 and
2023 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 interim Group HR Director in respect of average salary of an employee
in 2023 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.
Howden Joinery Group Plc
Annual Report & Accounts 2023
123
Fixed
Variable
Directors’ Remuneration Report – Part 2: Application of policy in 2023
In this section of the Directors’ remuneration report we set out how the Committee has executed policy for 2023. 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
Total
Remuneration
£000s
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022* 2023
2022* 2023
2022*
Fixed
Variable
Executive
Directors:
Andrew Livingston
710
Paul Hayes
464
670
438
Total
1,174
1,108
28
34
62
20
36
56
85
56
141
84
48
823
554
774
522
334
1,004
1,360
793
1,694
1,797
2,517
2,571
218
657
889
–
1,107
657
1,661
1,179
132
1,377
1,296
552
1,661
2,249
793
2,801
2,454
4,178
3,750
Non–Executive
Directors:
Karen Caddick
Andrew Cripps
Geoff Drabble
Retired May 2023
Louis Eperjesi
Appointed June 2023
Louise Fowler
77
82
27
36
60
Peter Ventress
Appointed July 2022
325
74
74
76
–
60
162
Debbie White
60
60
2
0
1
0
5
0
6
Total
667
506
14
2
0
0
–
4
0
0
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
79
82
28
36
65
325
66
681
76
74
76
–
64
162
60
512
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
79
82
28
36
65
325
66
681
76
74
76
–
64
162
60
512
* The vesting value of the 2020 PSP award for Andrew Livingston has been restated to reflect the actual share price on vesting on 7 August 2023 of £7.3676.
Total current Executive Director fixed vs variable pay
33%
36%
2023
2022
67%
64%
Fixed
Variable
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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
2024 can be found on page 126. 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
Executive Directors' benefits are based upon market rates
and include receipt of a car allowance, health insurance, and
death-in-service insurance payable by the Company. Non-
Executive Directors are entitled to receive expenses in respect
of reasonable travel and accommodation costs.
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 129. A case
study on pensions may be found on page 121.
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Remuneration Committee report continued
Directors’ remuneration report – Part 2: Application of policy in 2023 continued
Notes to the single figure table continued
Annual bonus (audited)
Targets
Our annual bonus for 2023 was based on PBT and cash
flow measures subject to an aggregate maximum of
200% of salary. The PBT and cash flow measures were
weighted as follows (percentages are of salary):
PBT component
Cash flow component
Threshold
Target
£340m (17%)
£350m (85%)
£407m (3%)
£419m (15%)
Outperformance
£389m (170%)
£431m (30%)
70% of any annual bonus is paid in cash and 30% is
deferred as shares, which 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 £340m. As explained in the Chair's annual statement,
the Committee applied judgment in reviewing whether
the PBT outcome was appropriate taking into account
all relevant factors, and it determined that it would be
appropriate to exercise discretion to reduce the outcome
for the PBT component to threshold performance. The
cash flow figure for the year in relation to the bonus
was £452.7m. In aggregate, the Executive Directors will
receive an annual bonus of 47% of salary for 2023, which
is equivalent to 24% of the maximum bonus opportunity.
30% of the bonus will be deferred into Company shares for
two years.
Andrew Livingston
Paul Hayes
PBT (% of salary)
Cash Flow (% of salary)
Total Bonus (% of salary)
Total Bonus (£'000)
17%
30%
47%
334
17%
30%
47%
218
Performance Share Plan (PSP) (audited)
Targets
The 2021 PSP award is measured against PBT growth and
relative total shareholder returns (TSR) over a three-year
period between FY 2020 to FY 2023. 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
67% of the 2021 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 2023, calculated on an unadjusted basis,
was £327.6m, and therefore growth on FY 2020 was 21%
p.a. This component of the award will vest at 100% of
maximum opportunity.
33% of the 2021 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
2023, the Company was ranked 'upper quartile' compared
to the comparator group and therefore 100% of the TSR
component of the award will vest.
The overall final vesting of the 2021 PSP award is 100%
of the maximum opportunity. The share price at the date
of grant was 745.4p and the three month average to
30 December 2023, the price on which the value of the
award is calculated, was 708.9p. Therefore, none of the
value of the LTIP awards shown in the single figure table is
attributable to share price appreciation.
sh Flo w
15%
a
C
15%
8
.
5
%
Annual
bonus
outcome
6 .5 %
7
T
B
P
R
S
T
%
3
3
%
3
3
PSP
outcome
67%
PBT growth
85%
67%67%
Opportunity (% of salary)
Target reached
Target not reached
Opportunity (% of salary)
Target reached
Target not reached
Howden Joinery Group Plc
Annual Report & Accounts 2023
125
Fixed
Variable
Directors’ remuneration report – Part 3: Implementation of policy in 2024
In this section of the Directors’ remuneration report we set out how the Committee has implemented policy for 2024.
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 2024.
2024 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%
33%
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% 37%
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 2024, alongside their 2024 pension entitlement, and actual
benefits received in 2023 (as a proxy for 2024).
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.
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Directors’ remuneration report – Part 3: Implementation of policy in 2024 continued
Non-Executive Director fees
Current fee levels for Non-Executive Directors are set out in the table below. They will next be reviewed during 2024 with any
increase taking effect from 1 April 2024.
2024
2023
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
N/A
£17,000
Until 31 March 2024
£60,250
£325,000
£10,600
£5,400
£17,000
1 January 2023
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
Executive Directors' base salary increases from 1 April 2024 are set out in the table below. The rationale for the increases may be
found in the Annual Remuneration Committee Chair statement on page 110. For 2024, salary increases for the wider workforce
will be, on average across the Group, 3% of salary.
Executive Directors
Salary (£'000)
Effective date
Salary (£'000)
Effective date
Andrew Livingston
Paul Hayes
731
478
1 April 2024
1 April 2024
710
464
1 January 2023
1 January 2023
2024
2023
Annual bonus measures
The table below sets out annual bonus measures for 2024. 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 2024 Remuneration Committee report.
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
Howden Joinery Group Plc
Annual Report & Accounts 2023
127
Fixed
Variable
Performance Share Plan (PSP) measures
Set out below are the performance measures and relative weightings for each of the measures. Further detail about the
measures first introduced for the 2023 PSP may be found in the Annual Remuneration Committee Chair statement of the 2022
Annual Report and Accounts. 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 130 for scheme interests awarded in 2023. Under the terms of the Directors' remuneration policy approved by
shareholders at the 2022 AGM, the 2024 PSP awards will be subject to a two-year post-vesting holding period.
PBT – 60% weighting
PBT component
vesting schedule
Relative TSR – 20% weighting
Comparator group
and averaging period
for TSR performance
Performance
assessment
PBT performance condition
£420m
£340m
Less than £340m
Straight-line vesting between these points
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).
• TSR average for the two months preceding the first day of the performance period and two months TSR
average for the final two months 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
Return on Capital Employed (ROCE) – 10% weighting
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.
Performance
assessment
Environmental measure – 10% weighting
28%
23%
Less than 23%
ROCE performance condition
Payout level
100% of maximum
Straight-line vesting between these points
15% of maximum
0% of maximum
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Environmental component
measurement details
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
All carbon emission and waste targets to be achieved by 31 December 2026. Base year for all targets is 2021.
Performance condition
4.2% p.a. reduction
Payout level
50% 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
50% of maximum
Straight-line vesting between these points
12% reduction
Below 12% reduction
7.5% of maximum
0% of maximum
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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.
Page TitlePage Title
Governance
Governance
128 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
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.
Consideration by the Directors of matters relating to Directors’ remuneration
The Committee met five times during 2023 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.
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 £58,687 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.
Howden Joinery Group Plc
Annual Report & Accounts 2023
129
Fixed
Variable
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 111 and
115 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 30 December 2023 (£'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
Director shareholdings (audited)
Executive Directors
Andrew Livingston
Paul Hayes
–
–
–
–
85
85
–
–
–
–
56
56
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 that were subject to performance conditions or held share options that were vested but unexercised.
Shareholding requirement (% of salary)
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%
200,226
387,863
387%
Y
42,968
181
714,669
200%
130,907
23,694
36%
N
28,094
153
403,978
1
2
3
Based on a share price of £7.089, being the three-month average price to 30 December 2023, and basic salary as at 30 December 2023. This is calculated by
using only those shares owned outright by the Executive Directors and their connected persons at 30 December 2023 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 30 December 2023 (the end of the period) and 28 February 2024, Andrew Livingston has acquired 38 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 28 February 2024.
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Non-Executive Director shareholdings (audited)
There is no shareholding requirement for Non-Executive Directors. The shareholding figures below include any shares held
by connected persons. With the exception of Debbie White and Geoff Drabble, who were not members of the Board as at
28 February 20241, the Company can confirm that 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 28 February 2024.
Non-Executive Director
Karen
Caddick
Andrew
Cripps
Geoff
Drabble1
Louis
Eperjesi
Louise
Fowler
Peter
Ventress
Shareholding:
6,000
7,500
3,000
3,100
470
20,316
Debbie
White1
4,562
1
Geoff Drabble retired from the Board on 4 May 2023 and Debbie White retired from the Board on 30 December 2023. Their respective reported shareholdings are
therefore given as at the date they each retired from the Board.
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Governance
Governance
130 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Remuneration Committee report continued
Directors’ remuneration report – Part 4: Additional disclosures continued
Scheme interests awarded during the financial year (audited)
Advisors to the Committee
Howden Joinery Group Plc
Annual Report & Accounts 2023
131
Fixed
Variable
During 2023, 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 beginning on page 199:
Nature of award:
Conditional Shares under the PSP
Number of shares under award:
Face value of award1:
CEO
288,310
£1,916,108
CFO
153,601
£1,020,832
Performance Period
See individual Performance
Conditions below
Grant Date
6 April 2023
Vest Date
Additional Holding Period
6 April 2026
Two years
Performance Conditions:
Profit Before Tax (PBT)
vesting schedule
(60% weighting)
Performance Period:
FY2022 to FY2025
Relative Total Shareholder
Returns (TSR) vesting schedule
(20% weighting)
Performance Period:
FY2022 to FY2025
Return on Capital Employed
(ROCE) vesting schedule (10%
weighting)
Performance Period:
FY2022 to FY2025
Environmental measure
(EM) vesting schedule (10%
weighting)
Performance Period:
All carbon emission and waste
targets to be achieved by 31
December 2025. Base year for
all targets is 2021.
PBT at end of Performance Period
Proportion of PBT component of Award that may vest
£484m
£400m
Straight line vesting between these two points
Less than £400m
100%
15%
0%
Howdens' rank versus comparator group
Proportion of TSR component of Award that may vest
At or above upper quartile
Straight line vesting between these two points
At median
Below median
ROCE achieved
100%
15%
0%
Proportion of ROCE component
of Award that may vest
30%
25%
Straight line vesting between these two points
Less than 25%
100%
15%
0%
Improving our carbon
intensity ratio
Fleet emissions
reduction
Carbon neutral status of
manufacturing sites
Waste avoiding
landfill
Per annum
reduction
Proportion
of EM that
may vest
Reduction
Proportion
of EM that
may vest
Number of
sites
Proportion
of EM that
may vest
4.2%
33.3%
15%
33.3%
Four
33.3%
Straight-line vesting
between these points
Straight-line vesting
between these points
4.0%
Below 4.0%
7.5%
0%
12%
Below 12%
7.5%
0%
Straight-line vesting
between these points
Two
0%
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.
1 Based on a share price of £6.646, being the closing price on 5 April 2023.
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
Matching Shares
19 May 2023
19 May 2026
Matching Shares
19 Jun 2023
19 Jun 2026
Matching Shares
19 Jul 2023
19 Jul 2026
Matching Shares
18 Aug 2023
18 Aug 2026
Free Shares
29 Aug 2023
29 Aug 2026
CFO
Free Shares
29 Aug 2023
29 Aug 2026
7
7
7
6
35
35
£6.880
£6.832
£6.798
£7.392
£7.030
£7.030
£48.16
£47.82
£47.59
£44.35
£246.05
£246.05
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').
The Committee regularly consults with the CEO, CFO and the Interim 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. Korn Ferry was appointed by the Committee as its retained independent advisor in September 2022. 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.
The Committee is satisfied that Korn Ferry 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 Korn Ferry in relation to remuneration services provided to the Committee totalled £77,388 with fee
levels based on the quantity and complexity of work undertaken.
Voting at the 2023 AGM
The results of the advisory vote in respect of the Directors’ remuneration report ('Report') at the 2023 AGM is shown in the chart
below. The 2021 AGM results and the 2022 AGM results (which included a binding vote on the Directors’ remuneration policy
('Policy')) are also shown in the chart below.
For¹
Against
AGM voting outcomes
2023
Report
For 86.06%
Against
13.94%
Withheld2 2,392,924
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
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
28 February 2024
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Page TitlePage Title
Governance
Audit Committee report
Governance
132 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
133
Governance
Governance
Audit Committee report
2023 meeting attendance
Andrew Cripps (6/6)
Karen Caddick (5/6)1
Geoff Drabble (3/3)
Louis Eperjesi (3/3)
Louise Fowler (6/6)
Debbie White (6/6)
1
Karen was unable to attend the November Committee meeting
due to illness.
Andrew Cripps
Audit Committee Chair
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).
• Review of the 2024 interim results.
• Consideration of internal audit’s annual plan,
findings, independence, and resources.
• Review of key controls.
• Approval of the 2025 Audit Committee calendar.
Introduction from the Audit
Committee Chair
I am pleased to present this report covering the work of the
Audit Committee.
