DUNELM GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023

DUNELM GROUP PLC

ANNUAL REPORT AND ACCOUNTS 2023

Seizing the

opportunity

DUNELM GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023

In this report

Strategic report

At a glance

About us 1

Chair’s statement 4

Market review 6

Business model 8

Our strategy 10

Highlights 12

CEO’s review 13

Key performance indicators 20

CFO’s review 22

Sustainability 26

Materiality assessment 28

Stakeholder engagement 30

Section 172 statement 35

Non-financial information 36

TCFD report 40

Our approach to risk management 48

Principal risks and uncertainties 50

Going concern and

viability statement 55

Governance report

Chair’s introduction 58

Governance dashboard 60

Directors and officers 61

Governance structure 64

Board activities 68

Culture and values 72

Nominations Committee report 74

Audit and Risk Committee report 80

Remuneration Committee report 88

Directors’ Remuneration

Policy 2023 92

Annual Report on Remuneration 103

Directors’ report 119

Statement of Directors’

responsibilities 123

Financial statements

Independent auditors’ report 126

Consolidated financial

statements 132

Parent company financial

statements 164

Other information

Alternative performance

measures (APMs) 172

Advisers and contacts

At a glance

We are the UK’s No.1 homewares retailer,

delivering value and joy to help more and

more UK consumers create a home they love

£1.6bn

FY23 sales

179

stores across the UK

£163m

FY23 total dividends paid

11,000+

committed colleagues

c.70,000

products to suit every style and budget

£193m

FY23 profit before tax

For more performance

highlights please see

page 12.

No.1

Market leader in

UK homewares

See corporate.dunelm.com for

more information and for our

Sustainability Report 2023.

Our vision: to build the UK’s

most trusted and valuable

brand for homewares

& furniture

100%

recycled glass vases from

our Conscious Choice range

About us

Our purpose:

to help create the

joy of truly feeling

at home, now and

for generations

to come

Our purpose guides all business activities and decisions

and helps us understand why people want to shop with us,

work for us, supply to us and stay invested in us

Our shared values

Our shared values have evolved from our fundamental business principles

developed more than a decade ago and reflect our attitudes and behaviours

throughout Dunelm

Stronger

together

Act like

owners

Keep listening

& learning

Long-term

thinking

Read more on pages 72-73.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 1

STRATEGIC REPORT

inspired

In this section

Chair’s statement 4

Market review 6

Business model 8

Our strategy 10

Highlights 12

CEO’s review 13

Key performance indicators 20

CFO’s review 22

Sustainability 26

Materiality assessment 28

Stakeholder engagement 30

Section 172 statement 35

Non-financial information 36

TCFD report 40

Our approach to risk

management 48

Principal risks and

uncertainties 50

Going concern and viability

statement 55

Seizing the opportunity

Dunelm Group plc Annual Report and Accounts 20232

inspired

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 3

CHAIR’S STATEMENT

Driving the business

forward sustainably

In my first set of full year results with Dunelm, I am delighted to report

anotheryear of strong sales growth and market share gains.

The last year has undoubtedly been

challenging for UK consumers

and businesses alike. I have been

hugely impressed by the energy

and enthusiasm with which our team

has approached these challenges,

delivering a strong performance for our

stakeholders whilst continuing to think

long-term and investing for the future

in light of the many opportunities we

see on the horizon. We have maintained

a focus on all our key stakeholders:

delighting our loyal customers, and

attracting new ones, by delivering

quality and value; strengthening

relationships with our suppliers and

partners; supporting our colleagues

and the communities we serve; as

well as generating strong shareholder

returns. Alongside this, we are also

making good progress towards our

long-term sustainability goals.

1 For statutory purposes FY22 included a 53rd week. Sales growth shown is on a

comparable 52-week basis. On a 53-week basis sales growth was 4%.

2 GlobalData UK combined homewares and furniture markets, excluding kitchen and

bathroom furniture. Market share for the period July 2022 to June 2023 was 7.2%.

3 For statutory purposes FY22 included a 53rd week. FY22 PBT and PBT margin are

shown on a comparable 52-week basis. On a 53-week basis FY22 PBT was £213m and

PBT margin was 13.5%.

The last year has undoubtedly been

challenging for UK consumers and

businesses alike. I have been hugely

impressed by the energy and

enthusiasmwith which our team

hasapproached these challenges.

This performance would not have

been possible without the individual

contributions of our more than 11,000

colleagues, across stores, logistics,

manufacturing, customer service and

support centres. I would like to thank

them all for their ongoing hard work

and dedication to the business and our

customers, and for their contribution

to our unique, inclusive and positive

culture which continues to help

us thrive.

Performance

FY23 saw record sales of £1.64bn,

reflecting a strong performance in an

extremely challenging environment.

As ever, we believe that the strength

and relevance of our product range

is a significant advantage, helping us

to provide outstanding value to our

customers, to grow our sales and win

market share.

Our sales grew by 6%

, and our overall

market share increased to 7.2%

, with

gross margin of 50.1%. Profit before tax

was robust at £193m (FY22: £209m)

which is particularly pleasing given

the impact of operating cost inflation

and our ongoing investment in the

business. Our profit before tax margin

of 11.8% (FY22: 13.5%

) was robust,

demonstrating the underlying resilience

of the business and tight operational

controls.

Dividends

Consistent and strong cash generation

remains an impressive quality of

Dunelm’s business model. This year,

the Board has proposed a final ordinary

dividend of 27 pence per share,

reflecting our strong profitability and

ongoing confidence in the business.

Dunelm Group plc Annual Report and Accounts 20234

First impressions

I have long been a Dunelm

customer and in that capacity

I had a great deal of affection

and admiration for the business.

Having joined the Board last

year, I thought it would be

useful to share some of

my early reflections.

One of my immediate impressions

is of being hugely impressed

by the strong culture within the

business. Dunelm is a company

that truly stands by its values:

stronger together; keep listening

and learning; act like owners;

and long-term thinking. We

have a team of highly motivated

colleagues who show great

commitment to the Company

and its purpose.

The ambition of the Company

and our colleagues continues

to impress me. Dunelm has

consistently grown throughout its

history, and there is huge appetite

for that to continue, both through

our store channels and also by

improving our digital offering to

fully take advantage of our total

retail system. This also extends

to continuously raising the bar

on our product ranges, aiming

to offer customers outstanding

value products at all price points,

with the best designs, materials

and sustainability credentials.

The team here are rightly proud

of Dunelm’s heritage, while also

being focused on looking forward

and continuously improving how

we deliver for customers.

Finally, the Company and the

management team strive for

Dunelm to be a force for good.

Our values are incredibly

important to us, and while it is

vital that we continue to grow

profitably, the team prides itself

on running an organisation that

makes a positive contribution

for its stakeholders. I feel very

proud to be a part of the Dunelm

team and am excited as we look

forward to further progress in the

years to come.

This brings the full-year ordinary

dividend to 42 pence per share, an

increase of 5% and within the range of

1.75

to 2.25

dividend cover

stated in

our capital and dividend policy. We also

paid a special dividend of 40 pence per

share in April. In all, we returned £163m

of cash in dividends during the year.

We have now returned more than

£1bn

to shareholders in the last ten

years, demonstrating our consistent

performance and highly cash

generative business model.

Doing the right thing

We build sustainability into all that we

do, embedding a long-term mindset

of doing the right thing through our

decisions and processes, with a view to

delivering for all our stakeholders. You

will be able to read more detail in our

upcoming 2023 Sustainability Report

about our progress, objectives and

future plans.

We strive to achieve product

mastery across our categories, which

increasingly involves innovation to

make our products more sustainable.

A fantastic example of this is Conscious

Choice, a label we introduced in 2022

to showcase own brand products that

are made from at least 50% (by weight)

more sustainable materials than their

comparable alternatives. Conscious

Choice options now account for c.15%

of own brand products across our

categories and we have plans to

expand this further.

We are also working in our stores

and supply chain to reduce carbon

emissions, continuing to replace gas

fired heating equipment, putting in

place energy management systems,

and starting to use vehicles powered

by more sustainable fuel, including

electricity and compressed natural gas,

in our distribution fleet. As a result, we

have seen a further reduction in Scope1

carbon intensity, ahead of our targets.

Combining sustainability with customer

engagement in our communities is

another positive way in which we

reduce our impact on the planet,

working towards circularity. We now

offer a textiles take-back service in the

majority of our stores, with over 70

tonnes per month of materials being

returned by our customers. As we

move towards product circularity, we

extended the impact of this scheme by

working with one of our suppliers to

turn these recycled textiles, along with

other recycled fibres, into products

for our new ‘Remade’ range. This year

we have also trialled a new Home to

Home initiative, which rehouses our

customers’ pre-loved homewares.

We are still at an early stage in our

sustainability journey, and recognise

there is much more to do, but we are

pleased with the progress being made

and the commitment from colleagues

across the business in this important area.

Board

I was delighted to join the Board as

Chair Designate last September and

take on the role of Chair in January.

I am very pleased with the diverse

experience we have across both our

Executive and Non-Executive Directors

and how this continues to contribute to

our performance.

I would like to thank and congratulate

Andy Harrison, who stepped down

as Chair in January having joined the

Board in 2014. Andy oversaw a period

of growth, particularly in organisational

capability, which left a very strong base

from which we can build going forward.

Seizing the opportunity

I am proud of what the business has

achieved in my first year, and also of its

aspirations for the future. We are very

mindful that the consumer environment

remains challenging and uncertain in

the near term. With the support of our

brilliant colleagues, we believe that

we are well positioned to seize the

opportunity to bring value and joy to

our growing base of customers across

our total retail system. As has been

the case throughout Dunelm’s history,

we will continue to invest wisely and

to deliver for all our stakeholders, in

order to keep growing the business

sustainably, for the long term.

Alison Brittain

Chair

20 September 2023

4 Dividend cover is calculated as earnings per share divided by the total ordinary dividend relating to the

financial year.

5 Ordinary dividends plus special dividends plus special distributions.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 5

MARKET REVIEW

The UK’s market leader

in homewares...

We are the UK’s market leader in homewares, with a

specialist offering for customers across our much-loved

superstores and digital platform dunelm.com.

Where we are today

Homewares market

11.0%

FY23 homewares

market share

+70bps

Furniture market

2.0%

FY23 furniture

market share

Unchanged

Combined market

7.2%

FY23 combined

market share

+40bps

36%

Digital share

of total sales

1 GlobalData UK homewares and furniture markets, July 2022 to

June 2023. Furniture excludes kitchen and bathroom furniture.

The customer

opportunity

During the year we updated

our research into consumers’

attitudes to the home and home

shopping, giving us much deeper

insight into our most valuable

customers to support our next

phase of growth.

Overall four key themes have

emerged which are helping us

seize the opportunity to acquire

and serve more customers:

Varied attitudes

to home

Focus on the home continues to

be high, but for different reasons:

style, sanctuary, entertainment

and family vary widely in

importance for different groups.

Gaps in brand

awareness

Dunelm brand awareness still

under-indexes in London and

amongst younger age groups.

Differing perceptions

of value

Value is important for all, but

there are increasingly differing

perceptions on price, quality

and use of credit in the current

environment.

Under-appreciation

of category breadth

Dunelm is well-loved, but often

across a limited part of the range,

even for customers with high

brand awareness.

Dunelm Group plc Annual Report and Accounts 20236

c.2%

c.£9bn

Market

Furniture Homewares

≤5%

c.£6bn

Market

c.10%

c.£3bn

Market

>11%

c.£5bn

Market

...with an exciting

runway for growth

We have a significant opportunity to continue growing

our share of all sub-categories of the highly

fragmented homewares and furniture markets.

We operate in the large homewares

and furniture markets, with a

combined size of c.£24bn

. Each of

these markets comprises a significant

number of sub-categories, often

with different and fragmented

competitors, in which we currently

have varying levels of market share.

We believe we have a significant

runway for further growth, and

that through our entrepreneurial

approach of testing and learning,

we can grow share in all these

categories.

Even in our most established categories

we have the opportunity to grow our

share despite being market leaders.

We will optimise our ranges through

product innovation, including offering

more sustainable options and making

our customers’ shopping experiences

easier and more convenient.

Whilst we have grown our share of the

furniture market in recent years, our

overall share remains low, presenting a

substantial opportunity for growth. We

have been building a stronger customer

offer and operating model to help

realise this opportunity.

We also have an opportunity to gain

share in the remaining homewares

categories, where we are currently

less well established, by developing

our product mastery. We are

confident that our relatively lower

product maturity gives significant

headroom for further growth and

share gain.

Dunelm market share by category

20%

10%

2 Each bar represents a Dunelm homewares

or furniture category which in total represent

c.80% of total sales, mapped to GlobalData

market sizes for the period January 2022

to December 2022. Excludes certain

Dunelm categories which are not part of the

GlobalData homewares and furniture markets

e.g. rugs. The furniture market excludes

kitchen and bathroom furniture.

The market

opportunity

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 7

BUSINESS MODEL

Our customer proposition

How we generate sustainable value

for all stakeholders

Our long-term

thinking

We remain ambitious about

being a good company

that focuses on growing

sustainably. This means

adopting a culture of making

decisions for the long term

to create enduring financial

and social value for our

stakeholders, while reducing

our environmental impacts.

We will deliver our purpose by being Customer 1st; striving to improve our

offer for savvy home-lover customers.

Stakeholder value creation

Colleagues

Ongoing investment in social

and financial wellbeing,

communication, diversity, equality

and opportunities to learn in

an ambitious and inclusive

organisation.

82%

participation in

our latest colleague

engagement survey

Customers

Improving our in-store and digital

services and experiences to raise

the bar on our customer offer and

deliver value and joy.

2.8%

growth in active

customer numbers

Communities

Creating mutual benefits by

expanding our community

communications, social media

interactions and meaningful local

fundraising initiatives.

61%

own brand products available

for take-back service

1 Growth in unique active customers who have transacted at least once in the 12 months to June 2023. Management estimates using Barclays data.

Read more in our CEO’s review on page 13.

Fast &

convenient

Everything easy

to find, buy & use

Value &

choice

Great product

quality & style

for every

budget

Friendly &

expert

Service that is

non-judgemental &

knowledgeable

Good &

circular

Positive choices

for people &

the environment

Customer

1st

Dunelm Group plc Annual Report and Accounts 20238

Our competitive advantages

Cost-effective total

retail system

Our total retail system

offers customers the

combination of enjoying

friendly service in stores

with the convenience of our

digital channels. Our low-

cost (mainly leased) store

portfolio is complemented

by a maturing digital

channel, allowing us to

benefit from a cost-effective

total retail system.

Financial strength

We have a highly cash-

generative model and

our deep-rooted founder

mentality keeps us

focused on operational

grip to deliver sustainable

profitable growth.

Runway for growth

We have a relatively small

share of large, fragmented

markets and are confident

of the very significant

opportunities for us to gain

further share to support our

growth ambitions.

Well-known brand

with broad appeal

Our brand is ambitious and

inclusive, appealing to a

broad range of home-lover

customers across different

regions, ages and incomes.

Product mastery

credentials

We design and develop the

majority of our products in-

house, allowing us to offer

relevant and curated ranges

and to adapt quickly to

the changing needs of

our customers.

Strong colleague

culture

Our friendly and

knowledgeable colleagues

are the heart of our

business, driven by our

purpose and shared values

to create an environment

for all to thrive.

We have an advantaged business model which helps set us apart from others

in a competitive and fragmented UK homewares market.

Doing the

right thing

We aim to think and operate

in a responsible, sustainable

and ethical way – taking

decisions while evaluating the

risks and opportunities that our

actions might have on our

colleagues, the planet, and

other stakeholders; and doing

the right thing to support the

relationships that we need

for long-term growth.

Suppliers

Strengthening engagement to

promote long-term relationships,

based on integrity and

transparency, that are focused

on social, environmental and

product quality standards.

99%

invoices paid

on time

Planet

Target-setting and actions to

reduce carbon emissions across

our operations and supply chain,

with increasing focus on the use

of more sustainable materials.

32%

reduction in Scope 1

carbon intensity since FY19

Shareholders

Timely and transparent financial

and ESG communication to

optimise capital allocation

decisions while remaining

focused on financial discipline

and performance.

£163m

total dividends

paidin the year

Read more about how we are generating

value in our CEO’s review on page 13.

Generating

c.15%

of own brand product range

by stock-keeping unit (SKU)

branded Conscious Choice

Our vision is to build the UK’s

most trusted and valuable brand

for homewares and furniture.

We are focused on continuing

to deliver sustainable, profitable

growth to create value for our

stakeholders and see a clear

runway for further growth.

Our Customer 1st proposition

remains at the heart of the

business and our ability to deliver

is powered by three core strategic

drivers which underpin our plans.

1 2 3

Aligned with these drivers is our

ambition to be a good company

and build sustainability into all that

we do. We also continue to invest

in digitalising and developing

our foundations to improve our

customer offer and make our

operations more efficient.

1 To be part of our Conscious Choice range, every product must be made from at least

50% more sustainable materials (by weight) compared to conventional alternatives.

Dunelm Group plc Annual Report and Accounts 202310

82%

our highest-ever

participation rate in our

colleague engagement

survey

Culture and identity

We have developed a strong culture as an ambitious

and inclusive organisation.

Maintaining the strength of our culture and identity is

essential to the long-term sustainability of our business.

Our shared values embody what we stand for – we remind

our long-standing colleagues of the importance of our values

and we instil these in new joiners. We are entrepreneurial,

inclusive, adaptable and resourceful in a workplace that

welcomes all.

36%

Digital sales mix

1.1m

community followers

...and joy

We are raising the bar on our proposition, with a

greater focus on bringing joy to more customers.

Joy comes in many forms, from providing a

non-judgemental, knowledgeable and friendly

service in store, to ensuring fast and convenient

home delivery solutions. Joy also comes through

offering more choices that are positive for

the environment, and more products with

personality, such as those found in our

Natural History Museum and Disney ranges.

Read more about how we are delivering

joy in our CEO’s review on page 13.

Total retail system

Our thriving total retail system combines the advantages

of physical and digital retail in a seamless offer which gives

choice to our customers in how they shop.

We continue to invest in technology to power this system

and empower our colleagues. Digitalisation encompasses

everything from improving our shopping experience, to

increasing operational productivity, to leveraging data and

insights to refine our proposition.

Our total retail system is people-led,

tech-powered, and efficient.

Brilliant

stores

serving

their local

communities

Digital

channels

optimised for

our customers

A marketing

ecosystem

to grow and

service our

audience

x x

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 11

HIGHLIGHTS

Performance summary 2023

Total sales

£1,639m

Profit before tax

£193m

FY22: £213m

Digital sales mix

36%

FY22: 35%

Free cash flow

£160m

FY22: £153m

Gross margin

50.1%

FY22: 51.2%

Ordinary dividends

42.0p

FY22: 40.0p

Diluted earnings

per share

75.0p

FY22: 83.6p

Financial highlights

Operational highlights

Active customer

growth

+2.8%

FY22: +8.5%

Market

7.2%

FY22: 6.8%

Our FY23 focus areas

and what we achieved

Sustainability

• Launched and grew our Conscious Choice

range, which now makes up c.15% of own

brand products

• Launched ‘Remade’, our first step towards

product circularity using post-consumer waste

• Ongoing investment in our colleagues’ learning

and development

Product development

• Focused on innovative design to broaden

range and maintain value

• Introduced c.20,000 additional products

• Improved commercial support through

enhanced data management

Customer understanding

• Developed customer data platform

• Improved understanding of cross-channel

profile matching

• Started leveraging data to improve our

‘single-customer’ view

Post-sales experience

• Shortened delivery lead times and reduced

‘split deliveries’

• Improved tracking data and customer

communications

• Trialled parcel shop collections in London and

click and collect lockers

Data and insight

• Strengthened in-house skills and resource

• Enhanced data platforms and capabilities used

to optimise decision-making

• Evolved personalised customer marketing,

based on behavioural insight

Shopping experience

• Diversified payment options via new online

payment platform

• Trialled bookable consultations and live chat,

improving access to colleague expertise

• Upgraded store experience through ten refits

and three new stores (including relocations)

1 Growth in unique active customers who have transacted at least once

in the 12 months to June 2023. Management estimates using

Barclays data.

2 GlobalData UK homewares and furniture markets, July 2022 to

June 2023. Furniture excludes kitchen and bathroom furniture.

Read more in the Alternative Performance Measures table

on page 172.

FY21 FY22 FY23

£1,336m

£1,581m

£1,639m

Dunelm Group plc Annual Report and Accounts 202312

CEO’S REVIEW

Our FY23 focus areas

and what we achieved

We delivered another strong performance in FY23. In a difficult

environment for our customers, where cost-of-living pressures were

front and centre, we sharpened our focus on relevance and value.

Seizing the opportunity, with

another record year of sales

I am very pleased by what we have

achieved in a trading environment

which continues to present a variety

of challenges. The macro-economic

backdrop during the year continued

to bring uncertainty for colleagues,

customers and suppliers, with high

levels of inflation presenting particular

headwinds. The adaptable approach

we have taken during the last few years

continues to serve us well: executing

successfully by pulling the levers within

our control, and maintaining good

operational grip. This has allowed us to

deliver strong results for all stakeholders,

grow market share, and also given us

the ability to keep investing for the

future, so that we can seize the multiple

opportunities ahead of us.

Whether developing our proposition,

strengthening our relationships,

improving our operations or serving

our customers, it is the work of

every colleague in Dunelm and our

partners that makes this happen.

For contributing their knowledge,

personality, commitment and

enthusiasm, I would like to sincerely

thank all of my colleagues. Together,

we are creating an ever more inclusive

workplace which, alongside our shared

values, is driving performance.

FY23 Review

A strong performance with

relevance and value at its core

We delivered another strong

performance in FY23. In a difficult

environment for our customers, where

cost-of-living pressures were front and

centre, we sharpened our focus on

relevance and value. In the first half of

the year we were able to offer customers

products such as heated clothes airers

and thermal curtains to help them keep

warm and manage their budgets when

energy costs were at their highest. We

continually adapt and evolve our product

range, and our offer was just as relevant in

the second half of the year, when seasonal

items such as garden furniture and

decorations proved appealing.

Nick Wilkinson

Chief Executive

Officer

Total sales growth

+6%

(Comparable 52-week basis)

Market share gains

+40bps

(Combined homewares and

furniture markets)

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 13

CEO’S REVIEW

1 Growth in unique active customers who have transacted at least once in the 12 months to June 2023. Management estimates using Barclays data.

2 GlobalData UK combined homewares and furniture markets, excluding kitchen and bathroom furniture. Market share for the period July 2022 to June 2023 was 7.2%.

3 For statutory purposes FY22 included a 53rd week. Gross margin is shown on a comparable 52-week basis. On a 53-week basis FY22 gross margin was 51.2%.

4 Ordinary dividends plus special dividends plus special distributions.

5 Retention is the percentage of colleagues from the start of the financial year (July 2022) who remained employed until the end of the financial year (June 2023),

excluding any planned leavers.

6 Our Pathway to Zero commitments are described in more detail in the sustainability section of our corporate website at https://corporate.dunelm.com/sustainability.

a special dividend of 40p declared at

the interim results. This brings the total

returned to shareholders over the last

decade to over £1bn

Delivering for all our

stakeholders

We try to make decisions based on

the needs and expectations of our key

stakeholders and are guided by our

shared values.

Our committed colleagues are at the

heart of our business. We understand

that the current environment is difficult

for many of them, so during the year

we increased our support on financial

wellbeing, with progressive pay

increases, additional support funds and

advice on a range of financial matters.

We have also invested in learning and

development opportunities to promote

a ‘learning for life’ mindset to help

colleagues to develop their careers.

This continued focus on colleague

development saw us retain 87% of our

colleagues through the year

. Listening

and learning is one of our shared

values and we undertake a twice-yearly

colleague survey. In FY23, we upgraded

our colleague engagement platform,

making it two-way and encouraging

colleagues to give direct feedback to

their line managers. We achieved a

participation rate of 82%, making it our

most comprehensive survey to date and

enabling us to achieve a deeper level of

understanding of our colleagues and to

take more targeted action.

We relentlessly strive to improve our

customer proposition. Product mastery

across our broad range of categories

ensures that our offer remains relevant

throughout the year, and that we are

offering quality and value at every price

tier. We also continued to develop

our digital channels, giving customers

even more choice by adding c.20,000

lines to our website, and by enabling a

more convenient experience with new

payment options such as Apple Pay

and Klarna.

We deepened our relationships with

customers in our store communities

with membership of our local Facebook

groups increasing to over 1.1 million.

Our Christmas ‘Delivering Joy’

campaign was our most successful ever,

with a threefold increase in the number

of gifts donated compared to FY22.

We significantly increased our charity

fundraising with our customers and

colleagues helping to raise over £800k,

of which over £700k was donated to our

charity partner, Mind.

We have always built long-term

relationships with our suppliers and

are committed to offering them a

strong partnership based on mutual

growth and respect. Together we are

growing our shared knowledge on

topics like supply chain technology and

sustainability, including the use

of sustainably sourced cotton.

As we learn more about how to reduce

our impact on the planet, progress on

our Pathway to Zero

plan continues.

We are making good progress on

reducing our carbon emissions, with our

decarbonisation programme in stores

contributing to a further reduction in

Scope 1 carbon intensity this year. We

are also transitioning our company car

fleet to hybrid or electric vehicles. We

extended our Conscious Choice ranges,

which are made from more sustainable

materials, to c.15% of our own brand

range. We launched our first ‘Remade’

products, using materials including those

from our take-back schemes, our first

step towards product circularity. During

FY23 we moved our environmental

accreditation to Better Cotton, who

are industry leaders in this area. As a

result this was a year of transition during

which we did not achieve our target. We

expect to see a significant improvement

in FY24 as we complete our transition

and remain committed to sourcing

c.100% more responsible cotton by

2025. Finally, we have now reduced our

use of virgin plastic packaging by 36%

compared to FY20 by both reducing the

amount of packaging we are using and

increasing the recycled content.

The expansion of our range to

approximately 70,000 product

lines allows us to meet more of our

customers’ needs for their homes,

and our relentless focus on offering

outstanding value has remained as

sharp as ever across all price points.

A good example of this during the

period was quickly reducing prices to

pass freight cost savings back to our

customers, with over 1,000 product

lines dropping in price in the spring.

By keeping relevance and value at the

heart of our proposition, total sales

grew by 6% against the comparable

52-week period in FY22 (which also

included a particularly strong Q1 as

Covid restrictions eased). Total sales

were 49% higher than FY19 (the last full

year uninterrupted by the pandemic).

Compared to FY22, we had 2.8% more

active customers

and our market

share in the combined homewares and

furniture markets increased by 40bps

in challenging market conditions

Gross margin of 50.1% (FY22: 51.2%

)

was tightly managed through the year

and we stayed true to our principle of

instilling operational grip across the

business. We saw more normalised

customer behaviour during our Sale

events and carefully balanced the

impact of higher cost prices with our

commitment to value. This resulted in

a robust PBT performance of £193m

(FY22: £209m on a comparable 52-

week basis), which was pleasing given

the tough backdrop and reflected

both tight control of margin amidst

inflation in our operating costs and

our ongoing commitment to investment

for the future.

We generated strong free cash flow of

£160m (FY22: £153m), allowing us to

declare a final dividend of 27p, bringing

the total ordinary dividend for the

year to 42p, a year-on-year increase

of 5%, reflecting our confidence in the

future performance of the business.

We returned a total of £163m to

shareholders during the year, including

Dunelm Group plc Annual Report and Accounts 202314

We will deliver our purpose by being Customer 1st, striving

to improve our offer for savvy home-lover customers.

By focusing on our proposition to deliver more value and joy to our customers, we are confident in our plans

to continue growing our sales and gaining market share.

Value & choice

We will continue to offer

customers relevant products

with outstanding value and

choice. Every customer has

a different perception of

what value means to them

but we know our products

must be practical, attractive,

affordable and, increasingly,

offer a sustainable reason

to buy them.

Friendly & expert

Whether in store, at the

end of a phone (or email) or

making a delivery to a home,

we train our colleagues to be

friendly and helpful (and track

how well our customers think

they do). Our investment in

technology and data gives

them additional tools to

advise on product choice and

availability more efficiently.

During the year, we submitted our

targets to the Science Based Targets

initiative (SBTi) and were pleased to

receive confirmation, after the year

end, that our near-term and net-zero

targets have been approved by the

SBTi

. This will see Dunelm align to

the latest climate science from the

Intergovernmental Panel on Climate

Change (IPCC) by limiting the global

temperature rise to 1.5°C.

Seizing the opportunity

We are excited and ambitious about

seizing the opportunity ahead of

us to continue to grow sustainably.

Throughout our history, we have had

a strong track record of growing sales

and market share, both in buoyant

markets and in more challenging

conditions. Since our IPO in 2006, our

sales have increased by a compound

annual growth rate of 10%, and in

the last ten years more than 85% of

this growth has been through market

share gains. In the last year, despite

consumers being under considerable

pressure, we continued to grow our

sales while the overall homewares

market remained broadly flat, reflecting

the gains we made in market share.

Whilst we are the homewares market

leader, we still hold only a c.7% share of

the UK homewares and furniture market

that is worth a total of c.£24bn

. This

significant market is highly fragmented,

giving us the opportunity to serve

many different product categories and

multiple customer missions. Our most

established categories have higher

market shares, which we are confident

of growing further still; at the same time

we have an opportunity to increase our

share in those more nascent categories

where we are currently less well

established.

We are developing and implementing

our plans at a time when consumer

interest in the home remains high

despite cost-of-living pressures.

Customers are seeking propositions

that meet their ever-evolving emotional

and functional needs. Multi-channel

shopping is now fully established in

homewares, and those businesses that

have an effective total retail system

with seamless integration between

their online and store channels, as we

do, have a clear advantage. We have a

strategic plan which will enable us to

capitalise on all of these themes and

seize the opportunity for sustainable

growth. I give an update below on some

of our key priorities.

7 Our targets approved by the SBTi are as follows. Overall Net-Zero Target: Dunelm Group PLC commits to reach net-zero greenhouse gas emissions across the

value chain by FY40 from a FY19 base year. Near-Term Targets: Dunelm Group PLC commits to reduce absolute Scopes 1 and 2 GHG emissions by 50% by FY30

from a FY19 base year. Dunelm Group PLC also commits to reduce absolute Scope 3 GHG emissions by 50% within the same timeframe. Long-Term Targets:

Dunelm commits to reduce absolute Scope 1, 2 and 3 GHG emissions by 90% by FY40 from a FY19 base year.

Value & choice

Great product

quality & style

for every

budget

Friendly & expert

Service that is

non-judgemental &

knowledgeable

Fast &

convenient

Everything easy

to find, buy & use

Good &

circular

Positive choices

for people & the

environment

Customer

1st

Fast & convenient

We aim to provide an easy

and seamless online and

in-store customer shopping

and delivery experience –

personable, knowledgeable,

efficient and glitch-free from

start to finish. Information

about our products and their

attributes is transparent,

including how tocarefor

them and – if need be – how

to return themeffortlessly.

Good & circular

We are making it easier

for our customers to make

thoughtful choices by using

more sustainable materials,

by building circularity into

our product design and by

communicating these initiatives

more clearly to our customers.

This includes our commitment

to treating our own colleagues

and people in our supply chains

fairly and with respect.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 15

CEO’S REVIEW



Strengthening our

customer offer

We are constantly striving to improve all

parts of our customer offer; however we

are focusing our efforts in two particular

areas: offering outstanding value and

helping to deliver joy to our customers,

through our products, services and

customer experience.

Value

We work tirelessly on our range

architecture to offer customers value

at all price points. A good example of

this is in our range of Egyptian cotton

towels, where we held prices a year

ago despite cost prices increasing. At

the same time, we introduced a new

‘Super Soft’ range in our lowest priced

‘good’ quality tier. These initiatives

resulted in gains in our volume share

of the bathroom textiles category.

We also demonstrate value across

the range by reducing prices as input

costs fall. During the year we reduced

prices on a number of our furniture lines

and lowered prices on many products

across other categories in the spring.

For us, and for our customers, value

is equally important at higher price

tiers. We can see this in attitudes

towards product quality and also

towards sustainability. Where we have

introduced more sustainable materials

into many of our ranges we have

typically maintained, or even reduced,

retail prices. For example, we reduced

the price of our Dorma 300 thread

count fitted sheet whilst re-sourcing

to a more sustainable cotton, and our

Teddy throws are now made from

recycled polyester at no extra cost to

our customers. We also extended the

higher quality tiers in our cushions

category, with new compositions using

beading, sequin embroidery and wool

blends, all hand-crafted in India. These

new and innovative designs enabled

us to stretch our price points while

continuing to offer outstanding value

for money.

As we grow our offer into new areas,

we remain highly focused on ensuring

value at all price points, even within

more nascent categories. We have

increased our curated range by

approximately 20,000 products in the

last year with the same product quality

and price focus. We will continue to

grow our ranges in this way, with further

additions in categories such as nursery

furniture and live plants.

Joy

Alongside outstanding value, we are

equally focused on delivering joy for our

customers. While shoppers will work

hard to be savvy, looking for ways to

A plan for

sustainable

growth

With our significant market share

runway and deep understanding

of our customers and product

categories, I have never been

more excited about our plans

for the future as we seize the

opportunity to:

Strengthen our

customer offer

Extend and digitalise

our total retail system

Evolve our marketing

ecosystem

Seizing the opportunity to

strengthen our customer offer

We are constantly striving to improve all parts of our customer offer

but in two particular areas we are redoubling our efforts: offering

outstanding

value and helping to deliver joy to our customers,

through our products, services and customer experiences.

Price drops

Over 1,000 lines reduced

in the spring.

Improving range

architecture

Held prices on Egyptian

cotton towels despite

cost price increases

whilst introducing new

‘good’ price point.

Innovation

New compositions

introduced in

cushions including

towelling, beading,

sequin embroidery

and wool blends.

Sustainability

Introduced more

sustainable materials

while maintaining prices.

Curated range

growth

Increased range by

c.20,000 to c.70,000

product lines.

Extended

guarantees

Our Egyptian cotton towel

collection uses more

responsibly sourced cotton

and comes with a five-year

guarantee.

Generating

value and joy

Dunelm Group plc Annual Report and Accounts 202316

save and balancing price and quality to

meet their budget, they are also looking

for their experiences and purchases to

bring them joy.

Our efforts to deliver this are reflected

in how we talk to customers in store

(we track ‘fast’ and ‘friendly’ feedback

scores for every shop), how our

marketing content does not take itself

too seriously, and by the selection of

food and offers in our Pausa cafes (for

example the giant coronation jammy

dodgers). However, we also offer joy in

our product development, in a way that

few other product companies would do.

One way to bring joy is through colour,

which we have embraced in our new

‘pride and joy’ collections for autumn/

winter 2023. We have also extended our

collaboration with the Natural History

Museum to bring customers products

with personality, and grown our Disney

ranges, introducing Mickey Mouse

designs across a number of categories.

The joy of products also requires

us to ensure our customers have a

high-quality shopping experience,

so reducing disappointment when

something goes wrong is also a focus.

We are growing our home delivery

perfect order rates, shortening

lead-times, and resolving problems

efficiently when things do not go as

planned.



Extending and digitalising

our total retail system

One of the key advantages of our

business model is what we call our

total retail system, which combines

the benefits of physical stores with the

convenience of online shopping, and

the reach of our marketing ecosystem.

Whilst digital sales have increased

in recent years (now accounting for

36% of total sales) our stores remain

fundamental to our success, not least

by fulfilling an increasingly important

role in marketing to, and being a part of,

their local communities.

We have continued to expand our store

estate, with three new openings last

year and our 180th store in Greenwich,

south-east London, opening after the

year end. The ongoing programme

to refit our older stores to the latest

standards for store environment

and layout also continues with good

paybacks. The success of our recent

openings and attractive return on

investment is encouraging, and we see

opportunity to double the run rate of

new (or relocated) stores in the next

two years.

The typical Dunelm superstore

has approximately 30,000 sq ft of

trading space (including a 10,000 sq

ft mezzanine floor) in an out-of-town

location. We are delighted with the

returns we generate on stores like

these, Weymouth being a recent

example. In recent years we have

opened four smaller stores, averaging

c.15,000 sq ft, and two town-centre

locations of around 30,000 sq ft. We are

seeing the same good returns across all

these openings, with payback periods

averaging under three years.

With better data and insights to

support location planning for new store

selection, we now expect to open five

to ten new stores (including relocations)

in each of the next two years. These are

full-service Dunelm stores, amplifying

our online offer and driving local

customer awareness to enable us to

benefit fully from our total retail system.

We will continue to apply our usual

discipline and tight operational grip to

these investments.

At the same time, we continue to

digitalise our total retail system

to improve our customer offer

and increase the efficiency of our

operations. In the last six months we

have been able to offer customers more

convenient payment options such as

Klarna, shortened lead times through

weekend deliveries and improved

our communications with customers.

In addition to these improvements to

our customer offer, we have begun

to roll out new product master data

management tools which will deliver

benefits across our operations, and

our suppliers. Our new ChatBot has

automated some post-sale service

communications, enabling more

customers to self-serve.

Seizing the opportunity to extend

and digitalise our total retail system

One of the key advantages of our business model is what we call our total

retail system, combining the benefits of physical stores with the convenience

of online shopping, and the reach of our marketing ecosystem. At the same

time, we continue to digitalise our total retail system to improve our customer

offer and increase the efficiency of our operations.

Recent store openings, outside of our traditional size and location criteria,

have demonstrated strong payback. For each of the next two years we

expect to accelerate openings to five to ten new (or relocated) stores.

Accelerating openings: Superstore openings since FY19

Typical superstore  In-town superstore  Smaller superstore

Square feet (‘000)

FY19 FY24 H1

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 17

CEO’S REVIEW

Over the next 12 months we will further

improve our website experience by

using new search tools, introducing

faster site architecture and increasing

the options for delivery of furniture

items. We will continue to expand

our product offer, with new ranges

and made-to-measure categories as

well as launching further convenient

payment options such as long-term

credit. To improve the efficiency of our

operations, we will launch new tools

for forecasting and replenishment and

improve the management of stock in

our warehouses, with both of these

initiatives also increasing availability for

our customers. We will also increase

our personalised communication with

customers, which we describe in more

detail below.



Evolving our marketing

ecosystem

During the year we deepened our

understanding of consumer attitudes to

the home and home shopping, giving

us greater insight into the customer

opportunity for our next phase of

growth. Comprehensive research

has allowed us to better understand

the attitudes of existing and target

customers. For example, whilst home

continues be a strong focus for many

households, motivators can be very

different, with home variously an

expression of personal style, a place of

sanctuary, an opportunity to socialise,

and a place to spend time with family.

The opportunity is to reach target

customers with more tailored and

personalised messages which appeal

to these motivators. At the same time,

growing awareness of the breadth of

our category offer will attract both new

customers and increase the shopping

frequency of existing ones.

At present, Dunelm is typically only top

of mind (1st, 2nd or 3rd mention) for

around half of the product categories

we offer, demonstrating the breadth of

the opportunity.

We can reach these target audiences

more effectively through our ever-

evolving marketing ecosystem. We

continue to make progress towards

a single combined view of our store

and online customers, with our online

payments system to be rolled out to

stores in the first half of this financial

year. In the meantime we have a

significant database of online customers

and those store customers who have

provided an email address. We are

combining data from multiple sources,

including demographics and previous

purchasing behaviour, to begin a more

targeted and personalised level of

marketing, including optimising the

timing of customer communications

and customer-specific product

recommendations within

marketing emails.

We are also testing a more customised

website, where paid search will lead to

a personalised dunelm.com landing

page with a greater range of options

beyond the specifically searched-for

product. This activity is at an early stage

and being approached with our usual

test and learn mindset, but we believe it

provides exciting opportunities for

a better customer experience and

future growth.

At the same time we continue to develop

the effectiveness of our paid marketing

channels and have now performed

testing on the effectiveness of most of

our brand and performance marketing

spend. Tests conducted in the year have

given us the confidence to increase

our brand marketing investment. Our

new brand campaign is launching this

autumn and is our most ambitious ever.

Seizing the opportunity to

evolve our marketing ecosystem

During the year we deepened our understanding of consumer attitudes to

the home and home shopping, giving us greater insight into the customer

opportunity for our next phase of growth. We can reach these target

audiences more effectively through our ever-evolving marketing ecosystem.

Personalisation presents

an exciting opportunity

to improve our customer

proposition and drive

profitable growth.

New brand campaign

launches this autumn to

extend our reach.

But before we begin...But before we begin...

We’ve noticed you looking, and we think you’d love these!

Dunelm Group plc Annual Report and Accounts 202318

Building sustainability into all that we do

We strive to make decisions that

are guided by our purpose and

underpinned by our shared values

that create value for our stakeholders

in a balanced and ethical way. We

are becoming bolder in delivering

meaningful initiatives across the

business to build sustainability

into all that we do.

Our Conscious Choice range

continues to expand. To qualify

for this range, each product

must be made from at least 50%

more sustainable materials (by

weight) compared to conventional

alternatives. Conscious Choice

options now represent c.15% of

our own brand product ranges

and we are working on further

category extensions. We have been

introducing recycled materials

into our textiles ranges using, for

example, recycled polyester in

cushion fillings and bedding ranges.

We are equally excited by the

opportunities for further product

differentiation in our non-textiles

range, by using materials that are

less carbon-hungry (such as recycled

steel and aluminium) in saucepans

and lighting. Our goal is to launch

these products at competitive price

points, as we believe sustainability

should be accessible to all. We take

a holistic approach to achieving

this – for example, in the design of

packaging to reduce transport costs,

waste disposal costs and (in the

case of plastic packaging) tax.

Our nationwide textiles take-

back scheme continues to gain

momentum. In February 2023, we

launched a new product range called

‘Remade’ in our Conscious Choice

assortment, made of materials

coming from pre-loved textiles

such as those generated from our

take-back scheme. This initiative

reflects our commitment to and first

step towards product circularity, by

recycling returned materials and

developing products from end-of-

life items.

We ‘do the right thing’ by looking

after our colleagues – we support

their mental and financial wellbeing,

invest in learning and training

opportunities and aim to make

them feel ‘at home’ in a diverse

and inclusive workplace.

We continue to support our

store communities through local

fundraising initiatives and by

opening up our retail and cafe

spaces to community groups and

small businesses. We trialled a

successful summer ‘Delivering Joy’

campaign on the back of our popular

winter events and we are looking at

how we can create wider social value

in our communities.

Finally, we do all the above in

an ethical and responsible way,

keeping our house in order through

mandatory training in responsible

business conduct (including product

safety protocols, anti-bribery,

prevention of modern day slavery,

data protection and responsible

marketing and communications),

and by promoting (and auditing)

responsible supply chain practices.

For more information, see page 26

and online in our Sustainability

Report 2023.

Summary and Outlook

We delivered another strong

performance in FY23 in a challenging

environment. We continued to think

long term and invest for the future while

delivering a strong performance

for our stakeholders. Record sales,

continued growth in market share and

customer numbers, and good strategic

progress were underpinned by our

tight operational grip on gross margin

and costs.

Consumers are still responding to their

own cost-of-living pressures and there

remains uncertainty as to what this

means for discretionary spend. Against

this backdrop we remain focused on our

proposition and ensuring our customer

offer is as relevant as ever. In that

context, we are pleased with trading

early in the new financial year.

We have a clear plan for sustainable

growth and the work we are doing to

strengthen our customer offer, extend

and digitalise our total retail system and

evolve our marketing ecosystem leave

us well positioned to capitalise on the

opportunities available for our business.

We have never been more confident

about our short, medium and long-term

prospects and will therefore continue

to invest where we see good returns,

including in accelerating our store

estate growth.

We are excited to continue to deliver

our strong performance record in the

year ahead.

Nick Wilkinson

Chief Executive Officer

20 September 2023

50% recycled

plastic from Plastic Bank® is

used to make the Quallofil®

Blue fibre seat filling in our

Marlow armchair. The chairs

also have recyclable feet

and frames.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 19

KEY PERFORMANCE INDICATORS

Measuring our progress

The Board uses a range of financial and non-financial key performance indicators (KPIs) to measure overall Group

performance and progress against our strategic priorities and to determine CEO and CFO remuneration.

Non-financial

We continue to make good progress in reducing

our carbon intensity, with our decarbonisation

programme in stores contributing to a further

reduction in Scope 1 emissions this year. We are

also transitioning our company car fleet to hybrid or

electric vehicles. Since the year end we introduced

our first compressed natural gas vehicles in our

trunking network, helping us to continue to reduce

our carbon emissions in FY24.

Why this measure is important

This measure helps us to understand how

successful we are in reducing our impact on the

environment and achieving our long-term carbon

reduction targets.

Scope

This metric is for Scope 1 emissions only. Scope

2 emissions for FY23 are negligible due to the

purchase of renewable electricity. For further

details on all carbon emissions, see our TCFD

report on pages 40 to 47.

Scope 1 intensity reduction

Reduction versus base year and Scope 1

tCO

e/£1m Group revenue

Base

year

Base

year

-32%

-20%

Listening and learning is one of our shared

values and we undertake an annual colleague

engagement survey to derive an eNPS

score. In FY23, we upgraded our colleague

engagement platform, allowing colleagues to

interact directly with their line managers. Our

year-on-year eNPS fell by 5%pts, returning to

its pre-pandemic high point. Participation was

particularly high at 82% (FY22: 78%) enabling

us to better understand our colleagues and to

take more targeted action.

Why this measure is important

This measure rates our colleagues’ experience

with us and the survey helps us understand

where we need to improve.

Scope

We compare results from the May survey

each year. However, due to Covid the May

2020 survey was postponed, and in FY20

we compared the November 2019 and

November 2018 surveys and in FY21, the

May 2021 and November 2019 surveys.

Employee net promoter score (eNPS)

Year-on-year improvement %pts

+9%

+1%

-5%

+1%

–5%pts –32% –36%

During FY23, we moved our environmental

accreditation to Better Cotton, who are industry leaders

in this area. We remain committed to sourcing c.100%

more responsible cotton by 2025. However, FY23 was a

year of transition during which we were registering and

accrediting suppliers to Better Cotton. We expect to

see a significant improvement in FY24 as the remainder

of our suppliers complete this process and our new

approach is more established across our supply base.

Why this measure is important

There are both ethical and environmental

considerations with cotton production, which our ‘More

Responsibly Sourced Cotton’ standard addresses.

Scope

In FY23, we became Better Cotton members and

moved to their verification for our Spring/Summer

2023 products. As Autumn/Winter 2022 was a

transition season, these sales were excluded.

This approach is for FY23 only.

Percentage of own brand cotton

products which meet our ‘More

Responsibly Sourced Cotton’ standard

1,2

We have achieved a 36% reduction in virgin plastic

packaging in FY23 against our FY20 base. We have

both reduced the amount of packaging we are

using, for example by introducing thinner plastics

or alternative materials, and increased the recycled

content.

Why this measure is important

This measure helps us to understand how

successful we are in reducing our impact on the

environment by reducing the amount of virgin

plastic in our packaging.

Scope

This metric includes all plastic product packaging

for own brand products (primary packaging) plus

sales packaging (in-store carrier bags and home

delivery packaging). Plastic that has a recycled

content greater than 30% is classed as non-virgin

plastic. All plastic packaging weights for the FY20

baseline and for Q1–Q3 for FY22 were assumed to

be virgin plastic. Recycled % was incorporated into

the calculation from Q4 FY22 following improved

availability of data.

Reduction in virgin plastic packaging

of own brand products (by weight

per £1 sales) versus base year

Whilst we believe our colleague base is

representative of wider society, our role-model

leaders do not currently show the same level of

representation.

Why this measure is important

At Dunelm we strive to be an inclusive

organisation. We believe that having a

colleague base that is representative of

wider society will ultimately lead to a better

proposition for our customers.

Scope

Our role-model leaders are defined as ‘Heads

of’ and above and include our regional and

store coaches. We currently have nearly 300

of these roles across the organisation and we

measure the proportion of these colleagues

that come from ethnically diverse backgrounds.

Ethnic diversity of our role-model

leaders

New

% of role-model leaders from an ethnically

diverse background

3.8%

Our take-back service has continued to

prove popular with our customers in stores.

We are now collecting over 70 tonnes of

textiles per month and we improved our

collection and sorting processes during

the year to help with our journey towards

product circularity. During the year we also

trialled the take-back of other homewares

products in a selection of stores.

Why this measure is important

This measure supports our commitment to

move towards a circular economy, reduce

our impact on the environment and support

local communities.

Scope

This metric covers own brand products sold

in our stores.

Percentage of own brand products

for which we offer an easy-to-use

take-back service

61%

26%

2019 2020 2021 2022 2023

2019 2022 2023 2020 2022 2023

2022 2023

2023

LTIP LTIP

61%

26%

3.8%

LTIP

-36%

-23%

1 Bases of reporting for these metrics are available at corporate.dunelm.com.

2 No comparative figures are presented for this KPI due to changes in the calculation methodology. For details, please refer to the basis of reporting documents at corporate.dunelm.com.

Dunelm Group plc Annual Report and Accounts 202320

Remuneration measures

Details of measures used for FY23 bonus and LTIP outcomes can be found on pages 105 to 107 of the Remuneration Report.

Further information on the performance criteria that apply to the FY24-26 LTIP award can be found on pages 115 to 116.

Bonus LTIP

Financial

We achieved strong revenue growth of 3.6%

by offering customers relevant product

throughout the year, from items to help them

save on energy bills during the winter to

everyday essential items offering great value

for money.

Why this measure is important

We use total revenue as an indicator of

how relevant we are to our customers, as it

demonstrates how successful we are at selling

the right products through the most convenient

channels.

Scope

FY22 included a 53rd week for statutory

reporting purposes. On a comparable 52-week

basis sales growth was 5.5%.

We remain a strongly cash generative business

with free cash flow of £160m. We converted 81% of

operating profit to free cash flow while continuing

to invest in new stores and refit activity.

Why this measure is important

Dunelm is highly cash generative. This measure

allows the Board to monitor cash flows to support

investment decisions for long-term profitability,

or to return surplus cash to shareholders.

Scope

Free cash flow is defined as net cash generated

from operating activities less capex (net of

disposals) and business combinations, net interest

paid (including leases) and loan transaction costs,

and repayment of lease liabilities. FY22 reflects

53 weeks of trading whereas all other years are

52 weeks.

Total revenue

£m and growth %

Free cash flow

£m

4.8%

11. 4%

37. 8%

1,581

213

83.6

1,336

158

62.9

1,058

109

42.9

1,100

126

49.9

175

153

160

109

+8.3%

+3.8%

+8.5%

+2.8%

+12.2%

+2.8% £1,639m

£193m

75.0p

£160m

We have grown our active customers by 2.8% as

we continued to attract new customers into our

stores and online during a challenging year. We

have seen broad based growth across age and

income groups as well as particularly strong

customer retention.

Why this measure is important

We use this metric to measure the growth in

our active customer base and therefore our

ability to reach new customers. It is important

as it underpins our growth in sales. This

measure combines our active store and online

customers.

Scope

Growth in unique active customers who have

shopped in the last 12 months, based on

management estimates using Barclays data.

Unique active customer growth

% growth

NPS was relatively stable during FY23. We saw

similar or improved year-on-year scores in three

of the four quarters, with service in the second

quarter being impacted by exceptional demand

for our winter ranges.

Why this measure is important

The NPS metric is a common business tool that

measures how likely people would (or would

not) be to recommend a product, service or

company. At Dunelm we use this to measure

how our customers rate their full experience

with us.

Scope

We measure customer NPS across the different

channels that our customers shop with us and

the metric above is a weighted average.

Net promoter score (NPS)

Year-on-year improvement %pts

Profit before tax (PBT) of £193m was 9.4% lower

than FY22, as expected, with FY22 benefitting

from an extra week of trading, an additional

Sale event and pent-up demand following the

final Covid lockdown. Gross margin was closer

to historical levels and we maintained tight

control of operating costs despite inflationary

pressures, particularly on wages.

Why this measure is important

PBT measures the overall financial performance

of the business, reflecting sales, gross margin

and cost control. It is also used as a key bonus

measure.

Scope

FY22 included a 53rd week for statutory

reporting purposes. On a comparable 52-week

basis PBT fell by 7.8% between FY22 and FY23.

Profit before tax

£m and % sales

Diluted earnings of 75.0p was 10.3% lower than

FY22 reflecting the lower profit before tax in the

year and an increase in the rate of corporation

tax.

Why this measure is important

Earnings per share is a key measure for

shareholders and one of the performance

criteria for awards under our LTIPs.

Scope

FY22 included a 53rd week for statutory

reporting purposes. On a comparable 52-week

basis EPS fell by 8.6% between FY22 and FY23.

Diluted earnings per share

pence and growth %

1,639

193

75.0

153

-3.9%

11.8%

46.6%

26.3%

10.3%

-14.0%

18.4%

13.5%

32.9%

3.6%

11.8%

-10.3%

2019 2020 2021 2022 2023 2019 2020 2021 2022 2023

2019 2020 2021 2022 2023

Bonus

LTIP

–0.9%pts

+1.8%

-4.2%

-0.9%

+4.2%

2019 2020 2021 2022 2023

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 21

Total sales

£1.64bn

FY22: £1.58bn

Total ordinary dividend

42p

FY22: 40p

CFO’S REVIEW

Focus on delivering

outstanding value

We delivered another strong performance in FY23 with growth in sales, customer

numbers and market share, and tight operational grip. Our significant free cash

flow allowed us to return £163m to shareholders.

Total sales for the period to 1 July

2023 increased by 5.5% to £1,639m

on a comparable 52-week basis (FY22

52w: £1,553m, FY22 53w: £1,581m).

Compared to FY19 (the last fully

comparable year before the pandemic),

total sales grew by 49% (FY19: £1,100m).

We saw strong sales growth for

the year despite the challenging

market conditions and particularly

strong comparative in Q1 (due to our

rescheduled Summer Sale and pent-

up demand following the final Covid

related lockdown). We were pleased to

see growth increasingly from volume as

we progressed through the year. Sales

increased both in stores and online,

with digital sales now making up 36%

of total sales, up 16ppts since FY19.

Growth was broad based across

categories as we focused on relevance

and value throughout the year.

Customers enjoyed shopping our

Winter Warm ranges as they looked for

ways to mitigate rising heating costs.

Similarly, our Summer Living collections,

in particular garden furniture and

decorations, performed well in the

warmer weather towards the end of the

financial year. Our two main Sale events

also resonated with our home-loving

customers. We continued to improve

and expand our offering, adding 20,000

carefully curated products online while

extending our Conscious Choice range

of sustainability-focused lines.

We continued to focus on offering

outstanding value to our customers

across all our categories and price

points. As a result of our relentless focus

on value we were pleased to be able to

pass on cost savings from lower freight

rates and reduce prices on over 1,000

lines in the final quarter of the year.

Karen Witts

Chief Financial Officer

Dunelm Group plc Annual Report and Accounts 202322

Our broad product offer continues

to resonate well with our customers

and the number of active customers

increased by 2.8%

in FY23, with an

increase in customer retention. We

were pleased to see higher growth in

the younger (16 to 24 years) and lower

income (<£20k) groups, reflecting our

growing appeal and focus on value.

We continued to gain market share,

with our sales growing year-on-year

and our share increasing by 40bps to

7.2%

against a combined market for

furniture and homewares which was

broadly flat. We were pleased to grow

share in homewares by a further 70bps

to 11.0%

. Our market share in furniture,

where we have been building a stronger

customer offer and operating model,

was broadly flat. Sales across our

furniture categories increased by 4%

year-on-year, with a particularly strong

performance in upholstery ranges

being partly offset by lower sales in

cabinet categories.

Gross margin

Gross margin of 50.1% was in line with

expectations and 110bps lower than

last year (FY22 52w: 51.2%, FY22 53w:

51.2%), reflecting both a return to more

normal patterns of customer behaviour

in our Sale events as well as the impact

of higher input cost prices.

We have good visibility of FY24 input

costs. We plan our purchasing for

each season, which helps us manage

changes in raw material prices, freight

costs and foreign exchange within

our margin rates. Looking ahead, we

will continue to balance the impact of

these with our commitment to offering

outstanding value to our customers.

We expect a net tailwind from

these factors this year, as well as the

sustainable benefit from the operational

actions we have taken in recent years,

and therefore expect gross margin in

FY24 to be c.100bps higher than FY23.

Operating costs

Total operating costs were £622m

(FY22 52w: £582m, FY22 53w: £592m),

representing an operating cost:sales

ratio of 38.0% (FY22 52w: 37.5%,

FY22 53w: 37.4%).

We maintain a tight operational grip on

costs and have worked hard to offset

inflationary impacts of c.£20m, mainly

relating to wages, through operational

efficiencies. Efficiencies in stores and

the supply chain, as well as the removal

of excess storage costs, and other small

one-off impacts generated savings

of £18m.

Volume growth added £8m of costs

to our distribution network and

performance marketing spend. The

annualisation of investments during

FY22 and new store openings added

£7m to operating costs in the period.

Our investments in recent years have

delivered strong sales growth and

so we continued to invest, increasing

spend by £22m on digitalisation

and building new capability in data,

technology and insight and analytics.

We are focused on seizing

opportunities for growth and will

continue to deploy resources

thoughtfully in digitalisation, capability,

and accelerating our store roll out

plans. We have been gaining new

insight into the effectiveness of our

marketing spend and our data-led

approach is giving us confidence to

invest more in areas such as brand

marketing in order to expand our

reach. We will continue to invest in

digitalising our total retail system as

well as expanding our store portfolio.

We also expect inflationary pressures

to continue in FY24, which we will

partially mitigate through productivity

improvements. While our focus remains

on tight operational grip and making

every pound count, we expect our

operating cost:sales ratio to increase

to c.39% in FY24.

Profit and earnings per share

Operating profit of £199m was £15m

lower than the comparable period in

FY22 (FY22 52w: £214m, FY22 53w:

£218m), against a tough backdrop and

reflected both tight control of margin

amidst inflation in our operating costs

and our ongoing commitment to

investment for the future.

Net finance costs of £6m (FY22

52w: £5m, FY22 53w: £5m) included

interest on IFRS 16 lease liabilities of

£5m (FY22 52w: £5m, FY22 53w: £5m).

Profit before tax in the period was

£193m (FY22 52w: £209m, FY22 53w:

£213m), a reduction of £16m year-on-

year on a comparable 52-week basis.

Profit after tax of £152m (FY22 52w:

£168m, FY22 53w: £171m) reflected

an effective tax rate of 21.2% (FY22:

19.5%). The increase in the effective tax

rate is broadly in line with the increase

to the UK headline rate of corporation

tax, which moved from 19% to 25% for

the final three months of the year. The

effective tax rate was 70bps higher than

the UK headline rate, due to our usual

items of disallowable expenditures.

In FY24 we expect PBT to be higher

than FY23, and the effective tax rate

to continue to trend slightly above the

headline rate of 25% from FY24.

Basic earnings per share (EPS) for the

period was 75.2 pence (FY22 52w: 83.0

pence, FY22 53w: 84.5 pence). Diluted

earnings per share was 75.0 pence (FY22

52w: 82.1 pence, FY22 53w: 83.6 pence).

Revenue

FY23

(52 weeks)

YoY

(52w v 52w)

YoY

(52w v 53w)

Total Group sales £1,638.8m +5.5% +3.6%

Digital % total sales 36% +1ppt +1ppt

Active customer growth

N/A +2.8%

Homewares market share

11.0% +70bps

Furniture market share

2.0% +0bps

1 Growth in unique active customers who have transacted at least once in the 12 months to June 2023. Management estimates using Barclays data.