Corporate governance trends have been in a state of flux as of
late. There have been differences in opinion as to whether the
UK Corporate Governance Code should focus on promoting
reporting of deeper controls over financial matters, as in other
jurisdictions, or as has happened, on broader operational
controls over the whole business. Over the last several years
Howdens has been working hard to enhance controls on a
number of fronts. This year's progress includes improving
precision and evidencing of financial controls, tightening
IT governance, and clarifying vital non-financial controls.
The Committee has been overseeing these activities closely
and providing appropriate support. Next steps will include
identifying which of the large number of controls are most
critical to business reliability and efficiency so as to ensure
that reporting is appropriately prioritised.
The Committee has also been encouraging the Company’s
identification and sharpening of controls over fraud which
already had a strong foundation, as is appropriate in the
current economic climate.
We have included a case study in this report on the Audit
Committee’s role in overseeing the controls that mitigate our
cyber and information security risk, one of our principal risks.
The case study can be found on page 136. Receiving updates
from management and the security team has become a
regular feature of the Committee as the Company adapts to
this increasing and evolving risk. I hope that the case study
provides some insight into the Committee’s level of oversight
and some of the important work we consider.
The Audit Committee also continued its programme of inviting
divisional finance directors to present on their part of the
business. In April 2023, we received an update from the
Supply Operations Finance Director. The Committee were
able to gain valuable insight into not just Supply Operations'
financial objectives for the year, but also a ten-year strategic
investment plan. The annual update from the Head of
Trade Compliance reviewed adherence to both financial
and non-financial controls in depots including health and
safety, inventory management, and fraud. The HR Director
presented to the Committee on the evolution of HR controls
including those that assist depots to fulfil their HR obligations.
These updates from operational management are vital
for the Committee, as they bring operative insights into
the Boardroom.
The Committee received updates on compliance in our French
business and we have invited the Finance Director in France
to present to the Committee in 2024. The Committee also
undertook its regular governance reviews, reviewing external
audit policies, reviewing conflicts of interest and monitoring
the effectiveness of the external audit process.
Our external reporting continued to receive external
accolades and we were particularly pleased that the
Corporate and Financial Awards commended Howdens on its
authentic communication that was aligned with our culture.
As I stated in last year’s report, receiving external recognition
is gratifying, and in some respects reassuring, but the Audit
Committee recognises the primary importance of maintaining
rigorous reporting standards and the confidence that this
gives our stakeholders. The Committee is committed to
building on these high standards in both financial and non-
financial reporting.
Robert Brent, our audit partner, is retiring at the end of this
audit cycle. I would like to take this opportunity to thank Robert
for his efforts and for overseeing the transition from Deloitte to
KPMG. We look forward to working with our new audit partner,
Kamran Walji, who shadowed Robert through this year’s audit.
I also look forward to answering any questions on the work of
the Audit Committee from shareholders at our AGM.
Andrew Cripps
Audit Committee Chair
2023 Audit Committee activity
January
Committee meeting
• Year End 2022: key judgements
• External Audit update
• Key controls: year end assurance
February
Committee meeting
• 2022 draft Annual
Report and Accounts
and Full Year
Announcement
• External audit report
• External audit policies
•
Internal audit report
• Key controls
• Audit Committee
effectiveness
• Discussion with
external auditor
(without management
present)
April
Committee meeting
• Cyber security update
•
Internal audit report
• Effectiveness of the
external auditor and
audit processes
• 2023 external
audit plan
• Supply Operations
Finance Director
update
• Discussion with Head of
Internal Audit (without
management present)
May
AGM
• The re-appointment of KPMG LLP as the external
auditor and authority for the Directors to determine
the auditor’s remuneration were approved by
shareholders
July
Committee meeting
• 2023 Half Year results,
including going
concern considerations
• External auditor Half
Year review
• Key controls and Half
Year control reviews
update
•
Internal audit report
• Conflicts of interest
review
• Discussion with
external auditor
(without management
present)
September
Committee meeting
• Cyber security update
•
Internal audit report
• HR controls update
• Depot compliance
update
• 2023 Annual Report
timetable
• Lead audit partner
succession
• Key controls and fraud
controls
• Annual review of risk
and control framework
• Discussion with Head of
Internal Audit (without
management present)
November
Committee meeting
• External audit plan
• Key controls and fraud
update
controls
•
•
Internal audit charter
• Terms of reference
Internal audit report
review
• 2024 Internal audit plan
and budget
• 2024 Audit Committee
calendar
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Page TitlePage Title
Governance
Governance
134 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
135
Governance
Audit Committee report continued
Financial reporting
Results review
The Audit Committee reviewed the Group’s 2023 Annual
Report and Accounts published in March 2023 and the half-
yearly financial report published in July 2023.
As part of these reviews, the Committee scrutinised 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 the results of management's key
control assessments prepared by Group and Divisional
management half yearly as well as a report from the Head
of Internal Audit and Risk on the scope of those controls and
adequacy of evidence retained. 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 debated regular updates in respect of
the wider key controls programme during the year. More
information on the key controls programme can be found
on page 138.
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 has challenged the underlying
assumptions and 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 2023 Annual Report and
Accounts are appropriate.
Areas of significant financial judgement:
Inventory obsolescence provisioning
Defined benefit pension scheme
Inventory obsolescence provisioning
The Group’s in-stock model (further information about which
can be found in the Strategic report beginning on page
2) 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 2023, management continued to take a strategic position
on stock holding. The Committee reviewed management's
conclusions on stock valuation and provisioning.
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 considered 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
As part of the triennial actuarial valuation of the pension plan,
changes were made to demographic assumptions, including
those for mortality assumptions. The methodology for all other
assumptions remained the same.
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 appropriate; and
•
they concurred with the views of the external auditors.
Other key judgements
Valuation of pension fund assets
The Audit Committee also considered processes to value
pension fund assets. At 30 December 2023, 57% of total
pension fund assets (2022: 76%) were assets for which there
is no observable market value (see note 22 on page 195).
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.
Committee membership
Independence is critical for fair assessment of the
management team and the external and internal audit
functions. The Committee is composed entirely of independent
Non-Executive Directors.
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.
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.
Governance
Governance updates
Updates on the latest governance practices for audit
committees and changes in reporting requirements were
reviewed with the external auditor. This included the FRC's
minimum standard guidance for audit committees' oversight
responsibilities for the external audit. In addition to other
resources, members of the Audit Committee are members of
the KPMG Board Leadership Centre and other bodies, which
provide updates on financial and reporting matters.
During the year, the Committee received regular updates
on the proposed corporate governance reforms. This
included the withdrawal of proposed secondary legislation
to affect the reforms set out in the Government’s White paper
‘Restoring trust in audit and corporate governance’ in October
and the publication of the updated UK Corporate Governance
Code 2024 by the FRC in January 2024. External audit and
internal controls remain live topics and the Committee will
continue to monitor any proposed audit or wider corporate
governance reforms.
Committee effectiveness
An effectiveness review was carried out on the Committee
and its members as part of the wider internal 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 page 138) and employment of ex-audit firm personnel. It
also reviewed the Directors’ related parties and conflicts of
interest register. Further information about the Committee's
review of related parties and conflicts of interest may be found
on page 139.
Competition and Markets Authority Order
(the 'Order') compliance
The Audit Committee confirms that the Company has complied
with the provisions of the Order throughout its financial period
ended 30 December 2023 and up to the date of this report.
Audit Committees and the External Audit:
Minimum Standard (the 'Minimum Standard')
Since the introduction of the FRC's Minimum Standard in May
2023, and in undertaking its role and responsibilities during
the year, the Audit Committee has complied with the Minimum
Standard throughout the year.
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Annual Report & Accounts 2023
Governance
Audit Committee report continued
Case study
Cyber Security and Information Security Risk Governance
As is the case for the majority of companies, cyber
security is treated as one of Howdens’ principal risks (see
page 40). Howdens’ systems are fundamental to the day-
to-day secure running of the business and the Board has
set a very low risk appetite for cyber security risk. As such,
one of the key roles of the Audit Committee during the
annual cycle is to evaluate updates from management on
the threat landscape and the actions take to mitigate this
risk as far as possible.
At both meetings, the Audit Committee considered
a publicly available security scorecard, which is an
independent benchmark of the Company’s external
website. This data provides useful insight into the external
security of howdens.com which was visited c.20 million
times in 2023.
The Committee will continue to receive updates on cyber
and information security in 2024, including on progress
towards control governance standards and initiatives to
reinforce cyber security culture at Howdens.
The Audit Committee received two updates on cyber
and information security during 2023 (at the April and
September meetings) from the Chief Customer Officer,
Director of Infrastructure and Service Delivery, and Head
of Information Security.
The security team updated the Committee at its meeting
in April on progress to date against strategic deliverables.
These included an update on cyber security strategy
and control governance, progress towards securing
the ISO27001 Information Security Management
standard and aligning to the IEC62443 Cyber Security in
Operational Technology standard. The Committee were
also briefed on the successful implementation of multi-
factor authentication which had been introduced for all
remote users and the outcome of simulated phishing
exercises that had been undertaken involving over 11,000
employees. Details of a full cyber crisis management
simulation (conducted during the year) with the Group
Crisis Management teams were also considered.
The September meeting was provided with further updates
on the strategic roadmap activities (control governance,
phishing exercises and user awareness) and also a review
of the transition of the French server infrastructure to the
UK datacentre.
External auditor1
External auditor
KPMG LLP ('KPMG')
External auditor appointed 12 May 2022
Lead audit partner
Robert Brent2
Lead audit partner tenure
Year two (of a five-year cycle)
Total fees paid to the
auditor in the year
£1.4m (audit related assurance
services accounted for £0.1m of
the total fee)
1 The information above is correct as at 30 December 2023.
2
Robert Brent will be retiring following the completion of the 2023 audit. He will
be succeeded as lead audit partner by Kamran Walji.
External audit tender
Following a comprehensive external audit tender process, 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. The Board recommended
KPMG's re-appointment to shareholders at the 2023 AGM and
shareholders approved the re-appointment with 98.9% of
votes in favour. The Board will once again recommend KPMG's
re-appointment to shareholders at the 2024 AGM.
Howden Joinery Group Plc
Annual Report & Accounts 2023
137
External auditor independence
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 2023,
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.
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.
• Provide continuity and succession planning of key
• Deliberation of the likelihood of a withdrawal of the auditor
staff members of KPMG.
from the market and note taken of the fact that there
are no contractual obligations to restrict the choice of
external auditor.
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
2023 audit.
• The external auditor’s fulfilment of the agreed audit plan
and any variations from the plan.
• 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.
• Evaluation from key management personnel and members
• Ultimately, provide a high-quality service to the
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.
The Lead Audit Partner also met with all members of the
Board to discuss their expectations and areas of focus for
the audit process.
The Committee concluded that the external auditor remained
effective and audit quality remained high.
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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Governance
Audit Committee report continued
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 page 136 and
in note 4 to the consolidated financial statements (page 170).
Controls and internal audit
Internal control framework
The Group has an established framework of internal controls,
which includes the following key elements:
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.
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, apart from interim review services,
were provided by KPMG during the year.
• 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 can 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 key financial & non-financial risk areas
aligned with principal risks. These include IT and cyber
controls, supplier management, ESG, health & safety and
data protection as well as other operational areas. 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
As previously reported, 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 work is improving our capability over our operational, IT
and financial controls, which mitigate our key and principal
risks and evidence their effective implementation.
Good progress continued throughout 2023 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 across the business.
Howden Joinery Group Plc
Annual Report & Accounts 2023
139
Internal audit
The Internal Audit team has continued to develop its
capabilities during the year. Building on the development of
data analytics and systemisation of controls, members of he
team also undertook ISO-accredited lead auditor training and
achieved Chartered IIA status, or equivalent.
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 and challenged:
•
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 Internal Audit team continues to comply with the IPPF.
These standards set out the expectations of the Global
Institute of Internal Auditors (IIA) for best practice. In Q4
2023 the IIA announced revised Global IIA Standards which
become mandatory in 2025. The Internal Audit team has
revised working practices and is now aligned with these new
standards in advance of mandatory implementation.
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.
In 2021, the Audit Committee commissioned an external
quality assessment (EQA) readiness assessment, provided by
the IIA. An EQA evaluates conformance with the International
Professional Practices Framework (IPPF) outlined above.
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.
The next effectiveness review will be considered in 2025,
and will be conducted against the revised IIA standards
outlined above.
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. The
enhancement project, first reported in last year's Audit
Committee report, is now complete. There will be further
testing and assessments undertaken during 2024 to ensure
that the Group is in line with best practice.
Cyber and information security risk
The risk of a cyber security incident is considered to be one
of the Group’s principal risks. A case study on cyber and
information security can be found on page 136.
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 Supply Operations
Finance Director and the Head of Compliance for the Trade
division gave presentations on the key risks and control
environments in their area. In September, the HR Director also
presented to the Committee.
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 78 and 79).
Conflicts of interest and related parties
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
28 February 2024
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Governance
Sustainability Committee report
Governance
140 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
141
Governance
Governance
Sustainability
Committee report
2023 meeting attendance
Peter Ventress (3/3)
Karen Caddick (3/3)
Andrew Cripps (3/3)
Geoff Drabble (2/2)
Louis Eperjesi (1/1)
Louise Fowler (3/3)
Debbie White (3/3)
Peter Ventress
Sustainability Committee Chair
Key activities in the year ahead
•
•
•
•
Receive updates on execution of the Group’s
sustainability strategy, including the roadmap for
SBTi net zero targets.
Receive updates on the Group’s equality, diversity
and inclusion priorities, workforce skills and
development.