2 GlobalData UK homewares and furniture markets, July 2022 to June 2023. Furniture excludes kitchen and bathroom furniture. FY22 has been restated.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 23

CFO’S REVIEW

There was a small working capital

outflow of £4m in the period (FY22:

£15m outflow). The prior year outflow

reflected the decision to build inventory

in order to mitigate the risk of further

supply chain disruption. Whilst

inventories at the end of FY23 of £211m

(FY22: £223m) were lower than FY22,

the resulting working capital inflow

was broadly offset by a reduction

in payables due to lower accruals,

including freight accruals. We

expect working capital in FY24

to be broadly stable.

Total capital investment of £22m (FY22:

£42m) primarily related to £19m spent

on the three new stores opened in the

period, refits of ten existing stores, and

our decarbonisation initiatives. FY22

included £18m paid to acquire the

trade and assets of Sunflex, a division

of Hunter Douglas (UK) Limited.

CFO’s review continued

We expect to increase the rate of new

store openings to five to ten (including

relocations) in FY24, therefore capital

expenditure will increase to c.£30-40m.

Cash tax paid was £38m (FY22: £35m)

reflecting the higher effective tax rate.

FY22 also included cash receipts in

relation to research and development

claims made at the end of FY21.

In the period, the Group spent £7m

(FY22: £28m) purchasing shares to

be held in treasury to satisfy future

obligations under its employee share

schemes. The Group held 1.7m shares

in treasury as at 1 July 2023.

After total dividend payments in the

period of £163m (FY22: £282m), the

Group ended the year with net debt

of £31m (FY22: £24m).

1 Including impairment and loss on disposal.

2 Excluding interest on lease liabilities.

3 Excluding lease liabilities. Full definition provided in the table of alternative performance measures.

4 Adjusted EBITDA defined as EBITDA less depreciation on right-of-use assets.

5 EBITDAR defined as EBITDA plus rent.

6 Fixed charges are defined as net interest costs plus right-of-use asset depreciation plus rent.

Cash generation and net cash

In the period, the Group generated £160m of free cash flow (FY22: £153m), with strong conversion of operating profit to free

cash flow of 81% (FY22: 70%).

FY23

(52 weeks)

£m

FY22

(53 weeks)

£m

Operating profit 198.8 217.7

Depreciation and amortisation

79.4 79.3

Net movement in working capital (4.2) (14.8)

Share-based payments 4.8 4.8

Tax paid (38.2) (35.2)

Net cash generated from operating activities 240.6 251.8

Capex and business combinations (21.8) (41.7)

Net interest and loan transaction costs

(1.1) (2.1)

Interest paid on lease liabilities (5.3) (4.8)

Repayment of principal element of lease liabilities (52.0) (50.2)

Free cash flow 160.4 153.0

Banking agreements

At the year end date, the Group had

in place a £185m sustainability-linked

unsecured revolving credit facility

(‘RCF’). The terms of the RCF included

covenants in respect of leverage

(net debt

to be no greater than 2.5×

adjusted EBITDA

) and fixed charge

cover (EBITDAR

to be no less than

1.75× fixed charges

), both of which

were met comfortably as at 1 July 2023.

Since the year end the Group has

renegotiated its RCF, extending the limit

to £250m to reflect the growth in the

business in recent years. The maturity

date is September 2027 with an option

to extend by a further two years at

Dunelm’s request, subject to lender

consent. The terms are consistent

with normal business practice and

the covenants are unchanged. In

addition, the Group maintains £10m

of uncommitted overdraft facilities.

Dunelm Group plc Annual Report and Accounts 202324

Capital and dividend policies

The Board policy on capital structure

targets an average net debt level

(excluding lease obligations and short-

term fluctuations in working capital)

of between 0.2× and 0.6× the last

12 months’ EBITDA

. The Group’s

dividend policy targets ordinary

dividend cover of between 1.75×

and 2.25× earnings per share

during the financial year to which

the dividend relates.

The Board will continue to consider

returning surplus cash to shareholders

if average net debt, excluding lease

liabilities, over a period, consistently

falls below the minimum target of

0.2× EBITDA

, subject to known and

anticipated investment and expenditure

plans at the time.

7 All Dunelm colleagues are based in the United Kingdom, except for 50 colleagues who work in our store in Jersey. Payroll taxes for FY22 have been restated.

8 EBITDA defined as operating profit plus depreciation and amortisation of property, plant and equipment and intangible assets plus loss on disposal and

impairment of property, plant and equipment and intangible assets plus depreciation on right-of-use assets.

9 Dividend cover is calculated as earnings per share divided by the total ordinary dividend relating to the financial year.

Capital and dividend policies

• Target average net debt

between 0.2× and 0.6× the last

12 months’ EBITDA

• Ordinary dividend cover of

between 1.75× and 2.25×

earnings per share during

the financial year to which the

dividend relates

• Return surplus cash if net debt

consistently falls below the

minimum target of 0.2×EBITDA

Our Tax Strategy

FY23

£m

FY22

£m

Net VAT collected 164.7 163.3

Payroll taxes including National Insurance

56.2 50.2

Corporation tax 38.2 35.2

Plastic packaging tax 0.1 —

Total tax contributions 259.2 248.7

Dunelm is committed to full compliance with all statutory obligations and full disclosure to tax authorities. The Group’s tax affairs are

managed in a way that is consistent with the Group’s commitment to high standards of governance. The Board has established a set of

principles that form the basis of the management philosophy and the tax policy of the Group. These principles can be found in full in our

Group Tax Strategy which is published on our corporate website and reviewed each year. Our Group Tax Strategy sets out one shared

vision within the Group of tax compliance and one view of performance.

Tax Strategy available on corporate.dunelm.com

Dividends

The Board has proposed a final ordinary

dividend of 27 pence per share,

recognising our strong performance in

the year and our ongoing confidence

in the business. This takes the full year

ordinary dividend to 42 pence per

share, 5% ahead of the 40 pence per

share paid in FY22, with dividend cover

of 1.8×, which is within the range of

our stated policy. The final dividend

will be paid on 20 November 2023

to shareholders on the register on

27 October 2023, subject to it being

approved by shareholders at the AGM.

We paid total dividends of £163m in

the year, including a special dividend

of £81m.

Karen Witts

Chief Financial Officer

20 September 2023

The Group’s full capital and dividend

policies are available on our website at

corporate.dunelm.com.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 25

SUSTAINABILITY

Visit Dunelm.com or ask in-store for details.

Bag and bring your clean and

undamaged home textiles here

and we’ll give them a second life

DUN4735/102712

Conscious Choice

Since its launch in August 2022, we

have grown our Conscious Choice

range to c.15% of own brand

products.

Building sustainability

into all that we do

We are taking action to embed sustainability in

the business and to give our stakeholders more

information and choice.

Our progress in FY23

Colleagues

Our learning-thriving-belonging

people strategy supports

our commitment to making

our colleagues feel ‘at home’

wherever they work. In FY23, we:

• Invested in learning and

development opportunities

to strengthen our leadership

capabilities and promote a

‘learning for life’ mindset.

• Increased support on financial

wellbeing given ongoing cost-

of-living pressures.

• Continued focus on colleague

development and retention,

which increased to 87%.

Customers

We have developed many

more sustainable choices for

customers, both across our

product range and in other

services we provide. In FY23, we:

• Launched and grew our

Conscious Choice

range to

c.15% of own brand products by

SKU and created an information

hub on our website.

• Increased focus on ‘care and

repair’ and other upcycling

options.

• Collected c.70 tonnes a month

of pre-loved textiles and

used some of these in our

Remade range.

Communities

We continued to support

communities in and around our

stores through various local

initiatives and in-store services.

In FY23, we:

• Collected and distributed

c.62,000 gifts during our winter

‘Delivering Joy’ campaign

(a threefold increase).

• Welcomed small businesses

and community groups to

make use of space in our

stores and Pausa cafes.

• Raised over £800k for charities,

including over £700k for our

Group charity partner, Mind.

In May 2023, we launched a range

of 21 Remade cushions and throws,

which use recycled fibres, such as

those collected through our textiles

take-back services.

1 To be part of our Conscious Choice range, every product must be made from at least 50% more

sustainable materials (by weight) compared to conventional alternatives.

2 Retention is the percentage of colleagues from the start of the financial year (July 2022) who remained

employed until the end of the financial year (June 2023), excluding any planned leavers.

‘Find your happy place’

is the central slogan for our

employer value proposition.

Dunelm Group plc Annual Report and Accounts 202326

Protecting our business

Our strong corporate and ESG governance frameworks,

holistic approach to risk management, well-established codes

of conduct and policies and Group-wide focus on health and

safety help to protect our stakeholders and preserve value in

our business.

Whilst the Board has overall responsibility for the Group’s

sustainability framework and strategy, responsibilities are

delegated to the CEO and Executive Team, supported by

steering groups as set out on page 64. This includes the

Group’s Risk and Resilience Committee, which helps to keep

the Board and Audit and Risk Committee informed of new or

emerging risks (including those related to sustainability) as

they relate to the Group. There is also a continued emphasis

at Dunelm on ‘doing the right thing’, guided by our purpose

and consistent with our shared values (see pages 1 and 73).

Suppliers

We reorganised our commercial

processes so that product quality

is reviewed alongside ethical

and environmental supply chain

standards, whilst increasing

engagement with our suppliers.

In FY23, we:

• Joined Better Cotton, industry

leaders in sustainably sourced

cotton.

• Engaged with key suppliers on

‘Better Manufacturing’, ethical

and packaging standards.

• Increased the number of

unannounced ethical audits,

resulting in corrective action,

and further increased our

visibility of supply chain

participants.

Shareholders

We shared our sustainable

and ethical performance with

shareholders, rating agencies and

banks to help them make more

informed investment decisions.

In FY23, we:

• Undertook our first third-

party materiality assessment,

gaining perspectives from

key stakeholders – including

investors and analysts – on

material ESG areas.

• Reviewed progress against

ESG metrics linked to our loan

facility (applicable only for FY23).

• Continued to engage with ESG

rating agencies.

Planet

Our improve-innovate-advocate

approach helps us focus on

things in our control, while

collaborating with others in the

industry to progress our net zero

commitments. In FY23, we:

• Reduced Scope 1 carbon

intensity and plastic

packaging, ahead of targets.

• Submitted carbon reduction

and net-zero targets to the SBTi

for validation with approval

received post year-end

• Used more recycled materials

in our products to lower our

environmental impact and to

support product circularity.

Seat at the table

We continued our advocacy

work with: Textiles 2030,

Better Cotton, the Sustainable

Logistics Forum, the British Retail

Consortium, the Aldersgate

Group, and we joined the

Sustainable Apparel Coalition.

For more information about our approach

to sustainability, progress and performance

against our sustainability metrics, see our

Sustainability Report 2023, available at

corporate.dunelm.com.

100% recycled glass

Our Pride and Joy table lamp

uses recycled glass that saves

energy during the production

process when compared with

virgin glass.

3 Please see our corporate website for our full target wording.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 27

MATERIALITY

Materiality assessment

In FY23, we undertook a

materiality assessment,

working with an

independent third

party to understand

the views of our

stakeholders on

our most material

environmental, social

and governance

(‘ESG’) topics.

We engage regularly with our key

stakeholders and believe we have a

fair understanding of what resonates

with them. However, we also recognise

the importance of applying a more

structured approach to understanding

how stakeholders view our ESG risks

and opportunities. Given greater

external scrutiny in this area and the

emergence of more prescriptive

sustainability reporting frameworks, in

FY23 we carried out our first, externally-

led materiality assessment.

The purpose of this exercise was to gain

insight into stakeholder perceptions on

how we manage our most material ESG

risks and opportunities. We present a

summary of the methodology in the

table to the right and a representation

of our findings to date in the matrix on

page 29 opposite.

While the research did not bring about

any major surprises, it elicited debate

and made us think more about why,

how and when we might communicate

more on these topics – internally and

externally. Having completed the

research in June 2023, our next task is

to utilise this work to analyse further

the potential impact of ESG risks and

opportunities over the short, medium

and long term, to review the metrics

that we use and to consider how this

work could shape the development of

our overall sustainability framework

and strategy.

Process overview

We engaged a third-party specialist to review our most material ESG topics

with our stakeholders and to create an informed assessment as a base for

further analysis of related risks and opportunities. We outline below the steps

taken so far.

Desktop audit

• Desktop assessment of company, peer group

and industry.

• Review of global benchmarks and media coverage to

identify sector issues.

• With Dunelm input, developed list of 25 ESG topics for

the survey.

Quantitative survey

• Online survey sent: 90 responses from colleagues

(including the senior leadership team and Group Board),

suppliers, customers, investors and analysts.

• Stakeholders asked to review relative impact of ESG topics

on Dunelm’s performance and viability.

• Risks and opportunities identified and plotted on matrix by

internal and external stakeholders (see opposite page).

Qualitative interviews

• Follow-up qualitative interview conducted with

24 internal and external stakeholders.

• Sessions allowed ‘free comment’, allowing deeper scrutiny

of current management approaches.

• Insight used to identify perceived ‘managed’ and ‘unmanaged’

risks, and opportunities.

Findings report

• Findings presented internally, including: degree of

stakeholder consensus, ESG disclosure gap analysis, initial

strategic and KPI recommendations.

• Findings discussed in workshop attended by Executive

Team, a Non-Executive Director, other members of the senior

leadership team, the Head of Climate Change and the Head

of Product Quality and Compliance.

Ongoing work and next steps

• Internal work to assess potential impacts and

opportunities to inform a more time-bound

materiality assessment.

• Analysis of findings to inform sustainability strategy, Group

strategic focus, performance metrics and communications.

Stakeholder identification

• Stakeholder groups mapped.

• Quantitative survey and qualitative interviewee lists determined.

Dunelm Group plc Annual Report and Accounts 202328

Materiality matrix

Environment



Responsible sourcing and

traceability



Carbon footprint



Plastics and packaging



Energy use



Sustainability of product

offering



Chemical safety



Waste management



Resource management



Climate change and

decarbonisation



Water use



Biodiversity

Social



Customer engagement and

satisfaction



Health, safety and wellbeing



Employee rights



Diversity, equity and

inclusivity



Talent acquisition and

development



Employee engagement



Community engagement

and investment

Governance



Product safety and quality



Financial performance



Data privacy and cyber

security



Human rights and supply

chain management



Business ethics



Corporate governance and

risk management



Industry engagement and

public advocacy

Increasing importance to external stakeholders

10.00

9.00

8.00

7.00

6.00

5.00

4.00 5.00 6.00 7.00 8.00 9.00 10.00

Increasing importance to internal stakeholders

Source: Buchanan Communications Ltd./Dunelm

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 29

STAKEHOLDER ENGAGEMENT

Stakeholder engagement

We seek to build long‑term relationships with our key stakeholders based on

fairness and respect, consistent with our Code of Business Conduct, and our

shared values and culture.

Key stakeholders

By understanding what our key

stakeholders care about, and

considering their perspectives,

we believe that we can build more

meaningful relationships and take

fully informed decisions that create

value for the long term.

We engage with a wide range of

stakeholders in the day-to-day running

of our business. Our key stakeholders

are those who we know are highly

likely to be affected by our actions and

decisions, and vice versa. Typically,

we engage with these stakeholder

groups regularly at an operational level,

withresponsibility held by members

of the Executive Team, and this is

described in the following pages 31

to 34. We also set out how the Board

is kept informed about the interests

of our key stakeholders, as well as

how our Board members engage with

them directly. Pages 68 to 71 in the

Governance Report provide further

detail as to how important stakeholder

feedback is presented to the Board

for discussion and debate, as well as

some examples of how the Board uses

outcomes of stakeholder engagement

in its decision-making. Examples of

metrics used by the Board to measure

the effectiveness of our engagement

are set out below.

In May 2023, we undertook research

with a third party to understand

stakeholder perceptions relating to our

most material environmental, social and

governance (‘ESG’) topics and more

information about this research can be

found on pages 28 to 29. Stakeholder

feedback from this exercise has been

included in the ‘what they care about’

entries on the following pages.

In addition to key stakeholders, we

acknowledge the importance of other

stakeholder groups on page 34.

Our S172(1) Companies Act 2006

confirmation statement is on page 35.

Examples of metrics used by the Board to measure the

effectiveness of our engagement:

  

Customers

• Unique active

customer growth

• Total revenue

• NPS

• Safety scores

Colleagues

• eNPS

• RIDDOR

incidents

• Gender pay gap

reporting

• Retention

• Whistleblowing

Communities

• Monies raised for

good causes

• Take-back

• Diversity

 

Suppliers

• % Tier 1 factories

audited

• % products with

responsibly sourced

raw materials

• Whistleblowing

• CO

emissions

Shareholders

• Share price

movements

• Free cash flow

• Profitability

• AGM voting

outcomes

1 Reporting of Injuries, Diseases and Dangerous Occurrences Regulations.

Dunelm Group plc Annual Report and Accounts 202330

Customers

2.8%

growth in unique active customers

shopping with us online and

in store

What they care about

➔ Value, style, choice and quality.

➔ Product safety.

➔ A great shopping experience

and responsive customer

services.

➔ Responsible use and protection

of personal data.

➔ Ethical and sustainable

sourcing.

Key management responsibility

Customer Director

How the Board engages

• Conducts store visits and

reviews online experience.

• Receives customer insights

report at every Board meeting.

• Monitors customer KPIs

(including NPS) and challenges

management to ensure

the customer proposition

remains at the forefront of all

development activities.

• Receives regular updates on

health and safety, product

quality and ethics, sustainability

and data protection.

How we have listened and

learned – highlights in FY23

• Reviewed value for money

across all categories and price

points, lowering prices on over

1,000 lines.

• Launched and grew our

‘Conscious Choice’ range to

c.15% of own brand products.

• Refreshed our Group-wide

policy on data protection and

privacy and continued to invest

in data security.

• Launched collaboration with

Airtasker to help customers put

their flatpack furniture together.

• Updated our health and safety

policy and continued the rollout

of a new training course for

store coaches and team leaders.

• Opened new stores outside

of our traditional size and

locations.

• Continued to develop our

ethical audit programme, which

covers suppliers of own brand

products.

Why we engage

Our business revolves around

our customers. We aim to be

Customer1st, striving to improve

our customer offer. We seek to

achieve this by delivering great

products, services and experiences.

Engagement improves our customer

insight which, in turn, influences our

strategic focus areas and capital

allocation. Ongoing investment in

customer data and analysis allows

us to respond more quickly and

accurately to develop relevant

product ranges and services, helps

drive brand awareness and grow

our customer base.

How we engage day‑to‑day

• During the shopping experience

and at point of sale in store,

with feedback being shared as

appropriate within the business.

• By means of our customer service

team and the channels by which it

communicates with our customers.

• Social media channels.

• Customer focus groups/panels.

• Customer surveys.

2 Growth in unique active customers who have transacted

at least once in the 12 months to June 2023. Management

estimate using Barclays data.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 31

STAKEHOLDER ENGAGEMENT

Stakeholder engagement continued

Colleagues

11,000+

colleagues

What they care about

➔ Fair pay and reward.

➔ Opportunities for progression.

➔ A safe, inclusive and diverse

workplace.

➔ Personal data protection.

➔ Opportunities to be listened to

and make a difference.

Key management responsibility

Stores and People Director

Why we engage

Committed and ambitious

colleagues are at the heart of our

business. We engage with them

to understand how best to recruit,

retain, motivate and reward them,

including helping with their mental

and financial wellbeing. We also

use this information to make better

decisions for our customers and

communities and to support our

strategic growth.

How we engage day‑to‑day

• Annual colleague engagement

survey, followed by targeted

pulse survey.

• Two-way ‘always on’

communication via our Home

Comforts intranet, on which

we also publish regular CEO

updates, known as ‘Nick’s Note’.

• Colleagues represented

through our NCV (see left for

more information) and our Local

and Regional Colleague Voice

networks (see our Sustainability

Report 2023 for more details).

• Store colleague roadshow.

• Weekly/monthly colleague

‘huddles’ at every store/for each

business area.

• 24/7 independent, confidential

whistleblowing hotline.

• End of year events reflect on the

past year and look ahead to the

new financial year.

How the Board engages

• Visits stores and other sites.

• The designated NED for

colleague matters and CEO

attend NCV meetings and

report to the Board.

• Receives People update in each

CEO report to the Board.

• Receives overview of

whistleblowing reports.

• Reviews key outcomes and

actions from colleague

engagement survey.

• Reviews a more detailed

colleague dashboard (including

key metrics) presented by the

Stores and People Director at

least twice per year.

• Discusses the gender pay gap

disclosure.

How we have listened and

learned – highlights in FY23

• Invested in learning and career

development opportunities to

strengthen our employer value

proposition, ‘grow’ talent and

improve succession planning.

• Piloted mentoring schemes

across the business to help with

professional development.

• Ongoing focus on colleague

financial health and support

given cost-of-living pressures.

• Taken a carefully considered

approach to colleague pay and

reward decisions for FY23.

• Personalised our benefits

system to help colleagues

easily locate their benefits

and find information to make

informed choices.

• Signed up to the ‘Menopause

Workplace Pledge’ and issued

our new menopause policy.

• Updated parenthood policies.

• Introduced pump/quick lift

trucks at our logistics site

to make it easier and more

efficient to raise pallets/totes.

• Improved the quality of uniform

for colleagues at our logistics

sites.

• Increased communication

about our charity and

community activities.

National Colleague

Voice (‘NCV’)

Our colleague representative

body, NCV, has been running for

four years. Members represent

a range of ages, ethnicities,

genders, locations, tenures and

levels of seniority across Dunelm.

During FY23, we held five

meetings, each attended by Nick

Wilkinson and members of the

People team. Marion Sears, who

is our designated Non-Executive

Director (‘NED’) for colleague

matters, attended and other

NEDs often joined, alongside

presenters (as appropriate).

Each meeting comprises three

parts: a business performance

update from Nick, a ‘What’s on

your mind?’ item for members

to raise concerns, and a ‘Big

Topic’ where we communicate

and seek feedback on important

matters. In FY23, these were

financial wellbeing, community

and charity, colleague safety,

sustainability, and reward.

The aim is to stimulate discussion

and debate, with representatives

acting as strong advocates for

their colleagues. This is achieved

by encouraging reps to ask

their wider teams for views both

generally and on the chosen ‘Big

Topic’ in advance of meetings.

After each meeting, members

share feedback with colleagues

and views and concerns raised

are presented to the Board.

The NCV is a valuable forum

for colleagues to engage, be

listened to and see action as a

result. For example, following the

community and charity session,

we increased communication of

our initiatives and ways in which

colleagues could participate and

support. And after our colleague

safety session, we trialled new

security-related initiatives. The

NCV has also been an important

part of the dialogue on colleague

pay and reward, as detailed

further on pages 71 and 118.

Dunelm Group plc Annual Report and Accounts 202332

Communities

185+

local community catchment areas

served by our stores and sites

What they care about

➔ Charitable initiatives.

➔ Services that support the

community and local area.

➔ Local employment and

volunteering opportunities.

➔ A business they are proud to

have in their neighbourhood.

Key management responsibility

Customer Director

Why we engage

By understanding local community

needs and concerns we build

awareness and trust, help evolve

our customer offer, strengthen our

local reputation and provide

another reason for people to shop

with us. We have also learned how

much our customers and colleagues

benefit from being involved

in meaningful local initiatives

and by having direct means of

communication with their local store.

How we engage day‑to‑day

• Community champions for each

region facilitate the sharing of

internal and external feedback,

learnings and ideas.

• Daily interaction with local store

communities via individual store

Facebook groups (organised by

locally appointed community

champions).

• Feedback from local businesses

and community groups who use

space in stores and Pausa cafes.

• Regular meetings with our Group

charity partner, Mind.

Suppliers

1,200+

stock and non‑stock suppliers

What they care about

➔ Fair trading and prompt

payment terms.

➔ Collaborating to maintain high

ethical standards and deliver on

sustainability initiatives.

➔ Long-term relationships.

➔ A growth opportunity for their

business.

Key management responsibility

Director of Commercial and

Supply Chain

How the Board engages

• Receives updates on

ethical trading, product

quality, modern slavery,

supplier payment terms and

whistleblowing reports.

• Receives updates on progress

against sustainability metrics.

• Ad hoc supplier meetings.

How we have listened and

learned – highlights in FY23

• Held webinars with our

key suppliers on ‘Better

Manufacturing’, ethical

standards and packaging.

• Undertook more ethical audits.

• Reviewed our protocols for

non-compliance.

• Provided greater access

to shared resources.

• Continued to collaborate

on sustainability initiatives.

• Implemented new stock

supplier portal to support

improved ways of working.

Why we engage

We work closely with our suppliers

and manufacturers worldwide to

develop relationships and business

growth opportunities through regular

engagement, and to ensure that we

are aligned on the importance of

upholding our high quality, ethical

and environmental standards.

How we engage day‑to‑day

• Hold annual stock supplier

conference and regular webinars.

• Regular supplier meetings.

• Regular contact for our committed

stock suppliers with our design

and commercial teams, as well as

our product quality, compliance

and sustainability teams.

• Dedicated procurement function

engages with non-stock suppliers.

How the Board engages

• Receives updates on charity and

community initiatives.

• Reviews community-related

KPIs, including level of take-

back and monies raised for

good causes.

How we have listened and

learned – highlights in FY23

• Expanded our ‘Delivering Joy’

campaign, achieving a threefold

increase in the number of

donated gifts.

• Launched ‘Home to Home’

trial for customers to donate

pre-loved homewares to be

redistributed to those in need.

• Expanded use of our Pausa

cafes by small businesses and

community groups.

• Raised over £700k for Mind.

• Enhanced processes for our

textiles take-back services.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 33

STAKEHOLDER ENGAGEMENT

Stakeholder engagement continued

Other stakeholders

We work with a number of other

stakeholders whose relationships

are important to the day-to-day

running of our business. These

stakeholders tend to impact

our business more than we

impact theirs and, in some cases,

engagement may be one-way.

We monitor and evaluate these

relationships regularly and the

Board is informed as required.

In all cases, our approach is to

seek to build long-term trusted

relationships based on fairness

and respect, consistent with our

Code of Business Conduct and

our values.

Other stakeholders with whom we engage include:

• Local and national UK Government bodies, including HMRC.

• Regulators, including Leicestershire County Council and Charnwood

Borough Council with whom we have a Primary Authority relationship, and

other bodies such as the Health and Safety Executive, Trading Standards

and Environmental Health officers.

• Banks and other financial institutions.

• A trusted team of professional advisers (for example, brokers, financial

PR, accountancy and recruitment firms, environment and sustainability

advisers).

• Shareholder representative bodies, ESG investment and credit ratings

agencies and potential investors.

• Other business support providers (e.g. logistics, landlords (as the majority

of our stores are leased), technology and construction/store development

companies).

• Industry bodies and working groups, such as Textiles 2030, Better Cotton

and the British Retail Consortium.

Shareholders

1,900+

shareholders including the

Adderley family

What they care about

➔ Strategy, performance and

outlook.

➔ Strong leadership.

➔ Culture and shared values

conducive to good governance

and high standards of business

ethics.

➔ Executive remuneration.

➔ ESG risks and opportunities.

Key management responsibility

CEO and CFO

Why we engage

Meaningful engagement is key to

building trust and driving long-

term success. It enables us to

better understand our investors’

priorities and concerns.

• Non-Executive Directors are

available to discuss any matter

with shareholders on request.

• Reviews AGM voting,

shareholder comments and

proxy reports. Reviews investor

roadshow feedback.

• Governance and other meetings

arranged as appropriate.

How we have listened and

learned – highlights in FY23

• Held more than 70 meetings

with shareholders (excluding

our largest shareholder) during

the year.

• Completed externally-facilitated

materiality assessment to

gain perspectives from key

stakeholders on material ESG

topics (including investors

and analysts).

• Included feedback from

Remuneration Policy

consultation within Board

discussions.

• 89.98% of issued share capital

voted at FY22 AGM.

We help our shareholders and their

representatives to have a good

understanding of our business

model, strategy, investment

opportunities and culture, and we

aim to be transparent and comply

with shareholder governance

requirements.

How we engage day‑to‑day

• Executive Directors meet with

investors during the year.

• Arranged store visits.

• Discuss ESG-related matters

on request.

• Via our corporate website.

How the Board engages

• Chair seeks regular engagement

with major shareholders on

governance and performance

against strategy.

• Consults as appropriate, including

in FY23 on the proposed new

Remuneration Policy.

• Attends results presentations and

the AGM.

Dunelm Group plc Annual Report and Accounts 202334

Section 172 statement

Decisions made by the Board must balance the occasional

conflicting needs and priorities of our key stakeholders, whilst

also ensuring they promote the long‑term success of the Group.

This duty is enshrined in section 172 of

the Companies Act 2006 (‘s.172’) which

requires a director of a company to act

in good faith and promote the success

of the company for the benefit of its

members as a whole. In doing so, they

must also have regard (amongst other

things) to a range of factors set out in

section 172(1) of the Companies Act,

including the interests of stakeholders.

Engagement with stakeholders plays

a hugely important role in ensuring

that our Directors fully understand

their needs and make well-informed

decisions that consider different

priorities. We recognise that not every

decision will benefit all stakeholders,

and we inevitably have to make trade-

offs between stakeholder groups

from time to time. By taking account

of the Company’s purpose and values

together with its strategic aims, and

closely following our decision-making

process, we aim to make sure that our

decisions are fair and consistent.

The preceding pages on stakeholder

engagement and pages 68 to 71 of the

Governance Report provide examples

of how the Directors performed their

s.172 duties during the year.

The Board confirms that during the year

under review, it has acted to promote

the long-term success of the Company

for the benefit of its shareholders

whilst having due regard to the factors

set out in section 172(1) (a) to (f) of the

Companies Act 2006.

Signed for and on behalf of the Board

Nick Wilkinson

CEO

The table below outlines other areas of this report that set out how the Board

has had regard to s.172 factors when making decisions:

s.172 factor Where to find more information Page

(a) likely consequences of

any decisions in the long

term

➔ Chair’s statement

➔ Business model

➔ CEO review

➔ Stakeholder engagement

➔ Board activities

(b) interests of the company’s

employees

➔ Stakeholder engagement

➔ NF&SI statement

➔ Board activities

➔ Remuneration Committee

report

company’s business

relationships with suppliers,

customers and others

➔ Business model

➔ Stakeholder engagement

(d) impact of the company’s

operations on the

community and environment

➔ CEO review

➔ Sustainability

➔ TCFD report

➔ Board activities

(e) desirability of the

company maintaining a

reputation for high standards

of business conduct

➔ Sustainability

➔ TCFD report

➔ Risk management

➔ Governance report

(f) need to act fairly as

between members of the

company

➔ Business model

➔ Stakeholder engagement

➔ Directors’ report

119

STRATEGIC REPORT

35Dunelm Group plc Annual Report and Accounts 2023

NON-FINANCIAL INFORMATION

Non-financial and sustainability

information statement FY23

ColleaguesCustomers

Our approach

Our vision is to build the UK’s most

trusted and valuable brand for

homewares and furniture. We have a

legal and moral obligation to develop

and sell products that are safe to use

(and safe to eat from our Pausa cafes)

and that are accurately and fairly

labelled, marketed and sold to our

customers. We must also provide a

safe environment for our customers

to shop – whether in store, online

or receiving home deliveries. As we

increase our customer engagement,

we have a responsibility to look after

and treat our customers’ personal

data and information with respect and

integrity. Increasingly, we are giving our

customers the option to choose from

a range of products that are sourced

‘more responsibly’ (with strict qualifying

criteria set).

Our outcomes

Alongside measuring customer

numbers and shopping frequency, we

predominantly measure the outcomes

relevant to our approach through our

Customer Net Promoter Score (NPS).

Our approach

We are committed to treating our

colleagues fairly, to reward them

appropriately for the work they do and

to give them opportunities to develop

and learn. We want them to be heard

and feel connected to our business

and to feel ‘at home’ in a safe and

inclusive working environment. We

continue to support their mental and

financial wellbeing – particularly given

the pressures on our colleagues in the

current UK economic environment.

In the following pages, we present

information relating to the non-financial

reporting requirements as contained

in sections 414CA and 414CB of the

Companies Act 2006. These include

our commitment to and management

of environmental and social matters

(as listed in the requirements) and how

these impact our business and key

stakeholders. We include links to some

of our relevant policies and references

to where additional information can

be found both within and outside

this report.

Our business model is on pages 8-9.

Some of our relevant policies

(see website: corporate.dunelm.com)

• Data Security and Privacy Policy

• Health and Safety Policy

Where to find more information

and outcomes in this report Page/s

➔ Customer proposition 8, 15

in the CEO Review

➔ Customer net promoter score 21

➔ Stakeholder engagement 31,35

and s.172 statement

➔ Principal risks 50–54

Additional information outside this report

• Sustainability Report 2023

Some of our relevant policies

(see website: corporate.dunelm.com)

• Data Security and Privacy Policy

• Health and Safety Policy

• Equality and Diversity Policy

• Whistleblowing Policy

• Anti-corruption and

Anti-bribery Policy

• Domestic Abuse Policy

• Colleague Code of Conduct

• Code of Business Conduct

Where to find more information

and outcomes in this report Page/s

➔ Culture and values 1, 73

➔ Chair’s statement 4-5

➔ CEO’s review 13–19

➔ Employee eNPS KPI 20

➔ Sustainability 26–27

➔ Stakeholder engagement, 32, 35, 68

s.172 statement and the

‘Board’s approach to s.172’

in the Governance report

➔ Principal risks 50–54

➔ ‘Diversity and inclusion’ in 78–79

Nominations Committee report

➔ Remuneration 88–118

Committee report

Additional information outside this report

• Sustainability Report 2023

• Gender Pay Report 2023

£820k

FY22: £632k

raised in FY23 through Group

charity and fundraising events

36 Dunelm Group plc Annual Report and Accounts 2023

Communities

Gender breakdown, year-end FY23 versus year-end FY22

Female Male

FY23 FY22 Change FY23 FY22 Change

Total

FY23

Group Board

5 4 +1 6 7 -1

45% 36% +9%pts 55% 64% -9%pts

Senior

management

17 14 +3 17 17 0

50% 45% +5%pts 50% 55% -5%pts

Store

colleagues

6,499 6,362 +137 2,351 2,237 +114

8,850

73% 74% -1%pts 27% 26% +1%pts

All

colleagues

7,669 7,410 +259 3,828 3,614 +214

11,497

67% 67% 0%pts 33% 33% 0%pts

1 Senior management for these purposes means our Executive Team (excluding Executive

Directors who sit on the Group Board) and members of our Dunelm leadership team.

Our approach

We are increasingly making more

meaningful connections to support

thriving, purpose-driven communities

in and around our stores and other

sites. We want to be known as the brand

that puts community at the heart of

its business to help people feel more

at home by expanding community

initiatives and services (including our

take-back services which are highly

popular and valued by our store

communities). Alongside promoting

Group-wide fundraising activities we

encourage colleagues to support local

charities, businesses and community

groups. We are also committed to

full compliance with all statutory tax

obligations and full disclosure to tax

authorities.

Our outcomes

At a Group level we track the amount

of Group and colleague fundraising

and Group cash charity contributions.

Informally, we monitor the number of

store Facebook group followers and

the number of small businesses and

community groups that we support

at the store level.

Our commitment to protecting

colleagues can be found in our Code of

Business Conduct and Colleague Code

of Conduct. All colleagues are obliged

to comply with our Anti-corruption and

Anti-bribery Policy and are trained upon

induction.

We continue to focus on achieving

diversity and gender balance across

all levels of the business and, in FY23,

we introduced an ethnicity leadership

metric to our Long-Term Incentive Plan.

Our median gender pay gap of 4.3%

and our mean gender pay gap of 19.1%

reflect that 70% of our colleagues are

women, 90% of whom are in hourly-

paid, predominantly store roles (see

table below).

We work with our colleague network

groups to understand possible barriers

and challenges to progression and

have adapted policies as a result. We

have expanded our apprenticeship

programme to improve social mobility.

Our outcomes

Alongside a number of colleague and

culture metrics (including colleague

retention and promotion from within)

we predominantly measure the

outcomes of the above through our

Employee Net Promoter Score (eNPS).

Some of our relevant policies

(see website: corporate.dunelm.com)

• Tax Strategy

• Responsible Cotton Policy

• Responsible Timber Policy

Where to find more information

and outcomes in this report Page/s

➔ Chair’s statement 4–5

➔ CEO’s review 13–19

➔ Sustainability 26–27

➔ Stakeholder engagement 33, 35

and s.172 statement

➔ Principal risks 50–54

Additional information outside this report

• Sustainability Report 2023

White – British 79%

White – Other 5%

Asian British 8%

Black 3%

Multi-ethnic 2%

Other 3%

Ethnicity data

Note: This data covers 80% of all colleagues.

Board and Executive Team ethnicity data is on page 79.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 37

NON-FINANCIAL INFORMATION

59%

recycled steel content

We have switched to using

recycled steel in our new galley

easy fit pendant light to reduce the

carbon impact of its raw materials.

Suppliers Planet

36%

reduction in virgin plastic

versus an FY20 baseline.

Some of our relevant policies

(see website: corporate.dunelm.com)

• Whistleblowing Policy

• Slavery and Human Trafficking

Statement

• Anti-corruption and

Anti-bribery Policy

• Ethical Code of Conduct for

Suppliers and Partners

• Responsible Animal Welfare Policy

• Responsible Cotton Policy

• Responsible Palm Oil Sourcing Policy

• Responsible Timber Policy

• Competition Law Policy

Where to find more information

and outcomes in this report Page/s

➔ ‘More responsibly sourced 20

cotton’ KPI

➔ Sustainability 26–27

➔ Stakeholder engagement 33, 35

and s.172 statement

➔ Principal risks 50–54

Additional information outside this report

• Sustainability Report 2023

Some of our relevant policies

(see website: corporate.dunelm.com)

• Environmental Policy

• Plastic and Packaging Policy

Where to find more information

and outcomes in this report Page/s

➔ Reduction in Scope 1 20

carbon intensity KPI

➔ Reduction in virgin plastic 20

packaging of own brand

products KPI

➔ s.172 statement 35

➔ Task Force on Climate-related

Financial Disclosures report 40–47

➔ Streamlined Energy 46

and Carbon Reporting

➔ Principal risks 50–54

➔ Chair’s introduction in the 58-59

Governance report

➔ ‘Board’s approach to s.172 68, 71

and sustainability update’

in the Governance report

➔ ‘Sustainability reporting’ in 85

Audit and Risk Committee

➔ ESG metrics within Executive 107, 116

remuneration

Additional information outside this report

• Sustainability Report 2023

Our approach

We have a responsibility to protect

and respect human rights and to

uphold high ethical standards in our

supply chains. We set out our minimum

expectations in our Ethical Code of

Conduct for Suppliers and Partners

that applies to all businesses involved

in the production of goods for Dunelm

and we use a risk-based approach

in our ethical auditing programme

to monitor supply chain practices

against our standards. We aim to work

collaboratively with suppliers to achieve

continuous improvement through

increased engagement and education

– including environmental and product

quality standards, alongside ethical

considerations. We are committed

to treating our suppliers properly

in accordance with agreed terms

and conditions and to paying them

promptly.

Our outcomes

We have set a Group target to increase

the percentage of own brand products

that meet our ‘More Responsibly

Sourced Cotton’ standard (which

covers both ethical and environmental

standards) as set out in our policy.

We have also set sustainability metrics

for other sourcing material areas such

as timber and palm oil.

Non-financial and sustainability information statement FY23 continued

Dunelm Group plc Annual Report and Accounts 202338

Shareholders

Some of our relevant policies

(see website: corporate.dunelm.com)

• Capital and Dividend Policy

• Employment of Former Employees

of the External Auditor Policy

• Tax Strategy

• Anti-corruption and

Anti-bribery Policy

Where to find more information

and outcomes in this report Page/s

➔ Stakeholder engagement 34–35

and s.172 statement

➔ Principal risks 50–54

➔ ‘Board’s approach to s.172’ 68

in the Governance report

➔ ‘Sustainability reporting’ 85

in Audit and Risk Committee

➔ ESG metrics in Executive

remuneration 107, 116

Additional information outside this report

• Sustainability Report 2023

Principal risks by key

stakeholder group

Our principal risks are listed on

pages 50 to 54. We summarise how

these map to our key stakeholder

groups below.

• Customers

– Customer offer

– Product reputation and trust

– IT systems, data and cyber security

– Business change

– Regulatory and compliance

– Supply chain resilience

– Climate change and environment

• Colleagues

– People and culture

– IT systems, data and cyber security

– Business change

– Regulatory and compliance

– Supply chain resilience

– Climate change and environment

– Finance and treasury

• Communities

– Customer offer

• Suppliers

– Customer offer

– Product reputation and trust

– Business change

– Regulatory and compliance

– Supply chain resilience

– Climate change and environment

• Planet

– Product reputation and trust

– Regulatory and compliance

– Climate change and environment

• Shareholders

– Customer offer

– People and culture

– IT systems, data and cyber security

– Business change

– Regulatory and compliance

– Climate change and environment

– Finance and treasury

Our approach

Our investment in resources to focus

on Pathway to Zero (a pillar of our

overall approach to sustainability)

has increased the level of awareness

across the business for the need to take

urgent action to reduce our impacts

on the planet. Our goal is to reduce

our absolute greenhouse gas (‘GHG’)

emissions by 50% by FY30 against a

FY19 baseline. We support the British

Retail Consortium’s Climate Action

Roadmap to achieve net zero by 2040,

and we are a partner member of Textiles

2030, with a commitment to meet their

carbon and water footprint reduction

targets. We remain focused on reducing

operational waste, including plastics and

other packaging, and exploring product

circularity solutions.

Our outcomes

We have made considerable progress

in better understanding the most

significant sources of GHG emissions

along our supply chains, using our

improve-innovate-advocate approach.

However, we need to act faster to hit our

published targets. Metrics relating to

plastic packaging and Scope 1 carbon

emissions intensity are set as Group

KPIs to maintain our focus. Although

we are still at an early stage, we are

making good headway in our product

circularity plans.

Greenhouse gas emissions and

Streamlined Energy and Carbon

Reporting information

can be found on page 46.

Our approach

We strive to provide our shareholders

with as clear a picture as possible of

our business and our prospects – both

financial and non-financial – in order

to enable them to make informed

investment decisions. We give various

opportunities for shareholders to meet

our Board and management through

scheduled meetings and on request.

We provide regular overviews of our

governance arrangements and our

progress in non-financial reporting.

Our outcomes

Our focus on sustainable returns has

led to progressive ordinary and special

dividends. We have returned over

£1bn to shareholders through

dividends over the last 10 years¹.

BIO-CNG

In July 2023, we moved our Home Delivery Network trunking

vehicles to bio-compressed natural gas (BIO-CNG) from diesel.

1 Ordinary dividends plus special dividends plus

special distributions.

See corporate.dunelm.com for more

information and for our Sustainability

Report 2023.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 39

TCFD REPORT

Task Force on Climate-related

Financial Disclosures (‘TCFD’)

Climate change has been considered

a principal risk for the Group since

FY19 and the current view of this

risk is described in detail on page

53. Following publication of the first

voluntary TCFD report in FY21, the

Group released its first full report

in FY22 and remains committed to

improving its disclosures in line with

evolving requirements. This year,

for example, we evolved our TCFD

reporting to include an updated FY19

Scope 3 baseline which is Greenhouse

Gas Protocol compliant and based on

more robust data and assumptions than

the high-level view reported in FY22.

We have also included the estimated

impact of mitigations in our climate

scenario modelling for transition risks,

in line with our carbon reduction

targets. We continue to consider the

potential financial impacts of climate

change in the cash flow scenario

modelling within our viability statement

on page 55 and in our accounting

policies note on page 141 of the

financial statements.

The Board recognises the risks and opportunities posed by

climate change to the Group’s business model and strategy.

Governance

Governance a) Board’s oversight

of climate-related risks and

opportunities

The Board takes overall responsibility

for our Pathway to Zero climate change

roadmap. It considers our approach,

strategy, risk management and

performance, receiving regular

updates on progress against our

climate-related KPIs. There is a

minimum of two Pathway to Zero deep

dives with the Board each year, led by

our Head of Climate Change. This year,

in October 2022 and March 2023, the

Board received detailed updates on

our emerging Scope 3 roadmap, as

well as our broader Pathway to Zero

strategy, looking at circularity, carbon

and community, and our approach to

governance and reporting (see page 71

for more detail).

The Board is supported by three

committees: the Audit and Risk

Committee, Remuneration Committee

and Nominations Committee. The Audit

and Risk Committee formally reviews

principal risks twice a year and TCFD,

ESG processes and reporting to verify

non-financial KPIs annually.

The Remuneration Committee reviews

and approves Executive Director and

Executive Team remuneration, including

climate-related targets in performance-

related pay. The Nominations Committee

sets specifications for new Board

roles and has oversight of the Talent

Committee to ensure necessary talent

and skills are available to deliver our

Pathway to Zero strategy.

The Board continues to listen and

learn about the implications of climate

change on the Group’s business model.

Board members are also regularly

updated on our wider sustainability

strategy, including our long-term

carbon emissions reduction targets,

and progress against them, as well

as other related topics such as water

reduction and product circularity.

The Audit and Risk Committee regularly

receives an update on upcoming

sustainability reporting requirements

and Dunelm’s planned approach. In

FY23, they also received an internal audit

report on the assessment of Dunelm’s

processes and controls relating to

our sustainability strategy, materiality

and target-setting activities which

highlighted several recommendations

which were already being actioned.

Group Board

Board Committees

Audit and Risk Committee Remuneration Committee Nominations Committee

Operational Committees

Pathway to Zero Steering Group Risk and Resilience Committee Talent Committee

Executive Team

Chief Executive Officer

Dunelm Group plc Annual Report and Accounts 202340

Governance b) Management’s role in

assessing and managing climate-

related risks and opportunities

Our CEO, Nick Wilkinson, leads the

Group’s climate-related activities and

chairs the Pathway to Zero Steering

Group. Meetings are held six times a

year and include the CFO, Commercial

& Supply Chain Director, Customer

Director, Group General Counsel and

Company Secretary and the Head of

Climate Change.

The Executive Team receives regular

updates on our climate-related KPIs and

reviews the principal risks prior to the

Group Board review. The management-

level Risk and Resilience Committee

is chaired by our CFO, Karen Witts,

and provides oversight and review of

risks, including climate change and

environment risk. The Talent Committee

is chaired by our Stores and People

Director, and ensures that we have the

correct capability in place to meet our

ambitions in this area.

Climate change considerations are

increasingly integrated into day-to-day

business activities: an assessment of

energy efficiency and carbon impact

is included in all new store and store

refit proposals; our product design

team is focused on increasing the use

of less carbon intensive materials such

as recycled cotton and polyester; and

we continue to reduce packaging or use

more sustainable packaging. In FY23,

we became Better Cotton members,

we have continued to develop plans to

introduce lower emission fuels into our

HGV fleet, with our first CNG vehicles

going live just after our FY23 year

end in July 2023, and we introduced

Remade, a range of cushions and

throws using textile materials such as

those recovered from stores as part of

our customer textile take-back scheme.

As climate-related considerations

become increasingly central to our

business, we are developing them into

‘business as usual’ protocols within

our strategy and financial planning.

An example of this is that we will be

devoting time once a quarter in our

Performance Executive meetings to

focus specifically on sustainability,

including climate change.

Strategy

Strategy a) Climate-related risks and

opportunities identified over the

short, medium and long term

Our purpose – To help create the joy

of truly feeling at home, now and for

generations to come – is deliberately

forward-looking, and when combined

with our business model (see pages 8

to 9), is designed to encapsulate our

desire to have a positive impact on our

communities and the planet, now and

in the future. It is underpinned by our

commitment to remain ambitious about

being a good company and building

sustainability into all that we do. A key

component of our customer proposition

is ‘good & circular’ which we describe as

being ‘positive choices for people and

the environment’.

Over the last two years, Dunelm has

engaged external TCFD consultants to

support the identification of potential

physical risks and opportunities

(relating to extreme weather events

and long-term chronic shifts in global

temperatures and precipitation) and

transition risks and opportunities

(relating to changes in regulation,

carbon pricing, consumer demand

changes and reputational damage) and

to determine their financial materiality.

To identify material risks, we reviewed

the existing risks and opportunities

in our risk registers and considered

additional risks and opportunities

based on a systematic peer comparison

and sector review. Each identified risk

and opportunity was then scored on the

basis of its potential impact, likelihood

and velocity to determine its relative

materiality, integrating stakeholder

insights and secondary data. The

top-ranked risks and opportunities

were then subject to detailed

scenario analysis and financial impact

quantification to enable the Group t

o assess the potential impact

on the business’ future profitability.

Following this work, six material risks

and opportunities were selected for

deep-dive risk modelling and financial

impact analysis. We used a range of

internal and external data sources,

including the Network for Greening

the Financial System (NGFS) v3.0, the

International Energy Agency (IEA)

World Economic Outlook 2022 and the

Intergovernmental Panel on Climate

Change’s (IPCC) Sixth Assessment

Report (AR6) – Model Intercomparison

Project Phase 6 (CMIP6) climate models,

and applied a number of assumptions.

In FY23, we enhanced our financial

modelling to include the impact of

current mitigating actions and planned

activities, using business growth

forecasts, market research, commodity

pricing forecasts and climate forecasts

to create ranges of financial impacts.

Financial impact ranges: We have

used financial impact ranges, which

are the same as we use for our

corporate risk management process.

Impact

Financial range

(Annual Profit before tax)

Low Less than £5m

Medium Between £5m

and £50m

High Greater than £50m

Time horizons: We have used the three time horizons described below:

Time period Years Reason

Short 2023–2030 Aligned to our 50% carbon reduction

target and strategic plan

Medium 2030–2040 Aligned to our net zero target and to

capture transition risks and opportunities

Long 2040–2050 Longer term to capture physical risks and

opportunities

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 41

TCFD REPORT

TCFD continued

There is a high degree of inherent

uncertainty in the modelling outcomes

given the complex interactions arising

under the different climate change

scenarios. That said, the information

shown represents the Group’s best

efforts in understanding the potential

impacts of climate change on its

financial position and performance.

Strategy b) Impact of climate-related

risks and opportunities on business,

strategy and financial planning

In preparing the financial statements,

the Directors have considered the cash

flow impacts of climate change on a

number of key estimates within the

financial statements, including:

• The impact of climate change on the

going concern basis of preparation

and the viability of the Group over

the next five years.

• The impact on potential impairment

triggers, and where a trigger is

identified, the impact on the value in

use of the related non-current assets.

Furthermore, our five-year strategic

planning process considers the

investment required to develop our

business processes to ensure that

we are making progress against our

climate change targets. We also

consider the impact of climate change

on commodity prices as part of our

strategic planning process.

We are committed to reducing our

carbon emissions, both in our direct

operations and also in our supply

chain, which accounts for c.99% of

our carbon emissions (see the table

on page 46 for the breakdown of our

emissions). We work in partnership

with our suppliers to support them in

various ways to help reduce supply

chain emissions. We have developed

and launched our Better Manufacturing

programme which focuses on lowering

carbon emissions during the product

manufacturing stage, and in FY23 we

held our first ‘Introduction to Net Zero’

workshops which were attended by key

suppliers. We have recently invested in

a supplier data platform and a tool to

enable us to complete product life-

cycle assessments, both of which focus

our attention on reducing carbon in

the most impactful areas and improve

the robustness of data to enhance the

accuracy of our reporting. We continue

to advocate at an industry level through

organisations such as the British Retail

Consortium, Better Cotton and Textiles

2030 to accelerate the reduction of

carbon emissions in our supply chains.

Whilst we have a high level roadmap

for the reduction of our emissions

in line with our FY30 target of a 50%

reduction in emissions against our

FY19 baseline, in FY24 we are planning

to produce a more detailed net zero

transition plan in line with the Transition

Plan Taskforce (‘TPT’) guidance. This

plan will set out our climate-related

ambitions and the actionable steps we

are taking to support our transition to a

low-carbon economy and to meet our

targets, including our overall emissions

reduction targets and actions to

mitigate climate risk. We plan to publish

a standalone net zero transition plan in

line with the timeframes set by the TPT.

Climate scenarios: We undertook climate risk and opportunity analysis under three climate scenarios outlined below:

Global Net Zero 2050

Scenario

Limits global warming to

1.5°C by 2100, with stringent

and immediately introduced

climate policies and emissions

reductions to achieve net zero

emissions by 2050.

Transition Risk

Transition risks are extreme

under this scenario in the

short to medium terms, unless

mitigated.

Physical Risk

Physical risks will be the least

extreme under this scenario.

Business as usual (BAU)

Scenario

World takes no/limited action,

equivalent to a 3.5-4.5°C

warming.

Transition Risk

Limited transition risks expected

due to lack of policy changes

and regulation.

Physical Risk

The most extreme physical risk

impacts in this scenario.

Delayed Transition

Scenario

Action taken to limit emissions

growth, but Paris targets missed

resulting in greater than 2°C

warming by 2050.

Transition Risk

This scenario presents a

significant transition risk in the

medium to long term, given

the speed and severity of

the response required when

implemented.

Physical Risk

Physical risks will be higher

than the Global Net Zero 2050

scenario due to warming greater

than 2°C instead of well below.

Dunelm Group plc Annual Report and Accounts 202342

Transition risks and opportunities

Risk and opportunities

summary description

Potential impact

(pre-mitigation)

Potential impact

(post-mitigation) Business readiness

metrics and

targets

Policy & Legal

Global Net Zero scenario most significant impact in short to medium term

Impact of carbon taxes on Dunelm suppliers

Introduction of a carbon

price could lead to an increase

in the cost of products with

high GHG emissions; this

could negatively impact

profits due to taxation on

Dunelm or taxation on

suppliers passed on to

Dunelm in product cost.

High in short to

medium term

Medium in

short term

Low in medium

to long term

• Actively engaging with our suppliers

to support the reduction of their

carbon emissions through setting

aligned carbon reduction targets

and sourcing better quality data.

• In FY24, we are planning to produce

a detailed transition plan in line

with the Transition Plan Taskforce

guidelines.

Carbon

emissions

metrics and

targets

Extension of producer responsibility: increased cost of existing packaging regime and extension

to additional product categories such as textiles

Extended Producer

Responsibility (EPR) fees

are being introduced in the

UK from January 2024. We

have assumed that EPR costs

will increase in line with the

carbon price and that an EPR-

type scheme for textiles will

be introduced in 2025.

High in the short,

medium and long

term (assuming prices

increase in line with

the carbon tax price

increase).

Not yet fully

modelled for

textiles as scheme

not currently

proposed (but

no exemptions

assumed).

• Estimated cost of packaging EPR

included in strategic plan.

• Increasing recycled content in

packaging (both plastic and

cardboard).

• Monitoring extension to other

categories beyond textiles.

• Increasing recycled content of

Dunelm product range including

using materials such as those from

our take-back scheme.

Nature and

packaging

metrics and

targets

Market

BAU scenario most impactful for this risk as fuel prices increase the most in the outer years

Changes to fuel prices caused by climate-related market disruption or increased taxation

Changing market dynamics

and decarbonisation trends

impact both fuel prices and

the transition to non-fossil

fuel alternatives, leading to

increased fuel costs across

the delivery network.

Medium across all

timeframes

Low across all

timeframes as

we assume a

degree of offset

through a range

of operational

actions.

• Moved trunking vehicles from diesel

to CNG, which produce >85% fewer

emissions than the diesel equivalent.

• Trialling electric vehicles in our fitter

van fleet and using one fully electric

44 tonne vehicle in partnership

with DHL.

• Working with our key logistics

suppliers to support their transition

from diesel to non-fossil fuel

alternatives.

Carbon

emissions

metrics and

targets

Strategy c) Resilience of strategy,

taking into consideration different

climate-related scenarios, including

a 2°C or lower scenario

Our commitment to ‘building

sustainability into all that we do’ ensures

that climate change considerations are

integrated into our business activities.

The work we have carried out has

confirmed that we are focused on the

most material climate risks to us as a

business.

The scenario analysis that we have

completed and updated this year,

together with the mitigating actions

we are currently taking, brings a high

degree of confidence in the long-term

resilience of the business.

The table below highlights the material

climate change risks and opportunities

that we have considered, and includes

an overview of our current and future

actions against these risks.

Our focus for FY24 will be on further

exploring each risk identified and

working with relevant business teams

to develop our risk management

and mitigation plans, as well as

continued horizon scanning to identify

any additional emerging risks or

opportunities.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 43

TCFD REPORT

TCFD continued

Transition risks and opportunities continued

Risk and opportunities

summary description

Potential impact

(pre-mitigation)

Potential impact

(post-mitigation) Business readiness

metrics and

targets

Reputation

Global Net Zero scenario most significant impact in medium to long term

Reputational damage due to failure to act on sustainability trends

If Dunelm fails to continue

to move towards using

more sustainable raw

materials and reduce carbon

emissions then we might

lose customers who switch to

retailers who they consider

to be more sustainable; we

could also struggle to retain

and attract colleagues and to

secure funding.

No impact in the short

term in all scenarios,

reflecting Dunelm’s

current position

versus the market.

High in the medium

to long term in both

the Global Net

Zero and Delayed

Transition scenarios

if other retailers

outpace Dunelm in

sustainability.

See opportunity

below in relation

to increasing

market share by

demonstrating

leadership in

addressing climate

change and

sustainability.

• We have set ambitious climate

change reduction targets.

• Starting to use lower-impact

materials in our products and

moving towards a more circular

sourcing model to enhance our

competitive advantage.

Carbon,

nature,

water stress,

packaging

and circular

metrics and

targets

Increased market share by demonstrating leadership in addressing climate change and sustainability

If Dunelm demonstrates

leadership in addressing

climate change and

delivering its climate change

reduction targets, whilst

other retailers do not, we

might gain market share from

customers actively moving

towards shopping at Dunelm.

Medium in the short

term in all scenarios.

Medium in the

medium and long

term in the BAU

scenario, but not a

differentiator in the

medium or long term

in the Global Net Zero

or Delayed Transition

scenarios as it is

assumed that other

retailers also take

similar action.

N/A • Increasing our communication to

customers and colleagues around

the increasing sustainability

credentials of our range, including

Conscious Choice.

• Working in collaboration with our

suppliers to reduce their carbon

emissions and create a more circular

sourcing model.

Carbon,

nature,

water stress,

packaging

and circular

metrics and

targets

Physical risks

Risk and opportunities

summary description

Potential impact

(pre-mitigation)

Potential impact

(post-mitigation) Business readiness

metrics and

targets

Physical Risks

BAU scenario most impactful

Physical risks (drought, flooding, wildfires, etc.) impact the availability of raw materials such as cotton or

timber, or impact manufacturing sites and logistics in countries from which we source our products

Physical risks mainly manifest

themselves in our supply

chain as none of our UK store

or depot footprints are in

areas at high risk of flooding.

Physical risks in our supply

chain are already being

experienced, for example the

recent floods in Pakistan.

Medium in the short,

medium and long

term

Not modelled

as changes in

sourcing strategy

are not currently

defined

• We are undertaking a detailed

exercise to map where our raw

materials originate.

• In FY24, we will overlay our nature-

related impacts on these maps to

better inform sourcing decisions and

help suppliers to build resilience.

• Working with the Textiles 2030

group of retailers to support actions

to mitigate these risks and to move

towards a more circular sourcing

model, which is being built into our

product design process.

Nature and

water stress

metrics and

targets

Dunelm Group plc Annual Report and Accounts 202344

Risk Management

Risk Management a) Processes for

identifying and assessing climate-

related risks

In FY21, we completed a detailed

climate change risk register with

the support of the Carbon Trust. In

FY22, we refined this risk register

with external TCFD consultants, and

quantified the most significant risks by

likelihood and potential impact on our

business. In FY23, we used the same

external TCFD consultants to review

these risks and also to consider our

mitigation plans. This work confirmed

that directionally we have identified

and understood the most significant

risks and that we are addressing these

through the mitigating actions we are

taking and planning to take.

In FY23, we also conducted our first

external materiality assessment, which

was a stakeholder-led study into

Dunelm’s sustainability-focused risk

and opportunities including climate-

related risks and opportunities. This

materiality assessment was developed

using information from a quantitative

survey followed up with qualitative

interviews across a range of our key

stakeholder groups. The output of this

study was mapped against the climate-

related risks already identified through

previous exercises, and reassuringly,

there were no material omissions

identified. For further details on this

activity see pages 28 to 29.

Risk Management b) Processes for

managing climate-related risks

Climate change and environment risk

is classified as a principal risk in our risk

risk register and quantification feeds

into this process and is owned by our

Head of Climate Change. Our Pathway

to Zero Steering Group uses this

climate change risk register to inform

its actions. Our CEO, Head of Climate

Change and other leaders throughout

the Group continue to work with expert

external advisers such as the British

Retail Consortium (BRC), WRAP, Textiles

2030, the Aldersgate Group and others

to keep up to date with regulatory and

best practice developments.

Risk Management c) Processes for

identifying, assessing and managing

climate-related risks are integrated

into the organisation’s overall risk

management

As one of our principal risks, climate

change and environment risk is

discussed formally with our Executive

Team, Risk and Resilience Committee,

Audit and Risk Committee and Group

Board as part of the twice-yearly formal

review of principal risks. The Risk and

Resilience Committee also conducts at

least one deep dive review into climate

risks each year.

The principal risks are considered

by management in connection with

the assessment of the viability of the

business over the longer term, with

these considerations informing the

Viability Statement in this report (page

55). Further details on the assessment

of our climate change and environment

risk can be found on page 53. Our

overall risk management framework

and supporting processes can be

found on pages 48 to 54.

Metrics and Targets

Metrics and Targets a) Metrics used

to assess climate-related risks and

opportunities in line with its strategy

and risk management process

The metrics we use to assess climate-

related risks and opportunities are set

out in the table on page 47. We have

chosen these metrics because they

relate directly to our material climate

risks and opportunities, and because

they are where we can make the biggest

potential impact. In setting our metrics

and targets, we have ensured that they

are in line with the Paris Agreement and

aligned to a 1.5°C pathway, the UK’s

commitment in the Climate Change Act

2008 (2050 Target Amendment) Order

2019 and other relevant legislation, as

well as the British Retail Consortium’s

Climate Action Roadmap which we

support. The carbon, cotton and water

metrics are aligned to the Textiles

2030 voluntary agreement, which we

have signed up to as members (and

now a partner). These topics are also

important to our colleagues, customers

and society more broadly.

Metrics and Targets b) Scope 1,

Scope 2 and Scope 3 greenhouse gas

(GHG) emissions and the related risks

In FY23, we undertook a full review

of our FY19 baseline for our Scope 3

emissions and updated this using more

robust data and assumptions available

following our continued investment in

this area. Our updated FY19 baseline

is fully compliant with the Greenhouse

Gas Protocol, which includes an

adjustment for the acquisition of the

Sunflex business in FY22. We submitted

this updated baseline, along with our

reduction targets, to the Science Based

Targets initiative (‘SBTi’) for validation

and received confirmation of approval

in September 2023, post year-end

We have defined and reported on

our full target boundary for Scope

3 emissions. We have determined

indirect use phase of sold products

emissions to be outside of our target

boundary, however we have measured

and reported these indirect emissions

based on materiality and in line with

the principles of transparency and

completeness in the GHG protocol.

For our FY19 baseline and FY23

Scope 3 emissions we have used an

entirely spend-based calculation

methodology for our most material

category of purchased goods and

services. Throughout FY23 we have

developed our data management plan

and will begin transitioning away from

an entirely spend-based approach in

FY24. This will include increasing the

amount of supplier-specific data that we

are gathering and completing life-cycle

assessments across a broad range of

our products. We intend to incorporate

this more accurate data into our

reporting from FY24 onwards.

1 Please see our corporate website for our full target wording.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 45

TCFD continued

TCFD REPORT

In FY23, we reduced our overall Scope

1 carbon emissions by 0.2% from our

FY19 baseline despite the strong sales

growth of 49% over the period. We have

achieved this through our gas boiler

replacement programme in stores

(which is on track to be completed by

FY30) and the ongoing transition of

our company car fleet to fully electric

or hybrid. However, we realise that we

need to do more to hit our FY30 target

of a 50% absolute reduction against our

FY19 baseline. We moved our trunking

vehicles from diesel to compressed

natural gas in July 2023, which should

reduce emissions from these vehicles

by >85%. In addition, we are trialling

electric vans in our Made to Measure

fitter fleet and using a fully electric

44-tonne vehicle for deliveries to

stores in partnership with DHL. We are

actively looking for more opportunities

to reduce emissions within our vehicle

fleet in line with the innovation of the

fleet industry.

Our Scope 2 emissions increased

slightly in the year due to the acquisition

of the Sunflex business towards the end

of FY22. However, we transitioned this

business to renewable electricity and

from October 2022 all of our electricity

supply is from renewable sources.

The Scope 3 emissions in our target

boundary have increased by 30%

since FY19, mainly due to the 49%

increase in sales in that time period.

Currently we are using spend-based

data for our purchased goods and

services emissions, which are 62%

of the Scope 3 emissions within our

target boundary. Due to the limitations

with this approach, we will not be able

to recognise any progress that our

suppliers are making in reducing their

emissions until we transition to more

specific supplier and product-based

information. We are moving towards

this in FY24 as we have invested in

a supplier data platform and are

currently conducting product life-

cycle assessments as well as working

in partnership with our suppliers to

support them on their transition to

net zero.

FY19 (updated)

Emissions

(tCO

FY20

Emissions

(tCO

FY21

Emissions

(tCO

FY22

Emissions

(tCO

FY23

Emissions

(tCO

Scope 1 7,059 7,108 8,633 7,902 7,044

Scope 2 (market-based) 10,861 8,757 268 21 27

Scope 3

Purchased goods and services 449,762 N/A N/A N/A 557,924

Use of sold products (direct use phase only) 164,736 N/A N/A N/A 238,774

Upstream transportation & distribution 30,296 N/A N/A N/A 43,449

End-of-life treatment of sold products 26,873 N/A N/A N/A 33,986

All other categories combined

16,240 N/A N/A N/A 19,785

Total Scope 3 within target boundary

687,907 N/A N/A N/A 893,918

Total Scope 3 (including indirect use phase

of use of sold products) 1,012,190 N/A N/A N/A 1,385,812

Streamlined Energy and Carbon Reporting emissions by source

FY19

MWh

FY20

MWh

FY21

MWh

FY22

MWh

FY23

MWh

Purchase of energy 57,167 50,547 53,158 51,980 51,415

Vehicles on company business 4,061 3,720 4,382 3,979 3,398

Vehicles in the Home Delivery Network 9,467 12,198 15,959 15,773 15,725

1 All other categories includes capital goods, fuel & energy-related activities, waste generated in operations, business travel, employee commuting, upstream

leased assets, downstream transportation & distribution, processing of sold products, downstream leased assets, franchises and investments.

2 Target boundary for Scope 3 excludes the indirect use of sold products.

Dunelm Group plc Annual Report and Accounts 202346

Metrics and Targets c) Targets used to manage climate-related risks and opportunities and performance against targets

In response to the Net-Zero Standard set by SBTi, we submitted our net zero 1.5-degree aligned targets across all Scopes to

be validated by SBTi, and received confirmation of approval in September 2023, post year-end

. As members of the BRC and

Textiles 2030, we also have targets aligned to cotton and water usage metrics. We have long-term remuneration targets for

Executive Directors over a range of sustainability metrics. These vary from year to year, but include Scope 1 carbon emissions,

plastic packaging, more responsibly sourced cotton and take-back % (see page 107 for more details).

Climate-related risk Metric and target Baseline Progress

Carbon

emissions

Reduce absolute Scope 1

carbon emissions by 50%

against an FY19 baseline

by FY30

7,059 tCO

in FY19

7,0 4 4 t CO

e in FY23, which is a 0.2% reduction on the FY19

baseline reflecting the progress made (see Scope 1

commentary on pages 45 to 46).

Reduce Scope 1 carbon

emission intensity against

FY19 baseline

6.4 tCO

e/£1m

Group revenue

in FY19

32% reduction in FY23 to 4.3 tCO

e/£1m Group revenue

(20% reduction on the FY19 baseline in FY22).

Purchase 100% renewable

electricity every year

N/A 99.7% in FY23 for the year on average but 100% from October

2022 onwards (99.7% in FY22).

Reduce absolute Scope 3

carbon emissions in our

target boundary

by 50%

against an FY19 baseline

by FY30

687,907 tCO

in FY19

893,918 tCO

e in FY23. Absolute Scope 3 carbon emissions

have increased by 30% due to sales and spend increasing by

49%. There is, however, an intensity reduction of 11%. We

have plans to transition away from entirely spend-based data

towards more product and supplier-specific data for Scope 3.

Water stress Reduce aggregate water

footprint in own brand

textile products by 30%

by 2030

Calendar year

(CY) 2019

This target reduction is in line with our commitment to Textiles

2030. We have carried out our baseline water footprint using

the WRAP water footprint tool and have just received our

CY2022 footprint which we are assessing.

Nature 100% of own brand

cotton more responsibly

sourced by 2025

N/A 26% in FY23. During FY23, we moved our environmental

accreditation to Better Cotton, who are industry leaders in

this area. We remain committed to sourcing c.100% more

responsible cotton by 2025. However, FY23 was a year of

transition during which we were registering and accrediting

suppliers to Better Cotton. We expect to see a significant

improvement in FY24 as the remainder of our suppliers

complete this process and our new approach is more

established across our supply base.

50% more responsibly

sourced timber by FY25

N/A We are currently working towards obtaining robust weight-

based data ahead of publishing, which should be in FY24.

Packaging 30% less virgin packaging

in own brand range by

2025 measured by weight

per £1 sales

2.2g per £1

sales in FY20

36% reduction in FY23 (FY22: 23% reduction). We have both

reduced the absolute amount of plastic packaging used per

item and also increased the recycled content in our plastic

packaging.

Circular

economy

Easy to use take-back

service in place for 50% of

our own brand products

N/A 61% in FY23 (FY22: 61%). Our take-back service has continued

to prove popular with our customers in stores. We are now

collecting over 70 tonnes of textiles per month and we

improved our collection and sorting processes during the

year to help with our journey towards product circularity.

We have been trialling take-back of other homewares items

in a selection of stores.

1 Please see our corporate website for our full target wording.

2 Limited assurance provided by Ernst & Young LLP for FY23 and applicable to our Revolving Credit Facility (not applicable beyond FY23) and LTIPs as relevant.

3 Target boundary for Scope 3 excludes the indirect use phase of use of sold products.

Listing Rule 9.8.6R Compliance Statement

Dunelm Group plc has complied with all of the requirements of LR 9.8.6R by including climate-related financial disclosures in this section (and

in the information available at the locations referenced therein) consistent with the TCFD Recommendations and Recommended Disclosures.

Independent Assurance

We engaged Ernst & Young LLP to provide limited assurance for FY23 over the key performance metrics which are marked with a 2 in the

table above. The full assurance statement and the Basis of Reporting documents that were applied in preparing these metrics can be found

online on our corporate website: corporate.dunelm.com.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 47

RISKS AND RISK MANAGEMENT

Our approach to risk management

Risk governance

The Board as a whole takes

responsibility for the management of

risk throughout the Group and ensures

that our strategic objectives are in line

with our risk appetite. It is supported by

the Audit and Risk Committee, which

monitors the ongoing effectiveness of

our risk management framework and

receives independent assurance on

the effectiveness of our approach to

risk management and internal control

systems through the activities of

internal audit.

For more information on the management

of our internal controls see page 85.

There is a formal process for setting

the risk appetite and for identifying,

assessing, and reviewing risks, as

described below and opposite. Risks

inevitably evolve and change over

time and the Board acknowledges

that the risk management framework,

and our system of internal controls,

are designed to manage such risks

appropriately, rather than eliminate

them.

Risk management

We have an established Risk

and Resilience Committee (‘R&R

Committee’) which is chaired by the

CFO and meets monthly. It comprises

risk owners from various business

areas and senior representatives from

our compliance functions. In addition,

a representative from internal audit

attends the meetings to provide

additional insight and challenge.

The R&R Committee’s key purpose

is to develop and review the risk

management framework to ensure

that it is effective and assist the Board

and Audit and Risk Committee in their

oversight of risk management. At each

meeting there is a review of leading

and lagging key risk indicators (‘KRIs’)

associated with Dunelm’s principal risks

enabling management to discuss and

take proactive steps to further mitigate

as may be appropriate. In addition, a

different deep dive topic is presented

at each meeting – these typically cover

principal or key operational risks that

are trending upwards or retain a high

residual risk impact. Meetings also

consider progress against action

plans arising from internal audit

reviews, updates from key compliance

areas (such as data protection, cyber

security, product quality and ethics

and food safety) and horizon scanning.

A summary of the R&R Committee’s

activities and findings is reported on

a regular basis to the Audit and Risk

Committee.

Individual risks

Individual members of the Executive

Team and senior leadership have

responsibility for managing the risks

and mitigating controls for their

respective business areas. They do this

by maintaining their own operational

risk registers and are responsible

for ensuring that any material issues

or trends are escalated to the R&R

Committee as appropriate.

Risk identification and

prioritisation

We adopt a top-down and bottom-up

approach to ensure that there is an

overarching view of Group risks. This

is considered monthly by way of the

KRIs presented to the R&R Committee,

but also more formally by way of a

biannual review of the key operational

risks (presented by each respective

operational risk register owner), as well

as the Group’s principal risks (presented

by each respective principal risk owner).

As part of the assessment, the key

operational risks are mapped to the

principal risks to enable appropriate

challenge to those risks identified as most

material to the Group. The assessment

considers both the inherent risk (before

mitigation) and residual risk (after

mitigation is applied). The output of

the assessment is reported to the Audit

and Risk Committee for challenge and

consideration ahead of being presented

to the Board for review and approval.

Risk appetite

The Board sets the risk appetite for

the Group, taking into consideration

the expectations of its shareholders

and other stakeholders. The clear

articulation of our risk appetite provides

for an effective mechanism to inform

investment decisions, facilitate the

discussion of risk, set parameters within

which objectives must be delivered,

and support the awareness of risk by

our colleagues and partners. The Board

reviewed the Group risk appetite in

July 2023 and confirmed that it remains

appropriate.

Principal risks and

uncertainties

The Board confirms that a robust

assessment of the principal risks

facing the Group has been carried

out, including emerging risks and those

that would threaten its business

model, future performance, solvency,

or liquidity.

In conducting such a review, we

identified two principal risks where

the potential impact is deemed to be

increasing.

The IT systems, data, and cyber risk

is considered to be increasing due

to the rise in malware and phishing

attacks targeting organisations of all

types. These activities pose a serious

challenge to the security and integrity

of our digital infrastructure. Combating

these threats remains a priority and we

continue to invest in proactive measures

to protect the business.

This year we separated business change

risk from the IT systems, data, and cyber

risk to reflect our ongoing investment

in change programmes that are key to

our strategy and the delivery of further

growth and efficiencies. We consider

this an increasing risk in the short term

as we take on larger and more complex

projects. However, it is anticipated that

the risk will stabilise as we continue to

deliver.

We also removed catastrophic business

events as a standalone principal risk.

The impact of, and approach that we

would take to, large disruptive events

has been considered as part of our

review and ongoing management of

each of the other principal risks. Our

approach is supported, amongst other

things, by learnings from our response

to the pandemic and our business

continuity plans.

The Board’s assessment of the principal

risks and uncertainties facing the Group

as at the date of this report and how

we mitigate them is set out on pages

50 to 54. The principal risks are not set

out in any order of priority and do not

represent all risks associated with the

Group’s activities. Additional risks that

are not currently deemed principal risks

are nevertheless monitored for their

impact on the Group.

Dunelm Group plc Annual Report and Accounts 202348

Bottom-up

review of risks

Top-down

review of risks

Risk governance and oversight

Group Board

• Overall responsibility for the

risk management framework.

• Sets the risk appetite for

the Group.

• Responsible for ensuring that

effective internal control and

risk management systems are

embedded within the business.

• Conducts annual assessment of

principal risks.

Audit and Risk Committee

• Responsible for assessing

the ongoing effectiveness of

the Group’s risk management

framework, controls and

processes.

• Approves the internal audit

programme and undertakes an

independent review of action

plans to mitigate and manage

material risks.

• Reviews the Group risk register.

Risk management

Risk and Resilience Committee

• Responsible for developing and

reviewing the risk management

framework and processes.

• Supports the Board and Audit and

Risk Committee in their oversight

of risk management.

• Conducts reviews of the principal

risks.

• Identifies and manages risks as

they arise.

• Monitors Key RiskIndicators.

• Provides forum to assess progress

under action plans to mitigate and

manage risks.

• Conducts deep dives into areas of

operational risk.

• Reviews management information

on key compliance areas such as

health and safety, data protection

and information security.

Risk and control owners

Individual Executive Team and operational risk owners

• Primary responsibility for

identifying, assessing and

managing risk in area of

responsibility within risk appetite.

• Maintain operational risk register

in area of responsibility.

• Escalate key risks and concerns

as appropriate.

Risk management framework

Independent assurance

Internal audit

• Provides independent assurance

to the Board, Audit and Risk

Committee and management

on the effectiveness of risk

management and internal control

systems.

• Conducts independent audits of

risks to the business in accordance

with risk-based internal audit

programme.

Risk-based reviews

• Conducts specialist third-party

reviews as required.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 49

RISKS AND RISK MANAGEMENT

Principal risks and uncertainties

Customer offer

Description of risk

Ongoing external uncertainty and inflationary pressure

on consumers has led to significant change in consumer

behaviour. Failure to respond to changing consumer needs

and to maintain a competitive offer (value & choice, friendly &

expert, fast & convenient and good & circular) will undermine

our ambition to increase market share and drive profitable and

sustainable growth.

Stakeholder groups

  

Risk trend

Link to strategy



Risk owner

Customer Director

How we mitigate

• Increased utilisation of customer and market insights

enabling us to understand more about our existing and

potential new customers and adapt as appropriate to their

changing needs.

• Ongoing review and development of our strategy to

become a more trusted and valuable brand (see pages 8

and 9 for business model).

• Continued investment in digitalising our business to

improve our customer offer.

• Focus on new product development, particularly own

brand, in both existing and new categories, as well as

continued product innovation in existing categories with

‘sustainability’ being a key element to strengthen our

customer offer.

• Ongoing review of supply chain capacity and capability,

investing as needed.

• Continued expansion of our range of products to appeal to

every budget and style and regular review of price points.

• Ongoing focus on engagement through social media and

community involvement.

Strategic drivers

Product

mastery

Total

retail system

Culture

and identity

Stakeholder groups

Customers Colleagues Communities

Suppliers Planet Shareholders

Risk trend

Stable

Increasing Decreasing

At a glance

Principal risks Risk trend

Customer offer

Product reputation and trust

Business change

People and culture

IT systems, data and cyber security

Regulatory and compliance

Climate change and environment

Supply chain resilience

Finance and treasury

Dunelm Group plc Annual Report and Accounts 202350

Product reputation and trust

Description of risk

Our stakeholders expect us to deliver products that are safe,

compliant with legal and regulatory requirements, and fit

for purpose. Our customers are increasingly aware of the

environmental and social impact of their purchases and want

to know that our products have been responsibly sourced and

that their environmental impact is minimised.

Failure by our suppliers to uphold our approach to business

ethics, regulatory compliance, human rights (including safety

and modern slavery) and the environment may undermine or

damage our reputation as a responsible retailer, and result in

a loss of confidence in Dunelm.

Stakeholder groups

 

Risk trend

Link to strategy



Risk owner

Director of Commercial and

Supply Chain

How we mitigate

• Mandatory training, a range of policies and our Ethical

Code of Conduct for Suppliers and Partners govern,

amongst other things, the quality of products and

production processes, and our expectations in relation

to responsible sourcing, anti-bribery and corruption and

modern slavery.

• Monitoring of our expectations on business practices,

product quality and compliance with applicable regulations

undertaken by a dedicated team, assisted by third-party

due diligence checks and our ethical audit programme.

• Provision of enhanced training to commercial teams and

suppliers on identifying and utilising sustainable materials

in our products and packaging.

• Conduct regular supplier conferences and awareness

training at which compliance with policies and the Ethical

Code of Conduct for Suppliers and Partners is a key topic.

• Focus on collation of data from suppliers in connection with

sustainability targets for products and packaging.

• Regular review by senior management of product recalls

and product safety-related issues, with clear procedures in

place to enable swift action to be taken as appropriate.

• Whistleblowing procedure and independently

administered helpline enables concerns to be raised in

confidence.

Business change

Description of risk

Dunelm recognises that there is a huge opportunity in

digitalising the business and has invested and will continue to

invest in system improvements to drive growth and efficiency.

Failing to successfully introduce and deliver wider technology

and new systems across the business and leverage the

data generated to further improve our proposition and

operations could result in reduced operational efficiency,

competitiveness, relevance and growth. Furthermore, failure

to deliver the expected objectives on time and on budget

could impact delivery of the planned business benefits.

Stakeholder groups

  

Risk trend

Link to strategy



Risk owner

Chief Technology and

Information Officer

How we mitigate

• Continued investment in digitalisation aligned to strategic

priorities.

• Structured and disciplined delivery methodology applied

to business change programmes, led by experienced

project managers.

• Detailed management oversight to monitor progress

and cost.

• Dedicated resource allocated to key change programmes,

supported by additional, external expertise as needed.

• Regular review of roadmaps and workstream prioritisation

by cross-functional leaders to ensure ongoing alignment

with delivery of strategy.

• Focus on building and developing strong third-party

relationships to enable effective collaboration,

communication and ongoing delivery.

• Ongoing simplification and rationalisation of processes

and systems.

• Regular reviews of progress using appropriate KPIs with all

stakeholders, including identification and management of

risks to delivery.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 51

RISKS AND RISK MANAGEMENT

IT systems, data and

cyber security

Description of risk

Our IT systems and infrastructure are critical to managing

our operations, interacting with customers, and trading

successfully.

A key system being unavailable or suffering a security

breach could lead to operational difficulties, loss of sales

and productivity, legal and regulatory penalties due to loss

of personal data, reputational damage, and loss of

stakeholder trust.

Stakeholder groups

 

Risk trend

Link to strategy

Risk owner

Chief Technology and

Information Officer

How we mitigate

• Continued investment and roadmap for further investment

in systems development and security.

• Ongoing programme of work to decommission outdated

applications, platforms, and infrastructure.

• Onboarding of new suppliers or suppliers undergoing

contract renewal requires an assessment of the robustness

of their security and data protection controls.

• Data protection and information security policies and

procedures in place and governed by subject matter

experts, including a dedicated, specialist information

security team, data protection officer and head of data

management.

• Mandatory training and ongoing awareness programmes

keep colleagues informed and aware of data protection

and information security risks.

• Security Operations Centre and vulnerability management

service tools provide increased visibility of security events

and enable vulnerabilities to be monitored and quickly

addressed. In addition, periodic systems vulnerability and

penetration testing carried out.

• Restricted access to sensitive data.

• Regular review and testing of incident and crisis

management plans, and business continuity plans, which

includes reviewing the resilience of and disaster recovery

for IT systems.

• Data and reporting used to track system performance,

utilisation, and vulnerability across our IT estate, with

regular reviews undertaken and delivery of resulting

actions monitored.

Principal risks and uncertainties continued

People and culture

Description of risk

Our business could be adversely impacted if we fail to attract,

retain, and develop colleagues with the appropriate skills,

capabilities and diverse backgrounds.

Failing to embed and live our values could impact business

performance, the delivery of our purpose and the long-term

sustainability of our business.

Stakeholder groups



Risk trend

Link to strategy

Risk owner

Stores and People Director

How we mitigate

• Regular review by the Executive Team and the Group Board

of colleague ‘dashboard’ and KPIs, including attrition and

recruitment rates. Such reviews also include an assessment

of capabilities to ensure that we continue to have the right

skillsets in the business to deliver our strategy.

• Continued focus on training, development and mentoring

opportunities, with emphasis on ‘growing our own’ talent,

driven by the management-level Talent Committee.

• Ongoing review and development of our total employee

value and reward proposition, assisted by benchmarking

exercises as appropriate.

• Enhanced mental and financial wellbeing programmes and

initiatives to support colleagues including introduction of

targeted support relating to parenthood, pregnancy loss,

and menopause.

• Regular communication with colleagues through

engagement surveys, National, Regional and Local

Colleague Voice meetings, D&I networks and huddles.

Utilising feedback to understand colleague perception of

culture and implementing actions based on the output.

• Commitment to increasing diversity across the Group.

• Continuing to ‘bring our shared values to life’ under our

behavioural framework project.

Dunelm Group plc Annual Report and Accounts 202352

Regulatory and compliance

Description of risk

We operate in an increasingly regulated environment and must

comply with a wide range of laws, regulations, and standards.

Failure to comply with or to take appropriate steps to

prevent a breach of these requirements could result in formal

investigations, legal and financial penalties, reputational

damage and loss of business.

Stakeholder groups

   

Risk trend

Link to strategy



Risk owner

Group General Counsel

and Company Secretary

How we mitigate

• Suite of compliance policies in place which are reviewed

regularly and governed by subject matter experts.

Group-wide mandatory training provided for high-risk

compliance areas such as health and safety, anti-bribery

and corruption, data protection and cyber security, with

additional training undertaken as required or as may be

appropriate to a specific role.

• Data trends for high-risk compliance areas and KPIs

monitored and reviewed by the Risk and Resilience

Committee, as well as cross-functional steering groups

(such as Pathway to Zero).

• Dedicated teams for product quality and ethics,

sustainability and health and safety, supported by in-house

legal team.

• Whistleblowing procedure and independently

administered helpline enables concerns to be raised in

confidence.

• Compliance with policies and Ethical Code of Conduct

for Suppliers and Partners monitored via our ethical audit

programme.

• Regular health and safety meetings for each of the retail

and distribution centres. Health and safety reports,

including audit outcomes, reviewed by the Risk and

Resilience Committee and the Board on a regular basis,

with in-depth presentation made by the Head of Health &

Safety to the Board at least annually.

• Continued focus on food hygiene and allergen awareness

in our Pausa cafes by way of regularly reviewed operating

guidelines, compulsory colleague training and regular

audits.

• Ongoing horizon scanning and monitoring of legislative

and regulatory developments and announcements in

relation to prospective change.

Climate change and environment

Description of risk

Failure to positively change our impact on the environment

would fall short of the expectations of our customers,

colleagues, shareholders, and other stakeholders which could

lead to reputational damage and financial loss.

In addition, an inability to anticipate and mitigate climate

change and other environmental risks could cause disruption

in the availability and quality of raw materials such as cotton

and timber, affecting production capacity, product quality,

and overall supply chain resilience. This, and potential

transition risks related to environmental taxation, could result

in higher costs, delays, and potential loss of customers.

Stakeholder groups

   

Risk trend

Link to strategy



Risk owner

Chief Executive Officer

How we mitigate

• Annualised targets in place to reduce emissions, energy

usage and waste to landfill, and increase recycling in our

operations.

• Pathway to Zero Steering Group (chaired by the CEO)

oversees progress against environmental targets and

climate change work with support from external advisers

(as required).

• Updates on progress towards targets/commitments,

including emerging risks, challenges and opportunities

under our climate change roadmap, regularly provided to

the Board.

• Regular review of standards and policies that govern

our approach to high-risk raw material types and routes.

Increased use of lower-impact raw materials in products

and ongoing work with our suppliers to move towards a

more circular design and business model.

• Implemented initiatives to shift vehicles from traditional

fossil fuels to more sustainable alternatives.

• Sustainability targets built into Executive Director long-

term incentives.

• Active engagement with suppliers and partners on the

collation of data required to assess delivery against carbon

reduction targets.

• Dedicated sustainability team.

• Regular horizon scanning conducted to keep abreast of

regulatory change and stakeholder sentiment.

Further information can be found in the

TCFD report on pages 40 to 47.

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 53

RISKS AND RISK MANAGEMENT

Finance and treasury

Description of risk

Progress against business objectives may be constrained by a

lack of short-term funding or access to long-term capital.

Stakeholder groups

 

Risk trend

Link to strategy



Risk owner

Chief Financial Officer

How we mitigate

• Maintain relationships with a syndicate of committed

partner banks to ensure appropriate funding is available.

• Revolving Credit Facility of £250m in place, extended until

September 2027.

• Group treasury policy governs levels of debt, cash

management strategies and foreign exchange exposures.

• Hedging for foreign exchange and freight and energy

prices agreed in advance, to help mitigate volatility and aid

margin management.

• Continued focus on cost discipline through capital

investment approval process and ongoing scrutiny of

discretionary expenditure.

• Treasury and Capital Committee ensures appropriate

governance around matters such as funding, dividends,

foreign exchange, and energy hedging.

• Ongoing focus on actions to improve controls around stock

and cash management, stock purchasing and forecasting.

Principal risks and uncertainties continued

Supply chain resilience

Description of risk

We are dependent on complex global supply chains and

fulfilment solutions to deliver products to our customers.

Instability in the global supply chain or failure of a key supplier

may impact our ability to effectively manage stock and satisfy

customer demand.

Stakeholder groups

  

Risk trend

Link to strategy

Risk owner

Director of Commercial

and Supply Chain

How we mitigate

• Ongoing review of supply chain strategy to ensure capacity

is in line with long-term financial plan.

• Detailed budgeting and forecasting processes match

capacity to demand, and are reviewed weekly by a cross-

functional team.

• Continuous monitoring of demand and stock visibility.

• Regular review and testing of incident and crisis

management plans, and business continuity plans.

• Dedicated procurement team oversees process for

tendering and negotiating with supply chain suppliers and

ensures that appropriate due diligence is carried out on

existing and prospective third-party partners.

• Active management of key supplier relationships to enable

early warnings of disruption and agree mitigating actions.

• Active engagement with suppliers and partners on the

collation of data required to assess delivery against carbon

reduction targets.

• Ongoing focus on initiatives to improve efficiency in the

delivery process.

Emerging risks and opportunities

Risks continue to evolve and change, and an awareness of emerging risks is important in driving effective strategic

planning. Understanding the potential implications of emerging risks and monitoring them enables us to consider them

appropriately within our decision-making processes.

We identify emerging risks by reviewing customer and market metrics and insights, relevant publications and consultation

papers, with the assistance of both internal and external subject matter experts.

While no significant emerging principal risks were identified in the year, we recognise that there is a high level of ongoing

uncertainty in the economy and continue to closely monitor the potential impact so far as it relates to Dunelm. We also

continue to consider the impact of technological change and monitor the pace of regulatory change and stakeholder

sentiment in relation to environmental and other sustainability-related matters.

Dunelm Group plc Annual Report and Accounts 202354

GOING CONCERN AND VIABILITY STATEMENT

Going concern and

viability statement

At the time of approving the financial

statements, the Board of Directors is

required to formally assess that the

business has adequate resources to

continue in operational existence and as

such can continue to adopt the ‘going

concern’ basis of accounting. The Board

is also required to state that it ‘has a

reasonable expectation that the Group

will continue in operation and meet its

longer-term liabilities as they fall due’

(the ‘Viability Statement’). To support

this statement, the Board has considered

the Group’s current financial position,

its strategy, the market outlook and its

principal risks. As the Group runs a five-

year planning process, the Board has

reviewed viability over a five-year period.

The base case for this review is the five-

year plan presented to and approved by

the Directors in May 2023.

The Group is operationally and

financially strong and has a long track

record of consistently generating profits

and cash, which is expected to continue

both in the short and long term. In the

financial years ending June 2020 and

June 2021, despite the impact of the

pandemic and the enforced closure of

its stores for significant periods, the

business continued to generate high

levels of cash before distributions.

Modelling potential

downside scenarios

In their consideration of going concern

and the future viability of the Group, the

Directors have reviewed future profit

forecasts and cash projections, which

reflect their experience in managing

the business. Both scenarios modelled

assume that variable costs would reduce

as sales reduce.

The ‘market downturn’ scenario assumes

a change in consumer spending away

from homewares, due to inflationary

pressures, with FY24 showing no sales

growth on FY23 and 8% lower growth

in FY25 than in the base case scenario.

In addition, a lower margin than base

case is assumed throughout the five-year

period. This ‘market downturn’ scenario

does not include any mitigating cost

reduction actions, which would be

taken if such a downturn occurred, and

assumes the continuation of dividend

payments in line with our current

dividend policy. In this ‘market downturn’

scenario, the Group would not breach

any of its financial covenants.

The ‘deeper market downturn’ scenario

assumes a 5% sales decline in FY24

compared to FY23 and 8% lower growth

in FY25 than in the base case. A more

severe margin erosion is assumed in

this scenario compared to the ‘market

downturn’ scenario and margin erosion

continues throughout the five-year

period. Similar to the ‘market downturn’

scenario, we have assumed no cost

mitigation and the continuation of

dividend payments in line with our

current dividend policy. As with the

‘market downturn’ scenario, the Group

would not breach any of its financial

covenants.

The Directors continue to assess the

risks that climate change poses to the

business via modelling and disclosures

in line with the Task Force on Climate-

related Financial Disclosures. The Group

will actively manage and mitigate these

risks as required within the existing

enterprise risk management processes

(as outlined on page 45). Climate change

is not expected to have a significant

impact on the Group’s going concern

assessment or on the viability of the

Group over the next five years.

Reverse stress testing

To provide additional assurance around

the Group’s viability, two reverse stress

tests have been modelled, similar to

the reverse stress testing carried out

at the end of FY22. In both of these

reverse stress tests we have assumed

that variable costs would reduce in

line with sales, that we would be able

to save £20m per annum of fixed costs

and that we would reduce the level of

capital investment to £10m per annum

and suspend the payment of dividends.

In the first reverse stress test, we have

modelled the sales decline required to

breach either of the current covenants

in the Revolving Credit Facility (RCF). A

sales reduction of 23% in FY24 and 28%

in FY25 from the base case would be

required for covenants to be breached

by the end of FY25. In the second reverse

stress test scenario, we have modelled

the level of sales reduction required

to breach the RCF limit of £250m. This

would require a reduction in sales of

47% in both FY24 and FY25 from the

base case to effectively run out of

funding by the end of FY25, assuming

reasonable mitigating actions have been

implemented.

Financing

The Group’s banking agreements and

associated covenants are set out in the

CFO’s Review and include a £250m RCF

(maturing in September 2027 with a two-

year extension option, subject to lender

consent), an accordion option with a

maximum facility of £100m and a £10m

uncommitted overdraft.

The Group ended the financial year

with net debt of £31m. The financial

covenants are tested in line with our

December interim reporting and June

year-end reporting. These covenants

are met with significant headroom. In

both downside scenarios, the Group

continues to forecast compliance with all

financial covenants throughout the going

concern and viability period.

Going concern and

viabilityconclusion

In both downside scenarios Dunelm has

sufficient liquidity to continue trading,

including maintaining the payment of

dividends in line with its dividend policy

and comfortably meeting its financial

covenants. The reverse stress modelling

has demonstrated that a sales reduction

of 23% in FY24 and 28% in FY25 from

the base case is required to breach

covenants by the end of FY25 and a 47%

sales reduction is required to breach the

RCF limit by the end of FY25, assuming

reasonable mitigating actions have been

implemented. Even in such an event,

management would follow a similar course

of action to that initially undertaken during

the recent Covid-19 pandemic. Such

actions could include further reductions

in discretionary spend (e.g. marketing and

travel) and capital investment in new stores

and refits, and reducing headcount.

The Board believes that the Group is well

placed to manage its financing and other

significant risks satisfactorily and that the

Group will be able to operate within the

level of its facilities and meet its liabilities

as they fall due, for at least the next five

years. For this reason, the Board also

considers it appropriate for the Group

to adopt the going concern basis in

preparing its financial statements.

Strategic Report

This report was reviewed and signed by

order of the Board on 20 September 2023.

Nick Wilkinson

Chief Executive Officer

20 September 2023

STRATEGIC REPORT

Dunelm Group plc Annual Report and Accounts 2023 55

savour

experiences

Seizing the opportunity

In this section

Chair’s introduction 58

Governance dashboard 60

Directors and officers 61

Governance structure 64

Board activities 68

Culture and values 72

Nominations Committee

report 74

Audit and Risk

Committee report 80

Remuneration

Committee report 88

Directors’ Remuneration

Policy 2023 92

Annual Report on

Remuneration 103

Directors’ report 119

Statement of Directors’

responsibilities 123

Dunelm Group plc Annual Report and Accounts 202356

GOVERNANCE REPORT

experiences

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 57

Chair’s introduction to

corporate governance

Dunelm’s long-term success depends

on our strong culture and shared values,

of which we are immensely proud,

underpinned by robust governance.

This report provides insight into the role

and activities of our Board and how our

governance framework contributes to

the development and delivery of the

Group’s strategic ambitions, for the

benefit of all our stakeholders.

We recognise the ongoing focus

given to all aspects of governance

by our stakeholders, including audit

and risk, regulatory compliance and

sustainability, and the need to ensure

that our approach is appropriate for

Dunelm. We also recognise that a

high level of engagement is key to

understanding what matters most to

those with an interest in our business

and that it is important to communicate

our thinking and approach in response.

I am confident in our ability to

effectively engage with our key

stakeholders and to incorporate their

views in our decision-making. This

has been demonstrated this year as

we have recognised the impact of the

challenging economic environment in

on our approach to offering more value

and choice to customers, colleague

reward and remuneration and our

community initiatives. More information

on how we consider the interests of

our key stakeholders is set out on

pages 30 to 34.

Key activities

During the year, the Board focused on

reviewing our key strategic priorities

and areas of focus, as well as continuing

to build capabilities and develop our

ambitions for growth. Strategic deep

dives into all areas of the business took

place, providing valuable insight into

our runway for growth and enabling

constructive challenge and robust

debate. This was particularly evident

at the May strategy day, as articulated

further on page 70.

Alison Brittain

Chair

We remain fully committed to our

sustainability agenda, working

collaboratively with suppliers,

colleagues, and customers to achieve

success. More details about our work

this year can be found on pages

26 and 27 and in our Sustainability

Report 2023.

We also maintained focus on

reviewing and laying the groundwork

for upcoming regulatory change,.

This includes the Government’s final

proposals on new corporate reporting

set out in its response last year to

the White Paper on restoring trust

in audit and corporate governance

and the forthcoming sustainability-

related requirements of the Transition

Plan Taskforce, the International

Sustainability Standards Board, and the

Taskforce on Nature-related Financial

Disclosures.

The Board has continued to prioritise

senior management succession

planning and development of internal

talent to support our growth ambitions.

This work has resulted in a clearer

understanding of capabilities and a

stronger pipeline for succession. We

also continue to promote diversity

and inclusion across the colleague

population, as acknowledged by our

inclusion of an ethnic diversity target in

this year’s LTIP and the Board’s ongoing

support for our colleague networks and

their respective initiatives and events,

further details of which are set out in our

Sustainability Report 2023.

This year we also conducted a detailed

review of our remuneration framework,

ahead of proposing to shareholders

a new policy for adoption at the 2023

AGM. This included consultation with

major shareholders and proxy agencies

and I offer our thanks to them for their

engagement and input. A detailed

explanation of the proposed changes to

the policy can be found on pages 89 to

91 and the new policy itself is on pages

93 to 102.

Board changes in FY23

I was delighted to be appointed as

Chair as of 1 January 2023, having

joined the Board in 7 September 2022

as an Independent Non-Executive

Director and Chair Designate. I would

like to take this opportunity to thank

my predecessor Andy Harrison for his

dedication and significant contribution

in leading the Dunelm Board over the

last nine years.

On behalf of the Board, I am pleased

to present our Governance report for

the year ended 1 July 2023.

Dunelm Group plc Annual Report and Accounts 202358

GOVERNANCE REPORT

Board effectiveness

and composition

The Board considers evaluation to

be an essential check and balance on

whether its composition, focus and

approach is in line with the Company’s

overall ambitions. During the year, we

conducted an internal performance

review and I am pleased to report

that the output of this work was that

the Board and its Committees are

operating efficiently and productively.

More details of the evaluation process

can be found on page 78.

Our broad range of Board talent covers

a variety of skills and our diverse group

of Non-Executive Directors continue

to bring experience and challenge to

Board discussions.

Nevertheless, we are mindful that

two of our Non-Executive Directors,

William Reeve and Peter Ruis, will have

completed nine years on the Board

during 2024. Therefore, we go into

the new financial year focused on

succession planning to ensure that we

are well-placed to continue delivering in

a way that is beneficial to our business

and our stakeholders, consistent with

our culture and true to our

shared values.

AGM

Our AGM this year takes place on

Thursday 16 November 2023. In line

with the UK Corporate Governance

Code, all Directors will be seeking

re-election. In addition, in accordance

with the Listing Rules, each of the Non-

Executive Directors will be subject to

a vote of shareholders independent

of the Adderley family. In light of the

Adderley family holding, we are also

required to seek a Rule 9 waiver to allow

us to buy back shares to fulfil colleague

share option entitlements. We hope

that shareholders will support this

resolution, which is limited to

this purpose.

The year ahead

The Board remains conscious of the

ongoing need for good governance

and I am reassured that our framework

is strong and effective. The past year

has not been without its challenges and

the commitment demonstrated by our

colleagues is admirable.

I would like to take this opportunity to

say thank you, on behalf of the Board,

to all our colleagues in the business for

their continued hard work, dedication

and focus on ensuring we are ‘doing

the right thing’ for Dunelm and its

stakeholders, and to my fellow Directors

for their valued contribution. We have

started FY24 with confidence and in the

knowledge that the Company is led by

a highly competent and professional

team. I look forward to the support of

our shareholders as the business seizes

the opportunities that lie ahead.

Alison Brittain

Chair

20 September 2023

Code compliance statement

This Governance report explains how we have applied the Principles of the UK Corporate Governance Code published

in July 2018 (the ‘Code’), which is available on the website of the Financial Reporting Council, www.frc.org.uk. These

Principles are applied to the Company’s sole trading subsidiary through the Group’s governance, risk management and

internal control structure.

The Board considers that it has complied in full with the Code during the financial year. Details of how we have applied

the Principles and complied with the Provisions can be found throughout this Annual Report. The table below provides an

overview of where relevant content and information can be found.

How we comply with the UK Corporate Governance Code 2018

Board leadership and

company purpose

Page(s)

Promoting and preserving

long-term value 35, 58, 68

Purpose, values, strategy

and culture 1, 10, 13, 72

Section 172 statement 35

Board engagement with

shareholders 34, 68

Managing director conflicts

of interests 66, 122

Workforce policies and practices 36, 72

Division of

responsibilities

Page(s)

Board structure and

independence 64, 66

Board responsibilities 65

Board biographies 61

Composition, succession,

and evaluation

Page(s)

Nominations Committee report 74

Board succession planning 77

Board evaluation 77

Audit, risk and

internal control

Page(s)

Audit and Risk Committee report 80

External auditor and internal audit

independence and effectiveness 83, 85

Fair, balanced and understandable 82

Risk management and internal

control framework 48, 85

Remuneration Page(s)

Remuneration Committee report 88

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 59

Governance dashboard

Board overview

Gender

55% Men

45% Women

Independence*

40% Non-independent

60% Independent

* Number excludes the Chair who

was independent on appointment.

Age diversity

9% 40–50

64% 50–60

27% 60+

Ethnicity

91% White

9% Asian

Nationality

82% British

9% Indian

9% Swedish

Length of tenure

46% 0–3 years

18% 3–6 years

18% 6–9 years

18% 9+ years

Board and Committee attendance

Director Committee memberships Board

Audit and Risk

Committee

Remuneration

Committee

Nominations

Committee

Alison Brittain

R N

8/8 N/A 3/3 4/4

Sir Will Adderley

9/9 N/A N/A 4/4

Nick Wilkinson 9/9 N/A N/A N/A

Karen Witts 9/9 N/A N/A N/A

Ian Bull

R N A

9/9 3/3 4/4 4/4

Kelly Devine

R N A

9/9 3/3 4/4 4/4

William Reeve

R N A

9/9 3/3 4/4 4/4

Peter Ruis

R N A

9/9 3/3 4/4 4/4

Marion Sears

9/9 N/A N/A 4/4

Arja Taaveniku

R N A

9/9 3/3 4/4 4/4

Vijay Talwar

R N A

9/9 3/3 4/4 4/4

Andy Harrison

R N

4/4 N/A 2/2 2/2

Audit and Risk Committee member

Nominations Committee member

Remuneration Committee member

Chair

1 Alison Brittain joined the Board on 7 September 2022 and attended all meetings following her appointment.

2 Andy Harrison stepped down from the Board and its Committees on 31 December 2022. He attended all meetings prior to that date.

Dunelm Group plc Annual Report and Accounts 202360

GOVERNANCE REPORT

Directors and officers

1. Alison Brittain

Chair

Independent on appointment

Appointed: September 2022

and as Chair in January 2023

Key strengths

An experienced business leader who brings

considerable expertise as NED and former

Chief Executive of a range of consumer-

facing companies. Has successfully scaled

businesses in the UK and internationally

and has longstanding plc experience

and shareholder understanding, coupled

with strong strategic insight and focus on

execution.

Past experience

Alison was CEO of Whitbread PLC from 2015

to 2023. Prior to that, she held a number

of senior roles in the UK banking industry,

serving as Group Director in the Retail

Division of Lloyds Banking Group PLC (2011-

2015), and Board Director at Santander UK

PLC (2007-2011) and Barclays PLC (1987-

2007). Alison is a former Non-Executive

Director of Marks & Spencer Group PLC.

Other commitments

Senior Independent Director at Experian plc.

Chair of English football’s Premier League.

Non-Executive Director at British Airways

plc. Chair and Trustee of The Prince’s Trust

Group Company.

2. Sir Will Adderley

Deputy Chair

Non-independent

Appointed: April 2003

Key strengths

Previous Chief Executive of Dunelm, with a

detailed understanding and experience of all

aspects of the business. Particular expertise

in buying and trading, maintaining strong

and long-standing supplier relationships.

Past experience

Will has worked for Dunelm his whole

career since joining in 1992. He took over

the day-to-day running of the Group from

his father in 1996 and remained as Chief

Executive through the Group’s IPO in 2006.

Will became Deputy Chair in February 2011

and was reappointed Chief Executive in

September 2014 for an interim period until

31 December 2015.

Will retains an executive role to support the

business in matters agreed with the CEO,

as required.

Other commitments

Owner of WA Capital Limited and Trustee of

Stoneygate Trust.

3. Nick Wilkinson

Chief Executive Officer

Non-independent

Appointed: February 2018

Key strengths

An experienced CEO, and proven business

leader in multichannel retail businesses

operating across a number of consumer

brands and geographies.

Past experience

Nick was the Chief Executive of Evans Cycles

from 2011 to 2016 and the Chief Executive of

Maxeda DIY from 2007 to 2010. Prior to that,

he was Group Buying Director and MD of

Currys at Dixons Retail Group (1999 to 2006).

Nick spent his early career at Unilever and

McKinsey & Co.

Other commitments

Trustee of Rewilding Britain.

4. Karen Witts

Chief Financial Officer

Non-independent

Appointed: June 2022

Key strengths

A highly qualified Chief Financial Officer

with a strong background in finance and

management, and a wealth of experience

across global retail and consumer-facing

businesses.

Past experience

Karen was CFO of Compass Group plc from

2019 to 2021 and CFO of Kingfisher Group

plc from 2012 to 2019. Before that, she

held various senior finance, strategic and

operational roles with Vodafone Group plc

(2010 to 2012), and at BT Group plc (1999

to 2010). Karen qualified as a Chartered

Accountant with Ernst & Whinney.

Other commitments

Non-Executive Director of Ipsen Pharma, SA.

1. Alison Brittain

R N

3. Nick Wilkinson 4. Karen Witts

2. Sir Will Adderley

Key

Audit and Risk Committee member

Nominations Committee member

Remuneration Committee member

Chair

Independent Director

Designated NED for colleague matters

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 61

5. Ian Bull

Non-Executive Director

Independent

Appointed: July 2019

Key strengths

An experienced finance and strategy

specialist. Fellow of the Chartered Institute

of Management Accountants with over 20

years’ business and financial experience in

leading consumer-facing businesses. Long-

standing plc experience and shareholder

understanding.

Past experience

Ian was CFO of Parkdean Resorts Group from

2016 to 2018 and CFO of Ladbrokes plc from

2011 to 2016. He was Group Finance Director

of Greene King plc (2006 to 2011), having

spent his early finance career at Whitbread

PLC, Walt Disney Company and BT Group.

Ian is a former Non-Executive Director and

Audit Committee Chair of Paypoint Limited,

Senior Independent Director and Audit

Committee Chair of St. Modwen Properties

plc and Chair of Lookers plc.

Other commitments

Senior Independent Director at Domino’s

Pizza Group plc. Member of Chapter Zero,

the Directors’ Climate Forum and a regular

attendee of its events.

6. Kelly Devine

Non-Executive Director

Independent

Appointed: March 2022

Key strengths

An accomplished business leader having

held multiple executive roles in financial

services and payment firms. Particular

experience building enterprise partnerships

in complex ecosystems to increase

market share.

Past experience

Kelly was Senior Vice-President, Head

of Bank Partnerships at Mastercard from

2018-2020, having first joined the company

in 2015. Prior to that, she held various roles

at American Express from 2005 to 2015

and was a member of PwC’s Economics

consultancy practice from 2003 to 2005.

Other commitments

President of Mastercard UK & Ireland.

Board Member at UK Finance.

7. William Reeve

Senior Independent Non-Executive

Director

Independent

Appointed: July 2015

Key strengths

An entrepreneur and technology investor

with extensive experience in the digital

sector and M&A.

Past experience

William co-founded three internet-

related businesses: Fletcher Research,

LOVEFiLM.com, and Secret Escapes.

He is a former Non-Executive Director of

Graze.com, Paddy Power plc, Zoopla and

Nutmeg among others.

Other commitments

Chief Executive of Oh Goodlord Limited.

7. William Reeve

R N A

8. Peter Ruis

R N A

6. Kelly Devine

R N A

5. Ian Bull

R N A

Bill Adderley

Founder and Life President

Bill, together with his wife Jean, founded the business in 1979. Although no longer on the

Board or actively involved in management, Jean remains a major shareholder.

8. Peter Ruis

Non-Executive Director

Independent

Appointed: September 2015

Key strengths

An experienced executive with particular

expertise in retail, brands, marketing and

product developed working for both large

and more entrepreneurial organisations.

Past experience

Peter was CEO of Indigo Books & Music Inc.

from 2022 to 2023, having previously joined

as President in 2021. He was the Managing

Director of Anthropologie Europe and

International from 2018 to 2020 and the

Chief Executive of Jigsaw from 2013 to 2018.

Prior to that, he held senior positions at John

Lewis Partnership (2005 to 2013), Levi Strauss

(2001 to 2004) and Ted Baker (1997 to 2001).

Other commitments

None.

Changes to the Board:

Alison Brittain joined the Board

on 7 September 2022.

Andy Harrison stepped down from the

Board on 31 December 2022.

Directors and officers continued

Dunelm Group plc Annual Report and Accounts 202362

GOVERNANCE REPORT

Key

Audit and Risk Committee member

Nominations Committee member

Remuneration Committee member

Chair

Independent Director

Designated NED for colleague matters

9. Marion Sears

Non-Executive Director

Non-independent

Appointed: July 2004

Key strengths

A long-standing Board Director, with

extensive City, investor and banking

experience, including M&A. Significant plc

experience and stakeholder understanding.

Past experience

Marion was Dunelm’s Senior Independent

Director and Chair of the Remuneration

Committee from 2006 to 2015 and was Chair

of the Nominations Committee until 2016.

She was Managing Director – Investment

Banking at JP Morgan, from 1994 to 2001,

prior to which she worked in corporate

finance and as an investment analyst.

Other commitments

Non-Executive Director and Chair of

Remuneration Committee at WHSmith

plc, and Keywords Studios plc, and Senior

Independent Director at abrdn New Dawn

Investment Trust plc. Director of WA Capital

Limited. Member of Chapter Zero, the

Directors’ Climate Forum and a regular

attendee of its events.

10. Arja Taaveniku

Non-Executive Director

Independent

Appointed: February 2021

Key strengths

A former Chief Executive with a wealth of

knowledge from international home retail

businesses. Particular expertise in the

strategic and operational development of

customer propositions and product value

chains, alongside environmental, social

and governance initiatives.

Past experience

Arja was a member of the Group Executive

at Kingfisher plc and Chief Executive of its

subsidiary, Kingfisher International Products

Limited from 2015 to 2018. Prior to that, she

was Chief Executive of lkano Group S.A.

from 2012 to 2015, having previously held

various leadership roles at IKEA Group from

1989 to 2012 including Global Business Area

Director.

Other commitments

Chair of Svenska Handelsfastigheter AB and

Polarn O. Pyret and Non-Executive Director

at Handelsbanken Group. Member of

Chapter Zero, the Director’s Climate Forum,

and a regular attendee of its events.

9. Marion Sears

11. Vijay Talwar

R N A

12. Luisa Wright

10. Arja Taaveniku

R N A

11. Vijay Talwar

Non-Executive Director

Independent

Appointed: October 2021

Key strengths

A proven business leader in driving

significant digital and operational

transformations. Broad international

executive experience developed at

consumer-facing, omni-channel businesses.

Past experience

Vijay was Chief Executive of ContextLogic

Inc from February to September 2022. Prior

to that, he was Chief Executive of Footlocker

EMEA from 2019 to 2022 and President of

Digital at Foot Locker from 2016 to 2019.

Previously, he was President of Gifts/Special

Occasions at Sears Holdings (2014 to 2016),

held C-suite positions at Blue Nile from 2010

to 2014 and was Chief Executive at William

J Clinton Foundation India (2008 to 2010).

Vijay was COO for EMEA at Nike from 2002

to 2008.

Other commitments

Chief Digital Officer and Chief Customer

Officer at Dufry AG.

12. Luisa Wright

Group General Counsel

and Company Secretary

Appointed: November 2022

Key strengths

An accomplished general counsel, company

secretary and regulatory adviser, with

extensive plc experience built at consumer-

facing digital, retail and technology

companies.

Past experience

Luisa was Group General Counsel and

Company Secretary of The Rank Group

Plc from 2018 to 2022 and Group General

Counsel and Company Secretary of Sportech

Plc from 2011 to 2017. Prior to that, Luisa

was a private practice lawyer at Olswang

LLP (now CMS Cameron McKenna Nabarro

Olswang LLP) from 2000 to 2011. Luisa

qualified as a lawyer with Olswang LLP.

Other commitments

None.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 63

We have always believed that good governance – in our words ‘doing the right thing’ – helps companies make better decisions

for the benefit of all stakeholders. The framework below provides a high-level summary of our approach, illustrating where

responsibilities fall so as to enable informed decision-making, effective oversight and clear accountability. Our framework also

allows for delegation of specific matters to the appropriate committees.

The Board believes that good governance supports Dunelm’s purpose, shared values and strategy, and is satisfied that these

elements and Dunelm’s culture are aligned.

Group Board

The Board as a whole is responsible for the overall direction, performance and long-term success of the Group.

It is responsible for setting and role modelling our purpose and shared values. It provides effective challenge to

management on the execution of the strategy and is responsible for ensuring that the Group maintains effective

risk management and internal control systems.

Executive Team

The Board delegates responsibility for the day-to-day operational management of the Company to the CEO.

The CEO is supported by a team of executives who head each of the key function areas of the Group and form the

Executive Team, which operates under the CEO’s direction and leadership.

Board Committees

The Board is supported by three committees to which it has delegated certain matters in order to ensure that

they receive the appropriate level of consideration. These committees support the Board in discharging its

duties. Each of the committees operates under terms of reference approved by the Board, which are reviewed

annually and can be found on the corporate website: corporate.dunelm.com.

The Executive Team is, in turn, supported by three executive management committees, which provide updates to

the Board, Audit and Risk Committee, Remuneration Committee and Executive Team as appropriate.

Risk and Resilience

Committee

Oversees and reviews

principal and operational

risks, tracks key risk indicators

and considers trends and

matters of significance.

Chaired by the CFO.

Pathway to Zero Steering

Group

Manages and tracks progress

of sustainability initiatives,

including those relating to

climate change. Chaired by

the CEO.

Talent Committee

Oversees and develops

succession planning at all

levels of the business and

monitors progress against

our ‘Know-Grow-Flow talent

management initiative.

Chaired by the Stores and

People Director.

Governance structure

Reports/recommends/informs

Reviews/challenges/approves

See page 74 for Nominations

Committee report.

See page 48 for more

information.

See page 88 for Remuneration

Committee report.

See our Sustainability Report

2023 for more information.

See page 80 for Audit and Risk

Committee report.

See page 40 for more

information.

Each of the respective Executive-led committees are supported by working groups led by subject matter experts.

Nominations Committee

Recommends appointments to the

Board, keeps the composition of

the Board under review, oversees

the succession plans for the Board

and senior management and

promotes diversity on the Board

and across the Group.

Audit and Risk Committee

Has oversight of the Group’s

financial and narrative reporting,

assesses the effectiveness

of internal control and risk

management systems, monitors

the independence of internal

and external audit and manages

the relationship with the external

auditor.

Remuneration Committee

Establishes the Remuneration

Policy, determines the

remuneration of the Executive

Directors and Chair, oversees

implementation of the

Remuneration Policy and of

remuneration policies and

practices across the Group.

Dunelm Group plc Annual Report and Accounts 202364

GOVERNANCE REPORT

Governance

Group General Counsel and Company Secretary

• Supporting the Chair and the Non-Executive

Directors with their responsibilities.

• Advising on corporate governance matters and

regulatory compliance.

• Facilitating individual induction programmes

for Directors and assisting with training needs

as required.

• Assisting with communications with shareholders

and organising the AGM.

Designated Non-Executive Director for

colleague matters

• Engaging with colleagues (for example through

the National Colleague Voice) to represent the

‘colleague voice’ at the Board.

• Monitoring the effectiveness of colleague

engagement initiatives.

• Providing regular updates to the Board.

Executive Non-Executive

Deputy Chair

• Maintaining a close dialogue with the Chair and

the CEO.

• Contributing to the development of the Group’s

purpose, culture and values by promoting and

visibly demonstrating the Company’s long-

established shared values.

• Assisting the CEO in strategic and operational

activities as requested.

• Supporting and deputising for the Chair

as required.

Chief Executive Officer

• Proposing the strategic objectives of the Group

for approval by the Board and delivering the

strategic and financial objectives in line with the

agreed purpose and strategy.

• Leading the Executive Team and senior

leadership in managing the operational

requirements of the business.

• Leading the climate change and sustainability

objectives of the Group.

• Providing clear and visible leadership of our

shared values.

• Effective and ongoing communication with

colleagues and shareholders.

Chief Financial Officer

• Working with the CEO to develop and

implement the Group’s purpose and strategic

objectives.

• Focusing on financial delivery and performance

of the Group.

• Ensuring that the Group remains appropriately

funded to pursue the strategic objectives.

• Ensuring proper financial controls and risk

management of the Group and compliance with

associated regulations.

• Leading on investor relations activities and

communications with shareholders.

The Chair and Chief Executive have clearly defined roles which are separate and distinct. The specific duties and division of

responsibilities between them have been agreed by the Board and are summarised below, together with information on the

roles of the Senior Independent Director, the Executive Directors, the Non-Executive Directors and the Group General Counsel

and Company Secretary. Further information can be found at corporate.dunelm.com.

Chair

• Leading the Board and responsible for its

effectiveness and governance.

• Setting the agenda, style and tone of Board

discussions with a particular focus on strategic

matters.

• Ensuring each Non-Executive Director makes

an effective contribution to the Board.

• Ensuring that the Directors receive accurate,

timely and clear information.

• Promoting a culture of openness and debate.

• Facilitating constructive Board relations.