Review the Sustainability Committee’s Report and
Terms of Reference.
Approval of the 2024 Sustainability Committee
calendar.
Introduction from the Sustainability
Committee Chair
Having a sustainable business is a strategic priority for the
Howdens Board and the reference to our work in this area can
be found in almost all other parts of this Annual Report, from
the CEO statement to the Governance reports. It is central to
everything we do and the Sustainability Committee, now in
its fourth year, helps to ensure that it is given as much of the
Board’s time and attention as our other business priorities.
The Committee received confirmation that Howdens’
greenhouse gas emission targets had been validated by SBTi
(the Science Based Targets initiative) with SBTi classifying
Howdens’ scope 1 and 2 target ambition as in line with a 1.5°C
trajectory. Validated targets include to reduce absolute scope
1 and 2 GHG emissions 42% by 2030 and our scope 3 supply
chain emissions by 25% by 2030 from a 2021 base year, and to
increase sourcing of renewable electricity from 30% in 2021 to
100% by 2027. The Committee will regularly monitor progress
against these targets in the coming years.
Sustainability in our workforce was also a key focus for
the Committee during the year and we have detailed some
of our key activities later in the report. I was pleased that
the Remuneration Committee introduced environmental
remuneration measures for the Executive long-term incentive
plan for the first time in 2023 and we will continue to work with
them to build on these further in the future.
Many of the items considered and approved at the
Sustainability Committee are considered in detail in the
sustainability matters report (which begins on page 42),
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.
2023 Sustainability Committee
activity
February
Committee meeting
• Sustainability strategy update
• EDI and workforce skills
• 2022 Sustainability Report
April
Committee meeting
• Sustainability strategy update
• Progress against SBT Net Zero Plans
September
Committee meeting
• Sustainability strategy update
• EDI update
• 2024 Sustainability Committee calendar
• Committee Terms of Reference
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 60 to 66. The Committee has encouraged a simple and
pragmatic approach to business resilience. Building on the
disclosures in 2022, the Committee considered three model
scenarios, a materiality impact assessment and associated
action plan. These are integrated with the Science Based
Targets Net Zero Plans, which include comprehensive supply
chain mapping, a compelling customer sustainability offer
and regular review of Howdens sustainability strategy.
The key duties the Committee carries out in relation to any
environment and climate action and Howdens’ contribution
to society are set out in the Committee’s Terms of Reference,
which are reviewed annually and can be accessed on our
corporate website (https://www.howdenjoinerygroupplc.
com/governance/corporate-governance-report/terms-of-
reference-of-the-sustainability-committee). 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 2023
Environmental sustainability
The Committee received updates at all its meetings from
the Director of Sustainability and remain committed to
management’s goal of becoming the UK’s leading responsible
kitchen and joinery business.
A significant amount of the Committee’s time was spent
considering the initiatives and engagement necessary to
help reduce the Group’s indirect, scope 3 carbon emissions
(mainly the emissions of our suppliers). This significant
undertaking involves aligning our global supply base with our
emissions objectives across all product categories. In 2023, a
new supplier code of conduct was introduced which included
obligations for emissions reductions and sustainability
targets. The Committee also received updates on supplier
visits and the ESG supplier conference held in July. This
workshop-style conference was held jointly with one of our
key kitchen frontal suppliers, Friul, with the objective to send
a strong message to our tier 2 supplier and focus them on our
objectives.
Achieving significant reductions in our scope 3 emissions,
in addition to reducing direct carbon emissions from our
business, is key to supporting our validated SBTi carbon
reduction targets.
The Committee also received regular updates on waste and
more widely on the product and packaging programme. There
were regular demonstrations of packaging innovation and new
technologies and the Head of Design updated the Committee
on innovations from the teams at Howdens, demonstrating
that sustainability by design had become embedded in our
product development processes.
More information on our environmental sustainability can be
found in the sustainability matters report (which begins on
page 42).
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142 Howden Joinery Group Plc
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Howden Joinery Group Plc
Annual Report & Accounts 2023
143
Governance
Sustainability Committee report continued
Directors’ report
Skills
A key area of focus for the Sustainability Committee during
the year was employee skills and development. Updates on
developing core skill frameworks and training for critical roles
were provided in addition to updates on apprenticeships and
core skills training.
A new Kitchen Sales Designer 'Better Buy Design' training
programme has been piloted and launched with 21 designers
in the initial trial. We have also trained 284 managers in our
leadership programme 'Leading the Way'. Both programmes
will be rolled out across our Depots in 2024.
Sustainability in 2024
The Committee will continue to focus on the core
environmental and social matters that matter the most to our
stakeholders. This will include further monitoring 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 Chair
28 February 2024
Supported by external consultancy, ESG360, the Group
utilised the following methodology for TCFD implementation:
• Governance and oversight: Board and management
oversight to ensure that climate issues are embedded in
the strategic planning/ enterprise risk management.
• Assess materiality of climate-related risks: Understand
potential climate related risks and opportunities for
Howdens’ business involving all relevant internal
stakeholders.
• Develop and define scenarios: Construct appropriate
scenarios to develop relevant narratives according to
Howdens’ context and business model.
• Evaluate business impacts: For each scenario (three
scenarios), identify key strategic and financial impacts –
qualitative to quantitative.
•
Identify potential responses: Use the results to identify
realistic strategic responses to manage risks and
opportunities.
• Document and disclose: Communicate to relevant parties
– the inputs, assumptions, methods, outputs, and potential
management responses.
Equality, diversity and inclusion (EDI)
The Sustainability Committee received updates from the
senior HR team on the progress made during the year in
respect of the EDI strategy, noting that management had
reframed its inclusion strategy around three key areas:
• Being ‘worthwhile for all’ – providing clarity on its approach
to inclusion.
• Support for all – helping managers to get the best out of all
their people.
• Accessible for all – broadening our reach and being
accessible to all.
The Committee considered communication strategies and
events undertaken during the year and how better-quality
quantitative data was being collected and used to promote
better inclusion across the business.
The Directors have pleasure in submitting their report and the audited financial statements for the 53 week period ended
30 December 2023. Comparative figures relate to the 52 weeks ended 24 December 2022.
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:
Located in the sustainability report:
Located in the additional information section:
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 67.
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), can be found on pages 67 and 68.
Annual General Meeting (AGM): Information about the AGM
can be found on page 214. The recommendation to reappoint
KPMG LLP as the Group’s auditor, can be found on page 136.
Share capital, substantial shareholdings and acquisition
of the Company’s own shares (including nominal value of
shares purchased): pages 214 and 215.
Directors' Indemnity and Insurance: page 215.
Significant agreements, which take effect, alter or
terminate upon a change of control: page 215.
Disclosure required under Listing Rule 9.8.4R:
• Dividend waivers: page 214.
Located in the governance section:
• Published profit forecasts made during the reporting period
Directors of Howden Joinery Group Plc: The names of anyone
who served as a Director during the period can be found on
page 74 under 'Board meeting attendance'.
2018 UK Corporate Governance Code (the ‘Code’): How
the Company applied the Principles and complied with the
Provisions of the Code can be found on pages 92 to 97. A copy
of the Code can be accessed via www.frc.org.uk.
Internal control and risk management arrangements: Internal
control arrangements information can be found in the Audit
Committee report on page 138. Risk management arrangements
information can be found on pages 36 to 37 and in the Principal
risks and uncertainties section beginning on page 38.
to 30 December 2023: page 215.
Located in the financial statements:
Employees: The average number of employees and their
remuneration are shown in note 21. Details of the SIP can be
found in note 23.
Financial risk management (relating to SI 2008/410
Schedule 7 Part 1.6): note 20.
Disclosure required under Listing Rule 9.8.4R:
• Details of long-term incentive schemes: note 23.
• Details of any tax relief, including amount and treatment:
Board and Group Diversity policies: page 102.
note 7.
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), can be found on pages 84 to 91.
Employees: The total number of employees and gender
diversity statistics are located on page 102. The methods of
engaging with the workforce can be found on pages 86 and
87. All eligible UK employees have been invited to participate
in a Free Shares award under the Company’s Share Incentive
Plan (SIP) each year since 2015, and since 2021 were invited to
participate in a SIP Partnership and Matching Shares plan.
The remaining disclosures required by LR 9.8.4R (with the
exception of those described above under subheading
'Located in the additional information section') are not
applicable to the Company.
Dividend: note 17.
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 2023 financial period.
Directors’ statement of disclosure of information to the
auditor: page 144.
By order of the Board
Located in the strategic report:
Principal Group activities, business review and results:
pages 2 to 35.
Dividend: pages 18 and 32.
Forbes McNaughton
Company Secretary
28 February 2024
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Page TitlePage Title
Governance
Directors’ statements
Governance
Non-financial and sustainability information
144 Howden Joinery Group Plc
Annual Report & Accounts 2023
Governance
Directors’ statements
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.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual
Report and Accounts 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 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, in respect of the parent Company
financial statements only, prudent;
•
•
for the Group financial statements, state whether they
have been prepared in accordance 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.
In accordance with Disclosure Guidance and Transparency
Rule ('DTR') 4.1.16R, the financial statements will form
part of the annual financial report prepared under DTR
4.1.17R and 4.1.18R. The auditor’s report on these financial
statements provides no assurance over whether the annual
financial report has been prepared in accordance with those
requirements.
Directors’ responsibility statement
We confirm to the best of our knowledge:
•
•
•
the financial statements, prepared in accordance with the
applicable set of accounting standards, 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 position and 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
28 February 2024
Howden Joinery Group Plc
Annual Report & Accounts 2023
145
Non-financial and sustainability information
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. The Howdens culture is to be ‘worthwhile for all
concerned’ and so we aim to treat all our stakeholders fairly and with integrity.
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.
To consolidate our reporting requirements under sections 414CA and 414CB of the Companies Act 2006 in respect of non-
financial reporting and sustainability information, 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).
• Greenhouse gas emissions and streamlined energy and carbon reporting
(pages 67 and 68).
• Discussion about the Company's SBT Net Zero commitment and targets (pages 46
and 47).
• Climate-related financial disclosure as defined in section 414CA(2a) Companies Act
2006 (Governance – (a) on pages 60 and 61; Strategy – (d), (e) and (f) on pages 61
and 62 and 64 to 66; Risk management – (b) and (c) on page 62; Metrics and Targets
– (g) and (h) on page 63).
• Discussion of the Company’s progress on implementing the recommendations of the
Task Force on Climate-Related Financial Disclosures (pages 60 to 66).
• Discussion of the UN Sustainable Development Goals (UN SDGs) (page 45).
• Discussion of our progress on 'zero waste to landfill' (page 57), Route to Net Zero
standard (page 56), and our use of renewable energy sources (page 57).
• KPIs on production waste reuse, recovery, and recycling (page 57) and our target of
100% of wood-based material used in manufacturing processes being made from
FSC® or PEFC certified sources (page 50).
• Discussions of our efforts to decarbonise our distribution fleet (page 51) and our
sustainable product offer and product innovation (pages 52 to 53).
• Our impact on our stakeholders (pages 58 and 58) and engagement
with stakeholders (starting on page 84).
• Our progress on equality, diversity and inclusion and wellbeing matters (pages 54
and 55) and our work with local and national charities (page 17).
• Our Boardroom and Group Diversity Policies (page 102).
Social matters
Sustainability and
Corporate Social
Responsibility Statement of
Intent (see Group website).
Respect for
human rights
Human Rights Policy and
Modern Slavery Statement
(see Group website).
• Discussion of the UN SDG Goal 8 (Decent Work and Economic Growth) (pages 54 and 55).
• Our Modern Slavery Statement (see Group website) sets out how we actively monitor
suppliers and train our procurement staff.
Anti-bribery
and corruption
Employees
Anti-bribery and
corruption, conflicts of
interest, corporate gifts
and hospitality, anti-money
laundering, anti-tax evasion
and competition law.
Health & Safety Statement
of Intent (see Group
website), market abuse
compliance, data
protection and privacy, and
whistleblowing.
•
Internationally recognised labour standards form part of our contracts of employment.
• 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 page 87.
• KPI on Health and Safety and discussion of Health and Safety performance and
initiatives (page 56).
• Discussion of employee rewards and benefits, development opportunities and
apprentice schemes (pages 51 and 55).
• Diversity policies and statistics (pages 101 and 102).
• Workforce engagement (pages 86 and 87).
• Directors’ remuneration policy (see Group website for the full policy or pages 113 to
116 for a summary of the policy).
We outline our resilient 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.
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146
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Our financial
performance
148 Independent auditor’s report
162 Consolidated income statement
165 Consolidated cash flow statement
166 Notes to the consolidated financial statements
162 Consolidated statement of comprehensive income
205 Company balance sheet
163 Consolidated balance sheet
206 Company statement of changes in equity
164 Consolidated statement of changes in equity
207 Notes to the Company financial statements
Revenue
£2,311m (2022: £2,319m)
Profit before tax
£328m (2022: £406m)
Net cash
£283m (2022: £308m)
2019
2020
2021
2022
2023
£1,584m
£1,548m
2019
£261m
2020
£185m
£2,094m
£2,319m
£2,311m
2021
2022
2023
£390m
£406m
£328m
2019
2020
2021
2022
2023
£267m
£308m
£283m
£431m
£515m
Operating profit
£340m (2022: £415m)
EPS
46.5p (2022: 65.8p)
Dividends paid
£114m paid in 2023
2019
£260m
2019
35p
2019
£70.6m
2020
£196m
2020
25p
2020 £0.0m
2021
2022
2023
£402m
£415m
£340m
2021
2022
2023
53.2p
2021 (inc. £54.1m special dividend)
£133.6m
65.8p
2022
2023
46.5p
£115.0m
£114.1m
Howden Joinery Group Plc
Annual Report & Accounts 2023
147
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Financial StatementsFinancial StatementsPage TitlePage Title
Independent auditor’s report
148
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
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 30 December 2023, and of the Group’s profit for the 53 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 53 week period ended 30 December 2023 (FY23) 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 6 to the Parent Company financial statements,
• Consolidates statement of changes in equity
• Consolidated cash flow statement
• Notes 1 to 25 to the Group financial statements,
which include the accounting policies
which include the accounting policies
Basis for opinion
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.