Senior Independent Non-Executive Director

• Acting as a ‘sounding board’ for the Chair and

an intermediary for the other Directors.

• Leading the Non-Executive Directors in their

annual assessment of the Chair’s performance.

• Available to shareholders, particularly if they

have concerns that the normal channels have

failed to resolve, or for which such contact

would be inappropriate.

• Leading the Chair succession process.

Non-Executive Directors

• Providing constructive contribution and

challenge to the development of strategy

and ensuring that decisions are taken so as to

promote the success of the Company in the

interests of all stakeholders.

• Monitoring operational and financial

performance and scrutiny of management

performance in the delivery of strategic

objectives.

• Providing oversight of financial and other

control processes for risk management.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 65

About our Board

The Board has agreed that our optimum

number of Board Directors is between

nine and eleven. It currently comprises

eleven, with an independent Chair,

four Executives/Non-Independent

Directors, and six independent Non-

Executive Directors. We consider that

this structure provides a good mix

of backgrounds and skills, enables

the right level of independent

challenge, and allows for effective

decision-making. We maintain a clear

division of responsibilities between

the leadership of the Board and the

executive leadership of the business,

as articulated on the preceding page.

Schedule of matters

reserved

Certain key matters requiring

Board approval are set out in

a formal schedule of matters

reserved, which the Board reviews

periodically. Examples of such

matters include Group strategy

and budget, Group capital

structure, approval of financial

results and the Annual Report

and Accounts, significant capital

or contractual commitments,

ensuring maintenance of internal

control and risk management

systems and approval of

significant Group-wide policies.

The schedule of matters reserved

for the Board is available at

corporate.dunelm.com.

Managing conflicts of interests

Directors are required to disclose any

actual or potential conflicts of interest

to the Board immediately as and when

they arise throughout the year. These

are considered by the Board and any

authorisations given are recorded

in the Board minutes and reviewed

annually. In addition, a formal process

is undertaken each year when all

Directors confirm to the Board

details of any other directorships

and relevant information in

connection with related parties.

The Board takes action to ensure

that the influence of third parties

does not compromise or override the

independent judgement of the Board.

Should Directors have any concerns

about the operation of the Board or

Dunelm management that cannot be

resolved, these can be recorded in the

Board minutes. If, upon resignation, any

Non-Executive Director has concerns of

this nature, they may provide a written

statement to the Chair for circulation.

The Board considers that its procedures

to approve actual and potential

conflicts of interest, to ensure that any

related party transactions involving

Directors or their connected persons

are conducted on an arm’s length

basis and to provide a communications

channel for any unresolved concerns,

are in place and operating effectively.

Director independence

The Board considers that Alison Brittain

was independent on her appointment

to the Board and subsequently as

Chair. All Non-Executive Directors,

with the exception of Marion Sears,

are considered to be independent.

The Board has treated Marion Sears

as a Non-Independent Non-Executive

Director since September 2015 in

view of her tenure of more than

nine years on the Board, and her

subsequent appointment as a Director

of WACapital Limited in March 2016.

WACapital Limited is a private limited

company established by Sir Will

Adderley (the Deputy Chair, and major

shareholder) to act as a long-term

holding company for his beneficial

interest in the Company and various

other investments. The Dunelm Board

has determined that this appointment

does not affect her judgement as

a Director of Dunelm, and that any

potential conflict of interest has been

cleared on the basis that WACapital

Limited and Sir Will Adderley are

parties to a Relationship Agreement,

details of which can be found in the

Directors’ report on page 119.

Re-election

In accordance with the UK Corporate

Governance Code, all Directors will

stand for re-election at the 2023 AGM.

Non-Executive Directors will be subject

to a separate vote by shareholders

independent of the Adderley family

as required by the Listing Rules of the

United Kingdom Listing Authority.

Marion Sears will put herself forward

for reappointment at the AGM by

shareholders, independent of the

Adderley family, as well as under

a full shareholder vote.

Time commitment

The Board recognises the importance

of individual members having

sufficient time to discharge their

duties. On behalf of the Board, the

Nominations Committee has reviewed

the time commitment of the Chair

and each Non-Executive Director.

The Board is satisfied that they each

commit sufficient time to their duties

to discharge their responsibilities

effectively.

None of the Executive Directors hold

any non-executive board positions at a

FTSE 100 company.

Please see pages 61 to 63 for each

Director’s biography, which includes

details of their other key commitments.

Governance structure continued

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 202366

Induction and training

Upon joining the Board, each new

Director is offered a comprehensive

and tailored induction programme with

visits to key sites and meetings with

senior managers and other colleagues.

See page 76 for information on

Alison Brittain’s induction process.

The Group General Counsel and

Company Secretary reports to the

Board at each meeting on new

legal, regulatory and governance

developments that affect the Group

and actions are agreed where needed.

Directors attend seminars provided by

independent organisations which cover

a wide range of governance topics.

As part of the annual Board evaluation,

any additional training or development

needs are addressed by the Chair with

each Director. For details of the specific

skills and experience of each Director,

see the Directors’ biographies on pages

61 to 63.

Advice and insurance

All Directors have access to the advice

and services of the Group General

Counsel and Company Secretary. In

addition, Directors may seek legal

advice at the Group’s expense if they

consider it necessary in connection

with their duties. The Group purchases

Directors’ and Officers’ liability

insurance cover for its Directors.

Share buyback and

Rule 9 waiver

Since the time of flotation of the

Company, the members of the Adderley

family, including Bill and Jean Adderley

and Sir Will Adderley, have been

considered to be acting in concert

(‘a Concert Party’) for the purposes of

Rule 9 of the City Code on Takeovers

and Mergers (the ‘Takeover Code’).

At the date of this report, Sir Will

Adderley controls 37.5% of the issued

share capital of the Company, and the

Concert Party controls 42.4%. Bill and

Jean Adderley are no longer Directors

of the Company or actively involved.

Sir Will Adderley is a Director and

Deputy Chair.

As usual we will be requesting authority

to buy back up to 5 million shares (2.5%

of our share capital) at the AGM. This

authority is to allow the Company to

purchase shares in order to satisfy

future share option entitlements

for Executives, excluding Sir Will

Adderley. Given that it is expected

that shares bought by Dunelm in the

market will be reissued, no dilution or

change of control should occur either

for the Concert Party or for other

shareholders. As Sir Will Adderley has

a beneficial interest of above 30% of

our share capital, and the interest of

the Concert Party is less than 50%,

we are required to ask shareholders

to approve a waiver of Rule 9 of the

Takeover Code. This waiver permits

the Company to exercise its authority

to buy back shares without triggering

an obligation on Sir Will to make an

offer to buy all of the shares in the

Company. We understand that some

shareholders have concerns about Rule

9 waivers in general and/or they may

be bound by their voting policy to vote

against the resolution. Nevertheless,

we hope that shareholders will give this

administrative matter full consideration

and conclude that they can support the

waiver, notwithstanding any internal

voting policy. In this regard we would

like to reassure shareholders that:

• Shares bought back by the Company

would be held in treasury and

used only to satisfy share option

entitlements, and not cancelled.

• Since 2012, Sir Will Adderley no

longer participates in the Long-Term

Incentive Plan or any other share-

based incentive plan, and therefore

his shareholding will not increase

through that mechanism.

• Since flotation of the Company

in 2006, the Adderley family has

reduced its holding from 67% to the

current 42.4%.

• There has been a Relationship

Agreement in place since flotation

which provides safeguards to other

shareholders – for details please see

the Directors’ report on page 119.

We therefore request that shareholders

take into account our specific

circumstances when making their voting

decision on the waiver resolution, and

hope that shareholders will support the

Board’s recommendation.

The Board has reviewed whether our

policy to purchase shares in the market

to satisfy share option entitlements

(as opposed to issuing shares) is still

appropriate; we believe that it is in

the interests of our shareholder base

as a whole as it avoids dilution of

shareholdings, and it is supported

by the majority of our institutional

shareholders. We would like to

reiterate that shares bought back by

the Company will be held in treasury

and used only to satisfy share option

entitlements, and not cancelled. The

Company purchased 908,064 of its

own shares during FY23.

Risk

The Board has overall responsibility for

the management of risk and for setting

risk appetite. During the year the Board

conducted a review of the Company’s

principal risks and approved the Group

risk appetite.

See page 48 to 54 for the risk management

framework and the Group’s principal risks

and uncertainties.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 67

Board activities

Board activities during

theyear

The Board discharges its

responsibilities through an annual

programme of Board and Committee

meetings, with additional ad hoc

meetings as required to meet business

needs. These are supplemented by

visits to stores and other sites. Agendas

are determined in advance to ensure

that meetings are well-planned and

time is allocated as appropriate. Papers

are circulated ahead of time to ensure

that Directors are able to review and

arrive at meetings fully prepared.

At each meeting the CEO reports on

strategic progress and operational

performance (including customers,

colleagues and health and safety)

and the CFO reports on financial

performance. A rolling agenda of other

operational, strategic, sustainability, risk

and governance matters is refreshed

during the year as necessary to ensure

the Board continues to focus on areas of

priority, whilst also continuing to meet

regulatory requirements.

The Board held nine formally scheduled

meetings during FY23, as well as a full

day dedicated to a review of strategy,

details of which are set out page 70.

See page 60 for meeting attendance.

The Chair meets with the Non-

Executive Directors at the end of each

Board meeting. This is a useful way of

exchanging views and dealing with

any concerns or questions. In addition

to this, the Chair and the other Non-

Executive Directors regularly have

informal, individual meetings with the

Executive Directors and other senior

managers in the business.

We measure the time spent by the

Board on strategy, governance and

operational performance at each

meeting. Over the year, the biggest part

of our time was spent on performance,

followed by strategy and governance,

which the Board considers to be

appropriate in respect of FY23.

Our approach to section 172

Each of our Directors is mindful of

their duties under section 172 of

the Companies Act 2006 (‘s.172’) to

run the Company for the long-term

benefit of its shareholders and, in

doing so, to consider the interests

of its key stakeholders during its

decision-making, and the impact of

any of its decisions on stakeholder

relationships, on the Company’s

reputation for high standards of

business conduct, and on the

environment.

The matters encompassed in s.172

touch on everything we do, at a Board

level in our discussions and decision-

making, and also at a business level by

members of our Executive Team and

the senior leadership team. More detail

can be found on pages 70 and 71 where

we provide examples of the ‘Board in

Action’ and on pages 30 to 34 where

we describe our key stakeholders and

summarise how and why we engage

with them more generally, what

matters most to them, allocation of

responsibility within the business and

how we consider the effectiveness of

our engagement.

The Board acknowledges that every

decision it makes will not necessarily

result in a positive outcome for all

stakeholders. A key consideration

when making decisions is for the Board

to balance the sometimes conflicting

needs of our stakeholders while

considering the Company’s purpose,

values and strategic priorities, which

ensures the Board’s decision-making is

consistent and in the best interests of

the Company.

We actively engage with our major

shareholder and institutional investors

throughout the year to understand their

views on a variety of topics. The AGM

provides a valuable opportunity each

year for all shareholders to hear from

the Board, and for the Board to hear

from our shareholders. This year’s AGM

will be held on 16 November 2023.

See page 35 for our s.172 statement.

Summary: keeping s.172 high on the Board’s agenda

We ensure that the requirements of s172(1) Companies Act 2006 are met

and the interests of our stakeholder groups are considered, challenged and

debated through a combination of the following practical approaches:

• The Board carries out an annual review of strategy which assesses the long-

term sustainable success of the Group and our impact on key stakeholders

(see page 70 for more insight). Agenda items for the following year are

based on the decisions and next steps agreed at this meeting.

• The Board’s risk management procedures identify the principal and

emerging risks facing the Group, and the mitigation in place to manage

their impact. We consider these through a stakeholder lens as set out on

pages 50 to 54.

• The Group General Counsel and Company Secretary references relevant

s.172 factors against each agenda item in the minutes to ensure they

remain at the forefront of Directors’ minds when reflecting on discussions.

• The rolling Board agenda includes standing items to ensure that

stakeholders are fully considered, including investor roadshow feedback,

updates on people matters, the annual health and safety presentation,

modern slavery and anti-bribery reporting and sustainability updates.

• There is a formal review of many of these topics through standard Audit

and Risk Committee and Remuneration Committee agenda items, as

described later in this report.

• The Board considers impact on key stakeholders when it reviews Group

KPIs and requests additional information as appropriate.

Dunelm Group plc Annual Report and Accounts 202368

GOVERNANCE REPORT

• Product, choice & value and

Commercial initiatives

• Principal risks

• Approved FY22 Annual Report

and Accounts (inc TCFD report)

• NCV

feedback – financial

wellbeing

Sept

2022

• Approved appointment of

ChairDesignate

• Total retail system

• Colleagues

• NCV

feedback – community

&charity

Nov

2022

• Approved interims

announcement and dividend

• Principal risks

• Tax strategy

Feb

2023

• Strategy day reflections

• NCV

feedback – reward

(see page 118)

May

2023

• Tour of Daventry warehouse

and hub, which opened in

January 2022

• Customer operations

• External FY22 Board

evaluation output

July

2022

• Sustainability (see page 26)

• Brand

• Investor feedback

• Modern Slavery Act statement

Oct

2022

• Annual H&S presentation

• Technology

• Capital allocation framework

• NCV

– colleague safety

Jan

2023

• FY24 Budget

• Competitor landscape

• FY23 Board evaluation outcome

June

2023

• NED presentation on

consumer landscape

• Product mastery

• Customer operations

• Sustainability

• NCV

feedback – sustainability

Mar

2023

FY23 Board activities

At each meeting the Board receives a report on strategic progress and operational

and financial performance from the CEO and CFO as explained on the opposite page.

We have set out below some of the other key activities, presentations and discussion

points for the Board in FY23.

May 2023 – Board Strategy Day

See page 70 for more information

November 2022 – AGM

1 Indicates presentation by Executive Team/senior leadership.

2 NCV – National Colleague Voice.

GOVERNANCE REPORT

69Dunelm Group plc Annual Report and Accounts 2023

Strategy review

The Board met in May 2023 for its

annual strategy review. This year,

key topics included consumer

mega-trends, customer insights and

market analysis, brand development

and personalisation, the evolution

of our store and furniture plans

and reviewing our digital and

data roadmaps.

Presentations were given by the

Executive Team and members of the

leadership team. This provided the

opportunity for detailed discussions

and a deeper understanding by the

Board of our growth plans. It also

enabled the Board to consider the

strength of connections between

the different parts of our business

and ensure that we keep appropriate,

continued focus on operational grip

to support our overall customer

value proposition.

The Board challenged management,

amongst other things, on the extent of

our headroom for continued growth

and the plans to achieve it, whether

even more can be done to improve our

customer offer, the opportunities and

risks presented by future trends, the

role of our suppliers in delivering our

ambitions and whether we can leverage

technology further (and accelerate

it) to drive business change and

efficiencies. The Board acknowledged

the importance of continued investment

in technology, insights and data as key

drivers to sustainable growth, as well as

the value of ongoing engagement with

our key stakeholders so as to ensure

we really understand their views,

how our actions are likely to impact

them and consider this within our

decision-making.

The Board welcomed management’s

refresh of the ‘Plan on a Page’ (see

below), participated in a lively

discussion on the importance of

protecting our culture and identity

and confirmed its support for an

ambitious five-year growth plan.

The agreed actions and takeaways

for management were noted with

updates to be provided by way of

further presentations and deep dives

by business area built into the Board

agenda over the course of the next

12 months.

‘Plan on a Page’

refresh

At its strategy review, the Board was

presented with a refreshed ‘Plan on a

Page’, developed with input from the

senior leadership team, and aimed at

maintaining our focus on delivering

long-term growth and creating

value for our stakeholders. This year,

there has a been an emphasis on

understanding how we can seize the

opportunities afforded by the post-

pandemic world, whilst also being

mindful of the current economic

climate and challenges that it brings.

The Board considered that our

purpose remains strong, influencing

our Board and our colleagues in

their decision-making and maintaining

our focus on a sustainable business

“for generations to come”. The Board

also considered that our Customer 1st

focus and proposition continues to

resonate strongly. However, it agreed

with management’s view that there is an

opportunity to raise the bar on ‘value’

and ‘joy’ across all products, services

and experiences that we offer to our

customers. The Board also discussed

the evolution of our previous focus

areas into foundational strategic drivers

that enable the customer offer, namely

product mastery, a thriving total retail

system which combines the advantages

of both physical and digital retail, and

our culture and identity.

The Board discussed the manner in

which the refreshed plan took into

account the different considerations

of our key stakeholders, noting their

respective interests and recognising the

extent to which they are all represented.

Further to this, the Board approved

the refreshed ‘Plan on a Page’, noting

that the effect of a clear articulation

of strategy that resonates with all

stakeholders creates a strong vision,

and positions us well to create long-

term value and sustainable growth.

Following the Board’s review and

approval, the CEO presented the

refreshed plan to colleagues by way

of a series of in-person and hybrid

‘huddles’, which formed part of a series

of colleague events to reflect on the

achievements of FY23 and look ahead

to the opportunities for the business in

the forthcoming year.

Dunelm Group plc Annual Report and Accounts 202370

Board activities continued

Board in action

GOVERNANCE REPORT

Product

circularity

FY23 colleague

support

Well-documented increasing cost-

of-living pressures in FY23, which

have been felt by all stakeholders,

have been an important theme across

Board discussions this year. They were

particularly relevant to discussions on

colleague pay, reward and support.

The Board received a ‘People’ update

at every meeting from the CEO

and more detailed presentations

during the year from the People

and Stores Director, which provided

additional context. Feedback from

National Colleague Voice generally

and following deep dive discussions

on pay and reward, as well as the

outcomes from our colleague

engagement survey were also

considered in our decision-making.

This year, we continued to focus on

the large number of hourly-paid

colleagues who work in our stores

and distribution centres, and who

were more likely to feel additional

pressure. The Board supported the

proposal to again implement the

annual pay review for our warehouse

and distribution colleagues early,

in October 2022. For our other

hourly-paid colleagues, we awarded

a median increase of 9.6% in April

2023 so that we remain aligned to the

National Living Wage rate set by the

UK Government.

For monthly-paid colleagues, the

annual pay review took place as usual

in August 2023. The Board welcomed

the continuation of last year’s tiered

approach, awarding the highest level

of increases to colleagues on lower

salaries and/or at more junior grades

and the introduction of an annual

bonus entitlement for the first time in

FY24 for our most junior grade.

The Board was keen to ensure that

other forms of support continued to

be available to colleagues. In recent

years, we have invested heavily

in wellbeing benefits, such as the

Dunelm Colleague Support Fund and

mental health initiatives. Feedback this

year provided a reminder that good

communication of the availability of

benefits and support is as important

as having them in place. Further to

this, the Board welcomed a significant

uplift in the communication of

assistance that is available, including

the launch of a new personalised

benefits portal to provide ease of

visibility and access to the support

that we offer. We also welcomed new

initiatives, such as the Retail Trust’s

financial education tools, a Cost of

Living hub on our colleague intranet

offering financial tips and guidance

and additional one-to-one wellbeing

meetings for all colleagues.

In supporting this year’s proposed

pay increases, reward and support

initiatives, the Board considered our

purpose and values and the balance

of short-term impact with long-term

value creation. It concluded that

the steps taken were essential to

improving colleague engagement

and supporting financial wellbeing

and key factors towards improving our

customer proposition, improving our

ability to attract and retain talent and

ultimately drive long-term benefit for

all stakeholders.

Circularity

• Increased focus on designing

products to be more circular.

• Environmental performance

information received on over 80%

of Tier 1 manufacturing suppliers.

Carbon

• Continued reduction in Scope 1

carbon emissions.

• Commenced transition of our

HDN trunking vehicles to lower

carbon fuel and trial for electric

Made to Measure fitter vans.

• Scope 3 FY19 baseline and

FY30 carbon reduction targets

submitted to SBTi for verification¹.

Community/Customer

• Rolled out customer textile take-

back service to 96% of stores.

• Launched ‘Home to Home’ trial

for customers to donate pre-loved

homewares for redistribution to

those in need.

Sustainability –

pathway to zero

update

We remain fully committed to

making a positive social impact and

reducing environmental damage in

our communities and supply chains.

In October 2022 and March 2023,

the Board received detailed updates

on our progress during the year

from the Head of Climate Change

and other members of senior

management on the three key areas

of our pathway to zero roadmap:

circularity, carbon, and community/

customer, as well as an overview

on our approach to governance

and reporting.

The Board discussed targets and

challenged progress made during

the year. The Board also reflected

on the views of and impact on our

key stakeholders, recognising the

need to continue to communicate,

in the most meaningful and easily

understood way, how we think

about sustainability at Dunelm, our

plans and our progress. The Board

concluded that our sustainability-

linked goals and activities remain

aligned with our Group vision,

purpose and strategy. However, we

acknowledge that this work involves

ongoing discovery, monitoring and

horizon-scanning, and therefore

discussion on a regular basis at

Board level and by the senior

leadership.

The Board will continue to receive

KPI updates, reflections on feedback

from stakeholder engagement

and presentations and updates on

regulatory developments in this area.

Our CEO will continue to take the

lead as Chair of our Pathway to Zero

Steering Group.

More information can be found in our

Sustainability Report 2023, available

at corporate.dunelm.com.

1 We received confirmation after the year end that our near-term and net zero targets were approved.

Our targets can be viewed on our corporate website: corporate.dunelm.com

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 71

Culture

Dunelm has an open and straightforward

culture, with a focus on doing the right

thing and taking decisions for the long

term. This reflects the shared values

instilled by the Adderley family, who

founded our business over 40 years ago

and are still our major shareholders. The

Board has always been careful to ensure

that we protect and retain this culture

as the business grows and becomes

more complex.

Our purpose is ‘To help create the

joy of truly feeling at home, now and

for generations to come’. It informs

our strategy, is underpinned by our

shared values and is supported by our

approach to sustainability (see our

Sustainability Report 2023 for more

information). We are committed to

ensuring that the Company’s actions are

in keeping with our culture, values and

purpose to drive long-term success.

Our shared values

Our shared values have inevitably

evolved over time from the business

principles formulated by Sir Will

Adderley, our Deputy Chair, over a

decade ago. However, that they have

not changed significantly is testament

to their strength and importance to

the business.

We very much believe in setting the

tone from the top and consider it the

Board’s responsibility to instil and

maintain a culture of openness, integrity

and transparency. We also expect our

Directors and senior leadership team

to role model our shared values and

consider them within our decision-

making and how we communicate

with our stakeholders.

We believe that our shared values are

an essential contributor towards driving

the right behaviours and maintaining a

positive culture of mutual respect, trust

and constructive challenge.

Codes of Conduct, anti-bribery

and other policies

Our shared values are also reflected

in our Group policies, which are an

important expression of how we

look after our colleagues and how

they should expect to be treated by

others. These policies include a Code

of Business Conduct and Colleague

Code of Conduct, which set out specific

standards of ethics and behaviour.

These Codes make reference to

a number of other policies and

procedures that have to be followed,

including Equality & Diversity, Health &

Safety, Slavery and Human Trafficking

Statement and Prevention of Modern

Slavery, Ethical Code of Conduct for

Suppliers and Partners, Tax Strategy,

Whistleblowing and our privacy notices.

Mandatory training is provided on all

high-risk areas as part of induction and

on an annual basis.

We are strongly opposed to any form

of corruption or bribery and have

controls in place that have been built

around a clear understanding of how

and where bribery risks could affect our

business. This includes policies (such

as our Anti-bribery & Anti-corruption

policy), procedures such as conducting

due diligence on suppliers, annual

training for colleagues on bribery risks

and an ongoing audit and assurance

programme in respect of our suppliers.

Bribery risk management is discussed at

senior leadership meetings, including at

the Risk and Resilience Committee, and

also at the Audit and Risk Committee.

We also encourage any colleagues

and other stakeholders with concerns

to speak out and have facilitated this

through our Whistleblowing policy,

which enables reports to be submitted

on a named or anonymous basis.

Reports are kept strictly confidential

and concerns identified are referred to

appropriate managers within the Group

for investigation. An analysis of reports

is provided regularly to the Audit and

Risk Committee.

Monitoring our culture

We aim to provide an environment

that inspires, engages and develops

all of our colleagues to reach their full

potential. The Board engages directly

with our colleagues in a number of ways

that assist it in monitoring our culture as

described below, including by means

of our colleague representative body,

National Colleague Voice (see page 32

for more information).

People and culture is one of our

principal risks, which are considered

formally by the Executive Team and

Board of Directors twice a year with

relevant trends tracked and discussed

as appropriate. For more information

on our People and Culture risk see

page 52.

Culture is also monitored by way of

regular reporting to the Group Board

and Executive Team, by way of specific

‘People’ reports (covering engagement,

retention, gender pay and diversity,

amongst other things) and others that

are indicative of culture, such as health

and safety and whistleblowing. The

Nominations Committee supports the

Board in reviewing culture, diversity,

inclusion and talent management

and the Remuneration Committee in

assessing executive performance.

Finally, we encourage our Directors,

Executive Team and senior leadership

to ensure that they regularly interact

in-person with colleagues working in all

areas of our business. By engaging with,

listening to, respecting and responding

to our colleagues, we inspire them to

be the best that they can, deliver the

best experience to our customers and

deliver our strategy.

Culture and values

Dunelm Group plc Annual Report and Accounts 202372

GOVERNANCE REPORT

Our shared values in action

Act like owners

• Sharesave and incentive plans

• Own growth talent pool

• Risk management and governance frameworks

• Delegation of authority

Keep listening and learning

• National Colleague Voice

• Colleague engagement survey and pulse

• Monthly CEO-led and weekly team huddles

• Events organised by our four Diversity Networks

• Whistleblowing helpline

• Regular communications and updates via Home

Comforts intranet

• Mentorship programme

Stronger together

• Diversity networks

• Codes of Conduct (Business, Colleague and Ethical)

• Colleague development fund

• Cost of living hub in Home Comforts

• Wellbeing buddies

• Colleague Support Fund

Longer term thinking

• Investment in technology

• Digitalising the business

• Focus on succession planning

• Leadership development programme

• Net Zero commitments and plans

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 73

Role and principal duties

The Nominations Committee

is responsible for leading

the process for Board

appointments, ensuring

appropriate succession plans

are in place, and overseeing

the development of a diverse

talent pipeline. Its principal

duties include:

• Reviewing the structure,

size and composition

(including the skills,

knowledge, experience

and diversity) of the

Board, ensuring it remains

effective and suited to

the Company’s strategic

priorities.

• Ensuring plans are in place

for an orderly succession

to Board and senior

management positions

and overseeing the

development of a diverse

pipeline for succession.

• Keeping under review

the leadership needs

of the business with a

view to ensuring its

continued ability to

compete effectively

in the marketplace.

• Identifying and nominating

for the approval of the

Board, candidates to fill

Board vacancies as and

when they arise.

• Leading a rigorous and

transparent process for

Board appointments.

• Keeping under review

demands on Directors’

time.

The Committee’s full terms of

reference can be found at:

corporate.dunelm.com.

Composition, succession

and evaluation

Committee membership

Alison Brittain (Chair)

Sir Will Adderley

Ian Bull

Kelly Devine

William Reeve

Peter Ruis

Marion Sears

Arja Taaveniku

Vijay Talwar

See page 60 for meeting attendance.

GOVERNANCE REPORT

Nominations

Committee report

On behalf of the Nominations

Committee (‘Committee’), I am pleased

to present the Nominations Committee

report for the year ended 1 July 2023,

my first as its Chair. It has been a busy

year for the Committee, with a strong

emphasis on reviewing skills and

succession planning.

Board skills review

We believe that Directors should bring

a mix of skills, experience and a variety

of perspectives to our Board; this

helps facilitate constructive discussion

and effective, balanced decision-

making. Having made four new Board

appointments in the last two financial

years, we felt it important this year

to conduct a detailed skills review

exercise. Our conclusion was that the

Board is well-balanced, providing an

appropriate blend of executive and

non-executive skills and a collective

competence to meet the Company’s

needs and deliver its strategy.

Succession planning

We are committed to reviewing

and updating our succession plans

on a regular basis to support the

development of a diverse pipeline of

talented people to ensure the long-

term success of the Company.

Alison Brittain

Chair of the Nominations

Committee

Dunelm Group plc Annual Report and Accounts 202374

We conducted a full review during

the year, with a particular focus on

our leadership team plans and the

talent pipeline for senior management

positions.

We also focused on succession

planning for Non-Executive Directors,

mindful that each of William Reeve

(who is also our Senior Independent

Director and Chair of the Remuneration

Committee) and Peter Ruis will have

completed nine years on the Board in

2024. We continue to believe that the

optimal size of our Board is between

nine and eleven Directors; this

enables us to meet our requirements

for governance, independence and

diversity, while fostering a cohesive

culture that enables all Board members

to contribute fully. Further to this and

taking into account the in-depth skills

review work undertaken during the

year, we will commence a search for at

least one new Non-Executive Director

this autumn.

Diversity and inclusion

We continue to develop our diversity

and inclusion policy and are committed

to enhancing diversity within our

talent pipeline and the business more

generally. We expect everyone to play

their part in ensuring we are both a

truly diverse and inclusive business

where differences are respected, and

everyone’s contributions are valued.

We aspire to achieve a colleague

base that is reflective of society, and

provides opportunity for all, regardless

of background, ethnicity, gender, sexual

orientation, disability or age.

The Committee has welcomed the

ongoing development of our four

colleague networks this year: disability

& neurodiversity, ethnicity & race,

LGBTQ+ and gender equality. It is

evident that our networks empower

our colleagues, who can see how

they can and are making a difference.

Their work is supported by a range of

initiatives that have continued to take

place across the business and has

resulted in demonstrable action and

change, including the introduction of

new parenthood and menopause

policies, new tools and equipment

to enable greater accessibility and

events that celebrate our differences.

More details on our colleague

networks and FY23 initiatives

can be found in our Sustainability

Report 2023.

From a Board perspective, I am

pleased to report that we comply

with the targets set out in the

Listing Rules, with 45% of the Board

being women, two senior Board

positions held by women and one

member of the Board from an ethnic

minority background. We are also

in alignment with the requirements

of the FTSE Women Leaders Review

and Parker Review. Nevertheless, we

continue to reflect on our approach

to diversity and inclusion at a Board

level, including in respect of each

Board Committee. Please see page

79 for our first annual statement on

Board and management diversity

metrics.

Board evaluation

Finally, having conducted a full

external evaluation process last year,

this year’s Board and Committee

evaluation was undertaken internally.

Further details of the process and a

summary of the Board outcome can

be found on page 78, and in respect

of the Committee on page 79.

Overall, I am pleased to confirm the

view of the Directors that the Board

and each Committee is operating

effectively.

I look forward to meeting

shareholders at our Annual General

Meeting on 16 November 2023.

Alison Brittain

Chair of the Nominations

Committee

20 September 2023

Committee composition

and governance

The majority of the Committee is

independent, with its members

comprising six independent Non-

Executive Directors, the independent

Chair of the Board, one non-

independent Non-Executive Director

and the Board’s non-independent

Deputy Chair. Alison Brittain took over

as Chair on 1 January 2023 following

the retirement of Andy Harrison from

the Board.

Only members of the Committee

have the right to attend Committee

meetings. Other individuals, such

as the CEO and People and Stores

Director are invited to attend all or part

of the meetings as appropriate. No

Director attends that part of a meeting

during which his or her own position is

discussed. The Group General Counsel

and Company Secretary acts as

secretary to the Committee and

attends all meetings.

During FY23, the Committee met

formally four times, with a further two

meetings taking place specifically in

relation to Alison Brittain’s appointment

as Chair Designate and then Chair. The

agenda for each meeting is based on a

standing agenda for the financial year

but tailored and updated throughout

as appropriate.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 75

Director appointment in FY23

Alison Brittain was appointed to the

Board in FY23, joining in September

2022 as an independent Non-Executive

Director and Chair Designate. She

succeeded Andy Harrison as Chair

of the Board and this Committee on

1 January 2023.

The process for Alison’s appointment

was led by William Reeve, the Senior

Independent Director. An external

search firm, Russell Reynolds, was

appointed to assist with the search.

Russell Reynolds has no other

connection with the Company or any

Director. They sought the input of

the Directors before drawing up a

role specification that was approved

by the Committee. The brief was

for an experienced business leader,

who has worked in a range of large,

Nominations Committee report continued

consumer-facing businesses and has a

track record of delivering growth. The

Committee also sought an individual

whose personal values are aligned

to our own. William Reeve and other

Committee members interviewed

shortlisted candidates, and all members

of the Board met with the preferred

candidate and gave their unanimous

support. The Committee therefore

recommended to the Board that Alison

Brittain be appointed to join the Board

in September 2022, with the aim of

succeeding Andy Harrison as Chair

early in 2023. In November 2022, the

Committee (without Alison Brittain or

Andy Harrison present) confirmed its

recommendation to the Board that

Alison be appointed Chair with effect

from 1 January 2023.

Alison Brittain’s biography can be found

on page 61.

Board appointment process

For Board appointments we generally

follow a well-established process,

adapted where necessary to account

for specific skills required and

circumstances, as follows:

• Detailed role and person

specification drawn up by the

Nominations Committee.

• Independent external search

consultant appointed to conduct

the process.

• Equal number of male and female

candidates feature on the longlist

as standard practice, and emphasis

placed on presentation of a diverse

candidate list.

• Initial candidates meet with Chair

and at least one other Board

member. Shortlisted candidates

meet with other Board members

as appropriate.

• Extensive references taken and,

for Non-Executive Directors, an

assessment of candidates’ other

commitments to ensure that they

have sufficient time to dedicate to

Board member duties.

• Nominations Committee makes

recommendation to the Board

for final approval.

Induction of Chair Designate

Each new Board Director receives a full and tailored induction, led by the Chair

and Group General Counsel and Company Secretary. Alison Brittain’s induction

when she joined the Board on 7 September 2022 included the following:

Meetings with all members of the Board.

• Chair provided an overview of the Board and its annual programme

of meetings.

• CEO discussed the strategy and ‘Plan on a Page’.

• Committee Chairs discussed how the Committees operate and matters

of significance.

• CFO provided a summary of the Group’s financial performance and

future plans.

Meetings with Executive Team and senior leadership team.

• Introduction to management structure, business operations, focus areas

and performance.

• Introduction to key opportunities and risks in each area of the business.

• Group General Counsel and Company Secretary provided an overview

of the governance framework and corporate structure.

Meetings with other colleagues and site visits.

• Deep dives with the Finance and Tech leadership teams.

• Visits to our logistics and manufacturing centres.

• Visits to stores and introductions to key suppliers.

• Attended National Colleague Voice meeting to develop an understanding

of the views of colleagues.

• Engaged more broadly with colleagues by participating in a Q&A

session for the INSPIRE Programme, set up for colleagues with strong

growth potential.

Key advisers

• Meetings with external and internal auditors, brokers and other advisers.

Dunelm Group plc Annual Report and Accounts 202376

GOVERNANCE REPORT

Succession planning

Non-Executive Director succession

During the year, the Committee

undertook a detailed skills review.

Amongst other things, it considered

the knowledge, experience, length of

service and performance of Directors,

our diversity and inclusion policy and

the balance of skills on the Board as

a whole. This work has provided a

framework for considering the skills

on which there should be more focus

in considering new appointments to

the Board.

Executive Director succession

In line with best practice, the

Committee continued to review and

refresh its CEO and CFO succession

plans. The Committee determined

during the year to set up working

groups, facilitated by the People and

Stores Director, to undertake this work,

which included a market mapping

exercise. This was presented back to the

Committee and will form the basis for

reviews of these plans in the future.

Senior leadership succession

During the year, the Committee

considered succession plans for

the Executive Team and the talent

pipeline for senior leadership roles.

The Committee also received updates

on the progress of our ‘Know-Grow-

Flow’ programme, which is designed

to ensure that talented individuals with

diverse skills and backgrounds can

thrive and offering them opportunities

to progress within the Group. This work

has resulted in a clearer understanding

of capabilities and a stronger pipeline

for succession.

Board effectiveness review

An evaluation of the Board, its

Committees and individual Directors

is carried out each year. The review

helps to identify areas for improvement,

informs training plans for our Directors

and identifies areas of knowledge,

expertise or diversity which should be

considered in our succession plans.

Each Director also goes through a

performance review process with the

Chair on an annual basis. The Senior

Independent Director and Deputy Chair

review the performance of the Chair.

The progress made against our FY22

evaluation is set out below.

The approach taken to our FY23

evaluation and a high level summary

of the key actions agreed following

the Board review are set out on the

following page.

FY22 Board evaluation

The FY22 Board evaluation was externally facilitated by Lorna Parker, a Board evaluation specialist who had facilitated such

reviews for the Company previously. As set out in last year’s report, the Board agreed on a number of areas that it wished to

focus on as a result of the review, progress against which is set out in the table below.

Topic Outcome and recommendations from FY22 evaluation Actions implemented in FY23

Strategy

development

• Continue to carefully balance time spent on activities

promoting ‘value creation’ with the ‘value protection’ role

of the Board.

• Ensure that more time is set aside to discuss long-term,

strategic topics, in the context of the risk appetite and

ambition of the Board.

• Increase the amount of time available for less formal,

discursive interactions.

• Continue to invite external speakers, to build knowledge

on strategic topics and stimulate discussion.

• Standing agenda items and

allocation of time to topics at each

meeting reviewed.

• Directors provided with

opportunities during the year for

less formal discussions.

• External speakers invited to

present to the Board during

the year.

NED involvement

in the business

• Set aside agenda time for NEDs to share their experiences

on a topic of mutual interest.

• NEDs are encouraged to spend more time interacting with

colleagues in the business outside of formal meetings, for

example through attendance at National Colleague Voice

meetings and on-site meetings with the leadership team.

• NEDs presented on specific topics

to the Board during the year.

• NEDs committed to spending

more time with senior leaders

to facilitate their development

and have attended National

Colleague Voice meetings during

the year.

Talent and

succession

• Continue to build visibility of talent management and

succession for the Executive Team and other senior

roles through the Nominations Committee and Board

discussions.

• Presentations received on talent

management and refreshed

approach to succession planning

implemented.

Meetings

and other

interactions

• Adapt the meeting schedule to have fewer and longer ‘in

person’ meetings focused on strategy development, using

remote meetings for more routine or transactional matters.

• Board meetings now a

mix of in-person and online

meetings, with agendas

tailored appropriately.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 77

FY23 Board evaluation

Given that an external evaluation was carried out last year, this year the review was conducted internally. Each Director

completed a questionnaire in respect of the Board and each Committee of which they were a member or otherwise

attended meetings on a regular basis. The Group General Counsel and Company Secretary collated the responses

and shared them with the Chair and each respective Committee Chair. An executive summary with the key findings was

then shared, alongside each report, with the Board and each Committee’s members for discussion. The key themes and

outcomes from the Board review were as follows:

Theme Outcomes

Succession

planning

• Acknowledgement that the appointment of new NED(s) to the Board, and to the roles of

Senior Independent Director and Chair of the Remuneration Committee when William Reeve

and Peter Ruis step down in 2024, is a priority.

• Continue to focus on succession plans and capability development for key senior positions.

Stakeholder

engagement

• Undertake a more detailed review of supplier relationships and consider increased supplier

engagement at Board level to further develop understanding of opportunities and risks.

ESG-related

risks and

opportunities

• Continue to support management in refining our ESG strategy and approach and ensure that it

remains relevant to our strategy. Provide feedback on reporting and share wider learnings and

experience.

Testing the

Company’s

strategy and

ambitions

• Include key topics raised by the Board at the Strategy Day in May on the agenda for the

forthcoming year.

• Continue to constructively challenge the Executive Team in order to maintain our focus on driving

long-term growth.

Overall, the results of the FY23

evaluation were very positive, with no

major concerns or issues raised. High

scores reflected a strong and positive

culture and an effective and well-

managed Board, and the comments

are being used to help shape the

Board agenda and its priorities in

FY24. It was also confirmed that

each Director continues to make an

effective contribution to the Board,

is well-prepared and demonstrates

commitment to their role.

Diversity & inclusion

Policy

Our overriding aim is to ensure that

the Board and Company comprise

outstanding people and teams who

can lead the business effectively in

a manner aligned to our purpose,

shared values and strategy. We believe

that the Group’s best interests are

served by ensuring that our people

represent a range of skills, experiences,

backgrounds and perspectives.

This is encapsulated in our ’stronger

together’ shared value and the

inclusion of ‘Culture and Identity’

(being an ambitious and inclusive

brand and organisation) as one of

our three strategic drivers to deliver

furthergrowth.

In order to achieve this aim, we remain

focused on three broad principles:

• refining the way we recruit.

• identifying, supporting and

mentoring existing diverse talent

in the business.

• increasing diversity amongst senior

appointments as they are made,

including to our Board and each

of its Committees.

In line with this approach, the

Committee:

• is committed to ensuring that the

Board is at least 40% female, that

at least one of the Chair, Senior

Independent Director, CEO and CFO

positions is held by a woman and at

least one Board Director is from an

ethnically diverse background.

• receives update on our approach

to recruitment at all levels of the

business as part of its oversight of

colleague policies and practices.

• continues to require that specific

effort is made to bring forward

diverse candidates for senior

management and Board

appointments.

• monitors the Group’s approach

to people development to ensure

that it continues to enable talented

individuals, regardless of gender,

marital status, sexual orientation,

disability, race, religion, colour,

nationality, ethnic origin, or age

to enjoy career progression

within Dunelm.

Dunelm Group plc Annual Report and Accounts 202378

Nominations Committee report continued

GOVERNANCE REPORT

Annual statement on Board and Executive Team diversity targets

Our Board and Executive Team gender and ethnicity data is provided below in accordance with UK Listing Rule 9.8.6R(10)

as at 1 July 2023. Diversity data is collected for Executive Team members via the engagement survey. At the end of the

financial year, the Board was asked to confirm which ethnicity category they identified with in the table below.

Gender

Group Board Executive Team¹

Number of

Board members

Percentage on

the Board

Number of

senior positions

on the Board

(CEO, CFO, SID

and Chair)

Number in

Executive Team

Percentage of

Executive Team

Men 6 55% 2 3 38%

Women 5 45% 2 5 62%

Not specified/prefer not to say — — — — —

Ethnicity

Group Board Executive Team¹

Number of

Board members

Percentage on

the Board

Number of

senior positions

on the Board

(CEO, CFO, SID

and Chair)

Number in

Executive Team

Percentage of

Executive Team

White British or other white groups

(including minority-white groups) 10 91% 4 8 100%

Mixed/multiple ethnic groups — — — — —

Asian/Asian British 1 9% — — —

Black/African/Caribbean/Black British — — — — —

Other ethnic groups including Arab — — — — —

Not specified/prefer not to say — — — — —

1 Both the CEO and CFO are members of the Executive Team.

Board

At a Board level, the Listing Rules

prescribe diversity targets, which are

met as follows:

Target Compliance

At least 40% of the

Board are women

45% of our Board

are women

At least one of the

senior Board

positions is held

by a woman

Alison Brittain is our

Chair and Karen

Witts is our CFO

At least one

member of the

Board is from a

minority ethnic

background

Vijay Talwar joined

the Board in

October 2021

Group

At a senior leadership level, we have

strong representation of women with

62% of our Executive Team and 41%

of our senior leadership roles being

held by women. Dunelm published its

sixth Gender Pay Gap Report in April

2023, and an overview is provided in

our Sustainability Report 2023. Both

documents are available to download at

corporate.dunelm.com.

In order to ensure appropriate focus on

ethnic representation and to continue

to drive greater ethnic representation

in leadership roles, work has continued

to collect ethnicity data. In addition,

we have introduced an ethnic diversity

target of 8% of our role-model leaders

into this year’s LTIP grant (see page

116 for more detail). The Committee

supports management’s commitment

to achieve this target and will track

progress.

Our equality and diversity policy can be

found at: corporate.dunelm.com.

Committee effectiveness

The effectiveness of the Committee

was considered as part of this year’s

Board evaluation process, more details

of which can be found opposite on

page 78. The review concluded that

the Committee continues to operate

effectively and having considered the

findings, it was agreed that particular

areas of focus during the forthcoming

year should be:

1. Continuing to assess the

appropriateness and effectiveness

of succession plans;

2. Reviewing information provided to

the Committee to further enhance

visibility of talent management and

development; and

3. Reviewing emphasis placed

on diversity and inclusion in

appointment and succession plans.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 79

Audit, risk and internal control

Audit and Risk

Committee report

On behalf of the Audit and Risk

Committee (‘Committee’), I am

pleased to present the Audit and

Risk Committee report for the year

ended 1 July 2023. The report explains

how the Committee has discharged

its responsibilities and provides an

overview of its main activities during the

year, the key highlights of which are set

out below.

Consideration of significant

issues and judgements

During the year, the Committee

examined the application of current

and likely accounting and reporting

standards. Careful scrutiny was given

to judgemental items, assessing their

appropriateness and consistency over

time as noted on page 82. As part of

our work, we considered and reflected

on the previous year’s external audit

control observations, ensuring that any

relevant recommendations were acted

upon by management as agreed with

the Committee.

Role and principal duties

The role of the Audit and

Risk Committee is to support

the Board in fulfilling its

corporate governance and

reporting obligations as to the

effectiveness of Dunelm’s risk

management systems, internal

controls and financial reporting

Its principal duties include:

• Monitoring the integrity

of the Group’s financial

statements and public

announcements relating to

financial performance.

• Reviewing and challenging

key accounting policies and

judgements.

• Monitoring the effectiveness

of internal controls and the

process for identifying and

managing risk.

• Reviewing and approving

statements in the annual

report concerning internal

control, risk management

(including the assessment

of principal risks), and the

viability statement.

• Approving and overseeing

delivery of the internal

audit plan. Monitoring and

reviewing the role and

effectiveness of the internal

audit function and process,

ensuring its ability to exercise

independent judgement.

• Overseeing the relationship

with the external auditor,

agreeing the audit fee and

terms of engagement.

• Reviewing and monitoring

the external auditor’s

reports, performance,

effectiveness and

independence.

The Committee’s full terms of

reference can be found at:

corporate.dunelm.com.

Committee membership

Ian Bull (Chair)

Kelly Devine

William Reeve

Peter Ruis

Vijay Talwar

Arja Taaveniku

See page 60 for meeting attendance.

Ian Bull

Chair of the Audit and

Risk Committee

Dunelm Group plc Annual Report and Accounts 202380

GOVERNANCE REPORT

Risk management and

internal control systems

The Board has overall responsibility for

our risk management framework, but

delegates authority to the Committee

for the effective management of risk

across the Group and monitoring of

material internal controls. During the

year, the Committee received regular

updates on work to further improve

and strengthen our risk management

processes and internal control

environment.

We received regular updates on the

Group’s principal and emerging risks

and mitigation strategies via a suite

of Key Risk Indicators (‘KRI’), enabling

the Committee to oversee enterprise

risk and focus its attention on key

risk areas and movements. We also

received updates from the CFO as chair

of the Risk and Resilience Committee,

which provided the Committee with

an additional level of assurance and

deeper insight at an operational level.

Management also provided the

Committee with updates throughout

the year on internal control

enhancements and we have welcomed

the implementation of new software to

enable balance substantiation, updated

controls mapping of key financial

processes and continued investment

in our cyber security capabilities.

Our ongoing multi-year project to

improve processes and controls in the

commercial function has continued to

make solid progress, with dedicated

resource and governance.

Internal audit reviews

KPMG have completed their third

year as our internal auditor. During

the year they completed reports

on supply chain, stock returns and

ESG processes, amongst others.

Management is working through the

various recommendations, as well as

those from previous reports, and an

update on progress is provided at

every Committee meeting. We seek

to ensure that each year the internal

audit plan is aligned with the Group’s

strategic priorities and key risks and

were pleased that there were no “high”

findings in any of this year’s reports.

We continue to review our strategy and

assurance map to prioritise our internal

audit approach.

See page 86 for more information

on work undertaken this year by our

internal auditor.

External audit tender

As reported last year, and in line with

our audit rotation policy, we undertook

a competitive audit tender process

during the year. The process was

informed by the Financial Reporting

Council’s (‘FRC’) guidance on audit

tendering and, with due regard to

the Government’s proposed audit

reforms, we invited five firms, including

three challenger firms, to participate.

Following the conclusion of the tender,

the Board approved the reappointment

of PwC as our external auditor and

PwC has expressed its willingness

to continue in role. This appointment

is subject to shareholder approval

at the Company’s 2023 Annual

General Meeting.

See page 84 for more information on the

external audit tender process.

Following completion of PwC’s FY22

audit, the Committee was informed that

the FRC’s Audit Quality Review team

had chosen the Group’s audit for its

review. The Committee has received

a copy of the review and was pleased

to note that it did not identify any key

findings and only a limited number of

improvements were required.

Sustainability reporting

We continue to focus on progress

against existing and forthcoming

sustainability-related reporting

requirements, including those of the

International Sustainability Standards

Board (‘ISSB’). In particular, the

Committee has had oversight of

management’s planning for this year’s

disclosure requirements, including work

to progress our understanding and

improve the data quality inputs into

the Scope 3 calculations. This has

led to a revised baseline, described

in more detail on page 85 and we

are pleased to confirm that we are

reporting this year on all areas of

the Task Force on Climate-related

Financial Disclosures (‘TCFD’)

framework.

Developments in

corporate reporting

The Board and the Committee

support measures that increase

the quality of governance, audit

and transparency for the benefit

of our shareholders and other

stakeholders. We have continued

to consider matters that are likely

to be implemented as part of

the corporate governance and

audit reforms now being led by

the Department for Business and

Trade (including our approach to

the implementation of an audit

and assurance policy and the other

requirements set out in the Draft

Companies (Strategic Report and

Directors’ Report) (Amendment)

Regulations 2023), whilst maintaining

a watching brief as we wait to see

how the proposals and timelines for

their implementation unfold.

It has again been a busy year, and

I would like to take this opportunity

to thank my fellow Committee

members for their hard work

and support and our Executive

Team and senior leadership for

their constructive engagement.

I look forward to answering any

shareholder questions on the

activities of the Committee at

the AGM.

Ian Bull

Chair of the Audit and Risk

Committee

20 September 2023

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 81

Committee composition

and governance

The Committee is composed solely of

independent Non-Executive Directors,

and was throughout FY23. The Board

is satisfied that they demonstrate a

breadth of knowledge and experience,

including sector expertise, to enable

the Committee to fulfil its duties. Both

Ian Bull and Vijay Talwar are considered

by the Board to have recent and

relevant financial experience and to be

competent in auditing and accounting.

Ian, who has chaired the Committee

since he joined the Board in 2019, is

a Fellow of the Chartered Institute of

Management Accountants with over 20

years’ business and financial experience

in leading consumer-facing businesses.

Vijay, who joined the Committee in

October 2021, is a Certified Public

Accountant.

Only members of the Committee

have the right to attend Committee

meetings. Other Board Directors, as

well as the Group Finance Director,

Chief Technology and Information

Officer, Head of Cyber Security,

representatives of PwC (external audit)

and representatives of KPMG (internal

audit) are invited to attend all or part

of meetings, as appropriate. The

Group General Counsel and Company

Secretary acts as secretary to the

Committee and attends all meetings.

During the year, the Committee

met three times (with a minimum of

four meetings scheduled for FY24).

Meetings are generally scheduled in

line with key times in the Company’s

financial reporting calendar. The

Committee maintains a rolling calendar

of items for consideration at each

meeting and reviews and updates it

regularly. The external auditor and

the internal auditor are provided with

the opportunity at each meeting to

discuss matters without the presence

of management. Furthermore, the

Committee Chair meets with the

external audit and internal audit

partners outside of meetings.

Key judgements and financial

reporting matters

A key aspect of the Committee’s work

is monitoring the integrity of the annual

and interim reports, including a review

of the significant financial reporting

matters and judgements contained

in them. Key accounting judgements

considered, conclusions reached and

their financial impacts during the year

under review are set out below.

Provisions for inventory

The Committee discussed in detail

the approach taken by management

to provisions for inventory. Particular

attention was given to reviewing the

provision for obsolete, slow-moving

or discontinued inventories including

the utilisation of provisions reported

in prior periods. The Committee

noted that there was a high degree

of consistency in the methodology

applied by management, with updated

inputs based on trading experience.

The Committee concurred with

management’s conclusions that

the values recorded in the financial

statements are appropriate.

Other accounting matters

The Committee received regular

updates on management’s assessment

of impairment triggers as required

under IFRS and it was noted that there

have been none identified in FY23. The

Committee also noted that there is no

material change in deferred tax assets

and the Group has no uncertain tax

provisions.

Going concern and

viability statement

The Directors must determine that

the business has adequate resources

to continue in operational existence

and as such can continue to adopt the

‘going concern’ basis of accounting.

Furthermore, the Directors are required

to make a statement in this Annual

Report as to the longer-term viability of

the Company.

The Committee conducted an

assessment pursuant to which the

Directors were able to conclude that it

is appropriate to prepare the financial

statements on a going concern basis.

They reviewed financial models

(including downside scenarios and

a reverse stress test), taking time to

understand and challenge, where

necessary, significant judgements

and assumptions in the modelling, the

reverse stress test model and covenant

and liquidity headroom.

The Committee also evaluated

management’s work in conducting a

robust assessment of the Company’s

longer-term viability. It affirmed the

reasonableness of the assumptions,

considered whether a viability period

of five financial years remained most

appropriate, and confirmed that it

was as part of a recommendation

to the Board.

See page 55 for going concern and

viability statements.

Fair, balanced and understandable

The Committee reviews the financial

statements set out in the Company’s

annual and interim results and reports

its findings and recommendations to

the Board. The Board considers the

recommendations of the Committee,

the representations made by

management and the views of the

internal and external auditors in order

to satisfy itself of the integrity of the

narrative and financial statements and

to determine whether the financial

and narrative statements when taken

together present a fair, balanced and

understandable assessment of the

Company’s position and prospects.

Robust year-end governance processes,

performed in parallel with the formal

process undertaken by the external

auditor, are in place to support this

and include:

• Project management by the Head

of FP&A and Investor Relations,

working with a cross-functional

team including the Group General

Counsel and Company Secretary

and communications specialists, and

overseen by the CFO.

• Internal verification by the finance

team of non-financial factual

statements, key performance

indicators and descriptions used

within the narrative.

• Engagement with, and feedback

from, senior management on

proposed content and changes.

Audit and Risk Committee report continued

Dunelm Group plc Annual Report and Accounts 202382

GOVERNANCE REPORT

• Feedback from external parties

(including remuneration advisers

and the external auditor) to enhance

the quality of reporting.

• Opportunities for the Committee

to challenge management and the

external auditor on the process and

content of the report before it is

tabled to the Board for approval.

The Board considers that, taken

as a whole, the Annual Report and

Accounts 2023 is fair, balanced and

understandable. The Board further

believes that the Annual Report and

Accounts 2023 provides the necessary

information for shareholders to

adequately assess the Company’s

position and performance, business

model and strategy.

External auditor

The Committee is responsible for

overseeing the relationship with

the external auditor, including

recommending to the Board their

appointment, reappointment and

removal, assessing their independence

on an ongoing basis, and approving the

statutory audit fees. The Committee

notes the publication in May 2023 of

the FRC’s Audit Committees and the

External Audit: Minimum Standard.

PwC have been the Company’s

external auditor since 2014. The lead

audit partner, Mark Skedgel, has been

in post since the FY19 audit and is

stepping down in September 2023 after

completion of the FY23 audit, with Gill

Hinks taking over in respect of FY24.

There are no contractual obligations

that restrict the Committee’s choice of

external auditor.

The external audit

PwC is engaged to express an opinion

on the financial statements. It reviews

the data contained in the financial

statements to the extent necessary

to express its opinion. It discusses

with management the reporting of

results and the financial position of

the Company and presents findings

to the Committee. Where it makes

recommendations in its report to the

Committee, the Committee reviews

them and agrees with management the

manner and extent to which they should

be implemented.

Each of the Directors in office at the

date of this report is not aware of

any relevant information that has not

been made available to PwC and each

Director has taken steps to be aware

of all such information and to ensure it

is available to PwC. PwC’s audit report

is published on pages 126 to 131. Fees

paid to PwC for its FY23 audit work

were £327,000 (2022: £301,500).

Auditor effectiveness

It is the responsibility of the Committee

to assess the effectiveness and

independence of the external audit

process. The assessment is conducted

in accordance with a process agreed

with the Committee, which involves

seeking the views of the Committee, as

well as those of colleagues who have

regular interactions with the external

auditor. The Committee was provided

with a summary of the responses

received in respect of the FY22 audit

to assist with its considerations.

Feedback overall was positive. It was

agreed that the audit partner provided

effective leadership and the audit team

demonstrated a good understanding

of Dunelm, the retail sector, and the

challenges that we face. A common

theme was the ongoing development

of ways of working and use of new

digital tools to assist in the efficient and

timely completion of actions arising,

in particular from ad hoc or follow

on requests.

Having conducted its review, and

also bearing in mind the quality of

interactions during the year, the

Committee concluded that PwC

had applied appropriately robust

challenge and professional scepticism

throughout the audit to demonstrate

independence, that it possessed the

skills and experience required to fulfil

its duties effectively and efficiently,

and that the audit was effective.

Following completion of PwC’s FY22

audit, the Committee was informed that

the FRC’s Audit Quality Review team

had chosen the Group’s audit for its

review. The Committee has received

a copy of the review and was pleased

to note that it did not identify any key

findings and only a limited number of

improvements were required.

The Committee will formally assess

PwC’s performance in relation to the

FY23 audit following its completion.

The FY23 assessment will include the

review of a number of defined Audit

Quality Indicators agreed between

management and PwC and approved

by the Committee during the year in

order to assist the Committee in its

assessment of the quality of the audit

going forwards.

Safeguarding auditor

independence and objectivity

The Committee recognises the

importance of ensuring that the

independence and objectivity of the

external auditor is not impaired through

the provision of non-audit services. We

have in place robust policies on the use

of auditors for non-audit work and the

recruitment of former employees of the

external auditor, which can be found on

our website at corporate.dunelm.com.

These include the following:

• Fees for non-audit services provided

by the statutory auditor in any year

may not exceed 70% of the average

fees for the Group statutory audit in

the three previous years.

• The auditor is prohibited from

providing certain non-audit services,

including almost all tax work,

internal audit, corporate finance,

and involvement in management

activities.

• The external auditor may not be

engaged to provide any non-audit

services without the approval of

the Committee.

• Restrictions apply to the employment

of senior members of the audit team

by the Company.

During the period we paid PwC

£46,000 (2022: £42,000) for their review

of the interim financial statements

(considered to be a non-audit service).

This was 12.3% of the total audit fees,

and the three-year average is 12.7%. No

other non-audit services were provided

by the external auditor.

The Committee can confirm that

the policies referred to above were

complied with throughout the year

and, in its opinion, the external auditor

remains independent.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 83

External audit tender

Our auditor rotation policy is that we

will tender the audit at least once every

ten years, we will change auditor at

least every 20 years, and we will invite

at least one firm outside the ‘Big Four’

to participate. Further to this, and

consistent with the proposal set out

in last year’s report, the Committee

commenced a competitive tender

process in H1 FY23 for the FY24

statutory audit.

The Committee agreed to undertake

the tender at its meeting in June 2022

and established a working group

comprising the Committee Chair,

Arja Taaveniku, Vijay Talwar, the CFO

and the Director of Group Finance.

The working group determined the

process, with due regard to the FRC’s

guidance on audit tendering and the

Government’s response in May 2022

to the BEIS March 2021 consultation

paper ‘Restoring Trust in Audit and

Corporate Governance’. It considered

a range of firms and sent a request

for proposal (‘RFP’) to five (of which

three were challenger firms, and from

which one challenger and one non-

challenger firm declined to participate).

All participating firms then met with key

internal stakeholders.

Following review of the RFP responses

and scorecard for each firm, together

with a review of recent FRC inspection

results, the working group presented

its recommendation to the Committee.