Howden Joinery Group Plc
Annual Report & Accounts 2023
149
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.
Our risk assessment also considers the Group’s operations,
the macro-economic and other relevant external factors
which impact the judgements and estimates made by the
Group. Having considered these external factors, we have
identified the same key audit matters and level of risk in
relation to these, as in the prior year.
We have determined that accounting for inventory is of
significance to our audit given the scale of the Group’s
product range which means there is significant judgement
in determining the adequacy and completeness of the
inventory obsolescence provision. Inventory provisioning
includes estimation based on both historic usage and
forward-looking demand assumptions, and as a result, the
deterioration in the macro-economic environment during
FY23 is not considered to have a significant impact on
the already high estimation uncertainty associated with
this key audit matter. Inventory quantity and cost is also
included within this audit matter due to the effect it has on
our audit effort.
Audit committee interaction
We have identified the defined benefit plan obligation as
a key audit matter given the significant level of estimation
required to determine the valuation of the gross defined
benefit liability. The sensitivity of this estimation is
heightened when there is volatility in macro-economic
conditions, as currently experienced in the UK in FY22 and
FY23. The risk has therefore not moved significantly from
the prior year.
The recoverability of the Parent Company’s investment in
subsidiaries and debt due from group entities is not at a
high risk of significant misstatement, however is identified
due to their materiality in the context of the Parent
Company financial statements.
Key Audit Matters
Vs FY22
Item
Accounting for inventory (Group)
Defined benefit pension obligation
(Group)
Recoverability of Parent Company’s
investment in subsidiaries and debt due
from group entities (Parent Company)
4.1
4.2
4.3
During the year, the AC met 6 times. KPMG are invited to attend all Audit Committee meetings and are provided with an
opportunity 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 judgements.
The matters included in the Audit Committee report on page 132 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
FY23 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. The period
of total uninterrupted engagement is for the two financial
periods ended 30 December 2023.
The Group engagement partner is required to rotate every
5 years. As these are the second set of the Group’s financial
statements signed by Robert Brent, he will be required to
rotate off after the FY26 audit.
Audit related fees (including interim review)
Other services
Non-audit fee as a % of total audit and audit
related fee %
Date first appointed
£1.3m
£0.1m
£nil
n/a
Uninterrupted audit tenure
12 May 2022
Next financial period which requires a tender
Tenure of Group engagement partner
Tenure of Group engagement partner
2 years
2032
2 years
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Financial StatementsFinancial StatementsPage Title
150
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Independent auditor’s report continued
To the members of Howden Joinery Group Plc
Materiality (item 6 below)
The scope of our work is influenced by our view of
materiality and our assessed risk of material misstatement.
Materiality levels used in our audit
We have determined overall materiality for the Group
financial statements as a whole at £17.5m (FY22: £19.0m)
and for the Parent Company financial statements as a
whole at £9.8m (FY22: £12.0m).
Consistent with FY22, we determined that profit before
tax remains the benchmark for the Group. As such, we
based our Group materiality on profit before tax, of which it
represents 5.4% (FY22: 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% (FY22: 1%).
Group
GPM
HCM
PLC
LCM
AMPT
2.5
2.4
0.9
1
13.1
12.3
9.8
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
17.5
19
16.6
18
FY23 £m
FY22 £m
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.
We consider the scope of our audit, as communicated to the Audit
Committee, to be an appropriate basis for our audit opinion.
Coverage of Group financial statements
Profit
before tax
Total assets
93%
7%
94%
6%
Revenue
97%
3%
Full scope audits
Residual components
Howden Joinery Group Plc
Annual Report & Accounts 2023
151
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
an 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 46.
Climate change impacts the Group in a variety of ways,
and pages 64 to 66 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 42 to 68, 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”).
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 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 assumptions 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 accounting
without any material uncertainty for the Group and Parent
Company to be acceptable. 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.
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 70 is materially consistent with the financial
statements and our audit knowledge.
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Financial StatementsFinancial StatementsPage TitlePage Title
152
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Independent auditor’s report continued
To the members of Howden Joinery Group Plc
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.
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 Long-term prospects and 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 Long-term prospects and 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 Long-term prospects and viability statement set out on
page 70 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 judgement, 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
FY23
FY22
Our assessment
of risk vs FY22
Inventories gross value
£432.4m
£426.8m
Inventory provision
£49.6m
£53.5m
Our assessment is that
the risk is similar to FY22.
Our results
FY23: Acceptable
FY22: Acceptable
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Description of the Key Audit Matter
Our response to the risk
The Group holds a significant amount of inventory across
its large depot network and a number of warehouses. The
accounting for inventory is the key audit matter which has
the greatest effect on our overall audit strategy. As at 30
December 2023, net inventory, after recognising relevant
provisions is £382.8 million (FY22: £373.3 million).
Subjective estimate
The scale of the Group’s product range means there is
significant judgement in determining the adequacy and
completeness of the inventory obsolescence provision,
in particular the provision applied to discontinued and
slow-moving product lines. Given the judgement required
in determining this provisioning, we have identified this as
an area at higher risk of fraud or error.
The deterioration in the macro-economic environment
during FY23 is not considered to have a significant impact
on the already high estimation uncertainty associated
with this key audit matter.
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.
Accounting for inventory (quantities and cost)
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
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.
Our procedures to address the risk included:
• Count attendance: for the Group’s depots we tested the operating
effectiveness of the inventory cycle counts control. We counted a sample
of inventory lines and assessed the accuracy of the Group’s inventory
quantities through comparing the results to the Group’s inventory records.
• Tests of detail: we counted a sample of inventory lines across the Group’s
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.
• Tests of detail: we assessed the accuracy of the cost of inventory through
testing a sample of inventory lines to relevant source data.
• Our sector experience: we assessed the Director’s methodology and key
assumptions supporting the inventory provision, including the expected level
of inventory that may not be in demand and respective sales prices, against
our knowledge of the business and industry.
• Historical comparisons: we assessed the Directors’ 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
the Directors to discontinued items.
• 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 over inventory provisioning 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:
• Our approach to the audit of inventory 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 (FY22: Acceptable).
Further information in the Annual Report and Accounts: See the Audit Committee report on page 138 for details on how the
Committee considered inventory obsolescence provisioning as an area of significant attention, page 209 for the accounting
policy on inventory obsolescence provisioning, and note 3 for the financial disclosures.
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Financial Statements
Independent auditor’s report continued
To the members of Howden Joinery Group Plc
4.2 Defined benefit pension scheme (Group)
Financial Statement Elements
FY23
FY22
Gross defined benefit liability
£913.6m
£930.5m
Our assessment
of risk vs FY22
Our assessment is that the risk
related to the gross defined
benefit liability is similar to FY22.
Our results
FY23: Acceptable
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.
The sensitivity of this estimation is heightened when there is
volatility in macro-economic conditions, as currently experienced
in the UK in FY22 and FY23. The risk has therefore not moved
significantly from the prior year.
The effect of these matters is that, as part of our risk assessment,
we determined that valuation of the gross defined benefit obligation
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, and possibly many times that amount. The
financial statements (note 22) disclose the sensitivities estimated by
the Group.
Previously we included within this key audit matter a risk over the
valuation of certain pension assets. The assessed risk for these
assets is lower this year and no longer considered a key audit matter.
Refer to further below in section 4 for our assessment of the risk.
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 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:
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4.3 Recoverability of parent company’s investment in subsidiaries
and debt due from group entities (parent company)
Financial Statement Elements
FY23
FY22
Our assessment
of risk vs FY22
Investments in subsidiaries
£699.0m
£699.0m
Amounts owed by subsidiary
companies
£69.4m
£103.3m
Our assessment is that
the risk is similar to FY22.
Description of the Key Audit Matter
Our response to the risk
Our results
FY23: Acceptable
FY22: Acceptable
Low risk, high value
The carrying amount of the Parent Company’s investment
in subsidiaries and intra-group debtor balance represents
78% (2022: 66%) of the Parent 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:
• Tests of detail: Assessing 100% of the investment in subsidiaries
and amounts owed by subsidiary companies against the net
assets of the relevant subsidiary included with the Group
consolidation to identify whether the entity net asset value, being
an approximation of its minimum recoverable amount, was in
excess of the carrying amount. Our procedures also included
assessing whether those individual subsidiary entities have
historically been profit-making.
• Comparing valuations: For the investment where the carrying
amount exceeded the net asset value, we compared the carrying
amount of the Company’s investment with the expected value
of the business based on forecasted dividends to ultimately be
received from the trading entity within the Group.
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; and
• We discussed our audit response to the Key Audit Matter which included the use of specialists to challenge the key aspects of the
• Our conclusions on the recoverability of the Parent Company’s investment in subsidiaries and intra-group debtor balances.
actuarial valuation;
• Our conclusions on the appropriateness of the key actuarial assumptions applied to the valuation of the gross defined benefit liability; and
• The adequacy of the disclosures, particularly as it relates to the sensitivities disclosed by the Group.
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).
Our results
We found the valuation of the gross defined benefit pension liability to be acceptable (FY22: Acceptable).
Further information in the Annual Report and Accounts: See the Audit Committee report on page 134 for details on how the
Committee considered validity of pension assumptions as an area of significant attention, page 192 for the accounting policy
on defined benefit pensions, and note 22 for the financial disclosures.
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
parent company from other Group entities.
Our results
We found the carrying value of investments in subsidiaries and the intra-group debtor balance to be acceptable (FY22: Acceptable).
Further information in the Annual Report and Accounts: See the Audit Committee report on page 138 for details on how the
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.
We continue to perform procedures over the valuation of pension assets for which there is no observable market price (level
3 “pension assets”). However, following a retrospective review of the 2022 lagged valuations which confirmed that the assets
were not highly sensitive to changes in market conditions, due to the long term maturity dates of the underlying investments, we
have not assessed this as one of the most significant risks in our current year audit or a matter that had the greatest effect on;
the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. Accordingly,
our procedures in this area are not separately identified in our report this year.
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Financial Statements
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.
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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.
• Reading Board and Audit Committee meeting minutes.
Risk communications
• 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 and the opportunities for bias in the subjective estimate.
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.
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 fraud
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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Financial Statements
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.
£17.5m (FY22: £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 £17.5m
(FY22: £19.0m). This was determined with reference to a benchmark of
Group profit before tax.
Consistent with FY22, we determined that Group profit before tax remains
the 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 £17.5m was determined by applying a percentage
to the Group profit before tax. When using a benchmark of Group profit
before tax to determine overall materiality, KPMG’s approach for public
interest entities considers a guideline range of 3% – 5% of the measure. In
setting overall Group materiality, we applied a percentage of 5% (FY22:
4.7%) to the forecast benchmark. This represents 5.3% (2022: 4.7%)
of the final profit before tax. We considered the materiality amount for
the financial statements as a whole and concluded that it remained
appropriate.
Materiality for the Parent Company financial statements as a whole was
set at £9.8m (FY22: £12.0m), determined with reference to a benchmark of
Parent Company total assets, of which it represents 1.0% (FY22: 1.0%).
£13.1m (FY22: £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 75%
(FY22: 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 £7.4m
(FY22: £7.8m), which equates to 75% (FY22: 65%) of materiality
for the Parent Company financial statements as a whole.
We applied this percentage in our determination of performance
materiality because we did not identify any factors indicating an elevated
level of risk in 2023 following our reassessment of aggregation risk.
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£0.9m (FY22: £1.0m)
Audit misstatement posting threshold
What we mean
Basis for determining materiality and judgements applied
We set our audit misstatement posting threshold at 5% (FY22: 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 £17.5m (FY22: £19.0m) compares as follows to the main financial
statement caption amounts:
Financial statement Caption
£2,310.9m
£2,319.0m
£327.6m
£405.8m £2,064.5m
£2,032.7m
Group Materiality as % of caption
0.8%
0.8%
5.3%
4.7%
0.8%
0.9%
Total Group Revenue
Group profit before tax
Total Group Assets
FY23
FY22
FY23
FY22
FY23
FY22
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 (FY22: 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 or total assets.
We selected these because these are the most representative of the relative size of the components. We identified 5 (FY22: 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
Residual components
Total
Number of
components
Range of
materiality
applied
Group
revenue
Total profits and
losses that made
up Group PBT
Group
total assets
5 (5)
£2.5m – £16.6m
(£2.4m – £18.0m)
9 (9)
14 (14)
97% (97%)
93% (96%)
94% (95%)
3% (3%)
100%
7% (4%)
100%
6% (5%)
100%
The remaining 3% of total Group revenue, 7% of total profits and losses that made up Group profit before tax and 6% of total
Group assets is represented by 9 reporting components, none of which individually represented more than 4% 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.
The scope of the audit work performed was predominately substantive as we placed limited reliance upon the Group’s internal
control over financial reporting.
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Financial Statements
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 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.
Howden Joinery Group Plc
Annual Report & Accounts 2023
161
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.