After due consideration, in November

2022 the Committee recommended to

the Board that PwC be reappointed as

Dunelm’s statutory auditors from FY24,

subject to shareholder approval.

The Committee considers that the

Company has complied with the

Competition and Markets Authority’s

Statutory Audit Services for Large

Companies Market Investigation

(Mandatory Use of Competitive Tender

Processes and Audit Committee

Responsibilities) Order 2014 for the

financial year under review.

Audit and Risk Committee report continued

Overview of the tender process

June

2022

• Committee agreed to undertake a tender process for the

FY24 statutory audit.

• Working group established to manage tender process.

July

2022

• Working group determined process and agreed objectives.

• Contact made with five potential firms, two of which

declined to participate.

Aug

2022

• Meetings arranged with three firms selected to tender.

• Tender scorecard developed.

• Timetable agreed with management.

Sept

2022

• RFP document issued to firms.

• Announcement that formal audit tender process had

commenced.

• Information shared via data room.

Oct

2022

• RFP responses received from firms.

• Initial review of responses undertaken.

Nov

2022

• Audit firm presentations.

• Assessment of each firm’s presentation and criteria scoring.

• Recommendation by working group to the Committee and

thereafter from the Committee to the Board.

Dec

2022

• Feedback to all audit firms.

• Announcement of the outcome of the audit tender process.

Tender scorecard criteria

The objective was to appoint the audit firm that would provide the highest

quality, most effective and efficient audit for the Company. To support this,

the participating firms were scored utilising the following criteria:

• Firm level quality: assessed with reference to AQR reports and progress

made against findings.

• Individual engagement team quality: based on internal metrics and

references.

• Use of technology to drive speed of delivery, quality, and value: assessed

based on RFP responses and demonstration.

• Ability of senior team to build relations and communicate complex

messages clearly: assessed via technical challenges and presentation.

• Ability of the firm to provide holistic assurance across both financial and

non-financial metrics e.g. ESG reporting: assessed on RFP response.

• Ability to deliver an efficient audit and value for money: assessed based

on commercial terms and in the context of scores for other scorecard items.

• Tender quality and experience: assessed based on RFP response and

presentation.

Dunelm Group plc Annual Report and Accounts 202384

GOVERNANCE REPORT

Sustainability reporting

The Committee’s role is to gain

assurance that the effects and

consequences of climate change are

being adequately reflected in our

financial statements and valuations.

Last year we reported on all areas

of the TCFD framework other than

under the ‘Metrics and Targets’ b)

recommendation. This year, with the

support of a third-party specialist

partner, management has made

further progress on understanding and

improving the data quality inputs into

the Scope 3 calculations which has led

to a revised baseline. We are reporting

for FY23 on carbon emissions on a

basis that is consistent with the revised

baseline and are in full compliance with

the TCFD recommendations.

During the year, the Committee

received regular updates on

progress against forthcoming

sustainability-related reporting

requirements including the first

two IFRS Sustainability Disclosure

Standards issued by the ISSB: IFRS S1

General Requirements for Disclosure

of Sustainability-related Financial

Information and IFRS S2 Climate-related

Disclosures. This included horizon

scanning to proactively consider

timelines and the steps required to

achieve compliance for each new

disclosure requirement as it comes into

force. We also welcomed the inception

of a new ESG-specific reporting team

to support the various sustainability-

related workstreams across the

business and ensure ongoing efficiency

and clarity of reporting for disclosure

purposes.

The Committee will continue to monitor

developing best practice, and seek

training/professional guidance when

required, to ensure that it continues to

effectively oversee our reporting in

this area.

See pages 40 to 47 for our TCFD report.

Risk management and

internal controls

Risk management

Whilst the Board has overall responsibility

for risk management, it delegates to the

Committee responsibility for assessing

the effectiveness of the systems

established by management to identify,

assess, manage and monitor financial

and non-financial risks.

During the year, the Committee

undertook the following risk

management activities, which enabled

it to maintain oversight and discuss risks

and challenges faced by the Company:

• Reviewed principal risks and the

Company’s formal risk appetite

statement ahead of submission

to the Board for approval.

• Considered and challenged

management’s KRIs.

• Received regular reports and

updates from the CFO as chair of the

Risk and Resilience Committee on

its activities during the year and on

any specific matters that impacted

internal controls.

• Received reports from management

on developments and improvements

to the control environment during

the year, including implementation

of a new balance substantiation

system, updated controls mapping

of key financial processes and

continued investment in our cyber

security capabilities.

• Reviewed internal and external audit

reports and progress on delivering

management actions.

• Received updates on improvements

to fraud monitoring and reporting

following the conclusion of the

annual fraud risk assessment.

• Reviewed progress on improving

business continuity plans.

• Received updates on data

protection, anti-bribery, material

litigation, business continuity

and whistleblowing (see page 72

for more information about our

Whistleblowing policy).

• Noted that a satisfactory insurance

programme is in place.

In addition, there was continued focus

on IT systems, cyber security and data

protection by way of presentations

to the Committee from the Chief

Technology and Information Officer and

Head of Cyber Security. The Committee

welcomes the ongoing improvements

in these areas in line with the priorities

previously identified as requiring focus.

The Committee considers that the

processes in place to manage risk by

the Board and management are robust

and working effectively.

Internal control framework

Management is responsible for

establishing and maintaining an

effective system of internal controls

and the Committee has responsibility

for ensuring the effectiveness of

those controls.

In the last two years there has

been a continuous improvement

in the effectiveness of our control

environment, which commenced

following an internal controls ‘health

check’ completed by KPMG in FY20. We

continue to invest in the modernisation

of our key business systems to ensure

that we have the right foundations in

place to support our ambitious strategic

growth plans and the Committee

continues to monitor progress.

The Group has established internal

controls and risk management systems

in relation to the process for preparing

consolidated financial statements.

Examples of the controls in operation

include regular balance sheet

reconciliations, monthly analysis and

reviews, technical accounting papers

and review and approval of externally

reported financial information.

Internal audit

The internal audit function provides

independent and objective assurance

to all levels of management up to the

Board. Its responsibilities include

evaluating and reporting on the

adequacy and effectiveness of the

systems of risk management and

internal controls. Since December

2019, the function has been outsourced

to KPMG.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 85

KPMG’s purpose, scope and authority

are defined within its charter which is

approved by the Committee annually.

The team develops an internal audit

plan for the year, with input from

management, that is structured to align

with the Group’s strategic priorities

and key risks and is approved by the

Committee. The plan is reviewed

periodically throughout the year to

confirm it remains relevant.

Each review concludes with a formal

report with graded recommendations,

management responses and actions.

These are communicated to the

Committee by KPMG, and rigorously

tracked through to completion.

The Committee as a whole and the

Committee Chair each meet with

KPMG without management present

on a regular basis to allow for open

discussion.

Audit and Risk Committee report continued

Internal audit reviews undertaken in FY23

KPMG conducted the following risk-based internal audit reviews in FY23:

Internal audit review Overview of scope

General IT controls Reviewed general IT controls processes and an

assessment of their effectiveness.

Purchase to pay Considered purchase to pay processes to help ensure

that the risks in this area are appropriately managed.

Supply chain Focused on core risks in the stock supply chain.

Stock return Reviewed the processes and controls designed to

manage risks related to stock returns.

Review of ESG

processes – phase 1

Considered our ESG processes and controls relating

to strategy, materiality and target setting activities.

Code of Conduct Assessed the existing controls around employee

behaviours.

Independent

programme

assurance

Focused on delivery of projects during the year

specific to internal control improvements.

The FRC requests that in reporting

on this engagement we make clear

the limitations of their review, namely

that it was based solely on the Annual

Report and Accounts and did not

benefit from a detailed knowledge of

our business, or an understanding of

the underlying transactions entered

into. They also noted that their review

provided no assurance that the report

and accounts are correct in all material

respects and that the FRC’s role is not

to verify the information provided but

to consider compliance with reporting

requirements. Finally, it is noted that

none of the FRC, its officers, employees

or agents accept liability for reliance

on their letter by the Company or any

third party, including but not limited to

investors and shareholders.

Committee effectiveness

The effectiveness of the Committee

was considered as part of this year’s

Board evaluation process, more details

of which can be found on page 78. The

review concluded that the Committee

continues to operate effectively and

having considered the findings, it was

agreed that particular areas of focus

during the forthcoming year should be:

1. Continuing to assess our approach to

internal audit;

2. Continuing to focus on assurances

around internal controls, fraud

and non-financial KPIs, including

sustainability;

3. Building a strong relationship with

the new external audit partner.

During the year the Committee carried

out a review of the effectiveness of

the internal audit function. This was

undertaken by way of a questionnaire,

and feedback was sought from

members of the Committee and

senior management. The Committee

concluded that the function continues

to operate effectively.

FRC review of annual report

and accounts

The FRC’s Corporate Reporting Review

team carried out a review of the FY22

Annual Report and Accounts during

the year, with no queries raised. The

FRC noted some matters that could

be improved in future reporting, and

these have been duly considered and

addressed as appropriate.

Dunelm Group plc Annual Report and Accounts 202386

GOVERNANCE REPORT

Remuneration – At a glance

Remuneration Principles

Simple and

transparent

Consistently applied

throughout business

Pay fairly for an

individual’s role and

responsibilities

Rewards strong

performance and

sustainable growth

over the long term

Aligned to shared

values and ownership

structure

Enshrined in

Remuneration Policy

Summary of Executive Remuneration Structure under 2023 Policy

Base Pay

➔ Median or below

Pension

➔ Aligned to workforce average

Benefits

➔ Median

Variable pay – annual cash bonus and LTIP

➔ Maximum opportunity 375% for

CEO and 325% for CFO

Annual cash bonus

➔ Median

➔ Up to 150% of salary*

➔ Linked to performance: sales,

profit, strategic/personal

➔ Clawback and malus apply

LTIP

➔ Upper quartile

➔ Up to 250% of salary*

➔ Three-year performance period

➔ Two-year retention period

➔ Mix of financial and non-financial

performance conditions

➔ Clawback and malus apply

Lifetime lock-in

➔ Two-thirds of bonus and LTIP

outcome retained in shares for the

duration of employment

Shareholding requirements

➔ During employment retain shares

worth maximum LTIP opportunity

➔ Two-year post-employment

holding requirement

*Subject to maximum variable pay opportunity.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 87

Remuneration

Committee report

Committee membership

William Reeve (Chair)

Alison Brittain

Ian Bull

Peter Ruis

Vijay Talwar

Arja Taaveniku

Kelly Devine

See page 60 for meeting attendance.

On behalf of the Remuneration

Committee (‘Committee’) I am

pleased to present the Remuneration

Committee report for the year ended

1 July 2023. This includes:

• My Annual Statement as Chair of

the Committee (pages 88 to 91);

• Our new Directors’ Remuneration

Policy which will be subject to a

binding shareholder vote at the

2023 AGM (pages 92 to 102); and

• The Annual Report on Remuneration

(pages 103 to 118), describing

how the existing Remuneration

Policy has been applied for the

year ended 1 July 2023 and how

we intend to implement policy for

FY24. The Remuneration Committee

report (excluding the Directors’

Remuneration Policy) will be subject

to an advisory shareholder vote at

the 2023 AGM.

Role and principal duties

The Committee is responsible

for determining the policy

for Directors’ remuneration

and setting the remuneration

for the Chair of the Board,

Executive Directors and

members of the Executive

Team in accordance with the

Principles and Provisions of

the Code. Its other principal

duties include:

• Establishing remuneration

schemes that support

alignment with long-term

shareholder interests;

• Designing remuneration

policies and practices

to support strategy

and promote long term

sustainable success;

• Reviewing the design of

all share incentive plans

for approval by the Board

and for any such plans

determine whether awards

will be made each year; and

• Reviewing workforce

remuneration and

related policies.

The Committee’s full terms of

reference can be found at:

corporate.dunelm.com.

William Reeve

Chair of the Remuneration

Committee

FY23 business performance

and incentive outcomes

Our Executive Team performed strongly

throughout the year, delivering another

good performance in a challenging

environment for UK consumers and

businesses, and resulting in record

sales of £1.6bn, and profit before tax

of £193m. The Committee’s decision-

making on the remuneration outcome

for our Executive Directors has

been shaped by this year’s financial

performance, as well as recognition

of the opportunities and challenges

for our business that lie ahead.

We remain committed to ensuring

that we reward sustainable, profitable

growth over the longer term on a

consistent basis and aligned with our

shared values.

The overall formulaic vesting level for

the annual bonus is 46% of maximum

opportunity for Nick Wilkinson and

45% of maximum opportunity for Karen

Witts. Full details of performance

against the FY23 objectives are set out

on pages 105 and 106. In addition, Nick

Wilkinson was granted an LTIP award

in November 2020 with vesting subject

to performance conditions assessed

over the three year period FY21–23. This

award has vested at 83% as set out on

page 107. The Committee considered

whether to use its discretion to adjust

Dunelm Group plc Annual Report and Accounts 202388

GOVERNANCE REPORT

either the bonus outcomes or the LTIP

award outcome. We concluded that the

outcomes of the annual bonus and LTIP

were fair and well-deserved and reflect

both the performance of the business

and the overall stakeholder experience,

including the wider workforce, and

therefore no discretion should be

applied.

At least two-thirds of Nick and Karen’s

respective cash bonuses (after

payment of tax and National Insurance

contributions) must be invested in

shares and retained in accordance

with our in- and post-employment

shareholding guidelines. Two-thirds

of Nick’s vesting LTIP award (after

payment of tax and National Insurance

contributions) must similarly be retained,

and it is, in any event, subject to a two-

year hold on the full amount.

Remuneration Policy review

We are grateful for the support for our

current Directors’ Remuneration Policy,

which was approved by shareholders

at the 2020 Annual General Meeting

with over 99% of votes cast in favour.

In line with the usual timetable, we

will be seeking shareholder approval

for a new Policy at the 2023 AGM.

Therefore, during FY23, the Committee

undertook a detailed review of the

executive remuneration framework

which included consultation with 18

major shareholders (including the major

shareholder) representing c.70% of

our issued share capital and the major

proxy agencies.

We reviewed the current policy against

UK Corporate Governance Code

(‘Code’) requirements and, in addition

to consulting with our biggest investors,

we considered (i) the views of the Non-

Executive Directors and management;

(ii) feedback on Executive Director pay

given by the National Colleague Voice

(‘NCV’); (iii) the Group’s strategy; and

(iv) market practice. We concluded that

the current Policy’s overall structure

remains appropriate for Dunelm and

continues to support the delivery of

our strategy and the generation of

shareholder value.

However, having completed the

review, we determined that specific

amendments would be appropriate in

order to ensure that the Policy continues

to reflect our long-standing approach

of aligning executive and shareholder

interests via performance-based pay

and executive equity holdings. The key

changes are as follows:

Increase in maximum variable pay

from 325% of salary to 375% of

salary for the CEO

Since the current Policy was approved,

the size and complexity of the Company

has continued to increase. As noted

in our FY22 Remuneration Report,

our CEO, Nick Wilkinson, asked for no

base salary increase in FY23. Due to

the significant and profitable growth

of the Group over the last five years in

particular, our CEO’s base salary is now

at the lower quartile versus our peers,

and the bonus opportunity of 125% of

salary is now below the lower quartile

compared to companies of a similar

size and complexity. This is not aligned

with our stated philosophy which is for

the fixed pay of our top executives to

be positioned at median or below and

for variable (performance-based) pay

to be median for the annual bonus and

upper quartile for the LTIP. Therefore,

taking into account our strategic growth

ambitions which will create real value for

shareholders, the new policy provides

for an increase in the CEO’s potential

performance-related pay, in line with

stretching performance targets.

For the incumbent CEO increasing the

annual bonus to 150% of salary and

the LTIP to 225% of salary allows us to

combine below median fixed pay with

the opportunity to earn a competitive

proportion of variable pay if performance

justifies it. This is aligned with our culture

of pay for performance. These increases

in variable pay recognise the growth and

increase in the scale of the Company over

the last three years and are intended to

ensure that the FY24 overall package is

competitive and aligned with our stated

remuneration philosophy. For the CFO,

the new policy maintains the maximum

variable pay award levels at the 325% of

salary aggregate, consisting of an annual

bonus of 125% of salary and an LTIP of

200% of salary.

In proposing this change for the CEO,

and in line with feedback received from

shareholders during the consultation

process, the Committee will ensure that

the stretch in the performance targets

is commensurate with the increased

opportunity arising from the proposed

increase in quantum.

Flexibility with the overall maximum

variable opportunity

The new policy introduces the potential

for flexibility for the future to enable us

to adjust the weighting between bonus

and LTIP for Executive Directors. This is

subject to a limit of 150% of salary for

the annual bonus and 250% of salary

for the LTIP, and the overall maximum

variable opportunity is limited to 375%

of salary for the CEO and 325% of

salary for the CFO. Any utilisation of

this flexibility would be accompanied

by clear rationale and continue to have

regard to our long-standing ethos of

alignment via executive equity holdings.

Threshold and target vesting levels

We are proposing to align our vesting

schedules for bonus with LTIP and

to introduce an element of flexibility

(which would not be utilised without

clear explanation). Under the new policy:

• the annual bonus vesting levels will

be stated as typically up to 10%

of maximum at threshold and up

to 50% of maximum for on-target

performance (compared to typical

market practice of up to 20% of

maximum for threshold and up

to 50% of maximum for on-target

performance); and

• the LTIP will be stated as typically

up to 10% of maximum for threshold

performance (compared to typical

market practice of up to 25% of

maximum) and up to 50% for on-

target performance.

Other key changes

In proposing the above changes to

incentive opportunities, we were

keen to ensure this was appropriately

balanced as follows:

• In-service shareholding guideline:

This will match the LTIP opportunity,

meaning that for the CEO it will

increase to 225% of salary, remaining

at 200% of salary for the CFO.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 89

• Post-employment shareholding

guideline: This will be aligned with the

proposed changes to the in-service

guideline such that 100% of the

in-service requirement (i.e. 225% of

salary for the CEO and 200% of salary

for the CFO) or the actual holding if

lower must be retained for two years

post cessation of employment.

• Lifetime lock-in: Two thirds of

variable pay will continue to be

invested in Dunelm shares, to be

held for the duration of employment.

However, we will introduce flexibility

in the new Policy to permit share

sales once the in-service guideline

is achieved, at the discretion of the

Committee. This is aligned with our

long-standing ethos of alignment via

executive equity holdings but retains

flexibility to attract and support

individuals with diverse backgrounds

and circumstances.

• Other changes have been made to

reflect the changes described above

and/or to introduce operational

flexibility – such as permitting the

deferral of bonuses on a gross basis.

Flexibility is included in the new

Policy to pay ‘dividend equivalents’

in respect of all dividends and not

just special dividends. We have

also made other minor changes for

operational reasons and to reflect

changes in practice.

The Committee is grateful to

shareholders for the time taken to

engage in relation to the proposed new

policy and is appreciative of the support

received during the consultation

exercise.

LTIP and Sharesave rules

Shareholders will note that we are also

seeking approval at this year’s AGM for

the extension of the term of each of our

Long-Term Incentive Plan (alongside

other updates) and Sharesave Plan,

which are otherwise due to expire in

2024. Details are set out in our 2023

AGM Notice of Meeting.

Remuneration Committee report continued

Remuneration for FY24

Our review of salaries for Executive

Directors in FY23 and intended

operation of the new Policy for the

financial year ending 1 July 2024

is as follows:

Salary

When considering salary increases,

the Committee was mindful of Director

performance, our remuneration

principles as set out on page 87 and the

wider colleague experience. We also

considered feedback on Executive pay

received from our National Colleague

Voice. Further to this, we reviewed the

salary levels of the Executive Directors

and approved a 5% increase in base

salary for each of Nick Wilkinson and

Karen Witts in line with the increases

given to senior management. This is

below the median pay award made

to the wider colleague population of

9.6%. In implementing the increase,

Nick’s base pay remains positioned

around the lower quartile versus our

peers and Karen’s base pay remains

positioned around median for the top

50 companies in the FTSE 250. The

Committee will consider a further

review of Executive Director base

salaries at the appropriate time in

the forthcoming year.

Variable pay/incentives

We apply a consistent pay structure

throughout the business, with the

remuneration of Executive Directors

more heavily weighted towards variable

pay and share-based incentives than

other colleagues, so that a greater

part of their pay is linked to successful

delivery of strategy and aligned with

shareholders. As set out above, we

are proposing to increase the annual

bonus opportunity for Nick Wilkinson to

150% of salary and his LTIP opportunity

to 225% of salary. This positions the

annual bonus opportunity around

median and the LTIP opportunity

around upper quartile for the CEO

compared to companies of a similar size

and complexity (in line with our stated

principles and our pay for performance

culture). Our CFO, KarenWitts’ bonus

opportunity will be at 125% of salary

and her LTIP opportunity at 200%

of salary.

Targets for the annual bonus will be

based on our annual budget and are

75% financial and 25% strategic and

personal. We have also set targets

for awards to be made under our

Long-Term Incentive Plan, expected

to be made after the 2023 AGM,

and these are 80% financial and

20% non-financial, with the non-

financial measures being based on

environmental and social targets.

As noted above, the Committee

has reviewed the stretch in the

performance targets to ensure that

the proposed increase in quantum is

commensurate with the increase in

opportunity.

Two-thirds of variable pay will

continue to be invested in Dunelm

shares, to be held for the duration

of employment.

Further details are set out on pages

115 and 116 of the Annual Report on

Remuneration.

Board changes in the year

As anticipated in my statement last

year, Alison Brittain was appointed

Chair with effect from 1 January

2023 on a base fee of £322,400 per

annum, inclusive of all Committee

chair fees. The base fee was set

at median for companies in the

FTSE 50-150, reflecting the growth

ambition of the Group over Alison’s

likely tenure as Chair.

Further engagement

I look forward to receiving your

support at our 2023 AGM where I

will be available to respond to any

questions that shareholders may

have on this report or in relation

to the Committee’s activities. In

the meantime, if you would like to

discuss any aspect of our approach

to remuneration, please feel free

to contact me via our Company

Secretary.

William Reeve

Chair of the Remuneration

Committee

20 September 2023

Dunelm Group plc Annual Report and Accounts 202390

GOVERNANCE REPORT

The table below summarises the changes between the policy approved in 2020 and the policy for which approval will be sought

at the 2023 AGM.

Proposed change Proposed Remuneration Policy changes Rationale

Total variable pay Increase in the overall maximum incentive

opportunity from 325% of salary to 375% of

salary for the CEO.

For Nick Wilkinson, annual bonus will be

increased to 150% of salary and the LTIP to

225% of salary.

For the CFO, the new policy maintains the

maximum variable pay award levels at 325% of

salary aggregate, consisting of an annual bonus

of 125% of salary and an LTIP at 200% of salary.

For the incumbent CEO, increasing the

annual bonus to 150% of salary and the LTIP

to 225% of salary allows us to combine below

median fixed pay with the opportunity to earn

a competitive proportion of variable pay if

performance justifies it. This is aligned with

our culture of pay for performance.

The increases in variable pay for the CEO

recognise the growth and increase in scale

of the Company over the last three years and

are intended to ensure that the FY24 overall

package is competitive and aligned with our

stated remuneration philosophy.

The Committee will review the stretch

in the performance targets to ensure

that the proposed increase in quantum

is commensurate with the increase in

opportunity.

Flexibility with the overall

maximum variable

opportunity of up to 375% of

salary for the CEO and up to

325% of salary for the CFO.

The new policy introduces the potential for

flexibility for the future to enable us to adjust

the weighting between bonus and LTIP for

Executive Directors, subject to a limit of 150% of

salary for the annual bonus and 250% of salary

for the LTIP.

To ensure the new policy has appropriate

flexibility. Any change to weightings in the

future would be accompanied by clear

rationale and would continue to have regard

to our long-standing ethos of alignment via

executive equity holdings.

Threshold and target

vesting levels

Under the new policy:

• the annual bonus vesting levels will be

stated as typically up to 10% of maximum

at threshold and up to 50% of maximum for

on-target performance (compared to typical

market practice of up to 20% of maximum

for threshold and up to 50% of maximum for

on-target performance); and

• the LTIP will be stated as typically up to 10%

of maximum for threshold performance

(compared to typical market practice of

up to 25% of maximum) and up to 50% for

on-target performance.

We are proposing to align our vesting

schedules for bonus with LTIP and to

introduce an element of flexibility (which

would not be utilised without clear

explanation).

This provides greater consistency and brings

the vesting levels more in line with the market.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 91

Directors’ Remuneration Policy 2023

Introduction to Directors’ Remuneration Policy

Our current binding Remuneration Policy was approved by shareholders at the Annual General Meeting on 17 November 2020

with over 99% of votes in favour (see FY22 Annual Report and Accounts for a copy of the current policy). It expires this year.

Therefore, during FY23, the Committee reviewed the Group’s overall remuneration philosophy and structure to ensure that the

framework remains effective in supporting the Group’s strategic objectives and long-term, sustainable growth. It considered

the ongoing need to maintain alignment of the Remuneration Policy with our strategic goals, investor sentiment and market

practice, as well as our shared values, which include ‘long-term thinking’ and to ‘act like owners’, in keeping with the family origin

of the business.

The Chair wrote to the Company’s largest shareholders in respect of proposed changes and took shareholders’ feedback into

account when finalising the new Policy (more details of which are set out in the Chair’s Annual Statement on page 88). The

Committee concluded that whilst the overall structure of the Policy should be maintained, some changes were desirable, and a

summary of the key changes is set out on page 91. Shareholders are being asked to approve the new Policy, which is intended to

apply for three years from the date of approval, at our FY23 AGM on 16 November 2023.

The Committee has ensured that the new Policy and practices are consistent with the factors set out in Provision 40 of the UK

Corporate Governance Code:

Clarity and

simplicity

• We operate a simple, sustainable and transparent remuneration structure.

• Performance targets for variable pay are linked to our strategy.

• Performance requirements are clearly disclosed and transparent and we provide detailed disclosures

of the relevant performance assessments and outcomes for our stakeholders to consider.

• Engagement is welcomed from stakeholders throughout the year.

• A National Colleague Voice meeting (see pages 32 and 118) is dedicated to providing clarity

to colleagues, and inviting discussion on our approach to executive pay.

Risk • The Committee is comfortable that the Company’s incentive arrangements do not encourage

inappropriate risk-taking.

• Our Policy includes (i) balanced use of short- and long-term incentives, (ii) the ability for the Committee to

apply discretion and judgement to outcomes, (iii) malus and clawback provisions, and (iv) the majority of

the variable remuneration of the Executive Directors is paid in shares which are subject to in-employment

and post-employment shareholding requirements.

• Our variable pay arrangements include the ability on the part of the Committee to adjust formulaic

vesting outturns so that vesting levels can be aligned with overall performance.

• Shareholding requirements apply both during and after employment to promote alignment with the

longer-term interests of shareholders and longer-term performance.

• Variable pay arrangements include malus and clawback provisions.

Predictability • The remuneration scenarios for Executive Directors on page 98 and 99 indicate the potential values that

may be earned through the remuneration structure.

• Where discretion may be exercised, this is clearly stated in the Policy.

Proportionality • Our Policy is drafted with clear consideration of the need to ensure that total remuneration fairly reflects

performance and enables meaningful and appropriate targets to be set with a significant proportion

linked to long-term shareholder value.

• A significant proportion of the Executive Directors’ remuneration is subject to performance conditions

and awarded in shares to ensure alignment with shareholders’ interests.

Alignment to

culture

• The Committee ensures that our incentive structure drives the right behaviours and reinforces the

Group’s purpose and shared values.

• Alignment is reflected in the approach to performance measures used in our incentive schemes, for example

(i) financial targets under the annual bonus and targets for the LTIP are the same for all management,

regardless of seniority, linking everyone’s contribution to a shared Group financial outcome, (ii) strategic

targets require our Executive Directors and senior leadership to work together to deliver growth and

value to the benefit of our stakeholders, and (iii) non-financial performance measures continue to focus

on ensuring that participants ‘do the right thing’, including delivery of our sustainability strategy.

Dunelm Group plc Annual Report and Accounts 202392

GOVERNANCE REPORT

The policy report

Future policy table

The following table sets out the structure of remuneration for Directors of the Company under the proposed new Policy

which will be presented to shareholders at the forthcoming AGM for approval by way of a binding vote. The Policy has been

determined by the Company’s Remuneration Committee in consultation with shareholders. Sir Will Adderley has requested that

he not be considered for participation in the annual bonus or LTIP.

The key differences between the policy approved at the AGM in 2020 and the proposed new Policy are summarised on page 91.

Executive Directors

Base salary

Purpose and

link to strategic

objectives

• Fixed remuneration for the role.

• To attract and retain the high calibre talent necessary to develop and deliver the business strategy.

• Reflects the size and scope of the Executive Director’s responsibilities.

Operation • Normally paid monthly.

• Base level set in the context of:

— Pay for similar roles in companies of similar size and complexity in the relevant market.

— Scale and complexity of the role.

• Should comprise a minority of potential remuneration.

Maximum

opportunity

• Reviewed annually, with percentage increases usually in line with or below the Group-wide review

unless other circumstances apply, such as:

— A significant change in the size, scale or complexity of the role or of the Group’s business.

— Development and performance in role (for example, on a new appointment, base salary might be

initially set at a lower level with the intention of increasing over time).

• The Committee does not consider it to be appropriate to set a monetary limit on the maximum base

salary that may be paid to an Executive Director within the terms of this Policy.

Performance

metrics

• None, although performance of the individual is considered at the annual salary review.

Retirement benefits

Purpose and

link to strategic

objectives

• To provide a competitive post-retirement benefit.

• To attract and retain the high calibre talent necessary to develop and deliver the business strategy.

Operation • Contribution to a defined contribution plan or a cash allowance in respect of some or all of the

contribution that would otherwise be made to a pension plan.

• No element other than base salary is pensionable.

Maximum

opportunity

• An amount as a percentage of base salary not exceeding the maximum rate available to the majority

of the wider workforce (currently 3%).

Performance

metrics

• None.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 93

Remuneration Committee report continued

Executive Directors continued

Benefits

Purpose and

link to strategic

objectives

• To provide a competitive benefits package.

• To attract and retain the high calibre talent necessary to develop and deliver the business strategy.

Operation • A range of benefits are provided, which may include car or car allowance; private health insurance for

the individual and their family; permanent health cover; life assurance; mobile phone; use of a car and

driver in connection with the role or an appropriate travel allowance; and colleague discount.

• Additional benefits, such as relocation expenses, housing allowance and school fees may also be

provided in certain circumstances if considered reasonable and appropriate by the Committee.

• For non-UK Executives (none at present) the Committee may consider additional allowances in

accordance with standard practice.

Maximum

opportunity

• The Committee reserves the right to provide such benefits as it considers necessary to support the

strategy of the Group.

• The Committee does not consider it to be appropriate to set a maximum cost to the Group of benefits

to be paid.

Performance

metrics

• None.

Annual bonus

Purpose and

link to strategic

objectives

• Rewards and incentivises delivery of annual financial, strategic and personal targets.

Operation • The amount of the bonus earned is determined after the results for the financial year have been

audited, subject to performance targets having been met. The Committee has discretion to adjust

the bonus payout upwards or downwards if it considers that the formulaic outturn does not reflect its

assessment of the overall financial or non-financial performance of the participant or the Group, or is

inappropriate in the context of circumstances that were unexpected or unforeseen at the start of the

relevant year, or is inappropriate for any other reason.

• At least two-thirds of any bonus earned will be either subject to a requirement that the after-tax

amount is invested in Dunelm shares or will be granted in the form of a share bonus award on a pre-

tax basis. Any shares acquired pursuant to such a requirement are subject to retention provisions as

set out in the ’Shareholding requirements’ section below.

Maximum

opportunity

• Maximum opportunity: 150% of base salary per annum.

• The combined annual bonus and LTIP opportunities for any year may not exceed: (a) 375% of salary in

the case of the Company’s CEO; and (b) 325% of salary in the case of any other Executive Director.

• Where bonus awards are granted as share awards, dividend accruals may be made in respect of

dividends paid during the vesting period applicable to an award. Any such dividend equivalents will

ordinarily be paid in shares.

Performance

metrics

• Stretching performance targets are set each year. Performance targets for the Executive Directors

may be based on financial objectives and/or strategic objectives and/or personal goals set by the

Committee annually.

• Financial objectives may include, but are not limited to, budgeted PBT for the financial year.

• The strategic objectives will vary depending on the specific business priorities in a particular year.

• The Committee will determine the weighting of performance measures for any year based on specific

business priorities for the year. Ordinarily, at least 50% of the annual bonus for Executive Directors will

be subject to financial objectives.

• Subject to the Committee’s discretion to override formulaic outturns, for financial measures typically

up to 10% of the maximum opportunity will be earned for threshold performance, and for on-target

performance up to 50% of the maximum opportunity will be earned, and for exceeding on-target

performance up to 100% of the maximum opportunity will be earned. Bonuses will typically be earned

between threshold and on-target and between on-target and maximum on a straight-line basis.

• For strategic measures and personal goals, vesting of the bonus will be determined by the

Committee between 0% and 100% based on its assessment of the extent to which the relevant

metrics or objectives have been met.

• Awards are subject to recovery provisions (malus and clawback) as set out below.

Dunelm Group plc Annual Report and Accounts 202394

GOVERNANCE REPORT

Executive Directors continued

Long-Term Incentive Plan

Purpose and

link to strategic

objectives

• Supports delivery of strategy by requiring the achievement of appropriate targets and objectives

which will normally include a measure based on EPS.

• Rewards strong financial performance and sustained increase in shareholder value over the long

term.

• Aligns with shareholder interests through the delivery of shares, with share retention requirements as

set out below.

Operation • Awards (which can take the form of a conditional award, nil-cost option or nominal value option)

are made annually, with vesting subject to performance, usually assessed following the end of a

performance period of three years, followed by a ‘Holding Period’ of two years. The Holding Period

may operate on the basis of: (i) the award vesting following assessment of performance but that,

other than as regards sales of shares to cover tax liabilities, shares acquired must be retained until the

end of the Holding Period; or (ii) vesting being deferred until the end of the Holding Period.

• Shares acquired are then subject to retention provisions as set out in the ’Shareholding requirements’

section below.

• The Committee has discretion to adjust the LTIP vesting outturn upwards or downwards if it considers

that the formulaic output does not reflect its assessment of the overall financial or non-financial

performance of the participant or the Group, or is inappropriate in the context of circumstances that

were unexpected or unforeseen at grant, or is inappropriate for any other reason.

Maximum

opportunity

• The maximum award for an Executive Director in respect of any financial year is an award over shares

with a value (as determined by the Committee) of 250% of salary.

• The combined annual bonus and LTIP opportunities for any year may not exceed: (i) 375% of salary in

the case of the Company’s CEO; and (ii) 325% of salary in the case of any other Executive Director.

• Dividend accruals may be made in respect of dividends paid during the performance period

applicable to an award and up to the vesting date. Payment would only be made in respect of shares

vesting after applying performance criteria. Any such dividend equivalents will ordinarily be paid in

shares.

Performance

metrics

• The Committee will determine the weighting of performance measures for any year. For at least 75%

of an award, vesting will be subject to the satisfaction of one or more financial measures, which will

normally include a measure based on EPS. The balance of the award vesting will be subject to one or

more other financial, strategic, environmental, social or governance measures.

• The Committee considers the targets annually taking into account a range of factors which will

include the Group’s plans, external forecasts and the overall business environment.

• Subject to the Committee’s discretion to override formulaic outturns, for financial measures typically

up to 10% of an award will vest for threshold performance (the lowest level of performance at which

awards will vest), rising to up to 50% for achieving a stretching level of ‘on-target’ performance and to

100% for achieving or exceeding a stretch level of performance. Vesting between threshold and on-

target and between on-target and maximum will typically be on a straight-line basis.

• For strategic, environmental, social or governance measures, vesting will be determined by the

Committee between 0% and 100% based on its assessment of the extent to which the relevant

measures have been met.

• Awards are subject to recovery provisions (malus and clawback) as set out below.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 95

Executive Directors continued

All employee share plan (Sharesave)

Purpose and

link to strategic

objectives

• Promotes share ownership by all eligible colleagues (including Executive Directors).

Operation • All UK employees with a minimum service requirement are eligible to join the UK tax qualifying

Dunelm Group Savings Related Share Option Plan (the Sharesave). Employees outside the UK are

eligible to join an equivalent plan which is not tax qualifying.

• Monthly savings are made over a period of three years (or such other period as may be permitted by

the applicable UK tax legislation) linked to the grant of an option over Dunelm shares at a discount of

up to 20% to the market price (or such other amount as permitted by the applicable UK tax legislation)

at the date of invitation to join the plan.

• Invitations are normally issued annually at the discretion of the Committee, which also has discretion

to set the minimum service requirement, maximum discount, maximum monthly savings and any

other limits within the terms of the plan rules.

Maximum

opportunity

• Maximum participation limits reflect the limits prescribed by the applicable UK tax legislation from

time to time. Currently the maximum limit is savings of £500 per month.

Performance

metrics

• None.

Shareholding requirements

To align the interests of Executive

Directors with those of shareholders

and to promote long-term thinking, the

Committee has adopted shareholding

requirements which apply both during

employment and for a period following

employment, as set out below. The

Committee retains the right to waive

or relax the retention requirements in

respect of shares acquired pursuant to

annual bonus deferral arrangements or

following the end of the Holding Period

applying to any LTIP award granted

after 1 July 2020 if the Executive

Director meets the required level of

shareholding during employment.

The Committee also retains the

right to waive or relax any element

of the shareholding requirements in

exceptional circumstances, such as

death, divorce, ill health or severe

financial hardship.

Shareholding requirements

during employment

• Executive Directors are expected

to make a personal investment in

Dunelm shares on appointment as

an Executive Director (subject to

closed periods).

• Each Executive Director is required

to build a beneficial holding of

shares with a value (as a percentage

of salary) equal to the higher of:

(i) their normal annual LTIP grant;

and (ii) 200% of salary. Executive

Directors are ordinarily expected to

achieve this holding within five years

from appointment. Shares subject to:

(i) LTIP awards which are exercisable

but which have not been exercised;

(ii) LTIP awards for which the

performance assessment has been

carried out but for which vesting is

deferred until the end of the Holding

Period; and (iii) share bonus awards,

count towards this requirement on

a net of assumed tax basis.

• Any shares acquired pursuant to

required annual bonus deferral

arrangements must be retained

during employment, other than

any shares sold to cover associated

tax liabilities.

• Following the end of the Holding

Period applying to any LTIP award

granted after 1 July 2020, an

Executive Director must retain

at least two-thirds of the shares

acquired, other than any shares sold

to cover associated tax liabilities.

Shareholding requirements following

termination of employment

Following termination of their

employment for any reason, an

Executive Director must retain for two

years shares equal to the lower of the

shareholding requirement applicable

to them during employment, and their

actual shareholding on departure. This

is a contractual requirement set out in

each Director’s service contract. The

Company also reserves the right to

require share certificates to be lodged

in its custody.

Remuneration Committee report continued

Dunelm Group plc Annual Report and Accounts 202396

GOVERNANCE REPORT

Payment of fixed remuneration

in shares

The Company may deliver any element

of fixed remuneration for an Executive

Director in shares rather than in cash

or any other form in which it is usually

provided. The number of shares would

be such number as have a value at the

relevant time equal to the value of the

fixed remuneration being delivered

in shares.

Recovery provisions (malus

and clawback)

The annual bonus (including any

granted as a share award) and LTIP are

subject to recovery provisions as set

out below.

Malus provisions apply which enable

the Committee to determine before

the payment of an annual bonus or the

vesting of an LTIP award, that the bonus

opportunity or LTIP award may be

cancelled or reduced.

Clawback provisions apply which

enable the Committee to determine for

up to three years following the payment

of a cash bonus or the assessment of

the performance outturn for an LTIP

award, that the amount of the bonus

paid may be recovered and the LTIP or

share bonus award may be cancelled or

reduced (if it has not been exercised) or

recovery may be applied to it (if it has

been exercised).

The malus and clawback provisions may

be applied in the event of:

• A material misstatement of any

Group company’s financial results;

• A material error in assessing a

performance condition applicable

to the award or in the information or

assumptions on which the award was

granted or vests;

• A material failure of risk management

in any Group company or a relevant

business unit;

• Serious reputational damage to

any Group company or a relevant

business unit;

• Serious misconduct or material error

on the part of the participant;

• A material corporate failure as

determined by the Board;

• Fraud; or

• Any other circumstances which the

Committee in its discretion considers

to be similar in their nature or effect

to those set out above.

Salary, pension, benefits and Sharesave

options are not subject to recovery.

Non-Executive Directors

Fees and appropriate benefits

Purpose and link to

strategic objectives

To attract and retain a high calibre Chair and Non-Executive Directors by offering competitive fee

levels and, where relevant, appropriate benefits.

Operation • Fees for the Chair are set by the Committee. Fees for Non-Executive Directors are set by the

Board. No Director participates in any decision relating to their own remuneration.

• The Chair is paid an all-inclusive fee for all Board responsibilities. The Non-Executive Directors

receive a basic fee, with supplemental fees for additional Board responsibilities.

• The level of fee reflects the size and complexity of the role and the time commitment.

• Fees are normally reviewed annually, having regard to a range of factors, including increases

in remuneration across the Group. In addition, a periodic review is undertaken against market

rates and taking into account time commitment and any change in size, scale or complexity of the

business.

• The Group’s colleague discount is available to the Chair and Non-Executive Directors. In

addition, they may receive benefits such as travel, accommodation and other reasonable

expenses incurred in the fulfilment of their duties, which may be ‘grossed up’ to reflect any tax

liabilities associated with the benefits. Additional benefits may be provided where considered

appropriate. The Chair and Non-Executive Directors do not participate in any incentive scheme.

Maximum

opportunity

• The maximum to be paid by way of fees to the Non-Executive Directors is set out in the

Company’s Articles of Association as amended from time to time.

Performance

metrics

• None.

The Committee may make minor changes to this Policy which do not have a material advantage to Directors, to aid its

operation or implementation without seeking shareholder approval, but taking into account the interests of shareholders.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 97

Performance measures and

how targets are set

The Committee selects performance

measures that it believes are:

• Aligned with the Group’s strategic

goals and set, where relevant, taking

into account market consensus and

individual broker expectations.

For the LTIP, financial measures will

normally include EPS which the

Committee considers to be the most

appropriate measure for medium-

term performance, aligned with our

growth ambitions and continuing to

win market share.

• Unambiguous and easy to calculate.

• Transparent to Directors and

shareholders.

For both the annual bonus and

the LTIP, the Committee reserves

the right to vary or substitute any

performance measure if justified by the

circumstances, for example if there was

a significant transaction.

Performance measures for the annual

bonus for FY24 are set out on page

115. Performance measures for the

LTIP awards proposed to be granted in

respect of FY24 are set out on pages

115 and 116.

Illustrative performance scenarios

At his request, Sir Will Adderley does not receive any remuneration apart from an annual salary, car allowance and healthcare

benefits. Therefore his remuneration has not been included in the scenarios below.

The following graphs set out what Nick Wilkinson and Karen Witts, the other Executive Directors in office at the date of this

report, could earn in FY24 under the following scenarios:

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Karen Witts

Fixed pay

Annual bonus

LTIP

Maximum plus 50% increase

in price of LTIP shares vesting

Total remuneration (£‘000)

Minimum

In line with

expectations

Maximum

Maximum plus 50%

increase in price of

LTIP shares vesting

100%

37%

1,263

525

2,533

2,060

21%

42%

46%

29%

25%

19%

37%

23%

21%

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Nick Wilkinson

Total remuneration (£‘000)

100%

39%

1,780

680

3,659

2,972

23%

38%

46%

31%

23%

19%

37%

25%

19%

Fixed pay

Annual bonus

LTIP

Maximum plus 50% increase

in price of LTIP shares vesting

Minimum

In line with

expectations

Maximum

Maximum plus 50%

increase in price of

LTIP shares vesting

Dunelm Group plc Annual Report and Accounts 202398

Remuneration Committee report continued

GOVERNANCE REPORT

The following assumptions have been made in respect of the scenarios on the previous page:

Fixed pay (base salary, benefits and pension only)

Base salary

£’000

Benefits

£’000

Pension

£’000

Nick Wilkinson 611 51 18

Karen Witts 473 38 14

Performance level Fixed pay Annual bonus LTIP

Minimum

(performance

below threshold)

As above Nil Nil

In line with

expectations

As above 45% of bonus opportunity earned (67.5%

of salary for Nick Wilkinson, 56.25% of

salary for Karen Witts).

50% of the LTIP award vests (112.5% of

salary for Nick Wilkinson and 100% of salary

for Karen Witts), based on face value of the

award at the date of grant.

Maximum

performance

As above 100% of bonus opportunity earned (150%

of salary for Nick Wilkinson, 125% of salary

for Karen Witts).

100% of the LTIP award vests (225% of

salary for Nick Wilkinson and 200% of salary

for Karen Witts), based on face value of the

award at the date of grant.

Maximum

performance, plus

share price increase

As above 100% of bonus opportunity earned (150%

of salary for Nick Wilkinson, 125% of salary

for Karen Witts).

100% of the LTIP award vests (225% of

salary for Nick Wilkinson and 200% of salary

for Karen Witts), plus an increase in the

value of the LTIP of 50% across the relevant

performance period to reflect possible

share price appreciation.

Service contracts and loss

of office payments

All of the Executive Directors have

service contracts. The notice period

for termination for Sir Will Adderley

is 12months from either party, and

for Nick Wilkinson and Karen Witts

is six months from either party. In

connection with her joining Dunelm

and as disclosed in the Directors’

Remuneration Report for the year

ended 2 July 2022, Karen Witts is

entitled to: (i) A contribution of up to

£50,000 towards the cost of purchasing

and furnishing a home close to

Dunelm’s offices in Leicester on the

understanding that the purchase

completes within two years of the

commencement of her employment.

The majority of any furnishings

should be purchased from Dunelm.

Approvable expenses will include

stamp duty and any agents’ fees plus

furnishings, fixtures and fittings;

(ii) An allowance of £1,500 per month

to cover the cost of rent on a property

close to Dunelm’s offices in Leicester

and/or other expenses and travel costs.

This will apply until Karen purchases

a home close to Leicester, or for the

duration of employment should Karen

choose not to do so (in which case the

£50,000 contribution to relocation

expenses referred to in (i) will not

be paid).

If the Company terminates the

employment of the Executive Director

it would honour its contractual

commitments. If termination was with

immediate effect, a payment in lieu of

notice may be made. The Committee

may apply mitigation in respect of any

termination payment.

Details in relation to the service

contracts for Executive Directors are

set out in Table 8 on page 110 of

the Annual Report on Remuneration.

Bonus

The Committee has discretion to

make a payment to a ‘good leaver’

(as determined by the Committee) in

respect of any annual bonus. Any such

bonus would normally be pro-rated

to the period of active service during

the relevant financial year. Ordinarily,

any bonus would be subject to deferral

into shares in the usual way; however,

the Committee retains discretion

not to apply deferral in appropriate

circumstances.

Share bonus awards will lapse on

termination of employment before

vesting other than in the event of death,

serious ill health and any other reason

at the discretion of the Committee.

If an award does not lapse, the

Committee will determine whether it

vests on termination or at the ordinary

vesting date.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 99

LTIP

If a participant leaves the employment

of the Group, the following provisions

apply to awards granted under the LTIP:

• Awards in the form of options that

have vested but have not yet been

exercised may be exercised within six

months of cessation of employment

(12 months in the case of death).

• Except in the case of dismissal for

gross misconduct, awards which

have not yet vested, but where the

performance period has elapsed,

may vest at the relevant vesting date.

The Committee has discretion to vest

the award earlier but would only use

this in exceptional circumstances

(such as ill-health). In the event of

death, unless the Board determines

otherwise, vesting will be as soon as

practicable. In the case of an option,

the option must be exercised within

six months of vesting (or 12 months

in the case of death), to the extent

that the performance conditions

have been met.

• If the participant leaves the Group

before an award has vested and

before the performance period has

elapsed, the award will usually lapse.

However, if the participant ceases

employment due to ill-health, injury

or disability or if the Committee

exercises its discretion to treat the

participant as a ‘good leaver’, the

award will be retained and vest

at the normal vesting date. The

Committee has discretion to vest

the award earlier, but would only use

this in exceptional circumstances

(such as ill-health). In the event of

death, unless the Board determines

otherwise, vesting will be as soon as

practicable. In the case of an option,

the option may be exercised within

six months of the relevant vesting

date (or 12 months in the case of

death). Any vesting would be subject

to assessment of the performance

conditions (and the exercise of any

discretion to vary formulaic outturns

in line with the Policy) and, unless the

Committee determined otherwise,

a reduction to reflect the proportion

of the performance period that had

elapsed at cessation.

In all cases, LTIP awards would be

subject to the applicable malus and

clawback provisions.

Sharesave

If a participant leaves the Group,

options granted under the Sharesave

will normally lapse, but may be

exercised within six months from the

cessation of employment due to injury,

disability, retirement, or redundancy (or

12 months in the case of death), or the

employing company leaving the Group

or, provided that the option has been

held for at least three years, cessation

for any other reason (apart from

dismissal by the Company).

Non-Executive Directors’

letters of appointment

Non-Executive Directors have letters of

appointment. The term is for an initial

period of three years with a provision

for termination on one month’s notice

from either party, or three months’

notice from either party in the case of

the Chair. Letters are renewed for up

to two additional three-year terms,

and then renewed annually. The letter

of appointment will terminate without

compensation if the Director is not

reappointed at the AGM.

Details in relation to the letters of

appointment are set out in Table 8 on

page 110 of the Annual Report on

Implementation.

Other payments

The Committee reserves the right to

make any other payments in connection

with a Director’s cessation of office

or employment where the payments

are made in good faith in discharge

of an existing legal obligation (or by

way of damages for breach of such an

obligation) or by way of settlement of

any claim arising in connection with

the cessation of a Director’s office

or employment or for any fees for

outplacement assistance and/or the

Director’s legal and/or professional

advice fees in connection with their

cessation of office or employment.

In appropriate circumstances, the

Committee may continue the provision

of certain benefits (for example health

insurance) for a period following

cessation.

Change of control and

other corporate events

Share bonus awards

Share bonus awards will vest on a

change of control or winding up of

the Company before the originally

anticipated vesting date.

LTIP

The following provisions apply to

awards made under the Long-Term

Incentive Plan in accordance with the

plan rules if there is a change of control

or winding up of the Company:

• Any vested but unexercised options

may be exercised.

• Any unvested awards in respect of

which the performance period has

ended and to which the performance

condition has been applied will vest

and, in the case of options, may be

exercised.

• Any unvested awards in respect

of which the performance period

has not ended may vest and, in the

case of options, be exercised at the

discretion of the Committee, subject

to any adjustment to take into

account the amount of time that has

elapsed through the performance

period (unless the Committee

decides not to apply a time-based

reduction) and the extent to which

any performance criteria have

been met (and the exercise of any

discretion to vary formulaic outturns

in line with the Policy table).

• The Executive Director may agree

that their awards are ‘rolled over’ into

shares of the acquiring company as

an alternative.

If the Company has been or will be

affected by any demerger, dividend

in specie, special dividend or other

transaction which will adversely affect

the current or future value of any

awards under the LTIP or any share

bonus awards, the plan rules allow

the Committee, acting fairly and

reasonably, to determine the extent to

which any awards should vest and the

period within which options may be

exercised.

Dunelm Group plc Annual Report and Accounts 2023100

Remuneration Committee report continued

GOVERNANCE REPORT

Sharesave

Sharesave options may be exercised

within six months following a change of

control or winding up of the Company,

using savings in the participant’s

account at the date of exercise. The

participant may agree that their awards

are ‘rolled over’ into shares of the

acquiring company as an alternative.

Operation of share plans

All discretions available under the

Company’s share plan rules will be

available under this Policy, except where

explicitly limited under this Policy. This

includes that:

• The Committee may amend the

terms of awards and options under

the Company’s share plans in

accordance with the plan rules in

the event of a variation of Dunelm’s

share capital or a demerger, special

dividend or other similar event or

otherwise in accordance with the

rules of those plans.

• Awards may be settled, in whole

or in part, in cash, although the

Committee would only settle an

Executive Director’s award in cash

in exceptional circumstances,

such as where there is a regulatory

restriction on the delivery of shares,

or in connection with the settlement

of tax liabilities arising in respect of

the award.

Executive pay and the pay

of other colleagues

The remuneration principles set out on

page 87 are applied consistently to pay

throughout the Group.

Pay for all colleagues is set at a level that

is fair for the role and responsibilities of

the individual, and is designed to attract

and retain high calibre talent that is

needed to deliver the Group’s strategy,

without paying too much.

The remuneration of Executive

Directors is more heavily weighted

towards variable pay than for other

colleagues, so that a greater part

of their pay is linked to successful

delivery of strategy and aligned with

shareholders. They are also required

to build and maintain a shareholding in

the Company as set out above.

The remuneration of colleagues below

the Board (including participation in

the LTIP) reflects the seniority of the

role, market practice and the ability

of the individual to influence Group

performance.

All colleagues with a minimum service

requirement (usually three months or

less) are encouraged to participate

in the Sharesave plan, which enables

them to become shareholders at a

discounted rate. Participation is usually

offered annually at the maximum price

discount permitted (currently 20%), at

the discretion of the Committee.

In setting the policy for the Executive

Directors’ remuneration, the Committee

takes note of the overall approach to

remuneration in the Group. Although

the Committee does not formally

consult with employees when setting

the Policy, details of how it engages

with colleagues on pay are set out on

page 118.

Shareholder views

The Board is committed to ongoing

engagement with shareholders in

respect of all governance matters,

including executive remuneration.

We consulted with shareholders in

relation to the new Policy including,

in particular, our approach to variable

pay and shareholding requirements

for Executive Directors. We were

pleased with the level of engagement

from shareholders and for the support

shown for our proposals, which we have

finalised having regard to feedback

received.

Approach to recruitment

remuneration

The Committee will apply the principles

set out below when agreeing a

remuneration package for a new

Executive Director (whether an external

candidate or an internal promotion).

The package must be sufficient to

attract and retain the high calibre talent

necessary to develop and deliver the

Group’s strategy:

• No more should be paid than is

necessary.

• Pension provision will be in line with

the Policy table.

• The Committee reserves the

discretion to make appropriate

remuneration decisions outside

the standard policy to meet the

individual needs of the recruitment

provided the Committee believes

the relevant decisions are in the best

interests of the Group.

Circumstances in which the Committee

might apply this discretion include:

• Where an interim appointment

is made on a short-term basis,

including where the Chair or another

Non-Executive Director has to

assume an executive position.

• Where employment commences

at a time in the year when it is

inappropriate to provide a bonus

or share incentive award as there

is insufficient time to assess

performance, the quantum for the

subsequent year might be increased

proportionately instead.

• An executive is recruited from a

business or location that offered

benefits that the Committee

considers it appropriate to ‘buy out’,

or which the Committee considers it

appropriate to offer.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 101

Examples of remuneration decisions

that the Committee may make are set

out below:

• It may be appropriate to offer a

lower salary initially, with a series of

increases to reach the desired salary

over a period of time, subject to

performance.

• The Committee may also alter the

performance criteria applicable to

the initial annual bonus or LTIP award

so that they are more applicable to

the circumstances of the recruitment.

• An internal candidate would be

able to retain any outstanding

variable pay awarded in respect of

their previous role that pays out in

accordance with its terms of grant.

• Appropriate costs and support

will be provided if the recruitment

requires the relocation of the

individual.

The maximum level of variable pay that

could be awarded to a new Executive

Director in the first year of employment,

excluding any buyout arrangements,

would be 375% of salary as set out

in the Policy table. The Committee

would explain the rationale for the

remuneration package in the next

Annual Report of the Company.

In addition, on hiring an external

candidate the Committee may make

arrangements to buy out remuneration

that the individual has forfeited on

leaving a previous employer. The

Committee will generally seek to

structure buyout awards and payments

on a comparable basis to remuneration

arrangements forfeited. These awards

or payments are excluded from

the maximum level of variable pay

referred to in the Policy; however, the

Committee’s intention is that the value

awarded or paid would be no higher

than the expected value of the forfeited

arrangements.

In order to implement the arrangements

described, the Committee may rely

on the exemption in Listing Rule 9.4.2,

which allows for the grant of share or

share option awards to facilitate, in

unusual circumstances, the recruitment

of a Director.

The Committee does not intend to use

any discretion in this section to make

a non-performance-related incentive

payment (for example a ‘golden hello’).

On the appointment of a new Chair the

fee will be set taking into account the

experience and calibre of the individual

and pay for similar roles in companies

of similar size and complexity in

the market. The fees for any newly

appointed Non-Executive Director

would be set in accordance with the

Policy table on page 97. No share

incentives or performance-related

incentives would be offered.

Legacy remuneration

arrangements

The Committee reserves the right to

make remuneration payments and

payments for loss of office (including

exercising any discretion available to it

in connection with any such payment)

notwithstanding that they are not in line

with the Policy set out above where the

terms of payments were agreed:

• Before the Policy came into effect

(provided that, in the case of any

payments agreed on or after

11 November 2014 they are in line

with any applicable shareholder

approved Directors’ remuneration

policy in force at the time they were

agreed or were otherwise approved

by shareholders); or

• At a time when the relevant

individual was not a Director of the

Company (or other person to whom

the Policy set out above applies) and,

in the opinion of the Committee, the

payment was not in consideration for

the individual becoming a Director of

the Company (or other such person).

For these purposes, ‘payments’

includes the satisfaction of variable

remuneration and, in relation to an

award over shares, the terms of the

payment are ‘agreed’ no later than the

time the award is granted.

Dunelm Group plc Annual Report and Accounts 2023102

Remuneration Committee report continued

GOVERNANCE REPORT

This report has been prepared on behalf of the Board by the Committee, chaired by William Reeve. It sets out how the Directors’

Remuneration Policy which was approved by shareholders on 17 November 2020 has been applied in FY23 and how the revised

policy being put forward for approval by shareholders at the AGM on 16 November 2023 will, subject to approval, be applied in

FY24. Together with the Chair’s statement on pages 88 to 91, it will be put to shareholders for an advisory vote at the FY23 AGM.

The information contained in this report is unaudited unless expressly stated otherwise.

Composition of the Committee

William Reeve has chaired the Committee since 2018. Alison Brittain became a member when she joined the Board on

7 September 2022 and has remained a member since becoming Chair (being independent on appointment). All other

independent Non-Executive Directors are members of the Committee.

Only members of the Committee have the right to attend meetings. Other Directors and individuals such as the CEO and

People & Stores Director are invited to attend all or part of meetings, as appropriate. No Director participates when his or her

own remuneration is discussed. The Group General Counsel and Company Secretary acts as secretary to the Committee and

attends all meetings.

During the year the Committee met four times. The table below sets out the membership of the Committee and attendance of

Directors at meetings during the year.

Member Attendance Notes

William Reeve 4/4

Alison Brittain 3/3 Alison joined the Board and the Committee on 7 September 2022.

Ian Bull 4/4

Peter Ruis 4/4

Vijay Talwar 4/4

Arja Taaveniku 4/4

Kelly Devine 4/4

Andy Harrison 2/2 Andy Harrison stepped down from the Board and the Committee on 31December2022.