9. Respective Responsibilities
Our reporting
We have nothing to report in these
respects.
Directors’ responsibilities
As explained more fully in their statement set out on page 144, 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 under Disclosure Guidance
and Transparency Rule (“DTR”) 4.1.7.17R and 4.1.18R . This auditor’s report provides no assurance over whether the annual
financial report has been prepared in accordance with those requirements.
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
28 February 2024
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Financial StatementsFinancial StatementsPage TitlePage Title
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
162
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Consolidated income statement
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
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
Notes
2
4
5
6
7
8
8
2,310.9
(907.0)
1,403.9
(1,063.7)
340.2
5.5
(18.1)
327.6
(73.0)
254.6
46.5p
46.3p
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
Consolidated statement of comprehensive income
Profit for the period
Items of other comprehensive income:
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
Notes
254.6
374.2
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains/(losses) 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:
22
7
7
Currency translation differences
Other comprehensive income for the period
Total comprehensive income for the period attributable to equity holders of the parent
13.3
(2.9)
(0.4)
(0.5)
9.5
264.1
(183.0)
34.8
11.0
2.1
(135.1)
239.1
Consolidated balance sheet
Howden Joinery Group Plc
Annual Report & Accounts 2023
163
Notes
30 December 2023
£m
24 December 2022
£m
Non-current assets
Intangible assets
Property, plant and equipment
Lease right-of-use assets
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
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
9
10
11
7
12
7
13
18
11
14
15
22
11
7
15
16
16
16
16
16
16
43.5
456.9
647.9
15.6
0.8
1,164.7
382.8
39.7
194.5
282.8
899.8
35.9
398.7
614.3
35.9
1.0
1,085.8
373.3
32.3
233.3
308.0
946.9
2,064.5
2,032.7
(85.3)
(373.2)
(9.5)
(468.0)
(12.6)
(599.2)
(3.3)
(3.0)
(618.1)
(1,086.1)
978.4
55.4
9.8
87.5
16.6
(24.0)
833.1
978.4
(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
The financial statements were approved by the Board and authorised for issue on 28 February 2024 and were signed on its
behalf by
Paul Hayes
Chief Financial Officer
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Financial StatementsFinancial Statements
Consolidated statement of changes in equity
Consolidated cash flow statement
164
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Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
165
Financial Statements
Consolidated statement of changes in equity
Consolidated cash flow statement
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
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 30 December 2023
Capital
redemption
reserve
£m
Share
premium
account
£m
ESOP and
share-based
payments
£m
Treasury
shares
£m
Retained
earnings
£m
5.4
87.5
5.9
(27.1)
860.0
Share
capital
£m
59.8
–
–
–
–
–
–
(3.7)
–
–
–
–
–
–
–
–
3.7
–
–
–
–
–
–
–
–
–
–
–
56.1
9.1
87.5
–
–
–
–
–
–
(0.7)
–
–
–
–
–
–
–
–
0.7
–
–
–
–
–
–
–
–
–
–
–
Total
£m
991.5
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
–
–
–
–
–
–
–
1.5
–
254.6
254.6
9.5
9.5
264.1
264.1
0.3
–
–
0.3
–
6.4
(50.0)
(50.0)
–
–
(114.1)
(114.1)
–
–
–
–
–
7.4
–
(1.6)
–
11.7
–
–
–
–
–
6.4
–
(1.5)
–
55.4
9.8
87.5
16.6
(24.0)
833.1
978.4
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 4,918,375 ordinary shares held in treasury, each with a nominal value of 10p (2022:
5,237,907 shares of 10p each).
We present a description of the nature and purpose of each reserve at note 16.
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m1
Notes
327.6
405.8
Profit before tax
Adjustments for:
Finance income
Finance costs
Depreciation and amortisation of owned assets
Depreciation, impairment and loss on termination of leased assets
9, 10
11
Share-based payments charge
Decrease/(increase) in prepaid credit facility fees
Difference between pension operating charge and cash paid
Loss/(profit) on disposal of property, plant and equipment and intangible assets
Operating cash flows before movements in working capital
Movements in working capital
Increase in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/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
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
Dividends paid to Group shareholders
Interest paid – including on lease liabilities
Repayment of capital on lease liabilities
Net cash used in financing activities
Net decrease 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
(5.5)
18.1
50.8
90.1
6.0
0.3
(16.9)
0.3
470.8
(9.5)
38.8
(64.3)
(35.0)
435.8
(63.5)
372.3
(118.9)
–
–
4.7
(114.2)
(50.0)
0.5
(114.1)
(16.8)
(105.0)
(285.4)
(27.3)
308.0
2.1
282.8
(3.8)
13.2
44.0
80.8
7.3
(0.7)
2.0
(0.1)
548.5
(69.8)
(23.7)
41.8
(51.7)
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
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We present an analysis of cash and non-cash changes in liabilities due to financing activities in note 18.
1
In 2023 the Directors have determined that it is appropriate for the consolidated cash flow statement to start from profit before tax and to present ‘Difference
between pension operating charge and cash paid’ as an adjustment to profit before tax. 2022 comparatives have been re-presented as a result.
Financial StatementsFinancial Statements
Notes to the consolidated financial statements
166
Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
167
Financial Statements
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.
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
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
General Information
Company and currency details
Howden Joinery Group Plc (‘the Company’) is a company
incorporated in the United Kingdom under the Companies
Act 2006. Its registered office address is 105 Wigmore Street,
London W1U 1QY. 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 on
trading 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 53 weeks to 30
December 2023. The comparative period covered the 52
weeks to 24 December 2022.
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 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.
Statement of compliance and basis
of preparation
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 69.
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 2023, and the Group balance sheet
at 30 December 2023, noting that the Group is debt-free, has
cash and cash equivalents of £283m, 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, which was not used during the
period 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 2023
Group forecast, prepared in November 2023 and including
the actual results of the 2023 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. 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
•
A ‘reverse stress-test’ scenario.
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Financial StatementsFinancial StatementsPage Title
168
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
169
General Information
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:
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 8: Definition of Accounting Estimates
Amendments to IAS 1 – Classification of Liabilities as Current or Non-Current
Amendments to IFRS 16: Lease Liability in a Sale and Leaseback
Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements
Amendments to IAS 12: International Tax Reform—Pillar Two Model Rules
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. 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
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 a small percentage of total revenue, and 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.
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 smaller presence in France, Belgium and the Republic of Ireland.
The Group has depots in each of these locations. 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 Republic of Ireland
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
2,241.1
69.8
2,310.9
2,256.1
62.9
2,319.0
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 Republic of Ireland
Non-current assets (excluding deferred tax)
UK
France, Belgium and Republic of Ireland
Additions to property plant and equipment and intangible assets
UK
France, Belgium and Republic of Ireland
30 December 2023
£m
24 December 2022
£m
1,935.6
128.9
2,064.5
1,903.1
129.6
2,032.7
30 December 2023
£m
24 December 2022
£m
1,068.3
80.8
1,149.1
975.4
74.5
1,049.9
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
108.3
9.1
117.4
122.7
24.5
147.2
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Notes to the consolidated financial statements continuedFinancial StatementsFinancial StatementsPage TitlePage Title
170
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
171
Earnings continued
4 Operating profit
Operating profit has been arrived at after (charging)/crediting:
Net foreign exchange (loss)/gain
Cost of inventories recognised as an expense
Write down of inventories
(Loss)/profit on disposal of fixed assets
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)
Total non-audit fees
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
(8.2)
(892.8)
(6.1)
(0.3)
(1.4)
(0.7)
(893.1)
(14.0)
0.1
(1.1)
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
(0.3)
(1.0)
(1.3)
(0.1)
(0.1)
(0.2)
(0.9)
(1.1)
(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
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
5.5
–
5.5
1.1
2.7
3.8
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
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
(16.8)
(1.3)
–
(18.1)
(13.1)
–
(0.1)
(13.2)
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.
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172
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
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
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
64.7
(8.2)
56.5
14.9
0.9
0.7
16.5
73.0
77.2
(33.6)
43.6
2.1
(14.7)
0.6
(12.0)
31.6
UK Corporation tax is calculated at 23.5% (2022: 19%) of the estimated assessable profit for the period. Tax for other countries is
calculated at the rates prevailing in the respective jurisdictions.
(b) Tax relating to items of other comprehensive income or changes in equity
Deferred tax charge/(credit) to other comprehensive income
on actuarial difference on pension scheme
Change of rate effect on deferred tax
Deferred tax (credit)/charge to equity on share schemes
Current tax (credit) to equity on share schemes
Total charge/(credit) to other comprehensive income or changes in equity
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
2.9
0.4
–
(0.3)
2.9
(34.8)
(11.0)
1.3
(0.4)
(44.9)
Howden Joinery Group Plc
Annual Report & Accounts 2023
173
(c) Reconciliation of the total tax charge
The total tax charge for the period can be reconciled to the result per the income statement as follows:
Profit before tax
Tax at the UK corporation tax rate of 23.5% (2022: 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 periods
Total tax charged in the income statement
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
327.6
77.0
0.5
2.9
6.2
1.0
–
0.7
(8.0)
(7.3)
73.0
405.8
77.1
0.3
1.0
2.7
1.6
(2.4)
0.6
(9.0)
(40.3)
31.6
The Group’s effective rate of tax is 22.3% (2022: 7.8%). The difference in the effective tax rate from prior year is driven by the
effect of the Patent Box deduction claims for 2017–2021, which were realised during 2022 as “Other tax adjustments in respect
of previous periods”, along with the increase in the headline corporation tax rate as of 1 April 2023.
Deferred tax:
Analysis of deferred tax assets and liabilities, and the movements on them during the period.
Retirement
benefit
obligations
£m
Accelerated
capital
allowances
£m
Company
share
schemes
£m
Other
temporary
differences
£m
Leasing
£m
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
(Charge)/credit to income statement
(Charge) to the income statement – change of rate
(Charge) outside the income statement – change of rate
(Charge)/credit outside the income statement
At 30 December 2023
(35.2)
–
–
11.0
34.8
10.6
(4.1)
–
(0.4)
(2.9)
3.2
0.2
12.9
(0.4)
–
–
12.7
(11.6)
(0.7)
–
–
3.5
–
–
0.2
(1.5)
2.2
–
–
–
–
3.3
0.2
–
–
–
3.5
(0.6)
–
–
–
3.9
(0.6)
(0.2)
–
–
3.1
0.5
–
–
–
0.4
2.2
2.9
3.6
Total
£m
(24.3)
12.5
(0.6)
11.2
33.3
32.1
(15.8)
(0.7)
(0.4)
(2.9)
12.3
Deferred tax arising from accelerated capital allowances can be further analysed as a £3.5m asset and a £3.1m liability (2022:
£16.5m asset and £3.8m liability).
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174
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Earnings continued
The presentation in the balance sheet is as follows:
Deferred tax assets
Deferred tax liabilities
30 December 2023
£m
24 December 2022
£m
15.6
(3.3)
12.3
35.9
(3.8)
32.1
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 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.
Trading losses
Non-trading losses
Capital losses
Total losses
30 December 2023
£m
24 December 2022
£m
100
20
86
206
77
20
86
183
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 (£4m) and France (£64m). 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
53 weeks to 30 December 2023
52 weeks to 24 December 2022
Weighted
average
number of
shares
m
548.1
2.1
550.2
Earnings
£m
254.6
–
254.6
Earnings per
share
p
46.5
(0.2)
46.3
Earnings
£m
374.2
–
374.2
Weighted
average
number of
shares
m
568.6
2.1
570.7
Earnings per
share
p
65.8
(0.2)
65.6
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.
Howden Joinery Group Plc
Annual Report & Accounts 2023
175
Operating assets and liabilities
9
Intangible assets
(a) Total amounts recognised in the balance sheet
Goodwill – cost and carrying value
Software
(b) Goodwill
Accounting policy
30 December 2023
£m
24 December 2022
£m
12.4
31.1
43.5
12.4
23.5
35.9
Goodwill arising on a business combination represents the excess of the cost of acquisition over the share of the aggregate
fair value of identifiable net assets (including intangible assets) of the acquired business at the date of acquisition. Goodwill
is initially recognised as an asset and allocated to cash-generating units that are expected to benefit from the synergies
of the business combination. Goodwill is not amortised, but is reviewed at least annually for impairment. Any impairment
is recognised immediately in the income statement. Goodwill is stated in the balance sheet at cost less any provisions for
impairment, if required.
The goodwill shown above all arose on the acquisition of 100% of Sheridan Fabrications Ltd (‘SFL’) in 2022. The trading activities
of SFL have been integrated into the Howden Joinery UK operations, which is the cash-generating unit to which we have
allocated all of the related goodwill.
The recoverability of the goodwill is assessed by looking at the value in use of the Howden Joinery UK cash-generating unit.
The Howden Joinery UK operations, as shown in the geographical analysis at note 3(b) to these financial statements, represent
over 95% of the consolidated Group sales. This is reflected in their contribution to total Group profit and cashflow. Given the size
and contribution of this cash-generating unit in comparison with the £12.4m cost and carrying value of the allocated goodwill,
it has not been considered necessary to look further ahead than the next 12 month forecast to verify that projected cashflows
from the cash-generating unit are significantly in excess of the carrying value of the associated goodwill.