Annual Report on Remuneration

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 103

Single figure for total remuneration (audited)

The following table sets out total remuneration for Directors for the period ended 1 July 2023:

Table 1 – Directors’ remuneration – single figure table

Salary/fees

£’000

Benefits

£’000

Pension

£’000

Total fixed

remuneration

£’000

LTIP awards

£’000

Bonus

£’000

Total variable

remuneration

£’000

Total

£’000

Director FY23 FY22 FY23 FY22 FY23 FY22 FY23 FY22 FY23 FY22 FY23 FY22 FY23 FY22 FY23 FY22

Executive

Nick

Wilkinson 582 580 48 48 17 20 647 648 1,003 1,210 335 653 1,338 1,863 1,985 2,511

Karen

Witts 450 27 38 2 14 1 502 30 — — 252 22 252 22 754 52

Sir Will

Adderley — — 20 20 — — 20 20 — — — — — — 20 20

Sub-total 1,032 607 106 70 31 21 1,169 698 1,003 1,210 587 675 1,590 1,885 2,759 2,583

Non-

Executive

Alison

Brittain 179 — — — — — 179 — — — — — — — 179 —

Ian Bull 67 64 — — — — 67 64 — — — — — — 67 64

Kelly

Devine 56 18 — — — — 56 18 — — — — — — 56 18

William

Reeve 73 71 — — — — 73 71 — — — — — — 73 71

Peter Ruis 56 54 — — — — 56 54 — — — — — — 56 54

Marion

Sears 56 54 — — — — 56 54 — — — — — — 56 54

Arja

Taaveniku 56 54 — — — — 56 54 — — — — — — 56 54

Vijay

Talwar 56 40 — — — — 56 40 — — — — — — 56 40

Andy

Harrison 108 216 — — — — 108 216 — — — — — — 108 216

Total 1,739 1,178 106 70 31 21 1,876 1,269 1,003 1,210 587 675 1,590 1,885 3,466 3,154

1 Vijay Talwar was appointed on 1 October 2021 and Kelly Devine was appointed on 1 March 2022. Karen Witts and Alison Brittain joined the Board on 9 June 2022 and

7 September 2022 respectively and Alison Brittain was appointed Chair on 1 January 2023. Basic salary/fee for Vijay Talwar, Kelly Devine and Alison Brittain and salary,

pension and benefits for Karen Witts are pro-rated over the relevant year as appropriate. Nick Wilkinson, the CEO, asked to not be considered for a salary increase for FY22.

Sir Will Adderley’s base salary is held at £1 per annum. Andy Harrison, the Chairman, asked not to be considered for a fee increase in FY22 and stepped down on 31 December

2022 and so his fee was pro-rated accordingly for the year. The fees for the other Non-Executive Directors increased by 4%.

2 Benefits include the cost of a car allowance and private health insurance for the individual and their family. Nick Wilkinson is also entitled to an allowance of 5% of his annual

salary towards the cost of travel from home to Leicester. Karen Witts is entitled to an allowance of £1,500 per month to cover the cost of rent on a property close to the office in

Leicester and travel costs. This is from 9 June 2022 and will continue until she purchases a home close to Leicester, or for the duration of her of employment should Karen not

choose to do so.

3 Pension entitlement is 3% of contractual salary to a defined contribution plan or cash allowance in lieu. For Nick Wilkinson, prior to 1 August 2022 the pension entitlement

was 8% of contractual salary, and prior to 1 August 2021 the pension entitlement was 10% of contractual salary. Sir Will Adderley waived his entitlement to a pension from

1 July 2015.

4 Total fixed remuneration includes salary/fees, benefits and pension.

5 The figure for Nick Wilkinson is the value of the FY21-23 LTIP award, the three-year performance period for which ends on the last day of the financial period being reported

on. The price used to calculate the value of the awards, which will vest on 20 November 2023, was the average of Dunelm’s closing share price over the last three months of

FY23, which was 1,133 pence per share. It also includes a ’special dividend equivalent’ of 65p per vested share in respect of the special dividend paid on 8 October 2021, 37p

per vested share in respect of the special dividend paid on 18 March 2022 and 40p per vested share in respect of the special dividend paid on 11 April 2023. The share price

used to calculate the number of shares in Nick’s ‘special dividend equivalent’ was 1,310p per share in respect of the October 2021 special dividend, 1,127p per share in respect

of the March 2022 special dividend and 1,081 per share in respect of the April 2023 special dividend, in each case being the share price the working day before the special

dividend date. No discretion was applied to adjust the performance conditions or outcome of the FY21-FY23 LTIP for share price appreciation or depreciation or for any other

reason. The prior year figures have been updated to reflect the actual closing share price of 796p on the day before the vesting date, compared to last year’s report which was

based on the average closing share price over the last three months of FY22. Sir Will Adderley asked not to be considered for an LTIP award.

6 Nick Wilkinson and Karen Witts were awarded an annual performance-related bonus for FY23 with a maximum opportunity of 125% of contractual salary. The performance

conditions which applied to the bonus were set in September 2022 and are described on pages 105 and 106. Karen Witts was awarded a pro-rated performance-related

annual bonus for FY22, reflective of the period from her start date to the end of the FY22 financial year and subject to the financial performance criteria applicable to

Nick Wilkinson (she declined the personal performance element given the relatively short period that she had been in role during that financial year).

7 Total variable remuneration includes bonus and LTIP awards.

Dunelm Group plc Annual Report and Accounts 2023104

Remuneration Committee report continued

GOVERNANCE REPORT

FY23 annual bonus (audited)

Each of Nick Wilkinson and Karen Witts were eligible to earn an annual bonus of up to 125% of base salary during the year,

subject to meeting the performance targets set out below. Sir Will Adderley asked not to be considered for an annual bonus.

The bonus was based on challenging targets set by the Committee at the start of the financial year, with 75% based on financial

targets and 25% based on personal and strategic targets. The ‘Sales’ element of the bonus would only be paid if we achieved

the threshold PBT and sales target. Information on the targets set and the performance against them is set out in Table 2

below. Based on performance against those targets, Nick Wilkinson earned a bonus of £334,592 and Karen Witts earned a

bonus of £251,719 (see Table 3 below). The full bonus is paid in cash, with two-thirds of the after tax amount being subject to a

requirement that it is invested in shares.

Table 2 – annual bonus 2023 payout (audited)

Performance measures

% of bonus

opportunity

Threshold

performance

(0%)

On-target

performance

(40%)

Maximum

performance

(100%)

FY23 actual

performance

% outcome for

each measure

Financial measures

- Profit before tax 50% £172.8m £192.0m £211.2m £192.7m 42%

- Sales 25% £1,531.2m £1,702.5m £1,787.6m £1,638.8m 25%

Non-financial personal and

strategic targets 25%

(see below and page 106 for details)

CEO – 75%

CFO – 70%

1 Bonus is earned between threshold and on-target and between on-target and maximum on a straight-line basis.

Table 3 – overall 2023 bonus earned (audited)

£’000 Base salary

Maximum bonus

% of salary

2023 bonus

outcome % of

maximum

Overall 2023

bonus earned

£’000

2023 bonus

outcome

% of salary

Nick Wilkinson 582 125% 46% 335 57%

Karen Witts 450 125% 45% 252 56%

Non-financial personal and strategic objectives

25% of the bonus opportunity is linked to performance against objectives, both personal and strategic. Payment of this element

of the bonus is subject to meeting threshold on the PBT financial metric for the year (which has been achieved). The targets,

which are specific to each of the CEO and CFO, were set by the Committee to reflect personal and strategic priorities for FY23.

Assessment against them (including consideration of relevant KPIs) was considered by the Committee at the end of the financial

year, and a bonus outcome determined accordingly.

It was assessed that 75% of the personal and strategic targets had been met by the CEO and 70% of the personal and strategic

targets had been met by the CFO. Further details on their respective key achievements against each objective are set out on the

following page.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 105

CEO – FY23 performance against objectives – outcome 75% of maximum

Objectives Key achievements during FY23

Strategy

c.25% weighting

• Navigated a complex and volatile trading environment, continuing to deliver clear investor communications

throughout.

• Delivered meaningful progress toward digitalisation goals.

• Further embedded sustainability initiatives across the business, including the successful launch of

‘Conscious Choice’. Scope 3 roadmap in development.

• Increased store-centred community engagement, with this becoming a key differentiator for Dunelm.

Customer proposition

c.25% weighting

• Delivered strongly on value and choice – achieved market share gains and margin targets, added significant

number of SKUs and improved value communications.

• Progress made on improving customer experience and product availability through process and

technology change.

People

c.25% weighting

• Successful restructuring of Executive Team in FY23. Team performing well.

• Strengthened senior leadership team (below Executive Team) with the recruitment of six external

candidates during the year.

• Implemented development plans for Executive Team and senior leadership team, with potential succession

opportunities identified.

Organisation capabilities –

drive efficiencies, build on

shared values

c.12.5% weighting

• Achieved stretching cost ratio targets for stores and logistics.

• Strong approach to cost reduction and identification of efficiency opportunities in procurement and returns

and stock loss.

• Continued progress on improving data insights and analytics, with clear step-change in capability.

• Supported ongoing work of our inclusion and diversity networks, which are flourishing.

Corporate

c.12.5% weighting

• Implemented greater rigor around identifying potential corporate activity.

• Managed post-acquisition performance of Sunflex, exceeding targets.

CFO – FY23 performance against objectives – outcome 70% of maximum

Objectives Key achievements during FY23

Driving business performance

c.25% weighting

• Implemented a revised approach to operational KPIs to provide holistic framework for driving budgeted

performance.

• Achieved full-year cost to sales ratio <38% despite cost pressures.

• Delivered £15m operating cost savings.

• Maintained strong free cash flow performance and strengthened robustness of cash flow forecasting.

Investor relations

c.15% weighting

• Developed investor relations capability.

• Developed relationships with advisers and a new investor relations strategy, the output of which has

introduced new investors to our register.

• Continued to progress work on telling our ESG equity story.

Sustainability

c.15% weighting

• Refreshed ESG operating model.

• Scope 3 roadmap in development.

• Reviewed and refreshed KPIs.

Internal controls environment

c.15% weighting

• Successfully implemented new balance substantiation system and commenced process mapping of key

financial processes ahead of the next stage of SAP4Hana implementation.

• Improved non-stock internal controls.

People

c.10% weighting

• Increased finance team engagement scores.

• Built capability in non-financial and sustainability reporting.

• Ensured succession plans are well developed.

Technology

c.10% weighting

• Improved accuracy of forecasting.

• Ongoing review of technology KPIs and delivery of cost-tracking improvements in relation to levels

of investment.

Corporate

c.10% weighting

• Implemented M&A framework.

• Increased corporate development capability and developed network.

Dunelm Group plc Annual Report and Accounts 2023106

Remuneration Committee report continued

GOVERNANCE REPORT

LTIP awards earned in respect of performance in FY21-23 (audited)

Nick Wilkinson was granted an LTIP award in November 2020 with vesting subject to performance conditions assessed

over the three-year period FY21 to FY23. This award has vested at 83% as set out in the table below. Neither Karen Witts

nor Sir Will Adderley had an LTIP award vesting in respect of performance in FY21 to FY23.

Table 4 – LTIP awards earned

Performance condition and outturn: FY23 Diluted EPS

Director

Shares under

award

Threshold

(10%

vesting)

On-target

(50%

vesting)

Maximum

(100%

vesting) FY23 outturn

Vesting

percentage

Vested

Dividend

equivalent

Total vesting

Nick Wilkinson 94,846 60p 65p 80p 75.0p 83% 79,038 9,440 88,478

1 Nick Wilkinson will also receive £106,985 by way of ‘special dividend equivalents’ in relation to the special dividends of (i) 65p per share paid on 8 October 2021,

(ii) 37p per share paid on 18 March 2022, and (iii) 40p per share paid on 11 April 2023, as well as any further special dividend paid before the vesting date (if

applicable). In each case these will be paid in shares. The number of additional shares to vest for Nick Wilkinson as a result is 9,440.

2 The value of this number of shares is included in the single figure for total remuneration for FY23 as set out in Table 1 on page 104, and the basis on which it has

been calculated is set out in note 5 of Table 1. Vested shares must be retained in accordance with the shareholding guidelines set out in the Remuneration Policy.

Awards made to Directors under share incentive schemes in FY23 (audited)

LTIP awards were made on 27 October 2022 to Nick Wilkinson and Karen Witts as set out below:

Table 5 – LTIP awards made to Directors during FY23

Director Award

under

award

Face value at

date of award

(200%

of salary) Performance condition

Performance

period

Vesting

date

Nick Wilkinson

Nil-cost options

under LTIP

139,765 £1,164,250

FY25 Diluted EPS (80% of opportunity)

Threshold

(10% vesting)

On-target

(50% vesting)

Maximum (100%

vesting)

July 2022

to June

2025

October

2025

83.4p 87.6p 103.4p

Non-financial measures

(20% of opportunity)

ESG metric 1

(5% vesting)

ESG metric 2

(5% vesting)

ESG metric 3

(5% vesting)

ESG metric 4

(5% vesting)

Karen Witts

Nil-cost options

under LTIP 108,043 £900,000

As above for Nick Wilkinson

1 Based on the average closing share price between 24 and 26 October 2022 of 833p per share.

2 Four sustainability-based measures, each accounting for a quarter of this element of the award, on a simple pass or fail basis against target: (i) ESG metric 1 –

reduction in Scope 1 greenhouse gas emissions per £m sales against a FY19 base (FY25 target – 32%); (ii) percentage of own brand cotton products which meet

our ‘More Responsibly Sourced Cotton’ standard (FY25 target – 100%); (iii) reduction in plastic packaging of own brand products against FY20 base (FY25 target

– 30%); and (iv) percentage of own brand products for which we offer an easy to use take-back service with a credible end-of-life solution in at least 90% of our

superstore estate (FY25 target – 50%).

All of the shares vesting (after payment of tax and National Insurance) must be held for two years from the vesting date, and

thereafter at least two-thirds of these must be held for the duration of employment. The Executive Directors are eligible to

receive a ‘special dividend equivalent’ in relation to these awards, in respect of a special dividend of 40 pence per share paid

on 11 April 2023 and any other special dividend paid before the awards vest.

Payments to past Directors and for loss of office (audited)

No payments were made to any former Director in the financial year or to any Director in respect of loss of office or the

termination of his or her employment.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 107

Statement of Directors’ share interests

Under the current Directors’ Remuneration Policy, Executive Directors are subject to a shareholding target which requires

them to build a holding of Dunelm shares with a value of 1× salary after three years and 2× salary after five years (measured by

reference to share price at the financial year end). Achievement against this requirement is set out in the table below, other than

in the case of Sir Will Adderley who only receives a salary of £1 per year and for whom the requirement is therefore not relevant.

The approach to shareholding requirements under the proposed Directors’ Remuneration Policy for which approval will be

sought at the 2023 AGM is set out on page 96.

Tables 6 and 7 show the interests of the Directors in shares of the Company at 1 July 2023.

Table 6 – Shareholdings of Directors and Persons Closely Associated with them (audited)

At 1 July 2023

1p Ordinary

At 2 July 2022

1p Ordinary

Percentage of

salary (where

applicable)

Shareholding target

(where applicable)

Executives

Nick Wilkinson 371,330 249,759 681%

1x salary by Feb 2021

2x salary by Feb 2023

Karen Witts 24,918 23,744 59%

1x salary by July 2025

2x salary by July 2027

Sir Will Adderley 76,371,779 76,371,779 N/A N/A

Non-Executives

Alison Brittain 37,500 N/A N/A N/A

Ian Bull 11,000 11,000 N/A N/A

Kelly Devine — — N/A N/A

William Reeve 22,000 22,000 N/A N/A

Peter Ruis — — N/A N/A

Marion Sears 105,000 105,000 N/A N/A

Arja Taaveniku 6,000 6,000 N/A N/A

Vijay Talwar 9,670 — N/A N/A

Andy Harrison

488,017 454,811 N/A N/A

1 Based on the closing share price of 1,121p on 1 July 2023 and base salary at 1 August 2023.

2 Position as at 31 December 2022 when Andy Harrison stepped down from the Board.

There have been no changes in the interests of each Director in the period from 2 July 2023 to the date of this report.

Dunelm Group plc Annual Report and Accounts 2023108

Remuneration Committee report continued

GOVERNANCE REPORT

Table 7 – Directors’ interests in share awards and options at the period end (audited)

All share awards and options held by the Executive Directors who served during the year, together with any movements, are

shown below:

Date of

award

Name of

award

Type of

award

options/

awards at

2July

2022

options/

awards

granted

during

the year

options/

awards

vested and

exercised

during

the year

options/

awards

lapsed/

cancelled

during

the year

options/

awards at

1July

2023

End of

performance

period

Option

price

Nick

Wilkinson

October

2019

FY20-22

LTIP

options 134,984 17,041 (152,025)² — —

June

2022 —

November

2020

FY21-23

LTIP

options 94,846 — — — 94,846

June

2023 —

October

2021

FY22-24

LTIP

options 89,078 — — — 89,078

June

2024 —

October

2022

FY23-25

LTIP

options — 139,765 — 139,765

June

2025 —

November

2020

FY20

Bonus

award 5,797 477 (6,274) — — N/A —

November

2020

FY21

Bonus

award 24,013 1,979 (25,992) — — June 2021 —

November

2021

FY22

Sharesave

options 1,720 — — (1,720) — N/A 1,046p

November

2022

FY23

Sharesave

options — 2,698 — — 2,698 N/A 667p

Karen

Witts

June

2022

FY22-24

LTIP

options 73,979 — — — 73,979

June

2024 —

October

2022

FY23-25

LTIP

options — 108,043 — — 108,043

June

2025 —

November

2022

FY23

Sharesave

options — 2,698 — — 2,698 n/a 667p

1 LTIP awards are eligible to receive a ‘special dividend equivalent’ in respect of any special dividend paid during the performance period applicable to the award

and up to the date of vesting. The FY20 and FY21 Share Bonus awards were also eligible to receive a ‘special dividend equivalent’ in respect of any special

dividend paid from date of grant up to the date of vesting. Dividend equivalent shares have been included where quantified.

2 During the year Nick Wilkinson exercised 152,025 nil-cost share options with a market value of 796p equalling a gain of £1,210,119.

3 Performance conditions in respect of the LTIP awards granted in FY20 and FY21 are set out in the FY21 Annual Report, and the performance conditions in respect

to the award granted in FY22 are set out in the FY22 Annual Report.

4 Payment of bonuses earned for FY20 and FY21, which would normally have been paid in cash, were deferred in shares under a Share Bonus Award, with 50%

vesting in September 2021 and 50% vesting in September 2022. During the year Nick Wilkinson received 32,266 shares with a market value of 713.5p equalling

a gain of £230,218. No performance conditions were applied to the FY20 Share Bonus awards. The FY21 Share Bonus awards were subject to the performance

conditions referred to on pages 155 to 158 of the FY21 Annual Report.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 109

Share options and dilution limits

The Committee considers the provisions of the Investment Association’s Guidelines on Executive Remuneration when

determining the number of shares over which share scheme incentive awards may be made.

As at 1 July 2023 over the last ten-year period options have been granted over 3.8% of the Company’s issued share capital

(adjusted for share issuance and cancellation). The Group does not hold any shares in an employee benefit trust.

Service contracts

In accordance with the Group’s policy, the service contracts of the Executive Directors have no fixed term. The notice period

for termination is 12 months from either party for Sir Will Adderley, and six months for each of Nick Wilkinson and Karen Witts

respectively. Service contracts for the Executive Directors include a non-compete arrangement. Payments on termination are

restricted to a maximum of the value of base salary and benefits for the notice period. The Committee may apply mitigation

in respect of any termination payment. Copies of the Executive Directors’ service contracts are available for inspection at the

Company’s registered office.

The Non-Executive Directors have letters of appointment for an initial period of three years with a provision for termination on

one month’s notice from either party, or three months’ notice from either party in the case of Alison Brittain, the Chair.

Table 8 – Directors’ service contracts

Start date Expiry of current term Notice period

Executives

Nick Wilkinson 1 February 2018 N/A 6 months

Karen Witts 9 June 2022 N/A 6 months

Sir Will Adderley 28 September 2006 N/A 12 months

Non-executives

Alison Brittain 7 September 2022 7 September 2025 3 months

Ian Bull 10 July 2019 10 July 2025 1 month

Kelly Devine 1 March 2022 1 March 2025 1 month

Williams Reeve 1 July 2015 1 July 2024 1 month

Peter Ruis 10 September 2015 10 September 2024 1 month

Marion Sears

22 July 2004 22 July 2024 1 month

Arja Taaveniku 15 February 2021 15 February 2024 1 month

Vijay Talwar 1 October 2021 1 October 2024 1 month

1 Marion Sears has served more than nine years on the Board. Her contract is renewed for a one-year term (rather than three), with the notice period referred

to above.

Dunelm Group plc Annual Report and Accounts 2023110

Remuneration Committee report continued

GOVERNANCE REPORT

Total shareholder return performance and historic CEO remuneration

The graph below shows the Group’s performance over ten years, measured by total shareholder return, compared with the

FTSE 350 General Retail Index and the FTSE 250. The Committee has chosen these indices for comparison because they

provide a range of comparator companies which have similar market capitalisation, which are in the same sector and face

similar market and economic challenges in the long term.

Table 9 – Total shareholder return performance graph (rebased to 2 July 2013 = 100)

The shares traded in the range of 671p to 1,232p during the year and stood at 1,121.0p at 1 July 2023.

200

400

600

800

300

100

500

700

900

1,000

TSR performance (Rebased to 100)

Jul 13 Jul 14 Jul 15 Jul 16 Jul 17 Jul 18 Jul 19 Jul 20 Jul 21 Jul 22 Jul 23

384.6%

93.1%

69.3%

Dunelm

FTSE 250

FTSE 350 General Retail

Factset as of 20 July 2023. Last ten years data on weekly frequency. FTSE 350 General Retail Index includes Dunelm.

The table below sets out the prescribed remuneration data for each of the individuals undertaking the role of Chief Executive

Officer during each of the last ten financial years.

Table 10 – Historic Chief Executive Officer pay

CEO single figure of

total remuneration

£’000

Annual bonus payment

against maximum

opportunity

Long-term incentive

vesting rates against

maximum opportunity

FY23 Nick Wilkinson 1,985 46.0% 83.3%

FY22 Nick Wilkinson 2,511 90.0% 100.0%

FY21 Nick Wilkinson 3,756 81.2% 100.0%

FY20 Nick Wilkinson

885 20.0% 19.8%

FY19 Nick Wilkinson 1,365 97.9% N/A

FY18 Nick Wilkinson

308 13.3% N/A

FY18 John Browett

2,3

429 N/A N/A

FY17 John Browett 722 14.0% N/A

FY16 John Browett

489 57.7% N/A

FY16 Sir Will Adderley

10 N/A N/A

FY15 Sir Will Adderley

507 5.0% N/A

FY15 Nick Wharton

110 N/A N/A

FY14 Nick Wharton

1,509 22.5% 77.5%

1 During the period April to June 2020 inclusive, Nick Wilkinson took a voluntary 90% reduction in base salary.

2 John Browett left the Group on 29 August 2017. He was succeeded by Nick Wilkinson on 1 February 2018. The total figure for John Browett includes £322,120 in

respect of salary and benefits paid for his six-month notice period. The data for each Director for FY18 is pro-rated by time of service as Chief Executive Officer.

3 No LTIP awards vested to John Browett during his tenure.

4 Sir Will Adderley was succeeded by John Browett as Chief Executive Officer on 1 January 2016. The data for each Director for FY16 is pro-rated by time of service

as Chief Executive Officer. Sir Will Adderley’s base salary was reduced to £1 on 1 July 2015.

5 Sir Will Adderley was reappointed Chief Executive Officer on 11 September 2014, following the resignation of Nick Wharton on 10 September 2014. The data for

each Director for FY15 is pro-rated by time of service as Chief Executive Officer.

6 Nick Wharton’s first LTIP award vested and was exercised in December 2013.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 111

Statement of change in pay

The table below sets out the increase in total remuneration for each Director compared with other colleagues.

Table 11 – Change in Directors’ pay compared with annual change in average employee’s pay

Percentage change in remuneration

between FY22 and FY23

Percentage change in remuneration

between FY21 and FY22

Percentage change in remuneration

between FY20 and FY21

Percentage change in remuneration

between FY19 and FY20

Salary and

fees

Benefits

Short-term

incentive

2,3

Salary and

fees

Benefits

Short-term

incentive

2,3

Salary and

fees

Benefits

Short-term

incentive

2,3

Salary and

fees

Benefits

Short-term

incentive

2,3

Executives

Nick

Wilkinson

0.3% 0.0% (48.8%) 3.4% (4.3%) 14.6% 1.8% 3.6% 313.0% 2.0% (55.6%) (79.2%)

Karen

Witts 0.0% 0.0% (33.7%) N/A N/A N/A N/A N/A N/A N/A N/A N/A

Sir Will

Adderley 0.0% 0.0% N/A 0.0% 0.0% N/A 0% (4.8%) N/A 0.0% 0.0% N/A

Non-

Executives

Alison

Brittain

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Ian

Bull 3.9% N/A N/A 2.7% N/A N/A 0% N/A N/A 2.0% N/A N/A

Kelly

Devine 3.9% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Andy

Harrison 0.0% N/A N/A 0.0% N/A N/A N/A N/A N/A 2.0% N/A N/A

Williams

Reeve

3.9% N/A N/A 4.5% N/A N/A 8.4% N/A N/A 2.2% N/A N/A

Peter

Ruis 4.0% N/A N/A 3.2% N/A N/A 0% N/A N/A 2.0% N/A N/A

Marion

Sears 4.0% N/A N/A 3.2% N/A N/A 0% N/A N/A 2.0% N/A N/A

Arja

Taaveniku 3.7% N/A N/A 3.2% N/A N/A N/A N/A N/A N/A N/A N/A

Vijay

Talwar 3.7% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

All

colleagues

7,8

7.2% 1.9% (36.6%) 4.9% 0.8% (4.7%) 4.4% 0% 145.4% 3.5% 0% (42.7%)

1 Directors’ remuneration is based on contractual salary or fees as appropriate and does not take account of the voluntary salary reductions of 90% of Nick

Wilkinson between April and June 2020 inclusive, or the waiver by all other Directors of 100% of their fees for this period.

2 Short-term incentive percentage has been calculated in relation to only those colleagues eligible to receive a bonus in the period as this is considered a more

appropriate comparator group. All colleagues’ short-term incentives include a one-off £250 ‘thank you’ payment to all colleagues not usually eligible for a bonus

in respect of FY20 and the ‘thank you’ payment of between £250 and £350 made to colleagues not usually eligible for a bonus in respect of FY21.

3 The difference between the increase in short-term incentives of the Directors and the ‘all colleagues’ rate reflects the strong performance of the business, and the

fact that a higher proportion of the Directors’ pay is performance-related.

4 The decrease in benefits for Nick Wilkinson in FY22 is due to benefits received in lieu of holiday in FY21 which were not received in FY22.

5 No comparator data is provided for Alison Brittain as she joined Dunelm during FY23.

6 The increase in William Reeve’s fee in FY21 is due to the assumption of responsibilities as Senior Independent Director.

7 All colleagues’ salary increase is calculated only for colleagues employed for the whole of the financial year.

8 Comparisons have been made against colleague pay across the entire Group as the parent company employs a limited number of individuals.

Dunelm Group plc Annual Report and Accounts 2023112

Remuneration Committee report continued

GOVERNANCE REPORT

CEO pay ratio

There are three permissible methods available to calculate the CEO pay ratio, which are outlined below:

Option Method

A Determining the total full term equivalent remuneration for all UK employees.

Rank from low to high.

Identify the colleagues at 25th percentile, 50th percentile and 75th percentile.

B Identify the colleagues at 25th, 50th and 75th percentile, using the Gender Pay Gap Reporting.

C Use a different data set, but calculate in the same way as the Gender Pay Gap Reporting.

Option A is considered the most statistically accurate method and therefore we have opted for this method. The data used to

identify the colleagues at 25th percentile, 50th percentile and 75th percentile was taken on 5 April 2023.

The table below shows the ratio of actual pay of Nick Wilkinson, CEO, to other colleagues. Full-year pay data has been used to

calculate these ratios and the elements included are based on the CEO single figure remuneration in Table 1. We have used

a 40-hour week in order to consistently calculate the annual salary for everyone, converting hourly rate of pay into a full-time

equivalent salary, to ensure a direct comparison.

Table 12 – CEO pay ratio

Financial year Method

25th percentile

pay

50th percentile

pay

75th percentile

pay

FY23 Option A 93:1 87:1 67:1

FY23 Base salary £20,864 £22,334 £28,811

FY23 Total pay and benefits £21,445 £22,880 £29,682

FY22 Option A 124:1 121:1 112:1

FY21 Option A 204:1 204:1 186:1

FY20 (Based on actual remuneration – including Nick’s 90% pay

reduction during the period April to June 2020) Option A 54:1 47:1 38:1

FY20 (Based on contractual remuneration) Option A 62:1 53:1 43:1

Commentary:

The Committee considered whether the median pay ratio for the year is consistent with the pay, reward and progression policies

for the Company’s UK employees taken as a whole, and concluded that it is, for the following reasons:

• The pay gap has significantly reduced, compared to the previous year. The main difference is the CEO bonus outcome for

FY23 at 46% of maximum opportunity being lower than last year.

• The CEO’s LTIP is vesting at 83% this year, which is a lower percentage than last year.

• The colleagues at the 25th, 50th and 75th percentile are hourly paid colleagues. This reflects that c.80% of our colleague

base are employed in hourly-paid roles.

• The median pay ratio is considered appropriate and consistent with the pay and reward policies for the Company’s UK

employees. Our remuneration strategy is based on paying median to market for salary, to reward strong performance and

focus on long-term value creation. The CEO remuneration is reflective of this, as his pay has a larger quantum in variable pay.

• In comparison we pay our hourly-paid colleagues upper median or above versus the market and have invested to improve

our pay position for these colleagues in FY23.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 113

Relative spend on pay

The table below shows the all employee pay cost, returns to shareholders by way of dividends (including special dividends) and

share buyback for FY23 and FY22.

Table 13 – Relative spend on pay

FY23

£’m

FY22

£’m % change

Total spend on pay 214.3 194.9 10.0%

Ordinary dividend to shareholders 82.6 75.1 10.0%

Distributions to shareholders via treasury share purchases 7.0 28.3 (75.3%)

Special distributions to shareholders 80.7 207.0 (61.0%)

Total distributions to shareholders 170.3 310.4 (45.1%)

This information is based on the following:

• Total spend on pay – total employee costs excluding car and travel allowances and bonuses from note 4 on page 144.

• Dividends taken from note 7 on page 146.

Executive Director external board appointments

Nick Wilkinson is a trustee of Rewilding Britain. Karen Witts is a Non-Executive Director of Ipsen Pharma SA. Sir Will Adderley is

a Director of WA Capital Limited.

Statement of implementation of policy in the FY24 financial year

Base salary and benefits for each of the Executive Directors for FY24 are set out in the table below.

Table 14 – Executive Directors fixed remuneration

Base salary

Increase to base

salary YoY Benefits

Increase to

benefits YoY Pension

Change to

pension

contribution YoY

Nick Wilkinson 611,100 5.0% 50,555 6.3% 18,333 Nil

Karen Witts 472,500 5.0% 38,000 Nil 14,175 Nil

Sir Will Adderley 1 Nil 20,000 Nil Nil N/A

Base salary

The Committee determined that the Executive Directors performed strongly throughout the year, and this has been reflected

in the financial performance of the Group. Further to this, the Committee approved a 5% increase in base salary for each of the

CEO and CFO in line with the increases given to senior management. In making its decision, the Committee took into account

the median pay award made to the wider colleague population of 9.6% and stakeholder considerations, including the feedback

on Executive pay received from the National Colleague Voice. In implementing the increase, Nick’s base pay remains positioned

around the lower quartile versus our peers and Karen’s base pay remains positioned at median for the top 50 companies in the

FTSE 250.

Sir Will Adderley has asked that he not be considered for a pay increase.

Pension

The pension entitlement for both Nick Wilkinson and Karen Witts is 3% of base salary, which is in line with the current

workforce average.

Dunelm Group plc Annual Report and Accounts 2023114

Remuneration Committee report continued

GOVERNANCE REPORT

FY24 annual bonus

Nick Wilkinson has been awarded a bonus opportunity of up to 150% of salary (subject to approval of, and in line with, our

new Policy) and Karen Witts has been awarded a bonus opportunity of up to 125% of base salary. The performance conditions

attached to their respective bonuses are:

• 50% linked to achievement of budget PBT.

• 25% linked to achievement of budget sales.

• 25% linked to achievement of strategic and personal targets, aligned to the Group strategy, and including environmental,

social and governance measures.

The budget sales and PBT are set taking into account market consensus and broker expectations. The actual financial and

strategic targets have not been disclosed at this time as they are commercially sensitive. The targets and an assessment of the

extent to which they have been achieved will be disclosed in next year’s Remuneration Committee report.

Whilst the Policy enables bonus vesting levels at up to 10% of maximum at threshold and 50% for on-target performance,

for FY24 this will apply only in respect of sales, with PBT remaining at 5% of maximum at threshold and 40% for on-target

performance (and PBT moving to up to 10% of maximum at threshold and 50% for on-target performance in FY25).

Nick Wilkinson and Karen Witts have contractually committed that two-thirds of the bonus earned (after payment of income

tax and National Insurance) will be invested in Dunelm shares, to be held for the duration of employment. This is also in line

with our Policy. Shares held on termination of employment will be retained for up to a minimum of two years as required by the

shareholding requirements set out in the Policy.

Sir Will Adderley has asked that he not be considered for a bonus award.

LTIP FY24-26

Subject to the approval of, and in line with, our proposed new Policy, and subject to shareholder approval of the proposed

amendments to the LTIP rules at this year’s AGM, an award is expected to be made in November 2023 under the LTIP over

shares to the value of 225% of salary to Nick Wilkinson and 200% of salary to Karen Witts. The award will vest, subject to

continued employment, on the third anniversary of the grant date, to the extent that performance conditions have been met.

All of the vested shares (after sales to cover tax and National Insurance liability on exercise) must be retained for two years after

vesting, after which one-third of these may be sold and the remainder must be retained for the duration of employment. Shares

held on termination of employment will be retained for a minimum of two years as required by the shareholding requirements

set out in the Policy. Our current intention is that the FY24-26 LTIP awards will be granted in line with our standard approach

(with the number of shares to be awarded based on the average share price for the three business days preceding grant) and we

will review the final outturn to ensure that there have not been any windfall gains. This is in addition to the performance underpin

and review of the final outturn to ensure it is warranted based on shareholder experience over the performance period.

The performance criteria that apply to the award were set by the Committee in line with the new Policy subject to shareholder

approval, and are as follows:

Financial measures: 80% of the award

Percentage of this element of the FY24-26 award vesting

Nil

Threshold

10%

On-target

50%

Maximum

100%

FY26 Diluted EPS

Less than

78p 78p 83p

100.0p

or more

1 Performance between each of these percentage thresholds will be calculated on a straight-line basis.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 115

Non-financial measures: 20% of the award

Measure

FY26

target

% of LTIP

award

Reduction in Scope 1 greenhouse gas emissions per £m sales -59.3% 6.67%

Percentage of own brand cotton products which meet our ‘More Responsibly Sourced Cotton’

standard 100% 6.67%

Percentage of role-model leadership roles filled by ethnically diverse colleagues 8% 6.67%

These targets were chosen because they are aligned to our strategy and long-term targets, and they cover areas where we are

able to make the most impact on the environment and provide the most benefit to our customers and our communities.

Reduction of our Scope 1 greenhouse gas emissions will enable us to reduce our impact on climate change in line with our

Pathway to Zero commitment. Cotton products account for approximately half of Dunelm’s carbon footprint. Cotton which

meets our ‘More Responsibly Sourced’ standard will have a lower carbon footprint, as well as using less water and meeting our

ethical/social standards.

This year, the Committee decided to remove our reduction in plastic packaging and take-back service targets on the basis that

our work in these areas is progressing well and, in the case of the former, is subject in any event to regulatory requirements. Its

view was that the focus should continue to be on those areas where a step-change is required to meet our ambitions. This in no

way diminishes the importance of other targets, but takes into account the outcome of stakeholder engagement as well as our

desire to ensure that we continue to live our shared values. As a result, these measures have been replaced with an ethnicity

target whereby 8% of our role-model leadership roles shall be held by ethnically diverse colleagues by the end of FY26. The

Committee has set stretching meet/fail targets rather than setting a target range in order to incentivise management to make

significant progress in delivering these important objectives.

Sir Will Adderley has asked that he not be considered for an LTIP award.

Sharesave

An invitation will be issued in October 2023 to all eligible employees to apply for options to be granted under the Sharesave

scheme at a 20% discount to the average closing market price of Dunelm shares on the three dealing days preceding the issue

of the invitation. The maximum monthly savings will be £500 per month. Executive Directors employed at the eligibility date

may apply for Sharesave options, subject to the plan rules.

Non-Executive Director fees for FY24

Fees to be paid to Non-Executive Directors in FY24 are as set out in the table below:

Table 15 – Non-Executive Director fees

Position Base fee

Committee

Chair/SID fee

Increase in base

fee year-on-year

Increase in

Committee/SID

fee year-on-year

Alison Brittain Chair £337,177 N/A 5.0% N/A

Ian Bull Audit and Risk Committee Chair £58,490 £11,316 5.0% 5.0%

Kelly Devine Non-Executive Director £58,490 N/A 5.0% N/A

William Reeve Remuneration Committee Chair £58,490 £11,316 5.0% 5.0%

Senior Independent Director (SID) — £7,190 5.0% 5.0%

Peter Ruis Non-Executive Director £58,490 N/A 5.0% N/A

Marion Sears Non-Executive Director £58,490 N/A 5.0% N/A

Arja Taaveniku Non-Executive Director £58,490 N/A 5.0% N/A

Vijay Talwar Non-Executive Director £58,490 N/A 5.0% N/A

Fees above are for the full year and reflect Board responsibilities at the date of this report.

Dunelm Group plc Annual Report and Accounts 2023116

Remuneration Committee report continued

GOVERNANCE REPORT

Statement of shareholder voting

At the Annual General Meeting on 30 November 2022, the total number of shares in issue with voting rights (excluding treasury

shares) was 201,361,214. Details of voting on remuneration-related resolution is set out below:

Resolution Votes for % of votes cast Votes against % of votes cast Votes withheld % withheld

Approve Annual Remuneration Report 177,668,641 99.77 408,268 0.23 3,114,149 1.55

At the Annual General Meeting on 17 November 2020, the total number of shares in issue with voting rights (excluding treasury

shares) was 202,354,357. Details of voting on the remuneration policy resolution is set out below:

Resolution Votes for % of votes cast Votes against % of votes cast Votes withheld % withheld

Approve Directors’ Remuneration Policy 185,828,351 99.9 21,010 0.01 248,318 0.13

Advisers

The UK Executive Compensation practice of Deloitte provides general advice on executive remuneration to the Committee

and access to external information and research on market data and trends. They were appointed by the Committee following a

review against other providers in the market. Deloitte are signatories to the Remuneration Consultants’ Code of Conduct, which

requires their advice to be impartial, and they have confirmed their compliance with the Code to the Committee.

Total fees paid to Deloitte for remuneration-related work in the year were £30,150 (FY22: £14,850) which was a mixture of fixed

fees and time spent basis, depending on the work conducted.

Risk Advisory and Consulting teams within Deloitte (outside of its UK Executive Compensation practice) provided non-

remuneration-related consultancy services in the year. In each case, the appointment of Deloitte was made based on

Deloitte’s expertise in the particular area, on an arm’s length basis and without reference to the fact that Deloitte also provides

remuneration advice. Having considered the fees paid to Deloitte for non- remuneration-related work, the Committee is

satisfied that the remuneration advice that they have received from Deloitte in the year has been objective and independent.

Gender pay disclosures

Dunelm’s purpose is ‘To help create the joy of truly feeling at home, now and for generations to come.’ We want everyone to

feel that Dunelm is a place for them, and this applies equally for our colleagues and customers. Diversity, inclusion, and more

generally the wellbeing of our colleagues, are high on our agenda. We want all colleagues to feel they can grow with Dunelm

and that they are welcome. Improving our gender balance remains one of our commitments.

The Committee supports gender pay reporting and the actions taken in the business to drive gender balance, supporting

a culture of inclusion. Dunelm published its sixth Gender Pay Gap Report in April 2023, and an overview is provided in our

Sustainability Report 2023. Both documents are available to download at corporate.dunelm.com.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 117

Engaging with our colleagues on pay

In May 2023, the National Colleague Voice (‘NCV’) allocated a full meeting to a discussion on pay and reward. The meeting

was well attended by representatives from across the business with a 43%:57% male/female gender split and ethnic diversity

representation of 21%. The meeting was led by members of our People Team who were joined by Marion Sears, our designated

Non-Executive Director for colleague matters, and William Reeve, Chair of the Remuneration Committee. It was also attended

by the Group General Counsel and Company Secretary. The meeting covered two key topics as follows:

Topic 1: Engaging on colleague reward and pay

Representatives from each part of the business were invited to share feedback on reward and pay gathered from colleagues

ahead of the meeting. Overall, colleagues were pleased with our general reward packages and those who have access to a

computer make good use of online access to our total reward system and access to benefits. However, the meeting discussed

that store colleagues and drivers do not always have the same ease of access and have requested further consideration as to

how this can be achieved. Other areas of discussion were the possibility of reviewing the Company’s approach to sick leave pay

and eligibility for the bonus scheme at a support analyst level.

There was also a discussion on cost of living, and notably that the effects of a higher cost of living are more acutely felt by

store colleagues who are impacted by the availability of overtime. As a result of this discussion, management determined to

define more specifically the most-affected colleague population to review whether a different approach might be adopted and

consider further improvements we can make to our communication more generally around business performance and more

personally to colleagues about the other assistance that is available for anyone experiencing hardship.

Topic 2: Engaging on Board remuneration

William Reeve provided an overview of the remit of the Committee, core elements of Dunelm’s proposed new Remuneration

Policy and the context in which the Committee takes decisions. It was explained that the Committee is held to account

through shareholder voting and that for the Executive Team, and most of our senior leadership, reward is related to business

performance. The fixed and variable reward elements for different role levels were highlighted, as was the requirement for a

significant proportion of reward to be held in shares, to ensure shareholder alignment and in keeping with our shared values.

Feedback on our executive pay was positive, with NCV colleagues recognising the desire to pay appropriately for good

leadership, the level of care and scrutiny exercised by the Committee and its long-term thinking. It was noted that colleagues’

acceptance of executive pay is linked to business performance, colleague job security and workforce pay, and if Dunelm’s

circumstances changed, colleagues would feel it inappropriate for our leaders to receive a high level of pay/bonus. It was also

noted that our colleagues consider strong leadership to include having compassion and being proactive.

For more information on the NCV and its other activities during the year see page 32.

Committee effectiveness

The effectiveness of the Committee was considered as part of this year’s Board evaluation process, more details of which can

be found on page 78. The review concluded that the Committee continues to operate effectively and having considered the

findings, it was agreed that particular areas of focus during the forthcoming year should be:

1. Reflecting on measures used to determine performance, alignment of management incentives and approach to retention

following implementation of the new Policy (subject to shareholder approval) and refresh of the ‘Plan on a Page’;

2. A deep dive into gender pay gap data and reporting; and

3. Preparing for an effective handover to a new Chair at the appropriate time.

Approved by the Board on 20 September 2023.

William Reeve

Chair of the Remuneration Committee

Dunelm Group plc Annual Report and Accounts 2023118

Remuneration Committee report continued

GOVERNANCE REPORT

Disclosures that are relevant to

the Directors’ report have been

incorporated by reference and can

be found elsewhere within the Annual

Report and Accounts as noted below.

Strategic report

The Group’s Strategic report is set

out on pages 1 to 55. It contains an

indication of likely future developments

in the business of the Company and

the Group.

Corporate governance

Our Governance report on pages 58 to

118 explains how we have applied the

Principles set out in the UK Corporate

Governance Code published in

July 2018 (the ‘Code’). Our Code

compliance statement can be found

on page 59.

Sustainability reporting

For information on the Group’s

approach to environmental, social and

governance matters, see Sustainability

on pages 26 and 27, our TCFD report

on pages 40 to 47 which includes

the Streamlined Energy and Carbon

Reporting disclosures, and our

Sustainability Report 2023, available

at corporate.dunelm.com.

Results and dividends

The consolidated profit of the Group

for the year after taxation was £151.9m

(2022: £171.2m). The results are

discussed in greater detail in the

CFO’s review on pages 22 to 25.

A final ordinary dividend of 27p per

share (2022: 26p per share) is proposed

in respect of the period ended 1 July

2023, to add to a special dividend of

40p per share paid on 11 April 2023

(2022: £1.02 pence in total) and an

interim ordinary dividend of 15p per

share paid on 11 April 2023 (2022:

14p per share). The final dividend

will be paid on 20 November 2023

to shareholders on the register at

27 October 2023.

The Directors present their report together with the audited

financial statements for the period ended 1 July 2023.

Treasury and risk management

The Group’s approach to treasury and

financial risk management, including

its use of hedging instruments, is

explained in the principal risks and

uncertainties section on page 54 and

note 17 of the financial statements.

Stakeholder engagement

Details of how the Directors have

engaged with employees and other

stakeholders, and had regard to the

interests of colleagues and the need

to foster the Company’s business

relationships with suppliers, customers

and others and the effect of that

regard, including on the principal

decisions taken by the Company during

the financial year, are set out in the

Strategic report on pages 30 to 34,

with complementary information in

the Governance report on pages 68 to

71. Our s172(1) Companies Act 2006

statement can be found on page 35.

Employee information

Information relating to employees of

the Group is set out in the Nominations

Committee report, with more

information in our Sustainability

Report 2023.

The Company is clear in its policy that

people with health conditions, both

visible and non-visible, will have a full

and fair consideration for all vacancies.

Dunelm continues to demonstrate its

commitment to interviewing applicants

with disabilities who fulfil the minimum

criteria for the role and endeavours

to retain colleagues in roles in the

business if they become disabled

during their employment. Dunelm

will actively look to put into place

reasonable adjustments that may be

required by the colleague to allow them

to thrive and belong at Dunelm.

Share incentive schemes in which

employees participate are described

in the Remuneration Committee report

on page 101.

Shareholder and voting rights

All members who hold Ordinary Shares

are entitled to attend and vote at the

Annual General Meeting. On a show

of hands at a general meeting every

member present in person shall have

one vote and, on a poll, every member

present in person or by proxy shall

have one vote for every Ordinary Share

held. There are no special voting rights

attached to any of the Company’s shares.

In order to be passed, an ordinary

resolution of the Company must be

supported by at least 50% of the votes

cast at a shareholders’ meeting, and

a special resolution by at least 75% of

votes cast.

Information to be disclosed under LR 9.8.4R

The majority of the disclosures required under LR 9.8.4 are not applicable to Dunelm.

The table below sets out the location of those requirements that are applicable:

Applicable sub-paragraph within LR 9.8.4 Disclosure provided

(4) Long-term incentive schemes pages 107, 115 and 116

(14) A statement made by the Board

that the Company has entered into an

agreement under LR 9.2.2A, that the

Company has, and as far as it is aware,

the other parties to the agreement have,

complied with the agreement.

‘Shareholder and voting rights’ below.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 119

Directors’ report

On 2 October 2006, Jean Adderley,

Bill Adderley and Sir Will Adderley (all

shareholders at that time) entered into

a Relationship Agreement with the

Company, pursuant to which each of

Jean Adderley, Bill Adderley and Sir Will

Adderley undertook to the Company

that, for so long as, individually or

together, they are entitled to exercise,

or to control the exercise of, 30% or

more of the rights to vote at general

meetings of the Company or they are

able to control the appointment of

Directors who are able to exercise a

majority of votes at Board meetings

of the Company, they will:

• Conduct all transactions and

relationships with any member of the

Group on arm’s length terms and on

a normal commercial basis.

• Not take any action which precludes

or inhibits any member of the

Group from carrying on its business

independently of Jean and Bill

Adderley, Sir Will Adderley and

their associates (as defined in the

Listing Rules).

• Not exercise any of their voting

rights or other powers to procure

any amendment to the Articles of

Association of the Company which

would be inconsistent with or

undermine any of the provisions

of the Relationship Agreement.

• Abstain from voting on any

resolution to which LR11.1.7.R(4) of

the Listing Rules applies involving

Jean Adderley, Bill Adderley or

Sir Will Adderley or any of their

associates as the related party.

• Not carry on (other than through

their holding of securities of the

Company) or have any financial

interest (other than a financial

interest in securities which are held

for investment purposes only) in any

person who carries on a business as

a homewares retailer, to the extent

that it would be inconsistent with

or undermine any provisions of the

Relationship Agreement.

• Only enter into, amend or terminate

any transaction, agreement or

relationship between themselves

or any of their associates and

any member of the Group with

the approval of a majority of the

independent Non-Executive

Directors.

WA Capital Limited and Lady Nadine

Adderley, to whom Sir Will Adderley

transferred shares by way of a gift,

have subsequently become parties

to this agreement.

In July 2014, the Relationship

Agreement was amended so as to

comply with Listing Rule LR 9.2.2A(2)(a),

which came into effect on 16 May 2014

(as at 1 January 2018 this reference is LR

9.2.2AD R(1)). The following additional

undertakings were given by the parties:

• No action will be taken that would

have the effect of preventing the

Company from complying with its

obligations under the Listing Rules.

• No resolution will be proposed, or

procured to be proposed, which

is intended to, or appears to be

intended to circumvent the proper

application of the Listing Rules.

In addition, the Articles of Association

of the Company provide that the

election and re-election of Independent

Directors must be conducted in

accordance with the election provisions

set out in LR 9.2.2ER and LR 9.2.2FR.

The Company confirms that it has

complied with its obligations under

the Relationship Agreement during the

financial period under review, and that

so far as it is aware, all other parties to

that agreement have complied with it.

The Company confirms that there

are no contracts of significance

between any member of the Group

and any of the parties to the

Relationship Agreement, with the

exception of Sir Will Adderley’s

service agreement as a Director of

the Company, the terms of which

are outlined in the Remuneration

Committee report.

There are no restrictions on the

transfer of Ordinary Shares in the

Company other than certain restrictions

imposed by laws and regulations

(such as insider trading and marketing

requirements relating to closed

periods) and requirements of the

Listing Rules whereby Directors and

certain employees of the Company

require Board approval to deal in the

Company’s securities.

Change of control

The Company is not party to any

significant agreements which take

effect, alter or terminate solely on a

change of control of the Company

following a takeover bid.

There are no agreements between

the Company and its Directors or

employees providing for additional

compensation for loss of office

or employment (whether through

resignation, redundancy or otherwise)

that occurs because of a takeover bid.

Details of the rights of employees to

exercise options on a change of control

of the Company are set out in the

Remuneration Policy section of

this report.

Share capital and

treasury shares

The Company has only one class of

shares, Ordinary Shares of 1p each.

As at 1 July 2023, its capital comprised

203,426,835 (2022: 203,426,835) fully

paid Ordinary shares of 1p each.

At the 2022 Annual General Meeting,

shareholders renewed the Directors’

authority to allot shares in the Company.

No shares were allotted during the

year. A resolution to renew the standard

authority will be proposed at the 2023

Annual General Meeting.

At 1 July 2023, the Company held

1,712,790 Ordinary Shares in treasury

(2022: 1,686,200).

During the year ended 1 July 2023 the

Company purchased 908,064 Ordinary

Shares for a total consideration of

£6,969,509 and these shares are held

in treasury with no voting or dividend

rights. 881,474 shares were transferred

to employees who exercised options

under a share incentive scheme or

under the LTIP scheme. Details of

option exercises by Directors are

set out in the Remuneration

Committee report.

Since the financial year end, 16,914

Ordinary Shares have been moved out

of treasury to employees who exercised

options under a share incentive scheme.

Further details on the Company’s share

capital are set out in note 20 to the

financial statements.

Directors’ report continued

Dunelm Group plc Annual Report and Accounts 2023120

GOVERNANCE REPORT

Directors and officers

Details of the Directors of the Company

who served on the Board during the

year can be found on page 60. The

biographies of the Directors on the

Board at the date of this report are

set out on pages 61 to 63. Details of

changes to the Board during the period

are set out on page 62. Details of the

interests of the Directors in shares of the

Company can be found in the Annual

Report on Remuneration on page 108.

On 1 December 2022, Dawn Durrant

stepped down as Company Secretary

and Luisa Wright was appointed.

Powers of Directors

The business of the Company is

managed by the Board, which may

exercise all of the powers of the

Company, subject to the requirements

of the Companies Act, the Articles of

Association of the Company and any

special resolution of the Company.

As stated in the Governance report

on page 66, the Board has adopted

internal delegations of authority in

accordance with the Code and these set

out matters which are reserved to the

Board or Committees and the powers

and duties of the Chair, the Deputy

Chair and the Chief Executive Officer

respectively.

Substantial shareholders

At 1 July 2023 the Company had been notified under the Disclosure and

Transparency Rules (DTR 5) of the following notifiable interests in the Company’s

issued share capital. The information provided below was correct at the date of

notification. These holdings are likely to have changed since the Company was

notified; however, notification of any change is not required until the next notifiable

threshold is crossed. No further notifications have been received since year end.

Ordinary

Percentage of

share capital Date of notification

Sir Will Adderley 76,371,779 37.8 15 February 2021

Jean Adderley 9,968,500 4.92 7 July 2021

abrdn plc 9,565,468 4.74 22 March 2018

JP Morgan Asset Management

Holdings Inc 10,936,894 5.43

11 December

2022

Jupiter Fund Management PLC 10,044,063 4.95 6 January 2022

Royal London Asset

Management Limited 9,907,809 4.91 13 July 2018

Sir Will Adderley is also deemed to hold a legal interest in 967,250 Ordinary Shares

held by the Stoneygate Trust and 172,750 Ordinary Shares held by the Paddocks

Discretionary Trust, by virtue of the fact that he is a trustee of those trusts.

Appointment and removal

of Directors

The Articles of Association of the

Company provide that a Director may

be appointed by ordinary resolution

of the Company’s shareholders in a

general meeting, or by the Board so

long as the Director stands down and

offers him or herself for election at the

next Annual General Meeting of the

Company.

The Board’s policy is that all Directors

are subject to annual re-election and

therefore should stand down and offer

themselves for re-election at each

Annual General Meeting. The Articles

also provide that each Director must

stand down and offer him or herself

for re-election by shareholders at the

Annual General Meeting at least every

three years.

The Nominations Committee makes

recommendations to the Board on the

appointment and removal of Directors.

Directors may be removed by a special

resolution of shareholders, or by an

ordinary resolution of which special

notice has been given in accordance

with the Companies Act 2006. The

Articles also provide that the office of

a Director shall be vacated if they are

prohibited by law from being a Director,

or are declared bankrupt; and that the

Board may resolve that his or her office

be vacated if he or she is of unsound

mind or is absent from Board meetings

without consent for six months or

more. A Director may also resign from

the Board.

Indemnities and insurance

The Company has granted indemnities

to each of its Directors and the

Company Secretary to the extent

permitted by law in respect of costs

of defending claims against them

and third-party liabilities. Deeds of

indemnity in favour of Alison Brittain

and Luisa Wright were entered

into during the year following their

appointments as Non-Executive

Director and Company Secretary

respectively.

All indemnities, the provisions of which

are deemed to be qualifying third-

party indemnity provisions pursuant

to section 234 of the Act, were in

force throughout FY23 (or, in the case

of Alison Brittain and Luisa Wright,

from the date of their respective

appointments and thereafter for the

remainder of FY23) and remain in force

as at the date of this report.

A copy of each indemnity is available for

inspection at the Company’s registered

office during normal business hours

and will be available for inspection

at the Company’s Annual General

Meeting.

The Group maintained Directors’ and

Officers’ liability insurance cover for

its Directors and officers as permitted

under the Articles of the Company and

the Companies Act 2006 throughout

the financial year.

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 121

Directors’ report continued

Managing conflicts of interest

and related-party matters

The Companies Act 2006 allows the

Board of a public company to authorise

conflicts and potential conflicts of

interest of individual Directors where

the Articles of Association contain a

provision to that effect. The Company’s

Articles of Association give the Board

this authority subject to the following

safeguards:

• Directors who have an interest in

matters under discussion at a Board

meeting must declare that interest

and abstain from voting.

• Only Directors who have no interest

in the matter being considered

are able to approve a conflict of

interest and, in taking that decision,

the Directors must act in a way they

consider, in good faith, would be

most likely to promote the success

of the Company.

• The Directors are able to impose

limits or conditions when giving

authorisation if they feel this is

appropriate.

Directors are required to disclose any

actual or potential conflicts of interests

to the Board immediately when they

arise. In addition, a formal process

is undertaken each year when all

Directors confirm to the Board details

of any other directorships and confirm

relevant information in connection with

related parties.

Further to the above, the Board believes

it has effective procedures in place

to monitor and manage conflicts of

interest and ensure that any related

party transactions involving Directors or

their connected persons are conducted

on an arm’s length basis.

Donations

The Group does not make any political

donations.

Public policy

We are members of the British Retail

Consortium and support relevant

campaigning activity by that body.

During the year we have not taken

part in any direct lobbying or public

policy activity.

Articles of association

The Company’s Articles of Association

may only be amended, or new articles

adopted, by a special resolution of

shareholders.

Independent auditors

In accordance with section

489oftheCompaniesAct2006 and

the recommendation oftheAudit

and Risk Committee, aresolution

will be proposed at the2023 AGMto

reappointPricewaterhouseCoopers LLP

as external auditor of the Group.

Important events since

1 July 2023

There have been no important

events affecting the Company or

any subsidiary since 1 July 2023.

Disclaimer

This Directors’ report, Strategic report

and the financial statements contain

certain forward-looking statements

with respect to the financial condition,

results, operations and business of

Dunelm Group plc.

These statements and forecasts

involve risk and uncertainty because

they relate to events and depend

upon circumstances that will occur

in the future. There are a number of

factors that could cause actual results

or developments to differ materially

from those expressed or implied by

these forward-looking statements and

forecasts. Nothing in this Directors’

report, the Strategic report or in

these financial statements should be

construed as a profit forecast.

This document also contains non-

financial information and data. While

reasonable steps have been taken to

ensure that this is correct, it has not

been externally audited or verified

unless specifically stated in this

document.

Annual General Meeting

The Annual General Meeting will

be held at 11:30am on Thursday

16 November 2023 at the Stoke 2

Distribution Centre, White Rock Road,

Prologis Park, Stoke-on-Trent, ST4 4FA.

A formal notice of meeting, explanatory

circular and a form of proxy will

accompany this Annual Report and

financial statements.

This report was reviewed and

signed by order of the Board on

20 September 2023.

Luisa Wright

Company Secretary

20 September 2023

Dunelm Group plc Annual Report and Accounts 2023122

GOVERNANCE REPORT

Statement of Directors’ responsibilities

in respect of the financial statements

The Directors are responsible for

preparing the Annual Report and

Accounts 2023 in accordance with

applicable law and regulation.

Company law requires the Directors

to prepare financial statements for

each financial year. Under that law the

Directors have prepared the Group

financial statements in accordance with

UK-adopted international accounting

standards and the parent company

financial statements in accordance with

United Kingdom Generally Accepted

Accounting Practice (United Kingdom

Accounting Standards, comprising FRS

101 “Reduced Disclosure Framework”,

and applicable law).

Under company law, Directors must

not approve the financial statements

unless they are satisfied that they give a

true and fair view of the state of affairs

of the Group and parent company and

of the profit or loss of the Group for

that period. In preparing the financial

statements, the Directors are

required to:

• select suitable accounting policies

and then apply them consistently;

• state whether applicable UK-

adopted international accounting

standards have been followed for

the Group financial statements

and United Kingdom Accounting

Standards, comprising FRS 101,

have been followed for the parent

company financial statements,

subject to any material departures

disclosed and explained in the

financial statements;

• make judgements and accounting

estimates that are reasonable and

prudent; and

• prepare the financial statements

on the going concern basis unless

it is inappropriate to presume that

the Group and parent company will

continue in business.