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176
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Annual Report & Accounts 2023
Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
177
Operating assets and liabilities continued
(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 25 December 2021
Exchange adjustments
Additions
Acquisition of subsidiary
Disposals
Reclassifications
At 24 December 2022
Additions
Disposals
Reclassifications
At 30 December 2023
Accumulated depreciation
At 25 December 2021
Exchange adjustments
Charge for the period
Disposals
At 24 December 2022
Charge for the period
Disposals
At 30 December 2023
Net book value at 30 December 2023
Net book value at 24 December 2022
Intangible assets
in use
£m
Assets under
construction
£m
46.3
0.1
1.8
0.3
(5.2)
2.5
45.8
3.0
(1.4)
4.9
52.3
(27.6)
(0.1)
(7.5)
5.1
(30.1)
(6.0)
1.4
(34.7)
17.6
15.7
3.9
–
6.5
–
(0.1)
(2.5)
7.8
10.6
–
(4.9)
13.5
–
–
–
–
–
–
–
–
13.5
7.8
TOTAL
£m
50.2
0.1
8.3
0.3
(5.3)
–
53.6
13.6
(1.4)
–
65.8
(27.6)
(0.1)
(7.5)
5.1
(30.1)
(6.0)
1.4
(34.7)
31.1
23.5
10 Property, plant and equipment
Accounting policy
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
Leasehold property improvements and fittings
Plant, machinery & vehicles
Fixtures & fittings
50 years
the period of the lease, or the individual asset’s life, if shorter
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 amounts and are recognised in the
income statement.
Cost
At 25 December 2021
Exchange adjustments
Additions
Acquisition of subsidiary
Disposals
Reclassifications
At 24 December 2022
Exchange adjustments
Additions
Disposals
Reclassifications
At 30 December 2023
Accumulated depreciation
At 25 December 2021
Exchange adjustments
Charge for the period
Disposals
At 24 December 2022
Exchange adjustments
Charge for the period
Disposals
At 30 December 2023
Freehold
property
£m
Leasehold
property
improvements
£m
Fixtures &
fittings
£m
Assets under
construction
£m
Plant,
machinery
& vehicles
£m
191.0
0.1
12.2
0.3
(5.3)
8.1
207.1
0.5
49.6
0.1
(1.3)
8.2
55.1
–
16.2
0.1
–
1.7
73.1
–
2.1
–
1.8
92.1
–
16.5
–
(0.3)
(0.2)
–
12.0
(1.7)
3.4
108.1
206.4
264.2
(0.1)
17.6
(12.2)
19.4
231.1
(0.4)
39.1
(2.3)
6.6
307.2
77.0
121.8
(9.1)
–
(1.7)
–
(29.6)
(125.5)
(118.4)
–
(5.1)
0.3
(0.1)
(12.3)
4.9
(0.1)
(17.4)
1.3
(10.8)
(34.4)
(133.0)
(134.6)
–
(1.9)
–
–
(6.2)
1.6
–
(13.9)
12.1
(12.7)
(39.0)
(134.8)
0.1
(22.8)
2.2
(155.1)
152.1
129.6
TOTAL
£m
578.4
0.6
138.9
0.5
(6.9)
–
711.5
(0.6)
103.8
(16.2)
–
798.5
(282.6)
(0.2)
(36.5)
6.5
(312.8)
0.1
(44.8)
15.9
(341.6)
456.9
398.7
33.1
–
44.4
–
–
(17.8)
59.7
(0.1)
33.0
–
(31.2)
61.4
–
–
–
–
–
–
–
–
–
61.4
59.7
Net book value at 30 December 2023
Net book value at 24 December 2022
64.3
62.3
82.8
73.7
96.3
73.4
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178
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Annual Report & Accounts 2023
Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
179
Operating assets and liabilities continued
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.
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
Lease liabilities
Current
Non-current
30 December 2023
£m
24 December 2022
£m
591.7
56.2
647.9
122.9
565.6
48.7
614.3
141.6
30 December 2023
£m
24 December 2022
£m
(85.3)
(599.2)
(684.5)
(95.3)
(570.0)
(665.3)
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180
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
181
Operating assets and liabilities continued
Amounts recognised in the income statement
Included in net operating expenses
Depreciation of right-of-use assets:
– property
– vehicles, plant & machinery
Impairment and net gain 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
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
72.7
17.8
(0.4)
90.1
4.8
2.6
16.8
65.4
16.3
(0.9)
80.8
5.4
2.9
13.1
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
121.8
79.2
Property leases are paid on the rent ‘quarter days’, which are 25 December, 25 March, 24 June and 29 September. Our 2022
financial year started on 26 December 2021, which means that there were only three rent payments in that year, whereas the
2023 financial year contained 5 quarter days and 5 rent payments.
Maturity analysis of lease liabilities
Contractual undiscounted cashflows due
– within 1 year
– 1 to 5 years
– more than 5 years
30 December 2023
£m
24 December 2022
£m
102.9
316.5
382.6
802.0
109.9
285.4
371.6
766.9
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
30 December 2023
£m
24 December 2022
£m
28.0
9.5
394.9
(49.6)
382.8
24.3
6.2
396.3
(53.5)
373.3
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
2023
2022
Gross value
of stock
£m
Allowance against
carrying value
£m
Gross value
of stock
£m
Allowance against
carrying value
£m
338.3
94.1
432.4
–
(49.6)
(49.6)
323.3
103.5
426.8
–
(53.5)
(53.5)
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Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
183
Operating assets and liabilities continued
An ageing analysis of these past due trade receivables is as follows:
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
Increase in allowance recognised in the income statement
Balance at end of period
30 December 2023
£m
24 December 2022
£m
159.5
29.2
5.8
194.5
173.5
55.2
4.6
233.3
30 December 2023
£m
24 December 2022
£m
17.6
–
0.4
18.0
15.8
0.2
1.6
17.6
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 £10.2m of debts in the period (2022: £7.9m). Included within our aggregate trade receivables balance are specific
debtor balances with customers totalling £46.1m before allowance for expected credit losses (2022: £44.7m 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.
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
30 December 2023
£m
24 December 2022
£m
21.4
6.8
3.9
14.0
46.1
22.6
6.1
3.8
12.2
44.7
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. 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.
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
30 December 2023
£m
24 December 2022
£m
174.5
70.4
29.8
98.5
373.2
189.5
91.9
37.2
115.3
433.9
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 53 days (2022: 55 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.
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Annual Report & Accounts 2023
Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
185
Operating assets and liabilities continued
Warranty provision
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 25 December 2021
Additional provision in the period
Provision released in the period
Utilisation of provision in the period
At 24 December 2022
Additional provision in the period
Provision released in the period
Utilisation of provision in the period
At 30 December 2023
Presented as current liabilities
Presented as non-current liabilities
At 30 December 2023
Property
£m
Warranty
£m
7.0
1.3
(1.6)
(1.7)
5.0
1.5
(1.6)
(1.1)
3.8
3.1
0.7
3.8
10.9
7.0
–
(6.7)
11.2
4.0
–
(7.0)
8.2
6.4
1.8
8.2
French post-
employment
benefits
£m
0.3
–
–
–
0.3
–
–
–
0.3
–
0.3
0.3
Other
£m
2.2
–
(1.4)
(0.8)
–
0.2
–
–
0.2
–
0.2
0.2
Total
£m
20.4
8.3
(3.0)
(9.2)
16.5
5.7
(1.6)
(8.1)
12.5
9.5
3.0
12.5
The basis of the allocation is outlined for each type of provision, below.
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.
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.
Other
Other miscellaneous small amounts.
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 assumed that the whole of this provision is non-current.
Capital structure and risk
16 Share capital and reserves
Ordinary shares of 10p each:
Allotted, called up and fully paid
30 December 2023
No.
52 weeks to 24
December 2022
No.
30 December 2023
£m
52 weeks to 24
December 2022
£m
Balance at the beginning of the period
560,916,049
597,573,827
Bought back and cancelled during the period
(7,324,329)
(36,657,778)
Balance at the end of the period
553,591,720
560,916,049
56.1
(0.7)
55.4
59.8
(3.7)
56.1
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 capital redemption reserve represents the nominal value of share capital bought back and cancelled. The share premium
reserve represents the premium above nominal value for any shares sold. The ESOP reserve relates to share-based payments
and is explained at the foot of the statement of changes in equity. 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.
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Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
187
Capital structure and risk continued
17 Dividends
Amounts recognised as distributions to equity holders in the period:
Final dividend for the 52 weeks to 25 December 2021 – 15.2p/share
Interim dividend for the 52 weeks to 24 December 2022 – 4.7p/share
Final dividend for the 52 weeks to 24 December 2022 – 15.9p/share
Interim dividend for the 53 weeks to 30 December 2023 – 4.8p/share
Dividends proposed at the end of the period (but not recognised in the period):
Proposed final dividend for the 53 weeks to 30 December 2023 – (16.2p/share)
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
–
–
87.8
26.3
114.1
88.9
26.1
–
–
115.0
53 weeks to
30 December 2023
£m
88.4
The Directors propose a final dividend in respect of the 53 weeks to 30 December 2023 of 16.2p per share, payable to ordinary
shareholders who are on the register of shareholders at 12 April 2024, and payable on 24 May 2024.
The proposed final dividend for the current period is subject to the approval of the shareholders at the 2024 Annual General
Meeting, and has 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.
18 Notes to the cash flow statement
Analysis of net cash
At 24 December 2022
Cash flow
At 30 December 2023
Cash at bank
and in hand
£m
308.0
(25.2)
282.8
Current asset
investments £m
–
–
–
Cash and cash
equivalents,
and net cash
£m
308.0
(25.2)
282.8
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: net additions to lease liabilities
Closing balance
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
(665.3)
105.0
16.8
(141.0)
(684.5)
(591.2)
66.1
13.1
(153.3)
(665.3)
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 30 December 2023, the full £150m of the facility was available in addition to the Group’s cash 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, from time to time, 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
30 December 2023
£m
24 December 2022
£m
159.5
282.8
173.5
308.0
174.5
189.5
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Annual Report & Accounts 2023
Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
189
Capital structure and risk continued
(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.
(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:
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
30 December 2023
£m
24 December 2022
£m
8.4
3.1
57.7
(35.4)
(4.6)
29.2
–
19.7
(0.8)
18.9
48.1
9.4
3.9
56.7
(43.4)
(7.3)
19.3
1.1
25.3
(1.1)
25.3
44.6
Our maximum exposure to credit risk is presented in the following table:
The Group does not have any significant exposure to interest rate risk.
Trade receivables (net of allowance)
Cash
Total credit risk exposure
30 December 2023
£m
24 December 2022
£m
159.5
282.8
442.3
173.5
308.0
481.5
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190
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
191
Capital structure and risk continued
(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 (2022: increase by £0.6m).
For a decrease of 50 basis points, the current year figures would decrease by £0.9m (2022: decrease by £0.6m).
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
30 December 2023
£m
24 December 2022
£m
3.2
(2.7)
2.1
(1.7)
2.1
(1.7)
2.8
(2.3)
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)
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
(561.4)
(49.8)
(44.8)
(656.0)
(536.3)
(47.8)
(40.0)
(624.1)
Wages and salaries includes a charge in respect of share-based payments of £6.0m (2022: £7.3m).
The average monthly number of persons (including executive directors) employed by the Group during the period was as follows:
UK depots, support and administration
Manufacturing and logistics
International
53 weeks to
30 December 2023
No.
52 weeks to
24 December 2022
No.
9,417
2,288
707
12,412
9,581
2,262
565
12,408
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.
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Notes to the consolidated financial statements continuedFinancial StatementsFinancial StatementsPage TitlePage Title
192
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Employees continued
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 surplus as the trustee does not have
the unilateral power to either enhance member benefits or to wind up the scheme and distribute any surplus to members and
therefore any surplus remaining once the final scheme benefits are paid to members would be returned to the Group under
scheme rules.
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.
The Group determines the net interest on the net defined benefit liability/(asset) for the period by applying the discount rate
used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability/(asset).
Remeasurements arising from defined benefit plans comprise actuarial gains and losses, the return on plan assets (excluding
interest) and the effect of the asset ceiling (if any, excluding interest). The Group recognises them immediately in other
comprehensive income and all other expenses related to defined benefit plans in employee benefit expenses in profit or loss.
(a) Overview of all retirement benefit arrangements
Defined contribution plans
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.
There is also a defined contribution plan relating to the defined benefit plan described below. This plan closed at the same time
as the defined benefit plan and the company had no further cost obligations after it closed.
The total cost charged to income in respect of defined contribution pensions in the current period of £42.5m (2022: £37.6m)
This represents the Group’s contributions due and payable in respect of the period, as was also the case in the previous 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.
Examples of interest rate risk are that a decrease in corporate bond yields increases the present value of the defined benefit
obligations, and that a decrease in gilt yields results in a worsening in the Scheme’s funding position.
Howden Joinery Group Plc
Annual Report & Accounts 2023
193
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 (i.e. that 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.
A description of how the plan’s asset allocation strategy seeks to address some of these risks is given below in the ‘Asset
allocation’ section.
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 is determined by a qualified actuary using the
projected unit method. The most recent completed actuarial valuation was carried out at 5 April 2023 by the plan actuary. The
actuary advising the Group has subsequently rolled forward the results of the 5 April 2023 valuation to 30 December 2023. 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 30 December 2023. We are using CMI 2022 mortality tables, being the
most recent tables available.
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 £1m per month until 31 May 2026, if the plan is underfunded on the Technical Provisions (‘TP’) basis. Under the
agreement, the scheme’s funding position is monitored on a monthly basis and deficit contributions are suspended if the
scheme’s funding position is 100% or greater as at the last working day of two consecutive months on a 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 Group’s estimated total cash contributions to the defined benefit plan in the 52 weeks ending 28 December 2024 are £12.2m.
This figure allows for additional deficit contributions for the whole of 2024 at the maximum rate of £1m per month. As noted in
the paragraph above, additional deficit contributions may cease and recommence during the year, depending on the scheme’s
funding position.
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 £12.6m. 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 £9.1m, this estimate being based on an approximate roll-forward of the 2023 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.
(b) Total amounts charged in respect of pensions in the period
Charged to the income statement:
Defined benefit plan – administration cost
Defined benefit plan – total service cost
Defined benefit plan – net finance charge/(credit)
Defined contribution plans – total operating charge
Total net amount charged to profit before tax
Charged to equity:
Defined benefit plan – actuarial (gains)/losses
Total charge/(credit)
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
2.3
2.3
1.3
42.5
46.1
(13.3)
32.8
2.4
2.4
(2.7)
37.6
37.3
183.0
220.3
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Notes to the consolidated financial statements continuedFinancial StatementsFinancial StatementsPage TitlePage Title
194
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
195
Employees continued
(c) Other information – defined benefit pension plan
Key assumptions used in the valuation of the plan
Discount rate
Inflation assumption – RPI
Inflation assumption – CPI
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%
– pensions with increases capped at the lower of CPI and 3%
Life expectancy (years): pensioner aged 65
– male
– female
Life expectancy (years): non-pensioner aged 45
– male
– female
Sensitivities
53 weeks to
30 December 2023
52 weeks to
24 December 2022
4.55%
3.05%
2.60%
2.60%
2.40%
2.60%
3.40%
2.15%
2.20%
85.7
88.0
86.7
89.6
4.70%
3.15%
2.70%
2.70%
2.45%
2.65%
3.45%
2.15%
2.25%
86.6
88.4
87.6
90.2
Present value of
scheme liabilities at
30 December 2023
£m
Projected 2024 pension cost
Total service cost
£m
Net interest
(credit)/cost
£m
Net pension
(credit)/expense
£m
Assumption
Current valuation, using the assumptions above
0.5% decrease in discount rate
0.5% increase in inflation
1 year increase in longevity
914
979
945
946
2.1
2.1
2.1
2.1
0.3
2.9
1.7
1.7
2.4
5.0
3.8
3.8
The sensitivities above are applied to the defined benefit obligation at the end of the reporting period, and the projected total
service cost for 2024. 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 by 0.25% or up by 1% in a linear manner would give materially correct results.
Analysis of plan assets
LDI*
– fixed income
– derivatives
– cash
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
30 December 2023
24 December 2022
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
282.9
20.5
12.7
–
–
–
–
–
0.1
–
60.0
0.5
8.3
385.1
–
–
–
49.8
–
–
–
70.8
–
233.4
161.9
–
–
515.9
270.0
(268.7)
172.8
–
–
–
1.0
–
1.8
7.7
1.2
0.5
25.3
211.6
–
–
–
–
0.6
152.4
–
105.2
–
239.9
179.3
–
–
677.4
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.
*
LDI – Liability Driven Investments – is a portfolio of investments chosen with the aim that its value is expected to move in line with movements in the value of the
underlying liabilities. The LDI portfolio can include a variety of investments, the simplest being conventional and index-linked gilts with appropriate maturities.
LDI portfolios often use a degree of leverage to achieve the same aim but to allow more return-seeking assets to be invested in at the same time. Derivatives and
repurchase agreements are the main tools used to employ leverage.
Valuation of plan assets
All of the quoted assets have a daily price, and therefore are valued using market prices within one day of our Saturday year
end date.
Unquoted investments are stated at values provided by the fund manager in accordance with relevant guidance. Some of the
unquoted funds 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, 13% of the unquoted assets are valued based on a valuation from the fund
manager within one day of our year end date, and a further 22% are valued at 30 November 2023, adjusted for cash movements
and rolled forwards using a suitably-correlated index if one is available. The fund managers’ 31 December 2023 valuations for
the remaining 65% of unquoted assets, which have a carrying value of £303.1m at the current period end, are not available until
after these consolidated financial statements are prepared and so the only available valuations for these funds at the current
year end is the 30 September 2023 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.
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Notes to the consolidated financial statements continuedFinancial StatementsFinancial StatementsPage TitlePage Title
196
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Employees continued
Asset allocation
The plan’s asset allocation strategy, as set out in the plan’s August 2023 Statement of Investment Principles, is set out below:
The Plan’s asset allocation strategy was determined with regard to the characteristics of the Plan, in particular the funding level,
the liability profile, the security offered by Howden Joinery Group plc to the Plan and the ability of Howden Joinery Group plc to
meet the required contributions. The objective is to reduce risk as the funding level improves, using an approach based upon the
expected returns (and risk) relative to the Plan’s liabilities. This involves considering the Plan’s assets as either ‘return seeking’ or
‘risk-reducing’.
‘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
government or corporate bonds and other financial instruments such as interest rate and inflation swaps, credit default swaps
and cash.
The Plan will initially have asset allocations as set out below but over time will move towards the target weight (particularly as the
Secure Income assets return capital over the coming years).The plan’s accounts explains these classes of assets as follows:
Asset class
RETURN-SEEKING ASSETS
– Global equities
– Absolute return
– Multi-asset credit
– Secure income assets
RISK-REDUCING ASSETS
Initial weighting
%
Target weighting
%
65
5
7
3
50
35
60
5
7
8
40
40
Range
%
50–70
0–10
2–12
0–13
30–50
30–50
The Risk-Reducing Assets will be initially structured to target interest rate and inflation hedge ratios of 65% (as a proportion of
funded liabilities), measured on the Plan’s long term liability basis. This section of the portfolio also provides exposure to credit
markets via credit default swaps.
The level of liability hedging will increase over time as the Secure Income assets return capital and the overall liquidity of the
portfolio is able to support higher hedging levels.
The Trustee will monitor the actual asset allocation versus the target weightings and the ranges at regular intervals. The Trustee
recognises that from time to time the actual asset allocation may move outside the ranges due to market movements and will
consider whether to rebalance back to the target weightings, taking into account current market conditions and medium-term
market views.
Howden Joinery Group Plc
Annual Report & Accounts 2023
197
Analysis of plan members, scheme liability split and duration
Deferred members
Pensioners
Total No./average duration
No. of members
% of total liability
Duration (years)
20231
5,905
4,428
10,333
52%
48%
100%
17
11
14
1
The membership figures are as given in the plan accounts and are as at 31 March 2023, 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 year end.
Deferred members
Pensioners
Total No./average duration
No. of members
% of total liability
Duration (years)
20222
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 audited pension plan accounts. The duration and %
of liability figures are as calculated by the Group’s actuary as at the Group’s year end.
Balance sheet
The amount included in the balance sheet arising from the Group’s obligations in respect of defined benefit retirement benefit
plan is as follows:
Present value of defined benefit obligations
Fair value of scheme assets
Deficit in the scheme, recognised in the balance sheet
Movements in the present value of defined benefit obligations were as follows:
Present value at start of period
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
30 December 2023
£m
24 December 2022
£m
(913.6)
901.0
(12.6)
(930.5)
889.0
(41.5)
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
930.5
2.3
42.8
14.2
(26.5)
(9.2)
(40.5)
913.6
1,512.5
2.4
28.3
(622.8)
(3.5)
55.8
(42.2)
930.5
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198
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
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
Employer contributions
(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
Administration cost
Employer contributions
Other finance (charge)/income
Total remeasurements recognised in other comprehensive income
Deficit at end of period
Income statement
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
889.0
41.5
19.2
(8.2)
(40.5)
901.0
1,653.3
31.0
0.4
(753.5)
(42.2)
889.0
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
(41.5)
(2.3)
19.2
(1.3)
13.3
(12.6)
140.8
(2.4)
0.4
2.7
(183.0)
(41.5)
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 pensions cost
The total pensions cost is included in Staff Costs (note 21).
Amount credited to other finance income or expense:
Interest income on plan assets
Interest cost on defined benefit obligation
Net finance expense/(income)
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
–
2.3
2.3
–
2.4
2.4
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
(41.5)
42.8
1.3
(31.0)
28.3
(2.7)
The actual return on plan assets was a gain of £33.5m (52 weeks to 24 December 2022: loss of £722.5m).
Howden Joinery Group Plc
Annual Report & Accounts 2023
199
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 on plan assets
(Increase)/decrease in plan liabilities due to financial assumptions
Decrease/(increase) in plan liabilities due to experience
Decrease in plan liabilities due to demographic assumptions
Net actuarial gain/(loss) before associated deferred tax
23 Share-based payments
Accounting policy
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
(8.2)
(14.2)
9.2
26.5
13.3
(753.5)
622.8
(55.8)
3.5
(183.0)
The Group issues equity-settled share-based payments as employee incentives. 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 £6.0m (2022: charge of £7.3m) 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.
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Notes to the consolidated financial statements continuedFinancial StatementsFinancial StatementsPage TitlePage Title
200
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Howden Joinery Group Plc
Annual Report & Accounts 2023
201
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 usually 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
– to 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
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
2013
2012
2015
6%
12%
2014
2013
2016
8%
20%
If profits grew by a figure between the upper and lower thresholds for each year, the award vested on a sliding scale.
(iii) Performance Share Plan, the vesting period for which is normally 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:
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
2018
2017
2020
5%
15%
2021
2020
2023
2019
2018
2021
5%
15%
2022
2021
2024
2020
2019
2022
67%
33%
33%
Median
Median
Median
compared to comparators in the
Upper quartile
Upper quartile
Upper quartile
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
33%
5%
15%
67%
5%
15%
67%
5%
15%
Date of award
Performance Conditions:
Total shareholder returns (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
The TSR tranche Performance Period is from year ended December 2022 to year ended December 2025.
Growth in pre-exceptional profit before tax (PBT) (the ‘PBT tranche’) represents the following proportion
of the Award:
– PBT tranche vests at 15% if PBT for year ended 2025 is
– PBT tranche vests at 100% if PBT for year ended 2025 is
The PBT tranche Performance Period is from year ended December 2022 to year ended December 2025.
Return on capital employed (ROCE) (the ‘ROCE tranche’) represents the following proportion of the Award:
– ROCE tranche vests at 15% if ROCE over the Performance Period is
– ROCE tranche vests at 100% if ROCE over the Performance Period is
The ROCE tranche Performance Period is from year ended December 2022 to year ended December 2025.
Environmental measures (together, the ‘Env. tranche’) represent the following proportion of the Award:
– Reducing Scope 1 and Scope 2 carbon emissions relative to PBT performance:
7.5% of the Env. tranche will vest if carbon emissions between 31 December 2021
and 31 December 2025 are reduced by
33.3% of the Env. tranche will vest if carbon emissions between 31 December 2021
and 31 December 2025 are reduced by
– Reducing UK Primary fleet emissions:
7.5% of the Env. tranche will vest if Primary fleet emissions are reduced between
25 December 2021 and 27 December 2025 by
33.3% of the Env. tranche will vest if Primary fleet emissions are reduced between
25 December 2021 and 27 December 2025 by
– Achieving carbon neutral status across manufacturing sites:
This portion of the Env. tranche will not vest where only the following number of
sites achieve carbon neutral status by 31 December 2025
33.3% of the Env. tranche will vest where the following number of sites achieve carbon
neutral status by 31 December 2025
– A target 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 the Env. tranche.
2023
20%
Equal to median
Upper quartile
60%
£400m
£484m
10%
25%
30%
10%
4.0%
4.2%
12%
15%
Two sites
Four sites
Vesting under the various measures above is determined on a straight-line basis between threshold and maximum payout.
(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.
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Notes to the consolidated financial statements continuedFinancial StatementsFinancial StatementsPage TitlePage Title
202
Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
Employees continued
2) Movements in the period
53 weeks to 30 December 2023
In issue at start of period
Granted in period
Lapsed in period
Exercised in period
In issue at end of period
Exercisable at end of period
Number of options in the closing balance
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 (£)
Exercise price for all options (£)
1 Weighted Average Exercise Price.
SIP (i)
Number
2,073,661
393,295
(74,665)
(467,695)
LTIP (i)
Number
382,200
105,000
(25,423)
–
LTIP (iii)
Number
3,066,207
953,327
(777,627)
(448,629)
LTIP (iv)
Number
–
12,854
–
–
1,924,596
461,777
2,793,278
12,854
–
–
N/A
0.6
7.05
0.00
1,009,826
12,692
6.96
1.0
7.03
0.00
LTIP (ii)
Number
240,346
–
–
(139,447)
100,899
100,899
–
7.11
–
N/A
3.79
–
–
N/A
1.8
6.70
0.00
WAEP1
(£)
3.48
N/A
N/A
3.26
3.79
3.79
–
–
–
–
–
67
–
7.37
1.3
5.70
0.00
SIP (iii)
Number
79,271
58,928
(29,814)
(1,644)
106,741
–
–
6.87
1.9
7.04
–
Howden Joinery Group Plc
Annual Report & Accounts 2023
203
52 weeks to 24 December 2022
In issue at start of period
Granted in period
Lapsed in period
Exercised in period
In issue at end of period
Exercisable at end of period
Number of options in the closing balance
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
1.27
7.71
0.00
LTIP (ii)
Number
307,429
–
–
(67,083)
240,346
240,346
–
7.62
0.00
N/A
–
–
N/A
2.73
5.27
0.00
WAEP (£)
3.17
N/A
N/A
2.04
3.48
3.48
–
–
–
–
–
67
–
6.92
1.41
6.24
0.00
SIP (iii)
Number
18,577
73,576
(12,324)
(558)
79,271
–
–
6.34
2.42
6.50
0.00
Exercise price for all options (£)
2.38 to 3.79
3) Fair value of options granted
The fair value of most of the share awards is considered to be the market value of the potential shares awarded, at market close
on the day before the grant of the award.