The Directors are responsible for

safeguarding the assets of the Group

and parent company and hence

for taking reasonable steps for the

prevention and detection of fraud

and other irregularities.

The Directors are also responsible

for keeping adequate accounting

records that are sufficient to show

and explain the Group’s and parent

company’s transactions and disclose

with reasonable accuracy at any time

the financial position of the Group and

parent company and enable them to

ensure that the financial statements and

the Directors’ Remuneration Report

comply with the Companies Act 2006.

The Directors are responsible for

the maintenance and integrity of the

parent company’s website. Legislation

in the United Kingdom governing

the preparation and dissemination of

financial statements may differ from

legislation in other jurisdictions.

Directors’ confirmations

Each of the Directors, whose names and

functions are listed in the Governance

report confirm that, to the best of their

knowledge:

• the Group financial statements,

which have been prepared in

accordance with UK-adopted

international accounting standards,

give a true and fair view of the assets,

liabilities, financial position and profit

of the Group;

• the parent company financial

statements, which have been

prepared in accordance with United

Kingdom Accounting Standards,

comprising FRS 101, give a true

and fair view of the assets, liabilities

and financial position of the parent

company; and

• the Strategic report includes a fair

review of the development and

performance of the business and

the position of the Group and

parent company, together with a

description of the principal risks

and uncertainties that it faces.

Disclosure of information

to the auditors

Each Director in office at the date on

which the Directors’ report is approved

confirms that:

• so far as the Directors are aware,

there is no relevant audit information

of which the auditor is unaware; and

• the Directors have taken all the steps

that they ought to have taken as

Directors to make themselves aware

of any relevant audit information and

to establish that the auditor is aware

of that information.

Nick Wilkinson

Chief Executive Officer

20 September 2023

GOVERNANCE REPORT

Dunelm Group plc Annual Report and Accounts 2023 123

spread

happiness

Seizing the opportunity

FINANCIAL STATEMENTS

Dunelm Group plc Annual Report and Accounts 2023124

In this section

Independent auditors’ report 126

Consolidated Financial

Statements 132

Parent Company Financial

Statements 164

Other information

Alternative performance

measures (APMs) 172

Advisers and contacts

happiness

Dunelm Group plc Annual Report and Accounts 2023 125

FINANCIAL STATEMENTS

Independent auditors’ report

to the members of Dunelm Group plc

Report on the audit

of the financial

statements

Opinion

In our opinion:

• Dunelm Group plc’s group

financial statements and parent

company financial statements

(the “financial statements”) give

a true and fair view of the state

of the group’s and of the parent

company’s affairs as at 1 July 2023

and of the group’s profit and the

group’s cash flows for the 52 week

period then ended;

• the group financial statements

have been properly prepared

in accordance with UK-adopted

international accounting

standards as applied in

accordance with the provisions of

the Companies Act 2006;

• the parent company financial

statements have been properly

prepared in accordance with

United Kingdom Generally

Accepted Accounting Practice

(United Kingdom Accounting

Standards, including FRS 101

“Reduced Disclosure Framework”,

and applicable law); and

• the financial statements have

been prepared in accordance

with the requirements of the

Companies Act 2006.

We have audited the financial

statements, included within the

Annual Report and Accounts

(the “Annual Report”), which

comprise: the consolidated

statement of financial position

and parent company statement

of financial position as at 1 July

2023; the consolidated income

statement, consolidated statement

of comprehensive income,

consolidated statement of cash

flows, consolidated statement

of changes in equity and parent

company statement of changes in

equity for the period then ended; the

accounting policies; and the notes to

the financial statements.

Our opinion is consistent with our

reporting to the Audit and Risk

Committee.

Basis for opinion

We conducted our audit in accordance

with International Standards on

Auditing (UK) (“ISAs (UK)”) and

applicable law. Our responsibilities

under ISAs (UK) are further described

in the Auditors’ responsibilities for the

audit of the financial statements section

of our report. We believe that the audit

evidence we have obtained is sufficient

and appropriate to provide a basis for

our opinion.

Independence

We remained independent of the

group in accordance with the ethical

requirements that are relevant to our

audit of the financial statements in the

UK, which includes the FRC’s Ethical

Standard, as applicable to listed public

interest entities, and we have fulfilled

our other ethical responsibilities in

accordance with these requirements.

To the best of our knowledge and

belief, we declare that non-audit

services prohibited by the FRC’s Ethical

Standard were not provided.

Other than those disclosed in note 3,

we have provided no non-audit services

to the parent company or its controlled

undertakings in the period under audit.

Our audit approach

Overview

Audit scope

• The group is structured with

one segment which comprises a

consolidation of the parent company

and eight additional components.

• For the purposes of the group

financial statements, we conducted

an audit of the complete financial

information of one financially

significant component, together with

additional procedures performed

centrally including the group

consolidation.

• We separately audited the parent

company financial statements.

Key audit matters

• Inventory provisions (group)

• Recoverability of investments in

subsidiary undertakings (parent)

Materiality

• Overall group materiality:

£9,635,000 (2022: £10,640,000)

based on 5% of profit before tax.

• Overall parent company materiality:

£2,300,000 (2022: £1,600,000) based

on 1% of total assets.

• Performance materiality: £7,225,000

(2022: £8,000,000) (group) and

£1,725,000 (2022: £1,200,000)

(parent company).

The scope of our audit

As part of designing our audit, we

determined materiality and assessed

the risks of material misstatement in the

financial statements.

Key audit matters

Key audit matters are those matters

that, in the auditors’ professional

judgement, were of most significance

in the audit of the financial statements

of the current period and include

the most significant assessed risks

of material misstatement (whether

or not due to fraud) identified by the

auditors, including those which had

the greatest effect on: the overall audit

strategy; the allocation of resources in

the audit; and directing the efforts of

the engagement team. These matters,

and any comments we make on the

results of our procedures thereon, were

addressed in the context of our audit of

the financial statements as a whole, and

in forming our opinion thereon, and we

do not provide a separate opinion on

these matters.

This is not a complete list of all risks

identified by our audit.

Dunelm Group plc Annual Report and Accounts 2023126

FINANCIAL STATEMENTS

The key audit matters below are consistent with last year.

Key audit matter How our audit addressed the key audit matter

Inventory provisions (group)

Refer to the Audit and Risk Committee Report, the

Accounting Policies, Note 3 (Operating Profit) and Note

13 (Inventories) to the Consolidated Financial Statements.

Inventory represents a significant asset on the Group’s

balance sheet and is carried at the lower of cost and net

realisable value (“NRV”). The Group’s accounting policy is

to determine a provision based upon: the historic negative

margin of the type of inventory, by ageing category, which is

calculated by analysing the historic sales price compared to

the cost of inventory, and applying a percentage provision

to each line of inventory; and a further provision for ‘at risk’

lines where the calculated provision was not considered to

be sufficient.

We tested sales made post period-end to assess whether

inventory items were held at the lower of cost and NRV. We

examined inventory write-offs in the financial period to assess

whether they are consistent with the key assumptions used in

the inventory provision model at the year end. We tested the

inputs to the provision calculation, including the classification

of inventory and sales data for each of the ageing categories

from the Buying department, which is segregated from the

Finance department. We tested the average cost of inventory

by agreeing a sample of inputs to source documentation and

testing freight and duty costs. We consider management’s

conclusion that there are no indicators of impairment to be

appropriate. We tested the integrity of the provision model

to ensure that it was using the underlying data correctly and

calculating provision amounts accurately. We challenged

management’s assumptions on what they deemed the ‘at

risk’ inventory lines were, and corroborated whether these

lines were at risk with the Merchandising team. We also

independently challenged the completeness of the ‘at risk’

lines based on our understanding of the nature of the group’s

inventory lines. We found that the NRV provision against

inventory was consistent with the evidence obtained

Recoverability of investments in subsidiary

undertakings (parent)

Refer to note 4 (Investments) to the Parent Company

Financial Statements. In accordance with IAS 36 (Impairment

of assets), the Parent Company’s investments balance of

£68.8m (FY22: £64.8m) should be carried at no more than

its recoverable amount, being the higher of fair value less

costs to sell and its value in use. IAS 36 requires an entity to

determine whether there are indications that an impairment

loss may have occurred and if so, make a formal estimate of

the recoverable amount.

We evaluated whether any indications that an impairment

loss may have occurred in relation to the Parent Company’s

investments balance with specific consideration given to

the following: the market capitalisation of the Group is

significantly in excess of the investments balance, noting that

substantially all of the market capitalisation is considered

to be in relation to one indirect subsidiary (Dunelm (Soft

Furnishings) Ltd) of the Parent Company; the trading

results of Dunelm (Soft Furnishings) Ltd are not worse than

expected and are not expected to be worse in future periods;

and there have not been and are not expected to be any

significant changes with an adverse impact in relation to

the technological, market, economic or legal environment

in which this indirect subsidiary operates. We consider

management’s conclusion that there are no indicators of

impairment to be appropriate.

Dunelm Group plc Annual Report and Accounts 2023 127

FINANCIAL STATEMENTS

Independent auditors’ report continued

How we tailored the audit scope

We tailored the scope of our audit to

ensure that we performed enough

work to be able to give an opinion on

the financial statements as a whole,

taking into account the structure of

the group and the parent company,

the accounting processes and

controls, and the industry in which

they operate.

The group is structured with one

reporting segment which comprises

a consolidation of the parent

company and eight additional

components.

In establishing the overall approach

to the group audit, we identified

one component: Dunelm (Soft

Furnishings) Limited, which, as the

sole trading legal entity in the Group,

required an audit of its complete

financial information due to its

financial significance to the group.

Further specific audit procedures

over central functions including the

Group consolidation, equity and

taxes were performed.

All audit procedures were performed

by the Group Engagement Team.

The scoping above gave us the

evidence we needed for our opinion

on the group financial statements as

a whole.

The Parent Company is comprised of

one component which was subject

to a full scope audit for the purposes

of the Parent Company financial

statements.

The impact of climate risk

on our audit

As part of our audit we made

enquiries of management to

understand the process adopted

to assess the extent of the potential

impact of climate risk on the financial

statements and to support the

disclosures made within the

Annual report.

Our risk assessment was based on enquiry, as well as the review of Dunelm’s

corporate responsibility reporting and climate related commitments. As detailed in

the group accounting policies, management considers that there is no material risk

to the financial statements in respect of climate change.

We challenged, based on our knowledge of the business, the impact of climate risk

on right-of-use assets and property, plant and equipment, which were considered

to be the assets at most risk of the effects of climate change.

We also considered the consistency of the disclosures in relation to climate change

(including the disclosures in the Task Force on Climate-related Financial Disclosures

(TCFD) section) within the Annual Report with the financial statements and our

knowledge obtained from our audit.

Our procedures did not identify any material impact in the context of our audit of

the financial statements as a whole, or our key audit matters for the 52 week period

ended 1 July 2023.

Materiality

The scope of our audit was influenced by our application of materiality. We set

certain quantitative thresholds for materiality. These, together with qualitative

considerations, helped us to determine the scope of our audit and the nature,

timing and extent of our audit procedures on the individual financial statement

line items and disclosures and in evaluating the effect of misstatements, both

individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial

statements as a whole as follows:

Financial statements – group

Financial statements –

parent company

Overall materiality £9,635,000 (2022:

£10,640,000).

£2,300,000 (2022:

£1,600,000).

How we determined it 5% of profit before tax 1% of total assets

Rationale for benchmark

applied

Profit before tax is the

primary measure used

by the shareholders in

assessing the performance

of the group and is a

generally accepted

auditing benchmark.

The parent company does

not trade and therefore

total assets is considered

to be the most appropriate

benchmark.

For each component in the scope of our group audit, we allocated a materiality that

is less than our overall group materiality.

We use performance materiality to reduce to an appropriately low level the

probability that the aggregate of uncorrected and undetected misstatements

exceeds overall materiality. Specifically, we use performance materiality in

determining the scope of our audit and the nature and extent of our testing

of account balances, classes of transactions and disclosures, for example in

determining sample sizes. Our performance materiality was 75% (2022: 75%) of

overall materiality, amounting to £7,225,000 (2022: £8,000,000) for the group

financial statements and £1,725,000 (2022: £1,200,000) for the parent company

financial statements.

Dunelm Group plc Annual Report and Accounts 2023128

FINANCIAL STATEMENTS

In determining the performance

materiality, we considered a number of

factors – the history of misstatements,

risk assessment and aggregation risk

and the effectiveness of controls –

and concluded that an amount at the

upper end of our normal range was

appropriate.

We agreed with the Audit and Risk

Committee that we would report to

them misstatements identified during

our audit above £480,000 (group audit)

(2022: £530,000) and £115,000 (parent

company audit) (2022: £80,000) as well

as misstatements below those amounts

that, in our view, warranted reporting

for qualitative reasons.

Conclusions relating to

going concern

Our evaluation of the directors’

assessment of the group’s and the

parent company’s ability to continue

to adopt the going concern basis of

accounting included:

• We obtained management’s going

concern assessment and ensured

that this was consistent with board

approved budgets;

• We have evaluated management’s

forecasting accuracy based on

historical budgets versus actual

performance;

• We obtained confirmation from

lenders of the level of drawn and

undrawn revolving credit facilities

and tested the actual and forecast

covenant compliance associated

with these facilities;

• We considered the mitigating

actions available to Dunelm to

increase liquidity, if required, with

the key actions being reductions in

stock purchases and capex, as well

as cessation of dividends; and

• We assessed the adequacy of the

going concern disclosures in the

accounting policies.

Based on the work we have performed,

we have not identified any material

uncertainties relating to events

or conditions that, individually or

collectively, may cast significant

doubt on the group’s and the parent

company’s ability to continue as a

going concern for a period of at least

twelve months from when the financial

statements are authorised for issue.

In auditing the financial statements,

we have concluded that the directors’

use of the going concern basis of

accounting in the preparation of the

financial statements is appropriate.

However, because not all future events

or conditions can be predicted, this

conclusion is not a guarantee as to

the group’s and the parent company’s

ability to continue as a going concern.

In relation to the directors’ reporting

on how they have applied the UK

Corporate Governance Code, we

have nothing material to add or draw

attention to in relation to the directors’

statement in the financial statements

about whether the directors considered

it appropriate to adopt the going

concern basis of accounting.

Our responsibilities and the

responsibilities of the directors with

respect to going concern are described

in the relevant sections of this report.

Reporting on other

information

The other information comprises all of

the information in the Annual Report

other than the financial statements

and our auditors’ report thereon. The

directors are responsible for the other

information, which includes reporting

based on the Task Force on Climate-

related Financial Disclosures (TCFD)

recommendations. Our opinion on the

financial statements does not cover

the other information and, accordingly,

we do not express an audit opinion or,

except to the extent otherwise explicitly

stated in this report, any form of

assurance thereon.

In connection with our audit of the

financial statements, our responsibility

is to read the other information and, in

doing so, consider whether the other

information is materially inconsistent

with the financial statements or our

knowledge obtained in the audit, or

otherwise appears to be materially

misstated. If we identify an

apparent material inconsistency

or material misstatement, we are

required to perform procedures

to conclude whether there is a

material misstatement of the

financial statements or a material

misstatement of the other

information. If, based on the work

we have performed, we conclude

that there is a material misstatement

of this other information, we are

required to report that fact. We have

nothing to report based on these

responsibilities.

With respect to the Strategic report

and Directors’ Report, we also

considered whether the disclosures

required by the UK Companies Act

2006 have been included.

Based on our work undertaken in the

course of the audit, the Companies

Act 2006 requires us also to report

certain opinions and matters as

described below.

Strategic report and

Directors’ Report

In our opinion, based on the work

undertaken in the course of the

audit, the information given in the

Strategic report and Directors’

Report for the period ended 1 July

2023 is consistent with the financial

statements and has been prepared

in accordance with applicable legal

requirements.

In light of the knowledge and

understanding of the group

and parent company and their

environment obtained in the course

of the audit, we did not identify

any material misstatements in the

Strategic report and Directors’

Report.

Directors’ Remuneration

In our opinion, the part of the

Remuneration Committee report

to be audited has been properly

prepared in accordance with the

Companies Act 2006.

Dunelm Group plc Annual Report and Accounts 2023 129

FINANCIAL STATEMENTS

Corporate governance

statement

The Listing Rules require us to

review the directors’ statements in

relation to going concern, longer-

term viability and that part of the

corporate governance statement

relating to the parent company’s

compliance with the provisions

of the UK Corporate Governance

Code specified for our review. Our

additional responsibilities with

respect to the corporate governance

statement as other information are

described in the Reporting on other

information section of this report.

Based on the work undertaken as

part of our audit, we have concluded

that each of the following elements

of the corporate governance

statement, included within the

Strategic report and Governance

report is materially consistent with

the financial statements and our

knowledge obtained during the

audit, and we have nothing material

to add or draw attention to in

relation to:

• The directors’ confirmation that

they have carried out a robust

assessment of the emerging and

principal risks;

• The disclosures in the Annual

Report that describe those

principal risks, what procedures

are in place to identify emerging

risks and an explanation of how

these are being managed or

mitigated;

• The directors’ statement in

the financial statements about

whether they considered it

appropriate to adopt the going

concern basis of accounting

in preparing them, and their

identification of any material

uncertainties to the group’s

and parent company’s ability to

continue to do so over a period

of at least twelve months from the

date of approval of the financial

statements;

• The directors’ explanation as to

their assessment of the group’s

and parent company’s prospects,

the period this assessment

covers and why the period is

appropriate; and

• The directors’ statement as to

whether they have a reasonable

expectation that the parent company

will be able to continue in operation

and meet its liabilities as they fall due

over the period of its assessment,

including any related disclosures

drawing attention to any necessary

qualifications or assumptions.

Our review of the directors’ statement

regarding the longer-term viability of

the group and parent company was

substantially less in scope than an audit

and only consisted of making inquiries

and considering the directors’ process

supporting their statement; checking

that the statement is in alignment

with the relevant provisions of the UK

Corporate Governance Code; and

considering whether the statement is

consistent with the financial statements

and our knowledge and understanding

of the group and parent company

and their environment obtained in the

course of the audit.

In addition, based on the work

undertaken as part of our audit, we have

concluded that each of the following

elements of the corporate governance

statement is materially consistent

with the financial statements and our

knowledge obtained during the audit:

• The directors’ statement that they

consider the Annual Report, taken

as a whole, is fair, balanced and

understandable, and provides

the information necessary for the

members to assess the group’s

and parent company’s position,

performance, business model

and strategy;

• The section of the Annual Report that

describes the review of effectiveness

of risk management and internal

control systems; and

• The section of the Annual Report

describing the work of the Audit

and Risk Committee.

We have nothing to report in respect

of our responsibility to report when

the directors’ statement relating to the

parent company’s compliance with

the Code does not properly disclose a

departure from a relevant provision of

the Code specified under the Listing

Rules for review by the auditors.

Responsibilities for the

financial statements and

the audit

Responsibilities of the directors for

the financial statements

As explained more fully in the

Statement of directors’ responsibilities

in respect of the financial statements,

the directors are responsible for the

preparation of the financial statements

in accordance with the applicable

framework and for being satisfied

that they give a true and fair view. The

directors are also responsible for such

internal control as they determine is

necessary to enable the preparation of

financial statements that are free from

material misstatement, whether due to

fraud or error.

In preparing the financial statements,

the directors are responsible for

assessing the group’s and the parent

company’s ability to continue as a going

concern, disclosing, as applicable,

matters related to going concern

and using the going concern basis of

accounting unless the directors either

intend to liquidate the group or the

parent company or to cease operations,

or have no realistic alternative but to

do so.

Auditors’ responsibilities for the

audit of the financial statements

Our objectives are to obtain reasonable

assurance about whether the financial

statements as a whole are free from

material misstatement, whether due to

fraud or error, and to issue an auditors’

report that includes our opinion.

Reasonable assurance is a high level

of assurance, but is not a guarantee

that an audit conducted in accordance

with ISAs (UK) will always detect a

material misstatement when it exists.

Misstatements can arise from fraud

or error and are considered material

if, individually or in the aggregate,

they could reasonably be expected

to influence the economic decisions

of users taken on the basis of these

financial statements.

Irregularities, including fraud, are

instances of non-compliance with laws

and regulations. We design procedures

in line with our responsibilities, outlined

above, to detect material misstatements

Dunelm Group plc Annual Report and Accounts 2023130

FINANCIAL STATEMENTS

Independent auditors’ report continued

in respect of irregularities, including

fraud. The extent to which our

procedures are capable of detecting

irregularities, including fraud, is

detailed below.

Based on our understanding of the

group and industry, we identified that

the principal risks of non-compliance

with laws and regulations related to

employment regulations, and we

considered the extent to which non-

compliance might have a material

effect on the financial statements.

We also considered those laws and

regulations that have a direct impact

on the financial statements such

as the Companies Act 2006 and

taxation. We evaluated management’s

incentives and opportunities for

fraudulent manipulation of the financial

statements (including the risk of

override of controls), and determined

that the principal risks were related

to the posting of journals with

unexpected account combinations,

which manipulate revenue or profits,

and management bias in accounting

estimates and judgements. Audit

procedures performed by the

engagement team included:

• Discussions with management,

internal audit and the Company

Secretary, including consideration

of known or suspected instances

of non-compliance with laws and

regulation and fraud;

• Assessment of matters reported on

the Group’s whistleblowing log;

• Searches for news articles

which would highlight potential

non-compliance with laws and

regulations;

• Identifying and testing journal

entries, in particular journal entries

posted with unusual account

combinations which manipulate

revenue or profits; and

• Challenging assumptions and

judgements made by management in

their significant accounting estimates

and judgements, in particular in

relation to inventory provisions

(see related key audit matter).

There are inherent limitations in the

audit procedures described above.

We are less likely to become aware of

instances of non-compliance with laws

and regulations that are not closely

related to events and transactions

reflected in the financial statements.

Also, the risk of not detecting a

material misstatement due to fraud is

higher than the risk of not detecting

one resulting from error, as fraud may

involve deliberate concealment by,

for example, forgery or intentional

misrepresentations, or through

collusion.

Our audit testing might include testing

complete populations of certain

transactions and balances, possibly

using data auditing techniques.

However, it typically involves selecting

a limited number of items for

testing, rather than testing complete

populations. We will often seek to

target particular items for testing based

on their size or risk characteristics. In

other cases, we will use audit sampling

to enable us to draw a conclusion about

the population from which the sample

is selected.

A further description of our

responsibilities for the audit of the

financial statements is located on the

FRC’s website at: www.frc.org.uk/

auditorsresponsibilities. This description

forms part of our auditors’ report.

Use of this report

This report, including the opinions,

has been prepared for and only for the

parent company’s members as a body

in accordance with Chapter 3 of Part

16 of the Companies Act 2006 and for

no other purpose. We do not, in giving

these opinions, accept or assume

responsibility for any other purpose or

to any other person to whom this report

is shown or into whose hands it may

come save where expressly agreed by

our prior consent in writing.

Other required

reporting

Companies Act 2006

exception reporting

Under the Companies Act 2006 we

are required to report to you if, in

our opinion:

• we have not obtained all the

information and explanations we

require for our audit; or

• adequate accounting records

have not been kept by the parent

company, or returns adequate for

our audit have not been received

from branches not visited by us; or

• certain disclosures of directors’

remuneration specified by law are

not made; or

• the parent company financial

statements and the part of

the Remuneration Committee

report to be audited are not in

agreement with the accounting

records and returns.

We have no exceptions to report

arising from this responsibility.

Appointment

Following the recommendation of

the Audit and Risk Committee, we

were appointed by the members

on 14 January 2014 to audit the

financial statements for the year

ended 28 June 2014 and subsequent

financial periods. The period of total

uninterrupted engagement is ten

years, covering the years ended

28 June 2014 to 1 July 2023.

Other matter

In due course, as required by

the Financial Conduct Authority

Disclosure Guidance and

Transparency Rule 4.1.14R, these

financial statements will form part of

the ESEF-prepared annual financial

report filed on the National Storage

Mechanism of the Financial Conduct

Authority in accordance with the

ESEF Regulatory Technical Standard

(‘ESEF RTS’). This auditors’ report

provides no assurance over whether

the annual financial report will be

prepared using the single electronic

format specified in the ESEF RTS.

Mark Skedgel

(Senior Statutory Auditor)

for and on behalf of

PricewaterhouseCoopers LLP

Chartered Accountants and

Statutory Auditors

Birmingham

20 September 2023

Dunelm Group plc Annual Report and Accounts 2023 131

FINANCIAL STATEMENTS

Consolidated Income Statement

For the 52 weeks ended 1 July 2023

Consolidated Statement of Comprehensive Income

For the 52 weeks ended 1 July 2023

Note

2023

52 weeks

£’m

2022

53 weeks

£’m

Revenue 1,638.8 1,581.4

Cost of sales (817.9) (772.0)

Gross profit 820.9 809.4

Operating costs 2 (622.1) (591.7)

Operating profit 3 198.8 217.7

Financial income 5 1.7 1.2

Financial expenses 5 (7.8) (6.1)

Profit before taxation 192.7 212.8

Taxation 6 (40.8) (41.6)

Profit for the period 151.9 171.2

Earnings per Ordinary Share – basic 8 75.2p 84.5p

Earnings per Ordinary Share – diluted 8 75.0p 83.6p

Note

2023

52 weeks

£’m

2022

53 weeks

£’m

Profit for the period 151.9 171.2

Other comprehensive (expense)/income:

Items that may be subsequently reclassified to profit or loss:

Movement in fair value of cash flow hedges 17 (14.0) 32.4

Deferred tax on hedging movements 12 6.6 (5.3)

Other comprehensive (expense)/income for the period, net of tax (7.4) 27.1

Total comprehensive income for the period 144.5 198.3

Dunelm Group plc Annual Report and Accounts 2023132

FINANCIAL STATEMENTS

Consolidated Statement of Financial Position

As at 1 July 2023

Note

1 July 2023

£’m

2 July 2022

£’m

Non-current assets

Intangible assets 9 5.3 9.9

Property, plant and equipment 10 169.9 173.7

Right-of-use assets 11 231.3 248.5

Deferred tax assets 12 6.9 4.1

Derivative financial instruments — 4.6

Total non-current assets 413.4 440.8

Current assets

Inventories 13 211.0 223.0

Trade and other receivables 14 24.3 22.9

Current tax asset — 1.1

Derivative financial instruments 1.8 19.9

Cash and cash equivalents 15 46.3 30.2

Total current assets 283.4 297.1

Total assets 696.8 737.9

Current liabilities

Trade and other payables 16 (208.1) (223.2)

Lease liabilities 11 (53.4) (52.8)

Current tax liability (0.2) —

Derivative financial instruments (7.9) —

Total current liabilities (269.6) (276.0)

Non-current liabilities

Bank loans 18 (75.9) (52.8)

Lease liabilities 11 (204.8) (225.3)

Provisions 19 (5.9) (5.5)

Derivative financial instruments (3.1) —

Total non-current liabilities (289.7) (283.6)

Total liabilities (559.3) (559.6)

Net assets 137.5 178.3

Equity

Issued share capital 20 2.0 2.0

Share premium account 1.7 1.7

Capital redemption reserve 43.2 43.2

Hedging reserve (6.9) 20.2

Retained earnings 97.5 111.2

Total equity attributable to equity holders of the Parent 137.5 178.3

The financial statements on pages 132 to 163 were approved by the Board of Directors on 20 September 2023 and were

signed on its behalf by:

Karen Witts

Chief Financial Officer

20 September 2023

Dunelm Group plc Annual Report and Accounts 2023 133

FINANCIAL STATEMENTS

Note

2023

52 weeks

£’m

2022

53 weeks

£’m

Cash flows from operating activities

Profit before taxation 192.7 212.8

Net financial expense 5 6.1 4.9

Operating profit 198.8 217.7

Depreciation and amortisation of property, plant and equipment and

intangible assets 3 29.8 30.5

Depreciation of right-of-use assets 3 49.3 48.6

Loss on disposal and impairment of property, plant and equipment and

intangible assets 3 0.3 0.3

Gain on disposal and impairment of right-of-use assets 3 — (0.1)

Share-based payments expense 4.8 4.8

Operating cash flows before movements in working capital 283.0 301.8

Decrease/(increase) in inventories 12.0 (40.3)

Increase in trade and other receivables (1.6) (7.7)

(Decrease)/increase in trade and other payables (14.6) 33.2

Net movement in working capital (4.2) (14.8)

Tax paid (38.2) (35.2)

Net cash generated from operating activities 240.6 251.8

Cash flows from investing activities

Acquisition of intangible assets (0.4) (0.7)

Acquisition of property, plant and equipment (21.4) (23.3)

Acquisition of business combination — (17.7)

Interest received 1.1 0.1

Net cash used in investing activities (20.7) (41.6)

Cash flows from financing activities

Proceeds from issue of treasury shares and Ordinary Shares 21 2.4 3.9

Purchase of treasury shares 21 (7.0) (28.3)

Drawdowns on Revolving Credit Facility 139.0 85.0

Repayments of Revolving Credit Facility (116.0) (31.0)

Interest paid and loan transaction costs (2.2) (2.2)

Interest paid on lease liabilities 11 (5.3) (4.8)

Repayment of principal element of lease liabilities (52.0) (50.2)

Ordinary dividends paid 7 (163.3) (282.1)

Net cash used in financing activities (204.4) (309.7)

Net increase/(decrease) in cash and cash equivalents 15.5 (99.5)

Foreign exchange revaluations 5 0.6 1.1

Cash and cash equivalents at the beginning of the period 15 30.2 128.6

Cash and cash equivalents at the end of the period 15 46.3 30.2

Consolidated Statement of Cash Flows

For the 52 weeks ended 1 July 2023

Dunelm Group plc Annual Report and Accounts 2023134

FINANCIAL STATEMENTS

Note

Issued share

capital

£’m

premium

account

£’m

Capital

redemption

reserve

£’m

Hedging

reserve

£’m

Retained

earnings

£’m

Total equity

attributable

to equity

holders of

the Parent

£’m

As at 27 June 2021 2.0 1.6 43.2 (4.3) 238.7 281.2

Profit for the period — — — — 171.2 171.2

Movement in fair value of cash flow hedges 17 — — — 32.4 — 32.4

Deferred tax on hedging movements 12 — — — (5.3) — (5.3)

Total comprehensive income for the period — — — 27.1 171.2 198.3

Proceeds from issue of shares 20 — 0.1 — — — 0.1

Proceeds from issue of treasury shares 21 — — — — 3.9 3.9

Purchase of treasury shares 21 — — — — (28.3) (28.3)

Share-based payments 22 — — — — 4.8 4.8

Deferred tax on share-based payments 12 — — — — 0.8 0.8

Current tax on share options exercised — — — — 2.2 2.2

Movement on cash flow hedges

transferred to inventory 17 — — — (2.6) — (2.6)

Ordinary dividends paid 7 — — — — (282.1) (282.1)

Total transactions with owners, recorded

directly in equity — 0.1 — (2.6) (298.7) (301.2)

As at 2 July 2022 2.0 1.7 43.2 20.2 111.2 178.3

Profit for the period — — — — 151.9 151.9

Movement in fair value of cash flow hedges 17 — — — (14.0) — (14.0)

Deferred tax on hedging movements 12 — — — 6.6 — 6.6

Total comprehensive income for the period — — — (7.4) 151.9 144.5

Proceeds from issue of treasury shares 21 — — — — 2.4 2.4

Purchase of treasury shares 21 — — — — (7.0) (7.0)

Share-based payments 22 — — — — 4.8 4.8

Deferred tax on share-based payments 12 — — — — (3.1) (3.1)

Current tax on share options exercised — — — — 0.6 0.6

Movement on cash flow hedges

transferred to inventory 17 — — — (19.7) — (19.7)

Ordinary dividends paid 7 — — — — (163.3) (163.3)

Total transactions with owners, recorded

directly in equity — — — (19.7) (165.6) (185.3)

As at 1 July 2023 2.0 1.7 43.2 (6.9) 97.5 137.5

Consolidated Statement of Changes in Equity

For the 52 weeks ended 1 July 2023

Dunelm Group plc Annual Report and Accounts 2023 135

FINANCIAL STATEMENTS

General information

The Group financial statements

consolidate those of Dunelm Group

plc (‘the Company’) and its subsidiaries

(together referred to as ‘the Group’).

The Company financial statements on

pages 164 to 171 present information

about the Company as a separate

entity and not about its Group.

Dunelm Group plc and its subsidiaries

are incorporated and domiciled in

the UK. Dunelm Group plc is a listed

public company, limited by shares and

the Company registration number

is 04708277. The registered office

is Dunelm Store Support Centre,

Watermead Business Park, Syston,

Leicester, Leicestershire, England,

LE7 1AD.

The primary business activity of the

Group is the sale of homewares in the

UK in stores and online.

Basis of preparation

The financial statements presented

cover a 52-week trading period for

the financial period ended 1 July 2023

(2022: 53-week period ended

2 July 2022).

The financial statements of Dunelm

Group plc have been prepared

in accordance with UK-adopted

International Accounting Standards

and with the requirements of the

Companies Act 2006 as applicable

to companies reporting under those

standards. These financial statements

are presented on pages 132 to 163.

The accounting policies set out below

have, unless otherwise stated, been

applied consistently to all periods

presented in these Group financial

statements.

The annual financial statements are

prepared under the historical cost

convention except for financial assets

and financial liabilities (including

derivative financial instruments and

share-based payments), which have

been stated at fair value. The financial

statements are prepared in pounds

sterling, rounded to the nearest

0.1million.1 million.

Going concern

At the time of approving the financial

statements, the Board of Directors is

required to formally assess that the

business has adequate resources to

continue in operational existence and

as such can continue to adopt the

‘going concern’ basis of accounting.

To support this assessment, the Board

is required to consider the Group’s

current financial position, its

strategy, the market outlook,

and its principal risks.

The key judgement that the Directors

have considered in forming their

conclusion is the potential impact on

future revenue, profits and cash flows

of a downturn in consumer spending

away from homewares, due to the

current economic environment. This

scenario might result in no growth

in Year 1 and lower sales and margin

across all channels throughout the

five-year review period. They have

also considered a deeper downturn

in consumer spending away from

homewares, resulting in negative

growth in Year 1 and lower sales and

margin across all channels throughout

the review period.

In both downside scenarios Dunelm

has sufficient liquidity to continue

trading, including maintaining the

payment of dividends in line with its

dividend policy, and to comfortably

meet its financial covenants. The

Directors continue to assess the

risks that climate change poses to

the business and climate change is

not expected to have a significant

impact on the Group’s going concern

assessment or on the viability of the

Group over the next five years.

Reverse stress modelling has

demonstrated that a prolonged sales

reduction of 23% in FY24 and 28% in

FY25 is required to breach covenants

by the end of FY25 and a reduction of

47% in both FY24 and FY25 is required

to breach the RCF limit by the end of

FY25, assuming reasonable mitigating

actions have been implemented.

Even in such an event, management

would follow a similar course of

action to that initially undertaken

during the recent Covid-19 pandemic.

Such actions could include further

reductions in discretionary spend

(e.g. marketing and travel) and capital

investment in new stores and refits,

and reducing headcount.

As a result, the Board believes that

the Group is well placed to manage

its financing and other significant risks

satisfactorily and that the Group will be

able to operate within the level of its

facilities and meet its liabilities as they

fall due, for at least the next five years.

For this reason, the Board considers it

appropriate for the Group to adopt the

going concern basis in preparing its

financial statements.

Further detail in respect of the

Directors’ going concern assessment

is included in the going concern

statement on page 55.

Further information regarding the

Group’s business activities, together

with the factors likely to affect its

future development, performance

and position is set out in the Strategic

Report on pages 1 to 55. In addition,

note 17 includes the Group’s

objectives, policies, and processes

for managing its capital, its financial

risk management objectives and

its exposures to credit risk and

liquidity risk.

Use of estimates and

judgements

Based on the IAS 1 definitions, there

are no significant estimates or critical

judgements used in the Financial

Statements. The inventory provision is

not considered a significant estimate

as there is not a significant risk of a

material adjustment to the level of

the provision in the next 12 months.

Management does, however, consider

the inventory provision to be a key

estimate as it is based on assumptions

relating to a highly material balance

(gross inventory) and is subject to

uncertainty. It is therefore disclosed as

an other estimate in line with IAS 1.

Consolidated Accounting Policies

For the 52 weeks ended 1 July 2023

Dunelm Group plc Annual Report and Accounts 2023136

FINANCIAL STATEMENTS

Inventory provisions

The Group provides against the

carrying value of the inventories

held where it is anticipated that net

realisable value (NRV) will be below

cost. NRV is based on estimated selling

price with future price reductions

assumed to be in line with historic

margin analysis on a line-by-line

basis and applied to the inventory

population as deemed appropriate

given the expected sell through period

and discontinuation status. A 100 basis

points change in the provision rate of

each stock discontinuation category

would lead to a change in the provision

of £1.9m (2022: £2.0m). Consideration

is also given to whether any stock

categories require additional provision

due to specific circumstances in place

at the period end date.

Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by

the Company. The financial statements

of subsidiaries are included in the

Consolidated Financial Statements

from the date that control commences

until the date that control ceases.

Transactions eliminated on

consolidation

Intra-group balances, and any

unrealised gains and losses or income

and expenses arising from intra-

group transactions, are eliminated in

preparing the Consolidated Financial

Statements. Consistent accounting

policies have been adopted across

the Group.

Revenue

Revenue is generated from the sale

of homewares and related goods

and services through the Group’s

stores and website, excluding sales

between Group companies, and is

after deducting returns, relevant

discounts and VAT. Revenue is

recognised when the Group has

satisfied its performance obligations

to its customers and the customer has

obtained control of the goods and

services being transferred.

In general, these conditions for store

sales are met at the point of sale. The

exceptions to this are custom-made

products and Click & Collect sales,

where revenue is recognised at the

point that the goods are collected,

and gift cards, where revenue is

deferred and subsequently recognised

when redeemed or expired. Gift card

obligations are recognised as deferred

income as shown in note 16. An

estimate of breakage is made on the

sale of gift cards based on historical

data and recognised at the point of

sale of the card. Revenue on home

delivery sales is recognised at the

point of delivery. Revenue is settled

in cash at the point of sale for all

revenue channels.

The Group has two types of products;

stocked products and products

which are sent directly from suppliers

to customers. Management has

established that the Group acts as a

principal for both types of products

and thus should recognise revenue as

the gross amount of consideration to

which it expects to be entitled.

The Group holds a sales return

provision in the Consolidated

Statement of Financial Position to

provide for expected levels of returns

on sales made before the period end

but returned after the period end. The

Group recognises the expected value

of revenue relating to returns within

sales provisions and the expected value

of cost of sales relating to the returned

items is included within inventories.

Expenses

Financial income and expenses

comprise interest payable on

borrowings calculated using the

effective interest method, interest

receivable on funds invested and

related foreign exchange gains

and losses.

Retirement benefits

The Group operates a defined

contribution pension plan using a

third-party provider. Obligations

for the contributions to this plan are

recognised as an expense in the

Consolidated Income Statement

as incurred.

Share-based payments

The Group operates a number

of equity-settled, share-based

compensation plans, under which

the entity receives services from

employees as consideration for

equity instruments (options) of the

Group. The fair value of the employee

services received in exchange for the

grant of the options is recognised as

an expense. The total amount to be

expensed is determined by reference

to the fair value of the options granted:

• Including any market performance

condition (for example, an entity’s

share price);

• Excluding the impact of any service

and non-market performance

vesting conditions (for example,

profitability, sales growth targets

and remaining an employee of the

entity over a specified time period);

and

• Including the impact of any non-

vesting conditions (for example, the

requirement for employees to save).

Non-market performance and service

conditions are included in assumptions

about the number of options that are

expected to vest. The total expense is

recognised over the vesting period,

which is the period over which all of

the specified vesting conditions are

to be satisfied.

In addition, in some circumstances

employees may provide services

in advance of the grant date and

therefore the grant date fair value

is estimated for the purposes of

recognising the expense during

the period between service

commencement period and

grant date.

At the end of each reporting period,

the Group revises its estimates of the

number of options that are expected to

vest based on the non-market vesting

conditions. It recognises the impact of

the revision to original estimates, if any,

in the Consolidated Income Statement,

with a corresponding adjustment

to equity.

Dunelm Group plc Annual Report and Accounts 2023 137

FINANCIAL STATEMENTS

When options are exercised, the

Company either issues new shares,

or uses treasury shares purchased for

this purpose. For newly issued shares,

the proceeds received net of any

directly attributable transaction costs

are credited to share capital (nominal

value) and the share premium account.

Social security contributions payable

in connection with the grant of the

share options are considered an

integral part of the grant itself, and the

charge will be treated as a cash-settled

transaction.

Foreign currencies

Transactions in foreign currencies

are recorded at the prevailing rate at

the date of the transaction. Monetary

assets and liabilities denominated

in foreign currency are translated at

the rates ruling at the Consolidated

Statement of Financial Position date.

Resulting exchange gains or losses

are recognised in the Consolidated

Income Statement for the period in

financial income and expenses, except

when deferred as qualifying cash

flow hedges.

Taxation

Tax on the profit or loss for the period

comprises current and deferred tax.

Tax is recognised in the Consolidated

Income Statement except to the extent

that it relates to items recognised

directly in equity, in which case it is

recognised in equity.

Current tax represents the expected

tax payable on the taxable income for

the period, using tax rates enacted

or substantively enacted at the

Consolidated Statement of Financial

Position date, together with any

adjustment to tax payable in respect

of previous periods.

Deferred tax is provided using the

Statement of Financial Position liability

method, providing for temporary

differences between the carrying

amounts of assets and liabilities for

financial reporting purposes and the

amounts used for taxation purposes.

Deferred tax is determined using

tax rates (and laws) that have been

enacted or substantively enacted

at the Consolidated Statement

of Financial Position date and are

expected to apply when the related

deferred tax asset is realised, or the

deferred tax liability is settled.

A deferred tax asset is recognised

only to the extent that it is probable

that future taxable profits will be

available against which the asset can

be recognised.

Deferred income tax assets and

liabilities are offset when there is a

legally enforceable right to offset

current tax assets against current

tax liabilities and when they relate

to income taxes levied by the same

taxation authority on either the taxable

entity or different taxable entities

where there is an intention to settle the

balances on a net basis.

Dividends

Dividends are recognised as a

liability in the period in which they

are approved such that the Group is

obligated to pay the dividend.

Intangible assets

Intangible assets comprise software

development, licences, rights to

brands and customer lists and are

stated at cost less accumulated

amortisation and impairment. Costs

incurred in developing the Group’s

own brands are expensed as incurred.

Separately acquired brands

and customer lists are shown at

historical cost. Software, brands and

customer lists acquired in a business

combination are recognised at fair

value at the acquisition date. These

assets are deemed to have a finite

useful life and are carried at cost

less accumulated amortisation.

Amortisation is calculated using the

straight-line method to allocate the

cost over the estimated useful life.

Acquired computer software licences

are capitalised on the basis of the costs

incurred to acquire and bring to use

the specific software. These costs are

amortised over their estimated

useful lives.

Costs associated with maintaining

computer software programmes are

recognised as an expense as incurred.

Development costs that are directly

attributable to the design and testing

of identifiable and unique software

products controlled by the Group are

recognised as intangible assets when

the following criteria are met:

• It is technically feasible to complete

the software product so that it will

be available for use;

• Management intends to complete

the software product and use or

sell it;

• There is an ability to use or sell the

software product;

• It can be demonstrated how the

software product will generate

probable future economic benefits;

• Adequate technical, financial and

other resources to complete the

development and to use or sell the

software product are available; and

• The expenditure attributable

to the software product during

its development can be reliably

measured.

Other development expenditures

that do not meet these criteria are

recognised as an expense as incurred.

Computer software development costs

recognised as assets are amortised

over their estimated useful lives.

Amortisation

Amortisation is charged to the

Consolidated Income Statement on a

straight-line basis over the estimated

useful life of the asset. These are as

follows:

Software development

and licences 3 to 5 years

Rights to brands and

customer lists 5 to 15 years

Consolidated Accounting Policies continued

Dunelm Group plc Annual Report and Accounts 2023138

FINANCIAL STATEMENTS

Property, plant

and equipment

Owned assets

Items of property, plant and equipment

are stated at historical cost less

accumulated depreciation and

impairment losses. Cost includes the

original purchase price of the asset

and the costs attributable to bringing

the asset to its working condition for

intended use.

Where parts of an item of property,

plant and equipment have different

useful lives, they are accounted for as

separate items of property, plant and

equipment.

Depreciation

Depreciation is charged to the

Consolidated Income Statement on a

straight-line basis over the estimated

useful lives of each part of an item of

property, plant and equipment, to

write down the cost to its estimated

residual value. Land is not depreciated.

The estimated useful lives are as

follows:

Freehold buildings 50 years

Leasehold

improvements

over the

remaining period

of the lease,

or useful life

if shorter

Fixtures, fittings,

and equipment

3 to 5 years

The assets’ residual values and useful

lives are reviewed and adjusted

if appropriate at the end of each

reporting period. An asset’s carrying

amount is written down immediately

to its recoverable amount if the asset’s

carrying amount is greater than its

estimated recoverable amount.

Leases

Lease recognition

At the inception of a contract, the

Group assesses whether a contract

is, or contains, a lease. A contract is,

or contains, a lease if it conveys the

right to control the use of an identified

asset for a period of time in exchange

for consideration. To assess whether

a contract conveys the right to control

the use of an identified asset, the

Group uses the definition of a lease

in IFRS 16.

Right-of-use assets

The Group recognises right-of-use

assets at the commencement date

of the lease. Right-of-use assets are

measured at cost, less accumulated

depreciation and impairment losses

and adjusted for any remeasurement

of lease liabilities. The cost of right-

of-use assets includes the amount of

lease liabilities recognised, adjusted

for any lease payments made at or

before the commencement date, less

any lease incentives received. Right-

of-use assets are depreciated over

the shorter of the asset’s useful life or

the lease term on a straight-line basis.

Right-of-use assets are subject to, and

reviewed regularly for, impairment.

Depreciation of right-of-use assets

is included in operating costs in the

Consolidated Income Statement.

Lease liabilities

At the commencement date of the

lease, the Group recognises lease

liabilities measured at the present

value of the lease payments to be

made over the lease term. Lease

payments include fixed payments less

any lease incentives receivable.

In calculating the present value of

lease payments, the Group uses its

incremental borrowing rate at the

lease commencement date if the

interest rate implicit in the lease

is not readily determinable. The

carrying amount of lease liabilities is

remeasured if there is a modification,

a change in the lease term or a change

in the fixed lease payments. Interest

charges are included in finance costs in

the Consolidated Income Statement.

Short-term leases and leases

of low-value assets

The Group has elected not to

recognise right-of-use assets and

lease liabilities for short-term leases of

machinery and equipment that have a

lease term of less than 12 months and

leases of low-value assets (defined

as assets with a value, when new,

of £5,000 or less). Lease payments

relating to short-term leases and leases

of low-value assets are recognised

as an expense on a straight-line basis

over the lease term.

Subsequent measurement

The lease liability and right-of-use

asset is subsequently remeasured to

reflect changes in:

• The lease term (using a revised

discount rate);

• The assessment of a purchase

option (using a revised discount

rate); and

• Future lease payments resulting

from a change in an index, or a rate

used to determine those payments

(using an unchanged discount rate).

Lease modifications may also prompt

remeasurement of the lease liability

unless they are determined to be

separate leases.

The payments related to leases are

presented under cash flow from

financing activities in the Consolidated

Cash Flow Statement.

Financial instruments

Recognition and measurement

At initial recognition, the Group

measures a financial asset at its fair

value plus, in the case of a financial

asset not at fair value through profit or

loss (FVPL), transaction costs that are

directly attributable to the acquisition

of the financial asset. Transaction costs

of financial assets carried at FVPL are

expensed in the Consolidated Income

Statement.

Financial assets with embedded

derivatives are considered in their

entirety when determining whether

their cash flows are solely payment

of principal and interest.

Dunelm Group plc Annual Report and Accounts 2023 139

FINANCIAL STATEMENTS

Subsequent measurement of debt

instruments depends on the Group’s

business model for managing the asset

and the cash flow characteristics of

the asset. There are two measurement

categories into which the Group

classifies its debt instruments:

• Amortised cost: Assets that are

held for collection of contractual

cash flows where those cash flows

represent solely payments of

principal and interest are measured

at amortised cost. Interest income

from these financial assets is

included in finance income

using the effective interest rate

method. Any gain or loss arising

on derecognition is recognised

directly in the Consolidated Income

Statement and presented in other

gains/(losses) together with foreign

exchange gains and losses.

• FVPL: All other financial assets

that do not meet the criteria for

amortised cost are measured at

FVPL, unless the Group has made

an irrevocable election at the time

of initial recognition to account for

the equity investment at fair value

through other comprehensive

income (FVOCI). A gain or loss

on a debt investment that is

subsequently measured at FVPL

is recognised in the Consolidated

Income Statement in the period in

which it arises.

Impairment of financial assets

The Group uses a forward-looking

approach to assess the expected

credit losses associated with its debt

instruments carried at amortised cost.

The impairment methodology applied

depends on whether there has been a

significant increase in credit risk.

Derivatives

Derivative financial instruments

used are forward foreign exchange

contracts. These are measured at fair

value. The fair values are determined

by reference to the market prices

available from the market on which the

instruments are traded.

Certain derivative financial instruments

are designated as hedges in line

with the Group’s treasury policy.

These are instruments that hedge

exposure to variability in cash flows

that is attributable to a particular risk

associated with a highly probable

forecasted transaction.

Any gains or losses arising from

changes in fair value derivative

financial instruments not designated

as hedges are recognised in the

Consolidated Income Statement.

The effective portion of changes in

the fair value of derivatives that are

designated and qualify as cash flow

hedges is recognised in the cash flow

hedge reserve within equity. The

gain or loss relating to the ineffective

portion is recognised immediately in

the Consolidated Income Statement,

within operating costs.

When option contracts are used to

hedge forecast transactions, the

Group designates only the intrinsic

value of the options as the hedging

instrument.

Gains or losses relating to the effective

portion of the change in intrinsic

value of the options and time value of

options are recognised in the cash flow

hedge reserve within equity.

When forward contracts are used

to hedge forecast transactions, the

Group designates the full change

in fair value of the forward contract

(including forward points) as the

hedging instrument. The gains or

losses relating to the effective portion

of the change in fair value of the entire

forward contract are recognised in the

cash flow hedge reserve within equity.

Amounts accumulated in equity are

reclassified in the periods when the

hedged item affects profit or loss.

Where the hedged item subsequently

results in the recognition of a non-

financial asset (such as inventory), both

the deferred hedging gains and losses

and the deferred time value of the

option contracts or deferred forward

points, if any, are included within the

initial cost of the asset. The deferred

amounts are ultimately recognised in

the Consolidated Income Statement as

the hedged item affects profit or loss

(for example, through cost of sales).

When a hedging instrument expires, or

is sold or terminated, or when a hedge

no longer meets the criteria for hedge

accounting, any cumulative deferred

gain/loss and deferred costs of

hedging in equity at that time remain

in equity until the forecast transaction

occurs, resulting in the recognition of

a non-financial asset such as inventory.

When the forecast transaction is

no longer expected to occur, the

cumulative gain/loss and deferred

costs of hedging that were reported in

equity are immediately reclassified to

the Consolidated Income Statement.

Offsetting financial instruments

Financial assets and liabilities are

offset, and the net amount reported

in the Consolidated Statement of

Financial Position when there is a

legally enforceable right to offset

the recognised amounts and there

is an intention to settle on a net

basis or realise the asset and settle

the liability simultaneously. The

legally enforceable right must not be

contingent on future events and must

be enforceable in the normal course

of business and in the event of default,

insolvency or bankruptcy of the Group

or the counterparty.

Trade and other receivables

Trade and other receivables are

initially recognised at fair value and

then carried at amortised cost using

the effective interest method, net of

impairment provisions.

Inventories

Inventories are stated at the lower of

cost and net realisable value. Cost is

derived using the average cost method

and includes costs incurred in bringing

the inventories to their present location

and condition. Net realisable value is

the estimated selling price less cost to

sell in the ordinary course of business.

Provisions are made for obsolete, slow-

moving or discontinued stock and for

stock losses.

Consolidated Accounting Policies continued

Dunelm Group plc Annual Report and Accounts 2023140

FINANCIAL STATEMENTS

Cash and cash equivalents

Cash and cash equivalents comprise

cash balances including credit card

receipts and deposits. All cash

equivalents have an original maturity

of three months or less.

Trade and other payables

Trade and other payables are

recognised initially at their fair value

and subsequently measured at

amortised cost using the effective

interest rate method.

Bank borrowings and

borrowing costs

Interest-bearing bank loans are

initially recorded at their fair value

and subsequently held at amortised

cost. Transaction costs incurred are

amortised over the term of the loan.

Borrowings are classed as current

liabilities unless the Group has an

unconditional right to defer settlement

of the liability for at least 12 months

from the Consolidated Statement of

Financial Position date.

Impairment of

non-financial assets

The carrying amounts of the Group’s

assets are reviewed annually at each

Consolidated Statement of Financial

Position date to determine whether

there is any indication of impairment.

If any such indication exists, the asset’s

recoverable amount is estimated.

The recoverable amount is the greater

of fair value less costs of disposal

and value in use. In assessing value in

use, the estimated future cash flows

are discounted to their present value

using a pre-tax discount rate that

reflects current market assessments

of the time-value of money and the

risks specific to the asset. For an

asset that does not generate largely

independent cash inflows, the

recoverable amount is determined for

assets grouped at the lowest levels for

which there are largely independent

cash flows, i.e. the cash-generating

unit to which the asset belongs.

An impairment loss is recognised

whenever the carrying amount of

an asset or its cash-generating unit

exceeds the recoverable amount. A

cash-generating unit has been defined

as an individual store or the online

business. If an impairment loss is

identified for a cash-generating unit,

the loss shall be allocated to reduce

the carrying amount of the assets

of the unit pro-rated on the basis of

the carrying amount of each asset in

the unit for both property, plant and

equipment and right-of-use assets.

Impairment losses are recognised in

the Consolidated Income Statement.

Share capital

Where the Group purchases its own

equity share capital (treasury shares),

the consideration paid, including

any directly attributable incremental

costs, is deducted from equity

attributable to the Group’s equity

holders until the shares are cancelled

or reissued. Where such shares are

subsequently sold or reissued, any

consideration received net of any

directly attributable incremental

transaction costs and the related

income tax effects, is included in

equity attributable to the Group’s

equity holders.

Provisions

A provision is recognised in the

Consolidated Statement of Financial

Position when the Group has a current

legal or constructive obligation

as a result of a past event and it is

probable that an outflow of economic

benefits will be required to settle the

obligation, and the amount has been

reliably measured.

A provision for onerous contracts is

recognised when the expected benefit

to be derived by the Group from a

contract is lower than the unavoidable

costs of meeting its obligations under

the contract.

A dilapidations provision is recognised

when there is an expectation of future

obligations relating to the maintenance

of leasehold properties arising from

events such as lease renewals or

terminations.

Climate change

Climate change risks including the

impact of achieving the Group’s

carbon emissions reduction targets

and the risks identified in the TCFD

disclosures on pages 40 to 47 have

been considered and assessed in

the preparation of the Consolidated

Financial Statements for the period to

1 July 2023.

There has been no material impact

identified on the financial reporting

judgements and estimates applied

in the preparation of the Group’s

Consolidated Financial Statements as a

result of climate change risks.

Given that the identified risks of

climate change are expected to be

present in the medium to long term

our focus has been on the non-current

assets within the Consolidated

Statement of Financial Position.

Specifically, for the material non-

current assets, we note the following:

• The plant, property and equipment,

and the right-of-use assets have

relatively short useful lives (the

average remaining lease term of our

leasehold land and buildings is 5.0

years (2022: 5.2 years)). The longer

life assets relate to freehold stores

and our head office, none of which

are located in areas identified as

being at significant risk to climate

change.

• The intangible assets, which consist

of a brand, internally generated and

other software, have a useful life of

3 to 5 years and therefore we would

not expect the identified risks to

impact these assets.

The other non-current assets were also

reviewed, and no risk was identified.

Current assets, by their nature, are

expected to be fully utilised within

the business in the short term and no

climate risk has been identified in this

time horizon.

Dunelm Group plc Annual Report and Accounts 2023 141

FINANCIAL STATEMENTS

New standards and

interpretations

The Group has applied the following

new standards and interpretations for

the first time for the annual reporting

period commencing 3 July 2022:

• Amendments to IAS 37: Onerous

Contracts – Cost of Fulfilling a

Contract.

• Amendments to IFRS 3: Reference

to the Conceptual Framework.

• Amendments to IAS 16: Property,

Plant and Equipment – Proceeds

before Intended Use.

• Annual Improvements to IFRS

Standards 2018-2020 Cycle:

Amendments to IFRS 1 First-time

Adoption of International Financial

Reporting Standards, IFRS 9

Financial Instruments, IFRS 16

Leases and IAS 41 Agriculture.

The adoption of the standards and

interpretations listed above has not

led to any changes to the Group’s

accounting policies or had any other

material impact on the financial

position or performance of the Group.

New accounting standards in

issue but not yet effective

New standards and interpretations that

are in issue, but not yet effective, are

listed below:

• IFRS 17 Insurance Contracts.

• Amendments to IAS 1: Classification

of Liabilities as Current or Non-

Current.

• Amendments to IAS 1 and IFRS

Practice Statement 2: Disclosure of

Accounting Policies.

• Amendments to IAS 8: Definition of

Accounting Estimates.

• Amendments to IAS 12: Deferred

Tax Related to Assets and Liabilities

arising from a Single Transaction.

• Amendments to IFRS 10 and IAS

28: Sale or Contribution of Assets

between an Investor and its

Associate or Joint Venture.

The adoption of the above standards

and interpretations is not expected

to lead to any changes to the Group’s

accounting policies nor have any

other material impact on the financial

position or performance of the Group.

Consolidated Accounting Policies continued

Dunelm Group plc Annual Report and Accounts 2023142

FINANCIAL STATEMENTS

1. Revenue

The Group has one reportable segment, in accordance with IFRS 8 Operating Segments, which is the retail of homewares in

the UK.

Customers access the Group’s offer across multiple channels and their journey often involves more than one channel.

Therefore, internal reporting focuses on the Group as a whole and does not identify individual segments.

The Chief Operating Decision-maker is the Executive Board of Directors of Dunelm Group plc. The Executive Board reviews

internal management reports on a monthly basis and performance is assessed based on a number of financial and non-

financial KPIs as well as on profit before taxation. The list of our financial and non-financial KPIs can be found on pages

20 to 21.

Management believes that these measures are the most relevant in evaluating the performance of the Group and for making

resource allocation decisions.

All material operations of the Group are carried out in the UK. The Group’s revenue is driven by the consolidation of

individual small value transactions and as a result, Group revenue is not reliant on a major customer or group of customers.

At the year end the Group had £13.8m (2022: £12.2m) of sales orders placed that will be recognised in the Consolidated

Income Statement when the goods are despatched in the following financial year.

2. Operating costs

2023

52 weeks

£’m

2022

53 weeks

£’m

Selling and distribution costs 489.7 469.4

Administrative expenses 132.4 122.3

622.1 591.7

3. Operating profit

Operating profit is stated after charging/(crediting) the following items:

2023

52 weeks

£’m

2022

53 weeks

£’m

Cost of inventories included in cost of sales 803.4 765.3

Amortisation of intangible assets 4.6 6.2

Depreciation of owned property, plant and equipment 25.2 24.3

Depreciation of right-of-use assets 49.3 48.6

Loss on disposal and impairment of property, plant and equipment and intangible assets 0.3 0.3

Gain on disposal and impairment of right-of-use assets — (0.1)

Expense related to short-term leases 1.6 0.6

The cost of inventories included in cost of sales includes the impact of a net decrease in the provision for obsolete

inventory of £0.8m (2022: £4.2m increase) of which £0.7m decrease relates to Sunflex which was acquired in May 2022

(2022: £2.6m increase).