The fair value of the Performance Share Plan (‘LTIP (iii) above) awards granted is estimated on the date of grant using a Monte
Carlo option valuation model.
The key assumptions used in this model were:
Dividend yield (%)
Expected life of options (years)
Expected share price volatility (%)
53 weeks to
30 December 2023
52 weeks to
24 December 2022
3.4
3
30.5
1.8 to 3.4
3
32.2 to 32.3
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Notes to the consolidated financial statements continuedFinancial StatementsFinancial StatementsPage TitlePage Title
204 Howden Joinery Group Plc
Annual Report & Accounts 2023
Financial Statements
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
30 December 2023
£m
24 December 2022
£m
15.2
–
15.2
16.1
0.7
16.8
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 benefits
Share-based payments
Other transactions with key management personnel
There were no other transactions with key management personnel.
30 December 2023
£m
24 December 2022
£m
10.2
0.5
2.3
13.0
10.5
0.8
4.2
15.5
Company balance sheet
Howden Joinery Group Plc
Howden Joinery Group Plc
Annual Report & Accounts 2023
Annual Report & Accounts 2023
205
205
Company balance sheet
Non-current assets
Investments in subsidiaries
Property, plant and equipment
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
Trade and other payables
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
Notes
30 December 2023
£m
24 December 2022
£m
3
6
5
5
5
6
699.0
37.4
179.1
69.4
0.9
0.7
986.5
0.3
–
0.3
699.0
–
175.5
103.3
1.0
1.0
979.8
9.9
218.2
228.1
986.8
1,207.9
(6.8)
(0.4)
–
(7.2)
(10.2)
–
(326.8)
(337.0)
(197.1)
(192.1)
(204.3)
782.5
55.4
9.8
87.5
(24.0)
653.8
782.5
(529.1)
678.8
56.1
9.1
87.5
(25.5)
551.6
678.8
The Company profit after tax for the 53 weeks to 30 December 2023 was £266.2m (52 weeks to 24 December 2022: profit after
tax of £293.8m).
The financial statements were approved by the Board and authorised for issue on 28 February 2024 and were signed on its
behalf by
Paul Hayes
Chief Financial Officer
For and on behalf of Howden Joinery Group Plc, registered number 02128710
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Notes to the consolidated financial statements continuedFinancial StatementsFinancial StatementsPage Title
Company statement of changes in equity
Notes to the Company financial statements
206
Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
207
Financial Statements
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
Treasury
shares
£m
At 25 December 2021
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
Retained profit for the period
Buyback and cancellation of shares
Transfer of shares from treasury into share trust
Dividends declared and paid
At 30 December 2023
59.8
–
(3.7)
–
–
56.1
–
(0.7)
–
–
55.4
5.4
–
3.7
–
–
9.1
–
0.7
–
–
9.8
The Company’s distributable reserves at period end are:
Retained earnings
Treasury shares
Distributable reserves
Retained
earnings
£m
623.3
293.8
Total
£m
748.9
293.8
(250.5)
(250.5)
–
1.6
(115.0)
(115.0)
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 53 weeks to 30 December 2023. The comparative period covered the 52 weeks to
24 December 2022.
87.5
(27.1)
–
–
–
–
–
–
1.6
–
87.5
(25.5)
551.6
678.8
Basis of accounting
–
–
–
–
–
–
1.5
–
87.5
(24.0)
266.2
(50.0)
–
(114.1)
653.8
266.2
(50.0)
1.5
(114.1)
782.5
30 December 2023
£m
653.8
(24.0)
629.8
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;
• 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.
Other accounting policies
The Company’s accounting policies are the same as those for the Group, which are disclosed as part of the relevant notes to the
Group consolidated financial statements.
2 Profit and loss account information
The Company has no employees (2022: none). Directors’ emoluments and 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 and prior periods.
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Financial StatementsFinancial Statements
208
Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
209
Financial Statements
Notes to the Company financial statements continued
3
Investments in subsidiaries
Cost and carrying value:
At 24 December 2022 and 30 December 2023
Total
£m
699.0
5 Lease right-of-use assets and lease liabilities
Nature of the Company’s leasing activities
The Company is the signatory for leases relating to factory, warehouse and office properties which are used by other
Group companies.
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 of 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.
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. Net expenses payable by the Company to companies outside the
100%-owned Group are in excess of this interest income. It is therefore considered that the market capitalisation of the Group,
which was significantly excess of the carrying value of the investment in subsidiaries at both the current and prior period end, is
a useful proxy for the net present value in use of expected future cashflows from the investment, and that therefore there is no
indicator of any impairment in the Company’s investment in subsidiaries.
Details of all Group subsidiaries are given on page 212.
4 Property, plant and equipment
Cost
At 25 December 2021 and 24 December 2022
Additions
At 30 December 2023
Accumulated depreciation
At 25 December 2021 and 24 December 2022
Charge for the period
At 30 December 2023
Net book value at 30 December 2023
Net book value at 24 December 2022
Leasehold property
improvements
£m
Assets under
construction
£m
–
44.6
44.6
–
(8.9)
(8.9)
35.7
–
–
1.7
1.7
–
–
–
1.7
–
Total
£m
–
46.3
46.3
–
(8.9)
(8.9)
37.4
–
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
– 2 to 5 years
– more than 5 years
30 December 2023
£m
24 December 2022
£m
179.1
12.9
175.5
3.1
30 December 2023
£m
24 December 2022
£m
(6.8)
(197.1)
(203.9)
(10.2)
(192.1)
(202.3)
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
8.6
4.6
7.9
4.5
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
14.7
8.7
30 December 2023
£m
24 December 2022
£m
11.1
46.7
204.5
262.3
14.6
42.7
204.6
261.9
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Financial StatementsFinancial StatementsPage TitlePage Title
Financial Statements
Additional Information
Financial Statements
Page Title
210 Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
211
Financial Statements
Notes to the Company financial statements continued
6 Share capital
Ordinary shares of 10p each:
Allotted, called up and fully paid
53 weeks to
30 December 2023
No.
52 weeks to
24 December 2022
No.
53 weeks to
30 December 2023
£m
52 weeks to
24 December 2022
£m
Balance at the beginning of the period
560,916,049
597,573,827
Bought back and cancelled during the period
(7,324,329)
(36,657,778)
Balance at the end of the period
553,591,720
560,916,049
56.1
(0.7)
55.4
59.8
(3.7)
56.1
Additional Information
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
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Financial StatementsPage TitlePage Title
Parent company and all subsidiary undertakings
Five year record
212
Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
213
Additional Information
Parent company and all subsidiary undertakings
At 30 December 2023
Parent company
Howden Joinery Group Plc
England and Wales
105 Wigmore Street, London, England, W1U 1QY
Country of registration
or incorporation
Registered office
All subsidiary undertakings
Intermediate Holding Companies:
Howden Joinery Holdings Limited
England and Wales
105 Wigmore Street, London, W1U 1QY
Howden Joinery International Holdings Limited
England and Wales
105 Wigmore Street, London, W1U 1QY
Trading:
Howden Joinery Limited
Howdens Cuisines SAS
Howdens Cuisines SRL
England and Wales
105 Wigmore Street, London, W1U 1QY
France
Belgium
1 Rue Calmette, ZA Du Bois Rigault Nord,
62880 Vendin-Le-Vieil
Rue du Cerisier 05-12, 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
105 Wigmore Street, London, W1U 1QY
Property Management:
Howden Joinery Properties Limited
England and Wales
105 Wigmore Street, London, W1U 1QY
Howden Kitchens Properties Limited
England and Wales
105 Wigmore Street, London, W1U 1QY
Administration and Employee Services:
Howden Joinery Corporate Services Limited
England and Wales
105 Wigmore Street, London, W1U 1QY
Howden Joinery People Services Limited
England and Wales
105 Wigmore Street, London, W1U 1QY
Dormant:
Howden Kitchens Limited
England and Wales
105 Wigmore Street, London, W1U 1QY
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
105 Wigmore Street, London, W1U 1QY
33–37 Athol Street, Douglas, Isle of Man, IM1 1LB
Five year record
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
TOTAL
Capital expenditure
December 2023
52 weeks
£m
December 2022
52 weeks
£m
December 2021
52 weeks
£m
December 2020
52 weeks
£m
December 2019
52 weeks
£m
2,310.9
2,319.0
2,093.7
1,547.5
1,583.6
340.2
327.6
21.0
46.5
516.8
647.9
382.8
234.2
(389.0)
(12.6)
(684.5)
(469.1)
282.8
978.4
840
65
10
915
119
415.2
405.8
20.6
65.8
471.5
614.3
373.3
265.6
(454.2)
(41.5)
(665.3)
(522.1)
308.0
871.7
808
60
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
40
–
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
30
–
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
27
–
759
61
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.
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Financial StatementsFinancial Statements
Shareholder and share capital information
214
Howden Joinery Group Plc
Annual Report & Accounts 2023
Howden Joinery Group Plc
Annual Report & Accounts 2023
215
Additional Information
Shareholder and share capital information
Annual General Meeting
The 2024 Annual General Meeting (‘AGM’) will be held at
Freshfields Bruckhaus Deringer LLP, 100 Bishopsgate, London,
EC2P 2SR on 2 May 2024 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 2023 final dividend payment being approved
by shareholders at the AGM on 2 May 2024, the following
timetable will apply:
2023 Final Dividend
Ex-Dividend date
Record Date
Payment Date
11 April 2024
12 April 2024
24 May 2024
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.
Share Capital
As at 30 December 2023, the Company had only fully paid
up ordinary 10 pence shares in issue (‘Shares’). Below sets
out the share capital position at 30 December 2023 and at
24 December 2022:
Number of Shares
% change
30 Dec 2023
24 Dec 2022
Total Shares in issue
(1.31)% 553,591,720 560,916,049
Treasury Shares
(6.10)%
4,918,375
5,237,907
Shares with voting rights (1.26)% 548,673,345 555,678,142
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 30 December 2023, 0.89% of the Company’s issued
share capital was held in Treasury, 0.26% was held by
Directors, persons discharging managerial responsibility
(PDMRs), or connected persons of those Directors or PDMRs,
0.25% was held in employee share trusts (excluding any
allocated shares which are not forfeitable), and none was held
by major shareholders (those who have declared holdings
above 5%).
Free float shares therefore accounted for 98.6% of the
Company’s issued share capital at the 30 December 2023.
Acquisition of the Company’s own shares
During 2023, the Company repurchased and cancelled just
over 7.32 million shares worth a total of £50m under its 2023
share repurchase programme. The repurchased shares
represented a nominal value of over £732,000 and equated
to 1.3% 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 page 32 for
more information) the Company returns surplus capital to
shareholders. In 2023, the Board considered that a share
buy back programme, in addition to paying a dividend,
was the most efficient means of deploying surplus capital
to shareholders.
At the AGM on 4 May 2023, the Directors were granted
authority by shareholders to purchase up to 55,455,816 of
the Company’s ordinary shares through the market1. The
authority expires at the conclusion of the 2024 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 28 February 2024, the Company had been notified,
in accordance with Rule 5 of the Disclosure and Transparency
Rules, of the following voting rights held by a shareholder of
the Company:
Substantial
Shareholder
% of total
voting rights
Date of last
notification
BlackRock, Inc
Below 5%3
13 October 2023
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 70 and in note 19
on page 187). 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 2 November
2023 for the financial year ended 30 December 2023:
“ Given the Group’s continued resilient trading, the
Board maintains its full year expectations for 2023, but
recognising a more uncertain macro-economic outlook
this is expected to be towards the lower end of the range of
analysts’ consensus forecasts.”
A footnote to the statement above read:
“ 2023 Full Year Profit Before Tax (PBT) consensus published
on the Company’s website is an average of £346m with a
range of £330m to £365m.”
The actual Group profit before tax figure for the period ended
30 December 2023 is set out in the consolidated income
statement on page 162.
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.
1
2
3
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.
Governed by the general provisions of the Articles of Association (which may be amended by special resolution of the shareholders) and prevailing legislation.
BlackRock, Inc previously held 5.02% and notified the Company on falling below the 5% threshold.
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Financial StatementsFinancial StatementsPage Title
Howden Joinery Group Plc
Annual Report & Accounts 2023
Additional Information
Shareholder ranges as at 30 December 2023
Advisors and registered office
Howden Joinery Group Plc
Annual Report & Accounts 2023
217
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
59
81
40
131
65
115
211
702
4,933
965
102
59
3
1
2
6,065
23,160
206,300
307,235
3,374,415
4,794,872
18,360,299
519,741,201
546,807,482
1,728,901
2,190,971
723,528
1,112,255
211,989
124,594
693,000
6,785,238
0.87
1.20
0.59
1.94
0.96
1.70
3.12
10.38
72.90
14.26
1.51
0.87
0.04
0.01
0.03
89.62
0.00
0.04
0.06
0.61
0.87
3.32
93.87
98.77
0.31
0.40
0.13
0.20
0.04
0.02
0.13
1.23
Total
6,767
553,592,720
100.00
100.00
Principal Banker
Lloyds
25 Gresham Street
London
EC2V 7HN
Joint Financial Advisers
and Stockbrokers
Deutsche 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
105 Wigmore Street
London
W1U 1QY
Corporate timetable
2024
Trading update
Annual General Meeting
Half-Yearly Report
Trading update
End of financial year
30 April
2 May
25 July
7 November
28 December
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Annual Report
and Accounts 2023
Howden Joinery Group Plc
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Made in
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Available through
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The UK’s number 1
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