Notes to the Consolidated Financial Statements

For the 52 weeks ended 1 July 2023

Dunelm Group plc Annual Report and Accounts 2023 143

FINANCIAL STATEMENTS

3. Operating profit continued

The analysis of the auditor’s remuneration is as follows:

2023

52 weeks

£’000

2022

53 weeks

£’000

Fees payable to the Group’s auditor for the audit of the Parent and consolidated annual

financial statements 34 46

Fees payable to the Group’s auditor and its associates for other services to the Group

– Audit of the Company’s subsidiaries pursuant to legislation 293 256

– Other assurance services (See Audit and Risk Committee report on page 83 for

further information) 46 42

4. Employee numbers and costs

The average monthly number of people employed by the Group (including Directors) was:

2023

52 weeks

Number

of heads

2023

52 weeks

Full-time

equivalents

2022

53 weeks

Number

of heads

2022

53 weeks

Full-time

equivalents

Selling 9,446 5,252 9,544 5,437

Distribution 1,057 1,026 963 930

Administration 1,099 1,082 925 906

11,602 7,360 11,432 7,273

The aggregate remuneration of all employees (including Directors) comprises:

2023

52 weeks

£’m

2022

53 weeks

£’m

Wages and salaries (including termination benefits) 224.8 211.1

Social security costs 16.1 14.4

Share-based payment expense 4.8 4.8

Pension costs – defined contribution plans 6.2 5.2

251.9 235.5

Details of Directors’ remuneration, share options, long-term incentive schemes and pension entitlements are disclosed in the

Remuneration Committee report on pages 88 to 118 and in the Related Parties note on page 163.

Notes to the Consolidated Financial Statements continued

Dunelm Group plc Annual Report and Accounts 2023144

FINANCIAL STATEMENTS

5. Financial income and expenses

2023

52 weeks

£’m

2022

53 weeks

£’m

Financial income

Interest on bank deposits 1.1 0.1

Net foreign exchange gains 0.6 1.1

1.7 1.2

Financial expenses

Interest on bank borrowings (2.2) (0.9)

Amortisation of issue costs of bank loans (0.3) (0.4)

Interest on lease liabilities (5.3) (4.8)

(7.8) (6.1)

Net financial expense (6.1) (4.9)

6. Taxation

2023

52 weeks

£’m

2022

53 weeks

£’m

Current taxation

UK corporation tax charge for the period 40.0 39.0

Adjustments in respect of prior periods 0.1 (0.2)

40.1 38.8

Deferred taxation

Origination of temporary differences 0.7 3.0

Adjustments in respect of prior periods 0.1 (0.2)

Impact of change in tax rate (0.1) —

0.7 2.8

Total tax expense 40.8 41.6

The tax expense is reconciled with the standard rate of UK corporation tax as follows:

2023

52 weeks

£’m

2022

53 weeks

£’m

Profit before taxation 192.7 212.8

UK corporation tax at standard rate of 20.5% (2022: 19.0%) 39.5 40.4

Factors affecting the charge in the period:

Non-deductible expenses 1.2 1.6

Adjustments in respect of prior periods 0.2 (0.4)

Impact of change in tax rate (0.1) —

Tax expense 40.8 41.6

The taxation expense for the period as a percentage of profit before tax is 21.2% (2022: 19.5%).

The UK Government substantively enacted an increase in the corporation tax rate to 25.0% effective from 1 April 2023.

The deferred tax asset as at 1 July 2023 has been calculated based on the rate of 25.0%.

Dunelm Group plc Annual Report and Accounts 2023 145

FINANCIAL STATEMENTS

7. Dividends

The dividends set out in the table below relate to the 1 pence Ordinary Shares:

2023

52 weeks

£’m

2022

53 weeks

£’m

Special dividend for the period ended 26 June 2021 – paid 65.0 pence — 131.9

Final dividend for the period ended 26 June 2021 – paid 23.0 pence — 46.8

Interim dividend for the period ended 2 July 2022 – paid 14.0 pence — 28.3

Special dividend for the period ended 2 July 2022 – paid 37.0 pence — 75.1

Final dividend for the period ended 2 July 2022 – paid 26.0 pence 52.4 —

Interim dividend for the period ended 1 July 2023 – paid 15.0 pence 30.2 —

Special dividend for the period ended 1 July 2023 – paid 40.0 pence 80.7 —

163.3 282.1

The Board is proposing a final dividend of 27 pence per Ordinary Share for the period ended 1 July 2023 which equates to

£54.5m. Subject to shareholder approval at the AGM this will be paid on 20 November 2023 to shareholders on the register

at the close of business on 27 October 2023.

8. Earnings per Ordinary Share

Basic earnings per share is calculated by dividing the profit for the period attributable to equity holders of the Company by

the weighted average number of Ordinary Shares in issue during the period, excluding Ordinary Shares purchased by the

Company and held as treasury shares (note 21).

For diluted earnings per share, the weighted average number of Ordinary Shares in issue is adjusted to assume conversion

of all dilutive potential Ordinary Shares. These represent share options granted to employees where the exercise price is less

than the average market price of the Group’s Ordinary Shares during the period.

Weighted average numbers of shares:

2023

52 weeks

‘000

2022

53 weeks

‘000

Weighted average number of shares in issue during the period 201,917 202,722

Impact of share options 746 2,135

Number of shares for diluted earnings per share 202,663 204,857

2023

52 weeks

£’m

2022

53 weeks

£’m

Profit for the period 151.9 171.2

Earnings per Ordinary Share – basic 75.2p 84.5p

Earnings per Ordinary Share – diluted 75.0p 83.6p

Notes to the Consolidated Financial Statements continued

Dunelm Group plc Annual Report and Accounts 2023146

FINANCIAL STATEMENTS

9. Intangible assets

Software

development

and licences

£’m

Rights to brands

and customer

lists

£’m

Total

£’m

Cost

At 27 June 2021 52.0 11.0 63.0

Additions 0.9 — 0.9

Acquisition through business combination — 0.5 0.5

Disposals (0.3) — (0.3)

At 2 July 2022 52.6 11.5 64.1

Additions 0.1 — 0.1

Disposals (0.7) — (0.7)

At 1 July 2023 52.0 11.5 63.5

Accumulated amortisation

At 27 June 2021 37.2 11.0 48.2

Charge for the financial period 6.2 — 6.2

Disposals (0.2) — (0.2)

At 2 July 2022 43.2 11.0 54.2

Charge for the financial period 4.5 0.1 4.6

Disposals (0.6) — (0.6)

At 1 July 2023 47.1 11.1 58.2

Net book value

At 27 June 2021 14.8 — 14.8

At 2 July 2022 9.4 0.5 9.9

At 1 July 2023 4.9 0.4 5.3

All amortisation is included within operating costs in the Consolidated Income Statement.

There was no trigger for impairment in the period.

Within software development and licences there were no additions (2022: nil) related to internally generated assets.

Dunelm Group plc Annual Report and Accounts 2023 147

FINANCIAL STATEMENTS

10. Property, plant and equipment

Freehold land

and buildings

£’m

Leasehold

improvements

£’m

Fixtures, fittings

and equipment

£’m

Total

£’m

Cost

At 27 June 2021 97.7 157.7 124.2 379.6

Transfer — 1.2 (1.2) —

Additions 0.1 13.3 12.6 26.0

Acquisition through business combination 9.2 0.1 0.3 9.6

Disposals — (8.3) (3.7) (12.0)

At 2 July 2022 107.0 164.0 132.2 403.2

Transfer — 0.2 (0.2) —

Additions — 10.2 11.4 21.6

Disposals — (7.2) (3.1) (10.3)

At 1 July 2023 107.0 167.2 140.3 414.5

Accumulated depreciation

At 27 June 2021 18.1 91.9 107.0 217.0

Transfer — (0.5) 0.5 —

Charge for the financial period 1.8 14.4 8.1 24.3

Disposals — (8.1) (3.7) (11.8)

At 2 July 2022 19.9 97.7 111.9 229.5

Transfer 0.1 0.1 (0.2) —

Charge for the financial period 1.8 14.3 9.1 25.2

Disposals — (7.0) (3.1) (10.1)

At 1 July 2023 21.8 105.1 117.7 244.6

Net book value

At 27 June 2021 79.6 65.8 17.2 162.6

At 2 July 2022 87.1 66.3 20.3 173.7

At 1 July 2023 85.2 62.1 22.6 169.9

All depreciation charges have been included within operating costs in the Consolidated Income Statement.

There was no trigger for impairment in the period.

Notes to the Consolidated Financial Statements continued

Dunelm Group plc Annual Report and Accounts 2023148

FINANCIAL STATEMENTS

11. Leases

Right-of-use assets included in the Consolidated Statement of Financial Position at 1 July 2023 were as follows:

2023

Land and

buildings

£’m

2023

Motor vehicles,

plant and

equipment

£’m

2023

Total

£’m

2022

Total

£’m

At the beginning of the period 240.4 8.1 248.5 262.0

Additions 20.3 12.0 32.3 35.3

Disposals (0.1) (0.1) (0.2) (0.2)

Depreciation (45.1) (4.2) (49.3) (48.6)

At the end of the period 215.5 15.8 231.3 248.5

Right-of-use additions did not include any lease modifications in the period (2022: £3.1m).

Lease liabilities included in the Consolidated Statement of Financial Position at 1 July 2023 were as follows:

2023

Land and

buildings

£’m

2023

Motor vehicles,

plant and

equipment

£’m

2023

Total

£’m

2022

Total

£’m

At the beginning of the period (270.1) (8.0) (278.1) (293.3)

Additions (21.2) (12.0) (33.2) (35.9)

Disposals 0.1 0.1 0.2 0.1

Interest (4.9) (0.4) (5.3) (4.8)

Repayment of lease liabilities 53.6 4.6 58.2 55.8

At the end of the period (242.5) (15.7) (258.2) (278.1)

The discount rate applied across all lease liabilities ranged between 0.9% and 5.85% (2022: 0.9% and 2.8%). The discount rate

reflects our incremental borrowing rate which we assess by considering the marginal rate on the Group’s Revolving Credit

Facility (‘RCF’), the Bank of England base rate, the yield on Government bonds and the term of the lease.

The maturity analysis of the lease liabilities is as follows:

2023

£’m

2022

£’m

Current (53.4) (52.8)

Non-current (204.8) (225.3)

(258.2) (278.1)

The remaining contractual maturities of the lease liabilities, which are gross and undiscounted, are as follows:

2023

£’m

2022

£’m

Less than one year (65.8) (57.1)

One to two years (61.4) (53.2)

Two to five years (123.0) (111.9)

Five to ten years (78.9) (68.3)

More than ten years (3.7) (5.0)

Total undiscounted lease liability (332.8) (295.5)

The average remaining lease term of our leasehold land and buildings is 5.0 years (2022: 5.2 years).

Dunelm Group plc Annual Report and Accounts 2023 149

FINANCIAL STATEMENTS

11. Leases continued

The following amounts have been recognised in the Consolidated Income Statement:

2023

52 weeks

Land and

buildings

£’m

2023

52 weeks

Motor vehicles,

plant and

equipment

£’m

2023

52 weeks

Total

£’m

2022

53 weeks

Total

£’m

Depreciation of right-of-use assets 45.1 4.2 49.3 48.6

Gain on disposal of right-of-use assets — — — (0.1)

Interest expenses (included in financial expenses) 4.9 0.4 5.3 4.8

Expense relating to short-term leases 0.4 1.2 1.6 0.6

There was no trigger for impairment in the current year.

The total cash outflow for leases during the financial period was £57.3m (2022: £55.0m).

12. Deferred tax assets/liabilities

Deferred tax is provided in full on temporary differences under the liability method using a taxation rate of 25.0%.

Deferred taxation assets and liabilities are attributable to the following:

Assets Liabilities Net assets/(liabilities)

2023

£’m

2022

£’m

2023

£’m

2022

£’m

2023

£’m

2022

£’m

Property, plant and equipment — 0.7 (0.8) — (0.8) 0.7

Share-based payments 5.1 7.5 — — 5.1 7.5

Hedging 2.3 — — (4.3) 2.3 (4.3)

Other temporary differences 0.5 0.4 (0.2) (0.2) 0.3 0.2

7.9 8.6 (1.0) (4.5) 6.9 4.1

Assets Liabilities Net assets/(liabilities)

2023

£’m

2022

£’m

2023

£’m

2022

£’m

2023

£’m

2022

£’m

Deferred tax recoverable/(payable)

after more than 12 months 2.1 1.4 (1.0) (0.2) 1.1 1.2

Deferred tax recoverable/(payable)

within 12 months 5.8 7.2 — (4.3) 5.8 2.9

7.9 8.6 (1.0) (4.5) 6.9 4.1

The movement in the net deferred tax balance is as follows:

Balance at

27 June

2021

£’m

Recognised in

income

£’m

Recognised in

equity

£’m

Balance at

2 July

2022

£’m

Property, plant and equipment 3.6 (2.9) — 0.7

Share-based payments 6.5 0.2 0.8 7.5

Hedging 1.0 — (5.3) (4.3)

Other temporary differences 0.3 (0.1) — 0.2

11.4 (2.8) (4.5) 4.1

Notes to the Consolidated Financial Statements continued

Dunelm Group plc Annual Report and Accounts 2023150

FINANCIAL STATEMENTS

Balance at

3 July

2022

£’m

Recognised in

income

£’m

Recognised in

equity

£’m

Balance at

1 July

2023

£’m

Property, plant and equipment 0.7 (1.5) — (0.8)

Share-based payments 7.5 0.7 (3.1) 5.1

Hedging (4.3) — 6.6 2.3

Other temporary differences 0.2 0.1 — 0.3

4.1 (0.7) 3.5 6.9

13. Inventories

2023

£’m

2022

£’m

Raw materials 1.6 1.7

Work in progress — 1.6

Goods for resale 209.4 219.7

211.0 223.0

Goods for resale includes a net realisable value provision of £20.7m (2022: £21.4m). Write-downs of inventories to net

realisable value amounted to £30.2m (2022: £20.1m). These were recognised as an expense during the period and were

included in cost of sales in the Consolidated Income Statement.

14. Trade and other receivables

2023

£’m

2022

£’m

Trade receivables 3.1 2.9

Other receivables 0.1 9.5

Prepayments and accrued income 21.1 10.5

24.3 22.9

All trade receivables are due within one year from the end of the reporting period.

No impairment was incurred on trade and other receivables during the period and the expected credit loss provision held at

period end is nil (2022: nil). No material amounts are overdue (2022: nil).

15. Cash and cash equivalents

2023

£’m

2022

£’m

Cash at bank and in hand 46.3 30.2

The Group deposits funds only with institutions that have a credit rating of ‘A’ and above and the term is less than

three months.

Dunelm Group plc Annual Report and Accounts 2023 151

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

16. Trade and other payables

2023

£’m

2022

£’m

Trade payables 94.6 98.3

Accruals 63.5 74.2

Deferred income – gift cards 1.1 1.3

Deferred income – other 11.4 11.3

Taxation and social security 37.3 34.0

Other payables 0.2 4.1

208.1 223.2

Deferred income arises in respect of gift cards as payment has been received for a performance obligation which will be

performed at a later point in time. Movement in the gift card deferred income balance is as follows:

2023

£’m

2022

£’m

Opening balance 1.3 1.5

Issued in the year 5.3 5.4

Released to income statement (5.5) (5.6)

1.1 1.3

17. Financial risk management

The Board of Directors has overall responsibility for the oversight of the Group’s risk management framework. A formal

process for reviewing and managing risk in the business is in place.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its

contractual obligations and arises principally from the Group’s deposits with banks and financial institutions as well as foreign

exchange hedging agreements with its banking counterparties. The Group only deals with creditworthy counterparties and

uses publicly available financial information to rate its counterparties, therefore credit risk is considered to be low.

Group policy is that surplus funds are placed on deposit with counterparties approved by the Board, with a minimum of an ‘A’

credit rating. The credit limit for the syndicate banks is up to £60.0m. All other parties are limited to £25.0m.

The Group’s maximum exposure to credit risk is represented by the carrying amount of financial assets. No collateral is held

(2022: nil). At the period end the maximum exposure is detailed in the table below:

2023

£’m

2022

£’m

Current

Cash and cash equivalents 46.3 30.2

Trade and other receivables 3.2 12.4

Accrued income 10.1 0.6

Derivative financial instruments 1.8 19.9

Total current financial assets 61.4 63.1

Non-current

Derivative financial instruments — 4.6

Total financial assets 61.4 67.7

Dunelm Group plc Annual Report and Accounts 2023152

FINANCIAL STATEMENTS

Trade and other receivables include rebates due from suppliers recognised as a reduction to cost of sales in the period

to which they relate. The rebates are recovered through deductions from future payments to suppliers and therefore

management is confident of the recoverability of these balances.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses (‘ECL’) which uses a lifetime expected

loss allowance for all trade and other receivables and accrued income. To measure the expected credit losses, trade and

other receivables and accrued income have been grouped based on shared credit risk characteristics and the days past due.

There is limited exposure to ECL due to the way the Group operates.

The Group will write off, either partially or in full, the gross carrying amount of a financial asset when there is no realistic

prospect of recovery. This is usually the case when it is determined that the debtor does not have the assets or sources of

income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, the Group may still

choose to pursue enforcement in order to recover the amounts due.

On that basis, the loss allowance as at 2 July 2022 and 1 July 2023 was determined to not be significant for trade and other

receivables, accrued income and cash and cash equivalents.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach

to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when

due. The Group manages this risk by regularly monitoring cash flow forecasts. Further details of the Group’s available

facilities can be found in the capital management section of this note.

All cash flows on financial liabilities for 2023 and 2022 are contractually due within one year with the exception of provisions,

bank loans, certain derivative financial liabilities and lease liabilities. The details of lease liabilities are shown in note 11.

Total borrowings of £77.0m (2022: £54.0m) reflect the level of facility drawdown at the period end on the Group’s

committed RCF.

Interest rate risk

The Group’s bank borrowings incur variable interest rate charges. The Group’s policy aims to manage the interest cost of the

Group within the constraints of its financial covenants. The Group will continue to monitor movements in the interest rate

swap market.

During the period, if SONIA interest rates had been 100 basis points higher with all other variables held constant, post-tax

profit would have been £0.3m lower (2022: £0.1m lower).

Foreign currency risk

All of the Group’s revenues are in sterling. The majority of purchases are also in pounds sterling, but some goods purchased

direct from overseas suppliers are paid for in US dollars, accounting for just over 30.0% (2022: 30.0%) of stock purchases in

the period ended 1 July 2023.

The Group uses various means to cover its exposure to US dollars including holding US dollar cash balances and taking

out forward foreign exchange contracts for the purchase of US dollars. All the Group’s foreign exchange transactions are

designed to satisfy US dollar denominated liabilities. The maximum level of hedging coverage which will be undertaken is

100.0% of anticipated expenditure on a three-month horizon, stepping down to 75.0% on a four- to 12-month horizon and

50.0% on a 13- to 18-month horizon. There is a low level of coverage beyond the 18-month horizon.

Cash flow hedges are in place to manage foreign exchange rate risk arising from forecast purchases denominated in US

dollars. At the Consolidated Statement of Financial Position date, the fair value of US dollar foreign exchange forward

contracts held in cash flow hedges was a £9.2m liability (2022: £24.5m asset) which relates to a commitment to purchase

$350.5m (2022: $369.0m) for a fixed sterling amount. A fair value loss of £14.0m (2022: £32.4m gain) was recognised in other

comprehensive income and no loss (2022: nil) was recognised on cash flow hedges during the period. In the period, a gain of

£19.7m (2022: £2.6m gain) was recycled from the cash flow hedge reserve to inventory to offset foreign exchange movements

on purchases. The remaining hedge reserve balance will be recycled to the Consolidated Income Statement to offset future

purchases occurring after the Consolidated Statement of Financial Position date, the majority of which expire in the next

12mo2 months.

Dunelm Group plc Annual Report and Accounts 2023 153

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

17. Financial risk management continued

The outstanding US dollar liabilities at the period end were $0.1m (2022: $0.1m).

At the period end if GBP had strengthened by 10.0% against the US dollar with all other variables held constant, post-tax

profit would have been £0.9m higher (2022: £0.7m higher) as a result of foreign exchange gains on translation of US dollar

denominated trade payables and cash and cash equivalents. Other components of equity would have been £0.9m higher

(2022: £2.5m higher) as a result of a decrease in fair value of derivatives designated as cash flow hedges.

Conversely, if GBP had weakened by 10.0% against the US dollar with all other variables held constant, post-tax profit for the

period would have been £1.1m lower (2022: £0.8m lower) and other components of equity would have been £0.9m lower

(2022: £2.5m lower).

The US dollar period end exchange rate applied in the above analysis is £1 = $1.2694 (2022: £1 = $1.2087).

Capital management

The Group considers equity plus debt as capital. There are no externally imposed capital requirements on the Group.

The Board’s objective with respect to capital management is to ensure the Group continues as a going concern in order to

optimise returns to shareholders. The Board regularly monitors the level of capital in the Group to ensure that this can be

achieved.

On 7 September 2023 the Group amended its existing syndicated RCF to £250.0m, which is committed until 6 September

2027, and which may be extended for a further two years at Dunelm’s request, subject to lender consent. There is also

an optional accordion facility of £100.0m. The terms of the RCF are consistent with normal practice and include the same

covenants as the previous RCF in respect of leverage (Group net debt to be no greater than 2.5x Group EBITDA before

exceptional items) and fixed charge cover (Group EBITDAR before exceptional items to be no less than 1.75x Group fixed

charges), both of which were met comfortably as at 1 July 2023 as shown below. In addition, the Group maintains £10.0m of

uncommitted overdraft facilities with one syndicate partner bank.

The gearing ratio and banking covenants were as follows:

2023

£’m

2022

£’m

Total borrowings (note 18) 77.0 54.0

Less: cash and cash equivalents (note 15) (46.3) (30.2)

Net debt 30.7 23.8

Less: unamortised debt issue costs (note 18) (1.1) (1.2)

Net debt including unamortised debt issue costs 29.6 22.6

Total equity 137.5 178.3

Total capital 167.1 200.9

Gearing ratio 17.7% 11.2%

Dunelm Group plc Annual Report and Accounts 2023154

FINANCIAL STATEMENTS

2023

52 weeks

£’m

2022

53 weeks

£’m

Operating profit 198.8 217.7

Add: Depreciation and amortisation of property, plant and equipment and intangible assets

(note 3) 29.8 30.5

Add: Loss on disposal and impairment of property, plant and equipment and intangible assets

(note 3) 0.3 0.3

Adjusted EBITDA 228.9 248.5

Leverage ratio 0.13 0.09

Adjusted EBITDA 228.9 248.5

Add: RoUA depreciation 49.3 48.6

EBITDA 278.2 297.1

Add: Rent 4.5 1.8

EBITDAR 282.7 298.9

Net interest (note 5) 6.1 4.9

Rent plus RoUA depreciation 53.8 50.4

Fixed charges 59.9 55.3

Fixed charge cover 4.7 5.4

Derivatives: Hedge ineffectiveness

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective

effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.

For hedges of foreign currency purchases, the Group enters into hedge relationships where the critical terms of the hedging

instrument match exactly with the terms of the hedged item. The Group therefore performs a qualitative assessment of

effectiveness. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match

exactly with the critical terms of the hedging instrument, the Group uses the hypothetical derivative method to assess

effectiveness.

In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what

was originally estimated, or if there are changes in the credit risk of the Group or the derivative counterparty.

Market risk

The Group has the option to use a combination of foreign currency options and foreign currency forwards to hedge its

exposure to foreign currency risk.

The Group only designates the spot component of foreign currency forwards in hedge relationships. The spot component is

determined with reference to relevant spot market exchange rates. The differential between the contracted forward rate and

the spot market exchange rate is defined as the forward points. It is discounted where material.

Dunelm Group plc Annual Report and Accounts 2023 155

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

17. Financial risk management continued

The changes in the forward element of the foreign currency forwards and the time value of the options that relate to hedged

items are deferred in the hedging reserve.

Effects of hedge accounting on the financial position and performance

2023

£’m

2022

£’m

Foreign currency forwards

Carrying amount of (liability)/asset (9.2) 24.5

Notional amount 286.4 280.4

Maturity date

July 2023-

June 2025

July 2022-

June 2024

Hedge ratio 1:1 1:1

Change in value of hedged item used to determine hedge effectiveness £(14.0)m £32.4m

Change in the value of hedging instruments £14.0m £(32.4)m

Weighted average hedged rate for the year (including forward points) £1:US$1.2998 £1:US$1.3426

Fair values

The fair value of the Group’s financial assets and liabilities are equal to their carrying value. The fair value of foreign currency

contracts are amounts required by the counterparties to cancel the contracts at the end of the period.

Fair value hierarchy

Financial instruments carried at fair value are required to be measured by reference to the following levels:

• Level 1: quoted prices in active markets for identical assets or liabilities;

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

(i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

All derivative financial instruments carried at fair value have been measured by a Level 2 valuation method, based on

observable market data.

Financial assets/(liabilities)

The carrying value of all financial assets and financial liabilities was materially equal to their fair value.

At 2 July 2022

Financial assets

at amortised

cost

£’m

Financial

liabilities at

amortised cost

£’m

Derivatives used

for hedging

£’m

Total

£’m

Cash and cash equivalents 30.2 — — 30.2

Trade and other receivables 12.4 — — 12.4

Accrued income 0.6 — — 0.6

Derivative financial instruments — — 24.5 24.5

Total financial assets 43.2 — 24.5 67.7

Trade and other payables — (102.4) — (102.4)

Accruals — (74.2) — (74.2)

Lease liabilities — (278.1) — (278.1)

Bank loans — (52.8) — (52.8)

Total financial liabilities — (507.5) — (507.5)

Net financial assets/(liabilities) 43.2 (507.5) 24.5 (439.8)

Dunelm Group plc Annual Report and Accounts 2023156

FINANCIAL STATEMENTS

At 1 July 2023

Financial assets

at amortised

cost

£’m

Financial

liabilities at

amortised cost

£’m

Derivatives used

for hedging

£’m

Total

£’m

Cash and cash equivalents 46.3 — — 46.3

Trade and other receivables 3.2 — — 3.2

Accrued income 10.1 — — 10.1

Derivative financial instruments — — 1.8 1.8

Total financial assets 59.6 — 1.8 61.4

Trade and other payables — (94.8) — (94.8)

Accruals — (63.5) — (63.5)

Lease liabilities — (258.2) — (258.2)

Bank loans — (75.9) — (75.9)

Derivative financial instruments — — (11.0) (11.0)

Total financial liabilities — (492.4) (11.0) (503.4)

Net financial assets/(liabilities) 59.6 (492.4) (9.2) (442.0)

The currency profile of the Group’s cash and cash equivalents is as follows:

2023

£’m

2022

£’m

Sterling 33.8 19.7

US dollar 12.4 10.4

Euro 0.1 0.1

46.3 30.2

18. Bank loans

2023

£’m

2022

£’m

Total borrowings 77.0 54.0

Less: unamortised debt issue costs (1.1) (1.2)

Net borrowings 75.9 52.8

Borrowings relate to the Group’s syndicated Revolving Credit Facility, as described in note 17.

Dunelm Group plc Annual Report and Accounts 2023 157

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

18. Bank loans continued

The analysis below shows the reconciliation of net debt:

2023

52 weeks

£’m

2022

53 weeks

£’m

Net (debt)/cash at 3 July 2022 and 27 June 2021 (23.8) 128.6

Net increase/(decrease) in cash and cash equivalents (excluding foreign exchange revaluations) 15.5 (99.5)

Effect of foreign exchange (note 5) 0.6 1.1

Repayments of Revolving Credit Facility 116.0 31.0

Drawdowns of Revolving Credit Facility (139.0) (85.0)

Movement in net debt (6.9) (152.4)

Net debt represented by

Cash and cash equivalents (note 15) 46.3 30.2

Non-current borrowings (note 18) (77.0) (54.0)

Net debt at 1 July 2023 and 2 July 2022 (30.7) (23.8)

Lease liabilities (note 11) (258.2) (278.1)

Net debt at 1 July 2023 and 2 July 2022 (including lease liabilities) (288.9) (301.9)

19. Provisions

Balance at

3 July 2022

£’m

Utilised in the

period

£’m

Created in the

period

£’m

Released in the

period

£’m

Balance at

1 July 2023

£’m

Property related 5.5 (0.1) 1.4 (0.9) 5.9

Property-related provisions consist of costs associated with vacant property and dilapidations. Dilapidations are based on

the Directors’ best estimate of the Group’s future liabilities.

20. Issued share capital

2023

Number of

Ordinary Shares

of 1p each

2022

Number of

Ordinary Shares

of 1p each

In issue at the start of the period 203,426,835 202,833,931

Issued during the period in respect of share option schemes — 592,904

In issue at the end of the period 203,426,835 203,426,835

2023

Number of

2023

£’m

2022

Number of

2022

£’m

Ordinary Shares of 1p each:

Authorised 500,000,000 5.0 500,000,000 5.0

Allotted, called up and fully paid 203,426,835 2.0 203,426,835 2.0

Proceeds received in relation to shares issued during the period were nil (2022: £0.1m).

Dunelm Group plc Annual Report and Accounts 2023158

FINANCIAL STATEMENTS

21. Treasury shares

2023

Number of

2023

£’m

2022

Number of

2022

£’m

Outstanding at the beginning of the period 1,686,200 17.5 160,319 1.4

Purchased during the period 908,064 7.0 2,500,000 28.3

Reissued during the period in respect of share option schemes (881,474) (8.5) (974,119) (12.2)

Outstanding at the end of the period 1,712,790 16.0 1,686,200 17.5

The Group acquired 908,064 (2022: 2,500,000) shares through purchases on the London Stock Exchange during the period

for a total value of £7.0m (2022: £28.3m).

The Group reissued 881,474 (2022: 974,119) treasury shares during the period for a total value of £8.5m (2022: £12.2m).

Proceeds from the issue of treasury shares included in the Consolidated Statement of Cash Flows and Consolidated

Statement of Changes in Equity of £2.4m (2022: £3.9m) is the amount employees contributed.

The Group has the right to reissue the remaining treasury shares at a later date.

22. Share-based payments

The Group operates a number of share-based payment schemes as follows:

Dunelm Group Savings Related Share Option Plan (Sharesave)

The Dunelm Group plc Savings Related Share Option Plan (Sharesave) scheme is open to all colleagues with eligible length

of service. Invitations to participate in the scheme are issued annually and the scheme is ‘approved’ under HMRC rules. The

current maximum monthly savings for the schemes detailed below is £500. Options are granted at the prevailing market rate

less a discount of 20.0%. Options may be exercised under the scheme within six months of the completion of each three-year

savings contract (from the grant date). There is provision for early exercise in certain circumstances such as death, disability,

redundancy, and retirement. Sharesave options are accounted for as equity-settled awards under IFRS 2.

The following table summarises the movement in Dunelm Group plc Sharesave options during the year:

2023 2022

Sharesave plans

No. of options

Weighted

average

exercise price

(p)

No. of options

Weighted

average

exercise price

(p)

Outstanding at beginning of year 1,182,512 923.00 1,571,890 651.20

Granted 2,063,669 667.00 632,092 1,046.00

Exercised (371,564) 634.54 (807,250) 483.06

Forfeited (660,351) 973.79 (214,220) 949.37

Outstanding at end of year 2,214,266 717.67 1,182,512 923.00

Exercisable at end of year 30,550 654.00 31,605 479.00

Exercisable at end of year refers to all share options not exercised which have passed their vesting date, but not yet

reached their expiry date. The figure of 30,550 options (2022: 31,605 options) excludes the provisions for early exercise

explained above.

Dunelm Group plc Annual Report and Accounts 2023 159

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

22. Share-based payments continued

Options outstanding at 1 July 2023 are exercisable at prices ranging between 654.00p and 1,167.00p (2022: 479.00p

and 1,167.00p) and have a weighted average remaining contractual life of 2.8 years (2022: 2.1 years), as analysed in the

table below:

2023 2022

Sharesave plans No. of options

Weighted

average

remaining

contractual life

(years) No. of options

Weighted

average

remaining

contractual life

(years)

Exercise price (pence):

479.00 — — 45,502 —

654.00 19,110 — 370,906 1.0

667.00 1,928,943 3.0 — —

1,046.00 170,758 2.0 553,288 3.0

1,167.0 0 95,455 1.0 212,816 2.0

2,214,266 2.8 1,182,512 2.1

Long-Term Incentive Plan (LTIP)

As explained in the Remuneration Report, the Group operates an equity-settled LTIP scheme for Executive Directors and

other senior colleagues. Performance conditions for the LTIP awards are detailed in the Remuneration Report. LTIP options

are also accounted for as equity-settled awards under IFRS 2.

The following table summarises the movements in nil-cost LTIP awards during the year:

LTIP awards

2023

No. of options

2022

No. of options

Outstanding at beginning of year 1,465,667 1,733,531

Granted 754,112 515,226

Dividend equivalent awarded in the year 122,382 17,866

Exercised (345,487) (497,830)

Forfeited (98,732) (303,126)

Outstanding at end of year 1,897,942 1,465,667

Exercisable at end of year 21,505 17,082

Exercisable at end of year refers to all share options not exercised which have passed their vesting date, but not yet reached

their expiry date.

The weighted average remaining contractual life of these options is 8.1 years (2022: 8.0 years).

Restricted Stock Award (RSA)

These awards are granted to particular individuals and are dependent on continuing employment. The only performance

condition is that the threshold diluted earnings per share as per the LTIP conditions is met as detailed in the Remuneration

Report. RSA options are also accounted for as equity-settled awards under IFRS 2.

The following table summarises the movements in nil-cost RSA options during the year:

Restricted Stock Awards

2023

No. of options

2022

No. of options

Outstanding at beginning of year 123,544 68,103

Granted 207,203 75,940

Dividend equivalent awarded in the year 14,697 2,765

Exercised (12,756) (10,308)

Forfeited (16,242) (12,956)

Outstanding at end of year 316,446 123,544

Exercisable at end of year 2,836 2,785

Dunelm Group plc Annual Report and Accounts 2023160

FINANCIAL STATEMENTS

Exercisable at end of year refers to all share options not exercised which have passed their vesting date, but not yet reached

their expiry date.

The weighted average remaining contractual life of these options is 7.5 years (2022: 8.8 years).

Bonus Deferred Shares Award

The Bonus Deferred Shares Award provides options over shares in Dunelm Group plc for colleagues of the Group as a

discretionary bonus. This is an equity-settled share option scheme and there are no performance conditions attached

to these awards, they are only dependent on continued employment. Under this arrangement, colleagues are awarded

a number of options which is based on the cash value of the earned bonus award, determined by their achievement of a

mixture of Group and individual performance metrics, divided by a share price value of 1,189.00p which was approved at

the November 2020 AGM. The deferred shares awarded vest in September 2021 and/or September 2022, depending on

colleague level.

The Bonus Deferred Shares Award is structured as nil-cost options and the following table summarises their movement

during the year:

Bonus Deferred Shares Award

2023

No. of options

2022

No. of options

Outstanding at beginning of year 158,398 494,420

Dividend equivalent awarded in the year — 9,608

Exercised (151,667) (252,488)

Forfeited (3,948) (93,142)

Outstanding at end of year 2,783 158,398

Exercisable at end of year 2,783 —

The weighted average remaining contractual life of these options is nil years (2022: 0.2 years).

Fair value calculations

The fair values of all share options granted are calculated at the date of grant using a Black-Scholes option pricing model.

Expected volatility is determined by calculating the historical volatility of the Group’s share price over a period equivalent to

the expected life of an option which is aligned to its vesting period.

The following tables list the inputs to the model used for options granted in the periods ended 1 July 2023 and 2 July 2022

based on information at the date of grant:

Sharesave plans 2023 2022

Share price at date of grant 974.00p 1,444.23p

Exercise price 667.00p 1,046.00p

Volatility 42.28% 43.54%

Expected life 3 years 3 years

Risk-free rate 3.66% 0.63%

Dividend yield 3.27% 2.90%

Fair value per option 393.50p 424.30p

Dunelm Group plc Annual Report and Accounts 2023 161

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

22. Share-based payments continued

LTIP awards 2023 2022

Share price at date of grant 865.00p 1,307.00p

Exercise price 0.00p 0.00p

Volatility 43.06% 43.65%

Expected life 3 years 3 years

Risk-free rate 3.62% 0.84%

Dividend yield 3.27% 2.90%

Fair value per option 623.30p 977.40p

Restricted Stock Awards 2023 2022

Share price at date of grant 678.00p-867.00p 1,307.00p

Exercise price 0.00p 0.00p

Volatility 35.58%-35.90% 46.25%-43.65%

Expected life 1-2 years 2-3 years

Risk-free rate 2.82%-3.62% 0.84%

Dividend yield 3.27% 2.90%

Fair value per option 623.30p-839.10p 977.40p

The charge to the Income Statement for all share option schemes is disclosed in note 4.

23. Commitments

As at 1 July 2023, the Group had entered into capital contracts for new stores and refits amounting to £8.1m (2022: £4.7m).

24. Contingent liabilities

The Group had no contingent liabilities at the period end date (2022: none).

Dunelm Group plc Annual Report and Accounts 2023162

FINANCIAL STATEMENTS

25. Related parties

Identity of related parties

The Group has related party relationships with its subsidiaries and with its Directors. Transactions between the Group and

its subsidiaries, which are related parties, have been eliminated on consolidation for the Group. A list of subsidiaries can be

found in note C4 to the Parent Company Financial Statements.

Key management personnel

The key management personnel of the Group comprise members of the Board of Directors and the Executive Board.

Directors of the Company and their close relatives control 42.7% (2022: 42.9%) of the voting shares of the Company.

Disclosures relating to remuneration of Directors are set out in the Remuneration Report on pages 88 to 118. The remuneration

of the key management personnel is set out below:

52 weeks

2023

£’m

53 weeks

2022

£’m

Wages and salaries 3.8 3.5

Termination benefits 0.1 —

Short-term employee benefits 3.1 4.2

Post-employment benefits 0.1 0.1

Share-based payments (including NI) 1.9 2.9

9.0 10.7

The amount of gains made by Directors on the exercise of share options are disclosed in the Remuneration Report on

page 109.

From time to time Directors of the Group, or their related entities, may purchase goods from the Group. These purchases

are on the same terms and conditions as those entered into by other Group employees and values involved are trivial.

26. Ultimate controlling party

The Directors consider that there is no ultimate controlling party of Dunelm Group plc.

Dunelm Group plc Annual Report and Accounts 2023 163

FINANCIAL STATEMENTS

Parent Company Statement of Financial Position

As at 1 July 2023

Note

1 July 2023

£’m

2 July 2022

£’m

Non–current assets

Investments in subsidiary undertakings C4 68.8 64.8

Deferred tax assets C5 0.6 1.0

Total non-current assets 69.4 65.8

Current assets

Trade and other receivables C6 162.3 98.3

Total current assets 162.3 98.3

Total assets 231.7 164.1

Current liabilities

Trade and other payables C7 (0.3) (0.3)

Total current liabilities (0.3) (0.3)

Total liabilities (0.3) (0.3)

Net assets 231.4 163.8

Equity

Issued share capital C11 2.0 2.0

Share premium account 1.7 1.7

Non-distributable reserves 23.6 19.6

Capital redemption reserve 43.2 43.2

Retained earnings 160.9 97.3

Total equity attributable to equity holders of the Parent 231.4 163.8

The Company made a profit after tax of £230.9m (2022: £150.5m).

The financial statements on pages 164 to 171 were approved by the Board of Directors on 20 September 2023 and were

signed on its behalf by:

Karen Witts

Director

Company number 04708277

20 September 2023

Dunelm Group plc Annual Report and Accounts 2023164

FINANCIAL STATEMENTS

Note

Issued share

capital

£’m

premium

account

£’m

Non-

distributable

reserves

£’m

Capital

redemption

reserve

£’m

Retained

earnings

£’m

Total equity

attributable to

equity holders

of the Parent

£’m

As at 26 June 2021 2.0 1.6 15.5 43.2 252.5 314.8

Profit for the period — — — — 150.5 150.5

Total comprehensive income for

the period — — — — 150.5 150.5

Proceeds from issue of shares — 0.1 — — — 0.1

Purchase of treasury shares C12 — — — — (28.3) (28.3)

Proceeds from issue of treasury

shares C12 — — — — 3.9 3.9

Share-based payments C13 — — 4.1 — 0.7 4.8

Deferred tax on share-based

payments C5 — — — — (0.5) (0.5)

Current corporation tax on share

options exercised C8 — — — — 0.6 0.6

Dividends C3 — — — — (282.1) (282.1)

Total transactions with owners,

recorded directly in equity — 0.1 4.1 — (305.7) (301.5)

As at 2 July 2022 2.0 1.7 19.6 43.2 97.3 163.8

Profit for the period — — — — 230.9 230.9

Total comprehensive income for

the period — — — — 230.9 230.9

Purchase of treasury shares C12 — — — — (7.0) (7.0)

Proceeds from issue of treasury

shares C12 — — — — 2.4 2.4

Share-based payments C13 — — 4.0 — 0.8 4.8

Deferred tax on share-based

payments C5 — — — — (0.3) (0.3)

Current corporation tax on share

options exercised C8 — — — — 0.1 0.1

Dividends C3 — — — — (163.3) (163.3)

Total transactions with owners,

recorded directly in equity — — 4.0 — (167.3) (163.3)

As at 1 July 2023 2.0 1.7 23.6 43.2 160.9 231.4

The non-distributable reserves’ purpose is to reflect movements in share-based payments in respect of awards given by the

Parent Company to employees of its subsidiaries.

At the time of declaring dividends, the Directors assessed the level of available distributable reserves with reference to

relevant accounts and considered there to be sufficient levels to support the dividend.

Parent Company Statement of Changes in Equity

For the 52 weeks ended 1 July 2023

Dunelm Group plc Annual Report and Accounts 2023 165

FINANCIAL STATEMENTS

General information

Dunelm Group plc (the ‘Company’)

is incorporated and domiciled in

the UK. Dunelm Group plc is a listed

public company, limited by shares and

the Company registration number

is 04708277. The registered office

is Dunelm Store Support Centre,

Watermead Business Park, Syston,

Leicester, Leicestershire, England,

LE7 1AD.

Basis of preparation

The financial statements in the prior

year were prepared in accordance with

UK-adopted International Financial

Reporting Standards (‘IFRS’) and with

the requirements of the Companies

Act 2006 as applicable to companies

reporting under those standards.

These financial statements have been

prepared in accordance with FRS

101 Reduced Disclosure Framework

(‘FRS101’). The impact on the net assets

of the Company as a result of the

change in accounting convention has

been £nil.

As permitted by FRS 101, the Company

has taken advantage of the disclosure

exemptions available under that

standard in relation to standards not

yet effective and presentation of a

cash flow statement. The accounting

policies adopted for the Parent

Company, Dunelm Group plc, are

otherwise consistent with those used

for the Group which are set out on

pages 136 to 142.

The annual financial statements have

been prepared under the historical

cost convention, and in accordance

with the Companies Act 2006 and

other applicable law. The financial

statements are prepared in pounds

sterling, rounded to the nearest

0.1 million.

Going concern

After making enquiries, the Directors

have a reasonable expectation that the

Company has adequate resources to

continue in operational existence for

the foreseeable future. Accordingly,

they continue to adopt the going

concern basis in preparing the financial

statements.

Additional considerations relating

to the potential downturn in the

homewares market on the going

concern assumptions are set out in the

Consolidated Financial Statements on

page 136.

Share-based payments

Employees of the Company have

been granted options for two equity-

settled, share-based compensation

plans, under which the entity

receives services from employees as

consideration for equity instruments

(options) of the Company. The fair

value of the employee services

received in exchange for the grant

of the options is recognised as an

expense. The total amount to be

expensed is determined by reference

to the fair value of the options granted:

• Including any market performance

conditions (for example, an entity’s

share price);

• Excluding the impact of any service

and non-market performance

vesting conditions (for example,

profitability, sales growth targets

and remaining an employee of the

entity over a specified time period);

and

• Including the impact of any non-

vesting conditions (for example, the

requirement for employees to save).

Non-market performance and service

conditions are included in assumptions

about the number of options that are

expected to vest. The total expense is

recognised over the vesting period,

which is the period over which all of

the specified vesting conditions are to

be satisfied.

In addition, in some circumstances

employees may provide services

in advance of the grant date and

therefore the grant date fair value

is estimated for the purposes of

recognising the expense during

the period between service

commencement period and

grant date.

At the end of each reporting period,

the Company revises its estimates

of the number of options that are

expected to vest based on the

non-market vesting conditions. It

recognises the impact of the revision to

original estimates, if any, in the Income

Statement, with a corresponding

adjustment to equity.

When the options are exercised, the

Company either issues new shares,

or uses treasury shares purchased for

this purpose. For newly issued shares,

the proceeds received net of any

directly attributable transaction costs

are credited to share capital (nominal

value) and share premium.

The social security contributions

payable in connection with the grant

of the share options are considered an

integral part of the grant itself, and the

charge will be treated as a cash-settled

transaction.

Parent Company Accounting Policies

For the 52 weeks ended 1 July 2023

Dunelm Group plc Annual Report and Accounts 2023166

FINANCIAL STATEMENTS

Taxation

Tax on the profit or loss for the period

comprises current and deferred

tax. Tax is recognised in the Income

Statement except to the extent that it

relates to items recognised directly in

equity, in which case it is recognised

in equity.

Current tax represents the expected

tax payable on the taxable income for

the period, using tax rates enacted or

substantively enacted at the Statement

of Financial Position date, together

with any adjustment to tax payable in

respect of previous periods.

Deferred tax provides for temporary

differences between the carrying

amounts of assets and liabilities for

financial reporting purposes and the

amounts used for taxation purposes.

Deferred tax is determined using

tax rates (and laws) that have been

enacted or substantively enacted at

the Statement of Financial Position

date and are expected to apply when

the related deferred tax asset is

realised or the deferred tax liability

is settled.

A deferred tax asset is recognised

only to the extent that it is probable

that future taxable profits will be

available against which the asset can

be recognised.

Deferred income tax assets and

liabilities are offset when there is a

legally enforceable right to offset

current tax assets against current

tax liabilities and when they relate

to income taxes levied by the same

taxation authority on either the taxable

entity or different taxable entities

where there is an intention to settle the

balances on a net basis.

Dividends

Dividends are recognised as a

liability in the period in which they are

approved such that the Company is

obligated to pay the dividend.

Trade and other receivables

Trade and other receivables are

initially recognised at fair value and

then carried at amortised cost, net of

impairment provisions.

Share capital

Where the Company purchases its own

equity share capital (treasury shares)

the consideration paid, including

any directly attributable incremental

costs, is deducted from equity

attributable to the Company’s equity

holders until the shares are cancelled

or reissued. Where such shares are

subsequently sold or reissued, any

consideration received net of any

directly attributable incremental

transaction costs and the related

income tax effects, is included in

equity attributable to the Company’s

equity holders.

Investments

Investments in subsidiary undertakings

are stated at the adjusted cost of

the investment. IFRS 2 requires the

Parent Company to recognise an

increase in the cost of its investment

in a subsidiary which has issued share

options in the Parent Company’s

shares to its employees.

New standards and

interpretations

A detailed list of new standards,

amendments or interpretations can be

found in the consolidated accounting

policies on page 142.

Use of estimates and judgements

Based on the IAS 1 definitions, there

are no significant estimates or critical

judgements used in the Company

Financial Statements.

Dunelm Group plc Annual Report and Accounts 2023 167

FINANCIAL STATEMENTS

C1. Income Statement

The Company made a profit after tax of £230.9m (2022: £150.5m). The Directors have taken advantage of the exemption

available under section 408 of the Companies Act 2006 and have not presented an Income Statement for the Company.

Disclosures relating to the fees paid to the Company’s auditor is set out in note 3 in the Group’s financial statements on

page 144.

C2. Employee costs

The Company’s employees are the three Executive Directors and the Non-Executive Directors. Full details of the Directors’

remuneration and interests are set out in the Remuneration Report on pages 88 to 118. Share-based payments details are

given in note C13 on page 171.

C3. Dividends and special distributions to shareholders

Disclosures relating to dividends and special distributions to shareholders are set out in note 7 in the Group’s financial

statements on page 146.

C4. Investments in subsidiary undertakings

Shares in subsidiary undertakings:

£’m

As at 27 June 2021 60.7

Share-based payments 4.1

As at 2 July 2022 64.8

Share-based payments 4.0

As at 1 July 2023 68.8

The share-based payment adjustment to investments reflects share option awards given by the Parent Company to

employees of its subsidiaries.

The following were subsidiaries as at 1 July 2023:

Subsidiary Proportion of ordinary shares held Nature of business

Dunelm Limited 100% Holding company

Dunelm (Soft Furnishings) Ltd* 100% Retailer of soft furnishings

Dunelm Estates Limited* 100% Dormant company

Zoncolan Limited* 100% Dormant company

Fogarty Holdings Limited* 100% Non-trading company

Globe Online Limited* 100% Dormant company

Dunelm (Soft Furnishings) Londonderry Ltd* 100% Non-trading company

*Share capital held by subsidiary undertaking.

Dunelm Group plc, the Parent Company, and its subsidiaries (excluding Dunelm (Soft Furnishings) Londonderry Ltd) are

incorporated and domiciled in the UK. The registered office is Dunelm Store Support Centre, Watermead Business Park,

Syston, Leicester, Leicestershire, England, LE7 1AD.

The registered address for Dunelm (Soft Furnishings) Londonderry Ltd is Faustina Retail Park, 35 Buncrana Road, Londonderry,

Northern Ireland, BT48 8QN.

Notes to the Parent Company Financial Statements

For the 52 weeks ended 1 July 2023

Dunelm Group plc Annual Report and Accounts 2023168

FINANCIAL STATEMENTS

C5. Deferred tax assets

2023

£’m

2022

£’m

Employee benefits 0.6 1.0

The movement in deferred tax assets is as follows:

Balance at

27 June 2021

£’m

Recognised in

income

£’m

Recognised in

equity

£’m

Balance at

2 July 2022

£’m

Employee benefits 1.8 (0.3) (0.5) 1.0

Balance at

3 July 2022

£’m

Recognised in

income

£’m

Recognised in

equity

£’m

Balance at

1 July 2023

£’m

Employee benefits 1.0 (0.1) (0.3) 0.6

C6. Trade and other receivables

2023

£’m

2022

£’m

Amounts owed by subsidiary undertakings 162.3 98.3

Amounts owed by subsidiary undertakings are repayable on demand. Interest is charged monthly on all intercompany

balances at an annual rate of 2.0%. There is no security on these balances.

These amounts pose no liquidity or credit risk as they are owed by other Group undertakings and are expected to be settled

by Group transactions.

C7. Trade and other payables

2023

£’m

2022

£’m

Accruals and deferred income 0.3 —

Other taxation and social security — 0.3

0.3 0.3

Dunelm Group plc Annual Report and Accounts 2023 169

FINANCIAL STATEMENTS

C8. Taxation

2023

52 weeks

£’m

2022

53 weeks

£’m

Current taxation

UK corporation tax charge for the period 0.1 0.5

Deferred taxation

Origination of temporary differences 0.1 0.3

Tax expense 0.2 0.8

The tax charge is reconciled with the standard rate of UK corporation tax as follows:

2023

52 weeks

£’m

2022

53 weeks

£’m

Profit before taxation 231.1 151.3

UK corporation tax at standard rate of 20.5% (2022: 19.0%) 47.4 28.7

Factors affecting the charge in the period:

Income not subject to tax (47.8) (28.5)

Impact of change in tax rate (0.1) -

Group relief 0.7 0.6

Tax expense 0.2 0.8

The UK Government substantively enacted an increase in the corporation tax rate to 25.0% effective from 1 April 2023.

The deferred tax asset as at 1 July 2023 has been calculated based on the rate of 25.0%.

C9. Interest-bearing loans and borrowings

The Company’s only interest-bearing borrowings relate to intercompany loans which have interest charges of 2.0% and are

not affected by changes in SONIA.

C10. Financial risk management

Capital management

The Board’s objective with respect to capital management is to ensure the Company continues as a going concern in order

to optimise returns to shareholders. The Board’s policy is to retain a strong capital base so as to maintain investor, creditor

and market confidence and to sustain future development. The Board regularly monitors the level of capital in the Group to

ensure that this can be achieved.

C11. Issued share capital

Disclosures relating to issued share capital are set out in note 20 in the Group’s financial statements on page 158.

C12. Treasury shares

Disclosures relating to treasury shares are set out in note 21 in the Group’s financial statements on page 159.

Notes to the Parent Company Financial Statements continued

Dunelm Group plc Annual Report and Accounts 2023170

FINANCIAL STATEMENTS

C13. Share-based payments

The Company operates the following share-based payment schemes for the CEO and CFO:

a. Dunelm Group Savings Related Share Option Plan (Sharesave)

The Dunelm Group plc Savings Related Share Option Plan (Sharesave) scheme is open to all colleagues with eligible length

of service. Invitations to participate in the scheme are issued annually and the scheme is ‘approved’ under HMRC rules. The

current maximum monthly savings for the schemes is £500. Options are granted at the prevailing market rate less a discount

of 20%. Options may be exercised under the scheme within six months of the completion of each three-year savings contract

(from the grant date). There is provision for early exercise in certain circumstances such as death, disability, redundancy, and

retirement. Sharesave options are accounted for as equity-settled awards under IFRS 2.

b. Long-Term Incentive Plan (LTIP)

As explained in the Remuneration Report, the Company operates an equity-settled LTIP scheme. Performance conditions for the

LTIP awards are detailed in the Remuneration Report. LTIP options are also accounted for as equity-settled awards under IFRS 2.

c. Bonus Deferred Shares Award

The Bonus Deferred Shares Award provides options over shares in Dunelm Group plc for participants as a discretionary

bonus. This is an equity-settled share option scheme and there are no performance conditions attached to these awards,

they are only dependent on continued employment. Under this arrangement, participants are awarded a number of options

which is based on the cash value of the earned bonus award – determined by their achievement of a mixture of Group and

individual performance metrics – divided by a share price value of 1,189.00p which was approved at the November 2020

AGM. The deferred shares awarded vest in September 2021 and September 2022.

C14. Contingent liabilities

The Company had no contingent liabilities at the period end date (2022: none).

C15. Related parties

Transactions between the Company and its subsidiaries were as follows:

2023

52 weeks

£’m

2022

53 weeks

£’m

Dividends received 163.3 150.2

Dividends receivable 70.0 —

Net interest receivable 2.3 3.1

235.6 153.3

Amounts owed by subsidiary undertakings 162.3 98.3

162.3 98.3

Key management personnel

All employees of the Company are key management personnel. Directors of the Company and their close relatives control

42.7% (2022: 42.9%) of the voting shares of the Company.

2023

52 weeks

£’m

2022

53 weeks

£’m

Wages and salaries 1.7 1.6

Short-term employee benefits 1.4 1.8

Share-based payments (including NI) 0.9 0.9

4.0 4.3

There were no termination benefits for employees of the Company.

The amount of gains made by Directors on the exercise of share options are disclosed in the Remuneration Report on page 109.

Dunelm Group plc Annual Report and Accounts 2023 171

FINANCIAL STATEMENTS

APM Definition, purpose and reconciliation to statutory measure

Unique active

customers

growth

Growth in unique active customers who have shopped in a 12-month period compared to the prior 12-month

period, based on Barclays transactional data. Note that Barclays data represents approximately 10% of total

Dunelm transactions. To measure whether we are continuing to grow our active customer base – from both new

customers and retention of existing customers.

Total sales

Equivalent to revenue (from all channels). This is net of customer returns.

Digital sales

Digital sales include home delivery, Click & Collect (or Reserve & Collect before October 2019) and tablet-based

sales in store.

Digital %

total sales

Digital sales (as defined above) expressed as a percentage of revenue. This is not a measure that we seek to

maximise in itself, but we measure it to track our adaptability to changing customer behaviours.

Gross margin %

Gross profit expressed as a percentage of revenue. Measures the profitability of product sales prior to operating

costs.

Operating costs

to sales ratio

Operating costs expressed as a percentage of revenue. To measure the growth of costs relative to sales growth.

EBITDA

Earnings before interest, tax, depreciation, amortisation and impairment. Operating profit plus depreciation and

amortisation of property, plant and equipment, right-of-use assets and intangible assets plus loss on disposal

and impairment of property, plant and equipment and intangible assets. Used in our capital and dividend policy.

Adjusted

EBITDA

EBITDA less depreciation on right-of-use assets. To measure compliance with bank covenants

EBITDAR

EBITDAR is calculated as EBITDA plus rent. To measure compliance with bank covenants

Effective tax rate

Taxation expressed as a percentage of profit before taxation. To measure how close we are to the UK corporation

tax rate and understand the reasons for any differences.

Capex (net of

disposals)

Acquisition of intangible assets and acquisition of property, plant and equipment less proceeds on disposal of

property, plant and equipment and intangibles.

Free cash flow

Free cash flow is defined as net cash generated from operating activities less capex (net of disposals) and

business combinations, net interest paid (including leases) and loan transaction costs, and repayment of

principal element of lease liabilities. Measures the cash generated that is available for disbursement to

shareholders.

Net cash/(debt)

Cash and cash equivalents less total borrowings (as shown in note 18). Excludes IFRS 16 lease liabilities.

Cash conversion

Free cash flow expressed as a percentage of operating profit.

Ordinary

dividend cover

Ordinary dividend cover is calculated as earnings per share divided by the total ordinary dividend relating to the

financial year. This measure is used in our capital and dividend policy.

Alternative performance measures (APMs)

1 Please see Note 17 to the Financial Statements on page 152.

2 Please see cash generation and net cash table on page 24.

Dunelm Group plc Annual Report and Accounts 2023172

FINANCIAL STATEMENTS

Advisers and contacts

Corporate

brokers

Barclays Bank plc

5 The North Colonnade

London E14 4BB

Tel: 020 7623 2323

Peel Hunt LLP

100 Liverpool Street

London EC2M 2AT

Tel: 020 7418 8900

Financial

advisers

UBS Investment Bank

5 Broadgate

London EC2M 2QS

Tel: 020 7567 8000

Financial public

relations

MHP Communications

60 Great Portland Street

London W1W 7RT

Tel: 020 3128 8100

Independent

auditor

PricewaterhouseCoopers LLP

One Chamberlain Square

Birmingham B3 3AX

Tel: 0121 265 5000

Registered

office

Dunelm Store Support Centre

Watermead Business Park

Syston, Leicester

Leicestershire, England LE7 1AD

Company registration no: 4708277

Principal bankers

Barclays Bank plc

Midlands Corporate Banking

PO Box 333

15 Colmore Row

Birmingham B3 2BH

Tel: 0345 734 5345

Investor

relations

corporate.dunelm.com

Tel: 0116 264 4400

Email: investorrelations@dunelm.com

Registrars

Equiniti

Aspect House

Spencer Road, Lancing

West Sussex BN99 6DA

Tel: 0371 384 2030

1 If dialling internationally, call +44 121 415 7047. The helpline is open Monday to Friday 8.30 am to 5.30 pm, excluding bank holidays.

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Pureprint Ltd is a Carbon/Neutral® Printing Company.

This is to certify that by using Carbon Balanced Paper for the Dunelm Group Annual

Report 2023, Dunelm Group plc has balanced through World Land Trust the equivalent

of 220kg of carbon dioxide. This support will enable World Land Trust to protect 42m

of critically threatened tropical forest. Issued on 28/09/2023 – Certificate number

CBP021073. Presented by Denmaur.

Designed and produced by Instinctif Partners, www.creative.instinctif.com

Tel: 0116 264 4400

Email: investorrelations@dunelm.com

corporate .dunelm.com